<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 11, 1998
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
THE DERBY CYCLE CORPORATION
LYON INVESTMENTS B.V.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE
31-1038896
THE NETHERLANDS 3751 NONE
(PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
(STATE OR OTHER CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
JURISDICTION OF
INCORPORATION OR
ORGANIZATION)
---------------
THE DERBY CYCLE CORPORATION LYON CT CORPORATION
INVESTMENTS B.V. C/O RALEIGH USA 1633 BROADWAY
BICYCLE CO. NEW YORK, NY
22710 72ND AVENUE SOUTH TELEPHONE: (212) 664-1666
KENT, WASHINGTON 98032 (NAME, ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE: (253) 395-1100 TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR
(ADDRESS, INCLUDING ZIP CODE, AND SERVICE)
TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANTS' PRINCIPAL
EXECUTIVE OFFICES)
---------------
COPY TO:
JACK M. FEDER
KIRKLAND & ELLIS
655 FIFTEENTH STREET, N.W.
WASHINGTON, DC 20005-5793
TELEPHONE: (202) 879-5040
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective. If the securities being registered on this Form are being offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE(2)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10% Senior Notes due
2008.................. $100,000,000 $1,000 $100,000,000 $29,500
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9 3/8% Senior Notes due
2008.................. DM110,000,000 DM1,000 DM110,000,000 $18,172
</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f).
(2) Calculated using the rate of DM1.00 = $0.56, the noon buying rate in New
York City for cable transfers in Deutsche Marks as announced by the
Federal Reserve Bank of New York on August 5, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF PART I OF FORM S-4
<TABLE>
<CAPTION>
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
----------------------- ---------------------------------
<S> <C>
1.Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus...... Outside Front Cover Page
2.Inside Front and Outside Back
Cover Pages of Prospectus..... Inside Front Cover Page; Outside Back Cover
Page
3.Risk Factors, Ratio of Earnings Prospectus Summary; Business; Selected
to Fixed Charges and Other Historical Financial Data; Unaudited Pro
Information................... Forma Condensed Combined Financial
Statements; Exhibit 12.1
4.Terms of the Transaction........ Outside Front Cover Page; Prospectus
Summary; Description of Exchange Notes;
The Exchange Offer; Certain U.S. Income
Tax Consequences; Certain Netherlands
Income Tax Consequences
5.Pro Forma Financial Unaudited Pro Forma Condensed Combined
Information................... Financial Statements
6.Material Contracts with the
Company Being Acquired........ Inapplicable
7.Additional Information
Required...................... Inapplicable
8.Interests of Named Experts and
Counsel....................... Legal Matters
9.Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... Inapplicable
10.Information with Respect to S-3
Registrants................... Inapplicable
11.Incorporation of Certain
Information by Reference...... Inapplicable
12.Information with Respect to S-2
or S-3 Registrants............ Inapplicable
13.Incorporation of Certain
Information by Reference...... Inapplicable
14.Information with Respect to
Registrants other than S-3 or Outside Front Cover Page; Prospectus
S-2 Registrants............... Summary; Risk Factors; Use of Proceeds;
Capitalization; The Recapitalization;
Unaudited Pro Forma Condensed Combined
Financial Statements; Selected Historical
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business;
Management; Security Ownership of Certain
Beneficial Owners and Management;
Description of Revolving Credit Agreement
15.Information with Respect to S-3
Companies..................... Inapplicable
16.Information with Respect to S-2
or S-3 Companies.............. Inapplicable
</TABLE>
<PAGE>
<TABLE>
<S> <C>
17.Information with Respect to
Companies Other than S-3 or S-2
Companies...................... Inapplicable
18.Information if Proxies, Consents
or Authorizations are to be
Solicited...................... Inapplicable
19.Information if Proxies, Consents
or Authorizations are not to be
Solicited or in an Exchange Management; Security Ownership of Certain
Offer.......................... Beneficial Owners and Management
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1998
PRELIMINARY PROSPECTUS
, 1998
THE DERBY CYCLE CORPORATION
LYON INVESTMENTS B.V.
OFFER TO EXCHANGE THEIR $100,000,000 10% SENIOR NOTES DUE 2008 AND THEIR
DM110,000,000 9 3/8% SENIOR NOTES DUE 2008, EACH OF WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY AND ALL OF THEIR
OUTSTANDING $100,000,000 10% SENIOR NOTES DUE 2008 AND THEIR OUTSTANDING
DM 110,000,000 9 3/8% SENIOR NOTES DUE 2008, RESPECTIVELY
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [ ],
1998, UNLESS EXTENDED.
The Derby Cycle Corporation, a Delaware corporation ("DCC"), and Lyon
Investments B.V., a company organized under the laws of The Netherlands and a
wholly-owned subsidiary of DCC, which was formerly known as Lyon Cycle B.V.
("Lyon," and, together with DCC, the "Issuers") hereby offer (the "Exchange
Offer"), upon the terms and conditions set forth in this Prospectus (the
"Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange $1,000 principal amount of each of their
$100,000,000 10% Senior Notes due 2008 (the "Exchange Dollar Notes") and their
DM110,000,000 9 3/8% Senior Notes due 2008 (the "Exchange DM Notes" and,
together with the Exchange Dollar Notes, the "Exchange Notes"), each of which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which this
Prospectus is a part, for each $1,000 principal amount of their outstanding
$100,000,000 10% Senior Notes due 2008 (the "Old Dollar Notes") and their
outstanding DM110,000,000 9 3/8% Senior Notes due 2008 (the "Old DM Notes" and,
together with the Old Dollar Notes, the "Old Notes"), respectively. The Issuers
are jointly and severally liable for all payments due under the Dollar Notes
(as defined) and the DM Notes (as defined). The Initial Offering occurred
concurrently with the Recapitalization (as defined) of DCC and its direct and
indirect subsidiaries, including Lyon (the "Company" or "Derby"). The Dollar
Notes and the DM Notes each form a separate series (each, a "Series"). The Old
Notes of each Series may be exchanged for an issue of Exchange Notes of a like
Series, substantially identical in all material respects to such Old Notes
except that (i) the Exchange Notes will have been registered under the
Securities Act and, therefore, will not bear legends restricting the transfer
thereof, and (ii) the holders of Exchange Notes will not be entitled to certain
rights under the Exchange and Registration Rights Agreement (as defined). The
Old Notes and the Exchange Notes are sometimes referred to herein collectively
as the "Notes". The Old Dollar Notes and the Exchange Dollar Notes are
sometimes referred to herein collectively as the "Dollar Notes". The Old DM
Notes and the Exchange DM Notes are sometimes referred to herein collectively
as the "DM Notes". The Exchange Notes will evidence the same debt as the Old
Notes (which they replace) and will be issued under and be entitled to the
benefits of the Indentures (as defined). See "Exchange Offer" and "Description
of the Exchange Notes".
The Company will accept for exchange any and all Old Notes validly tendered and
not withdrawn prior to 5:00 p.m., New York City time on [ ], 1998, unless
extended by the Company in its sole discretion (the "Expiration Date"). Tenders
of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the Expiration
Date. The Exchange Offer is subject to certain customary conditions. See "The
Exchange Offer".
The Old Dollar Notes were sold by the Issuers on May 14, 1998, to Chase
Securities Inc. ("CSI") and the Old DM Notes were sold on the same date to
Chase Manhattan Bank AG, Chase Manhattan International Limited and CSI
(collectively, the "Initial Purchasers") in a transaction not registered under
the Securities Act in reliance upon an exemption under the Securities Act (the
"Initial Offering"). The Initial Purchasers subsequently placed the Old Notes
with (i) qualified institutional buyers in reliance upon Rule 144A under the
Securities Act, (ii) a limited number of institutional accredited investors
that agreed to comply with certain transfer restrictions and other conditions
and (iii) qualified buyers outside the United States in reliance upon
Regulation S under the Securities Act. Accordingly, the Old Notes may not be
reoffered, resold or otherwise transferred in the United States unless
registered under the Securities Act or unless an applicable exemption from the
registration requirements of the Securities Act is available. The Exchange
Notes are being offered hereunder in order to satisfy the obligations of the
Issuers to the Initial Purchasers under the Exchange and Registration Rights
Agreement entered into by the Issuers in connection with the Initial Offering
(the "Exchange and Registration Rights Agreement"). See "The Exchange Offer".
The Dollar Notes will bear interest at the rate of 10% per annum, and the DM
Notes will bear interest at the rate of 9 3/8% per annum. Interest on the Notes
will accrue from their date of original issuance and will be payable semi-
annually in arrears on May 15 and November 15 of each year, commencing November
15, 1998. The Notes will mature on May 15, 2008. Except as described below, the
Issuers may not redeem the Notes prior to May 15, 2003. Thereafter, the Issuers
may redeem the Notes, in whole or in part, at the redemption prices set forth
herein, together with accrued and unpaid interest and Additional Amounts (as
defined), if any, to the date of redemption. In addition, at any time prior to
May 15, 2001, the Issuers may, subject to certain requirements, redeem up to 33
1/3% of the original aggregate principal amount of each class of the Notes with
the net cash proceeds of one or more Public Equity Offerings (as defined), in
the case of the Dollar Notes, at a redemption price equal to 110% of the
principal amount to be redeemed and, in the case of the DM Notes, at a
redemption price equal to 109.375% of the principal amount to be redeemed,
together with accrued and unpaid interest and Additional Amounts, if any,
provided that at least 66 2/3% of the original aggregate principal amount of
each Series remains outstanding immediately after each such redemption. The
Notes may also be redeemed at the option of the Issuers, in whole but not in
part, at any time at 100% of the principal amount thereof, together with
accrued and unpaid interest and Additional Amounts, if any, to the date of
redemption, in the event of certain changes affecting withholding taxes of the
United States or The Netherlands. The Notes will not be subject to any sinking
fund requirement. Upon the occurrence of a Change of Control (as defined), each
holder of Notes will have the right to require the Issuers to repurchase such
holder's Notes at a price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest and Additional Amounts, if any, to
the date of repurchase. See "Description of Exchange Notes".
The Notes will be unsecured and will rank pari passu in right of payment with
all existing and future Senior Indebtedness (as defined) of the Issuers. The
Notes will rank senior in right of payment to all existing and future
Subordinated Obligations (as defined) of the Issuers. The Notes will be
effectively subordinated to any secured indebtedness of the Issuers to the
extent of the value of the assets securing such indebtedness and to all
liabilities of the subsidiaries of DCC other than Lyon. As of March 29, 1998,
on a pro forma basis after giving effect to the Recapitalization, (a) the
outstanding Senior Indebtedness of the Issuers would have been $238.2 million
(including all indebtedness and guarantees of indebtedness under the Revolving
Credit Agreement (as defined), but excluding unused commitments thereunder), of
which $78.1 million would have been Secured Indebtedness (as defined), and the
Issuers would have had no outstanding Subordinated Obligations, and (b) the
outstanding indebtedness of the subsidiaries of DCC other than Lyon would have
been $79.8 million (consisting of indebtedness under the Revolving Credit
Agreement and indebtedness under the South African Credit Facility (as defined)
but excluding, in each case, unused commitments thereunder), all of which would
have been Secured Indebtedness. The indenture governing the Dollar Notes (the
"Dollar Notes Indenture") and the indenture governing the DM Notes (the "DM
Notes Indenture," and, together with the Dollar Notes Indenture, the
"Indentures") permit DCC and its Restricted Subsidiaries (as defined) to incur
additional indebtedness, including Senior Indebtedness, subject to certain
limitations. See "Description of the Exchange Notes" and "Description of
Revolving Credit Agreement".
The Dollar Notes have been designated for trading in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market. Application
will be made to list the Notes on the Luxembourg Stock Exchange concurrently
with the Exchange Offer.
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DESCRIPTION OF CERTAIN RISKS TO
BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Based upon an interpretation by the staff of the United States Securities and
Exchange Commission (the "Commission") set forth in certain no-action letters
issued to third parties, the Issuers believe that the Exchange Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by any holder thereof (other than any
such holder that is an "affiliate" of the Issuers within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and such holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes. See "The Exchange
Offer--Resale of the Exchange Notes". Holders of Old Notes wishing to accept
the Exchange Offer must represent to the Issuers, as required by the Exchange
and Registration Rights Agreement, that such conditions have been met. Each
broker-dealer (a "Participating Broker-Dealer") that receives Exchange Notes
for its own account pursuant to the Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities. The Issuers have agreed that, for a period of 180 days
after the Expiration Date, they will make this Prospectus available to any
Participating Broker-Dealer for use in connection with any such resale. See
"Plan of Distribution".
<PAGE>
The Issuers will not receive any proceeds from the Exchange Offer. The
Issuers have agreed to bear the expenses of the Exchange Offer. No underwriter
is being used in connection with the Exchange Offer.
Holders of Old Notes not tendered and accepted in the Exchange Offer will
continue to hold such Old Notes and will be entitled to all the rights and
benefits and will be subject to the limitations applicable thereto under the
Indentures and with respect to transfer under the Securities Act. See "The
Exchange Offer".
There has not previously been any public market for the Old Notes or the
Exchange Notes. The Issuers intend to list the Notes on the Luxembourg Stock
Exchange; however, there can be no assurance that the Issuers will meet the
applicable listing requirements of the Luxembourg Stock Exchange or any other
recognized stock exchange, and there can be no assurance that an active market
for the Notes will develop. To the extent that a market for the Notes does
develop, the market value of the Notes will depend on market conditions (such
as yields on alternative investments), general economic conditions, the
Issuers' financial condition and other conditions. Such conditions might cause
the Notes, to the extent that they are actively traded, to trade at a
significant discount from face value. See "Risk Factors--Absence of a Public
Market Could Adversely Affect the Value of Exchange Notes".
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE ISSUERS ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE ISSUERS. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL [ ], 1998 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER), ALL
DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
PROSPECTIVE INVESTORS IN THE EXCHANGE NOTES ARE NOT TO CONSTRUE THE CONTENTS
OF THIS PROSPECTUS AS INVESTMENT, LEGAL OR TAX ADVICE. EACH INVESTOR SHOULD
CONSULT ITS OWN COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO LEGAL, TAX,
BUSINESS, FINANCIAL AND RELATED ASPECTS OF THE EXCHANGE NOTES. THE ISSUERS ARE
NOT MAKING ANY REPRESENTATION TO ANY PROSPECTIVE INVESTOR IN THE EXCHANGE
NOTES REGARDING THE LEGALITY OF AN INVESTMENT THEREIN BY SUCH PERSON UNDER
APPROPRIATE LEGAL INVESTMENT OR SIMILAR LAWS.
THE ISSUERS ACCEPT RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS
PROSPECTUS. TO THE BEST KNOWLEDGE AND BELIEF OF THE ISSUERS (WHO HAVE TAKEN
ALL REASONABLE CARE TO ENSURE THAT SUCH IS THE CASE), THE INFORMATION
CONTAINED IN THIS PROSPECTUS IS IN ACCORDANCE WITH THE FACTS AND DOES NOT OMIT
ANYTHING LIKELY TO AFFECT THE IMPORT OF SUCH INFORMATION.
i
<PAGE>
MARKET DATA USED THROUGHOUT THIS PROSPECTUS WERE OBTAINED FROM INTERNAL
COMPANY ESTIMATES AND INDUSTRY PUBLICATIONS. WHILE THE ISSUERS BELIEVE THESE
INTERNAL COMPANY ESTIMATES AND INDUSTRY PUBLICATIONS TO BE RELIABLE, SUCH
ESTIMATES AND INDUSTRY PUBLICATIONS HAVE NOT BEEN VERIFIED BY ANY INDEPENDENT
SOURCES.
THE INITIAL PURCHASERS MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN
OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED HEREBY, INCLUDING
OVERALLOTMENT, STABILIZING TRANSACTIONS, SHORT COVERING TRANSACTIONS AND
PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF
DISTRIBUTION".
AVAILABLE INFORMATION
The Issuers have filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which term shall encompass
all amendments, exhibits, annexes and schedules thereto) pursuant to the
Securities Act, and the rules and regulations promulgated thereunder, covering
the Exchange Notes being offered hereby. This Prospectus does not contain all
the information set forth in the Exchange Offer Registration Statement. For
further information with respect to the Issuers and the Exchange Offer,
reference is made to the Exchange Offer Registration Statement. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Exchange
Offer Registration Statement, reference is made to the exhibit for a more
complete description of the document or matter involved, and each such
statement shall be deemed qualified in its entirety by such reference. The
Exchange Offer Registration Statement, including the exhibits thereto, and
periodic reports and other information filed by the Issuers with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, or at its regional offices located at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World
Trade Center, Suite 1300, New York, New York 10048. Copies of such materials
can be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.com.
Notwithstanding that DCC may not be subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, DCC will file with the Commission and
provide holders of Notes and prospective holders of Notes (upon request)
within 15 days after DCC files them with the Commission, copies of its annual
report and the information, documents and other reports that are specified in
Sections 13 or 15(d) of the Exchange Act. In addition, following a Public
Equity Offering (as defined) DCC will furnish to the holders of Notes,
promptly upon their becoming available, copies of the annual report to
shareholders and any other information provided by DCC to its public
shareholders generally.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available upon request from
Simon J. Goddard, Chief Financial Officer of The Derby Cycle Corporation, c/o
Raleigh Industries Ltd., Triumph Road, Nottingham NG7 2DD, England, United
Kingdom. In order to ensure timely delivery of the documents, any request
should be made by [ ], 1998 (five business days prior to the Expiration
Date).
DCC, a corporation organized under the laws of Delaware, and Lyon, a company
formed under the laws of The Netherlands, have their principal executive
offices located at The Derby Cycle Corporation, c/o Raleigh USA Bicycle Co.,
22710 72nd Avenue South, Kent, Washington, USA 98032; its telephone number is
(253) 395-1100.
ii
<PAGE>
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED
STATUTES ("CHAPTER 421-B") WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A
SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW
HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT
FILED UNDER CHAPTER 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY
SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY
WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO,
ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE
MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION
INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WHICH ARE NOT
HISTORICAL FACTS. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS
INCLUDED IN THIS PROSPECTUS, INCLUDING, WITHOUT LIMITATION, STATEMENTS
REGARDING THE COMPANY'S FUTURE FINANCIAL POSITION, STRATEGY, PROJECTED COSTS
AND PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS, ARE FORWARD-
LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS ARE TYPICALLY IDENTIFIED BY THE
WORDS "BELIEVE", "EXPECT", "ANTICIPATE", "INTEND", "ESTIMATE" AND SIMILAR
EXPRESSIONS. ALTHOUGH THE ISSUERS BELIEVE THAT THE EXPECTATIONS REFLECTED IN
SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, NO ASSURANCE CAN BE GIVEN THAT
SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT FACTORS THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S AND THE
ISSUERS' EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED UNDER "RISK
FACTORS" AND ELSEWHERE IN THIS PROSPECTUS, INCLUDING, WITHOUT LIMITATION, IN
CONJUNCTION WITH THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS PROSPECTUS.
ALL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY, THE ISSUERS OR
PERSONS ACTING ON THEIR BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY
THE CAUTIONARY STATEMENTS.
SERVICE OF PROCESS AND ENFORCEMENT OF JUDGMENTS
DCC IS INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE AND LYON IS
ORGANIZED UNDER THE LAWS OF THE NETHERLANDS. ALTHOUGH EACH OF THE ISSUERS WILL
AGREE, IN ACCORDANCE WITH THE TERMS OF THE INDENTURES, TO ACCEPT SERVICE IN
THE UNITED STATES BY ITS AGENT DESIGNATED FOR SUCH PURPOSE, IT MAY BE
DIFFICULT OR IMPOSSIBLE FOR HOLDERS OF NOTES (A) TO EFFECT SERVICE UPON
CERTAIN OF THE DIRECTORS AND OFFICERS OF THE ISSUERS AND (B) TO ENFORCE IN THE
UNITED STATES JUDGMENTS OF COURTS OF THE UNITED STATES PREDICATED UPON THE
CIVIL LIABILITY OF LYON OR CERTAIN OF THE OFFICERS AND DIRECTORS OF THE
ISSUERS UNDER THE U.S. FEDERAL SECURITIES LAWS. THERE IS DOUBT AS TO THE
ENFORCEABILITY OUTSIDE OF THE UNITED STATES AGAINST ANY OF THESE PERSONS, IN
ORIGINAL ACTIONS OR IN ACTIONS FOR ENFORCEMENT OF JUDGMENTS OF U.S. COURTS, OF
LIABILITIES PREDICATED SOLELY ON THE U.S. FEDERAL SECURITIES LAWS.
iii
<PAGE>
CERTAIN TERMS AND CONVENTIONS
As used herein, unless the context otherwise requires, the "Company" or
"Derby" means "DCC" together with its direct or indirect subsidiaries,
including Lyon. References herein to the following direct or indirect
subsidiaries of DCC are defined as follows:
<TABLE>
<CAPTION>
SUBSIDIARY REFERENCE
---------- ---------
Curragh Finance Company "Curragh Finance"
<S> <C>
Derby Cycle Werke GmbH "DCW"
Derby Holding B.V. "DHBV"
Derby Holding
(Deutschland) GmbH "Derby Holding (Deutschland)"
Derby Holding Limited "Derby Holding Limited"
Derby Investment Holdings
(Pty) Limited "Derby Holdings South Africa"
Derby Nederland BV "Derby Nederland"
Derby Trading Co., Inc. "Derby Trading"
Koninklijke Gazelle B.V. "Gazelle"
MS Sport Vertriebs AG "MS Sport AG"
MS Sport Vertriebs GmbH "MS Sport GmbH", together with MS Sport AG,
the "MS Sport Group"
Probike S.A. (Pty) Ltd. "Probike South Africa"
Raleigh BV "Raleigh Holland"
Raleigh BVBA "Raleigh Belgium"
Raleigh Europe B.V. "Raleigh Europe"
Raleigh Fahrrader GmbH "Raleigh Fahrrader"
Raleigh Industries Limited "Raleigh U.K."
Raleigh Industries of Can-
ada Limited "Raleigh Canada"
Raleigh Ireland Limited "Raleigh Ireland"
Raleigh International Lim-
ited "Raleigh International"
Sturmey-Archer B.V. "Sturmey-Archer BV"
Sturmey-Archer Limited "Sturmey-Archer"
Triumph Cycle Co. Ltd. "Triumph"
Univega Beteiligungen GmbH "Univega"
Univega Worldwide License
GmbH "Univega License"
Winora-Staiger GmbH "Winora-Staiger"
</TABLE>
References herein to "DICSA" are to Derby International Corporation S.A., a
corporation organized under the laws of the Grand Duchy of Luxembourg, and
references herein to "DFS" are to Derby Finance S.a.r.l., a corporation
incorporated under the laws of the Grand Duchy of Luxembourg and a wholly-
owned subsidiary of DICSA. Prior to the Restructuring, DICSA controlled,
directly or indirectly, DCC and all of its direct and indirect subsidiaries.
References herein to "U.S. dollars", "US$" or "$" are to the lawful currency
of the United States; references to "pounds Sterling", "GBP" or "(Pounds)" are
to the lawful currency of the United Kingdom; references to "NLG" or "Dutch
Guilders" are to the lawful currency of The Netherlands; references to
"Deutsche Marks" or "DM" are to the lawful currency of Germany; references to
"Canadian dollars" or "CAN$" are to the lawful currency of Canada; references
to "(Yen)" or "Yen" are to the lawful currency of Japan; references to "NT$"
or "New Taiwan dollar" are to the lawful currency of the Republic of China;
references to "Rand" or "R" are to the lawful currency of South Africa; and
references to "IRL", "IRL(Pounds)" or the Irish Punt are to the lawful
currency of Ireland.
As used herein, the symbol "MM" means millions, and the symbol "000s" means
thousands.
PRESENTATION OF FINANCIAL INFORMATION
Unless otherwise indicated, all historical and pro forma financial
statements included in this Prospectus have been prepared in accordance with
U.S. generally accepted accounting principles ("U.S. GAAP") and are set forth
in U.S. dollars.
TRADEMARKS
Raleigh, Nishiki, Univega, Gazelle, Kalkhoff, Rixe, Musing, Winora, Staiger,
BSA, Phillips and Triumph are trademarks owned or licensed by Derby and
registered in certain jurisdictions. This Prospectus also includes trade names
and trademarks of companies other than Derby.
iv
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. References
to fiscal years are to the Company's fiscal year ending on December 31 of each
year. Market data used throughout this Prospectus are management estimates,
based in part on a study commissioned on behalf of the Company and undertaken
by Coba Consulting Limited ("COBA"), and on industry or general publications,
including those produced by the National Sporting Goods Association and the
Bicycle Product Suppliers Association ("BPSA"). The Company has not
independently verified market data provided by third parties or industry or
general publications. Similarly, management estimates, while believed by the
Company to be reliable, have not been verified by any independent sources. The
Company believes that management estimates of market share, while inherently
imprecise, are generally indicative of relative market share.
THE COMPANY
OVERVIEW
Derby is a world-leading designer, manufacturer and marketer of bicycles. The
Company holds the leading market share in the United Kingdom, The Netherlands,
Canada, South Africa and Ireland, holds the leading market share in the adult
bicycle market in Germany and is also a leading bicycle supplier in the United
States. Competing primarily in the medium- to premium-priced market, Derby owns
or licenses many of the most recognized brand names in the bicycle industry,
including leading global brands such as Raleigh, Nishiki and Univega, and
leading regional brands such as Gazelle in The Netherlands and Kalkhoff,
Musing, Winora and Staiger in Germany. Derby designs, manufactures and markets
a wide range of bicycles in all major product categories: (i) all-terrain or
mountain bicycles ("MTBs"), (ii) city bicycles, also called touring or upright
bicycles, (iii) hybrid bicycles, also called comfort or cross bicycles, (iv)
juvenile bicycles, including bicycle motocross ("BMX") bicycles, and (v)
race/road bicycles. The Company distributes branded bicycles through extensive
local market networks of independent bicycle dealers ("IBDs") as well as
through national retailers, and distributes private label bicycles through mass
merchandisers and specialty stores. For the fiscal year ended December 31,
1997, and the three months ended March 30, 1997 and March 29, 1998, the Company
had net revenues of $465.7 million, $122.8 million, and $121.4 million,
respectively, and EBITDA (as defined herein) of $35.8 million, $10.2 million,
and $10.2 million, respectively.
Through a series of acquisitions and plant expansions, the Company has
created a global bicycle business distinguished by its leading market
positions, low cost production, extensive distribution network and reputation
for high quality. Organized in 1986 for the purpose of acquiring the Raleigh,
Gazelle and Sturmey-Archer bicycle and bicycle component businesses from TI
Group plc, Derby expanded into the United States and Germany in 1988. Since
then, Derby has acquired additional well-known brands and leveraged its
existing manufacturing plants and component sourcing operations to lower unit
costs for its acquired businesses. See "Business--History".
The Company has manufacturing operations in five countries, each led by
experienced local management, and maintains marketing or purchasing operations
in five additional countries. Each local operation manages national
distribution channels, dealer service and working capital and benefits from
shared product design and manufacturing technologies as well as from economies
of scale generated by the Company's aggregate purchasing power. Consequently,
each local operation has the flexibility to respond to shifts in local market
demand and product preference.
1
<PAGE>
The Company's operations are concentrated in the United Kingdom, The
Netherlands, Germany, the United States and Canada, markets which generated
sales of more than an estimated 21 million new bicycles in 1997. An overview of
Derby's 1997 operations is as follows:
<TABLE>
<CAPTION>
BICYCLE % OF TOTAL
UNIT SALES US$ SALES DOLLAR
COMPANY (000S) (IN MM) SALES
------- ---------- --------- ----------
<S> <C> <C> <C>
Raleigh U.K. (United Kingdom).................. 664 $107.3 23%
Gazelle (The Netherlands)...................... 294 107.8 23%
DCW/Winora-Staiger/MS Sport Group (Germany).... 415 103.8 22%
Raleigh USA (United States).................... 236 57.9 13%
Raleigh Canada (Canada)........................ 298 29.5 6%
Sturmey-Archer (United Kingdom)(/1/)........... n/a 29.6 6%
Probike South Africa (South Africa)............ 177 20.6 5%
Raleigh Ireland (Ireland)...................... 38 8.1 2%
Other and inter-company adjustments............ (40) 1.1 --
----- ------ ----
Derby Total.................................. 2,082 $465.7 100%
===== ====== ====
</TABLE>
- --------
(1) Represents third party sales.
COMPETITIVE STRENGTHS
Global Industry Leader. Derby is a world-leading designer, manufacturer and
marketer of bicycles. Derby holds the leading market share in the United
Kingdom, The Netherlands, Canada, South Africa and Ireland, has the leading
market share in the adult bicycle market in Germany and is consistently among
the five largest suppliers to the IBD market in the United States. Derby's
leading market shares in multiple markets position the Company as a global
bicycle industry leader and reduce its vulnerability to local economic cycles
and changing consumer preferences. The table below outlines the Company's
market rank and approximate market share based on unit volumes by country for
1997:
<TABLE>
<CAPTION>
MARKET MARKET RANK MARKET SHARE
------ ----------- ------------
<S> <C> <C>
United Kingdom.................................... #1 26%
The Netherlands(/1/).............................. #1 24%
Germany(/2/)...................................... #1 12%
Canada............................................ #1 26%
South Africa...................................... #1 60%
Ireland........................................... #1 32%
United States(/3/)................................ #4 8%
</TABLE>
- --------
(1) Represents Gazelle (22%) and Raleigh Europe (2%).
(2) Represents DCW (10%), Gazelle (1%) and Raleigh Europe (1%), and market rank
and market share of the adult bicycle market only.
(3) Represents market rank and market share of IBD market only.
Portfolio of Well-Recognized Brand Names. Derby owns or licenses many of the
most widely-recognized brand names in the bicycle industry. These brands
include leading global brands such as Raleigh, Nishiki and Univega, and leading
regional brands such as Gazelle in The Netherlands and Kalkhoff, Musing, Winora
and Staiger in Germany. The Company has maintained its leading brand names
primarily by providing high quality, reliable and innovative products supported
by strong customer service to its dealers. The Company promotes its brand names
through mass-media advertising and focused promotional efforts such as
sponsoring professional and amateur cycling teams and individuals, extending
cooperative advertising programs to IBDs and participating in major trade
shows. Based on marketing surveys conducted by the Company, the Raleigh brand
has a 98%
2
<PAGE>
prompted recognition in the United Kingdom and is the second most recognized
bicycle brand in the United States. In addition, Raleigh and Gazelle are the
two most recognized bicycle brands in The Netherlands.
Significant Purchasing Power. As one of the world's largest purchasers of
bicycle components, management believes that the Company's aggregate buying
power and supplier relationships provide the Company with an important
competitive advantage. Typically, bicycle components and raw materials account
for approximately 75% of a bicycle's total manufacturing cost. Derby's ability
to obtain favorable pricing and trade terms on a global basis results in lower
per unit bicycle costs and higher gross margins. The Company's purchasing
subsidiary, Derby Trading, assists the operating companies in negotiating with
Taiwanese and Chinese bicycle component manufacturers. Management believes that
the Company is one of the largest customers of Shimano, Inc. ("Shimano"), the
world's largest bicycle component manufacturer and supplier. Derby's long term
relationships with key suppliers help the Company to obtain high quality
components in a timely, cost-efficient manner.
Extensive Dealer Distribution Networks. Management believes the Company has
the most extensive dealer distribution network of any bicycle company in its
three largest markets, the United Kingdom, The Netherlands and Germany, as well
as in Canada, South Africa and Ireland. For example, Raleigh U.K. has
approximately 225 exclusive retail outlets, while its nearest competitor has
fewer than ten. In The Netherlands, Gazelle distributes through approximately
1,500 dealers, representing more than 60% of the IBDs in the country, and in
Germany, DCW is one of the largest suppliers to the Zweirad-Einkaufs-
Genossenschaft ("ZEG"), a major retail cooperative that supplies approximately
65% of the German IBD market. The Company actively works with its dealers to
develop brand loyalty and to respond quickly to changes in retailing formats
and customer buying habits, in part by tailoring sales and marketing programs
to each market and distribution channel. The Company believes its strong
relationships with its dealers are a key to its success.
Flexible and Cost-Efficient Design and Manufacturing. Derby operates modern
manufacturing facilities in the United Kingdom, The Netherlands, Germany,
Canada and the United States, each of which has local in-house design and
engineering staff who develop new models and styles. Local market manufacturing
flexibility and integrated product development allow the Company to respond
quickly to changes in customer demand, maintain consistent, high quality
products, manage working capital needs and reduce the risk of inventory
obsolescence for both the Company and its dealers. Furthermore, the development
department at each manufacturing operation participates in the Company's make-
or-buy decision process to help ensure that in-house manufacturing is the most
cost-effective method of production. Between 1991 and 1997, Derby invested
approximately $25 million to build a modern manufacturing facility located in
Rostock, in the former German Democratic Republic, approximately $20 million to
reorganize and upgrade its Nottingham, England, manufacturing facility, and
approximately $38 million to increase quality and capacity and reduce total
product and distribution costs in other existing facilities. The Company
reduced its labor hours per manufactured unit by approximately 19% over that
period.
Diversified Revenues and Cash Flows. Derby operates in ten countries around
the world and offers a comprehensive product line in each of its markets.
Management believes the Company's geographical diversification and broad
product line: (i) reduce the effects of cyclical downturns in individual
markets and (ii) help to mitigate the impact of sales volatility due to
changing consumer preferences associated with individual markets and products.
Experienced Management Team. Derby has a strong and experienced management
team at both the corporate and operating levels. The Company's ten executive
managers average more than ten years of experience in the bicycle industry. To
capitalize on the strengths of each of its local
3
<PAGE>
operations, management teams from the Company's local operations meet
periodically to share ideas regarding product innovation, manufacturing
processes and component purchasing. Since the Company's formation in 1986,
management has successfully integrated ten acquisitions and expanded the range
of Derby brands and product lines. See "Management" and "Business--History".
BUSINESS STRATEGY
The Company intends to enhance and leverage its competitive strengths through
the following business strategies:
Capitalize on Strength of Derby Brand Names. Derby owns or licenses many of
the most recognized brand names in the bicycle industry. The Company intends to
continue to leverage its leading market positions and strong brand equity to:
(i) further penetrate attractive market niches such as the hybrid and BMX
segments, (ii) develop and enhance relationships with existing and new IBDs,
(iii) augment the Company's position in the growing multi-sport retail channel,
principally in the United Kingdom and in the United States, and (iv) pursue
attractive ancillary businesses, such as cycling accessories and branded
clothing.
Enhance and Leverage Dealer Relationships. Due to the long-standing market
presence of many of Derby's local operations and brands (e.g., more than 100
years each for Raleigh U.K. and Gazelle), management believes its relationships
with local bicycle dealers are strong as well as extensive. The Company intends
to enhance loyalty among IBDs, further penetrate its existing markets and
expand into new markets by maintaining multiple product categories and superior
customer service.
Increase Market Share in Growing Hybrid Bicycle Sector. In several markets,
management expects the hybrid bicycle segment to grow at a rate significantly
higher than that of the overall bicycle industry. For example, in the United
Kingdom and the United States, management estimates that the hybrid segment
will grow at an average annual rate in excess of 10% over the next several
years. Management believes the Company is well-positioned to capitalize on this
growth. For example, Raleigh U.K. held approximately 30% of the hybrid market
in 1996 and maintains strong relationships with IBDs, the principal channel of
distribution for hybrid bicycles. In the United States, Raleigh USA is
strategically positioned in the hybrid segment with Raleigh, Nishiki and
Univega all offering models in this category.
Pursue Strategic Acquisitions. Management believes that the fragmented nature
of the bicycle industry provides opportunities for growth through strategic
acquisitions. The Company intends to pursue acquisitions that will allow it to
leverage its existing distribution network and its modern manufacturing
facilities. The Company also intends to focus its efforts on acquiring leading
brands with particular emphasis on consolidation opportunities in the United
States and Germany and in markets where the Company is not currently
represented. In the ordinary course of business, the Company routinely
considers potential acquisition candidates. On July 18, 1998, the Company
entered into a nonbinding letter of intent to acquire a bicycle design and
distribution Company for a purchase price of approximately $20 million in cash,
the assumption of certain indebtedness and a contingent payment based on
purchases. The Company intends to also explore acquisitions which provide
opportunities to expand into ancillary products such as cycling accessories.
4
<PAGE>
GLOBAL BICYCLE INDUSTRY OVERVIEW
The global bicycle industry, including bicycles, parts and accessories, is
estimated to have had total retail sales of $25 billion in 1997. The bicycle
manufacturing segment of the industry, with annual production of approximately
100 million units, is competitive, highly fragmented and locally driven.
Bicycles are produced throughout the world in approximately 65 countries with
product demand, design and distribution driven by varying local market dynamics
and consumer preferences. Across local markets, bicycle products can be
classified into five major categories: (i) all-terrain or mountain bicycles,
referred to as MTBs, which feature wide tires, high strength frames, components
with multiple gears and powerful brakes, (ii) city bicycles, also called
touring or upright bicycles, which feature more comfortable seats, up to seven
gears within the wheel hub, chain and splash guards, luggage racks and lights,
(iii) hybrid bicycles, also called comfort or cross bicycles, which combine the
technology of MTBs with the comfort and practicality of city bicycles, (iv)
juvenile bicycles with smaller wheels and frame size, including BMX bicycles,
and (v) race/road bicycles, which feature narrow, high pressure tires,
lightweight frames and components with multiple gears. In general, these
bicycle products are marketed and sold through two primary distribution
channels: IBDs and mass merchandisers. IBDs typically carry a broad range of
relatively high priced, high quality bicycles, while mass merchandisers tend to
offer relatively lower-priced bicycles focused primarily on the juvenile
market. The Company manufactures and markets bicycles across all five major
product categories and distributes through both the IBD channel and the mass
merchandiser channel. Management believes that the Company is an industry
leader because it offers its customers high quality, comprehensive product
lines in each of its local markets. See "Business--Global Bicycle Industry
Overview".
THE RECAPITALIZATION
On May 14, 1998, DCC consummated a recapitalization of the Company pursuant
to a Recapitalization Agreement dated March 11, 1998 (as amended, the
"Recapitalization Agreement"), (i) the Company was restructured (the
"Restructuring") such that DCC now owns all the capital stock of approximately
70 existing subsidiaries, a controlling interest in Raleigh Canada, Univega,
Univega License, the MS Sport Group, Derby Holdings South Africa and certain
other subsidiaries, and a minority interest in certain other entities; (ii)
each of DFS (a wholly owned subsidiary of DICSA, the former parent company of
the Company), Thayer Equity Investors III, L.P. ("Thayer") and Perseus Capital,
L.L.C. ("Perseus") purchased (through their respective wholly owned
subsidiaries) equity interests in DCC in the amounts of $3.0 million, $50.0
million and $10.0 million, respectively, for cash (collectively, the "Equity
Contributions"); (iii) DICSA (directly and through DFS) retained an equity
interest in DCC and Raleigh Canada having a value of $45.0 million (the
"Retained Equity"), based on the amounts invested in DCC's equity by DFS,
Thayer and Perseus. The Retained Equity includes preferred stock of Raleigh
Canada issued to DICSA in connection with the Recapitalization (the "Raleigh
Canada Preferred Stock"), which may be exchanged for shares of Class A Common
Stock (as defined) and Class B Common Stock (as defined) of DCC having a value
of $23.3 million, based on the amounts invested in DCC's equity by DFS, Thayer
and Perseus, or redeemed subsequent to the vesting of the Company's right to
exchange such stock for shares of its Common Stock (as defined), at the option
of DICSA under certain circumstances, for a cash payment of $23.3 million, plus
all accrued and unpaid dividends thereon, pursuant to an exchange agreement
among DICSA, DCC and Raleigh Canada (the "Raleigh Canada Exchange Agreement").
In addition, (i) DCC made a cash payment of approximately $146.2 million to DFS
(the "DFS Payment") and DCC is obligated to make a further payment to DFS of up
to $10.0 million depending upon the performance of DCC and certain of its
subsidiaries in the 1998 fiscal year (the "Additional Payment"); (ii) equity
held by the minority shareholders of Derby Holdings South Africa was redeemed
for a cash payment of approximately $1.9 million (the "Redemption Payment");
(iii) the Company repaid its net existing indebtedness (the
5
<PAGE>
"Existing Indebtedness") (other than indebtedness of the Company's South
African subsidiaries incurred under a credit facility providing for maximum
borrowings in an amount approximately equivalent to $6 million (the "South
African Credit Facility")), in an amount of approximately $142.6 million; (iv)
DCC and certain of its subsidiaries borrowed approximately $78.1 million under
a new senior secured revolving credit agreement (the "Revolving Credit
Agreement"); and (v) the Issuers issued the Old Notes (collectively with
borrowings under the Revolving Credit Agreement, the "Debt Financing"), each on
a pro forma basis as of March 29, 1998. The Restructuring, the Equity
Contributions, the DFS Payment, the repayment of Existing Indebtedness (other
than indebtedness incurred under the South African Credit Facility) and the
Debt Financing are collectively referred to as the "Recapitalization". See "The
Recapitalization".
SOURCES AND USES OF FUNDS
The sources and uses of the funds necessary to consummate the
Recapitalization and to pay the related fees and expenses, on a pro forma basis
assuming the Recapitalization was consummated on March 29, 1998, were as
follows:
<TABLE>
<CAPTION>
AMOUNT
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
SOURCES OF FUNDS:
Cash and cash equivalents............................ $ 8.2
Revolving Credit Agreement(/1/)(/2/)................. 78.1
Notes(/2/)........................................... 160.1
Equity Contributions (cash)(/3/)..................... 63.0
Retained Equity(/4/)................................. 45.0
------
Total Sources...................................... $354.4
======
USES OF FUNDS:
DFS Payment and value of Retained Equity............. $191.2
Repayment of certain Existing Indebtedness........... 142.6
Redemption Payment(/5/).............................. 1.9
Payment of fees and expenses......................... 18.7
------
Total Uses......................................... $354.4
======
</TABLE>
- --------
(/1/The)Revolving Credit Agreement provides for loans of up to DM225 million
($123 million). See "Description of Revolving Credit Agreement".
(/2/For)the purposes of this presentation, the Revolving Credit Agreement and
the DM Notes have been converted into U.S. dollars at the rate of 1.83
Deutsche Marks to 1.00 U.S. dollar.
(/3/Includes)cash paid in the amount of $40.5 million as consideration for
shares of Series A Preferred Stock (as defined) and Series B Preferred
Stock (as defined), which have redemption rights, and cash paid in the
amount of $22.5 million as consideration for shares of Class A Common
Stock.
(/4/Includes)Class A Common Stock having a value of $8.3 million and Class B
Common Stock having a value of $15.0 million issuable to DICSA upon
exchange of the Raleigh Canada Preferred Stock. The Raleigh Canada
Preferred Stock may be redeemed subsequent to the vesting of the Company's
right to exchange such stock for shares of its Common Stock, at the option
of DICSA under certain circumstances, for a cash payment of $23.3 million,
plus all accrued and unpaid dividends thereon.
(/5/The)Redemption Payment was paid within 30 days following the consummation
of the Recapitalization.
6
<PAGE>
COMPANY ORGANIZATION
The Company's principal holding companies and principal operating
subsidiaries are organized as follows:
LOGO
INVESTOR GROUP
The Company's shareholders are (i) a wholly-owned subsidiary of Thayer, which
controls approximately 56% of the total voting power of DCC's capital stock,
(ii) a wholly-owned subsidiary of Perseus, which controls approximately 11% of
the total voting power of DCC's capital stock, and (iii) DFS, which controls
approximately 33% of the total voting power of DCC's capital stock.
Thayer is a private equity fund managed by TC Equity Partners ("Thayer
Capital"), a private equity investment firm based in Washington, D.C. Thayer
Capital's partners are Frederic V. Malek, Carl J. Rickertsen and Paul G. Stern.
Thayer Capital invests primarily in private equity investments in management
buyouts and recapitalizations. In June 1996, Thayer Capital closed Thayer, its
current corporate private equity fund, with $364 million in commitments.
Perseus is a merchant banking venture managed by Perseus Management L.L.C.
("Perseus Management") and based in Washington, D.C. Perseus invests primarily
in leveraged acquisitions of operating businesses. Frank H. Pearl is the
Chairman and President of Perseus and is one of the founding directors and
shareholders of DICSA.
DFS is a wholly-owned subsidiary of DICSA. A. Edward Gottesman, the chairman
of DICSA, and a charitable trust of which he is the settlor, control a majority
of the capital stock of DICSA indirectly through an industrial holding company,
Centenary Corporation ("Centenary"). Alan J. Finden-Crofts, the Group Chief
Executive of DICSA and a director of the Company, and Mr. Pearl, a director of
DICSA, own minority interests in DICSA.
See "Risk Factors--Controlling Shareholders" and "Security Ownership of
Certain Beneficial Owners and Management".
7
<PAGE>
THE INITIAL OFFERING
Old Notes................... The Old Dollar Notes were sold by the Issuers
on May 14, 1998 to Chase Securities Inc.
("CSI"), and the Old DM Notes were sold to
Chase Manhattan Bank AG, Chase Manhattan
International Limited and CSI (collectively,
the "Initial Purchasers") pursuant to a
Purchase Agreement dated May 7, 1998 (the
"Purchase Agreement"). The Initial Purchasers
subsequently resold the Old Notes to (i)
qualified institutional buyers pursuant to
Rule 144A under the Securities Act, (ii) a
limited number of institutional accredited
investors that agreed to comply with certain
transfer restrictions and other conditions
and (iii) qualified buyers outside the United
States in reliance upon Regulation S under
the Securities Act.
Exchange and Registration Pursuant to the Purchase Agreement, the
Rights Agreement............ Issuers and the Initial Purchasers entered
into an Exchange and Registration Rights
Agreement dated as of May 7, 1998 (the
"Exchange and Registration Rights
Agreement"), which grants the holders of the
Old Notes certain exchange and registration
rights. The Exchange Offer is intended to
satisfy such exchange rights which terminate
upon the consummation of the Exchange Offer.
THE EXCHANGE OFFER
Securities Offered.......... $100,000,000 aggregate principal amount of
10% Senior Notes due 2008 (the "Exchange
Dollar Notes") and DM110,000,000 aggregate
principal amount of 9 3/8% Senior Notes due
2008 (the "Exchange DM Notes").
Exchange Dollar Notes....... $1,000 principal amount of Exchange Dollar
Notes in exchange for each $1,000 principal
amount of Old Dollar Notes. As of the date
hereof, $100,000,000 aggregate principal
amount of Old Dollar Notes are outstanding.
The Issuers will issue the Exchange Dollar
Notes to holders on or promptly after the
Expiration Date.
Exchange DM Notes........... DM1,000 principal amount of Exchange DM Notes
in exchange for each DM1,000 principal amount
of Old DM Notes. As of the date hereof,
DM110,000,000 aggregate principal amount of
Old DM Notes are outstanding. The Issuers
will issue the Exchange DM Notes to holders
on or promptly after the Expiration Date.
Based on an interpretation by the staff of
the Commission set forth in no-action letters
issued to third parties (specifically, Exxon
Capital Holdings Corporation (available April
13, 1989), Morgan Stanley & Co., Inc.
(available June 5, 1991) and Shearman &
Sterling (available July 2, 1993)), the
Issuers believe that Exchange Notes issued
pursuant to the Exchange
8
<PAGE>
Offer in exchange for Old Notes may be
offered for resale, resold and otherwise
transferred by any holder thereof (other than
any such holder which is an "affiliate" of
the Issuers within the meaning of Rule 405
under the Securities Act) without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided
that such Exchange Notes are acquired in the
ordinary course of such holder's business and
that such holder does not intend to
participate and has no arrangement or
understanding with any person to participate
in the distribution of such Exchange Notes.
Expiration Date............. 5:00 p.m., New York City time, on [ ],
1998, unless the Exchange Offer is extended,
in which case the term "Expiration Date"
means the latest date and time to which the
Exchange Offer is extended.
Accrued Interest on the Each Exchange Note will bear interest from
Exchange Notes and the Old its issuance date. Holders of Old Notes that
Notes....................... are accepted for exchange will receive, in
cash, accrued interest thereon to, but not
including, the issuance date of the Exchange
Notes. Such interest will be paid with the
first interest payment on the Exchange Notes.
Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance
of the Exchange Notes.
Conditions to the Exchange The Exchange Offer is subject to certain
Offer....................... customary conditions, which may be waived by
the Issuers. See "The Exchange Offer--
Conditions".
Procedures for Tendering Each holder of Old Notes wishing to accept
Old Notes................... the Exchange Offer must complete, sign and
date the accompanying Letter of Transmittal,
or a facsimile thereof, in accordance with
the instructions contained herein and
therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile,
together with the Old Notes and any other
required documentation to the Exchange Agent
(as defined) at the address set forth herein.
Persons holding book-entry interests in Old
Notes through the Depository Trust Company
("DTC") and wishing to accept the Exchange
Offer must do so pursuant to the DTC's
Automated Tender Offer Program, by which each
tendering Participant will agree to be bound
by the Letter of Transmittal. Persons holding
book-entry interests in Old Notes through
Euroclear and Cedel and wishing to accept the
Exchange Offer must do so pursuant to their
procedures by which each tendering
Participant will agree to be bound by the
Letter of Transmittal. By executing the
Letter of Transmittal, each holder will
represent to the Issuers that, among other
things, the Exchange Notes acquired pursuant
to the Exchange Offer are being obtained in
the ordinary course of business of the person
receiving such Exchange Notes, whether or not
such person is the holder, that neither the
9
<PAGE>
holder nor any such other person has any
arrangement or understanding with any person
to participate in the distribution of such
Exchange Notes and that neither the holder
nor any such other person is an "affiliate,"
as defined under Rule 405 of the Securities
Act, of the Issuers. See "The Exchange
Offer--Purpose and Effect of the Exchange
Offer" and "--Procedures for Tendering".
Untendered Old Notes........ Following the consummation of the Exchange
Offer, holders of Old Notes eligible to
participate but who do not tender their Old
Notes will not have any further exchange
rights and such Old Notes will continue to be
subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for
such Old Notes could be adversely affected.
Consequences of Failure to The Old Notes that are not exchanged pursuant
Exchange.................... to the Exchange Offer will remain restricted
securities. Accordingly, such Old Notes may
be resold only (i) to the Issuers, (ii)
pursuant to Rule 144A or Rule 144 under the
Securities Act or pursuant to some other
exemption under the Securities Act, (iii)
outside the United States to a foreign person
pursuant to the requirements of Rule 904
under the Securities Act, or (iv) pursuant to
an effective registration statement under the
Securities Act. See "The Exchange Offer--
Consequences of Failure to Exchange".
Shelf Registration In the event that applicable interpretations
Statement................... of the staff of the Commission do not permit
the Issuers to effect the Exchange Offer and,
under certain other circumstances, the
Issuers have agreed to register the Old Notes
on a shelf registration statement (the "Shelf
Registration Statement") and use their
reasonable best efforts to cause it to be
declared effective by the Commission as
promptly as practical after the filing
thereof. The Issuers have agreed to maintain
the effectiveness of the Shelf Registration
Statement for, under certain circumstances, a
maximum of two years, to cover resales of the
Old Notes held by any such holders.
Special Procedures for Any beneficial owner whose Old Notes are
Beneficial Owners........... registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender should
contact such registered holder promptly and
instruct such registered holder to tender on
such beneficial owner's behalf. If such
beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to
completing and executing the Letter of
Transmittal and delivering its Old Notes,
either make appropriate arrangements to
register ownership of the Old Notes in such
owner's name or obtain a properly completed
bond power from the registered holder. The
transfer of
10
<PAGE>
registered ownership may take considerable
time. The Issuers will keep the Exchange
Offer open for not less than 30 days in order
to provide for the transfer of registered
ownership.
Guaranteed Delivery Holders of Old Notes who wish to tender their
Procedures.................. Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent (or comply
with the procedures for book-entry transfer)
prior to the Expiration Date must tender
their Old Notes according to the guaranteed
delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery
Procedures".
Withdrawal Rights........... Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the
Expiration Date.
Acceptance of Old Notes and The Issuers will accept for exchange any and
Delivery of Exchange all Old Notes which are properly tendered in
Notes....................... the Exchange Offer prior to 5:00 p.m., New
York City time, on the Expiration Date. The
Exchange Notes issued pursuant to the
Exchange Offer will be delivered promptly
following the Expiration Date. See "The
Exchange Offer--Terms of the Exchange Offer".
Use of Proceeds............. There will be no cash proceeds to the Issuers
from the exchange pursuant to the Exchange
Offer.
Exchange Agents............. IBJ Schroder Bank & Trust Company is serving
as the Exchange Agent in connection with the
Exchange Offer.
THE EXCHANGE NOTES
General..................... The form and terms of the Exchange Notes are
the same as the form and terms of the Old
Notes (which they replace) except that (i)
the Exchange Notes have been registered under
the Securities Act and, therefore, will not
bear legends restricting their transfer, and
(ii) the holders of Exchange Notes will not
be entitled to certain rights under the
Exchange and Registration Rights Agreement,
including the provisions providing for an
increase in the interest rate on the Old
Notes in certain circumstances relating to
the timing of the Exchange Offer, which
rights will terminate when the Exchange Offer
is consummated. See "The Exchange Offer--
Purpose and Effect". The Exchange Notes will
evidence the same debt as the Old Notes and
will be entitled to the benefits of the
Indenture. See "Description of Exchange
Notes". The Old Notes and the Exchange Notes
are referred to herein collectively as the
"Notes".
11
<PAGE>
Securities Offered
Exchange Dollar Notes...... $100,000,000 aggregate principal amount of
10% Senior Notes due 2008.
Exchange DM Notes.......... DM110,000,000 aggregate principal amount of 9
3/8% Senior Notes due 2008.
Exchange Dollar Notes
Interest................. 10% per annum.
Interest Payment Dates... May 15 and November 15 of each year,
commencing May 15, 1999.
Maturity................. May 15, 2008.
Exchange DM Notes
Interest................. 9 3/8% per annum.
Interest Payment Dates... May 15 and November 15 of each year,
commencing May 15, 1999.
Maturity................. May 15, 2008.
Additional Terms of the
Exchange Notes
Optional Redemption...... Except as described below, the Notes will not
be redeemable at the option of the Issuers
prior to May 15, 2003. Thereafter, the Notes
will be redeemable at the option of the
Issuers, in whole or in part, upon not less
than 30 nor more than 60 days' prior notice,
at the redemption prices set forth herein,
together with accrued and unpaid interest and
Additional Amounts, if any, to the date of
redemption. In addition, at any time prior to
May 15, 2001, the Issuers may, subject to
certain requirements, redeem up to 33 1/3% of
the original aggregate principal amount of
each class of the Notes with the net cash
proceeds of one or more Public Equity
Offerings, in the case of the Dollar Notes,
at a redemption price equal to 110.000% of
the principal amount to be redeemed and, in
the case of the DM Notes, at a redemption
price equal to 109.375% of the principal
amount to be redeemed, together with accrued
and unpaid interest and Additional Amounts,
if any, provided that at least 66 2/3% of the
original aggregate principal amount of each
class of the Notes remains outstanding
immediately after each such redemption. The
Issuers may also redeem the Notes, in whole
but not in part, at any time at 100% of the
principal amount thereof, together with
accrued and unpaid interest, and Additional
Amounts, if any, to the date of redemption,
in the event of certain changes affecting
withholding taxes of the United States or The
Netherlands. See "Description of Exchange
Notes--Optional Redemption", "--Redemption
for Taxation Reasons" and "--Withholding
Taxes".
12
<PAGE>
Change of Control......... Upon the occurrence of a Change of Control,
each holder of Exchange Notes will have the
right to require the Issuers to repurchase
such holder's Exchange Notes at a price equal
to 101% of the principal amount thereof,
together with accrued and unpaid interest and
Additional Amounts, if any, to the date of
repurchase. See "Description of Exchange
Notes--Change of Control".
Ranking................... The Exchange Notes will be unsecured and will
rank pari passu in right of payment with all
existing and future Senior Indebtedness of
the Issuers. The Exchange Notes will rank
senior in right of payment to all existing
and future Subordinated Obligations of the
Issuers. The Exchange Notes will be
effectively subordinated to any secured
indebtedness of the Issuers to the extent of
the value of the assets securing such
indebtedness and to all liabilities of the
subsidiaries of DCC other than Lyon. As of
March 29, 1998, on a pro forma basis after
giving effect to the Recapitalization,
(i) the outstanding Senior Indebtedness of
the Issuers would have been $238.2 million
(including all indebtedness and guarantees of
indebtedness under the Revolving Credit
Agreement, but excluding unused commitments
thereunder), of which $78.1 million would
have been Secured Indebtedness, and the
Issuers would have had no outstanding
Subordinated Obligations, and (ii) the
outstanding indebtedness of the subsidiaries
of DCC other than Lyon would have been $79.8
million (consisting of indebtedness under the
Revolving Credit Agreement and indebtedness
under the South African Credit Facility, but
excluding, in each case, unused commitments
thereunder), all of which would have been
Secured Indebtedness. See "Description of
Exchange Notes--Ranking".
Restrictive Covenants.... The Indentures contain certain covenants
that, among other things, limit (i) the
incurrence of additional indebtedness by DCC
and its Restricted Subsidiaries, (ii) the
payment of dividends on, and redemption of,
capital stock of DCC and its Restricted
Subsidiaries and the redemption of certain
subordinated obligations of DCC and its
Restricted Subsidiaries, (iii) investments,
(iv) sales of assets and subsidiary stock,
(v) certain transactions with affiliates,
(vi) the sale or issuance of capital stock of
DCC's Restricted Subsidiaries, (vii) the
existence of liens, (viii) the lines of
business in which DCC and its Restricted
Subsidiaries may operate, (ix) certain sale
and leaseback transactions and (x)
consolidations, mergers and transfers of all
or substantially all the assets of DCC and
its Restricted Subsidiaries. The Indentures
also limit the ability of DCC to create or
permit to exist any restriction on the
ability of any Restricted Subsidiary to pay
dividends or make certain other
distributions. All of these limitations,
however, are subject
13
<PAGE>
to a number of important qualifications and
exceptions. See "Description of Exchange
Notes--Certain Covenants" and "-- Merger and
Consolidation".
Listing................... Application has been made to list the Notes
on the Luxembourg Stock Exchange.
Use of Proceeds........... The Issuers will not receive any cash
proceeds from the issuance of the Exchange
Notes pursuant to the Exchange Offer. The net
proceeds from the Initial Offering, together
with the funds borrowed under the Revolving
Credit Agreement, the Equity Contributions
and the Company's excess cash, were used to
finance the Recapitalization and to pay fees
and expenses related to the Recapitalization.
See "Use of Proceeds" and "The
Recapitalization".
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered before tendering Old Notes in exchange for Exchange Notes. These
risk factors are generally applicable to the Old Notes as well as the Exchange
Notes.
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<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
Set forth below are summary historical and pro forma financial data of the
Company as of the dates and for the periods presented. The summary historical
financial data as of December 31, 1996 and 1997 and for each of the three years
in the period ended December 31, 1997 were derived from the audited combined
financial statements of the Company. The summary unaudited historical financial
data of the Company as of December 31, 1995 and March 29, 1998 and for each of
the three months in the period ended March 30, 1997 and March 29, 1998 were
prepared by management in a manner consistent with the audited combined
financial statements. The summary unaudited pro forma financial data as of
March 29, 1998 and for the year ended December 31, 1997 and the three months
ended March 29, 1998 reflect the effect of the Recapitalization (as described
under "Unaudited Pro Forma Condensed Combined Financial Statements") on the
historical results of operations and financial position of the Company. The
summary unaudited pro forma financial data are not necessarily indicative of
the results of operations and financial position of the Company had the
Recapitalization actually been consummated on the dates assumed and are not
necessarily indicative of the results of operations for any future period. The
information contained in this table should be read in conjunction with
"Selected Historical and Pro Forma Financial Data", "Unaudited Pro Forma
Condensed Combined Financial Statements", "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the combined financial
statements and accompanying notes thereto appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED PRO FORMAS
----------------------- ------------------- ----------------------
THREE
MONTHS
YEAR ENDED ENDED
MARCH 30, MARCH 29, DECEMBER 31, MARCH 29,
1995 1996 1997 1997 1998 1997 1998
------- ------- ------- --------- --------- ------------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues............ $ 473.8 $ 452.6 $ 465.7 $122.8 $121.4 $465.7 $121.4
Cost of sales........... 366.2 339.1 345.9 93.1 90.3 345.9 90.3
------- ------- ------- ------ ------ ------ ------
Gross profit............ 107.6 113.5 119.8 29.7 31.1 119.8 31.1
Selling, general and
administrative
expenses............... 81.3 80.1 90.1 21.2 22.8 90.1 22.8
Operating income........ 22.0 33.4 29.7 8.5 8.3 29.7 8.3
Interest expense........ 9.4 8.0 7.5 2.0 1.8 19.3 5.3
Net income.............. 13.2 14.6 12.7 4.6 4.6 5.7 2.2
OTHER FINANCIAL DATA:
EBITDA(a)............... 27.9 39.0 35.8 10.2 10.2 35.8 10.2
Depreciation and
amortization........... 8.7 8.2 8.6 2.4 2.4 8.6 2.4
Capital expenditures.... 11.1 10.8 7.4 1.2 1.4 7.4 1.4
Ratio of EBITDA to
interest expense....... 1.9x 1.9x
BALANCE SHEET DATA (END
OF PERIOD):
Cash and cash
equivalents............ 12.7 8.8 15.4 8.2 --
Working capital......... 85.3 80.0 63.3 67.0 155.4
Total assets............ 263.3 260.7 289.1 341.0 338.7
Total debt, including
current portion........ 92.0 78.6 102.2 147.5 239.9
Preferred stock with
redemption rights...... -- -- -- -- 40.5
Stock rights(b)......... -- -- -- -- 23.3
Shareholder's equity
(deficit).............. 66.1 83.1 81.9 85.3 (65.4)
</TABLE>
15
<PAGE>
- --------
(a) EBITDA is calculated herein as operating income plus depreciation and
amortization (net of negative amortization) less amortization into income
of the pension transition asset (recognized upon adoption of SFAS No. 87)
of $2.7 million, $2.7 million, $2.5 million, $0.7 million and $0.6
million, in 1995, 1996, 1997 and for the three months ended March 30, 1997
and March 29, 1998, respectively (see Note 14 in "Notes to Combined
Financial Statements"). EBITDA has not been adjusted for what management
believes to be one-time expenses of $2.9 million recognized in 1997. These
one-time expenses include: (i) employee severance and a terminated
management compensation program of $0.9 million, (ii) warehouse closing
costs of $0.6 million, (iii) transaction costs of $0.3 million and (iv)
certain other one-time expenses of $1.1 million. The Company includes
information concerning EBITDA because it is commonly used by certain
investors as a measure of a company's ability to generate cash flows and
service debt. EBITDA should not be considered in isolation or as a
substitute for net income or cash flow from operating activities presented
in accordance with U.S. GAAP.
(b) Reflects Class A Common Stock having a value of $8.3 million and Class B
Common Stock having a value of $15.0 million issuable to DICSA upon
exchange of the Raleigh Canada Preferred Stock. The Raleigh Canada
Preferred Stock may be redeemed subsequent to the vesting of the Company's
right to exchange such stock for shares of its Common Stock, at the option
of DICSA under certain circumstances, for a cash payment of $23.3 million,
plus all accrued and unpaid dividends thereon.
16
<PAGE>
RISK FACTORS
In addition to other information contained in this Prospectus, the following
factors should be considered carefully before tendering Old Notes for Exchange
Notes. The risk factors are generally applicable to the Old Notes as well as
the Exchange Notes.
SUBSTANTIAL LEVERAGE
The Company incurred substantial indebtedness in connection with the
Recapitalization and has a highly leveraged capital structure. As of March 29,
1998, on a pro forma basis after giving effect to the Recapitalization, the
Company would have had combined total indebtedness of approximately $239.9
million (including all indebtedness and guarantees of indebtedness under the
Revolving Credit Agreement and indebtedness under the South African Credit
Facility, but excluding, in each case, unused commitments thereunder), and
shareholder's deficit would have been approximately $(65.4) million. The
Indentures, subject to certain limitations, permit additional indebtedness to
be incurred, including Secured Indebtedness. See "Capitalization",
"Description of Revolving Credit Agreement" and "Description of Exchange
Notes--Certain Covenants".
The degree to which the Company is leveraged could have important
consequences for holders of the Exchange Notes, including, without limitation,
the following: (a) the Company's ability to obtain financing in the future for
working capital, capital expenditures, acquisitions or other corporate
purposes may be impaired, (b) a substantial portion of the Company's cash flow
from operations will be required to be dedicated to the payment of interest
on, and principal of, its indebtedness, including the Exchange Notes, thereby
reducing the funds available for other purposes, (c) certain of the Company's
indebtedness, including borrowings under the Revolving Credit Agreement, will
be at variable rates of interest, which could result in higher interest
expense in the event of increases in interest rates, (d) all the indebtedness
outstanding under the Revolving Credit Agreement will be secured and
guaranteed by the obligors thereunder through a first priority fully protected
security interest in all the assets, properties and undertakings of DCC and
each other obligor thereunder where available and cost effective to do so, and
to the extent permissible by local laws, and (e) the Company's ability to
adjust to changing market conditions and to withstand competitive pressures
could be limited, and the Company may be vulnerable in the event of a downturn
in general economic conditions or its business. In addition, the Company's
ability to make acquisitions will depend on the availability of additional
debt financing on acceptable terms and will be subject to compliance with the
covenants contained in the Revolving Credit Agreement and the Indentures. The
long term growth of the Company depends, in part, on its ability to expand by
acquisition, and, therefore, an inability to finance acquisitions through
borrowed funds could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Description of the
Revolving Credit Agreement" and "Description of Exchange Notes".
DEBT SERVICE OBLIGATIONS
The Company's ability to make scheduled payments (and to refinance its
obligations) with respect to its indebtedness, including its ability to pay
the interest on, and to retire the principal of, the Exchange Notes, is
dependent upon its future operating performance, which, in turn, is subject to
general economic and competitive conditions and to financial, business and
other factors, many of which are beyond the Company's control, including
operating difficulties, increases in operating costs, decreases in product
prices, market cyclicality, actions of competitors and regulatory
developments. For the year ended December 31, 1997 and the three months ended
March 29, 1998, on a pro forma basis after giving effect to the
Recapitalization, the Company's combined total interest expense would have
been $19.3 million and $5.3 million, respectively, and the Company's combined
total ratio of earnings to fixed charges would have been 1.5 to 1.0 for both
periods. Although the Company believes that, based on current operations, it
will have sufficient cash flow from operations to service its
17
<PAGE>
obligations with respect to its indebtedness, there can be no assurance that
the Company will be able to meet such obligations. In the event that the
Company is unable to generate cash flow from operations that is sufficient to
service its obligations in respect of its indebtedness, including the Exchange
Notes, the Company may be required to take certain actions, including delaying
or reducing capital expenditures, attempting to restructure or refinance its
indebtedness, selling material assets or operations or seeking additional
equity. There can be no assurance that the Company will be able to generate
cash flow from operations that is sufficient to service its obligations in
respect of its indebtedness or that any of such actions could be effected or
would be effective to allow the Company to service such obligations. The
failure to generate sufficient cash flow from operations or to effect any of
such actions could, among other things, materially adversely affect the
Company's ability to pay interest and Additional Amounts, if any, on, and to
repay the principal of, the Exchange Notes and the market value of the
Exchange Notes. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources".
UNSECURED STATUS OF NOTES AND ASSET ENCUMBRANCE
The Indentures will permit the Company to incur certain secured
indebtedness, including indebtedness under the Revolving Credit Agreement,
which will be secured and guaranteed by the obligors thereunder through a
first priority fully protected security interest in all the assets, properties
and undertakings of DCC and each other obligor thereunder where available and
cost effective to do so, and to the extent permissible by local laws.
Borrowings under the South African Credit Facility are secured by a security
interest in certain of the assets of the Company's South African subsidiaries.
The Exchange Notes are unsecured and therefore do not have the benefit of any
such collateral. Accordingly, if an event of default were to occur under the
Revolving Credit Agreement or the South African Credit Facility, the lenders
thereunder would have the right to foreclose upon the collateral securing such
indebtedness to the exclusion of the holders of the Exchange Notes,
notwithstanding the existence of an event of default with respect to the
Exchange Notes. In such event, the assets constituting such collateral would
first be used to repay in full all amounts outstanding under the Revolving
Credit Agreement or the South African Credit Facility, as applicable,
resulting in all or a portion of the assets of the Issuers being unavailable
to satisfy the claims of holders of the Exchange Notes and other unsecured
indebtedness of the Issuers.
RESTRICTIVE LOAN COVENANTS
The Revolving Credit Agreement contains a number of covenants that, among
other things, restrict the ability of DCC and its subsidiaries to dispose of
shares in any subsidiary, dispose of assets, incur additional indebtedness,
engage in mergers and acquisitions, exercise certain options, make
investments, incur guaranty obligations, make loans, make capital
distributions, enter into joint ventures, repay the Exchange Notes, make loans
or pay any dividend or distribution to the Issuers for any reason other than
(among other things) to pay interest (but not principal or Additional Amounts)
owing in respect of the Exchange Notes, incur liens and encumbrances and
permit the amount of receivables and inventory to exceed specified thresholds.
In addition, the Revolving Credit Agreement will require the Company to
maintain specified financial ratios and tests, including a minimum interest
coverage ratio, minimum consolidated net worth, a minimum level of Adjusted
EBITDA (as defined in the Revolving Credit Agreement) and a maximum leverage
ratio. The ability of the Company to comply with these and other provisions of
the Revolving Credit Agreement may be affected by changes in general economic
and competitive conditions and by financial, business and other factors that
are beyond the Company's control. The failure to comply with the provisions of
the Revolving Credit Agreement could result in an event of default thereunder,
and, depending upon the actions of the lenders thereunder, all amounts
borrowed under the Revolving Credit Agreement, together with accrued interest,
could be declared due and payable. If the Company were not able to repay all
18
<PAGE>
amounts borrowed under the Revolving Credit Agreement, together with accrued
interest, the lenders thereunder would have the right to proceed against the
collateral granted to them to secure such indebtedness. See "--Unsecured
Status of Exchange Notes and Asset Encumbrance". If the indebtedness
outstanding under the Revolving Credit Agreement were to be accelerated, there
can be no assurance that the assets of the Company would be sufficient to
repay in full such indebtedness, and there can be no assurance that there
would be sufficient assets remaining after such repayments to pay amounts due
in respect of any or all of the Exchange Notes. See "Description of Revolving
Credit Agreement" and "Description of Exchange Notes--Ranking".
In addition, the Indentures contain certain covenants that, among other
things, restrict the ability of DCC and its Restricted Subsidiaries to incur
additional indebtedness, pay dividends on and redeem capital stock, redeem
certain subordinated obligations, make investments, undertake sales of assets
and subsidiary stock, engage in certain transactions with affiliates, sell or
issue capital stock,
permit liens to exist, operate in other lines of business, engage in certain
sale and leaseback transactions and engage in mergers, consolidations or sales
of all or substantially all the assets of the Company. A failure to comply
with the restrictions contained in either of the Indentures could result in an
event of default under such Indenture. See "Description of Exchange Notes--
Certain Covenants" and "--Defaults".
HOLDING COMPANY STRUCTURE; STRUCTURAL SUBORDINATION
Although DCC conducts certain operations as described under "Business--
Raleigh USA", DCC conducts a substantial majority of its operations through
direct or indirect subsidiaries. Moreover, Lyon is an intermediate holding
company and conducts all its operations through direct or indirect wholly
owned subsidiaries. As a result, the Issuers must rely upon distributions and
other inter-company payments from operating subsidiaries for the funds
necessary to meet their obligations, including the payment of principal,
premium, interest, Additional Amounts, if any, and any other amounts, owing in
respect of the Exchange Notes. The Indentures contain certain covenants that
limit the ability of DCC to create or permit to exist any restriction on the
ability of the Restricted Subsidiaries to pay dividends or make certain other
distributions. Nonetheless, the ability of the subsidiaries of DCC and Lyon to
make any such payments is subject to, among other things, restrictions imposed
by the Revolving Credit Agreement and by applicable laws and regulations and
by terms of any agreements to which they are or may become parties. In
addition, there can be no assurances that such distributions will be adequate
to fund all the obligations of the Issuers, including their obligations with
respect to the Exchange Notes.
The Exchange Notes will be effectively subordinated to all liabilities of
the subsidiaries of DCC other than Lyon. Upon consummation of the
Recapitalization, the liabilities of the subsidiaries of DCC other than Lyon
include (i) borrowings under the Revolving Credit Agreement, which are secured
and guaranteed by the obligors thereunder through a first priority fully
protected security interest in all the assets, properties and undertakings of
DCC and each other obligor thereunder where available and cost effective to do
so, and to the extent permissible by local laws, (ii) borrowings under the
South African Credit Facility, which are secured by a security interest in
certain of the Company's South African subsidiaries, and (iii) indebtedness to
trade creditors and similar indebtedness incurred in the ordinary course of
business. As of March 29, 1998, on a pro forma basis after giving effect to
the Recapitalization, the outstanding indebtedness of the subsidiaries of DCC
other than Lyon would have been $79.8 million (consisting of indebtedness
under the Revolving Credit Agreement and indebtedness under the South African
Credit Facility, but excluding, in each case, unused commitments thereunder),
all of which would have been Secured Indebtedness, and at such date, the total
liabilities of the subsidiaries of DCC (excluding Lyon) would have been
approximately $332.0 million, including trade payables. The Exchange Notes
will be unsecured obligations of the Issuers and will not have the benefit of
a guarantee from any of the subsidiaries of DCC or of Lyon or any collateral.
All borrowings made under the Revolving Credit Agreement will be made by DCC
and
19
<PAGE>
certain of its subsidiaries (other than Lyon). In the event of the insolvency,
bankruptcy, liquidation or reorganization of any of the subsidiaries of DCC
other than Lyon, creditors of DCC and Lyon, including the holders of the
Exchange Notes, would be subject to the prior claims of the creditors of such
subsidiary (including the lenders under the Revolving Credit Agreement and the
South African Credit Facility, if applicable).
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Exchange Notes
will have the right to require the Issuers to repurchase such holder's
Exchange Notes at a price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest and Additional Amounts, if any, to
the date of repurchase. The occurrence of certain events which would
constitute a Change of Control would also constitute a default under the
Revolving Credit Agreement. In addition, the Revolving Credit Agreement will
effectively prevent the repurchase of the Exchange Notes by the Issuers in the
event of a Change of Control unless all amounts outstanding under the
Revolving Credit Agreement are repaid in full, and the Indentures will provide
that, prior to mailing to holders of Exchange Notes the required notice in
respect of any Change of Control, but in any event within 30 days following
any Change of Control, the Issuers must repay in full all Senior Indebtedness
(which would include all amounts outstanding under the Revolving Credit
Agreement) or obtain the requisite consent under the agreements governing the
Senior Indebtedness (which would include the Revolving Credit Agreement) to
permit the repurchase of the Exchange Notes as provided in the Indentures. The
Issuers' failure to repurchase the Exchange Notes would result in an event of
default under the Indentures. The inability to repay all indebtedness
outstanding under the Revolving Credit Agreement, if accelerated, would also
constitute an event of default under the Indentures. Any such event of default
under the Indentures could materially adversely effect the Company and the
holders of the Exchange Notes. In the event of a Change of Control, there can
be no assurance that the Company would have sufficient assets to satisfy all
obligations under the Revolving Credit Agreement and the Indentures. Future
indebtedness of the Company may also contain prohibitions of certain events or
transactions which would constitute a Change of Control. See "Description of
Revolving Credit Agreement" and "Description of Exchange Notes--Change of
Control".
RISKS ASSOCIATED WITH GROWTH STRATEGY
A significant component of the Company's business strategy is the growth of
the Company's product and customer base through the acquisition of companies
in similar lines of business. Although the Company believes that there
currently exist a number of opportunities for such acquisitions, there can be
no assurance that the Company will be able to successfully exploit any such
opportunities or that additional opportunities will be available in the
future. To capitalize on acquisition opportunities, the Company may need to
obtain additional capital. To raise such capital, the Company may elect to
undertake additional debt financings, which would result in additional
leverage. The incurrence of additional indebtedness will be limited by the
covenants contained in the Revolving Credit Agreement and the Indentures. See
"Description of Revolving Credit Agreement" and "Description of Exchange
Notes--Certain Covenants".
Growth through the acquisition of companies in similar lines of business, as
well as internal expansion, will place demands on the Company's management,
employees, operations and physical and financial resources. To manage its
growth, the Company must continue to implement and improve its operational and
financial systems and to expand, train and manage its employee base. Any
inability of the Company to attract and retain the executive and managerial
personnel required to expand its business could have a material adverse effect
on the Company's business, financial condition and results of operations. In
addition, if the Company's systems, procedures or controls are not adequate to
support the Company's operations, management may not be able to achieve the
expansion necessary to exploit potential market opportunities for the
Company's products.
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<PAGE>
RISK OF FOREIGN EXCHANGE RATE FLUCTUATIONS; INTRODUCTION OF THE EURO
The Company's business is conducted by operating subsidiaries in many
countries, and, accordingly, the Company's results of operations are subject
to currency translation risk and currency transaction risk. With respect to
currency translation risk, the results of operations of each of these
operating subsidiaries is reported in the relevant local currency and then
translated into U.S. dollars at the applicable currency exchange rate for
inclusion in the Company's financial statements. The appreciation of the U.S.
dollar against the local currencies of the operating subsidiaries will have a
negative impact on the Company's sales and operating margin. Conversely, the
depreciation of the U.S. dollar against such currencies will have a positive
impact. Fluctuations in the exchange rate between the U.S. dollar and the
other currencies in which the Company conducts its operations may also affect
the book value of the Company's assets and the amount of the Company's
shareholders' equity. In addition, to the extent indebtedness of the Company
is denominated in different currencies, changes in the values of such
currencies relative to other currencies in which the Company conducts its
operations may have a negative impact on the Company's ability to meet
principal and interest obligations in respect of such indebtedness.
In addition to currency translation risk, the Company incurs currency
transaction risk to the extent that the Company's operations involve
transactions in differing currencies. Fluctuations in currency exchange rates
will impact the Company's results of operations to the extent that the costs
incurred by the operating subsidiaries are denominated in currencies that
differ from the currencies in which the related sale proceeds are denominated.
To mitigate such risk, the Company enters into forward purchase contracts
primarily relating to the pound Sterling, the U.S. dollar, the Dutch Guilder,
the Deutsche Mark, the New Taiwan dollar and the Yen. The Company does not
enter into forward purchase agreements for speculative purposes. Given the
volatility of currency exchange rates, there can be no assurance that the
Company will be able effectively to manage its currency transaction risks or
that any volatility in currency exchange rates will not have a material
adverse effect on the Company's business, financial condition or results of
operations.
Under the treaty on the European Economic and Monetary Union (the "Treaty"),
to which the Federal Republic of Germany is a signatory, on January 1, 1999,
and subject to the fulfillment of certain conditions, a European single
currency (the "Euro") may replace all or some of the currencies of the member
states of the European Union (the "E.U."), including the Deutsche Mark. If,
pursuant to the Treaty, the Deutsche Mark is replaced by the Euro, the payment
of principal of, or interest and Additional Amounts, if any, on, the DM
Exchange Notes and the Revolving Credit Agreement will be effected in Euro in
conformity with legally applicable measures taken pursuant to, or by virtue
of, the Treaty. The circumstances and consequences described in this paragraph
do not entitle the Company or any holder of the Exchange Notes or participant
in the Revolving Credit Agreement to early redemption, rescission, notice,
repudiation, adjustment or renegotiation of the terms and conditions of the
Exchange Notes, the Indentures or the Revolving Credit Agreement or to raise
other defenses or to request any compensation claim, nor will they affect any
of the obligations of the Company under the Exchange Notes, the Indentures or
the Revolving Credit Agreement. Additionally, the Dutch Guilder, the Irish
Punt and certain other currencies in which Derby's revenues are earned will
also be replaced by the Euro.
CONTROLLING SHAREHOLDERS
As a result of the Recapitalization, DFS, Thayer and Perseus, directly or
indirectly, own all the outstanding capital stock of DCC, and control the
affairs and policies of DCC. Circumstances may occur in which the interests of
such investors, as shareholders of DCC, may conflict with the interests of the
holders of the Exchange Notes. For example, these investors may have an
interest in pursuing acquisitions, divestitures or other transactions that, in
their judgment, could enhance their equity
21
<PAGE>
investment, even though such transactions might involve risks to the holders
of the Exchange Notes. See "Security Ownership of Certain Beneficial Owners
and Management".
CHANGES IN ECONOMIC CONDITIONS
The Company's business is subject to changes in general economic conditions
insofar as discretionary spending, such as purchases of bicycles, tends to
decline in periods of economic uncertainty. Accordingly, any significant
decline in general economic conditions, including uncertainty regarding future
economic prospects, could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company's
business is also subject to changes in consumer preferences. Although the
Company has benefitted from increased interest in fitness activities,
including bicycling, in recent years, there can be no assurance that this
interest will continue to grow, or that the Company will be able to sustain
current levels of production and sales, or to increase such levels. Any
significant decline in the size of the bicycle market or any segment of the
bicycle market in which the Company competes, whether as a result of a
downturn in general economic conditions or a decrease in the popularity of
bicycling or otherwise, could have a material adverse effect on the Company's
business, financial condition and results of operations.
DEPENDENCE UPON NEW PRODUCT INTRODUCTIONS
The bicycle industry, in recent years, has been characterized by frequent
new product introductions. The Company believes that the frequent introduction
of new, innovative bicycles as well as parts and accessories that respond
timely to changing consumer demands will be critical to its future success.
Although the Company has generally been successful in the introduction of its
bicycles, parts and accessories, no assurance can be given that the Company
will be able to continue to design and manufacture products that will achieve
commercial success. In addition, successful designs for various bicycle models
may be rendered obsolete within a relatively short period of time as new
products are introduced into the market. In the event the Company is unable to
successfully design and manufacture products in response to consumer demands,
the Company's business, financial condition and results of operations would be
materially adversely affected.
WEATHER CONDITIONS AND SEASONALITY
Demand for bicycles in the Company's principal markets is influenced by
weather conditions. For example, warm weather tends to increase sales of
bicycles, and cold, wet weather tends to reduce sales of bicycles. Moreover,
demand for bicycles in the Company's principal markets is seasonal,
characterized in most cases by a majority of consumer sales in the spring and
summer months, with a strong bias towards consumer sales in the last four
months of the calendar year in the United Kingdom, South Africa and Ireland.
Seasonality in the United Kingdom, South Africa and Ireland is influenced by
increased sales of juvenile bicycles in the month preceding Christmas.
Accordingly, dealers' peak purchasing months are October and November when
they build inventory in anticipation of Christmas sales of juvenile bicycles.
The Company seeks to mitigate the impact of the seasonality of the demand for
bicycles by varying the amount of labor employed throughout the year.
Additional labor is employed in the months before and during the periods of
greater consumer sales through the operation of longer shifts and the hiring
of temporary workers. In addition, certain of the Company's local operations,
such as those in Canada, are closed during periods of low production. There
can be no assurance, however, that the Company will be able to successfully
respond to changes in demand for bicycles due to variations in weather
conditions or to manage its working capital needs. Any failure to so respond
may have a material adverse effect on the Company's business, financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business--Employees".
22
<PAGE>
HIGHLY COMPETITIVE INDUSTRY
The market for bicycles, parts and accessories is highly competitive.
Competition in the bicycle industry is based upon price, quality, brand name
and service. In all its product categories, the Company competes with other
manufacturers and distributors, some of which have well-recognized brand names
and substantial financial, technological, distribution, advertising and
marketing resources. In addition, several bicycle manufacturers and component
suppliers that have substantial resources do not currently compete directly
with the Company, but could pose a significant competitive threat to the
Company in the future. Moreover, additional competitors could enter the
Company's markets, as management believes the barriers to entering the bicycle
designing and manufacturing businesses are low. Management also believes,
however, that it would be difficult for a new competitor to build a
distribution network as effective as the Company's distribution network.
Like other bicycle manufacturers, the Company also faces competition from
bicycles imported from the Far East. In recent years, the impact of this
competition has diminished due to the imposition of anti-dumping duties by the
E.U. Specifically, imports from the Far East have been constrained by E.U.
initiatives such as the 30.6% anti-dumping duty on Chinese bicycles introduced
in 1993, which continues in effect until September 1998. The E.U. has also
imposed anti-dumping duties and tarriffs, ranging up to 39.4%, on bicycles
imported from most manufacturers in Thailand, Malaysia and Indonesia. In
addition, in January 1997, the E.U. strengthened its existing regulations to
prevent circumvention through the importation of kits and partially assembled
bicycles. In November 1997, the E.U. opened an anti-dumping inquiry into
imports from Taiwan.
There can be no assurance that the Company will be able to compete
successfully in the future with other bicycle manufacturers located in its
principal markets or in the Far East or that the expiration or repeal of
existing anti-dumping duties or competition in the bicycle industry will not
have a material adverse effect on the Company's business, financial condition
and results of operations.
DEPENDENCE ON CERTAIN SUPPLIERS
The Company's operations are highly dependent upon products manufactured by
non-U.S. suppliers located primarily in Taiwan and Japan and, to a lesser
extent, in China. As is common in the bicycle industry, a substantial majority
of the Company's multi-speed bicycles contain components supplied by Shimano,
the world's largest bicycle component manufacturer and supplier, and a brand
with a strong reputation among bicycle consumers. Although Shimano has not
indicated any intention to limit or reduce sales of components to the Company,
if it were to do so, the Company's business, financial condition and results
of operations could be adversely affected. Although the Company has
established relationships with its principal suppliers, the Company's future
success will depend on its ability to maintain such relationships and to
develop relationships with new suppliers. In the event of a delay or
disruption in the supply of components, the Company believes that suitable
alternative suppliers could be located, although the transition to other
suppliers could result in significant production delays. Any significant delay
or disruption in the supply of components could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business--Group Operations--Suppliers".
INTERNATIONAL OPERATIONS
Most of the Company's operations are conducted outside the United States and
are subject to the risks that are inherent in operating abroad, including,
without limitation, the risks associated with governmental regulation, taxes,
import duties and trade restrictions. Although the Company believes it is
substantially in compliance with government regulations, changes in such
regulations or the actions of regulators, including changes in administration
and enforcement policies and practices, may from time to time require
operational modifications, the payment of fines, or both. The Company is also
subject to numerous foreign taxes and import duties. Certain historical
intercompany transactions as
23
<PAGE>
well as a series of such transactions involved in the Restructuring have been
designed to minimize applicable foreign taxes. There can be no assurance that
the relevant tax authorities will not challenge the tax position taken by the
Company. Any challenge by a tax authority of a position taken by the Company
could materially adversely affect the Company's business, financial condition
and results of operations.
The Company's business is subject to the risks associated with the enactment
of additional legislation and regulations, or modification of existing
legislation and regulations, or changes in administration and enforcement
policies and practices, related to exports or imports of bicycles, parts and
accessories, including duties and quotas and other charges and limitations, by
the governments in each of the countries in which it has operations or markets
bicycles. The Company's business is also subject to the risks associated with
similar enactments or modifications by the E.U. Changes in the existing
legislation, regulations, administration and enforcement policies and
practices related to the exports or imports of bicycles, parts and accessories
could have a material adverse effect on the Company's business, financial
condition and results of operations.
INVENTORY RISKS
The Company must maintain significant inventories of bicycles and bicycle
components to accommodate the short lead times of its customers, particularly
mass merchandisers in Germany and Canada. Because the market for bicycles,
parts and accessories is subject to changing consumer preferences, the Company
is subject to the risks that demand for existing products will dissipate and
that new products will not achieve widespread acceptance. In either event, the
Company may be required to accept significant price markdowns or to retain
unsold inventory, which may have a material adverse effect on the Company's
business, financial condition and results of operations.
PRODUCT LIABILITY
Due to the nature of the Company's business, the Company is a defendant in a
number of product liability lawsuits. The plaintiffs in these lawsuits
generally seek damages, in amounts that may be material, for personal injuries
allegedly sustained as a result of alleged defects in the Company's products.
Although the Company maintains product liability insurance, due to the
uncertainty as to the nature and extent of manufacturers' and distributors'
liability for personal injuries, there can be no assurance that the product
liability insurance maintained by the Company is or will be adequate to cover
product liability claims or that the applicable insurer will be solvent at the
time of any covered loss. In addition, due to deductibles, self-retention
levels and aggregate coverage amounts applicable under the Company's insurance
policies, the Company will bear responsibility for a significant portion, if
not all, of the defense costs (which include attorneys' fees and expenses
incurred in the defense of any claim) and the related payments to satisfy any
judgments associated with any claim asserted against the Company in excess of
any applicable coverage. The settlement of a significant number of insured
claims, the settlement of a claim exceeding the Company's insurance coverage
or the successful assertion or settlement of an uninsured claim could have a
material adverse effect on the Company's business, financial condition or
results of operations. There can be no assurance that insurance will remain
available, or, if available, will not be prohibitively expensive. The
deductible under Derby's insurance policies is currently $250,000 per claim;
however, prior to 1993, the deductible was $1.0 million per claim. Not all
claims arising during the period in which the Company's deductible was $1.0
million have been resolved and it is possible that additional claims may be
filed. The aggregate amount of liability under existing and potential claims
could exceed the reserves established by the Company for product liability
claims. See "Business--Legal Proceedings".
PRODUCT RECALLS
Although the Company has not recently experienced a significant product
recall, the Company has, in the past, recalled certain bicycle models. If the
Company were required to make a significant
24
<PAGE>
product recall, such a recall could have a material adverse effect on the
Company's business, financial condition or results of operations. In common
with the rest of the bicycle industry, components fitted to its bicycles may
be subject to a recall program of the component supplier.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the continued services of its senior management
team. Although the Company believes that it will be able to retain these key
employees, and the Company believes that it would be able to replace these key
employees should the need arise, the loss of these key employees could have a
material adverse effect on the Company's business, financial condition or
results of operations. See "Management--Directors and Executive Officers of
the Company".
FRAUDULENT CONVEYANCE
The incurrence by the Issuers of indebtedness represented by the Old Notes
(and subsequently the Exchange Notes) to finance the Recapitalization may be
subject to review under U.S. federal bankruptcy law or relevant state
fraudulent transfer laws if a bankruptcy or reorganization case or lawsuit is
commenced by or on behalf of creditors of the Issuers. Under these laws, if a
court were to find that, after giving effect to the sale of the Old Notes and
the application of the net proceeds therefrom, (i) either Issuer incurred such
indebtedness with the intent of hindering, delaying or defrauding present or
future creditors or (ii) either Issuer received less than the reasonably
equivalent value in consideration for incurring such indebtedness and, at the
time of the incurrence of such indebtedness, such Issuer (a) was insolvent or
was rendered insolvent by reason of such transactions, (b) was engaged or was
about to engage in a business or transaction for which the remaining
unencumbered assets of such Issuer constituted unreasonably small capital or
(c) intended to incur, or believed that it would incur, debts beyond its
ability to pay as they matured or became due, such court might subordinate
such indebtedness to presently existing or future indebtedness of such Issuer,
void the issuance of such indebtedness and direct the repayment of any amounts
paid thereunder to the creditors of such Issuer or take other action
detrimental to the holders of the Exchange Notes.
Under U.S. federal law and relevant state fraudulent transfer laws, the
measure of insolvency varies depending upon the law of the particular
jurisdiction being applied. Generally, however, a debtor would be considered
insolvent, with respect to a particular date, if on such date, the sum of all
its liabilities, including contingent liabilities, was greater than the value
of all its assets at fair valuation, or if the present fair saleable value of
the debtor's assets was less than the amount required to repay its probable
liabilities on its debts, including contingent liabilities, as they become
absolute and matured.
Because proceeds of the Old Notes were used to refinance indebtedness
incurred in connection with the Recapitalization, a court might find that the
Issuers did not receive fair consideration or reasonably equivalent value for
the incurrence of the indebtedness represented by the Old Notes (and
subsequently the Exchange Notes). In addition, if a court were to find that
any component of the Recapitalization constituted a fraudulent transfer, to
the extent proceeds from the Exchange Notes were used to finance or refinance
such component, a court might find that the Issuers did not receive fair
consideration or reasonably equivalent value for incurring the indebtedness
represented by the Exchange Notes.
The Issuers believe that they received equivalent value at the time the
indebtedness under the Old Notes was incurred. In addition, after giving
effect to the issuance of the Exchange Notes, each of the Issuers (i) believes
that it is not insolvent or rendered insolvent, (ii) believes that it is not
engaged in a business or transaction for which its remaining unencumbered
assets constitute unreasonably small capital and (iii) does not intend to
incur, or believe that it will incur, debts beyond its ability to pay as they
mature. These beliefs are based upon the analyses of internal cash flow
projections and estimated values of assets and liabilities of the Issuers at
the time of the Initial Offering. There can be no assurance, however, that a
court passing on these issues would make the same determination.
25
<PAGE>
Although the Indentures are governed by New York law, such law (or U.S. law
or the laws of any other state of the United States for that matter) may not
apply to a fraudulent conveyance claim or other claims of competing creditors;
the Issuers cannot predict which law would be applied or what the outcome
would be. In rendering its opinion as to the validity of the Exchange Notes,
U.S. counsel for the Issuers or the Initial Purchasers expressed no opinion as
to any laws relating to fraudulent transfers.
Fraudulent conveyance legislation also is in force in The Netherlands.
Portions of this legislation provide generally that certain transactions with
a creditor entered into by the debtor are subject to rescission; provided that
both parties to the transaction knew or should have known that the transaction
would prejudice other creditors or that the debtor had made an application for
bankruptcy. Knowledge that the transaction would prejudice other creditors is
presumed by law for all transactions performed within one year of the
adjudication before bankruptcy or within one year before the date the claim of
fraudulent conveyance is made, if it is also established that one of the
conditions mentioned in Article 43 of the Bankruptcy Act or Article 3:46 of
the Dutch Civil Code is fulfilled. These conditions include, but are not
limited to, situations in which (i) the value of the obligation of the debtor
materially exceeds the value of the obligation of the creditor or (ii) the
debtor pays or grants security for debts which are not yet due. This
presumption of knowledge may be rebutted.
LIABILITY FOR ENVIRONMENTAL MATTERS
The Company is subject to a wide variety of governmental requirements
related to environmental protection including, among other things, the
management of hazardous substances and wastes. Although the Company has made
and will continue to make significant expenditures related to its
environmental compliance obligations, there can be no assurance that the
Company will at all times be in compliance with all such requirements.
Moreover, the Company's existing and historical operations, including the
operations of its predecessors, expose the Company to the risk of clean-up
liabilities or environmental or personal injury claims related to releases and
emissions of hazardous substances and wastes. Such liabilities and claims
could require the Company to incur material costs related to such releases or
to the investigation or remediation of contaminated property. Also, changes in
existing environmental requirements or the imposition of additional
environmental liabilities related to existing or historical operations could
result in substantial cost to the Company.
ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF EXCHANGE NOTES
The Old Notes were issued to, and the Issuers believe are currently owned
by, a relatively small number of beneficial owners. Prior to the Exchange
Offer, there has not been any public market for the Old Notes. The Old Notes
have not been registered under the Securities Act and will be subject to
restrictions on transferability to the extent that they are not exchanged for
Exchange Notes by holders who are entitled to participate in this Exchange
Offer. The holders of Old Notes (other than any such holder who is an
"affiliate" of the Issuers within the meaning of Rule 405 under the Securities
Act) who are not eligible to participate in the Exchange Offer are entitled to
certain registration rights, and the Issuers are required to file a Shelf
Registration Statement with respect to such Old Notes. The Exchange Notes will
constitute a new issue of securities with no established trading market. The
Initial Purchasers have advised the Issuers that they currently intend to make
a market in the Exchange Notes, but they are not obligated to do so and may
discontinue such market making at any time. In addition, such market making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer and the pendency of
the Shelf Registration Statement. Accordingly, no assurance can be given that
an active public or other market will develop for the Exchange Notes or as to
the liquidity of the trading market for the Exchange Notes. If a trading
market does not develop or is not maintained, holders of the Exchange Notes
may experience difficulty in reselling the Exchange Notes or may be unable to
sell them at all. If a market for the Exchange Notes develops, any such market
may be discontinued at any time.
26
<PAGE>
If a public trading market develops for the Exchange Notes, future trading
prices of such securities will depend on many factors including, among other
things, prevailing interest rates, the Issuers' results of operations and the
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Issuers, the Exchange Notes may trade at a discount from
their principal amount.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the Exchange Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after a timely tender of Old Notes by
tendering holders pursuant to the instructions set forth in this Prospectus
and the accompanying Letter of Transmittal. Therefore, holders of the Old
Notes desiring to tender such Old Notes in exchange for Exchange Notes should
allow sufficient time to ensure timely tender. The Issuers are under no duty
to give notification of defects or irregularities with respect to the tenders
of Old Notes for exchange. Old Notes that are not tendered or are tendered but
not accepted will, following the consummation of the Exchange Offer, continue
to be subject to the existing restrictions upon transfer thereof, and, upon
consummation of the Exchange Offer certain registration rights under the
Exchange and Registration Rights Agreement will terminate. In addition, any
holder of Old Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities, and if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. See "Plan
of Distribution". To the extent that Old Notes are tendered and accepted in
the Exchange Offer, the trading market for untendered and tendered but
unaccepted Old Notes could be adversely affected. See "The Exchange Offer".
INFORMATION TECHNOLOGY--YEAR 2000
The Company is in the process of implementing a plan designed to ensure that
all application software used in connection with the Company's management
information systems, including internally developed systems, software
purchased from outside vendors and embedded chips at the Company's
manufacturing facilities, will manage and manipulate data involving the
transition of dates from 1999 to 2000 without functional or data abnormality
and without inaccurate results related to such dates. Due to the fact that
existing software often defines each year with two digits rather than four
digits, the Company's computers that have date-sensitive software may
recognize a date using "00" as occurring in the year 1900 rather than the year
2000, which would result in such abnormalities and inaccuracies and lead to
disruptions of the Company's operations, including a temporary inability to
process customer orders, send invoices or engage in other normal business
activities. Many of the Company's existing computer systems will need to be
retired, replaced or remediated prior to the year 2000. Retirement,
replacement and remediation may require that, over the next few years, a
substantial portion of the Company's management information systems spending
be allocated to such activities. The Company is currently in the process of
replacing and upgrading the computer systems of its United States and Canadian
operations. The Company expects to spend a total of approximately $1.8 million
in 1998 and $0.1 million in 1999 to achieve "Year 2000 compliance" for all of
its operations. The Company plans to complete all Year 2000 compliance efforts
by early 1999. The costs and timing of such efforts, however, are based upon
management's best estimates, which are derived using assumptions relating to,
among other things, the availability of certain resources, the timing of
actions taken by third parties and other factors. Additional expenditures
beyond the Company's projections may be necessary. In the event that the
Company materially underestimates the amount of funds or the time necessary to
resolve identified problems or that any information systems relied upon by the
Company for critical functions are not substantially Year 2000 compliant in a
timely manner, there could be a material adverse effect on the Company's
business, financial condition and results of operations.
27
<PAGE>
EXCHANGE RATE INFORMATION
The revenues and expenses of the Company's operations are denominated in
numerous foreign currencies. Except as noted, amounts herein are denominated
in U.S. dollars. Conversions of foreign currencies to U.S. dollars in the
financial information included herein and in the historical financial
statements included elsewhere herein have been calculated, for income
statement purposes, on the basis of average exchange rates over the related
periods and, for balance sheet purposes, on the date thereof.
The following tables sets forth, for the periods indicated, certain
information concerning the Noon Buying Rate in U.S. dollars for certain
principal currencies in which the Company does business. The term "Noon Buying
Rate" means the noon buying rate in New York City for cable transfers into
foreign currencies as certified for customs purposes by the Federal Reserve
Bank of New York. Such rates are provided solely for the convenience of the
reader and should not be construed as a representation that foreign currency
amounts actually represent such U.S. dollar amounts or that such foreign
currency amounts could have been, or could be, converted into U.S. dollars at
that rate or at any other rate. Such rates may differ from the actual rates
used in the preparation of the financial statements and other financial
information of the Company appearing herein. See "Risk Factors--Risk of
Foreign Exchange Rate Fluctuations; Introduction of the Euro". Rates for the
Yen and the New Taiwan dollar are included because the Company purchases a
substantial amount of bicycle components in those currencies.
Pounds Sterling
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, Average Rate/(1)/ High Low Period End
- ------------------------------ ----------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
1993.................... (Pounds)0.67 (Pounds)0.70 (Pounds)0.63 (Pounds)0.68
1994.................... 0.65 0.68 0.61 0.64
1995.................... 0.63 0.65 0.61 0.65
1996.................... 0.64 0.67 0.58 0.58
1997.................... 0.61 0.63 0.58 0.60
<CAPTION>
Three Months Ended
- ------------------
<S> <C> <C> <C> <C>
March 30, 1997.......... 0.61 0.63 0.59 0.61
March 29, 1998.......... 0.61 0.62 0.59 0.59
- --------
/(1)/The average of the Noon Buying Rates on the last day of each month during
the relevant period. On August 5, 1998, the Noon Buying Rate was
(Pounds)0.61 to $1.00.
Dutch Guilders
<CAPTION>
Fiscal Year Ended December 31, Average Rate/(1)/ High Low Period End
- ------------------------------ ----------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
1993.................... NLG1.87 NLG1.96 NLG1.78 NLG1.95
1994.................... 1.81 1.95 1.69 1.74
1995.................... 1.60 1.71 1.54 1.60
1996.................... 1.69 1.73 1.65 1.73
1997.................... 1.96 2.07 1.84 2.03
<CAPTION>
Three Months Ended
- ------------------
<S> <C> <C> <C> <C>
March 30, 1997.......... 1.86 1.93 1.73 1.89
March 29, 1998.......... 2.05 2.07 2.01 2.06
</TABLE>
- --------
/(1)/The average of the Noon Buying Rates on the last day of each month during
the relevant period. On August 5, 1998, the Noon Buying Rate was NLG2.00
to $1.00.
28
<PAGE>
Deutsche Marks
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, Average Rate/(1)/ High Low Period End
- ------------------------------ ----------------- ------ ------ ----------
<S> <C> <C> <C> <C>
1993................................ DM1.66 DM1.74 DM1.59 DM1.74
1994................................ 1.61 1.74 1.50 1.55
1995................................ 1.43 1.52 1.38 1.43
1996................................ 1.51 1.54 1.47 1.54
1997................................ 1.74 1.84 1.64 1.80
<CAPTION>
Three Months Ended
- ------------------
<S> <C> <C> <C> <C>
March 30, 1997...................... 1.65 1.72 1.54 1.68
March 29, 1998...................... 1.82 1.84 1.78 1.83
</TABLE>
- --------
/(1)/The average of the Noon Buying Rates on the last day of each month during
the relevant period. On August 5, 1998, the Noon Buying Rate was DM1.77 to
$1.00.
Canadian dollars
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, Average Rate/(1)/ High Low Period End
- ------------------------------ ----------------- -------- -------- ----------
<S> <C> <C> <C> <C>
1993............................ CAN$1.29 CAN$1.34 CAN$1.25 CAN$1.33
1994............................ 1.37 1.40 1.33 1.40
1995............................ 1.37 1.41 1.34 1.37
1996............................ 1.36 1.37 1.34 1.37
1997............................ 1.39 1.43 1.35 1.43
<CAPTION>
Three Months Ended
- ------------------
<S> <C> <C> <C> <C>
March 30, 1997.................. 1.36 1.38 1.34 1.38
March 29, 1998.................. 1.43 1.46 1.41 1.41
</TABLE>
- --------
/(1)/The average of the Noon Buying Rates on the last day of each month during
the relevant period. On August 5, 1998, the Noon Buying Rate was CAN$1.52
to $1.00.
Yen
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, Average Rate/(1)/ High Low Period End
- ------------------------------ ----------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1993.................... (Yen)110.68 (Yen)124.97 (Yen)104.73 (Yen)111.70
1994.................... 101.27 108.72 96.90 99.60
1995.................... 94.07 103.28 84.04 103.28
1996.................... 109.31 115.77 104.63 115.77
1997.................... 121.85 130.45 114.61 130.45
<CAPTION>
Three Months Ended
- ------------------
<S> <C> <C> <C> <C>
March 30, 1997.......... 120.93 124.54 115.24 123.93
March 29, 1998.......... 128.05 133.99 123.31 130.17
- --------
/(1)/The average of the Noon Buying Rates on the last day of each month during
the relevant period. On August 5, 1998, the Noon Buying Rate was
(Yen)144.38 to $1.00.
New Taiwan dollar
<CAPTION>
Fiscal Year Ended December 31, Average Rate/(1)/ High Low Period End
- ------------------------------ ----------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1993.................... NT$26.42 NT$26.96 NT$25.41 NT$26.63
1994.................... 26.47 27.09 26.02 26.29
1995.................... 26.50 27.55 25.17 27.29
1996.................... 27.46 28.17 24.69 27.52
1997.................... 28.75 33.25 27.34 28.75
<CAPTION>
Three Months Ended
- ------------------
<S> <C> <C> <C> <C>
March 30, 1997.......... 27.49 27.63 27.32 27.55
March 29, 1998.......... 33.19 34.80 32.05 32.63
</TABLE>
- --------
/(1)/The average of the Noon Buying Rates on the last day of each month during
the relevant period. On August 5, 1998, the Noon Buying Rate was NT$34.50
to $1.00.
29
<PAGE>
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Issuers'
obligations under the Purchase Agreement and the Exchange and Registration
Rights Agreement. The Issuers will not receive any cash proceeds from the
issuance of the Exchange Notes offered hereby. In consideration for issuing
the Exchange Notes contemplated in this Prospectus, the Issuers will receive
Old Notes in like principal amount, the form and terms of which are the same
as the form and terms of the Exchange Notes (which replace the Old Notes),
except as otherwise described herein. The Old Notes surrendered in exchange
for Exchange Notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the Exchange Notes will not result in any increase or
decrease in the indebtedness of the Issuers. As such, no effect has been given
to the Exchange Offer in the pro forma statements or capitalization tables.
The net proceeds from the issuance of the Old Notes was $156.9 million
($154.1 million after deduction of the commission payable to the Initial
Purchasers). These proceeds, together with the funds borrowed under the
Revolving Credit Agreement and proceeds from the Equity Contributions and the
Company's excess cash, were used to finance the Recapitalization and to pay
fees and expenses related thereto. See "The Recapitalization".
30
<PAGE>
CAPITALIZATION
The following table sets forth, as of March 29, 1998, (i) the historical
cash and cash equivalents, and the capitalization, of the Company and (ii) the
unaudited pro forma cash and cash equivalents, and the capitalization, of the
Company giving effect to the Recapitalization. The pro forma capitalization
does not give effect to the Company's obligation to make the Additional
Payment to DFS of up to $10.0 million depending on the performance of DCC and
certain of its subsidiaries in the 1998 fiscal year. This information was
derived from, is qualified by reference to, and should be read in conjunction
with, "Unaudited Pro Forma Condensed Combined Financial Statements",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the combined financial statements and accompanying notes
thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
MARCH 29, 1998
---------------------
ACTUAL PRO FORMA
---------------------
(UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents....................................... $ 8.2 $ --
========== ==========
Debt (including current portion):
Existing Indebtedness......................................... 147.5 1.7
Revolving Credit Agreement(/1/)............................... -- 78.1
Notes......................................................... -- 160.1
---------- ----------
Total debt.................................................. 147.5 239.9
---------- ----------
Preferred stock with redemption rights(/2/)............................-- 40.5
Stock rights(/3/)............................................... -- 23.3
---------- ----------
-- 63.8
---------- ----------
Shareholder's equity:
Capital stock and additional paid-in capital(/4/)............. -- 22.5
Capital investment............................................ 90.6 --
Retained earnings(/5/)........................................ (1.6) (84.2)
Accumulated other comprehensive income........................ (3.7) (3.7)
---------- ----------
Total shareholder's equity (deficit)........................ 85.3 (65.4)
---------- ----------
Total capitalization........................................ $ 232.8 $ 238.3
========== ==========
</TABLE>
- --------
(1) The Revolving Credit Agreement provides for loans of up to DM225 million
($123 million). See "Description of Revolving Credit Agreement".
(2) Includes Series A Preferred Stock, 25,000 shares authorized; 25,000 shares
issued and outstanding of $250, Series B Preferred Stock, 3,000 shares
authorized; 3,000 shares issued and outstanding of $30 and additional paid
in capital of $40,499,720.
(3) Includes Class A Common Stock having a value of $8.3 million and Class B
Common Stock having a value of $15.0 million issuable to DICSA upon
exchange of the Raleigh Canada Preferred Stock. The Raleigh Canada
Preferred Stock may be redeemed subsequent to the vesting of the Company's
right to exchange such stock for shares of its Common Stock, at the option
of DICSA under certain circumstances, for a cash payment of $23.3 million,
plus all accrued and unpaid dividends thereon.
(4) Includes Class A Common Stock, 200,000 shares authorized; 44,200 shares
issued and outstanding of $442 and additional paid in capital of
$22,499,588.
(5) Pro forma retained earnings reflect (i) nonrecurring transaction expenses
of $7.8 million, (ii) write-off of deferred financing costs on the
extinguishment of existing debt of $0.6 million, (iii) net assets payable
to DICSA of $4.7 million to be forgiven as part of the Recapitalization,
(iv) excess of the DFS Payment over the Company's historical capital
investment balance and (v) the Class A Common Stock and the Class B Common
Stock having a combined value of $23.3 million issuable to DICSA upon
exchange of the Raleigh Canada Preferred Stock. The Raleigh Canada
Preferred Stock may be redeemed subsequent to the vesting of the Company's
right to exchange such stock for shares of its Common Stock, at the option
of DICSA under certain circumstances, for a cash payment of $23.3 million,
plus all accrued and unpaid dividends thereon.
31
<PAGE>
THE RECAPITALIZATION
On May 14, 1998, DCC consummated the Recapitalization, pursuant to which (i)
the Company effected the Restructuring such that DCC now owns all the capital
stock of approximately 70 existing subsidiaries, a controlling interest in
Raleigh Canada, Univega, Univega License, the MS Sport Group, Derby Holdings
South Africa and certain other subsidiaries, and a minority interest in
certain other entities; (ii) DFS, Thayer and Perseus (through their respective
wholly owned subsidiaries) made the Equity Contributions; and (iii) DICSA
(directly and through DFS) retained the Retained Equity. In addition, (i) DCC
made the DFS Payment and DCC became obligated to make the Additional Payment
depending upon the performance of DCC and certain of its subsidiaries in the
1998 fiscal year; (ii) equity held by the minority shareholders of Derby
Holdings South Africa was redeemed by the Redemption Payment; (iii) the
Company repaid the Existing Indebtedness (other than indebtedness incurred
under the South African Credit Facility); (iv) DCC and certain of its
subsidiaries borrowed approximately $78.1 million under the Revolving Credit
Agreement; and (v) the Issuers issued the Old Notes, each on a pro forma basis
as of March 29, 1998.
As a result of the Recapitalization, DC Cycle L.L.C. ("DC Cycle"), a wholly
owned subsidiary of Thayer, owns approximately 28% of the Class A Common
Stock, par value $.01 per share (the "Class A Common Stock"), and all of the
outstanding shares of the Series A Preferred Stock, par value $.01 per share
(the "Series A Preferred Stock"). Perseus Cycle, L.L.C. ("Perseus Cycle"), a
wholly owned subsidiary of Perseus, owns approximately 23% of the Class A
Common Stock. DFS owns approximately 49% of the Class A Common Stock and all
the Series B Preferred Stock, par value $.01 per share (the "Series B
Preferred Stock"). Under the terms of DCC's Amended and Restated Certificate
of Incorporation and the Shareholders' Agreement (as defined), (i) Thayer
controls approximately 56% of the total voting power of DCC's capital stock;
(ii) DFS controls approximately 33% of the total voting power of DCC's capital
stock; and (iii) Perseus controls approximately 11% of the total voting power
of DCC's capital stock. In addition, pursuant to a recapitalization of Raleigh
Canada, DICSA received all of the outstanding shares of the Raleigh Canada
Preferred Stock, a new class of nonvoting senior preferred stock of Raleigh
Canada, in exchange for its shares of common stock of Raleigh Canada pursuant
to the Raleigh Canada Exchange Agreement. The shares of Raleigh Canada
Preferred Stock, which have a liquidation value of $23.3 million, are
exchangeable (at the option of DICSA at any time and by DCC at any time after
January 2, 2001) into 8,300 shares of Class A Common Stock and 15,000 shares
of Class B Common Stock, par value $.01 per share (the "Class B Common Stock",
and, together with the Class A Common Stock, the "Common Stock") (or the right
to receive securities or such other property into which such classes of stock
are converted). The exchange ratio will be adjusted, if required, as provided
in the Articles of Raleigh Canada and the Raleigh Canada Exchange Agreement.
The exchange ratio will be such that the value of the Raleigh Canada Preferred
Stock on the date of the consummation of the Recapitalization will equal the
value of the shares of Raleigh Canada common stock that are exchanged for the
Raleigh Canada Preferred Stock. If the value of the Raleigh Canada Preferred
Stock is later determined to be greater than, or less than, the value of the
shares of Raleigh Canada common stock exchanged for the Raleigh Canada
Preferred Stock, the exchange ratio will be adjusted through increasing or
decreasing the number of shares of Class A Common Stock to be received upon
exercise of the exchange rights. Any adjustment in the exchange ratio will
result in an offsetting adjustment against the number of shares of Class A
Common Stock retained by DFS in the Recapitalization. DICSA also has the right
to redeem its shares of Raleigh Canada Preferred Stock for a cash payment of
$23.3 million, plus all accrued and unpaid dividends thereon, at any time
after April 1, 2001, upon 60 days' prior notice, provided that such redemption
does not result in a breach or default under any financing document of Raleigh
Canada or its affiliates, including, without limitation, the Revolving Credit
Agreement and the Indentures. Upon liquidation of Raleigh Canada, each holder
of Raleigh Canada Preferred Stock will be entitled to receive an amount based
upon the value that such holder would have received if such holder had
exchanged the Raleigh Canada Preferred Stock pursuant to the Raleigh Canada
Exchange Agreement.
32
<PAGE>
Holders of shares of Class A Common Stock are entitled to one vote per
share, and holders of shares of Series A Preferred Stock are entitled to 1.5
votes per share. Holders of Class A Common Stock and Series A Preferred Stock
will vote together as a single class on all matters submitted to the
shareholders of DCC for a vote. During the first year following the
consummation of the Recapitalization or upon the occurrence of certain events,
each share of Series A Preferred Stock will be convertible, at the option of
the holder thereof, into one-half share of Class A Common Stock, plus a number
of shares of Class A Common Stock equal to the liquidation value, which will
initially be $1,000 (plus accrued and unpaid dividends thereon, if any), of
such share divided by $1,000. At any time after the tenth anniversary of the
consummation of the Recapitalization or upon the occurrence of certain events,
holders of shares of Series A Preferred Stock will have the right to require
DCC to repurchase all or any portion of such shares for cash at a price per
share equal to the sum of the liquidation value (plus accrued and unpaid
dividends thereon, if any) of such share and one-half share of Class A Common
Stock; provided that if (other than in connection with a proposed sale of DCC
that constitutes a Change of Control) DCC is prohibited by law from
repurchasing such shares or if any such repurchase would result in a default
under the Revolving Credit Agreement or the Indentures, DCC may defer such
repurchase until such prohibition no longer exists or such default would no
longer occur. DCC must use commercially reasonable efforts to obtain any
consent necessary to permit such payment.
Holders of shares of Class B Common Stock and Series B Preferred Stock are
not entitled to voting rights, except as otherwise required by applicable law.
Upon the occurrence of certain events, each share of Series B Preferred Stock
will be convertible, at the option of the holder thereof, into the number of
shares of Class A Common Stock having a fair market value equal to the
liquidation value, which will initially be $1,000 (plus accrued and unpaid
dividends thereon, if any), of such share. At any time after the fourth
anniversary of the consummation of the Recapitalization or upon the occurrence
of certain events, holders of shares of Series B Preferred Stock will have the
right to require DCC to repurchase all or any portion of such shares for cash
at a price per share equal to the liquidation value (plus accrued and unpaid
dividends thereon, if any) of such share; provided that if (other than in
connection with a proposed sale of DCC that constitutes a Change of Control)
DCC is prohibited by law from repurchasing such shares or if any such
repurchase would result in a default under the Revolving Credit Agreement or
the Indentures, DCC may defer such repurchase until such prohibition no longer
exists or such default would no longer occur. DCC must use commercially
reasonable efforts to obtain any consent necessary to permit such payment.
Dividends on each share of Series A Preferred Stock will accrue on a daily
basis at the rate of 20% per annum on the sum of the liquidation value
thereof, which will initially be $1,000, plus all accumulated and unpaid
dividends thereon. Dividends on each share of Series B Preferred Stock will
accrue on a daily basis at the rate of 9.75% per annum on the sum of the
liquidation amount thereof, which will initially be $1,000, plus all
accumulated and unpaid dividends thereon. The dividends and capital
distributions on the Series A Preferred Stock and Series B Preferred Stock
rank pari passu. Although a single security, each share of Series A Preferred
Stock consists of two economic elements: (i) the right to receive a
liquidation value of $1,000 plus the 20% per annum return described above, in
respect of which Thayer (through DC Cycle) invested $1,000 per share; and (ii)
the economic rights equivalent to one-half share of Class A Common Stock, in
respect of which Thayer (through DC Cycle) invested $500 per share (the
"Deemed Common Stock"). After all such amounts required to be paid to holders
of Series A Preferred Stock and Series B Preferred Stock have been paid, any
distribution made by DCC will be paid (i) first, to holders of Class A Common
Stock and Series A Preferred Stock until such holders have received $1,000 for
each share of Class A Common Stock and $500 for each share of Series A
Preferred Stock (in respect of the Deemed Common Stock) (subject to adjustment
in certain circumstances), (ii) second, to holders of Class B Common Stock
until such holders have received $1,000 for each share of Class B Common Stock
(subject to adjustment in certain circumstances), (iii) third, to holders of
Class A Common Stock and Series A Preferred Stock until such
33
<PAGE>
holders have received a 25% internal rate of return, (iv) fourth, to holders
of Class B Common Stock until such holders have received a 20% internal rate
of return and (v) fifth, to holders of Class A Common Stock and Series A
Preferred Stock.
The Recapitalization Agreement provides that, on or before the 60th day
following the delivery of the audited financial statements of DCC for the 1998
fiscal year, DCC will be obligated to pay the Additional Payment to DFS, the
amount of which will be determined by reference to (i) the earnings before
interest and taxes of DCW, (ii) the gross margin achieved by DCC with respect
to its sales, (iii) the earnings before interest and taxes of Raleigh U.K. and
(iv) the earnings before interest and taxes of the Company. DCC may defer the
making of such Additional Payment, if any, if and to the extent that the
making of such Additional Payment would cause a default under the Revolving
Credit Agreement or the Indentures, in which case the amount to be paid as the
Additional Payment (or any unpaid portion thereof) will accrue interest at the
rate of 9.75% per annum, although such Additional Payment will be payable upon
consummation of the sale of all or substantially all the assets or capital
stock of DCC, subject to certain limited exceptions, and prior to any
distribution (other than a distribution of securities of DCC) to DCC's
shareholders (other than payments of such Additional Payment to DFS).
Mr. Gottesman and Mr. Finden-Crofts entered into non-competition and non-
solicitation agreements in connection with the execution of the
Recapitalization Agreement, whereby Mr. Finden-Crofts agreed not to solicit
any employees of, or compete with, the Company for a period of at least one
year after termination of his employment and Mr. Gottesman agreed not to
solicit any employees of, or compete with, the Company so long as Mr.
Gottesman owns (directly or indirectly) an equity interest of more than 5% in
DCC and for an additional period of two years thereafter.
34
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined balance sheet gives
effect to the Recapitalization as if it had occurred on March 29, 1998. The
following unaudited pro forma condensed combined statements of income for the
year ended December 31, 1997 and the three months ended March 29, 1998 give
effect to the Recapitalization as if it had occurred on January 1, 1997.
The unaudited pro forma condensed combined financial statements (the
"Unaudited Pro Forma Condensed Combined Financial Statements") do not give
effect to the Company's obligation to make the Additional Payment to DFS of up
to $10 million depending on the performance of DCC and certain of its
subsidiaries in the 1998 fiscal year.
The Unaudited Pro Forma Condensed Combined Financial Statements should be
read in conjunction with the notes included therewith, the combined financial
statements and the notes thereto included elsewhere herein and the description
of the Recapitalization set forth under "The Recapitalization". The Unaudited
Pro Forma Condensed Combined Financial Statements do not purport to represent
what the Company's results of operations or financial position actually would
have been had such transactions and events occurred on the dates specified, or
to project the Company's results of operations or financial position for any
future period or date. The pro forma adjustments are based upon available
information and certain adjustments that management believes are reasonable.
In the opinion of management, all adjustments have been made that are
necessary to present fairly the pro forma data.
35
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 29, 1998
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------------
SOURCES
OF USES OF PRO
HISTORICAL FUNDS FUNDS OTHER (M) FORMA
---------- ------- ------- --------- ------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents............ $ 8.2 $301.2 $(309.4) $ -- $ --
Receivables............. 111.4 -- -- -- 111.4
Inventories............. 103.2 -- -- -- 103.2
Other current assets.... 14.5 -- (3.9)(f) (1.4) 9.2
------ ------ ------- ----- ------
Total current assets.. 237.3 301.2 (313.3) (1.4) 223.8
Property, plant, and
equipment.............. 47.9 -- -- -- 47.9
Intangibles............. 6.4 -- 11.2 (g) -- 17.6
Prepaid pension assets.. 49.4 -- -- -- 49.4
------ ------ ------- ----- ------
Total assets.......... $341.0 $301.2 $(302.1) $(1.4) $338.7
====== ====== ======= ===== ======
LIABILITIES AND SHARE-
HOLDER'S EQUITY (DEFI-
CIT)
Accounts payable........ $ 36.3 $ -- $ -- $ -- $ 36.3
Accrued liabilities..... 25.6 -- -- -- 25.6
Income taxes payable.... 4.8 -- -- -- 4.8
Short-term borrowings
and current portion of
long-term borrowings... 96.6 -- (94.9)(h) -- 1.7(n)
Other current
liabilities............ 6.9 -- (.8)(i) (6.1) --
------ ------ ------- ----- ------
Total current
liabilities.......... 170.2 -- (95.7) (6.1) 68.4
Long-term debt, net of
current portion........ 50.9 -- (50.9)(j) -- --
Excess of assets
acquired over cost of
acquisitions........... 11.1 -- -- -- 11.1
Deferred income taxes... 17.9 -- -- -- 17.9
Revolving Credit
Agreement.............. -- 78.1 (a) -- -- 78.1
Notes................... -- 160.1 (b) -- -- 160.1
Other liabilities....... 4.7 -- -- -- 4.7
Minority interest....... .9 -- (.9)(k) -- --
------ ------ ------- ----- ------
Total liabilities..... 255.7 238.2 (147.5) (6.1) 340.3
Preferred stock with
redemption rights...... -- 40.5 (c) -- -- 40.5
Stock rights............ -- 23.3 (d) -- -- 23.3
Shareholder's equity
(deficit):............. 85.3 (0.8)(e) (154.6)(l) 4.7 (65.4)
------ ------ ------- ----- ------
Total liabilities and
shareholder's equity
(deficit)............ $341.0 $301.2 $(302.1) $(1.4) $338.7
====== ====== ======= ===== ======
</TABLE>
36
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net revenues................................ $ 465.7 $ -- $ 465.7
Cost of sales............................... (345.9) -- (345.9)
-------- ------- --------
Gross profit................................ 119.8 -- 119.8
Selling, general and administrative ex-
penses..................................... (90.1) -- (o) (90.1)
-------- ------- --------
Operating income............................ 29.7 -- 29.7
Other income (expense), net................. 0.1 (0.1)(p) --
Interest expense............................ (7.4) (11.9)(q) (19.3)
Interest income............................. 1.0 (1.0)(r) --
-------- ------- --------
Income before income taxes.................. 23.4 (13.0) 10.4
Provision for income taxes.................. (10.6) 5.9 (s) (4.7)
Minority interest........................... (0.1) 0.1 (t) --
-------- ------- --------
Net income.................................. $ 12.7 $ (7.0) $ 5.7
======== ======= ========
EBITDA(u)................................... $ 35.8 $ -- $ 35.8
======== ======= ========
</TABLE>
FOR THE THREE MONTHS ENDED MARCH 29, 1998
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net revenues................................ $121.4 $ -- $121.4
Cost of sales............................... (90.3) -- (90.3)
------- ------ -------
Gross profit................................ 31.1 -- 31.1
Selling, general and administrative ex-
penses..................................... (22.8) -- (o) (22.8)
------- ------ -------
Operating income............................ 8.3 -- 8.3
Other income (expense), net................. (0.1) 0.1 (p) --
Interest expense............................ (1.8) (3.5)(q) (5.3)
Interest income............................. 0.1 (0.1)(r) --
------- ------ -------
Income (loss) before income taxes........... 6.5 (3.5) 3.0
Provision for income taxes.................. (1.9) 1.1 (s) (0.8)
------- ------ -------
Net income (loss)........................... $ 4.6 $(2.4) $ (2.2)
======= ====== =======
EBITDA(u)................................... $ 10.2 $ -- $ 10.2
======= ====== =======
</TABLE>
37
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(a) Reflects borrowings under the Revolving Credit Agreement.
(b) Reflects the issuance of the Notes, assuming the DM Notes were converted
into U.S. dollars at the rate of 1.83 Deutsche Marks to 1.00 U.S. dollar.
(c) Reflects cash paid as consideration for shares of Series A Preferred Stock
and Series B Preferred Stock, which have redemption rights.
(d) Reflects Class A Common Stock having a value of $8.3 million and Class B
Common Stock having a value of $15.0 million issuable to DICSA upon
exchange of the Raleigh Canada Preferred Stock. The Raleigh Canada
Preferred Stock may be redeemed subsequent to the vesting of the Company's
right to exchange such stock for shares of its Common Stock, at the option
of DICSA under certain circumstances, for a cash payment of $23.3 million,
plus all accrued and unpaid dividends thereon.
(e) Reflects Class A Common Stock included in Equity Contributions ($22.5
million) less the adjustment for the stock rights ($23.3 million) (see
(d)).
(f) Reflects net fair value of swaps to be cancelled in connection with the
Company's retirement of its existing senior notes.
(g) Reflects the Company's (i) payment of deferred financing costs of $10.8
million less (ii) elimination of historical unamortized deferred financing
costs of $0.6 million related to the indebtedness to be extinguished (see
(l)) plus (iii) intangibles related to the purchase of the equity held by
the minority shareholders of Derby Holdings South Africa of $1.0 million.
(h) Reflects repayment of the Company's existing revolving credit facility of
$80.6 million and current portion of existing senior notes of $14.3
million.
(i) Reflects payment of interest on the Company's Existing Indebtedness.
(j) Reflects repayment of the Company's long-term portion of existing senior
notes of $42.0 million and long-term bank loan of $8.9 million.
(k) Reflects the elimination of the minority interest due to the purchase of
the equity held by the minority shareholders of Derby Holdings South
Africa (see (g)).
(l) Reflects the (i) DFS Payment of $146.2 million; (ii) payment of
transaction costs of $7.8 million; (iii) elimination of historical
unamortized deferred financing costs of $0.6 million related to the
indebtedness to be retired.
(m) Reflects the elimination of the fair value of derivative instruments to be
retained by DICSA of $0.9 million, intercompany finance charges due from
DICSA of $0.5 million and dividends payable by the Company to DICSA of
$6.1 million, which would have been forgiven had the Recapitalization
occurred on March 29, 1998.
(n) Reflects borrowings under the South African Credit Facility.
(o) Transaction expenses of $7.8 million and the write-off of unamortized
deferred financing costs of $0.6 million upon the early retirement of
indebtedness have not been included in the pro forma adjustments as such
costs are nonrecurring charges incurred in connection with the
Recapitalization. The amortization of goodwill recognized in connection
with the purchase of the equity held by the minority shareholders of Derby
Holdings South Africa (which occurred within 30 days following the
consummation of the Recapitalization) is approximately $26 thousand and is
not reflected in the accompanying pro forma condensed combined financial
statements as it is not significant.
(p) Reflects the elimination of the unrealized gain (loss) on the swaps
entered into in connection with the existing senior notes.
(q) Reflects (i) an increase in interest expense to reflect total interest
expense both on the Notes (at interest rates of 10% on the Dollar Notes
and 9 3/8% on the DM Notes) and on amounts outstanding under the Revolving
Credit Agreement (at an assumed interest rate of 7.79% for December 31,
1997, and March 29, 1998) and (ii) amortization of deferred financing
costs less historical interest expense associated with the Company's
indebtedness to be repaid.
(r) Reflects the elimination of historical interest income.
(s) Reflects the tax effect of the pro forma adjustments.
38
<PAGE>
(t) Eliminates the minority interest in income of Derby Holdings South Africa.
(u) EBITDA is calculated herein as operating income plus depreciation and
amortization (net of negative amortization) less amortization into income
of the pension transition asset (recognized upon adoption of SFAS No. 87)
of $2.5 million and $0.6 million for the year ended December 31, 1997, and
the three months ended March 29, 1998, respectively (see Note 14 in "Notes
to Combined Financial Statements"). EBITDA has not been adjusted for what
management believes to be one-time expenses of $2.9 million recognized in
1997. These one-time expenses include: (i) employee severance and a
terminated management compensation program of $0.9 million, (ii) warehouse
closing costs of $0.6 million, (iii) transaction costs of $0.3 million and
(iv) certain other one-time expenses of $1.1 million. The Company includes
information concerning EBITDA because it is commonly used by certain
investors as a measure of a company's ability to generate cash flows and
service debt. EBITDA should not be considered in isolation or as a
substitute for net income or cash flow from operating activities presented
in accordance with U.S. GAAP.
39
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
Set forth below are selected historical financial data of the Company as of
the dates and for the periods presented. The selected historical financial
data as of December 31, 1996 and 1997 and for each of the three years in the
period ended December 31, 1997 were derived from the audited combined
financial statements of the Company. The selected unaudited historical
financial data of the Company as of December 31, 1993, 1994, 1995 and March
29, 1998 and for each of the two years in the period ended December 31, 1994
and each of the three months in the period ended March 30, 1997 and March 29,
1998 were prepared by management in a manner consistent with the audited
combined financial statements. The information contained in this table should
be read in conjunction with "Unaudited Pro Forma Condensed Combined Financial
Statements", "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the combined financial statements and accompanying
notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
------------------------------------ -------------------
MARCH 30, MARCH 29,
1993 1994 1995 1996 1997 1997 1998
------ ------ ------ ------ ------ --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues............ $466.6 $432.6 $473.8 $452.6 $465.7 $122.8 $121.4
Cost of sales........... 354.2 332.5 366.2 339.1 345.9 93.1 90.3
------ ------ ------ ------ ------ ------ ------
Gross profit............ 112.4 100.1 107.6 113.5 119.8 29.7 31.1
Selling, general and
administrative
expenses............... 83.3 77.4 81.3 80.1 90.1 21.2 22.8
Operating income........ 29.1 22.7 22.0 33.4 29.7 8.5 8.3
Interest expense........ 10.5 10.5 9.4 8.0 7.5 2.0 1.8
Income before income
taxes.................. 17.8 11.9 23.5 23.5 23.4 6.5 6.5
Provision for income
taxes.................. 7.0 6.1 10.1 8.9 10.6 1.9 1.9
Net income.............. 10.6 5.6 13.2 14.6 12.7 4.6 4.6
OTHER FINANCIAL DATA:
EBITDA(a)............... 33.1 28.0 27.9 39.0 35.8 10.2 10.2
Depreciation and
amortization........... 6.5 7.8 8.7 8.2 8.6 2.4 2.4
Capital expenditures.... 13.0 7.0 11.1 10.8 7.4 1.2 1.4
Ratio of earnings to
fixed charges(b)....... 2.5 2.0 3.0x 3.3x 3.4x 3.4 3.5x
Ratio of EBITDA to
interest expense.......
BALANCE SHEET DATA (END
OF PERIOD):
Cash and cash
equivalents............ 4.1 21.8 12.7 8.8 15.4 8.2
Working capital......... 91.5 96.9 85.3 80.0 63.3 67.0
Total assets............ 227.8 250.3 263.3 260.7 289.1 341.0
Total debt, including
current portion........ 94.5 93.7 92.0 78.6 102.2 147.5
Preferred stock with
redemption rights...... -- -- -- -- -- --
Stock rights(c)......... -- -- -- -- -- --
Shareholder's equity
(deficit).............. 38.8 56.3 66.1 83.1 81.9 85.3
</TABLE>
- --------
(a) EBITDA is calculated herein as operating income plus depreciation and
amortization (net of negative amortization) less amortization into income
of the pension transition asset (recognized upon adoption of SFAS No. 87)
of $2.5 million, $2.5 million, $2.7 million, $2.7 million, $2.5 million,
$0.7 million and $0.6 million, in 1993, 1994, 1995, 1996, 1997 and for the
three months ended March 30, 1997, and March 29, 1998, respectively (see
Note 14 in "Notes to Combined Financial Statements"). EBITDA has not been
adjusted for what management believes to be one-time expenses of $2.9
million recognized in 1997. These one-time expenses include: (i) employee
severance and a terminated management compensation program of $0.9
million, (ii) warehouse closing costs of $0.6 million, (iii) transaction
costs of $0.3 million and (iv) certain other one-time expenses of $1.1
million. The Company includes information concerning EBITDA because it is
commonly used by certain investors as a measure of a company's ability to
generate cash flows and service debt. EBITDA should not be considered in
isolation or as a substitute for net income or cash flow from operating
activities presented in accordance with U.S. GAAP.
(b) For purposes of calculating the ratio of earnings to fixed charges,
earnings represent income before taxes and fixed charges. Fixed charges
consist of (i) interest, whether expensed or capitalized, (ii)
amortization of deferred financing costs and (iii) the portion of rental
expense considered to represent interest (assumed to be one-third).
(c) Reflects Class A Common Stock having a value of $8.3 million and Class B
Common Stock having a value of $15.0 million issuable to DICSA upon
exchange of the Raleigh Canada Preferred Stock. The Raleigh Canada
Preferred Stock may be redeemed subsequent to the vesting of the Company's
right to exchange such stock for shares of its Common Stock, at the option
of DICSA under certain circumstances, for a cash payment of $23.3 million,
plus all accrued and unpaid dividends thereon.
40
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with the audited
combined financial statements of the Issuers and the selected financial and
other data contained elsewhere in this Prospectus.
Derby is a world-leading designer, manufacturer and marketer of bicycles.
Competing primarily in the medium- to premium-priced market, Derby owns or
licenses many of the most recognized brand names in the bicycle industry,
including leading global brands such as Raleigh, Nishiki and Univega, and
leading regional brands such as Gazelle in The Netherlands and Kalkhoff,
Musing, Winora and Staiger in Germany. For the fiscal year ended December 31,
1997 and the three months ended March 29, 1997 and March 30, 1998, the Company
had net revenues of $465.7 million, $122.8 million and $121.4 million,
respectively, and EBITDA of $35.8 million, $10.2 million and $10.2 million,
respectively.
The following table summarizes the Company's historical results of
operations as a percentage of net revenues for the years ended December 31,
1995, 1996 and 1997 and the three months ended March 30, 1997 and March 29,
1998:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
----------------------- -------------------
MARCH 30, MARCH 29,
1995 1996 1997 1997 1998
------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues.............. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............. (77.3) (74.9) (74.3) (75.9) (74.4)
------- ------- ------- ------ ------
Gross profit.............. 22.7 25.1 25.7 24.1 25.6
Selling, general and
administrative expenses.. (17.2) (17.7) (19.3) (17.2) (18.7)
Reorganization costs...... (0.9) -- -- -- --
------- ------- ------- ------ ------
Operating income.......... 4.6 7.4 6.4 6.9 6.9
Interest expense.......... (2.0) (1.8) (1.6) (1.6) (1.5)
Interest income........... 0.2 0.2 0.2 -- --
Other income (expense),
net...................... 2.1 (0.6) -- -- (0.1)
------- ------- ------- ------ ------
Income before income tax-
es....................... 4.9 5.2 5.0 5.3 5.3
Provision for income tax-
es....................... (2.1) (2.0) (2.3) (1.6) (1.5)
Minority interest......... -- -- -- -- --
------- ------- ------- ------ ------
Net income................ 2.8% 3.2% 2.7% 3.7% 3.8%
======= ======= ======= ====== ======
</TABLE>
Derby operates in ten countries around the world with a majority of its
operations conducted in countries other than the United States. In 1997, 51%
of the Company's net revenues were denominated in currencies within the
European Monetary System, 23% were denominated in pounds Sterling and 26% were
denominated in other currencies. In the same period, 45% of the Company's
material costs, which in turn accounted for 74% of its cost of goods sold,
were purchased in currencies other than the currency of the related revenues.
The Company reduces its currency exposure by maintaining operations in the
major markets in which it sells its products. The Company further mitigates
foreign exchange risk by purchasing currency options and entering into forward
purchase contracts primarily related to transactions denominated in U.S.
dollars, New Taiwan dollars and Yen, which accounted for 13%, 12% and 11%,
respectively, of the Company's material costs in 1997. See Note 8 of the
"Notes to Combined Financial Statements".
The Company is a net importer of products from Asian markets and accordingly
was not adversely impacted by the Asian currency depreciation in late 1997.
41
<PAGE>
ACQUISITION HISTORY AND INVESTMENT PROGRAM
Derby was organized in 1986 to acquire the Raleigh, Gazelle and Sturmey-
Archer bicycle and bicycle component businesses from TI Group plc. In
September 1988, Derby acquired the assets of Neue Kalkhoff, the second largest
bicycle manufacturer in the former Federal Republic of Germany at the time,
and established DCW. In October 1988, the Company acquired the assets of
Raleigh Cycle Company of America from Raleigh's U.S. licensee, Huffy
Corporation, and the West Coast Cycle division of Medalist Industries Inc.
(owner of the Nishiki brand in the United States). These two businesses were
merged to form Raleigh USA. Derby formed the Company's Probike South Africa
operating company with the acquisitions of Cycle and Hardware Factors in 1989,
J.H. Slotar in 1990 and Cycle Centre Wholesale in 1991. In 1992, Derby
acquired Musing, the German bicycle manufacturer.
Derby has continued to acquire bicycle and bicycle component companies and
leading brand names. In January 1997, Derby completed the acquisition of the
assets and operations of the Winora and Staiger businesses for approximately
$2.7 million in cash and $9.1 million of assumed debt. Winora-Staiger is a
long-established bicycle manufacturer and distributor located in southwestern
Germany that sells bicycles to a network of IBDs to which the Company was not
previously a major supplier. In March 1997, Derby acquired the worldwide
rights to the Univega brand name and its associated trade names, trademarks
and designs for approximately $2.6 million. In August 1997, the Company formed
Univega to serve as a holding company for the acquisition of the MS Sport
Group from Robert Holzer over a specified period of years. Univega agreed to
pay Mr. Holzer a purchase price based on the MS Sport Group's performance
through the year 2000 in a maximum amount of DM13.1 million and a minimum
amount of DM5.35 million. The Company also formed Univega License, which is
owned by Derby Holding (Deutschland) and Mr. Holzer, to hold and license the
Univega trademarks.
Since 1990, Derby has invested in labor-saving, flexible production
machinery and restructured the workforces at its manufacturing locations. From
1992 to 1993, taking advantage of substantial incentives from the German
government, Derby built a factory in Rostock, in the former German Democratic
Republic. Derby completed its internal reorganization and investment program
in 1996, having made major steps toward improving production efficiency and
increasing manufacturing flexibility.
42
<PAGE>
RESULTS OF OPERATIONS
Summary of Operations by Operating Company
The following table summarizes certain historical results of operations for
Derby's operating companies:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
------------------------- -------------------
MARCH 30, MARCH 29,
1995 1996 1997 1997 1998
------- ------- ------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Raleigh U.K. (United Kingdom):
Net Revenues................. $ 106.7 $ 107.4 $ 107.3 $16.7 $15.6
EBITDA....................... 4.6 8.8 14.9 0.3 (1.0)
Operating Income............. 3.3 7.5 13.1 (0.1) (1.5)
Gazelle (The Netherlands):
Net Revenues................. 119.7 120.8 107.8 32.7 30.6
EBITDA....................... 14.0 16.8 13.9 4.9 4.8
Operating Income............. 13.6 16.2 13.4 4.8 4.6
DCW/Winora-Staiger/MS Sport
Group (Germany):
Net Revenues................. 92.5 82.4 103.8 33.6 40.3
EBITDA....................... 0.8 4.0 0.6 2.6 4.7
Operating Income............. (2.6) 1.1 (2.2) 1.7 3.8
Raleigh USA (United States):
Net Revenues................. 57.4 53.5 57.9 11.6 11.2
EBITDA....................... (1.3) (0.1) (1.4) (0.3) (0.3)
Operating Income............. (1.9) (0.7) (2.0) (0.4) (0.4)
Raleigh Canada (Canada):
Net Revenues................. 36.2 29.5 29.5 14.6 11.6
EBITDA....................... 3.5 3.1 3.1 1.6 1.3
Operating Income............. 3.2 2.8 2.8 1.4 1.1
Sturmey-Archer (United King-
dom):
Net Revenues................. 32.4 30.1 29.6 8.4 6.9
EBITDA....................... 4.5 5.6 3.3 0.9 0.4
Operating Income............. 4.4 5.5 3.4 0.9 0.4
Probike South Africa (South Af-
rica):
Net Revenues................. 22.6 20.5 20.6 4.2 4.0
EBITDA....................... 2.2 2.2 2.3 0.4 0.2
Operating Income............. 1.9 2.0 2.1 0.4 0.2
Other and inter-company adjust-
ments(/1/):
Net Revenues................. 6.3 8.4 9.2 1.0 1.2
EBITDA....................... (0.4) (1.4) (0.9) (0.2) 0.1
Operating Income............. 0.1 (1.0) (0.9) (0.2) 0.1
Total:
Net Revenues................. $ 473.8 $ 452.6 $ 465.7 122.8 121.4
EBITDA....................... 27.9 39.0 35.8 10.2 10.2
Operating Income............. 22.0 33.4 29.7 8.5 8.3
</TABLE>
- --------
(1) The amounts shown have been calculated by subtracting, for each item, the
sum of the amounts for each of the operating companies from the
corresponding total amount. These amounts reflect the margin made on
revenues on Company produced bicycles by distribution companies, including
Raleigh Europe and Raleigh Ireland, revenues from sales of components to
third parties by Derby Trading and inter-company adjustments.
43
<PAGE>
COMPARISON OF QUARTER ENDED MARCH 29, 1998 TO QUARTER ENDED MARCH 30, 1997
Net Revenues. Net revenues decreased $1.4 million, or 1.1%, to $121.4
million for the three months ended March 29, 1998 from $122.8 million for the
comparable period in 1997. In local currencies, net revenues increased 6.0%
over the same period. The decrease in U.S. dollar terms was due primarily to
the strengthening of the U.S. dollar against the Deutsche Mark and the Dutch
Guilder. The acquisitions of Winora-Staiger and the MS Sport Group in 1997
contributed to a 10.3% increase in average selling price, while the additional
volume of 12 thousand units generated by these acquisitions helped to offset a
reduction in volume of 31 thousand units at Raleigh Canada.
Raleigh U.K.'s net revenues decreased $1.1 million, or 6.6%, to $15.6
million and decreased 7.1% in local currency.
Gazelle's net revenues decreased $2.1 million, or 6.4%, to $30.6 million. In
local currency, Gazelle's net revenues increased 4.1% as an increase in
average selling price offset a small reduction in volume.
DCW's net revenues increased $6.7 million, or 19.9%, to $40.3 million. In
local currency, DCW's net revenues increased 31.6% primarily due to the
acquisitions of Winora-Staiger and the MS Sport Group in 1997, which
strengthened DCW's product mix and contributed 12 thousand units to a total
unit volume increase of 19 thousand units.
Raleigh USA's net revenues decreased by $0.4 million, or 3.5%, to $11.2
million, and Raleigh Canada's net revenues decreased $3.0 million, or 20.6%,
to $11.6 million. The decrease in Raleigh Canada's net revenues was due
primarily to production and commercial interruptions associated with a
weather-related factory shutdown in January 1998.
Gross Profit. Gross profit increased $1.4 million, or 4.7%, to $31.1 million
for the quarter ended March 29, 1998 from $29.7 million for the comparable
period in 1997. Improved operating efficiency at Raleigh U.K. and DCW,
together with the benefit of reduced material costs due to exchange rate
movements, contributed to a 1.5% increase in gross margin. This increase was
achieved despite a reduction in gross profit of $1.0 million due to the
marking-to-market of hedging contracts for future raw material purchases.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.6 million, or 7.5%, to $22.8 million in
the first quarter of 1998 from $21.2 million in the comparable period of 1997.
The increase is attributable to $1.1 million of expenses related to the
acquisitions of Winora-Staiger and the MS Sport Group, and $0.5 million
related to the costs of the Univega distribution business in the U.S. where
trading commenced in September 1997.
Operating Income. Operating income of $8.4 million was unchanged for the
quarter ended March 29, 1998 as compared to the quarter ended March 30, 1997.
Improved operating performance was offset by the marking-to-market of hedging
contracts for future raw material purchases, which resulted in a $1.0 million
reduction in operating profit, and by a $0.6 million reduction in the value of
foreign earnings upon translation into U.S. dollars due to the strengthening
of the U.S. dollar against foreign currencies, principally the Deutsche Mark
and the Dutch Guilder. The benefit of the $1.4 million increase in gross
profit was offset by increased selling, general and administrative expenses.
Interest Expense. Interest expense decreased $0.2 million, or 10.0%, to $1.8
million for the quarter ended March 29, 1998 from the comparable period in
1997. The decrease was due primarily to an increased proportion of Deutsche
Mark denominated debt effective as of July 30, 1997 which carried a relatively
low interest rate of 5.53% and the refinancing of the Group's seasonal working
capital borrowings resulting in a reduction in the spread paid over LIBOR of
1/2 percent. These benefits were partially offset by an increase in borrowings
associated with acquisitions made during 1997.
Other Income (Expense). Other income (expense) decreased $0.1 million to
$(.1) million for the first quarter of 1998. This represents the fluctuation
of mark-to-market adjustments on outstanding interest rate swap contracts.
44
<PAGE>
Provision for Income Taxes. Provision for income taxes of $1.9 million for
the quarter ended March 29, 1998 was unchanged from the comparable period in
1997. This represents an effective tax rate of 29% compared with an effective
tax rate of 38% which was projected for the year ended December 31, 1998. The
lower effective income tax rate in the first quarter of 1997 and 1998 is due
principally to the seasonality of income at the Group's operations in Germany.
During the first quarter of 1998, operations in Germany produced income before
taxes of $1.7 million for which no tax provision was provided due to the
existing net operating losses in Germany and the projected net loss in Germany
for the second half of the year which management believes will result in an
overall loss for the year in Germany.
Net Income. Net income remained at $4.6 million for the first quarter of
1998 as compared to the first quarter of 1997.
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996
Net Revenues. Net revenues increased $13.1 million, or 2.9%, to $465.7
million for 1997 from $452.6 million for 1996. This increase was primarily due
to increases in selling prices as the Company's product mix strengthened.
Average unit selling prices decreased by 1.5%. Net revenues from sales of
parts and accessories, which accounted for 14.7% of total 1997 net revenues,
increased by 25.5% in 1997, due in part to the acquisition of Winora-Staiger.
Bicycle sales volume increased 22.9 thousand units, or 0.8%, to 2.1 million
units. The benefits of increased volume were partially offset by the continued
strength of the U.S. dollar against the major continental European currencies,
tempered by the U.S. dollar's weaker position relative to the pound Sterling.
Raleigh U.K.'s net revenues decreased $0.1 million, or 0.1%, from 1996. In
local currency, Raleigh U.K.'s net revenues declined 4.5%. Raleigh U.K.'s
sales to dealers declined by 34 thousand units, or 11%, from 1996, while mail
order sales declined by 8 thousand units.
Gazelle's net revenues decreased $13.0 million, or 10.8%, from 1996. In
local currency, Gazelle's net revenues increased 2.4%. The decrease in sales
was primarily due to high levels of dealer inventories resulting from
overstocking during the second half of 1996.
DCW's net revenues increased $21.4 million, or 26%, from 1996. In local
currency, DCW's net revenues increased 43.9%. DCW's acquisitions in 1997 of
Winora-Staiger and the MS Sport Group, which distributes the Univega brand,
contributed substantially to volume increases. In addition, the introduction
of high specification Winora bicycles strengthened the product mix. These
factors offset a decline of 27 thousand units, or 7.5%, in DCW sales other
than in the Winora and Univega product lines, reflecting difficult overall
market conditions in Germany. Without the 1997 acquisitions, net revenues
would have decreased by $1.7 million, or 2.1%. Plans are in development to
increase production and sales of private label bicycles at prevailing market
prices to achieve higher margins.
Raleigh USA's net revenues increased $4.4 million, or 8.2%, from 1996 as it
benefited from organizational changes and a well-received mid-priced product
offering for the 1996/97 season. Unit volume increased by 22 thousand units,
or 10.3%, over 1996.
Raleigh Canada's net revenues were relatively flat between 1996 and 1997. In
local currency, Raleigh Canada's net revenues increased CAN$0.2 million.
Gross Profit. Gross profit increased $6.3 million, or 5.6%, to $119.8
million for 1997 from $113.5 million for 1996, and gross margin increased from
25.1% to 25.7%. This increase was primarily due to a relative emphasis on
increasing profit margins rather than sales. Continued weakening of the Yen
led to a fall in material costs as a percentage of sales to 54.7% from 55.1%
in 1996 which offset an increase in labor costs.
45
<PAGE>
Raleigh U.K.'s gross profit increased by $4.9 million, or 19.2%, from 1996,
and gross margin increased from 23.6% to 28.2%. In local currency, gross
profit increased (Pounds)2.3 million, or 14.2%. Favorable exchange rate
movements and lower component costs benefited Raleigh U.K. The benefits of
factory reorganizations at Raleigh U.K. also contributed to the increase in
gross profit.
Gazelle's gross profit decreased by $3.6 million, or 12.0%, from 1996, and
gross margin declined from 24.9% to 24.5%. Gross profit in local currency
increased NLG0.4 million, or 0.8%.
DCW's gross profit increased by $5.6 million, or 38.5%, and gross margin
increased from 17.6% to 19.3%. Without giving effect to the 1997 acquisitions,
gross profit would have decreased by $2.6 million, or 17.7%. Following the
acquisition of Winora-Staiger by DCW, insufficient forward hedging against
U.S. dollar purchases of materials resulted in an exchange loss as the
Deutsche Mark significantly depreciated. In local currency, gross profit
increased DM12.6 million, or 58.3%. The acquisition of Winora-Staiger, which
occurred immediately prior to the peak selling season, required short and
inefficient production runs to meet demand, which caused significant factory
disruption at DCW and contributed to increased labor costs. A favorable shift
in product mix to high specification models at DCW required a greater amount
of labor input than required for traditional DCW models, further adding to the
increase in direct labor costs.
Raleigh USA's gross profit increased by $2.0 million, or 15.9%, from 1996,
and gross margin increased from 23.6% to 25.2% primarily due to lower Yen-
denominated component prices.
Raleigh Canada's gross profit increased by $0.5 million, or 7.5%, from 1996,
and gross margin increased from to 20.8% to 22.3%. Gross profit in local
currency increased CAN$0.7 million.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $10.0 million, or 12.5%, to $90.1 million in
1997 from $80.1 million in 1996. As a percentage of net revenues, selling,
general and administrative expenses increased to 19.3% from 17.7% in 1996.
This increase was principally the result of the acquisitions of Winora-Staiger
and the MS Sport Group. Included in selling, general and administrative
expenses is net negative amortization of $(0.7) million, which includes
amortization of net negative goodwill related to acquisitions as well as
amortization into income of capital grants from the German government for
facility construction in Germany.
Operating Income. Operating income decreased $3.7 million, or 11.1%, to
$29.7 million for 1997 from $33.4 million in 1996. The operating margin
declined to 6.4% in 1997 from 7.4% in 1996.
Interest Expense. Interest expense decreased $0.5 million, or 6.3%, to $7.5
million in 1997 from $8.0 million in 1996. The decrease was due primarily to
an increased proportion of Deutsche Mark denominated debt which carried a
relatively low interest rate of 5.25%. These benefits were partially offset by
an increase in borrowings associated with acquisitions made during the year.
Other Income (Expense), Net. Other income (expense) increased $2.8 million
to $0.1 million from $(2.7) million in 1996. Other income (expense) in 1997
was comprised entirely of an unrealized gain on outstanding swap contracts.
Provision for Income Taxes. Income taxes increased $1.7 million, or 19.1%,
to $10.6 million for 1997 from $8.9 million in 1996. The effective tax rate
increased to 45% in 1997 from 38% in 1996 due to higher losses in Germany and
the United States for which no income tax benefit was available.
Net Income. Net income decreased $1.9 million, or 13.0%, to $12.7 million
for 1997 from $14.6 million for 1996 due to the factors discussed above.
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COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
Net Revenues. Net revenues decreased $21.2 million, or 4.5%, to $452.6
million for 1996 from $473.8 million for 1995. Net revenues from sales of
parts and accessories, which accounted for 12.0% of total 1996 net revenues,
increased by 4.5% in 1996. Bicycle sales volume was 7.4% lower than in 1995 as
markets in both Europe and North America weakened, although reduced demand was
partially offset by a 4.3% improvement in average selling price. The U.S.
dollar strengthened against major European currencies but weakened against the
pound Sterling, producing a reduction in net revenues due to foreign exchange
translation.
Raleigh U.K.'s net revenues increased $0.7 million, or 0.7%, from 1995. In
local currency, Raleigh U.K.'s net revenues increased 1.5%. While the number
of units sold in 1996 decreased by 3.9%, Raleigh U.K. was able to raise its
average trade price by 3.1% due to an improved product mix.
Gazelle's net revenues increased $1.1 million, or 0.9%, from 1995. In local
currency, Gazelle's revenues increased 5.5%. Volume increased by 2.5% and
average selling price increased 5.3% from 1995. The increase in sales was
primarily due to continued dealer optimism and high order levels early in the
year following strong consumer demand in 1995.
DCW's net revenues decreased $10.1 million, or 10.9%, from 1995. In local
currency, DCW's revenues decreased 6.7% as a result of strong price
competition in the context of decreased bicycle demand in the German market.
DCW focused on maintaining profit margins rather than volume, and units sold
declined by 9.1%. DCW was able to raise its average sales price by 2.2% in
1996, as the benefits of a restructuring undertaken in 1995 to eliminate
certain redundant production processes enabled DCW to remain competitive in
market segments above a DM300 retail price.
Raleigh USA's net revenues decreased $3.9 million, or 6.8%, from 1995 due to
a 7.8% decline in unit sales as customers entered the year with excess
inventories. The average selling price increased by 2.5% as demand for higher
priced suspension and road bicycles improved.
Raleigh Canada's net revenues decreased $6.7 million, or 18.5%, from 1995.
In local currency, Raleigh Canada's net revenues decreased CAN$10.0 million.
Two major customers in the mass merchandiser channel reduced orders for new
private-label bicycles in 1996 after making exceptionally large unit purchases
in 1995.
Gross Profit. Gross profit increased $5.8 million, or 5.4%, to $113.5
million in 1996 from $107.7 million in 1995, and gross margin increased from
22.7% to 25.1%. This increase was primarily due to cost reductions and
increased manufacturing productivity resulting from management actions taken
in late 1995 and early 1996, primarily at DCW and Raleigh USA. These actions
included the elimination of certain redundant production processes at DCW and
changes in material sourcing and factory layout at Raleigh USA, which improved
productivity and reduced unit costs. A reduction in material costs to 55.1% of
revenues in 1996 from 56.9% of revenues in 1995 resulted from over capacity in
the component market, which enabled several operating companies to negotiate
material cost savings, while the weakening of the Yen and lower levels of
discounted sales further improved margins.
Raleigh U.K.'s gross profit decreased by $0.7 million, or 2.6%, from 1995,
and gross margin decreased from 24.4% to 23.6%. In local currency, gross
profit decreased (Pounds)0.3 million, or 1.8%. Implementation of new robotic
welding equipment and a paint plant diluted the benefit of the factory
reorganization at Raleigh U.K. A 3.1% increase in average trade price was
offset by a 3.9% decline in units sold.
Gazelle's gross profit increased by $2.8 million, or 10.2%, from 1995, and
gross margin increased from 22.7% to 24.9%. In local currency, gross profit
increased 15.6%. Gross margins improved primarily due to a strengthening of
the Dutch Guilder and lower component costs. As Gazelle was able
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<PAGE>
to maintain its unit cost of revenues in 1996, higher average unit sales
prices also contributed to the improvement in the gross margin.
DCW's gross profit increased by $1.4 million, or 10.8%, from 1995, and gross
margin increased from 14.1% to 17.6%. In local currency, gross profit
increased DM2.9 million, or 15.5%.
Raleigh USA's gross profit increased by $1.0 million, or 8.6%, from 1995,
and gross margin increased from 20.2% to 23.6%. The margin improvement was a
result of certain material sourcing changes as well as improvements to Raleigh
USA's manufacturing processes that reduced close-out sales at the end of the
season.
Raleigh Canada's gross profit decreased by $0.2 million, or 3.7%, from 1995,
and gross margin increased from 17.5% to 20.8%. In local currency, gross
profit decreased CAN$0.4 million.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $1.2 million, or 1.5%, to $80.1 million for
1996 from $81.3 million for 1995. As a percentage of net revenues, selling,
general and administrative expenses increased to 17.7% for 1996 from 17.2% in
1995. This increase resulted primarily from higher marketing expenditures at
Gazelle and restructuring costs at Raleigh U.K. Also included in selling,
general and administrative expenses is net amortization of $(1.2) million,
which includes amortization of net negative goodwill related to acquisitions
as well as amortization into income of capital grants from the German
government for facility construction in Germany.
Operating Income. Operating income increased $11.4 million, or 51.8%, to
$33.4 million for 1996 from $22.0 million for 1995. The operating margin
improved to 7.4% in 1996 from 4.6% in 1995. This was primarily a result of
cost reductions realized in 1996 and reorganization costs of $4.4 million
incurred in 1995 at Raleigh U.K.
Interest Expense. Interest expense decreased $1.4 million, or 14.9%, to $8.0
million for 1996 from $9.4 million for 1995. This was primarily due to the
decrease in interest rates in Europe and North America and the repayment of
the first installment of the medium term senior notes in late 1995.
Other Income (Expense), Net. Other income (expense) decreased $12.7 million
to $(2.7) million from $10.0 million in 1995. Other income (expense) in 1996
was comprised entirely of an unrealized loss on outstanding swap contracts.
Provision for Income Taxes. Income taxes decreased $1.2 million, or 11.9%,
to $8.9 million for 1996 from $10.1 million for 1995. The effective tax rate
decreased to 38% in 1996 from 43% in 1995 due to decreased losses in Germany
and the United States for which no income tax benefit was available.
Net Income. Net income increased $1.4 million, or 10.6%, to $14.6 million
for 1996 from $13.2 million for 1995. This increase was primarily due to the
reasons described above.
LIQUIDITY AND CAPITAL RESOURCES
Demand for bicycles in Derby's principal markets is seasonal, characterized
in most cases by a majority of consumer sales in the spring and summer months
(the "Peak Season"). In the United Kingdom, South Africa and Ireland, consumer
revenues are typically higher in the last four months of the calendar year due
to increased sales of juvenile bicycles in the month preceding Christmas.
Accordingly, dealers' peak purchasing months in those countries are October
and November when they build inventory in anticipation of Christmas sales of
juvenile bicycles. Excluding this holiday seasonality, the Company's working
capital requirements are greatest during February, March and April at the
start of the Company's Peak Season as receivable levels increase. The Company
offers
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extended credit terms during the months prior to the Peak Season, although
Derby encourages early payments through trade discounts. The net result is an
increase in days outstanding of receivables from a normal level of
approximately 60 days to a peak of approximately 90 days. As a result, in the
first quarter of the year net cash outflow from operating activities was $50.8
million in 1998 compared with $38.7 million in 1997 as inventories increased
by $12.8 million more in 1998 due to an unexpected slowdown in sales. This was
financed from cash resources.
Finished goods inventory remains relatively constant throughout the fiscal
year and the level of raw materials increases and decreases normally only to
accommodate production needs. Work in progress represents, on average, eight
days' production. Inventory levels reach a minimum at the end of the Peak
Season.
Net cash flows from operating activities decreased $0.9 million to $11.0
million for the year ended December 31, 1997 from $11.9 million for the year
ended December 31, 1996. Net cash flows from operating activities increased
$3.8 million to $11.9 million for 1996 from net cash provided by operating
activities of $8.1 million during 1995.
Net cash flows from financing activities increased to $8.5 million in 1997
from a net use of $15.7 million in 1996. This increase of $24.2 million was
due primarily to an increase in short term borrowings of $28.9 million in
1997. In the first quarter of 1998 net cash flow from financing activities was
$44.0 million compared with $46.0 million in 1997, to finance the peak season
cash flow requirements.
The Company's contributions to its defined benefit pension plans were $2.3
million, $2.2 million, $2.3 million, $0.6 million and $0.6 million in 1995,
1996, 1997 and for the three months ended March 30, 1997 and March 29, 1998,
respectively. The Company adopted Statement of Financial Accounting Standards
No. 87, "Employers' Accounting for Pensions" on January 1, 1993. The impact of
adopting SFAS No. 87 was the recognition of a transition asset of $37.8
million. The transition asset is being amortized into income over 15 years.
Net periodic pension income was $5.8 million, $6.3 million, $5.8 million, $1.5
million and $1.2 million in 1995, 1996, 1997 and for the three months ended
March 30, 1997 and March 29, 1998, respectively. Net periodic pension income
includes amortization of the transition asset into income of $2.7 million,
$2.7 million, $2.5 million, $0.7 million and $0.6 million in 1995, 1996, 1997
and for the three months ended March 30, 1997 and March 29, 1998,
respectively.
The Company's capital expenditures were $11.1 million, $10.8 million, $7.4
million, $1.2 million and $1.4 million in 1995, 1996, 1997 and for the three
months ended March 30, 1997 and March 29, 1998, respectively. The Company
anticipates that total capital expenditures for 1998 will be approximately $12
million, which includes $2.9 million of capital expenditures to increase
capacity at Sturmey-Archer and $1.0 million to upgrade computer systems in its
operations at Raleigh USA and Raleigh Canada.
The Company incurred significant indebtedness in connection with the
Recapitalization. As of March 29, 1998, after giving pro forma effect to the
Recapitalization, the Company would have had approximately $238.2 million of
combined indebtedness, including $160.1 million of indebtedness pursuant to
the Exchange Notes, $78.1 million of borrowings under the Revolving Credit
Agreement and $1.7 million of borrowings under the South African Credit
Facility. The Revolving Credit Agreement provides for a seven-year DM225
million senior secured revolving credit facility to be made available to
Derby's operating companies. Borrowings under the Revolving Credit Agreement
are available subject to a borrowing base determined as a percentage of
eligible assets. See "Description of Revolving Credit Agreement".
The Company historically has met its working capital needs and capital
expenditure requirements primarily through a combination of operating cash
flow and borrowings under bank facilities. Following the Recapitalization, the
Company will satisfy its debt service requirements and meet its working
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<PAGE>
capital and capital expenditure needs through a combination of operating cash
flow and funds available under the Revolving Credit Agreement. In connection
with the Recapitalization, the Company refinanced all its existing debt other
than its debt under the South African Credit Facility. In addition, certain
standby letters of credit under the Revolving Credit Agreement in an amount of
approximately $3.5 million are outstanding.
The Company's ability to make scheduled payments of principal, and to pay
the interest on its indebtedness (including the Exchange Notes), and to fund
planned capital expenditures or finance acquisitions, will depend on its
future financial and operating performance, which to a certain extent is
subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond its control. Based on the current and
anticipated level of operations, management believes that cash flow from
operations and available cash, together with available borrowings under the
Revolving Credit Agreement, will be adequate to meet the Company's anticipated
future requirements for working capital, budgeted capital expenditures and
scheduled payments of principal and interest on its indebtedness, including
the Notes, for the foreseeable future. There can be no assurance, however,
that the Company will be able to meet such obligations.
INFORMATION TECHNOLOGY--YEAR 2000
The Company is in the process of implementing a plan designed to ensure that
all application software used in connection with the Company's management
information systems, including internally developed systems, software
purchased from outside vendors and embedded chips at the Company's
manufacturing facilities, will manage and manipulate data involving the
transition of dates from 1999 to 2000 without functional or data abnormality
and without inaccurate results related to such dates. Due to the fact that
existing software often defines each year with two digits rather than four
digits, the Company's computers that have date-sensitive software may
recognize a date using "00" as occurring in the year 1900 rather than the year
2000, which would result in such abnormalities and inaccuracies and lead to
disruptions of the Company's operations, including a temporary inability to
process customer orders, send invoices or engage in other normal business
activities. Many of the Company's existing computer systems will need to be
retired, replaced or remediated prior to the year 2000. Retirement,
replacement and remediation may require that, over the next few years, a
substantial portion of the Company's management information systems spending
be allocated to such activities. The Company is currently in the process of
replacing and upgrading the computer systems of its United States and Canadian
Operations. The Company expects to spend a total of approximately $1.8 million
in 1998 and $0.1 million in 1999 to achieve "Year 2000 compliance" for all its
operations. The Company plans to complete all Year 2000 compliance efforts by
early 1999. The costs and timing of such efforts, however, are based upon
management's best estimates, which are derived using assumptions relating to,
among other things, the availability of certain resources, the timing of
actions taken by third parties and other factors. Additional expenditures
beyond the Company's projections may be necessary. In the event that the
Company materially underestimates the amount of funds or the time necessary to
resolve identified problems or if any information systems relied upon by the
Company for critical functions are not substantially Year 2000 compliant in a
timely manner, there could be a material adverse effect on the Company's
business, financial condition and results of operations.
INFLATION
The rate of inflation over recent years has been relatively low, and
management believes that inflation has not had a material impact on the
Company's results of operations for any of the fiscal years in the five-year
period ended December 31, 1997. There can be no assurance, however, that in
future years inflation will not have an adverse impact on Derby's business.
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<PAGE>
BUSINESS
OVERVIEW
Derby is a world-leading designer, manufacturer and marketer of bicycles.
The Company holds the leading market share in the United Kingdom, The
Netherlands, Canada, South Africa and Ireland, holds the leading market share
in the adult bicycle market in Germany and is also a leading bicycle supplier
in the United States. Competing primarily in the medium- to premium-priced
market, Derby owns or licenses many of the most recognized brand names in the
bicycle industry, including leading global brands such as Raleigh, Nishiki and
Univega, and leading regional brands such as Gazelle in The Netherlands and
Kalkhoff, Musing, Winora and Staiger in Germany. Derby designs, manufactures
and markets a wide range of bicycles in all major product categories: (i) all-
terrain or mountain bicycles, referred to as MTBs, (ii) city bicycles, also
called touring or upright bicycles, (iii) hybrid bicycles, also called comfort
or cross bicycles, (iv) juvenile bicycles, including BMX bicycles, and (v)
race/road bicycles. The Company distributes branded bicycles through extensive
local market networks of IBDs as well as through national retailers, and
distributes private label bicycles through mass merchandisers and specialty
stores. For the fiscal year ended December 31, 1997, the Company had net
revenues of $465.7 million and EBITDA of $35.8 million.
Through a series of acquisitions and plant expansions, the Company has
created a global bicycle business distinguished by its leading market
positions, low cost production, extensive distribution network and reputation
for high quality. Organized in 1986 for the purpose of acquiring the Raleigh,
Gazelle and Sturmey-Archer bicycle and bicycle component businesses from TI
Group plc, Derby expanded into the United States and Germany in 1988. Since
then, Derby has acquired additional well-known brands and leveraged its
existing manufacturing plants and component sourcing operations to lower unit
costs for its acquired businesses. See "--History".
The Company has manufacturing operations in five countries, each led by
experienced local management, and maintains marketing or purchasing operations
in five additional countries. Each local operation manages national
distribution channels, dealer service and working capital and benefits from
shared product design and manufacturing technologies as well as from economies
of scale generated by the Company's aggregate purchasing power. Consequently,
each local operation has the flexibility to respond to shifts in local market
demand and product preference.
The Company's operations are concentrated in the United Kingdom, The
Netherlands, Germany, the United States and Canada, markets which generated
sales of more than an estimated 21 million new bicycles in 1997. An overview
of Derby's 1997 operations is as follows:
<TABLE>
<CAPTION>
BICYCLE % OF TOTAL
UNIT SALES US$ SALES DOLLAR
COMPANY (000S) (IN MM) SALES
------- ---------- --------- ----------
<S> <C> <C> <C>
Raleigh U.K. (United Kingdom).................. 664 $107.3 23%
Gazelle (The Netherlands)...................... 294 107.8 23%
DCW/Winora-Staiger/MS Sport Group (Germany).... 415 103.8 22%
Raleigh USA (United States).................... 236 57.9 13%
Raleigh Canada (Canada)........................ 298 29.5 6%
Sturmey-Archer (United Kingdom)(/1/)........... n/a 29.6 6%
Probike South Africa (South Africa)............ 177 20.6 5%
Raleigh Ireland (Ireland)...................... 38 8.1 2%
Other and inter-company adjustments............ (40) 1.1 --
----- ------ ----
Derby Total.................................. 2,082 $465.7 100%
===== ====== ====
</TABLE>
- --------
(1) Represents third party sales.
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<PAGE>
COMPETITIVE STRENGTHS
Global Industry Leader. Derby is one of the world's largest designers,
manufacturers and marketers of bicycles. Derby holds the leading market share
in the United Kingdom, The Netherlands, Canada, South Africa and Ireland, has
the leading market share in the adult bicycle market in Germany and is
consistently among the five largest suppliers to the IBD market in the United
States. Derby's leading market shares in multiple markets position the Company
as a global bicycle industry leader and reduce its vulnerability to local
economic cycles and changing consumer preferences. The table below outlines
the Company's market rank and approximate market share based on unit volumes
by country for 1997:
<TABLE>
<CAPTION>
MARKET MARKET RANK MARKET SHARE
------ ----------- ------------
<S> <C> <C>
United Kingdom.................................... #1 26%
The Netherlands(/1/).............................. #1 24%
Germany(/2/)...................................... #1 12%
Canada............................................ #1 26%
South Africa...................................... #1 60%
Ireland........................................... #1 32%
United States(/3/)................................ #4 8%
</TABLE>
- --------
(1) Represents Gazelle (22%) and Raleigh Europe (2%).
(2) Represents DCW (10%), Gazelle (1%) and Raleigh Europe (1%), and market
rank and market share of the adult bicycle market only.
(3) Represents market rank and market share of IBD market only.
Portfolio of Well-Recognized Brand Names. Derby owns or licenses many of the
most widely-recognized brand names in the bicycle industry. These brands
include leading global brands such as Raleigh, Nishiki and Univega, and
leading regional brands such as Gazelle in The Netherlands and Kalkhoff,
Musing, Winora and Staiger in Germany. The Company has maintained its leading
brand names primarily by providing high quality, reliable and innovative
products supported by strong customer service to its dealers. The Company
promotes its brand names through mass-media advertising and focused
promotional efforts such as sponsoring professional and amateur cycling teams
and individuals, extending cooperative advertising programs to IBDs and
participating in major trade shows. Based on marketing surveys conducted by
the Company, the Raleigh brand has a 98% prompted recognition in the United
Kingdom and is the second most recognized bicycle brand in the United States.
In addition, Raleigh and Gazelle are the two most recognized bicycle brands in
The Netherlands.
Significant Purchasing Power. As one of the world's largest purchasers of
bicycle components, management believes that the Company's aggregate buying
power and supplier relationships provide the Company with an important
competitive advantage. Typically, bicycle components and raw materials account
for approximately 75% of a bicycle's total manufacturing cost. Derby's ability
to obtain favorable pricing and trade terms on a global basis results in lower
per unit bicycle costs and higher gross margins. The Company's purchasing
subsidiary, Derby Trading, assists the operating companies in negotiating with
Taiwanese and Chinese bicycle component manufacturers. Management believes
that the Company is one of the largest customers of Shimano, the world's
largest bicycle component manufacturer and supplier. Derby's long term
relationships with key suppliers help the Company to obtain high quality
components in a timely, cost-efficient manner.
Extensive Dealer Distribution Networks. Management believes the Company has
the most extensive dealer distribution network of any bicycle company in its
three largest markets, the United Kingdom, The Netherlands and Germany, as
well as in Canada, South Africa and Ireland. For example, Raleigh U.K. has
approximately 225 exclusive retail outlets, while its nearest competitor has
fewer than ten. In The Netherlands, Gazelle distributes through approximately
1,500 dealers,
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representing more than 60% of the IBDs in the country, and in Germany, DCW is
one of the largest suppliers to ZEG, a major retail cooperative that supplies
approximately 65% of the German IBD market. The Company actively works with
its dealers to develop brand loyalty and to respond quickly to changes in
retailing formats and customer buying habits, in part by tailoring sales and
marketing programs to each market and distribution channel. The Company
believes its strong relationships with its dealers are a key to its success.
Flexible and Cost-Efficient Design and Manufacturing. Derby operates modern
manufacturing facilities in the United Kingdom, The Netherlands, Germany,
Canada and the United States, each of which has local in-house design and
engineering staff who develop new models and styles. Local market
manufacturing flexibility and integrated product development allow the Company
to respond quickly to changes in customer demand, maintain consistent, high
quality products, manage working capital needs and reduce the risk of
inventory obsolescence for both the Company and its dealers. Furthermore, the
development department at each manufacturing operation participates in the
Company's make-or-buy decision process to help ensure that in-house
manufacturing is the most cost-effective method of production. Between 1991
and 1997, Derby invested approximately $25 million to build a modern
manufacturing facility located in Rostock, in the former German Democratic
Republic, approximately $20 million to reorganize and upgrade its Nottingham,
England, manufacturing facility, and approximately $38 million to increase
quality and capacity and reduce total product and distribution costs in other
existing facilities. The Company reduced its labor hours per manufactured unit
by approximately 19% over that period.
Diversified Revenues and Cash Flows. Derby operates in ten countries around
the world and offers a comprehensive product line in each of its markets.
Management believes the Company's geographical diversification and broad
product line: (i) reduce the effects of cyclical downturns in individual
markets and (ii) help to mitigate the impact of sales volatility due to
changing consumer preferences associated with individual markets and products.
Experienced Management Team. Derby has a strong and experienced management
team at both the corporate and operating levels. The Company's ten executive
managers average more than ten years of experience in the bicycle industry. To
capitalize on the strengths of each of its local operations, management teams
from the Company's local operations meet periodically to share ideas regarding
product innovation, manufacturing processes and component purchasing. Since
the Company's formation in 1986, management has successfully integrated ten
acquisitions and expanded the range of Derby brands and product lines. See
"Management" and "--History".
BUSINESS STRATEGY
The Company intends to enhance and leverage its competitive strengths
through the following business strategies:
Capitalize on Strength of Derby Brand Names. Derby owns or licenses many of
the most recognized brand names in the bicycle industry. The Company intends
to continue to leverage its leading market positions and strong brand equity
to: (i) further penetrate attractive market niches such as the hybrid and BMX
segments, (ii) develop and enhance relationships with existing and new IBDs,
(iii) augment the Company's position in the growing multi-sport retail
channel, principally in the United Kingdom and in the United States and (iv)
pursue attractive ancillary businesses, such as cycling accessories and
branded clothing.
Enhance and Leverage Dealer Relationships. Due to the long-standing market
presence of many of Derby's local operations and brands (e.g., more than 100
years each for Raleigh U.K. and Gazelle), management believes its
relationships with local bicycle dealers are strong as well as extensive. The
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Company intends to enhance loyalty among IBDs, further penetrate its existing
markets and expand into new markets by maintaining multiple product categories
and superior customer service.
Increase Market Share in Growing Hybrid Bicycle Sector. In several markets,
management expects the hybrid bicycle segment to grow at a rate significantly
higher than that of the overall bicycle industry. For example, in the United
Kingdom and the United States, management estimates that the hybrid segment
will grow at an average annual rate in excess of 10% over the next several
years. Management believes the Company is well-positioned to capitalize on
this growth. For example, Raleigh U.K. held approximately 30% of the hybrid
market in 1996 and maintains strong relationships with IBDs, the principal
channel of distribution for hybrid bicycles. In the United States, Raleigh USA
is strategically positioned in the hybrid segment with Raleigh, Nishiki and
Univega all offering models in this category.
Pursue Strategic Acquisitions. Management believes that the fragmented
nature of the bicycle industry provides opportunities for growth through
strategic acquisitions. The Company intends to pursue acquisitions that will
allow it to leverage its existing distribution network and its modern
manufacturing facilities. The Company also intends to focus its efforts on
acquiring leading brands with particular emphasis on consolidation
opportunities in the United States and Germany and in markets where the
Company is not currently represented. In the ordinary course of business, the
Company routinely considers potential acquisition candidates. On July 18,
1998, the Company entered into a nonbinding letter of intent to acquire a
bicycle design and distribution company for a purchase price of approximately
$20 million in cash, the assumption of certain indebtedness and a contingent
payment based on purchases. The Company also intends to explore acquisitions
which provide opportunities to expand into ancillary products such as cycling
accessories.
GLOBAL BICYCLE INDUSTRY OVERVIEW
The global bicycle industry, including bicycles, parts and accessories, is
estimated to have had total retail sales of $25 billion in 1997. The bicycle
manufacturing segment of the industry, with annual production of approximately
100 million units, is competitive, highly fragmented and locally driven.
Bicycles are produced throughout the world in approximately 65 countries with
product demand, design and distribution driven by varying local market
dynamics and consumer preferences. The bicycle component segment, in contrast,
comprises a few well-positioned suppliers, including Shimano (based in Japan),
Sachs AG ("Sachs") (based in Germany), RockShox, Inc. ("RockShox") (based in
the United States) and Derby's Sturmey-Archer (based in the United Kingdom),
which globally supply to the more fragmented bicycle manufacturing segment.
Across local markets, bicycle products can be classified into five major
categories: (i) MTBs, which feature wide tires, high-strength frames,
components with multiple gears and powerful brakes, (ii) city bicycles, also
called touring or upright bicycles, which feature more comfortable seats, up
to seven gears within the wheel hub, chain and splash guards, luggage racks
and lights, (iii) hybrid bicycles, also called comfort or cross bicycles,
which combine the technology of MTBs with the comfort and practicality of city
bicycles, (iv) juvenile bicycles with smaller wheels and frame size, including
BMX bicycles, and (v) race/road bicycles, which feature narrow, high pressure
tires, lightweight frames and components with multiple gears. The Company
manufactures and markets bicycles across all five major product categories.
Management believes that the Company is an industry leader because it offers
its customers high quality, comprehensive product lines in each of its local
markets.
Demand in the bicycle industry is driven primarily by four major factors:
(i) new product trends/fashion, (ii) market demographics, (iii) personal
disposable income and (iv) long term lifestyle and behavioral trends. During
the past twenty years, new product innovation and lifestyle changes have been
the major driver of bicycle demand as evidenced by the introduction of MTBs
and BMX bicycles. Starting in the mid-1980s, the growth of the mountain
bicycle segment, which coincided with
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<PAGE>
a broader trend in the leisure market toward outdoor activities, led to strong
growth in MTB and BMX bicycle sales. In recent years, the hybrid bicycle,
which combines features of the mountain bicycle and the traditional city
bicycle, has become increasingly popular. Growing demand by older cyclists for
a versatile and comfortable bicycle and the expanding use of bicycle paths
world-wide are expected to fuel increasing sales growth of hybrid bicycles.
In general, bicycle products are marketed and sold through two primary
distribution channels: IBDs and mass merchandisers. IBDs typically carry a
broad range of relatively high priced, high quality bicycles, while mass
merchandisers tend to offer relatively lower-priced bicycles focused primarily
in the juvenile market. In many countries, the IBD market is highly fragmented
with most dealers owning a single retail shop and carrying three or four
brands and a wide variety of parts and accessories. Throughout the 1980s, mass
merchandisers increased market share at the expense of IBDs. In recent years,
however, the market shares of IBDs and mass merchandisers have generally
stabilized in the Company's major markets. Factors contributing to this trend
include IBDs (i) offering increased levels of technical expertise and support
for increasingly sophisticated bicycle products, (ii) providing a broad
product selection and (iii) forming buyer groups to enhance purchasing power.
At the same time, multi-sport retailers have become a growing source of
bicycle sales.
While many bicycle manufacturers have lost market share to imported bicycles
from the Far East, the impact of such imports on Derby's operations has
diminished due to E.U. anti-dumping duties and the greater competitiveness and
flexibility of its domestic manufacturing. Specifically, imports from the Far
East have been constrained by E.U. initiatives such as the 30.6% anti-dumping
duty on Chinese bicycles introduced in 1993, which continues in effect until
September 1998. As a result of this initiative, imports of Chinese bicycles
significantly declined, although imports of bicycles from other Asian
countries and imports of Chinese finished frames increased (140% growth
between 1992 and 1996). In response, anti-dumping duties and tariffs ranging
up to 39.4% were imposed by the E.U. on bicycles imported from most
manufacturers in Thailand, Malaysia and Indonesia. In addition, in January
1997, the E.U. strengthened its existing regulations to prevent circumvention
through the importation of kits and partially assembled bicycles. In November
1997, the E.U. opened an anti-dumping inquiry into imports from Taiwan.
Primarily as a result of the imposition of anti-dumping duties, imports of
bicycles from outside the E.U. have stabilized at approximately 54% in the
United Kingdom, 45% in The Netherlands and 42% in Germany for 1996. In the
United States, imports stabilized at approximately 44% in 1996 as bicycle
companies increasingly manufacture in the United States to improve their
flexibility.
HISTORY
Derby was organized in 1986 to acquire the Raleigh, Gazelle and Sturmey-
Archer bicycle and bicycle component businesses from TI Group plc. Shortly
after acquiring these businesses in 1987, Derby divested certain non-core
operations, selling its French operations in 1987 and its Australian
operations in 1987 and 1989. In 1988, Derby began to expand through
acquisition. In September 1988, Derby acquired the assets of Neue Kalkhoff,
the second largest bicycle manufacturer in the former Federal Republic of
Germany at the time, and established DCW. In October 1988, the Company
acquired the shares of Raleigh Cycle Company of America from Raleigh's U.S.
licensee, Huffy Corporation, and the West Coast Cycle division of Medalist
Industries Inc. (owner of the Nishiki brand in the United States). These two
businesses were merged to form Raleigh USA. Derby formed the Company's Probike
South Africa operating company with the acquisitions of Cycle and Hardware
Factors in 1989, J.H. Slotar in 1990 and Cycle Centre Wholesale in 1991. In
1992, Derby acquired Musing, the German bicycle manufacturer.
To further its strategy of growth through strategic acquisitions, Derby has
continued to acquire bicycle and bicycle component companies and leading brand
names. In January 1997, Derby
55
<PAGE>
completed the acquisition of the assets and operations of the Winora and
Staiger businesses, a long-established bicycle manufacturer and distributor
located in southwestern Germany. Winora-Staiger sells bicycles to a network of
IBDs to which the Company was not previously a major supplier. In March 1997,
Derby acquired the worldwide rights to the Univega brand name and its
associated trade names, trademarks and designs. In August 1997, the Company
formed Univega to serve as a holding company for the acquisition of the MS
Sport Group from Robert Holzer over a specified period of years. Univega
agreed to pay Mr. Holzer a purchase price based on the MS Sport Group's
performance through the year 2000 in a maximum amount of DM13.1 million and a
minimum amount of DM5.35 million. The Company also formed Univega License,
which is owned 80% by Derby Holding (Deutschland) and 20% by Mr. Holzer, to
hold and license the Univega trademarks.
From 1989 to 1996, Derby implemented a reorganization and rationalization
program. In 1989, Derby consolidated its manufacturing facilities in the
United Kingdom and the United States and closed its South African bicycle
manufacturing facilities, which were sold in 1993. Since 1990, Derby has
invested in labor-saving, flexible production machinery and restructured the
workforces at its manufacturing locations. From 1992 to 1993, taking advantage
of substantial incentives from the German government, Derby built a factory in
Rostock, in the former German Democratic Republic. Derby completed its
reorganization and investment program in 1996, having made major steps toward
improving production efficiency, and increasing manufacturing flexibility.
GROUP OPERATIONS
Suppliers. Derby's aggregate buying power is a key competitive advantage.
Typically, bicycle components and raw materials account for approximately 75%
of a bicycle's total manufacturing cost; hence, controlling component and raw
material costs is essential for cost-competitive manufacturing. Derby is one
of the world's largest purchasers of bicycle components, and management
believes that the Company's aggregate buying power and supplier relationships
provide the Company with an important competitive advantage as the Company
seeks to obtain favorable prices and trade terms from its suppliers. Major
component suppliers include Shimano, Sachs, RockShox and Derby's Sturmey-
Archer. Derby Trading acts as Derby's representative in Taiwan and China,
where most of the large-volume component manufacturers are located. Derby's
operating companies negotiate directly with suppliers and are able to consult
with Derby Trading to determine whether the quoted terms they receive are the
best available. Derby's operating companies can thus achieve volume prices on
smaller orders, thereby reducing inventory risk and working capital
requirements.
Product Design and Development. Each of Derby's major operating companies
complements its flexible manufacturing capabilities with in-house design and
engineering staff who develop new models and styles. Many members of the staff
are bicycle enthusiasts and use their familiarity with local market trends and
fashions to help develop frame shapes, colors, finishes and technological
features that consumers find attractive. Models are designed on computer-aided
workstations and are subsequently tested to ensure that they will be
attractive to consumers. Since product design is managed internally at each
major operating company, the Company is able to respond quickly to new trends,
fill market niches with limited manufacturing runs, and reduce the risk of
inventory obsolescence for both the Company and its dealers. Furthermore, the
development department at each manufacturing operation participates in the
Company's make-or-buy decision process to help ensure that in-house
manufacturing is the most cost-effective method of production.
Distribution. In 1997, the Company sold a total of 2.1 million bicycles. Of
these, approximately 1.9 million bicycles were manufactured by the Company and
the balance of the bicycles was purchased by the Company. Branded products
accounted for approximately 1.7 million, or 81.0%, of the bicycles sold with
the remainder attributable to private label sales, largely in Germany and
Canada.
56
<PAGE>
Warranties. The Company offers warranty terms in respect of its products
that are consistent with standard practices in the bicycle industry. For
example, bicycle components are generally warranted for a period of twelve
months, and frames are generally warranted for a period ranging from two years
to the life of the frame, depending upon material composition, channel of
distribution and country of sale. Each of the operating companies maintains a
reserve for warranty expense which management believes to be adequate.
RALEIGH U.K.
General Overview. Raleigh U.K., the largest bicycle company in the United
Kingdom, had a 26% unit market share in 1997. Raleigh is also the United
Kingdom's most recognized bicycle brand. Founded in 1887 and based in
Nottingham, England, Raleigh U.K. has led the U.K. market since the early
1900s by virtue of its commitment to high quality, reliable products and
design innovation. The following table outlines Raleigh U.K.'s historical
operating performance from 1995 to 1997:
RALEIGH U.K. HISTORICAL OPERATING RESULTS
<TABLE>
<CAPTION>
RALEIGH U.K. 1995 1996 1997
------------ ---- ---- ----
<S> <C> <C> <C>
Units (in 000s)............................................ 747 718 664
Sales ((Pounds) in MM)..................................... 67.5 68.5 65.4
Gross Profit ((Pounds) in MM).............................. 16.5 16.2 18.5
Gross Profit Margin (%).................................... 24.4 23.6 28.3
EBITDA ((Pounds) in MM).................................... 2.9 5.5 9.1
EBITDA Margin (%).......................................... 4.3 8.0 13.9
</TABLE>
Market Overview and Competitive Environment. The U.K. bicycle market grew
quickly during the 1980s and the beginning of the 1990s primarily as a result
of the introduction and growth in sales of MTBs. While growth in demand slowed
in the mid-1990s, the Company expects the U.K. market to benefit from (i)
improved general economic conditions, (ii) trends toward fitness and improved
lifestyle, (iii) increased environmental awareness and (iv) initiatives such
as the National Cycling Strategy, a government-led program that seeks to
double bicycle use by 2002, and the National Cycle Network, a 6,500 mile
network of bicycle paths that is currently under construction. The Company
estimates that in 1996, 42% of the bicycles sold in the United Kingdom were
MTBs, 8% were city and hybrid bicycles, 48% were juvenile bicycles, 1% were
race/road bicycles and the remaining 1% were other bicycles. The following
table sets forth the estimated 1997 unit bicycle market share of each major
brand in the U.K. consumer bicycle market:
1997 U.K. UNIT MARKET SHARE
<TABLE>
<CAPTION>
BRAND SHARE
----- -----
<S> <C>
Raleigh.......................................... 26%
Townsend & Falcon................................ 11%
Apollo (Halfords)................................ 11%
Universal........................................ 8%
Others........................................... 44%
----
Total.......................................... 100%
====
</TABLE>
57
<PAGE>
Products and Brands. Based on marketing surveys conducted by the Company,
the Raleigh brand has a 98% prompted recognition in the United Kingdom and is
associated with a tradition of quality. Raleigh U.K. leverages its brand
equity by sponsoring well-known athletes in competitive biking and has also
recently started licensing the Raleigh brand to producers of clothing, toys,
soft drinks and postcards. Raleigh U.K. designs, manufactures and markets a
wide range of bicycles as outlined in the following table:
<TABLE>
<CAPTION>
TYPE BRANDS/MODELS MARKET
- -----------------------------------------------------------------------------------
<C> <C> <S>
MTB M-Trax Mountain biking enthusiasts and
Max Cromo sports-minded 15-30 year olds
MTB Pro-Line
- -----------------------------------------------------------------------------------
Hybrid; Trekking Freedom Commuters, 25+ year olds and families
Pioneer
- -----------------------------------------------------------------------------------
Juvenile Play 2-6 year olds
Action 6-11 year olds
Max 11-16 year olds
- -----------------------------------------------------------------------------------
Race/Road Pro-Line 853 Race/road bicycling enthusiasts,
cycling tourists
- -----------------------------------------------------------------------------------
Electrically Power Assisted Select 45+ year olds
</TABLE>
Manufacturing. Raleigh U.K.'s manufacturing facility in Nottingham, England,
is the Company's largest manufacturing plant. Production equipment includes
laser cutting and robotic welding equipment used in frame manufacturing,
automated wheel trueing units, a paintshop using chemical pre-treatment and
electrophoretic processes, component sub-assembly units and final assembly
lines. This facility, which has a production capacity of 5,500 units per day
operating on a double shift basis, produced an average of 2,900 units per day
in 1997, reaching 3,700 units per day in the spring and summer months. This
production represents more than 65% of the United Kingdom's total domestic
bicycle production for 1997. At the beginning of 1996, Raleigh U.K. completed
a major restructuring of its manufacturing processes that improved production
flow, reduced work-in-progress and unnecessary movement of components and
substantially improved product quality. Raleigh U.K.'s approximate (Pounds)10
million investment to restructure its manufacturing processes between 1994 and
1996 resulted in annual savings of approximately (Pounds)2.1 million.
58
<PAGE>
Sales, Marketing and Distribution. Raleigh U.K.'s sales and marketing
department works closely with its in-house design and engineering staff to
develop new models and styles with coloring and detailing that reflect current
trends and fashions. The Nottingham factory's paint shop is capable of
creating a wide range of colors and finishes, an important capability given
that style, color and detailing attract consumers and support Raleigh U.K.'s
pricing strategy. While Raleigh U.K. markets products at multiple price points
in most segments, the largest portion of units is sold at the mid-price range.
Juvenile bicycles and Raleigh models sold through mass merchandisers or mail
order distributors account for most of the lower-priced units sold. The
following table sets forth the retail price segmentation of bicycles sold in
the U.K. market for 1996:
U.K. MARKET PRICE SEGMENTATION
<TABLE>
<CAPTION>
TOTAL
RETAIL PRICE U.K. MARKET RALEIGH U.K.
------------ ----------- ------------
<S> <C> <C>
< (Pounds)100.................................... 46% 28%
(Pounds)100-(Pounds)120.......................... 9% 10%
(Pounds)120-(Pounds)160.......................... 26% 37%
(Pounds)160-(Pounds)200.......................... 10% 17%
(Pounds)200-(Pounds)300.......................... 6% 6%
> (Pounds)300.................................... 3% 2%
---- ----
Total.......................................... 100% 100%
==== ====
</TABLE>
Raleigh U.K. has the most extensive dealer distribution network in the
United Kingdom, comprised of approximately 225 exclusive retail dealers and
approximately 800 multi-brand dealers. Raleigh U.K.'s distribution network of
approximately 1,100 IBDs constitutes approximately 37% of the approximately
3,000 total IBDs in the United Kingdom. In addition, Raleigh U.K. distributes
21% of its units through Halfords, a national retailer of bicycle and
automotive parts with approximately 400 stores, and approximately 11% of its
units through multi-sport retailers and mail order distributors. The following
table sets forth Raleigh U.K.'s sales to major customers in 1997:
RALEIGH U.K. SALES TO MAJOR CUSTOMERS
<TABLE>
<CAPTION>
1997 SALES % OF TOTAL
MAJOR CUSTOMER ((Pounds) IN MM) 1997 SALES
-------------- ---------------- ----------
<S> <C> <C>
Halfords...................................... (Pounds)13.7 21%
Great Universal Stores........................ 1.1 2%
Sports Division Ltd........................... 0.9 1%
Mr. G.L.F. Read............................... 0.9 1%
Others........................................ 48.8 75%
------------ ----
Total....................................... (Pounds)65.4 100%
============ ====
</TABLE>
59
<PAGE>
GAZELLE
General Overview. Gazelle, the leading bicycle manufacturer and brand name
in The Netherlands, had a 22% unit market share in 1997. In the city bicycle
segment, which accounted for 57% of the approximately 1.1 million bicycles
sold in The Netherlands 1996, Gazelle had a 33% market share. Founded in 1892,
the Gazelle brand has been the leader in the Dutch market for more than 100
years, and Gazelle has a reputation for producing the most reliable, highest
quality bicycles sold in The Netherlands. Gazelle added "Koninklijke", meaning
"Royal", in Dutch, to its name after receiving the Royal Warrant on the
occasion of its 100th anniversary in 1992. The following table outlines
Gazelle's historical operating performance from 1995 to 1997:
GAZELLE HISTORICAL OPERATING RESULTS
<TABLE>
<CAPTION>
GAZELLE 1995 1996 1997
-------- ----- ----- -----
<S> <C> <C> <C>
Units (in 000s)......................................... 286 293 294
Sales (NLG in MM)....................................... 192.1 202.7 207.5
Gross Profit (NLG in MM)................................ 43.6 50.4 50.8
Gross Profit Margin (%)................................. 22.7 24.9 24.5
EBITDA (NLG in MM)...................................... 22.5 28.2 26.5
EBITDA Margin (%)....................................... 11.7 13.9 12.8
</TABLE>
Market Overview and Competitive Environment. Cycling is a way of life in The
Netherlands, where a population of approximately 15.5 million owns
approximately 16 million bicycles. The Dutch use bicycles primarily for
transportation, as opposed to the Company's other major markets, where
bicycles are used primarily for leisure. Due to the widespread use of bicycles
for transportation, city models have retained the majority share of the Dutch
market, unlike other European and North American markets where the MTB segment
has gained a large share of the market. Hybrid bicycles, which combine
features of city bicycles and MTBs, are currently growing in popularity in The
Netherlands. Gazelle is strongly positioned in the city bicycle segment with
an estimated 33% unit market share in 1997 and has developed a range of hybrid
bicycles to respond to growing demand. The Company estimates that in 1996, 57%
of the bicycles sold in The Netherlands were city bicycles, 25% were hybrid
bicycles and MTBs, 15% were juvenile bicycles and the remaining 3% were other
bicycles. The following table sets forth the estimated 1997 unit market share
based on sales to distributors for each major bicycle brand in The
Netherlands:
1997 DUTCH UNIT MARKET SHARE
<TABLE>
<CAPTION>
BRAND SHARE
----- -----
<S> <C>
Gazelle.......................................... 22%
Batavus.......................................... 19%
Giant............................................ 10%
Union/Rivel...................................... 10%
Others........................................... 39%
----
Total.......................................... 100%
====
</TABLE>
60
<PAGE>
Products and Brands. The Gazelle brand is regarded as a premium brand in The
Netherlands with extensive consumer recognition. As evidence of its success,
Gazelle has won the Bicycle of the Year Award from the Dutch Bicycle
Foundation in The Netherlands in four of the last seven years. Gazelle's
product developers work in partnership with outside design consultants, with
one such partnership leading to Gazelle's Expresso concept bicycle winning
Shimano's European Design Contest in 1995. Gazelle also won the 1997 Dutch
Children's Bike of the Year Award from the Dutch Tourist Association.
Gazelle's own design and engineering staff has successfully broadened
Gazelle's product offering from its market-leading, traditional city bikes to
include other popular models. Gazelle designs, manufactures and markets a wide
range of bicycles as outlined in the following table:
<TABLE>
<CAPTION>
TYPE BRANDS/MODELS MARKET
- ------------------------------------------------------------------------------
<S> <C> <C>
MTB Skyhawk Mountain biking enthusiasts and
Extreme fashion-conscious 15-25 year olds
Instinct
Impulse
- ------------------------------------------------------------------------------
City Primeur (Comfort) Commuters, families and 45-65 year
Impala (Comfort) olds; younger users targeted by Free
Free (Trendy) and Boomerang models in the Trendy
Boomerang (Trendy) line
Orange (Sportief)
Paris (Sportief)
- ------------------------------------------------------------------------------
Hybrid Formula Trekking Commuters, 25+ year olds and
Medeo families
Lausanne
Aristo
Riacho
- ------------------------------------------------------------------------------
Juvenile Street Cruiser 6-14 year olds
Laser
Tempo
Swing
- ------------------------------------------------------------------------------
Race/Road Formula Team Race/road bicycling enthusiasts
Giro
Vuelta
Primavera
Alu Road
</TABLE>
Manufacturing. Gazelle's manufacturing facility, located in Dieren, The
Netherlands, has a production capacity of 1,700 units per day operating on a
single shift basis and produced an average of 1,300 units per day in 1997.
Because Dutch consumers generally prefer a high degree of technological
enhancements in their bicycles and are willing to pay a premium for top
quality frame construction and components, Gazelle's manufacturing facility
employs technologies not used by Derby's other operations. One such technology
is the automated induction brazing of frame joints (as opposed to welding),
which bonds the frame together internally, thus eliminating the "toothpaste
look" around the joints of welded frames.
61
<PAGE>
Sales, Marketing and Distribution. Gazelle focuses on the high value, high
margin price segments of the Dutch bicycle market. The following table sets
forth the retail price segmentation of bicycles sold in the Dutch market in
1996:
DUTCH MARKET PRICE SEGMENTATION
<TABLE>
<CAPTION>
TOTAL
RETAIL PRICE DUTCH MARKET GAZELLE
------------ ------------ -------
<S> <C> <C>
< NLG450............................................. 28% 0%
NLG450-NLG700........................................ 17% 7%
NLG700-NLG1,000...................................... 27% 37%
NLG1,000-NLG1,500.................................... 20% 47%
> NLG1,500........................................... 8% 9%
---- ----
Total.............................................. 100% 100%
==== ====
</TABLE>
Gazelle's network of approximately 1,500 IBDs constitutes the most extensive
dealer network in The Netherlands. Gazelle sells bicycles predominantly to
IBDs in its home market, and approximately 90% of these sales are Gazelle
branded products. Due to the widespread use of bicycles in The Netherlands,
almost every town or village has at least two dealers. Typically, one dealer
carries the Gazelle brand and the other carries the Batavus brand,
manufactured by Atag Bicycle Group. The Company believes that Gazelle's
recognition as the highest quality producer helps Gazelle to maintain its
market share and operating margins. In addition, the Company believes that
Gazelle has excellent relationships with its dealers and that these
relationships are becoming increasingly important as IBDs have begun to form
buying organizations to obtain better terms from bicycle manufacturers and
distributors. Gazelle has partnered with four other manufacturers and
distributors in The Netherlands to sponsor a new association of IBDs. Gazelle
also exports to neighboring countries, principally Germany. The following
table sets forth Gazelle's sales to major customers in 1997:
GAZELLE SALES TO MAJOR CUSTOMERS
<TABLE>
<CAPTION>
1997 SALES % OF TOTAL
MAJOR CUSTOMER (NLG IN MM) 1997 SALES
-------------- ----------- ----------
<S> <C> <C>
Meer(/1/).......................................... NLG 7.4 4%
Baumker(/1/)....................................... 5.7 3%
ZEG(/2/)........................................... 5.7 3%
Others............................................. 188.7 90%
-------- ----
Total............................................ NLG207.5 100%
======== ====
</TABLE>
--------
(/1/) Represents export sales.
(/2/) Includes sales to ZEG members in The Netherlands and in Germany.
62
<PAGE>
DCW
General Overview. DCW, an active consolidator in the German market and the
largest bicycle manufacturer and distributor in Germany, had a 12% unit market
share of the German adult bicycle market in 1997. Derby established DCW
following its 1988 acquisition of Neue Kalkhoff, the second largest bicycle
manufacturer in the former Federal Republic of Germany at the time. The
following table outlines DCW's historical operating performance from 1995 to
1997:
DCW HISTORICAL OPERATING RESULTS
<TABLE>
<CAPTION>
DCW 1995 1996 1997(/1/)
--- ----- ----- ---------
<S> <C> <C> <C>
Units (in 000s)..................................... 405 368 415
Sales (DM in MM).................................... 132.3 123.4 177.6
Gross Profit (DM in MM)............................. 18.7 21.6 34.2
Gross Profit Margin (%)............................. 14.1 17.5 19.3
EBITDA (DM in MM)................................... 1.1 5.9 0.6
EBITDA Margin (%)................................... 0.8 4.8 0.3
</TABLE>
--------
(/1/1997)figures include eleven months of sales by Winora-Staiger,
which was acquired in January 1997, and five months of sales by
the MS Sport Group, in which the Company acquired a controlling
interest in August 1997.
Market Overview and Competitive Environment. The integration of the former
German Democratic Republic and the introduction of MTBs created a surge in
bicycle sales that peaked in 1991 at approximately 7 million units. In 1997,
the total German consumer market, excluding juvenile bicycles, is estimated to
have been 3.5 million units. Recent significant consumer trends in the German
bicycle market include growth of the city bicycle segment, reduced share of
the MTB segment and a shift in consumer demand to higher-priced bicycles.
Management expects that the breadth of DCW's product range and the particular
strength of the Kalkhoff brand in the high-end city bicycle segment will drive
DCW's unit sales growth in the near future. The Company estimates that in
1996, 37% of the bicycles sold in Germany were MTBs, 21% were city bicycles,
20% were juvenile bicycles, 20% were race/road bicycles and the remaining 2%
were other bicycles. The following table sets forth the estimated 1997 unit
bicycle market share based on sales to distributors for each major brand in
the German adult bicycle market:
1997 GERMAN UNIT MARKET SHARE
<TABLE>
<CAPTION>
BRAND SHARE
----- -----
<S> <C>
Derby brands(/1/)................................ 12%
Kynast........................................... 10%
Sprick........................................... 6%
Prophete......................................... 5%
Others........................................... 67%
----
Total.......................................... 100%
====
</TABLE>
--------
(/1/Includes)DCW (10%), Gazelle (1%) and Raleigh Europe (1%).
63
<PAGE>
Products and Brands. DCW manufactures and distributes well-known brand names
such as Kalkhoff, Rixe, Musing and Focus. DCW also produces Winora and Staiger
brand bicycles, which are marketed and distributed in Germany by Derby's
Winora-Staiger subsidiary, acquired in January 1997. In 1998, DCW plans to
begin production of Univega brand bicycles, which are marketed and distributed
in Germany and Switzerland by the MS Sport Group. In addition, DCW produces
private label bicycles sold through mass merchandisers. DCW designs,
manufactures and markets a wide range of bicycles as outlined in the following
table:
<TABLE>
<CAPTION>
TYPE BRANDS/MODELS MARKET
- ---------------------------------------------------------------
<S> <C> <C>
MTB Terrafox Mountain biking enthusiasts
Univega
Winora
Staiger
Focus
- ---------------------------------------------------------------
City Winora Commuters, families and 45-
Staiger 65 year olds
Kalkhoff
Rixe
Terrafox
Topside
- ---------------------------------------------------------------
Hybrid Kalkhoff All age groups
Focus
Musing
Rixe
Topside
Terrafox
- ---------------------------------------------------------------
Juvenile Rixe 6-14 year olds
Kalkhoff
Topside
Terrafox
- ---------------------------------------------------------------
Race/Road Focus 18-34 year olds
Musing
</TABLE>
Manufacturing. DCW produces private label bicycles in its manufacturing
facilities in Cloppenburg, Germany, while higher quality models are
manufactured in its Rostock facility in the former German Democratic Republic,
a state-of-the-art, highly automated production site completed in 1993, which
management believes is among the most modern bicycle manufacturing facilities
in the world. These production facilities include automated welding equipment
for frame manufacturing, automated paintshops using chemical or mechanical
pretreatment and automated painting processes, wheel assembly units, component
sub-assembly units and final assembly workshops. DCW's facilities in
Cloppenburg and Rostock have production capacities of 1,800 units per day and
850 units per day, respectively, operating on a single shift basis and
produced averages of 1,150 units per day and 750 units per day, respectively,
in 1997.
Sales, Marketing and Distribution. DCW supports its brand names through
advertising and by sponsoring bicycle teams. DCW plans to capitalize on export
opportunities, particularly with respect to Scandinavian markets, and is
currently examining growth opportunities in the Austrian IBD market. In 1997,
DCW exported 53,000 units, as compared to domestic sales of 351,000 units.
The German bicycle market is price sensitive, especially in the lower price
range. DCW's focus on less price sensitive, higher priced bicycles has helped
it maintain average trade prices at relatively
64
<PAGE>
constant levels, despite a decline in average real bicycle prices in the
German market since 1990. The following table sets forth the retail price
segmentation of bicycles sold in the German market for 1996:
GERMAN MARKET PRICE SEGMENTATION
<TABLE>
<CAPTION>
TOTAL
RETAIL PRICE GERMAN MARKET DCW
------------ ------------- ----
<S> <C> <C>
< DM180................................................. 12% 3%
DM180-DM300............................................. 36% 16%
DM300-DM500............................................. 28% 40%
DM500-DM700............................................. 9% 15%
DM700-DM1,200........................................... 6% 15%
> DM1,200............................................... 9% 11%
---- ----
Total................................................. 100% 100%
==== ====
</TABLE>
Dealer buying groups, of which ZEG is the largest, exert significant
influence over German bicycle manufacturers and distributors. Other
distribution channels in Germany include mail order firms and department
stores, which sell high-end bicycles, and mass merchandisers, including
hypermarkets, which sell low-end bicycles. DCW is the only German manufacturer
which participates in all major distribution channels, selling both branded
and private label products. The following table sets forth DCW's sales to
major customers in 1997:
DCW SALES TO MAJOR CUSTOMERS
<TABLE>
<CAPTION>
1997 SALES % OF TOTAL
MAJOR CUSTOMER (DM IN MM) 1997 SALES
-------------- ---------- ----------
<S> <C> <C>
ZEG.................................................. DM 27.8 16%
GHD.................................................. 7.3 4%
METRO (D)............................................ 6.1 3%
METRO (A)............................................ 3.5 2%
Others............................................... 132.8 75%
------- ----
Total.............................................. DM177.5 100%
======= ====
</TABLE>
RALEIGH USA
General Overview. Raleigh is the second most recognized bicycle brand in the
U.S. IBD market. In October 1988, Derby acquired all the shares of Raleigh
Cycle Company of America from Raleigh's U.S. licensee, Huffy Corporation, and
the West Coast Cycle division of Medalist Industries (owner of the Nishiki
brand in the United States). These two businesses were merged to form Raleigh
USA. In 1997, Raleigh USA was the fourth largest supplier to the U.S. IBD
market with approximately 8% unit market share. Raleigh USA designs,
manufactures and markets a full range of bicycles under the Raleigh and
Nishiki brands. In March 1997, Derby acquired the worldwide rights to the
Univega brand name, as well as Univega's distribution business in the United
States. As a result, Raleigh USA increased its annual production for 1997 by
approximately 25,000 units. Management expects sales of Univega brand bicycles
and the strength of the Univega distribution network to increase Raleigh USA's
penetration of the IBD market.
From 1994 to 1996, management reorganized Raleigh USA's manufacturing
facility located in Kent, Washington, and established a flexible, efficient
operation that management believes is capable of competing on the basis of
price and quality with imports from the Far East. Through this reorganization,
management improved Raleigh USA's financial performance, despite a challenging
65
<PAGE>
market environment. Moreover, management expects further enhancement of
Raleigh USA's financial performance as a result of improved market conditions
and the addition of the Univega brand to Raleigh USA's existing brand names.
Raleigh USA is currently positioned as a strong platform from which to expand
the Company's market position through acquisitions. The following table
outlines Raleigh USA's historical operating performance from 1995 to 1997:
RALEIGH USA HISTORICAL OPERATING RESULTS
<TABLE>
<CAPTION>
RALEIGH USA 1995 1996 1997
----------- ---- ---- ----
<S> <C> <C> <C>
Units (in 000s).......................................... 232 214 236
Sales ($ in MM).......................................... 57.4 53.5 57.9
Gross Profit ($ in MM)................................... 11.6 12.6 14.6
Gross Profit Margin (%).................................. 20.2 23.6 25.2
EBITDA ($ in MM)......................................... (1.3) 0.1 (1.4)
EBITDA Margin (%)........................................ n/a n/a n/a
</TABLE>
Market Overview and Competitive Environment. Cycling is the third largest
participant sport in the United States with more than 50 million cyclists and
approximately 12 million bicycles sold annually. The Company estimates that in
1996, 57% of the bicycles sold in the United States were MTBs, 10% were hybrid
bicycles, 28% were juvenile bicycles, 2% were race/road bicycles and the
remaining 3% were other bicycles. The following table sets forth the estimated
1997 IBD unit market share for each major brand in the United States based on
sales to IBDs.
1997 U.S. UNIT MARKET SHARE
<TABLE>
<CAPTION>
BRAND SHARE
----- -----
<S> <C>
Trek............................................. 24%
GT............................................... 18%
Schwinn.......................................... 14%
Raleigh(/1/)..................................... 8%
Specialized...................................... 8%
Others........................................... 28%
----
Total.......................................... 100%
====
</TABLE>
--------
(/1/)Includes sales of Nishiki bicycles.
Products and Brands. With a history of more than 50 years in the U.S.
market, Raleigh is the second best-known bicycle brand in the U.S. IBD market.
Raleigh USA markets a full range of bicycle models under the Raleigh and
Nishiki brands. The recently acquired Univega brand broadens Raleigh USA's
product offering, especially in the MTB and hybrid segments. Raleigh USA
designs, manufactures and markets a wide range of bicycles as outlined in the
following table:
<TABLE>
<CAPTION>
TYPE BRANDS/MODELS MARKET
- ---------------------------------------------------------------------
<S> <C> <C>
MTB Raleigh Mountain biking enthusiasts and
Nishiki fashion-conscious 15-25 year olds
Univega
- ---------------------------------------------------------------------
Hybrid Raleigh 35+ year olds
Nishiki
Univega
- ---------------------------------------------------------------------
Juvenile Raleigh 6-14 year olds
Univega
- ---------------------------------------------------------------------
Race/Road Raleigh Race/road bicycling enthusiasts
</TABLE>
66
<PAGE>
Manufacturing. Beginning in early 1994, Raleigh USA made the strategic
decision to increase its domestic manufacturing capability and reduce its use
of finished bicycle imports from the Far East. This decision was based
primarily on a detailed make-or-buy analysis which indicated that Raleigh
USA's manufacturing facility could produce bicycles competitive with those
imported from Taiwan and mainland China. The resulting increase in
manufacturing flexibility has helped to reduce the risk of inventory "close-
outs". Management believes Raleigh USA's domestic manufacturing capability has
improved product quality, delivery time and inventory management. Domestic
manufacturing also provides a key marketing advantage: Raleigh USA is one of
the few bicycle manufacturers able to leverage the "Made in USA' label.
Raleigh USA's factory has a production capacity of 1,100 units per day
operating on a single shift basis and produced an average of 950 units per day
in 1997.
Sales, Marketing and Distribution. Raleigh USA has a diversified customer
base of more than 1,500 IBDs, the top fifty of which represent less than 30%
of sales. In 1996, Raleigh USA reorganized its sales force and distribution
centers into three regions covering the western, central and eastern United
States. This reorganization has resulted in lower operating costs and better
customer service.
Management believes that in 1996 more IBDs became distributors of Raleigh
bicycles than of any other brand, evidencing Raleigh USA's increasing market
penetration. In 1996 and 1997, IBD dealer surveys ranked Raleigh USA second in
overall dealer satisfaction among all bicycle manufacturers and distributors.
Both Raleigh and Nishiki are positioned in the $200 to $500 price segment, the
largest volume and fastest growing segment of the adult IBD market. Raleigh
and Nishiki bicycles are marketed through IBDs, and Nishiki bicycles are also
sold through multi-sport outlets. To increase penetration of the IBD market,
Raleigh USA recently began selling Univega brand bicycles to non-Raleigh
dealers. The following table sets forth Raleigh USA's sales to major customers
in 1997:
RALEIGH USA SALES TO MAJOR CUSTOMERS
<TABLE>
<CAPTION>
1997 SALES % OF TOTAL
MAJOR CUSTOMER ($ IN MM) 1997 SALES
-------------- ---------- ----------
<S> <C> <C>
Dick's Clothing and Sporting........................ $ 1.8 3%
Retail Concepts Inc................................. 1.4 2%
Recreational Equipment.............................. 1.2 2%
Sports Chalet....................................... 1.2 2%
Others.............................................. 52.3 91%
----- ----
Total............................................. $57.9 100%
===== ====
</TABLE>
RALEIGH CANADA
General Overview. Raleigh Canada, the largest distributor and one of the
largest bicycle manufacturers in Canada, had an estimated 26% unit market
share in 1997. Raleigh Canada produces an extensive range of bicycles,
including MTBs, hybrid bicycles, city bicycles and juvenile bicycles. The
following table outlines Raleigh Canada's historical operating performance
from 1995 to 1997:
RALEIGH CANADA HISTORICAL OPERATING RESULTS
<TABLE>
<CAPTION>
RALEIGH CANADA 1995 1996 1997
-------------- ---- ---- ----
<S> <C> <C> <C>
Units (in 000s)............................................ 378 307 298
Sales (CAN$ in MM)......................................... 50.3 40.3 40.5
Gross Profit (CAN$ in MM).................................. 8.8 8.4 9.1
Gross Profit Margin (%).................................... 17.5 20.8 22.5
EBITDA (CAN$ in MM)........................................ 4.9 4.3 4.2
EBITDA Margin (%).......................................... 9.7 10.7 10.4
</TABLE>
67
<PAGE>
Market Overview and Competitive Environment. In 1997, approximately 1.2
million bicycles were sold in Canada. Management expects that Raleigh Canada's
recent introduction of hybrid bicycles with traditional components and other
attractive features will drive Raleigh Canada's unit sales growth in the near
future. Raleigh Canada's two major competitors are Groupe Procycle Inc. and
Victoria Precision Inc. The Company estimates that in 1996, 84% of the
bicycles sold in Canada were MTBs, 6% were hybrid bicycles, 8% were juvenile
bicycles, 1% were race/road bicycles and the remaining 1% were other bicycles.
Products and Brands. Of Raleigh Canada's total 1997 sales, 72% were private
label products, and 28% were Raleigh brand products. Raleigh Canada leverages
its brand equity by participating in the Toronto Consumer Bicycle Show and the
Montreal Bicycle Consumer Show.
Manufacturing. Raleigh Canada's Waterloo, Quebec, facility, which has a
production capacity of 3,300 units per day operating on a double shift basis,
produced an average of 1,900 units per day in 1997. Raleigh Canada recently
invested in laser cutting equipment to improve productivity and quality and is
considering additional automation to reduce operating costs further.
Sales, Marketing and Distribution. Raleigh Canada's products are sold under
the Raleigh brand to a network of approximately 250 IBDs and under private
labels to specialty stores and numerous mass merchandisers, including Wal-Mart
and Zellers. Raleigh Canada also exports its products to the Caribbean Islands
and Israel, which management believes will provide opportunities for future
growth.
STURMEY-ARCHER
General Overview. Sturmey-Archer, founded in 1902 and based in Nottingham,
England, is known for its high quality bicycle gears, hub brakes and Brooks
seats. Historically, Sturmey-Archer principally supplied bicycle components to
the Company, but currently 75% of its sales are to third parties. In 1997, 67%
of net sales were generated by bicycle hub gears and brakes, seats, spokes and
spoke nipples, and 33% of net sales were generated by automotive parts and
domestic appliance components. In 1997, Sturmey-Archer had sales of
(Pounds)18.0 million and EBITDA of (Pounds)2.0 million.
Market Overview and Competitive Environment. Increased demand for hybrid
bicycles is generating growth for Sturmey-Archer's hub gears. Major
competitors of Sturmey-Archer in the bicycle component market include Shimano,
the largest bicycle components manufacturer in the world, and Sachs, a German-
based manufacturer whose bicycle components business was recently acquired by
SRAM Corporation ("SRAM"), the manufacturer of Gripshift bicycle gear
controls.
Products and Brands. Sturmey-Archer's bicycle gears include fully-enclosed,
planetary hub gear sets, with and without brakes, in three, five and seven
speeds. Sturmey-Archer developed the three-speed hub gear in 1902 and has
since led this market in Europe. Although the design concept of hub gears has
changed relatively little, Sturmey-Archer has enhanced its product offering
over the past decade, improving the performance of its hub gears and
introducing press button and grip shifting, while expanding the gear range to
five and seven speeds.
Sturmey-Archer's automotive parts and domestic appliance segment has
expanded steadily in recent years, partially offsetting a decline in sales of
bicycle parts. Management believes sales in this segment will continue to grow
as automotive manufacturers increasingly use sintered and cold forged
components which are typically less expensive to manufacture than components
manufactured by traditional machining.
Sales, Marketing and Distribution. Sturmey-Archer is recognized within the
bicycle industry as a producer of high quality bicycle components. Sturmey-
Archer advertises its products in the trade press, promoting their safety and
reliability. As 75% of Sturmey-Archer's sales are made to continental
68
<PAGE>
European countries, Sturmey-Archer operates a European distribution company,
Sturmey-Archer BV, with a sales office in The Netherlands. Major customers
include Gazelle, as well as third-party bicycle manufacturers, and automotive
and domestic appliance manufacturers. Sturmey-Archer BV accounted for
approximately 51% of Sturmey-Archer's 1997 revenues.
Manufacturing. Sturmey-Archer has two manufacturing facilities in England:
one located in Nottingham, which produces bicycle and engineering components,
and one located in Birmingham, which produces high-quality, traditional
leather seats under the Brooks brand name.
MARKETING COMPANIES
Probike South Africa. Probike South Africa is the largest distributor of
bicycles, bicycle parts and accessories in South Africa with a 60% unit market
share in 1997. Bicycles are sold under the Haro, Nishiki and Raleigh brand
names. Derby formed the Company's Probike South Africa operating company with
the acquisitions of Cycle and Hardware Factors in 1989, J.H. Slotar in 1990
and Cycle Centre Wholesalers in 1991. The South African manufacturing facility
was closed at the end of 1992, and Probike South Africa currently purchases
low-cost bicycles from a variety of third party sources in Asia. In 1997,
Probike South Africa had sales of R95.5 million and EBITDA of R10.7 million.
Parts and accessories accounted for 39.3% of 1997 sales.
Raleigh Ireland. Raleigh Ireland is the largest importer and distributor of
bicycles throughout Ireland with a 32% unit market share in 1997. Incorporated
in 1947, Raleigh Ireland imports bicycles and bicycle parts and accessories
manufactured or sourced by Raleigh U.K. In 1997, Raleigh Ireland had sales of
IRL(Pounds)5.4 million and EBITDA of IRL(Pounds)0.1.
Raleigh Europe. Raleigh Europe acts as the European export sales and
marketing arm of Raleigh U.K. In 1997, Raleigh Europe had sales of NLG27.8
million and EBITDA of NLG(2.6) million. Raleigh Europe was formed in 1995 by
combining the distribution operations of Raleigh Holland, Raleigh Fahrrader
and Raleigh Belgium.
Raleigh International. Raleigh International sells products to, and grants
licenses in, markets other than those served by the other Derby operating
companies. These markets include Australia, China, France, Malaysia, New
Zealand, Nigeria and Uganda. Raleigh International generally assists
distributors and licensees by: (i) facilitating imports of Raleigh bicycles
into the country; (ii) providing engineering services and technical advice to
help ensure that licensee-produced bicycles meet Raleigh International quality
standards; and (iii) providing guidance in the import of bicycles produced by
third parties. In 1997, Raleigh International had net sales of (Pounds)1.0
million and EBITDA of (Pounds)0.4 million.
DERBY TRADING
Derby Trading acts as Derby's purchasing arm for components, frames and
finished bicycles. Established in 1984, Derby Trading has two separate and
distinct sales branches in Taiwan and Shenzhen, China. In addition to
assisting the operating companies in negotiating with Taiwanese and Chinese
bicycle component manufacturers, Derby Trading sources parts and accessories
for third party distributors, components for original equipment manufacturers
("OEMs") and a small number of finished bicycles for Derby licensees and
others. Derby Trading also plays an important role as Derby's liaison to
component manufacturers, gathering information on product design and OEM
buying patterns and monitoring suppliers' production quality. In 1997, Derby
Trading had sales of NT$1.4 billion, NT$1.1 billion of which were made to
Derby operating companies, and EBITDA of NT$3.1 million.
69
<PAGE>
EMPLOYEES
At December 31, 1997, Derby employed 3,136 people in ten countries. Each
year Derby increases it workforce to over 3,500 in preparation for the Peak
Season. The following table sets forth employees by operating company and
function as of December 31, 1997:
<TABLE>
<CAPTION>
SALES/MARKETING/ PRODUCTION/
COMPANY ADMINISTRATION DISTRIBUTION TOTAL
------- ---------------- ------------ -----
<S> <C> <C> <C>
Raleigh U.K........................... 126 724 850
Gazelle............................... 72 455 527
DCW................................... 115 464 579
Raleigh USA........................... 97 191 288
Raleigh Canada........................ 24 148 172
Sturmey-Archer........................ 17 385 402
Probike South Africa.................. 65 134 199
Raleigh Europe........................ 27 0 27
Raleigh Ireland....................... 16 11 27
Raleigh International................. 5 0 5
Derby Trading......................... 52 0 52
Derby Headquarters.................... 8 0 8
--- ----- -----
Total............................... 624 2,512 3,136
=== ===== =====
</TABLE>
Substantially all the Company's hourly workers outside the United States are
unionized, with the principal terms of the union contracts generally
negotiated each year. Management believes the Company's relations with the
unions are generally satisfactory.
LEGAL PROCEEDINGS
Due to the nature of the Company's business, the Company is a defendant in a
number of product liability lawsuits. The plaintiffs in these lawsuits
generally seek damages, in amounts that may be material, for personal injuries
allegedly sustained as a result of alleged defects in the Company's products.
Derby carries insurance policies, subject to customary deductibles, to cover
product liability claims in amounts which management believes to be adequate.
The deductible under Derby's insurance policies is currently $250,000 per
claim; however, prior to 1993, the deductible was $1.0 million per claim. Not
all claims arising during the period in which the deductible was $1.0 million
per claim have been resolved and it is possible that additional claims will be
filed. The aggregate amount of liability under existing and potential claims
could exceed the reserves established by Derby for product liability claims.
Derby is not involved in any pending legal proceedings, other than routine
litigation incidental to its business. None of these legal actions is expected
to have a material adverse effect on Derby's business, financial condition or
results of operations.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
The Company is subject to a wide variety of foreign, federal, state and
local laws and regulations relating to air emissions, wastewater discharges
and hazardous substance and hazardous waste management ("Environmental Laws").
The Company is also required to comply with worker health and safety
requirements in the various jurisdictions in which it operates. Although the
Company has made and will continue to make significant expenditures related to
its environmental, health and safety compliance obligations, there can be no
assurance that the Company will at all times be in compliance with all such
requirements. Under certain Environmental Laws, the Company could be held
responsible for the remediation of, or other damages caused by, hazardous
substances at currently- or formerly-owned or operated properties, or at
third-party waste disposal sites. In addition, as a result of changes
70
<PAGE>
in Environmental Laws, the Company may be required to implement equipment or
process changes that would reduce emissions from the Company's manufacturing
operations, perhaps at substantial cost.
The Company is responsible for investigating and remediating groundwater
contamination associated with certain of its existing and historical
operations. Based on the Company's present information regarding the nature
and volume of the contamination and its experience with similar matters, the
Company does not believe that investigation or remediation costs associated
with these operations will be material, either individually or in the
aggregate.
71
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information regarding the directors
and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Alan J. Finden-Crofts..... 56 Chief Executive Officer and Director of DCC
William W. Austin, Jr. ... 60 President, Raleigh USA
Simon J. Goddard.......... 46 Chief Financial Officer of DCC
Klaas Dantuma ............ 54 Managing Director, Gazelle
Robert Holzer............. 33 Managing Director, MS Sport Group
Peter Miller.............. 50 Joint Managing Director, Probike South Africa
Kim Roether............... 34 Managing Director, DCW
Irwin R. Slotar........... 50 Joint Managing Director, Probike South Africa
John V. Spon-Smith........ 45 Director, Raleigh U.K.
Mark J. Todd.............. 35 Managing Director, Raleigh U.K.
Farid Vaiya............... 54 President, Raleigh Canada
Peter E. Wittering........ 60 Managing Director, Sturmey-Archer
A. Edward Gottesman....... 61 Director of DCC
Frederic V. Malek......... 61 Chairman and Director of DCC
Frank H. Pearl............ 54 Director of DCC
Carl J. Rickertsen........ 38 Director of DCC
Paul G. Stern............. 59 Director of DCC
Dr. Thomas H. Thomsen..... 64 Director of DCC
</TABLE>
ALAN J. FINDEN-CROFTS, Chief Executive Officer and Director of DCC
Mr. Finden-Crofts, age 56, has been the Group Chief Executive of DICSA since
1987. Mr. Finden-Crofts was previously the chief executive officer of Dunlop
Slazenger International from 1985 to 1987 and director, consumer group, of
Dunlop from 1982 to 1984. Prior to joining the Company, Mr. Finden-Crofts
served on the operational board of BTR plc from 1982 to 1986. From 1968 to
1982, Mr. Finden-Crofts was managing director of various subsidiaries of
Norcros plc, an industrial conglomerate in the United Kingdom. Mr. Finden-
Crofts also serves on the board of numerous subsidiaries of the Company.
WILLIAM W. AUSTIN, JR., President of Raleigh USA
Mr. Austin, age 60, has been President of Raleigh USA since 1994. Mr. Austin
was previously group vice president of Schwinn Cycling and Fitness, Inc. from
1981 to 1986. From 1988 to 1993, Mr. Austin was president of Giant Bicycle
Company.
SIMON J. GODDARD, Chief Financial Officer of DCC
Mr. Goddard, age 46, has been the Group Financial Controller of the Company
since 1990. Mr. Goddard began working at Raleigh U.K. in 1985 as the
management accountant for international operations. Prior to that, Mr. Goddard
was with Coopers & Lybrand in the United Kingdom and Zimbabwe. Mr. Goddard is
also a director of Curragh Finance, Derby Holding Limited and Raleigh
International, each a subsidiary of DCC.
KLAAS DANTUMA, Managing Director of Gazelle
Mr. Dantuma, age 54, has been Managing Director of Gazelle since 1990. He
has been a director of DHBV, Derby Nederland, Lyon and Raleigh Europe since
1991. Mr. Dantuma has held a variety of positions with the Company since 1973,
including Deputy Commercial Director for four years, before becoming
Commercial Director in 1985.
72
<PAGE>
ROBERT HOLZER, Managing Director of the MS Sport Group
Mr. Holzer, age 33, has been Managing Director of the MS Sport Group since
the Company acquired an interest in the MS Sport Group in 1997. Prior to this
acquisition, Mr. Holzer owned the MS Sport Group since 1988. Mr. Holzer was
also an executive officer of Univega, in which the Company acquired a
controlling interest in 1997. From 1994 to 1995, Mr. Holzer was the general
manager and owner of Winners Bike & Fun Sport Center GmbH. Since 1992, Mr.
Holzer has been a general manager and director of Nobel Haus Industrie und
Wohnbau GmbH.
PETER MILLER, Joint Managing Director of Probike South Africa
Mr. Miller, age 50, has been Joint Managing Director of Probike South Africa
since the Company acquired Cycle Center Wholesalers in 1991, a company that
Mr. Miller had founded.
KIM ROETHER, Managing Director of DCW
Mr. Roether, age 34, has been Managing Director of DCW since 1997. Mr.
Roether started with DCW as its Controller in 1994. In 1995, he became DCW's
Financial Director. From 1991 to 1994, Mr. Roether was a consultant to Grant
Thornton International in Oldenburg, Germany.
IRWIN R. SLOTAR, Joint Managing Director of Probike South Africa
Mr. Slotar, age 50, has been Joint Managing Director of Probike South Africa
since the Company acquired Probike South Africa in 1990. Prior to the
acquisition, Probike South Africa had been owned by Mr. Slotar's family for
several generations. Prior to the acquisition by the Company, Mr. Slotar was
Managing Director of Probike South Africa.
JOHN V. SPON-SMITH, Director of Raleigh U.K.
Mr. Spon-Smith, age 45, has been Director of Raleigh U.K. and General
Manager of Raleigh Parts & Accessories-U.K. since 1996. From 1991 to 1996, Mr.
Spon-Smith was Sales and Marketing Director of Stanley Tools for the United
Kingdom, South Africa and Ireland.
MARK J. TODD, Managing Director of Raleigh U.K.
Mr. Todd, age 35, has been Managing Director of Raleigh U.K. since July
1997. Prior to joining Raleigh U.K., Mr. Todd was business unit director of
Courage Limited, the U.K.'s largest brewing company from 1994 to 1997. From
1994 to 1995, Mr. Todd was managing director of Moulinex Limited, which
manufactures food processing appliances. Prior to joining Moulinex, Mr. Todd
was sales and marketing director for Toshiba U.K., Limited from 1989 to 1994.
FARID VAIYA, President of Raleigh Canada
Mr. Farid Vaiya, age 54, has been President of Raleigh Canada since 1989.
Mr. Vaiya has been with the Company since 1972, as Vice President of Sales and
Marketing of Raleigh Canada from 1987 to 1988 and National Account Sales
Manager and Product Manager of Raleigh Canada from 1981 to 1987.
PETER E. WITTERING, Managing Director of Sturmey-Archer
Mr. Wittering, age 60, has been Managing Director of Sturmey-Archer since it
was established as a separate operating unit in 1985. From 1982 to 1985, Mr.
Wittering was Production Director for Raleigh U.K. Mr. Wittering joined
Raleigh U.K. in 1977 as Manufacturing Director of Sturmey-Archer, which
position he held until 1982. Prior to working for the Company, Mr. Wittering
was general manager of Herbert Morris Ltd., a crane manufacturer in the United
Kingdom.
73
<PAGE>
A. EDWARD GOTTESMAN, Director of DCC
Mr. Gottesman, age 61, is the chairman of DICSA. Mr. Gottesman has been
chairman of Centenary since its formation in 1989. Mr. Gottesman was a partner
of Coudert Brothers from 1963 to 1970 and has been a partner of Gottesman
Jones & Partners since 1970. Mr. Gottesman is chairman of Exeter International
Corporation S.A. which, through its subsidiaries, manufactures and distributes
Royal Worcester and Spode fine bone china and porcelain, and Piedmont
International S.A., a company formed in 1996 to acquire the personal computer
business of Olivetti SpA.
FREDERIC V. MALEK, Chairman of the Board of Directors of DCC
Mr. Malek, age 61, has been chairman of Thayer Capital, the general partner
of Thayer, since 1993. Prior to that, Mr. Malek was president of Marriott
Hotels and Resorts from 1980 to 1988, and president and then vice chairman of
Northwest Airlines from 1989 to 1991. Mr. Malek currently serves on the board
of directors of Automatic Data Processing Corporation, American Management
Systems, Inc., FPL Group, Inc., Choice Hotels, Inc., Manor Care, Inc., CB
Commercial Real Estate Group, Inc., Northwest Airlines, Colorado Prime, Inc.,
Paine Webber Mutual Funds and Global Vacation Group, Inc.
FRANK H. PEARL, Director of DCC
Mr. Pearl, age 54, is chairman and president of Perseus and Perseus
Management, the managing member of Perseus. Prior to founding Perseus in 1996,
Mr. Pearl founded, and is also chairman of, Rappahannock Investment Company
("Rappahannock"), a private investment fund which owns approximately 57% of
Perseus Management. From 1984 to 1988, Mr. Pearl was a principal and managing
director of Wesray Capital Corporation. Mr. Pearl is also a founding
shareholder and director of DICSA.
CARL J. RICKERTSEN, Director of DCC
Mr. Rickertsen, age 38, is a partner of Thayer Capital, the general partner
of Thayer. Prior to joining Thayer Capital in 1995, Mr. Rickertsen acted as a
private financial consultant from 1993 through August 1994, and was a partner
at Hancock Park Associates, a private equity investment firm based in Los
Angeles, from 1989 to 1993. Before joining Hancock Park Associates, Mr.
Rickertsen was an associate at Brentwood Associates from 1987 to 1989, and
worked in the high technology group at Morgan Stanley & Co., Inc. from 1983 to
1985. Mr. Rickertsen currently serves as a director of MLC Holdings, Inc. and
Global Vacation Group, Inc. and as the chairman of the board of Software AG
Systems, Inc.
PAUL G. STERN, Director of DCC
Mr. Stern, age 59, is a partner of Thayer Capital, the general partner of
Thayer. Prior to joining Thayer Capital in 1995, Mr. Stern was a special
limited partner of Forstmann Little, a leveraged buy-out investment fund. From
1988 to 1993, Mr. Stern was a director, vice-chairman and chief executive
officer of Northern Telecom Ltd., a Canadian telecommunications equipment
vendor and manufacturer. Mr. Stern currently serves on the board of directors
of LTV Steel Corporation, Whirlpool Corporation, Dow Chemical Company and
Software AG Systems, Inc.
DR. THOMAS H. THOMSEN, Director of DCC
Dr. Thomsen, age 64, is a director of DICSA. Dr. Thomsen was director of
corporate engineering of The Gillette Company from 1969 to 1981. From 1982 to
1991, Dr. Thomsen was a member of the management board of Braun AG. Dr.
Thomsen currently serves on the board of directors of Travelplans and A.
Paukner S.A., as well as the German Institute for New Technical Form and the
Design Council, State of Hesse.
COMPENSATION OF DIRECTORS
The Company will reimburse directors for any out-of-pocket expenses incurred
by them in connection with services provided in such capacity. In addition,
the Company may compensate directors for services provided in such capacity.
74
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the compensation paid
or accrued by the Company for services in all capacities to the Company for
each of the years ended December 31, 1997, 1996, and 1995, of those persons
who served as (i) the chief executive officer of the Company during fiscal
year 1997 and (ii) the other four most highly compensated executive officers
of the Company for fiscal 1997 (each, a "Named Executive Officer"):
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------
OTHER
ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
--------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Alan J. Finden-Crofts(/1/)............. 1997 $273,288 $362,856 $143,809
Chief Executive Officer, DCC 1996 273,288 686,404 143,226
1995 273,288 323,908 167,829
William W. Austin, Jr. ................ 1997 248,827 70,910 --
President, Raleigh USA 1996 228,067 25,681 --
1995 209,090 61,803 --
Klaas Dantuma(/2/)..................... 1997 151,946 54,701 --
Managing Director, Gazelle 1996 149,052 74,526 --
1995 144,711 68,014 --
Farid Vaiya(/3/)....................... 1997 129,706 62,259 --
President, Raleigh Canada 1996 125,500 45,180 --
1995 119,190 59,595 --
Mark J. Todd(/4/)...................... 1997 73,321 32,495 10,615
Managing Director, Raleigh U.K. 1996 -- -- --
1995 -- -- --
</TABLE>
--------
(/1/Mr.)Finden-Crofts is compensated in pounds Sterling. The amounts
reported in the table have been converted at the rate of
(Pounds)0.6001 per $1.00.
(/2/Mr.)Dantuma is compensated in Dutch Guilders. The amounts reported
in the table have been converted at the rate of NLG2.0731 per $1.00.
(/3/Mr.)Vaiya is compensated in Canadian dollars. The amounts reported
in the table have been converted at the rate of CAN$1.4263 per
$1.00.
(/4/Mr.)Todd joined Raleigh U.K. as Managing Director in July 1997. Mr.
Todd's annual salary is (Pounds)101,000. Mr. Todd is compensated in
pounds Sterling. The amounts reported in the table have been
converted at the rate of (Pounds)0.6001 per $1.00.
EMPLOYMENT AGREEMENTS
DCC has entered into employment agreements with certain of its officers. The
terms of Mr. Finden-Crofts' employment agreement as Chief Executive Officer of
DCC include a term of employment of one year, with an annual base salary of
$333,260 and a targeted bonus of $416,575, subject to increase or decrease
based on DCC's performance against budget, provided that no bonus will be
earned unless DCC's profit before interest payments and taxes exceeds $23.3
million. The terms of Mr. Austin's employment agreement as President of
Raleigh USA provide for a base salary of $248,827 and a bonus ranging from 20%
to 50% of base salary tied to DCC's profit before interest payments and taxes,
inventory turns and account receivables turnover. DICSA paid Mr. Austin
approximately $552,000 upon the closing of the Recapitalization pursuant to a
change of control provision in his former employment agreement.
Under the terms of Mr. Holzer's employment agreement with the MS Sport
Group, the MS Sport Group will pay Mr. Holzer for each of the five calendar
years from 1997 to 2001 as follows: (i) if the profit before tax ("PBT") of
the MS Sport Group is less than DM 2.3 million, 10% of the amount by which PBT
exceeds DM 1.35 million and, in addition, (ii) if PBT exceeds DM 2.3 million,
25% of the amount by which PBT exceeds DM 2.3 million.
75
<PAGE>
The Company has entered into employment contracts with other senior managers
of the Company which generally contain remuneration packages including base
salary, bonus, insurance, pension benefits and noncompete provisions.
PAYMENT OF CERTAIN FEES AND EXPENSES
In connection with the Recapitalization, DCC paid closing fees (i) to Thayer
in the amount of $1.2 million, (ii) to Perseus in the amount of $1.0 million
and (iii) to Centenary (which is controlled in part by Mr. A. Edward
Gottesman) in the amount of $0.7 million. In addition, DCC paid all the out-
of-pocket expenses of Thayer and Perseus, certain expenses incurred in order
to effect the reorganization, and up to $150,000 of the out-of-pocket expenses
of DICSA and DFS. In the future, affiliates of Thayer may receive customary
fees for advisory and other services rendered to the Company. If such services
are rendered in the future, the fees will be negotiated from time to time and
will be based on the services performed and the prevailing fees then charged
by third parties for comparable services.
DESCRIPTION OF SHAREHOLDERS' AGREEMENT AND REGISTRATION AGREEMENT
DCC, DFS, DC Cycle and Perseus Cycle (DFS, DC Cycle and Perseus Cycle being
referred to as the "Shareholders") entered into a Shareholders' Agreement in
connection with the consummation of the Recapitalization (the "Shareholders'
Agreement"). The following summary of certain provisions of the Shareholders'
Agreement does not purport to be complete and is qualified in its entirety by
reference to all the provisions of the Shareholders' Agreement. The
Shareholders' Agreement provides, among other things, for the following: (i)
the Board of Directors of DCC initially consists of seven individuals, four of
whom will be appointed by DC Cycle, two by DFS and one by Perseus Cycle, (ii)
certain restrictions on the transfer of shares of DCC, including, but not
limited to, provisions providing that (a) the Shareholders have limited rights
of first offer in any proposed third party sale of Class A Common Stock and
Series A Preferred Stock by any Shareholder and (b) the Shareholders have
limited participation rights in any proposed third party sale of Class A
Common Stock and Series A Preferred Stock by any Shareholder, (iii) an
agreement among the Shareholders that, upon approval of a sale of all or
substantially all of DCC's outstanding capital stock or a sale of all or
substantially all of DCC's assets by DCC's Board of Directors, each
Shareholder will consent to, and raise no objections against, such sale and
sell its shares and rights to acquire shares, if so required, and (iv) certain
limited preemptive rights of the Shareholders with respect to an issuance or
sale of common stock by DCC. Certain material transactions require the
approval of a supermajority of the Board of Directors which can be achieved
with the votes of the DC Cycle nominees and any one other director. The
Shareholders' Agreement also provides that DFS shall be deemed to own all
shares of DCC's capital stock which DICSA can acquire pursuant to the Raleigh
Canada Exchange Agreement for purposes of determining the voting power of the
stock held by DFS and for all other purposes.
The Shareholders also entered into a Registration Agreement (the
"Registration Agreement") upon the consummation of the Recapitalization.
Pursuant to the Registration Agreement, subject to certain restrictions, all
holders of Registrable Securities (as defined in the Registration Agreement)
are entitled to piggyback registration rights, whenever the Company proposes
to register any of its securities under the Securities Act. Each such holder
is subject to certain pro rata limitations, including priorities and
preferences for certain holders, on its ability to participate in such a
piggyback registration. DCC will pay all expenses related to these
registrations (other than underwriting discounts and commissions) and, subject
to certain conditions and limitations, is required to use its best efforts to
effect such registrations. DCC has agreed to indemnify all holders of
Registrable Securities for certain liabilities arising out of such
registrations, including certain liabilities under the Securities Act.
76
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The authorized capitalization of DCC is: 200,000 shares of Class A Common
Stock, 15,000 shares of Class B Common Stock, 25,000 shares of Series A
Preferred Stock and 3,000 shares of Series B Preferred Stock. The issued and
outstanding capital stock of DCC consists of 44,200 shares Class A Common
Stock, 25,000 shares of Series A Preferred Stock and 3,000 shares of Series B
Preferred Stock. Holders of Class B Common Stock and Series B Preferred Stock
have no voting rights except as required by applicable law. In addition, DICSA
has the right to acquire 15,000 shares of Class B Common Stock and 8,300
shares of Class A Common Stock under the Raleigh Canada Exchange Agreement.
The Holders of Class A Common Stock are entitled to one vote per share on all
matters to be voted upon by the shareholders of DCC, including the election of
directors. Holders of Series A Preferred Stock are entitled to 1.5 votes per
share, voting together with the Class A Common Stock as a single class.
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Class A Common Stock and Series A
Preferred Stock by (i) each shareholder known by the Company to own
beneficially five percent or more of each class of the Company's voting
securities, (ii) each current director of DCC, (iii) each Named Executive
Officer of DCC and (iv) all directors of DCC and executive officers of the
Company as a group. Unless indicated otherwise below, to the knowledge of the
Company, each shareholder has sole voting and investment power with respect to
the shares indicated as beneficially owned.
<TABLE>
<CAPTION>
CLASS A SERIES A PERCENT OF
COMMON STOCK PREFERRED STOCK DCC'S TOTAL
-------------------- -------------------- OUTSTANDING
NAME AND ADDRESS NUMBER OF PERCENT OF NUMBER OF PERCENT OF VOTING
OF BENEFICIAL OWNER(/1/) SHARES CLASS SHARES CLASS SECURITIES(/2/)
- ------------------------ --------- ---------- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
DC Cycle, L.L.C.(/3/)... 12,500 28.28 25,000 100 61.20
1455 Pennsylvania Ave-
nue, Ste. 350
Washington, DC 20004
Derby Finance 21,700 49.10 26.56
S.a.r.l.(/4/)..........
5 Boulevard de la Foire
L-1528 Luxembourg
Grand Duchy of Luxem-
bourg
Derby International Cor- 8,300 15.81 9.22
poration S.A.(/5/).....
5 Boulevard de la Foire
L-1528 Luxembourg
Grand Duchy of Luxem-
bourg
Perseus Cycle, 10,000 22.62 12.24
L.L.C(/6/).............
1627 "I" Street NW,
Ste. 610
Washington, D.C. 20006
Frederic V. Malek(/7/).. 12,500 28.28 25,000 100 61.20
1455 Pennsylvania Ave-
nue, Ste. 350
Washington, DC 20004
Paul G. Stern(/8/)...... 12,500 28.28 25,000 100 61.20
1455 Pennsylvania Ave-
nue, Ste. 350
Washington, DC 20004
Carl J. 12,500 28.28 25,000 100 61.20
Rickertsen(/9/)........
1455 Pennsylvania Ave-
nue, Ste. 350
Washington, DC 20004
</TABLE>
77
<PAGE>
<TABLE>
<CAPTION>
CLASS A SERIES A PERCENT OF
COMMON STOCK PREFERRED STOCK DCC'S TOTAL
-------------------- -------------------- OUTSTANDING
NAME AND ADDRESS NUMBER OF PERCENT OF NUMBER OF PERCENT OF VOTING
OF BENEFICIAL OWNER(/1/) SHARES CLASS SHARES CLASS SECURITIES(/2/)
- ------------------------ --------- ---------- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
A. Edward Gottes- 30,000 57.14 33.33
man(/1//0/)............
38 Chester Terrace
London NW1 4ND
England
Alan J. Finden- 30,000 57.14 33.33
Crofts(/1//1/).........
c/o Raleigh Industries
Ltd. Triumph Rd.
Nottingham, NG7 200
England
Frank H. Pearl(/1//2/).. 30,000 57.14 33.33
1627 I Street NW, Suite
610
Washington, D.C. 20006
Dr. Thomas H. Thomson...
Salkensteinerstrasse 36
Konigstein im Taunus
Frankfurt, Germany
William W. Austin, Jr...
c/o Raleigh USA Bicycle
Co.
22710 72nd Avenue South
Kent, Washington 98032-
1926
Mark J. Todd............
c/o Raleigh Industries
Limited
Triumph Road
Nottingham, England NG7
2DD
Farid Vaiya.............
c/o Raleigh Industries
of Canada Limited
Les Industries Raleigh
du Canada Limitee
2124 London Lane
Oakville, Ontario L6H
5V8
Klass Dantuma...........
c/o Koninklijke Gazelle
B.V.
Wilhelminaweg VII
6951 BP Dieren
The Netherlands
All Directors and Execu-
tive Officers
as a Group (6 per-
sons)(/1//3/).......... 52,500 25,000 100
</TABLE>
- --------
(/1/The)percentages of DCC's voting securities held by DC Cycle, Perseus
Cycle and DFS set forth in this table differ from the percentages of
total voting power indirectly held by their respective parent companies
under "Summary--Investor Group" and "The Recapitalization" for two
reasons: first, rights to acquire shares of Class A Common Stock which
are exercisable within 60 days of the date hereof are considered
outstanding for the purpose of determining the percent of the class held
by the holder of such rights, but not for the purpose of computing the
percentage held by others (in accordance with Rule 13d-3(d)(1)(ii)), and
second, under the terms of the Shareholders' Agreement, all shares of DCC
beneficially owned by DICSA are deemed to be beneficially owned by DFS
for voting purposes and all other purposes thereunder. See "Description
of Shareholders' Agreement and Registration Agreement".
(/2/Pursuant)to the rules of the Commission, shares are deemed to be
"beneficially owned" by a person if such person directly or indirectly
has or shares (i) the power to vote or dispose of such shares, whether or
not such person has any pecuniary interest in such shares, or (ii) the
right to acquire the power to vote or dispose of such shares within 60
days, including any right to acquire through the exercise of any option,
warrant or right, or the conversion or exchange of a security.
78
<PAGE>
(/3/DC)Cycle is 100% owned by Thayer Equity Investors III, L.P. ("Thayer"), a
Delaware limited partnership. TC Capital Partners, a Delaware general
partnership, is the general partner of Thayer. Messrs. Frederic V. Malek,
Paul G. Stern and Carl J. Rickertsen, directors of DCC, are general
partners of TC Capital Partners. As such, Messrs. Malek, Stern and
Rickertsen have shared voting and investment power (as well as an
indirect pecuniary interest within the meaning of Rule 16a-1 under the
Exchange Act), with respect to the shares held by DC Cycle. As a result,
each of Messrs. Malek, Stern and Rickertsen may be deemed to be the
beneficial owners of the 12,500 shares of Class A Common Stock and the
25,000 shares of Series A Preferred Stock held by DC Cycle.
(/4/DFS)is a wholly owned subsidiary of DICSA. See note 5 below.
(/5/Includes)8,300 shares of Class A Common Stock issuable to DICSA upon
conversion of its Raleigh Canada Preferred Stock under the Raleigh Canada
Exchange Agreement. Mr. Gottesman, a director of DCC, is the chairman of
DICSA. Mr. Gottesman and a charitable trust of which he is the settlor,
control a majority of the capital stock of DICSA indirectly through an
industrial holding company, Centenary. Mr. Finden-Crofts, a director of
DCC and the Group Chief Executive of DICSA, and Mr. Pearl, a director of
DCC and a director of DICSA, own minority interests in DICSA. As a result
of their shared voting and investing power with respect to shares
beneficially owned by DFS and DICSA, Messrs. Gottesman, Finden-Crofts and
Pearl may each be deemed to be the beneficial owner of the shares owned
by DFS and DICSA.
(/6/Perseus)Cycle is 100% owned by Perseus Capital, L.L.C., a Delaware
limited liability company ("Perseus"). Perseus Management, a Delaware
limited liability company, is the managing member of Perseus and owns
approximately 17% of Perseus. Mr. Frank H. Pearl is the Chairman and
President of Perseus Management. Rappahannock Investment Company, a
Delaware corporation, owns approximately 57% of Perseus Management.
Rappahannock is 100% owned by Mr. Pearl. Mr. Pearl, by virtue of his
indirect ownership interest in Perseus, may be deemed the beneficial
owner of the 10,000 shares of Class A Common Stock held by Perseus.
(/7/Includes)the 12,500 shares of Class A Common Stock and 25,000 shares of
Series A Preferred Stock beneficially owned by DC Cycle. See note 3
above.
(/8/Includes)the 12,500 shares of Class A Common Stock and 25,000 shares of
Series A Preferred Stock beneficially owned by DC Cycle. See note 3
above.
(/9/Includes)the 12,500 shares of Class A Common Stock and 25,000 shares of
Series A Preferred Stock beneficially owned by DC Cycle. See note 3
above.
(/1//Includes0the/21,700)shares of Class A Common Stock beneficially owned by
DFS and the 8,300 shares of Class A Common Stock beneficially owned by
DICSA. See note 5 above.
(/1//Includes1the/21,700)shares of Class A Common Stock beneficially owned by
DFS and the 8,300 shares of Class A Common Stock beneficially owned by
DICSA. See note 5 above.
(/1//Includes2the/10,000)shares of Class A Common Stock beneficially owned by
Perseus, the 21,700 shares of Class A Common Stock beneficially owned by
DFS and the 8,300 shares of Class A Common Stock beneficially owned by
DICSA. See notes 5 and 6 above.
(/1//Includes3(1)/12,500)shares of Class A Common Stock and 25,000 shares of
Series A Preferred Stock beneficially owned by DC Cycle which may be
deemed to be beneficially owned by Messrs. Malek, Stern, and Rickertsen
(see note 3 above); (2) 21,700 shares of Class A Common Stock
beneficially owned by DFS and 8,300 shares of Class A Common Stock
beneficially owned by DICSA which may be deemed to be beneficially owned
by Messrs. Gottesman, Finden-Crofts and Pearl (see note 5 above); and (3)
10,000 shares of Class A Common Stock beneficially owned by Perseus which
may be deemed to be beneficially owned by Mr. Pearl (see note 5 above).
79
<PAGE>
DESCRIPTION OF REVOLVING CREDIT AGREEMENT
Concurrently with the consummation of the Recapitalization, DCC and certain
of its subsidiaries, including Raleigh U.K., Gazelle, Raleigh Canada, Sturmey-
Archer, Derby Holding (Deutschland) and Derby Holdings South Africa (which was
not a Borrower upon closing of the Recapitalization) (collectively, the
"Borrowers", and together with certain guarantors, the "Obligors") entered
into the Revolving Credit Agreement with Chase Manhattan plc, as Arranger,
Chase Manhattan International Limited, as both Facility Agent and as Security
Agent, and the financial institutions named therein as banks, pursuant to
which such banks will provide a revolving, multi-currency loan facility (the
"Facility") to the Company. Other subsidiaries of DCC may become borrowers
under the Revolving Credit Agreement, subject to the approval of each of the
banks.
The following summary of the Revolving Credit Agreement does not purport to
be complete and is qualified in its entirety by reference to the Revolving
Credit Agreement, including the definitions therein of certain terms used in
this section entitled "Description of Revolving Credit Agreement".
GENERAL
The Revolving Credit Agreement provides a revolving credit line of up to
DM225 million (which is also available in U.S. dollars, pounds Sterling and
other currencies which are freely transferable and convertible into Deutsche
Marks), of which (i) DM214 million of the revolving credit line can be used by
the Borrowers or, if and when any bank in South Africa accedes to the
Revolving Credit Agreement, and so long as the South African Credit Facility
is terminated, DM225 million of the revolving credit line may be used by the
Borrowers, of which up to (A) DM69 million, or, if and when any bank in South
Africa accedes to the Revolving Credit Agreement, and so long as the South
African Credit Facility is terminated, DM75 million, may be made available by
the Ancillary Banks to the Borrowers as Ancillary Facilities, less amounts
drawn under Standby Letters of Credit, and (B) up to DM15 million may be used
by means of Standby Letters of Credit; provided, however, that DCC may use up
to a maximum of $7.5 million of the revolving credit line. The Facility is
available in multiple Advances from time to time, subject to conditions
precedent standard for facilities of this size and type, and subject further
to certain limitations, including a requirement that no Requested Amount of
any proposed Advance exceed the then Adjusted Available Amount in relation to
the relevant Borrower. Advances and Standby Letters of Credit or Ancillary
Facilities drawn under the Revolving Credit Agreement were used to finance (i)
the repayment of the Existing Indebtedness (other than indebtedness incurred
under the South African Credit Facility), (ii) the payment of certain fees and
expenses related to the Recapitalization and (iii) general working capital
requirements and other corporate purposes of the relevant Borrower and its
Subsidiaries.
SECURITY
The obligations under the Revolving Credit Agreement are secured and
guaranteed by the Obligors through a first priority fully perfected security
interest in all the assets, properties and undertakings of DCC and each other
Obligor, where available and cost effective to do so, and to the extent
permissible by local laws; except that (i) no obligation of DCC is guaranteed
by any other entity and (ii) DCC has not pledged more than approximately 66%
of the voting stock it holds in any other entity to secure its indebtedness.
The security covers at least 85% of the Company's Consolidated Adjusted EBITDA
and Total Assets and, if such security falls below this percentage in the
future, further security must be granted, by the accession of additional
Obligors or otherwise.
INTEREST RATE; FEES
The interest rate per annum applicable to each Advance under the Revolving
Credit Agreement is based upon (i) LIBOR relative to each Advance for each
Interest Period, plus (ii) an applicable
80
<PAGE>
margin ranging from 1.25% to 2.00% depending upon the financial performance of
the Group; provided, however, that the margin is 2.00% per annum (i) until the
first anniversary of the consummation of the Recapitalization and (ii) if a
Default is continuing.
The Borrowers have agreed to pay Chase customary fees with respect to the
Facility, including an up-front structuring and arrangement fee and an annual
administration fee. DCC will pay a commitment fee equal to 0.50% per annum on
the daily unused portion of the Facility, payable quarterly in arrears. DCC
will pay a utilization fee equal to 0.25% per annum on all Advances, Standby
Letters of Credit and Ancillary Facilities if the average amount outstanding
thereunder equals or exceeds 50% of the Facility over a three-month period,
calculated with regard to each day such percentage is exceeded and payable
quarterly in arrears. In addition, all overdue amounts, whether of principal,
interest, fees or otherwise, shall bear interest at 2.00% per annum over the
otherwise applicable rate.
COVENANTS
The Revolving Credit Agreement contains certain affirmative and negative
covenants that, among other things, restrict the ability of DCC and its
Subsidiaries to dispose of shares in DCC or in any Subsidiary, dispose of
assets, incur additional indebtedness, engage in mergers and acquisitions,
exercise options other than under an Approved Hedging Program or the MS Group
Option, make investments, incur guaranty obligations, make loans, make capital
distributions, enter into joint ventures, repay the Exchange Notes, make loans
or pay any dividend or distribution to the Issuers for any reason other than
(among other things) to pay interest (but not principal or Additional Amounts)
owing in respect of the Exchange Notes, incur liens and encumbrances and permit
the amount of receivables and inventory to exceed specified thresholds.
However, certain acquisitions are permitted up to a total value of $30 million.
In addition, the Revolving Credit Agreement requires the Company to maintain
specified financial ratios and tests, including a minimum interest coverage
ratio, minimum consolidated net worth, a minimum level of Adjusted EBITDA (as
defined in the Revolving Credit Agreement) and a maximum leverage ratio.
EVENTS OF DEFAULT
The Revolving Credit Agreement contains customary events of default
including, but not limited to, non-payment, breach of undertaking,
misrepresentation, cross default, repudiation of the Transaction Documents,
invalidity, inability to pay debts, insolvency, liquidation, bankruptcy,
appointment of a receiver, unlawfulness, qualification of accounts, cessation
of business, change of control, litigation, DICSA's warranties under the
Recapitalization Agreement being incorrect (subject to a materiality
threshold), failure to comply with ERISA requirements, expropriation of assets
and certain material adverse effects.
GUARANTORS
Each of the Borrowers and certain other Subsidiaries are guarantors. However,
no obligation of DCC or Lyon under the Revolving Credit Agreement is guaranteed
by any other entity.
MATURITY
Loans made pursuant to the Revolving Credit Agreement may be borrowed, repaid
and reborrowed from time to time until the date falling 83 months after the
completion of the Recapitalization, subject to satisfaction of certain
conditions on the date of any such borrowing. The Facility will be reduced by
DM20 million and DM25 million on the fifth and sixth anniversary, respectively,
of the Facility and will mature on the seventh anniversary of the closing of
the Facility.
The obligation of the banks to make Advances or extend letters of credit
under the Revolving Credit Agreement is subject to the satisfaction of certain
customary closing conditions.
81
<PAGE>
DESCRIPTION OF EXCHANGE NOTES
GENERAL
As used in this section entitled "Description of Exchange Notes", the term
"Issuers" means The Derby Cycle Corporation, a Delaware corporation ("DCC" or
"Raleigh USA"), together with Lyon Investments B.V., a company organized under
the laws of The Netherlands and a wholly owned subsidiary of DCC, which was
formerly known as Lyon Cycle B.V. ("Lyon").
The Exchange Dollar Notes are to be issued under an Indenture, dated as of
May 14, 1998 (the "Dollar Notes Indenture"), among the Issuers, as joint and
several obligors, and IBJ Schroder Bank & Trust Company, as trustee (the
"Dollar Notes Trustee"), a copy of which is available upon request to DCC.
The DM Exchange Notes are to be issued under an Indenture, dated as of May
14, 1998 (the "DM Notes Indenture"), among the Issuers, as joint and several
obligors, and IBJ Schroder Bank & Trust Company, as trustee (the "DM Notes
Trustee"), a copy of which is available upon request to DCC.
The Dollar Notes Indenture and the DM Notes Indenture are together referred
to as the "Indentures". The Dollar Notes Trustee and the DM Notes Trustee are
together referred to as the "Trustees". Any reference to a "Trustee" means the
Dollar Notes Trustee or the DM Notes Trustee, as the context may require.
The form and terms of the Exchange Dollar Notes and Exchange DM Notes are
the same as the form and terms of the Old Dollar Notes and Exchange DM Notes,
respectively (which they replace) except that (i) the Exchange Notes have been
registered under the Securities Act, and therefore, will not bear legends
restricting their transfer, and (ii) the holder of Exchange Notes will not be
entitled to certain rights under the Exchange and Registration Rights
Agreement, including the provisions providing for an increase in the interest
rate on the Old Notes under certain circumstance relating to the timing of the
Exchange Offer, which rights will terminate when the Exchange Offer is
consummated.
The following summary of certain provisions of the Indentures and the Notes
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Indentures and the Notes,
including the definitions of certain terms therein and those terms made a part
thereof by the TIA. Capitalized terms used herein and not otherwise defined
have the meanings set forth under "--Certain Definitions".
Principal of, premium, if any, and interest on the Dollar Notes will be
payable, and the Dollar Notes may be exchanged or transferred, at the office
or agency of the Issuers maintained for that purpose in the Borough of
Manhattan, The City of New York, and, so long as the Notes are listed on the
Luxembourg Stock Exchange and the rules of such exchange so require, at the
offices of the paying agent in Luxembourg (which initially shall be The
Industrial Bank of Japan (Luxembourg), S.A.), except that, at the option of
the Issuers, payment of interest on the Dollar Notes may be made by check
mailed to the registered holders of the Dollar Notes at their registered
addresses. Principal of, premium, if any, and interest on the DM Notes will be
payable, and the DM Notes may be exchanged or transferred, at the office or
agency of the Issuers maintained for that purpose in Frankfurt, Germany, and,
so long as the Notes are listed on the Luxembourg Stock Exchange and the rules
of such exchange so require, at the offices of the paying agent in Luxembourg
(which initially shall be The Industrial Bank of Japan (Luxembourg), S.A.).
The Issuers will ensure that, with respect to the Dollar Notes, there will be
a paying agent in the United States to perform the functions assigned to it in
the Dollar Notes Indenture and, with respect to the DM Notes, there will be a
paying agent in Germany to perform the functions assigned to it in the DM
Notes Indenture, and, so long as the Notes are listed on the Luxembourg Stock
Exchange, and the rules of such exchange so require, the Issuers will ensure
that there will be a paying agent in Luxembourg (or such other place as the
Luxembourg Stock Exchange may approve).
82
<PAGE>
The Dollar Exchange Notes will be issued only in fully registered form,
without coupons, in denominations of $1,000 and any integral multiple of
$1,000. The DM Exchange Notes will be issued only in fully registered form,
without coupons, in denominations of DM1,000 and any integral multiple of
DM1,000. No service charge will be made for any registration of transfer or
exchange of Notes, but the Issuers, or the paying agent, as applicable, may
require payment of a sum sufficient to cover any transfer tax or other similar
governmental charge payable in connection therewith.
Application has been made to list the Notes on the Luxembourg Stock Exchange
concurrently with the Exchange Offer.
TERMS OF THE NOTES
The Dollar Notes are unsecured senior obligations of the Issuers, limited to
$100 million aggregate principal amount, and will mature on May 15, 2008. Each
Dollar Note bears interest at a rate per annum shown on the front cover of
this Prospectus from May 14, 1998, or from the most recent date to which
interest has been paid or provided for, payable semiannually to holders of
record at the close of business on the May 1 or November 1 immediately
preceding the interest payment date on May 15 and November 15 of each year,
commencing November 15, 1998. The Issuers will pay interest on overdue
principal at 1% per annum in excess of such rate, and the Issuers will pay
interest on overdue installments of interest at such higher rate to the extent
lawful.
The DM Notes are unsecured senior obligations of the Issuers, limited to
DM110 million aggregate principal amount, and will mature on May 15, 2008.
Each DM Note will bear interest at a rate per annum shown on the front cover
of this Prospectus from May 14, 1998, or from the most recent date to which
interest has been paid or provided for, payable semiannually to holders of
record at the close of business on the May 1 or November 1 immediately
preceding the interest payment date on May 15 and November 15 of each year,
commencing November 15, 1998. The Issuers will pay interest on overdue
principal at 1% per annum in excess of such rate, and the Issuers will pay
interest on overdue installments of interest at such higher rate to the extent
lawful.
The interest rate on the Notes is subject to increase in certain
circumstances if the Issuers fail to file a registration statement relating to
the Notes or if such registration statement is not declared effective on a
timely basis or if certain other conditions are not satisfied, all as further
described under "The Exchange Offer".
OPTIONAL REDEMPTION
Except as set forth below or under "--Redemption for Taxation Reasons", the
Notes will not be redeemable at the option of the Issuers prior to May 15,
2003. Thereafter, the Notes will be redeemable at the option of the Issuers,
in whole or in part, on not less than 30 nor more than 60 days' prior notice
delivered to each holder of Notes in accordance with the provisions set forth
under "--Notices", at the following redemption prices (expressed as
percentages of principal amount), plus accrued and unpaid interest and
Additional Amounts, if any, to the redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant payment date and Additional Amounts, if any, in respect thereof), if
redeemed during the 12-month period commencing on May 15 of the years set
forth below:
For the Dollar Notes
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2003........................................................... 105.000%
2004........................................................... 103.333%
2005........................................................... 101.667%
2006 and thereafter............................................ 100.000%
</TABLE>
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For the DM Notes
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2003........................................................... 104.688%
2004........................................................... 103.125%
2005........................................................... 101.563%
2006 and thereafter............................................ 100.000%
</TABLE>
At any time and from time to time prior to May 15, 2001, the Issuers may, at
their option, redeem up to a maximum of 33 1/3% of the original aggregate
principal amount of the Dollar Notes with all or a portion of the proceeds of
one or more Public Equity Offerings following which there is a Public Market,
at a redemption price equal to 110.000% of the principal amount thereof, plus
accrued and unpaid interest and Additional Amounts, if any, to the redemption
date (subject to the right of holders of record on the relevant record date to
receive interest due on the relevant payment date and Additional Amounts, if
any, in respect thereof); provided, however, that, after giving effect to any
such redemption, at least 66 2/3% of the original aggregate principal amount
of the Dollar Notes (calculated giving effect to any issuance of Additional
Dollar Notes) remains outstanding. Any such redemption shall be made within 60
days of such Public Equity Offering upon not less than 30 nor more than 60
days' notice delivered to each holder of Dollar Notes being redeemed in
accordance with the provisions set forth under "--Notices" and otherwise in
accordance with the procedures set forth in the Dollar Notes Indenture.
At any time and from time to time prior to May 15, 2001, the Issuers may, at
their option, redeem up to a maximum of 33 1/3% of the original aggregate
principal amount of the DM Notes with all or a portion of the proceeds of one
or more Public Equity Offerings following which there is a Public Market, at a
redemption price equal to 109.375% of the principal amount thereof, plus
accrued and unpaid interest and Additional Amounts, if any, to the redemption
date (subject to the right of holders of record on the relevant record date to
receive interest due on the relevant payment date and Additional Amounts, if
any, in respect thereof); provided, however, that, after giving effect to any
such redemption, at least 66 2/3% of the original aggregate principal amount
of the DM Notes (calculated giving effect to any issuance of Additional DM
Notes) remains outstanding. Any such redemption shall be made within 60 days
of such Public Equity Offering upon not less than 30 nor more than 60 days'
notice delivered to each holder of DM Notes being redeemed in accordance with
the procedures set forth under "--Notices" and otherwise in accordance with
the procedures set forth in the DM Notes Indenture.
SELECTION
In the case of any partial redemption, selection of the Notes for redemption
will be made by the applicable Trustee in compliance with the requirements of
the principal securities exchange, if any, on which the Notes are listed and
the requirements of any depositary holding the global certificates
representing the Notes, or, if the Notes are not so listed or such exchange
prescribes no method of selection and the depositary, if any, holding the
global certificates representing the Notes imposes no requirements, on a pro
rata basis, by lot or by such other method as such Trustee in its sole
discretion shall deem to be fair and appropriate, although no Dollar Note of
$1,000 in original principal amount or less and no DM Note of DM1,000 in
original principal amount or less will be redeemed in part. If any Note is to
be redeemed in part only, the notice of redemption relating to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note
in principal amount equal to the unredeemed portion thereof will be issued in
the name of the holder thereof upon cancellation of the original Note.
REDEMPTION FOR TAXATION REASONS
The Dollar Notes and the DM Notes may be redeemed, at the option of the
Issuers, in whole but not in part, any time upon giving not less than 30 nor
more than 60 days' prior notice delivered to each
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holder of Notes in accordance with the provisions set forth under "--Notices"
(which notice shall be irrevocable), at a redemption price equal to the
principal amount thereof, together with accrued and unpaid interest, if any,
to the date fixed by the Issuers for redemption (a "Tax Redemption Date") and
all Additional Amounts, if any, then due and which will become due on the Tax
Redemption Date as a result of the redemption or otherwise, if the Issuers
determine that, as a result of (i) any change in, or amendment to, the laws or
treaties (or any regulations, protocols or rulings promulgated thereunder) of
the United States or The Netherlands or any other jurisdiction in which either
of the Issuers is organized or engaged in business for tax purposes (or, in
each case, any political subdivision or taxing authority thereof or therein)
or of the jurisdiction from or through which payment is made or where the
payor is located affecting taxation, which change or amendment becomes
effective on or after the date of the Indentures, or (ii) any change in
position regarding the application, administration or interpretation of such
laws, treaties, regulations or rulings (including a holding, judgment or order
by a court of competent jurisdiction), which change, amendment, application or
interpretation becomes effective on or after the date of the Indentures, the
Issuers are or will be required to pay Additional Amounts, and the Issuers
determine that such payment obligation cannot be avoided by the Issuers taking
reasonable measures. Notwithstanding the foregoing, no such notice of
redemption shall be given earlier than 90 days prior to the earliest date on
which the Issuers would be obligated to make such payment or withholding if a
payment in respect of the Dollar Notes or the DM Notes, as the case may be,
were then due. Prior to the delivery of any notice of redemption of the Dollar
Notes or the DM Notes pursuant to the foregoing, the Issuers will deliver to
the Dollar Notes Trustee or the DM Notes Trustee, as applicable, an opinion of
a tax counsel reasonably satisfactory to such Trustee to the effect that the
circumstances referred to above exist. Each of the Dollar Notes Trustee and
the DM Notes Trustee shall accept such opinion as sufficient evidence of the
satisfaction of the conditions precedent described above, in which event it
shall be conclusive and binding on all holders of Dollar Notes or the DM
Notes, as the case may be.
RANKING
The indebtedness evidenced by the Notes is unsecured Senior Indebtedness of
the Issuers, ranks pari passu in right of payment with all existing and future
Senior Indebtedness of the Issuers and senior in right of payment to all
existing and future Subordinated Obligations of the Issuers. The Notes are
effectively subordinated to any Secured Indebtedness of the Issuers and their
respective Subsidiaries to the extent of the value of the assets securing such
Secured Indebtedness.
Certain of the operations of the Issuers are conducted through their
respective Subsidiaries. Claims of creditors of such Subsidiaries, including
trade creditors, and claims of preferred shareholders (if any) of such
Subsidiaries generally will have priority with respect to the assets and
earnings of such Subsidiaries over the claims of creditors of the Issuers,
including holders of the Notes. The Notes, therefore, are effectively
subordinated to creditors, including trade creditors, and preferred
shareholders (if any) of the Subsidiaries of DCC (excluding Lyon). At March
29, 1998, the total liabilities of the Subsidiaries of DCC (excluding Lyon)
were approximately $332.0 million, including trade payables. Although the
Indentures limit the Incurrence of Indebtedness by, and the issuance of
preferred stock of, certain of the Subsidiaries of DCC (including Lyon), such
limitations are subject to a number of significant qualifications.
As of March 29, 1998, on a pro forma basis after giving effect to the
Recapitalization, (a) the outstanding Senior Indebtedness of the Issuers would
have been $238.2 million (including all Indebtedness and Guarantees of
Indebtedness under the Revolving Credit Agreement, but excluding unused
commitments thereunder), of which $78.1 million would have been Secured
Indebtedness, and the Issuers would have had no outstanding Indebtedness that
is subordinate or junior in right of payment to the Notes, and (b) the
outstanding Indebtedness of the Subsidiaries of DCC (other than Lyon) would
have been $239.9 million (consisting of Indebtedness under the Revolving
Credit
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Agreement and indebtedness under the South African Credit Facility, but
excluding, in each case, unused commitments thereunder), all of which would
have been Secured Indebtedness. Although the Indentures contain limitations on
the amount of additional Indebtedness which DCC and certain of its
Subsidiaries (including Lyon) may Incur, under certain circumstances the
amount of such Indebtedness could be substantial and, in any case, such
Indebtedness may be Senior Indebtedness. See "--Certain Covenants--Limitation
on Indebtedness".
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each holder of Notes will have the right to require the Issuers to
repurchase all or any part of such holder's Notes at a purchase price in cash
equal to 101% of the principal amount thereof, plus accrued and unpaid
interest and Additional Amounts, if any, to the date of repurchase (subject to
the right of holders of record on the relevant record date to receive interest
due on the relevant payment date and Additional Amounts, if any, in respect
thereof);
(i) prior to an Initial Public Offering, the Permitted Holders cease to
be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of a majority in the aggregate of
the total voting power of the Voting Stock of DCC, whether as a result of
issuance of securities of DCC, any merger, consolidation, liquidation or
dissolution of DCC, any direct or indirect transfer of securities by any
Permitted Holder or otherwise (for purposes of this clause (i) and clause
(ii) below, the Permitted Holders shall be deemed to beneficially own any
Voting Stock of an entity (the "specified entity") held by any other entity
(the "parent entity") so long as the Permitted Holders beneficially own (as
so defined), directly or indirectly, in the aggregate a majority of the
voting power of the Voting Stock of the parent entity);
(ii) (A) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in clause (i) above, except that
for purposes of this clause (ii) such person shall be deemed to have
"beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 35% of the total
voting power of the Voting Stock of DCC and (B) the Permitted Holders
"beneficially own" (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the total voting power
of the Voting Stock of DCC than such other person and do not have the right
or ability by voting power, contract or otherwise to elect or designate for
election a majority of the board of directors of DCC (for the purposes of
this clause (ii), such other person shall be deemed to beneficially own any
Voting Stock of a specified corporation held by a parent corporation, if
such other person is the beneficial owner (as defined in this clause (ii)),
directly or indirectly, more than 35% of the voting power of the Voting
Stock of such parent corporation and the Permitted Holders "beneficially
own" (as defined in clause (i) above), directly or indirectly, in the
aggregate a lesser percentage of the voting power of the Voting Stock of
such parent corporation and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority
of the board of directors of such parent corporation;
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the board of directors of DCC
(together with any new directors whose election by such board of directors
or whose nomination for election by the shareholders of DCC was approved by
a vote of at least 50% of the directors of DCC then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of such board of directors then in office;
(iv) the adoption of a plan relating to the liquidation or dissolution of
either of the Issuers; or
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(v) the merger or consolidation of DCC with or into another Person (other
than Lyon) or the merger of another Person (other than Lyon) with or into
DCC, or the sale of all or substantially all the assets of DCC to another
Person (other than a Person that is controlled by the Permitted Holders),
and, in the case of any such merger or consolidation, the securities of DCC
that are outstanding immediately prior to such transaction and which
represent 100% of the aggregate voting power of the Voting Stock of DCC are
changed into or exchanged for cash, securities or property, unless pursuant
to such transaction such securities are changed into or exchanged for, in
addition to any other consideration, securities of the surviving Person or
transferee that represent immediately after such transaction, at least a
majority of the aggregate voting power of the Voting Stock of the surviving
Person or transferee.
In the event that, at the time of such Change of Control, the terms of the
Bank Indebtedness restrict or prohibit the repurchase of Notes pursuant to
either of the Indentures, then prior to the mailing of the notice to holders
of Notes as provided in the immediately following paragraph but in any event
within 30 days following any Change of Control, the Issuers will be required
to (i) repay in full all Bank Indebtedness or (ii) obtain the requisite
consent under the agreements governing the Bank Indebtedness to permit the
repurchase of the Notes as provided for in the immediately following
paragraph.
Within 30 days following any Change of Control, the Issuers shall notify
each holder of Notes in accordance with the provisions set forth under "--
Notices", with a copy of such notice to each Trustee (the "Change of Control
Offer"), stating: (1) that a Change of Control has occurred and that such
holder has the right to require the Issuers to purchase such holder's Notes at
a purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest and Additional Amounts, if any, to the date of
repurchase (subject to the right of holders of record on the relevant record
date to receive interest due on the relevant payment date and Additional
Amounts, if any, in respect thereof); (2) the circumstances and relevant facts
and financial information regarding such Change of Control; (3) the repurchase
date (which shall be no earlier than 30 days nor later than 60 days from the
date such notice is delivered, except as otherwise may be required by
applicable law) and (4) the instructions determined by the Issuers, consistent
with the Indentures, that a holder of Notes must follow in order to have its
Notes purchased.
The Issuers will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the required Change of Control Offer
in the manner, at the times and otherwise in compliance with the requirements
set forth in the Indentures applicable to a Change of Control Offer made by
the Issuers and purchases all Notes validly tendered and not withdrawn under
such Change of Control Offer.
The Issuers will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or
regulations, including any securities laws of The Netherlands and the
requirements of the Luxembourg Stock Exchange or any other securities exchange
on which the Notes are listed, to the extent such laws or regulations or
requirements are applicable, in connection with the repurchase of Notes
pursuant to the Indentures. To the extent that the provisions of any
securities laws or regulations conflict with provisions of the Indentures, the
Issuers will comply with the applicable securities laws and regulations and
will not be deemed to have breached their obligations under the Indentures by
virtue thereof.
The Change of Control purchase feature is a result of negotiations between
DCC and the Initial Purchasers. Management of DCC has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that management would decide to do so in the future. Subject to the
limitations discussed below, the Issuers could, in the future, enter into
certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a
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Change of Control under the Indentures, but that could increase the amount of
Indebtedness of the Issuers and their respective Subsidiaries outstanding at
such time or otherwise affect the capital structure or credit ratings of the
Issuers. Restrictions on the ability of DCC and certain of its Subsidiaries
(including Lyon) to incur additional Indebtedness are described under "--
Certain Covenants--Limitation on Indebtedness", "--Limitation on Liens" and
"--Limitation on Sale/Leaseback Transactions". Such restrictions can only be
waived with the consent of the holders of a majority in principal amount of
each class of Notes then outstanding. Except for the limitations contained in
such covenants, however, the Indentures do not contain any covenants or
provisions that may afford holders of the Notes protection in the event of a
highly leveraged transaction involving the Issuers and their respective
Subsidiaries.
The occurrence of certain of the events which would constitute a Change of
Control would constitute a default under the Revolving Credit Agreement.
Future Senior Indebtedness of the Issuers may contain prohibitions of certain
events which would constitute a Change of Control or require such Senior
Indebtedness to be repurchased upon a Change of Control. Moreover, the
exercise by the holders of Notes of their right to require the Issuers to
repurchase the Notes could cause a default under such Senior Indebtedness,
even if the Change of Control itself does not, due to the financial effect of
such repurchase on the Issuers. Finally, the ability of the Issuers to pay
cash to holders of Notes upon a repurchase may be limited by the then existing
financial resources of the Issuers. There can be no assurance that sufficient
funds will be available when necessary to make any required repurchases. The
provisions under the Dollar Notes Indenture and the DM Notes Indenture
relative to the obligation of the Issuers to make an offer to repurchase the
Dollar Notes or the DM Notes, as applicable, as a result of a Change of
Control may be waived or modified with the written consent of the holders of a
majority in principal amount of the Dollar Notes or the DM Notes, as
applicable.
CERTAIN COVENANTS
The Indentures contain covenants including, among others, the following:
Limitation on Indebtedness. (a) DCC will not, and will not permit any
Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness;
provided, however, that DCC or any Restricted Subsidiary may Incur
Indebtedness, if on the date of such Incurrence and after giving effect
thereto, the Consolidated Coverage Ratio would be greater than 2.00:1.00 if
such Indebtedness is Incurred on or prior to the second anniversary of the
date of the original issuance of the Notes and 2.25:1.00 if such Indebtedness
is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), DCC and its Restricted
Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness outstanding at any one time in an aggregate principal
amount not to exceed the greater of (A) 100% of the total commitment under
the Revolving Credit Agreement on the date of the Indentures (DM 225
million) less the aggregate amount of Indebtedness incurred by all
Securitization Entities in connection with Qualified Securitization
Transactions that is outstanding at such time; or (B) 75% of accounts
receivable and 35% of inventory, in each case net of reserves and as shown
on the consolidated balance sheet of DCC as of the most recent month for
which financial statements are available from time to time (so that
Indebtedness incurred pursuant to this clause (B) is not at any time
greater than the permitted amount based on the most recent such financial
statements);
(ii) Indebtedness of DCC owed to, and held by, any Restricted Subsidiary
or Indebtedness of a Restricted Subsidiary owed to, and held by, DCC or any
other Restricted Subsidiary; provided, however, that any subsequent
issuance or transfer of any Capital Stock or any other event that results
in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or
any subsequent transfer of any such Indebtedness (except to DCC or a
Restricted Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Indebtedness by the issuer thereof;
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(iii) Indebtedness (A) represented by the Notes, any Exchange Notes or
any Private Exchange Notes, (B) outstanding on the date of the Indentures
(other than the Indebtedness described in clauses (i) and (ii) above), (C)
consisting of Refinancing Indebtedness Incurred in respect of any
Indebtedness described in this clause (iii) (including Indebtedness
Refinancing Refinancing Indebtedness) or the foregoing clause (i) and (D)
consisting of Guarantees of any Indebtedness not prohibited by the
Indenture;
(iv) (A) Indebtedness of a Restricted Subsidiary Incurred and outstanding
on or prior to the date on which such Restricted Subsidiary was acquired by
DCC or a Restricted Subsidiary (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a
Subsidiary of DCC or a Restricted Subsidiary or was otherwise acquired by
DCC or a Restricted Subsidiary); provided, however, that on the date that
such Restricted Subsidiary is acquired by DCC or a Restricted Subsidiary,
DCC would have been able to Incur $1.00 of additional Indebtedness pursuant
to the foregoing paragraph (a) after giving effect to the Incurrence of
such Indebtedness pursuant to this clause (iv) and (B) Refinancing
Indebtedness Incurred by a Restricted Subsidiary in respect of Indebtedness
Incurred by such Restricted Subsidiary pursuant to this clause (iv);
(v) Indebtedness (A) in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds provided by DCC
and its Restricted Subsidiaries in the ordinary course of business and (B)
under Currency Agreements and Interest Rate Agreements entered into for
bona fide hedging purposes of DCC and its Restricted Subsidiaries in the
ordinary course of business; provided, however, that such Currency
Agreements and Interest Rate Agreements do not increase the Indebtedness of
DCC and its Restricted Subsidiaries outstanding at any time other than as a
result of fluctuations in foreign currency exchange rates or interest rates
or by reason of fees, indemnities and compensation payable thereunder;
(vi) Purchase Money Indebtedness and Capitalized Lease Obligations in an
aggregate principal amount not in excess of $10 million at any time
outstanding;
(vii) Indebtedness arising from agreements of DCC or any of its
Restricted Subsidiaries providing for indemnification, adjustment of
purchase price, earn out or other similar obligations, in each case,
incurred or assumed in connection with the disposition of a Restricted
Subsidiary or any business or assets of DCC or a Restricted Subsidiary,
other than Guarantees of Indebtedness incurred by any Person acquiring all
or any portion of such business, assets or such Restricted Subsidiary for
the purpose of financing such acquisition; provided that the maximum
assumable liability in respect of all such Indebtedness shall at no time
exceed the gross proceeds actually received by DCC or its Restricted
Subsidiaries in connection with such disposition;
(viii) Indebtedness incurred by a Securitization Entity in a Qualified
Securitization Transaction that is Non-Recourse Indebtedness with respect
to DCC and its other Restricted Subsidiaries (except for Standard
Securitization Undertakings);
(ix) the incurrence of Indebtedness by Foreign Subsidiaries which does
not exceed $5 million at any one time outstanding;
(x) Indebtedness (other than Indebtedness permitted to be Incurred
pursuant to the foregoing paragraph (a) or any other clause of this
paragraph (b)) in an aggregate principal amount on the date of Incurrence
that, when added to all other Indebtedness Incurred pursuant to this clause
(x) and then outstanding, shall not exceed $20 million; and
(xi) Contribution Indebtedness.
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(c) Notwithstanding the foregoing, neither of the Issuers may Incur any
Indebtedness pursuant to paragraph (b) above if the proceeds thereof are used,
directly or indirectly, to repay, prepay, redeem, defease, retire, refund or
refinance any Subordinated Obligations of such Issuer unless such Indebtedness
will be subordinated to the Notes to at least the same extent as such
Subordinated Obligations.
(d) Notwithstanding any other provision of this covenant, the maximum amount
of Indebtedness that DCC or any Restricted Subsidiary may Incur pursuant to
this covenant shall not be deemed to be exceeded solely as a result of
fluctuations in the exchange rates of currencies. For purposes of determining
the outstanding principal amount of any particular Indebtedness Incurred
pursuant to this covenant, (i) Indebtedness Incurred pursuant to the Revolving
Credit Agreement prior to or on the date of the Indentures shall be treated as
Incurred pursuant to clause (i) of paragraph (b) above, (ii) Indebtedness
permitted by this covenant need not be permitted solely by reference to one
provision permitting such Indebtedness but may be permitted in part by one
such provision and in part by one or more other provisions of this covenant
permitting such Indebtedness and (iii) in the event that Indebtedness meets
the criteria of more than one of the types of Indebtedness described in this
covenant, DCC, in its sole discretion, shall classify such Indebtedness and
only be required to include the amount of such Indebtedness in one of such
clauses.
Limitation on Restricted Payments. (a) DCC will not, and will not permit any
Restricted Subsidiary, directly or indirectly, to (i) declare or pay any
dividend or make any distribution on or in respect of its Capital Stock
(including any payment in connection with any merger or consolidation
involving DCC) or similar payment (including any payment in respect of the
Additional Payment) to the direct or indirect holders of its Capital Stock
except dividends or distributions payable solely in its Capital Stock (other
than Disqualified Stock) or in options, warrants or other rights to purchase
such Capital Stock and except dividends or distributions payable to DCC or
another Restricted Subsidiary (and, if such Restricted Subsidiary has
shareholders other than DCC or other Restricted Subsidiaries, to its other
shareholders on a pro rata basis), (ii) purchase, redeem, retire or otherwise
acquire for value any Capital Stock of DCC or any Restricted Subsidiary held
by Persons other than DCC or another Restricted Subsidiary, (iii) purchase,
repurchase, redeem, defease or otherwise acquire or retire for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition) or (iv) make any
Restricted Investment in any Person (any such dividend, distribution,
purchase, redemption, repurchase, defeasance, other acquisition, retirement or
Investment being herein referred to as a "Restricted Payment") if at the time
DCC or such Restricted Subsidiary makes such Restricted Payment: (1) a Default
will have occurred and be continuing (or would result therefrom); (2) DCC
could not Incur at least $1.00 of additional Indebtedness under paragraph (a)
of the covenant described under "--Limitation on Indebtedness"; or (3) the
aggregate amount of such Restricted Payment and all other Restricted Payments
(the amount so expended, if other than in cash, to be determined in good faith
by the board of directors of DCC, whose determination will be conclusive and
evidenced by a resolution of such board of directors) declared or made
subsequent to the date of the Indentures would exceed the sum of: (A) 50% of
the Consolidated Net Income accrued during the period (treated as one
accounting period) from the beginning of the fiscal quarter immediately
following the fiscal quarter during which the Notes are originally issued to
the end of the most recent fiscal quarter for which financial statements are
available (or, in case such Consolidated Net Income will be a deficit, minus
100% of such deficit); (B) the aggregate Net Cash Proceeds received by DCC
from the issue or sale of its Capital Stock (other than Disqualified Stock) or
other capital contributions subsequent to the date of the Indentures other
than an issuance or sale to (x) a Subsidiary of DCC or (y) an employee stock
ownership plan or other trust established by DCC or any of its Subsidiaries to
the extent such sale to an employee stock ownership plan or similar trust is
financed by loans from, or is Guaranteed by, DCC
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or any Restricted Subsidiary unless such loans have been repaid in cash prior
to the date of such determination; (C) the amount by which Indebtedness of DCC
or its Restricted Subsidiaries is reduced on DCC's consolidated balance sheet
upon the conversion or exchange (other than by a Subsidiary of DCC) subsequent
to the date of the Indentures of any Indebtedness of DCC or its Restricted
Subsidiaries convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of DCC (less the amount of any cash or the fair market
value of other property distributed by DCC or any Restricted Subsidiary upon
such conversion or exchange), plus the amount of cash and the fair market
value of any other property (determined as provided above) received by DCC or
any Restricted Subsidiary upon such conversion or exchange; and (D) the amount
equal to the net reduction in Investments in Unrestricted Subsidiaries
resulting from (i) payments of dividends, repayments of the principal of loans
or advances or other transfers of assets to DCC or any Restricted Subsidiary
from Unrestricted Subsidiaries or the disposal of such Investments or (ii) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued
in each case as provided in the definition of "Investment") not to exceed, in
the case of any Unrestricted Subsidiary, the amount of Investments previously
made by DCC or any Restricted Subsidiary in such Unrestricted Subsidiary,
which amount was included in the calculation of the amount of Restricted
Payments, less (E) the aggregate principal amount of any outstanding
Contribution Indebtedness.
(b) The provisions of the foregoing paragraph (a) will not prohibit: (i) any
Restricted Payment made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of DCC (other than
Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary
of DCC or an employee stock ownership plan or other trust established by DCC
or any of its Subsidiaries to the extent such sale to an employee stock
ownership plan or similar trust is financed by loans from, or is Guaranteed
by, DCC or any Restricted Subsidiary unless such loans have been repaid in
cash prior to the date of such determination) or a substantially concurrent
capital contribution to DCC; provided, however, that (A) such Restricted
Payment will be excluded in the calculation of the amount of Restricted
Payments under clause (3) of paragraph (a) above and (B) the Net Cash Proceeds
from such sale applied in the manner set forth in this clause (i) will be
excluded from the calculation of amounts under clause (3)(B) of paragraph (a)
above; (ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations of DCC or its
Restricted Subsidiaries made by exchange for, or out of the proceeds of, the
substantially concurrent sale of, Indebtedness of DCC or its Restricted
Subsidiaries that is permitted to be Incurred pursuant to paragraph (b) of the
covenant described under "--Limitation on Indebtedness"; provided, however,
that such purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value will be excluded in the calculation of the amount of
Restricted Payments under clause (3) of paragraph (a) above; (iii) any
purchase or redemption of Subordinated Obligations of any Subsidiary of DCC
from Net Available Cash to the extent permitted by the covenant described
under "--Limitation on Sales of Assets and Subsidiary Stock"; provided,
however, that such purchase or redemption will be excluded in the calculation
of the amount of Restricted Payments under clause (3) of paragraph (a) above;
(iv) dividends paid within 60 days after the date of declaration thereof if at
such date of declaration such dividend would have complied with this covenant;
provided, however, that such dividend will be included in the calculation of
the amount of Restricted Payments under clause (3) of paragraph (a) above; (v)
the repurchase or other acquisition of shares of, or options to purchase
shares of, common stock of DCC or any of its Subsidiaries from employees,
former employees, directors or former directors of DCC or any of its
Subsidiaries (or permitted transferees of such employees, former employees,
directors or former directors), pursuant to the terms of the agreements
(including employment agreements) or plans (or amendments thereto) approved by
the relevant board of directors under which such individuals purchase or sell,
or are granted the option to purchase or sell, shares of such common stock;
provided, however, that the aggregate amount of such repurchases or
acquisitions shall not exceed $2 million in any calendar year or $5 million in
total; provided further, however, that such repurchases and other acquisitions
shall be excluded in the calculation of the amount of Restricted Payments
under clause (3) of paragraph (a) above; (vi) repurchases of Capital
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Stock deemed to occur upon the exercise of stock options if such Capital Stock
represents a portion of the exercise price thereof; provided further, however,
that such repurchases shall be excluded in the calculation of the amount of
Restricted Payments under clause (3) of paragraph (a) above; (vii) any
purchases of Capital Stock of Univega or the MS Sport Group for aggregate
consideration not in excess of $7.0 million; provided, however, that such
purchases will be included in the calculation of the amount of Restricted
Payments under clause (3) of paragraph (a) above; (viii) any purchases of
Capital Stock of Derby Holdings South Africa for aggregate consideration not
in excess of $2 million; provided, however, that such purchases will not be
included in the calculation of the amount of Restricted Payments under clause
(3) of paragraph (a) above; or (ix) any distribution on or in respect of any
Capital Stock of DCC or any Restricted Subsidiary or similar payment made in
connection with any sale of Excluded Assets undertaken in accordance with the
terms of the Recapitalization Agreement in an aggregate amount not in excess
of $0.3 million; provided, however, that such distribution or payment will not
be included in the calculation of the amount of Restricted Payments under
clause (3) of paragraph (a) above.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. DCC will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligations owed to either of the
Issuers, (ii) make any loans or advances to either of the Issuers or (iii)
transfer any of its property or assets to either of the Issuers, except: (1)
any encumbrance or restriction pursuant to an agreement in effect at, or
entered into on, the date of the Indentures; (2) any encumbrance or
restriction with respect to a Restricted Subsidiary pursuant to an agreement
relating to any Indebtedness Incurred by such Restricted Subsidiary prior to
the date on which such Restricted Subsidiary was acquired by DCC or another
Restricted Subsidiary or of another Person that is assumed by DCC or any
Restricted Subsidiary in connection with the acquisition of assets from, or
merger or consolidation with, such Person (other than Indebtedness Incurred as
consideration paid in connection with, in contemplation of, or to provide all
or any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Restricted Subsidiary became a Restricted Subsidiary or was otherwise acquired
by DCC or another Restricted Subsidiary) and outstanding on such date; (3) any
encumbrance or restriction with respect to a Restricted Subsidiary pursuant to
any agreement not relating to any Indebtedness in existence when a Person
becomes a Subsidiary of DCC or any other Restricted Subsidiary or when such
assets are acquired by DCC or any Restricted Subsidiary, that is not created
in contemplation of such Person becoming such a Subsidiary or such
acquisition; (4) any encumbrance or restriction pursuant to an agreement
effecting a refinancing of Indebtedness, including agreements that increase
the amount of such Indebtedness to the extent otherwise permitted by the
Indenture, Incurred pursuant to an agreement referred to in clause (1) or (2)
of this covenant or this clause (4) or contained in any amendment to an
agreement referred to in clause (1) or (2) of this covenant or this clause
(4); provided, however, that the encumbrances and restrictions contained in
any such refinancing agreement or amendment are no less favorable to holders
of the Notes than the encumbrances and restrictions contained in such
predecessor agreements; (5) in the case of clause (iii) above, any encumbrance
or restriction (A) that restricts in a customary manner the subletting,
assignment or transfer of any property or asset that is subject to a lease,
license or similar contract, or the assignment or transfer of any lease,
license or contract, (B) that is or was created by virtue of any transfer of,
agreement to transfer, option or right with respect to, or Lien on, any
property or assets of DCC or any Restricted Subsidiary not otherwise
prohibited by the Indentures or (C) contained in security agreements securing
Indebtedness of a Restricted Subsidiary to the extent such encumbrance or
restriction restricts the transfer of the property subject to such security
agreements; (6) with respect to a Restricted Subsidiary, any restriction
imposed pursuant to an agreement entered into for the sale or disposition of
all or substantially all the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition; (7) any agreement
or instrument governing Capital Stock of any person that is in effect on the
date such Person is acquired by DCC or a Restricted Subsidiary and
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that is not created in contemplation of such acquisition or of such Person
becoming a Subsidiary of DCC or a Restricted Subsidiary; (8) restrictions on
cash or other deposits or net worth imposed by customers under contracts
entered into in the ordinary course of business; (9) any Purchase Money Note
or other Indebtedness or other contractual requirements of a Securitization
Entity in connection with a Qualified Securitization Transaction; provided,
that such restrictions apply only to such Securitization Entity; and (10) any
agreement or instrument governing Indebtedness of Foreign Subsidiaries
operating in jurisdictions in which the Issuers, as of the date of the
Indentures, do not have any significant operations; provided, however, that,
at the time such agreement or instrument is executed by the parties thereto,
the aggregate earnings before interest, taxes, depreciation and amortization
of such Foreign Subsidiaries for the period of the most recent four
consecutive fiscal quarters for which financial statements are available
(calculated, in the case of each such Foreign Subsidiary, in a manner
consistent with the calculation of EBITDA, and, in the case of each such
Foreign Subsidiary that is acquired by DCC, on a pro forma basis as if such
acquisition had occurred on the first day of such period) shall not exceed 10%
of EBITDA for such period.
Limitation on Sales of Assets and Subsidiary Stock. (a) DCC will not, and
will not permit any Restricted Subsidiary to, make any Asset Disposition
unless (i) DCC or such Restricted Subsidiary receives consideration (including
by way of relief from, or by any other Person assuming sole responsibility
for, any liabilities, contingent or otherwise) at the time of such Asset
Disposition at least equal to the fair market value, as determined in good
faith by the board of directors of DCC or such Restricted Subsidiary, as the
case may be, of the shares and assets subject to such Asset Disposition, (ii)
at least 80% of the consideration thereof received by DCC or such Restricted
Subsidiary is in the form of cash or cash equivalents and (iii) an amount
equal to 100% of the Net Available Cash from such Asset Disposition is applied
by DCC or such Restricted Subsidiary, as the case may be, (A) first, to the
extent the Issuers elect (or are required by the terms of the Revolving Credit
Agreement or any secured refinancing thereof (including refinancings that
increase the amount of Indebtedness outstanding to the extent otherwise
permitted by the Indenture)), to prepay, repay, redeem or purchase
Indebtedness of the Issuers or a Restricted Subsidiary of DCC outstanding
under the Revolving Credit Agreement or any such refinancing referred to above
within one year from the later of the date of such Asset Disposition or the
receipt of such Net Available Cash; (B) second, to the extent of the balance
of Net Available Cash after application in accordance with clause (A), to the
extent DCC or such Restricted Subsidiary elects, to reinvest in Additional
Assets (including by means of an Investment in Additional Assets by a
Restricted Subsidiary with Net Available Cash received by DCC or another
Restricted Subsidiary) within one year from the later of such Asset
Disposition or the receipt of such Net Available Cash (or DCC or such a
Restricted Subsidiary enters into an agreement to reinvest in Additional
Assets within one year from the later of such Asset Disposition or the receipt
of such Net Available Cash, which reinvestment must be consummated within 18
months from the later of such Asset Disposition or the receipt of such
Available Net Cash); (C) third, to the extent of the balance of such Net
Available Cash after application in accordance with clauses (A) and (B), to
make an Offer (as defined below) to purchase Notes pursuant to and subject to
the conditions set forth in paragraph (b) of this covenant; provided, however,
that, if the Issuers elect (or are required by the terms of any other Senior
Indebtedness of the Issuers or any Restricted Subsidiary), such Offer may be
made ratably to purchase the Notes and other Senior Indebtedness of the
Issuers or any Restricted Subsidiary and (D) fourth, to the extent of the
balance of such Net Available Cash after application in accordance with
clauses (A), (B) and (C), for any other general corporate purpose not
prohibited by the Indentures, including Restricted Payments; provided, however
that, in connection with any prepayment, repayment or purchase of Indebtedness
pursuant to clause (A), (C) or (D) above, DCC or such Restricted Subsidiary
will retire such Indebtedness and will cause the related loan commitment (if
any) to be permanently reduced in an amount equal to the principal amount so
prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this
covenant, DCC and the Restricted Subsidiaries will not be required to apply
any Net Available Cash in accordance with this covenant except to the extent
that the aggregate Net Available Cash from all Asset Dispositions that is not
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applied in accordance with this covenant exceeds $5 million. The provisions of
this covenant will not apply to any consideration received by DCC or any
Restricted Subsidiary in connection with any sale of Excluded Assets
undertaken in accordance with the terms of the Recapitalization Agreement to
the extent that the aggregate amount of such consideration does not exceed
$0.3 million.
For the purposes of this covenant, the following are deemed to be cash: (x)
the assumption of Indebtedness of DCC (other than Disqualified Stock of DCC)
or any Restricted Subsidiary and the release of DCC or such Restricted
Subsidiary from all liability on such Indebtedness in connection with such
Asset Disposition, (y) securities received by DCC or any Restricted Subsidiary
from the transferee that are promptly converted by DCC or such Restricted
Subsidiary into cash and (z) any Designated Non-Cash Consideration received by
DCC or any Restricted Subsidiary in such Asset Disposition having an aggregate
fair market value, taken together with all other Designated Non-Cash
Consideration received pursuant to this clause (z) that is at that time
outstanding, not to exceed 3% of Total Assets at the time of the receipt of
such Designated Non-Cash Consideration (with the fair market value of each
item of Designated Non-Cash Consideration being measured at the time received
without giving effect to subsequent changes in value).
(b) In the event of an Asset Disposition that requires the purchase of Notes
(and other Senior Indebtedness of the Issuers or any Restricted Subsidiary)
pursuant to clause (a)(iii)(C) of this covenant, the Issuers will be required
to purchase Notes (and other Senior Indebtedness of the Issuers or any
Restricted Subsidiary) tendered pursuant to an offer by the Issuers for the
Notes (and other Senior Indebtedness of the Issuers or any Restricted
Subsidiary) (the "Offer") at a purchase price of 100% of their principal
amount (without premium) plus accrued and unpaid interest and Additional
Amounts, if any, to the date of purchase (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
payment date and Additional Amounts, if any, in respect thereof) in accordance
with the procedures (including prorationing in the event of oversubscription)
set forth in the Indentures. If the aggregate purchase price of Notes (and
other Senior Indebtedness of the Issuers or any Restricted Subsidiary)
tendered pursuant to the Offer is less than the Net Available Cash allotted to
the purchase of the Notes (and other Senior Indebtedness of the Issuers or any
Restricted Subsidiary), the Issuers will apply the remaining Net Available
Cash in accordance with clause (a)(iii)(D) of this covenant. The Issuers will
not be required to make an Offer for Notes (and other Senior Indebtedness of
the Issuers or any Restricted Subsidiary) pursuant to this covenant if the Net
Available Cash available therefor (after application of the proceeds as
provided in clauses (A) and (B) of clause (a)(iii)) is less than $10 million
for any particular Asset Disposition (which lesser amount will be carried
forward for purposes of determining whether an Offer is required with respect
to the Net Available Cash from any subsequent Asset Disposition). Upon
completion of any such offer pursuant to clause (a)(iii)(C), the Net Available
Cash amount shall be reset at zero.
(c) The Issuers will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations, including any securities laws of The Netherlands and the
requirements of the Luxembourg Stock Exchange or any other securities exchange
on which the Notes are listed, to the extent such laws or regulations or
requirements are applicable, in connection with the repurchase of Notes
pursuant to this covenant. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this covenant, the Issuers
will comply with the applicable securities laws and regulations and will not
be deemed to have breached its obligations under this covenant by virtue
thereof.
Limitation on Transactions with Affiliates. (a) DCC will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, enter into or
conduct any transaction (including the purchase, sale, lease or exchange of
any property or the rendering of any service) with any Affiliate of DCC (an
"Affiliate Transaction") on terms (i) that are less favorable to DCC or such
Restricted Subsidiary, as the case may be, than those that could be obtained
at the time of such transaction in arm's-length
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dealings with a Person who is not such an Affiliate, (ii) if such Affiliate
Transaction involves an aggregate amount in excess of $5 million, (1) set
forth in writing and (2) that have been approved by a majority of the members
of the board of directors of DCC or such Restricted Subsidiary, as the case
may be, having no personal stake in such Affiliate Transaction, or have been
determined by a nationally recognized appraisal or investment banking firm to
be fair, from a financial standpoint, to DCC and its Restricted Subsidiaries
and (iii) if such Affiliate Transaction involves an amount in excess of $10
million, that have been determined by a nationally recognized appraisal or
investment banking firm to be fair, from a financial standpoint, to DCC and
its Restricted Subsidiaries.
(b) The provisions of the foregoing paragraph (a) will not prohibit (i) any
Restricted Payment permitted to be paid pursuant to the covenant described
under "--Limitation on Restricted Payments" or any Permitted Investment, (ii)
any issuance of securities, or other payments, awards or grants in cash, or
otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the board of directors of DCC or
such Restricted Subsidiary, as the case may be, (iii) the grant of stock
options or similar rights to employees and directors of DCC or such Restricted
Subsidiary pursuant to plans approved by the board of directors of DCC or such
Restricted Subsidiary, as the case may be, (iv) loans or advances to employees
in the ordinary course of business in accordance with past practices of DCC or
such Restricted Subsidiary, as the case may be, but in any event not to exceed
$4 million in the aggregate outstanding at any one time, (v) the entering
into, maintaining or performance of any employment contract, collective
bargaining agreement, benefit plan, program or arrangement, related trust
agreement or any other similar arrangement for or with any employee, officer
or director entered into before or after the date of the Indentures in the
ordinary course of business, including vacation, health, insurance deferred
compensation, retirement, savings or other similar plans, (vi) the payment of
customary annual management, consulting and advisory fees and related expenses
to the Investor Group and any of their respective Affiliates made pursuant to
any financial advisory, financing, underwriting or placement agreement or in
respect of other investment banking activities, including, without limitation,
in connection with acquisitions or divestitures which are approved by the
board of directors of DCC or any Restricted Subsidiary in good faith;
provided, however, that the aggregate amount of such fees and related expenses
shall not exceed $2 million in any calendar year, (vii) reasonable fees and
compensation paid to, and indemnity provided on behalf of, officers,
directors, employees or consultants of DCC or any of its Subsidiaries as
determined in good faith by the board of directors of DCC or such Subsidiary,
as the case may be, (viii) any agreement in effect as of the date of the
Indentures or any amendment or replacement thereto or any transaction
contemplated thereby (including pursuant to any amendment or replacement
thereto) so long as any such amendment or replacement agreement is not more
disadvantageous to the holders of Notes in any material respect than the
original agreement as in effect on the date of the Indentures, (ix)
transactions with customers, clients, suppliers, joint venture partners or
purchasers or sellers of goods or services, in each case in the ordinary
course of business (including, without limitation, pursuant to joint venture
agreements) and otherwise in compliance with the terms of the Indentures and
which are fair to DCC and its Restricted Subsidiaries, in the reasonable
determination of the board of directors of DCC or such Restricted Subsidiary,
as the case may be, or are on terms at least as favorable as might reasonably
have been obtained at such time from an unaffiliated party, (x) transactions
effected as part of a Qualified Securitization Transaction, (xi) any
transaction between DCC and a wholly owned Restricted Subsidiary or between or
among wholly owned Restricted Subsidiaries and (xii) any sale of Excluded
Assets undertaken in accordance with the terms of the Recapitalization
Agreement; provided that the consideration received by DCC or any Restricted
Subsidiary in connection does not exceed $0.3 million.
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. DCC will not sell or otherwise dispose of any shares of Capital
Stock of a Restricted Subsidiary, and will not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of
any shares of its Capital Stock except: (i) to DCC or a Wholly Owned
Subsidiary; (ii) if, immediately after giving effect to
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such issuance, sale or other disposition, none of DCC or any of its
Subsidiaries own any Capital Stock of such Restricted Subsidiary or (iii) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary and any
Investment in such Person remaining after giving effect thereto would have
been permitted to be made under the covenant described under "--Limitation on
Restricted Payments" if made on the date of such issuance, sale or other
disposition. The proceeds of any sale of such Capital Stock permitted hereby
will be treated as Net Available Cash from an Asset Disposition and must be
applied in accordance with the terms of the covenant described under "--
Limitation on Sales of Assets and Subsidiary Stock".
Limitation on Liens. DCC will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, Incur or permit to exist any Lien of
any nature whatsoever on any of its property or assets (including Capital
Stock of a Restricted Subsidiary), whether owned on the date of the Indentures
or thereafter acquired, other than Permitted Liens, without effectively
providing that the Notes shall be secured equally and ratably with (or prior
to) the obligations so secured for so long as such obligations are so secured;
provided, however, that DCC may Incur other Liens to secure Indebtedness as
long as the amount of outstanding Indebtedness secured by Liens Incurred
pursuant to this proviso does not exceed 5% of Consolidated Net Tangible
Assets, as determined based on the consolidated balance sheet of DCC as of the
end of the most recent fiscal quarter for which financial statements are
available.
Reports to Holders of Notes. Notwithstanding that DCC may not be subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, DCC
will file with the Commission and provide each Trustee and holders of Notes
and prospective holders of Notes (upon request) within 15 days after DCC files
them with the Commission, copies of its annual report and the information,
documents and other reports that are specified in Sections 13 and 15(d) of the
Exchange Act. In addition, following a Public Equity Offering, DCC shall
furnish to each Trustee and the holders of Notes, promptly upon their becoming
available, copies of the annual report to shareholders and any other
information provided by such Issuer to its public shareholders generally. The
Issuers will comply with the other provisions of Section 314(a) of the TIA.
Limitation on Lines of Business. DCC will not, and will not permit any
Restricted Subsidiary to, engage in any business, other than a Related
Business.
Limitation on Sale/Leaseback Transactions. DCC will not, and will not permit
any Restricted Subsidiary to, enter into any Sale/Leaseback Transaction with
respect to any property unless (a) DCC or such Restricted Subsidiary would be
entitled to (i) Incur Indebtedness in an amount equal to the Attributable Debt
with respect to such Sale/Leaseback Transaction pursuant to the covenant
described under "--Limitation on Indebtedness" and (ii) create a Lien on such
property securing such Attributable Debt without equally and ratably securing
the Notes pursuant to the covenant described under "--Limitation on Liens",
(b) the net proceeds received by DCC or such Restricted Subsidiary in
connection with such Sale/Leaseback Transaction are at least equal to the fair
market value (as determined in good faith by the board of directors of DCC or
such Restricted Subsidiary, as the case may be) of such property and (c) the
transfer of such property is permitted by, and DCC applies the proceeds of
such transaction in compliance with, the covenant described under "--
Limitation on Sales of Assets and Subsidiary Stock".
Future Note Guarantors. DCC will cause each Domestic Subsidiary that Incurs
Indebtedness and each Restricted Subsidiary that is a guarantor of
Indebtedness Incurred by either of the Issuers pursuant to the covenant
described under "--Limitation on Indebtedness" to become a guarantor of the
Dollar Notes and the DM Notes pursuant to a Guarantee (each, a "Note
Guarantee"), and, if applicable, execute and deliver to each Trustee a
supplemental indenture in the form set forth in the applicable Indenture
pursuant to which such Restricted Subsidiary will Guarantee payment of the
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Dollar Notes and the DM Notes. Each Note Guarantee will be limited to an
amount not to exceed the maximum amount that can be Guaranteed by the
applicable Restricted Subsidiary without rendering the Note Guarantee, as it
relates to such Restricted Subsidiary, voidable under applicable law relating
to fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally.
MERGER AND CONSOLIDATION
Neither of the Issuers will consolidate with or merge with or into, or
convey, transfer or lease all or substantially all its assets to, any Person,
unless: (i) the resulting, surviving or transferee Person (the "Successor
Company") will be a corporation organized and existing under the laws of the
United States of America, any state thereof or the District of Columbia, in
the case of DCC, or The Netherlands, in the case of Lyon, and the Successor
Company (if not an Issuer) will expressly assume, by a supplemental indenture,
executed and delivered to each Trustee, in form reasonably satisfactory to
each Trustee, all the obligations of such Issuer under the Notes and the
Indentures; (ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor Company
or any Restricted Subsidiary as a result of such transaction as having been
Incurred by the Successor Company or such Restricted Subsidiary at the time of
such transaction), no Default will have occurred and be continuing; (iii)
immediately after giving effect to such transaction, the Successor Company
would be able to Incur an additional $1.00 of Indebtedness under paragraph (a)
of the covenant described under "--Certain Covenants--Limitation on
Indebtedness"; (iv) the Issuers will have delivered to each Trustee Officers'
Certificates and Opinions of Counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture (if any) comply with the
Indentures and (v) the Issuers will have delivered to each Trustee opinions of
tax counsel reasonably acceptable to each Trustee stating that (A) any payment
of principal, redemption price or purchase price of, premium, if any, interest
on, and, if any, Additional Amounts in respect of, the Notes by the Successor
Company to a holder of Notes after the consolidation, merger, conveyance,
transfer or lease of assets will be exempt from the Taxes described under "--
Withholding Taxes" and (B) no other taxes on income (including taxable capital
gains) will be payable under the laws of The Netherlands and any other
jurisdiction where the Successor Company is or becomes located by a holder of
Notes who is not deemed to be a resident of The Netherlands or other
jurisdiction where the Successor Company is or becomes located and does not
carry on any business activities through a branch, agency or permanent
establishment in The Netherlands or such other jurisdiction where the
Successor Company is or becomes located in respect of the acquisition,
ownership or disposition of Notes, including receipt of principal, premium, if
any, interest on, and, Additional Amounts, if any, paid pursuant to such
Notes.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, such Issuer under the Indentures, but the
predecessor company in the case of a conveyance, transfer or lease of all or
substantially all its assets will not be released from the obligation to pay
the principal of and interest on the Notes.
Notwithstanding the foregoing, (a) any Restricted Subsidiary may consolidate
with, merge into or transfer all or part of its properties and assets to
either of the Issuers and (b) either of the Issuers may merge with an
Affiliate of the Issuers incorporated solely for the purpose of
reincorporating such Issuer in another jurisdiction to realize tax or other
benefits.
DEFAULTS
An Event of Default is defined in the Indentures as (i) a default in any
payment of interest on, or Additional Amounts, if any, with respect to, any
Dollar Note or DM Note, as the case may be, when due and payable, continued
for 30 days, (ii) a default in the payment of principal of any Dollar Note or
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DM Note, as the case may be, when due and payable at its Stated Maturity, upon
required redemption or repurchase, upon declaration or otherwise, (iii) the
failure by either of the Issuers to comply with its obligations under the
covenant described under "--Merger and Consolidation", (iv) the failure by
either of the Issuers to comply for 30 days after written notice with any of
its obligations under the covenants described under "--Change of Control" or
"--Certain Covenants" (in each case, other than a failure to purchase Dollar
Notes or DM Notes), (v) the failure by either of the Issuers to comply for 60
days after written notice with its other agreements contained in the Dollar
Notes or the DM Notes or the applicable Indenture, (vi) the failure by either
of the Issuers or any Significant Subsidiary (other than a Securitization
Entity) to pay any Indebtedness within any applicable grace period after final
maturity (giving effect to any extensions thereof) or the acceleration of any
such Indebtedness by the holders thereof because of a default if the total
amount of such Indebtedness unpaid or accelerated exceeds $5 million or its
foreign currency equivalent (the "cross acceleration provision") and such
failure continues for 10 days after receipt of the notice specified in the
applicable Indenture, (vii) certain events of bankruptcy, insolvency or
reorganization of either of the Issuers or a Significant Subsidiary (the
"bankruptcy provisions") or (viii) the rendering of any judgment or decree for
the payment of money in excess of $10 million or its foreign currency
equivalent at the time it is entered against either of the Issuers or a
Significant Subsidiary and is not discharged, waived or stayed if (A) an
enforcement proceeding thereon is commenced by any creditor or (B) such
judgment or decree remains outstanding for a period of 60 days following such
judgment and is not discharged, waived or stayed (the "judgment default
provision").
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body.
A default under clauses (iv), (v) or (viii) above, however, will not
constitute an Event of Default until the Dollar Notes Trustee or the DM Notes
Trustee, as applicable, or the holders of at least 25% in principal amount of
the outstanding Dollar Notes or DM Notes, as applicable, notify the Issuers of
the default and the Issuers do not cure such default within the time specified
in clauses (iv), (v) or (viii) above after receipt of such notice.
If an Event of Default (other than an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of either of the Issuers)
occurs and is continuing, the Dollar Notes Trustee or the DM Notes Trustee, as
applicable, or the holders of at least 25% in principal amount of the
outstanding Dollar Notes or the DM Notes, as applicable, by notice to the
Issuers may declare the principal of and accrued but unpaid interest and
Additional Amounts, if any, on all Dollar Notes or DM Notes, as applicable, to
be due and payable by notice in writing to the Issuers and the Dollar Notes
Trustee or the DM Notes Trustee, as applicable, specifying the Event of
Default and that the notice is a "notice of acceleration". Upon such a
declaration, such principal, interest and Additional Amounts will be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of either of the Issuers occurs, the
principal of and interest and Additional Amounts, if any, on all Dollar Notes
and DM Notes will become immediately due and payable without any declaration
or other act on the part of either the Dollar Notes Trustee or the DM Notes
Trustee or any holders of Dollar Notes or DM Notes. Under certain
circumstances, the holders of a majority in principal amount of the
outstanding Dollar Notes or DM Notes, as applicable, may rescind any such
acceleration with respect to the Dollar Notes or the DM Notes, as applicable,
and its consequences.
Subject to the provisions of each Indenture relating to the duties of the
applicable Trustee, in case an Event of Default occurs and is continuing, the
Dollar Notes Trustee or the DM Notes Trustee, as the case may be, will be
under no obligation to exercise any of the rights or powers under the
applicable Indenture at the request or direction of any of holders of the
Dollar Notes or the DM Notes,
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as the case may be, unless such holders have offered to such Trustee
reasonable indemnity or security against any loss, liability or expense.
Except to enforce the right to receive payment of principal, premium, if any,
interest or Additional Amounts, if any, when due, no holder of Dollar Notes or
DM Notes may pursue any remedy with respect to the Dollar Notes Indenture or
the DM Notes Indenture, as applicable, or the Dollar Notes or the DM Notes, as
applicable, unless (i) such holder has previously given the applicable Trustee
notice that an Event of Default is continuing, (ii) holders of at least 25% in
principal amount of the outstanding Dollar Notes or the DM Notes, as
applicable, have requested the Dollar Notes Trustee or the DM Notes Trustee,
as applicable, in writing to pursue the remedy, (iii) such holders have
offered the Dollar Notes Trustee or the DM Notes, as applicable, reasonable
security or indemnity against any loss, liability or expense, (iv) the Dollar
Notes Trustee or the DM Notes Trustee, as applicable, has not complied with
such request within 60 days after the receipt of the request and the offer of
security or indemnity and (v) the holders of a majority in principal amount of
the outstanding Dollar Notes or DM Notes, as applicable, have not given Dollar
Notes Trustee or the DM Notes Trustee, as applicable, a direction inconsistent
with such request within such 60-day period. Subject to certain restrictions,
the holders of a majority in principal amount of the outstanding Dollar Notes
and DM Notes have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Dollar Notes Trustee or the DM
Notes Trustee, as applicable, or of exercising any trust or power conferred on
such Trustee. Each of the Dollar Notes Trustee and the DM Notes Trustee,
however, may refuse to follow any direction that conflicts with law or the
Dollar Notes Indenture or the DM Notes Indenture, as applicable, or that such
Trustee determines is unduly prejudicial to the rights of any other holder of
Dollar Note or DM Notes, as applicable, or that would involve such Trustee in
personal liability. Prior to taking any action under the Dollar Notes
Indenture or the DM Notes Indenture, the Dollar Notes Trustee or the DM Notes
Trustee, as the case may be, will be entitled to indemnification satisfactory
to it in its sole discretion against all losses and expenses caused by taking
or not taking such action.
The Indentures provide that if a Default occurs and is continuing and is
known to the Dollar Notes Trustee or the DM Notes Trustee, such Trustee must
deliver to each holder of Dollar Notes or DM Notes, as applicable, notice of
the Default in accordance with the provisions set forth under "--Notices" and
otherwise in accordance with the procedures set forth in the applicable
Indenture within the earlier of 90 days after it occurs or 30 days after it is
known to a Trust Officer in respect of such Trustee or written notice of it is
received by such Trustee. Except in the case of a Default in the payment of
principal of, premium, if any, or interest or Additional Amounts, if any, on
any Dollar Note or DM Note (including payments pursuant to the redemption
provisions of such Dollar Note or DM Note), the Dollar Notes Trustee or the DM
Notes Trustee, as applicable, may withhold notice if and so long as a
committee of its Trust Officers in good faith determines that withholding
notice is in the interests of the holders of Dollar Notes or the DM Notes, as
applicable. In addition, the Issuers will be required to deliver to each
Trustee, within 120 days after the end of each fiscal year, a certificate
indicating whether the signers thereof know of any Default that occurred
during the previous year. The Issuers also will be required to deliver to each
Trustee, within 30 days after the occurrence thereof, written notice of any
event which would constitute certain Events of Default, the status of any such
event and the action the Issuers are taking or propose to take in respect
thereof.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee or stockholder of either of the Issuers, as
such, shall have any liability for any obligations of such Issuer under the
Notes or the Indentures or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each holder of a Note by accepting
such Note waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
AMENDMENTS AND WAIVERS
Each Indenture provides, subject to certain exceptions, that such Indenture
or the Notes issued thereunder may be amended with the written consent of the
holders of a majority in principal amount
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of such Notes then outstanding (including consents obtained in connection with
a purchase of, or tender offer or exchange offer for, such Notes), and any
past default or compliance with any provisions may be waived with the consent
of the holders of a majority in principal amount of such Notes then
outstanding. Without the consent of each holder of an outstanding Dollar Note
or DM Note, as the case may be, that would be affected, no amendment may,
among other things, (i) reduce the amount of Dollar Notes or DM Notes, as
applicable, whose holders must consent to an amendment, (ii) reduce the rate
of or extend the time for payment of interest or any liquidated damages on any
Dollar Note or DM Note, as applicable, (iii) reduce the principal of or extend
the Stated Maturity of any Dollar Note or DM Note, as applicable, (iv) reduce
the premium payable upon the redemption of any Dollar Note or DM Note, as
applicable, or change the time at which any Dollar Notes or DM Note, as
applicable, may be redeemed as described under "--Optional Redemption", (v)
make any Dollar Note or DM Note, as applicable, payable in money other than
that stated in such Note, (vi) impair the right of any holder of Dollar Notes
or DM Notes, as applicable, to receive payment of principal of and interest,
any liquidated damages or Additional Amounts, if any, on such holder's Dollar
Notes or DM Notes, as the case may be, on or after the due dates therefor or
to institute suit for the enforcement of any payment on or with respect to
such holder's Dollar Notes or DM Notes, as the case may be, (vii) make any
change in the amendment provisions which require the consent of each holder of
Dollar Notes or DM Notes, as applicable, or in the waiver provisions, or
(viii) make any change in the provisions of the Dollar Notes Indenture or the
DM Notes Indenture, as applicable, described under "--Withholding Taxes" that
adversely affects the rights of any holder of Dollar Notes or DM Notes, as
applicable, or amend the terms of the Dollar Notes Indenture or the DM Notes
Indenture, as applicable, in a way that would result in a loss of an exemption
from any of the Taxes described thereunder or an exemption from any obligation
to withhold or deduct Taxes so described thereunder unless the Issuers agree
to pay Additional Amounts, if any, in respect thereof.
The Indentures provide that, without the consent of any holder of Dollar
Notes or DM Notes, the Issuers and Dollar Notes Trustee or the DM Notes
Trustee, as applicable, may amend the Dollar Notes Indenture or the DM Notes
Indenture, as the case may be, to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of either of the Issuers under the Dollar Notes Indenture or the
DM Notes Indenture, as applicable, to provide for uncertificated Dollar Notes
or DM Notes, as applicable, in addition to or in place of certificated Dollar
Notes or DM Notes (provided that the uncertificated Dollar Notes or DM Notes,
as the case may be, are issued in registered form for purposes of Section
163(f) of the Code, or in a manner such that the uncertificated Dollar Notes
or DM Notes, as the case may be, are described in Section 163(f)(2)(B) of the
Code), to add any Guarantee of the Dollar Notes or the DM Notes, as
applicable, to secure the Dollar Notes or the DM Notes, as applicable, to add
to the covenants of the Issuers for the benefit of the holders of the Dollar
Notes or the DM Notes, as applicable, or to surrender any right or power
conferred upon the Issuers by such Indenture, to make any change that does not
adversely affect the rights of any holder of the Dollar Notes or the DM Notes,
as applicable, subject to the provisions of the Dollar Notes Indenture or the
DM Notes Indenture, as applicable, to provide for the issuance of the Exchange
Notes, Private Exchange Notes or Additional Notes or to comply with any
requirement of the Commission in connection with the qualification of the
Dollar Notes Indenture or the DM Notes Indenture, as applicable, under the
TIA.
The consent of the holders of Notes will not be necessary under either of
the Indentures to approve the particular form of any proposed amendment. It
will be sufficient if such consent approves the substance of the proposed
amendment.
After an amendment under the Dollar Notes Indenture or the DM Notes
Indenture becomes effective, the Issuers will be required to deliver to each
holder of the Dollar Notes or the DM Notes, as applicable, a notice briefly
describing such amendment in accordance with the provisions set forth under
"--Notices". The failure to give such notice to all holders of Dollar Notes or
DM Notes, as applicable, or any defect therein, however, will not impair or
affect the validity of the amendment.
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TRANSFER AND EXCHANGE
A holder of Notes may transfer or exchange Dollar Notes and DM Notes in
accordance with the Dollar Notes Indenture and the DM Notes Indenture, as
applicable. Upon any transfer or exchange, the registrar under the applicable
Indenture and the applicable Trustee may require a holder of Dollar Notes or
DM Notes, as the case may be, among other things, to furnish appropriate
endorsements and transfer documents, and the Issuers or the paying agent, as
applicable, may require a holder of Dollar Notes or DM Notes, as the case may
be, to pay any taxes required by law or permitted by the Dollar Notes
Indenture or the DM Notes Indenture, as applicable. The Issuers will not be
required to transfer or exchange any Dollar Notes or DM Notes selected for
redemption or to transfer or exchange any Dollar Notes or DM Notes for a
period of 15 days prior to a selection of Dollar Notes or DM Notes, as
applicable, to be redeemed.
NOTICES
Notice regarding the Notes will be (i) mailed by first-class mail to each
holder's registered address and (ii) published in a leading newspaper having a
general circulation in (a) New York City (which is expected to be The Wall
Street Journal), (b) Frankfurt, Germany (which is expected to be Frankfurter
Allgemeine Zeitung and (c) if and so long as the Notes are listed on the
Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange so
require, a newspaper having a general circulation in Luxembourg (which is
expected to be Luxembourg Wort). If and so long as the Notes are listed on any
other securities exchange, notices will also be given in accordance with any
applicable requirements of such securities exchange. Notices given by
publication will be deemed to be given on the first date on which publication
is made, and notices given by first-class mail will be deemed given five
calendar days after mailing.
DEFEASANCE
The Issuers at any time may terminate all their obligations under the Dollar
Notes and the Dollar Notes Indenture or the DM Notes and the DM Notes
Indenture ("legal defeasance"), except for certain obligations, including
those respecting the defeasance trust and obligations to register the transfer
or exchange of Dollar Notes or DM Notes, as applicable, to replace mutilated,
destroyed, lost or stolen Dollar Notes or DM Notes, as applicable, and to
maintain a registrar and paying agent in respect of the Dollar Notes or the DM
Notes, as applicable. The Issuers at any time may terminate their obligations
under the covenants described under "--Change of Control" and "--Certain
Covenants", the operation of the cross acceleration provision, the bankruptcy
provisions with respect to Significant Subsidiaries and the judgment default
provision described under "--Defaults" and the limitations contained in
clauses (iii) and (iv) under the first paragraph of "--Merger and
Consolidation" ("covenant defeasance").
The Issuers may exercise their legal defeasance option notwithstanding their
prior exercise of their covenant defeasance option. If the Issuers exercise
their legal defeasance option, payment of the Dollar Notes or the DM Notes, as
applicable, may not be accelerated because of an Event of Default with respect
thereto. If the Issuers exercise their covenant defeasance option, payment of
the Dollar Notes or the DM Notes, as applicable, may not be accelerated
because of an Event of Default specified in clause (iv), (vi), (vii) (with
respect only to Significant Subsidiaries) or (viii) (with respect only to
Significant Subsidiaries) under "--Defaults" or because of the failure of
either of the Issuers to comply with clause (iii) or (iv) under the first
paragraph of "--Merger and Consolidation".
In order to exercise either defeasance option, the Issuers must irrevocably
deposit in trust (the "defeasance trust") with the Dollar Notes Trustee or the
DM Notes Trustee, as applicable, in the case of the Dollar Notes, money in
U.S. dollars or U.S. Government Obligations, and, in the case of the DM Notes,
money in Deutsche Marks or German Government Obligations, for the payment of
principal,
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premium, if any, and interest on the Dollar Notes or the DM Notes, as
applicable, to redemption or maturity, as the case may be, and must comply
with certain other conditions, including delivery to the Dollar Notes Trustee
or the DM Notes Trustee, as applicable, of Opinions of Counsel to the effect
that (i) holders of the Dollar Notes or the DM Notes, as applicable, will not
recognize income, gain or loss for U.S. federal income tax purposes as a
result of such deposit and defeasance and will be subject to U.S. federal
income tax and income tax under applicable law of The Netherlands on the same
amount and in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred (and, in the case of
legal defeasance only, such Opinions of Counsel as to U.S. federal income tax
law must be based on a ruling of the Internal Revenue Service or other change
in applicable U.S. federal income tax law), (ii) after the 91st day following
the deposit, trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally under applicable U.S. federal or state law or applicable law
of The Netherlands and that the Dollar Notes Trustee or the DM Notes Trustee,
as applicable, has a perfected security interest in such trust funds for the
ratable benefit of holders of the Dollar Notes or the DM Notes, as applicable,
and (iii) payments from the defeasance trust will be free and exempt from any
and all withholding taxes and other income taxes of whatever nature imposed or
levied by or on behalf of The Netherlands or any political subdivision thereof
or therein having the power to tax.
WITHHOLDING TAXES
All payments made by the Issuers on the Notes will be made without
withholding or deduction for, or on account of, any present or future taxes,
duties, assessments or governmental charges of whatever nature (collectively,
"Taxes") imposed or levied by or on behalf of the United States, The
Netherlands or any other jurisdiction in which either of the Issuers is
organized or engaged in business for tax purposes or, in each case, any
political subdivision thereof or any authority having power to tax therein
(each a "Tax Authority"), unless the withholding or deduction of such Taxes is
then required by law. If any deduction or withholding for, or on account of,
any Taxes of any Tax Authority shall at any time be required on any payments
made by the Issuers with respect to the Notes, including payments of
principal, redemption price, interest, liquidated damages or premium, the
Issuers will pay such additional amounts (the "Additional Amounts") as may be
necessary in order that the net amounts received in respect of such payments
by the holders of the Notes or the applicable Trustee, as the case may be,
after such withholding or deduction, equal the respective amounts which would
have been received in respect of such payments in the absence of such
withholding or deduction, except that no such Additional Amounts will be
payable with respect to:
(i) any Taxes which would not have been imposed but for the existence of
any present or former connection between a holder of Notes and the United
States, The Netherlands or any other jurisdiction in which either of the
Issuers is organized or engaged in business for tax purposes other than the
mere receipt of such payment or the holding of such Notes;
(ii) any Taxes which would not have been imposed but for the presentation
by a holder of Notes for payment on a date more than 30 days after the date
on which such payment became due and payable or the date on which payment
thereof was duly provided for;
(iii) the extent that such Taxes would not have been imposed but for the
failure of a holder of Notes to comply with any certification,
identification or other reporting requirements concerning the nationality,
residence, identity or connection with The Netherlands of such holder if
(A) such compliance is required or imposed by law as a precondition to
exemption from all or a part of such Taxes, (B) such holder may legally
comply with such requirements and (C) at least 30 days prior to the date on
which the Issuers shall apply this clause (iii), the Issuers shall have
notified all holder of Notes of such requirements;
(iv) any estate, inheritance, gift, sale, transfer, personal property or
similar tax, assessment or governmental charge; or
(v) any combination of the items set forth in clause (i), (ii), (iii) or
(iv).
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The Issuers will pay any present or future stamp, court or documentary
taxes, or any other excise or property taxes, charges or similar levies which
arise in any jurisdiction from the execution, delivery or registration of the
Notes or any other document or instrument referred to therein, or the receipt
of any payments with respect to the Notes, excluding any such taxes, charges
or similar levies imposed by any jurisdiction outside of the United States,
The Netherlands or any jurisdiction in which a paying agent is located, other
than those resulting from, or required to be paid in connection with, the
enforcement of the Notes or any other such document or instrument following
the occurrence of any Event of Default with respect to the Notes.
No Additional Amounts will be paid with respect to any payment on a Note to
a holder that is a fiduciary or partnership or other than the sole beneficial
owner of such payment to the extent a beneficiary or settlor with respect to
such fiduciary or member of such partnership or beneficial owner would not
have been entitled to receive payment of the Additional Amounts had the
beneficiary, settlor, member or beneficial owner been the holder of the Notes.
Upon request, the Issuers will provide the Dollar Notes Trustee or the DM
Notes Trustee, as applicable, with documentation satisfactory to such Trustee
evidencing the payment of Additional Amounts. Copies of such documentation
will be made available to the holders of Dollar Notes or DM Notes, as
applicable, upon request.
CONCERNING THE TRUSTEE
IBJ Schroder Bank & Trust Company is to be the Dollar Notes Trustee under
the Dollar Notes Indenture and the DM Notes Trustee under the DM Notes
Indenture.
The Indentures contain certain limitations on the rights of the Dollar Notes
Trustee or the DM Notes Trustee, as applicable, should it become a creditor of
either of the Issuers, to obtain payment of claims in certain cases or to
realize on certain property received in respect of any such claim as security
or otherwise. Each Trustee will be permitted to engage in other transactions;
provided, however, if it acquires any conflicting interest, it must eliminate
such conflict within 90 days, apply to the Commission for permission to
continue or resign.
GOVERNING LAW
The Indentures provide that the Indentures, and the Dollar Notes or the DM
Notes, as applicable, are governed by, and construed in accordance with, the
laws of the State of New York without giving effect to applicable principles
of conflicts of law to the extent that the application of the law of another
jurisdiction would be required thereby.
CURRENCY INDEMNITY
The U.S. dollar is the sole currency of account and payment for all sums
payable by the Issuers under or in connection with the Dollar Notes, including
damages. Any amount received or recovered in a currency other than U.S.
dollars (whether as a result of, or the enforcement of, a judgment or order of
a court of any jurisdiction, in the winding-up or dissolution of either of the
Issuers or otherwise) by any holder of a Dollar Note in respect of any sum
expressed to be due to it from the Issuers will only constitute a discharge to
the Issuers to the extent of the U.S. dollar amount which the recipient is
able to purchase with the amount so received or recovered in that other
currency on the date of that receipt or recovery (or, if it is not practicable
to make that purchase on the date, on the first date on which it is
practicable to do so). If the U.S. dollar amount is less than the U.S. dollar
amount expressed to be due to the recipient under any Dollar Note, the Issuers
shall indemnify the recipient against any loss sustained by it as a result. In
any event, the Issuers shall indemnify the recipient against the cost of
making any such purchase. For the purposes of this paragraph, the holder of a
Dollar Note shall certify
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in a satisfactory manner to the Dollar Notes Trustee (indicating the sources
of information used) that it would have suffered a loss had an actual purchase
of U.S. dollars been made with the amount so received in that other currency
on the date of receipt or recovery (or, if a purchase of U.S. dollars on such
date had not been practicable due to currency market conditions generally, on
the first date on which it would have been practicable, it being required that
the need for a change of date be certified in the manner mentioned above).
These indemnities constitute a separate and independent obligation from the
other obligations of the Issuers, shall give rise to a separate and
independent cause of action, shall apply irrespective of any indulgence
granted by any holder of a Dollar Note and shall continue in full force and
effect despite any other judgment, order, claim or proof for a liquidated
amount in respect of any sum due under any Dollar Note.
The Deutsche Mark is the sole currency of account and payment for all sums
payable by the Issuers under or in connection with the DM Notes, including
damages. Any amount received or recovered in a currency other than Deutsche
Marks (whether as a result of, or the enforcement of, a judgment or order of a
court of any jurisdiction, in the winding-up or dissolution of either of the
Issuers or otherwise) by any holder of a DM Note in respect of any sum
expressed to be due to it from the Issuers will only constitute a discharge to
the Issuers to the extent of the Deutsche Mark amount which the recipient is
able to purchase with the amount so received or recovered in that other
currency on the date of that receipt or recovery (or, if it is not practicable
to make that purchase on the date, on the first date on which it is
practicable to do so). If the Deutsche Mark amount is less than the Deutsche
Mark amount expressed to be due to the recipient under any DM Note, the
Issuers shall indemnify the recipient against any loss sustained by it as a
result. In any event, the Issuers shall indemnify the recipient against the
cost of making any such purchase. For the purposes of this paragraph, the
holder of a DM Note shall certify in a satisfactory manner to the DM Notes
Trustee (indicating the sources of information used) that it would have
suffered a loss had an actual purchase of Deutsche Marks been made with the
amount so received in that other currency on the date of receipt or recovery
(or, if a purchase of Deutsche Marks on such date had not been practicable due
to currency market conditions generally, on the first date on which it would
have been practicable, it being required that the need for a change of date be
certified in the manner mentioned above). These indemnities constitute a
separate and independent obligation from the other obligations of the Issuers,
shall give rise to a separate and independent cause of action, shall apply
irrespective of any indulgence granted by any holder of a DM Note and shall
continue in full force and effect despite any other judgment, order, claim or
proof for a liquidated amount in respect of any sum due under any DM Note.
SUBSTITUTION OF CURRENCY
Under the treaty of the European Economic and Monetary Union (the "Treaty"),
to which the Federal Republic of Germany is a signatory, on January 1, 1999,
and subject to the fulfillment of certain conditions, the "Euro", a European
single currency, may replace all or some of the currencies of the member
states of the European Union, including the Deutsche Mark. If, pursuant to the
Treaty, the Deutsche Mark is replaced by the Euro, the payment of principal
of, or interest on, the DM Notes will be effected in Euro in conformity with
legally applicable measures taken pursuant to, or by virtue of, the Treaty. In
addition, the regulations of the European Commission relating to the Euro will
then apply to the DM Notes and the DM Notes Indenture. The circumstances and
consequences described in this paragraph do not entitle the Issuers or any
holder of DM Notes to early redemption, rescission, notice, repudiation,
adjustment or renegotiation of the terms and conditions of the DM Notes or the
DM Notes Indenture or to raise any other defenses or to request any
compensation or claim, nor will they affect any of the obligations of the
Issuers under the DM Notes or the DM Notes Indenture.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by DCC or a Restricted Subsidiary
in a Related Business, (ii) the Capital Stock of a Person
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that becomes a Restricted Subsidiary as a result of the acquisition of such
Capital Stock by DCC or another Restricted Subsidiary or (iii) Capital Stock
constituting a minority interest in any Person that at such time is a
Restricted Subsidiary; provided, however, that any such Restricted Subsidiary
described in clause (ii) or (iii) above is primarily engaged in a Related
Business.
"Additional Payment" means the contingent payment of up to $10 million
payable to DFS pursuant to the Recapitalization Agreement.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of the provisions described under "--Certain
Covenants--Limitation on Transactions with Affiliates" and "--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock" only,
"Affiliate" shall also mean any beneficial owner of shares representing 5% or
more of the total voting power of the Voting Stock (on a fully diluted basis)
of DCC or of rights or warrants to purchase such Voting Stock (whether or not
currently exercisable) and any Person who would be an Affiliate of any such
beneficial owner pursuant to the first sentence hereof.
"Applicable Premium" means, on any date of redemption, the greater of (i)
1.0% of the principal amount of a Note and (ii) the excess of (A) the present
value as of such date of redemption of (1) the redemption price of such Note
at May 15, 2003 (such redemption price being set forth under "--Certain
Covenants--Optional Redemption") plus (2) all required payments of interest
and Additional Amounts, if any, due on such Note through May 15, 2003
(excluding accrued and unpaid interest), computed using a discount rate equal
to the Treasury Rate plus 50 basis points over (B) the principal amount of
such Note.
"Asset Disposition" means any sale, lease (other than operating leases
entered into in the ordinary course of business), transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
DCC or any Restricted Subsidiary, including any disposition by means of a
merger, consolidation or similar transaction (each referred to for the
purposes of this definition as a "disposition"), of (i) any shares of Capital
Stock of a Restricted Subsidiary (other than directors' qualifying shares or
shares required by applicable law to be held by a Person other than DCC or a
Restricted Subsidiary), (ii) all or substantially all the assets of any
division or line of business of DCC or any Restricted Subsidiary or (iii) any
other assets of DCC or any Restricted Subsidiary outside of the ordinary
course of business of DCC or such Restricted Subsidiary; provided, however,
that Asset Dispositions shall not include (A) a disposition by a Restricted
Subsidiary to DCC or by DCC or a Restricted Subsidiary to a Wholly Owned
Subsidiary, (B) for purposes of the provisions described under "--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock" only, a
disposition subject to the covenant described under "--Certain Covenants--
Limitation on Restricted Payments", (C) a disposition of assets with a fair
market value of less than $500,000, (D) the disposition of all or
substantially all of the assets of the Issuers as permitted under the
provisions described under "--Merger and Consolidation" or any disposition
that constitutes a Change of Control, (E) the sale or discount, in each case
without recourse, of accounts receivable arising in the ordinary course of
business, but only in connection with the compromise or collection thereof,
(F) the factoring of accounts receivable arising in the ordinary course of
business pursuant to arrangements customary in the industry, (G) the licensing
of intellectual property, (H) disposals or replacements of obsolete,
uneconomical, negligible, worn out or surplus property in the ordinary course
of business and (I) sales of accounts receivable, equipment and related assets
(including contract rights) of the type specified in the definition of the
term "Qualified Securitization Transaction" to a Securitization Entity for the
fair market value thereof, including cash in an amount at least equal to 75%
of the fair market value thereof. For the purposes of clause (I), Purchase
Money Notes shall be deemed to be cash.
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"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the Dollar Notes or the DM Notes, as applicable, compounded annually)
of the total obligations of the lessee for rental payments during the
remaining term of the lease included in such Sale/Leaseback Transaction
(including any period for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied
by the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in respect of
the Revolving Credit Agreement and any Refinancing Indebtedness with respect
thereto, as amended from time to time, including principal, premium, if any,
interest (including interest accruing on or after the filing of any petition
in bankruptcy or for reorganization relating to either of the Issuers whether
or not a claim for post-filing interest is allowed in such proceedings), fees,
charges, expenses, reimbursement obligations, guarantees and all other amounts
payable thereunder or in respect thereof.
"Board of Directors" means the board of directors or similar governing body
of either of the Issuers or any Restricted Subsidiary, or any committee
thereof duly authorized to act on behalf of such board or directors or
governing body.
"Business Day" means a day other than a Saturday, Sunday or other day on
which the banking institutions in the United States, Germany, Luxembourg or
The Netherlands or any place of payment are authorized or required by law to
close.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of, or
interests in (however designated), equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with U.S. GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with U.S. GAAP, and the Stated Maturity
thereof shall be the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease may be prepaid
by the lessee without payment of a penalty.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange Commission.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters for which financial statements are available
to (ii) Consolidated Interest Expense for such four fiscal quarters; provided,
however, that (A) if DCC or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding on
such date of determination or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period, (B) if DCC or any Restricted
Subsidiary
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has repaid, repurchased, defeased or otherwise discharged any Indebtedness
since the beginning of such period or if any Indebtedness is to be repaid,
repurchased, defeased or otherwise discharged (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the
date of the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall
be calculated on a pro forma basis as if such discharge had occurred on the
first day of such period and as if DCC or such Restricted Subsidiary has not
earned the interest income actually earned during such period in respect of
cash or Temporary Cash Investments used to repay, repurchase, defease or
otherwise discharge such Indebtedness, (C) if, since the beginning of such
period (including on the date of the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio), DCC or any Restricted Subsidiary
shall have made any Asset Disposition, the EBITDA for such period shall be
reduced by an amount equal to the EBITDA (if positive) directly attributable
to the assets that are the subject of such Asset Disposition for such period
or increased by an amount equal to the EBITDA (if negative) directly
attributable thereto for such period, and Consolidated Interest Expense for
such period shall be reduced by an amount equal to the Consolidated Interest
Expense directly attributable to any Indebtedness of DCC or any Restricted
Subsidiary repaid, repurchased, defeased or otherwise discharged with respect
to DCC and its continuing Restricted Subsidiaries in connection with such
Asset Disposition for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to the extent
DCC and its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale), (D) if, since the beginning of such period, DCC
or any Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any Person that becomes a
Restricted Subsidiary) or an acquisition of assets, including any acquisition
of assets occurring in connection with a transaction causing a calculation to
be made hereunder, which constitutes all or substantially all of an operating
unit of a business, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto (including the
Incurrence of any Indebtedness) as if such Investment or acquisition occurred
on the first day of such period (and irrespective of the method (purchase or
pooling) of accounting for such Investment or acquisition of assets) and (E)
if, since the beginning of such period, any Person (that subsequently became a
Restricted Subsidiary or was merged with or into DCC or any Restricted
Subsidiary since the beginning of such period) shall have made any Asset
Disposition or any Investment or acquisition of assets that would have
required an adjustment pursuant to clause (C) or (D) above if made by DCC or a
Restricted Subsidiary during such period, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto as if such Asset Disposition, Investment or acquisition of assets
occurred on the first day of such period. For all purposes of the foregoing
definition, with respect to any EBITDA (or component thereof) and any
Consolidated Interest Expense (unless subject to a Currency Agreement covering
principal, premium, if any, and interest payable on such Indebtedness)
denominated in a currency other than dollars, the amount of such EBITDA (or
component thereof) or Consolidated Interest Expense shall be calculated at the
relevant currency exchange rate in effect on the date of determination. For
purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and
the amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be
determined in good faith by a responsible financial or accounting Officer of
DCC. If any Indebtedness bears a floating rate of interest and is being given
pro forma effect, the interest expense on such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement has
a remaining term as at the date of determination in excess of 12 months).
"Consolidated Current Liabilities" as of the date of determination means the
aggregate amount of liabilities of DCC and its Consolidated Restricted
Subsidiaries which may properly be classified as
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current liabilities (including taxes accrued as estimated), on a Consolidated
basis, after eliminating (i) all intercompany items between DCC and any
Restricted Subsidiary and (ii) all current maturities of long-term
Indebtedness, all as determined in accordance with U.S. GAAP consistently
applied.
"Consolidated Interest Expense" means, for any period, the total interest
expense of DCC and its Consolidated Restricted Subsidiaries, plus, to the
extent Incurred by DCC or its Subsidiaries in such period but not included in
such interest expense, (i) interest expense attributable to Capitalized Lease
Obligations and the interest expense attributable to leases constituting part
of any Sale/Leaseback Transaction, (ii) the earned discount or yield with
respect to any sale of receivables or equipment by any Securitization Entity
in connection with any Qualified Securitization Transaction, (iii)
amortization of debt discount and debt issuance cost other than as related to
the Recapitalization, (iv) capitalized interest, (v) non-cash interest
expense, (vi) commissions, discounts and other fees and charges attributable
to letters of credit and bankers' acceptance financing, (vii) interest
accruing on any Indebtedness of any other Person to the extent such
Indebtedness is Guaranteed by DCC or any Restricted Subsidiary, (viii) net
costs associated with Hedging Obligations (including amortization of fees),
(ix) dividends in respect of (A) all Preferred Stock of DCC and any of its
Subsidiaries and (B) Disqualified Stock of DCC, in the case of clause (A),
other than non-cash dividends, and, in the case of each of clauses (A) and
(B), to the extent held by Persons other than DCC or a Wholly Owned
Subsidiary, (x) interest Incurred in connection with investments in
discontinued operations and (xi) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than DCC) in
connection with Indebtedness Incurred by such plan or trust. Notwithstanding
the foregoing, for the purpose of the covenant described under "--Certain
Covenants--Limitation on Indebtedness", only, there shall be excluded from
Consolidated Interest Expense all non-cash interest payable in respect of the
Additional Payment.
"Consolidated Net Income" means, for any period, the net income of DCC and
its Consolidated Subsidiaries for such period; provided, however, that there
shall not be included in such Consolidated Net Income: (i) any net income of
any Person (other than DCC) if such Person is not a Restricted Subsidiary,
except that (A) subject to the limitations contained in clause (iv) below, the
equity of DCC in the net income of any such Person for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Person during such period to DCC or a Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution made to a Restricted Subsidiary, to the
limitations contained in clause (iii) below) and (B) the equity of DCC in a
net loss of any such Person for such period shall be included in determining
such Consolidated Net Income; (ii) any net income (or loss) of any person
acquired by DCC or any of its Subsidiaries in a pooling of interests
transaction for any period prior to the date of such acquisition; (iii) any
net income (or loss) of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the payment
of dividends or the making of distributions by such Restricted Subsidiary,
directly or indirectly, to DCC, except that (A) subject to the limitations
contained in clause (iv) below, the equity of DCC in the net income of any
such Restricted Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Restricted Subsidiary during such period to DCC or another
Restricted Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution made to another Restricted
Subsidiary, to the limitation contained in this clause (iii)); provided,
however, that, for purposes of determining the Consolidated Coverage Ratio,
any net income of any Restricted Subsidiary subject only to any such direct or
indirect restrictions on the payment of dividends or the making of
distributions by such Restricted Subsidiary, directly or indirectly, to DCC
that are permitted pursuant to the covenant described under "--Certain
Covenants--Limitation on Restrictions on Distributions from Restricted
Subsidiaries" shall be included in Consolidated Net Income; and provided
further, that, for purposes of the covenant described under "--Certain
Covenants--Limitation on Restricted Payments" the amount of Consolidated Net
Income of DCC and
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its Consolidated Subsidiaries to be included pursuant to subclause (A) of
clause (3) of paragraph (a) shall be increased by 100% of any increase in
Consolidated Net Income resulting from cash distributions from Restricted
Subsidiaries, but only to the extent that such increase in Consolidated Net
Income does not cause the amount Consolidated Net Income included pursuant to
such subclause (A) to exceed the amount of Consolidated Net Income that would
have been included if this clause (iii) were inapplicable to the net income of
Restricted Subsidiaries which are the source (direct or indirect) of such cash
distributions; provided, further, however, that, for purposes of the
immediately foregoing proviso as it applies to amounts available for
Restricted Investments, the Restricted Subsidiaries shall be deemed to have
distributed cash to DCC that they could have distributed to DCC (to the extent
such amount exceeds the cash distributions actually made); provided that any
resulting increase in Consolidated Net Income shall be subject to the overall
limitation on increases set forth in such proviso and (B) the equity of DCC in
a net loss of any such Restricted Subsidiary for such period shall be included
in determining such Consolidated Net Income; (iv) any gain or loss realized
upon the sale or other disposition of any asset of DCC or any of its
Consolidated Subsidiaries (including pursuant to any Sale/Leaseback
Transaction) that is not sold or otherwise disposed of in the ordinary course
of business and any gain or loss realized upon the sale or other disposition
of any Capital Stock of any Person together with any related tax effects
according to U.S. GAAP associated with the foregoing; (v) any extraordinary
gain or loss; (vi) any gain or loss included in other income that is
attributable to Hedging Obligations; (vii) any gain or loss that is
attributable to minority interests; and (viii) the cumulative effect of a
change in accounting principles. Notwithstanding the foregoing, for the
purpose of the covenant described under "--Certain Covenants--Limitation on
Restricted Payments" only, there shall be excluded from Consolidated Net
Income any dividends, repayments of loans or advances or other transfers of
assets from Unrestricted Subsidiaries to DCC or any Restricted Subsidiary to
the extent such dividends, repayments or transfers increase the amount of
Restricted Payments permitted under such covenant pursuant to clause (a)(3)(D)
thereof.
"Consolidated Net Tangible Assets" as of any date of determination, means
the total amount of assets (less accumulated depreciation and amortization,
allowances for doubtful receivables, other applicable reserves and other
properly deductible items) which would appear on a consolidated balance sheet
of DCC and its Consolidated Restricted Subsidiaries, determined on a
Consolidated basis in accordance with U.S. GAAP, and after giving effect to
purchase accounting and after deducting therefrom Consolidated Current
Liabilities and, to the extent otherwise included, the amounts of: (i)
minority interests in consolidated Subsidiaries held by Persons other than DCC
or a Restricted Subsidiary; (ii) excess of cost over fair value of assets of
businesses acquired, as determined in good faith by the board of directors of
DCC; (iii) any revaluation or other write-up in book value of assets
subsequent to the date of the Indentures as a result of a change in the method
of valuation in accordance with U.S. GAAP consistently applied; (iv)
unamortized debt discount and expenses and other unamortized deferred charges,
goodwill, patents, trademarks, service marks, trade names, copyrights,
licenses, organization or developmental expenses and other intangible items;
(v) treasury stock; (vi) cash set apart and held in a sinking or other
analogous fund established for the purpose of redemption or other retirement
of Capital Stock to the extent such obligation is not reflected in
Consolidated Current Liabilities; and (vii) Investments in and assets of
Unrestricted Subsidiaries.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of DCC and its Restricted Subsidiaries, determined on a Consolidated
basis, as of the end of the most recent fiscal quarter of DCC ending at least
45 days prior to the taking of any action for the purpose of which the
determination is being made, as (i) the par or stated value of all outstanding
Capital Stock of DCC plus (ii) paid-in capital or capital surplus relating to
such Capital Stock plus (iii) any retained earnings or earned surplus less (A)
any accumulated deficit and (B) any amounts attributable to Disqualified
Stock.
"Consolidation" means the consolidation of the amounts of each of the
Restricted Subsidiaries with those of DCC in accordance with U.S. GAAP
consistently applied; provided, however, that
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"Consolidation" will not include consolidation of the accounts of any
Unrestricted Subsidiary, but the interest of DCC or any Restricted Subsidiary
in an Unrestricted Subsidiary will be accounted for as an investment. The term
"Consolidated" has a correlative meaning.
"Contribution Indebtedness" means unsecured Indebtedness of DCC incurred in
connection with the acquisition of all or substantially all the Capital Stock
or assets of a Related Business in an aggregate principal amount not greater
than the aggregate amount of cash contributions made to the capital of DCC,
which amount shall not, in any event, exceed $40 million in the aggregate;
provided that such Contribution Indebtedness (i) has a Stated Maturity later
than the Stated Maturity of the Notes, (ii) is Incurred substantially
concurrently with such cash contributions and (iii) is so designated as
Contribution Indebtedness pursuant to an Officers' Certificate delivered on
the date of Incurrence.
"Corporate Trust Office of the Trustee" means the office at which the
corporate trust business of the Dollar Notes Trustee or the DM Notes Trustee,
as the case may be, is principally administered.
"Currency Agreement" means, in respect of any Person, any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or beneficiary.
"DCC" means The Derby Cycle Corporation, a corporation organized under the
laws of the State of Delaware.
"DC Cycle" means DC Cycle, L.L.C., a limited liability company organized
under the laws of the State of Delaware.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Derby Holdings South Africa" means Derby Investment Holdings (Pty) Limited.
"Designated Non-Cash Consideration" means any non-cash consideration
received by DCC or any of its Restricted Subsidiaries in connection with an
Asset Disposition that is so designated as Designated Non-Cash Consideration
pursuant to an Officers' Certificate executed by the Principal Executive
Officer and the Principal Financial Officer of DCC or such Restricted
Subsidiary.
"DFS" means Derby Finance S.a.r.l., a corporation (societe a responsibilite
limitee) organized under the laws of the Grand Duchy of Luxembourg.
"DICSA" means Derby International Corporation S.A., a corporation (societe
anonyme) organized under the laws of the Grand Duchy of Luxembourg.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event (i) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (ii) is convertible or exchangeable for
Indebtedness or Disqualified Stock (excluding capital stock which is
convertible or exchangeable solely at the option of DCC or any of its
Restricted Subsidiaries) or (iii) is redeemable at the option of the holder
thereof, in whole or in part, in each case on or prior to the first
anniversary of the Stated Maturity of the Notes; provided, however, that only
the portion of Capital Stock which so matures is mandatorily redeemable, is so
convertible or exchangeable or is so redeemable at the option of the holder
thereof prior to such date shall be deemed to be Disqualified Stock; provided,
further, that any Capital Stock that would not constitute Disqualified Stock
but for provisions thereof giving holders thereof the right to require such
Person to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or "change of control" occurring prior to the first anniversary
of the Stated Maturity of the Notes shall not constitute Disqualified Stock if
the "asset sale" or "change of control" provisions applicable to such Capital
Stock
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are not more favorable to the holders of such Capital Stock than the
provisions of the covenants described under "--Change of Control" and "--
Certain Covenants--Limitation on Sale of Assets and Subsidiary Stock".
"DM Notes Trustee" means the party named as such in the DM Notes Indenture
until a successor replaces it and, thereafter, means the successor.
"Dollar Notes Trustee" means the party named as such in the Dollar Notes
Indenture until a successor replaces it and, thereafter, means the successor.
"Domestic Subsidiary" means any Restricted Subsidiary other than a Foreign
Subsidiary.
"EBITDA" for any period means the Consolidated Net Income for such period,
plus the following to the extent deducted in calculating such Consolidated Net
Income: (i) income tax expense of DCC and its Consolidated Restricted
Subsidiaries, (ii) Consolidated Interest Expense, (iii) depreciation expense
of DCC and its Consolidated Restricted Subsidiaries, (iv) amortization of DCC
and its Consolidated Restricted Subsidiaries (excluding amortization
attributable to a prepaid cash item that was paid in a prior period), (v) all
other non-cash charges of DCC and its Consolidated Restricted Subsidiaries
(excluding any such non-cash charge to the extent it represents an accrual of
or reserve for cash expenditures in any future period), in each case for such
period, (vi) all one time cash payments made for the payment (and amortization
thereof) of fees, expenses and charges incurred in connection with the
Recapitalization in an amount not to exceed $5.7 million and (vii) all
expenses attributable to achieving Year 2000 compliance in an aggregate
principal amount not to exceed $1.9 million, less all amounts attributable to
the amortization into income of the transition asset related to the defined
benefit pension plans of DCC and its Subsidiaries, which transition asset was
recognized upon the adoption of Statement of Financial Accounting Standards
No. 87. Notwithstanding the foregoing, the provision for taxes based on the
income or profits of, and the depreciation and amortization and non-cash
charges of, any Restricted Subsidiary shall be added to Consolidated Net
Income to compute EBITDA only to the extent (and in the same proportion) that
the net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted
at the date of determination to be dividended to DCC by such Restricted
Subsidiary without prior approval (that has not been obtained) pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its shareholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means a registered exchange offer for the Notes undertaken
by the Issuers pursuant to the Exchange and Registration Rights Agreement.
"Exchange and Registration Rights Agreement" means the Exchange and
Registration Rights Agreement, dated the date of the Indentures, among the
Issuers and the Initial Purchasers.
"Exchange Notes" means, collectively, debt securities of the Issuers that
are identical in all material respects to the Notes, except for transfer
restrictions relating to the Notes, issued in a like aggregate principal
amount of the Notes originally issued pursuant to the Exchange and
Registration Rights Agreement.
"Excluded Assets" means the assets identified in the Recapitalization
Agreement as the assets to be transferred and sold to one or more affiliates
of DICSA and DFS.
"Foreign Subsidiary" means any Restricted Subsidiary that is not organized
under the laws of the United States of America or any State thereof or the
District of Columbia.
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"German Government Obligations" means securities that are direct and
unconditional obligations of the Federal Republic of Germany or any of its
states (Bundeslander), as defined in Section 1807, No. 2 of the German Civil
Code (Burgerliches Gesetzbuch), as from time to time in amended, and which are
not callable or redeemable at the issuer's option.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of
any other Person and any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or other obligation of such
other Person (whether arising by virtue of partnership arrangements, or by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for purposes of assuring in any other manner the obligee of
such Indebtedness or other obligation of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part); provided,
however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Currency Agreement or Interest Rate Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is registered
on the registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary of another Person
(whether by merger, consolidation, acquisition or otherwise) shall be deemed
to be Incurred by such Person at the time it becomes a Subsidiary of such
other Person. The term "Incurrence" when used as a noun has a correlative
meaning. The accretion of principal of a non-interest bearing or other
discount security shall be deemed the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium, if any,
in respect of indebtedness of such Person for borrowed money; (ii) the
principal of and premium, if any, in respect of obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments; (iii) all
obligations of such Person in respect of letters of credit or other similar
instruments (including reimbursement obligations with respect thereto); (iv)
all obligations of such Person to pay the deferred and unpaid purchase price
of property or services (except accrued expenses and Trade Payables), which
purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion of
such services; (v) all Capitalized Lease Obligations and all Attributable Debt
of such Person; (vi) the amount of all obligations of such Person with respect
to the redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, any Preferred Stock (but
excluding, in each case, any accrued dividends); (vii) all Indebtedness of
other Persons secured by a Lien on any asset of such Person, whether or not
such Indebtedness is assumed by such Person; provided, however, that the
amount of Indebtedness of such Person shall be the lesser of (A) the fair
market value of such asset at such date of determination and (B) the amount of
such Indebtedness of such other Persons, (viii) to the extent not otherwise
included in this definition, Hedging Obligations of such Person; or (ix) all
obligations of the type referred to in clauses (i) and (ii) of other Persons
and all dividends of other Persons for the payment of which, in either case,
such Person is responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise, including by means of any Guarantee. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at
such date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
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The amount of indebtedness of any person at any date shall be determined as
set forth above or otherwise in accordance with U.S. GAAP. For purposes of
calculating the amount of Indebtedness of a Securitization Entity outstanding
as of any date, the face or notional amount of any interest in receivables or
equipment that is outstanding as of such date shall be deemed to be
Indebtedness but any such interests held by Affiliates of such Securitization
Entity shall be excluded for purposes of such calculation.
"Initial Public Offering" means the first underwritten public offering of
common stock (or ordinary shares) by either of the Issuers pursuant to a
registration statement filed with the Commission in accordance with the
Securities Act for aggregate net cash proceeds of at least $10 million.
"Initial Purchasers" means Chase Securities Inc., Chase Manhattan Bank AG
and Chase Manhattan International Limited.
"Interest Rate Agreement" means with respect to any Person any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar
agreement or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extension of credit (including by way of Guarantee or similar arrangement, but
excluding any debt or extension of credit represented by a bank deposit) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others) or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary" and the covenant described under "--Certain
Covenants--Limitation on Restricted Payments", (i) "Investment" shall include
the portion (proportionate to the equity interest of DCC in such Subsidiary)
of the fair market value of the net assets of any Subsidiary of DCC at the
time that such Subsidiary is designated an Unrestricted Subsidiary; provided,
however, that, upon a redesignation of such Subsidiary as a Restricted
Subsidiary, DCC shall be deemed to continue to have a permanent "Investment"
in an Unrestricted Subsidiary in an amount (if positive) equal to (x) the
"Investment" of DCC in such Subsidiary at the time of such redesignation less
(y) the portion (proportionate to the equity interest of DCC in such
Subsidiary) of the fair market value of the net assets of such Subsidiary at
the time of such redesignation; and (ii) any property transferred to or from
an Unrestricted Subsidiary shall be valued at its fair market value at the
time of such transfer, in each case as determined in good faith by the board
of directors of DCC.
"Investor Group" means, collectively, Thayer, Perseus and DICSA.
"Issuers" means, collectively, DCC and Lyon.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Lyon" means Lyon Investments B.V., a company organized under the laws of
The Netherlands and a wholly owned Restricted Subsidiary, which was formerly
known as Lyon Cycle B.V.
"MS Sport Group" means, collectively, MS Sport Vertriebs AG and MS Sport
Vertriebs GmbH.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise and proceeds from
the sale or other disposition of any securities received as
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consideration, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of
Indebtedness or other obligations relating to the properties or assets that
are the subject of such Asset Disposition or received in any other non-cash
form, and excluding Designated Non-Cash Consideration) therefrom, in each case
net of (i) all legal, accounting and investment banking fees, and sales
commissions, and all title and recording tax expenses, commissions and other
fees and expenses incurred, and all federal, state, provincial, local and
foreign taxes required to be paid or accrued as a liability under U.S. GAAP,
as a consequence of such Asset Disposition, (ii) all payments made on any
Indebtedness which is secured by any assets subject to such Asset Disposition,
in accordance with the terms of any Lien upon or other security agreement of
any kind with respect to such assets, or which must by its terms, or in order
to obtain a necessary consent to such Asset Disposition, or by applicable law,
be repaid out of the proceeds from such Asset Disposition, (iii) all
distributions and other payments required to be made to minority interest
holders in Subsidiaries of DCC or joint ventures as a result of such Asset
Disposition and (iv) appropriate amounts to be provided by the seller as a
reserve, in accordance with U.S. GAAP, against any liabilities associated with
the property or other assets disposed of in such Asset Disposition and
retained by DCC or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Non-Recourse Indebtedness" means Indebtedness (i) as to which neither DCC
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise) or (c) constitutes the lender and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of DCC or
any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior
to its state of maturity and (iii) as to which the lenders have been notified
in writing they will not have recourse to the shares or assets of DCC or any
of its Restricted Subsidiaries.
"Noteholder" or "Holder" means the Person in whose name a Note is registered
on the registrar's books.
"Officer" means the Chairman of the Board, the Principal Executive Officer,
the Principal Financial Officer, the President, any Vice President, the
Treasurer or the Secretary of either of the Issuers, or any of the Restricted
Subsidiaries, as the case may be.
"Officers' Certificate" means a certificate signed by two Officers of either
of the Issuers, or any of the Restricted Subsidiaries, as the case may be.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Dollar Notes Trustee or the DM Notes Trustee, as applicable.
The counsel may be an employee of, or counsel to, DCC or such Trustee.
"Permitted Holders" means DC Cycle, Perseus Cycle and DFS, any of their
respective Affiliates, any Person who is a beneficial owner of DC Cycle,
Perseus Cycle or DFS on the date of the Indentures, and any investment fund
managed by Thayer or Perseus, and any Person acting in the capacity of an
underwriter in connection with a public or private offering of the Capital
Stock of either of the Issuers.
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"Permitted Investment" means an Investment by DCC or any Restricted
Subsidiary in (i) DCC, any Restricted Subsidiary or any Person that will, upon
the making of such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is a Related
Business; (ii) another Person if, as a result of such Investment, such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, DCC or any Restricted Subsidiary; provided,
however, that the primary business of such Person is a Related Business; (iii)
Temporary Cash Investments; (iv) receivables owing to DCC or any Restricted
Subsidiary if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as
DCC or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees made in the ordinary course of business
consistent with past practices of DCC or any Restricted Subsidiary and not
exceeding $2 million in the aggregate outstanding at any one time; (vii)
stock, obligations or securities received in settlement of debts created in
the ordinary course of business and owing to DCC or any Restricted Subsidiary
or in satisfaction of judgments; (viii) any Person to the extent such
Investment represents the non-cash portion of the consideration received for
an Asset Disposition that was made pursuant to and in compliance with the
covenant described under "--Certain Covenants--Limitation on Sale of Assets
and Subsidiary Stock"; (ix) Investments existing on the date of the
Indentures; (x) Hedging Obligations otherwise in compliance with the
Indentures; (xi) additional Investments having an aggregate fair market value,
taken together with all other Investments made pursuant to this clause (xi)
that are at the time outstanding, not to exceed $10 million (with a fair
market value of each Investment being measured at the time made and without
giving effect to subsequent changes in value); and (xii) any Investment by DCC
or a Subsidiary of DCC in a Securitization Entity or any Investment by a
Securitization Entity in any other Person in connection with a Qualified
Securitization Transaction; provided that any Investment in a Securitization
Entity is in the form of a Purchase Money Notes or an equity interest.
"Permitted Liens" means, with respect to any Person, (a) Liens, pledges or
deposits by such Person under worker's compensation laws, unemployment
insurance and other types of social security laws or similar legislation, or
good faith deposits in connection with bids, tenders, contracts (other than
for the payment of Indebtedness), or leases to which such Person is a party,
or deposits to secure public or statutory obligations of such Person or
deposits of cash or government bonds to secure surety or appeal bonds to which
such Person is a party, or deposits as security for contested taxes or import
duties or for the payment of rent, in each case Incurred in the ordinary
course of business; (b) statutory liens of landlords and other Liens imposed
by law, including carriers', warehousemen's, suppliers', material men's,
repairmen's and mechanics' Liens, in each case for sums not yet due or being
contested in good faith by appropriate proceedings or other Liens arising out
of judgments or awards against such Person with respect to which such Person
shall then be proceeding with an appeal or other proceedings for review; (c)
Liens for taxes, assessments or governmental charges not yet due or payable or
subject to penalties for non-payment on which are being contested in good
faith by appropriate proceedings; (d) Liens in favor of issuers of surety
bonds or letters of credit issued pursuant to the request of and for the
account of such Person in the ordinary course of its business; provided,
however, that such letters of credit do not constitute Indebtedness; (e) minor
survey exceptions, minor encumbrances, easements or reservations of, or rights
of others for, licenses, rights-of-way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, or zoning or other restrictions as
to the use of real property or Liens incidental to the conduct of the business
of such Person or to the ownership of its properties which were not Incurred
in connection with Indebtedness and which do not in the aggregate materially
adversely affect the value of said properties or materially impair their use
in the operation of the business of such Person; (f) Liens securing
Indebtedness Incurred to finance the construction, purchase or lease of, or
repairs, improvements or
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additions to, property of such Person; provided, however, that the Lien may
not extend to any other property owned by such Person or any of its
Subsidiaries at the time the Lien is Incurred, and the Indebtedness (other
than any interest thereon) secured by the Lien may not be Incurred more than
180 days after the later of the acquisition, completion of construction,
repair, improvement, addition or commencement of full operation of the
property subject to the Lien; (g) Liens to secure Indebtedness permitted
pursuant to clause (b)(i) of the covenant described under "--Certain
Covenants--Limitation on Indebtedness", and other Liens to secure Indebtedness
permitted pursuant to the other clauses thereunder; (h) Liens existing on the
date of the Indentures; (i) Liens on property or shares of stock of another
Person at the time such other Person becomes a Subsidiary of such Person;
provided, however, that such Liens are not created, Incurred or assumed in
connection with, or in contemplation of, such other Person becoming such a
Subsidiary; provided further, however, that such Liens may not extend to any
other property owned by such Person or any of its Subsidiaries; (j) Liens on
property at the time such Person or any of its Subsidiaries acquires the
property, including any acquisition by means of a merger or consolidation with
or into such Person or any Subsidiary of such Person; provided, however, that
such Liens are not created, Incurred or assumed in connection with, or in
contemplation of, such acquisition; provided further, however, that the Liens
may not extend to any other property owned by such Person or any of its
Subsidiaries; (k) Liens securing Indebtedness or other obligations of a
Subsidiary of such Person owing to such Person or a wholly owned Subsidiary of
such Person; (l) Liens securing Hedging Obligations so long as such Hedging
Obligations relate to Indebtedness that is, and is permitted to be under the
Indentures, secured by a Lien on the same property securing such Hedging
Obligations; (m) Liens to secure any Refinancing (or successive Refinancings)
as a whole, or in part, of any Indebtedness secured by any Lien referred to in
the foregoing clauses (f), (h), (i) and (j); provided, however, that (x) such
new Lien shall be limited to all or part of the same property that secured the
original Lien (plus improvements to or on such property) and (y) the
Indebtedness secured by such Lien at such time is not increased to any amount
greater than the sum of (A) the outstanding principal amount or, if greater,
committed amount of the Indebtedness described under clause (f), (h), (i) or
(j) at the time the original Lien became a Permitted Lien under the Indentures
and (B) an amount necessary to pay any fees and expenses, including premiums,
related to such Refinancings. Notwithstanding the foregoing, "Permitted Liens"
will not include any Lien described in clause (f), (i) or (j) above to the
extent such Lien applies to any Additional Assets acquired directly or
indirectly from Net Available Cash pursuant to the covenant described under
"--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock"; (n)
judgment Liens not giving rise to an Event of Default; (o) an interest or
title of a lessor under any Capitalized Lease Obligation; (p) Liens on
specific items of inventory or other goods and proceeds of any Person securing
such Person's obligations in respect of bankers' acceptances issued or created
for the account of such Person to facilitate the purchase, shipment or storage
of such inventory or other goods; (q) liens securing reimbursement obligations
with respect to commercial letters of credit which encumber documents and
other property relating to such letters of credit; (r) leases or subleases
granted to others that do not materially interfere with the ordinary course of
business of DCC and its Restricted Subsidiaries; and (s) Liens in favor of
customers and revenue authorities arising as a matter of law to secure payment
of customer duties. For purposes of this definition, the term "Indebtedness"
shall be deemed to include interest on such Indebtedness.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Perseus" means Perseus Capital, L.L.C., a limited liability company
organized under the laws of the State of Delaware.
"Perseus Cycle" means Perseus Cycle, L.L.C., a limited liability company
organized under the laws of the State of Delaware.
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"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) that is preferred
as to the payment of dividends or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over
shares of Capital Stock of any other class of such Person.
"Principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Private Exchange Notes" means, collectively, debt securities of the Issuers
that are identical in all material respects to the Exchange Notes, except for
transfer restrictions relating to such Private Exchange Notes, issued by the
Issuers (under the same indenture as the Exchange Notes) simultaneously with
the delivery of the Exchange Notes in the Exchange Offer to any Noteholder
that holds any Notes acquired by it that have, or that are reasonably likely
to be determined to have, the status of an unsold allotment in an initial
distribution, or to any holder of Notes that is not entitled to participate in
the Exchange Offer, upon the request of any such holder, in exchange for a
like aggregate principal amount of Notes held by such holder.
"Public Equity Offering" means a primary public offering of common stock,
ordinary shares or equivalent equity interests (other than Disqualified Stock)
of either of the Issuers, following which shares of common stock, ordinary
shares or equivalent equity interests, as the case may be, of such Issuer
either (i) are listed on a nationally recognized stock exchange or automated
quotation system in the United States, Canada or a member of the European
Union or (ii) have been distributed in the United States by means of an
effective registration statement under the Securities Act or sales pursuant to
Rule 144 under the Securities Act.
"Public Market" means that at any time with respect to the common stock,
ordinary shares or equivalent equity interests of either of the Issuers (i) at
least 10% of the total issued and outstanding common stock, ordinary shares or
equivalent equity interests of such Issuer has been distributed prior to such
time by means of an effective registration statement under the Securities Act
or (ii) an established public trading market otherwise exists for any such
common stock, or ordinary shares or equivalent equity interests.
"Purchase Money Indebtedness" means Indebtedness (i) consisting of the
deferred purchase price of an asset, conditional sale obligations, obligations
under any title retention agreement and other purchase money obligations, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition by DCC or a Restricted Subsidiary of such asset,
including additions and improvements; provided, however, that such
Indebtedness is incurred within 180 days after the acquisition by DCC or such
Restricted Subsidiary, as the case may be, of such asset.
"Purchase Money Notes" means a promissory note of a Securitization Entity
evidencing a line of credit, which may be irrevocable, from DCC or any
Restricted Subsidiary in connection with a Qualified Securitization
Transaction, which note shall be repaid from cash available to the
Securitization Entity, other than amounts required to be established as
reserves pursuant to agreements, amounts paid to investors in respect of
interest, principal and other amounts owing to such investors and amounts paid
in connection with the purchase of newly generated receivables or newly
acquired equipment.
"Qualified Securitization Transaction" means any transaction or series of
transactions pursuant to which DCC or any Restricted Subsidiary may sell,
convey or otherwise transfer to (a) a Securitization Entity (in the case of a
transfer by DCC or any of Restricted Subsidiary) and (b) any other Person (in
the case of a transfer by a Securitization Entity), or may grant a security
interest in, any accounts receivable or equipment (whether existing on the
date of the Indentures or arising or acquired thereafter) of DCC or any of its
Restricted Subsidiaries, and any assets related thereto including,
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without limitation, all collateral securing such accounts receivable and
equipment, all contracts and contract rights and all Guarantees or other
obligations in respect of such accounts receivable and equipment, proceeds of
such accounts receivable and equipment and other assets (including contract
rights) which are customarily transferred or in respect of which security
interests are customarily granted in connection with asset securitization
transactions involving accounts receivable and equipment.
"Recapitalization" means the recapitalization of DCC pursuant to the
Recapitalization Agreement.
"Recapitalization Agreement" means the Recapitalization Agreement dated as
of March 11, 1998, as amended as of the date of the Indentures, among DCC, DC
Cycle, Perseus Cycle, DICSA and DFS, and, for the purposes specified therein,
A. Edward Gottesman, Alan J. Finden-Crofts and Frank H. Pearl.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness exchange or replacement for, such Indebtedness. "Refinanced" and
"Refinancing" have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend, modify, restate, defer, substitute
or supplement (including pursuant to any defeasance or discharge mechanism)
any Indebtedness of DCC or any Restricted Subsidiary existing on the date of
the Indentures or Incurred in compliance with the Indentures (including
Indebtedness of DCC or such Restricted Subsidiary that Refinances Refinancing
Indebtedness); provided, however, that (i) the Refinancing Indebtedness has a
Stated Maturity no earlier than the Stated Maturity of the Indebtedness being
Refinanced, (ii) the Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being refinanced, (iii) such Refinancing
Indebtedness is Incurred in an aggregate principal amount (or if issued with
original issue discount, an aggregate issue price) that is equal to or less
than the aggregate principal amount (or if issued with original issue
discount, the aggregate accreted value) then outstanding of the Indebtedness
being Refinanced (plus fees and expenses, including any premium and defeasance
costs associated with the Refinancing) and (vi) if the Indebtedness being
Refinanced is subordinated in right of payment to the Notes, such Refinancing
Indebtedness is subordinated in right of payment to the Notes at least to the
same extent as the Indebtedness being Refinanced; provided further, however,
that Refinancing Indebtedness shall not include (x) Indebtedness of a
Restricted Subsidiary that Refinances Indebtedness of DCC or (y) Indebtedness
of DCC or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or complementary to
the businesses of DCC and the Restricted Subsidiaries on the date of the
Indentures.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of DCC other than an
Unrestricted Subsidiary.
"Revolving Credit Agreement" means the credit agreement, to be dated as of
the date of the Indentures, as amended, waived or otherwise modified from time
to time, among DCC, the subsidiaries of DCC identified therein, Chase
Manhattan plc, as Arranger, the financial institutions named therein as banks
and Chase Manhattan International Limited, as Facility Agent and Security
Agent (except to the extent, if any, that any such amendment, waiver or other
modification thereto would be prohibited by the terms of either of the
Indentures, unless otherwise agreed to by the holders of at least a majority
in aggregate principal amount of Dollar Notes or the DM Notes, as applicable,
at the time outstanding).
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"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired by DCC or a Restricted Subsidiary whereby DCC or a
Restricted Subsidiary transfers such property to a Person and DCC or such
Restricted Subsidiary leases it from such Person, other than leases between
DCC and a Wholly Owned Subsidiary or leases between Wholly Owned Subsidiaries.
"Secured Indebtedness" means any Indebtedness of either of the Issuers
secured by a Lien. "Secured Indebtedness" of any Subsidiary of either of the
Issuers has a correlative meaning.
"Securities Act" means the Securities Act of 1933, as amended.
"Securitization Entity" means a Wholly Owned Subsidiary (or a wholly owned
Subsidiary of another Person in which DCC or any Subsidiary of DCC makes an
Investment and to which DCC or any Subsidiary of DCC transfers accounts
receivable or equipment and related assets) that engages in no activities
other than in connection with financing of accounts receivable or equipment
and that is designated by the board of directors of DCC (as provided below) as
a Securitization Entity (A) no portion of the Indebtedness or any other
obligations (contingent or otherwise) of which (i) is Guaranteed by DCC or any
Restricted Subsidiary (excluding Guarantees of obligations (other than the
principal of, and interest on, Indebtedness)) pursuant to Standard
Securitization Undertakings, (ii) is recourse to or obligates DCC or any
Restricted Subsidiary in any way other than pursuant to Standard
Securitization Undertakings or (iii) subjects any property or asset of DCC or
any Restricted Subsidiary, directly or indirectly, contingently or otherwise,
to the satisfaction thereof, other than pursuant to Standard Securitization
Undertakings, (B) with which neither DCC nor any Restricted Subsidiary has any
material contract, agreement, arrangement or understanding other than on terms
no less favorable to DCC or such Restricted Subsidiary than those that might
be obtained at the time from Persons that are not Affiliates of DCC, other
than fees payable in the ordinary course of business in connection with
servicing receivables of such entity, and (C) to which neither DCC nor any
Restricted Subsidiary has any obligation to maintain or preserve such
entities' financial condition or cause such entity to achieve certain levels
of operating results. Any such designation by the board of directors of DCC
shall be evidenced to each Trustee by filing with each Trustee a certified
copy of the resolution of the board of directors of DCC giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
"Senior Indebtedness" of either of the Issuers means the principal of,
premium (if any) and accrued and unpaid interest on (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization of such Issuer, regardless of whether or not a claim for post-
filing interest is allowed in such proceedings) on, and fees and other amounts
owing in respect of, Bank Indebtedness and all other Indebtedness of such
Issuer, whether outstanding on the date of the Indentures or thereafter
Incurred, unless in the instrument creating or evidencing the same or pursuant
to which the same is outstanding it is provided that such obligations are not
superior in right of payment to the Notes; provided, however, that Senior
Indebtedness shall not include (i) any obligation of DCC to any of its
Subsidiaries or any obligation of Lyon to any of the Subsidiaries of DCC, (ii)
any liability for federal, state, provincial, local, foreign or other taxes
owed or owing by such Issuer, (iii) any accounts payable or other liability to
trade creditors arising in the ordinary course of business (including
Guarantees thereof or instruments evidencing such liabilities), (iv) any
Indebtedness or obligation of such Issuer (and any accrued and unpaid interest
in respect thereof) that by its terms is subordinate or junior in any respect
to any other Indebtedness or obligation of such Issuer, including any
Subordinated Obligations, (v) any obligations with respect to any Capital
Stock or (vi) any Indebtedness Incurred in violation of the Indentures.
"Senior Indebtedness" of any Subsidiary of either of the Issuers has a
correlative meaning.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of either of the Issuers within the meaning of Rule
1-02 under Regulation S-X promulgated by the Commission.
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"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by DCC or any Subsidiary of DCC that
are reasonably customary in an accounts receivable or equipment securitization
transaction.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of either of the Issuers
(whether outstanding on the date of the Indentures or thereafter Incurred)
that is subordinate or junior in right of payment to the Notes pursuant to a
written agreement. "Subordinated Obligation" of any Subsidiary of either of
the Issuers has a correlative meaning.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) such Person, (ii) such Person and
one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of
such Person.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the United States or any agency thereof or
obligations Guaranteed by the United States or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company that is organized under the laws of the
United States, any state thereof or any foreign country recognized by the
United States having capital, surplus and undivided profits aggregating in
excess of $250,000,000 (or the foreign currency equivalent thereof) and whose
long-term debt is rated "A" (or such similar equivalent rating) or higher by
at least one nationally recognized statistical rating organization (as defined
in Rule 436 under the Securities Act), (iii) repurchase obligations with a
term of not more than 30 days for underlying securities of the types described
in clause (i) above entered into with a bank meeting the qualifications
described in clause (ii) above, (iv) investments in commercial paper, maturing
not more than 90 days after the date of acquisition, issued by a corporation
(other than an Affiliate of DCC) organized and in existence under the laws of
the United States or any foreign country recognized by the United States with
a rating at the time as of which any investment therein is made of "P-1" (or
higher) according to Moody's Investors Service, Inc. ("Moody's") or "A-1" (or
higher) according to Standard and Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc. ("S&P"), and (v) investments in securities with
maturities of six months or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States, or by
any political subdivision or taxing authority thereof, and rated at least "A"
by Moody's or "A" by S&P.
"Thayer" means Thayer Equity Investors III, L.P., a limited partnership
organized under the laws of the State of Delaware.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb)
as in effect on the date of the Indentures.
"Total Assets" means the total Consolidated assets of DCC and its Restricted
Subsidiaries, as set forth on DCC's most recent consolidated balance sheet.
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"Trade Payables" means, with respect to any Person, any accounts payable or
any Indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled by,
and published in, the most recent Federal Reserve Statistical Release
H.15(519) which has become publicly available at least two Business Days prior
to the date fixed for redemption of the Notes following a Change of Control
(or, if such Statistical Release is no longer published, any publicly
available source of similar market data)) most nearly equal to the then
remaining Average Life to Stated Maturity of the Notes; provided, however,
that if the Average Life to Stated Maturity of the Notes is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the
weekly average yields of United States Treasury securities for which such
yields are given, except that if the Average Life to Stated Maturity of the
Securities is less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant maturity of one year
shall be used.
"Trust Officer" means the Chairman of the Board, the President or any other
officer or assistant officer of the Dollar Notes Trustee or the DM Notes
Trustee, as applicable, assigned by such Trustee to administer its corporate
trust matters.
"Univega" means Univega Beteiligungen GmbH.
"Unrestricted Subsidiary" means (i) any Subsidiary of DCC (other than Lyon)
that at the time of determination shall be designated an Unrestricted
Subsidiary by the board of directors of DCC in the manner provided below and
(ii) any Subsidiary of an Unrestricted Subsidiary. The board of directors of
DCC may designate any Subsidiary of DCC (other than Lyon) (including any newly
acquired or newly formed Subsidiary of DCC) to be an Unrestricted Subsidiary
unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or owns or holds any Lien on any property of, either of the
Issuers or any other Subsidiary of either of the Issuers that is not a
Subsidiary of the Subsidiary to be so designated; provided, however, that
either (A) the Subsidiary to be so designated has total Consolidated assets of
$1,000 or less or (B) if such Subsidiary has Consolidated assets greater than
$1,000, then such designation would be permitted under the covenant described
under "--Certain Covenants--Limitation on Restricted Payments". The board of
directors of DCC may designate any Subsidiary of DCC that is an Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to such designation, (x) DCC could Incur $1.00 of
additional Indebtedness under paragraph (a) of the covenant described under
"--Certain Covenants--Limitation on Indebtedness" and (y) no Default shall
have occurred and be continuing. Any such designation of a Subsidiary as a
Restricted Subsidiary or Unrestricted Subsidiary by the board of directors of
DCC shall be evidenced to each of the Trustees by promptly filing with each of
the Trustees a copy of the resolution of such board of directors giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"U.S. GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the date of the Indentures, including
those set forth in (i) the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants,
(ii) statements and pronouncements of the Financial Accounting Standards
Board, (iii) such other statements by such other entity as approved by a
significant segment of the accounting profession and (iv) the rules and
regulations of the Commission governing the inclusion of financial statements
(including pro forma financial statements) in periodic reports required to be
filed pursuant to Section 13 of the Exchange Act, including opinions and
pronouncements in staff accounting bulletins and similar written statements
from the accounting staff of the Commission. All ratios and computations based
on U.S. GAAP contained in the Indentures shall be computed in conformity with
U.S. GAAP.
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"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States
(including any agency or instrumentality thereof) for the payment of which the
full faith and credit of the United States is pledged and which are not
callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding
and normally entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of DCC all the
Capital Stock of which (other than directors' qualifying shares) is owned by
DCC or another Wholly Owned Subsidiary.
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DESCRIPTION OF EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
As a condition to the Purchase Agreement among the Issuers and the Initial
Purchasers dated May 14, 1998 (the "Purchase Agreement"), the Issuers and the
Initial Purchasers entered into the Exchange and Registration Rights Agreement
on May 14, 1998. Pursuant to the Exchange and Registration Rights Agreement,
the Issuers agreed to (i) file with the Commission on or prior to 90 days
after the date of original issuance of the Old Notes, which is referred to as
the Issue Date, a registration statement on an appropriate form, which is
referred to as the Exchange Offer Registration Statement, relating to a
registered Exchange Offer for the Old Notes under the Securities Act and (ii)
use their reasonable best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act within 210 days
after the Issue Date. As soon as practicable after the effectiveness of the
Exchange Offer Registration Statement, the Issuers will offer to the holders
of Transfer Restricted Notes (as defined below) who are not prohibited by any
law or policy of the Commission from participating in the Exchange Offer the
opportunity to exchange their Transfer Restricted Notes for an issue of a
second series of notes, the Exchange Notes, that are identical in all material
respects to the Old Notes (except that the Exchange Notes will not contain
terms with respect to transfer restrictions) and that would be registered
under the Securities Act. The Issuers will keep the Exchange Offer open for
not less than 30 days (or longer, if required by applicable law) after the
date on which notice of the Exchange Offer is mailed to the holders of the
Notes.
If (i) because of any change in law or applicable interpretations thereof by
the staff of the Commission, the Issuers are not permitted to effect the
Exchange Offer as contemplated by the Exchange and Registration Rights
Agreement, (ii) any Old Notes validly tendered pursuant to the Exchange Offer
are not exchanged for Exchange Notes within 240 days after the Issue Date,
(iii) any of the Initial Purchasers so requests with respect to Old Notes not
eligible to be exchanged for Exchange Notes in the Exchange Offer, (iv) any
applicable law or interpretations do not permit any holder of Old Notes to
participate in the Exchange Offer, (v) any holder of Old Notes that
participates in the Exchange Offer does not receive freely transferable
Exchange Notes in exchange for tendered Old Notes or (vi) the Issuers so
elect, then the Issuers will file with the Commission a shelf registration
statement (the "Shelf Registration Statement") to cover resales of Transfer
Restricted Notes by such holders who satisfy certain conditions relating to
the provision of information in connection with the Shelf Registration
Statement. For purposes of the foregoing, "Transfer Restricted Notes" means
each Old Note until (i) the date on which such Old Note has been exchanged for
a freely transferable Exchange Note in the Exchange Offer, (ii) the date on
which such Old Note has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement or (iii)
the date on which such Old Note is distributed to the public pursuant to Rule
144 under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act.
The Issuers will use their reasonable best efforts to have the Exchange
Offer Registration Statement or, if applicable, the Shelf Registration
Statement (each, a "Registration Statement") declared effective by the
Commission as promptly as practicable after the filing thereof. Unless the
Exchange Offer would not be permitted by a policy of the Commission, the
Issuers will commence the Exchange Offer and will use their reasonable best
efforts to consummate the Exchange Offer as promptly as practicable, but in
any event prior to 240 days after the Issue Date. If applicable, the Issuers
will use their reasonable best efforts to keep the Shelf Registration
Statement effective for a period of two years after the Issue Date.
If (i) the applicable Registration Statement is not filed with the
Commission on or prior to 90 days after the Issue Date; (ii) the Exchange
Offer Registration Statement or the Shelf Registration Statement, as the case
may be, is not declared effective within 210 days after the Issue Date; (iii)
the Exchange Offer is not consummated on or prior to 240 days after the Issue
Date or (iv) the Shelf Registration Statement is filed and declared effective
within 210 days after the Issue Date but shall thereafter cease to be
effective (at any time that the Issuers are obligated to maintain the
effectiveness thereof) without being succeeded within 30 days by an additional
Registration Statement filed and
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declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Issuers will be obligated to pay liquidated
damages to each holder of Transfer Restricted Notes, during the period of one
or more such Registration Defaults, in an amount equal to $0.192 per week per
$1,000 principal amount of Dollar Notes constituting Transfer Restricted Notes
held by such holder and DM0.192 per week per DM1,000 principal amount of DM
Notes constituting Transfer Restricted Notes held by such holder, until the
applicable Registration Statement is filed, the Exchange Offer Registration
Statement is declared effective and the Exchange Offer is consummated or the
Shelf Registration Statement is declared effective or again becomes effective,
as the case may be. All accrued liquidated damages shall be paid to holders in
the same manner as interest payments on the Notes on semi-annual payment dates
that correspond to interest payment dates for the Old Notes. Following the
cure of all Registration Defaults, the accrual of liquidated damages will
cease.
The Exchange and Registration Rights Agreement also provides that the
Issuers (i) shall make available for a period of 180 days after the
consummation of the Exchange Offer a prospectus meeting the requirements of
the Securities Act to any broker-dealer for use in connection with any resale
of any such Exchange Notes and (ii) shall pay all expenses incident to the
Exchange Offer (including the expense of one counsel to the holders of the Old
Notes) and will jointly and severally indemnify certain holders of the Old
Notes (including any broker-dealer) against certain liabilities, including
liabilities under the Securities Act. A broker-dealer that delivers such a
prospectus to purchasers in connection with such resales will be subject to
certain of the civil liability provisions under the Securities Act and will be
bound by the provisions of the Exchange and Registration Rights Agreement
(including certain indemnification rights and obligations).
Each holder of Old Notes who wishes to exchange such Old Notes for Exchange
Notes in the Exchange Offer will be required to make certain representations,
including representations that (i) any Exchange Notes to be received by it
will be acquired in the ordinary course of its business; (ii) it has no
arrangement or understanding with any person to participate in the
distribution of the Exchange Notes and (iii) it is not an "affiliate" (as
defined in Rule 405 under the Securities Act) of the Issuers, or if it is an
affiliate, that it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of
the Exchange Notes. If the holder is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities,
it will be required to acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
Holders of the Old Notes will be required to make certain representations to
the Issuers (as described above) in order to participate in the Exchange Offer
and will be required to deliver information to be used in connection with the
Shelf Registration Statement in order to have their Old Notes included in the
Shelf Registration Statement and benefit from the provisions regarding
liquidated damages set forth in the preceding paragraphs. A holder who sells
Old Notes pursuant to the Shelf Registration Statement generally will be
required to be named as a selling securityholder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales
and will be bound by the provisions of the Exchange and Registration Rights
Agreement which are applicable to such a holder (including certain
indemnification obligations).
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THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were sold by the Issuers on May 14, 1998, in a private
placement. In connection with that placement, the Issuers entered into the
Exchange and Registration Rights Agreement, which requires the Issuers to file
a registration statement under the Securities Act with respect to the Old
Notes and, upon the effectiveness of that registration statement, offer to the
holders of the Old Notes the opportunity to exchange their Old Notes for a
like principal amount of Exchange Notes, which will be issued without a
restrictive legend and may be reoffered and resold by holders that are not
affiliates of the Issuers without registration under the Securities Act. Upon
the completion of the Exchange Offer, the Issuers' obligations with respect to
the registration of the Old Notes and the Exchange Notes will terminate. The
Exchange and Registration Rights Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. Following the
completion of the Exchange Offer, holders of Old Notes not tendered will not
have any further registration rights, and those Old Notes will continue to be
subject to certain restrictions on transfer. Accordingly, the liquidity of the
market for the Old Notes could be adversely affected upon completion of the
Exchange Offer.
Based on an interpretation by the Commission's staff set forth in
interpretive letters issued to third parties unrelated to the Issuers, the
Issuers believe that, with the exceptions set forth below, Exchange Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by any person receiving such
Exchange Notes, whether or not such person is the holder (other than any such
holder or such other person which is an "affiliate" of the Issuers within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that the Exchange Notes are acquired in the ordinary course of
business of the holder or such other person, and neither the holder nor such
other person has an arrangement or understanding with any person to
participate in the distribution of such Exchange Notes. Any holder who tenders
in the Exchange Offer for the purpose of participating in a distribution of
the Exchange Notes cannot rely on this interpretation by the Commissions's
staff and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Old Notes, where the Old Notes were acquired by that
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution".
EXCHANGE OF BOOK-ENTRY INTERESTS
In connection with the Exchange Offer, Book-Entry Interests in the
certificateless depositary interests in the Old Notes ("Old Book-Entry
Interests") may be tendered to the Book-Entry Depositary in exchange for Book-
Entry Interests in the depositary interests in the Exchange Notes ("New Book-
Entry Interests") which are traded, in the case of the Dollar Notes, through
the facilities of DTC and, in the case of the DM Notes, through the facilities
of Euroclear and Cedel (each of DTC, Euroclear and Cedel, a "Book-Entry
Transfer Facility"). In such case, the Book-Entry Depositary has committed to
exchange a like principal amount of New Book-Entry Interests of the applicable
class for the Old Book-Entry Interests of each class so tendered. Other than
as described below under "Procedures for Tendering", the terms and conditions
for exchanging Old Book-Entry Interests for New Book-Entry Interests are
identical to the terms and conditions for exchanging Old Notes for Exchange
Notes. In this regard, except as the context otherwise requires, holders, as
used below, include, as appropriate, any participant in the Book-Entry
Transfer Facility system whose name appears on a security position as a holder
of Book-Entry Interests, references to Exchange Notes or Old Notes include New
Book-Entry Interests and Old Book-Entry Interests, as appropriate, and
provisions of the following discussion that apply to the Issuers also apply,
as appropriate, to the Book-Entry Depositary. The Exchange Agent for the
Issuers will also act as exchange agent for the Book-Entry Depositary in
effecting such exchange.
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TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuers will accept any and all Old
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Issuers will issue $1,000 principal amount
of Exchange Dollar Notes in exchange for each $1,000 principal amount of
outstanding Old Dollar Notes accepted in the Exchange Offer. Holders may
tender some or all of their Old Dollar Notes pursuant to the Exchange Offer.
However, Old Dollar Notes may be tendered only in integral multiples of
$1,000.
The Issuers will issue DM1,000 principal amount of Exchange DM Notes in
exchange for each DM1,000 principal amount of outstanding Old DM Notes
accepted in the Exchange Offer. Holders may tender some or all of their Old DM
Notes pursuant to the Exchange Offer. However, Old DM Notes may be tendered
only in integral multiples of DM1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Old Notes except that (i) the Exchange Notes bear a different CUSIP
Number from the Old Notes, (ii) the Exchange Notes have been registered under
the Securities Act and hence will not bear legends restricting their transfer
and (iii) the holders of the Exchange Notes will not be entitled to certain
rights under the Exchange and Registration Rights Agreement, including the
provisions providing for an increase in the interest rate on the Old Notes in
certain circumstances relating to the timing of the Exchange Offer, all of
which rights will terminate when the Exchange Offer is terminated. The
Exchange Notes will evidence the same debt as the Old Notes and will be
entitled to the benefits of the Indentures.
As of the date of this Prospectus, $100,000,000 aggregate principal amount
of Old Dollar Notes and DM110,000,000 aggregate principal amount of Old DM
Notes were outstanding. The Issuers have fixed the close of business on [ ],
1998, as the record date for the Exchange Offer for purposes of determining
the persons to whom this Prospectus and the Letter of Transmittal will be
mailed initially.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware, Dutch law or the Indentures in
connection with the Exchange Offer. The Issuers intend to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and
the rules and regulations of the Commission thereunder.
The Issuers shall be deemed to have accepted validly tendered Old Notes
when, as and if the Issuers have given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Exchange Notes from the Issuers.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Issuers will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection
with the Exchange Offer. See "--Fees and Expenses".
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
[ ], 1998, unless the Issuers, in their sole discretion, extend the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Issuers will notify the Exchange
Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
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The Issuers reserve the right, in their sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agents or (ii) to amend the terms of
the Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or written notice thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from their date of issuance. Holders
of Old Notes that are accepted for exchange will receive, in cash, accrued
interest thereon to, but not including, the date of issuance of the Exchange
Notes. Such interest will be paid with the first interest payment on the
Exchange Notes on May 15, 1999. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the Exchange Notes.
Interest on the Exchange Notes is payable semi-annually on each May 15 and
November 15, commencing on May 15, 1999.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes and any other required documents, to the Exchange Agent prior to the
Expiration Date. In addition, either (i) certificates for such Old Notes must
be received by the Exchange Agent along with the Letter of Transmittal, or
(ii) in the case of Book-Entry Interests, a timely confirmation of a book-
entry transfer of such Book-Entry Interests (a "Book-Entry Confirmation"), if
that procedure is available, into the Exchange Agent's account at a Book-Entry
Transfer Facility pursuant to the procedure for book-entry transfer described
below, must be received by the Exchange Agent prior to the Expiration Date, or
(iii) the Holder must comply with the guaranteed delivery procedures described
below. To be tendered effectively, the Letter of Transmittal and other
required documents must be completed and received by the Exchange Agent at the
address set forth below under "Exchange Agent" prior to the Expiration Date.
By executing the Letter of Transmittal, each holder will make to the Issuers
the representations set forth above in the sixth paragraph under "--
Description of Exchange and Registration Rights Agreement".
The tender by a holder and the acceptance thereof by the Issuers will
constitute agreement between such holder and the Issuers in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENTS IS AT THE ELECTION AND SOLE
RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENTS BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE
ISSUERS. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal must be
guaranteed by an Eligible Institution (as defined below) unless the Old Notes
tendered pursuant thereto are tendered (i) by a
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registered holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal are required
to be guaranteed, such guarantee must be by a member firm of the Medallion
System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
holder as such registered holder's name appears on such Old Notes with the
signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Issuers of their authority to so act must be submitted with the Letter of
Transmittal.
The Issuers understand that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the
Old Notes at a Book-Entry Transfer Facility, for the purpose of facilitating
the Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Old Notes by causing such Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. Although delivery of the Old Notes may be
effected through book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility, an appropriate Letter of Transmittal properly
completed and duly executed with any required signature guarantee and all
other required documents must in each case be transmitted to and received or
confirmed by the Exchange Agent at its address set forth below on or prior to
the Expiration Date, or, if the guaranteed delivery procedures described below
are complied with, within the time period provided under such procedures.
Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old
Notes will be determined by the Issuers in their sole discretion, which
determination will be final and binding. The Issuers reserve the absolute
right to reject any and all Old Notes not properly tendered or any Old Notes
the Issuers' acceptance of which would, in the opinion of counsel for the
Issuers, be unlawful. The Issuers also reserve the right in their sole
discretion to waive any defects, irregularities or conditions of tender as to
particular Old Notes. The Issuers' interpretation of the terms and conditions
of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be
cured within such time as the Issuers shall determine. Although the Issuers
intend to notify holders of defects or irregularities with respect to tenders
of Old Notes, neither the Issuer, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution; and
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(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof) together with the certificate(s)
representing the Old Notes (or a confirmation of book-entry transfer of
such Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at the Book-
Entry Transfer Facility), and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five New York Stock
Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date.
Any such notice of withdrawal must (i) specify the name of the person having
deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the
Old Notes to be withdrawn (including the certificate number(s) and principal
amount of such Old Notes, or, in the case of Old Notes transferred by book-
entry transfer, the name and number of the account at the Book-Entry Transfer
Facility to be credited), (iii) be signed by the holder in the same manner as
the original signature on the Letter of Transmittal by which such Old Notes
were tendered (including any required signature guarantees) or be accompanied
by documents of transfer sufficient to have the Trustee with respect to the
Old Notes register the transfer of such Old Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Old Notes
are to be registered, if different from that of the Depositor. All questions
as to the validity, form and eligibility (including time of receipt) of such
notices will be determined by the Issuers, whose determination shall be final
and binding on all parties. Any Old Notes so withdrawn will be deemed not to
have been validly tendered for purposes of the Exchange Offer and no Exchange
Notes will be issued with respect thereto unless the Old Notes so withdrawn
are validly re-tendered. Any Old Notes which have been tendered but which are
not accepted for exchange will be returned to the holder thereof without cost
to such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be re-
tendered by following one of the procedures described above under "--
Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuers shall not
be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Issuers, might materially impair the
ability of the Issuers to proceed with the Exchange Offer or any material
adverse development has occurred in any existing action or proceeding with
respect to the Issuers or any of its subsidiaries; or
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(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the sole judgment
of the Issuers, might materially impair the ability of the Issuers to
proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Issuers; or
(c) any governmental approval has not been obtained, which approval the
Issuers shall, in its sole discretion, deem necessary for the consummation
of the Exchange Offer as contemplated hereby.
If the Issuers determine in their sole discretion that any of the conditions
are not satisfied, the Issuers may (i) refuse to accept any Old Notes and
return all tendered Old Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, subject, however, to the rights of holders to withdraw such Old
Notes (see "--Withdrawal of Tenders") or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Old Notes which have not been withdrawn.
In all cases, issuance of Exchange Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation into the Exchange Agent's account at a Book-Entry Transfer
Facility, a properly completed and duly executed Letter of Transmittal (or,
with respect to DTC and its participants, electronic instructions in which the
tendering holder acknowledges its receipt of and agreement to be bound by the
Letter of Transmittal), and all other required documents. If any tendered Old
Notes are not accepted for any reason set forth in the terms and conditions of
the Exchange Offer, or if Old Notes are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged
Old Notes will be returned without expense to the tendering holder thereof (or,
in the case of Book-Entry Interests, such non-exchanged Book-Entry Interests
will be credited to an account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the expiration or termination of the
Exchange Offer.
EXCHANGE AGENT
All executed Letters of Transmittal should be directed to the Exchange Agent.
IBJ Schroder Bank & Trust Company has been appointed as Exchange Agent for the
Exchange Offer. Questions, requests for assistance and requests for additional
copies of this Prospectus or of the Letter of Transmittal in connection with
the Exchange Notes should be directed to the Exchange Agent addressed as
follows:
For Information or
Confirmation by Telephone:
(212) 858-2103
By Mail: By Facsimile Transmission By Hand or Overnight
IBJ Schroder Bank & (for Eligible Institutions Delivery:
Trust Company Only): IBJ Schroder Bank & Trust
P. O. Box 84 (212) 958-2103 Company
Bowling Green Station Steven Giurlando One State Street
New York, NY 10274-0084 New York, NY 10004
Attention: Attention: Securities
Reorganization Processing Window
Operations Department Subcellar One (SC-1)
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
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FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Issuers. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Issuers and their affiliates.
The Issuers have not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Issuers, however, will pay
the Exchange Agent's reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuers. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs,
among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is face value, as reflected in the Issuers' accounting records on
the date of exchange. Accordingly, no gain or loss for accounting purposes
will be recognized by the Issuers. The expenses of the Exchange Offer will be
expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Old Notes
may be resold only (i) to the Issuers (upon redemption thereof or otherwise),
(ii) so long as the Old Notes are eligible for resale pursuant to Rule 144A,
to a person inside the United States whom the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, in
accordance with Rule 144 under the Securities Act, or pursuant to another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel reasonably acceptable to the Issuers), (iii)
outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, or (iv) pursuant to an
effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any state of the United
States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based upon interpretations by the
staff of the Commission set forth in no-action letters issued to third
parties, the Issuers believe that a holder or other person who receives
Exchange Notes, whether or not such person is the holder (other than a person
who is an "affiliate" of the Issuers within the meaning of Rule 405 under the
Securities Act) who receives Exchange Notes in exchange for Old Notes in the
ordinary course of business and who is not participating, does not intend to
participate, and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes, will be allowed to
resell the Exchange Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes
a prospectus that satisfies the requirements of Section 10 of the Securities
Act. However, if any holder acquires Exchange Notes in the Exchange Offer for
the purpose of distributing or participating in a distribution of the Exchange
Notes, such holder cannot rely upon the position of the staff of the
Commission enunciated in such no-action letters or any similar interpretive
letters, and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction,
unless an exemption from registration is otherwise available. Further, each
Participating Broker-Dealer that receives Exchange Notes for its own account
in exchange for Old Notes, where such Old Notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
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As contemplated by these no-action letters and the Exchange and Registration
Rights Agreement, each holder accepting the Exchange Offer is required to
represent to the Issuers in the Letter of Transmittal that (i) the Exchange
Notes are to be acquired by the holder or the person receiving such Exchange
Notes, whether or not such person is the holder, in the ordinary course of
business, (ii) the holder or any such other person (other than a broker-dealer
referred to in the next sentence) is not engaging and does not intend to
engage, in the distribution of the Exchange Notes, (iii) the holder or any
such other person has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes, (iv) neither the holder
nor any such other person is an "affiliate" of the Issuers within the meaning
of Rule 405 under the Securities Act, and (v) the holder or any such other
person acknowledges that if such holder or other person participates in the
Exchange Offer for the purpose of distributing the Exchange Notes it must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale of the Exchange Notes and cannot
rely upon those no-action letters. As indicated above, each Participating
Broker-Dealer that receives an Exchange Note for its own account in exchange
for Old Notes must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. For a description of the procedures
for such resales by Participating Broker-Dealers, see "Plan of Distribution".
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CERTAIN U.S. INCOME TAX CONSEQUENCES
The following discussion is based upon the current provisions of the
Internal Revenue Code of 1986, as amended, applicable Treasury regulations,
judicial authority and administrative rulings and practice. There can be no
assurance that the Internal Revenue Service (the "Service") will not take a
contrary view, and no ruling from the Service has been or will be sought.
Legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conditions set forth
herein. Any such changes or interpretations may or may not be retroactive and
could affect the tax consequences to holders. Certain holders (including
insurance companies, tax-exempt organizations, financial institutions, broker-
dealers, foreign corporations and persons who are not citizens or residents of
the United States) may be subject to special rules not discussed below. The
Issuers recommend that each holder consult such holder's own tax advisor as to
the particular tax consequences of exchanging such holder's Old Notes for
Exchange Notes, including the applicability and effect of any state, local or
foreign tax laws.
The Issuers believe that the exchange of Old Notes for Exchange Notes
pursuant to the Exchange Offer will not be treated as an "exchange" for
federal income tax purposes because the Exchange Notes will not be considered
to differ materially in kind or extent from the Old Notes. Rather, the
Exchange Notes received by a holder will be treated as a continuation of the
Old Notes in the hands of such holder. As a result, there will be no federal
income tax consequences to holders exchanging Old Notes for Exchange Notes
pursuant to the Exchange Offer.
CERTAIN NETHERLANDS INCOME TAX CONSEQUENCES
The following is a summary of certain Netherlands tax consequences relating
to the exchange of the Old Notes for the Exchange Notes pursuant to the
Exchange Agreement. The summary does not address any laws other than the tax
laws of the Netherlands as currently in effect and as interpreted in published
case law by the courts of the Netherlands as the date hereof. Any changes of
law with retroactive effect are not addressed. The summary does not purport to
address all possible Netherlands tax consequences relating to the exchange.
Any Netherlands tax consequences due to the applications of a special regime,
such as the tax-exempt status of qualifying pension funds, are excluded from
the summary. In view of the general nature of the summary, the summary should
be treated with corresponding caution. Holders of Notes who or which are in
doubt with regard to the Netherlands tax consequences of the exchange of the
Old Notes for the Exchange Notes should consult with their professional
advisors.
The Issuers believe that a holder of Notes will not be subject to any
Netherlands taxes on income or capital gains in respect of any gain realized
on the exchange of Old Notes for Exchange Notes pursuant to the Exchange
Offer, provided that (i) such holder is neither resident nor deemed to be
resident in The Netherlands, (ii) such holder does not have an enterprise or
an interest in an enterprise which is, in whole or in part, carried on through
a permanent establishment or a permanent representative in The Netherlands and
to which enterprise or part of an enterprise the Notes are attributable, and
(iii) neither such holder nor his spouse, other persons sharing his household
or certain of their relatives by blood or marriage in the direct line
(including foster children) have a substantial or deemed substantial interest
(a term defined by statute) in Lyon or, if such holder or one or more of the
other persons referred to do have such an interest, both the Notes and such
interest(s) form part of the assets of an enterprise.
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PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of Exchange
Notes received in exchange for Old Notes where such Old Notes were acquired as
a result of market-making activities or other trading activities. The Issuers
have agreed that, for a period of 180 days after the Expiration Date, they
will make this Prospectus, as amended or supplemented, available to any
Participating Broker-Dealer for use in connection with any such resale. In
addition, until [ ], 1998 (90 days after the commencement of the Exchange
Offer), all dealers effecting transactions in the Exchange Notes may be
required to deliver a prospectus.
The Issuers will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker-Dealers. Exchange Notes received by
Participating Broker-Dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in the over-
the-counter market, in negotiated transactions, through the writing of options
on the Exchange Notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such Participating Broker-
Dealer and/or the purchasers of any such Exchange Notes. Any Participating
Broker-Dealer that resells the Exchange Notes that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
For a period of 180 days after the Expiration Date, the Issuers will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that requests
such documents in the Letter of Transmittal. The Issuers have agreed to pay
all expenses incident to the Exchange Offer (including the expenses of one
counsel for the Holders of the Old Notes) other than commissions or
concessions of any Participating Broker-Dealers and will indemnify the Holders
of the Old Notes (including any Participating Broker-Dealers) against certain
liabilities, including liabilities under the Securities Act.
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BOOK-ENTRY; DELIVERY AND FORM
The Dollar Notes and the DM Notes were offered and sold in connection with
the initial offering thereof solely to QIBs pursuant to Rule 144A under the
Securities Act and in offshore transactions to Non-U.S. Persons in reliance on
Regulation S under the Securities Act. Following the initial offering of the
Notes, the Dollar Notes and the DM Notes could be sold to QIBs pursuant to
Rule 144A, Non-U.S. Persons in reliance on Regulation S and pursuant to other
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act, as described under "Transfer
Restrictions", including sales that are not QIBs.
THE GLOBAL NOTES
Dollar Global Notes. Dollar Notes offered and sold to QIBs pursuant to Rule
144A under the Securities Act were issued in the form of one or more
registered notes in global form, without interest coupons (the "Dollar Rule
144A Global Note"). The Dollar Rule 144A Global Note was deposited on the date
of the closing of the sale of the Notes (the "Closing Date") with, or on
behalf of, The Depository Trust Company ("DTC") and registered in the name of
Cede & Co., as nominee of DTC, or will remain in the custody of the Dollar
Notes Trustee pursuant to the FAST Balance Certificate Agreement between DTC
and the Dollar Notes Trustee. Investors may hold their interests in the Dollar
Rule 144A Global Note directly through DTC, if they are participants in such
system, or indirectly through organizations which are participants in such
system. Interests in the Dollar Rule 144A Global Note are available for
purchase only by QIBs.
Dollar Notes offered and sold in offshore transactions to Non-U.S. Persons
in reliance on Regulation S under the Securities Act were issued in the form
of one or more registered notes in global form, without interest coupons (the
"Dollar Regulation S Global Note"). The Dollar Regulation S Global Note was
deposited upon issuance with, or on behalf of, a custodian for DTC in the
manner described above for credit to the respective accounts of the purchasers
(or to such other accounts as they may direct) at Morgan Guaranty Trust
Company of New York, Brussels Office, as operator of the Euroclear System
("Euroclear"), or Cedel Bank, societe anonyme ("Cedel"). Investors may hold
their interests in the Dollar Regulation S Global Note directly through
Euroclear or Cedel, if they are account holders in such systems, or indirectly
through organizations which are account holders in such systems. Investors may
also hold such interests through organizations other than Euroclear or Cedel
that are participants in the DTC system. Euroclear and Cedel hold such
interests in the Dollar Regulation S Global Note on behalf of their account
holders through securities accounts in the respective account holders' names
on Euroclear's and Cedel's respective book-entry registration and transfer
systems, which in turn hold such interests in the Dollar Regulation S Global
Note in accounts in Euroclear's or Cedel's name on the books of DTC.
In connection with the sale of Dollar Notes to an Institutional Accredited
Investor, beneficial interests in the Dollar Rule 144A Global Note and the
Dollar Regulation S Global Note may be exchanged for interests in a separate
note in registered form, without interest coupons (the "Dollar Institutional
Accredited Investor Global Note"), which was deposited on the Closing Date
with, or on behalf of, a custodian for DTC in the manner described above.
DM Global Note. The DM Notes offered and sold to QIBs pursuant to Rule 144A
under the Securities Act and the DM Notes offered and sold in offshore
transactions to Non-U.S. Persons in reliance on Regulation S under the
Securities Act were issued in the form of a single registered note in global
form, without interest coupons (the "DM Global Note"). The DM Global Note was
deposited on the Closing Date with, or on behalf of, The Industrial Bank of
Japan (Luxembourg), S.A., as common depositary (the "Common Depositary") for
Euroclear and Cedel, and registered in the name of the Common Depositary.
Investors may hold their interests in the DM Global Note directly through
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Euroclear or Cedel, if they are account holders in such systems, or indirectly
through organizations which are account holders in such systems.
Beneficial interests in the DM Global Note may only be transferred to QIBs
pursuant to Rule 144A under the Securities Act, in offshore transactions to
Non-U.S. Persons in accordance with Regulation S under the Securities Act and
to Institutional Accredited Investors.
Except as set forth below, the Dollar Rule 144A Global Note, the Dollar
Regulation S Global Note and the Dollar Institutional Accredited Investor
Global Note (collectively, the "Dollar Global Notes") may be transferred, in
whole and not in part, solely to another nominee of DTC or to a successor of
DTC or its nominee. In addition, the DM Global Note (together with the Dollar
Global Notes, the "Global Notes") may be transferred, in whole but not in
part, solely to a nominee of the Common Depositary, a successor of the Common
Depositary or its nominee. Beneficial interests in the Global Notes may not be
exchanged for Notes in physical, certificated form ("Certificated Notes")
except in the limited circumstances described below.
All interests in the Dollar Global Notes, including those held through
Euroclear or Cedel, may be subject to the procedures and requirements of DTC.
All interests in the Dollar Global Notes held through Euroclear or Cedel and
all interests in the DM Global Note may be subject to the procedures and
requirements of such systems. In addition, all interests in the DM Global Note
may be subject to the procedures and requirements of the Common Depositary,
its nominee or their respective successors.
EXCHANGES AMONG THE GLOBAL NOTES
Exchanges among the Dollar Global Notes. Prior to the 40th day after the
later of the commencement of the offering of the Notes and the Closing Date
(such period through and including such 40th day, the "Restricted Period"),
transfers by an owner of a beneficial interest in the Dollar Regulation S
Global Note to a transferee who takes delivery of such interest through the
Dollar Rule 144A Global Note or the Dollar Institutional Accredited Investor
Global Note may be made only in accordance with applicable procedures and upon
receipt by the Dollar Notes Trustee of a written certification from the
transferor of the beneficial interest in the form provided in the Dollar Notes
Indenture to the effect that such transfer is being made to (i) a person whom
the transferor reasonably believes is a QIB within the meaning of Rule 144A
under the Securities Act in a transaction meeting the requirements of Rule
144A or (ii) an Institutional Accredited Investor purchasing for its own
account, or for the account of such an Institutional Accredited Investor, in a
minimum principal amount of Notes of $250,000. Such written certification will
no longer be required after the expiration of the Restricted Period. In
addition, in the case of a transfer pursuant to clause (ii) above, whether
before or after the expiration of the Restricted Period, the transferor may be
required to deliver to the Issuers and the Dollar Notes Trustee a letter from
the transferee substantially in the form of Annex A hereto, which shall
provide, among other things, that the transferee is an Institutional
Accredited Investor that is acquiring such Notes not for distribution in
violation of the Securities Act.
Transfers by an owner of a beneficial interest in the Dollar Rule 144A
Global Note or the Dollar Institutional Accredited Investor Global Note to a
transferee who takes delivery of such interest through the Dollar Regulation S
Global Note, whether before or after the expiration of the Restricted Period,
may be made only upon receipt by the Dollar Notes Trustee of a certification
from the transferor to the effect that such transfer is being made in
accordance with Regulation S or (if available) Rule 144A under the Securities
Act and that, if such transfer is being made prior to the expiration of the
Restricted Period, the interest transferred will be held immediately
thereafter through Euroclear or Cedel.
Any beneficial interest in one of the Dollar Global Notes that is
transferred to a person who takes delivery in the form of an interest in
another Dollar Global Note will, upon transfer, cease to be an
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interest in such Dollar Global Note and become an interest in the other Dollar
Global Note and, accordingly, will thereafter be subject to all transfer
restrictions, if any, and other procedures applicable to beneficial interests
in such other Dollar Global Note for as long as it remains such an interest.
No Exchanges between Dollar Global Notes and the DM Global Note. Beneficial
interests in any of the Dollar Global Notes are not exchangeable for interests
in the DM Global Note, or vice versa, under any circumstances.
CERTAIN BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTES
The descriptions of the operations and procedures of DTC, Euroclear and
Cedel set forth below are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to change at any time or from time to time.
None of the Issuers or the Initial Purchasers takes any responsibility for
these operations or procedures, and investors are urged to contact the
relevant system or its participants or account holders directly to discuss
these matters.
DTC. DTC has advised the Issuers that it is (i) a limited purpose trust
company organized under the laws of the State of New York, (ii) a "banking
organization" within the meaning of the New York Banking Law, (iii) a member
of the Federal Reserve System, (iv) a "clearing corporation" within the
meaning of the Uniform Commercial Code, as amended, and (v) a "clearing
agency" registered pursuant to Section 17A of the Exchange Act. DTC was
created to hold securities for its participants and facilitates the clearance
and settlement of securities transactions between its participants through
electronic book-entry changes to the accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates. DTC's
participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain
other organizations (including Euroclear and Cedel). Indirect access to DTC's
system is also available to other entities such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with
one of DTC's participants, either directly or indirectly. Investors who are
not participants in DTC may beneficially own securities held by or on behalf
of DTC only through DTC's participants or indirect participants.
The Issuers expect that pursuant to procedures established by DTC (i) upon
deposit of each Dollar Global Note, DTC will credit the accounts of its
participants designated by the Initial Purchasers with an interest in such
Dollar Global Note and (ii) ownership of the Dollar Notes will be shown on,
and the transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the interests of its participants) and the
records of its participants and indirect participants (with respect to the
interests of persons other than DTC's participants).
Euroclear and Cedel. Euroclear and Cedel each hold securities for their
account holders and facilitate the clearance and settlement of securities
transactions by electronic book-entry transfer between their respective
account holders, thereby eliminating the need for physical movements of
certificates and any risk from lack of simultaneous transfers of securities.
Euroclear and Cedel provide various services including safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Euroclear and Cedel also deal with
domestic securities lending and borrowing as well as domestic securities
markets in several countries through established depositary and custodial
relationships. Euroclear and Cedel have established an electronic bridge
between their two systems across which their respective account holders may
settle trades with each other.
Account holders in Euroclear and Cedel are world-wide financial
institutions, including underwriters, securities brokers and dealers, banks,
trust companies and clearing corporations. Indirect
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access to Euroclear and Cedel is available to other institutions that clear
through or maintain a custodial relationship with an account holder in either
system.
Account holders' overall contractual relations with Euroclear and Cedel are
governed by the respective rules and operating procedures of Euroclear and
Cedel and any applicable laws. Euroclear and Cedel act under such rules and
operating procedures only on behalf of their respective account holders and
have no record of or relationship with persons holding through their
respective account holders.
Certain Consequences. The laws of some jurisdictions may require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Accordingly, the ability to transfer interests in the Notes
represented by a Global Note to such persons may be limited. In addition,
because DTC can act only on behalf of its participants, who in turn act on
behalf of persons who hold interests through such participants, and because
Euroclear and Cedel act only on behalf of their respective account holders,
who in turn act on behalf of persons who clear through or maintain a custodial
relationship with such account holders, the ability of a person having an
interest in Notes represented by a Global Note to pledge or transfer such
interest to persons or entities that do not participate in the systems of DTC,
Euroclear or Cedel, as the case may be, or to otherwise take actions in
respect of such interest, may be affected by the lack of a physical definitive
security in respect of such interest.
So long as DTC or its nominee or the Common Depositary or its nominee, as
the case may be, is the owner of a Global Note, DTC or its nominee, or the
Common Depositary or its nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by such Global Note for all
purposes under the applicable Indenture and the applicable Notes. Except as
provided below, owners of beneficial interests in a Global Note will not be
entitled to have Notes represented by such Global Note registered in their
names, will not receive or be entitled to receive physical delivery of
Certificated Notes, and will not be considered the owners or holders thereof
under the applicable Indenture for any purpose, including with respect to the
giving of any direction, instruction or approval to the Trustee thereunder.
Accordingly, each holder owning a beneficial interest in a Dollar Global Note
must rely on the procedures of DTC and, if such holder is not one of DTC's
participants or indirect participants, on the procedures of the participant
through which such holder owns its interest, and each holder owning a
beneficial interest in the DM Global Note must rely on the procedures of the
Common Depositary and the procedures of Euroclear or Cedel, as applicable,
and, if such holder is not one of Euroclear's or Cedel's account holders, on
the procedures of the account holder through which such holder owns its
interest, to exercise any rights of a holder of Notes under the applicable
Indenture or such Global Note. The Issuers understand that under existing
industry practice, in the event that the Issuers request any action of holders
of Notes, or a holder that is an owner of a beneficial interest in a Global
Note desires to take any action that DTC or the Common Depositary, as the case
may be, as the holder of such Global Note, is entitled to take, DTC or the
Common Depositary (acting with Euroclear and Cedel), as the case may be, would
authorize its participants or account holders, as the case may be, to take
such action and the participants or account holders, as the case may be, would
authorize holders owning through such participants or account holders, as the
case may be, to take such action or would otherwise act upon the instruction
of such holders. None of the Issuers, any paying agent, the Initial Purchasers
or the Trustees will have any responsibility or liability for any aspect of
the records relating to or payments made on account of Notes by DTC or the
Common Depositary (or Euroclear or Cedel), as the case may be, or for
maintaining, supervising or reviewing any records of DTC or the Common
Depositary (or Euroclear or Cedel), as the case may be, relating to such
Global Notes.
PAYMENT
The Issuers appointed IBJ Schroder Bank & Trust Company as paying agent for
all amounts owing in respect of the Dollar Notes (the "U.S. Paying Agent"),
and all such amounts will be payable
138
<PAGE>
in U.S. dollars. The Issuers appointed The Industrial Bank of Japan (Germany)
and the Industrial Bank of Japan (Luxembourg), S.A. as paying agents for all
amounts owing in respect of the DM Notes (the "DM Paying Agents", and,
collectively with the U.S. Paying Agent, the "Paying Agents"), and all such
amounts will be payable in Deutsche Marks. The Issuers will ensure that, with
respect to the Dollar Notes, there will be a paying agent in the United States
to perform the functions assigned to it in the Dollar Notes Indenture and,
with respect to the DM Notes, there will be a paying agent in Germany to
perform the functions assigned to it in the DM Notes Indenture, and, so long
as the Notes are listed on the Luxembourg Stock Exchange, and such exchange so
requires, the Issuers will ensure that there will be a paying agent in
Luxembourg (or such other place as the Luxembourg Stock Exchange may approve).
Payments with respect to principal of, premium, if any, liquidated damages
or Additional Amounts, if any, and interest on, the Dollar Notes will be made
by the Issuers in U.S. dollars to the U.S. Paying Agent, which will in turn
distribute all such payments to DTC's nominee as the registered holder of each
of the Dollar Global Notes. DTC will promptly credit such payments on its
book-entry registration and transfer system to the accounts of its
participants in amounts proportionate to their respective beneficial interests
in the principal or face amount of Dollar Notes represented by each such
Dollar Global Note, as shown on the records of DTC or its nominee.
Payments with respect to principal of, premium, if any, liquidated damages
or Additional Amounts, if any, and interest on, the DM Notes will be made by
the Issuers in Deutsche Marks to either of the DM Paying Agents, which will in
turn distribute all such payments to the Common Depositary as the registered
holder of the DM Global Note. Upon receipt of such payments, the Common
Depositary will promptly distribute such payments to Euroclear and Cedel in
proportion to their respective interests, as shown on the records of the
Common Depositary. Euroclear and Cedel will promptly credit such payments on
their respective book-entry registration and transfer systems to the accounts
of their respective account holders in amounts proportionate to their
respective beneficial interests in the principal or face amount of the DM
Notes represented by the DM Global Note, as shown on their respective records.
Under the terms of the Indentures, the Issuers and the applicable Trustee
may treat the persons in whose names the Notes, including the Global Notes,
are registered as the owners thereof for the purpose of receiving payment
thereon and for any and all other purposes whatsoever. Accordingly, none of
the Issuers, the Paying Agents, the Initial Purchasers or the Trustees has or
will have any responsibility or liability for the payment of such amounts to
owners of beneficial interests in a Global Note (including principal, premium,
if any, liquidated damages or Additional Amounts, if any, and interest).
Payments by participants and indirect participants in DTC to the owners of
beneficial interests in a Dollar Global Note will be governed by standing
instructions and customary industry trade practice and will be the
responsibility of the participants and indirect participants and DTC, and
payments by account holders and indirect account holders at Euroclear and
Cedel to the owners of beneficial interests in the DM Global Note will be
governed by standing instructions and customary industry trade practice and
will be the responsibility of the account holders and indirect account holders
and Euroclear and Cedel.
Transfers between participants in DTC will be effected in accordance with
DTC's procedures and will be settled in same-day funds. Transfers between
account holders in Euroclear and Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures and will be
settled in same-day funds.
Subject to compliance with the transfer restrictions applicable to the
Notes, cross-market transfers between participants in DTC, on the one hand,
and account holders at Euroclear or Cedel, on the other hand, will be effected
by the applicable Trustee through the deposit or withdrawal at custodian
("DWAC") system in accordance with DTC's rules on behalf of Euroclear or
Cedel, as the case may be, by its respective depositary; however, such cross-
market transactions will require delivery of instructions to Euroclear or
Cedel, as the case may be, by the counterparty in such system in
139
<PAGE>
accordance with the rules and procedures and within the established deadlines
(Brussels time) of such system. Euroclear or Cedel, as the case may be, will,
if the transaction meets its settlement requirements, deliver instructions to
its respective depositary to take action to effect final settlement on its
behalf by delivering or receiving interests in the relevant Global Note in DTC
and making or receiving payment in accordance with normal procedures for same-
day funds settlement applicable to DTC. Euroclear and Cedel account holders
may not deliver instructions directly to the depositaries for Euroclear or
Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel account holder purchasing an interest in a Global Note from a
participant in DTC will be credited, and any such crediting will be reported
to the relevant Euroclear or Cedel account holder, during the securities
settlement processing day (which must be a business day for Euroclear and
Cedel) immediately following the settlement date of DTC. Credit of any
transactions in interests in Notes represented by a Global Note settled during
such processing day will be reported to the relevant Euroclear or Cedel
account holder on such day. Cash received in Euroclear or Cedel as a result of
sales of interests in a Global Note by or through a Euroclear or Cedel account
holder to a participant in DTC will be received with value on the settlement
date of DTC but will be available in the relevant Euroclear or Cedel cash
account only as of the business day for Euroclear or Cedel following DTC's
settlement date.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Notes among participants in
DTC and account holders at Euroclear and Cedel, they are under no obligation
to perform or to continue to perform such procedures, and such procedures may
be discontinued at any time. None of the Issuers, any Paying Agent or the
Trustees will have any responsibility for the performance by DTC, Euroclear or
Cedel or their respective participants or indirect participants or account
holders or indirect account holders of their respective obligations under the
rules and procedures governing their operations.
CERTIFICATED NOTES
If (i) the Issuers notify the Dollar Notes Trustee in writing that DTC is no
longer willing or able to act as a depositary or DTC ceases to be registered
as a clearing agency under the Exchange Act and a successor depositary is not
appointed within 90 days of such notice or cessation, (ii) the Issuers, at
their option, notify the Dollar Notes Trustee in writing that they elect to
cause the issuance of Dollar Notes in definitive form under the Dollar Notes
Indenture or (iii) upon the occurrence of certain other events as provided in
the Dollar Notes Indenture, then, upon surrender by DTC of the Dollar Global
Notes, Certificated Notes will be issued to each person that DTC identifies as
the beneficial owner of the Dollar Notes represented by the Dollar Global
Notes. Upon any such issuance, the Dollar Notes Trustee will be required to
register such Certificated Notes in the name of such person or persons (or the
nominee of any thereof) and cause the same to be delivered thereto.
If (i) the Issuers notify the DM Notes Trustee in writing that each of
Euroclear and Cedel is no longer willing or able or ceases to be registered as
a clearing agency under the Exchange Act and a successor registered as a
clearing agency under the Exchange Act is not appointed within 90 days of such
notice or cessation, (ii) the Issuers, at their option, notify the DM Notes
Trustee in writing that they elect to cause the issuance of DM Notes in
definitive form under the DM Notes Indenture, (iii) the Common Depositary at
any time notifies the Issuers that it is unwilling or unable to continue as
the Common Depositary and a successor to such Common Depositary is not
appointed within 90 days of such notice or (iv) upon the occurrence of certain
other events as provided in the DM Notes Indenture, then, upon surrender by
the Common Depositary of the DM Global Note, Certificated Notes will be issued
to each person that Euroclear or Cedel identifies as the beneficial owner of
the DM Notes represented by the DM Global Note. Upon any such issuance, the DM
Notes Trustee will be required to register such Certificated Notes in the name
of such person or persons (or the nominee of any thereof) and cause the same
to be delivered thereto.
140
<PAGE>
None of the Issuers or the Trustees shall be liable for any delay by DTC, or
any of its participants or indirect participants, or Euroclear or Cedel, or
any of their respective account holders or indirect account holders, in
identifying the beneficial owners of the related Notes and each such person
may conclusively rely on, and shall be protected in relying on, instructions
from DTC, Euroclear or Cedel, as applicable, for all purposes (including with
respect to the registration and delivery, and the principal amounts, of the
Notes to be issued).
141
<PAGE>
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon for the
Issuers by Kirkland & Ellis, Washington, D.C., United States of America, and
Trenite Van Doorne, Amsterdam. Netherlands.
142
<PAGE>
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COMPANY COMBINED FINANCIAL STATEMENTS:
Report of Independent Public Accountants.................................. F-2
Combined Balance Sheets as of December 31, 1996 and 1997 and March 29,
1998..................................................................... F-3
Combined Statements of Income for the years ended December 31, 1995, 1996
and 1997 and the three months ended March 30,1997 and March 29, 1998..... F-4
Combined Statements of Shareholder's Equity for the years ended December
31, 1995, 1996 and 1997 and the three months ended March 29, 1998........ F-5
Combined Statements of Cash Flows for the years ended December 31, 1995,
1996 and 1997 and the three months ended March 30, 1997 and March 29,
1998..................................................................... F-6
Notes to Combined Financial Statements.................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Derby Bicycle Group:
We have audited the accompanying combined balance sheets of The Derby
Bicycle Group (the "Group" as described in Note 1) as of December 31, 1996 and
1997, and the related combined statements of income, shareholder's equity and
cash flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Group's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial positions of the Group as of
December 31, 1996 and 1997, and the combined results of its operations and its
cash flows for each of the three years in the period ended December 31, 1997,
in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Washington, D.C.
April 9, 1998
(except with respect to the matter discussed in Note 17, as to which the date
is May 14, 1998)
F-2
<PAGE>
THE DERBY BICYCLE GROUP
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 29,
1996 1997 1998
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................... $ 8,830 $ 15,426 $ 8,162
Receivables, net of allowances of $7,573,
$8,259 and $8,199 as of December 31, 1996,
1997, and March 29, 1998, respectively...... 68,139 64,526 111,346
Inventories.................................. 80,476 89,792 103,199
Other current assets......................... 8,266 15,201 14,542
--------- --------- ---------
Total current assets....................... 165,711 184,945 237,249
--------- --------- ---------
PROPERTY, PLANT AND EQUIPMENT, net of
accumulated depreciation of $55,783, $59,463,
and $61,100 as of December 31, 1996, 1997, and
March 29, 1998, respectively.................. 51,716 49,707 47,912
INTANGIBLES, net of accumulated amortization of
$522, $818, and $1,052 as of December 31,
1996, 1997, and March 29, 1998, respectively.. 881 6,651 6,425
PREPAID PENSION ASSETS......................... 42,411 47,777 49,385
--------- --------- ---------
Total assets............................... $260,719 $289,080 $340,971
========= ========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable............................. $ 33,059 $ 35,526 $ 36,302
Accrued liabilities.......................... 22,593 23,320 25,639
Income taxes payable......................... 4,365 4,027 4,772
Short-term borrowings and current portion of
long-term borrowings........................ 22,250 51,160 96,627
Other current liabilities.................... 3,454 7,603 6,880
--------- --------- ---------
Total current liabilities.................. 85,721 121,636 170,220
--------- --------- ---------
OTHER LIABILITIES:
Long-term debt, net of current portion....... 56,333 51,059 50,878
Excess of assets acquired over cost of acqui-
sitions..................................... 11,971 11,235 11,138
Deferred income taxes........................ 16,092 17,451 17,907
Other liabilities............................ 6,719 4,950 4,656
Minority interest............................ 802 876 855
--------- --------- ---------
Total liabilities.......................... 177,638 207,207 255,654
--------- --------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY:
Capital investment........................... 94,498 91,455 90,617
Retained earnings (deficit).................. (12,738) (6,162) (1,554)
Accumulated other comprehensive income....... 1,321 (3,420) (3,746)
--------- --------- ---------
Total shareholder's equity................. 83,081 81,873 85,317
--------- --------- ---------
Total liabilities and shareholder's equi-
ty........................................ $260,719 $289,080 $340,971
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
F-3
<PAGE>
THE DERBY BICYCLE GROUP
COMBINED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, THREE MONTHS ENDED
-------------------------------- -------------------
MARCH 30, MARCH 29,
1995 1996 1997 1997 1998
---------- ---------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Net revenues........... $ 473,841 $ 452,584 $ 465,687 $122,825 $121,433
Cost of sales.......... (366,163) (339,119) (345,885) (93,170) (90,315)
---------- ---------- ---------- --------- ---------
Gross profit......... 107,678 113,465 119,802 29,655 31,118
---------- ---------- ---------- --------- ---------
SELLING, GENERAL, AND AD-
MINISTRATIVE EXPENSES... (81,289) (80,083) (90,101) (21,236) (22,768)
REORGANIZATION COSTS..... (4,413) -- -- -- --
---------- ---------- ---------- --------- ---------
Operating income..... 21,976 33,382 29,701 8,419 8,350
---------- ---------- ---------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense....... (9,429) (8,023) (7,490) (2,006) (1,814)
Interest income........ 872 815 1,038 54 84
Other income (expense),
net................... 10,046 (2,675) 107 27 (138)
---------- ---------- ---------- --------- ---------
Income before income
taxes............... 23,465 23,499 23,356 6,494 6,482
---------- ---------- ---------- --------- ---------
PROVISION FOR INCOME TAX-
ES...................... (10,095) (8,924) (10,621) (1,914) (1,874)
MINORITY INTEREST........ (130) (10) (51) -- --
---------- ---------- ---------- --------- ---------
Net income........... $ 13,240 $ 14,565 $ 12,684 $ 4,580 $ 4,608
========== ========== ========== ========= =========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-4
<PAGE>
THE DERBY BICYCLE GROUP
COMBINED STATEMENTS OF SHAREHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
RETAINED OTHER
CAPITAL (DEFICIT) COMPREHENSIVE
INVESTMENT EARNINGS INCOME TOTAL
---------- --------- ------------- --------
<S> <C> <C> <C> <C>
JANUARY 1, 1995................... $87,466 $(29,093) $(2,057) $56,316
Comprehensive Income:
Net income...................... -- 13,240 -- 13,240
Translation adjustments......... -- -- 248 248
-------- --------- -------- --------
Total Comprehensive Income........ -- 13,240 248 13,488
Increase (decrease) in capital.. 1,387 (2,790) -- (1,403)
Dividends....................... -- (2,311) -- (2,311)
-------- --------- -------- --------
DECEMBER 31, 1995................. 88,853 (20,954) (1,809) 66,090
-------- --------- -------- --------
Comprehensive Income:
Net income...................... -- 14,565 -- 14,565
Translation adjustments......... -- -- 3,130 3,130
-------- --------- -------- --------
Total Comprehensive Income........ -- 14,565 3,130 17,695
Increase in capital............. 5,645 -- -- 5,645
Dividends....................... -- (6,349) -- (6,349)
-------- --------- -------- --------
DECEMBER 31, 1996................. 94,498 (12,738) 1,321 83,081
-------- --------- -------- --------
Comprehensive Income:
Net income...................... -- 12,684 -- 12,684
Translation adjustments......... -- -- (4,741) (4,741)
-------- --------- -------- --------
Total Comprehensive Income........ -- 12,684 (4,741) 7,943
Decrease in capital............. (3,043) -- -- (3,043)
Dividends....................... -- (6,108) -- (6,108)
-------- --------- -------- --------
DECEMBER 31, 1997................. 91,455 (6,162) (3,420) 81,873
-------- --------- -------- --------
Comprehensive Income:
Net income (Unaudited).......... -- 4,608 -- 4,608
Translation adjustments (Unau-
dited)......................... -- -- (326) (326)
-------- --------- -------- --------
Total Comprehensive Income (Unau-
dited)........................... -- 4,608 (326) 4,282
Decrease in capital (Unau-
dited)......................... (838) -- -- (838)
-------- --------- -------- --------
MARCH 29, 1998 (Unaudited)........ $90,617 $ (1,554) $(3,746) $85,317
======== ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-5
<PAGE>
THE DERBY BICYCLE GROUP
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, THREE MONTHS ENDED
--------------------------- -----------------------
MARCH 30, MARCH 29,
1995 1996 1997 1997 1998
-------- -------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income............... $13,240 $14,565 $12,684 $4,580 $4,608
Adjustments to reconcile
net income
to net cash provided by
operating activities
Depreciation............ 9,848 9,400 9,362 2,631 2,565
Amortization............ (1,195) (1,164) (730) (186) (126)
Minority interest....... 130 10 51 -- --
Profit on disposal of
land and buildings..... (4,740) -- -- -- --
Unrealized (gain) loss
on swaps............... (5,306) 2,675 (107) (27) 138
Net periodic pension in-
come................... (5,793) (6,261) (5,828) (1,489) (1,227)
Net changes in operating
assets and liabilities,
net of acquisitions
Increase in receiv-
ables.................. (701) (5,686) (1,447) (50,048) (47,621)
(Increase) decrease in
inventories............ (613) 2,753 (10,104) (1,609) (14,407)
(Increase) decrease in
other current assets... (1,736) 24 (1,877) 359 1,054
Increase (decrease) in
accounts payable....... 1,220 (5,385) 4,405 7,650 1,142
Increase in accrued lia-
bilities............... 102 12 2,097 7 2,579
(Decrease) increase in
income taxes payable... (771) 882 209 (464) 680
Increase (decrease) in
other current liabili-
ties................... 393 384 288 (972) (601)
Increase in deferred in-
come taxes............. 3,155 1,954 2,371 910 543
Increase (decrease) in
other liabilities...... 888 (2,249) (416) (5) (116)
-------- -------- -------- -------- --------
Net cash provided by
(used in) operating
activities........... 8,121 11,914 10,958 (38,663) (50,789)
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property,
plant and equipment..... (11,121) (10,765) (7,413) (1,190) (1,416)
Proceeds from property,
plant and equipment
dispositions............ 3,903 3,933 882 -- 36
Cash paid for acquisi-
tions, net of cash ac-
quired.................. -- -- (6,650) -- --
Purchases of trademarks.. -- -- (2,663) (2,550) --
Purchase of minority in-
terest.................. (138) -- -- -- --
-------- -------- -------- -------- --------
Net cash used in invest-
ing activities......... (7,356) (6,832) (15,844) (3,740) (1,380)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Repayment of long-term
debt, net of cash (paid)
received on related
swaps................... -- (14,570) (13,331) -- --
Short-term borrowings,
net..................... (1,809) 950 28,910 47,834 45,465
Debt financing costs..... -- -- (596) (434) (8)
Dividends paid........... (2,778) (5,607) (1,139) -- --
Contributions made to
pension plans........... (2,276) (2,154) (2,335) (585) (624)
Net (distribution to)
contribution by DICSA... (1,403) 5,645 (3,043) (808) (838)
-------- -------- -------- -------- --------
Net cash (used in)
provided by financing
activities............. (8,266) (15,736) 8,466 46,007 43,995
-------- -------- -------- -------- --------
EFFECT OF EXCHANGE RATE
CHANGES................... (1,609) 6,799 3,016 338 910
NET (DECREASE) INCREASE IN
CASH AND CASH
EQUIVALENTS............... (9,110) (3,855) 6,596 3,942 (7,264)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD....... 21,795 12,685 8,830 8,830 15,426
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD............. $12,685 $ 8,830 $15,426 $12,772 $ 8,162
======== ======== ======== ======== ========
SUPPLEMENTAL CASH FLOW IN-
FORMATION:
Interest paid............ $ 9,036 $ 8,015 $ 7,202 $ 2,119 $ 1,813
Income taxes paid........ $ 7,711 $ 6,088 $ 8,041 $ 1,468 $ 651
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-6
<PAGE>
THE DERBY BICYCLE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 29, 1998 AND FOR THE THREE MONTHS ENDED
MARCH 30, 1997 AND MARCH 29, 1998 IS UNAUDITED)
1. NATURE OF THE BUSINESS AND BASIS OF PRESENTATION:
The accompanying combined financial statements have been prepared to reflect
the financial position and results of operations of the bicycle and bicycle
component businesses of Derby International Corporation SA ("DICSA"), a
Luxembourg holding company. DICSA owns shares, either directly or indirectly,
in a number of bicycle and bicycle component companies worldwide that
predominantly operate as standalone entities. Each of the companies
manufactures, assembles and/or distributes bicycles and bicycle components.
These bicycle and bicycle component companies, collectively referred to as The
Derby Bicycle Group (the "Group"), have significant operations in the
Netherlands ("Gazelle"), the United Kingdom ("Derby Holding Ltd." or "DHL",
and "Sturmey Archer Ltd." or "SAL"), Canada ("Raleigh Industries of Canada" or
"RIC"), Germany ("Derby Cycle Werke" or "DCW"), South Africa ("Derby
Investment Holdings Pty Ltd.") and the United States ("The Derby Cycle
Corporation" or "DCC"). The Group owns or licenses many of the most recognized
brands in the bicycle industry, including leading global brands such as
Raleigh, Nishiki (for USA only) and Univega, and leading national brands such
as Gazelle in the Netherlands and Kalkoff, Musing, Winora and Staiger in
Germany.
Effective May 14, 1998, DICSA reorganized its businesses in connection with
a recapitalization agreement (see Note 17) so that each of its bicycle and
bicycle component companies are owned directly or indirectly by DCC, a
Delaware corporation with operations in the United States. Accordingly, the
accompanying combined financial statements have been prepared in conformity
with accounting principles generally accepted in the United States and are
presented in United States dollars.
The accompanying combined financial statements have been prepared as if the
Group had been in existence for all periods presented. DICSA's historical
basis in the assets and liabilities of the Group has been carried over. All
material intercompany transactions and balances between entities included in
these combined financial statements have been eliminated. Certain expenses
were originally recorded by DICSA on behalf of the Group, such as
headquarters' management costs and other corporate expenses. These amounts
have been reflected in their entirety in the Group's financial statements, as
such costs were incurred on behalf of the Group. Management believes this
allocation is reasonable and represents the expenses as if the Group had been
a stand-alone operation.
2. ACCOUNTING POLICIES:
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses. Actual results
could differ from those estimates.
UNAUDITED INTERIM FINANCIAL DATA
The unaudited interim combined financial statements as of March 29, 1998 and
for the three months ended March 29, 1998 and March 30, 1997 have been
prepared on the same basis as the audited combined financial statements and,
in the opinion of management, includes all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial
information set forth therein, in accordance with generally accepted
accounting principles. The data disclosed in the notes to the combined
financial statements for these periods is unaudited. The Group's results of
operations for the three month period ended March 29, 1998 are not necessarily
indicative of the results to be expected for any future period.
F-7
<PAGE>
THE DERBY BICYCLE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
QUARTER ENDS
The Group's first, second and third quarters end on the last Sunday in
March, June and September, respectively. The fiscal year ends on December 31
of each year.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Group's companies have been translated in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 52
"Foreign Currency Translation". Current rates of exchange are used to
translate the balance sheets of the Group's companies, while the average
exchange rate for each year is used to translate the statements of income and
cash flows. The resulting translation adjustments are recorded as a component
of shareholder's equity. Gains or losses resulting from transactions in other
than a functional currency are reflected in net income.
REVENUE RECOGNITION
Revenue is generally recognized net of sales taxes, returns, discounts and
allowances, when products are shipped to customers or services are rendered.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Total advertising costs were
$10,608,000, $11,329,000 and $10,245,000 for the years ended December 31,
1995, 1996, and 1997, respectively, and $2,498,000 and $2,690,000, for the
three months ended March 30, 1997 and March 29, 1998, respectively.
INCOME TAXES
The Group accounts for income taxes under the liability method in accordance
with SFAS No. 109 "Accounting for Income Taxes." Deferred taxes are recognized
for the tax consequences of temporary differences by applying enacted
statutory tax rates applicable to future years to differences between the
financial statement carrying amounts and the tax bases of existing assets and
liabilities. The effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date. Future
tax benefits are recognized to the extent that realization of such benefits is
more likely than not.
COMPREHENSIVE INCOME
The Group adopted SFAS No. 130 "Reporting Comprehensive Income" during 1998.
The adoption of this standard did not have a material effect on the Group's
financial statements as the Group's comprehensive income does not differ
materially from net income except for foreign currency translation adjustments
included in comprehensive income, the effect of which could be material
depending on future changes in foreign exchange rates.
CASH AND CASH EQUIVALENTS
The Group considers liquid investments with an original maturity at the date
of purchase of three months or less to be cash equivalents. Due to the short
maturity of these investments, their carrying amount approximates fair value.
INVENTORIES
Inventories are stated at the lower of cost or net realizable value, with
cost determined on a first in, first out ("FIFO") basis. A provision is made
for obsolete, slow moving and defective items where appropriate.
F-8
<PAGE>
THE DERBY BICYCLE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 29,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Finished products................................ $35,891 $43,211 $ 42,475
Work in process.................................. 9,053 8,841 9,424
Raw materials.................................... 35,532 37,740 51,300
------- ------- --------
Total inventories.............................. $80,476 $89,792 $103,199
======= ======= ========
</TABLE>
The market for bicycles, parts and accessories is subject to the risk of
changing consumer trends. In the event that a particular bicycle model or
accessory does not achieve widespread consumer acceptance, and the Group holds
excess inventory of that bicycle model, part or accessory, the Group may be
required to take significant price markdowns, which could have a material
adverse effect on the Group's business, results of operations and financial
condition.
PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment are recorded at cost and depreciated using
the straight-line method over the useful life of the asset (buildings--50
years; plant and equipment--3 to 13 years) or the lease term if shorter for
leasehold improvements. The cost and accumulated depreciation for property,
plant and equipment sold, retired, or otherwise disposed of are removed from
the financial statements, and the resulting gains and losses are reflected
within other income or expense.
CAPITAL GRANTS
Capital grants received from government authorities to construct facilities
are amortized over the estimated useful life of the respective assets. The
unamortized balance of capital grants was $4,852,000, $3,633,000 and
$3,463,000 as of December 31, 1996, 1997, and March 29, 1998, respectively,
and is included in the accompanying balance sheets as other long-term
liabilities.
INTANGIBLES
The Group has goodwill related to 1997 acquisitions of $3,462,000 and
$3,354,000 included in intangibles as of December 31, 1997, and March 29,
1998, respectively, and negative goodwill of $11,971,000, $11,235,000, and
$11,138,000 as of December 31, 1996, 1997, and March 29, 1998, respectively,
in excess of assets acquired over cost of acquisitions in the accompanying
balance sheets. Both positive and negative goodwill are amortized straight-
line over 40 years. Total amortization expense on positive goodwill was
$85,000 for the year ended December 31, 1997, and $22,000 for the three months
ended March 29, 1998, and total amortization income related to negative
goodwill was $366,000, $364,000, and $380,000 for the years ended December 31,
1995, 1996, 1997 and $95,000 and $97,000 for the three months ended March 30,
1997 and March 29, 1998, respectively. Trademarks are amortized over 15 years.
Deferred financing costs are amortized over the life of the related debt using
the effective interest rate method.
IMPAIRMENT OF LONG-LIVED ASSETS
The Group periodically evaluates whether events or circumstances have
occurred indicating that the carrying amount of long-lived assets may not be
recoverable. When factors indicate possible impairment, the Group uses an
estimate of undiscounted future cash flows to determine the amount of such
impairments.
F-9
<PAGE>
THE DERBY BICYCLE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DERIVATIVE FINANCIAL INSTRUMENTS
The Group uses derivative financial instruments for purposes other than
trading and does so to reduce its exposure to fluctuations in interest and
foreign currency exchange rates.
OPTIONS--Options are used to hedge foreign currency exchange rate movements
on inventory purchases and sales of goods. Changes in the market value of the
options are recorded as gains or losses through cost of sales in the
accompanying statements of income. The options are expensed at maturity if
they are not exercised.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods were used to estimate the fair value of each class of
financial instruments:
CASH AND CASH EQUIVALENTS--The carrying amount approximates the fair value
due to the short-term nature of the instruments.
SHORT-TERM AND LONG-TERM DEBT--The fair value is estimated based upon quoted
market prices at year-end or current interest rates for debt of the same
maturity (see Notes 9 and 10).
FORWARDS AND OPTIONS--The fair value is estimated based on quoted market
prices at year-end (see Note 8).
SWAPS--The fair value of currency and interest rate swap agreements were
estimated based on quoted market prices at year-end (see Note 8).
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related information," which requires financial and descriptive
information about reportable operating segments and related products,
services, geographic areas and major customers. This statement is effective
for fiscal years beginning after December 31, 1997.
3. RECEIVABLES:
Receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- MARCH 29,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Trade receivables............................ $74,087 $71,341 $118,062
Royalty receivables.......................... 1,625 1,444 1,483
------- ------- --------
Total receivables.......................... 75,712 72,785 119,545
Allowance for doubtful trade accounts........ (4,500) (4,419) (4,570)
Allowance for discounts, rebates and other
items....................................... (3,073) (3,840) (3,629)
------- ------- --------
Total receivables, net..................... $68,139 $64,526 $111,346
======= ======= ========
</TABLE>
F-10
<PAGE>
THE DERBY BICYCLE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
4. OTHER CURRENT ASSETS:
Other current assets consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- MARCH 29,
1996 1997 1998
------ ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Prepaid expenses.................................. $5,103 $ 5,495 $ 5,831
Receivable on swaps............................... -- 4,335 4,812
Sales taxes recoverable........................... 797 1,409 1,546
Other receivables................................. 2,366 3,962 2,353
------ ------- -------
Total other current assets...................... $8,266 $15,201 $14,542
====== ======= =======
</TABLE>
5. PROPERTY, PLANT, AND EQUIPMENT:
Property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 29,
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land........................................ $ 2,910 $ 3,910 $ 3,832
Buildings................................... 21,208 22,422 21,999
Equipment................................... 83,381 82,838 83,181
-------- -------- --------
107,499 109,170 109,012
Accumulated depreciation and amortization... (55,783) (59,463) (61,100)
-------- -------- --------
Net property, plant and equipment........... $ 51,716 $ 49,707 $ 47,912
======== ======== ========
</TABLE>
Depreciation expense was $9,848,000, $9,400,000, and $9,362,000 for the
years ended December 31, 1995, 1996, and 1997 and $2,631,000 and $2,565,000
for the three months ended March 30, 1997 and March 29, 1998, respectively.
In the United Kingdom, a major reorganization of manufacturing activities at
Raleigh Industries was undertaken in 1995. The cost of the reorganization
charged through the statement of income for the year ended December 31, 1995,
was $4,413,000.
The cost of the reorganization was funded in part by the disposal of 18
acres of a factory site that was released from manufacturing and warehouse
use. The sale price of the land and buildings was $7,750,000, of which
$3,875,000 had been received by the end of 1995, and $3,875,000 was received
in 1996. The net book value of the land and buildings sold was $925,000. After
deducting associated costs and fees, the profit on disposal was $4,740,000
which is included in other income (expense) for the year ended December 31,
1995, in the accompanying statements of income. There was no tax effect
arising from this disposal.
F-11
<PAGE>
THE DERBY BICYCLE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
6. INTANGIBLES:
Intangible assets consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- MARCH 29,
1996 1997 1998
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Trademarks purchased............................ $ -- $2,665 $ 2,665
Goodwill purchased.............................. -- 3,462 3,462
Deferred financing costs........................ 1,403 1,342 1,350
------ ------ -------
1,403 7,469 7,477
Accumulated amortization........................ (522) (818) (1,052)
------ ------ -------
Total intangibles, net........................ $ 881 $6,651 $ 6,425
====== ====== =======
</TABLE>
7. ACCRUED LIABILITIES:
The following is a breakdown of accrued liabilities (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 29,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Sales taxes payable.............................. $ 3,658 $ 3,911 $ 3,890
Payroll taxes payable............................ 3,934 3,089 3,862
Accrued vacation................................. 1,510 1,269 2,625
Accrued unvouchered trade payables............... 13,491 15,051 15,262
------- ------- -------
Total accrued liabilities...................... $22,593 $23,320 $25,639
======= ======= =======
</TABLE>
F-12
<PAGE>
THE DERBY BICYCLE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
8. DERIVATIVE FINANCIAL INSTRUMENTS:
FORWARDS
A forward foreign exchange contract calls for delivery of a specified amount
of one currency for a specified amount of another currency at a fixed exchange
rate and a specified future date. The exchange rate is established at the time
the contract is agreed on, but payment and delivery are not required until
maturity. Forward contracts are entered into with bank counterparties. The
Group enters into forward foreign exchange contracts to minimize the impact of
currency movements, principally on purchases of inventory and sales of goods
denominated in currencies other than the subsidiaries' functional currencies.
The Group held forward foreign exchange contracts in the following gross
amounts (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1996 1997 MARCH 29, 1998
--------------- --------------- ---------------
BUY SELL BUY SELL BUY SELL
------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
United States dollars........... $41,945 $ -- $53,673 $ 6,835 $35,569 $ 9,681
Japanese yen.................... 12,399 -- 15,139 -- 6,392 --
Dutch guilders.................. -- 10,942 1,153 9,643 917 7,236
German marks.................... -- 5,213 -- 1,900 -- 922
British pounds sterling......... 2,358 -- 1,579 -- 1,215 --
Other........................... 1,222 -- 2,984 -- 2,428 --
------- ------- ------- ------- ------- -------
Total notional amounts........ $57,924 $16,155 $74,528 $18,378 $46,521 $17,839
======= ======= ======= ======= ======= =======
Fair value.................... $56,331 $14,816 $73,845 $18,502 $46,357 $17,632
======= ======= ======= ======= ======= =======
</TABLE>
CURRENCY AND INTEREST RATE SWAPS
A currency swap is an agreement to exchange principal and interest of one
currency for those of another currency. Interest rate swaps constitute a
contractual agreement between two parties to exchange interest-type cash flows
at periodic intervals based on a hypothetical principal or notional amount.
The Group enters into currency swap and interest rate swap contracts such that
the notional principal amount is equal to the principal amount of the
underlying debt. The swaps achieve the effect of synthetically converting the
original United States dollar denominated debt into several other foreign
currencies and converting the fixed interest rate on the debt to a floating
interest rate.
The following is a summary of the Group's currency and interest rate swap
net receivables (payables) as of December 31, 1996, 1997 and March 29, 1998
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1996 1997 MARCH 29, 1998
--------------- --------------- ---------------
NOTIONAL FAIR NOTIONAL FAIR NOTIONAL FAIR
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
-------- ----- -------- ------ -------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Swaps........................ $(1,193) $(214) $3,279 $4,335 $3,892 $4,812
======= ===== ====== ====== ====== ======
</TABLE>
F-13
<PAGE>
THE DERBY BICYCLE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
CREDIT RISK
The Group enters into derivative transactions with several counterparties
including Bankers Trust, Midland Bank, Natwest Markets and Banque National de
Paris. The Group is exposed to credit loss in the event of non-performance by
these counterparties. However, the Group does not anticipate non-performance
by these counterparties. In the event of non-performance, the Group would be
subject to the following counterparty risk (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- MARCH 29,
1996 1997 1998
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Forwards........................................... $1,198 $ 748 $ 829
Swaps.............................................. $ -- $4,335 $4,812
</TABLE>
9. SHORT-TERM BORROWINGS:
Short-term borrowings consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 29,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Net borrowings on revolving credit facilities.. $ -- $34,049 $80,984
Bank overdraft................................. 7,917 2,778 1,310
Current portion of long-term debt (see Note
10)........................................... 14,333 14,333 14,333
------- ------- -------
$22,250 $51,160 $96,627
======= ======= =======
</TABLE>
At December 31, 1996, the Group maintained a 364 day aggregate revolving
credit facility of (Pounds)26,500,000 ($45,100,000), guaranteed by DICSA and
on which interest was charged at 1 1/4 percent above the London Interbank
Borrowing Rate. On March 6, 1997, these facilities were replaced by a
syndicated three year aggregated revolving credit facility of
(Pounds)60,000,000 ($99,000,000), guaranteed by DICSA and on which interest is
charged at 1 percent above the London Interbank Borrowing Rate. In addition
the Group's subsidiaries had available overdraft facilities of up to
$24,000,000 during the periods ended December 31, 1996, 1997, and March 29,
1998.
The weighted average balance outstanding on these facilities was
$18,200,000, $33,500,000 during the years ended December 31, 1996 and 1997,
and $34,175,000 and $60,916,000 during the three months ended March 30, 1997
and March 29, 1998, respectively. The highest amount outstanding on these
facilities was $44,800,000 and $60,300,000 during the years ended December 31,
1996 and 1997 and $55,750,000 and $82,294,000 during the three months ended
March 30, 1997 and March 29, 1998, respectively.
The terms of the revolving credit facilities restrict the ability of the
Group together with DICSA to incur additional indebtedness and sell assets,
among other restrictions, and require the Group together with DICSA to
maintain certain financial ratios. DICSA has investments of approximately
(Pounds)25,774,000 ($42,527,000) as of December 31, 1997 in entities under the
control of DICSA's majority shareholder. The redemption of approximately,
(Pounds)16,450,000 ($27,142,000) of these investments has been guaranteed by
DICSA's majority shareholder. Continued compliance with the terms of the
revolving credit facility currently in place depends, in part, on the ultimate
redemption of these investments by DICSA.
F-14
<PAGE>
THE DERBY BICYCLE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Other than as noted above, the revolving credit facilities and overdrafts of
the Group are unsecured except in South Africa, where accounts receivables of
Group companies have been ceded as security for facilities up to $7,100,000.
Management believes that there is no material difference between the book
values and fair values of borrowings on revolving credit facilities and bank
overdrafts.
10. LONG-TERM DEBT:
In 1993, Derby Holding BV, a subsidiary of DICSA based in the Netherlands,
issued unsecured United States dollar denominated Senior Notes, guaranteed by
DICSA, in the aggregate principal of $85,000,000. Derby Holding BV repaid
$14,333,000 of the Senior Notes in September 1996 and $14,333,000 in September
1997, leaving $56,333,000 outstanding at December 31, 1997 and March 29, 1998.
As of December 31, 1996, 1997, and March 29, 1998, long-term debt consists
of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 29,
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Series A Senior Notes........................ $ 44,000 $ 33,000 $ 33,000
Series B Senior Notes........................ 20,000 20,000 20,000
Series C Senior Notes........................ 6,666 3,333 3,333
Long-term bank loan.......................... -- 9,059 8,878
-------- -------- --------
Total long-term debt......................... 70,666 65,392 65,211
Less current portion of long-term debt....... (14,333) (14,333) (14,333)
-------- -------- --------
Non-current portion of long-term debt........ $ 56,333 $ 51,059 $ 50,878
======== ======== ========
</TABLE>
The fair value of the Senior Notes as of December 31, 1996, 1997, and March
29, 1998, was approximately $70,305,000, $56,149,000 and $55,053,000,
respectively. Management believes that there was no material difference
between the fair value of the long-term bank loan as of December 31, 1997 and
March 29, 1998, and its book value.
The Senior Notes accrue interest at fixed rates ranging from 6.80 to 7.66
percent, however, swaps have been entered into in order to convert the fixed
interest rate obligations on the Series A and Series C Senior Notes into fixed
rates (7.09 percent, 7.10 percent, 7.11 percent and 7.11 percent at December
31, 1995, 1996, 1997, and March 29, 1998, respectively, on amounts receivable
on swaps and 6.05 percent, 5.82 percent, 5.18 percent and 5.18 percent at
December 31, 1995, 1996, 1997, and March 29, 1998, respectively, for amounts
payable on swaps). The weighted-average interest rate on the Senior Notes was
7.23 percent, 7.26 percent, 7.31 percent for the years ended December 31,
1995, 1996 and 1997, and 7.26 percent and 7.31 percent for the three months
ended March 30, 1997 and March 29, 1998, respectively.
The terms of the Senior Notes require DICSA and the Group to maintain
certain financial ratios and restrict certain actions of the Group (together
with DICSA), including the ability to incur additional funded debt, make
distributions and sell assets. DICSA has investments of approximately
(Pounds)25,774,000 ($42,527,000) as of December 31, 1997 in entities under the
control of DICSA's majority shareholder. The redemption of approximately
(Pounds)16,450,000 ($27,142,000) of these investments has been
F-15
<PAGE>
THE DERBY BICYCLE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
guaranteed by DICSA's majority shareholder. Continued compliance with the
terms of the Senior Notes currently in place depends, in part, on the ultimate
redemption of these investments by DICSA. Management plans to repay the Senior
Notes in full in connection with the recapitalization discussed in Note 17.
The long-term bank loan represents a loan of DM16,250,000 equivalent to
$9,059,000 and $8,878,000 as of December 31, 1997 and March 29, 1998,
respectively, assumed on the acquisition of the Winora and Staiger business
(Note 13). The loan is repayable in full in 2001 and interest is charged at
5.25 percent.
The future scheduled maturities of the long-term debt are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1998.............................................................. $14,333
1999.............................................................. 11,000
2000.............................................................. 31,000
2001.............................................................. 9,059
-------
Total........................................................... $65,392
=======
</TABLE>
11. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
Total rent expense for operating leases, primarily in respect of land and
buildings and automobiles, was $5,223,000, $4,908,000 and $4,837,000 for the
years ended December 31, 1995, 1996, and 1997, and $1,699,000 and $1,669,000
for the three months ended March 30, 1997 and March 29, 1998, respectively,
which is included in selling, general and administrative expenses in the
accompanying statements of income.
The future minimum lease payments for operating leases as of December 31,
1997, are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1998.............................................................. $ 4,502
1999.............................................................. 3,770
2000.............................................................. 2,411
2001.............................................................. 1,125
2002.............................................................. 941
Thereafter........................................................ 7,761
-------
Total........................................................... $20,510
=======
</TABLE>
Leases of land and buildings are typically subject to rent reviews at
specified intervals and provide for the lessee to pay all insurance,
maintenance and repair costs. The Group's facilities are subject to the
requirements of environmental regulations in their respective jurisdictions.
There can be no assurance that the Group is at all times in compliance with
all such requirements.
INTERNATIONAL OPERATIONS; DEPENDENCE ON FOREIGN SUPPLIERS AND SALES
A significant portion of the Group's operations are conducted in foreign
countries and are subject to the risks that are inherent in operating abroad,
including, without limitation, the risks associated with foreign governmental
regulation, foreign taxes, import duties and trade restrictions. The Group's
F-16
<PAGE>
THE DERBY BICYCLE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
business is highly dependent upon products manufactured by foreign suppliers
located primarily in Taiwan and Japan and to a lesser extent the People's
Republic of China. A substantial majority of the Group's multi-speed bicycles
contain components supplied on a purchase order basis by one Japanese
manufacturer. The Group's business is also subject to the risks generally
associated with doing business abroad, such as delays in shipment and foreign
governmental regulations which could have a material adverse effect on the
results of operations and financial condition of the Group. In addition,
several of the Group's manufacturing operations are unionized.
PRODUCT LIABILITY
Because of the nature of the Group's business, the Group at any particular
time is a defendant in a number of product liability lawsuits and expects that
this will continue to be the case in the future. These lawsuits generally seek
damages, sometimes in substantial amounts, for personal injuries allegedly
sustained as a result of defects in the Group's products. Although the Group
maintains product liability insurance, due to the uncertainty as to the nature
and extent of manufacturers' and distributors' liability for personal
injuries, there is no assurance that the product liability insurance
maintained by the Group is or will be adequate to cover product liability
claims or that the applicable insurer will be solvent at the time of any
covered loss. In addition, due to deductibles, self-retention levels and
aggregate coverage amounts applicable under the Group's insurance policies,
the Group may bear responsibility for a significant portion of the defense
costs (which include attorneys' fees and expenses incurred in the defense of
any claim), and the related payments to satisfy any judgments associated with
any claim asserted against the Group in excess of any applicable coverage. The
successful assertion or settlement of an uninsured claim, the settlement of a
significant number of insured claims, or a claim exceeding the Group's
insurance coverage could have a material adverse effect on the Group's
business, results of operations and financial condition. In addition, there
can be no assurance that insurance will remain available or, if available,
will not be prohibitively expensive.
UNCONDITIONAL PURCHASE OBLIGATIONS
The Group had unconditional purchase obligations for raw materials and
bicycle components of $49,188,000 and $55,127,000 as of December 31, 1997, and
March 29, 1998, respectively, which are not recorded in the combined financial
statements.
F-17
<PAGE>
THE DERBY BICYCLE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
12. INCOME TAXES:
The Group does not have a formal tax sharing agreement with DICSA. The Group
calculates its income taxes on a stand-alone basis, with subsidiaries filing
separate returns in their own jurisdictions. The combined related amounts are
included in income taxes payable and deferred income taxes payable in the
accompanying balance sheets.
Income (loss) before income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, -------------------
-------------------------- MARCH 30, MARCH 29,
1995 1996 1997 1997 1998
-------- ------- ------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
United Kingdom.................. $ 22,076 $14,544 $19,533 $ 668 $(1,049)
Holland......................... 13,384 8,136 8,541 4,904 4,351
Germany......................... (11,954) (6,031) (9,753) 268 2,157
United States................... (5,325) (1,293) (2,807) (1,076) (1,072)
Canada.......................... 1,407 1,474 1,591 869 752
South Africa.................... 993 1,109 1,369 128 155
Other........................... 2,884 5,560 4,882 733 1,188
-------- ------- ------- ------- -------
$ 23,465 $23,499 $23,356 $ 6,494 $ 6,482
======== ======= ======= ======= =======
</TABLE>
The provision (benefit) for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, -------------------
------------------------ MARCH 30, MARCH 29,
1995 1996 1997 1997 1998
------- ------ ------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CURRENT TAX PROVISION:
United Kingdom............ $ 1,520 $1,411 $ 3,547 $ (573) $ (574)
Holland................... 4,124 4,185 3,271 1,314 1,399
Germany................... 364 499 (196) (187) --
United States............. -- -- -- -- --
Canada.................... 507 400 525 336 295
South Africa.............. 321 244 759 59 59
Others.................... 104 231 344 55 152
------- ------ ------- ------ ------
Total current provi-
sion................... 6,940 6,970 8,250 1,004 1,331
------- ------ ------- ------ ------
DEFERRED TAX PROVISION (BEN-
EFIT):
United Kingdom............ 691 2,102 1,844 786 388
Holland................... 2,510 (326) 498 265 191
Germany................... 136 -- -- -- --
United States............. -- -- -- -- --
Canada.................... (76) 129 93 (32) (28)
South Africa.............. -- (27) 45 -- --
Others.................... (106) 76 (109) (109) (8)
------- ------ ------- ------ ------
Total deferred tax pro-
vision................. 3,155 1,954 2,371 910 543
------- ------ ------- ------ ------
PROVISION FOR INCOME TAXES.. $10,095 $8,924 $10,621 $1,914 $1,874
======= ====== ======= ====== ======
</TABLE>
F-18
<PAGE>
THE DERBY BICYCLE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes the significant differences between the
United States statutory tax rate and the Group's effective tax rate for
financial statement purposes:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, -------------------
---------------- MARCH 30, MARCH 29,
1995 1996 1997 1997 1998
---- ---- ---- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Statutory tax rate--US Federal.......... 35% 35% 35% 35% 35%
Effect of foreign tax rates............. 2 3 (2) (7) 1
Utilization of losses brought forward... -- -- -- (2) (12)
Net operating losses for which no
benefit is currently available......... 10 2 14 5 6
Permanent differences and other......... (4) (2) (2) (2) (1)
--- --- --- --- ---
Effective tax rate...................... 43% 38% 45% 29% 29%
=== === === === ===
</TABLE>
Deferred income tax (assets) liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, --------------------
------------------ MARCH 30, MARCH 29,
1996 1997 1997 1998
-------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
DEFERRED INCOME TAX ASSETS:
Operating losses..................... $ 76,222 $ 66,830 $ 72,624 $ 66,061
Provisions and accruals.............. 727 427 565 427
-------- -------- -------- --------
Total deferred income tax assets... 76,949 67,257 73,189 66,488
VALUATION ALLOWANCE.................... (72,387) (63,523) (69,065) (62,819)
-------- -------- -------- --------
Net deferred income tax assets..... 4,562 3,734 4,124 3,669
-------- -------- -------- --------
DEFERRED INCOME TAX LIABILITIES:
Pension.............................. (14,276) (15,543) (14,276) (16,059)
Depreciation......................... (5,937) (5,272) (5,555) (5,206)
Other................................ (441) (370) (440) (311)
-------- -------- -------- --------
Total deferred income tax liabili-
ties.............................. (20,654) (21,185) (20,721) (21,576)
-------- -------- -------- --------
Net deferred income tax liabili-
ties.............................. $(16,092) $(17,451) $(16,147) $(17,907)
======== ======== ======== ========
</TABLE>
The operating losses, which arise in Germany and the United States, begin to
expire in 1998. The ability of the Group to utilize these losses may be
limited by a change in ownership of the Group.
13. ACQUISITIONS:
In January 1997, the Group completed the acquisition of the assets and
operations of a bicycle and bicycle component business in Germany which
distributes bicycles under the names Winora and Staiger, for consideration of
$2,650,000, net of assumed debt equivalent to $9,059,000 and $8,878,000 as of
December 31, 1997 and March 29, 1998, respectively (see Note 10). The results
of this business are included in the combined financial statements from
February 1, 1997.
In August 1997, the Group acquired a controlling interest in the MS Sport
Group for consideration of $4,000,000. MS Sport Group is the main distributor
of Univega brand cycles in Europe. The results of MS Sport are included in the
combined financial statements from September 1, 1997.
F-19
<PAGE>
THE DERBY BICYCLE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
These acquisitions were accounted for under the purchase method with the
purchase price allocated as follows (in thousands):
<TABLE>
<S> <C>
Accounts receivable................................................ $ 2,351
Inventories........................................................ 5,742
Property, plant and equipment...................................... 6,025
Goodwill........................................................... 3,386
Liabilities assumed and direct acquisitions........................ (10,854)
--------
$ 6,650
========
</TABLE>
Pro forma net revenues and net income and earnings per share reflecting the
acquisitions as if they had occurred on January 1, 1996, and January 1, 1997,
respectively, have been omitted because the differences between those amounts
and the historical results are not material.
In March 1997, the Group acquired the Univega brand name, trademarks and
related intellectual property for consideration of $2,550,000 (see Note 6).
Univega is a range of all-terrain and mountain bikes. In addition, further
licenses were acquired during the year for $115,000.
14. PENSION PLANS:
The Group operates defined benefit pension plans in its subsidiaries in
Canada, Netherlands, Ireland and the United Kingdom, which are funded in
accordance with local actuarial advice and cover all eligible current and
retired employees. In the United States, the Group operates a 401(k) pension
contribution plan for certain of its employees. The plans are operated under
trusts and their assets are invested independently of the Group. The largest
plans are in the United Kingdom and Netherlands, where valuations are carried
out by qualified actuaries every three years and every year respectively.
The Group adopted SFAS No. 87 "Employers' Accounting for Pensions" on
January 1, 1993. The impact of adopting SFAS No. 87 was a transition asset of
$37,795,000. The transition asset is being amortized into income over 15
years. A cumulative change in accounting principle was recorded as of January
1, 1993, which represented the amortization of the transition asset between
January 1, 1989, the effective date of SFAS No. 87, and January 1, 1993, the
Group's adoption of SFAS No. 87.
The following is a detail of the Group's defined benefit plan assets (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1996 1997
----------------- -----------------
FAIR FAIR
COST VALUE COST VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
UK quoted equities....................... $ 38,061 $ 64,201 $ 44,411 $ 73,978
Other equities........................... 21,871 34,661 21,898 37,332
Treasury instruments..................... 54,829 54,492 47,172 47,735
Property shares.......................... 8,544 8,828 8,640 9,608
Cash..................................... 8,921 8,921 10,371 10,371
Other.................................... 1,727 1,728 1,667 1,640
-------- -------- -------- --------
$133,953 $172,831 $134,159 $180,664
======== ======== ======== ========
</TABLE>
F-20
<PAGE>
THE DERBY BICYCLE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Net periodic pension costs of the defined benefit pension plans consist of
the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Service cost................................. $ 1,739 $ 2,098 $ 2,792
Interest cost on projected benefit obliga-
tion........................................ 7,224 7,599 8,386
Amortization of prior service costs.......... 152 224 382
Return on assets:
Actual..................................... (19,719) (16,591) (20,927)
Deferred gain.............................. 7,538 3,061 6,075
Amortization of transition asset............. (2,727) (2,652) (2,536)
-------- -------- --------
Net periodic pension income.................. $ (5,793) $ (6,261) $ (5,828)
======== ======== ========
</TABLE>
The following is the actuarial present value of benefit obligations and
funded status of the Group's defined benefit plans (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
--------- ---------
<S> <C> <C>
Accumulated benefit obligation - vested.............. $(107,942) $(126,618)
--------- ---------
Projected benefit obligation......................... (113,338) (130,830)
Plan assets at fair value............................ 172,831 180,664
--------- ---------
Projected plan assets in excess of benefit obliga-
tion................................................ 59,493 49,834
Unrecognized net loss................................ 121 9,660
Unrecognized net transition asset.................... (19,049) (14,981)
Unrecognized prior service cost...................... 1,846 3,264
--------- ---------
Prepaid pension asset................................ $ 42,411 $ 47,777
========= =========
</TABLE>
Assumptions used in developing the projected benefit obligation as of
December 31 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
UNITED KINGDOM:
Weighted average discount rate........................... 8.5% 8.5% 7%
Weighted average expected long-term rate of return....... 10 10 10
Weighted average rate of salary increases................ 6 6 6
NETHERLANDS:
Weighted average discount rate........................... 6.5 6.5 6.5
Weighted average expected long-term rate of return....... 7 7 7
Weighted average rate of salary increases................ 4.5 4.5 4.5
CANADA:
Weighted average discount rate........................... 9 8 7
Weighted average expected long-term rate of return....... 9.5 9.5 9.5
Weighted average rate of salary increases................ 5.5% 5.5% 5.5%
</TABLE>
F-21
<PAGE>
THE DERBY BICYCLE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
15. GEOGRAPHIC INFORMATION:
OPERATING LOCATIONS
The Group manufactures its products in several geographic locations. A
summary of revenues, operating income, depreciation, identifiable assets and
capital additions categorized by the location of the operating subsidiary from
which the sales were generated is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH MARCH
1995 1996 1997 30, 1997 29, 1998
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET REVENUES:
United Kingdom.............. $109,167 $105,510 $106,425 $ 14,320 $ 16,002
Netherlands................. 133,096 134,591 120,846 37,593 33,099
Germany..................... 101,226 90,225 108,745 35,636 41,201
United States............... 55,253 53,516 57,938 11,584 11,172
Canada...................... 36,287 29,459 29,503 14,556 11,631
South Africa................ 22,590 20,010 20,631 4,190 4,018
Rest of the World........... 16,222 19,273 21,599 4,946 4,310
-------- -------- -------- -------- --------
Total net revenues........ $473,841 $452,584 $465,687 $122,825 $121,433
======== ======== ======== ======== ========
OPERATING INCOME:
United Kingdom.............. $ 13,652 $ 14,015 $ 17,635 $ 986 $ (1,209)
Netherlands................. 12,082 16,683 13,724 4,936 4,652
Germany..................... (4,332) 282 (3,204) 1,348 3,335
United States............... (3,298) (1,696) (3,011) (416) (420)
Canada...................... 2,326 2,099 2,076 1,067 897
South Africa................ 1,454 1,427 1,811 254 182
Rest of the World........... 92 572 670 244 913
-------- -------- -------- -------- --------
Total operating income.... $ 21,976 $ 33,382 $ 29,701 $ 8,419 $ 8,350
======== ======== ======== ======== ========
</TABLE>
F-22
<PAGE>
THE DERBY BICYCLE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH 30, MARCH 29,
1995 1996 1997 1997 1998
-------- -------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
DEPRECIATION:
United Kingdom................. $ 2,500 $ 2,465 $ 3,103 $ 781 $ 902
Netherlands.................... 1,967 1,948 1,692 436 404
Germany........................ 4,179 3,757 3,362 1,010 906
United States.................. 545 608 618 153 112
Canada......................... 347 374 322 188 180
South Africa................... 261 219 164 28 20
Rest of the World.............. 49 29 101 35 41
-------- -------- -------- -------- --------
Total depreciation........... 9,848 9,400 9,362 2,631 2,565
======== ======== ======== ======== ========
IDENTIFIABLE ASSETS:
United Kingdom................. 71,253 80,567 88,941 82,795 88,010
Netherlands.................... 57,147 53,449 56,911 64,902 70,354
Germany........................ 64,237 58,118 74,889 96,345 102,800
United States.................. 37,183 33,789 35,680 38,747 40,554
Canada......................... 16,072 14,798 13,065 23,364 22,093
South Africa................... 11,041 11,608 9,865 9,398 9,903
Rest of the World.............. 6,366 8,390 9,729 7,577 7,257
-------- -------- -------- -------- --------
Total identifiable assets.... 263,299 260,719 289,080 323,128 340,971
======== ======== ======== ======== ========
CAPITAL ADDITIONS:
United Kingdom................. 6,704 4,150 2,432 327 277
Netherlands.................... 2,150 1,862 1,645 42 152
Germany........................ 2,022 2,147 2,434 582 584
United States.................. 1,005 481 471 183 282
Canada......................... 379 143 151 25 96
South Africa................... 329 202 38 7 17
Rest of the World.............. 145 111 242 24 8
-------- -------- -------- -------- --------
Total capital additions...... $ 12,734 $ 9,096 $ 7,413 $ 1,190 $ 1,416
======== ======== ======== ======== ========
</TABLE>
NET REVENUES BY GEOGRAPHIC REGION
The Group sells its products in several geographic regions. Net revenues
relating to each region (categorized by the customer's geographic location)
are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- MARCH MARCH
1995 1996 1997 30, 1997 29, 1998
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET REVENUES:
United Kingdom................... $104,102 $101,260 $100,892 $ 13,103 $ 14,181
Netherlands...................... 112,642 113,508 101,216 29,554 28,467
Germany.......................... 105,590 97,347 117,990 38,610 42,284
United States.................... 53,717 52,903 58,316 12,407 11,530
Canada........................... 36,312 29,477 29,528 14,504 11,622
South Africa..................... 22,590 20,010 20,631 4,190 4,018
Rest of the World................ 38,888 38,079 37,114 10,457 9,331
-------- -------- -------- -------- --------
Total net revenues............. $473,841 $452,584 $465,687 $122,825 $121,433
======== ======== ======== ======== ========
</TABLE>
F-23
<PAGE>
THE DERBY BICYCLE GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
16. RELATED-PARTY TRANSACTIONS:
The Group rents land and buildings under operating leases from certain
minority shareholders in Germany and South Africa. Rents charged under such
leases were $418,000, $326,000 and $495,000 for the years ended December 31,
1995, 1996, and 1997, and $31,000 and $78,000 for the three months ended March
30, 1997 and March 29, 1998, respectively.
17. RECAPITALIZATION AGREEMENT:
DICSA has reorganized and recapitalized the Group to take advantage of
acquisition opportunities. Accordingly, DICSA has reorganized the ownership
structure so that DCC, an existing United States operating company, has become
the parent company owning all of the other existing bicycle and bicycle
component companies within the Group effective May 14, 1998. Pursuant to the
recapitalization agreement entered into on March 11, 1998, Thayer Capital
Partners and Perseus Capital invested $60,000,000 for preferred and common
stock of DCC.
The recapitalization agreement included the placement of $161,111,000 in
long-term debt and the provision of working capital financing. The proceeds
were used first to redeem shares in certain subsidiaries owned by DICSA, and
pay certain costs, totalling $146,158,000.
F-24
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To The Derby Bicycle Group:
We have audited in accordance with generally accepted auditing standards,
the combined financial statements of The Derby Bicycle Group, included in this
registration statement and have issued our report thereon dated April 9, 1998
(except with respect to the matter discussed in Note 17 as to which the date
is May 14, 1998). Our audits were made for the purpose of forming an opinion
on the basic combined financial statements taken as a whole. The schedule
appearing on page S-2 is the responsibility of the Group's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic combined financial statements.
This schedule has been subjected to the auditing procedures applied in the
audits of the basic combined financial statements and, in our opinion fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic combined financial statements taken as a
whole.
/s/ Arthur Andersen LLP
Washington, D.C.
April 9, 1998
S-1
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS CHARGED ADDITIONS CHARGED BALANCE AT
BEGINNING TO COSTS AND TO OTHER END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(2) DEDUCTIONS(1) OF PERIOD
- ----------- ---------- ----------------- ----------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful
Trade Accounts
1995................... $3.1 $ .7 $ .1 $ (1) $3.9
1996................... 3.9 .8 (.2) (1) 4.5
1997................... 4.5 .2 (.3) (1) 4.4
Allowance for Discounts
and Rebates
1995................... $2.8 $(.1) $ .1 $ (1) $2.8
1996................... 2.8 (.3) (.2) (1) 2.3
1997................... 2.3 .7 (.1) (1) 2.9
</TABLE>
- --------
(1) Charges to the accounts are for the purpose for which the reserves were
created.
(2) Charges represent foreign currency translation adjustments.
S-2
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN-
TATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITA-
TION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT
RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURI-
TIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEI-
THER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMA-
TION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 17
Exchange Rate Information................................................. 28
Use of Proceeds........................................................... 30
Capitalization............................................................ 31
The Recapitalization...................................................... 32
Unaudited Pro Forma Condensed Combined Financial Statements............... 35
Selected Historical Financial Data........................................ 40
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 41
Business.................................................................. 51
Management................................................................ 72
Description of Shareholders' Agreement and Registration Agreement......... 76
Security Ownership of Certain Beneficial Owners and Management............ 77
Description of Revolving Credit Agreement................................. 80
Description of Exchange Notes............................................. 82
Description of Exchange and Registration Rights Agreement................. 123
The Exchange Offer........................................................ 125
Certain U.S. Income Tax Consequences...................................... 133
Certain Netherlands Income Tax Consequences............................... 133
Plan of Distribution...................................................... 134
Book-Entry; Delivery and Form............................................. 135
Legal Matters............................................................. 142
Index to Combined Financial Statements.................................... F-1
</TABLE>
PROSPECTUS
OFFER TO EXCHANGE ITS
$100,000,000
10% SENIOR NOTES DUE 2008 FOR ANY AND ALL OF THEIR OUTSTANDING 10% SENIOR NOTES
DUE 2008
AND
DM110,000,000
9 3/8% SENIOR NOTES DUE 2008
FOR ANY AND ALL OF THEIR OUTSTANDING 9 3/8% SENIOR NOTES DUE 2008
THE DERBY CYCLE CORPORATION
LYON INVESTMENTS B.V.
(FORMERLY KNOWN AS LYON CYCLE B.V.)
LOGO
PROSPECTUS
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Derby Cycle Corporation is incorporated under the laws of the State of
Delaware. Section 145 of the General Corporation Law of the State of Delaware
("Section 145") provides that a Delaware corporation may indemnify any person
who is a party, or is threatened to be made a party, to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
such corporation), by reason of the fact that such person is or was an
officer, director, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent
of another corporation or enterprise. The indemnity may include expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit or proceeding, provided such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the corporation's
best interests and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was illegal. A Delaware
corporation may indemnify any person who is a party, or is threatened to be
made a party, to any threatened, pending or completed action or suit by or in
the right of the corporation by reason of the fact that such person was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent
of another corporation or enterprise. The indemnity may include expenses
(including attorney's fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit, provided
such person acted in good faith and in a manner he reasonably believed to be
in or not opposed to the corporation's best interests except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him or her against the
expenses which such officer or director has actually and reasonably incurred.
Section 145 further provides that the indemnification provisions of Section
145 shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in
such person's official capacity and as to action in another capacity while
holding such office. The amended and restated certificate of incorporation of
The Derby Cycle Corporation provides that, to the fullest extent permitted by
the General Corporation Law of the State of Delaware, no director of the
corporation shall be liable to the corporation or its stockholders for
monetary damages arising from a breach of fiduciary duty owed to the
corporation or its stockholders.
Article X of the bylaws of The Derby Cycle Corporation provides that each
person who is or was a director, officer or promoter of The Derby Cycle
Corporation (and the heirs, executors or administrators of such person) who is
or was made a party to, or is or was involved in, any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that such person is or was a director,
officer or promoter of The Derby Cycle Corporation or is or was serving at the
request or for the benefit of The Derby Cycle Corporation as a director,
officer, promoter, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall be held
harmless and indemnified by The Derby Cycle Corporation against any expense
liability or loss (including without limitation judgments, fines, settlement
payments and the expense of legal counsel) incurred by such person in any such
capacity to the fullest extent permitted by applicable law. The right to
indemnification conferred shall also include the right to be paid by The Derby
Cycle Corporation the expenses incurred in defending in any such proceeding in
advance of its final disposition to the fullest extent permitted by applicable
law. The
II-1
<PAGE>
Derby Cycle Corporation may provide indemnification to such other employees
and agents of The Derby Cycle Corporation to such extent and to such effect
permitted or authorized by applicable law.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
or enterprise, against any liability asserted against him and incurred by him
in any such capacity, arising out of his status as such, whether or not the
corporation would otherwise have the power to indemnify him under Section 145.
Article X of the bylaws of The Derby Cycle Corporation provides that The
Derby Cycle Corporation may purchase and maintain insurance, at its expense,
to protect itself and any person who is or was a director, officer, promoter,
employee or agent of The Derby Cycle Corporation or who is or was serving at
the request or for the benefit of The Derby Cycle Corporation as a director,
officer, promoter, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against any
expense, liability or loss incurred by such person in any such capacity,
whether or not The Derby Cycle Corporation would have the power to indemnify
such person against such expense, liability or loss under applicable law.
Lyon is incorporated under the laws of The Netherlands. The Articles of
Association of Lyon contain no provisions under which any member of its board
of management or its officers is indemnified in any manner against any
liability which he may incur in his capacity as such. Under the laws of The
Netherlands, members of the board may be liable to the company for improper or
negligent acts. For example, Article 2:248 of The Netherlands Civil Code
provides that members of the board are jointly and severally liable to the
estate of a private company with limited liability by shares, such as Lyon,
which suffers an involuntary liquidation when management has manifestly
performed its duties improperly and such is an important cause of the
involuntary liquidation. Members of the management board may be held
personally liable for improper or negligent managerial acts which affect third
parties.
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Purchase Agreement dated as of May 7, 1998, among The Derby Cycle
Corporation, Lyon Investments B.V., Chase Securities Inc., Chase
Manhattan Bank AG, and Chase Manhattan International Limited
2.1 Recapitalization Agreement dated as of March 11, 1998, among The Derby
Cycle Corporation, Derby International Corporation S.A., Derby Finance
S.a.r.l., DC Cycle, L.L.C., and Perseus Cycle, L.L.C.
2.2 First Amendment to the Recapitalization Agreement dated March 17,
1998, among The Derby Cycle Corporation, Derby International
Corporation S.A., Derby Finance S.a.r.l., DC Cycle, L.L.C., Perseus
Cycle, L.L.C., Frank H. Pearl and Alan J. Finden-Crofts
2.3 Second Amendment to the Recapitalization Agreement dated as of May 14,
1998, among The Derby Cycle Corporation, Derby International
Corporation S.A., Derby Finance S.a.r.l., DC Cycle, L.L.C., Perseus
Cycle, L.L.C., Alan J. Finden-Crofts, A. Edward Gottesman, Frank H.
Pearl and Thayer Equity Partners, III
3.1 Amended and Restated Certificate of Incorporation of The Derby Cycle
Corporation
3.2 Bylaws of The Derby Cycle Corporation
3.3 Articles of Association of Lyon Investments B.V.
4.1 Dollar Indenture dated May 14, 1998, by and among The Derby Cycle
Corporation, Lyon Investments, B.V. and IBJ Schroder Bank & Trust
Company, as trustee
4.2 DM Indenture dated May 14, 1998, by and among The Derby Cycle
Corporation, Lyon Investments B.V. and IBJ Schroder Bank & Trust
Company, as trustee
4.3 Forms of 10% Senior Note and 9 3/8% Senior Note (contained in Exhibit
4.1 as Exhibit A thereto)
4.4 Exchange and Registration Rights Agreement dated as of May 14, 1998,
among The Derby Cycle Corporation, Lyon Investments B.V. and Chase
Securities Inc., Chase Manhattan Bank AG, and Chase Manhattan
International Limited
5.1 Opinion and consent of Kirkland & Ellis*
5.2 Opinion and consent of Trenite Van Doorne*
10.1 Multicurrency Credit Facility Agreement dated May 12, 1998, by and
among The Derby Cycle Corporation, Chase Manhattan plc as arranger,
the Financial Institutions named therein as Banks, and Chase Manhattan
International Limited as Facility Agent and Security Agent
10.2 Shareholders Agreement of The Derby Cycle Corporation dated as of May
14, 1998, by and among The Derby Cycle Corporation, Derby Finance
S.a.r.l., DC Cycle, L.L.C. and Perseus Cycle, L.L.C.
10.3 Registration Agreement dated as of May 14, 1998, by and among The
Derby Cycle Corporation, Derby Finance S.a.r.l., DC Cycle, L.L.C. and
Perseus Cycle, L.L.C.
10.4 Trademark License Agreement dated as of May 14, 1998 between The Derby
Cycle Corporation and Derby International Corporation S.A.
10.5 Support Agreement dated as of May 12, 1998 among The Derby Cycle
Corporation, Derby International Corporation S.A., Derby Finance
S.a.r.l., DC Cycle, L.L.C., Perseus Cycle, L.L.C. and Raleigh
Industries of Canada Limited
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.6 Put and Call Option Agreement dated May 13, 1998 among The Derby Cycle
Corporation, Derby International Corporation S.A., Derby Finance
S.a.r.l., DC Cycle, L.L.C., Perseus Cycle, L.L.C. and Raleigh
Industries of Canada Limited
10.7 Derby Cycle Corporation Share Option Agreement dated May 13, 1998
among The Derby Cycle Corporation, Derby International Corporation,
S.A., Derby Finance S.a.r.l., DC Cycle, L.L.C. Perseus Cycle, L.L.C.
and Raleigh Industries of Canada Limited
10.8 Employment Agreement dated as of May 14, 1998 between The Derby Cycle
Corporation and Alan J. Finden-Crofts
10.9 Employment Agreement dated as of May 14, 1998 between The Derby Cycle
Corporation and William W. Austin, Jr.
12.1 Statement Regarding Computation of Ratios of Earnings to Fixed Charges
21.1 Subsidiaries of The Derby Cycle Corporation
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1)
23.3 Consent of Trenite Van Doorne (included in Exhibit 5.2)
24.1 Powers of Attorney of Directors and Officers of The Derby Cycle
Corporation and Lyon Investments B.V. (included on Signature Page)
25.1 Statement of Eligibility of Trustee on Form T-1*
27.1 Financial Data Schedule*
99.1 Form of Letter of Transmittal in connection with the DM Notes*
99.2 Form of Notice of Guaranteed Delivery in connection with the DM Notes*
99.3 Form of Book-Entry Facility Participant*
99.4 Form of Letter to Clients and Form of Instruction to Book-Entry
Transfer Participant*
99.5 Form of Letter of Transmittal in connection with the Dollar Notes*
99.6 Form of Notice of Guaranteed Delivery in connection with the Dollar
Notes*
99.7 Form of Letters of DTC Participants*
99.8 Form of Letter to Clients and Form of Instruction to Book-Entry
Transfer Participant*
</TABLE>
(b) Financial Statement Schedules
* to be filed by Amendment
II-4
<PAGE>
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes.
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing any
increase or decrease in volume of securities (if the total dollar value
of securities offered would not exceed that which was registered) and
any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with
the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof;
(3) To remove form registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) To file a post effective amendment to the registration statement to
include any financial statements required by (S) 210.3-19.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered, therein, and the offering of such
securities at that item shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
II-5
<PAGE>
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of an
included in the registration statement when it became effective.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Nottingham, England, on
August 10, 1998.
Derby Cycle Corporation
/s/ Simon J. Goddard
By: _________________________________
Name: Simon J. Goddard
Title: Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Simon J. Goddard, his true and lawful attorney-
in-fact and agent, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities (including his
capacity as a director and/or officer of The Derby Cycle Corporation), to sign
any or all amendments (including post-effective amendments) to this
registration statement and any subsequent registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-
fact and agent full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement and power of attorney have been signed by the following persons in
the capacities and on the dates indicated:
SIGNATURE CAPACITY DATE
/s/ Alan J. Finden-Crofts President, Chief August 10, 1998
- ------------------------------------- Executive Officer
ALAN J. FINDEN-CROFTS and Director
(principal
executive officer)
/s/ Simon J. Goddard Chief Financial August 10, 1998
- ------------------------------------- Officer (principal
SIMON J. GODDARD financial and
accounting officer)
/s/ Frederic V. Malek Chairman of the August 10, 1998
- ------------------------------------- Board and Director
FREDERIC V. MALEK
/s/ A. Edward Gottesman Director August 10, 1998
- -------------------------------------
A. EDWARD GOTTESMAN
/s/ Frank H. Pearl Director August 10, 1998
- -------------------------------------
FRANK H. PEARL
/s/ Carl J. Rickertsen Director August 10, 1998
- -------------------------------------
CARL J. RICKERTSEN
/s/ Paul G. Stern Director August 10, 1998
- -------------------------------------
PAUL G. STERN
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the cities of New York, New York,
U.S.A. and Dieren, The Netherlands, respectively, on August 10, 1998.
Lyon Investments B.V.
/s/ A. Edward Gottesman
By: _________________________________
Name: A. Edward Gottesman
Title: Managing Director
/s/ A.J. Straalman
By: _________________________________
Name: A.J. Straalman
Title: Managing Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Simon J. Goddard, his true and lawful attorney-
in-fact and agent, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities (including his
capacity as a director and/or officer of The Derby Cycle Corporation), to sign
any or all amendments (including post-effective amendments) to this
registration statement and any subsequent registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-
fact and agent full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement and power of attorney have been signed by the following persons in
the capacities and on the dates indicated:
SIGNATURE CAPACITY DATE
/s/ A. Edward Gottesman Managing Director August 10, 1998
- -------------------------------------
A. EDWARD GOTTESMAN
/s/ A.J. Straalman Managing Director August 10, 1998
- -------------------------------------
A.J. STRAALMAN
II-8
<PAGE>
REGISTERED OFFICE OF THE ISSUERS
THE DERBY CYCLE CORPORATION
LYON INVESTMENTS B.V.
c/o Raleigh Industries Ltd.
Triumph Road
Nottingham NG7 2DD, England
United Kingdom
To the Issuers as to United States To the Issuers as to Dutch law:
law:
TRENITE VAN DOORNE
KIRKLAND & ELLIS INTERNATIONAL Postbus 75265
International Financial Centre 1007 AG Amsterdam, The Netherlands
Old Broad Street, 8th Floor
London EC2N 1HQ, England
United Kingdom
AUDITORS
ARTHUR ANDERSEN LLP
8000 Towers Crescent Drive
Vienna, VA 22182-2725
BOOK-ENTRY DEPOSITARY,
TRANSFER AGENT AND PAYING AGENT FOR
TRUSTEE THE DOLLAR NOTES
IBJ Schroder Bank & Trust Company IBJ SCHRODER
One State Street One State Street
New York, NY 10004 New York, NY 10004
TRANSFER AGENT AND PAYING AGENT FOR THE DM NOTES
Industrial Bank of Japan (Luxembourg) S.A.
6, rue Jean Monnet
L-2180 Luxembourg
LISTING AGENT
Industrial Bank of Japan (Luxembourg) S.A.
6, rue Jean Monnet
L-2180 Luxembourg
II-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Purchase Agreement dated as of May 7, 1998, among The Derby Cycle
Corporation, Lyon Investments B.V., Chase Securities Inc., Chase
Manhattan Bank AG, and Chase Manhattan International Limited
2.1 Recapitalization Agreement dated as of March 11, 1998, among The Derby
Cycle Corporation, Derby International Corporation S.A., Derby Finance
S.a.r.l., DC Cycle, L.L.C., and Perseus Cycle, L.L.C.
2.2 First Amendment to the Recapitalization Agreement dated March 17,
1998, among The Derby Cycle Corporation, Derby International
Corporation S.A., Derby Finance S.a.r.l., DC Cycle, L.L.C., Perseus
Cycle, L.L.C., Frank H. Pearl and Alan J. Finden-Crofts
2.3 Second Amendment to the Recapitalization Agreement dated as of May 14,
1998, among The Derby Cycle Corporation, Derby International
Corporation S.A., Derby Finance S.a.r.l., DC Cycle, L.L.C., Perseus
Cycle, L.L.C., Alan J. Finden-Crofts, A. Edward Gottesman, Frank H.
Pearl and Thayer Equity Partners, III
3.1 Amended and Restated Certificate of Incorporation of The Derby Cycle
Corporation
3.2 Bylaws of The Derby Cycle Corporation
3.3 Articles of Association of Lyon Investments B.V.
4.1 Dollar Indenture dated May 14, 1998, by and among The Derby Cycle
Corporation, Lyon Investments B.V. and IBJ Schroder Bank & Trust
Company, as trustee
4.2 DM Indenture dated May 14, 1998, by and among The Derby Cycle
Corporation, Lyon Investments B.V. and IBJ Schroder Bank & Trust
Company, as trustee
4.3 Forms of 10% Senior Note and 9 3/8% Senior Note (contained in Exhibit
4.1 as Exhibit A thereto)
4.4 Exchange and Registration Rights Agreement dated as of May 14, 1998,
among The Derby Cycle Corporation, Lyon Investments B.V. and Chase
Securities Inc., Chase Manhattan Bank AG, and Chase Manhattan
International Limited
5.1 Opinion and consent of Kirkland & Ellis*
5.2 Opinion and consent of Trenite Van Doorne*
10.1 Multicurrency Credit Facility Agreement dated May 12, 1998, by and
among The Derby Cycle Corporation, Chase Manhattan plc as arranger,
the Financial Institutions named therein as Banks, and Chase Manhattan
International Limited as Facility Agent and Security Agent
10.2 Shareholders Agreement of The Derby Cycle Corporation dated as of May
14, 1998, by and among The Derby Cycle Corporation, Derby Finance
S.a.r.l., DC Cycle, L.L.C. and Perseus Cycle, L.L.C.
10.3 Registration Agreement dated as of May 14, 1998, by and among The
Derby Cycle Corporation, Derby Finance S.a.r.l., DC Cycle, L.L.C. and
Perseus Cycle, L.L.C.
10.4 Trademark License Agreement dated as of May 14, 1998 between The Derby
Cycle Corporation and Derby International Corporation S.A.
10.5 Support Agreement dated as of May 12, 1998 among The Derby Cycle
Corporation, Derby International Corporation S.A., Derby Finance
S.a.r.l., DC Cycle, L.L.C., Perseus Cycle, L.L.C. and Raleigh
Industries of Canada Limited
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.6 Put and Call Option Agreement dated May 13, 1998 among The Derby Cycle
Corporation, Derby International Corporation S.A., Derby Finance
S.a.r.l., DC Cycle, L.L.C., Perseus Cycle, L.L.C. and Raleigh
Industries of Canada Limited
10.7 Derby Cycle Corporation Share Option Agreement dated May 13, 1998
among The Derby Cycle Corporation, Derby International Corporation,
S.A., Derby Finance S.a.r.l., DC Cycle, L.L.C. Perseus Cycle, L.L.C.
and Raleigh Industries of Canada Limited
10.8 Employment Agreement dated as of May 14, 1998 between The Derby Cycle
Corporation and Alan J. Finden-Crofts
10.9 Employment Agreement dated as of May 14, 1998 between The Derby Cycle
Corporation and William W. Austin, Jr.
12.1 Statement Regarding Computation of Ratios of Earnings to Fixed Charges
21.1 Subsidiaries of The Derby Cycle Corporation
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1)
23.3 Consent of Trenite Van Doorne (included in Exhibit 5.2)
24.1 Powers of Attorney of Directors and Officers of The Derby Cycle
Corporation and Lyon Investments B.V. (included on Signature Page)
25.1 Statement of Eligibility of Trustee on Form T-1*
27.1 Financial Data Schedule*
99.1 Form of Letter of Transmittal in connection with the DM Notes*
99.2 Form of Notice of Guaranteed Delivery in connection with the DM Notes*
99.3 Form of Book-Entry Facility Participant*
99.4 Form of Letter to Clients and Form of Instruction to Book-Entry
Transfer Participant*
99.5 Form of Letter of Transmittal in connection with the Dollar Notes*
99.6 Form of Notice of Guaranteed Delivery in connection with the Dollar
Notes*
99.7 Form of Letters of DTC Participants*
99.8 Form of Letter to Clients and Form of Instruction to Book-Entry
Transfer Participant*
</TABLE>
(b) Financial Statement Schedules
* to be filed by Amendment
2
<PAGE>
EXHIBIT 1.1
THE DERBY CYCLE CORPORATION
LYON INVESTMENTS B.V.
$100,000,000 10% Senior Notes due 2008
DM110,000,000 9 3/8% Senior Notes due 2008
PURCHASE AGREEMENT
May 7, 1998
CHASE SECURITIES INC.
270 Park Avenue, 4th floor
New York, New York 10017
CHASE MANHATTAN BANK AG
Grueneburgweg 2
60322 Frankfurt am Main
Germany
CHASE MANHATTAN INTERNATIONAL LIMITED
125 London Wall, 9th Floor
London, EC2Y 5AJ
England
Ladies and Gentlemen:
Pursuant to the Recapitalization Agreement dated as of March 11, 1998,
as amended (the "Recapitalization Agreement"), among The Derby Cycle
Corporation, a Delaware corporation ("DCC"), Derby International Corporation
S.A., a corporation organized under the laws of the Grand Duchy of Luxembourg
("DICSA"), Derby Finance S.a.r.l., a corporation organized under the laws of the
Grand Duchy of Luxembourg and a wholly owned subsidiary of DICSA ("DFS"), DC
Cycle, L.L.C., a Delaware limited liability company ("DC Cycle"), and Perseus
Cycle, L.L.C., a Delaware limited liability company ("Perseus Cycle"), DCC and
its direct and indirect wholly owned subsidiaries, including Lyon Investments
B.V., a company organized under the laws of The Netherlands and a wholly owned
subsidiary of DCC, which was formerly known as Lyon Cycle B.V. ("Lyon", and,
together with DCC, the "Issuers"), will undertake a restructuring (the
"Restructuring"), as a result of which DCC will own all the capital stock of
approximately 80 existing subsidiaries and the other components of the
Recapitalization (as defined in the Offering Memorandum referred to below) will
be consummated.
<PAGE>
2
In connection with the foregoing, the Issuers propose to issue and
sell $100,000,000 aggregate principal amount of 10 % Senior Notes due 2008 (the
"Dollar Securities") and DM110,000,000 aggregate principal amount of 9 3/8%
Senior Notes due 2008 (the "DM Securities", and, together with the Dollar
Securities, the "Securities"). The Dollar Securities will be issued pursuant to
an Indenture to be dated as of May 14, 1998 (the "Dollar Securities Indenture"),
among the Issuers and IBJ Schroder Bank & Trust Company, as trustee (the "Dollar
Securities Trustee"), and the DM Securities will be issued pursuant to an
Indenture to be dated as of May 14, 1998 (the "DM Securities Indenture" and,
together with the Dollar Securities Indenture, the "Indentures"), among the
Issuers and IBJ Schroder Bank & Trust Company, as trustee (the "DM Securities
Trustee", and together with the Dollar Securities Trustee, the "Trustees"). The
Issuers hereby confirm their agreement with Chase Securities Inc. ("CSI"), Chase
Manhattan Bank AG ("Chase AG") and Chase Manhattan International Limited
(collectively with CSI and Chase AG, the "Initial Purchasers") concerning the
purchase of the Securities from the Issuers by the several Initial Purchasers.
The Securities will be offered and sold to the Initial Purchasers
without being registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon an exemption therefrom. The Issuers have
prepared a preliminary offering memorandum dated April 17, 1998 (the
"Preliminary Offering Memorandum"), and will prepare an offering memorandum
dated the date hereof (the "Offering Memorandum") setting forth information
concerning the Issuers and the Securities. Copies of the Preliminary Offering
Memorandum have been, and copies of the Offering Memorandum will be, delivered
by the Issuers to the Initial Purchasers pursuant to the terms of this
Agreement. Any references herein to the Preliminary Offering Memorandum and the
Offering Memorandum shall be deemed to include all amendments and supplements
thereto, unless otherwise noted. The Issuers hereby confirm that they have
authorized the use of the Preliminary Offering Memorandum and the Offering
Memorandum in connection with the offering and resale of the Securities by the
Initial Purchasers in accordance with Section 2.
Holders of the Securities (including the Initial Purchasers and their
direct and indirect transferees) will be entitled to the benefits of an Exchange
and Registration Rights Agreement, substantially in the form attached hereto as
Annex A (the "Exchange and Registration Rights Agreement"), pursuant to which
the Issuers will agree to file with the Securities and Exchange Commission (the
"Commission") (i) a registration statement under the Securities Act (the
"Exchange Offer Registration Statement") registering two issues of senior notes
of the Issuers (together, the "Exchange Securities"), one of which is identical
in all material respects to the Dollar Securities and one of which is identical
in all material respects to the DM Securities (except that the Exchange
Securities will not contain terms with respect to transfer restrictions), and
(ii) under certain circumstances, a shelf registration statement pursuant to
Rule 415 under the Securities Act (the "Shelf Registration Statement").
Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Offering Memorandum.
<PAGE>
3
1. Representations, Warranties and Agreements of the Issuers. Each
Issuer represents and warrants to, and agrees with, the several Initial
Purchasers on and as of the date hereof and the Closing Date (as defined in
Section 3) that:
(a) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its respective date, did not, and on the Closing Date the
Offering Memorandum will 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 the light of the
circumstances under which they were made, not misleading; provided that the
Issuers make no representation or warranty as to information contained in
or omitted from the Preliminary Offering Memorandum or the Offering
Memorandum in reliance upon and in conformity with written information
relating to the Initial Purchasers furnished to the Issuers by or on behalf
of any Initial Purchaser specifically for use therein (the "Initial
Purchasers' Information").
(b) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its respective date, contains all the information that,
if requested by a prospective purchaser of the Securities, would be
required to be provided to such prospective purchaser pursuant to Rule
144A(d)(4) under the Securities Act.
(c) Assuming the accuracy of the representations and warranties of the
Initial Purchasers contained in Section 2 and their compliance with the
agreements set forth therein, it is not necessary, in connection with the
issuance and sale of the Securities to the Initial Purchasers and the
offer, resale and delivery of the Securities by the Initial Purchasers in
the manner contemplated by this Agreement and the Offering Memorandum, to
register the Securities under the Securities Act or, prior to the
effectiveness of any Registration Statement, to qualify the Indentures
under the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act").
(d) DCC has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware and is
duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which its ownership or lease of
property or the conduct of its business requires such qualification, Lyon
has been duly incorporated or organized and is validly existing in the form
of a private company with limited liability ("besloten vennootschap met
beperkte aansprakelijkheid") under the laws of The Netherlands, and each of
the subsidiaries of DCC listed on Schedule 1(d) hereto (the
"Subsidiaries"), which subsidiaries are all the subsidiaries of DCC
identified as "Obligors" in the Revolving Credit Agreement, has been duly
incorporated or organized and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation, and DCC and
the Subsidiaries have all power and authority necessary to own or hold
their respective properties and to conduct the businesses in which they are
engaged, except where the failure so to qualify or have such power or
authority would not, singularly or in the aggregate, have a material
adverse effect on the condition (financial or otherwise), results of
operations, business or prospects of DCC and the Subsidiaries, taken as a
whole (a "Material Adverse Effect").
<PAGE>
4
(e) As of the Closing Date, DCC will have an authorized capitalization
as set forth in its Amended and Restated Certificate of Incorporation and
as described in the Offering Memorandum, and Lyon will have an authorized
capitalization as set forth in its Deed of Incorporation. All the
outstanding shares of capital stock of DCC and Lyon are duly and validly
authorized and issued and are fully paid and non-assessable, and, as of the
Closing Date and after giving effect to the Transactions (as defined
below), all the outstanding shares of capital stock of DCC and Lyon will be
duly and validly authorized and issued and will be fully paid and non-
assessable. As of the Closing Date and after giving effect to the
Transactions, the capital stock of DCC will conform in all material
respects to the description thereof contained in the Offering Memorandum.
All of the outstanding shares of capital stock of each subsidiary of DCC
(including Lyon) have been duly and validly authorized and issued and are
fully paid and non-assessable, and, after giving effect to the
Restructuring, will be owned, directly or indirectly, by DCC, with the
exception of Raleigh Canada, Univega, Univega License, MS Sport Vertriebs
GmbH, MS Sport Vertriebs AG, Shenzen Raleigh Industrial Development Co.
Ltd, Derby Holdings South Africa and Derby Component Manufacturing (Pty.)
Ltd, with respect to which DCC will own controlling interests, and Piederb
Properties (Pty.) Ltd., with respect to which DCC will own a minority
interest. All such shares will be owned free and clear of any lien, charge,
encumbrance, security interest (other than as contemplated by the Revolving
Credit Agreement), restriction upon voting or transfer or any other claim
of any third party.
(f) Each of the Issuers and each of the Subsidiaries has full right,
power and authority to execute and deliver this Agreement, the Exchange and
Registration Rights Agreement, the Indentures, the Securities, the
Revolving Credit Agreement and the Recapitalization Agreement
(collectively, the "Transaction Documents") to which each is a party and to
perform its respective obligations hereunder and thereunder; and all action
required to be taken for the due and proper authorization, execution and
delivery of each of the Transaction Documents and the consummation of the
transactions contemplated thereby (the "Transactions") has been duly and
validly taken.
(g) This Agreement has been duly authorized, executed and delivered by
each of the Issuers and constitutes a valid and legally binding agreement
of each of the Issuers.
(h) The Registration Rights Agreement has been duly authorized by each
of the Issuers and, when duly executed and delivered in accordance with its
terms by each of the parties thereto, will constitute a valid and legally
binding agreement of each of the Issuers enforceable against each of the
Issuers in accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law).
(i) Each of the Dollar Securities Indenture and the DM Securities
Indenture has been duly authorized by each of the Issuers and, when duly
executed and delivered in accordance with its terms by each of the parties
thereto, will constitute a valid and legally
<PAGE>
5
binding agreement of each of the Issuers, enforceable against each of the
Issuers in accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law). On the Closing
Date, each of the Dollar Securities Indenture and the DM Securities
Indenture will conform in all material respects to the requirements of the
Trust Indenture Act and the rules and regulations of the Commission
applicable to an indenture that is qualified thereunder.
(j) The Dollar Securities and the DM Securities have been duly
authorized by each of the Issuers and, when duly executed, authenticated,
issued and delivered as provided in the Dollar Securities Indenture or the
DM Securities Indenture, as applicable, and paid for as provided herein,
will be duly and validly issued and outstanding and will constitute valid
and legally binding obligations of each of the Issuers, as joint and
several obligors, entitled to the benefits of the applicable Indenture and
enforceable against each of the Issuers in accordance with their terms,
except to the extent that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws affecting creditors' rights generally and by general
equitable principles (whether considered in a proceeding in equity or at
law).
(k) On the Closing Date, the Revolving Credit Agreement will be duly
authorized, executed and delivered by DCC and the Subsidiaries and, when
duly executed and delivered in accordance with its terms by each of the
parties thereto, will constitute a valid and legally binding agreement of
DCC and the Subsidiaries, enforceable against DCC and the Subsidiaries in
accordance with its terms, except to the extent that such enforceability
may be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors'
rights generally and by general equitable principles (whether considered in
a proceeding in equity or at law).
(l) The Recapitalization Agreement has been duly authorized, executed
and delivered by DCC, DICSA, DFS, DC Cycle and Perseus Cycle and
constitutes the valid and legally binding agreement of DCC, DICSA, DFS, DC
Cycle and Perseus Cycle, enforceable against DCC, DICSA, DFS, DC Cycle and
Perseus in accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law).
(m) Each Transaction Document conforms in all material respects to the
description thereof contained in the Offering Memorandum.
(n) (i) The execution, delivery and performance by each of the Issuers
and each of the Subsidiaries of each of the Transaction Documents to which
it is a party, (ii) the issuance, authentication, sale and delivery of the
Securities and compliance by each of the Issuers with the terms thereof and
(iii) the consummation of the Transactions will not
<PAGE>
6
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets
of either of the Issuers or any of the Subsidiaries (other than as
contemplated by the Revolving Credit Agreement) pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which either of the Issuers or any the Subsidiaries is a
party or by which either of the Issuers or any of such subsidiaries is
bound or to which any of the property or assets of either of the Issuers or
any of the Subsidiaries is subject, which breach, violation, default or
creation or imposition of a lien, charge or encumbrance could reasonably be
expected to have a Material Adverse Effect, nor will such actions result in
any violation of the provisions of the charter or by-laws (or comparable
organizational or governing documents) of either of the Issuers or any of
the Subsidiaries or any statute or any judgment, order, decree, rule or
regulation of any court or arbitrator or governmental agency or body having
jurisdiction over either of the Issuers or any of the Subsidiaries or any
of their respective properties or assets; and no consent, approval,
authorization or order of, or filing or registration with, any such court
or arbitrator or governmental agency or body under any such statute,
judgment, order, decree, rule or regulation is required for (i) the
execution, delivery and performance by each of the Issuers and the
Subsidiaries of each of the Transaction Documents to which it is a party,
(ii) the issuance, authentication, sale and delivery of the Securities and
compliance by each of the Issuers with the terms thereof and (iii) the
consummation of the Transactions, except for such consents, approvals,
authorizations, filings, registrations or qualifications (A) which shall
have been obtained or made prior to the Closing Date or which are to be
made following the Closing Date with the Luxembourg Stock Exchange (the
"Luxembourg Exchange") or (B) as may be required to be obtained or made
under the Securities Act as provided in the Exchange and Registration
Rights Agreement and applicable state securities laws.
(o) (i) Arthur Andersen LLP ("Arthur Andersen") are independent
certified public accountants with respect to each of DICSA and its
subsidiaries, and DCC and its subsidiaries (including Lyon), in each case
within the meaning of Rule 101 of the Code of Professional Conduct of the
American Institute of Certified Public Accountants ("AICPA") and its
interpretations and rulings thereunder. The historical financial statements
(including the notes thereto) contained in the Offering Memorandum have
been prepared in accordance with U.S. generally accepted accounting
principles consistently applied throughout the periods covered thereby and
fairly present the financial position of the entities purported to be
covered thereby at the respective dates indicated and the results of their
operations and their cash flows for the respective periods indicated; and
the financial information contained in the Offering Memorandum under the
headings "Summary--Summary Historical and Pro Forma Financial Data",
"Capitalization", "Selected Historical and Pro Forma Financial Data",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Management--Compensation of Executive Officers" is derived
from the accounting records of DICSA and its subsidiaries (including DCC
and Lyon) and fairly presents the information purported to be shown
thereby, except that the financial information contained in the Offering
Memorandum under such headings in respect of dates, unit sales, sale
prices, sales to major customers and exchange rates is not derived from
such
<PAGE>
7
accounting records. The pro forma financial information contained in the
Offering Memorandum has been prepared on a basis consistent with the
historical financial statements contained in the Offering Memorandum
(except for the pro forma adjustments specified therein), includes all
material adjustments to the historical financial information necessary to
reflect the transactions described in the Offering Memorandum, gives effect
to assumptions made on a reasonable basis and fairly presents the
historical and proposed transactions contemplated by the Offering
Memorandum and the Transaction Documents. The other historical financial
and statistical information and data included in the Offering Memorandum
are, in all material respects, fairly presented.
(p) There are no legal or governmental proceedings pending to which
DICSA or any of its subsidiaries (including DCC and Lyon) is a party or of
which any property or assets of DICSA or any of its subsidiaries (including
DCC and Lyon) is subject that, (A) singularly or in the aggregate, if
determined adversely to DICSA or any of its subsidiaries (including DCC and
Lyon), could reasonably be expected to have a Material Adverse Effect or
(B) question the validity or enforceability of any of the Transaction
Documents or any action taken or to be taken pursuant thereto; and to the
best knowledge of DICSA and the Issuers, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others.
(q) No action has been taken and no statute, rule, regulation or order
has been enacted, adopted or issued by any governmental agency or body that
prevents the issuance of the Securities or suspends the sale of the
Securities in any jurisdiction; no injunction, restraining order or order
of any nature by any U.S. federal or state court or any court of The
Netherlands or any court of Luxembourg, in each case of competent
jurisdiction, has been issued with respect to either of the Issuers that
would prevent or suspend the issuance or sale of the Securities or the use
of the Preliminary Offering Memorandum or the Offering Memorandum in any
jurisdiction; no action, suit or proceeding is pending against or, to the
best knowledge of the Issuers, threatened against or affecting the Issuers
before any court or arbitrator or any governmental agency, body or
official, domestic or foreign, that could reasonably be expected to
interfere with or adversely affect the issuance of the Securities or in any
manner draw into question the validity or enforceability of any of the
Transaction Documents or any action taken or to be taken pursuant thereto;
and each of the Issuers has complied with, and will comply with, any and
all requests by the Luxembourg Exchange for additional information to be
included in the Listing Application (as defined below) and has received no
request from the Luxembourg Exchange or any securities authority in any
jurisdiction for additional information to be included in the Preliminary
Memorandum or the Offering Memorandum.
(r) None of the Issuers or any of the subsidiaries of DCC is (i) in
violation of its charter or by-laws (or comparable organizational or
governing documents), (ii) in default in any material respect, and no event
has occurred which, with notice or lapse of time or both, would constitute
such a default, in the due performance or observance of any term, covenant
or condition contained in any indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument to which it is a party
or by which it is bound or
<PAGE>
8
to which any of its property or assets is subject (unless such default has
been waived) or (iii) in violation in any material respect of any law,
ordinance, governmental rule, regulation or court decree to which it or its
property or assets may be subject, in each case which could reasonably be
expected, singularly or in the aggregate, to have a Material Adverse
Effect.
(s) DICSA, the Issuers and each of the Subsidiaries possess and, upon
consummation of the Transactions, each of the Issuers and the Subsidiaries
will possess, all licenses, certificates, authorizations and permits issued
by, and have made and, upon consummation of the Transactions, will have
made, all declarations and filings with, the appropriate federal, state or
foreign regulatory agencies or bodies that are necessary or desirable for
the ownership of their respective properties or the conduct of their
respective businesses as described in the Offering Memorandum, except where
the failure to possess or make the same would not, singularly or in the
aggregate, have a Material Adverse Effect, and none of DICSA, the Issuers
or any the Subsidiaries has received notification of any revocation or
modification of any such license, certificate, authorization or permit or
has any reason to believe that any such license, certificate, authorization
or permit will not be renewed in the ordinary course.
(t) DICSA and each of its subsidiaries (including DCC and Lyon but
excluding Exeter International Corporation S.A. ("Exeter"), which, as of
the date hereof, is not, and, upon consummation of the Transactions, will
not be, a subsidiary of DCC) has filed all federal, state, local and
foreign income and franchise tax returns required to be filed through the
date hereof and has paid all taxes due thereon, and no tax deficiency has
been determined adversely to DICSA or any of its subsidiaries (including
DCC and Lyon but excluding Exeter) that has had (nor does DICSA or any of
its subsidiaries (including DCC and Lyon but excluding Exeter) have any
knowledge of any tax deficiency that, if determined adversely to DICSA or
any of its subsidiaries (including DCC and Lyon but excluding Exeter),
could reasonably be expected to have) a Material Adverse Effect.
(u) Neither of the Issuers is, and, upon consummation of the
Transactions neither of the Issuers will be, (i) an "investment company" or
a company "controlled by" an investment company within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company Act"),
and the rules and regulations of the Commission thereunder or (ii) a
"holding company" or a "subsidiary company" of a holding company or an
"affiliate" thereof within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
(v) DICSA and each of its subsidiaries (including DCC and Lyon but
excluding Exeter) maintains, and, upon consummation of the Transactions,
each of the Issuers and each of the subsidiaries of DCC will maintain, a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and
<PAGE>
9
(iv) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect
to any differences.
(w) DICSA and each of its subsidiaries (including DCC and Lyon but
excluding Exeter) have, and, upon consummation of the Transactions, each of
the Issuers and each of the subsidiaries of DCC will have, insurance
covering their respective properties, operations, personnel and businesses,
which insurance is in amounts and insures against such losses and risks as
are adequate to protect DICSA and each of its subsidiaries (including DCC
and Lyon but excluding Exeter) and their respective businesses and, upon
consummation of the Transactions, will be in amounts and insure against
such losses and risks as will be adequate to protect the Issuers, the
subsidiaries of DCC and their respective businesses. None of DICSA or any
of its subsidiaries (including DCC and Lyon but excluding Exeter) has
received notice from any insurer or agent of such insurer that capital
improvements or other expenditures are required or necessary to be made in
order to continue such insurance.
(x) DICSA and each of its subsidiaries (including DCC and Lyon but
excluding Exeter) owns or possesses and, upon consummation of the
Transactions, each of the Issuers and each of the subsidiaries of DCC will
own or possess, adequate rights to use all patents, patent applications,
trademarks, service marks, trade names, trademark registrations, service
mark registrations, copyrights, licenses and know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) necessary for the conduct
of their respective businesses in the manner such businesses are conducted
on the Closing Date; and the conduct of their respective businesses does
not and will not conflict in any material respect with, and DICSA and its
subsidiaries (including DCC and Lyon but excluding Exeter) have not
received any notice of any claim of conflict with, any such rights of
others.
(y) DICSA and each of its subsidiaries (including DCC and Lyon but
excluding Exeter) have, and, upon consummation of the Transactions, each of
the Issuers and the subsidiaries of DCC will have, good and marketable
title in fee simple to, and DICSA and each of its subsidiaries (including
DCC and Lyon but excluding Exeter) have, and, upon consummation of the
Transactions, each of the Issuers and the subsidiaries of DCC will have,
valid rights to lease or otherwise use, all items of real and personal
property that are material to the business of DICSA and its subsidiaries
(including DCC and Lyon but excluding Exeter), and, upon consummation of
the Transactions, the Issuers and the subsidiaries of DCC, in each case
free and clear of all liens, encumbrances (other than as contemplated by
the Revolving Credit Agreement), claims and defects and imperfections of
title except such as (i) do not materially interfere with the use made and
proposed to be made of such property or (ii) could not reasonably be
expected to have a Material Adverse Effect.
(z) No labor disturbance by or dispute with the employees of DICSA or
any of its subsidiaries (including DCC and Lyon but excluding Exeter)
exists or, to the best knowledge of DICSA and the Issuers, is contemplated
or threatened.
<PAGE>
10
(aa) No "prohibited transaction" (as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"), or Section
4975 of the Internal Revenue Code of 1986, as amended from time to time
(the "Code")) or "accumulated funding deficiency" (as defined in Section
302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA
(other than events with respect to which the 30-day notice requirement
under Section 4043 of ERISA has been waived) has occurred with respect to
any employee benefit plan of DCC or any of its subsidiaries (including
Lyon) which could reasonably be expected to have, singularly or in the
aggregate, a Material Adverse Effect; each such employee benefit plan is in
compliance in all material respects with applicable law, including ERISA
and the Code; DCC and its subsidiaries (including Lyon) have not incurred,
and, upon consummation of the Transactions, DCC and its subsidiaries do not
expect to incur, liability under Title IV of ERISA with respect to the
termination of, or withdrawal from, any pension plan for which DCC or any
of its subsidiaries (including Lyon) would have any liability; and each
such pension plan that is intended to be qualified under Section 401(a) of
the Code is so qualified in all material respects and nothing has occurred,
whether by action or by failure to act, which could reasonably be expected
to cause the loss of such qualification.
(bb) There has been no storage, generation, transportation, handling,
treatment, disposal, discharge, emission or other release of any kind of
toxic or other wastes or other hazardous substances by, due to or caused by
DICSA or any of its subsidiaries (including DCC or Lyon) (or, to the best
knowledge of DICSA and the Issuers, any other entity (including any
predecessor) for whose acts or omissions the Issuers or any of the
subsidiaries of DCC is or could reasonably be expected to be liable) upon
any of the property now or previously owned or leased by DICSA or any of
its subsidiaries (including DCC and Lyon), or upon any other property, in
violation of any statute or any ordinance, rule, regulation, order,
judgment, decree or permit or that would, under any statute or any
ordinance, rule (including rule of common law), regulation, order,
judgment, decree or permit, give rise to any liability, except for any
violation or liability that the Issuers believe could not reasonably be
expected to have, singularly or in the aggregate with all such violations
and liabilities, a Material Adverse Effect; and there has been no disposal,
discharge, emission or other release of any kind onto such property or into
the environment surrounding such property of any toxic or other wastes or
other hazardous substances with respect to which DICSA or the Issuers has
knowledge, except for any such disposal, discharge, emission or other
release of any kind which could not reasonably be expected to have,
singularly or in the aggregate with all such discharges and other releases,
a Material Adverse Effect.
(cc) None of DICSA or any of its subsidiaries (including DCC and Lyon
but excluding Exeter) or, to the best knowledge of DICSA and the Issuers,
any director, officer, agent, employee or other person associated with or
acting on behalf of DICSA or any of its subsidiaries (including DCC and
Lyon but excluding Exeter) has (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds;
<PAGE>
11
(iii) violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977; or (iv) made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
(dd) On and immediately after the Closing Date, each of the Issuers
(after giving effect to the issuance of the Securities and to the other
transactions related thereto as described in the Offering Memorandum) will
be Solvent. As used in this paragraph, the term "Solvent" means, with
respect to a particular date, that on such date (i) the present fair market
value (or present fair saleable value) of the assets of each of the Issuers
is not less than the total amount required to pay the probable liabilities
of such Issuer on its total existing debts and liabilities (including
contingent liabilities) as they become absolute and matured, (ii) each of
the Issuers is able to realize upon its assets and pay its debts and other
liabilities, contingent obligations and commitments as they mature and
become due in the normal course of business, (iii) assuming the sale of the
Securities as contemplated by this Agreement and the Offering Memorandum,
neither of the Issuers is incurring debts or liabilities beyond its ability
to pay as such debts and liabilities mature and (iv) neither of the Issuers
is engaged in any business or transaction, or about to engage in any
business or transaction, for which its property would constitute
unreasonably small capital after giving due consideration to the prevailing
practice in the industry in which such Issuer is engaged. In computing the
amount of such contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in the light of all the
facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability.
(ee) Except as described in the Offering Memorandum, there are no
outstanding subscriptions, rights, warrants, calls or options to acquire,
or instruments convertible into or exchangeable for, or agreements or
understandings with respect to the sale or issuance of, any shares of
capital stock of or other equity or other ownership interest in either of
the Issuers or any of the subsidiaries of DCC.
(ff) None of DICSA or any of its subsidiaries (including DCC and
Lyon) owns, and, upon consummation of the Transactions, none of the Issuers
or any of the subsidiaries of DCC will own, any "margin securities" as that
term is defined in Regulation U of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), and none of the proceeds of
the sale of the Securities will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security, for the purpose of
reducing or retiring any indebtedness which was originally incurred to
purchase or carry any margin security or for any other purpose which might
cause any of the Securities to be considered a "purpose credit" within the
meanings of Regul ation T, U or X of the Federal Reserve Board.
(gg) None of DICSA or any of its subsidiaries (including DCC and Lyon
but excluding Exeter) is a party to any contract, agreement or
understanding with any person that would give rise to a valid claim against
DICSA or any of its subsidiaries (including DCC and Lyon but excluding
Exeter) or the Initial Purchasers for a brokerage
<PAGE>
12
commission, finder's fee or like payment in connection with the offering
and sale of the Securities.
(hh) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(ii) None of DICSA, any of its subsidiaries (including DCC and Lyon
but excluding Exeter), any of its or their respective affiliates or any
person acting on its or their behalf (other than the Initial Purchasers)
has engaged or will engage in any directed selling efforts (as such term is
defined in Regulation S under the Securities Act ("Regulation S")) with
respect to the Securities, and all such persons have complied and will
comply with the offering restrictions requirement of Regulation S to the
extent applicable.
(jj) None of DICSA, any of its subsidiaries (including DCC and Lyon
but excluding Exeter) or any of its or their respective affiliates has,
directly or through any agent, sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of, any security (as such term is
defined in the Securities Act), which is or will be integrated with the
sale of the Securities in a manner that would require registration of the
Securities under the Securities Act.
(kk) None of DICSA, any of its subsidiaries (including DCC and Lyon
but excluding Exeter), any of its or their respective affiliates or any
person acting on its or their behalf has engaged, in connection with the
offering of the Securities, in any form of general solicitation or general
advertising within the meaning of Rule 502(c) of Regulation D under the
Securities Act ("Regulation D").
(ll) There are no securities of the Issuers registered under the
Exchange Act or listed on a national securities exchange or quoted in a
U.S. automated inter-dealer quotation system.
(mm) None of DICSA, any of its subsidiaries (including DCC and Lyon
but excluding Exeter) has taken or will take, directly or indirectly, any
action prohibited by Regulation M under the Exchange Act in connection with
the offering of the Securities.
(nn) No forward-looking statement (within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act) contained in the
Preliminary Offering Memorandum or the Offering Memorandum has been made or
reaffirmed without a reasonable basis or has been disclosed other than in
good faith.
(oo) None of DICSA or any of its subsidiaries (including DCC and Lyon
but excluding Exeter) does business with the government of Cuba or with any
person or affiliate located in Cuba within the meaning of Florida Statutes
Section 517.075.
(pp) with respect to DCC and the Subsidiaries (other than
Subsidiaries that are dormant companies), any reprogramming required to
permit the proper functioning, in and
<PAGE>
13
following the year 2000, of (i) DCC's or any Subsidiary's computer systems
and (ii) equipment containing embedded microchips (including systems and
equipment supplied by others or with which DCC's or any Subsidiary's
systems interface) and the testing of all such systems and equipment, as so
reprogrammed, will be completed by March 31, 1999. The cost to DCC and each
Subsidiary of such reprogramming and testing and of the reasonably
foreseeable consequences of year 2000 to DCC and each Subsidiary
(including, without limitation, reprogramming errors and the failure of
others' systems or equipment) will not result in a Material Adverse Effect.
Except for such of the reprogramming referred to in the preceding sentence
as may be necessary, the computer and management information systems of DCC
and each Subsidiary are and, with ordinary course upgrading and
maintenance, will continue to be, sufficient to permit DCC and each
Subsidiary to conduct its business without Material Adverse Effect.
(qq) Since the date as of which information is given in the Offering
Memorandum, (i) there has been no material adverse change or any
development involving a prospective material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs,
management or business prospects of DICSA and its subsidiaries (including
DCC and Lyon), whether or not arising in the ordinary course of business,
(ii) none of DICSA and its subsidiaries (including DCC and Lyon) has
incurred any material liability or obligation, direct or contingent, other
than in the ordinary course of business and (iii) except as contemplated by
the Recapitalization Agreement, (A) none of DICSA and its subsidiaries
(including DCC and Lyon) has entered into any material transaction other
than in the ordinary course of business and (B) there has not been any
change in the capital stock or long-term debt of DICSA and its subsidiaries
(including DCC and Lyon) or any dividend or distribution of any kind
declared, paid or made by DICSA or any of its subsidiaries (including DCC
and Lyon) on any class of their respective capital stock.
(rr) Application will be made to list the Securities on the
Luxembourg Exchange prior to the earlier to occur of the first interest
payment date in respect of the Securities and the consummation of the
Exchange Offer and, in connection therewith, the Issuers will prepare and
submit to the Luxembourg Exchange a listing application with respect to the
Securities (the "Listing Application"). The final Listing Application
approved by the Luxembourg Stock Exchange will comply in all material
respects with the requirements of the Luxembourg Exchange. There is no
requirement to deliver the Listing Application to prospective purchasers or
purchasers of Securities from the Initial Purchasers in connection with the
offer and sale by the Initial Purchasers of the Securities in the manner
contemplated by this Agreement and the Offering Memorandum.
(ss) Each of the Issuers has the power to submit, and pursuant to
this Agreement and the Indentures, has legally, validly, effectively and
irrevocably submitted, or in the case of the Indentures will legally,
validly, effectively and irrevocably submit, to the jurisdiction of any
U.S. Federal or state court in the Borough of Manhattan in The City of New
York, New York, and has the power to designate, appoint and empower and,
pursuant to this Agreement and the Indentures has, or in the case of the
Indentures will have, legally, validly, effectively and irrevocably
designated, appointed and empowered
<PAGE>
14
an agent for service of process in any suit or proceeding based on or
arising under this Agreement, the Exchange and Registration Rights
Agreement and the Indentures in any U.S. Federal or state court in the
Borough of Manhattan in The City of New York, as provided in Section 17
hereof, and Section 11(h) of the Exchange and Registration Rights Agreement
and Section 11.10 of each of the Indentures.
(tt) There is no "substantial U.S. market interest" as defined in
Rule 902(n) of Regulation S in the Issuers' debt securities.
(uu) No stamp duty, stock exchange tax, value-added tax, withholding
or any other similar duty or tax is payable in the United States, The
Netherlands or any other jurisdiction in which either of the Issuers is
organized or engaged in business for tax purposes or, in each case, any
political subdivision thereof or any authority having power to tax, in
connection with the authorization, issuance, sale and delivery of the
Securities by the Issuers to the Initial Purchasers and resales thereof by
the Initial Purchasers in the manner contemplated by this Agreement and the
Offering Memorandum.
(vv) None of the Issuers or any of the subsidiaries of DCC, and none
of their respective properties or assets, has any immunity from the
jurisdiction of any court or from any legal process (whether through
service or notice, attachment prior to judgment, attachment in aid of
execution, executing or otherwise) under the laws of the United States or
The Netherlands.
(ww) To ensure the legality, validity, enforceability and
admissibility into evidence of each of this Agreement, the Exchange and
Registration Rights Agreement, the Indentures, the Securities and any other
document to be furnished hereunder or thereunder in The Netherlands, it is
not necessary that this Agreement, the Exchange and Registration Rights
Agreement, the Indentures, the Securities or such other document be filed
or recorded with any court or other authority in The Netherlands or that
any stamp of similar tax be paid in The Netherlands on or in respect of
this Agreement, the Exchange and Registration Rights Agreement, the
Indentures, the Securities or any such other document.
(xx) None of DICSA, any of its subsidiaries (including DCC and Lyon)
or any of its or their respective affiliates has offered, sold, transferred
or delivered, and will not offer, sell, transfer or deliver, the
Securities, anywhere in the world, directly or indirectly, other than to
banks, pension funds, insurance companies, securities funds, investment
institutions, central governments, large international and supra-national
institutions and other comparable entities, including, inter alia,
treasuries and finance companies of large enterprises which trade or invest
in securities in the conduct of a business or profession.
(yy) None of the DICSA or any of its subsidiaries (including DCC and
Lyon but excluding Exeter) or any of its or their respective affiliates
has, directly or through any agent, sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any security under
circumstances that would breach article 3 of The Netherlands Securities
Market Supervision Act of 1995 ("Wet Toezicht Effectenverkeer 1995").
<PAGE>
15
2. Purchase and Resale of the Securities. (a) On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the Issuers agree to issue and sell to
each of the Initial Purchasers, severally and not jointly, and each of the
Initial Purchasers, severally and not jointly, agrees to purchase from the
Issuers, the principal amount of Securities set forth opposite the name of such
Initial Purchaser on Schedule 1 hereto at a purchase price equal to 97% of the
aggregate principal amount thereof. The Issuers shall not be obligated to
deliver any of the Securities except upon payment for all of the Securities to
be purchased as provided herein. If any court or documentary taxes, or any
other excise or property taxes, charges or similar levies are payable in the
United States, The Netherlands or any other jurisdiction in which either of the
Issuers is organized or engaged in business for tax purposes or, in each case,
any political subdivision thereof or any authority having power to tax in
connection with the issuance, sale and delivery by the Issuers to the Initial
Purchasers and resales thereof by the Initial Purchasers in the manner
contemplated by this Agreement and the Offering Memorandum, the Issuers agree to
pay, or to reimburse the Initial Purchasers promptly for, any such tax, charge
or levy.
(b) The Initial Purchasers have advised the Issuers that they propose
to offer the Securities for resale upon the terms and subject to the conditions
set forth herein and in the Offering Memorandum. Each Initial Purchaser,
severally and not jointly, represents, warrants and agrees that (i) it is
purchasing the Securities pursuant to a private sale exempt from registration
under the Securities Act, (ii) it has not solicited offers for, or offered or
sold, and will not solicit offers for, or offer or sell, the Securities by means
of any form of general solicitation or general advertising within the meaning of
Rule 502(c) of Regulation D or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act and (iii) it has solicited and
will solicit offers for the Securities only from, and has offered or sold and
will offer, sell or deliver the Securities, as part of its initial offering,
only (A) within the United States to persons whom it reasonably believes to be
qualified institutional buyers ("Qualified Institutional Buyers"), as defined in
Rule 144A under the Securities Act ("Rule 144A"), or if any such person is
buying for one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to it that each such
account is a Qualified Institutional Buyer to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A and in each case,
in transactions in accordance with Rule 144A and (B) outside the United States
to persons other than U.S. persons in reliance on Regulation S under the
Securities Act ("Regulation S").
(c) In connection with the offer and sale of Securities in reliance
on Regulation S, each Initial Purchaser, severally and not jointly, represents,
warrants and agrees that:
(i) the Securities have not been registered under the Securities
Act and may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except pursuant to an exemption
from, or in transactions not subject to, the registration requirements of
the Securities Act;
(ii) such Initial Purchaser has offered and sold the Securities, and
will offer and sell the Securities, (A) as part of their distribution at
any time and (B) otherwise until 40 days after the later of the
commencement of the offering of the Securities and the
<PAGE>
16
Closing Date, only in accordance with Regulation S or Rule 144A or any
other available exemption from registration under the Securities Act;
(iii) None of such Initial Purchaser or any of its affiliates or any
other person acting on its or their behalf has engaged or will engage in
any directed selling efforts with respect to the Securities, and all such
persons have complied and will comply with the offering restriction
requirements of Regulation S;
(iv) at or prior to the confirmation of sale of any Securities sold
in reliance on Regulation S, it will have sent to each distributor, dealer
or other person receiving a selling concession, fee or other remuneration
that purchases Securities from it during the restricted period a
confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not
be offered or sold within the United States or to, or for the account
or benefit of, U.S. persons (i) as part of their distribution at any
time or (ii) otherwise until 40 days after the later of the
commencement of the offering of the Securities and the date of
original issuance of the Securities, except in accordance with
Regulation S or Rule 144A or any other available exemption from
registration under the Securities Act. Terms used above have the
meanings given to them by Regulation S."
(v) it has not and will not enter into any contractual arrangement
with any distributor with respect to the distribution of the
Securities, except with its affiliates or with the prior written
consent of the Issuers.
Terms used in this Section 2(c) have the meanings given to them by Regulation S.
(d) Each Initial Purchaser, severally and not jointly, represents,
warrants and agrees that (i) it has not offered or sold and, prior to the date
six months after the Closing Date, will not offer or sell, any Securities to
persons in the United Kingdom, except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their business or otherwise in
circumstances which have not resulted in and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995, (ii) it has complied with and will comply with all
applicable provisions of the Financial Services Act 1986 and the Public Offers
of Securities Regulations 1995 with respect to anything done by it in relation
to the Securities in, from or otherwise involving the United Kingdom and (iii)
it has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issue of the
Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
(as amended), or to a person to whom such document may otherwise lawfully be
issued or passed on.
(e) Each Initial Purchaser, severally and not jointly, represents and
agrees that the Securities will not be offered, sold, transferred or delivered
as part of their initial distribution or any time thereafter, anywhere in the
world, directly or indirectly, other than to banks, pension
<PAGE>
17
funds, insurance companies, securities funds, investment institutions, central
governments, large international and supra-national institutions and other
comparable entities, including, inter alia, treasuries and finance companies of
large enterprises which trade or invest in securities in the conduct of a
business or profession.
(f) Each Initial Purchaser, severally and not jointly, represents and
agrees that (i) it is aware of the fact that no sales prospectus (Wertpapier-
Verkaufsprospekt) in Germany has been or will be published in respect of the
Securities, (ii) it will comply with the Securities Sales Prospectus Act of
Germany (Wertpapier-Verkaufsprospektgesetz) of December 13, 1990 and the
restrictions thereunder applying to the offer and distribution of the Securities
in Germany and (iii) in particular, it will only offer or sell any Securities in
Germany under any of the exemptions provided for in Section 2 of the Securities
Sales Prospectus Act.
(g) Each Initial Purchaser, severally and not jointly, agrees that,
prior to or simultaneously with the confirmation of sale by such Initial
Purchaser to any purchaser of any of the Securities purchased by such Initial
Purchaser from the Issuers pursuant hereto, such Initial Purchaser shall furnish
to that purchaser a copy of the Offering Memorandum (and any amendment or
supplement thereto that the Issuers shall have furnished to such Initial
Purchaser prior to the date of such confirmation of sale). In addition to the
foregoing, each Initial Purchaser acknowledges and agrees that the Issuers and,
for purposes of the opinions to be delivered to the Initial Purchasers pursuant
to Sections 5(d) and (e), counsel for the Issuers and for the Initial
Purchasers, respectively, may rely upon the accuracy of the representations and
warranties of the Initial Purchasers and their compliance with their agreements
contained in this Section 2, and each Initial Purchaser hereby consents to such
reliance.
(h) The Issuers acknowledge and agree that the Initial Purchasers may
sell Securities to any affiliate of an Initial Purchaser and that any such
affiliate may sell Securities purchased by it to an Initial Purchaser.
3. Delivery of and Payment for the Securities. (a) Delivery of and
payment for the Securities shall be made at the offices of Kirkland & Ellis, 153
East 53rd Street, New York, New York 10022, or at such other place as shall be
agreed upon by the Initial Purchasers and the Issuers, at 9:00 a.m., New York
City time, on May 14, 1998, or at such other time or date, not later than seven
full business days thereafter, as shall be agreed upon by the Initial Purchasers
and the Issuers (such date and time of payment and delivery being referred to
herein as the "Closing Date").
(b) On the Closing Date, payment of the purchase price for the
Securities shall be made to the Issuers by wire or book-entry transfer of same-
day funds to such account or accounts as the Issuers shall specify prior to the
Closing Date or by such other means as the parties hereto shall agree prior to
the Closing Date against delivery to the Initial Purchasers of the certificates
evidencing the Securities. Time shall be of the essence, and delivery at the
time and place specified pursuant to this Agreement is a further condition of
the obligations of the Initial Purchasers hereunder. Upon delivery, the
Securities shall be in global form, registered in such names and in such
denominations as CSI, on behalf of the Initial Purchasers, shall have requested
in writing not less than two full business days prior to the Closing Date. The
Issuers agree to
<PAGE>
18
make the global certificates evidencing the Securities available for inspection
by CSI, on behalf of the Initial Purchasers, in New York, New York at least 24
hours prior to the Closing Date.
4. Further Agreements of the Issuers. Each of the Issuers agrees with
each of the several Initial Purchasers:
(a) to advise the Initial Purchasers promptly and, if requested,
confirm such advice in writing, of the happening of any event which makes
any statement of a material fact made in the Offering Memorandum untrue or
which requires the making of any additions to or changes in the Offering
Memorandum (as amended or supplemented from time to time) in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; to advise the Initial Purchasers promptly of any
order preventing or suspending the use of the Preliminary Offering
Memorandum or the Offering Memorandum, of any suspension of the
qualification of the Securities for offering or sale in any jurisdiction
and of the initiation or threatening of any proceeding for any such
purpose; and to use its best efforts to prevent the issuance of any such
order preventing or suspending the use of the Preliminary Offering
Memorandum or the Offering Memorandum or suspending any such qualification
and, if any such suspension is issued, to obtain the lifting thereof at the
earliest possible time;
(b) to furnish promptly to each of the Initial Purchasers and counsel
for the Initial Purchasers, without charge, as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum (and any
amendments or supplements thereto) as may be reasonably requested;
(c) prior to making any amendment or supplement to the Offering
Memorandum, to furnish a copy thereof to each of the Initial Purchasers and
counsel for the Initial Purchasers and not to effect any such amendment or
supplement to which the Initial Purchasers shall reasonably object by
notice to the Issuers after a reasonable period to review;
(d) if, at any time prior to completion of the resale of the
Securities by the Initial Purchasers, any event shall occur or condition
exist as a result of which it is necessary, in the opinion of counsel for
the Initial Purchasers or counsel for the Issuers, to amend or supplement
the Offering Memorandum in order that the Offering Memorandum will not
include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a purchaser, not
misleading, or if it is necessary to amend or supplement the Offering
Memorandum to comply with applicable law, to promptly prepare such
amendment or supplement as may be necessary to correct such untrue
statement or omission or so that the Offering Memorandum, as so amended or
supplemented, will comply with applicable law;
(e) for so long as the Securities are outstanding and are "restricted
securities" within the meaning of Rule 144(a)(3) under the Securities Act,
to furnish to holders of the Securities and beneficial owners and
prospective purchasers of the Securities designated
<PAGE>
19
by such holders, upon request of such holders or such beneficial owners or
prospective purchasers, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act, unless the Issuers are then
subject to and in compliance with Section 13 or 15(d) of the Exchange Act
(the foregoing agreement being for the benefit of the holders from time to
time of the Securities and beneficial owners and prospective purchasers of
the Securities designated by such holders);
(f) for so long as the Securities are outstanding, to furnish to the
Initial Purchasers copies of any annual reports, quarterly reports and
current reports filed by either of the Issuers with the Commission on Forms
10-K, 10-Q and 8-K, or 20-F or 6-K, or such other similar forms as may be
designated by the Commission, and such other documents, reports and
information as shall be furnished by the Issuers to the Trustees or to the
holders of the Securities pursuant to the Indentures or the Exchange Act or
any rule or regulation of the Commission thereunder;
(g) to promptly take from time to time such actions as the Initial
Purchasers may reasonably request to qualify the Securities for offering
and sale under the securities or Blue Sky laws of such jurisdictions as the
Initial Purchasers may designate and to continue such qualifications in
effect for so long as required for the resale of the Securities; and to
arrange for the determination of the eligibility for investment of the
Securities under the laws of such jurisdictions as the Initial Purchasers
may reasonably request; provided that the Issuers and the subsidiaries of
DCC shall not be obligated to qualify as foreign corporations in any
jurisdiction in which they are not so qualified or to file a general
consent to service of process in any jurisdiction (other than as required
by this Agreement);
(h) to arrange, with the cooperation of the Initial Purchasers, for
(i) the Dollar Securities to be (A) designated Private Offerings, Resales
and Trading through Automated Linkages ("PORTAL") Market securities in
accordance with the rules and regulations adopted by the National
Association of Securities Dealers, Inc. ("NASD") relating to trading in the
PORTAL Market, (B) eligible for clearance and settlement through The
Depository Trust Company ("DTC"), the Euroclear System ("Euroclear") and
Cedel S.A. ("Cedel") and (C) listed on the Luxembourg Exchange and (ii) for
the DM Securities to be (A) eligible for clearance and settlement through
Euroclear and Cedel and (B) listed on the Luxembourg Exchange;
(i) not to, and to cause its affiliates not to, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security
(as such term is defined in the Securities Act) that could be integrated
with the sale of the Securities in a manner that would require registration
of the Securities under the Securities Act or that would require compliance
with Article 3 of The Netherlands Securities Market Supervision Act of 1995
("Wet Toezicht Effectenverkeer 1995");
(j) except following the effectiveness of the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may
be, not to, and to cause its affiliates not to, and not to authorize or
knowingly permit any person acting on its or their
<PAGE>
20
behalf to, solicit any offer to buy or offer to sell the Securities by
means of any form of general solicitation or general advertising within the
meaning of Regulation D or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act and not to offer, sell,
contract to sell or otherwise dispose of, directly or indirectly, any
securities under circumstances where such offer, sale, contract or
disposition would cause the exemption afforded by Section 4(2) of the
Securities Act to cease to be applicable to the offering and sale of the
Securities as contemplated by this Agreement and the Offering Memorandum;
(k) for a period of 180 days from the date of the Offering
Memorandum, not to, and to cause its affiliates not to, offer for sale,
sell, contract to sell or otherwise dispose of, directly or indirectly, or
file a registration statement for, or announce any offer, sale, contract
for sale of or other disposition of any debt securities issued or
guaranteed by the Issuers or any subsidiaries of DCC (other than the
Securities) without the prior written consent of the Initial Purchasers,
which consent shall not be unreasonably withheld;
(l) during the period from the Closing Date until two years after the
Closing Date, without the prior written consent of the Initial Purchasers,
not to, and not permit any of its affiliates (as defined in Rule 144 under
the Securities Act) to, resell any of the Securities that have been
reacquired by either of them, except for Securities purchased by either of
the Issuers or any of their affiliates and resold in a transaction
registered under the Securities Act;
(m) not to, for so long as the Securities are outstanding, be or
become, or be or become owned by, an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the Investment Company Act, and to not
be or become, or be or become owned by, a closed-end investment company
required to be registered, but not registered thereunder;
(n) in connection with the offering of the Securities, until CSI, on
behalf of the Initial Purchasers, shall have notified the Issuers of the
completion of the resale of the Securities, not to, and to cause its
affiliated purchasers (as defined in Regulation M under the Exchange Act)
not to, either alone or with one or more other persons, bid for or
purchase, for any account in which it or any of its affiliated purchasers
has a beneficial interest, any Securities, or attempt to induce any person
to purchase any Securities and not to, and to cause its affiliated
purchasers not to, make bids or purchase for the purpose of creating
actual, or apparent, active trading in or of raising the price of the
Securities;
(o) in connection with the offering of the Securities, to make its
officers, employees, independent accountants and legal counsel reasonably
available upon request by the Initial Purchasers;
(p) to furnish to each of the Initial Purchasers on the date hereof a
copy of the independent accountants' report included in the Offering
Memorandum signed by the accountants rendering such report;
<PAGE>
21
(q) to do and perform all things required to be done and
performed by it under this Agreement that are within its control prior to,
on or after the Closing Date, and to use its best efforts to satisfy all
conditions precedent on its part to the delivery of the Securities;
(r) to not take any action prior to the execution and delivery of
the Indentures that, if taken after such execution and delivery, would
have violated any of the covenants contained in the Indentures;
(s) to not take any action prior to the Closing Date that would
require the Offering Memorandum to be amended or supplemented pursuant to
Section 4(d);
(t) prior to the Closing Date, not to issue any press release or
other communication directly or indirectly or hold any press conference
with respect to DICSA, the Issuers, their condition, financial or
otherwise, or earnings, business affairs or business prospects (except for
routine oral marketing communications in the ordinary course of business
and consistent with the past practices of DICSA and the Issuers and of
which the Initial Purchasers are notified), without the prior written
consent of the Initial Purchasers, unless in the judgment of the Issuers
and their counsel, and after notification to the Initial Purchasers, such
press release or communication is required by law; and
(u) to apply the net proceeds from the sale of the Securities as
set forth in the Offering Memorandum under the heading "Use of Proceeds".
5. Conditions of Initial Purchasers' Obligations. The respective
obligations of the several Initial Purchasers hereunder are subject to the
accuracy, on and as of the date hereof and the Closing Date, of the
representations and warranties of the Issuers contained herein, to the accuracy
of the statements of each of the Issuers and their respective officers made in
any certificates delivered pursuant hereto, to the performance by each of the
Issuers of its obligations hereunder, and to each of the following additional
terms and conditions:
(a) The Offering Memorandum (and any amendments or supplements
thereto) shall have been printed and copies distributed to the Initial
Purchasers as promptly as practicable on or following the date of this
Agreement or at such other date and time as to which the Initial Purchasers
may agree; and no stop order suspending the sale of the Securities in any
jurisdiction shall have been issued and no proceeding for that purpose
shall have been commenced or shall be pending or threatened.
(b) None of the Initial Purchasers shall have discovered and
disclosed to the Issuers on or prior to the Closing Date that the Offering
Memorandum or any amendment or supplement thereto contains an untrue
statement of a fact that, in the opinion of counsel for the Initial
Purchasers, is material or omits to state any fact which, in the opinion of
such counsel, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to
the authorization, form and validity of each of the Transaction Documents
and the Offering
<PAGE>
22
Memorandum, and all other legal matters relating to the Transaction
Documents and the Transactions shall be satisfactory in all material
respects to the Initial Purchasers, and the Issuers shall have furnished to
the Initial Purchasers and their counsel all documents and information that
they or their counsel may reasonably request to enable them to pass upon
such matters.
(d) Kirkland & Ellis shall have f furnished to the Initial Purchasers
their written opinion, as U.S. counsel to the Issuers, addressed to the
Initial Purchasers and dated the Closing Date, in form and substance
reasonably satisfactory to the Initial Purchasers, Trenite Van Doorne shall
have furnished to the Initial Purchasers their written opinion, as Dutch
counsel to the Issuers, addressed to the Initial Purchasers and dated the
Closing Date, in form and substance reasonably satisfactory to the Initial
Purchasers, and the Issuers shall have furnished to such counsel such
documents and information as they reasonably request for the purpose of
enabling them to pass upon such matters.
(e) The Initial Purchasers shall have received from Cravath, Swaine &
Moore, counsel for the Initial Purchasers, such opinion or opinions, dated
the Closing Date, with respect to such matters as the Initial Purchasers
may reasonably require, and the Issuers shall have furnished to such
counsel such documents and information as they request for the purpose of
enabling them to pass upon such matters.
(f) The Issuers shall have furnished to the Initial Purchasers a
letter (the "Initial Letter") of Arthur Andersen, addressed to the Initial
Purchasers and dated the date hereof, in form and substance satisfactory to
the Initial Purchasers.
(g) The Issuers shall have furnished to the Initial Purchasers a
letter (the "Bring-Down Letter") of Arthur Andersen, addressed to the
Initial Purchasers and dated the Closing Date (i) confirming that they are
independent public accountants with respect to each of DICSA and its
subsidiaries, and DCC and its subsidiaries (including Lyon), in each case
within the meaning of Rule 101 of the Code of Professional Conduct of the
AICPA and its interpretations and rulings thereunder, (ii) stating, as of
the date of the Bring-Down Letter (or, with respect to matters involving
changes or developments since the respective dates as of which specified
financial information is given in the Offering Memorandum, as of a date
not more than three business days prior to the date of the Bring-Down
Letter), that the conclusions and findings of such accountants with
respect to the financial information and other matters covered by the
Initial Letter are accurate and (iii) confirming in all material respects
the conclusions and findings set forth in the Initial Letter.
(h) The Issuers shall have furnished to the Initial Purchasers a
certificate, dated the Closing Date, of the chief executive officer of
their group and the financial controller of their group stating that (A)
such officers have carefully examined the Offering Memorandum, (B) in their
opinion, the Offering Memorandum, as of its date, did not include any
untrue statement of a material fact and did not omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and since the date
<PAGE>
23
of the Offering Memorandum, no event has occurred that should have been set
forth in a supplement or amendment to the Offering Memorandum so that the
Offering Memorandum (as so amended or supplemented) would not include any
untrue statement of a material fact and would not omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, (C) as of the Closing Date, the representations and
warranties of such Issuer in this Agreement are true and correct in all
material respects, such Issuer has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder
on or prior to the Closing Date and subsequent to the date of the most
recent financial statements contained in the Offering Memorandum, there has
been no material adverse change in the financial position or results of
operation of such Issuer or any of its subsidiaries, or any change, or any
development including a prospective change, in or affecting the condition
(financial or otherwise), results of operations, business or prospects of
such Issuer and its subsidiaries, taken as a whole and (D) the
Recapitalization has been consummated on the terms described in the
Offering Memorandum.
(i) The Initial Purchasers shall have received a counterpart of
the Exchange and Registration Rights Agreement which shall have been
executed and delivered by a duly authorized officer of each Issuer.
(j) Each Indenture shall have been duly executed and delivered by the
Issuers and the applicable Trustee, and the Securities shall have been duly
executed and delivered by the Issuers and duly authenticated by the
applicable Trustee.
(k) The Dollar Securities shall have been approved by the NASD for
trading in the PORTAL Market and shall be eligible for clearance and
settlement through the facilities of DTC, Euroclear and Cedel. The DM
Securities shall be eligible for clearance and settlement through the
facilities of Euroclear and Cedel.
(l) If any event shall have occurred that requires the Issuers under
Section 4(d) to prepare an amendment or supplement to the Offering
Memorandum, such amendment or supplement shall have been prepared, the
Initial Purchasers shall have been given a reasonable opportunity to
comment thereon, and copies thereof shall have been delivered to the
Initial Purchasers reasonably in advance of the Closing Date.
(m) There shall not have occurred any invalidation of Rule 144A
or Regulation S under the Securities Act by any court or any withdrawal or
proposed withdrawal of any rule or regulation under the Securities Act or
the Exchange Act by the Commission or any amendment or proposed amendment
thereof by the Commission that in the judgment of the Initial Purchasers
would materially impair the ability of the Initial Purchasers to purchase,
hold or effect resales of the Securities as contemplated hereby.
(n) Subsequent to the execution and delivery of this Agreement or, if
earlier, the dates as of which information is given in the Offering
Memorandum (exclusive of any amendment or supplement thereto), there shall
not have been any change in the capital
<PAGE>
24
stock or long-term debt or any change, or any development involving a
prospective change, in or affecting the condition (financial or otherwise),
results of operations, business or prospects of DICSA and its subsidiaries
(including DCC and Lyon) or DCC and its subsidiaries (including Lyon), each
taken as a whole, the effect of which, in any such case described above,
is, in the judgment of the Initial Purchasers, so material and adverse as
to make it impracticable or inadvisable to proceed with the sale or
delivery of the Securities on the terms and in the manner contemplated by
this Agreement and the Offering Memorandum (exclusive of any amendment or
supplement thereto ) .
(o) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental
agency or body that would, as of the Closing Date, prevent the issuance or
sale of the Securities; and no injunction, restraining order or order of
any other nature by any U.S. federal or state court or any court of The
Netherlands or any court of Luxembourg, in each case of competent
jurisdiction, shall have been issued as of the Closing Date which would
prevent the issuance or sale of the Securities.
(p) Subsequent to the execution and delivery of this Agreement
(i) no downgrading shall have occurred in the rating accorded the
Securities or any of the Issuers' other debt securities or preferred stock
by any "nationally recognized statistical rating organization", as such
term is defined by the Commission for purposes of Rule 436(g)(2) of the
rules and regulations of the Commission under the Securities Act and (ii)
no such organization shall have publicly announced that it has under
surveillance or review (other than an announcement with positive
implications of a possible upgrading), its rating of the Securities or any
of the Issuers' other debt securities or preferred stock.
(q) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the Luxembourg Exchange, the New York Stock Exchange, the
American Stock Exchange or the over-the-counter market shall have been
suspended or limited, or minimum prices shall have been established on any
such exchange or market by any such exchange, the Commission or by any
other regulatory body or governmental authority having jurisdiction, or
trading in any securities of the Issuers on any exchange or in the
over-the-counter market shall have been suspended or (ii) any general
moratorium on commercial banking activities shall have been declared by
Luxembourg, The Netherlands or U.S. federal or New York state authorities
or (iii) an outbreak or escalation of hostilities in the United States or
in any member state of the European Union or a declaration by the United
States or any member state of the European Union of a national emergency or
war or (iv) a material adverse change in general economic, political or
financial conditions (or the effect of international conditions on
financial markets shall be such) the effect of which, in the case of this
clause (iv), is, in the judgment of the Initial Purchasers, so material and
adverse as to make it impracticable or inadvisable to proceed with the sale
or the delivery of the Securities on the terms and in the manner
contemplated by this Agreement and in the Offering Memorandum (exclusive of
any amendment or supplement thereto).
<PAGE>
25
(r) Substantially simultaneously with the sale of the Securities
hereunder, the Recapitalization shall have been consummated on the terms
described in the Offering Memorandum and the Revolving Credit Agreement
shall have been executed and delivered and the initial borrowings
thereunder shall have been made. All conditions precedent to the
consummation of the Transactions, other than the payment of the
consideration contained in this Agreement, shall have been satisfied or
waived, with the prior written consent of the Initial Purchasers, prior to
or on the Closing Date. There shall have been no amendment, supplement or
waiver of any part of the Recapitalization Agreement (including the
exhibits and schedules thereto) not disclosed in writing to the Initial
Purchasers prior to the date hereof, or any such amendment, supplement or
waiver after the date hereof not consented to in writing by the Initial
Purchasers.
(u) The Initial Purchasers shall have received such further opinions,
certificates, letters and documents as the Initial Purchasers may
reasonably request.
The Issuers shall have furnished, or shall furnish, the Initial
Purchasers with conformed copies of such opinions, certificates, letters and
documents mentioned above as the Initial Purchasers reasonably request. All
opinions, certificates, letters and documents mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Initial Purchasers.
The Initial Purchasers may in their sole discretion waive compliance
with any conditions to their obligations hereunder, whether in respect of the
Closing Date or otherwise.
6. Termination. The obligations of the Initial Purchasers hereunder
may be terminated by the Initial Purchasers, in their absolute discretion, by
notice given to and received by the Issuers prior to delivery of and payment for
the Securities if, prior to that time, any of the events described in Section
5(m), (n), (o), (p) or (q) shall have occurred and be continuing.
7. Reimbursement of Initial Purchasers' Expenses. If (a) this
Agreement shall have been terminated pursuant to Section 6, (b) the Issuers
shall fail to tender the Securities for delivery to the Initial Purchasers for
any reason permitted under this Agreement or (c) the Initial Purchasers shall
decline to purchase the Securities for any reason permitted under this
Agreement, the Issuers shall reimburse the Initial Purchasers for such out-of-
pocket expenses (including reasonable fees and disbursements of counsel) as
shall have been reasonably incurred by the Initial Purchasers in connection with
this Agreement and the proposed purchase and resale of the Securities.
8. Indemnification. (a) The Issuers shall indemnify and hold harmless
each Initial Purchaser, its affiliates, their respective officers, directors,
employees, representatives and agents, and each person, if any, who controls any
Initial Purchaser within the meaning of the Securities Act or the Exchange Act
(collectively referred to for purposes of this Section 8(a), Section 9 and
Section 17(c) as an Initial Purchaser), from and against any and all losses,
claims, damages or liabilities and reasonable expenses, joint or several, or any
action in respect thereof (including, without limitation, any loss, claim,
damage, liability or action relating to purchases
<PAGE>
26
and sales of the Securities), to which that Initial Purchaser may become
subject, whether commenced or threatened, under the Securities Act, the Exchange
Act, any other statutory law or regulation, at common law or otherwise, insofar
as such loss, claim, damage, liability or action arises out of, or is based
upon, (i) any untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Offering Memorandum, the Offering Memorandum or in
any amendment or supplement thereto or in any information provided by the
Issuers pursuant to Section 4(e) or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and shall reimburse each Initial Purchaser
promptly upon demand for any legal or other expenses reasonably incurred by that
Initial Purchaser in connection with investigating or defending or preparing to
defend against or appearing as a third party witness in connection with any such
loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Issuers shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of, or
is based upon, an untrue statement or alleged untrue statement in or omission or
alleged omission from any of such documents in reliance upon and in conformity
with any Initial Purchasers' Information; and provided, further, that with
respect to any such untrue statement in or omission from the Preliminary
Offering Memorandum, the indemnity agreement contained in this Section 8(a)
shall not inure to the benefit of any such Initial Purchaser to the extent that
the sale to the person asserting any such loss, claim, damage, liability or
action was an initial resale by such Initial Purchaser and any such loss, claim,
damage, liability or action of or with respect to such Initial Purchaser results
from the fact that both (i) to the extent required by applicable law, a copy of
the Offering Memorandum was not sent or given to such person at or prior to the
written confirmation of the sale of such Securities to such person and (ii) the
untrue statement in or omission from the Preliminary Offering Memorandum was
corrected in the Offering Memorandum unless, in either case, such failure to
deliver the Offering Memorandum was a result of non-compliance by the Issuers
with Section 4(b).
(b) Each Initial Purchaser, severally and not jointly, shall
indemnify and hold harmless the Issuers, their affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls the Issuers within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 8(b) and
Section 9 as the Issuers), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Issuers may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other statutory law or regulation, at
common law or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in the Preliminary Offering
Memorandum or the Offering Memorandum or in any amendment or supplement thereto
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with the Initial Purchasers' Information, and shall
reimburse the Issuers for any legal or other expenses reasonably incurred by the
Issuers in connection with investigating or defending or preparing to defend
against or appearing as a third party witness in connection with any such loss,
claim, damage, liability or action as such expenses are incurred.
<PAGE>
27
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 8(a) or 8(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability that it may have under this Section 8 except to the extent
that it has been materially prejudiced by such failure; and provided, further,
that the failure to notify the indemnifying party shall not relieve it from any
liability that it may have to an indemnified party otherwise than under this
Section 8. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation; provided,
however, that an indemnified party shall have the right to employ its own
counsel in any such action, but the fees, expenses and other charges of such
counsel for the indemnified party will be at the expense of such indemnified
party unless (1) the employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (2) the indemnified party has
reasonably concluded (based upon advice of counsel to the indemnified party)
that there may be legal defenses available to it or other indemnified parties
that are different from or in addition to those available to the indemnifying
party, (3) a conflict or potential conflict exists (based upon advice of counsel
to the indemnified party) between the indemnified party and the indemnifying
party (in which case the indemnifying party will not have the right to direct
the defense of such action on behalf of the indemnified party) or (4) the
indemnifying party has not in fact employed counsel reasonably satisfactory to
the indemnified party to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 8(a) and 8(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party (which
consent shall not be unreasonably withheld), effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
<PAGE>
28
The obligations of the Issuers and the Initial Purchasers in this
Section 8 and in Section 9 are in addition to any other liability that the
Issuers or the Initial Purchasers, as the case may be, may otherwise have,
including in respect of any breaches of representations, warranties and
agreements made herein by any such party.
9. Contribution. If the indemnification provided for in Section 8 is
unavailable or insufficient to hold harmless an indemnified party under Section
8(a) or 8(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Issuers on the one hand and the Initial Purchasers on
the other from the offering of the Securities or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Issuers on the one hand and the Initial
Purchasers on the other with respect to the statements or omissions that
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations. The relative benefits
received by the Issuers on the one hand and the Initial Purchasers on the other
with respect to such offering shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Securities purchased under this
Agreement (before deducting expenses) received by or on behalf of the Issuers,
on the one hand, and the total discounts and commissions received by the Initial
Purchasers with respect to the Securities purchased under this Agreement, on the
other, bear to the total gross proceeds from the sale of the Securities under
this Agreement, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to the
Issuers or information supplied by the Issuers on the one hand or to any Initial
Purchasers' Information on the other, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Issuers and the Initial Purchasers agree
that it would not be just and equitable if contributions pursuant to this
Section 9 were to be determined by pro rata allocation (even if the Initial
Purchasers were treated as one entity for such purpose) or by any other method
of allocation that does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 9 shall be deemed to include, for purposes of
this Section 9, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending or preparing to
defend any such action or claim. Notwithstanding the provisions of this Section
9, no Initial Purchaser shall be required to contribute any amount in excess of
the amount by which the total discounts and commissions received by such Initial
Purchaser with respect to the Securities purchased by it under this Agreement
exceeds the amount of any damages which such Initial Purchaser has otherwise
paid or become liable to pay by reason of any untrue or alleged untrue statement
or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to contribute
as provided in this Section 9 are several in proportion to their respective
purchase obligations and not joint.
<PAGE>
29
10. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchasers, the Issuers
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except as provided in
Sections 8 and 9 with respect to affiliates, officers, directors, employees,
representatives, agents and controlling persons of the Initial Purchasers and
the Issuers and in Section 4(e) with respect to holders and beneficial owners
and prospective purchasers of the Securities. Nothing in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 10, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
11. Expenses. (a) The Issuers agree with the Initial Purchasers to
pay (i) the costs incident to the authorization, issuance, sale, preparation and
delivery of the Securities and any taxes payable in that connection; (ii) the
costs incident to the preparation, printing and distribution of the Preliminary
Offering Memorandum, the Offering Memorandum, the Listing Application and any
amendments or supplements thereto; (iii) the costs of reproducing and
distributing each of the Transaction Documents; (iv) the costs incident to the
preparation, printing and delivery of the certificates evidencing the
Securities, including stamp duties, stock exchange taxes, value added taxes,
withholding taxes, or any similar duties or taxes, if any, payable upon
authorization, issuance, sale or delivery of the Securities; (v) the fees and
expenses of the Issuers' counsel and independent accountants; (vi) the fees and
expenses of qualifying the Securities under the securities laws of the several
jurisdictions as provided in Section 4(g) and of preparing, printing and
distributing Blue Sky Memoranda (including related fees and expenses of counsel
for the Initial Purchasers); (vii) any fees charged by rating agencies for
rating the Securities; (viii) the fees and expenses of the Trustees, any paying
agents and any listing agent (including any affiliate of any Initial Purchaser
acting in such capacity) (including related fees and expenses of any counsel to
such parties); (ix) all expenses and application fees incurred in connection
with the application for and the qualification for inclusion of the Dollar
Securities for quotation on the PORTAL Market, the approval of the Dollar
Securities for book-entry transfer through DTC, Euroclear and Cedel, the
approval of the DM Securities for book-entry transfer through Euroclear and
Cedel and the listing of the Securities on the Luxembourg Exchange or any other
securities exchange; (x) the expenses incurred by the Issuers and the Initial
Purchasers in connection with attending or hosting "road show" meetings with
prospective purchasers of the Securities from the Initial Purchasers; (xi) any
fees or other costs incident to securing any required review by any other
regulatory authority in The Netherlands; (xii) any fees or other costs incurred
by the Initial Purchasers as a result of the failure to release the DM
Securities for delivery and settlement through Euroclear and Cedel on, and as
of, the Closing Date and (xiii) all other costs and expenses incident to the
performance of the obligations of the Issuers under this Agreement which are not
otherwise specifically provided for in this Section 11; provided, however, that
except as provided in this Section 11 and Section 7, the Initial Purchasers
shall pay their own costs and expenses.
(b) In addition, the Issuers agree to indemnify and hold harmless the
Initial Purchasers against any stamp duties, stock exchange taxes, value added
taxes, withholding taxes or similar duties or taxes, including any interest and
penalties, on the authorization, issuance, sale and delivery of the Securities
and on the execution and delivery of this Agreement.
<PAGE>
30
(c) All amounts payable by the Issuers hereunder shall be paid free
and clear of, and without any deduction or withholding for or on account of, any
current or future taxes, levies, imports, duties, charges or other deductions or
withholdings levied in any jurisdiction from or through which payment is made or
where the payor is located unless such deduction or withholding is required by
applicable law, in which event the Issuers shall pay additional amounts so that
the persons entitled to such payments receive the amount that such persons would
otherwise have received but for such deduction or withholding.
12. Survival. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Issuers and the Initial
Purchasers contained in this Agreement or made by or on behalf of the Issuers or
the Initial Purchasers pursuant to this Agreement or any certificate delivered
pursuant hereto shall survive the delivery of and payment for the Securities and
shall remain in full force and effect, regardless of any termination or
cancelation of this Agreement or any investigation made by or on behalf of any
of them or any of their respective affiliates, officers, directors, employees,
representatives, agents or controlling persons.
13. Notices, etc.. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent by mail
or telecopy transmission to (i) Chase Securities Inc., 270 Park Avenue, New
York, New York, 10017, Attention: James C. Neary (telecopier no.: (212)
270-0994); (ii) Chase Manhattan Bank AG, Grueneburgweg 2, 60322 Frankfurt
am Main, Germany; Attention: Wolfgang Boehm (telecopier no.: 49-69-7158-
2553) and (iii) Chase Manhattan International Limited, 125 London Wall, 9th
Floor, London, EC2Y 5AJ; Attention: Eddie Villiers (telecopier no.: (44)
171-777-3141); or
(b) if to the Issuers, shall be delivered or sent by mail or telecopy
transmission to The Derby Cycle Corporation, in care of Raleigh Industries
Ltd., Triumph Road, Nottingham NG7 2DD, England, Attention: Mr. Alan J.
Finden-Crofts (telecopier no.: 011-44-115-942-2178);
provided that any notice to an Initial Purchaser pursuant to Section 8(c) shall
also be delivered or sent by mail to such Initial Purchaser at its address set
forth on the signature page hereof. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Issuers shall
be entitled to act and rely upon any request, consent, notice or agreement given
or made on behalf of the Initial Purchasers by CSI.
14. Definition of Terms. For purposes of this Agreement, (a) the
term "business day" means a day other than a Saturday, Sunday or other day on
which banking institutions in the State of New York, Luxembourg, London or
Frankfurt are authorized or required by law to close, (b) the term "subsidiary"
has the meaning set forth in Rule 405 under the Securities Act and (c) except
where otherwise expressly provided, the term "affiliate" has the meaning set
forth in Rule 405 under the Securities Act.
<PAGE>
31
15. Initial Purchasers' Information. The parties hereto acknowledge
and agree that, for all purposes of this Agreement, the Initial Purchasers'
Information consists solely of the following information in the Preliminary
Offering Memorandum and the Offering Memorandum: (i) the last paragraph on the
front cover page concerning the terms of the offering by the Initial Purchasers;
(ii) the first paragraph on the inside front cover page concerning over-
allotment and trading activities by the Initial Purchasers; and (iii) the
statements concerning the Initial Purchasers contained in the third, eleventh
(except the first sentence), fourteenth and fifteenth paragraphs under the
caption "Plan of Distribution".
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
17. Consent to Jurisdiction; Appointment of Agent for Service of
Process; Judgment Currency. (a) Each of the Issuers agrees that any suit, action
or proceeding against such Issuer arising out of or relating to this Agreement
may be instituted in any state or U.S. Federal court in the Borough of
Manhattan, The City of New York, New York, and any appellate court from any
thereof, and it irrevocably submits to the non-exclusive jurisdiction of such
courts in any suit, action or proceeding. Each of the Issuers irrevocably
waives, to the fullest extent permitted by law, any objection to any suit,
action or proceeding that may be brought in connection with this Agreement,
including such actions, suits or proceedings relating to securities laws of the
United States of America or any state thereof, in such courts whether on the
grounds of venue, residence or domicile or on the ground that any such suit,
action or proceeding has been brought in an inconvenient forum. Each of the
Issuers agrees that final judgment in any such suit, action or proceeding
brought in such court shall be conclusive and binding upon such Issuer and may
be enforced in any court to the jurisdiction of which such Issuer is subject by
a suit upon such judgment; provided that service of process is effected upon
such Issuer in the manner provided by this Section 17.
(b) Each of the Issuers irrevocably appoints CT Corporation System,
with offices on the date hereof at 1633 Broadway, New York, New York 10019, as
its authorized agent (the "Authorized Agent"), upon whom process may be served
in any suit, action or proceeding arising out of or relating to this Agreement
or the transactions contemplated herein which may be instituted in any state or
U.S. Federal court in the Borough of Manhattan, The City of New York, New York,
and expressly accepts the non-exclusive jurisdiction of any such court in
respect of any such suit, action or proceeding. Each of the Issuers hereby
represents and warrants that the Authorized Agent has accepted such appointment
and has agreed to act as said agent for service of process, and each of the
Issuers agrees to take any and all action, including the filing of any and all
documents that may be necessary to continue such respective appointment in full
force and effect so long as such Issuer has any outstanding obligations under
this Agreement, the Indentures or the Securities. Service of process upon the
Authorized Agent shall be deemed, in every respect, effective service of process
upon each of the Issuers. Notwithstanding the foregoing, any action involving
the Issuers arising out of or relating to this Agreement may be instituted in
any court of competent jurisdiction in any other jurisdiction.
<PAGE>
32
(c) Any action, suit or proceeding brought by the Issuers against any
Initial Purchaser entitled to indemnification or contribution under Section 8 or
9 arising out of or based upon this Agreement and the transactions contemplated
herein shall be brought solely in a U.S. Federal or state court in the Borough
of Manhattan, The City of New York, New York, and the Issuers shall not initiate
nor seek to initiate, in the State of Delaware, The Netherlands or in any other
jurisdiction other than in such New York courts, any action, suit or proceeding
against any Initial Purchaser entitled to indemnification or contribution under
Section 8 or 9 arising out of or based upon this Agreement and the transactions
contemplated hereby. The foregoing shall apply, without limitation, to any
action seeking to obtain any injunction or declaratory judgment against the
enforcement of, or a declaratory judgment concerning, any claim by any Initial
Purchaser in respect of this Agreement and any transaction contemplated hereby,
and any action challenging the enforceability of or seeking to invalidate in any
respect the submission by the Issuers hereunder to the jurisdiction of such New
York courts or the designation, pursuant to this Section 17, of the laws of the
State of New York as the law applicable to this Agreement.
(d) If for the purposes of obtaining judgment in any court it is
necessary to convert a sum due hereunder into any currency other than U.S.
dollars or Deutsche marks, the parties hereto agree, to the fullest extent that
they may effectively do so, that the rate of exchange used shall be the rate at
which in accordance with normal banking procedures the Initial Purchasers could
purchase U.S. dollars or Deutsche marks, as applicable, with the other currency
in New York City on the business day preceding that on which final judgment is
given. The obligation of the Issuers in respect of any sum due to an Initial
Purchaser shall, notwithstanding any judgment in a currency other than U.S.
dollars or Deutsche marks, not be discharged until the first business day
following receipt by such Initial Purchaser of any sum adjudged to be so due in
such other currency, on which (and only to the extent that) such Initial
Purchaser may in accordance with normal banking procedures purchase U.S. dollars
or Deutsche marks, as applicable, with such other currency; if the U.S. dollars
or Deutsche marks so purchased are less than the sum originally due to an
Initial Purchaser hereunder, each of the Issuers agrees, as a separate
obligation and notwithstanding any such judgment, to indemnify such Initial
Purchaser against such loss. If the U.S. dollars or Deutsche marks so purchased
are greater than the sum originally due to an Initial Purchaser hereunder, such
Initial Purchaser agrees to pay to the Issuers an amount equal to the excess of
the U.S. dollars or Deutsche marks, as the case may be, so purchased over the
sum originally due to such Initial Purchaser hereunder.
(e) The provisions of this Section 17 shall survive any termination
or cancelation of this Agreement.
18. Counterparts. This Agreement may be executed in one or more
counterparts (which may include counterparts delivered by telecopier) and, if
executed in more than one counterpart, the executed counterparts shall each be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
19. Amendments. No amendment or waiver of any provision of this
Agreement, nor any consent or approval to any departure therefrom, shall in any
event be effective unless the same shall be in writing and signed by the parties
hereto.
<PAGE>
33
20. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among the Issuers and the several
Initial Purchasers in accordance with its terms.
Very truly yours,
THE DERBY CYCLE CORPORATION,
by Alan J. Finden-Crofts
----------------------------------
Name: Alan J. Finden-Crofts
Title: CEO and President
LYON CYCLE B.V.,
by Alan J. Finden-Crofts
----------------------------------
Name:Alan J. Finden-Crofts
Title:
<PAGE>
Accepted:
On behalf of Chase Securities Inc.,
Chase Manhattan Bank AG and
Chase Manhattan International Limited
CHASE SECURITIES INC.,
by [SIGNATURE ILLEGIBLE]^^
------------------------------
Authorized Signatory
Address for notices pursuant to Section 8(c):
1 Chase Plaza, 25th floor
New York, New York 10081
Attention: Legal Department
<PAGE>
SCHEDULE 1
Principal
Amount
Initial Purchasers of Securities
Chase Securities Inc. $ 100,000,000
DM 36,666,666
Chase Manhattan Bank AG DM 36,666,667
Chase Manhattan International Limited DM 36,666,667
___________
Total $ 100,000,000
DM 110,000,000
<PAGE>
SCHEDULE 1(d)
SUBSIDIARIES
NAME JURISDICTION OF INCORPORATION
Derby Holding Limited England and Wales
Raleigh Industries Limited England and Wales
Raleigh International Limited England and Wales
Sturmey-Archer Limited England and Wales
Raleigh Industries of Canada Limited Canada Limited
Raleigh BV Netherlands
Raleigh Europe BV Netherlands
Koninklijke Gazelle BV Netherlands
Derby Nederland BV Netherlands
Derby Holding BV Netherlands
Sturmey-Archer Limited BV Netherlands
Lyon Investments BV Netherlands
Derby Holding (Deutschland) GmbH Germany
Raleigh Fahrrader GmbH Germany
NW Sportgerate GmbH Germany
Derby Cycle Werke GmbH Germany
E Weiner Bike Parts GmbH Germany
Univega Worldwide GmbH Germany
Univega Beteiligung GmbH Germany
MS Sport Vertiebs GmbH Germany
Derby Fahrrader GmbH Germany
Derby WS Germany
Vermogenswerwaltungs GmbH Germany
Winora-Staiger GmbH Germany
Curragh Finance Company Ireland
<PAGE>
3
NAME JURISDICTION OF INCORPORATION
Raleigh Ireland Limited Ireland
InterDerby Group Finance N.V. Netherlands Antilles
Derby Finance N.V. Netherlands
The British Cycle Corporation Limited England and Wales
<PAGE>
EXHIBIT 2.1
RECAPITALIZATION AGREEMENT
--------------------------
THIS RECAPITALIZATION AGREEMENT is entered into this 11th day of March
1998 by and between:
THE DERBY CYCLE CORPORATION (d.b.a. Raleigh USA Bicycle Company) a
corporation organized and existing under the laws of Delaware, having its
principal office at 22710 72nd Avenue South, Kent, Washington 98032 (the
"Company");
DERBY INTERNATIONAL CORPORATION S.A., a corporation (societe anonyme)
---------------
organized and existing under the laws of the Grand Duchy of Luxembourg, having
its registered office at 5 Boulevard de la Foire, L-1528 Luxembourg, Grand Duchy
of Luxembourg ("Derby International") and DERBY FINANCE S.a.r.l., a corporation
(societe a responsibilite limitee) organized and existing under the laws of the
--------------------------------
Grand Duchy of Luxembourg, having its registered office at 5 Boulevard de la
Foire, L-1528 Luxembourg, Grand Duchy of Luxembourg ("DFS") (Derby International
and DFS being referred to together as the "Sellers"); and
DC CYCLE, L.L.C., a limited liability company organized and existing
under the laws of Delaware, having its registered office at 1209 Orange Street,
Wilmington, Delaware ("LLC") and PERSEUS CYCLE, L.L.C., a limited liability
company organized and existing under the laws of Delaware, having its principal
office at Suite 610, 1627 I Street, N.W., Washington, D.C. 20006 ("Perseus" and,
together with LLC, the "Buyer").
WHEREAS, at or before the Closing (as defined below), Derby
International has agreed to cause to be effected the restructuring (the
"Restructuring") of the Company and the other Subsidiaries (as defined below)
outlined in the Transaction Outline, as defined below; and
WHEREAS, as a result of the Restructuring, at the Closing, DFS will
own thirty thousand (30,000) shares of the Company's Class A Common Stock;
WHEREAS, at the Closing, the Company shall issue to Perseus ten
thousand (10,000) shares of the Company's Class A Common Stock (the "Perseus
Common Shares"), and to LLC twelve thousand five hundred (12,500) shares of the
Company's Class A Common Stock ("LLC Common Shares" and, together with the
Perseus Common Shares, the "Buyer Common Shares") and twenty-five thousand
(25,000) shares of the Company's Preferred Stock, Series A (the "Preferred
Shares" and, together
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with the Buyer Common Shares, the "Buyer Shares"), in exchange for sixty million
United States dollars ($60,000,000) cash (the "Stock Purchase"); and
WHEREAS, the Buyer has proposed, and the Company, Derby International
and DFS have agreed, that, at the Closing, the Company will: (i) enter into a
senior credit facility with Chase Manhattan Bank or one of its subsidiaries (as
lender and as agent), comprised of a revolving credit facility in the aggregate
principal amount of up to two hundred fifteen million German deutschemarks (DM
215,00,000) (the "Senior Credit Facility"); (ii) issue bonds in an aggregate
principal amount of up to one hundred seventy-five million United States dollars
($175,000,000) pursuant to an offering under Rule 144A and Regulation S of the
Securities Act of 1933, as amended (the "Bond Financing") (subparagraphs (i) and
(ii) are collectively referred to as the "Debt Financing," which will provide
for available credit at the Closing having a value of at least two hundred
seventy million United States dollars ($270,000,000)); and (iii) issue and sell
to DFS (the "DFS Stock Purchase") in exchange for $9,500,000 cash the following:
(A) three thousand (3,000) shares of the Company's Preferred Stock, Series B,
(the "DFS Series B Preferred") and (B) six thousand five hundred (6,500) shares
of Class B Common (the "DFS Class B Common" and, together with the DFS Series B
Preferred, the "DFS Shares").
WHEREAS, immediately after the Closing, Perseus shall own
approximately 19.05%, LLC shall own approximately 23.81% and the Sellers shall
own approximately 57.14% of the issued and outstanding Class A Common Stock of
the Company, DFS will own 100% of the issued and outstanding Preferred Stock,
Series B, and Class B Common Stock of the Company and LLC will own one hundred
percent (100%) of the issued and outstanding Preferred Stock, Series A, of the
Company;
WHEREAS, at the Closing, the Company shall pay in full the aggregate
amount of one hundred fifty nine million four hundred seventy-five thousand
United States dollars ($159,475,000) to DFS in accordance with the Transaction
Outline (the "DFS Payment") less the amount of eight million five hundred
----
thousand United States dollars ($8,500,000);
WHEREAS, the Restructuring, the Stock Purchase, the DFS Stock
Purchase, the Debt Financing and the DFS Payment are referred to herein
collectively as the "Recapitalization" and the transactions required to
accomplish the Recapitalization are referred to as the "Recapitalization
Transactions"; and
WHEREAS, it is intended that the Recapitalization be recorded as a
recapitalization for United States accounting reporting purposes;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants of the parties contained in this Agreement, the parties hereby agree
as follows:
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1. CERTAIN DEFINITIONS
-------------------
For the purposes of this Agreement, the following words and terms
shall have the meanings set forth below:
1.1 "Accounting Principles" shall mean, with respect to a Person (as
defined below), generally accepted accounting principles, consistently applied,
in the country of incorporation of such Person.
1.2 "Additional Payment" shall have the meaning ascribed to it in Section
16.4.
1.3 "Additional Payment Date" shall have the meaning ascribed to it in
Section 16.4.
1.4 "Affiliate" shall mean, with respect to any Person (as defined below),
an individual, corporation, partnership, limited liability company, firm,
association, unincorporated organization or other entity directly or indirectly
controlling, controlled by or under common control with such Person. A Person
will be deemed to "control" another Person if such Person possesses, directly or
indirectly, the power to: (i) vote fifty percent (50%) or more of the voting
securities of such Person; or (ii) direct or cause the direction of the
management and policies of such other Person, whether through the ownership of
voting securities, partnership interests or other equity interests, by contract
or otherwise.
1.5 "Another Transaction" shall have the meaning ascribed to it in
Section 8.8.
1.6 "Assigned Debt " shall have the meaning ascribed to it in Section
8.10.
1.7 "Bond Financing" shall have the meaning ascribed to it in the
preamble.
1.8 "Business" shall mean the business carried on by the Subsidiaries
immediately prior to the Closing, which consists primarily of designing,
manufacturing, distributing and selling bicycles, bicycle components and
accessories.
1.9 "Business Day" shall mean any calendar day other than Saturdays,
Sundays or any other days on which banks are authorized to close in the United
Kingdom, the Grand Duchy of Luxembourg or the United States of America.
1.10 "Buyer" shall have the meaning ascribed to it in the preamble.
1.11 "Buyer Indemnified Parties" shall have the meaning ascribed to it in
Section 9.1.
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<PAGE>
1.12 "Buyer Shares" shall have the meaning ascribed to it in the preamble.
1.13 "Centum" shall have the meaning ascribed to it in Section 6.1(b)(iv).
1.14 "Closing" shall have the meaning ascribed to it in Section 3.1.
1.15 "Closing Date" shall have the meaning ascribed to it in Section 3.1.
1.16 "COBRA" shall mean the requirements of Part 6 of Subtitle B of Title 1
of ERISA (as defined below) and Code (S)4980B.
1.17 "Code" shall mean the United States Internal Revenue Code of 1986, as
amended.
1.18 "Company" shall have the meaning ascribed to it in the preamble.
1.19 "Company Intellectual Property" shall have the meaning ascribed to it
in Section 6.6(d)(i).
1.20 "Confidential Information" shall have the meaning ascribed to it in
Section 14.1.
1.21 "Contracts" shall have the meaning ascribed to it in Section
6.11(c)(xiii).
1.22 "Cut-Off Date" shall be April 16, 1998; provided that the Cut-Off Date
shall be extended one Business Day for each Business Day the delivery of the
U.S. GAAP Audited Financials are delayed after March 16, 1998 solely as the
result of the Sellers not delivering to Buyer and Arthur Anderson the default
waivers (in form and substance reasonably satisfactory to Arthur Anderson and
Buyer) whereby (i) the purchasers of the Senior Notes have waived all defaults
under the Credit Agreements and (ii) the lending institutions party to a certain
multi-currency revolving credit facility agreement, dated March 6, 1997 (the
"Revolver Agreement"), between Derby Holding B.V. and such lending institutions
(arranged by Banque Nationale De Paris) have waived all defaults under the
Revolver Agreement; and further provided that under no circumstances shall the
Cut-Off Date be extended beyond April 30, 1998.
1.23 "Debt Financing" shall have the meaning ascribed to it in the
preamble.
1.24 "Deductible" shall have the meaning ascribed to it in Section 9.3(c).
1.25 "DFS" shall have the meaning ascribed to it in the preamble.
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<PAGE>
1.26 "DFS Class B Common" shall have the meaning ascribed to it in the
preamble.
1.27 "DFS Payment" shall have the meaning ascribed to it in the preamble.
1.28 "DFS Price" shall have the meaning ascribed to it in Section 2.3(b).
1.29 "DFS Series B Preferred" shall have the meaning ascribed to it in the
preamble.
1.30 "DFS Shares" shall have the meaning ascribed to it in the preamble.
1.31 "DHBV" shall have the meaning ascribed to it in Section 9.1.
1.32 "Employment Agreement" shall have the meaning ascribed to it in
Section 8.12.
1.33 "Environmental Law" shall mean any federal, state, local or foreign
law, statute, regulation, ordinance or similar provision having the force or
effect of law of any governmental entity in effect prior to or on the Closing
Date which applies to a relevant Subsidiary, including all common law relating
to pollution, protection of the environment, waste generation, handling,
treatment, storage, distribution, processing, testing, labeling, release or
threatened release, disposal or transportation, and exposure to hazardous or
toxic substances or wastes, public health and safety and worker health and
safety.
1.34 "Environmental Lien" means a lien, either recorded or unrecorded, in
favor of any governmental entity, relating to any liability arising under any
Environmental Law.
1.35 "Environmental Assessment Reports" means all reports or documents
prepared by or on behalf of the Sellers by Dames & Moore (including reports and
studies referenced therein) and by or on behalf of the Buyer by Environmental
Resources Management (including reports and studies referenced therein) with
respect to Environmental Law.
1.36 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as amended.
1.37A "Escrow Amount" shall have the meaning ascribed to it in Section 16.6.
1.37B "Exchange Agreement" shall have meaning ascribed to it in Section
3.2(b)(viii).
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<PAGE>
1.38 "Excluded Assets" shall have the meaning ascribed to it in Section
8.10.
1.39 "Financial Statements" shall mean the audited consolidated balance
sheets and the related consolidated statements of profit and loss and cash flows
of Derby International and of each of the Principal Subsidiaries (other than
Probike S.A. (Pty) Limited) at and for the years ended (i) December 31, 1994,
(ii) December 31, 1995, and (iii) December 31, 1996, which are attached to this
Agreement as Exhibit D and made a part hereof.
1.40 "Financing Documents" means the Senior Credit Facility and the
indenture relating to the issue of the Bond Financing, in each case as may be
amended, modified, renewed, refunded, replaced, extended, restated or refinanced
from time to time, provided, however, that the terms of such Financing Documents
may not be more restrictive or onerous with respect to payment of the Additional
Payment referred to in Section 16.4 than the original Senior Credit Facility and
the Bond Financing documentation unless such additional restrictions are, in the
good faith determination of the Company's board of directors, required in order
to refinance, replace, refund or amend the Bond Financing or the Senior Credit
Facility and such refinancing, replacement, refunding or amendment is required
to avoid or obtain waivers of a default under or acceleration of such financing
prior to its maturity.
1.41A "GAAP" shall mean generally accepted accounting principles
consistently applied in the jurisdiction of incorporation of the relevant Person
at the time of determination.
1.41B "German Basket Representation" shall have the meaning ascribed to it
in Section 6.4(p).
1.42 "Hart-Scott-Rodino Act" shall mean the United States Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
1.43 "Indebtedness" of any Person at any date shall mean, without
duplication: (a) all indebtedness of such Person for borrowed money (including
without limitation accrued interest, fees, penalties and premiums or other
payments in addition to principal with respect thereto), (b) indebtedness
representing the deferred purchase price of property or services which, in
accordance with GAAP, would be required to be shown as a liability on the face
of a balance sheet of such Person on such date (other than trade payables and
accrued expenses incurred in the ordinary course of business and payable in
accordance with customary practices), (c) any other indebtedness of such Person
which is evidenced by a promissory note, bond, debenture or similar instrument,
(d) all capitalized lease obligations of such Person, (e) all obligations of
such Person in respect of banker's
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<PAGE>
acceptances issued or created for the account of such Person, (f) all
obligations of such Person in respect of letters of credit issued for the
account of such Person (other than standby letters of credit not drawn), (g) all
guarantees of such Person of any indebtedness or obligations of any other Person
of the types referred to in the preceding clauses (a) through (f), and (h) all
indebtedness or obligations of the types referred to in the preceding clauses
(a) through (g) of any other Person secured by any Lien on any assets of such
Person to the extent attributable to such Person's interest in such assets, even
though such Person has not assumed or otherwise become liable for the payment
thereof but excluding customer deposits and interest payable thereon in the
ordinary course of business.
1.44 "Indemnification Notice" shall have the meaning ascribed to it in
Section 11.1(a).
1.45 "Indemnified Liability" shall have the meaning ascribed to it in
Section 9.1.
1.46 "Indemnified Party" shall have the meaning ascribed to it in Section
10.
1.47 "Intellectual Property" shall mean all of the following: (i) patents,
patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (ii) trademarks, service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; (v) trade secrets, confidential information
and know-how (including but not limited to ideas, formulae, compositions,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information); and (vi) computer
software (including but not limited to data, data bases and documentation).
1.48 "IRS" shall mean the United States Internal Revenue Service, or any
successor agency thereto.
1.49 "Leases" shall have the meaning ascribed to it in Section 6.6(a)(ii).
1.50 "Leased Property" shall have the meaning ascribed to it in Section
6.6(a)(ii).
1.51 "LIBOR" shall have the meaning ascribed to it in Section 2.2(b).
1.52 "Licenses" shall have the meaning ascribed to it in Section 6.7A.(b)
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<PAGE>
1.53 "Lien" shall mean, with respect to any property or asset, any
mortgage, pledge, security interest, lien (statutory or other), charge,
encumbrance, lease, claim, option, right of first refusal, easement, servitude,
transfer restriction, or other similar restrictions or limitations of any kind
or nature whatsoever on or with respect to such property or asset.
1.54 "LLC" shall have the meaning ascribed to it in the preamble.
1.55 "Make-Whole Amount" shall have the meaning ascribed to it in Section
9.1.
1.56 "Merger Control Approvals" shall have the meaning ascribed to it in
Section 4.10.
1.57 "Minimum Balance" shall have the meaning ascribed to it in Section
16.6.
1.58 "Modified Make-Whole Amount" shall have the meaning ascribed to it in
Section 9.1.
1.59 "MS Sport Agreement" shall have the meaning ascribed to it in Section
16.5.
1.60 "Note Purchase Agreement" shall have the meaning ascribed to it in
Section 9.1.
1.61 "Owned Property" shall have the meaning ascribed to it in Section
6.6(a)(i).
1.62 "PBGC" shall mean the United States Pension Benefit Guaranty
Corporation.
1.63 "Permitted Liens" shall mean: (i) Liens for taxes or other
governmental charges other than Environmental Liens or levies which are not
delinquent or are being contested in good faith and by appropriate proceedings;
(ii) mechanic's, worker's, materialmen's and other like Liens arising in the
ordinary course of business in respect of obligations which are not delinquent
or which are being contested in good faith and by appropriate proceedings; (iii)
Liens arising in the ordinary course of business either for sums being contested
in good faith and by appropriate proceedings or for sums not due; (iv) other
matters which do not materially impair the occupancy or use of the property or
asset burdened by such matter for the purposes for which it is currently used in
connection with the Business; and (v) Real Estate Permitted Liens.
1.64 "Perseus" shall have the meaning ascribed to it in the preamble.
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<PAGE>
1.65 "Person" shall mean any individual, corporation, partnership, limited
liability company, firm, association, unincorporated organization or other
entity.
1.66 "Preferred Shares" shall have the meaning ascribed to it in the
preamble.
1.67 "Price" shall have the meaning ascribed to it in Section 2.2(b).
1.68 "Primary Representation" shall have the meaning ascribed to it in
Section 6.18.
1.69 "Principal Subsidiaries" shall mean the companies named on Exhibit B
attached hereto and made a part of the Agreement.
1.70 "Principal Subsidiaries Shares" shall mean shares representing the
entire issued and outstanding shares of the Principal Subsidiaries.
1.71 "Real Estate" shall have the meaning ascribed to it in Section
6.6(a)(ii).
1.72 "Real Estate Permitted Liens" shall mean: (i) Liens for taxes or
assessments and similar charges, which either are: (A) not delinquent or (B)
being contested in good faith and by appropriate proceedings, and adequate
reserves (as determined in accordance with GAAP, consistently applied) have been
established on the applicable Subsidiaries' books with respect thereto; (ii)
mechanics', materialmen's or contractors' Liens or encumbrances or any similar
statutory Lien or restriction incurred in the ordinary course of business and
which are for amounts not yet due and payable; (iii) zoning, entitlement,
building and other land use regulations imposed by governmental agencies having
jurisdiction over the Real Estate which are not violated by the current use and
operation of the Real Estate; and (iv) covenants, conditions, restrictions,
easements and other similar matters of record affecting title to the Real Estate
which do not materially impair the value of the Real Estate or occupancy or use
of the Real Estate for the purposes for which it is currently used in connection
with the Business. Notwithstanding anything to the contrary set forth in this
section, Real Estate Permitted Liens do not include Environmental Liens.
1.73 "Recapitalization" shall have the meaning ascribed to it in the
preamble.
1.74 "Recapitalization Transactions" shall have the meaning ascribed to it
in the preamble.
1.75A "Restructuring" shall have the meaning ascribed to it in the preamble.
1.75B "Senior RIC Shares" shall have the meaning ascribe to it in the
Exchange Agreement.
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<PAGE>
1.76 "Securities Act" shall have the meaning ascribed to it in Section
7(e)(ii).
1.77 "Seller Affiliate" shall have the meaning ascribed to it in Section
8.10.
1.78 "Sellers" shall have the meaning ascribed to it in the preamble.
1.79 "Senior Credit Facility" shall have the meaning ascribed to it in the
preamble.
1.80 "Senior Notes" shall have the meaning ascribed to it in Section 9.1.
1.81 "Shares" shall mean, as the context requires, with respect to a
Subsidiary, all of the issued and outstanding shares of such Subsidiary.
1.82 "Shareholders' Agreements" shall have the meaning ascribed to it in
Section 3.2(b)(vi).
1.83 "Special Environmental Liability" shall have the meaning ascribed to
it in Section 9.1.
1.84 "Special Product Liabilities" shall have the meaning ascribed to it in
Section 9.1.
1.85 "Special Tax Liabilities" shall have the meaning ascribed to it in
Section 9.1.
1.86 "Stock Purchase" shall have the meaning ascribed to it in the
preamble.
1.87 "Subsidiaries" shall mean the Principal Subsidiaries and each of the
companies or corporations named in Exhibit C attached to this Agreement and made
a part hereof.
1.88 "Tax" shall mean any federal, state, local, or foreign income, gross
receipts, VAT, employment or other similar tax, including any undisputed
interest, penalty, or addition thereto.
1.89 "Taxing Authority" shall mean any federal, state, local or foreign
government or governmental agency with authority to collect Taxes or audit or
review Tax Returns.
1.90 "Tax Return" shall mean any mandatory return, declaration or report
relating to Taxes, including any amendment thereof.
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1.91 "Topping Agreement" shall have the meaning ascribed to it in Section
18.3.
1.92 "Topping Fee" shall have the meaning ascribed to it in Section 18.3.
1.93 "Transaction Expenses" shall have the meaning ascribed to it in
Section 15.6.
1.94 "Transaction Outline" shall have the meaning ascribed to it in Section
2.1.
1.95 "Trigger Tax Notice" shall mean a written notice that Sellers desire
to add to the definition of Triggered Tax Liability for taxes assessed by one or
more jurisdictions other than The Netherlands which notice shall specify such
jurisdictions.
1.96A "Triggered Tax Liability" shall have the meaning ascribed to it in
Section 9.3(f).
1.96B "UK GAAP" shall mean GAAP as applied in the United Kingdom.
1.97 "U.S. GAAP" shall mean GAAP as applied in the United States of
America.
1.98 "U.S. GAAP Audited Financials" shall have the meaning ascribed to it
in Section 8.9.
1.99 "WARN" shall have the meaning ascribed to it in Section 6.16.
2. THE RECAPITALIZATION
--------------------
2.1 Restructuring. Subject to the terms and conditions set out in this
-------------
Agreement, DFS agrees to deliver or cause the delivery of any share
certificates, duly endorsed, together with appropriate deeds of transfer,
required to effect the Restructuring. The Sellers and the Company agree to
take, prior to the Closing, the steps necessary to effect the transactions
specified in a memorandum to be agreed to by representatives of the Buyer and
the Sellers outlining the transactions necessary or desirable to effect the
reorganization and recapitalization of the Derby International Group (the
"Transaction Outline").
2.2 Buyer's Investment.
------------------
(a) Agreement to Purchase and Sell. Subject to the terms and
------------------------------
conditions set out in this Agreement, the Company hereby agrees to sell to the
Buyer, and the Buyer hereby agrees to purchase from the Company, the Buyer
Shares, with each of
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LLC and Perseus purchasing the number of shares of Class A Common Stock and
Preferred Stock, Series A, of the Company set forth opposite its name on the
attached Exhibit 2.2(a).
--------------
(b) Price. The Company and the Buyer hereby agree that the price (the
-----
"Price") for the Buyer Shares shall be sixty million United States dollars
($60,000,000), with the aggregate consideration paid for such shares by LLC and
Perseus set forth on the attached Exhibit 2.2(a). Unless otherwise agreed in
--------------
writing by the parties, at the Closing, the Buyer shall pay an additional amount
equal to the simple interest accruing on the sum of the DFS Payment at a rate
per annum equal to the London Interbank Offer Rate for United States dollars
("LIBOR") from and including March 1, 1998 through March 28, 1998, and at a rate
per annum equal to four percent (4%) from and including March 29, 1998, through
the Closing Date.
2.3 DFS' Investment.
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(a) Agreement to Purchase and Sell. Subject to the terms and
------------------------------
conditions set out in this Agreement, the Company hereby agrees to sell to DFS,
and DFS hereby agrees to purchase from the Company, the DFS Shares.
(b) Price. The Company and DFS hereby agree that the price (the "DFS
-----
Price") for the DFS Shares shall be nine million five hundred thousand United
States dollars ($9,500,000).
3. CLOSING
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3.1 Date and Place of the Closing. The completion of the Recapitalization
-----------------------------
Transactions (the "Closing") shall take place at the New York offices of
Kirkland & Ellis, or at such other place as shall be agreed between the parties,
at 10:00 a.m. on the later of (i) April 14, 1998, or (ii) the third Business Day
after all conditions to Closing set forth in Sections 4 and 5 have been
satisfied or waived (the "Closing Date"), but in no event later than the Cut-Off
Date (as defined in Section 18.1(e)).
3.2 Action at Closing. In addition to any other action to be taken and
-----------------
any other instrument required to be executed and/or delivered pursuant to this
Agreement, at the Closing:
(a) the Sellers shall deliver or cause to be delivered:
(i) to the Company, the certificates representing ownership
(directly or indirectly) of the Principal Subsidiaries Shares duly endorsed for
transfer or with duly executed stock transfer forms attached, in each case, in a
form sufficient to effect
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the transfer of the Principal Subsidiaries Shares to the Company, together with
the original share certificates (if and to the extent ownership of such Shares
is evidenced by certificates or similar instruments) representing the issued and
outstanding shares of the Subsidiaries other than the Principal Subsidiaries;
(ii) to the Buyer, copies of the resignations of those
directors and officers of the Subsidiaries which shall be designated by the
Buyer no later than five (5) Business Days before the Closing, each original
resignation having been duly delivered to the relevant Subsidiary;
(iii) to the Buyer, an opinion of counsel for the Sellers
addressed to the Buyer with respect to the matters set out in Exhibit
3.2(a)(iii) to this Agreement and made a part hereof;
(iv) to the Buyer, a certificate executed on behalf of the
Sellers in substantially the form set out in Exhibit 3.2(a)(iv) to this
Agreement and made a part hereof;
(v) to the Buyer, certified resolutions of the Sellers and the
Company authorizing the execution, delivery and performance of this Agreement
and the transactions contemplated hereby;
(vi) to the Buyer, evidence of the corporate organization and
existence and, to the extent ordinarily available in the jurisdiction of
incorporation, good standing of the Sellers and the Principal Subsidiaries under
the laws of their respective jurisdictions of incorporation, in each case in
form reasonably satisfactory to Buyer;
(vii) to the Company, a license agreement to use the trade name
"Derby" in connection with the Business on substantially the terms and
conditions set forth in Exhibit 3.2(a)(vii) attached hereto and made a part
hereof; and
(viii) such other documents relating to the transactions
contemplated by this Agreement as Buyer or its counsel may reasonably request
within a reasonable time prior to the Closing;
(b) the Buyer shall:
(i) pay to the Company the Price for the Buyer Shares in
immediately available funds by transfer in United States dollars to the accounts
of the Company at such bank or banks as the Company shall designate not less
than five (5) days before the Closing;
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<PAGE>
(ii) deliver to the Sellers and the Company opinions of counsel
for LLC and Perseus addressed to the Sellers and the Company with respect to the
matters set out in Exhibit 3.2(b)(ii) to this Agreement and made a part hereof;
(iii) deliver to the Sellers and the Company certified
resolutions of LLC and Perseus authorizing the execution, delivery and
performance of this Agreement and the transactions contemplated hereby;
(iv) deliver to the Sellers and the Company evidence of the
organization, existence and good standing of each of LLC and Perseus under the
laws of Delaware, each in form reasonably satisfactory to the Sellers and the
Company; and
(v) deliver to the Sellers a certificate executed on behalf of
the Buyer in substantially the form set out in Exhibit 3.2(b)(v) to this
Agreement and made a part hereof;
(vi) execute and deliver a shareholders' agreement and
registration agreement with the Company and DFS in substantially the form
attached hereto as Exhibit 3.2(b)(vi) and made a part hereof (collectively, the
"Shareholders' Agreements");
(vii) cause to be delivered such other documents relating to the
transactions contemplated by this Agreement as the Sellers or their counsel may
reasonably request within a reasonable time prior to the Closing; and
(viii) execute and deliver an exchange agreement in substantially
the form attached hereto as Exhibit 3.2(b)(viii) and made a part hereof (the
"Exchange Agreement");
(c) the Company shall:
(i) pay in full to DFS the DFS Payment (less the amount of
eight million five hundred thousand United States dollars ($8,500,000)) in
immediately available funds by transfer in United States dollars to the accounts
of DFS at such bank or banks as DFS shall designate not less than five (5) days
before the Closing, provided that, if and to the extent the DFS Price is not
paid by DFS at the Closing, the Company shall be entitled to offset the DFS
Price against such amount;
(ii) deliver to Perseus fully executed stock certificates dated
the Closing Date representing the Perseus Common Shares, registered in the name
of Perseus (or in the names of such nominees as Perseus shall direct) in such
denominations as Perseus shall direct;
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(iii) deliver to LLC fully executed stock certificates dated
the Closing Date representing the Preferred Shares and the LLC Common Shares,
registered in the name of LLC (or in the names of such nominees as LLC shall
direct) in such denominations as LLC shall direct;
(iv) execute and deliver the Shareholders' Agreements;
(v) deliver to DFS fully executed stock certificates dated the
Closing Date representing the DFS Shares, registered in the name of DFS (or in
the names of such nominees as DFS shall direct) in such denominations as DFS
shall direct; and
(vi) execute and deliver the Exchange Agreement;
(d) DFS shall:
(i) pay to the Company the DFS Price for the DFS Shares in
immediately available funds by transfer in United States dollars to the accounts
of the Company at such banks as the Company shall designate not less than five
(5) days before the Closing;
(ii) execute and deliver the Shareholders' Agreement; and
(e) Derby International shall execute and deliver the Exchange
Agreement.
3.3 Simultaneous Action. All actions to be taken at the Closing shall be
-------------------
deemed to have occurred simultaneously and every such action shall be
conditional upon:
(a) the occurrence at the Closing of every other such action; and
(b) the prior occurrence of every action to be taken or event to have
occurred hereunder before the Closing pursuant to Sections 4 and 5 below unless
otherwise waived as provided therein.
3.4 Acknowledgment. The Sellers agree that the payment by the Buyer of
--------------
the Price for the Buyer Shares in accordance with this Agreement shall
constitute full and complete satisfaction of the obligations of the Buyer to pay
for the Buyer Shares.
3.5 The DFS Payment. The Company hereby agrees to repay in full the DFS
---------------
Payment less the amount of eight million five hundred thousand United States
dollars ($8,500,000) on the Closing Date.
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<PAGE>
4. CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS
-----------------------------------------------
Each and all of the obligations and duties of the Buyer under this
Agreement are expressly conditioned upon, and subject to the fulfillment before
or at the Closing, of each of the following conditions, provided, however, that
LLC may waive any conditions specified in this Section 4 by executing a writing
so stating at or prior to the Closing:
4.1 Accuracy of Representations and Conditions to Closing. The
-----------------------------------------------------
representations and warranties of the Sellers contained in Section 6 of this
Agreement shall be true and correct in all material respects at the time of the
Closing as though made at that time, and the Sellers shall have performed all
obligations and complied in all material respects with all covenants and
conditions to be performed or complied with under this Agreement before or at
the Closing unless otherwise waived by LLC.
4.2 Government Orders and Third-Party Consents and Approvals. There shall
--------------------------------------------------------
not have been any order entered by any court or governmental agency in any
jurisdiction prohibiting or making illegal the transactions contemplated to be
performed by the Sellers or the Company by this Agreement, and all governmental
and third-party consents and approvals: (a) required for the legal and valid
consummation of the transactions contemplated by this Agreement by the Sellers
or the Company, or (b) required for each of the Principal Subsidiaries to
conduct their respective businesses in all material respects after the Closing
on the same basis as conducted prior to the Closing, or (c) set forth on Exhibit
6.1(d), shall be given or obtained in a form reasonably acceptable to LLC.
4.3 No Material Adverse Change. No material adverse change shall have
--------------------------
occurred since December 31, 1996 in the business, operations or condition,
financial or otherwise, of the Subsidiaries taken as a whole, and no event shall
have occurred since December 31, 1996, which would reasonably be expected to
have a material adverse effect on the business, operations or condition,
financial or otherwise, of the Subsidiaries, taken as a whole.
4.4 Absence of Litigation. There shall not be in effect any injunction,
---------------------
writ or restraining order or any order of any nature with respect to the Buyer,
the Sellers, the Company or any of the Principal Subsidiaries issued by a court
or governmental agency of competent jurisdiction: (a) restraining or prohibiting
the consummation of the transactions provided for herein; (b) causing any of the
transactions contemplated by this Agreement to be rescinded following
consummation; or (c) affecting adversely the right of any of the Principal
Subsidiaries to own its assets and operate its business (and no such injunction,
judgment, order, decree, ruling or charge shall be in effect); and immediately
before the Closing, no proceeding or lawsuit shall be pending or have been
threatened by any
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governmental or regulatory agency with respect to the transactions contemplated
by this Agreement which the Buyer, acting in good faith and with the advice of
legal counsel, believes is likely to result in any of the foregoing.
4.5 Recapitalization Transactions. The consummation of the
-----------------------------
Recapitalization Transactions shall occur on or prior to the Closing.
4.6 Certificate. On the Closing Date, the Sellers shall have delivered to
-----------
the Buyer a certificate to the effect that each of the conditions specified in
Sections 4.1 through 4.5 is satisfied in all respects; provided, however, that
-----------------
in the event that: (a) the condition specified in Section 4.1 shall not be
satisfied because one or more specific representations or warranties of the
Sellers is not true as of the Closing, and (b) LLC agrees to waive satisfaction
of such condition so that the transactions contemplated herein will be
consummated; then the Sellers shall nevertheless provide the certificate
referred to in this Section 4.6, but such certificate shall exclude those
specific representations and warranties which were not true as of the Closing.
4.7 Financing. The Company shall have obtained the funding of the Debt
---------
Financing on terms reasonably acceptable to the Buyer.
4.8 Recapitalization. The Recapitalization shall be treated as a
----------------
recapitalization under GAAP as applied in the United States by the United States
Securities and Exchange Commission for financial reporting purposes.
4.9 Shareholders' Agreements. On the Closing Date, DFS and the Company
------------------------
shall have executed the Shareholders' Agreements.
4.10 Reporting Requirements. All applicable mandatory waiting periods (and
----------------------
any extensions thereof) under the Hart-Scott-Rodino Act shall have expired or
been terminated and all approvals shall have been obtained or notices given as
required under any similar laws of the jurisdictions of incorporation of the
Principal Subsidiaries or of the jurisdictions where the Business is conducted
(collectively, the "Merger Control Approvals").
4.11 Restated Certificate of Incorporation. The Certificate of
-------------------------------------
Incorporation of the Company shall have been amended and restated to read in its
entirety substantially as set forth in Exhibit 4.11 attached hereto.
4.12 U.S. GAAP Audited Financials. The report of Arthur Andersen, L.L.P.
----------------------------
("Arthur Andersen") on the U.S. GAAP Audited Financials shall have been
delivered to the Buyer as provided in Section 8.9, and such report shall be
without limitation as to the scope of the audit.
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<PAGE>
4.13 Stock Purchase. DFS shall have paid the DFS Price for the DFS Shares.
--------------
LLC may waive any conditions specified in this Section 4 if it executes a
writing so stating at or prior to the Closing.
4.14 Repayment of the Senior Indebtedness. All senior Indebtedness and
------------------------------------
similar obligations of the Subsidiaries, including the Senior Notes and the
Indebtedness evidenced by the Multi-Currency Revolving Credit Facility dated
March 6, 1997, arranged by Banque Nationale de Paris for Derby Holding B.V.,
shall have been repaid in full at the Closing.
5. CONDITIONS PRECEDENT TO THE SELLERS' OBLIGATIONS
------------------------------------------------
Each and all of the obligations and duties of the Sellers and the
Company under this Agreement are expressly conditioned upon, and subject to the
fulfillment before or at the Closing, of each of the following conditions:
5.1 Accuracy of Representations and Conditions to Closing. The
-----------------------------------------------------
representations and warranties of the Buyer contained in Section 7 of this
Agreement shall be true and correct in all material respects at the time of the
Closing as though made at that time, and the Buyer shall have performed all
obligations and complied in all material respects with all covenants and
conditions to be performed or complied with under this Agreement before or at
the Closing unless otherwise waived by the Sellers.
5.2 Government Orders and Third-Party Consents and Approvals. There shall
--------------------------------------------------------
not have been any order entered by any court or governmental agency in any
jurisdiction prohibiting or making illegal the transactions contemplated to be
performed by the Buyer by this Agreement, and all governmental and third-party
consents and approvals required for the legal and valid consummation of the
transactions contemplated by this Agreement by the Buyer shall be given or
obtained in a form reasonably acceptable to the Sellers and the Company.
5.3 Absence of Litigation. There shall not be in effect any injunction,
---------------------
writ or restraining order or any order of any nature with respect to the Buyer,
the Sellers, the Company or any of the Principal Subsidiaries issued by a court
or governmental agency of competent jurisdiction (a) restraining or prohibiting
the consummation of the transactions provided for herein, (b) causing any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling or charge
shall be in effect), and immediately before the Closing, no proceeding or
lawsuit shall be pending or have been threatened by any governmental or
regulatory agency with respect to the transactions contemplated by this
Agreement which the Sellers,
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<PAGE>
acting in good faith and with the advice of legal counsel, believe is likely to
result in any of the foregoing.
5.4 Certificate. The Buyer shall have delivered to the Sellers a
-----------
certificate to the effect that each of the conditions specified in Sections 5.1
through 5.3 is satisfied in all respects; provided, however, that in the event
-----------------
that (a) the condition specified in Section 5.1 shall not be satisfied because
one or more specific representations or warranties of the Buyer is not true as
of the Closing, and (b) the Sellers agree to waive satisfaction of such
condition so that the transactions contemplated herein will be consummated, then
the Buyer shall nevertheless provide the certificate referred to in this Section
5.4, but such certificate shall exclude those specific representations and
warranties which were not true as of the Closing.
5.5 Financing. The Company shall have obtained the funding of the Debt
---------
Financing providing for an aggregate amount of available credit at the Closing
having a value of at least two hundred seventy million United States dollars
($270,000,000) on terms substantially as set forth in the commitment letter
attached as Exhibit 5.5A to this Agreement (with respect to the Senior Credit
Facility) and on terms substantially as set forth in the "highly confident"
letter attached hereto as Exhibit 5.5B (with respect to the Bond Financing) or,
in either case, on such other terms as shall be reasonably acceptable to the
Company.
5.6 Shareholders' Agreements. LLC and Perseus shall have executed the
------------------------
Shareholders' Agreements.
5.7 Stock Purchase. The Buyer shall have paid the Price for the Buyer
--------------
Shares.
5.8 Reporting Requirements. All applicable mandatory waiting periods (and
----------------------
any extensions thereof) under the Hart-Scott-Rodino Act shall have expired or
been terminated and all approvals shall have been obtained or notices given as
required under any similar laws of the jurisdictions of incorporation of the
Principal Subsidiaries or of the jurisdictions where the Business is conducted.
5.9 Repayment of the Senior Indebtedness. All senior Indebtedness and
------------------------------------
similar obligations of the Subsidiaries, including the Senior Notes and the
Indebtedness evidenced by the Multi-Currency Revolving Credit Facility dated
March 6, 1997, arranged by Banque Nationale de Paris for Derby Holding B.V.,
shall have been repaid in full at the Closing.
5.10 Senior RIC Shares. Raleigh Industries of Canada Limited ("RIC") shall
-----------------
have issued the Senior RIC Shares (as defined in the Exchange Agreement) to
Derby International, free and clear of any and all Liens.
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<PAGE>
5.11 Derby International Shareholder Approval. The shareholders of Derby
----------------------------------------
International shall have approved the Recapitalization Transactions.
6. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
---------------------------------------------
The Sellers hereby represent and warrant that the statements contained
in this Section 6 are true and correct as of the date of this Agreement and,
except as such changes may be necessary to effect the transactions contemplated
in this Agreement, shall be true and correct at the time of the Closing:
6.1 Incorporation and Capitalization.
--------------------------------
(a) Each of Derby International and DFS is a corporation duly
organized, validly existing and in good standing under the laws of the Grand
Duchy of Luxembourg, with requisite power and authority and all material
licenses, permits and authorizations required to own and lease its properties
and to conduct its business as now conducted. The execution and delivery of this
Agreement by the Sellers and the performance of the transactions contemplated
herein have been duly authorized by all necessary corporate action on the part
of the Sellers. This Agreement has been executed and delivered by duly
authorized representatives of the Sellers and constitutes the legal, valid and
binding obligations of the Sellers, enforceable against each in accordance with
its terms and conditions.
(b) (i) At the date of this Agreement, the capitalization (including
class or series and number of shares of authorized and outstanding capital
stock) of the Subsidiaries is as set forth in Exhibit 6.1(b) attached to this
Agreement and made a part hereof. Except as contemplated in this Agreement or as
disclosed in Exhibit 6.1(b), neither of the Sellers nor any of their respective
Affiliates is a party to any option, warrant, purchase right, or other
commitment that could require such Seller or any of its Affiliates to sell,
transfer, or otherwise dispose of any capital stock of any of the Subsidiaries.
(ii) Except as disclosed in Exhibit 6.1(b), there are no
outstanding:
(A) securities or bonds of any Subsidiary convertible into or
exchangeable for any share of capital stock or other securities
of such Subsidiary;
(B) subscriptions, options, warrants or other rights entitling
any third party to acquire from any Subsidiary any shares of
capital stock or other securities of such Subsidiary; or
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<PAGE>
(C) contractual obligations of any Subsidiary to purchase,
redeem or otherwise acquire any outstanding quotas or shares of
the capital stock of such Subsidiary.
(iii) Except as disclosed in Exhibit 6.1(b), the Shares of
each Subsidiary have been duly and validly issued and are fully-paid and non-
assessable.
(iv) Except as disclosed in Exhibit 6.1(b), the Principal
Subsidiaries Shares are owned, directly or indirectly, by the Sellers on the
date of this Agreement and, except as disclosed in Exhibits 8.3, will be owned,
directly or indirectly, by the Company or, in the case of the Company, by DFS at
the Closing, free and clear of any Lien (other than those created in connection
with the Recapitalization Transactions except for Liens arising from (A) the
transfers of (1) capital stock and assets from Derby International to DFS or
from DFS or Centum Investments N.V. ("Centum") to the Company or (2) capital
stock or assets by Derby International, DFS or Centum which directly results in
the issuance of securities of the Company or RIC to Derby International, DFS or
Centum; (B) the issuance of notes or payment of cash or cash equivalent
consideration to Derby International, DFS or Centum which are part of or
directly related to the DFS Payment; (C) the transfer of shares of capital stock
of the Company from Derby Holding B.V. to Derby International or DFS; (D) the
transactions described in Section 8.10 herein; and (E) any breach of agreements
or contracts not disclosed hereunder caused by the Recapitalization
Transactions).
(v) Except as disclosed in Exhibit 6.1(b) or as contemplated in
Exhibit 8.3, each of the Principal Subsidiaries owns the Shares of the
applicable Subsidiaries as set forth in Exhibit 6.1(b) attached to this
Agreement and made a part hereof, free and clear of all Liens.
(vi) Except as disclosed in Exhibit 6.1(b) or as contemplated in
Exhibit 8.3, all of the issued and outstanding capital stock of each of the
Subsidiaries other than the Company is owned by the Sellers or one or more
Subsidiaries.
(vii) Except as disclosed in Exhibit 6.1(b) or as contemplated in
Exhibit 8.3, at and immediately after the Closing, the Company will own,
directly or indirectly, all shares of the capital stock of the Subsidiaries
other than the Company, free and clear of all Liens (other than those created in
connection with the Recapitalization Transactions except for Liens arising from
(A) the transfers of (1) capital stock and assets from Derby International to
DFS or from DFS or Centum Investments N.V. ("Centum") to the Company or (2)
capital stock or assets by Derby International, DFS or Centum which directly
results in the issuance of securities of the Company or RIC to Derby
International, DFS or Centum; (B) the issuance of notes or payment of cash or
cash equivalent consideration to Derby International, DFS or Centum which are
part of or directly related
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<PAGE>
to the DFS Payment; (C) the transfer of shares of capital stock of the Company
from Derby Holding B.V. to Derby International or DFS; (D) the transactions
described in Section 8.10 herein; and (E) any breach of agreements or contracts
not disclosed hereunder caused by the Recapitalization Transactions).
(c) Except as disclosed in Exhibit 6.1(c), each of the Company and
the Principal Subsidiaries is a company duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has the
power to own, lease and operate its properties and to conduct the Business of
such Subsidiary as now conducted.
(d) Except as disclosed in Exhibit 6.1(d), neither the execution and
delivery of this Agreement by the Sellers, nor the consummation of the
transactions contemplated herein, will:
(i) conflict with any court or administrative order or process
or conflict with, result in a breach or violation or default or loss of any
benefit under, or accelerate the performance required by, any agreement or
commitment to which the Sellers, the Company or any Principal Subsidiary is a
party or by which any of them (or any of their respective properties or assets)
is bound or affected;
(ii) conflict with or result in any violation or loss of benefit
under any provision of the certificate of incorporation, bylaws or any other
organizational or governing document of a Seller, the Company or any of the
Principal Subsidiaries;
(iii) result in the creation of, or give any party the right to
create, any material lien, charge, encumbrance or other security interest upon
the property and assets of the Company or any Principal Subsidiary;
(iv) require any action by or in respect of, or filing with, any
governmental body, agency or official other than the Merger Control Approvals
and state and federal securities filings relating to the offer and sale of the
Buyer Shares; and
(v) contravene, or constitute a default under, any provision of
applicable law, rule or regulation or any agreement, judgement, injunction,
order, decree or other instrument binding upon it.
6.2 Books and Records. All accounts, books, ledgers and other records of
-----------------
the Principal Subsidiaries:
(a) have been properly and accurately maintained and contain true and
proper records of all matters required by law to be entered therein; and
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<PAGE>
(b) report or reflect all matters which are required to be reflected
in the books and records of the Business in order to prepare the Financial
Statements in accordance with the Accounting Principles.
6.3 Financial Statements.
--------------------
(a) Each of the Financial Statements has been prepared in accordance
with the requirements of all relevant statutes and in accordance with the
Accounting Principles, are true and complete, correctly reflect and present a
fair view of the assets and liabilities and fairly present the financial
condition and operating results of Derby International or the relevant Principal
Subsidiary and its subsidiaries on a consolidated basis for the years ended
December 31, 1994, 1995 and 1996. The unaudited consolidated management accounts
of Derby International as of September 28, 1997 (copies of which are attached
hereto as Exhibit 6.3 and made a part hereof) have been prepared (without notes
or schedules) in accordance with GAAP applicable to interim financial statements
in the United Kingdom, subject to any changes resulting from normal year-end
audit adjustments.
(b) Adequate provision or reserve has been made in the respective
Financial Statements for the liabilities of Derby International and each
Principal Subsidiary, as the case may be, as of December 31, 1996.
6.4 Taxes, Social Security and Labor Insurance Matters. The Sellers have
--------------------------------------------------
delivered or made available to the Buyer correct and complete copies of all Tax
Returns filed by the Principal Subsidiaries through the date of the Closing,
together with examination reports, and statements of deficiencies assessed
against, or agreed to by, any of the Principal Subsidiaries since December 31,
1994. Exhibit 6.4 includes a list of the current status of tax computations of
the Principal Subsidiaries for years through 1996. Except as otherwise
disclosed in Exhibit 6.4 attached to this Agreement and made a part hereof:
(a) Each Principal Subsidiary has filed within the statutory periods
(and extensions thereof) all Tax Returns, social security and insurance returns
which were due to be filed up to the date hereof or has obtained or applied for
extensions to file such returns in accordance with applicable law.
(b) Each Principal Subsidiary has paid all Taxes and duties that were
shown to be due on the Tax Returns, and has made all necessary and adequate
provision for Taxes and administrative charges pertaining to the Business of
such Principal Subsidiary, that have accrued before the date hereof but are not
yet due.
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<PAGE>
(c) Each Principal Subsidiary has withheld all required withholding
Taxes or made the necessary provisions for the payment of all withholding Taxes
and has paid or deposited all such withholdings as and when due.
(d) There is no material dispute or claim concerning any Tax
liability of any of the Principal Subsidiaries either: (i) claimed or raised by
any Tax Authority in writing; or (ii) as to which any of the Sellers has
knowledge based upon personal contact by a Seller with any agent of such Tax
Authority. No audit or other investigation by a Tax Authority is presently being
made or threatened with respect to any Principal Subsidiary.
(e) None of the Subsidiaries has filed a consent under Code (S)341(f)
concerning collapsible corporations.
(f) None of the Subsidiaries has made any payments, or is obligated
to make any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any "excess parachute" payments that
will not be deductible under Code (S)280G.
(g) There are no Liens other than Permitted Liens on any assets of
the Subsidiaries that arose in connection with any failure or alleged failure to
pay any Tax.
(h) Each of the Subsidiaries that is required to file a United States
federal income tax return has disclosed on its United States federal income tax
returns the relevant facts affecting the tax treatment of any item that could
give rise to a substantial understatement of United States federal incomes taxes
within the meaning of Code (S)6662 and for which there is or was not
"substantial authority" for such treatment within the meaning of Code (S)6662.
(i) To the knowledge of the Sellers, no claim has ever been made by a
Taxing Authority in a jurisdiction where any of the Principal Subsidiaries does
not file Tax Returns that such Subsidiary is or may be subject to taxation by
such jurisdiction.
(j) None of the Subsidiaries (i) has been a member of an affiliated
group filing a consolidated United States federal income tax return (other than
one of which one of the Sellers or the Company was the common parent), or (ii)
has any liability for the Taxes of any Person under Reg. (S)1.1502-6 under Code
(S)1502 (or corresponding provision of state, local, or foreign law) as a
transferee or successor, by contract or otherwise.
(k) None of the Principal Subsidiaries is a party to or bound by any
tax allocation or tax sharing arrangement or has a current or potential
contractual obligation to
-24-
<PAGE>
indemnify any other Person with respect to Taxes, excluding, however, any
arrangements with or obligations with respect to other Principal Subsidiaries.
(l) None of the Principal Subsidiaries has been a "United States Real
Property Holding Corporation" as defined in Code (S)897.
(m) None of the Subsidiaries will be required: (i) as a result of a
change in method of accounting for a taxable period ending on or prior to the
Closing Date, to include any adjustment in taxable income for any taxable period
ending after the Closing Date, (ii) as a result of any closing agreement as
described in Code (S)7121 (or any corresponding provision of state, local, or
foreign income tax law) to include any item of income in, or exclude any item of
deduction from, taxable income for any taxable period ending after the Closing
Date or (iii) as a result of any deferred intercompany gain described in
Treasury Regulation 1.1502-13 or any excess loss account described in Treasury
Regulation Section 1.1502-19 under Code (S)1502 (or any corresponding provision
of state, local, or foreign income tax law) to include any item of income in
taxable income for any taxable period ending after the Closing Date.
(n) None of the Subsidiaries which is not a Principal Subsidiary has
any liability for Taxes not provided for in any financial statements delivered
prior to the date hereof which liability would have a material adverse effect on
the financial condition of the Principal Subsidiaries considered as a whole.
(o) None of the Subsidiaries has waived any statute of limitations in
respect of any Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(p) The tax equity baskets of Derby Holding (Deutschland) GmbH at
December 31, 1993 and December 31, 1997 as represented to in the opinion of
Arthur Andersen, Hamburg attached hereto as Exhibit 6.4A is correct (the "German
Basket Representation") unless after the Closing the Company, any Subsidiary,
Buyer or any Affiliate of Buyer takes or omits to take any action that causes
such representation to be untrue.
6.5 Litigation and Claims.
---------------------
(a) Except as otherwise disclosed in Exhibit 6.10 or Exhibit 6.5
attached to this Agreement and made a part hereof, none of the Sellers or the
Subsidiaries is: (i) subject to any material outstanding injunction, judgment,
order, decree, ruling, settlement or charge; or (ii) is a party or, to the
knowledge of the Sellers, is threatened to be made a party to any material
action, suit, proceeding, hearing, or investigation of, before
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<PAGE>
any court or quasi-judicial or administrative agency or any federal, state,
local or foreign jurisdiction or before any arbitrator.
(b) No director of any Principal Subsidiary is currently subject to
any judicial proceeding or has received notice of any threatened judicial
proceeding related to his power or activity as a director of such Subsidiary.
To the best knowledge of the Sellers, no director of any Subsidiary other than a
Principal Subsidiary is currently subject to any judicial proceeding or has
received notice of any threatened judicial proceeding related to his power or
activity as a director of such Subsidiary.
6.6 Title to Assets.
---------------
(a) Real Estate.
-----------
(i) Attached as Exhibit 6.6(a) is a list of each parcel of real
property owned by the Sellers and used in the conduct of the Business of the
Subsidiaries or owned by any Subsidiary (collectively, the "Owned Property").
Copies of the legal descriptions of the Owned Properties have been previously
delivered by the Sellers to the Buyer.
(ii) Attached as Exhibit 6.6(a) is a list of all leases, sub
leases and other occupancy agreements to which any Subsidiary is a party (the
"Leases"). Copies of the Leases, including all amendments, extensions and
modifications thereto, have been delivered to the Buyer by the Sellers (the
premises demised by such leases, subleases and occupancy agreements are
hereinafter referred to collectively as the "Leased Property"; the "Owned
Property" and the "Leased Property" are collectively referred to as the "Real
Estate").
(iii) The Real Estate constitutes all of the real property
which the Sellers or any Subsidiary currently own, lease, occupy or have the
right to occupy in connection with the Business. All permits, licenses and
other approvals required to be obtained by the Subsidiaries to occupy and use
the Real Estate as currently used and occupied have been obtained, are in full
force and effect, and have not been violated in any material respect.
(iv) Other than the Subsidiaries, there are no parties in
possession or parties having any current or future right to occupy any of the
Owned Property or to occupy or use any of the Leased Property during the term of
any lease for such Leased Property, except as disclosed in Exhibit 6.6(a).
(v) Except as otherwise disclosed in Exhibit 6.6(a), neither
the Sellers nor any Subsidiary has received notice that any permit, license and
other approval
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<PAGE>
required to be obtained by any Subsidiary to occupy and use the Real Estate as
currently used and occupied has not been obtained or is not in full force and
effect.
(vi) Except as otherwise disclosed in Exhibit 6.6(a), none of
the Subsidiaries has received any notice that it is in violation of any permit,
license, approval, covenant, condition, restriction, easement, agreement or
order affecting any portion of the Real Estate, which violation remains
outstanding, and neither the Sellers nor any of the Subsidiaries has any
knowledge of any such violation which would have a material adverse effect on
the value, occupancy or use by the Subsidiaries of the relevant Real Estate.
(vii) Except as otherwise disclosed in Exhibit 6.6(a), there
is no pending, or to the knowledge of the Sellers, any threatened condemnation
proceeding, or material lawsuit or administrative action affecting the ability
of the Subsidiaries to occupy and use the Real Estate.
(viii) Except as described in the title documents, valuations
listed in Exhibit 6.6(a) or as otherwise disclosed in Exhibit 6.6(a), all of the
Real Estate is in operating condition and repair reasonably adequate for use in
the conduct of the Business. Except as described in the title documents and
valuations previously provided to the Buyer or as otherwise disclosed in Exhibit
6.6(a), no improvements, buildings or facilities located on the Real Estate and
no accessways thereto encroach on land not included in the Real Estate and no
such improvement is dependent for its access, operation or utility on any land,
building or other improvement not included in the Real Estate. Except as
described in the valuations listed in Exhibit 6.6(a) or as otherwise disclosed
in Exhibit 6.6(a) or Exhibit 6.7, none of the Sellers nor any of the
Subsidiaries has received any notice of violation of any zoning, fire, building,
environmental and administrative regulations to the extent relevant for such
use.
(ix) Except as disclosed in Exhibit 6.6(a), the Sellers or the
relevant Subsidiaries have good and marketable title to the Owned Property, free
and clear of all Liens, except for the Real Estate Permitted Liens. With
respect to the Leased Property, except as disclosed in Exhibit 6.6(a): (A) the
Subsidiaries have a good and valid leasehold interest in and to all of the
Leased Property, free and clear of all Liens, except for the Real Estate
Permitted Liens; (B) each Lease is in full force and effect and is enforceable
in accordance with its terms and none of the Subsidiaries has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in
such Lease; (C) there exists no material default by any Subsidiary, or
condition which, with the giving of notice, the passage of time, or both, could
become a material default by any Subsidiary under any such lease or, to the
knowledge of the Sellers or the Subsidiaries, by any other party to such lease;
and (D) except as otherwise disclosed in Exhibit 6.6(a), the execution of this
Agreement or the consummation of the transactions contemplated hereby
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<PAGE>
shall not give rise to a material default or requirement for consent under any
such lease agreement for Leased Property.
(x) As of the Closing Date, all of the Real Estate shall be in
substantially the same condition and repair as on the date of this Agreement,
damage by casualty (if and to the extent covered by insurance) and reasonable
wear and tear excepted.
Except as expressly set forth in this Section 6.6(a), neither the Sellers nor
any Subsidiary makes any representation or warranty concerning the condition of
the Real Property or its fitness for any particular purpose. The Sellers
further disclaim any implied warranties of condition or fitness for use, and the
Buyers acknowledge and accept such disclaimer.
(b) Inventory. Except for the items of inventory reserved against in
---------
the Financial Statements, all inventories included in the Business are current
and within the qualitative standards of the Subsidiaries and capable of being
sold or used in the ordinary course of business.
(c) Assets. The Principal Subsidiaries have good and marketable title
------
to, or a valid leasehold interest in or right to use, the material properties
and material assets used in the Business, free from all Liens other than
Permitted Liens. The Principal Subsidiaries' material tangible assets required
for the conduct of the Business are in good operating condition and are fit for
use in the ordinary course of business of the Principal Subsidiaries as
presently conducted. Except as disclosed on Exhibit 6.6(c) attached hereto and
made a part of this Agreement, the Principal Subsidiaries own, or have the right
to use, or at the Closing will own or have the right to use, all material
assets, rights and privileges necessary for the conduct of the Business. Except
as disclosed in Exhibit 6.6(c), none of the Sellers or any of their Affiliates
other than the Subsidiaries owns, leases or otherwise holds any of the assets,
rights or privileges necessary for or historically used in the conduct of the
business carried on by the Subsidiaries, which consists primarily of designing,
manufacturing, distributing and selling bicycles, bicycle components and
accessories.
(d) Intangibles.
-----------
(i) Exhibit 6.6(d) attached to this Agreement and made a part
hereof sets forth a complete and accurate list of: (A) patented or registered
Intellectual Property of the Subsidiaries and pending applications by the
Subsidiaries for the patenting or registration of Intellectual Property; and (B)
licenses or similar agreements covering Intellectual Property to which the
Company or any Subsidiary is a party, either as licensee or licensor, which are
material to the operation of the Business as presently conducted, but excluding
any licenses solely between or among Subsidiaries ("Company Intellectual
Property").
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<PAGE>
(ii) Except as described in Exhibit 6.6(d) attached hereto, to
the best knowledge of the Sellers, the Company Intellectual Property does not
violate, misappropriate, interfere with or infringe upon any proprietary or
other rights of any third party, and there are no claims by any third party
pending or threatened in respect of the Company Intellectual Property.
(iii) Except as noted in Exhibit 6.6(d), each registered
trademark, patent and copyright has been duly registered with, filed in or
issued by, as the case may be, the United States Patent and Trademark Office or
other appropriate governmental entities, domestic or foreign.
(iv) Except as disclosed in Exhibit 6.5 or 6.6(d), each
trademark registration, copyright registration and patent constituting the
Company Intellectual Property remains in full force and effect, and each
Subsidiary has taken all necessary action to maintain and protect all of the
Company Intellectual Property.
(v) To the knowledge of the Sellers, except as described in
Exhibit 6.6(d), no third party has interfered with, infringed upon,
misappropriated, or otherwise violated any Company Intellectual Property rights.
(vi) Except as described in Exhibit 6.6(d), to the knowledge of
the Sellers, no third party has contested the validity, enforceability, use or
ownership of any Company Intellectual Property.
(vii) Except as described in Exhibit 6.6(d), none of the
Subsidiaries is infringing, misappropriating, or otherwise violating any
Intellectual Property of any other Person, and no claim is pending or threatened
to the effect that the conduct by any Subsidiary conflicts with or infringes in
any way upon the Intellectual Property of any other Person, which infringement,
violation or claim would result in a material adverse effect on such Subsidiary.
(viii) Except as disclosed in Exhibit 6.6(d) or in Exhibit
6.11, neither the Sellers nor any of the Subsidiaries has granted any license,
franchise or permit to any Person to use any of the Company Intellectual
Property.
(ix) Except as disclosed in Exhibit 6.6(d) or in Exhibit 6.11,
immediately subsequent to the Closing, the Company Intellectual Property will be
owned or available for use by the Subsidiaries on terms and conditions
substantially similar to those under which such Subsidiaries owned or used such
Intellectual Property immediately prior to the Closing.
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6.7 Authorizations, Permits, Compliance with Environmental Law.
----------------------------------------------------------
(a) Except as described in Exhibit 6.7 or in the Environmental
Assessment Reports, each Principal Subsidiary has operated and is operating in
compliance with Environmental Law, except for such noncompliance which would not
have a material adverse effect on the financial condition of the Principal
Subsidiaries, considered as a whole.
(b) Except as described in Exhibit 6.7 or in the Environmental
Assessment Reports, each of the Principal Subsidiaries has obtained all material
environmental permits and authorizations required under Environmental Law as
necessary for the operation of its business. Except as described in Exhibit 6.7
or in the Environmental Assessment Reports, (i) all material permits and
authorizations issued pursuant to Environmental Law are valid and are in full
force and effect; (ii) neither the Sellers nor any Principal Subsidiary has
received any notice of any material default under such permit or authorization;
and (iii) there are no outstanding notices or claims against any of the
Principal Subsidiaries for damages, penalties, or other obligations or
liabilities regarding any actual or alleged material violation of any
Environmental Law.
(c) Except as described in Exhibit 6.7 or in the Environmental
Assessment Reports, none of the Principal Subsidiaries has received any written
notice, report or other information within the past five years regarding any
actual or alleged material violation of, or any material liabilities or
potential liabilities arising thereunder, any Environmental Law (whether
accrued, absolute, contingent, unliquidated or otherwise), including any
investigatory, remedial or corrective obligation, relating to any of them or its
facilities arising under any Environmental Law.
(d) Except as described in Exhibit 6.7 or in the Environmental
Assessment Reports, none of the following exists at any property or facility on
the Real Estate which is in material violation of Environmental Law, and any of
which have a material adverse effect on the financial condition of the Principal
Subsidiaries: (i) underground storage tanks, (ii) asbestos-containing material
in any damaged form or condition, (iii) landfills, surface impoundments, or
disposal areas, or (iv) materials or equipment containing polychlorinated
biphenyls.
(e) Except as noted in Exhibit 6.7 or in the Environmental Assessment
Reports, none of the Principal Subsidiaries has treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled or released any
hazardous substance, or owned or operated any property or facility (and no such
property or facility is contaminated by any such substance) in a manner that has
given or would give rise to material liabilities, including liabilities for
response costs, corrective action costs, personal injury, property
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<PAGE>
damage, natural resources damages or attorney fees pursuant to any Environmental
Law, which would also have a material adverse effect on the financial condition
of the Principal Subsidiaries, considered as a whole.
(f) Except as described in Exhibit 6.7 or in the Environmental
Assessment Reports, none of the Principal Subsidiaries or the Subsidiaries has,
either expressly or by operation of law, assumed, undertaken, or otherwise
become subject to any material liability of any other Person relating to
Environmental Law, including without limitation any obligation for corrective or
remedial actions.
(g) Except as described in Exhibit 6.7 or in the Environmental
Assessment Reports, no facts, events or conditions relating to the past or
present facilities, properties or operations of the Principal Subsidiaries (or
of the Subsidiaries) will prevent, hinder, or limit continued material
compliance with Environmental Laws as in effect at present, give rise to any
material investigatory, remedial or corrective obligations as a result of a
violation of Environmental Law as in effect at present, or give rise to any
other material liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise) pursuant to any violation of Environmental Law as in effect at
present, including without limitation any relating to onsite or offsite releases
or threatened releases of hazardous materials, substances or wastes, personal
injury, property damage or natural resources damage which would have a material
adverse effect on the financial condition of the Principal Subsidiaries,
considered as a whole.
(h) This Section 6.7 contains the sole and exclusive representations
and warranties of the Seller with respect to Environmental Law, including
without limitation any representation or warranty arising out of Environmental
Law or other matters arising out of any environmental, health and safety
matters.
6.7A. Authorizations, Permits, Compliance with Laws.
---------------------------------------------
(a) Except as otherwise disclosed in Exhibit 6.7A attached to this
Agreement and made a part hereof, each Principal Subsidiary currently operates
in all material respects in compliance with the laws and regulations from time
to time in force in the countries where such Principal Subsidiary is
incorporated and/or operates or conducts the Business. Except as otherwise
disclosed in Exhibit 6.7A, each Subsidiary other than the Principal Subsidiaries
currently operates in all material respects in compliance with the laws and
regulations from time to time in force in the countries where such Subsidiary is
incorporated and/or operates or conducts business, and no failure of such
Subsidiary to comply with such laws and regulations would have a material
adverse effect on the financial condition of the Principal Subsidiaries,
considered as a whole.
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<PAGE>
(b) Except as otherwise disclosed in Exhibit 6.7A, each Principal
Subsidiary currently owns or validly holds all material licenses, permits or
authorizations (other than licenses, permits or authorizations under
Environmental Law addressed in Section 6.7(b) above) required to conduct the
Business as currently conducted (the "Licenses"). All of the Licenses are
valid, binding and in full force and effect. Except as otherwise disclosed in
Exhibit 6.7A, none of the Principal Subsidiaries is in material default under
any of the Licenses and, to the knowledge of the Sellers, no failure of a
Subsidiary to hold or default by a Subsidiary with respect to any License would
have a material adverse effect on the financial condition of the Business.
6.8 No Infringement. No agreement, practice or arrangement carried on by
---------------
any Subsidiary, or to which any Subsidiary is a party, infringes any
competition, any restrictive trade practice or any antitrust legislation
applicable in the Grand Duchy of Luxembourg or the jurisdiction of incorporation
or location or market in which any portion of the Business is conducted by such
Subsidiary. None of the Subsidiaries has given any assurance or undertaking to
the competition authorities in Germany, the Netherlands, the United States of
America or the United Kingdom or to the Commission of the European Union or is
subject to any act, decision, regulation, order, settlement or other instrument
made by any of them relating to any matter referred to in this Section 6.8.
6.9 No Prejudicial Effect. The consummation of the transactions
---------------------
contemplated by this Agreement, including the transfer of the Principal
Subsidiaries Shares by the Sellers to the Company in compliance with the terms
of this Agreement, will not cause any Principal Subsidiary to lose the benefit
of any material right or privilege it enjoys at present, except as disclosed in
Exhibit 6.9 attached hereto and made a part hereof.
6.10 Insurance. Exhibit 6.10 attached to this Agreement and made a part
---------
hereof contains a list of all insurance policies which are material or necessary
to the conduct of the Business. Exhibit 6.10 contains the most recent insurance
claims histories prepared by the Subsidiaries' regular insurance brokers.
Except as described in Exhibit 6.5 or Exhibit 6.10, with respect to each such
insurance policy: (i) the policy is in full force and effect; (ii) neither the
Principal Subsidiaries nor, to the knowledge of the Sellers, any other party to
the policy, is in material breach or default (including, with respect thereto,
the payment of premiums or the giving of notices); (iii) no pending claim made
by any Subsidiary is being disputed by the Subsidiaries' insurers; and (iv) no
event has occurred which, with notice or lapse of time, would constitute a
material breach or default on the part of any Subsidiary or, to the knowledge of
the Sellers, on the part of any other party, or would permit termination,
modification or acceleration under such policy by the insurer.
6.11 Agreements. Except as disclosed in Exhibit 6.6(a), Exhibit 6.6(d)
----------
or Exhibit 6.11 (including Exhibit 6.11(v)) or as contemplated in this
Agreement, no Subsidiary has entered into or undertaken (whether orally or in
writing) any agreement,
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<PAGE>
transaction, obligation, commitment, arrangement or liability which has not been
fully performed by the relevant Subsidiary and has not been terminated
(excluding, however, agreements or commitments for the purchase of raw materials
which have terms of less than six (6) months and agreements or arrangements
solely with other Subsidiaries) and:
(a) is a lease or a contract for hire or rent, hire purchase or
purchase by way of credit sale or periodical payments whereby such Subsidiary is
required to pay amounts exceeding two hundred fifty thousand United States
dollars ($250,000) in the aggregate in any calendar year;
(b) requires payment of any commission or royalty;
(c) is one of the following types of contracts or agreements:
(i) contracts or commitments for capital expenditures or
acquisitions in excess of two hundred fifty thousand United States dollars
($250,000) per project;
(ii) distribution, dealer or sales agency agreements involving
payments to parties other than Affiliates in excess of two hundred fifty
thousand United States dollars ($250,000) per year;
(iii) guarantees of third-party obligations;
(iv) agreements (including non-compete agreements) which
restrict the kinds of businesses in which any of the Subsidiaries may engage or
the geographical areas in which any of them may conduct their business;
(v) indentures, mortgages, loan agreements or other agreements
relating to Indebtedness for borrowed money, the granting of Liens or lines of
credit;
(vi) collective bargaining agreements;
(vii) material licenses, agreements, assignments or contracts
(whether as licensor or licensee, assignor or assignee) with third parties
relating to any of the Company Intellectual Property;
(viii) joint venture agreements, partnership agreements or
similar agreements with any party which is not a Subsidiary;
(ix) stock purchase agreements, asset purchase agreements or
other acquisitions or divestiture agreements entered into after January 1, 1992
involving
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the acquisition or disposition of assets having a market value in excess of one
hundred thousand United States dollars ($100,000);
(x) employment, consulting or management agreements requiring the
payment of annual compensation in excess of one hundred fifty thousand United
States dollars ($150,000);
(xi) agreements or other arrangements with any director, officer,
employee or shareholder of any of the Subsidiaries other than as disclosed in
subsection (x) above which involve annual payment in excess of one hundred fifty
thousand United States dollars ($150,000);
(xii) any agreement or contract which is not of the foregoing type
and is material to any of the Principal Subsidiaries or involves consideration
in excess of five hundred thousand United States dollars ($500,000); and
(xiii) brokerage or finder's agreements.
All items collectively in Exhibit 6.11 are referred to as "Contracts". True and
correct copies of all written Contracts have been delivered or made available to
Buyer. Except as disclosed in Exhibit 6.11: (a) all Contracts are valid and
subsisting and binding and enforceable obligations of the Subsidiary party
thereto; and (b) no material breach or default thereunder by the Subsidiaries
party thereto, or to the knowledge of the Sellers, by any other party thereto,
has occurred and is continuing uncured.
6.12 Accounts Receivable. All accounts receivable of the Business
-------------------
reflected in the Financial Statements represent sales actually made and
commercial transactions carried out in the ordinary course of the Business.
6.13 Absence of Certain Transactions. Except as necessary to effect the
-------------------------------
Recapitalization Transactions or as set forth on Exhibit 6.13 and Exhibit 8.3,
since December 31, 1996:
(a) each Subsidiary has carried on its business in the usual and
ordinary course consistent with past practice;
(b) none of the Subsidiaries has:
(i) declared or paid dividends or made any other distribution
with respect to its capital stock (other than to a Subsidiary);
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<PAGE>
(ii) redeemed, purchased, canceled or otherwise acquired, directly
or indirectly, any outstanding shares of its capital stock (other than from a
Subsidiary);
(iii) issued additional stock (other than exercise or conversion of
outstanding options, warrants, or convertible securities), warrants, options or
any other similar rights to acquire capital stock (other than to a Subsidiary);
(iv) made (or committed to make) any payments or transfer of assets
or rights to or for the benefit of a Seller or any Affiliate of a Seller (other
than the Subsidiaries); or
(v) engaged in any transaction with a Seller or any Affiliate of a
Seller for the purpose of effecting a payment or distribution of the type
described in clauses (i) through (iv) above to such Seller or Affiliate.
(c) none of the Subsidiaries has filed a voluntary petition in bankruptcy;
(d) none of the Subsidiaries has incurred any Indebtedness; made any
material loans, advances or capital contributions to, or investments in, any
other Person (other than to or in a Subsidiary); pledged or otherwise encumbered
shares of its capital stock, mortgaged or pledged any of its property, or
created any Liens with respect to such property (other than Permitted Liens)
(other than to a Subsidiary); or entered into or modified any material contract,
agreement, lease, license, commitment or arrangement with a third party (other
than to a Subsidiary) with respect to the foregoing, except in the ordinary
course of business consistent with past practice;
(e) none of the Principal Subsidiaries has granted any increase in
compensation to any salaried employees or paid any bonus, except for increases
in salary or wages in the ordinary course of business consistent with past
practice;
(f) other than provisions of services or sales in the ordinary course
of business and consistent with past practice or involving only one or more
Subsidiaries, none of the Principal Subsidiaries has: (i) sold, leased,
licensed, transferred or otherwise disposed of any assets or property having a
book or market value, individually, in excess of two hundred fifty thousand
United States dollars ($250,000), or in the aggregate in excess of one million
United States dollars ($1,000,000); or (ii) entered into, or consented to the
entering into of, any agreement granting a preferential right to sell, lease,
license, or otherwise dispose of any of such assets;
(g) none of the Subsidiaries has:
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<PAGE>
(i) entered into any new line of business;
(ii) changed its investment, liability management or other
material policies in any material respect;
(iii) incurred or committed to incur any capital expenditures,
obligations or liabilities that individually exceed two hundred and fifty
thousand United States dollars ($250,000), or in the aggregate are in excess of
one million United States dollars ($1,000,000) (other than with one or more
Subsidiaries);
(iv) acquired or agreed to acquire by merging or consolidating
with, or acquired or agreed to acquire by purchasing a substantial portion of
the assets of, or in any other manner, any business or Person (other than with
one or more Subsidiaries); or
(v) otherwise acquired or agreed to acquire any other assets or
made any lease or license commitments for a total individual consideration in
excess of two hundred and fifty thousand United States dollars ($250,000), or in
aggregate in excess of one million United States dollars ($1,000,000) (other
than with one or more Subsidiaries);
(h) none of the Subsidiaries has granted any license or sublicense
of any material rights with respect to any of its Company Intellectual Property
to any Person other than a Subsidiary;
(i) there has been no change made or authorized in the charter,
bylaws or other constituting documents of any of the Principal Subsidiaries;
(j) none of the Principal Subsidiaries has suffered any event that
is material and adverse to such Principal Subsidiary;
(k) no Subsidiary which is not a Principal Subsidiary has suffered
any event that is material and adverse to the Principal Subsidiaries' financial
condition considered as a whole;
(l) each Principal Subsidiary has made all reasonable efforts
consistent with past practices to keep their respective businesses and
properties substantially intact and to preserve existing relationships with
customers, suppliers, lessors, licensors, employees and others with whom such
Principal Subsidiaries deal;
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<PAGE>
(m) no Subsidiary has settled or compromised any legal proceeding,
action, suit, arbitration or other controversy which, after insurance
reimbursement, is material individually or in the aggregate to the Subsidiaries;
and
(n) no Subsidiary has authorized or entered into an agreement,
whether in writing or otherwise, to do any of the foregoing.
6.14. Undisclosed Liabilities. None of the Subsidiaries has any material
-----------------------
liability (whether known, asserted or unasserted, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, due or to become due) except
(i) as otherwise described in Exhibit 6.3, Exhibit 6.7, Exhibit 6.11, Exhibit
6.13, Exhibit 6.14, Exhibit 6.15 or (ii) as described on the face of the
Financial Statements or quantified in the notes to the Financial Statements or
(iii) liabilities owed to another Subsidiary or (iv) liabilities which have
arisen after December 31, 1996, in the ordinary course of business and
consistent with past practice.
6.15. Employee Plans.
--------------
(a) Exhibit 6.15 lists each of the following plans which currently is
sponsored, maintained or contributed to by (or required to be contributed to by)
the Company or any Principal Subsidiary for the benefit of any current or former
employee, director or other personnel: (i) any "employee benefit plan," as such
term is defined in Section 3(3) of ERISA, whether or not subject to the
provisions of ERISA; and (ii) any other stock option, stock bonus, stock
purchase, phantom stock, incentive, bonus, deferred compensation, retirement,
severance, vacation, medical or dental policy or arrangement which is not an
employee benefit plan as defined in Section 3(3) of ERISA (each such plan,
policy and arrangement being herein referred to as an "Employee Plan").
(b) With respect to each Employee Plan, except for any multi-employer
plan within the meaning of Section 3(37) of ERISA (a "Multiemployer Plan") and
except as set forth on Exhibit 6.15, the Sellers have made available to the
Buyer true and complete copies of each current plan document, policy statement,
summary plan description and other written material governing or describing the
Employee Plan (including, without limitation, any related trust agreement,
insurance company contract, most recent IRS determination letter, and the prior
year's IRS Form 5500) or, if there are no such written materials, a summary
description of the Employee Plan.
(c) With respect to each Employee Plan which is an "employee benefit
plan" within the meaning of Section 3(3) of ERISA or which is a "plan" within
the meaning of Section 4975(e) of the Code, there has occurred no transaction
which is prohibited by Section 406 of ERISA or which constitutes a "prohibited
transaction" under Section
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4975(c) of the Code and with respect to which a prohibited transaction exception
has not been granted and is not currently in effect.
(d) Exhibit 6.15 identifies each funded Employee Plan which is an
employee pension benefit plan within the meaning of Section 3(2) of ERISA (other
than a Multiemployer Plan within the meaning of Section 3(37) of ERISA). With
respect to each such funded Employee Plan that is intended to be qualified under
Section 401(a) of the Code: (i) the Employee Plan is a qualified plan under
Section 401(a) of the Code, and its related trust is exempt from federal income
taxation under Section 501(a) of the Code; (ii) there has been no termination or
partial termination within the meaning of Section 411(d)(3) of the Code; (iii)
no such Employee Plan is covered by Section 412 of the Code; and (iv) no such
Employee Plan is covered by Title IV of ERISA. With respect to all funded
Employee Plans, the assets held in each such plan exceed the benefits accrued
under such plan determined as of the Closing Date based on assumptions used in
the most recent actuarial valuation of such plan. The Company has not ceased
operations at a facility so as to become subject to the provisions of Section
4062(c) of ERISA, or withdrawn as a substantial employer so as to become subject
to the provisions of Section 4063 of ERISA, withdrawn as a sponsor of a
Multiemployer Plan, or ceased making contributions on or before the Closing Date
to any Employee Plan which is a pension plan subject to Section 4064(a) of
ERISA.
(e) Except as set forth on Exhibit 6.15, the consummation of the
transactions contemplated by this Agreement will not entitle any employee or
other person to receive severance or other compensation which would not
otherwise be payable absent the consummation of the transactions contemplated by
this Agreement or cause the acceleration of the time of payment or vesting of
any award or entitlement under any Employee Plan.
(f) Except as set forth on Exhibit 6.15 hereto, (i) each Employee
Plan and any related trust, insurance contract or fund has been maintained,
funded and administered in compliance with its respective terms and in
compliance with ERISA and the Code; (ii) there has been no application for or
waiver of the minimum funding standards imposed by Section 412 of the Code with
respect to any Employee Plan, and the Sellers are not aware of any facts or
circumstances that would materially change the funded status of any such
Employee Plan; and (iii) no Principal Subsidiary has incurred any liability
under Title IV of ERISA. Each funded Employee Plan located outside of the United
States satisfies all applicable requirements that govern the funding of such
plan and such assets held under such plan exceed the benefits accrued under such
plan determined as of the Closing Date based on assumptions used in the most
recent actuarial valuation of such plan.
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<PAGE>
(g) Except as set forth on Exhibit 6.15 hereto, (i) each Principal
Subsidiary which is subject to COBRA has complied with the health care
continuation requirements of COBRA; and (ii) no Principal Subsidiary has any
obligation under any Employee Plan or otherwise to provide health or life
insurance benefits to former employees of any Principal Subsidiary or any other
Person, except as specifically required by COBRA.
(h) Except as set forth on Exhibit 6.15 hereto, (i) no Employee Plan
subject to Title IV of ERISA which is a Multiemployer Plan has been terminated
since September 2, 1974; (ii) no proceeding has been initiated to terminate any
such Multiemployer Plan and there has been no "reportable event" (within the
meaning of Section 4043(c) of ERISA) since September 2, 1974 with respect to any
such Multiemployer Plan; (iii) no such Multiemployer Plan is in reorganization
as described in Section 4241 of ERISA and no such Multiemployer Plan is
insolvent as described in Section 4245 of ERISA; (iv) no Principal Subsidiary
has incurred any liability on account of a "partial withdrawal" or a "complete
withdrawal" (within the meaning of Sections 4205 and 4203, respectively, of
ERISA) from any Multiemployer Plan, no such liability has been asserted, and
there are no events or circumstances which could result in any such partial or
complete withdrawal; and (v) no Principal Subsidiary is bound by any contract or
agreement or has any obligation or liability described in Section 4204 of ERISA.
(i) No Principal Subsidiary has any liability with respect to any
"employee benefit plan" (as defined in Section 3(3) of ERISA) not listed on
Exhibit 6.15 solely by reason of being treated as a single employer under
Section 414 of the Code with any trade, business or entity other than the
Subsidiaries.
(j) Except as set forth on Schedule 6.15 hereto, no Principal
Subsidiary contributes to, maintains or sponsors or has any liability with
respect to any Employee Plan or other employee benefit plan, agreement or
arrangement applicable to employees located outside the United States (the
"Foreign Plans").
(k) All contributions (including all employer contributions and
employee salary reduction contributions), premiums or other payments which are
due have been paid to each Employee Plan (including each Foreign Plan) and all
contributions, premiums or other payments for any period ending on or before the
date of this Agreement which are not yet due have been paid to each Employee
Plan or properly accrued.
(l) No Subsidiary which is not a Principal Subsidiary has any
liability with respect to any Employee Plan, which liability would have an
material adverse effect on the financial condition of the Principal Subsidiaries
considered as a whole.
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<PAGE>
6.16. Employees. Except as disclosed in Exhibit 6.16 attached hereto and
---------
made a part hereof, to the knowledge of any of the Sellers, no executive, key
employee, or significant group of employees plans to terminate employment with
any of the Principal Subsidiaries within the next twelve (12) months. Except as
disclosed in Exhibit 6.16, none of the Subsidiaries is a party to or bound by
any collective bargaining agreement, nor has any of the Subsidiaries experienced
any strike or material grievance, claim of unfair labor practices, or other
collective bargaining disputes within the last five years. Except as disclosed
in Exhibit 6.16, none of the Principal Subsidiaries has committed any material
unfair labor practice. Except as disclosed in Exhibit 6.16, none of the
Subsidiaries which are not Principal Subsidiaries has committed any unfair labor
practice which practice would result in a material adverse effect on the
financial condition of the Subsidiaries taken as a whole. None of the Sellers
has any knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of any
of the Subsidiaries. No Subsidiary subject to the Worker Adjustment Retraining
and Notification Act of 1988, as amended ("WARN"), has implemented any plant
closing or mass layoff of employees as those terms are defined in WARN or any
similar state or local law or regulation, and no layoffs that could implicate
such laws or regulations will be implemented before the Closing without advance
notification to Buyer.
6.17. Affiliated Transactions. Except for:
-----------------------
(a) those agreements or transactions listed in Exhibit 6.11, Exhibit
6.13 and Exhibit 6.17 attached hereto and made a part hereof, or as otherwise
expressly contemplated by this Agreement;
(b) fees paid to directors not exceeding fifty thousand United States
dollars ($50,000) per annum;
(c) salaries paid to officers over one hundred fifty thousand United
States dollars ($150,000) and disclosed pursuant to Section 6.11 above; and
(d) transactions not exceeding fifty thousand United States dollars
($50,000) or set of related transactions not exceeding one hundred and fifty
thousand United States dollars ($150,000) in the aggregate;
since January 1, 1993, no Subsidiary has: (x) paid, loaned or advanced to any of
the officers, directors, stockholders or Affiliates of any of the Principal
Subsidiaries or either of the Sellers any amount of which an amount remains
outstanding; (y) sold, transferred or leased to or from any of the officers,
directors, stockholders or Affiliates of any of the Principal Subsidiaries or
either of the Sellers any properties or assets; or (z) entered into or continued
any agreement, arrangement or understanding (written or otherwise) with any of
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the officers, directors, stockholders or Affiliates of any of the Principal
Subsidiaries or either of the Sellers.
6.18. Cross-References. The Sellers have disclosed information and
----------------
agreements in exhibits attached to this Agreement which have been included as a
disclosure against the representation and warranty that most closely describes
the information or agreement (the "Primary Representation"). Such information
and agreements shall also be deemed to be disclosed with respect to
representations and warranties other than the Primary Representation where it is
reasonably apparent from the face of the agreement or nature of the disclosure
provided that such disclosure may reasonably be deemed to be disclosed against
such other representations and warranties, regardless of whether specific cross-
references to such other representations and warranties are made.
7. REPRESENTATIONS AND WARRANTIES OF THE BUYER
-------------------------------------------
Each of LLC and Perseus hereby represents and warrants (but only with
respect to itself) that the statements contained in this Section 7 are true and
correct as of the date of this Agreement and shall be true and correct at the
time of the Closing;
(a) each of LLC and Perseus is a limited liability company duly
organized and validly existing under the laws of Delaware, with the requisite
power and authority to own and lease its properties and conduct its business as
now conducted;
(b) the execution and delivery of this Agreement by Perseus and LLC,
and the consummation by each of the transactions contemplated herein, have been
duly authorized by all necessary corporate action on the part of Perseus and
LLC, respectively;
(c) this Agreement has been executed and delivered by the legal
representatives of LLC and Perseus, and this Agreement constitutes the legal,
valid and binding obligations of LLC and Perseus, enforceable against each of
them in accordance with its terms and conditions;
(d) there are no restrictions in any agreement or instrument to which
LLC or Perseus is a party or by which LLC or Perseus is bound or in any
applicable law and regulation which would prevent LLC or Perseus from purchasing
the Buyer Shares to be purchased by it hereunder or consummating the
transactions contemplated in this Agreement, and, other than Merger Control
Approvals, the execution or consummation of the transactions contemplated in
this Agreement, requires no action by or in respect of, or filing with, any
governmental body, agency or official and does not and will not contravene, or
constitute a default under, any provision of applicable law or regulation or of
its certificate of incorporation or other comparable organizational documents or
any
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agreement, judgement, injunction, order, decree or other instrument binding upon
Perseus or LLC;
(e) each of LLC and Perseus:
(i) is acquiring the Buyer Shares being purchased by it
hereunder for its own account for investment purposes only and not with a view
to the re-sale, distribution or transfer thereof within the meaning of the
Securities Act;
(ii) acknowledges that the offering and sale of the Buyer
Shares is intended to be exempt from registration under the United States
Securities Act of 1933, as amended (the "Securities Act");
(iii) is an "accredited investor" as defined in Regulation D
under the Securities Act,
(iv) has sufficient knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of
purchasing the Buyer Shares;
(v) is able to bear the economic risk of such investment,
including the complete loss of the funds invested in the Buyer Shares;
(vi) meets all suitability standards imposed by applicable law;
(vii) has carefully considered and has, to the extent it
believes such discussion necessary, discussed with legal, tax, accounting and
financial advisers the suitability of an investment in the Buyer Shares for the
its particular tax and financial situation and has determined that the Buyer
Shares being subscribed for by the Buyer are a suitable investment for the
Buyer; and
(viii) is not purchasing the Buyer Shares with funds that
constitute, directly or indirectly, the assets of an employee benefit plan
subject to Title I of the United States Employee Retirement Income Security Act
of 1974 ("ERISA") or Section 4975 of the United States Internal Revenue Code of
1986, as amended (the "Code").
(f) Financing. The Buyer has received and has furnished to the
---------
Sellers a copy of (i) a commitment letter with respect to the Senior Credit
Facility and (ii) "highly confident" letters with respect to the Bond Financing,
true and correct copies of which are attached hereto as Exhibit 5.5A and made a
part hereof, each of which (other than those delivered by Derby International as
to which the Buyer makes no representation) is (A) valid, binding and
enforceable against the Buyer in accordance with their terms and (B) to
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the knowledge of the Buyer, valid, binding and enforceable against the other
parties thereto in accordance with their terms.
(g) Adequate Equity. Each of LLC and Perseus has equity or equity
---------------
commitments in amounts sufficient to consummate the transactions contemplated in
this Agreement and to meet the obligations of LLC and Perseus, respectively,
arising out of this Agreement and the agreements (to which it is a party) to be
entered into pursuant to this Agreement.
8. CONDUCT OF BUSINESS UP TO CLOSING
---------------------------------
8.1. Access. From the date of this Agreement until the Closing, the
------
Sellers shall and shall cause the Subsidiaries to provide to representatives of
the Buyer upon request full and complete information on the current operating
performance, financial condition and business prospects of the Business, as well
as the Subsidiaries' projected, actual and budgeted, as applicable, operating
and financial performance for calendar years 1997 and 1998, and access to all
such documents and financial records (certified to be true copies, if requested)
with respect to the affairs of the Subsidiaries as the Buyer may reasonably
request. From the date of this Agreement until the Closing, the Buyer shall have
reasonable access to the management, and the premises, properties, books,
contracts, commitments, records and accountants pertaining to each of the
Subsidiaries at mutually acceptable times and places, subject to restrictions
required by any confidentiality agreements by which the Subsidiaries may be
bound.
8.2. Management Responsibility. Notwithstanding anything contained in this
-------------------------
Agreement, the sole responsibility for management, control and operation of the
Subsidiaries until the Closing shall remain with the board of directors and
executive officers of the Sellers and the Subsidiaries, subject only to the
terms and conditions of this Agreement.
8.3. Restrictions on Actions before Closing. Except as may be required to
--------------------------------------
effect the transactions contemplated by this Agreement, from the date hereof
until the Closing or as requested by or with the consent of LLC or as disclosed
in Exhibit 8.3 attached hereto and made a part of this Agreement, the Sellers
shall not permit any of the Subsidiaries to:
(a) sell, transfer, dispose of or encumber, or negotiate or grant any
options or other rights to purchase, its Shares or any of the Subsidiaries'
material assets;
(b) sell, transfer, lease, dispose of or encumber in any way any
material part of the assets, business, Company Intellectual Property, customer
lists or goodwill of the Subsidiaries (other than the sale of inventory or of
equipment in the ordinary course of business consistent with past practice),
except with prior agreement by LLC;
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(c) incur any Indebtedness for borrowed money without prior agreement
by LLC, except as required to effect the Recapitalization Transactions
contemplated in this Agreement, or under existing bank facilities to finance
budgeted working capital needs (including budgeted capital expenditures);
(d) acquire any material assets or incur any material liabilities or
capital commitments without prior agreement by LLC;
(e) terminate any existing distribution arrangements or agreements,
or enter into any new arrangements or agreements for the sale, licensing or
distribution of the main products of the Subsidiaries, which arrangements or
agreements are material to the Business considered as a whole, without prior
agreement by LLC;
(f) change or commit to change any significant terms of employment of
any management executives, directors or officers or any employee whose current
salary exceeds one hundred and fifty thousand United States dollars ($150,000)
per year of the Subsidiaries or negotiate any changes to their terms of
employment without prior agreement by LLC, which shall not be unreasonably
withheld;
(g) amend its certificate of incorporation, by-laws or other
governing document or agreement;
(h) issue or sell (or agree to issue or sell) any shares of its
capital stock of any class or series, or any options, warrants, conversion or
other rights to purchase any such shares of any securities convertible into or
exchangeable for such shares (other than upon the exercise or conversion of
options, warrants, or convertible securities outstanding on the date hereof), or
grant or agree to grant, any such options to modify or alter the terms of any of
the above;
(i) discharge or satisfy any material Lien (other than a Permitted
Lien) or pay or satisfy any material obligation or liability other than existing
revolving bank facilities, except in the ordinary course of business consistent
with past practice, or commence any voluntary petition, proceeding or action
under any bankruptcy, insolvency, or other similar laws;
(j) split, combine or reclassify its outstanding capital stock or
declare, set aside, make or pay any dividend or other distribution in respect of
its capital stock (in cash or otherwise);
(k) prepay any principal or accrued interest in respect of any
Indebtedness for borrowed money; or
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(l) make (or commit to make) any payment or transfer of rights or
assets (including cash or evidences of indebtedness) to or on behalf of a Seller
or any Affiliate of a Seller (other than the Subsidiaries).
8.4. Consents and Approvals. The Sellers shall, and shall cause each of
----------------------
the Principal Subsidiaries to, give any notices to third parties, and the
Sellers shall, and shall cause each of the Principal Subsidiaries to, use their
respective commercially reasonable best efforts to, obtain any third party
consents that LLC or Perseus may reasonably request in connection with the
satisfaction of the condition set forth in Section 4.2. Each of Perseus and LLC
shall, and shall cause its respective Affiliates to, give any notices to third
parties, and each of Perseus and LLC shall, and shall cause its respective
Affiliates to, use their respective commercially reasonable best efforts to,
obtain any third party consents that Sellers may reasonably request in
connection with the satisfaction of the condition set forth in Section 5.2.
8.5. Supplemental Disclosure.
-----------------------
(a) From time to time during the period from the date of this
Agreement until the Closing, upon becoming aware of any such matter, condition
or occurrence, the Sellers will promptly disclose to LLC and Perseus: (i) any
material development affecting the ability of the Sellers to consummate the
transactions contemplated by this Agreement, (ii) any matter, condition,
occurrence or knowledge which, if existing or occurring at the date of this
Agreement, would have been required to be excepted from any representation or
warranty of the Sellers contained herein in order for such representation or
warranty to be true and correct on the date hereof or otherwise set forth or
described in an Exhibit hereto, (iii) any breach of any covenant or agreement of
the Sellers contained in this Agreement of which either of the Sellers has
knowledge, and (iv) any material transaction entered into or consummated by any
Subsidiary. No disclosure pursuant to this Subsection 8.5(a), however, shall be
deemed to amend or supplement this Agreement (including the Exhibits hereto) or
to prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(b)(i) From time to time during the period from the date of this
Agreement until the Closing, upon becoming aware of any such matter, condition
or occurrence, each of Perseus and LLC will promptly disclose (with respect to
itself) to the Sellers: (A) any material development affecting the ability of
Perseus or LLC, as the case may be, to consummate the transactions contemplated
by this Agreement, (B) any matter, condition, occurrence or knowledge which, if
existing or occurring at the date of this Agreement, would have been required to
be excepted from any representation or warranty of Perseus or LLC, as the case
may be, contained herein in order for such representation or warranty to be true
and correct on the date hereof, and (C) any breach of any covenant or agreement
of
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Perseus or LLC, as the case may be, contained in this Agreement of which Perseus
or LLC, as the case may be, has knowledge. No disclosure pursuant to this
Subsection 8.5(b)(i), however, shall be deemed to amend or supplement this
Agreement or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
(ii) From time to time prior to the Closing if and to the extent LLC
or Perseus has actual knowledge thereof, LLC or Perseus, as the case may be,
will promptly disclose to the Sellers and the Company: (A) any material
development affecting the ability of the Sellers to consummate the transactions
contemplated by this Agreement; (B) any matter, condition, occurrence or
knowledge which, if existing or occurring at the date of this Agreement, would
have been required to be excepted from any representation and warranty contained
herein in order for such representation or warranty to be true and correct on
the date hereof or otherwise set forth or described in an Exhibit hereto; and
(C) any breach of any covenant or agreement contained in this Agreement. No
disclosure pursuant to this Subsection 8.5(b)(ii), however, shall be deemed to
amend or supplement this Agreement or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
8.6. Fulfillment of Conditions. The Sellers shall use commercially
-------------------------
reasonable efforts to fulfill or obtain the fulfillment of all conditions to the
Closing set forth in Section 4. Each of Perseus and LLC shall (with respect to
itself) use commercially reasonable efforts to fulfill or obtain the fulfillment
of all conditions to the Closing set forth in Section 5. The parties to this
Agreement shall use commercially reasonable efforts to avoid any breach of their
respective representations and warranties.
8.7. Indebtedness. The Sellers have made available to the Buyer and its
------------
representatives copies of all agreements, commitments to fund or outstanding
letters of credit evidencing all Indebtedness of the Principal Subsidiaries.
The parties to this Agreement shall use their best efforts to negotiate the
prepayment at the Closing of such Indebtedness, the release of any Liens in
existence before the Closing Date on the capital stock of the Subsidiaries and
all assets securing such Indebtedness and all guarantees, suretyships and
comfort letters given in connection with such Indebtedness, other than the
Indebtedness of Probike S.A. (Pty) Limited.
8.8. Exclusivity. Without prior written approval from or the involvement
-----------
of both Perseus and LLC, the Sellers shall not, and the Sellers shall not permit
any Subsidiary or any officer, director, agent, representative or Affiliate of
the Sellers to, directly or indirectly, enter into any written or oral agreement
or understanding with any Person regarding Another Transaction (as defined
below). As used herein, the term "Another Transaction" means the sale of any
material assets of the Sellers or any Principal Subsidiary (other than the sale
of assets in the ordinary course of business) or any sale,
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merger, consolidation, public offering, reorganization, dissolution,
recapitalization, business combination or similar transaction involving any of
the Sellers or any Principal Subsidiary, or any of the Seller's or any Principal
Subsidiary's capital stock (or rights to acquire such capital stock).
8.9. GAAP Financial Statements. Before the Closing, the Sellers shall: (a)
-------------------------
commence the preparation of (i) combined financial statements of the
Subsidiaries as of December 31, 1997, and the related statements of earnings and
of cash flows for the fiscal year then ended in accordance with U.K. GAAP (the
"1997 U.K. GAAP Financials"); (ii) combined financial statements of the
Subsidiaries as of December 31, 1997 and 1996, and the related statements of
earnings and of cash flows for each of the three fiscal years ended December 31,
1997, 1996, and 1995 in accordance with U.S. GAAP and in accordance with
Regulation S-X as promulgated by the United States Securities Exchange
Commission ("Regulation S-X") (the financial information for the period ended
December 31, 1997 is referred to as the "U.S. GAAP Audited Financials") and the
financial information related to periods ending prior to December 31, 1997 are
referred to as the "Prior Years U.S. GAAP Financials"); and (b) instruct Arthur
Andersen to audit (i) the 1997 U.K. GAAP Financials; and (ii) the 1997 U.S. GAAP
Financials and the Prior Years U.S. GAAP Financials. Together, the 1997 U.S.
GAAP Financials and the Prior Years U.S. GAAP Financials are referred to herein
as the U.S. GAAP Audited Financials." Together, the U.S. GAAP Financials and the
1997 U.K. GAAP Financials are referred to herein as the "GAAP Audited
Financials." Delivery of the 1997 U.K. GAAP Financials shall constitute a
representation by the Sellers and the Company that the 1997 U.K. GAAP Financials
are true and complete, correctly reflect and present a fair view of the assets
and liabilities and fairly present the financial condition and operating results
of the Subsidiaries on a combined basis for the year ended December 31, 1997.
Delivery of the 1997 U.S. GAAP Financials shall constitute a representation by
the Sellers that any information provided by the Company to Arthur Andersen
solely for the purpose of the translation of the 1997 U.K. GAAP Financials into
U.S. GAAP format is true and correct in all material respects and that the
Sellers have no knowledge of any error in such translation. Delivery of the
Prior Years U.S. GAAP Financials shall constitute a representation by the
Sellers that the information with respect to the Subsidiaries contained in the
Financial Statements is true and correct in all material respects and that the
Sellers have no knowledge of any error in the translation to the Prior Years
U.S. GAAP Financials. The Sellers shall instruct Arthur Andersen to deliver the
GAAP Audited Financials in draft form to the Buyer after completion of such
audit at least five (5) Business Days prior to delivering their report thereon,
and the Buyer shall be entitled to provide the Sellers with comments on such
GAAP Audited Financials for two (2) Business Days after such delivery. In the
event that the Sellers and the Buyer disagree as to whether the Buyer's comments
should be incorporated into the final GAAP Audited Financials, the Sellers and
the Buyer shall use their best efforts to resolve such dispute. The Sellers
shall use commercially reasonable efforts to deliver, or to cause Arthur
Andersen to deliver, the GAAP Audited Financials
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and an unqualified and unmodified opinion of Arthur Andersen with respect
thereto, to both LLC and Perseus at least five (5) Business Days prior to the
Closing Date. The Buyer and the Sellers shall use commercially reasonable
efforts to obtain the consent of Arthur Andersen to the use of its opinion with
respect to the U.S. GAAP Audited Financials in any registration statement filed
by the Buyer or any of the Subsidiaries with the SEC.
8.10 Transfers and Intercompany Obligations. Prior to the Closing, the
--------------------------------------
Sellers shall cause the assets identified on the Schedule of Excluded Assets
attached as Exhibit 8.10A to this Agreement and made a part hereof (the
"Excluded Assets") to be transferred and sold to one or more Affiliates of the
Sellers for the prices indicated on such Schedule of Excluded Assets. None of
the Excluded Assets is necessary for or has been used since January 1, 1997 by
the Subsidiaries in the business of designing, manufacturing, distributing and
selling bicycles, bicycle components and accessories. Except (A) for those
intercompany obligations arising out of any costs, Taxes, fees and other
expenses incurred by the Subsidiaries in connection with the establishment and
financing of DFS and (B) to the extent otherwise provided in the Transaction
Outline, prior to the Closing, the Sellers shall cause all of the intercompany
obligations between the Sellers and the Subsidiaries as identified on the
Schedule of Intercompany Obligations attached as Exhibit 8.10B to this Agreement
and made a part hereof to be first offset against other intercompany debt. The
remaining net amounts owed by (i) the Subsidiaries (the "Assigned Debt") to
Derby International and any Affiliate of Derby International that is not a
Subsidiary (a "Seller Affiliate") shall be assigned by the relevant lender to
the Subsidiary or Subsidiaries designated by the Buyer not less than ten (10)
Business Days before the Closing or (ii) Derby International and any Seller
Affiliate to the Subsidiaries shall be assigned, canceled, contributed to
capital or otherwise settled (without the payment of cash) as the Buyer and
Sellers may agree. At or after the Closing, the Buyer shall use, and shall
cause the Subsidiaries and their Affiliates to use, commercially reasonable
efforts to replace or remove all guarantees, suretyships and similar obligations
of the Sellers and Seller Affiliates given, issued or made with respect to any
obligations of the Subsidiaries.
8.11 Business Opportunities. If and when requested by the Buyer during the
----------------------
two (2) year period following the Closing, the Sellers shall assign, or cause to
be assigned, to the Company for no additional consideration (above cost) all
rights held by either of them or any of their Affiliates (other than the
Subsidiaries) with respect to the acquisition of businesses or business assets
in the same line of business as the Business as conducted prior to the Closing.
8.12 William W. Austin, Jr. Employment Contract. At the Closing, the
------------------------------------------
Sellers shall retain all responsibility for payment of the Stock Appreciation
Fund as defined in subclause 1(g) of Appendix B to the Amended & Restated
Employment Agreement dated August 29, 1997 by and between Derby International
and William W. Austin, Jr. (the "Employment Agreement") and the increase in such
Stock Appreciation Fund due on the
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Closing Date as a result of the Recapitalization Transactions, on the condition
that such Employment Agreement is terminated at the Closing and replaced with a
new employment agreement in accordance with Section 18.1(b).
9. INDEMNIFICATION BY THE SELLERS
------------------------------
9.1. Obligation To Indemnify. Subject to the provisions of Sections 9.2
-----------------------
and 9.3 and the procedures set forth in Section 11, the Sellers jointly and
severally agree to hold harmless and indemnify, if prior to the Closing, Perseus
and LLC, their respective directors, officers, members and Affiliates, or, if on
or after the Closing, the Subsidiaries and their Affiliates (collectively, the
"Buyer Indemnified Parties") with respect to any liabilities, losses, damages,
or costs (including reasonable legal fees and court costs) of any kind, which
shall be suffered or incurred as a result of: (a) any circumstances or state of
facts constituting a breach of any representation or warranty made by the
Sellers in this Agreement; (b) the breach of any covenants of the Sellers
contained in this Agreement; (c) any Indemnified Liability; (d) any Special
Environmental Liability; or (e) without giving effect to the disclosure of such
liabilities on the exhibits attached hereto, any Special Tax Liabilities or
Special Product Liabilities. "Special Tax Liabilities" means any Netherlands tax
liability, including penalties and interest, resulting from the disallowance of
interest deduction on loans owed to the Company and deducted by extending the
fiscal year of certain Dutch Subsidiaries in 1996 and 1997. "Special Product
Liabilities" means damages, losses, costs or expenses of the Company (including
reasonable attorneys' fees) arising from product liability claims based on
products sold prior to the Closing by the Company which exceed in the aggregate
four hundred thousand United States dollars ($400,000). "Indemnified Liability"
shall mean: (1) all amounts payable in respect of the "Make-Whole Amount" or
"Modified Make-Whole Amount" as such terms are defined in the Note Purchase
Agreement dated as of September 1, 1993 among Derby Holding B.V. ("DHBV"), Derby
International and the purchasers named therein (the "Note Purchase Agreement")
with respect to the purchase and sale of three series of Senior Notes of DHBV
(the "Senior Notes"), less any profits realized under the interest rate swaps
(the interest rate component and not the foreign exchange component) under the
ISDA Master Agreement, dated September 15, 1994, between DHBV and Bankers Trust
International plc; (2) all amounts accrued, paid or payable as interest in
respect of the Senior Notes from November 11, 1997 through the January 31, 1998,
plus fifty percent (50%) of amounts paid or payable in respect of accrued
interest on the Senior Notes from and including February 1, 1998 to March 29,
1998, plus one hundred percent (100%) of amounts paid or payable in respect of
accrued interest on the Senior Notes from and including March 29, 1998 to the
Closing Date; (3) any interest accrued and payable after the Closing Date until
the date of prepayment (or amounts payable in lieu of interest payable to enable
prepayment on or about the Closing Date) in the event that the holders of the
Senior Notes do not agree to the repayment of the Senior Notes on the Closing
Date, provided, however,
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that the parties shall use all commercially reasonable efforts to obtain the
consent of the holders of the Senior Notes to ensure the prepayment of the
Senior Notes on or as soon as possible after the Closing Date; (4) any
liabilities or obligations, whether accrued, absolute or contingent, whether
known or unknown, whether due or to become due, which are unrelated to the
Business or arise out of assets disposed of by the Business prior to the
Closing; (5) any liability or obligation owed with respect to intercompany
payables or other liabilities owed to the Sellers or any Affiliate of the
Sellers (other than the Subsidiaries) and not assigned or transferred to the
Company or one of the Subsidiaries; (6) all taxes, fees, expenses and other
costs (i) arising from (A) the transfers of capital stock and assets from Derby
International to DFS or from DFS or Centum to the Company, (B) the transfer of
assets by Derby International, DFS or Centum which directly results in the
issuance of securities of the Company or RIC to Derby International, DFS or
Centum or (C) the issuance of notes or payment of cash or cash equivalent
consideration to Derby International, DFS or Centum which are part of or
directly related to the DFS Payment, (ii) arising from the issuance or exchange
of the Senior RIC Shares (as defined in the Exchange Agreement) or (iii) arising
out of the transactions contemplated in the third and fourth sentences of
Section 8.10 or those parts of the Transaction Outline which relate to the
repayment, cancellation, contribution or offset of the intercompany obligations
of the type described in the third sentence of Section 8.10 herein; (7) any
liabilities, costs or expenses arising from or relating to any default under the
Senior Notes caused by the payment of dividends in September or December 1997 in
violation of the Note Purchase Agreement, provided, however, that such
indemnification shall not apply unless the Senior Notes are repaid as soon as
permitted by the holders of the Senior Notes on or after the Closing Date; and
(8) all costs, Taxes, fees and other expenses incurred by the Subsidiaries in
connection with the establishment and financing of DFS and all outstanding
amounts borrowed from any Subsidiary by Derby International, DFS or any Seller
Affiliates in connection therewith. Except in the case of the Indemnified
Liabilities, all liability of the Sellers shall be reduced by and to the extent
of any provisions made on the books and records of the Subsidiaries and
reflected on the Financial Statements or any unaudited financial statements
delivered prior to the date hereof with respect to the obligations or
liabilities upon which a claim for indemnification is based. "Special
Environmental Liability" shall mean all costs, liabilities or obligations
arising from or relating to soil or groundwater contamination on, or migrating
from, any Real Estate prior to the Closing Date, whether or not such
contamination would constitute a breach of the Sellers' representations and
warranties made in Section 6.7 hereof, but only if the cost of remediation of
such contamination of any particular site exceeds one million United States
dollars ($1,000,000) per year for at least five (5) consecutive years.
Notwithstanding anything in this Section 9.1 of the contrary, except as
specifically provided in Section 15.6, the Sellers shall have no liability to
the Buyers under this Section 9.1 for Transaction Expenses.
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9.2. Survival of Representations and Warranties. Subject to the
------------------------------------------
limitations in Section 9.3, all the representations and warranties of the
Parties contained in this Agreement shall survive the Closing hereunder and
continue in full force and effect thereafter for the periods noted in Section
9.3 below.
9.3. Exclusions and Limitations.
--------------------------
(a) The Sellers' obligations under this Section 9 shall remain in
full force and effect:
(i) with respect to any Indemnification Notice (as defined in
Section 11 below) (other than in relation to the matters referred to in
subsections (ii) and (iii) below) which is delivered to the Sellers no later
than thirty (30) days after the second (2nd) anniversary of the Closing;
(ii) with respect to any Indemnification Notice containing
claims relating to Environmental Law submitted by the Buyer pursuant to Section
11 which is delivered to the Sellers no later than thirty (30) days after the
third (3rd) anniversary of the Closing (the parties agreeing that the Sellers
shall remain obligated pursuant to clause (d) of Section 9.1 with respect to
claims relating to matters which may subsequently constitute Special
Environmental Liabilities if but only if an Indemnification Notice identifying
such claim as relating to a potential Special Environmental Liability is
delivered to the Sellers no later than thirty (30) days after the third (3rd)
anniversary of the Closing Date); and
(iii) with respect to any Indemnification Notice containing
claims relating to Tax submitted by the Buyer pursuant to Section 11 which is
delivered to the Sellers no later than thirty (30) days after the fifth (5th)
anniversary of the Closing.
(b) Subject to the applicable limitations period noted above, the
obligations of the Sellers to indemnify the Buyer Indemnified Parties shall be
reduced to the extent that any liabilities for which the Sellers have an
Indemnification obligation are covered under existing insurance policies (and
any renewals or replacements thereof) to the extent of any reimbursement or
benefit of comparable value actually received by the Buyer, any Subsidiary or
any Affiliate of the Buyer or any Subsidiary or any lender of any such Persons
under any such insurance policy.
(c) Notwithstanding anything to the contrary contained in this
Section 9, the Sellers' obligation hereunder shall be reduced by an amount equal
to ten million United States dollars ($10,000,000) (the "Deductible"), and the
Sellers shall have no liability for any individual claim unless the loss
incurred in respect thereof is greater than four hundred fifty thousand United
States dollars ($450,000). For purposes of determining the Sellers' obligations
under Section 9 of this Agreement, the existence of a breach of any
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representation or warranty shall be determined without regard to any
qualification that any fact, event or circumstance be or not be "material," or
be accurate in "all material respects" or have or not have or caused a "material
adverse effect" except to the extent that such materiality relates to claims by
the Buyers for relief other than monetary damages. For purposes of clarity and
for the avoidance of doubt, all losses incurred in respect of any single fact,
circumstance or occurrence or any group of related facts, circumstances or
occurrences that alone or together constitute a misrepresentation, violation of
law, inaccuracy or omission shall be deemed to be an individual claim. All
amounts in excess of such Deductible shall be payable to the Buyer Indemnified
Party designated by LLC, as appropriate with interest at a rate equal to LIBOR
within forty-five (45) Business Days after the date of the Indemnification
Notice for such claim.
(d) this Agreement and for any losses, damages or costs incurred by
the Buyer Indemnified Parties in connection herewith shall be fifty million
United States dollars ($50,000,000).
(e) The limitations set forth in Sections 9.3(a), (b) and (c) shall
not apply to any claim for indemnification: (i) pursuant to clause (c) of
Section 9.1; (ii) as a result of a knowing or intentional breach or fraud on the
part of either Seller; or (iii) as a result of the breach of any representation
or warranty set forth in Section 6.1(b), Section 6.13(b) or Section 6.14 (with
respect only to the principal amount of Indebtedness for borrowed money); (iv)
pursuant to clause (b) of Section 9.1; provided, however, that the
Indemnification Notice with respect to the foregoing subclauses (i) and (iii)
must be submitted on or before the thirtieth day after the sixth anniversary of
the Closing Date and the Indemnification Notice with respect to the foregoing
subclause (iv) in respect of covenants which are required to be performed on or
prior to the Closing Date must be submitted on or before the thirtieth day after
the fifth anniversary of the Closing Date (except for claims relating to
breaches of covenants set forth in Section 8.3, the Indemnification Notice for
which claims must be submitted on or before the thirtieth day after the third
anniversary of the Closing Date). The limitations set forth in Section 9.3(d)
shall not apply to any claim for indemnification: (i) as a result of or pursuant
to clauses (6) and (8) of the Indemnified Liability definition set forth in
Section 9.1 above; (ii) as a result of intentional fraud on the part of either
Seller; or (iii) as a result of the breach of any representation or warranty set
forth in Section 6.1(b). Notwithstanding anything to the contrary in this
Section 9, the covenants set forth in Sections 8.2 (Management Responsibility),
8.4 (Consents and Approvals), 8.6 (Fulfillment of Conditions), 8.7
(Indebtedness), 8.8 (Exclusivity), 8.9 (GAAP Financial Statements) and 16.3
(Hedging) shall not survive the Closing.
(f) Notwithstanding anything to the contrary herein, Sellers shall
have no indemnification liability under this Section 9 arising from a "Triggered
Tax Liability." A "Triggered Tax Liability" is (i) any liability for income or
other taxes under Netherlands law due to a reopening or reinvestigation of prior
taxable periods, but only to the extent
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that any additional tax liabilities (including interest and penalties) for prior
periods arises from the reorganization or recapitalization in order to
accommodate the placement of debt in such Subsidiaries and (ii) any liability
for any steps taken or omitted to be taken by the Company or any Subsidiary
after the Closing that causes the representation of the Sellers contained in
Section 6.4(p) above to be untrue. In the event that Sellers deliver a Trigger
Tax Notice on or before March 17, 1998, and LLC does not exercise its right to
terminate this Agreement under Section 18.1(g), the reference to Netherlands law
in this Section 9.3(f) shall be amended to include the laws of each other
jurisdiction included in such Trigger Tax Notice.
(g) If, pursuant to Section 9.1, the Sellers make to one or more
Buyer Indemnified Parties a payment or payments in respect of a breach or
alleged breach of the representations and warranties made in Section 6.6(b),
6.6(c) or 6.12 of this Agreement, which breach gave rise to reduction or
depreciation in value of an asset of a Subsidiary (including, without
limitation, any item of inventory or any account receivable), and the amount of
such payment or payments equals or exceeds: in the case of an item of inventory,
its book value (without regard to the reduction in value resulting from the
breach or alleged breach); in the case of an account receivable, the written-
down value of such account (without regard to any further reductions resulting
from the breach or alleged breach); and in the case of any other asset, the fair
market value of such asset (determined by an independent appraiser without
regard to the reduction or depreciation in value resulting from the breach or
alleged breach); then, in each such case, the Sellers shall have the right to
acquire such Subsidiary's entire right, title and interest in such asset at the
depreciated or recoverable value of such asset (determined after giving effect
to the reduction or depreciation in value resulting from the breach or alleged
breach). Notwithstanding anything to the contrary contained in this Section
9.3(g), the obligations of the relevant Subsidiary to sell any such assets to
the Sellers shall be limited to the extent that:
(i) the Financing Documents or any other agreement or
documentation evidencing material indebtedness of such Subsidiary prohibit such
sale or disposal (the "Subsidiary Loan Documents");
(ii) such sale or disposal would cause a default under the terms
of the Financing Documents or the Subsidiary Loan Documents; or
(iii) such sale or disposal would interfere with the business
of such Subsidiary in any material way or would cause the Company or any
Subsidiary to incur any loss, expense, or damages in respect of which it is not
entitled to indemnification under this Section 9.
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(h) The Sellers shall have no liability for any breach of the German
Basket Representation contained in Section 6.4(p) except in the event and to the
extent that the Buyer and/or the Company and their Affiliates have first pursued
in good faith all possible courses of action against Arthur Andersen with
respect to any inaccuracy contained in their opinion attached as Exhibit 6.4A
and have been unable to fully recover from Arthur Andersen their losses arising
as a result of the breach of such representation; provided that, nothing herein
shall limit the right of Buyer and/or the Company and their Affiliates from
delivering to the Sellers an Indemnification Notice during the period the Buyer
and/or the Company and their Affiliates are pursuing courses of action against
Arthur Andersen as required hereunder; and further provided that such
Indemnification Notice is delivered within the time limitations disclosed in
Section 9.3(a) above.
10A. INDEMNIFICATION BY PERSEUS
--------------------------
Subject to the procedures set forth in Section 11, Perseus agrees to
hold harmless and indemnify the Sellers and their respective directors,
officers, members and Affiliates (other than the Subsidiaries) with respect to
any liabilities, losses, damages or costs (including reasonable legal fees and
court costs) of any kind which shall be suffered or incurred as a result of: (a)
any breach of any representation or warranty made by Perseus in this Agreement;
(b) the breach of any covenants of Perseus contained in this Agreement; and (c)
as a result of a knowing or intentional breach or fraud on the part of Perseus;
provided that the Sellers must make a written claim for indemnification against
Perseus no later than thirty (30) days after (i) the second (2nd) anniversary of
the Closing for claims made under subsection (a) above and (ii) the fifth (5th)
anniversary of the Closing for claims made under subsection (b) above its
respect of covenants which are required to be performed on or prior to the
Closing Date, and further provided, that no such time limitation shall apply to
any claim made with under subsection (c) above. Notwithstanding anything to the
contrary in this Section 10A, the covenants set forth in Sections 8.2
(Management Responsibility), 8.4 (Consents and Approvals), 8.6 (Fulfillment of
Conditions), 8.7 (Indebtedness), 8.8 (Exclusivity), 8.9 (GAAP Financial
Statements) and 16.3 (Hedging) shall not survive the Closing.
10B. INDEMNIFICATION BY LLC
----------------------
Subject to the procedures set forth in Section 11, LLC agrees to hold
harmless and indemnify the Sellers and their respective directors, officers,
members and Affiliates (other than the Subsidiaries) with respect to any
liabilities, losses, damages or costs (including reasonable legal fees and court
costs) of any kind which shall be suffered or incurred as a result of: (a) any
breach of any representation or warranty made by LLC in this Agreement; (b) the
breach of any covenants of LLC contained in this Agreement; and (c) as a result
of a knowing or intentional breach or fraud on the part of LLC; provided that
the Sellers must make a written claim for indemnification against LLC no later
than thirty (30) days after (i) the second (2nd) anniversary of the Closing for
claims made under
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subsection (a) above and (ii) the fifth (5th) anniversary of the Closing for
claims made under subsection (b) above its respect of covenants which are
required to be performed on or prior to the Closing Date, and further provided,
that no such time limitation shall apply to any claim made with under subsection
(c) above. Notwithstanding anything to the contrary in this Section 10B, the
covenants set forth in Sections 8.2 (Management Responsibility), 8.4 (Consents
and Approvals), 8.6 (Fulfillment of Conditions), 8.7 (Indebtedness), 8.8
(Exclusivity), 8.9 (GAAP Financial Statements) and 16.3 (Hedging) shall not
survive the Closing.
10C. INDEMNIFICATION BY THE COMPANY
------------------------------
Subject to the procedures set forth in Section 11, following the
Closing the Company agrees to hold harmless and indemnify the Sellers and their
respective directors, officers, members and Affiliates (other than the
Subsidiaries) (each a "Company Indemnified Party") (other than in their capacity
as shareholders of the Company or any other Subsidiary) with respect to any
liabilities, losses, damages or costs (including reasonable legal fees and court
costs) of any kind which shall be suffered or incurred as a result of: (a) any
failure of any Subsidiary following the Closing to comply with (i) any agreement
referred to in Section 6.11 (so long as a Subsidiary is a party thereto) or (ii)
any Environmental Law applicable to it, in each case, so long as such failure
was caused by the Subsidiaries after the Closing Date; (b) any claims against
any guarantee, suretyship or similar contingent obligation of the Sellers with
respect to any Indebtedness or other obligations of the Subsidiaries which was
not released or discharged at the Closing in accordance with Exhibit 8.3 unless
the Buyer is entitled, pursuant to Section 9, to indemnification in respect of
such Indebtedness or other obligations of the Subsidiaries, (c) any waiver,
cancellation, forgiveness, assignment or other disposition after the Closing
Date of any portion of the Assigned Debt, if any (other than by payment in
accordance with the terms of such Assigned Debt except to the extent such
payment would violate agreements with taxing authorities); (d) from all expenses
and costs incurred and tax liabilities of any kind resulting from the actions
described in the Transaction Outline other than (i) those liabilities, costs or
expenses in respect of which the Sellers have agreed to indemnify the Buyer
under clause (6) of Section 9.1 and (ii) legal fees and related expenses as
provided in Section 15.6 and (e) any steps taken or failed to be taken by the
Company or the Subsidiaries after the Closing which causes the German Basket
Representation (as set forth in Section 6.4(p) above) to be untrue.
11. INDEMNIFICATION PROCEDURE
-------------------------
11.1. Procedure. Upon the Buyer's knowledge that any event has occurred
---------
which could give rise to the Sellers' liability under Section 9 of this
Agreement, the following provisions shall apply:
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(a) Either Perseus or LLC shall give prompt written notice to the
Sellers of such event (an "Indemnification Notice") and shall provide all
reasonable particulars thereof, provided, that any delay in giving such notice
shall not relieve the Sellers of their obligations except to the extent of any
damages actually suffered by the Sellers as a result of such delay.
(b) During a period of twenty (20) Business Days following the giving
of an Indemnification Notice to the Sellers, the Buyer and the Sellers will
attempt in good faith to resolve any differences which they may have with
respect to any matters constituting the subject matter of such notice. If, at
the end of such period, the Sellers and the Buyer fail to reach agreement with
respect to all such matters, then any matter as to which agreement is not so
reached may, thereafter, be submitted to the competent court pursuant to Section
17 of this Agreement.
(c) Notwithstanding the submission of any dispute to the competent
court pursuant to Section 11.1(b) above, in the case of liabilities arising with
respect to any Tax or social security matters, the Sellers shall pay all amounts
required to be paid as directed by the issuing Taxing Authority (or, in the case
of a disputed social security matter, the government authority having
jurisdiction over such matter) assessing such amounts within the time period
indicated by such authority to avoid incurring any interest, penalties or other
liabilities. The Buyer shall promptly furnish the Sellers with adequate
documentation of such amounts, such as copies of a tax invoice. In the event of
the successful resolution of such dispute, the Sellers shall be entitled to
receive from the relevant Buyer Indemnified Party the full amount paid by the
Sellers under this Section 11.1(c), or such lesser amount as the Buyer
Indemnified Party or any Affiliate of such Buyer Indemnified Party shall be
entitled to receive as a refund, rebate, credit or other benefit as a result of
the successful resolution of such dispute, including any interest received in
respect of such refund, rebate or credit. If the Sellers fail to timely make
payment as required by this Section 11.1(c), any payment by Buyer (or the
applicable Subsidiary) shall in no event absolve the Sellers of their
obligations to indemnify the Buyer and its Affiliates for such payment.
(d) The Sellers shall have the right to participate, and, to the
maximum extent permitted by law, join, at their cost and by counsel of their
choosing, in the defense of any claim, action, suit or proceeding asserted or
initiated against the Buyer or any Subsidiary constituting the subject matter of
any Indemnification Notice. If and to the extent the Sellers indemnify a Buyer
Indemnified Party with respect to any matter hereunder, such Buyer Indemnified
Party shall assign to the Sellers any claims such Buyer Indemnified Party may
have against other Persons with respect thereto and shall receive in trust for,
and shall pay over to, the Sellers any amounts received by it from any such
Person in respect thereof.
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(e) If a party to an action, the Buyer shall properly and diligently
defend, and whether or not the Buyer is a party to an action, shall cause each
Subsidiary that is a party thereto to properly and diligently defend, any claim,
suit, action or proceeding referred to in the Indemnification Notice and shall
refrain, and shall cause each Subsidiary to refrain, from taking any action
which could prejudice the defense of the Sellers' interest hereunder.
(f) No settlement shall be effected by the indemnifying party without
the consent of the person seeking indemnification (which consent shall not be
unreasonably withheld) unless, in connection with such settlement, the person
seeking indemnification is fully and unconditionally released from such asserted
liability (without any liability for payment), and the settlement does not
contain other terms or conditions that are adverse to the interests of the
person seeking indemnification. No settlement shall be effected by a person
seeking indemnification without the consent of the indemnifying party, such
consent not to be unreasonably withheld, unless the person seeking
indemnification would be liable for at least fifty percent (50%) of any payments
due pursuant to the terms of such settlement.
11.2. Procedure in Case of the Buyer's Liability. The provisions of Section
------------------------------------------
11.1 shall apply, mutatis mutandis, in case of Perseus', LLC's or the Company's
----------------
liability under Section 10A, 10B and 10C, respectively.
12. INVESTMENT BANKING FEES
-----------------------
(a) The Sellers shall indemnify and hold the Buyer and its Affiliates
(including, after the Closing, the Company) harmless against any claim by any
banker, broker, investment banker or agent for any fees or expenses claimed to
be due to such party in connection with the transactions provided for in this
Agreement as a result of any agreement with or commitment by the Sellers or the
Subsidiaries, excluding, however, any claim made by any party in connection with
the Debt Financing based on or arising out of any agreement entered into or
action taken or caused by the Buyer or its Affiliates or by the Sellers or any
of their Affiliates with the prior knowledge of the Buyer.
(b) Each of Perseus and LLC shall (but only with respect to itself)
indemnify and hold the Sellers and their Affiliates harmless against any claim
by any banker, broker, investment banker or agent for any fees or expenses
claimed to be due to such party in connection with the transactions provided for
in this Agreement as a result of any agreement with or commitment by Perseus or
its Affiliates (with respect to Perseus) or LLC or its Affiliates (with respect
to LLC).
13. PUBLIC ANNOUNCEMENTS
--------------------
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Except as otherwise required under any law, rule or regulation issued
by any government, regulatory, stock exchange or other agency or authority
having jurisdiction over any party, none of the parties to this Agreement, nor
the Affiliates of any of them shall make any public announcement relating to the
transactions provided for in this Agreement without the prior consent of the
other parties, which shall not be unreasonably withheld. The text of any public
announcement which any party proposes to make with respect to the transaction
shall be submitted to the other parties not less than five (5) Business Days
before the day on which the announcement is to be made, and the parties shall
consult not less than forty-eight (48) hours before the time of such public
announcement to agree the final text of such announcement.
14. CONFIDENTIALITY
---------------
14.1. Undertakings of the Parties. Except as mutually agreed in accordance
---------------------------
with Section 13 above, the Parties will keep confidential all provisions of this
Agreement, the Shareholders' Agreement and each of the Non-Competition
Agreements entered into by the Company with Alan Finden-Crofts and A. Edward
Gottesman on the date hereof. Prior to the Closing, each of Perseus and LLC
agrees (with respect to itself) to keep and to cause its respective
representatives and Affiliates to keep confidential and not to use in its
business or operations any of the information, data, projections or budget
forecasts of a confidential nature obtained by Perseus and LLC, as the case may
be, from the Sellers or any of the Subsidiaries ("Confidential Information").
The obligations contained in this Section 14 shall not prohibit disclosure by
the Buyer of such confidential information to the extent required by law or its
legal advisers, accountants, bankers, financial or other advisers to the extent
necessary to carry out the transactions contemplated by this Agreement. The
parties shall obtain from any Person to whom such confidential information is
disclosed an undertaking to abide by the provisions of this Section 14, or, in
the case of disclosure required by law, the parties shall use their best efforts
to obtain confidential treatment of such disclosure.
14.2. Obligations in the Event of Termination. In the event that the
---------------------------------------
transactions contemplated by this Agreement are not consummated, Perseus and LLC
will return to the Sellers and will cause their respective representatives and
Affiliates to return to the Sellers upon request, and the Sellers will return to
the Buyer and will cause its representatives and Affiliates to return to the
Buyer, upon request, all documents and other materials (and copies thereof)
obtained from any of the other parties in connection with the transactions
contemplated by this Agreement, including all Environmental Assessments Reports
prepared by Buyer or received by Buyer with respect to the Sellers' and the
Subsidiaries' operations and Real Estate.
14.3. Obligations after the Closing. After the Closing, the Sellers will
-----------------------------
treat and hold as such all Confidential Information, refrain from using any
Confidential Information
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except in connection with this Agreement, and deliver promptly to LLC or
destroy, at the request and option of Buyer, all tangible embodiments (and all
copies) of Confidential Information which are in the Sellers' possession. In the
event that the Sellers are requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, the Sellers will notify Perseus and LLC promptly of the request or
requirement so that Perseus and LLC may seek an appropriate protective order or
waive compliance with the provisions of this Section 14.3. If, in the absence of
a protective order or the receipt of a waiver hereunder, the Sellers are, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, the Sellers may disclose the
Confidential Information to the tribunal; provided, however, that the Sellers
shall use its reasonable best efforts to obtain, at the request of Perseus or
LLC, an order or other assurance that confidential treatment will be accorded to
such portion of the Confidential Information required to be disclosed as Perseus
or LLC shall designate.
15. GENERAL TERMS
-------------
15.1. In case at any time any further action is necessary to carry out the
purposes of this Agreement, each of the parties will take such further action
(including the execution and delivery of additional instruments and documents)
as any other party reasonably may request, all at the sole cost and expense of
the requesting party (unless the requesting party is entitled to indemnification
under Sections 9, 10A, 10B or 10C above). The Sellers acknowledge and agree
that from and after the Closing, Perseus and LLC will be entitled to access to
all documents, books, records, agreements, and financial data relating to the
Subsidiaries.
15.2. Amendments. This Agreement may not be waived, changed, modified or
----------
discharged orally, unless an agreement in writing is signed by all parties to
this agreement.
15.3. Assignment. Except as otherwise specifically provided herein, no
----------
party may assign any of its rights, interests or obligations hereunder without
the prior written consent of the other parties, which consent shall not be
unreasonably withheld; provided, however, that Perseus and LLC may collaterally
assign its rights hereunder to any Person providing financing to Perseus and
LLC.
15.4. Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which shall constitute one agreement, and each such
counterpart shall be deemed to have been made, executed and delivered on the
date set out at the head of this Agreement, without regard to the date when any
of such counterparts may actually have been made, executed or delivered.
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15.5. Entire Agreement. This Agreement (including Exhibits hereto) and the
----------------
other documents and certificates referred to herein or delivered pursuant hereto
contains the entire agreement of the parties with respect to the transfer of the
Principal Subsidiaries Shares and the purchase and sale of the Buyer Shares and
supersedes all prior agreements between the parties, whether written or oral,
with respect to the proposed transactions. No representation or statement with
respect to the Sellers, the Subsidiaries or the Business shall have any force or
effect unless set forth in this Agreement (or any Exhibit hereto or certificate
delivered in connection herewith).
15.6. Expenses. Unless this Agreement is terminated prior thereto, at the
--------
Closing, the Company or the Subsidiaries shall reimburse: (i) Perseus and LLC
(or their respective Affiliates) for all reasonable out-of-pocket fees and
expenses incurred in connection with the transactions contemplated by this
Agreement ("Transaction Expenses"), and (ii) the Sellers for up to seventy-five
thousand dollars ($75,000) of their legal fees and related expenses incurred in
connection with the negotiation, documentation and implementation of the tax
structuring of the Recapitalization Transactions, other than fees and expenses
related to the transfer of shares of capital stock of the Principal Subsidiaries
from Derby International to DFS, and (iii) LLC, Perseus and the Sellers for all
reasonable legal fees and expenses incurred by or on behalf of LLC, Perseus and
the Sellers in connection with possible acquisitions by the Company or any of
the Subsidiaries of, or possible business combinations of the Company or any of
the Subsidiaries with, other businesses. At the Closing, the Company shall also
pay the following closing fees: one million two hundred thousand United States
dollars ($1,200,000) to Thayer Capital Partners; one million United States
dollars ($1,000,000) to Perseus Cycle, L.L.C.; and seven hundred thousand United
States dollars ($700,000) to Centenary Corporation. If this Agreement is
terminated other than pursuant to Section 18.1(c), (d), (e), (f), (g) or (h)
hereof, upon termination of this Agreement, the Company shall reimburse Perseus
and LLC (or their respective Affiliates) for all Transaction Expenses other than
the costs of preparing the Environmental Assessment Reports and sixty-six and
sixty-seven hundredths percent (66.67%) of the fees and expenses payable to
Chase Manhattan Bank N.A. and its affiliates under the commitment letter for the
Senior Credit Facility. If this Agreement is terminated pursuant to either
Section 18.1(c) or (d) hereof, the breaching party shall reimburse the
terminating party and the Company for all Transaction Expenses incurred by the
terminating party or the Company.
15.7. Headings. The descriptive headings contained in this Agreement are
--------
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement.
15.8. Notices. Any consent, communication or notice required or permitted
-------
to be given under this Agreement shall be made in writing and shall be deemed to
have been duly and validly given: (i) in the case of notice sent by letter or
cable, upon receipt of
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same; and (ii) in the case of notice sent by telefax, upon express
acknowledgment (also by telefax) of receipt of transmission by the receiving
party, addressed, in each case, as follows:
(a) if to the Buyer, to LLC and Perseus at the addresses indicated at
the head of this Agreement with copy to:
Kirkland & Ellis
655 15th Street N.W.
Washington D.C. 20005
Attention: Jack M. Feder, Esquire
Facsimile: 202-879-5200
(b) if to the Sellers, to either or both at :
Derby International Corporation S.A.
5 Boulevard de la Foire
L-1528 Luxembourg
Grand Duchy of Luxembourg
Telefax: 352-451-23201
Attention: Chairman
with a copy to :
Gottesman Jones & Partners
8 New Fetter Lane
London EC4A 1AP
Telefax: 44-171-203-5205
Attention: Sonya C. Park
and a copy to:
Peabody & Arnold LLC
50 Rowes Wharf
Boston, MA 02110
Attention: William E. Kelly, Esquire
Facsimile: 617-951-2125
or at such other address and/or telefax number as either party may hereafter
furnish to the other by written notice, as herein provided.
15.9. No Waiver. The failure to enforce or to require the performance at any
---------
time of any of the binding provisions of this Agreement shall not be construed
to be a waiver of such provisions and shall not affect either the validity of
this Agreement or any part thereof
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or the right of either party to this Agreement thereafter to enforce each and
every provision in accordance with this Agreement.
16. POST CLOSING COVENANTS
----------------------
16.1. Litigation Support. In the event and for so long as any party is
------------------
actively contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, or demand in connection with: (a) any
transaction contemplated under this Agreement; or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving any of the Subsidiaries; each of the other parties will cooperate and
make available their personnel, and provide such testimony and access to their
books and records as shall be necessary in connection with the contest or
defense.
16.2. Cooperation on Tax Matters.
--------------------------
(a) The Buyer, the Subsidiaries and the Sellers shall cooperate fully
as and to the extent reasonably requested by the other party in connection with
the filing of Tax Returns and any audit, litigation or other proceedings with
respect to Taxes. Such cooperation shall include the retention and (upon the
other party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The parties
agree to cause the Subsidiaries to (i) retain all books and records with respect
to Tax matters pertinent to the Subsidiaries relating to any taxable period
beginning before the Closing Date until the expiration of the statute of
limitations (and to the extent notified by Buyer or Sellers, any extensions
thereof) of the respective Tax periods, and to abide by all record retention
agreements entered into with any Taxing Authority, and (ii) to give the other
party reasonable written notice prior to transferring, destroying or discarding
any such books and records, and if the other party so requests, the relevant
Subsidiary shall allow the other party to take possession of such books and
records.
(b) The Buyer and the Sellers further agree, upon request, to use
their best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transaction contemplated hereby).
16.3 Hedging. Within seven (7) days after execution of this Agreement, the
-------
Company shall use its best efforts to agree with the Buyer on the purchase of
foreign currency option contracts which will result in hedging for the period
from the date of this Agreement until the Closing Date, the amount of cash
payable at the Closing in accordance
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<PAGE>
with the Price in Section 2.2(b) above against an agreed amount of British
pounds sterling, Dutch guilders, German deutschemarks and Canadian dollars.
16.4 Additional Payment. On or before the sixtieth (60th) day following
------------------
the delivery of audited financial statements for the Company and its
subsidiaries for the 1998 fiscal year (the "Additional Payment Date"), the
Company shall pay to the Sellers the additional payment, if any, provided for in
Exhibit 16.4 attached hereto and made a part hereof (the "Additional Payment"),
provided, however, that payment of the Additional Payment, or a portion thereof,
may be deferred if and to the extent that such payment would itself cause a
default under the Financing Documents; and, provided further, that to the extent
the Company is required to defer the payment of any portion of the Additional
Payment in accordance with the foregoing clause, the Additional Payment (or
unpaid portion thereof) shall accrue interest from the Additional Payment Date
until paid at an annual rate equal to nine and three-quarters percent (9.75%),
provided further, that Perseus, LLC and the relevant Subsidiary shall use
commercially reasonable efforts to negotiate with the banks parties to the
Financial Documents to exempt the payment of 12% of the Additional Payment to
DFS under the Financial Documents. The Additional Payment (and any accrued but
unpaid interest thereon) shall be fully paid (A) upon the consummation of an
Approved Sale (as defined in the Shareholders' Agreement) unless such Approved
Sale is a transaction whereby the shareholders of the Company will become the
beneficial owners of securities of the surviving entity in substantially the
same proportion and no cash distributions are made to any shareholder of the
Company in connection with the consummation of such Approved Sale and (B) prior
to any distribution (other than a distribution of the securities of the Company)
to the Company's shareholders (other than payments of the Additional Payment to
DFS).
16.5. MS Sport Group Acquisition Price. For purposes of this Section 16.5,
--------------------------------
capitalized terms not otherwise defined in this Agreement shall have the same
meanings used in the Share Purchase Agreement dated August 8, 1997 by and
between Robert Holzer and Univega Beteiligungen GmbH (fka PIA Zweite Verwaltungs
GmbH) (the "MS Sport Agreement"). The Sellers agree to reimburse the relevant
Subsidiary which pays the Purchase Price for the acquisition of the MS Group
Shares if and to the extent that the Base Price exceeds eighty percent (80%) of
an amount equal to five and one-half times (5.5x) the applicable average PBT for
the MS Group, all as defined and determined in accordance with the MS Sport
Agreement.
16.6 Minimum Net Worth. For a period of five (5) years after the Closing
-----------------
Date, the Sellers jointly agree to maintain a minimum net worth (excluding
goodwill) as determined in accordance with U.S. GAAP of fifty million United
States dollars ($50,000,000). For a period of two (2) years after the Closing
Date and for so long thereafter as any claims for indemnity made by any Buyer
Indemnified Party pursuant to Section 11 on or prior to the second (2nd)
anniversary of the Closing Date remain
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<PAGE>
outstanding, DFS shall maintain on hand a balance in cash, government bonds,
and cash equivalents (i) until the thirtieth (30th) day after the second (2nd)
anniversary of the Closing Date, an amount equal to no less than nine million
----
United States dollars ($9,000,000) less the amount of all indemnification
payments made by DFS pursuant to Section 9 (other than amounts paid by DFS under
clauses (1), (2), (3) and (7) in the definition of "Indemnified Liability"
contained in Section 9.1 above) and (ii) after the thirtieth (30/th/) day after
the second (2nd) anniversary of the Closing Date for so long thereafter as any
claims for indemnity made up by any Buyer Indemnified Party pursuant to Section
11 on or prior to the thirtieth (30/th/) day after the second (2nd) anniversary
of the Closing Date remain outstanding, an amount equal to the lower of (x) nine
million United States dollars ($9,000,000) less the amount of all
----
indemnification payments made by DFS pursuant to Section 9 or (y) the aggregate
amount of all outstanding claims for indemnity made by Buyer Indemnified Parties
pursuant to Section 11 on or prior to the thirtieth (30/th/) day after the
second (2nd) anniversary of the Closing Date less all amounts paid to the
----
Buyer Indemnified Parties after the second (2nd) anniversary of the Closing
Date in respect of such claims (in either case, the "Minimum Balance"). At the
Closing, a portion of the Minimum Balance, in the amount of one million eighty
thousand United States dollars ($1,080,000) (the "Escrow Amount") shall be
placed by DFS in escrow with a bank or trust company acceptable to the Sellers
and the Buyer, as escrow agent, pursuant to an escrow agreement substantially in
the form of Exhibit 16.6 attached hereto. In the event that, prior to the later
of (i) the thirtieth (30/th/) day after second (2nd) anniversary of the Closing
Date and (ii) the date on which all of the indemnity claims by Buyer Indemnified
Parties outstanding on the thirtieth (30/th/) day after the second (2nd)
anniversary of the Closing Date have been satisfied or resolved, the balance of
cash and cash equivalents (including the Escrow Amount) on hand at DFS shall be
less than the then-required Minimum Balance, and to the extent that DFS then
becomes obligated pursuant to Section 9 to make any indemnity payments to a
Buyer Indemnified Party in an aggregate amount in excess of the actual amount of
cash and cash equivalents (including the Escrow Amount) then on hand at DFS, A.
Edward Gottesman, Alan J. Finden-Crofts and Frank H. Pearl, severally and not
jointly, in proportion to their respective direct and indirect ownership
interests in Derby International as of the Closing Date, shall contribute to DFS
for use solely to satisfy DFS's indemnification obligation, an aggregate amount
equal to the difference between the Minimum Balance and the actual amount of
cash and cash equivalents (including the Escrow Amount) then on hand at DFS.
16.7 Further Assistance. Each of the Sellers, Perseus and LLC shall
------------------
execute and deliver such further instruments of conveyance and transfer and take
such other additional action as the other parties to the Agreement may
reasonably request to effect, consummate and confirm the transactions
contemplated in this Agreement.
16.8 Modification of the Assigned Debt. Each of LLC and Perseus, in its
---------------------------------
capacity as a shareholder of the Company, shall use all reasonable efforts
(including,
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<PAGE>
without limitation, by giving instructions to members of the Company's board of
directors nominated by it pursuant to the Shareholders' Agreement) to cause the
Company and its subsidiaries not to modify, cancel, assign, transfer, repay or
otherwise amend the terms of the Assigned Debt without the prior written consent
of the Sellers, which consent shall not be unreasonably withheld.
16.9 Payment Obligations. Each of LLC and Perseus, in its capacity as a
-------------------
shareholder of the Company, shall use all reasonable efforts (including, without
limitation, by giving instructions to members of the Company's board of
directors nominated by it pursuant to the Shareholders' Agreement) to cause the
Company and its subsidiaries to honor all payment and other obligations with
respect to which any one or more of the Sellers or their Affiliates (other than
the Subsidiaries) have given guarantees, suretyships, security or similar
undertakings which have not been discharged at the Closing; provided, however,
that the obligations of LLC and Perseus under this Section 16.9 shall not be
deemed to require LLC or Perseus to provide additional capital to meet such
obligations or to make any direct payment of such obligations.
17. GOVERNING LAW AND JURISDICTION
------------------------------
ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION
OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO ANY MATTER ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR
THE SUBJECT MATTER HEREOF MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO HEREBY ACCEPTS
FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY, GENERALLY AND UNCONDITIONALLY,
THE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HERETO HEREBY WAIVES, AND
AGREES NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING PROVIDED
FOR IN THIS SECTION 17 THAT IT IS NOT SUBJECT THERETO OR THAT SUCH ACTION, SUIT
OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT
THIS AGREEMENT MAY NOT BE ENFORCED IN OR BY SAID COURTS OR THAT ITS PROPERTY IS
EXEMPT OR IMMUNE FROM EXECUTION, THAT THE SUIT, ACTION OR
-65-
<PAGE>
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER OR (PROVIDED THAT PROCESS SHALL BE SERVED IN
ANY MANNER REFERRED TO IN THE FOLLOWING SENTENCE) THAT SERVICE OR PROCESS UPON
SUCH PARTY IS INEFFECTIVE. EACH OF THE PARTIES HERETO AGREES THAT SERVICE OF
PROCESS IN ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE MADE UPON IT IN ANY MANNER
PERMITTED BY THE LAWS OF THE STATE OF NEW YORK OR THE FEDERAL LAWS OF THE UNITED
STATES OR AS FOLLOWS: (A) BY PERSONAL SERVICE OR BY CERTIFIED OR REGISTERED MAIL
TO THE PARTY'S DESIGNATED AGENT FOR SUCH SERVICE IN SUCH STATE, OR (B) BY
CERTIFIED OR REGISTERED MAIL TO THE PARTY FOR WHICH INTENDED AT ITS ADDRESS SET
FORTH HEREIN. SERVICE OF PROCESS IN ANY MANNER REFERRED TO IN THE PRECEDING
SENTENCE SHALL BE DEEMED, IN EVERY RESPECT, EFFECTIVE SERVICE OF PROCESS UPON
SUCH PARTY.
18. TERMINATION.
-----------
18.1. Termination. This Agreement may be terminated at any time prior to
-----------
the Closing:
(a) by the mutual agreement of the Sellers and the Buyer;
(b) by LLC at any time prior to the Closing, if the Company or
another Subsidiary has not entered into arrangements satisfactory to LLC in its
sole discretion in respect of the employment of each of the management employees
set forth on Exhibit 18.1, provided, however, that the terms and conditions of
the arrangements with such management employees shall not be less advantageous
to such management employees than the terms and conditions in effect at present;
(c) by LLC, if the Buyer is prepared to close and the Sellers have
breached in any material respect any of their material representations,
warranties, covenants or agreements contained in this Agreement, and such breach
has not been remedied within five (5) Business Days after receipt of notice
specifying such breach and demanding such breach to be remedied;
(d) by the Sellers, if the Sellers are prepared to close and either
Perseus or LLC has breached in any material respect any of its material
representations, warranties, covenants or agreements contained in this
Agreement, and such breach has not been remedied within five (5) Business Days
after receipt of notice specifying such breach and demanding such breach to be
remedied;
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<PAGE>
(e) by any one of LLC, Perseus or the Sellers in the event the
Closing has not occurred on or before the Cut-Off Date, unless the failure of
such consummation or the failure to satisfy a condition precedent to Closing, as
applicable, shall be due to any action or inaction or due to a breach of any
representation or warranty made by the party seeking to terminate this Agreement
or the failure of such terminating party to comply in all material respects with
the agreements and covenants contained herein to be performed by such party on
or before the Cut-Off Date;
(f) by any one of LLC, Perseus or the Sellers if, prior to 5:00 p.m.,
Eastern Standard Time, on March 16, 1998, LLC, Perseus and Sellers have not yet
agreed on the Transaction Outline satisfactory to each party in its sole
discretion and the terminating party has delivered a written termination notice
to the other parties prior to 5:00 p.m. Eastern Standard Time, March 17, 1998;
(g) by LLC or Perseus in the event Sellers deliver a "Trigger Tax
Notice" on or before 5:00 p.m. Eastern Standard Time on March 17, 1998 and the
terminating party has delivered a written termination notice to the other
parties prior to 5:00 p.m. Eastern Standard Time on March 19, 1998;
(h) by LLC, Perseus or the Sellers if such party receives advice from
its counsel or tax advisors concerning tax consequences of the transactions
contemplated by this Agreement which are unacceptable to such party and such
terminating party has delivered a written termination notice to the other
parties prior to 5:00 p.m. Eastern Standard Time on the second Business Day
after the date of this Agreement; or
(i) by the Sellers, notwithstanding any waiver by LLC under Section
4.6(b) above, if, (A) as a result of one or more breaches, inaccuracies or
violations of the Sellers' representations or warranties, the Sellers determine
that, save for any such waiver, they would be unable to deliver at the Closing
the certificate required pursuant to Section 4.6 above, and any such breaches,
inaccuracies or violations would, in the reasonable opinion of the Sellers, be
likely to give rise to any liabilities, losses, damages or costs in excess of
six million United States dollars ($6,000,000) in the aggregate, (B) the Sellers
deliver a written notice to the Buyer to such effect, and (C) the Buyer does not
agree in writing that it shall have no right to indemnification under Section
9.1 after the Closing in respect of such breaches.
18.2. Procedure and Effect of Termination.
-----------------------------------
In the event of the termination and abandonment of this Agreement by
the Sellers, Perseus or LLC pursuant to Section 18.1 hereof, written notice
thereof shall forthwith be given to the other party or parties. If the
transactions contemplated by this
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<PAGE>
Agreement are terminated as provided herein, this Agreement shall become void
and of no further force and effect, except for the provisions of Section 12
relating to investment banking fees, Section 13 relating to publicity, Section
14 relating to Confidentiality, Section 15.6 relating to expenses, and Section
18.3 relating to a Topping Fee and this Section 18.2; provided that such
termination shall not relieve any party then in breach of any representation,
warranty, covenant or agreement contained in this Agreement from liability in
respect of any such breach.
18.3 Topping Fee.
-----------
In the event that the Sellers terminate this Agreement pursuant to
Section 18.1(e) and within one hundred twenty (120) days after such termination
enter into any agreement with respect to a merger, recapitalization, sale of
stock or material assets or similar transaction involving one or more of the
Principal Subsidiaries or the Business and such transaction implies an equity
value for the Business of in excess of one hundred ninety-five million United
States dollars ($195,000,000) (a "Topping Agreement"), the Sellers shall
immediately upon consummation of the transactions contemplated by the Topping
Agreement pay to Perseus and LLC (in proportion to their respective investment
in the Subsidiaries as contemplated herein) in cash the sum of five million
United States dollars ($5,000,000) (the "Topping Fee").
9. SEVERABILITY
------------
If any provision of this Agreement is held to be invalid or
unenforceable by any judgement of a tribunal of competent jurisdiction, the
remainder of the provisions of this Agreement shall not be affected by such
judgement, and the understanding of the parties embodied in this Agreement shall
be carried out as nearly as possible according to their original terms and
intent.
* * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date set out on the first page hereof.
DERBY INTERNATIONAL DERBY FINANCE S.a.r.l.
CORPORATION S.A.
By:___________________________ By:___________________________
Title: Title:
By:___________________________ By:___________________________
Title: Title:
DC CYCLE, L.L.C. THE DERBY CYCLE
CORPORATION
By:___________________________ By:___________________________
Title: Title:
PERSEUS CYCLE, L.L.C.
By:___________________________
Title:
[CONTINUED ON NEXT PAGE]
<PAGE>
The undersigned hereby join as parties to the foregoing Agreement
solely for the purposes of Sections 15, 16.6 and 17. Any notice, consent or
communications required or permitted to be given under this Agreement to any of
the undersigned shall be given, in the manner provided in Section 15.8,
addressed to him at the address set forth beneath his signature below.
- ------------------------ -------------------------- --------------------------
A. Edward Gottesman Alan J. Finden-Crofts Frank H. Pearl
8 New Fetter Lane Willowhayne House Suite 610
London EC4A 1AP Tamarisk Way 1627 I Street, N.W.
England The Willowhayne Washington, DC 20006
East Preston USA
Littlehampton
West Sussex BN16 2TE
England
The undersigned hereby joins as a party to the foregoing Agreement as
a guarantor of the obligations of DC Cycle, L.L.C. under the foregoing Agreement
and under each of the other agreements to be entered into by DC Cycle, L.L.C. in
connection with the foregoing Agreement.
THAYER EQUITY PARTNERS, III
By: _______________________
Title:
<PAGE>
EXHIBIT 2.2(A)
<TABLE>
<CAPTION>
- ------------- ------------------ ------------------ ------------------ -------------------
<S> <C> <C> <C> <C>
ENTITY NUMBER OF AGGREGATE NUMBER OF AGGREGATE
SHARES OF PRICE PAID SHARES OF PRICE PAID
CLASS A FOR THE PREFERRED FOR THE
COMMON SHARES OF STOCK, SHARES OF
STOCK CLASS A SERIES A, PREFERRED
PURCHASED COMMON PURCHASED STOCK,
STOCK SERIES A,
PURCHASED PURCHASED
LLC 12,500 $12,500,000 25,000 $37,500,000
------------------ ------------------ ------------------ -------------------
Perseus 10,000 $10,000,000 -0- -0-
------------------ ------------------ ------------------ -------------------
TOTAL 22,500 $22,500,000 25,000 $37,500,000
</TABLE>
<PAGE>
CERTIFICATION
-------------
The undersigned, being the direct or indirect beneficial owners of not
less than seventy-five percent (75%) of the issued and outstanding common stock
of Derby International Corporation S.A. ("Derby International"), hereby agree,
represent and warrant as follows:
(a) that they shall vote and cause all Persons under their control to
vote in favor of the approval of the Recapitalization Transactions described in
a certain Recapitalization Agreement of even date herewith by and among Derby
International, The Derby Cycle Corporation, Derby Finance S.a.r.l., DC Cycle,
L.L.C. and Perseus Cycle, L.L.C. (the "Recapitalization Agreement"); and
(b) that the number of votes to which the undersigned and the Persons
under their control are entitled is sufficient to approve the Transactions under
the terms of the Articles of Incorporation and the Third Amended and Restated
Shareholders' Agreement by and among Derby International and its shareholders.
Capitalized terms not otherwise defined herein shall have the same meanings used
in the Recapitalization Agreement.
Executed this 11th day of March, 1998.
CENTUM INVESTMENTS LIMITED ___________________________________
A. EDWARD GOTTESMAN
By:_____________________________
Name:
Title:
___________________________________
FRANK H. PEARL
___________________________________
ALAN J. FINDEN-CROFTS
<PAGE>
EXHIBIT 2.2
FIRST AMENDMENT
TO
THE RECAPITALIZATION AGREEMENT
THIS FIRST AMENDMENT TO THE RECAPITALIZATION AGREEMENT (this
"Amendment") is entered into this 17th day of March 1998 by and between:
THE DERBY CYCLE CORPORATION (d.b.a. Raleigh USA Bicycle Company) a
corporation organized and existing under the laws of Delaware, having its
principal office at 22710 72nd Avenue South, Kent, Washington 98032 (the
"Company");
DERBY INTERNATIONAL CORPORATION S.A., a corporation (societe anonyme)
---------------
organized and existing under the laws of the Grand Duchy of Luxembourg, having
its registered office at 5 Boulevard de la Foire, L-1528 Luxembourg, Grand Duchy
of Luxembourg ("Derby International") and DERBY FINANCE S.a.r.l., a corporation
(societe a responsibilite limitee) organized and existing under the laws of the
--------------------------------
Grand Duchy of Luxembourg, having its registered office at 5 Boulevard de la
Foire, L-1528 Luxembourg, Grand Duchy of Luxembourg ("DFS") (Derby International
and DFS being referred to together as the "Sellers");
DC CYCLE, L.L.C., a limited liability company organized and existing
under the laws of Delaware, having its registered office at 1209 Orange Street,
Wilmington, Delaware ("LLC") and PERSEUS CYCLE, L.L.C., a limited liability
company organized and existing under the laws of Delaware, having its principal
office at Suite 610, 1627 I Street, N.W., Washington, D.C. 20006 ("Perseus" and,
together with LLC, the "Buyer"); and
FRANK H. PEARL ("Mr. Pearl"), ALAN J. FINDEN-CROFTS ("Mr. Finden-
Crofts") and A. EDWARD GOTTESMAN ("Mr. Gottesman" and collectively with Mr.
Pearl and Mr. Finden-Crofts, the "Shareholders").
WHEREAS, on the 11th day of March 1998 the Company, the Sellers, the
Buyer and the Shareholders entered into a Recapitalization Agreement (the
"Recapitalization Agreement"). Unless otherwise defined herein, capitalized
terms shall have the meaning ascribed to them in the Recapitalization Agreement.
WHEREAS, the Company, the Sellers, the Buyer and the Shareholders
desire to amend the Recapitalization Agreement as set forth in this Amendment.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants of the parties contained in this Amendment, the parties hereby agree
as follows:
1. Section 18.1(f) of the Recapitalization Agreement shall be deleted in its
entirety and replaced by the following:
"(f) by any one of LLC, Perseus or the Sellers if,
prior to 5:00 p.m., Eastern Standard Time, on March 19,
1998, LLC,
<PAGE>
Perseus and Sellers have not yet agreed on the Transaction
Outline satisfactory to each party in its sole discretion
and the terminating party has delivered a written
termination notice to the other parties prior to 5:00 p.m.
Eastern Standard Time, March 20, 1998;"
2. Amendments. This Amendment may not be waived, changed, modified or
----------
discharged orally, unless an agreement in writing is signed by all parties
to this Amendment.
3. Assignment. Except as otherwise specifically provided herein, no party may
----------
assign any of its rights, interests or obligations hereunder without the
prior written consent of the other parties, which consent shall not be
unreasonably withheld; provided, however, that Perseus and LLC may
collaterally assign its rights hereunder to any Person providing financing
to Perseus and LLC.
4. Counterparts. This Amendment may be executed in any number of
------------
counterparts, all of which shall constitute one agreement, and each such
counterpart shall be deemed to have been made, executed and delivered on
the date set out at the head of this Amendment, without regard to the date
when any of such counterparts may actually have been made, executed or
delivered.
5. GOVERNING LAW AND JURISDICTION. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
------------------------------
VALIDITY AND INTERPRETATION OF THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR
RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO ANY
MATTER ARISING UNDER OR IN CONNECTION WITH THIS AMENDMENT OR THE SUBJECT
MATTER HEREOF MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS AMENDMENT, EACH PARTY HERETO HEREBY ACCEPTS
FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY
HERETO HEREBY WAIVES, AND AGREES NOT TO ASSERT, AS A DEFENSE IN ANY ACTION,
SUIT OR PROCEEDING PROVIDED FOR IN THIS SECTION 17 THAT IT IS NOT SUBJECT
THERETO OR THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS
NOT MAINTAINABLE IN SAID COURTS OR THAT THIS AMENDMENT MAY NOT BE ENFORCED
IN OR BY SAID COURTS OR THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM
EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT THE
2
<PAGE>
VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR (PROVIDED THAT
PROCESS SHALL BE SERVED IN ANY MANNER REFERRED TO IN THE FOLLOWING
SENTENCE) THAT SERVICE OR PROCESS UPON SUCH PARTY IS INEFFECTIVE. EACH OF
THE PARTIES HERETO AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION, SUIT
OR PROCEEDING MAY BE MADE UPON IT IN ANY MANNER PERMITTED BY THE LAWS OF
THE STATE OF NEW YORK OR THE FEDERAL LAWS OF THE UNITED STATES OR AS
FOLLOWS: (A) BY PERSONAL SERVICE OR BY CERTIFIED OR REGISTERED MAIL TO THE
PARTY'S DESIGNATED AGENT FOR SUCH SERVICE IN SUCH STATE, OR (B) BY
CERTIFIED OR REGISTERED MAIL TO THE PARTY FOR WHICH INTENDED AT ITS ADDRESS
SET FORTH HEREIN. SERVICE OF PROCESS IN ANY MANNER REFERRED TO IN THE
PRECEDING SENTENCE SHALL BE DEEMED, IN EVERY RESPECT, EFFECTIVE SERVICE OF
PROCESS UPON SUCH PARTY.
* * * *
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as
of the date set out on the first page hereof.
DERBY INTERNATIONAL DERBY FINANCE S.a.r.l.
CORPORATION S.A.
By:_____________________ By:_______________________
Title: Title:
By:_____________________ By:_______________________
Title: Title:
DC CYCLE, L.L.C. THE DERBY CYCLE
CORPORATION
By:_____________________ By:_______________________
Title: Title:
PERSEUS CYCLE, L.L.C.
By:_____________________
Title:
___________________ _____________________ ___________________
A. Edward Gottesman Alan J. Finden-Crofts Frank H. Pearl
8 New Fetter Lane Willowhayne House Suite 610
London EC4A 1AP Tamarisk Way 1627 I Street, N.W.
England The Willowhayne Washington, DC 20006
East Preston USA
Littlehampton
West Sussex BN16 2TE
England
<PAGE>
EXHIBIT 2.3
SECOND AMENDMENT TO RECAPITALIZATION AGREEMENT
----------------------------------------------
THIS SECOND AMENDMENT (this "Amendment") to the Recapitalization
Agreement dated as of March 11, 1998 (the "Recapitalization Agreement") is made
this 14th day of May 1998 by and among:
THE DERBY CYCLE CORPORATION (d.b.a. Raleigh USA Bicycle Company) a
corporation organized and existing under the laws of Delaware, having its
principal office at 22710 72nd Avenue South, Kent, Washington 98032 (the
"Company");
DERBY INTERNATIONAL CORPORATION S.A., a corporation (societe anonyme)
---------------
organized and existing under the laws of the Grand Duchy of Luxembourg, having
its registered office at 5 Boulevard de la Foire, L-1528 Luxembourg, Grand Duchy
of Luxembourg ("Derby International") and DERBY FINANCE S.a.r.l., a corporation
(societe a responsibilite limitee) organized and existing under the laws of the
--------------------------------
Grand Duchy of Luxembourg, having its registered office at 5 Boulevard de la
Foire, L-1528 Luxembourg, Grand Duchy of Luxembourg ("DFS") (Derby International
and DFS being referred to together as the "Sellers");
DC CYCLE, L.L.C., a limited liability company organized and existing
under the laws of Delaware, having its registered office at 1209 Orange Street,
Wilmington, Delaware ("LLC") and PERSEUS CYCLE, L.L.C., a limited liability
company organized and existing under the laws of Delaware, having its principal
office at Suite 610, 1627 I Street, N.W., Washington, D.C. 20006 ("Perseus" and,
together with LLC, the "Buyer"); and
ALAN J. FINDEN-CROFTS, A. EDWARD GOTTESMAN, FRANK H. PEARL and THAYER
EQUITY PARTNERS, III (together, the "Other Parties"), who are also parties to
the Recapitalization Agreement for limited purposes (together, the Sellers, the
Buyer and the Other Parties are referred to herein as the "Parties").
WHEREAS, the Parties to this Amendment are also all of the parties to
the Recapitalization Agreement; and
WHEREAS, the Parties desire to amend the Recapitalization Agreement as
set forth in this Amendment.
NOW, THEREFORE, in consideration of the mutual premises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties agree as follows:
<PAGE>
-2-
1. The "WHEREAS" clauses of the Recapitalization Agreement are hereby
amended by deleting all of such clauses in their entirety and replacing them
with the following text:
"WHEREAS, at or before the Closing (as defined below), Derby
International has agreed to cause to be effected the restructuring
(the "Restructuring") of the Company and the other Subsidiaries (as
defined below) outlined in the Transaction Outline, as defined below;
and
WHEREAS, as a result of the Restructuring, at the Closing, DFS
will own twenty-one thousand seven hundred (21,700) shares of the
Company's Class A Common Stock; and
WHEREAS, Derby International will retain shares of exchangeable
preferred stock of Raleigh Industries of Canada Limited (the "Retained
Shares") which are exchangeable for (a) such number of shares of the
Company's Class A Common Stock as, when taken together with the shares
of Class A Common Stock held by DFS at the time of the Closing, shall
equal thirty thousand (30,000) shares of Class A Common Stock, and (b)
all of the authorized shares of the Company's Class B Common Stock
(the "Sellers' Class B Common") in accordance with the Exchange
Agreements (as defined below);
WHEREAS, at the Closing, the Company shall issue to Perseus ten
thousand (10,000) shares of the Company's Class A Common Stock (the
"Perseus Common Shares"), and to LLC twelve thousand five hundred
(12,500) shares of the Company's Class A Common Stock ("LLC Common
Shares" and, together with the Perseus Common Shares, the "Buyer
Common Shares") and twenty-five thousand (25,000) shares of the
Company's Preferred Stock, Series A (the "Preferred Shares" and,
together with the Buyer Common Shares, the "Buyer Shares"), in
exchange for sixty million United States dollars ($60,000,000) cash
(the "Stock Purchase"); and
WHEREAS, the Buyer has proposed, and the Company, Derby
International and DFS have agreed, that, at the Closing, the Company
will: (i) enter into a senior credit facility with Chase Manhattan
Bank or one of its subsidiaries (as lender and as agent), comprised of
a revolving credit facility in the aggregate principal amount of up to
two hundred twenty-five million German deutschemarks (DM225,00,000)
(the "Senior Credit Facility"); (ii) issue
<PAGE>
-3-
bonds in an aggregate principal amount of up to one hundred million
United States dollars ($1000,000,000) and one hundred ten million
Deutschemarks (DM110,000,000) pursuant to an offering under Rule 144A
and Regulation S of the Securities Act of 1933, as amended (the "Bond
Financing") (subparagraphs (i) and (ii) are collectively referred to
as the "Debt Financing," which will provide for available credit at
the Closing having a value of at least two hundred seventy million
United States dollars ($270,000,000)); and (iii) issue and sell to DFS
(the "DFS Stock Purchase") in exchange for three million United States
dollars ($3,000,000) three thousand (3,000) shares of the Company's
Preferred Stock, Series B (the "Sellers' Series B Preferred"), (the
Sellers' Class B Common, together with the Sellers' Series B
Preferred, are referred to as the "DFS Shares").
WHEREAS, at the Closing, the Company shall pay in full the
aggregate amount of one hundred sixty-seven million seven hundred
seventy-five thousand United States dollars ($167,775,000) to DFS in
accordance with the Transaction Outline (the "DFS Payment") less the
----
amount of twenty-three million three hundred thousand United States
dollars ($23,300,000);
WHEREAS, the Restructuring, the Stock Purchase, the DFS Stock
Purchase, the Debt Financing and the DFS Payment are referred to
herein collectively as the "Recapitalization" and the transactions
required to accomplish the Recapitalization are referred to as the
"Recapitalization Transactions"; and
WHEREAS, it is intended that the Recapitalization be recorded as
a recapitalization for United States accounting reporting purposes;"
2. Section 1.22 of the Recapitalization Agreement is hereby amended by
substituting the words "May 15, 1998" for the words "April 16, 1998" and
deleting the remainder of that Section.
3. Section 1.37B of the Recapitalization Agreement is hereby amended by
replacing it in its entirety with the following text:
"1.37B "Exchange Agreements" shall have the meaning ascribed to
it in Section 3.2(b)(viii)."
All references to the "Exchange Agreement" in the Recapitalization Agreement are
hereby replaced with the words "Exchange Agreements."
<PAGE>
-4-
4. Section 1.75B of the Recapitalization Agreement is hereby amended by
replacing it in its entirety with the following text:
"1.75B "Exchangeable Shares" shall have the meaning ascribed to the
Exchangeable Shares of Raleigh Industries of Canada Limited contained in
the Exchange Agreements and the Articles of Incorporation of Raleigh
Industries of Canada Limited."
All references to the "Senior RIC Shares" in the Recapitalization Agreement are
hereby replaced with the words "Exchangeable Shares."
5. Section 2.2 of the Recapitalization Agreement is hereby amended by
inserting the following text before the words "through the Closing Date" in the
last sentence of that sub-paragraph (b): "to April 14, 1998, and at a rate per
annum equal to LIBOR from and including April 14, 1998".
6. Section 3.1 (i) and (ii) of the Recapitalization Agreement are hereby
amended by deleting them in their entirety and replacing them with the following
text: "(i) May 14, 1998 (the "Closing Date"), and (ii) the Cut-Off Date.
7. Section 3.2(c)(i) and Section 3.5 of the Recapitalization Agreement is
hereby amended by deleting the words "eight million five hundred thousand United
States dollars ($8,500,000);" and replacing such amount with "twenty-three
million three hundred thousand United States dollars ($23,300,000)."
8. Section 3.2(b)(viii) of the Recapitalization Agreement is hereby amended by
deleting such sub-section in its entirety and replacing it with the following
text:
"(viii) execute and deliver a put and call agreement, execute and
deliver a support agreement and execute and deliver a DCC share option
agreement in substantially the forms attached hereto as Exhibit
3.2(b)(viii) and made a part hereof (the "Exchange Agreements");
9. Sections 4.7 and 5.5 of the Recapitalization Agreement are hereby amended
by deleting the text thereof and replacing such text with the following:
"[intentionally left blank]"
10. Section 8 of the Recapitalization Agreement is hereby amended by adding a
new section 8.13 as follows:
"8.13 Excluded Assets. The parties acknowledge that certain assets
---------------
described in Exhibit 8.10 at present owned by one of more of
<PAGE>
-5-
the South African Subsidiaries are intended to be transferred or
donated to the Sellers or one or more of the Sellers' affiliates
before the Closing (the "South African Assets"). If and to the extent
that any of such assets are not transferred to the Sellers or one or
more of the Sellers' affiliates before the Closing, the Company will
cause the Subsidiaries, and the Buyer shall use all commercially
reasonably efforts to cause the Company and the Subsidiaries, to
ensure that: (a) the South African Assets are duly transferred or
donated to the Sellers or their affiliates as soon as possible after
the Closing; (b) the South African Assets shall be transferred free
and clear of any Lien of any kind created by the Buyer, the Company or
the Subsidiaries on or after May 11, 1998; and (c) the transfer of the
South African Assets shall not; (i) conflict with any court or
administrative order or process or conflict with, result in a breach
or violation or default or loss of any benefit under, or accelerate
the performance required by, any agreement or commitment to which the
Sellers, the Company or any Subsidiary is a party or by which any of
them (or any of their respective properties or assets) is bound or
affected entered into or with an effective date on or after May 11,
1998; (ii) conflict with or result in any violation or loss of benefit
under any provision of the certificate of incorporation, bylaws or any
other organizational or governing document of the Company or any of
the Subsidiaries; (iii) result in the creation of, or give any party
the right to create, any material lien, charge, encumbrance or other
security interest upon the property and assets of the Company or any
Subsidiary; (iv) require any action by or in respect of, or filing
with, any governmental body, agency or official as a result of actions
taken or made by the Buyer, the Company or the Subsidiaries on or
after May 11, 1998; and (v)contravene, or constitute a default under,
any provision of applicable law, rule or regulation or any agreement,
judgement, injunction, order, decree or other instrument binding upon
it, other than such results which would have occurred if the Excluded
Assets had been transferred before May 11, 1998. Notwithstanding
anything to the contrary contained in this Section 8.13, the Company
shall not be deemed to be in breach of the provisions of clauses (b)
and (c) of this Section if and to the extent that such failure to
comply results solely and directly from the transfer of the assets
required under the clause (a) of this Section and any claim by the
Sellers pursuant to clauses (b) and (c) would itself by an Indemnified
Liability under Section 9.1(a)(iii)(D) of this Agreement."
11. Section 9.1 of the Recapitalization Agreement is hereby amended by
deleting it in its entirety and replacing it with the following text;
<PAGE>
-6-
"9.1. Obligation To Indemnify. (a) Subject to the provisions of
-----------------------
Sections 9.2 and 9.3 and the procedures set forth in Section 11, the
Sellers jointly and severally agree to hold harmless and indemnify, if
prior to the Closing, Perseus and LLC, their respective directors,
officers, members and Affiliates, or, if on or after the Closing, the
Subsidiaries and their Affiliates (collectively, the "Buyer
Indemnified Parties") with respect to any liabilities, losses,
damages, or costs (including reasonable legal fees and court costs) of
any kind, which shall be suffered or incurred as a result of:
(i) any circumstances or state of facts constituting a breach
of any representation or warranty made by the Sellers in this
Agreement;
(ii) the breach of any covenants of the Sellers contained in
this Agreement;
(iii) any Indemnified Liability, which means:
(A) all amounts payable in respect of the "Make-Whole
Amount" or "Modified Make-Whole Amount" as such terms are defined in
the Note Purchase Agreement dated as of September 1, 1993 among Derby
Holding B.V. ("DHBV"), Derby International and the purchasers named
therein (the "Note Purchase Agreement") with respect to the purchase
and sale of three series of Senior Notes of DHBV (the "Senior Notes"),
less any profits realized under the interest rate swaps (the interest
rate component and not the foreign exchange component) under the ISDA
Master Agreement, dated September 15, 1994, between DHBV and Bankers
Trust International plc;
(B) all amounts accrued, paid or payable as interest in
respect of the Senior Notes from November 11, 1997 through January 31,
1998, plus fifty percent (50%) of amounts paid or payable in respect
of accrued interest on the Senior Notes from February 1, 1998 through
March 29, 1998, plus one hundred percent (100%) of amounts paid or
payable in respect of accrued interest on the Senior Notes from and
including March 30, 1998 to April 14, 1998, plus fifty percent (50%)
of amounts paid or payable in respect of accrued interest on the
Senior Notes from and including April 14, 1998 to the Closing Date;
(C) any interest accrued and payable after the Closing Date
until the date of prepayment (or amounts payable in
<PAGE>
-7-
lieu of interest payable to enable prepayment on or about the Closing
Date) in the event that the holders of the Senior Notes do not agree
to the repayment of the Senior Notes on the Closing Date, provided,
however, that the Parties shall use all commercially reasonable
efforts to obtain the consent of the holders of the Senior Notes to
ensure the prepayment of the Senior Notes on or as soon as possible
after the Closing Date;
(D) any liabilities or obligations, whether accrued,
absolute or contingent, whether known or unknown, whether due or to
become due, which: (1) are unrelated to the Business; (ii) arise out
of assets disposed of by the Business prior to the Closing; (iii)
arise out of any of the Excluded Assets transferred to the Sellers or
their Affiliates (other than the Subsidiaries); or (iv) arise from the
transfer of such Excluded Assets to the Sellers or their Affiliates
other than the Subsidiaries), except to the extent that such
liabilities result from actions taken, or agreements entered into, by
the Buyer, the Company or its subsidiaries on or after May 11, 1998
(excluding those actions taken solely to comply with the provisions of
Section 8.13(a) hereof);
(E) any liability or obligation owed with respect to
intercompany payables or other liabilities owed to the Sellers or any
Affiliate of the Sellers (other than the Subsidiaries) and not
assigned or transferred to the Company or one of the Subsidiaries;
(F) all taxes, fees, expenses and other costs to the
Sellers and the Subsidiaries other than those for which the Sellers
are indemnified under Sections10A, 10B and 10C (except Section
10C(d)(i), for which the Sellers are not indemnified) of this
Agreement arising from;
(1) the transfers of capital stock of the Subsidiaries
and assets directly from Derby International to DFS;
(2) the transfers by DFS of capital stock of:
(a) Derby Holding Limited to Sturmey-Archer Limited ("SAL"), and
(b) Derby Holding B.V., Releigh Industries of Canada Limited
("RIC") and SAL to the Company;
(3) the transfer of assets by Derby International or
DFS which directly results in the issuance of securities of the
Company or RIC to Derby International or DFS;
<PAGE>
-8-
(4) the payment of cash to Derby International, DFS or Centum as
part of the DFS Payment (or, in the event that notes are issued in
lieu of any cash payment, the issuance and repayment of such notes,
provided that no additional taxes, fees, expenses or other costs are
incurred as a result of such issuance or the repayment thereof); or
(5) the issuance and exchange of the Exchangeable Shares (as
defined in the Exchange Agreements), but excluding any taxes, fees,
expenses or other costs arising from the issuance to the Company or
any other party other than the Sellers and their Affiliates of any
other class of securities of RIC after the Closing Date or from any
action taken or made after the Closing Date in connection with the
acquisition or disposition of any assets of RIC;
(G) any liabilities, costs or expenses arising from or relating
to any default under the Senior Notes caused by the payment of a dividend
in December 1997, provided, however, that such indemnification shall not
apply if the Senior Notes are repaid on the Closing Date; and
(H) all costs, Taxes, fees and other expenses incurred by the
Subsidiaries in connection with the establishment and financing of DFS and
all outstanding amounts borrowed from any Subsidiary by Derby
International, DFS or any Seller Affiliate in connection therewith.
(iv) any Special Environmental Liability, which means all costs,
liabilities or obligations arising from or relating to soil or groundwater
contamination on, or migrating from, any Real Estate prior to the Closing
Date, whether or not such contamination would constitute a breach of the
Sellers' representations and warranties made in Section 6.7 hereof, but
only if the cost of remediation of such contamination of any particular
site exceeds one million United States dollars ($1,000,000) per year for at
least five (5) consecutive years; or
(v) without giving effect to the disclosure of such liabilities on
the exhibits attached hereto, any Special Tax Liabilities or Special
Product Liabilities where:
(A) "Special Tax Liabilities" means any Netherlands tax
liability, including penalties and interest, resulting from the
<PAGE>
-9-
disallowance of interest deduction on loans owed to the Company and
deducted by extending the fiscal year of certain Dutch Subsidiaries in
1996 and 1997; and
(B) "Special Product Liabilities" means damages, losses,
costs or expenses of the Company (including reasonable attorneys'
fees) arising from product liability claims based on products sold
prior to the Closing by the Company which exceed in the aggregate four
hundred thousand United States dollars ($400,000).
(b) Except in the case of the Indemnified Liabilities, all
liability of the Sellers shall be reduced by and to the extent of any
provisions made on the books and records of the Subsidiaries and
reflected on the Financial Statements or any unaudited financial
statements delivered prior to the date hereof with respect to
the obligations or liabilities upon which a claim for indemnification
is based.
(c) Notwithstanding anything in this Section 9.1 to the
contrary, except as specifically provided in Section 15.6, the Sellers
shall have no liability to the Buyers for Transaction Expenses.
12. Sections 9.3 (e) and (f) of the Recapitalization Agreement are hereby
amended by deleting each such sub-section in its entirety and replacing it with
the following text:
"(e) The limitations set forth in Sections 9.3(a), (b) and
(c) shall not apply to any claim for indemnification:
(i) pursuant to Section 9.1(a)(ii);
(ii) pursuant to Section 9.1(a)(iii);
(iii) as a result of a knowing or international breach
or fraud on the part of either Seller; or
(iv) as a result of the breach of any representation
or warranty set forth in Section 6.1(b), Section 6.13(b) or Section
6.14 (with respect only to the principal amount of Indebtedness for
borrowed money;
provided, however, that the Indemnification Notice with respect to the
foregoing subclauses (i) and (iv) must be submitted on or before
<PAGE>
-10-
the thirtieth day after the sixth anniversary of the Closing Date and
the Indemnification Notice with respect to the foregoing subclause
(ii) in respect of covenants which are required to be performed on or
prior to the Closing Date must be submitted on or before the thirtieth
day after the fifth anniversary of the Closing Date (except for claims
relating to breaches of covenants set forth in Section 8.3, the
Indemnification Notice for which claims must be submitted on or before
the thirtieth day after the third anniversary of the Closing Date).
The limitation set forth in Section 9.3(d) shall not apply to any
claim for indemnification: (1) as a result of or pursuant to clauses
(F) and (H) of Section 9.1(a) above; (2) as a result of intentional
fraud on the part of either Seller; or (3) as a result of the breach
of any representation or warranty set forth in Section 6.1(b).
Notwithstanding anything to the contrary in this section 9, the
covenants set forth in Sections 8.2 (Management Responsibility), 8.4
(Consents and Approvals), 8.6 (Fulfillment of Conditions), 8.7
(Indebtedness), 8.8 (Exclusivity), 8.9 (GAAP Financial Statements) and
16.3 (Hedging) shall not survive the Closing.
(f) Notwithstanding anything to the contrary herein,
Sellers shall have no indemnification liability under this Section 9
arising from a "Triggered Tax Liability." A "Triggered Tax Liability"
is: (i) any liability for income or other taxes under Netherlands law
due to a reopening or reinvestigation of prior taxable periods, but
only to the extent that any additional tax liabilities (including
interest and penalties) for prior periods arises from the
reorganization or recapitalization in order to accommodate the
placement of debt in such Subsidiaries and (ii) any liability for any
steps taken or omitted to be taken by the Company or any Subsidiary
after the Closing that causes the representation of the Sellers
contained in Section 6.4(p) above to be untrue."
13. Section 10C of the Recapitalization Agreement is hereby amended by
deleting clause (d)(i) and replacing it with the following language: "actions
required to be taken in connection with the Transaction Outline other than (i)
those liabilities, costs or expenses in respect of which the Sellers have agreed
to indemnify the Buyer under clause (F) of Section 9.1(a)(iii), and (ii) legal
fees and related expenses as provided in Section 15.6".
14. Section 15.6(ii) of the Recapitalization Agreement is hereby amended
by deleting the words "seventy-five thousand dollars ($75,000)" and replacing
them with the words "one hundred and fifty thousand dollars ($150,000)".
<PAGE>
-11-
15. Section 16.4 of the Recapitalization Agreement is hereby amended by
adding the following at the end of the last sentence of such section:
"provided, however, that upon an Approved Sale, payment of the
Additional Payment, or a portion thereof, may be deferred if and to
the extent that such payment itself would cause a default under the
Financing Documents; and further provided that to the extent the
Company is required to defer the payment of any portion of the
Additional Payment in accordance with the foregoing clause, the
Additional Payment (or the unpaid portion thereof) shall accrue
interest from the Additional Payment Date until paid at an annual
rate equal to nine and three-quarters percent (9.75%); and further
provided that Perseus, LLC, the Company and the relevant Subsidiaries
shall use all commercially reasonable efforts to negotiate with the
banks parties to the Financing Documents (or the documentation
evidencing any subsequent or replacement financing) to exempt the
payment of twelve percent (12%) of the Additional Payment to DFS under
the Financial Documents."
16. Section 16.9 is hereby amended by deleting such section in its
entirety and replacing it with the following text:
"Payment Obligations. Each of LLC and Perseus, in its capacity as
-------------------
a shareholder of the Company, shall use all reasonable efforts
(including, without limitation, by giving instructions to members of
the Company's board of directors nominated by it pursuant to the
Shareholders' Agreement) to cause the Company and its subsidiaries on
or after the Closing Date to honor all payment and other obligations
of the Company and such subsidiaries with respect to which any one or
more of the Sellers or their Affiliates (other than the Subsidiaries)
have given guarantees, suretyships, security or similar undertakings
which have not been discharged at the Closing; provided, however, that
the obligations of LLC and Perseus under this Section 16.9 shall not
be deemed to require LLC or Perseus to provide additional capital to
meet such obligations or to make any direct payment of such
obligations."
17. Section 18.1 of the Recapitalization Agreement is hereby amended by
deleting the text of sub-sections (f) and (g) and replacing such text with the
following text: "[intentionally left blank]".
18. Amendments. This Amendment may not be waived, changed, modified or
----------
discharged unless by agreement in writing signed by all Parties to this
Amendment.
<PAGE>
-12-
19. Counterparts. This Amendment may be executed in any number of counterparts,
------------
all of which shall constitute one agreement, and each such counterpart shall be
deemed to have been made, executed and delivered on the date set out at the head
of this Amendment, without regard to the date when any of such counterparts may
actually have been made, executed or delivered.
20. Headings. The descriptive headings contained in this Amendment are for
--------
reference purposes only and shall not affect the meaning or interpretation of
this Amendment.
21. GOVERNING LAW AND JURISDICTION
------------------------------
ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OR THE STATE OF NEW YORK OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO ANY MATTER ARISING UNDER OR IN CONNECTION WITH THIS AMENDMENT OR
THE SUBJECT MATTER HEREOF MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND,
BY EXECUTION AND DELIVERY OF THIS AMENDMENT, EACH PARTY HERETO HEREBY ACCEPTS
FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY, GENERALLY AND UNCONDITIONALLY,
THE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HERETO HEREBY WAIVES, AND
AGREES NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING PROVIDED
FOR IN THIS SECTION 17 THAT IT IS NOT SUBJECT THERETO OR THAT SUCH ACTION, SUIT
OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT
THIS AMENDMENT MAY NOT BE ENFORCED IN OR BY SAID COURTS OR THAT ITS PROPERTY IS
EXEMPT OR IMMUNE FROM EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT
IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS
IMPROPER OR (PROVIDED THAT PROCESS SHALL BE SERVED IN ANY MANNER REFERRED TO IN
THE FOLLOWING SENTENCE) THAT SERVICE OR
<PAGE>
-13-
PROCESS UPON SUCH PARTY IS INEFFECTIVE, EACH OF THE PARTIES HERETO AGREES THAT
SERVICE OF PROCESS IN ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE MADE UPON IT IN
ANY MANNER PERMITTED BY THE LAWS OF THE STATE OF NEW YORK OR THE FEDERAL LAWS OF
THE UNITED STATES OR AS FOLLOWS: (A) BY PERSONAL SERVICE OR BY CERTIFIED OR
REGISTERED MAIL TO THE PARTY'S DESIGNATED AGENT FOR SUCH SERVICE IN SUCH STATE,
OR (B) BY CERTIFIED OR REGISTERED MAIL TO THE PARTY FOR WHICH INTENDED AT ITS
ADDRESS SET FORTH HEREIN, SERVICE OF PROCESS IN ANY MANNER REFERRED TO IN THE
PRECEDING SENTENCE SHALL BE DEEMED, IN EVERY RESPECT, EFFECTIVE SERVICE OF
PROCESS UPON SUCH PARTY.
21. SEVERABILITY
------------
If any provision of this Amendment is held to be invalid or
unenforceable by any judgement of a tribunal of competent jurisdiction, the
remainder of the provisions of this Amendment shall not be affected by such
judgement, and the understanding of the parties embodied in this Amendment shall
be carried out as nearly as possible according to their original terms and
intent.
IN WITNESS WHEREOF, the Parties have executed or caused their duly
authorized representatives to execute this amendment as of the date set out on
the first page hereof.
DERBY INTERNATIONAL DERBY FINANCE S.a.r.l.
CORPORATION S.A.
By: /s/ Alan J. Finden-Crofts By: /s/ Alan J. Fiden-Crofts
------------------------------- -------------------------------
By: /s/ A. Edward Gottesman By: /s/ A. Edward Gottesman
------------------------------- -------------------------------
<PAGE>
-14-
DC CYCLE, L.L.C. PERSEUS CYCLE, L.L.C.
By: ______________________________ By: ______________________________
THE DERBY CYCLE CORPORATION THAYER EQUITY PARTNERS, III
By: /s/ Alan J. Finden-Crofts By: ______________________________
-------------------------------
/s/ A. Edward Gottesman /s/ Alan J. Finden-Crofts
- ---------------------------------- ----------------------------------
A. EDWARD GOTTESMAN ALAN J. FINDEN-CROFTS
__________________________________
FRANK H. PEARL
<PAGE>
-14-
DC CYCLE, L.L.C. PERSEUS CYCLE, L.L.C.
By: _______________________________ By: /s/ [SIGNATURE ILLEGIBLE] ^^
---------------------------------
THE DERBY CYCLE CORPORATION THAYER EQUITY PARTNERS, III
By: _______________________________ By: ________________________________
___________________________________ ____________________________________
A. EDWARD GOTTESMAN ALAN J. FINDEN-CROFTS
/s/ Frank H. Pearl
- -----------------------------------
FRANK H. PEARL
<PAGE>
-14-
DC CYCLE, L.L.C. PERSEUS CYCLE, L.L.C.
By: /s/ [SIGNATURE ILLEGIBLE]^^ By: _______________________________
--------------------------------
THE DERBY CYCLE CORPORATION THAYER EQUITY INVESTORS III, L.P.
By: _______________________________ By: /s/ [SIGNATURE ILLEGIBLE]^^
--------------------------------
___________________________________ ___________________________________
A. EDWARD GOTTESMAN ALAN J. FINDEN-CROFTS
___________________________________
FRANK H. PEARL
<PAGE>
EXHIBIT 3.1
THE DERBY CYCLE CORPORATION
RESTATED CERTIFICATE OF INCORPORATION
The Derby Cycle Corporation, originally incorporated under the name
Raleigh, Inc. by original Certificate of Incorporation filed in the office of
the Secretary of State of the State of Delaware on October 24, 1988, and
currently organized and existing under and by virtue of the General Corporation
Law of the State of Delaware, does hereby certify that the Board of Directors of
the Corporation has duly adopted a resolution, pursuant to Section 242 of the
General Corporation Law of the State of Delaware, setting forth an amended and
restated Certificate of Incorporation of the Corporation and declaring said
amendment and restatement to be advisable. The stockholders of the Corporation
have duly approved said amendment and restatement by the required vote of such
stockholders, adopted by unanimous written consent in lieu of a meeting of such
stockholders, all in accordance with Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware.
The Certificate of Incorporation of the Corporation, as amended and
restated in its entirety, is as set forth in Exhibit A hereto.
In connection with the amendment and restatement of the Certificate of
Incorporation, the Board of Directors has proposed, and the stockholders of the
Corporation have duly adopted, the following resolution with respect to the
conversion of the outstanding shares of the Common Stock, par value $1.00 per
share, of the Corporation:
RESOLVED: That immediately upon the filing of the Restated Certificate of
Incorporation referred to in the foregoing Resolution and without any
further action on the part of the holder thereof, each share of the
Common Stock, par value $1.00 per share, of this Corporation (the "Old
Common Stock") issued and outstanding immediately prior to such filing
be converted into 7.23 1/3 shares of the Class A Common Stock, par
value $0.01 per share, of this Corporation (the "Class A Common
Stock") and that, upon surrender to the Secretary of this Corporation
of the certificate representing such outstanding shares of Old Common
Stock, the proper officers of this Corporation be, and hereby are,
authorized and directed, to issue to the record holder thereof a
certificate, under seal of this Corporation, representing the shares
of Class A Common Stock into which such shares of Old Common Stock
have been converted.
IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate of
Incorporation to be signed by its Secretary this 12th day of May, 1998.
THE DERBY CYCLE CORPORATION
By: /s/ Sharon Robinson
-------------------
Sharon Robinson
Secretary
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EXHIBIT A
RESTATED
CERTIFICATE OF INCORPORATION
OF
THE DERBY CYCLE CORPORATION
--------------------------
ARTICLE ONE
The name of the Corporation is The Derby Cycle Corporation
ARTICLE TWO
The address of the Corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle 19801. The name of its registered agent at such address is
The Corporation Trust Company.
ARTICLE THREE
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful set or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware
ARTICLE FOUR
PART A AUTHORIZED SHARES
The total number of shares of capital stock which the Corporation has
authority to issue is 243,000 shares, consisting of:
(a) 25,000 shares of Preferred Stock, Series A, par value $.01 per share
("Series A Preferred Stock");
(b) 3,000 shares of Preferred Stock, Series B, par value $.01 per share
("Series B Preferred Stock");
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(c) 200,000 shares of Class A Common Stock, par value $.01 per share
("Class A Common Stock"); and
(d) 15,000 shares of Class B Common Stock, par value $.01 per share
("Class B Common Stock"; and together with the Class A Common
Stock, "Common Stock").
The Series A Preferred Stock and the Series B Preferred Stock are
referred to collectively as the "Preferred Stock." The Preferred Stock and the
Common Stock are referred to collectively as the "Shares." The Preferred Stock
shall have the rights, preferences and limitations set forth in Part B. The
Common Stock shall have the rights, preferences and limitations set forth in
Part C. The Shares shall have the Distribution rights and be subject to the
general terms set forth in Part D. Capitalized terms used but not otherwise
defined in Part A, Part B, Part C or Part D of this ARTICLE FOUR are defined in
Part E of this ARTICLE FOUR.
PART B PREFERRED STOCK
Section 1. Dividends.
A. When and as declared by the Corporation's Board of Directors and
to the extent permitted under the General Corporation Law, the Corporation shall
pay preferential dividends in cash to the holders of Preferred Stock as provided
in this Section 1 and Part D of this ARTICLE FOUR. Dividends on each share of
the Series A Preferred Stock (a "Series A Preferred Share") shall accrue on a
daily basis at the rate of twenty percent (20%) per annum of the sum of the
Liquidation Value thereof plus all accumulated and unpaid dividends thereon from
and including the date of issuance of such Series A Preferred Share to and
including the first to occur of (i) the date on which the Liquidation Value of
such Series A Preferred Share (plus all accrued and accumulated but unpaid
dividends thereon) is paid to the holder thereof, (ii) the date on which such
Series A Preferred Share is converted to Class A Common Stock as set forth
herein or (iii) the date on which such Series A Preferred Share is otherwise
acquired by the Corporation. Dividends on each share of the Series B Preferred
Stock (a "Series B Preferred Share") shall accrue on a daily basis at the rate
of nine and three-quarters percent (9.75%) per annum of the sum of the
Liquidation Amount thereof plus all accumulated and unpaid dividends thereon
from and including the date of issuance of such Series B Preferred Share to and
including the first to occur of (i) the date on which the Liquidation Amount of
such Series B Preferred Share (plus all accrued and accumulated but unpaid
dividends thereon) is paid to the holder thereof, (ii) the date on which such
Series B Preferred Share is redeemed as set forth herein or (iii) the date on
which such Series B Preferred Share is otherwise acquired by the Corporation.
Such dividends shall accrue whether or not they have been declared and whether
or not there are profits, surplus or other funds of the Corporation legally
available for the payment of dividends. The date on which the Corporation
initially issues any Preferred Share (as defined below) shall be deemed to be
its "date of issuance" regardless of the number
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of times transfer of such Preferred Share is made on the stock records
maintained by or for the Corporation and regardless of the number of
certificates which may be issued to evidence such Preferred Share. The Series A
Preferred Shares and the Series B Preferred Shares are referred to collectively
as the "Preferred Shares."
B. Dividend Reference Dates. To the extent not paid on December 31
of each year, beginning December 31, 1998 (the "Dividend Reference Dates"), all
dividends which have accrued on each Preferred Share outstanding during the
twelve-month period (or other period in the case of the initial Dividend
Reference Date) ending upon each such Dividend Reference Date shall be
accumulated and shall remain accumulated dividends with respect to such
Preferred Share until paid to the holder thereof.
Section 2. Priority of Preferred Stock on Dividends and Redemptions.
So long as any accrued but unpaid dividends on the Preferred Shares remains
outstanding, without the prior written consent of (a) the holders of a majority
of the outstanding Series A Preferred Shares and (b) the holders of a majority
of the outstanding Series B Preferred Shares, the Corporation shall not, nor
shall it permit any Subsidiary to, redeem, purchase or otherwise acquire
directly or indirectly any Junior Securities, nor shall the Corporation directly
or indirectly pay or declare any dividend or make any distribution upon any
Junior Securities.
Section 3. Voting Rights. The holders of Series A Preferred Stock
shall be entitled to notice of all stockholders meetings in accordance with the
Corporation's bylaws, and except as otherwise provided by law or as provided
herein, the holders of the Series A Preferred Stock shall be entitled to vote on
all matters submitted to the stockholders for a vote together with the holders
of the Class A Common Stock voting together as a single class with each share of
Class A Common Stock entitled to one vote per share and each Series A Preferred
Share entitled to 1.5 votes per share. Except as otherwise provided by law or
as provided herein, the holders of Series B Preferred Stock shall not be
entitled to voting rights.
Section 4. Conversion.
A. At any time (a) prior to the first anniversary of the Closing
Date or (b) in connection with an Approved Sale or a transaction described in
Section 10(b) of the Shareholders' Agreement occurring prior to the date that
is eighteen months after the Closing Date, each holder of Series A Preferred
Stock may convert all or any portion of the Series A Preferred Shares held by
such holder into shares of Class A Common Stock as follows: each Series A
Preferred Share shall be convertible into (i) one-half share of Class A Common
Stock and (ii) the number of shares of Class A Common Stock determined by
dividing the Liquidation Value of such Series A Preferred Stock as of its date
of issuance by $1,000 (subject to adjustment as provided in Section 7B of this
Part B).
B. At any time in connection with an Initial Public Offering, all
outstanding Series A Preferred Shares (other than Series A Preferred Shares as
to which the holders thereof
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have exercised their voluntary conversion rights under Section 4A or 4C of this
Part B) shall be converted automatically into shares of Class A Common Stock or,
if the outstanding shares of Class A Common Stock are converted into another
equity security of the Corporation in connection with such Initial Public
Offering (the "IPO Stock"), into shares of such IPO Stock as follows: each
Series A Preferred Share shall be converted into (i) one-half share of Class A
Common Stock (or such number of shares of the IPO Stock into which one-half
share of Class A Common Stock is converted) plus (ii) such number of shares of
Class A Common Stock or IPO Stock (as applicable) having a Fair Market Value (as
of the effective date of the Initial Public Offering with respect to which such
conversion occurs) equal to the Liquidation Value (plus all accrued and
accumulated but unpaid dividends thereon) of such Series A Preferred Share.
C. In connection with an Initial Public Offering occurring prior to the
date that is eighteen months after the Closing Date, each holder of Series A
Preferred Stock may, in lieu of mandatory conversion, pursuant to Section 4B of
this Part B, of the Series A Preferred Shares held by such holder, convert all
or any portion of such Series A Preferred Shares into shares of IPO Stock as
follows: each Series A Preferred Share shall be converted into (i) one-half
share of Class A Common Stock and (ii) the number of shares of Class A Common
Stock determined by dividing the Liquidation Value of such Series A Preferred
Stock as of its date of issuance by $1,000 (subject to adjustment as provided in
Section 7B of this Part B).
D. At any time in connection with a transfer of Shares pursuant to
Section 10(a) of the Shareholders' Agreement or an Approved Sale, each holder of
Series A Preferred Stock may convert all or any portion of such Series A
Preferred Shares into shares of Class A Common Stock as follows: each Series A
Preferred Share shall be convertible into (i) one-half share of Class A Common
Stock plus (ii) such number of shares of Class A Common Stock having a Fair
Market Value (as of the close of business on the day on which such conversion is
to occur) equal to the Liquidation Value (plus all accrued and accumulated but
unpaid dividends thereon) of such Series A Preferred Share.
E. At any time in connection with a transfer of Shares pursuant to
Section 10(a) of the Shareholders' Agreement or an Approved Sale, each holder of
Series B Preferred Stock may convert all or any portion of such Series B
Preferred Shares which are to be sold under Section 10(a) of the Shareholders'
Agreement or an Approved Sale into shares of Class A Common Stock as follows:
each Series B Preferred Share shall be convertible into such number of shares of
Class A Common Stock having a Fair Market Value (as of the close of business on
the day on which such conversion is to occur) equal to the Liquidation Value
(plus all accrued and accumulated but unpaid dividends thereon) of such Series B
Preferred Share.
F. Except as otherwise provided herein, each conversion of Preferred
Stock pursuant to this Section 4 or Section 5A below shall be deemed to have
been effected as of the close of business on the date on which the certificate
or certificates representing the Preferred Stock to be converted have been
surrendered for conversion at the principal office of the
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Corporation. At the time any such conversion has been effected, the rights of
the holder of the Preferred Stock converted as a holder of such Preferred Stock
shall cease and if applicable, the Person or Persons in whose name or names any
certificate or certificates for shares of Class A Common Stock are to be issued
upon such conversion shall be deemed to have become the holder or holders of
record of the shares of Class A Common Stock represented thereby.
G. As soon as possible after a conversion pursuant to this Section 4
or Section 5A below has been effected (but in any event within five business
days), the Corporation shall deliver to the converting holder:
(a) a certificate or certificates representing the number of
shares of Class A Common Stock issuable by reason of such conversion in such
name or names and such denomination or denominations as the converting holder
has specified; and
(b) a certificate representing any Preferred Shares which were
represented by the certificate or certificates delivered to the Corporation in
connection with such conversion but which were not converted.
H. The issuance of certificates for shares of Class A Common Stock or
Class B Common Stock upon conversion of Preferred Stock pursuant to this Section
4 or Section 5A below or pursuant to the Exchange Agreements shall be made
without charge to the holders of such Preferred Stock for any issuance tax in
respect thereof or other cost incurred by the Corporation in connection with
such conversion and the related issuance of shares of Class A Common Stock or
Class B Common Stock. Upon conversion of each share of Preferred Stock pursuant
to this Section 4 or Section 5A below or upon exercise of rights set forth in
the Exchange Agreements, the Corporation shall take all such actions as are
necessary in order to insure that the Class A Common Stock issuable with respect
to such conversion shall be validly issued, fully paid and nonassessable, free
and clear of all taxes, liens, charges and encumbrances with respect to the
issuance thereof.
I. The Corporation shall assist and cooperate with any holder of
Shares required to make any governmental filings or obtain any governmental
approval prior to or in connection with any conversion of Preferred Shares
hereunder (including, without limitation, making any filings required to be made
by the Corporation).
J. The Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Class A Common Stock, solely for the
purpose of issuance upon the conversion of the Preferred Stock pursuant to this
Section 4 or Section 5A below, such number of shares of Class A Common Stock
issuable upon the conversion of all outstanding Preferred Shares. All shares of
Class A Common Stock which are so issuable shall, when issued, be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges. The Corporation shall take all such actions as may be necessary to
assure that all such shares of Class A Common Stock may be so issued without
violation of any applicable law or
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governmental regulation or any requirements of any domestic securities exchange
upon which shares of Class A Common Stock may be listed (except for official
notice of issuance which shall be immediately delivered by the Corporation upon
each such issuance). The Corporation shall not take any action which would cause
the number of authorized but unissued shares of Class A Common Stock to be less
than the number of such shares required to be reserved hereunder for issuance
upon conversion of the Preferred Stock pursuant to this Section 4 and Section 5A
below.
Section 5. Put Rights.
A. (i) Upon a proposed Sale of the Corporation or (ii) at any time
after the tenth anniversary of the Closing Date, each holder of Series A
Preferred Stock (the "Series A Offering Holder") shall have the right to require
the Corporation to repurchase (the "Series A Put") all or any portion of the
Series A Preferred Shares held by such holder at a price per Series A Preferred
Share equal to the Series A Put Price by delivering a written notice to the
Corporation at the Corporation's principal place of business or at such other
address as the Corporation may, by written notice to all holders of Preferred
Stock, designate, specifying the number of Series A Preferred Shares that such
holder desires that the Corporation repurchase (the "Series A Put Notice"). A
Series A Put Notice relating to a proposed Sale of the Corporation must be
delivered not later than 10 days after the date on which the Corporation
notifies a Series A Offering Holder of a proposed Sale of the Corporation. The
"Series A Put Price" shall mean (x) an amount of cash equal to the Liquidation
Value (plus all accrued and accumulated but unpaid dividends thereon through the
date of the Put Closing) of each Series A Preferred Share specified by a Series
A Offering Holder in its Series A Put Notice plus (y) one-half share of Class A
Common Stock.
B. (i) Upon a proposed Sale of the Corporation or (ii) at any time
after the fourth anniversary of the Closing Date, each holder of Series B
Preferred Stock (the "Series B Offering Holder") shall have the right to require
the Corporation to repurchase (the "Series B Put") all or any portion of the
Series B Preferred Shares held by such holder for cash at a price per Series B
Preferred Share equal to the Liquidation Amount (plus all accrued and
accumulated but unpaid dividends thereon through the date of the Put Closing) of
each Series B Preferred Share specified by such Series B Offering Holder (the
"Series B Put Price") to be repurchased by the Corporation in a written notice
delivered to the Corporation at the Corporation's principal place of business
or at such other address as the Corporation may, by written notice to all
holders of Preferred Stock, designate, specifying the number of Series B
Preferred Shares that such holder desires that the Corporation repurchase (the
"Series B Put Notice" and together with the Series A Put Notice, the "Put
Notices"). A Series B Put Notice relating to a proposed Sale of the Corporation
must be delivered not later than 10 days after the date on which the Corporation
notifies a Series A Offering Holder of a proposed Sale of the Corporation. The
A Series A Offering Holder and a Series B Offering Holder shall be referred to
herein as an "Offering Holder."
<PAGE>
C. The Corporation shall purchase, and the Offering Holder shall
sell, the number of Preferred Shares specified in the Series A Put Notice or the
Series B Put Notice, as the case may be, at a mutually agreeable place (the "Put
Closing") (i) on a date that is not later than thirty days after the delivery of
the Series A Put Notice or the Series B Put Notice, as the case may be, in the
case of the exercise of a put right pursuant to Section 5A(ii) or 5B(ii) or (ii)
immediately prior to the consummation of the Sale of the Corporation in the case
of the exercise of a put right pursuant to Section 5A(i) or 5B(i); provided,
however, the Corporation shall not be obligated to purchase any Preferred Shares
upon exercise of the rights specified in Sections 5A(i) and 5B(i) if the related
proposed Sale of the Corporation is not consummated; and provided further that
if, other than in connection with a Sale of the Corporation, the Corporation is
prohibited by law from repurchasing any Preferred Shares or if any such
repurchase would result in a default under any Financing Documents, then the
Corporation may defer such repurchase until such prohibitions no longer exist or
such default would no longer occur. The Corporation shall use its commercially
reasonable efforts to obtain any consent necessary to permit such payments. In
the event the Corporation is prohibited by law or any Financing Document from
repurchasing all of the Preferred Shares as to which Put Notices have been
given, the Corporation shall repurchase the maximum number of Preferred Shares
which it is permitted to repurchase without violating such laws or creating a
default under such Financing Documents, selected from among the Preferred Shares
held by all Offering Holders pro rata in proportion to the aggregate Series A
Put Price or Series B Put Price, as the case may be, payable in respect of all
of the Preferred Shares specified in the respective Put Notices of each such
Offering Holder.
D. At any Put Closing, each Offering Holder shall deliver to the
Corporation certificates representing the Preferred Shares to be repurchased by
the Corporation from such Offering Holder and the Corporation shall deliver to
such Offering Holder:
(a) the Series A Put Price or the Series B Put Price, as the case
may be, for each Preferred Share to be purchased by the Corporation by cashier's
or certified check payable to such Offering Holder or by wire transfer of
immediately available funds to an account designated by such Offering Holder;
and
(b) a certificate representing any Preferred Shares which were
represented by the certificate or certificates delivered to the Corporation in
connection with such Put Closing but which were not purchased at the Put
Closing.
Section 6. Redemptions at the Option of the Corporation.
A. The Corporation may at any time redeem all or any portion of the
Series B Preferred Shares then outstanding. On any such redemption, the
Corporation shall pay a purchase price per Series B Preferred Share equal to the
Series B Put Price as of the date of the redemption. Any redemption of less than
all of the Series B Preferred Shares shall be made pro
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rata from all holders of Series B Preferred Shares in proportion to their
respective Series B Put Price.
B. At any time after the fifth anniversary of the Closing Date, the
Corporation may redeem all or any portion of the Series A Preferred Shares then
outstanding. On any such redemption, the Corporation shall pay a purchase price
per Series A Preferred Share equal to the Series A Put Price as of the date of
the redemption. Any redemption of less than all of the Series A Preferred
Shares shall be made pro rata from all holders of Series A Preferred Shares in
proportion to their respective Series A Put Price.
C. The Corporation shall mail written notice of each redemption of
any Preferred Shares to each record holder thereof not more than 60 days nor
less than 10 days prior to the date on which such redemption is to be made. In
case fewer than the total number of Preferred Shares represented by any
certificate are redeemed, a new certificate representing the number of
unredeemed Preferred Shares of the same series shall be issued to the holder
thereof without cost to such holder within ten business days after surrender of
the certificate representing the redeemed Preferred Shares.
D. Any Preferred Shares which are redeemed or otherwise acquired by
the Corporation shall be canceled and shall not be reissued, sold or
transferred.
Section 7. Anti-Dilution Provisions.
A. Subdivision or Combination of Class A Common Stock. If the
Corporation at any time (i) subdivides (by any stock split, stock dividend,
recapitalization or otherwise) shares of Class A Common Stock into a larger
number of shares of (ii) combines (by reverse stock split or otherwise) shares
of Class A Common Stock into a smaller number of shares, then the Series A
Preferred Shares shall be subdivided or combined, as the case may be, in the
same manner and the Liquidation Value (and all accrued and accumulated but
unpaid dividends thereon) shall be reduced proportionately or increased
proportionately, as the case may be, in good faith by the Board of Directors of
The Corporation.
B. Issuance of Shares of Class A Common Stock below Fair Market
Value. In the event that prior to the first anniversary of the Closing Date the
Corporation issues (i) Common Stock for less than its fair market value, or (ii)
rights to acquire Common Stock for an exercise conversion price less than the
fair market value of the Common Stock to be acquired, in each case as determined
in good faith by the independent auditors of the Corporation, the number of
shares into which each Series A Preferred Share may be converted under clause
(ii) of Sections 4A and 4C hereof shall be adjusted under customary
weighted-average antidilution provisions applicable to convertible instruments
of this type so that the fair market value of the Conversion Element after
taking into account such issuance is the same as prior to such issuance. Any
application of the adjustment required hereunder shall be made by unanimous vote
of the Board of Directors acting in good faith. This Section 7B shall not apply
to any issuances to
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which Section 7A applies, to any issuances to which the preemptive rights under
Section 12(a) of the Shareholders' Agreement do not apply, to any issuances of
Class B Common Stock pursuant to the Exchange Agreement, or to any issuances of
Class A Common Stock pursuant to the exercise of the Redemption Right.
PART C COMMON STOCK
Except as otherwise provided in this Part C or in Part D of this
ARTICLE FOUR or as otherwise required by applicable law, all shares of Common
Stock shall be identical in all respects and shall entitle the holders thereof
to the same rights and privileges, subject to the same qualifications,
limitations and restrictions.
Section 1. Voting Rights. Except as otherwise required by applicable
law as provided herein, holders of the Class A Common Stock shall be entitled to
one vote per share on all matters to be voted on by the stockholders of the
Corporation and shall vote together as one class with the holders of Series A
Preferred Stock, and the holders of Class B Common Sock shall not be entitled to
voting rights.
Section 2. Conversion of Class B Common Stock.
A. A holder of shares of Class B Common Stock (a "Converting Holder")
acquired as a result of the exercise of rights by another Person under Section
10(a) of the Shareholders' Agreement to sell the Selling Percentage (as defined
in the Shareholders' Agreement) of Class B Common Stock shall have the right to
convert each share of Class B Common Stock so acquired into Class A Common Stock
in accordance with the provisions of this Section 2A. The Converting Holder
shall receive in exchange for each share of Class B Common Stock a number of
shares of Class A Common Stock having the value equal to the price paid for such
Class B Common Stock by the Converting Holder (which, for this purpose, shall
not exceed the Implied Class B Purchase Price (as defined in the Shareholders'
Agreement) of such stock); the value of a share of Class A Common Stock for this
purpose shall equal the price paid by the Converting Holder for each share of
Class A Common Stock acquired by the Converting Holder in the transaction in
which such Class B Common Stock was acquired. A Converting Holder may exercise
the foregoing conversion right at any time within six (6) months after such
Class B Common Stock is acquired by providing written notice of such conversion
to the Corporation.
B. Immediately prior to the effectiveness of an Initial Public
Offering, each share of Class B Common Stock shall be converted into such number
of shares of Class A Common Stock determined by dividing (i) the amount that the
holder of such Class B Common Stock would have received had the Company made
liquidation distributions pursuant to Part D of Article Four of the Certificate
of Incorporation in an amount equal to the aggregate fair market value of the
capital stock of the Company immediately prior to the effectiveness of such
Initial Public Offering implied from the price and amount of equity securities
to be sold in the Initial
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Public Offering by (ii) the price per share to be received by the Company in the
Initial Public Offering (adjusted so as to eliminate the effect of any stock
splits or similar transaction which will occur in connection with such Initial
Public Offering).
C. Except as otherwise provided herein, each conversion of Class B
Common Stock pursuant to Section 2A or Section 2B hereof shall be deemed to have
been effected as of the close of business on the date on which the certificate
or certificates representing the Class B Common Stock to be converted have been
surrendered for conversion at the principal office of the Corporation. At the
time any such conversion has been effected, the rights of the holder of the
Class B Common Stock converted as a holder of Class B Common Stock shall cease
and if applicable, the Person or Persons in whose name or names any certificate
or certificates for shares of Class A Common Stock are to be issued upon such
conversion shall be deemed to have become the holder or holders of record of the
shares of Class A Common Stock represented thereby.
D. As soon as possible after a conversion pursuant to Section 2A or
Section 2B hereof has been effected (but in any event within five business
days), the Corporation shall deliver to the converting holder:
(a) a certificate or certificates representing the number of
shares of Class A Common Stock issuable by reason of such conversion in such
name or names and such denomination or denominations as the converting holder
has specified; and
(b) a certificate representing any shares of Class B Common Stock
which were represented by the certificate or certificates delivered to the
Corporation in connection with such conversion but which were not converted.
E. The issuance of certificates for shares of Class A Common Stock
upon conversion of Class B Common Stock pursuant to Section 2A or Section 2B
hereof shall be made without charge to the holders of such Class B Common Stock
for any issuance tax in respect thereof or other cost incurred by the
Corporation in connection with such conversion and the related issuance of
shares of Class A Common Stock. Upon conversion of each share of Class B Common
Stock pursuant to Section 2A or Section 2B hereof, the Corporation shall take
all such actions as are necessary in order to insure that the Class A Common
Stock issuable with respect to such conversion shall be validly issued, fully
paid and nonassessable, free and clear of all taxes, liens, charges and
encumbrances with respect to the issuance thereof.
F. The Corporation shall assist and cooperate with any holder of
Shares required to make any governmental filings or obtain any governmental
approval prior to or in connection with any conversion of shares of Class B
Common Stock hereunder (including, without limitation, making any filings
required to be made by the Corporation).
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G. All shares of Class A Common Stock which are so issuable shall,
when issued, be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens, charges and encumbrances. The Corporation shall take all
such actions as may be necessary to assure that all such shares of Class A
Common Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Class A Common Stock may be listed (except for official
notice of issuance which shall be immediately delivered by the Corporation upon
each such issuance). The Corporation shall not take any action which would cause
the number of authorized but unissued shares of Class A Common Stock to be less
than the number of such shares required to be reserved hereunder for issuance
upon conversion of the Class B Common Stock pursuant to Section 2A and Section
2B hereof.
H. The Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Class A Common Stock, solely for the
purpose of issuance upon the conversion of the Class B Common Stock pursuant to
this Section 2, such number of shares of Class A Common Stock issuable upon the
conversion of all outstanding shares of Class B Common Stock. All shares of
Class A Common Stock which are so issuable shall, when issued, be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges. The Corporation shall take all such actions as may be necessary to
assure that all such shares of Class A Common Stock may be so issued without
violation of any applicable law or governmental regulation or any requirements
of any domestic securities exchange upon which shares of Class A Common Stock
may be listed (except for official notice of issuance which shall be
immediately delivered by the Corporation upon each such issuance). The
Corporation shall not take any action which would cause the number of authorized
but unissued shares of Class A Common Stock to be less than the number of such
shares required to be reserved hereunder for issuance upon conversion of the
Class B Common Stock pursuant to this Section 2.
Part D Distribution Rights and General Terms
Section 1. Distributions. At the time of each Distribution, such
Distribution shall be made to the holders of Shares in the following priority:
A. The holders of Series A Preferred Stock and Series B Preferred
Stock, together as a group, shall be entitled to receive the entirety of such
Distribution (ratably among such holders based upon the aggregate amount of
accrued and accumulated but unpaid dividends on the Preferred Shares held by
each such holder as of the time of such Distribution) up to an amount equal to
the aggregate accrued and accumulated but unpaid dividends on the outstanding
shares of Series A Preferred Stock and Series B Preferred Stock, respectively,
as of the time of such Distribution, and no Distribution or any portion thereof
shall be made under Sections 1B and 1C below until the entire amount of accrued
and accumulated but unpaid dividends on the outstanding shares of Series A
Preferred Stock and Series B Preferred Stock, respectively, as of the time of
such Distribution has been paid in full.
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B. After the aggregate accrued and accumulated but unpaid dividends
on the outstanding Preferred Shares has been paid in full pursuant to Section 1A
above, the holders of Series A Preferred Stock and Series B Preferred Stock,
together as a group, shall be entitled to receive all or a portion of any
Distribution (ratably among such holders based upon the aggregate amount of
Liquidation Value and Liquidation Amount of the Preferred Shares held by each
such holder as of the time of the Distribution) equal to the aggregate
Liquidation Value and the aggregate Liquidation Amount of the outstanding Series
A Preferred Shares and Series B Preferred Shares, respectively, as of the time
of such Distribution (with the holders of Series A Preferred Shares entitled to
receive the aggregate Liquidation Value of such Series A Preferred Shares and
the holders of Series B Preferred Shares entitled to receive the aggregate
Liquidation Amount of such Series B Preferred Shares) less amounts previously
paid under this Section 1B, if any. No Distribution or any portion thereof shall
be made under Section 1C below until the entire amount of the Liquidation Value
and Liquidation Amount of the outstanding Preferred Shares as of the time of
such Distribution has been paid in full.
C. After the amounts required to be paid pursuant to Sections 1A and
1B above have been paid in full, the remainder of a Distribution (if any) shall
be distributed as follows:
(a) first, 100% to the holders of the outstanding Class A Common Stock and
the holders of the Series A Preferred Stock (ratably among such
holders based on the Unpaid Acquisition Cost of each such holder until
such time as each such holder shall have received its Unpaid
Acquisition Costs);
(b) second, 100% to the holders of the outstanding Class B Common Stock
(ratably among such holders based on the number of shares of Class B
Common Stock held by each such holder) until such time as each such
holder shall have received $1,000 (subject to adjustment by the Board
of Directors of the Corporation for stock splits, stock dividends,
reverse stock splits and other similar transactions) for each share of
Class B Common Stock held by such holder less any amounts previously
distributed under this clause (b);
(c) third, 100% to the holders of the outstanding Class A Common Stock and
the holders of the Series A Preferred Stock (ratably among such
holders based on the number of shares of Deemed Common Stock,
respectively, represented by the shares held by each such holder)
until such time as each such holder shall have received an IRR equal
to 25% in respect of all of the shares of Class A Common Stock and
Series A Preferred Shares held by such holder;
(d) fourth, 100% to the holders of the outstanding Class B Common Stock
(ratably among such holders based on the number of shares of Class B
Common Stock held by each such holder) until such time as each such
holder shall have received
12
<PAGE>
an IRR equal to 20% in respect of all of the shares of Class B Common
Stock held by such holder on the date of determination; and
(e) fifth, 100% to the holders of the outstanding Common Stock and Series A
Preferred Stock (ratably among such holders based on the number of
shares of Deemed Common Stock, respectively, represented by the shares
held by each such holder).
Section 2. Stock Splits and Stock Dividends. The Corporation shall
not in any manner subdivide (by stock split, stock dividend, merger,
consolidation or otherwise) or combine (by reverse stock split, stock dividend,
merger, consolidation or otherwise) any of the outstanding shares of Class A
Common Stock unless all shares of Class A Common Stock, are to be
proportionately subdivided or combined. The Corporation shall not in any manner
subdivide (by stock split, stock dividend, merger, consolidation or otherwise)
or combine (by reverse stock split, stock dividend, merger, consolidation or
otherwise) any of the outstanding Series A unless all shares of Class A Common
Stock, are to be proportionately subdivided or combined. All such subdivisions
and combinations of Common Stock shall be payable to the holders of Class A
Common Stock only in Class A Common Stock. All subdivisions and combinations of
Preferred Stock shall be payable to the holders of Series A Preferred Stock only
in Series A Preferred Stock. In no event shall a stock split or stock dividend
constitute a payment of Liquidation Value (or accrued but unpaid dividends
thereon) or Liquidation Amount (or accrued but unpaid dividends thereon).
Section 3. Registration of Transfer. The Corporation shall keep at
its principal office (or such other place as the Corporation reasonably
designates) a register for the registration of Shares. Upon the surrender of any
certificate representing shares of any class of Shares at such place, the
Corporation shall, at the request of the registered holder of such certificate,
execute and deliver a new certificate or certificates in exchange therefor
representing in the aggregate the number of shares of such class represented by
the surrendered certificate, and the Corporation forthwith shall cancel such
surrendered certificate. Each such new certificate will be registered in such
name and will represent such number of shares of such class as is requested by
the holder of the surrendered certificate and shall be substantially identical
in form to the surrendered certificate. The issuance of new certificates shall
be made without charge to the holders of the surrendered certificates for any
issuance tax in respect thereof or other cost incurred by the Corporation in
connection with such issuance.
Section 4. Replacement. Upon receipt of evidence reasonably
satisfactory to the Corporation (an affidavit of the registered holder will be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing one or more shares of any class of Shares, and in
the case of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Corporation (provided that if the holder is a
financial institution or other institutional investor its own agreement will be
satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and
13
<PAGE>
deliver in lieu of such certificate a new certificate of like kind representing
the number of shares of such class represented by such lost, stolen, destroyed
or mutilated certificate and dated the date of such lost, stolen, destroyed or
mutilated certificate, and with respect to Preferred Stock, dividends shall
accrue on the Preferred Stock represented by such new certificate from the date
to which dividends have been fully paid on such lost, stolen, destroyed or
mutilated certificate.
Section 5. Notices. Except as otherwise expressly provided
hereunder, all notices referred to herein shall be in writing and shall be
delivered by registered or certified mail, return receipt requested and postage
prepaid, or by reputable overnight courier service, charges prepaid, and shall
be deemed to have been given when so mailed or sent (i) to the Corporation, at
its principal executive offices and (ii) to any stockholder, at such holder's
address as it appears in the stock records of the Corporation (unless otherwise
indicated by any such holder).
Section 6. Amendment and Waiver. No amendment or waiver of any
provision of this ARTICLE FOUR shall be effective without the prior written
consent of the holders of a majority of the then outstanding Shares with voting
power voting as a single class; provided that no amendment as to any terms or
provisions of, or for the benefit of, any class or series of Shares that
adversely affects the powers, preferences or special rights of such class or
series of Shares shall be effective without the prior consent of the holders of
a majority of the then outstanding shares of such affected class or series of
Shares, voting as a single class; provided further, that no amendment which
treats holders of the same class or series differently shall be effective
without the prior consent of the holders of a majority of the then outstanding
shares of each such group within the class or series which is treated
differently, each voting as a separate class; and, provided further, that no
amendment of the terms or provisions of any class or series of Shares which
adversely affects the powers, preferences or special rights of any other class
or series of Shares (not including any such effects resulting solely from the
issuance of a new class or series of Shares) shall be effective without the
prior consent of the holders of a majority of the then outstanding shares of
such affected class or series of Shares, voting as a single class.
PART E DEFINITIONS
"Approved Sale" shall have the same meaning as in the Shareholders'
Agreement.
"Closing Date" means the date on which the closing of the transactions
contemplated by the Recapitalization Agreement occurs.
"Conversion Element" means the right to convert Series A Preferred
Shares under clause (ii) of Section 4A of Part B of this ARTICLE FOUR or under
clause (ii) of Section 4C of Part B of this ARTICLE FOUR.
"Corporation" means the Derby Cycle Corporation.
14
<PAGE>
"Deemed Common Stock" has the meaning given such term in the
Shareholders' Agreement.
"Distribution" means each distribution made by the Corporation to
holders of Shares, whether in cash, property, or securities of the Corporation
and whether by dividend, liquidating distributions or otherwise; provided that
neither of the following shall be a Distribution: (a) any redemption or
repurchase by the Corporation of any Shares pursuant to Section 4 or Section 5
of Part B of this ARTICLE FOUR or (b) any recapitalization or exchange of any
Shares, or any subdivision (by stock split, stock dividend or otherwise) or any
combination (by reverse stock split, stock dividend or otherwise) of any
outstanding Shares.
"Exchange Agreements" means the Exchange Agreements as defined in the
Recapitalization Agreement.
"Fair Market Value" means (1) with respect to a convention pursuant to
Section 4B of Part B of this ARTICLE FOUR, in the event of an Initial Public
Offering in which equity securities of the Corporation are offered and sold to
the public pursuant to an effective registration statement under the Securities
Act of 1933, as amended (the "Securities Act"), the price per share at which the
IPO Stock is offered to the public in the Initial Public Offering, (2) with
respect to an Initial Public Offering other than as described in clause (1)
above, the last sale price of the IPO Stock prior to the close of business on
the date of determination on the principal national securities exchange where
the IPO Stock is traded or, if not traded on a national securities exchange, the
average of the highest bid and lowest asked prices for the IPO Stock on the
NASDAQ National Market (if the IPO Stock is listed on the NASDAQ National
Market) or another automated quotation system (if the IPO Stock is not listed on
the NASDAQ National Market) on the date of determination (or if such date is not
a trading day, the last trading day prior to the date of determination), and (3)
with respect to a conversion pursuant to Section 4D or Section 4E of Part B of
this ARTICLE FOUR, the price per share of Class A Common Stock to be sold
pursuant to the provision of Section 10(a) of the Shareholders' Agreement or the
Approved Sale, as the case may be.
"Financing Documents" has the meaning given such term in the
Recapitalization Agreement.
"General Corporation Law" means the General Corporation Law of the State
of Delaware, as amended from time to time.
"Initial Public Offering" means a public offering and sale of the
Corporation's common equity securities, other than in connection with a business
combination with or acquisition of any other Person (unless, upon consummation
of such business combination or acquisition, the holders of Series A Preferred
Stock are eligible to sell to the public at least 25% of the Deemed Common Stock
then held by them pursuant to sales within nine months after the effective date
of such business combination or acquisition, pursuant to Rule 144 under such
15
<PAGE>
Securities Act), representing not less than 25% of the outstanding capital stock
of the Corporation on a fully diluted basis (i) pursuant to an effective
registration statement under the Securities Act of 1933, as amended, if
immediately thereafter the Corporation has publicly held equity securities
listed on a national securities exchange or the NASD automated quotation system
or (ii) made on any recognized stock exchange in any country which is a member
of the Organization of Economic Cooperation and Development. An Initial Public
Offering shall also be deemed to occur on the date on which the holders of
Series A Preferred Stock have the right to sell a number of shares of Common
Stock pursuant to registration statements effective under the Securities Act
which equals at least 25% of the Deemed Common Stock owned by such holders
immediately after the first sale of Common Stock to the public pursuant to an
effective registration statement under the Securities Act (after eliminating the
effect of any subsequent stock split, subdivision or combination of stock
dividends in respect of such Common Stock).
"IRR" means, with respect to any Share, the annual interest rate
(compounded annually) which when used to calculate the net present value as of
the Closing Date of all Payment Inflows received by a holder of such Share in
respect of such Share as of the date of determination causes the difference
between such net present value and all Payment Outflows made in respect of such
Share as of such date of determination to equal zero. The IRR shall be
determined by the Company's regular outside accounting firm.
"Junior Securities" means the Common Stock and any other capital stock
or other equity securities of the Corporation, other than the Preferred Stock.
"Liquidation Amount" of any Series B Preferred Share as of any
particular date shall be equal to $1,000./1/
"Liquidation Value" of any Series A Preferred Share as of any
particular date shall be equal to $1,000./2/
"Payment Inflows" means, with respect to any Share and as of the date
of determination, the sum of (i) all payments of cash and cash equivalents
made by the Corporation prior to and through and including such date of
determination in respect of such Share (excluding, for this purpose, any
payments made pursuant to Sections 1A or 1B of Part D of this Article FOUR) and
(ii) the fair market value (determined in good faith by the independent auditors
of the Corporation) of any property (other than cash or cash equivalents and
Qualified Company Securities) distributed by the Corporation prior to and
through and including such date of determination in respect of such Share
(excluding, for this purpose, any property distributed pursuant to Section 1A or
1B of Part D of this Article FOUR).
______________________
/1/The aggregate amount of the Liquidation Amount is to be $3 million.
/2/The aggregate amount of the Liquidation Value is to be $25 million.
16
<PAGE>
"Payment Outflows" means, with respect to any Share, the purchase price
paid in cash or cash equivalents in respect of such Share (for this purpose, the
cash purchase price paid in respect of (i) any share of Class A Common Stock
issued on or prior to the Closing Date, (ii) any share of Class A Common Stock
issued upon conversion of a Series A Preferred Share under clause (ii) of
Section 4A or clause (ii) of Section 4C of Part B hereof, (iii) any share of
Class A Common Stock issuable under clause (i) of Sections 4A, 4B, 4C and 4D of
Part B hereof, shall be deemed to be $1,000 per share and (iv) any share of
Class A Common Stock or Class B Common Stock issued in exchange for a Senior RIC
Share shall be deemed to be $1,000 per share (subject, in each case, to
adjustment by the Board of Directors of the Corporation for stock splits, stock
dividends, reverse stock splits and other similar transactions)).
"Person" means an individual, a partnership, a corporation, a limited
liability company, a limited liability, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization or a governmental
entity or any department, agency or political subdivision thereof.
"Qualified Company Securities" means securities of the Company received as
a result of (i) conversions of securities provided for in this Certificate of
Incorporation, (ii) adjustments under Section 7A or 7B of Part B of ARTICLE FOUR
hereof, and (iii) stock dividends, stock splits, combinations, subdivision, or
reclassifications and similar distributions of Common Stock which apply to all
holders of the class of Common Stock receiving such distributions.
"Recapitalization Agreement" means the certain Recapitalization Agreement
entered into by and among the Corporation, Derby International Corporation S.A.
(a societe anonyme under Luxembourg law), DC Cycle, L.L.C. (a Delaware limited
liability company), Derby Finance S.a.r.l. (a societe a responsibilite limitee
under Luxembourg law) and Perseus Cycle, L.L.C. (a Delaware limited liability
company) as of March 11, 1998, as amended.
"Redemption Right" has the meaning given such term in the Shareholders
Agreement.
"Sale of the Corporation" means any transaction or series of transactions
pursuant to which any Person or Persons acquires (i) capital stock of the
Corporation possessing voting power under normal circumstances to elect a
majority of the Corporation's Board of Directors (whether by merger,
consolidation or sale or transfer of the Corporation's capital stock) or (ii)
all or substantially all of the Corporation's assets determined on a
consolidated basis; provided that a Sale of the Corporation shall not be deemed
to occur unless it will result in a "Change of Control" as that term is defined
in that certain Indenture dated May 14, 1998, entered into among the Company,
Lyon Investments B.V. and IBJ Schroder Bank and Trust Company, as Trustee.
"Securities Act" means the Securities Act of 1933, as amended.
17
<PAGE>
"Senior RIC Share" has the meaning assigned to such term in the Exchange
Agreements.
"Shareholders' Agreement" means that certain Shareholders' Agreement
dated May 14, 1998, by and among the Corporation, DC Cycle, L.L.C., Derby
Finance S.a.r.l and Perseus Cycle, L.L.C.
"Subsidiary" means any corporation of which a majority of the shares of
outstanding capital stock possessing the voting power (under ordinary
circumstances) in electing the Board of Directors are, at the time as of which
any determination is being made, owned by the Corporation either directly or
indirectly.
"Unpaid Acquisition Costs" in the case of a holder of shares of Class A
Common Stock and/or Series A Preferred Shares and as of the date of any
Distribution shall mean (a) the sum of (i) $1,000 for each share of Class A
Common Stock outstanding on the Closing Date or issued pursuant to the Exchange
Agreements and the amount paid for each share of Class A Common Stock issued
after the Closing Date (other than shares referred to in clause (iii) of this
definition) which is held by such holder on such date (regardless of when
acquired), (ii) $500 for each Series A Preferred Share outstanding on the
Closing Date and one-half of the fair market value (as determined in good faith
by the independent auditors of the Corporation) of a share of Class A Common
Stock for and as of each Series A Preferred Share issued after the Closing Date
which is held by such holder on such date and (iii) with respect to a share of
Class A Common Stock held by such holder on such date and acquired by such
holder pursuant to clause (ii) of Section 4B and Section 4D of Part B of this
ARTICLE FOUR, the aggregate Liquidation Value of the Series A Preferred Shares
converted into such shares of Class A Common Stock (plus all accrued and
accumulated but unpaid dividends thereon) as of the date of conversion less (b)
all amounts distributed to such holder (including amounts distributed to any
predecessor holders of such shares of Class A Common Stock or Series A Preferred
Shares) prior to such date under clause (a) of Section 1C of Part D of this
ARTICLE FOUR.
ARTICLE FIVE
The Corporation is to have perpetual existence.
ARTICLE SIX
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the Corporation is expressly authorized to make, alter
or repeal the by-laws of the Corporation.
18
<PAGE>
EXHIBIT 3.2
AMENDMENTS TO THE BYLAWS
OF
THE DERBY CYCLE CORPORATION
A DELAWARE CORPORATION
1. Article I of the Bylaws is hereby deleted, and replaced in its
entirety with the following:
ARTICLE I
NAME, REGISTERED OFFICE AND REGISTERED AGENT
The name of the corporation is The Derby Cycle Corporation (the
"Corporation"). The registered office of the Corporation is Corporation Trust
Center, 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801.
The initial registered agent of the Corporation is The Corporation Trust
Company.
2. Article VI of the Bylaws is hereby deleted, and replaced in its
entirety with the following:
ARTICLE VI
CHAIRMAN OF THE BOARD, OFFICERS, AGENTS, AND EMPLOYEES
SECTION 1. Chairman of the Board and Officers. The Chairman of
the Board and executive officers of the Corporation shall be chosen by the board
of directors. The officers shall include a President, a Chief Executive
Officer, a Chief Financial Officer, Vice-Presidents, Executive Directors, and a
Secretary. Other officers, assistant officers, agents and employees that the
board of directors from time to time may deem necessary may be elected by the
board or be appointed in a manner prescribed by the board. Two or more offices
may be held by the same person except that one person shall not at the same time
hold the offices of President and Secretary. Officers shall hold office until
their successors are chosen and have qualified, unless they are sooner removed
from office as provided in these bylaws.
SECTION 2. Vacancies. When a vacancy occurs in the Chairman's
post or one of the executive offices by death, resignation or otherwise, it
shall be filled by the board of directors. The officer so selected shall hold
office until his successor is chosen and qualified.
SECTION 3. Salaries. The board of directors shall fix the
salaries of the officers of the Corporation. The salaries of other agents and
employees of the Corporation may be fixed by the board of directors or by an
officer to whom that function has been delegated by the board.
SECTION 4. Resignation and Removal of Officers and Agents. Any
officer or agent of the Corporation may resign at any time by delivering a
written resignation to the board of
<PAGE>
directors, the President or the Secretary. Unless otherwise specified therein,
such resignation shall take effect upon delivery. An officer or agent of the
Corporation may be removed by a vote of the majority of directors in office
whenever, in their judgment, the best interests of the Corporation will be
served by such removal. Such removal shall be without prejudice to the contract
rights, if any, of the person so removed.
SECTION 5. Chairman of the Board of Directors. The Chairman of
the board of directors shall preside at all meetings of the board of directors
and shall perform whatever other duties the board of directors may from time to
time prescribe.
SECTION 6. President and Chief Executive Officer: Powers and
Duties. The President and Chief Executive Officer shall be the chief executive
officer of the Corporation and shall have general supervision of the business of
the Corporation. He or she shall preside at all meetings of stockholders and
discharge the duties of a presiding officer, shall attend all meetings of the
board of directors, shall present at each annual meeting of the shareholders a
report of the business of the Corporation for the preceding fiscal year, and
shall perform whatever other duties the board of directors may from time to time
prescribe.
SECTION 7. Vice-President: Powers and Duties. The Vice-President
shall have such powers and shall perform such duties as shall be assigned to him
or her by the President or the board of directors.
SECTION 8. Executive Directors: Powers and Duties. An Executive
Director shall act as a consultant to the Corporation and the board of
directors. He or she shall be allowed to attend all meetings of the directors.
SECTION 9. Secretary: Powers and Duties. The Secretary shall
attend all meetings of the directors and of the shareholders and shall keep or
cause to be kept a true and complete record of the proceedings of those
meetings. He or she shall keep the corporate seal of the Corporation and, when
directed by the board of directors, shall affix it to any instrument requiring
it. He or she shall give, or cause to be given, notice of all meetings of the
directors or of the shareholders and shall perform whatever additional duties
the board of directors and the President may from time to time prescribe.
SECTION 10. Other Officers and Agents: Powers and Duties. Subject
to Sections 6, 7, and 8 hereof, the officers, agents and employees of the
Corporation shall each have such powers and duties in the management of the
property and affairs of the Corporation, subject to the control of the board of
directors, as generally pertain to their respective offices, as well as such
powers and duties as from time to time may be prescribed by the board of
directors.
SECTION 11. Delegation of Duties. Whenever an officer is absent or
whenever for any reason the board of directors may deem it desirable, the board
may delegate the powers and duties of an officer to any other officer or
officers or to any director or directors.
<PAGE>
B Y - L A W S
of
RALEIGH INC.
ARTICLE 1
---------
NAME, REGISTERED OFFICE AND REGISTERED AGENT
--------------------------------------------
The name of the corporation is RALEIGH INC. (the "Corporation"). The
initial registered office of the Corporation is Corporation Trust Center, 1209
Orange Street, Wilmington, County of New Castle, Delaware 19801. The initial
registered agent of the Corporation is The Corporation Trust Company.
ARTICLE II
----------
FISCAL YEAR
-----------
The fiscal year of the Corporation shall begin on January 1 and end on
December 31.
ARTICLE III
-----------
SHAREHOLDERS' MEETINGS
----------------------
SECTION 1. Place of Meetings. Meetings of the shareholders shall be
-----------------
held at the registered office of the Corporation or at any other place, within
or outside the state of Delaware, as the board of directors or shareholders may
from time to time elect.
<PAGE>
-2-
SECTION 2. Annual Meeting. An annual meeting of the shareholders shall
--------------
be held on the second Friday in May of each year, if not a legal holiday, and if
a legal holiday, then on the next secular day following that which is not a
legal holiday, at three o'clock P.M., or at such other date and time as the
board of directors or shareholders may from time to time elect. The shareholders
shall elect a board of directors and transact such other business as may
properly come before the meeting. If an annual meeting has not been called and
held within six months after the close of the corporation's fiscal year, any
shareholder may call it. Shareholders of non-voting classes of stock shall be
entitled to attend all annual meetings.
SECTION 3. Special Meetings. Special meetings of the shareholders may
----------------
be called by the President, by a majority of the board of directors, or by the
holders of a majority or more of the shares outstanding and entitled to vote.
Shareholders of non-voting classes of stock shall be entitled to attend all
special meetings.
SECTION 4. Notice of Meetings. A written or printed notice of each
------------------
shareholders' meeting, stating
<PAGE>
-3-
the place, day and hour of the meeting, and in case of a special meeting the
purpose or purposes of the meeting shall be given by the Secretary or by the
person authorized to call the meeting, to each shareholder of record entitled to
vote at the meeting and to each shareholder of non-voting stock entitled to
attend the meeting. This notice shall be sent at least ten (10) days but not
more than thirty (30) days before the date named for the meeting (unless a
greater period of notice is required by law in a particular case) to each
shareholder by mail or by telegram, charges prepaid, to his address appearing on
the books of the corporation.
SECTION 5. Waiver of Notice. A shareholder, either before or after a
----------------
shareholders' meeting, may waive notice of the meeting; and his waiver shall be
deemed the equivalent of giving notice. Attendance at a shareholders' meeting,
either in person or by proxy, of a person entitled to notice shall constitute a
waiver of notice of the meeting unless he attends for the express purpose of
objecting to the transaction of business on the ground that the meeting was not
lawfully called or convened.
<PAGE>
SECTION 6. Voting Rights. Subject to the provisions of the
-------------
Corporation's Certificate of Incorporation and the law of the state of Delaware,
each holder of Common Stock in the Corporation shall be entitled at each
shareholders' meeting to one vote for every share of Common Stock standing in
his name on the books of the Corporation and each holder of Convertible
Preferred Stock in the Corporation shall be entitled at each shareholders'
meeting to one-tenth of one vote for every share of Convertible Preferred Stock
standing in his name on the books of the Corporation; but, transferees of shares
that are transferred on the books of the Corporation within ten (10) days next
preceding the date set for a meeting shall not be entitled to notice of, or to
vote at, the meeting. The Redeemable Preferred Stock of the Corporation shall be
non-voting.
SECTION 7. Proxies. A shareholder entitled to vote may vote in person
-------
or by proxy executed in writing by the shareholder or by his attorney-in-fact. A
proxy shall not be valid after eleven (11) months from the date of its execution
unless a longer period is expressly stated in it.
SECTION 8. Quorum. The presence, in person or by proxy, of the
------
holders of a majority or more of the
<PAGE>
-5-
shares outstanding and entitled to vote shall constitute a quorum at meetings of
shareholders. At a duly organized meeting stockholders present can continue to
do business until adjournment even though enough stockholders withdraw to leave
less than a quorum.
SECTION 9. Adjournments. Any meeting of shareholders may be adjourned.
------------
Notice of the adjourned meeting or of the business to be transacted there, other
than by announcement at the meeting at which the adjournment is taken, shall not
be necessary. At an adjourned meeting at which a quorum is present or
represented, any business may be transacted which could have been transacted at
the meeting originally called.
SECTION 10. Voting. At all meetings of the shareholders, except as
------
may be expressly required by statute or by the Certificate of Incorporation,
all matters shall be decided by a vote of the holders of a majority or more of
the shares outstanding and entitled to vote and present at the meeting in person
or by proxy. Shares of Common Stock held by the Corporation shall not be
entitled to vote.
<PAGE>
-6-
SECTION 11. Informal Action by Shareholders. Any action that may be
-------------------------------
taken at a meeting of shareholders may be taken without a meeting if a consent
in writing setting forth the action shall be signed by all of the shareholders
entitled to vote on the action and shall be filed with the Secretary. This
consent shall have the same effect as a unanimous vote at a shareholders'
meeting.
ARTICLE IV
----------
THE BOARD OF DIRECTORS
----------------------
SECTION 1. General Powers. The property, affairs and business of the
--------------
Corporation shall be managed by the board of directors, which may exercise all
the powers of the Corporation, whether derived from law or the Certificate of
Incorporation, except such powers which are vested solely in the shareholders of
the Corporation by statute, the Certificate of Incorporation or these By-laws.
SECTION 2. Number, Qualification and Term of Office. The authorized
----------------------------------------
number of directors shall be
<PAGE>
-7-
not less than three (3) nor more than seven (7) as the board of directors or
shareholders may form time to time determine by resolution. Whenever elected,
each director (unless he shall sooner die, resign or be removed) shall hold
office until the next annual meeting of shareholders and until his successor
shall have been elected and shall qualify. A director need not be a resident of
the state of Delaware or hold shares of stock of the Corporation.
SECTION 3. Election of Directors. Except as otherwise provided in this
---------------------
Article IV, the directors shall be elected annually at the annual meeting of the
shareholders, and shall hold office until their successors are duly elected and
qualified. All of the directors shall be nominated by the shareholders of common
stock. A separate election shall be held for each person nominated for
membership in the board of directors. Those persons who receive a majority of
the valid votes cast in favor of their election shall become directors.
SECTION 4. Registrations. Any director may resign at any time by
-------------
delivering a written resignation
<PAGE>
-8-
to either the board of directors, the President or the Secretary. Unless
otherwise specified therein, such resignation shall take effect upon delivery.
SECTION 5. Removal of Directors. Any director may be removed at any
--------------------
time, either with or without cause, by the affirmative vote of the holders of at
least a majority of the outstanding shares of common stock of the Corporation
entitled to vote for the election of such director.
SECTION 6. Vacancies and Newly-Created Directorships. Vacancies in
-----------------------------------------
the board of directors, including those created by an increase in the number of
directors by amendment to these By-laws, may be filled by a vote of a majority
of the directors than in office, though less than a quorum. The directors so
chosen shall hold office until the next annual meeting of shareholders or a
special meeting called earlier for that purpose, and until their successors
shall be duly elected and qualified.
SECTION 7. Reliance on Accounts and Reports. A director, in the
--------------------------------
performance of his duties, shall be
<PAGE>
- 9 -
fully protected in relying in good faith on the books and accounts or reports
made to the Corporation by any of its officers, or by any independent certified
public accountant, or by an appraiser selected with reasonable care by the board
of directors, or in relying in good faith upon other records of the Corporation.
SECTION 8. Compensation. Directors shall not receive a salary for
------------
their services as directors: but, by resolution of board of directors, a fixed
sum and expenses of attendance may be allowed for attendance at each meeting of
the board. A director may serve the Corporation in a capacity other than that of
director and receive compensation for the services rendered in that other
capacity.
SECTION 9. Interested Directors: Quorum. No contract or transaction
----------------------------
between the Corporation and one or more of its directors or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors are directors or officers or
have a financial interest, shall be void or avoidable solely for this reason, or
<PAGE>
- 10 -
solely because the director is present at or participates in the meeting of the
board of directors which authorized the contract or transaction, or solely
because his or their votes are counted for such purposes, if: (a) the material
facts as to his relationship or interest and as to the contract or transaction
are disclosed or are known to the board of directors and the board in good faith
authorizes the contract or transaction by the affirmative vote of a majority of
the disinterested directors, even though the disinterested directors be less
than a quorum, or (b) the material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the shareholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the shareholders, or (c) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified by the board of directors or the shareholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the board of directors which authorizes the contract or transaction.
<PAGE>
-11-
ARTICLE V
---------
Meetings of the Board
---------------------
SECTION 1. Annual and Regular Meetings. The annual meeting of the
---------------------------
board of directors for election of officers and for the transaction of such
other business as may come before the meeting may be held in each year
immediately after the annual meeting of the shareholders at the place of such
annual meeting of shareholders, and notice of such annual meeting of the board
of directors shall not be required to be given, provided, however, that such
annual meeting may be held at such other time and place as may be fixed by
written consent of all the directors. The board of directors from time to time
may provide by resolution for the holding of regular meetings and fix the time
and place (which may be within or outside the State of Delaware) thereof. Notice
of such regular meetings need not be given, provided that in case the board of
directors shall fix or change the time or place of regular meetings, notice of
such actions shall be mailed promptly to each director who shall not have been
present at the meeting at which such action was taken, addressed to him at his
residence or usual place of business.
<PAGE>
- 12 -
SECTION 2. Special Meetings: Notice. Special meetings of the board of
------------------------
directors may be convened by the Chairman of the board of directors and shall be
held whenever called by the President, a Vice President, the Secretary, or by
two (2) or more directors, at such time and place (which may be within or
outside of the state of Delaware) as may be specified in the respective notices
or waivers of notice thereof. At least ten (10) days before the date on which a
special meeting is to be held, notice of the meeting, stating the time and
place thereof, shall be given to each director in person, by telephone, by
telex, by postal delivery or by telefax or other electronic means. Notice of any
special meeting need not be given to any director who shall attend such meeting
in person, unless such director attends for the express purpose of objecting to
the transaction of business on the ground that the meeting was not lawfully
called or convened, or to any director who shall waive notice of such meeting in
writing, whether before or after the time of such meeting, and any business may
be transacted thereat. No notice need be given of any adjourned meeting.
<PAGE>
- 13 -
SECTION 3. Quorum: Vote Required for any Action. At all meetings of
-------------------------------------
the board of directors the presence of a majority of the directors in office
shall be necessary to constitute a quorum for the transaction of business, and
the affirmative vote of a majority of the directors present at the meeting shall
be necessary for the taking of any action whatsoever, except that, if a quorum
shall not be present at any meeting, a majority of the directors present may
adjourn the meeting, from time to time, until a quorum shall be present.
SECTION 4. Adjournment. A meeting of the board of directors may be
-----------
adjourned. Notice of the adjourned meeting or of the business to be transacted
there, other than by announcement at the meeting at which the adjournment is
taken, shall not be necessary. At an adjourned meeting at which a quorum is
present, any business may be transacted which could have been transacted at the
meeting originally called.
SECTION 5. Informal Action. If all the directors severally or
---------------
collectively consent in writing to any
<PAGE>
- 14 -
action taken or to be taken by the Corporation and the writing or writings
evidencing their consent are filed with the Secretary, the action shall be as
valid as though it had been authorized at a meeting of the board.
ARTICLE VI
----------
CHAIRMAN OF THE BOARD, OFFICERS, AGENTS, AND EMPLOYEES
------------------------------------------------------
SECTION 1. Chairman of the Board and Officers.
----------------------------------
The Chairman of the Board and executive officers of the Corporation shall be
chosen by the board of directors. The officers shall include a President, Vice
President and Secretary. Other officers, assistant officers, agents and
employees that the board of directors from time to time may deem necessary may
be elected by the board or be appointed in a manner prescribed by the board.
Two or more offices may be held by the same person except that one person shall
not at the same time hold the offices of President and Secretary. Officers
shall hold office until their successors are chosen and have qualified, unless
they are sooner removed from office as provided in these By-laws.
<PAGE>
- 15 -
SECTION 2. Vacancies. When a vacancy occurs in the Chairman's post
---------
or one of the executive offices by death, resignation or otherwise, it shall be
filled by the board of directors. The officer so selected shall hold office
until his successor is chosen and qualified.
SECTION 3. Salaries. The board of directors shall fix the salaries
--------
of the officers of the Corporation. The salaries of other agents and employees
of the Corporation may be fixed by the board of directors or by an officer to
whom that function has been delegated by the board.
SECTION 4. Resignation and Removal of Officers and Agents. Any
----------------------------------------------
officer or agent of the Corporation may resign at any time by delivering a
written resignation to the board of directors, the President or the Secretary.
Unless otherwise specified therein, such resignation shall take effect upon
delivery. An officer or agent of the Corporation may be removed by a vote of
the majority of directors in office whenever in their judgment the
<PAGE>
- 16 -
best interests of the Corporation will be served by the removal. The removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
SECTION 5. Chairman of the Board of Directors.
----------------------------------
The Chairman of the board of directors shall preside at all meetings of the
board of directors and shall perform whatever other duties the board of
directors may from time to time prescribe.
SECTION 6. President: Powers and Duties.
-----------------------------
The President shall be the chief executive officer of the Corporation and shall
have general supervision of the business of the Corporation. He shall preside
at all meetings of stockholders and discharge the duties of a presiding officer,
shall attend all meetings of the board of directors, shall present at each
annual meeting of the shareholders a report of the business of the Corporation
for the preceding fiscal year, and shall perform whatever other duties the board
of directors may from time to time prescribe.
<PAGE>
-17-
SECTION 7. Vice President: Powers and Duties. The Vice President shall
----------------------------------
have such powers and shall perform such duties as shall be assigned to him by
the President or the board of directors.
SECTION 8. Secretary: Powers and Duties. The secretary shall attend
-----------------------------
all meetings of the directors and of the shareholders and shall keep or cause to
be kept a true and complete record of the proceedings of those meetings. He
shall keep the corporate seal of the Corporation, and when directed by the board
of directors, shall affix it to any instrument requiring it. He shall give, or
cause to be given, notice of all meetings of the directors or of the
shareholders and shall perform whatever additional duties the board of directors
and the President may from time to time prescribe.
SECTION 9. Other Officers and Agents: Powers and Duties. Subject to
--------------------------------------------
Sections 6, 7 and 8, the officers, agents and employees of the Corporation shall
each have such powers and duties in the management of the property and affairs
of the Corporation, subject to the control of the board of directors, as
generally pertain to their
<PAGE>
-18-
respective offices, as well as such powers and duties as from time to time may
be prescribed by the board of directors.
SECTION 10. Delegation of Duties. Whenever an officer is absent or
--------------------
whenever for any reason the board of directors may deem it desirable, the board
may delegate the powers and duties of an officer to any other officer or
officers or to any director or directors.
ARTICLE VII
-----------
SHARE CERTIFICATES AND THE TRANSFER OF SHARES
---------------------------------------------
SECTION 1. Share Certificates. The share certificates shall be in a
------------------
form approved by board of directors. Each certificate shall be signed by the
President and Secretary, and shall be stamped with the corporate seal. Each
certificate shall bear a legend disclosing restrictions on transfer as may be
agreed by the Corporation and its shareholders under the terms of such separate
shareholder agreements as they may enter into from time to time.
<PAGE>
-19-
SECTION 2. Registered Shareholders. The Corporation shall be
-----------------------
entitled to treat the holder of record of shares as the holder in fact and,
except as otherwise provided by the laws of the State of Delaware, shall not be
bound to recognize any equitable or other claim to or interest in the shares.
SECTION 3. Transfers of Shares. Shares of the Corporation shall only
-------------------
be transferred on its books upon the surrender to the Corporation of the share
certificates duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer. In that event, the surrendered certificates
shall be cancelled, new certificates issued to the person entitled to them, and
the transaction recorded on the books of the Corporation. Shares shall only be
transferred on the books of the Corporation if the Corporation is satisfied that
such transfer is in compliance with the terms of any shareholder agreement
restricting transfers between the Corporation and its shareholders.
SECTION 4. Record Date. The board of directors may fix in advance a
-----------
date, not exceeding ten (10) days
<PAGE>
-20-
preceding the date of any meeting of shareholders, or the date for the payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, as a
record date for the determination of the shareholders entitled to a notice of,
and to vote at, any such meeting and any adjournment thereof, or entitled to
receive payment of any such dividend, or to any such allotment of rights, or to
exercise the rights in respect of any such change, conversion or exchange of
capital stock. In such case such shareholders and only such shareholders as
shall be shareholders of record on the date so fixed shall be entitled to such
notice of, and to vote at, such meetings and any adjournment thereof, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the Corporation after any such record date fixed as
aforesaid.
SECTION 5. Lost Certificates. The board of directors may direct a new
-----------------
certificate to be issued in place of a certificate alleged to have been
destroyed
<PAGE>
-21-
or lost if the owner makes an affidavit that it is destroyed or lost. The board,
in its discretion, may as a condition precedent to issuing the new certificate,
require the owner to give the Corporation a bond as indemnity against any claim
that may be made against the Corporation on the certificate allegedly destroyed
or lost.
ARTICLE VIII
------------
SPECIAL CORPORATE ACTS
-----------------------
SECTION 1. Execution of Written Instruments. Contracts, deeds,
--------------------------------
documents, and instruments shall be executed by a director or by the President
or Vice President, unless the board of directors shall in a particular situation
designate another procedure for their execution.
SECTION 2. Signing of Checks and Notes. Checks, notes, drafts and
---------------------------
demands for money shall be signed by the person or persons from time to time
designated by the board of directors.
SECTION 3. Voting Shares Held in Other Corporations. In the absence
----------------------------------------
of other arrangement by
<PAGE>
-22-
the board of directors, shares of stock issued by any other Corporation and
owned or controlled by the Corporation may be voted at any shareholders' meeting
of the other Corporation by the President of the Corporation or, if he is not
present at the meeting, by the Vice President; and in the event neither the
President nor the Vice President is to be present at a meeting, the shares may
be voted by such person as the President or Vice President of the Corporation
shall by duly executed proxy designate to represent the Corporation at the
meeting.
ARTICLE IX
----------
MISCELLANEOUS PROVISIONS
------------------------
SECTION 1. Offices. The Corporation may establish and maintain one or
-------
more offices within or outside of the State of Delaware, in such place or places
as the board of directors from time to time may determine.
SECTION 2. Corporate Seal. The corporate seal of the Corporation
--------------
shall be circular in form and shall have inscribed on its surface the name of
the Corporation, the year of its incorporation and words
<PAGE>
-23-
indicating that it is a Delaware corporation. The form of the seal shall be
subject to alteration by the board of directors. The seal may be used by causing
it or a facsimile to be impressed or affixed or printed or otherwise reproduced.
SECTION 3. Waivers of Notice. Whenever any notice whatsoever is
-----------------
required to be given by law, or under the provisions of the Certificate of
Incorporation, or of these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE X
---------
INDEMNIFICATION OF OFFICERS AND DIRECTORS
-----------------------------------------
SECTION 1. Each person who is or was a director, officer or promoter
of the Corporation (and the heirs, executors or administrators of such person)
who is or was made a party to, or is or was involved in, any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or
<PAGE>
-24-
investigative, by reason of the fact that such person is or was a director,
officer or promoter of the Corporation or is or was serving at the request or
for the benefit of the Corporation as a director, officer, promoter,employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan, or other enterprise, shall be held harmless and indemnified by the
Corporation against any expense, liability or loss (including without limitation
judgments, fines, settlement payments and the expense of legal counsel) incurred
by such person in any such capacity to the fullest extent permitted by
applicable law. The right to indemnification conferred in this Article shall
also include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition to the fullest
extent permitted by applicable law.
SECTION 2. The Corporation may provide indemnification to such other
employees and agents of the Corporation to such extent and to such effect
permitted or authorized by applicable law.
<PAGE>
-25-
SECTION 3. The Corporation may purchase and maintain insurance, at
its expense, to protect itself and any person who is or was a director, officer,
promoter, employee or agent of the Corporation, or who is or was serving at the
request or for the benefit of the Corporation as a director, officer, promoter,
employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against any expense, liability
or loss incurred by such person in any such capacity, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under applicable law.
SECTION 4. The rights and authority conferred in this Article shall
not be exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of the Certificate of Incorporation or
By-laws of the Corporation, agreement, vote of stockholders or disinterested
directors or otherwise.
SECTION 5. Neither the amendment not repeal of this Article nor the
adoption of any provision of the
<PAGE>
-26-
Certificates or Incorporation or By-laws or of any statute inconsistent with
this Article shall eliminate or reduce the effect of this Article in respect of
any acts or omissions occurring prior to such amendment, repeal or adoption of
an inconsistent provision.
ARTICLE XI
----------
AMENDMENTS
----------
Any provision of these By-laws may be amended, altered, added to or
repealed by the affirmative vote or action of a majority of the directors in
office or by the holders of a majority of the shares outstanding and entitled to
vote. Any by-law adopted, altered or repealed by the shareholders shall
supersede any similar by-law adopted by the board of directors and may be
altered or repealed only by the shareholders.
<PAGE>
EXHIBIT 3.3
I, Frederika Catharina Compton, nee Reimer, of Amsterdam, the Netherlands, a
sworn translator of English and Dutch, CERTIFY that the document in English
appended hereto is a full and accurate translation which I have made of the
Articles of Association [Statuten], of LYON INVESTMENTS B.V., a certified copy
of the original of which document written in the Dutch language is appended to
my translation.
WITNESS my hand and seal, this 13th day of may 1998.
[SEAL] /s/ F.C. Compton Reimer
F.C. Compton Reimer
<PAGE>
FULL AND UNABRIDGED TEXT of the Articles of Association of
LYON INVESTMENTS B.V. a company situate in Dieren
I, the undersigned,
Jelle Dingeman van der Beek, of Amsterdam, acting deputy of Rickert Jan Frederik
Blokhuis, Notaris ["Notary"] in Amsterdam, certify that the Articles of
Association of
LYON INVESTMENTS B.V., a company situate in Dieren,
read as shown in the document attached hereto,
The Articles of Association were last altered by deed executed before me, J.D.
van der Beek, on 23 April 1998.
Company number B.V. 366.894.
Signed in Amsterdam on 13 May 1998
L.S
R.J.F. Blokbuis
Notary in (Signed: J.D. van der Beek)
Amsterdam
<PAGE>
ARTICLES OF ASSOCIATION
- -----------------------
Article 1: Name and Registered Office
- -------------------------------------
1. The name of the Company is: LYON INVESTMENTS B.V.
2. The Company has its registered office in Dieren (municipality of Rheden)
and may establish other offices elsewhere.
Article 2: Objects
- ------------------
1. The objects for which the Company has been established are:
a. to operate and run to account intellectual property rights and
know-how;
b. to manage and conduct the administration of other companies and
enterprises;
c. to render financial and marketing services to other companies and
enterprises;
d. to participate and otherwise take an interest in and to finance other
companies and enterprises and to stand surety for and to give security
for liabilities of other companies and enterprises, regardless of
whether such companies or enterprises are affiliated with the Company.
2. The objects specified in the preceding paragraph shall be construed in the
broadest sense so as to include any activity or purpose which is related,
incidental or condutive thereto, and particularly, as the case may be, the
making of loans with a view to enabling others to take or acquire shares in
the capital of the Company or depositary receipts issued for shares in the
capital of the Company, provided that such loans shall not exceed the
amount of the Company's distributable reserves and that the Company shall
maintain an undistributable reserve equal to the outstanding amount of such
loans.
3. In pursuing its objects the Company shall also take into account the
interests of the companies and enterprises with which it is affiliated.
Article 3: Duration
- -------------------
The Company has been established for an indefinite period of time.
Article 4: Capital and Shares
- -----------------------------
1. The authorised capital of the Company is two hundred thousand guilders (NLG
200,000), divided into twenty thousand (20,000) shares of ten guilders (NLG
10) each. The shares shall be indivisible, shall be registered shares and
shall be numbered consecutively from 1 upwards; no share certificates shall
be issued.
2. Shares remaining unissued for the time being shall be issued at such price,
upon such conditions and at such times as shall be determined by the
General Meeting of Shareholders or another body to which the General
Meeting of Shareholders has transferred its power to do so, provided that
the shares not be issued below par value.
3. At the issue of new shares each existing shareholder shall have a pre-
emptive right to take such shares pro rata to the amount of his existing
holding. The shareholders shall not have a pre-emptive right in respect of
shares that are issued to employees of the Company or of a group company,
or to a person exercising a previously acquired
<PAGE>
2
right to take shares. The pre-emptive right may, for each individual issue
only, be limited or excluded by resolution of the General Meeting of
Shareholders or of the body to which the General Meeting of Shareholders
has transferred its authority under paragraph 2.
4. The provisions of the preceding two paragraphs of this article shall apply
mutatis mutandis to any rights issue.
5. Save in so far as permitted by law, the Company may not grant security,
give price guarantees, commit itself in any other way or declare to be
jointly or severally liable with or for others with a view to enabling
others to take or acquire shares in its capital or depositary receipts
issued for shares. This restriction shall also apply to the acquisition of
shares or depositary receipts issued for shares in the capital of any
Dutch company of which the Company is a subsidiary.
6. If the sum of the paid and called-up part of the capital and the reserves
which must be maintained by law or these Articles of Association is less
than the minimum capital most recently set by law, the Company shall be
required to maintain a reserve equal to the difference between these
amounts.
Article 5: Acquisition by the Company of its own shares
- -------------------------------------------------------
1. Any acquisition by the Company of partly-paid shares in its own capital
shall be null and void.
2. The Company may acquire fully paid-up shares in its own capital, but either
for no consideration or if:
a. its shareholders' equity, reduced by the acquisition price of the
shares concerned, is not less than the paid and called-up capital plus
the reserves which must be maintained by law or these Articles of
Association; and
b. the nominal value of the shares to be acquired and of the shares
already held by the Company and its subsidiaries combined does not
exceed half of the issued capital of the Company; and
c. the General Meeting of Shareholders or another body of the Company
designated for that purpose by the General Meeting of Shareholders has
authorised the acquisition.
3. With a view to the requirement set out in paragraph 2.a, the factor
deciding whether the acquisition is valid shall be the amount of the
shareholders' equity of the Company as shown in its most recently adopted
balance sheet, reduced by the acquisition price of shares in the capital of
the Company and any payments from profits or reserves to others which may
have become due by the Company and its subsidiaries since the balance sheet
date. In the event that more than six (6) months of a financial year have
passed without the annual accounts having been adopted, acquisition of own
shares shall not be permitted.
4. Shares in the capital of the Company which are held by the Company itself
or by its subsidiaries shall not be taken into account in determining the
distribution of profits and no dividends shall be paid thereon.
<PAGE>
3
6. The term shares, where used in this article, shall include depositary
receipts issued for shares.
Article 6: Register of Shareholders
- -----------------------------------
1. The Board of Directors shall keep a register in which shall be entered the
name and address of each holder of shares and the amount paid on each
share.
2. In the register shall also be entered the names and addresses of persons
who possess a pledge or usufruct in respect of shares, together with notes
specifying which of the rights attached to the shares vest in them in
accordance with paragraphs 9, 10 and 11 of this article.
3. In the register shall further be entered the names and addresses of persons
who are holders of registered depositary receipts issued for shares with
the corporation of the Company.
4. Each shareholder, pledgee and usufructuary of shares and each holder of
registered depositary receipts issued for shares with the cooperation of
the Company shall be required to ensure that his address is known to the
Company.
5. Finally, in the register shall be entered each and any release from
liability granted in respect of monies unpaid and not yet called on shares,
as well as the date of transfer in cases of transfer of partly-paid shares.
6. The Board of Directors shall ensure that the register be kept up to date at
all times. All entries shall be signed by a Director or by a person
authorised thereto by the Board of Directors.
7. Upon request and at no charge, the Board of Directors shall supply to any
shareholder, pledgee, usufructuary or holder of depositary receipts an
extract from the register in respect of the applicant's right to a share.
If the share is encumbered with usufruct or a pledge the extract shall
state which person possesses the rights referred to in paragraphs 9,10 and
11 of this article.
8. The Board of Directors shall keep the register at the Company's registered
office where it shall be open to the inspection of the shareholders and of
pledgees and usufructuaries who possess the rights referred to in
paragraphs 9,10 and 11 of this article. The particulars in this register in
respect of partly-paid shares shall be open to public inspection and copies
of or extracts from such particulars shall be supplied at a charge not
exceeding cost.
9. Shares may be encumbered with usufruct. If at the creation of the usufruct
it has been provided that the usufructuary shall have the right to vote he
shall have that right only if both the aforesaid provision and in the case
of transfer of the usufruct the transmission of the right to vote have been
approved by the General Meeting of Shareholders.
10. A shareholder without the right to vote and a usufructuary who has the
right to vote shall have all such rights as the law grants to the holders
of depositary receipts issued for shares with the cooperation of the
company. A usufructuary without the right to vote shall have said statutory
rights unless provided otherwise at the creation of the usufruct or upon
the transfer thereof.
<PAGE>
4
11. Shares may be pledged as security. The provisions of paragraphs 9 and 10 of
this article shall in that case apply mutatis mutandis.
12. Where these Articles of Association further refer to "holders of receipts",
this shall mean the holders of registered depositary receipts issued for
shares with the cooperation of the Company as well as the persons who as a
result of a pledge or usufruct created on a share possess the rights
referred to in paragraph 10.
Article 7: Joint Owners
- -----------------------
If a share or a registered depositary receipt issued for such share with the
cooperation of the Company or a pledge or usufruct is owned by more than one
person, such joint owners may only be represented vis-a-vis the Company by one
person to be appointed by them, of which appointment the Board of Directors must
forthwith be notified in writing.
Article 8: Transfer of Shares
- -----------------------------
1. The transfer of shares shall require a deed of transfer and service of that
deed upon the Company or written acknowledgment by the Company of the
transfer upon presentation of the transfer deed. The transfer of party-paid
shares shall be acknowledged only if the deed of transfer has a recorded
date.
2. The first sentence of paragraph 1 shall apply mutatis mutandis to the
creation of a pledge and to the creation of usufruct of shares. Paragraph 1
shall apply mutautus mutandis to the apportionment of shares at the
division of any community of property or joint estate.
Article 9: Approval Procedure
- -----------------------------
1. A shareholder who wishes to transfer any of his shares shall require prior
approval of the transfer by the General Meeting of Shareholders
(hereinafter: "the General Meeting").
2. The shareholder (hereinafter: "the transferor") shall request said approval
by letter by recorded delivery to the Board of Directors, stating therein
the number of shares with respect to which the approval is requested and
the name(s) of the person(s) to whom he wishes to transfer the share or
shares. Within fourteen days of receipt of the request for approval the
Board of Directors shall call a General Meeting to whom the request for
approval shall be submitted.
3. A decision on the request must be made by the General Meeting within three
months of the date of the transferor's letter referred to in paragraph 2.
If the approval is given the Board of Directors shall so notify the
transferor promptly by letter sent by recorded delivery. If the General
Meeting has not decided on the request within the aforesaid term of three
months the approval shall be deemed to have been given.
If the approval is given or is deemed to have been given the transfer of
all the shares specified in the transferor's letter referred to in
paragraph 2 must be completed within three months thereafter, failing which
the transferor shall be required to re-apply for approval.
4. The General Meeting may withhold approval of the intended transfer,
providing that the General Meeting shall designate one or several
interested purchasers who
<PAGE>
are prepared to buy against payment in cash all the shares in respect of
which the request for approval was made, failing which designation the
approval shall be deemed to have been given.
Within eight days after the General Meeting has made the decision to
withhold its approval the transferor shall be given notice of that
decision, such notice also to state the name(s) of the interested
purchaser(s) designated by the General Meeting and the maximum number of
shares each of them is interested in buying, as well as, in connection with
the provisions of paragraphs 8 and 9, the order in which the interested
purchasers rank.
5. The transferor and the interested purchaser or purchasers accepted by him
("the accepted purchasers") shall consult together on the price to be paid
for the share or shares. If they fail to reach agreement on the price
within three weeks after the Board of Directors has given the transferor
and the accepted purchasers notice requiring them to consult together as
aforesaid, the price shall be determined by a chartered accountant to be
appointed by the transferor and the accepted purchasers in mutual
agreement. If the parties fail to reach agreement on the appointment within
fourteen days after one of the parties has informed the others that he
wishes the price to be determined by a chartered accountant, a chartered
accountant shall be appointed by the Chairman of the Chamber of Commerce
and Industry in whose district the Company's registered office is situate.
6. The chartered accountant shall render his report to the Board of Directors
and the Board of Directors shall promptly by letters sent by recorded
delivery inform the transferor and each of the accepted purchasers which
price the chartered accountant has determined.
7. Each accepted purchaser may within one month of despatch of the letters
referred to in paragraph 6 inform the Board of Directors, by letter sent by
recorded delivery, that he is no longer interested in buying any of the
shares or that he is interested only in buying a smaller number of shares.
8. If in consequence of the event referred to in paragraph 7 one or several
shares become available such shares shall be allotted to the other
interested purchasers designated in accordance with paragraph 4, to the
extent that after the provision in paragraph 7 has applied, as the case
may be they are still interested in buying and to the extent that the
transferor accepts them yet.
9. The transferor shall have the right to withdraw his request for approval at
any time, provided he shall do so within one month after he has been
informed definitively to which interested purchaser or purchasers and at
which price he may sell all the shares to which his request for approval
related. Notice of such withdrawal is to be given to the Board of Directors
by letter sent by recorded delivery.
10. When the aforesaid term for withdrawal of the request has expired and it is
established that the purchaser or purchasers designated by the General
Meeting as referred to in paragraph 4 shall buy all the shares in respect
of which the transferor requested approval, the transferor shall be
required to transfer the shares to the purchaser or
<PAGE>
6
purchasers concerned against simultaneous payment by the purchaser or
purchasers of the price due to be paid therefor.
11. The transferor shall be at liberty to transfer to the proposed transferee
or transferees named by him in his letter referred to in paragraph 2 all
the shares in respect of which he had requested approval as aforesaid in
the event that not all the shares are brought against cash payment by the
interested purchaser or purchasers designated by the General Meeting as
referred to in paragraph 4, always provided that the transferor has not
withdrawn his request and that the transfer is completed within three
months after it has been established that not all the shares are brought by
the designated purchaser(s) as aforesaid.
12. The cost of appointment and the fee of the chartered accountant referred to
in paragraph 5 shall be paid:
a. by the transferor, if he withdraws his request;
b. in moieties by the transferor and the purchaser(s), if the shares are
sold to the interested purchaser or purchasers designated by the
General Meeting, provided that each purchaser shall contribute toward
the costs in proportion to the number of shares he has brought;
c. by the Company, if the interested purchaser or purchasers designated
by the General Meeting have not brought all the shares in respect of
which the transferor requested approval.
Article 10:
- -----------
1. In any of the following events:
a. upon a shareholder's death or being officially declared presumed dead;
b. upon a shareholder being adjudged bankrupt or granted suspension of
payments by court order or being placed under compulsory guardianship
or otherwise losing absolute control of his property;
c. upon the community of property in which a shareholder is married and
of which his shares are part being dissolved without the shares having
been apportioned to the original shareholder within twelve months
thereafter;
d. upon voluntary or compulsory winding up or cessation or dissolution of
a body corporate, general partnership, limited partnership or any
other company who is the holder of shares; or
e. upon apportionment of shares at the division of any community property
or joint estate;
the shareholder or the beneficiaries of his estate or his successors or
legal representative or, at the case may be, the new holders or owners
shall be under the obligation to give notice of that event to the Board of
Directors by letter sent by recorded delivery, such notice to be given
within thirty days after said obligation has risen.
2. The Board of Directors shall be required to call a General Meeting within
three months of receipt of the notice referred to in paragraph 1, which
General Meeting may then designate one or several interested purchasers to
whom all the shares concerned must be transferred against payment in cash.
In that case paragraphs 5
<PAGE>
7
to and including 12 of Article 9 shall mutatis mutandis apply, save that
the transferor shall not be permitted to refuse to accept the designated
interested purchasers and shall not be entitled to withdraw, and further
provided that if within the term set in paragraph 4 of Article 9 the
General Meeting has not designated one or several interested purchasers to
whom the shares concerned must be transferred against payment in cash, or
in an event as referred to in paragraph 11 of Article 9 where the
transferor would be at liberty to transfer the shares concerned, the
shareholder or the beneficiaries of his estate or his successors or, as the
case may be, the new holders or owners shall only have the right to retain
the shares.
The consequence of failure to fulfil the obligation to offer shares by
virtue of this paragraph shall be that after expiry of the term set in
paragraph 1 of this article the rights of assembly and voting attached to
the shares cannot be exercised and the right to receive dividends shall
remain suspended until such time as said obligation has been fulfilled.
3. If the shareholder or the beneficiaries of his estate or his successors or
legal representative or, as the case may be, the new holders or owners fail
to transfer the share or shares against payment in cash of the price as
agreed or determined and despite notice demanding compliance given by the
Board of Directors fail to remedy his/their default, the Company shall be
irrevocably authorised to make the transfer on his/their behalf and to
execute the deed(s) required therefor. In that event the price as agreed or
determined must be paid to the Company for the benefit of the former
holder(s) or owner(s).
Article 11: Management
- ----------------------
1. The Company shall be managed by a Board of Directors consisting of one or
several members who shall be appointed by the General Meeting of
Shareholders and who may be suspended or removed from office by the General
Meeting of Shareholders at any time.
2. A body corporate may be a member of the Board of Directors.
3. The remuneration of the Director(s), any rights to bonuses and the further
terms of their appointment shall be determined by the General Meeting of
Shareholders for each Director individually.
Article 12: Decision-making by the Board of Directors
- -----------------------------------------------------
1. If the Board of Directors consists of several members this article shall
apply to the decision-making of the Board of Directors.
2. All resolutions of the Board of Directors shall be passed by an absolute
majority of the votes validly cast.
3. Meetings of the Board of Directors may be called by any Director by giving
notice in writing to all the other Directors at least three days prior to
the date of the meeting. If a meeting has been called in accordance with
the preceding sentence, resolutions may be passed at such meeting
regardless of the number of Directors present.
<PAGE>
8
4. A Director may be represented at the Board meetings by a fellow-Director
acting by virtue of a power of attorney issued in writing. Such power of
attorney may only concern the one specifically designated meeting stated
therein.
5. Resolutions may be passed outside a meeting, provided that all Directors
have been consulted, that they have expressed their opinion on the intended
resolution in writing and that a majority of them is in favour of the
resolution concerned.
6. For the purposes of this article "in writing" shall mean communications
sent by letter, telegram, telex or telefax.
Article 13: Duties and Powers of Representation
- -----------------------------------------------
1. The Board of Directors shall be in charge of managing the business and
affairs of the Company. The General Meeting of Shareholders may give
instructions regarding the general lines of the financial, social, economic
and personnel policies to be followed. The Board of Directors shall
discharge their duties of office in accordance with such instructions.
2. If only one Director has been appointed to office that sole Director shall
have the power to represent the Company in and out of court. If several
Directors have been appointed the power to represent the Company in and out
of court shall vest in any two Directors acting jointly.
These provisions concerning the powers of representation shall also apply
in the event of a conflict of interest.
3. The General Meeting of Shareholders may resolve that certain executive
decisions shall require its prior approval. The executive decisions
concerned shall be carefully described in the resolution of the General
Meeting of Shareholders and the Board of Directors shall be informed of
such resolution without delay.
4. In the event that one or several Directors shall cease to hold office or be
unable to act, the General Meeting of Shareholders may designate a
substitute for each Director who has ceased to hold office or is unable to
act, and the remaining Director or Directors together with the substitute
or substitutes, if any appointed by the General Meeting of Shareholders
shall be temporarily in charge of the management. In the event that all
Directors or the sole Director shall cease to hold office or be unable to
act, the management shall be temporarily entrusted to the person to be
appointed for that purpose by the General Meeting of Shareholders.
Article 14: General Meeting of Shareholders
- -------------------------------------------
All powers not conferred upon the Board of Directors or others shall vest in the
General Meeting of Shareholders within the limits set by law and these Articles
of Association.
Articles 15: Annual Meeting
- ---------------------------
1. The Annual General Meeting of Shareholders shall be held within six months
after the end of the financial year.
2. In addition to the Annual General Meeting referred to in paragraph 1,
Extraordinary General Meetings of Shareholders may be held as well.
<PAGE>
9
Article 16: Venue and Notice of Meetings
- ----------------------------------------
1. The General Meetings of Shareholders may be held in The Netherlands in the
municipality where the Company's registered office is situate, as well as
in the municipalities of Amsterdam, Rotterdam, The Hague and
Haarlemmermeer. A General Meeting of Shareholders held elsewhere may
validly pass resolutions only if the entire issued and outstanding share
capital is represented.
2. The General Meeting of Shareholders shall be called by notices to be sent
by a Director to the Shareholders and holders of receipts no later than
fifteen clear days before the date of the meeting to the addresses recorded
in the register referred to in Article 6. The notice shall state the
subjects to be discussed and decided upon, entirely without prejudice to
the provisions of Article 24 concerning proposals to alter these Articles
of Association or to wind up the Company.
3. Any Meeting of Shareholders which has been called without due observance of
the formalities referred to in paragraph 2 cannot validly pass resolutions
unless the resolutions are passed unanimously at a meeting at which the
entire issued and outstanding share capital is represented.
Article 17: Chairman, Secretary and Minutes
- -------------------------------------------
1. The General Meetings of Shareholders shall be chaired by the person
appointed for that purpose by the meeting itself. The Chairman shall
appoint a Secretary, who need not be a Shareholder.
2. The Chairman of the meeting or the Board of Directors may instruct a
notaris ["notary"] to draw up an official record of the meeting at the
Company's expense.
3. Unless a notarial record of the business transacted at the meeting is drawn
up, minutes of the business transacted shall be kept. The minutes shall be
confirmed by the Chairman and the Secretary of the meeting concerned and
shall be signed by them in evidence thereof, or they shall be confirmed by
any subsequent meeting and signed in evidence thereof by the Chairman and
the Secretary of that meeting.
Article 18: Voting Rights
- -------------------------
1. Subject to the provisions in paragraphs 2 and 3 of this article, each share
carries the right to cast one vote. Shareholders and holders of receipts
may be represented at meetings by proxies appointed in writing.
2. No votes may be cast at a General Meeting of Shareholders on shares which
are held by the Company or any of its subsidiaries, nor on shares the
depositary receipts issued for which are held by the Company or any of its
subsidiaries, unless the voting rights attached to such shares vest in a
pledgee or usufructuary and the pledge or usufruct was created before the
shares concerned were held by the Company or a subsidiary of the Company.
The Company or a subsidiary of the Company may not cast votes on shares in
respect of which the Company or a subsidiary of the Company possesses a
pledge or usufruct.
3. In determining to which extent the shareholders cast votes, are present or
represented, or to which extent the share capital is represented, the
shares on which by virtue of paragraph 2 no votes may be cast shall not be
taken into account.
<PAGE>
10
Article 19: Voting Procedure
- ----------------------------
1. Unless the law or these Articles of Association stipulate a larger
majority, all resolutions of the General Meeting of Shareholders shall be
passed by an absolute majority of the votes validly cast. Blank votes and
invalid votes shall not be counted.
2. If an absolute majority is not obtained after two votes, the proposal shall
be rejected, unless it concerns the election of persons, in which case a
further vote shall be taken between the two persons who obtained the
largest number of votes at the second vote. If such further vote results in
a tie, a drawing of lots shall decide which of the two persons who obtained
the largest number of votes is elected.
3. Votes shall be taken by voice, but votes concerning the election of persons
shall be taken by secret ballot if so requested by any person entitled to
vote. Voting in some other manner, for example by acclamation, shall be
permitted if none of the persons entitled to vote objects thereto.
Article 20: Decision-making outside Meetings
- --------------------------------------------
Provided that there are no holders of receipts, any resolution which the
shareholders can pass at a General Meeting may also be passed by the
shareholders outside a meeting. However, a resolution passed outside a meeting
shall be valid only if all shareholders have voted in favour of such resolution
by letter, telegram, telex or telefax.
Article 21: Financial Year, Balance Sheet, Profit and Loss Account
- ------------------------------------------------------------------
1. The financial year of the Company shall coincide with the calendar year.
2. Each year as at the end of the financial year the books of the Company
shall be closed. Within five months after the end of the financial year,
save where this term is extended by a maximum of six months by the General
Meeting of Shareholders on account of special circumstances, the Board of
Directors shall draw up the balance sheet and the profit and loss account
and explanatory notes thereon (hereinafter jointly referred to as "the
annual accounts". Unless Section 403 of Book 2 of the Civil Code applies to
the Company, the Board of Directors shall also present the annual report
within this period.
3. The annual accounts shall be signed by all Directors and presented to the
General Meeting of Shareholders for adoption. If the signature of any of
the Directors is missing, this and the reason for such absence shall be
stated.
Article 22: Inspection of Accounts, Release from Liability
- ----------------------------------------------------------
1. From the date of notice calling the General Meeting of Shareholders at
which the annual accounts are to be dealt with and until the end of that
meeting the annual accounts, the annual report and the information to be
added thereto by virtue of Section 392 of Book 2 of the Civil Code shall be
open to the inspection of the shareholders and the holders of receipts at
the registered office of the Company.
2. Copies of the documents referred to in this article shall be made available
by the Company to the shareholders and the holders of receipts free of
charge.
3. Unless the General Meeting has made a reservation with regard thereto, the
adoption of the annual accounts by the General Meeting of Shareholders
shall constitute a
<PAGE>
11
the financial year concerned, entirely without prejudice to the statutory
restrictions.
Article 23: Distribution of Profits
- -----------------------------------
1. Out of the profits as shown by the adopted profit and loss account each
year such amounts shall be carried to reserve as shall be determined,
whether or not on a proposal of the Board of Directors, by the General
Meeting of Shareholders.
2. The remainder shall be the distributable profit, the allocation of which
shall be determined by the General Meeting of Shareholders.
3. The Company may make distributions to its shareholders and to others
entitled to receive part of its distributable profit only if and to the
extent that the Company's equity capital exceeds the sum of its paid and
called-up capital and the reserves which it is required to maintain by
law or by these Articles of Association.
4. To the extent that the Company has a profit, and subject to the approval of
the General Meeting of Shareholders, the Board of Directors may declare an
interim dividend, provided always that paragraph 3 of this article has been
satisfied.
5. Dividends (including interim dividends for the purposes of this and the
next paragraph) shall be made payable at the Company's registered office on
the date when the dividend is declared, unless the resolution concerned
shall provide for a different place or date.
6. Any dividend which has remained unclaimed for five years from the date when
it became due for payment shall be forfeited to the benefit of the Company.
Article 24: Alteration of Articles of Association and Winding-up
- ----------------------------------------------------------------
1. If a proposal to alter these Articles of Association or to wind up the
Company is to be made to the General Meeting of Shareholders, this must be
stated in the notice calling the General Meeting of Shareholders.
2. The person giving such notice must at the same time deposit a copy of the
proposal, in which if it is a proposal to alter the Articles of Association
the proposed alteration is quoted verbatim, at the office of the Company
for inspection by every shareholder and holder of receipts until the end of
the meeting. Failing this, no resolution can be validly passed on the
proposal unless the resolution is passed unanimously at a meeting at which
the entire issued and outstanding share capital is represented.
3. From the date of deposit as aforesaid and until the date of the General
Meeting of Shareholders the shareholders and holders of receipts must be
given the opportunity to obtain copies of the proposal as referred to in
the preceding paragraph. Such copies shall be supplied free of charge.
4. A resolution as referred to in this article must be passed by a majority of
at least two thirds of the votes representing more than half of the issued
and outstanding share capital at a meeting at which at least half of the
issued and outstanding share capital is represented.
5. If not at least half of the issued and outstanding share capital is
represented at the meeting, a decision on the proposal shall be made at a
second meeting to be held no later than four weeks but no earlier than
fifteen days after the first meeting. At that second meeting the majority
required to pass the resolution shall be at least
<PAGE>
12
two thirds of the votes cast, irrespective of the number of shares
represented at that meeting.
6. The notice calling the second meeting shall be despatched after the first
meeting has been held and shall be served in the same manner as used for
the meeting, provided that the notice must state that and by virtue of
which provision a resolution may be passed irrespective of the part of the
capital represented at the meeting. The provisions of paragraphs 2 and 3
shall fully apply in respect of the second meeting.
Article 25: Liquidation
- -----------------------
1. In the event of voluntary winding up the Company its liquidation shall be
carried out by the Board of Directors, unless determined otherwise by the
General Meeting of Shareholders in the resolution to wind up the Company or
at any time thereafter.
2. During the liquidation the provisions of these Articles of Association
shall remain in force to the fullest possible extent. The financial year in
which it is resolved to wind up the Company shall end on the date when the
plan van ?ithering [plan of distribution] becomes final.
3. The surplus assets remaining after the Company's liabilities have been
satisfied shall be divided among the shareholders pro rata to the nominal
value of each one's holding, provided that in respect of partly-paid
shares only the amount paid on those shares shall be taken into account.
4. After completion of the liquidation the accounts and records of the
dissolved Company shall for such period of time as required by law remain
in custody of the liquidator, unless determined otherwise by the General
Meeting of Shareholders in the resolution to wind up the Company or at any
time thereafter.
<PAGE>
EXHIBIT 4.1
================================================================================
THE DERBY CYCLE CORPORATION
LYON INVESTMENTS B.V.
10% Senior Notes due 2008
$100,000,000
___________
INDENTURE
Dated as of May 14, 1998
___________
IBJ SCHRODER BANK & TRUST COMPANY,
Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions.............................................. 1
SECTION 1.02. Other Definitions........................................ 29
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act........................................... 29
SECTION 1.04. Rules of Construction.................................... 30
ARTICLE 2
The Securities
--------------
SECTION 2.01. Form and Dating.......................................... 31
SECTION 2.02. Execution and Authentication............................. 31
SECTION 2.03. Registrar and Paying Agent............................... 32
SECTION 2.04. Paying Agent to Hold Money in Trust...................... 33
SECTION 2.05. Securityholder Lists..................................... 33
SECTION 2.06. Transfer and Exchange.................................... 33
SECTION 2.07. Replacement Securities................................... 34
SECTION 2.08. Outstanding Securities................................... 35
SECTION 2.09. Temporary Securities..................................... 35
SECTION 2.10. Cancelation.............................................. 36
SECTION 2.11. Defaulted Interest....................................... 36
SECTION 2.12. CUSIP Numbers............................................ 36
SECTION 2.13. Currency Indemnity....................................... 36
ARTICLE 3
Redemption
----------
SECTION 3.01. Notices to Trustee....................................... 37
SECTION 3.02. Selection of Securities To Be Redeemed................... 37
SECTION 3.03. Notice of Redemption..................................... 38
SECTION 3.04. Effect of Notice of Redemption........................... 39
SECTION 3.05. Deposit of Redemption Price.............................. 39
SECTION 3.06. Securities Redeemed in Part.............................. 39
</TABLE>
<PAGE>
ARTICLE 4
Covenants
---------
<TABLE>
<S> <C>
SECTION 4.01. Payment of Securities.................................... 40
SECTION 4.02. Reports to Holders of Securities......................... 40
SECTION 4.03. Limitation on Indebtedness............................... 40
SECTION 4.04. Limitation on Restricted Payments........................ 43
SECTION 4.05. Limitation on Restrictions on
Distributions
from Restricted Subsidiaries............................ 47
SECTION 4.06. Limitation on Sales of Assets and
Subsidiary Stock........................................ 49
SECTION 4.07. Limitation on Transactions with
Affiliates.............................................. 53
SECTION 4.08. Change of Control........................................ 54
SECTION 4.09. Compliance Certificate................................... 56
SECTION 4.10. Further Instruments and Acts............................. 56
SECTION 4.11. Future Note Guarantors................................... 56
SECTION 4.12. Limitation on Lines of Business.......................... 57
SECTION 4.13. Limitation on the Sale or Issuance of
Capital Stock of Restricted Subsidiaries............... 57
SECTION 4.14. Limitation on Liens...................................... 57
SECTION 4.15. Limitation on Sale/Leaseback Transactions................ 57
SECTION 4.16. Additional Amounts; Withholding Taxes.................... 58
ARTICLE 5
Merger and Consolidation
------------------------
SECTION 5.01. When Issuers May Merge or Transfer Assets................ 59
</TABLE>
<PAGE>
ARTICLE 6
Defaults and Remedies
---------------------
<TABLE>
<S> <C>
SECTION 6.01. Events of Default........................................ 61
SECTION 6.02. Acceleration............................................. 63
SECTION 6.03. Other Remedies........................................... 64
SECTION 6.04. Waiver of Past Defaults.................................. 64
SECTION 6.05. Control by Majority...................................... 64
SECTION 6.06. Limitation on Suits...................................... 65
SECTION 6.07. Rights of Holders to Receive Payment..................... 65
SECTION 6.08. Collection Suit by Trustee............................... 65
SECTION 6.09. Trustee May File Proofs of Claim......................... 65
SECTION 6.10. Priorities............................................... 66
SECTION 6.11. Undertaking for Costs.................................... 66
SECTION 6.12. Waiver of Stay or Extension Laws......................... 67
ARTICLE 7
Trustee
-------
SECTION 7.01. Duties of Trustee........................................ 67
SECTION 7.02. Rights of Trustee........................................ 68
SECTION 7.03. Individual Rights of Trustee............................. 69
SECTION 7.04. Trustee's Disclaimer..................................... 69
SECTION 7.05. Notice of Defaults....................................... 69
SECTION 7.06. Reports by Trustee to Holders............................ 70
SECTION 7.07. Compensation and Indemnity............................... 70
SECTION 7.08. Replacement of Trustee................................... 71
SECTION 7.09. Successor Trustee by Merger.............................. 72
SECTION 7.10. Eligibility; Disqualification............................ 72
SECTION 7.11. Preferential Collection of Claims
Against the Issuers..................................... 72
</TABLE>
<PAGE>
ARTICLE 8
Discharge of Indenture; Defeasance
----------------------------------
<TABLE>
<S> <C>
SECTION 8.01. Discharge of Liability on Securities; Defeasance......... 73
SECTION 8.02. Conditions to Defeasance................................. 74
SECTION 8.03. Application of Trust Money............................... 76
SECTION 8.04. Repayment to the Issuers................................. 76
SECTION 8.05. Indemnity for Government Obligations..................... 76
SECTION 8.06. Reinstatement............................................ 76
ARTICLE 9
Amendments
----------
SECTION 9.01. Without Consent of Holders............................... 77
SECTION 9.02. With Consent of Holders.................................. 78
SECTION 9.03. Compliance with Trust Indenture Act...................... 79
SECTION 9.04. Revocation and Effect of Consents and Waivers............ 79
SECTION 9.05. Notation on or Exchange of Securities.................... 79
SECTION 9.06. Trustee to Sign Amendments............................... 80
SECTION 9.07. Payment for Consent...................................... 80
ARTICLE 10
Note Guarantees
---------------
SECTION 10.01. Execution of Supplemental Indenture for
Future Note Guarantors.................................. 80
</TABLE>
<PAGE>
ARTICLE 11
Miscellaneous
-------------
<TABLE>
<S> <C>
SECTION 11.01. Trust Indenture Act Controls............................ 81
SECTION 11.02. Notices................................................. 81
SECTION 11.03. Communication by Holders with Other Holders............. 82
SECTION 11.04. Certificate of Opinion as to Conditions Precedent....... 82
SECTION 11.05. Statements Required in Certificate or Opinion........... 82
SECTION 11.06. When Securities Disregarded............................. 83
SECTION 11.07. Rules by Trustee, Paying Agent and Registrar............ 83
SECTION 11.08. Legal Holidays.......................................... 83
SECTION 11.09. Governing Law........................................... 83
SECTION 11.10. Jurisdiction............................................ 84
SECTION 11.11. No Personal Liability of Directors, Officers,
Employees and Stockholders............................ 84
SECTION 11.12. Successors.............................................. 85
SECTION 11.13. Multiple Originals...................................... 85
SECTION 11.14. Table of Contents; Headings............................. 85
</TABLE>
Appendix A - Provisions Relating to Initial Securities,
Private Exchange Securities and Exchange Securities
Exhibit A - Form of Initial Security
Exhibit B - Form of Exchange Security
Exhibit C - Form of Supplemental Indenture
Exhibit D - Form of Transferee Letter of Representation
<PAGE>
INDENTURE dated as of May 14, 1998 among THE DERBY CYCLE
CORPORATION, a Delaware corporation ("DCC"), LYON INVESTMENTS
B.V., a Company organized under the laws of The Netherlands and a
wholly owned subsidiary of DCC, which was formerly known as LYON
CYCLE B.V. ("Lyon" and, together with DCC, the "Issuers"), as
issuers, and IBJ SCHRODER BANK & TRUST COMPANY, a New York
banking corporation, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of (i) the Issuers' 10% Senior
Notes due 2008 issued on the date hereof (the "Initial Securities"), (ii) if and
when issued as provided in the Registration Agreement (as defined in Appendix A
hereto (the "Appendix"), the Issuers' 10% Senior Notes due 2008 issued in the
Registered Exchange Offer (as defined herein) in exchange for any Initial
Securities (the "Exchange Securities") and (iii) if and when issued as provided
in the Registration Agreement, the Private Exchange Securities (as defined
herein, and together with the Initial Securities and any Exchange Securities
issued hereunder, the "Securities") issued in the Private Exchange (as defined
in the Appendix). Except as otherwise provided herein, the Securities shall be
limited to $100,000,000 in aggregate principal amount outstanding.
ARTICLE 1
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions.
------------
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by DCC or a Restricted Subsidiary in
a Related Business, (ii) the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock by DCC or
another Restricted Subsidiary or (iii) Capital Stock constituting a minority
interest in any Person that at such time is a Restricted Subsidiary; provided,
--------
however, that any such Restricted Subsidiary described in clause (ii) or (iii)
- -------
above is primarily engaged in a Related Business.
"Additional Payment" means the contingent payment of up to $10,000,000
payable to DFS pursuant to the Recapitalization Agreement.
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with
<PAGE>
2
such specified Person. For the purposes of this definition, "control" when used
with respect to any Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. For purposes of
Sections 4.06 and 4.07 only, "Affiliate" shall also mean any beneficial owner of
shares representing 5% or more of the total voting power of the Voting Stock (on
a fully diluted basis) of DCC or of rights or warrants to purchase such Voting
Stock (whether or not currently exercisable) and any Person who would be an
Affiliate of any such beneficial owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease (other than operating leases
entered into in the ordinary course of business), transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by DCC or any
Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than DCC or a Restricted
Subsidiary), (ii) all or substantially all the assets of any division or line of
business of DCC or any Restricted Subsidiary or (iii) any other assets of DCC or
any Restricted Subsidiary outside of the ordinary course of business of DCC or
such Restricted Subsidiary; provided, however, that Asset Dispositions shall not
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include (A) a disposition by a Restricted Subsidiary to DCC or by DCC or a
Restricted Subsidiary to a Wholly Owned Subsidiary, (B) for purposes of Section
4.06 only, a disposition subject to Section 4.04, (C) a disposition of assets
with a fair market value of less than $500,000, (D) the disposition of all or
substantially all of the assets of the Issuers as permitted under Article 5 or
any disposition that constitutes a Change of Control, (E) the sale or discount,
in each case without recourse, of accounts receivable arising in the ordinary
course of business, but only in connection with the compromise or collection
thereof, (F) the factoring of accounts receivable arising in the ordinary course
of business pursuant to arrangements customary in the industry, (G) the
licensing of intellectual property, (H) disposals or replacements of obsolete,
uneconomical, negligible, worn out or surplus property in the ordinary course of
business and (I) sales of accounts receivable, equipment and related assets
(including contract rights) of the type specified in the definition of the term
"Qualified Securitization Transaction" to a Securitization Entity for the fair
market value thereof, including cash in an amount at least equal to 75% of the
fair market value thereof. For the purposes of clause (I), Purchase Money
Securities shall be deemed to be cash.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means,
as at the time of determination, the present value (discounted at the interest
rate borne by
<PAGE>
3
the Securities, compounded annually) of the total obligations of the lessee for
rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of the numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in
respect of the Revolving Credit Agreement and any Refinancing Indebtedness with
respect thereto, as amended from time to time, including principal, premium, if
any, interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to either of the Issuers
whether or not a claim for post-filing interest is allowed in such proceedings),
fees, charges, expenses, reimbursement obligations, guarantees and all other
amounts payable thereunder or in respect thereof.
"board of directors" means the board of directors or similar governing
body of either of the Issuers or any Restricted Subsidiary, or any committee
thereof duly authorized to act on behalf of such board of directors or governing
body.
"Business Day" means a day other than a Saturday, Sunday or other day
on which the banking institutions in the United States, Germany, Luxembourg or
The Netherlands or any place of payment are authorized or required by law to
close.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of,
or interests in (however designated), equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required
to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with U.S. GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with U.S. GAAP, and the Stated Maturity
thereof shall be the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease may be prepaid by
the lessee without payment of a penalty.
<PAGE>
4
"Change of Control" means the occurrence of any of the following
events:
(i) prior to an Initial Public Offering, the Permitted Holders cease
to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of a majority in the aggregate of
the total voting power of the Voting Stock of DCC, whether as a result of
issuance of securities of DCC, any merger, consolidation, liquidation or
dissolution of DCC, any direct or indirect transfer of securities by any
Permitted Holder or otherwise (for purposes of this clause (i) and clause
(ii) below, the Permitted Holders shall be deemed to beneficially own any
Voting Stock of an entity (the "specified entity") held by any other entity
(the "parent entity") so long as the Permitted Holders beneficially own (as
so defined), directly or indirectly, in the aggregate a majority of the
voting power of the Voting Stock of the parent entity);
(ii) (A) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in clause (i) above, except that
for purposes of this clause (ii) such person shall be deemed to have
"beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 35% of the total
voting power of the Voting Stock of DCC and (B) the Permitted Holders
"beneficially own" (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the total voting power
of the Voting Stock of DCC than such other person and do not have the right
or ability by voting power, contract or otherwise to elect or designate for
election a majority of the board of directors of DCC (for the purposes of
this clause (ii), such other person shall be deemed to beneficially own any
Voting Stock of a specified corporation held by a parent corporation, if
such other person is the beneficial owner (as defined in this clause (ii)),
directly or indirectly, more than 35% of the voting power of the Voting
Stock of such parent corporation and the Permitted Holders "beneficially
own" (as defined in clause (i) above), directly or indirectly, in the
aggregate a lesser percentage of the voting power of the Voting Stock of
such parent corporation and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority
of the board of directors of such parent corporation;
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the board of directors of DCC
(together with any new directors whose election by such board of directors
or whose nomination for election by the shareholders of DCC was approved by
a vote of at least 50% of the directors of DCC then still in office who
were either directors at the
<PAGE>
5
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of
such board of directors then in office;
(iv) the adoption of a plan relating to the liquidation or dissolution
of either of the Issuers; or
(v) the merger or consolidation of DCC with or into another Person
(other than Lyon) or the merger of another Person (other than Lyon) with or
into DCC, or the sale of all or substantially all the assets of DCC to
another Person (other than a Person that is controlled by the Permitted
Holders), and, in the case of any such merger or consolidation, the
securities of DCC that are outstanding immediately prior to such
transaction and which represent 100% of the aggregate voting power of the
Voting Stock of DCC are changed into or exchanged for cash, securities or
property, unless pursuant to such transaction such securities are changed
into or exchanged for, in addition to any other consideration, securities
of the surviving Person or transferee that represent immediately after such
transaction, at least a majority of the aggregate voting power of the
Voting Stock of the surviving Person or transferee.
"Closing Date" means the date of this Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange
Commission.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters for which financial statements are
available to (ii) Consolidated Interest Expense for such four fiscal quarters;
provided, however, that (A) if DCC or any Restricted Subsidiary has Incurred any
- -------- -------
Indebtedness since the beginning of such period that remains outstanding on such
date of determination or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such Indebtedness as if such Indebtedness had
been Incurred on the first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had occurred on the first
day of such period, (B) if DCC or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of such period or if any
<PAGE>
6
Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in
each case other than Indebtedness Incurred under any revolving credit facility
unless such Indebtedness has been permanently repaid and has not been replaced)
on the date of the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such
period shall be calculated on a pro forma basis as if such discharge had
occurred on the first day of such period and as if DCC or such Restricted
Subsidiary has not earned the interest income actually earned during such period
in respect of cash or Temporary Cash Investments used to repay, repurchase,
defease or otherwise discharge such Indebtedness, (C) if, since the beginning of
such period (including on the date of the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio), DCC or any Restricted Subsidiary
shall have made any Asset Disposition, the EBITDA for such period shall be
reduced by an amount equal to the EBITDA (if positive) directly attributable to
the assets that are the subject of such Asset Disposition for such period or
increased by an amount equal to the EBITDA (if negative) directly attributable
thereto for such period, and Consolidated Interest Expense for such period shall
be reduced by an amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness of DCC or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to DCC and its
continuing Restricted Subsidiaries in connection with such Asset Disposition for
such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent DCC and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness after such
sale), (D) if, since the beginning of such period, DCC or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary) or an
acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any Indebtedness)
as if such Investment or acquisition occurred on the first day of such period
(and irrespective of the method (purchase or pooling) of accounting for such
Investment or acquisition of assets) and (E) if, since the beginning of such
period, any Person (that subsequently became a Restricted Subsidiary or was
merged with or into DCC or any Restricted Subsidiary since the beginning of such
period) shall have made any Asset Disposition or any Investment or acquisition
of assets that would have required an adjustment pursuant to clause (C) or (D)
above if made by DCC or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or acquisition
of assets occurred on the first day of such period. For all purposes of the
foregoing definition, with respect to any EBITDA (or component thereof) and any
Consolidated Interest Expense (unless
<PAGE>
7
subject to a Currency Agreement covering principal, premium, if any, and
interest payable on such Indebtedness) denominated in a currency other than U.S.
dollars, the amount of such EBITDA (or component thereof) or Consolidated
Interest Expense shall be calculated at the relevant currency exchange rate in
effect on the date of determination. For purposes of this definition, whenever
pro forma effect is to be given to an acquisition of assets, the amount of
income or earnings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection therewith, the
pro forma calculations shall be determined in good faith by a responsible
financial or accounting Officer of DCC. If any Indebtedness bears a floating
rate of interest and is being given pro forma effect, the interest expense on
such Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term as at the date of determination in
excess of 12 months).
"Consolidated Current Liabilities" as of the date of determination
means the aggregate amount of liabilities of DCC and its Consolidated Restricted
Subsidiaries which may properly be classified as current liabilities (including
taxes accrued as estimated), on a Consolidated basis, after eliminating (i) all
intercompany items between DCC and any Restricted Subsidiary and (ii) all
current maturities of long-term Indebtedness, all as determined in accordance
with U.S. GAAP consistently applied.
"Consolidated Interest Expense" means, for any period, the total
interest expense of DCC and its Consolidated Restricted Subsidiaries, plus, to
the extent Incurred by DCC or its Subsidiaries in such period but not included
in such interest expense, (i) interest expense attributable to Capitalized Lease
Obligations and the interest expense attributable to leases constituting part of
any Sale/Leaseback Transaction, (ii) the earned discount or yield with respect
to any sale of receivables or equipment by any Securitization Entity in
connection with any Qualified Securitization Transaction, (iii) amortization of
debt discount and debt issuance cost other than as related to the
Recapitalization, (iv) capitalized interest, (v) non-cash interest expense, (vi)
commissions, discounts and other fees and charges attributable to letters of
credit and bankers' acceptance financing, (vii) interest accruing on any
Indebtedness of any other Person to the extent such Indebtedness is Guaranteed
by DCC or any Restricted Subsidiary, (viii) net costs associated with Hedging
Obligations (including amortization of fees), (ix) dividends in respect of (A)
all Preferred Stock of DCC and any of its Subsidiaries and (B) Disqualified
Stock of DCC, in the case of clause (A), other than non-cash dividends, and, in
the case of each of clauses (A) and (B), to the extent held by Persons other
than DCC or a Wholly Owned Subsidiary, (x) interest Incurred in connection with
investments in discontinued operations and (xi) the cash contributions to any
employee stock ownership plan or similar trust to the extent such contributions
are
<PAGE>
8
used by such plan or trust to pay interest or fees to any Person (other than
DCC) in connection with Indebtedness Incurred by such plan or trust.
Notwithstanding the foregoing, for the purposes of Section 4.03 only, there
shall be excluded from Consolidated Interest Expense all non-cash interest
payable in respect of the Additional Payment.
"Consolidated Net Income" means, for any period, the net income of DCC
and its Consolidated Subsidiaries for such period; provided, however, that there
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shall not be included in such Consolidated Net Income:
(i) any net income of any Person (other than DCC) if such Person is
not a Restricted Subsidiary, except that (A) subject to the limitations
contained in clause (iv) below, the equity of DCC in the net income of any
such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Person during such period to DCC or a Restricted Subsidiary as a dividend
or other distribution (subject, in the case of a dividend or other
distribution made to a Restricted Subsidiary, to the limitations contained
in clause (iii) below) and (B) the equity of DCC in a net loss of any such
Person for such period shall be included in determining such Consolidated
Net Income;
(ii) any net income (or loss) of any Person acquired by DCC or any of
its Subsidiaries in a pooling of interests transaction for any period prior
to the date of such acquisition;
(iii) any net income (or loss) of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or indirectly,
on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to DCC, except that (A)
subject to the limitations contained in clause (iv) below, the equity of
DCC in the net income of any such Restricted Subsidiary for such period
shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Restricted Subsidiary during
such period to DCC or another Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution made
to another Restricted Subsidiary, to the limitation contained in this
clause (iii)); provided, however, that, for purposes of determining the
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Consolidated Coverage Ratio, any net income of any Restricted Subsidiary
subject only to any such direct or indirect restrictions on the payment of
dividends or the making of distributions by such Restricted Subsidiary,
directly or indirectly, to DCC that are permitted pursuant to Section 4.05
shall be included in Consolidated Net Income; and provided further, that,
----------------
for purposes of
<PAGE>
9
Section 4.04 the amount of Consolidated Net Income of DCC and its
Consolidated Subsidiaries to be included pursuant to Section 4.04(a)(3)(A)
shall be increased by 100% of any increase in Consolidated Net Income
resulting from cash distributions from Restricted Subsidiaries, but only to
the extent that such increase in Consolidated Net Income does not cause the
amount of Consolidated Net Income included pursuant to such Section
4.04(a)(3)(A) to exceed the amount of Consolidated Net Income that would
have been included if this clause (iii) were inapplicable to the net income
of Restricted Subsidiaries which are the source (direct or indirect) of
such cash distributions; provided, further, however, that, for purposes of
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the immediately foregoing proviso as it applies to amounts available for
-------
Restricted Investments, the Restricted Subsidiaries shall be deemed to have
distributed cash to DCC that they could have distributed to DCC (to the
extent such amount exceeds the cash distributions actually made); provided
--------
that any resulting increase in Consolidated Net Income shall be subject to
the overall limitation on increases set forth in such proviso and (B) the
equity of DCC in a net loss of any such Restricted Subsidiary for such
period shall be included in determining such Consolidated Net Income;
(iv) any gain or loss realized upon the sale or other disposition of
any asset of DCC or any of its Consolidated Subsidiaries (including
pursuant to any Sale/Leaseback Transaction) that is not sold or otherwise
disposed of in the ordinary course of business and any gain or loss
realized upon the sale or other disposition of any Capital Stock of any
Person together with any related tax effects according to U.S. GAAP
associated with the foregoing;
(v) any extraordinary gain or loss;
(vi) any gain or loss included in other income that is attributable
to Hedging Obligations;
(vii) any gain or loss that is attributable to minority interests;
and
(viii) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of Section 4.04 only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries to
DCC or any Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted under Section
4.04(a)(3)(D).
<PAGE>
10
"Consolidated Net Tangible Assets" as of any date of determination,
means the total amount of assets (less accumulated depreciation and
amortization, allowances for doubtful receivables, other applicable reserves and
other properly deductible items) which would appear on a consolidated balance
sheet of DCC and its Consolidated Restricted Subsidiaries, determined on a
Consolidated basis in accordance with U.S. GAAP, and after giving effect to
purchase accounting and after deducting therefrom Consolidated Current
Liabilities and, to the extent otherwise included, the amounts of: (i) minority
interests in consolidated Subsidiaries held by Persons other than DCC or a
Restricted Subsidiary; (ii) excess of cost over fair value of assets of
businesses acquired, as determined in good faith by the board of directors of
DCC; (iii) any revaluation or other write-up in book value of assets subsequent
to the Closing Date as a result of a change in the method of valuation in
accordance with U.S. GAAP consistently applied; (iv) unamortized debt discount
and expenses and other unamortized deferred charges, goodwill, patents,
trademarks, service marks, trade names, copyrights, licenses, organization or
developmental expenses and other intangible items; (v) treasury stock; (vi) cash
set apart and held in a sinking or other analogous fund established for the
purpose of redemption or other retirement of Capital Stock to the extent such
obligation is not reflected in Consolidated Current Liabilities; and (vii)
Investments in and assets of Unrestricted Subsidiaries.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of DCC and its Restricted Subsidiaries, determined on a
Consolidated basis, as of the end of the most recent fiscal quarter of DCC
ending at least 45 days prior to the taking of any action for the purpose of
which the determination is being made, as (i) the par or stated value of all
outstanding Capital Stock of DCC plus (ii) paid-in capital or capital surplus
relating to such Capital Stock plus (iii) any retained earnings or earned
surplus less (A) any accumulated deficit and (B) any amounts attributable to
Disqualified Stock.
"Consolidation" means the consolidation of the amounts of each of the
Restricted Subsidiaries with those of DCC in accordance with U.S. GAAP
consistently applied; provided, however, that "Consolidation" shall not include
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consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of DCC or any Restricted Subsidiary in an Unrestricted Subsidiary shall be
accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Contribution Indebtedness" means unsecured Indebtedness of DCC
incurred in connection with the acquisition of all or substantially all the
Capital Stock or assets of a Related Business in an aggregate principal amount
not greater than the aggregate amount of cash contributions made to the capital
of DCC, which amount shall not, in any event, exceed $40,000,000 in the
aggregate; provided that such Contribution
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11
Indebtedness (i) has a Stated Maturity later than the Stated Maturity of the
Securities, (ii) is Incurred substantially concurrently with such cash
contributions and (iii) is so designated as Contribution Indebtedness pursuant
to an Officers' Certificate delivered on the date of Incurrence.
"Corporate Trust Office of the Trustee" means the office at which the
corporate trust business of the Trustee is principally administered.
"Currency Agreement" means, in respect of any Person, any foreign
exchange contract, currency swap agreement or other similar agreement as to
which such Person is a party or beneficiary.
"DCC" means The Derby Cycle Corporation, a corporation organized under
the laws of the State of Delaware.
"DC Cycle" means DC Cycle, L.L.C., a limited liability company
organized under the laws of the State of Delaware.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default, all as described in Section 6.01.
"Derby Holdings South Africa" means Derby Investment Holdings (Pty)
Limited.
"Designated Non-Cash Consideration" means any non-cash consideration
received by DCC or any of its Restricted Subsidiaries in connection with an
Asset Disposition that is so designated as Designated Non-Cash Consideration
pursuant to an Officers' Certificate executed by the Principal Executive Officer
and the Principal Financial Officer of DCC or such Restricted Subsidiary.
"DFS" means Derby Finance S.a.r.l., a corporation (societe a
responsibilite limitee) organized under the laws of the Grand Duchy of
Luxembourg.
"DICSA" means Derby International Corporation S.A., a corporation
(societe anonyme) organized under the laws of the Grand Duchy of Luxembourg.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event (i) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (ii) is convertible or exchangeable for
Indebtedness or Disqualified Stock (excluding capital
<PAGE>
12
stock which is convertible or exchangeable solely at the option of DCC or any of
its Restricted Subsidiaries) or (iii) is redeemable at the option of the holder
thereof, in whole or in part, in each case on or prior to the first anniversary
of the Stated Maturity of the Securities; provided, however, that only the
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portion of Capital Stock which so matures is mandatorily redeemable, is so
convertible or exchangeable or is so redeemable at the option of the holder
thereof prior to such date shall be deemed to be Disqualified Stock; provided,
--------
further, that any Capital Stock that would not constitute Disqualified Stock but
- -------
for provisions thereof giving holders thereof the right to require such Person
to repurchase or redeem such Capital Stock upon the occurrence of an "asset
sale" or "change of control" occurring prior to the first anniversary of the
Stated Maturity of the Securities shall not constitute Disqualified Stock if the
"asset sale" or "change of control" provisions applicable to such Capital Stock
are not more favorable to the holders of such Capital Stock than the provisions
of Sections 4.06 and 4.08.
"Domestic Subsidiary" means any Restricted Subsidiary other than a
Foreign Subsidiary.
"EBITDA" for any period means the Consolidated Net Income for such
period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) income tax expense of DCC and its Consolidated
Restricted Subsidiaries, (ii) Consolidated Interest Expense, (iii) depreciation
expense of DCC and its Consolidated Restricted Subsidiaries, (iv) amortization
of DCC and its Consolidated Restricted Subsidiaries (excluding amortization
attributable to a prepaid cash item that was paid in a prior period), (v) all
other non-cash charges of DCC and its Consolidated Restricted Subsidiaries
(excluding any such non-cash charge to the extent it represents an accrual of or
reserve for cash expenditures in any future period), in each case for such
period, (vi) all one time cash payments made for the payment (and amortization
thereof) of fees, expenses and charges incurred in connection with the
Recapitalization in an amount not to exceed $5,700,000 and (vii) all expenses
attributable to achieving Year 2000 compliance in an aggregate principal amount
not to exceed $1,900,000, less all amounts attributable to the amortization into
income of the transition asset related to the defined benefit pension plans of
DCC and its Subsidiaries, which transition asset was recognized upon the
adoption of Statement of Financial Accounting Standards No. 87. Notwithstanding
the foregoing, the provision for taxes based on the income or profits of, and
the depreciation and amortization and non-cash charges of, any Restricted
Subsidiary shall be added to Consolidated Net Income to compute EBITDA only to
the extent (and in the same proportion) that the net income of such Restricted
Subsidiary was included in calculating Consolidated Net Income and only if a
corresponding amount would be permitted at the date of determination to be
dividended to DCC by such Restricted Subsidiary without prior approval (that has
not been obtained) pursuant to the terms of its
<PAGE>
13
charter and all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to such Restricted Subsidiary or
its shareholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange and Registration Rights Agreement" means the Exchange and
Registration Rights Agreement, to be dated the Closing Date, among the Issuers
and the Initial Purchasers.
"Exchange Securities" means, collectively, debt securities of the
Issuers that are identical in all material respects to the Securities, except
for transfer restrictions relating to the Securities, issued in a like aggregate
principal amount of the Securities originally issued pursuant to the Exchange
and Registration Rights Agreement.
"Excluded Assets" means the assets identified in the Recapitalization
Agreement as the assets to be transferred and sold to one or more affiliates of
DICSA and DFS.
"Foreign Subsidiary" means any Restricted Subsidiary that is not
organized under the laws of the United States or any State thereof or the
District of Columbia.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation of such other
Person (whether arising by virtue of partnership arrangements, or by agreement
to keep-well, to purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
-------- -------
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Currency Agreement or Interest Rate Agreement.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
<PAGE>
14
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
-------- -------
Person existing at the time such Person becomes a Subsidiary of another Person
(whether by merger, consolidation, acquisition or otherwise) shall be deemed to
be Incurred by such Person at the time it becomes a Subsidiary of such other
Person. The term "Incurrence" when used as a noun has a correlative meaning.
The accretion of principal of a non-interest bearing or other discount security
shall be deemed the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication),
(i) the principal of and premium, if any, in respect of indebtedness
of such Person for borrowed money;
(ii) the principal of and premium, if any, in respect of obligations
of such Person evidenced by bonds, debentures, notes or other similar
instruments;
(iii) all obligations of such Person in respect of letters of credit
or other similar instruments (including reimbursement obligations with
respect thereto);
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except accrued expenses and Trade
Payables), which purchase price is due more than six months after the date
of placing such property in service or taking delivery and title thereto or
the completion of such services;
(v) all Capitalized Lease Obligations and all Attributable Debt of
such Person;
(vi) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, any Preferred Stock (but
excluding, in each case, any accrued dividends);
(vii) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person;
provided, however, that the amount of Indebtedness of such Person shall be
-------- -------
the lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness of such other
Persons;
<PAGE>
15
(viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person; or
(ix) all obligations of the type referred to in clauses (i) and (ii)
of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
The amount of indebtedness of any person at any date shall be
determined as set forth above or otherwise in accordance with U.S. GAAP. For
purposes of calculating the amount of Indebtedness of a Securitization Entity
outstanding as of any date, the face or notional amount of any interest in
receivables or equipment that is outstanding as of such date shall be deemed to
be Indebtedness but any such interests held by Affiliates of such Securitization
Entity shall be excluded for purposes of such calculation.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Initial Public Offering" means the first underwritten public offering
of common stock (or ordinary shares) by either of the Issuers pursuant to a
registration statement filed with the Commission in accordance with the
Securities Act for aggregate net cash proceeds of at least $10,000,000.
"Initial Purchasers" means Chase Securities Inc., Chase Manhattan Bank
AG and Chase Manhattan International Limited.
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party or is a
beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extension of credit
<PAGE>
16
(including by way of Guarantee or similar arrangement, but excluding any debt or
extension of credit represented by a bank deposit) or capital contribution to
(by means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others) or any purchase or
acquisition of Capital Stock, Indebtedness or other similar instruments issued
by such Person. For purposes of the definition of "Unrestricted Subsidiary" and
Section 4.04, (i) "Investment" shall include the portion (proportionate to the
equity interest of DCC in such Subsidiary) of the fair market value of the net
assets of any Subsidiary of DCC at the time that such Subsidiary is designated
an Unrestricted Subsidiary; provided, however, that, upon a redesignation of
-------- -------
such Subsidiary as a Restricted Subsidiary, DCC shall be deemed to continue to
have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if
positive) equal to (x) the "Investment" of DCC in such Subsidiary at the time of
such redesignation less (y) the portion (proportionate to the equity interest of
DCC in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and (ii) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined in good faith by the
board of directors of DCC.
"Investor Group" means, collectively, Thayer, Perseus and DICSA.
"Issue Date" means the date on which the Initial Securities are
originally issued.
"Issuers" means each of DCC and Lyon until replaced by a successor
and, thereafter, means the successor and, for purposes of any provision
contained herein and required by the TIA, each other obligor on the indenture
securities.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Lyon" means Lyon Investments B.V., a company organized under the laws
of The Netherlands and a Wholly Owned Subsidiary, which was formerly known as
Lyon Cycle B.V.
"MS Sport Group" means, collectively, MS Sport Vertriebs AG and MS
Sport Vertriebs GmbH.
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and proceeds
from the sale or
<PAGE>
17
other disposition of any securities received as consideration, but only as and
when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other non-cash form, and excluding Designated Non-Cash
Consideration) therefrom, in each case net of (i) all legal, accounting and
investment banking fees, and sales commissions, and all title and recording tax
expenses, commissions and other fees and expenses incurred, and all federal,
state, provincial, local and foreign taxes required to be paid or accrued as a
liability under U.S. GAAP, as a consequence of such Asset Disposition, (ii) all
payments made on any Indebtedness which is secured by any assets subject to such
Asset Disposition, in accordance with the terms of any Lien upon or other
security agreement of any kind with respect to such assets, or which must by its
terms, or in order to obtain a necessary consent to such Asset Disposition, or
by applicable law, be repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to minority
interest holders in Subsidiaries of DCC or joint ventures as a result of such
Asset Disposition and (iv) appropriate amounts to be provided by the seller as a
reserve, in accordance with U.S. GAAP, against any liabilities associated with
the property or other assets disposed of in such Asset Disposition and retained
by DCC or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Non-Recourse Indebtedness" means Indebtedness (i) as to which neither
DCC nor any of its Restricted Subsidiaries (a) provides credit support of any
kind (including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise) or (c) constitutes the lender and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of DCC or
any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its state of maturity and (iii) as to which the lenders have been notified in
writing they shall not have recourse to the shares or assets of DCC or any of
its Restricted Subsidiaries.
"Note Guarantee" means each Guarantee of the obligations with respect
to the Securities issued by a Subsidiary of DCC pursuant to the terms of this
Indenture.
<PAGE>
18
Each such Note Guarantee shall be evidenced by delivery of a supplemental
indenture substantially in the form of Exhibit C hereto.
"Note Guarantor" means any Person that has issued a Note Guarantee.
"Officer" means the Chairman of the Board, the Principal Executive
Officer, the Principal Financial Officer, the President, any Vice President, the
Treasurer or the Secretary of either of the Issuers, or any of the Restricted
Subsidiaries, as the case may be.
"Officers' Certificate" means a certificate signed by two Officers of
either of the Issuers, or any of the Restricted Subsidiaries, as the case may
be.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of, or counsel to,
DCC or the Trustee.
"Permitted Holders" means DC Cycle, Perseus Cycle and DFS, any of
their respective Affiliates, any Person who is a beneficial owner of DC Cycle,
Perseus Cycle or DFS on the Closing Date, and any investment fund managed by
Thayer or Perseus, and any Person acting in the capacity of an underwriter in
connection with a public or private offering of the Capital Stock of either of
the Issuers.
"Permitted Investment" means an Investment by DCC or any Restricted
Subsidiary in (i) DCC, any Restricted Subsidiary or any Person that shall, upon
the making of such Investment, become a Restricted Subsidiary; provided,
--------
however, that the primary business of such Restricted Subsidiary is a Related
- -------
Business; (ii) another Person if, as a result of such Investment, such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, DCC or any Restricted Subsidiary; provided,
--------
however, that the primary business of such Person is a Related Business; (iii)
- -------
Temporary Cash Investments; (iv) receivables owing to DCC or any Restricted
Subsidiary if created or acquired in the ordinary course of business and payable
or dischargeable in accordance with customary trade terms; provided, however,
-------- -------
that such trade terms may include such concessionary trade terms as DCC or any
such Restricted Subsidiary deems reasonable under the circumstances; (v)
payroll, travel and similar advances to cover matters that are expected at the
time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business; (vi) loans or
advances to employees made in the ordinary course of business consistent with
past practices of DCC or any Restricted Subsidiary and not exceeding $2,000,000
in the aggregate outstanding at any one time; (vii) stock, obligations or
securities received in settlement of debts created in the ordinary course of
<PAGE>
19
business and owing to DCC or any Restricted Subsidiary or in satisfaction of
judgments; (viii) any Person to the extent such Investment represents the non-
cash portion of the consideration received for an Asset Disposition that was
made pursuant to and in compliance with Section 4.06; (ix) Investments existing
on the Closing Date; (x) Hedging Obligations otherwise in compliance with this
Indenture; (xi) additional Investments having an aggregate fair market value,
taken together with all other Investments made pursuant to this clause (xi) that
are at the time outstanding, not to exceed $10,000,000 (with a fair market value
of each Investment being measured at the time made and without giving effect to
subsequent changes in value); and (xii) any Investment by DCC or a Subsidiary of
DCC in a Securitization Entity or any Investment by a Securitization Entity in
any other Person in connection with a Qualified Securitization Transaction;
provided that any Investment in a Securitization Entity is in the form of a
- --------
Purchase Money Securities or an equity interest.
"Permitted Liens" means, with respect to any Person, (i) Liens,
pledges or deposits by such Person under worker's compensation laws,
unemployment insurance and other types of social security laws or similar
legislation, or good faith deposits in connection with bids, tenders, contracts
(other than for the payment of Indebtedness), or leases to which such Person is
a party, or deposits to secure public or statutory obligations of such Person or
deposits of cash or government bonds to secure surety or appeal bonds to which
such Person is a party, or deposits as security for contested taxes or import
duties or for the payment of rent, in each case Incurred in the ordinary course
of business; (ii) statutory liens of landlords and other Liens imposed by law,
including carriers', warehousemen's, suppliers', material men's, repairmen's and
mechanics' Liens, in each case for sums not yet due or being contested in good
faith by appropriate proceedings or other Liens arising out of judgments or
awards against such Person with respect to which such Person shall then be
proceeding with an appeal or other proceedings for review; (iii) Liens for
taxes, assessments or governmental charges not yet due or payable or subject to
penalties for non-payment on which are being contested in good faith by
appropriate proceedings; (iv) Liens in favor of issuers of surety bonds or
letters of credit issued pursuant to the request of and for the account of such
Person in the ordinary course of its business; provided, however, that such
-------- -------
letters of credit do not constitute Indebtedness; (v) minor survey exceptions,
minor encumbrances, easements or reservations of, or rights of others for,
licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines
and other similar purposes, or zoning or other restrictions as to the use of
real property or Liens incidental to the conduct of the business of such Person
or to the ownership of its properties which were not Incurred in connection with
Indebtedness and which do not in the aggregate materially adversely affect the
value of said properties or materially impair their use in the operation of the
business of such Person; (vi) Liens securing Indebtedness Incurred to finance
the construction, purchase or lease of, or repairs, improvements or additions
to, property of such Person; provided,
--------
<PAGE>
20
however, that the Lien may not extend to any other property owned by such Person
- -------
or any of its Subsidiaries at the time the Lien is Incurred, and the
Indebtedness (other than any interest thereon) secured by the Lien may not be
Incurred more than 180 days after the later of the acquisition, completion of
construction, repair, improvement, addition or commencement of full operation of
the property subject to the Lien; (vii) Liens to secure Indebtedness permitted
pursuant to clause (b) of Section 4.03; (viii) Liens existing on the Closing
Date; (ix) Liens on property or shares of stock of another Person at the time
such other Person becomes a Subsidiary of such Person; provided, however, that
-------- -------
such Liens are not created, Incurred or assumed in connection with, or in
contemplation of, such other Person becoming such a Subsidiary; provided
--------
further, however, that such Liens may not extend to any other property owned by
- ------- -------
such Person or any of its Subsidiaries; (x) Liens on property at the time such
Person or any of its Subsidiaries acquires the property, including any
acquisition by means of a merger or consolidation with or into such Person or
any Subsidiary of such Person; provided, however, that such Liens are not
-------- -------
created, Incurred or assumed in connection with, or in contemplation of, such
acquisition; provided further, however, that the Liens may not extend to any
-------- ------- -------
other property owned by such Person or any of its Subsidiaries; (xi) Liens
securing Indebtedness or other obligations of a Subsidiary of such Person owing
to such Person or a wholly owned Subsidiary of such Person; (xii) Liens securing
Hedging Obligations so long as such Hedging Obligations relate to Indebtedness
that is, and is permitted to be under this Indenture, secured by a Lien on the
same property securing such Hedging Obligations; (xiii) Liens to secure any
Refinancing (or successive Refinancings) as a whole, or in part, of any
Indebtedness secured by any Lien referred to in the foregoing clauses (vi),
(viii), (ix) and (x); provided, however, that (x) such new Lien shall be limited
-------- -------
to all or part of the same property that secured the original Lien (plus
improvements to or on such property) and (y) the Indebtedness secured by such
Lien at such time is not increased to any amount greater than the sum of (A) the
outstanding principal amount or, if greater, committed amount of the
Indebtedness described under clause (vi), (viii), (ix) or (x) at the time the
original Lien became a Permitted Lien under this Indenture and (B) an amount
necessary to pay any fees and expenses, including premiums, related to such
Refinancings. Notwithstanding the foregoing, "Permitted Liens" shall not include
any Lien described in clause (vi), (ix) or (x) above to the extent such Lien
applies to any Additional Assets acquired directly or indirectly from Net
Available Cash pursuant to Section 4.06; (xiv) judgment Liens not giving rise to
an Event of Default; (xv) an interest or title of a lessor under any Capitalized
Lease Obligation; (xvi) Liens on specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods; (xvii) liens
securing reimbursement obligations with respect to commercial letters of credit
which encumber documents and other property relating to such letters of credit;
(xviii) leases or subleases granted to others that do not
<PAGE>
21
materially interfere with the ordinary course of business of DCC and its
Restricted Subsidiaries; and (xix) Liens in favor of customers and revenue
authorities arising as a matter of law to secure payment of customer duties. For
purposes of this definition, the term "Indebtedness" shall be deemed to include
interest on such Indebtedness.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Perseus" means Perseus Capital, L.L.C., a limited liability company
organized under the laws of the State of Delaware.
"Perseus Cycle" means Perseus Cycle, L.L.C., a limited liability
company organized under the laws of the State of Delaware.
"Preferred Stock", as applied to the Capital Stock of any Person,
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person,
over shares of Capital Stock of any other class of such Person.
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security that is due or overdue or is to become
due at the relevant time.
"Private Exchange Securities" means, collectively, debt securities of
the Issuers that are identical in all material respects to the Exchange
Securities, except for transfer restrictions relating to such Private Exchange
Securities, issued by the Issuers (under the same indenture as the Exchange
Securities) simultaneously with the delivery of the Exchange Securities in the
Registered Exchange Offer to any Securityholder that holds any Securities
acquired by it that have, or that are reasonably likely to be determined to
have, the status of an unsold allotment in an initial distribution, or to any
holder of Securities that is not entitled to participate in the Registered
Exchange Offer, upon the request of any such holder, in exchange for a like
aggregate principal amount of Securities held by such holder.
"Public Equity Offering" means a primary public offering of common
stock, ordinary shares or equivalent equity interests (other than Disqualified
Stock) of either of the Issuers, following which shares of common stock,
ordinary shares or equivalent equity interests, as the case may be, of such
Issuer either (i) are listed on a
<PAGE>
22
nationally recognized stock exchange or automated quotation system in the United
States, Canada or a member of the European Union or (ii) have been distributed
in the United States by means of an effective registration statement under the
Securities Act or sales pursuant to Rule 144 under the Securities Act.
"Public Market" means that at any time with respect to the common
stock, ordinary shares or equivalent equity interests of either of the Issuers
(i) at least 10% of the total issued and outstanding common stock, ordinary
shares or equivalent equity interests of such Issuer has been distributed prior
to such time by means of an effective registration statement under the
Securities Act or (ii) an established public trading market otherwise exists for
any such common stock, or ordinary shares or equivalent equity interests.
"Purchase Money Indebtedness" means Indebtedness (i) consisting of the
deferred purchase price of an asset, conditional sale obligations, obligations
under any title retention agreement and other purchase money obligations, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition by DCC or a Restricted Subsidiary of such asset,
including additions and improvements; provided, however, that such Indebtedness
-------- -------
is incurred within 180 days after the acquisition by DCC or such Restricted
Subsidiary, as the case may be, of such asset.
"Purchase Money Securities" means a promissory note of a
Securitization Entity evidencing a line of credit, which may be irrevocable,
from DCC or any Restricted Subsidiary in connection with a Qualified
Securitization Transaction, which note shall be repaid from cash available to
the Securitization Entity, other than amounts required to be established as
reserves pursuant to agreements, amounts paid to investors in respect of
interest, principal and other amounts owing to such investors and amounts paid
in connection with the purchase of newly generated receivables or newly acquired
equipment.
"Qualified Securitization Transaction" means any transaction or series
of transactions pursuant to which DCC or any Restricted Subsidiary may sell,
convey or otherwise transfer to (a) a Securitization Entity (in the case of a
transfer by DCC or any of Restricted Subsidiary) and (b) any other Person (in
the case of a transfer by a Securitization Entity), or may grant a security
interest in, any accounts receivable or equipment (whether existing on the
Closing Date or arising or acquired thereafter) of DCC or any of its Restricted
Subsidiaries, and any assets related thereto including, without limitation, all
collateral securing such accounts receivable and equipment, all contracts and
contract rights and all Guarantees or other obligations in respect of such
accounts receivable and equipment, proceeds of such accounts receivable and
equipment
<PAGE>
23
and other assets (including contract rights) which are customarily transferred
or in respect of which security interests are customarily granted in connection
with asset securitization transactions involving accounts receivable and
equipment.
"Recapitalization" means the recapitalization of DCC pursuant to the
Recapitalization Agreement.
"Recapitalization Agreement" means the Recapitalization Agreement
dated as of March 11, 1998, as amended as of the Closing Date, among DCC, DC
Cycle, Perseus Cycle, DICSA and DFS, and, for the purposes specified therein, A.
Edward Gottesman, Alan J. Finden-Crofts and Frank H. Pearl.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that is Incurred to
refund, refinance, replace, renew, repay or extend, modify, restate, defer,
substitute or supplement (including pursuant to any defeasance or discharge
mechanism) any Indebtedness of DCC or any Restricted Subsidiary existing on the
Closing Date or Incurred in compliance with this Indenture (including
Indebtedness of DCC or such Restricted Subsidiary that Refinances Refinancing
Indebtedness); provided, however, that (i) the Refinancing Indebtedness has a
-------- -------
Stated Maturity no earlier than the Stated Maturity of the Indebtedness being
Refinanced, (ii) the Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being refinanced, (iii) such Refinancing
Indebtedness is Incurred in an aggregate principal amount (or if issued with
original issue discount, an aggregate issue price) that is equal to or less than
the aggregate principal amount (or if issued with original issue discount, the
aggregate accreted value) then outstanding of the Indebtedness being Refinanced
(plus fees and expenses, including any premium and defeasance costs associated
with the Refinancing) and (vi) if the Indebtedness being Refinanced is
subordinated in right of payment to the Securities, such Refinancing
Indebtedness is subordinated in right of payment to the Securities at least to
the same extent as the Indebtedness being Refinanced; provided further, however,
-------- ------- -------
that Refinancing Indebtedness shall not include (x) Indebtedness of a Restricted
Subsidiary that Refinances Indebtedness of DCC or (y) Indebtedness of DCC or a
Restricted Subsidiary that Refinances Indebtedness of an Unrestricted
Subsidiary.
"Registered Exchange Offer" means a registered exchange offer for the
Securities (i) undertaken by the Issuers pursuant to the Exchange and
Registration Rights
<PAGE>
24
Agreement and (ii) made to certain Holders of Initial Securities, to issue and
deliver to such Holders, in exchange for their Initial Securities, a like
aggregate principal amount of Exchange Securities registered under the
Securities Act.
"Related Business" means any business related, ancillary or comple-
mentary to the businesses of DCC and the Restricted Subsidiaries on the Closing
Date.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of DCC other than an
Unrestricted Subsidiary.
"Revolving Credit Agreement" means the credit agreement, to be dated
as of the Closing Date, as amended, waived or otherwise modified from time to
time, among DCC, the subsidiaries of DCC identified therein, Chase Manhattan
plc, as Arranger, the financial institutions named therein as banks and Chase
Manhattan International Limited, as Facility Agent and Security Agent (except to
the extent, if any, that any such amendment, waiver or other modification
thereto would be prohibited by the terms of this Indenture, unless otherwise
agreed to by the holders of at least a majority in aggregate principal amount of
Securities at the time outstanding).
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired by DCC or a Restricted Subsidiary whereby DCC or
a Restricted Subsidiary transfers such property to a Person and DCC or such
Restricted Subsidiary leases it from such Person, other than leases between DCC
and a Wholly Owned Subsidiary or leases between Wholly Owned Subsidiaries.
"Secured Indebtedness" means any Indebtedness of either of the Issuers
secured by a Lien. "Secured Indebtedness" of any Subsidiary of either of the
Issuers has a correlative meaning.
"Securities" means the Securities issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
"Securitization Entity" means a Wholly Owned Subsidiary (or a wholly
owned Subsidiary of another Person in which DCC or any Subsidiary of DCC makes
an Investment and to which DCC or any Subsidiary of DCC transfers accounts
receivable or equipment and related assets) that engages in no activities other
than in connection with financing of accounts receivable or equipment and that
is designated by the board of
<PAGE>
25
directors of DCC (as provided below) as a Securitization Entity (A) no portion
of the Indebtedness or any other obligations (contingent or otherwise) of which
(i) is Guaranteed by DCC or any Restricted Subsidiary (excluding Guarantees of
obligations (other than the principal of, and interest on, Indebtedness))
pursuant to Standard Securitization Undertakings, (ii) is recourse to or
obligates DCC or any Restricted Subsidiary in any way other than pursuant to
Standard Securitization Undertakings or (iii) subjects any property or asset of
DCC or any Restricted Subsidiary, directly or indirectly, contingently or
otherwise, to the satisfaction thereof, other than pursuant to Standard
Securitization Undertakings, (B) with which neither DCC nor any Restricted
Subsidiary has any material contract, agreement, arrangement or understanding
other than on terms no less favorable to DCC or such Restricted Subsidiary than
those that might be obtained at the time from Persons that are not Affiliates of
DCC, other than fees payable in the ordinary course of business in connection
with servicing receivables of such entity, and (C) to which neither DCC nor any
Restricted Subsidiary has any obligation to maintain or preserve such entities'
financial condition or cause such entity to achieve certain levels of operating
results. Any such designation by the board of directors of DCC shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
resolution of the board of directors of DCC giving effect to such designation
and an Officers' Certificate certifying that such designation complied with the
foregoing conditions.
"Senior Indebtedness"of either of the Issuers means the principal of,
premium, if any, and accrued and unpaid interest on (including interest accruing
on or after the filing of any petition in bankruptcy or for reorganization of
such Issuer, regardless of whether or not a claim for post-filing interest is
allowed in such proceedings), and fees and other amounts owing in respect of,
Bank Indebtedness and all other Indebtedness of such Issuer, whether outstanding
on the Closing Date or thereafter Incurred, unless in the instrument creating or
evidencing the same or pursuant to which the same is outstanding it is provided
that such obligations are not superior in right of payment to the Securities;
provided, however, that Senior Indebtedness shall not include (i) any obligation
- -------- -------
of DCC to any of its Subsidiaries or any obligation of Lyon to any of the
Subsidiaries of DCC, (ii) any liability for federal, state, provincial, local,
foreign or other taxes owed or owing by such Issuer, (iii) any accounts payable
or other liability to trade creditors arising in the ordinary course of business
(including Guarantees thereof or instruments evidencing such liabilities), (iv)
any Indebtedness or obligation of such Issuer (and any accrued and unpaid
interest in respect thereof) that by its terms is subordinate or junior in any
respect to any other Indebtedness or obligation of such Issuer, including any
Subordinated Obligations, (v) any obligations with respect to any Capital Stock
or (vi) any Indebtedness Incurred in violation of this Indenture. "Senior
Indebtedness" of any Subsidiary of either of the Issuers has a correlative
meaning.
<PAGE>
26
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "Significant Subsidiary" of either of the Issuers within the meaning of Rule
1-02 under Regulation S-X promulgated by the Commission.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by DCC or any Subsidiary of
DCC that are reasonably customary in an accounts receivable or equipment
securitization transaction.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency beyond the control of the issuer unless such
contingency has occurred).
"Subordinated Obligation" means any Indebtedness of either of the
Issuers (whether outstanding on the Closing Date or thereafter Incurred) that is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement. "Subordinated Obligation" of any Subsidiary of either of the
Issuers has a correlative meaning.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States or any agency thereof or
obligations Guaranteed by the United States or any agency thereof, (ii)
investments in time deposit accounts, certificates of deposit and money market
deposits maturing within 180 days of the date of acquisition thereof issued by a
bank or trust DCC that is organized under the laws of the United States, any
state thereof or any foreign country recognized by the United States having
capital, surplus and undivided profits aggregating in excess of $250,000,000 (or
the foreign currency equivalent thereof) and whose long-term debt is rated "A"
(or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act), (iii) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clause (i) above
entered into with a bank meeting the
<PAGE>
27
qualifications described in clause (ii) above, (iv) investments in commercial
paper, maturing not more than 90 days after the date of acquisition, issued by a
corporation (other than an Affiliate of DCC) organized and in existence under
the laws of the United States or any foreign country recognized by the United
States with a rating at the time as of which any investment therein is made of
"P-1" (or higher) according to Moody's Investors Service, Inc. ("Moody's") or
"A-1" (or higher) according to Standard and Poor's Ratings Service, a division
of The McGraw-Hill Companies, Inc. ("S&P"), and (v) investments in securities
with maturities of six months or less from the date of acquisition issued or
fully guaranteed by any state, commonwealth or territory of the United States,
or by any political subdivision or taxing authority thereof, and rated at least
"A" by S&P or "A" by Moody's.
"Thayer" means Thayer Equity Investors III, L.P., a limited
partnership organized under the laws of the State of Delaware.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
------
77bbbb) as in effect on the Closing Date.
"Total Assets" means the total Consolidated assets of DCC and its
Restricted Subsidiaries, as set forth on DCC's most recent consolidated balance
sheet.
"Trade Payables" means, with respect to any Person, any accounts
payable or any Indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person arising in the ordinary course of business
in connection with the acquisition of goods or services.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"Univega" means Univega Beteiligungen GmbH.
"Unrestricted Subsidiary" means (i) any Subsidiary of DCC (other than
Lyon) that at the time of determination shall be designated an Unrestricted
Subsidiary by the board of directors of DCC in the manner provided below and
(ii) any Subsidiary of
<PAGE>
28
an Unrestricted Subsidiary. The board of directors of DCC may designate any
Subsidiary of DCC (other than Lyon) (including any newly acquired or newly
formed Subsidiary of DCC) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of,
or owns or holds any Lien on any property of, either of the Issuers or any other
Subsidiary of either of the Issuers that is not a Subsidiary of the Subsidiary
to be so designated; provided, however, that either (A) the Subsidiary to be so
-------- -------
designated has total Consolidated assets of $1,000 or less or (B) if such
Subsidiary has Consolidated assets greater than $1,000, then such designation
would be permitted under Section 4.04. The board of directors of DCC may
designate any Subsidiary of DCC that is an Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that immediately after giving effect
-------- -------
to such designation, (x) DCC could Incur $1.00 of additional Indebtedness under
paragraph (a) of Section 4.03 and (y) no Default shall have occurred and be
continuing. Any such designation of a Subsidiary as a Restricted Subsidiary or
Unrestricted Subsidiary by the board of directors of DCC shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the resolution of such
board of directors giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. GAAP" means generally accepted accounting principles in the
United States as in effect as of the Closing Date, including those set forth in
(i) the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the Commission
governing the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the
Commission. All ratios and computations based on U.S. GAAP contained in this
Indenture shall be computed in conformity with U.S. GAAP.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States (including any agency or instrumentality thereof) for the payment
of which the full faith and credit of the United States is pledged and which are
not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally
<PAGE>
29
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of DCC all the
Capital Stock of which (other than directors' qualifying shares) is owned by DCC
or another Wholly Owned Subsidiary.
SECTION 1.02. Other Definitions.
------------------
Defined in
Term Section
---- -------------
"Additional Amounts"...................................... 4.16
"Affiliate Transaction"................................... 4.07
"Authorized Agent"........................................ 11.01
"Bankruptcy Law".......................................... 6.01
"Change of Control Offer"................................. 4.08(b)
"covenant defeasance option".............................. 8.01(b)
"Custodian"............................................... 6.01
"Event of Default"........................................ 6.01
"legal defeasance option"................................. 8.01(b)
"Legal Holiday"........................................... 11.08
"Offer"................................................... 4.06(b)
"Offer Amount"............................................ 4.06(c)
"Offer Period"............................................ 4.06(c)
"Paying Agent"............................................ 2.03
"protected purchaser"..................................... 2.07
"Purchase Date"........................................... 4.06(c)
"Registrar"............................................... 2.03
"Restricted Payment"...................................... 4.04(a)
"Successor Company"....................................... 5.01(a)
"Tax Authority"........................................... 4.16
"Taxes"................................................... 4.16
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
--------------------------------------------------
This Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by
<PAGE>
30
reference in and made a part of this Indenture. The following TIA terms have the
following meanings:
"Commission" means the United States Securities and Exchange
Commission.
"indenture securities" means the Securities and the Note Guarantees.
"indenture security holder" means a Holder or Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Issuers, the Note
Guarantors and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
have the meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise
----------------------
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with U.S. GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
<PAGE>
31
(7) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with U.S. GAAP;
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE 2
The Securities
--------------
SECTION 2.01. Form and Dating. Provisions relating to the Initial
----------------
Securities, the Private Exchange Securities and the Exchange Securities are set
forth in the Appendix, which is hereby incorporated in and expressly made a part
of this Indenture. The (i) Initial Securities and the Trustee's certificate of
authentication and (ii) Private Exchange Securities and the Trustee's
certificate of authentication shall each be substantially in the form of Exhibit
A hereto, which is hereby incorporated in and expressly made a part of this
Indenture. The Exchange Securities and the Trustee's certificate of
authentication shall each be substantially in the form of Exhibit B hereto,
which is hereby incorporated in and expressly made a part of this Indenture.
The Securities may have notations, legends or endorsements required by law,
stock exchange rule, agreements to which either of the Issuers or any Note
Guarantor is subject, if any, or usage (provided that any such notation, legend
or endorsement is in a form acceptable to the Issuers). Each Security shall be
dated the date of its authentication.
SECTION 2.02. Execution and Authentication. One or more Officers
-----------------------------
shall sign the Securities for each of the Issuers by manual or facsimile
signature.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate and make available for delivery
Securities as set forth in the Appendix.
<PAGE>
32
The Trustee may appoint an authenticating agent reasonably acceptable
to the Issuers to authenticate the Securities. Any such appointment shall be
evidenced by an instrument signed by a Trust Officer, a copy of which shall be
furnished to the Issuers. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Securities whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as
any Registrar, Paying Agent or agent for service of notices and demands.
SECTION 2.03. Registrar and Paying Agent. The Issuers shall maintain
---------------------------
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Issuers may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent, and the
term "Registrar" includes any co-registrars. The Issuers initially appoint the
Trustee as (i) Registrar and Paying Agent in connection with the Securities and
(ii) the Securities Custodian (as defined in the Appendix) with respect to the
Global Securities. The Issuers also intend to appoint The Industrial Bank of
Japan (Luxembourg), S.A. as Luxembourg Paying Agent once they apply for listing
of the Securities on the Luxembourg Stock Exchange. In all circumstances, the
Issuers shall ensure that (i) at least one Paying Agent shall be located in the
United States, (ii) at least one Paying Agent shall be, if and so long as the
Securities are listed on the Luxembourg Stock Exchange and the rules of such
exchange so require, located in Luxembourg or such other place as the Luxembourg
Stock Exchange may approve and (iii) if and so long as the Securities are listed
on any other securities exchange, any applicable requirements of such exchange
as to Paying Agents are satisfied.
The Issuers shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture, which shall incorporate
the terms of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such agent. The Issuers shall notify the Trustee of
the name and address of any such agent. If the Issuers fail to maintain a
Registrar or Paying Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation therefor pursuant to Section 7.07. DCC or any of its
domestically organized Wholly Owned Subsidiaries may act as Paying Agent or
Registrar.
The Issuers may remove any Registrar or Paying Agent upon written
notice to such Registrar or Paying Agent and to the Trustee; provided, however,
-------- -------
that no such removal shall become effective until (1) acceptance of an
appointment by a successor as evidenced by an appropriate agreement entered into
by the Issuers and such
<PAGE>
33
successor Registrar or Paying Agent, as the case may be, and delivered to the
Trustee or (2) notification to the Trustee that the Trustee shall serve as
Registrar or Paying Agent until the appointment of a successor in accordance
with clause (1) above. The Registrar or Paying Agent may resign at any time upon
written notice; provided, however, that the Trustee may resign as Paying Agent
-------- -------
or Registrar only if the Trustee also resigns as Trustee in accordance with
Section 7.08.
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due
------------------------------------
date of the principal, interest and Additional Amounts, if any, on any Security,
the Issuers shall deposit with the Paying Agent (or if DCC or any Subsidiary is
acting as Paying Agent, segregate and hold in trust for the benefit of the
Persons entitled thereto) a sum sufficient to pay such principal, interest and
Additional Amounts, if any, when so becoming due. The Issuers shall require
each Paying Agent (other than the Trustee) to agree that the Paying Agent shall
hold in trust for the benefit of Securityholders or the Trustee all money held
by the Paying Agent for the payment of principal of or interest or Additional
Amounts, if any, on the Securities and shall notify the Trustee of any default
by the Issuers in making any such payment. If DCC or a Subsidiary of DCC acts
as Paying Agent, it shall segregate the money held by it as Paying Agent and
hold it as a separate trust fund. The Issuers at any time may require a Paying
Agent to pay all money held by it to the Trustee and to account for any funds
disbursed by the Paying Agent. Upon complying with this Section 2.04, the Paying
Agent shall have no further liability for the money delivered to the Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
---------------------
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Issuers shall furnish, or cause the Registrar to furnish, to the
Trustee, in writing at least five Business Days before each payment date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of Securityholders.
SECTION 2.06. Transfer and Exchange. The Securities shall be issued
----------------------
in registered form and shall be transferable only upon the surrender of a
Security for registration of transfer. When a Security is presented to the
Registrar with a request to register a transfer, the Registrar shall register
the transfer as requested if the requirements of Section 8-401(a)(l) of the
Uniform Commercial Code are met. When Securities are presented to the Registrar
with a request to exchange them for an equal principal amount of Securities of
other denominations, the Registrar shall make the exchange as requested if the
same requirements are met. To permit registration of transfers and exchanges,
the Issuers shall execute and the Trustee shall authenticate Securities at the
Registrar's request. The Issuers, or the Paying Agent, as applicable, may
require payment of a sum
<PAGE>
34
sufficient to pay all taxes, assessments or other governmental charges in
connection with any transfer or exchange pursuant to this Section 2.06. The
Issuers shall not be required to make and the Registrar need not register
transfers or exchanges of Securities selected for redemption (except, in the
case of Securities to be redeemed in part, the portion thereof not to be
redeemed) or transfers or exchanges of Securities for a period of 15 days before
a selection of Securities to be redeemed.
Prior to the due presentation for registration of transfer of any
Security, and subject to the provisions of the Securities with respect to record
dates, the Issuers, the Note Guarantors, the Trustee, the Paying Agent or the
Registrar may deem and treat the Person in whose name a Security is registered
as the absolute owner of such Security for the purpose of receiving payment of
principal, interest, and Additional Amounts, if any, on such Security and for
all other purposes whatsoever, whether or not such Security is overdue, and none
of the Issuers, any Note Guarantor, the Trustee, the Paying Agent or the
Registrar shall be affected by notice to the contrary.
Any Holder of a Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interest in such Global Security
may be effected only through a book-entry system maintained by (i) the Holder of
such Global Security (or its agent) or (ii) any Holder of a beneficial interest
in such Global Security, and that ownership of a beneficial interest in such
Global Security shall be required to be reflected in a book entry.
All Securities issued upon any transfer or exchange pursuant to the
terms of this Indenture shall evidence the same debt and shall be entitled to
the same benefits under this Indenture as the Securities surrendered upon such
transfer or exchange.
SECTION 2.07. Replacement Securities. If a mutilated Security is
-----------------------
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Issuers shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met, such that the Holder (i)
satisfies the Issuers or the Trustee within a reasonable time after he has
notice of such loss, destruction or wrongful taking and the Registrar does not
register a transfer prior to receiving such notification, (ii) makes such
request to the Issuers or the Trustee prior to the Security being acquired by a
protected purchaser as defined in Section 8-303 of the Uniform Commercial Code
(a "protected purchaser") and (iii) satisfies any other reasonable requirements
of the Trustee. If required by the Trustee or the Issuers, such Holder shall
furnish an indemnity bond sufficient in the judgment of the Trustee to protect
the Issuers, the Trustee, the Paying Agent and the Registrar from any loss that
any of them may suffer if a Security is replaced. The Issuers and the Trustee
may charge the Holder for their expenses in
<PAGE>
35
replacing a Security. In the event any such mutilated, lost, destroyed or
wrongfully taken Security has become or is about to become due and payable, the
Issuers in their discretion may pay such Security instead of issuing a new
Security in replacement thereof.
Every replacement Security is an additional obligation of the Issuers.
The provisions of this Section 2.07 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, lost, destroyed or wrongfully taken
Securities.
SECTION 2.08. Outstanding Securities. Securities outstanding at any
-----------------------
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancelation and those described in this Section
2.08 as not outstanding. Subject to Section 11.06, a Security does not cease to
be outstanding because the Issuers or an Affiliate of the Issuers holds the
Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and the Issuers receive proof satisfactory to
them that the replaced Security is held by a protected purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all principal, interest and Additional Amounts, if any, payable on that date
with respect to the Securities (or portions thereof) to be redeemed or maturing,
as the case may be, and the Paying Agent is not prohibited from paying such
money to the Securityholders on that date pursuant to the terms of this
Indenture, then on and after that date such Securities (or portions thereof)
cease to be outstanding and interest and Additional Amounts, if any, on them
cease to accrue.
SECTION 2.09. Temporary Securities. In the event that Definitive
---------------------
Securities (as defined in the Appendix) are to be issued under the terms of this
Indenture, until such Definitive Securities are ready for delivery, the Issuers
may prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of Definitive Securities but may
have variations that the Issuers consider appropriate for temporary Securities.
Without unreasonable delay, the Issuers shall prepare and the Trustee shall
authenticate Definitive Securities and deliver them in exchange for temporary
Securities upon surrender of such temporary Securities at the office or agency
of the Issuers, without charge to the Holder.
<PAGE>
36
SECTION 2.10. Cancelation. The Issuers at any time may deliver
------------
Securities to the Trustee for cancelation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel all
Securities surrendered for registration of transfer, exchange, payment or
cancelation and deliver canceled Securities to the Issuers pursuant to written
direction by an Officer. Subject to Section 2.07, the Issuers may not issue new
Securities to replace Securities they have redeemed, paid or delivered to the
Trustee for cancelation. The Trustee shall not authenticate Securities in place
of canceled Securities other than pursuant to the terms of this Indenture.
SECTION 2.11. Defaulted Interest. If the Issuers default in a
-------------------
payment of interest on the Securities, the Issuers shall pay the defaulted
interest (plus interest on such defaulted interest to the extent lawful) in any
lawful manner. The Issuers may pay the defaulted interest to the Persons who
are Securityholders on a subsequent special record date. The Issuers shall fix
or cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee or Paying Agent, as applicable. At least
15 days before the subsequent special record date, the Issuers shall deliver, in
accordance with Section 11.02, a notice to each Holder of Securities, with a
copy to the Trustee and the Paying Agent, that states the subsequent special
record date, the payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid.
SECTION 2.12. CUSIP Numbers. The Issuers in issuing the Securities
--------------
may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall
use the applicable "CUSIP" number in notices of redemption as a convenience to
Holders; provided, however, that any such notice may state that no
-------- -------
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers.
SECTION 2.13. Currency Indemnity. U.S. dollars is the sole currency
------------------
of account and payment for all sums payable by the Issuers under or in
connection with the Securities, including damages. Any amount received or
recovered in a currency other than U.S. dollars (whether as a result of, or the
enforcement of, a judgment or order of a court of any jurisdiction, in the
winding-up or dissolution of either of the Issuers or otherwise) by any holder
of a Security in respect of any sum expressed to be due to it from the Issuers
shall only constitute a discharge to the Issuers to the extent of the U.S.
dollar amount which the recipient is able to purchase with the amount so
received or recovered in that other currency on the date of that receipt or
recovery (or, if it is not
<PAGE>
37
practicable to make that purchase on the date, on the first date on which it is
practicable to do so). If the U.S. dollar amount is less than the U.S. dollar
amount expressed to be due to the recipient under any Security, the Issuers
shall indemnify the recipient against any loss sustained by it as a result. In
any event, the Issuers shall indemnify the recipient against the cost of making
any such purchase. For the purposes of this Section 2.14, the Holder of a
Security shall certify in a satisfactory manner to the Trustee (indicating the
sources of information used) that it would have suffered a loss had an actual
purchase of U.S. dollars been made with the amount so received in that other
currency on the date of receipt or recovery (or, if a purchase of U.S. dollars
on such date had not been practicable due to currency market conditions
generally, on the first date on which it would have been practicable, it being
required that the need for a change of date be certified in the manner mentioned
above). These indemnities constitute a separate and independent obligation from
the other obligations of the Issuers, shall give rise to a separate and
independent cause of action, shall apply irrespective of any indulgence granted
by any holder of a Security and shall continue in full force and effect despite
any other judgment, order, claim or proof for a liquidated amount in respect of
any sum due under any Security.
ARTICLE 3
Redemption
----------
SECTION 3.01. Notices to Trustee. If the Issuers elect to redeem
-------------------
Securities pursuant to paragraph 5 of the Securities, they shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which the redemption
shall occur.
The Issuers shall give each notice to the Trustee provided for in this
Section 3.01 at least 60 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Issuers to the effect that such
redemption shall comply with the conditions herein. If fewer than all the
Securities are to be redeemed, the record date relating to such redemption shall
be selected by the Issuers and given to the Trustee, which record date shall be
not fewer than 15 days after the date of notice to the Trustee. Any such notice
may be canceled at any time prior to notice of such redemption being delivered
to any Holder and shall thereby be void and of no effect.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than
---------------------------------------
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed in compliance with the requirements of the principal securities
exchange, if
<PAGE>
38
any, on which such Securities are listed and the requirements of any depositary
holding the global certificates representing the Securities, or, if such
Securities are not so listed or such exchange prescribes no method of selection
and the depositary, if any, holding the global certificates representing the
Securities imposes no requirements, on a pro rata basis, by lot or by such other
method that the Trustee in its sole discretion shall deem to be fair and
appropriate and in accordance with methods generally used at the time of
selection by fiduciaries in similar circumstances (and in such manner as
complies with applicable legal and exchange requirements). Any such requirements
of any such securities exchange not located in the United States shall be
specified by the Issuers in writing to the Trustee. The Trustee shall make the
selection from outstanding Securities not previously called for redemption. The
Trustee may select for redemption portions of the principal of Securities that
have denominations equal to or larger than $1,000. Securities and portions of
them the Trustee selects shall be in amounts of $1,000 or a whole multiple of
$1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption. The
Trustee shall notify the Issuers promptly of the Securities or portions of
Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not more
---------------------
than 60 days before a date for redemption of Securities, the Issuers shall
deliver or cause to be delivered, in accordance with Section 11.02, a notice of
redemption to each Holder whose Securities are to be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price and the amount of accrued and unpaid
interest, if any, and Additional Amounts, if any, to be paid;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price plus accrued and unpaid
interest, if any, and Additional Amounts, if any;
(5) if fewer than all the outstanding Securities are to be redeemed,
the certificate numbers and principal amounts of the particular Securities
(or portion thereof) to be redeemed;
(6) that, unless the Issuers default in making such redemption payment
or the Paying Agent is prohibited from making such payment pursuant to the
terms
<PAGE>
39
of this Indenture, interest and Additional Amounts, if any, on Securities
(or portion thereof) called for redemption ceases to accrue on and after
the redemption date;
(7) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed;
(8) the CUSIP number, if any, printed on the Securities being
redeemed; and
(9) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Issuers' request, the Trustee shall give the notice of
redemption in the Issuers' name and at the Issuers' expense. In such event, the
Issuers shall provide the Trustee with the information required by this Section
3.03.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
-------------------------------
redemption is given in accordance with Section 3.03, Securities called for
redemption become due and payable on the redemption date and at the redemption
price plus accrued and unpaid interest and Additional Amounts, if any, stated in
the notice. Upon surrender to the Trustee or Paying Agent, such Securities
shall be paid at the redemption price stated in the notice, plus accrued and
unpaid interest and Additional Amounts, if any, to the redemption date;
provided, however, that if the redemption date is after a regular record date
- -------- -------
and on or prior to the payment date, the accrued interest shall be payable to
the Securityholder of the redeemed Securities registered on the relevant record
date. Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to 10:00 a.m. New
----------------------------
York City time on the redemption date, the Issuers shall deposit with the Paying
Agent (or, if DCC or a Subsidiary of DCC is the Paying Agent, shall segregate
and hold in trust) money in U.S. dollars sufficient to pay the redemption price
of and accrued and unpaid interest and Additional Amounts, if any, on all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption that have been delivered by the Issuers to the
Trustee for cancelation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
----------------------------
Security that is redeemed in part, the Issuers shall execute and the Trustee
shall authenticate for the Holder (at the Issuers' expense) a new Security equal
in principal amount to the unredeemed portion of the Security surrendered.
<PAGE>
40
ARTICLE 4
Covenants
---------
SECTION 4.01. Payment of Securities. The Issuers shall promptly pay
----------------------
the principal of and interest, liquidated damages and Additional Amounts, if
any, on the Securities on the dates and in the manner provided in the Securities
and in this Indenture. Principal, interest and Additional Amounts shall be
considered paid on the date due if at 10:00 a.m. New York City time on such date
the Trustee or the Paying Agent holds in accordance with this Indenture money in
U.S. dollars sufficient to pay all principal, interest, liquidated damages and
Additional Amounts then due.
The Issuers shall pay interest on overdue principal at the rate
specified therefor in the Securities, and they shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. Reports to Holders of Securities. Notwithstanding that
---------------------------------
DCC may not be subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, DCC shall file with the Commission and provide the Trustee and
holders of Securities and prospective holders of Securities (upon request)
within 15 days after DCC files them with the Commission, copies of its annual
report and the information, documents and other reports that are specified in
Sections 13 and 15(d) of the Exchange Act. In addition, following a Public
Equity Offering, DCC shall furnish to the Trustee and Securityholders, promptly
upon their becoming available, copies of the annual report to shareholders and
any other information provided by such Issuer to its public shareholders
generally. The Issuers shall comply with the other provisions of Section 314(a)
of the TIA.
SECTION 4.03. Limitation on Indebtedness. (a) DCC shall not, and
---------------------------
shall not permit any Restricted Subsidiary to, Incur, directly or indirectly,
any Indebtedness; provided, however, that DCC or any Restricted Subsidiary may
-------- -------
Incur Indebtedness, if on the date of such Incurrence and after giving effect
thereto, the Consolidated Coverage Ratio would be greater than 2.00:1.00 if such
Indebtedness is Incurred on or prior to the second anniversary of the date of
the original issuance of the Securities and 2.25:1.00 if such Indebtedness is
Incurred thereafter.
(b) Notwithstanding Section 4.03(a), DCC and its Restricted
Subsidiaries may Incur the following Indebtedness:
<PAGE>
41
(i) Indebtedness outstanding at any one time in an aggregate
principal amount not to exceed the greater of (A) 100% of the total
commitment under the Revolving Credit Agreement on the Closing Date (DM225
million) less the aggregate amount of Indebtedness incurred by all
Securitization Entities in connection with Qualified Securitization
Transactions that is outstanding at such time; or (B) 75% of accounts
receivable and 35% of inventory, in each case net of reserves and as shown
on the consolidated balance sheet of DCC as of the most recent month for
which financial statements are available from time to time (so that
Indebtedness incurred pursuant to this clause (B) is not at any time
greater than the permitted amount based on the most recent such financial
statements);
(ii) Indebtedness of DCC owed to, and held by, any Restricted
Subsidiary or Indebtedness of a Restricted Subsidiary owed to, and held by,
DCC or any other Restricted Subsidiary; provided, however, that any
-------- -------
subsequent issuance or transfer of any Capital Stock or any other event
that results in any such Restricted Subsidiary ceasing to be a Restricted
Subsidiary or any subsequent transfer of any such Indebtedness (except to
DCC or a Restricted Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the issuer thereof;
(iii) Indebtedness (A) represented by the Securities, any Exchange
Securities or any Private Exchange Securities, (B) outstanding on the
Closing Date (other than the Indebtedness described in clauses (i) and (ii)
above), (C) consisting of Refinancing Indebtedness Incurred in respect of
any Indebtedness described in this clause (iii) (including Indebtedness
Refinancing Refinancing Indebtedness) or the foregoing clause (i) and (D)
consisting of Guarantees of any Indebtedness not prohibited by this
Indenture;
(iv) (A) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Restricted Subsidiary was
acquired by DCC or a Restricted Subsidiary (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the funds
or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary became a
Subsidiary of DCC or a Restricted Subsidiary or was otherwise acquired by
DCC or a Restricted Subsidiary); provided, however, that on the date that
-------- -------
such Restricted Subsidiary is acquired by DCC or a Restricted Subsidiary,
DCC would have been able to Incur $1.00 of additional Indebtedness pursuant
to Section 4.03(a) after giving effect to the Incurrence of such
Indebtedness pursuant to this clause (iv) and (B) Refinancing Indebtedness
Incurred by a Restricted Subsidiary in respect of Indebtedness Incurred by
such Restricted Subsidiary pursuant to this clause (iv);
<PAGE>
42
(v) Indebtedness (A) in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds provided by DCC
and its Restricted Subsidiaries in the ordinary course of business and (B)
under Currency Agreements and Interest Rate Agreements entered into for
bona fide hedging purposes of DCC and its Restricted Subsidiaries in the
ordinary course of business; provided, however, that such Currency
-------- -------
Agreements and Interest Rate Agreements do not increase the Indebtedness of
DCC and its Restricted Subsidiaries outstanding at any time other than as a
result of fluctuations in foreign currency exchange rates or interest rates
or by reason of fees, indemnities and compensation payable thereunder;
(vi) Purchase Money Indebtedness and Capitalized Lease Obligations
in an aggregate principal amount not in excess of $10,000,000 at any time
outstanding;
(vii) Indebtedness arising from agreements of DCC or any of its
Restricted Subsidiaries providing for indemnification, adjustment of
purchase price, earn out or other similar obligations, in each case,
incurred or assumed in connection with the disposition of a Restricted
Subsidiary or any business or assets of DCC or a Restricted Subsidiary,
other than Guarantees of Indebtedness incurred by any Person acquiring all
or any portion of such business, assets or such Restricted Subsidiary for
the purpose of financing such acquisition; provided that the maximum
--------
assumable liability in respect of all such Indebtedness shall at no time
exceed the gross proceeds actually received by DCC or its Restricted
Subsidiaries in connection with such disposition;
(viii) Indebtedness incurred by a Securitization Entity in a Qualified
Securitization Transaction that is Non-Recourse Indebtedness with respect
to DCC and its other Restricted Subsidiaries (except for Standard
Securitization Undertakings);
(ix) the Incurrence of Indebtedness by Foreign Subsidiaries which
does not exceed $5,000,000 at any one time outstanding;
(x) Indebtedness (other than Indebtedness permitted to be Incurred
pursuant to the foregoing paragraph (a) or any other clause of this
paragraph (b)) in an aggregate principal amount on the date of Incurrence
that, when added to all other Indebtedness Incurred pursuant to this clause
(x) and then outstanding, shall not exceed $20,000,000; and
(xi) Contribution Indebtedness.
<PAGE>
43
(c) Notwithstanding the foregoing, neither of the Issuers may Incur
any Indebtedness pursuant to paragraph (b) above if the proceeds thereof are
used, directly or indirectly, to repay, prepay, redeem, defease, retire, refund
or refinance any Subordinated Obligations of such Issuer unless such
Indebtedness shall be subordinated to the Securities to at least the same extent
as such Subordinated Obligations.
(d) Notwithstanding any other provision of this Section 4.03, the
maximum amount of Indebtedness that DCC or any Restricted Subsidiary may Incur
pursuant to this Section 4.03 shall not be deemed to be exceeded solely as a
result of fluctuations in the exchange rates of currencies. For purposes of
determining the outstanding principal amount of any particular Indebtedness
Incurred pursuant to this Section 4.03, (i) Indebtedness Incurred pursuant to
the Revolving Credit Agreement prior to or on the Closing Date shall be treated
as Incurred pursuant to Section 4.03(b)(i), (ii) Indebtedness permitted by this
Section 4.03 need not be permitted solely by reference to one provision
permitting such Indebtedness but may be permitted in part by one such provision
and in part by one or more other provisions of this Section 4.03 permitting such
Indebtedness and (iii) in the event that Indebtedness meets the criteria of more
than one of the types of Indebtedness described in this Section 4.03, DCC, in
its sole discretion, shall classify such Indebtedness and only be required to
include the amount of such Indebtedness in one of such clauses.
SECTION 4.04. Limitation on Restricted Payments. (a) DCC shall not,
----------------------------------
and shall not permit any Restricted Subsidiary, directly or indirectly, to (i)
declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving DCC) or similar payment (including any payment in
respect of the Additional Payment) to the direct or indirect holders of its
Capital Stock except dividends or distributions payable solely in its Capital
Stock (other than Disqualified Stock) or in options, warrants or other rights to
purchase such Capital Stock and except dividends or distributions payable to DCC
or another Restricted Subsidiary (and, if such Restricted Subsidiary has
shareholders other than DCC or other Restricted Subsidiaries, to its other
shareholders on a pro rata basis), (ii) purchase, redeem, retire or otherwise
acquire for value any Capital Stock of DCC or any Restricted Subsidiary held by
Persons other than DCC or another Restricted Subsidiary, (iii) purchase,
repurchase, redeem, defease or otherwise acquire or retire for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition) or (iv) make any Restricted
Investment in any Person (any such dividend, distribution, purchase, redemption,
repurchase, defeasance, other
<PAGE>
44
acquisition, retirement or Investment being herein referred to as a "Restricted
Payment") if at the time DCC or such Restricted Subsidiary makes such Restricted
Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) DCC could not Incur at least $1.00 of additional Indebtedness
under Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the board of directors of DCC, whose
determination shall be conclusive and evidenced by a resolution of such
board of directors) declared or made subsequent to the Closing Date would
exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal
quarter immediately following the fiscal quarter during which the
Closing Date occurs to the end of the most recent fiscal quarter for
which financial statements are available (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such
deficit);
(B) the aggregate Net Cash Proceeds received by DCC from the
issue or sale of its Capital Stock (other than Disqualified Stock) or
other capital contributions subsequent to the Closing Date other than
an issuance or sale to (x) a Subsidiary of DCC or (y) an employee
stock ownership plan or other trust established by DCC or any of its
Subsidiaries to the extent such sale to an employee stock ownership
plan or similar trust is financed by loans from, or is Guaranteed by,
DCC or any Restricted Subsidiary unless such loans have been repaid in
cash prior to the date of such determination;
(C) the amount by which Indebtedness of DCC or its Restricted
Subsidiaries is reduced on DCC's consolidated balance sheet upon the
conversion or exchange (other than by a Subsidiary of DCC) subsequent
to the Closing Date of any Indebtedness of DCC or its Restricted
Subsidiaries convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of DCC (less the amount of any cash or the fair
market value of other property distributed by DCC or any Restricted
Subsidiary upon such conversion or exchange), plus the amount of cash
and the fair market value of any other property (determined as
provided
<PAGE>
45
above) received by DCC or any Restricted Subsidiary upon such
conversion or exchange; and
(D) the amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from (i) payments of dividends,
repayments of the principal of loans or advances or other transfers of
assets to DCC or any Restricted Subsidiary from Unrestricted
Subsidiaries or the disposal of such Investments or (ii) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries
(valued in each case as provided in the definition of "Investment")
not to exceed, in the case of any Unrestricted Subsidiary, the amount
of Investments previously made by DCC or any Restricted Subsidiary in
such Unrestricted Subsidiary, which amount was included in the
calculation of the amount of Restricted Payments, less (E) the
aggregate principal amount of any outstanding Contribution
Indebtedness.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any Restricted Payment made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Capital Stock of DCC
(other than Disqualified Stock and other than Capital Stock issued or sold
to a Subsidiary of DCC or an employee stock ownership plan or other trust
established by DCC or any of its Subsidiaries to the extent such sale to an
employee stock ownership plan or similar trust is financed by loans from,
or is Guaranteed by, DCC or any Restricted Subsidiary unless such loans
have been repaid in cash prior to the date of such determination) or a
substantially concurrent capital contribution to DCC; provided, however,
-------- -------
that (A) such Restricted Payment shall be excluded in the calculation of
the amount of Restricted Payments under clause (3) of Section 4.04(a) and
(B) the Net Cash Proceeds from such sale applied in the manner set forth in
this clause (i) shall be excluded from the calculation of amounts under
clause (3)(B) of Section 4.04(a);
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations of DCC or
its Restricted Subsidiaries made by exchange for, or out of the proceeds
of, the substantially concurrent sale of, Indebtedness of DCC or its
Restricted Subsidiaries that is permitted to be Incurred pursuant to
Section 4.03(b); provided, however, that such purchase, repurchase,
-------- -------
redemption, defeasance or other acquisition or retirement for value shall
be excluded in the calculation of the amount of Restricted Payments under
clause (3) of Section 4.04(a);
<PAGE>
46
(iii) any purchase or redemption of Subordinated Obligations of any
Subsidiary of DCC from Net Available Cash to the extent permitted by
Section 4.06; provided, however, that such purchase or redemption shall be
-------- -------
excluded in the calculation of the amount of Restricted Payments under
clause (3) of Section 4.04(a);
(iv) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with Section 4.04(a); provided, however, that such dividend shall be
-------- -------
included in the calculation of the amount of Restricted Payments under
clause (3) of Section 4.04(a);
(v) the repurchase or other acquisition of shares of, or options to
purchase shares of, common stock of DCC or any of its Subsidiaries from
employees, former employees, directors or former directors of DCC or any of
its Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors), pursuant to the terms of the
agreements (including employment agreements) or plans (or amendments
thereto) approved by the relevant board of directors under which such
individuals purchase or sell, or are granted the option to purchase or
sell, shares of such common stock; provided, however, that the aggregate
-------- -------
amount of such repurchases or acquisitions shall not exceed $2,000,000 in
any calendar year or $5,000,000 in total; provided further, however, that
---------------- -------
such repurchases and other acquisitions shall be excluded in the
calculation of the amount of Restricted Payments under clause (3) of
Section 4.04(a);
(vi) repurchases of Capital Stock deemed to occur upon the exercise
of stock options if such Capital Stock represents a portion of the exercise
price thereof; provided further, however, that such repurchases shall be
-------- ------- -------
excluded in the calculation of the amount of Restricted Payments under
clause (3) of Section 4.04(a);
(vii) any purchases of Capital Stock of Univega or the MS Sport Group
for aggregate consideration not in excess of $7,000,000; provided, however,
-------- -------
that such purchases shall be included in the calculation of the amount of
Restricted Payments under clause (3) of Section 4.04(a);
(viii) any purchases of Capital Stock of Derby Holdings South Africa
for aggregate consideration not in excess of $2,000,000; provided, however,
-------- -------
that such purchases shall not be included in the calculation of the amount
of Restricted Payments under clause (3) of Section 4.04(a); or
(ix) any distribution on or in respect of any Capital Stock of DCC or
any Restricted Subsidiary or similar payment made in connection with any
sale of Excluded Assets undertaken in
<PAGE>
47
accordance with the terms of the Recapitalization Agreement in an aggregate
amount not in excess of $300,000; provided, however, that such distribution
-------- -------
or payment shall not be included in the calculation of the amount of
Restricted Payments under clause (3) of Section 4.04(a).
SECTION 4.05. Limitation on Restrictions on Distributions from
------------------------------------------------
Restricted Subsidiaries. DCC shall not, and shall not permit any Restricted
- ------------------------
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligations owed to either of the
Issuers, (ii) make any loans or advances to either of the Issuers or (iii)
transfer any of its property or assets to either of the Issuers, except:
(1) any encumbrance or restriction pursuant to an agreement in effect
at, or entered into on, the Closing Date;
(2) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary prior to the date on which such Restricted
Subsidiary was acquired by DCC or another Restricted Subsidiary or of
another Person that is assumed by DCC or any Restricted Subsidiary in
connection with the acquisition of assets from, or merger or consolidation
with, such Person (other than Indebtedness Incurred as consideration paid
in connection with, in contemplation of, or to provide all or any portion
of the funds or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was otherwise acquired by DCC or another
Restricted Subsidiary) and outstanding on such date;
(3) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to any agreement not relating to any Indebtedness in
existence when a Person becomes a Subsidiary of DCC or any other Restricted
Subsidiary or when such assets are acquired by DCC or any Restricted
Subsidiary, that is not created in contemplation of such Person becoming
such a Subsidiary or such acquisition;
(4) any encumbrance or restriction pursuant to an agreement effecting
a refinancing of Indebtedness, including agreements that increase the
amount of such Indebtedness to the extent otherwise permitted by this
Indenture, Incurred pursuant to an agreement referred to in clause (1) or
(2) of this Section 4.05 or this clause (4) or contained in any amendment
to an agreement referred to in clause (1) or (2) of this Section 4.05 or
this clause (4); provided, however, that the encumbrances and restrictions
-------- -------
contained in any such refinancing agreement or
<PAGE>
48
amendment are no less favorable to holders of the Securities than the
encumbrances and restrictions contained in such predecessor agreements;
(5) in the case of clause (iii) any encumbrance or restriction (A)
that restricts in a customary manner the subletting, assignment or transfer
of any property or asset that is subject to a lease, license or similar
contract, or the assignment or transfer of any lease, license or contract,
(B) that is or was created by virtue of any transfer of, agreement to
transfer, option or right with respect to, or Lien on, any property or
assets of DCC or any Restricted Subsidiary not otherwise prohibited by this
Indenture or (C) contained in security agreements securing Indebtedness of
a Restricted Subsidiary to the extent such encumbrance or restriction
restricts the transfer of the property subject to such security agreements;
(6) with respect to a Restricted Subsidiary, any restriction imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition;
(7) any agreement or instrument governing Capital Stock of any person
that is in effect on the date such Person is acquired by DCC or a
Restricted Subsidiary and that is not created in contemplation of such
acquisition or of such Person becoming a Subsidiary of DCC or a Restricted
Subsidiary;
(8) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(9) any Purchase Money Security or other Indebtedness or other
contractual requirements of a Securitization Entity in connection with a
Qualified Securitization Transaction; provided, that such restrictions
--------
apply only to such Securitization Entity; and
(10) any agreement or instrument governing Indebtedness of Foreign
Subsidiaries operating in jurisdictions in which the Issuers, as of the
Closing Date, do not have any significant operations; provided, however,
-------- -------
that, at the time such agreement or instrument is executed by the parties
thereto, the aggregate earnings before interest, taxes, depreciation and
amortization of such Foreign Subsidiaries for the period of the most recent
four consecutive fiscal quarters for which financial statements are
available (calculated, in the case of each such Foreign Subsidiary, in a
manner consistent with the calculation of EBITDA, and, in the case of each
such Foreign Subsidiary that is acquired by DCC, on a pro
<PAGE>
49
forma basis as if such acquisition had occurred on the first day of such
period) shall not exceed 10% of EBITDA for such period.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock. (a)
---------------------------------------------------
DCC shall not, and shall not permit any Restricted Subsidiary to, make any Asset
Disposition unless (i) DCC or such Restricted Subsidiary receives consideration
(including by way of relief from, or by any other Person assuming sole
responsibility for, any liabilities, contingent or otherwise) at the time of
such Asset Disposition at least equal to the fair market value, as determined in
good faith by the board of directors of DCC or such Restricted Subsidiary, as
the case may be, of the shares and assets subject to such Asset Disposition,
(ii) at least 80% of the consideration thereof received by DCC or such
Restricted Subsidiary is in the form of cash or cash equivalents and (iii) an
amount equal to 100% of the Net Available Cash from such Asset Disposition is
applied by DCC or such Restricted Subsidiary, as the case may be, (A) first, to
-----
the extent the Issuers elect (or are required by the terms of the Revolving
Credit Agreement or any secured refinancing thereof (including refinancings that
increase the amount of Indebtedness outstanding to the extent otherwise
permitted by this Indenture)), to prepay, repay, redeem or purchase Indebtedness
of the Issuers or a Restricted Subsidiary of DCC outstanding under the Revolving
Credit Agreement or any such refinancing referred to above within one year from
the later of the date of such Asset Disposition or the receipt of such Net
Available Cash; (B) second, to the extent of the balance of Net Available Cash
------
after application in accordance with clause (A), to the extent DCC or such
Restricted Subsidiary elects, to reinvest in Additional Assets (including by
means of an Investment in Additional Assets by a Restricted Subsidiary with Net
Available Cash received by DCC or another Restricted Subsidiary) within one year
from the later of such Asset Disposition or the receipt of such Net Available
Cash (or DCC or such a Restricted Subsidiary enters into an agreement to
reinvest in Additional Assets within one year from the later of such Asset
Disposition or the receipt of such Net Available Cash, which reinvestment must
be consummated within 18 months from the later of such Asset Disposition or the
receipt of such Available Net Cash); (C) third, to the extent of the balance of
-----
such Net Available Cash after application in accordance with clauses (A) and
(B), to make an Offer (as defined in Section 4.06(b)) to purchase Securities
pursuant to and subject to the conditions of Section 4.06(b); provided, however,
-------- -------
that, if the Issuers elect (or are required by the terms of any other Senior
Indebtedness of the Issuers or any Restricted Subsidiary), such Offer may be
made ratably to purchase the Securities and other Senior Indebtedness of the
Issuers or any Restricted Subsidiary and (D) fourth, to the extent of the
------
balance of such Net Available Cash after application in accordance with clauses
(A), (B) and (C), for any other general corporate purpose not prohibited by this
Indenture, including Restricted Payments; provided, however that, in connection
-------- -------
with any prepayment, repayment or purchase of Indebtedness pursuant to clause
(A), (C) or (D) above, DCC or such Restricted Subsidiary shall retire such
Indebtedness and shall
<PAGE>
50
cause the related loan commitment, if any, to be permanently reduced in an
amount equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this Section 4.06, DCC and the
Restricted Subsidiaries shall not be required to apply any Net Available Cash in
accordance with this Section 4.06(a) except to the extent that the aggregate Net
Available Cash from all Asset Dispositions that is not applied in accordance
with this Section 4.06(a) exceeds $5,000,000. The provisions of this Section
4.06 shall not apply to any consideration received by DCC or any Restricted
Subsidiary in connection with any sale of Excluded Assets undertaken in
accordance with the terms of the Recapitalization Agreement to the extent that
the aggregate amount of such consideration does not exceed $300,000.
For the purposes of this Section 4.06, the following are deemed to be
cash: (x) the assumption of Indebtedness of DCC (other than Disqualified Stock
of DCC) or any Restricted Subsidiary and the release of DCC or such Restricted
Subsidiary from all liability on such Indebtedness in connection with such Asset
Disposition, (y) securities received by DCC or any Restricted Subsidiary from
the transferee that are promptly converted by DCC or such Restricted Subsidiary
into cash and (z) any Designated Non-Cash Consideration received by DCC or any
Restricted Subsidiary in such Asset Disposition having an aggregate fair market
value, taken together with all other Designated Non-Cash Consideration received
pursuant to this clause (z) that is at that time outstanding, not to exceed 3%
of Total Assets at the time of the receipt of such Designated Non-Cash
Consideration (with the fair market value of each item of Designated Non-Cash
Consideration being measured at the time received without giving effect to
subsequent changes in value).
(b) In the event of an Asset Disposition that requires the purchase of
Securities (and other Senior Indebtedness of the Issuers or any Restricted
Subsidiary) pursuant to clause (a)(iii)(C) of this Section 4.06, the Issuers
shall be required to purchase Securities (and other Senior Indebtedness of the
Issuers or any Restricted Subsidiary) tendered pursuant to an offer by the
Issuers for the Securities (and other Senior Indebtedness of the Issuers or any
Restricted Subsidiary) (the "Offer") at a purchase price of 100% of their
principal amount (without premium) plus accrued and unpaid interest and
Additional Amounts, if any, to the date of purchase (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant payment date and Additional Amounts, if any, in respect thereof) in
accordance with the procedures (including prorationing in the event of
oversubscription) set forth in Section 4.06(d). If the aggregate purchase price
of Securities (and other Senior Indebtedness of the Issuers or any Restricted
Subsidiary) tendered pursuant to the Offer is less than the Net Available Cash
allotted to the purchase of the Securities (and other Senior Indebtedness of the
Issuers or any Restricted Subsidiary), the Issuers shall apply the remaining Net
Available Cash in accordance with clause (a)(iii)(D) of this Section
<PAGE>
51
4.06. The Issuers shall not be required to make an Offer for Securities (and
other Senior Indebtedness of the Issuers or any Restricted Subsidiary) pursuant
to this Section 4.06 if the Net Available Cash available therefor (after
application of the proceeds as provided in clauses (A) and (B) of Section 4.06
(a)(iii)) is less than $10,000,000 for any particular Asset Disposition (which
lesser amount shall be carried forward for purposes of determining whether an
Offer is required with respect to the Net Available Cash from any subsequent
Asset Disposition). Upon completion of any such offer pursuant to Section 4.06
(a)(iii)(C), the Net Available Cash amount shall be reset at zero.
(c) (1) Promptly, and in any event within 10 days after the Issuers
become obligated to make an Offer, the Issuers shall be obligated to deliver to
the Trustee and to deliver or cause to be delivered, in accordance with Section
11.02, a notice of an Offer to each Holder whose Securities are to be
purchased. The notice shall state that the Holder may elect to have his
Securities purchased by the Issuers either in whole or in part (subject to
prorationing as hereinafter described in the event the Offer is oversubscribed)
in integral multiples of DM1,000 of principal amount, at the applicable purchase
price. The notice shall specify a purchase date not less than 30 days nor more
than 60 days after the date of such notice (the "Purchase Date") and shall
contain (or, in the case of a notice by publication, shall contain instructions
on how to obtain from the Issuers by first-class mail, postage prepaid) such
information concerning the business of the Issuers which the Issuers in good
faith believe shall enable such Holders to make an informed decision (which at a
minimum shall include (i) the most recently filed Annual Report on Form 10-K
(including audited consolidated financial statements) of DCC, the most recent
subsequently filed Quarterly Report on Form 10-Q and any Current Report on Form
8-K of DCC filed subsequent to such Quarterly Report, other than Current Reports
describing Asset Dispositions otherwise described in the offering materials (or
corresponding successor reports), (ii) a description of material developments in
the Issuers' business subsequent to the date of the latest of such reports and
(iii) if material, appropriate pro forma financial information) and all
instructions and materials necessary to tender Securities pursuant to the Offer,
together with the address referred to in clause (3).
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided above, the Issuers shall deliver to the
Trustee an Officers' Certificate as to (i) the amount of the Offer (the "Offer
Amount"), (ii) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (iii) the compliance
of such allocation with the provisions of Section 4.06(a). On such date, the
Issuers shall also irrevocably deposit with the Trustee or with a Paying Agent
(or, if DCC or a Subsidiary of DCC is the Paying Agent, segregate and hold in
trust) an amount equal to the Offer Amount to be invested in Temporary Cash
Investments and to be held for payment in accordance with the provisions of this
Section 4.06. Upon the expiration of the period for which the Offer
<PAGE>
52
remains open ( the "Offer Period"), the Issuers shall deliver to the Trustee for
cancelation the Securities or portions thereof that have been properly tendered
to and are to be accepted by the Issuers. The Trustee (or the Paying Agent, if
not the Trustee) shall, on the date of purchase, mail or deliver payment to each
tendering Holder in the amount of the purchase price. In the event that the
aggregate purchase price of the Securities delivered by the Issuers to the
Trustee is less than the Offer Amount applicable to the Securities, the Trustee
shall deliver the excess to the Issuers immediately after the expiration of the
Offer Period for application in accordance with this Section 4.06.
(3) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Issuers at the address specified in the notice at least three Business Days
prior to the Purchase Date. Holders shall be entitled to withdraw their election
if the Trustee or the Issuers receive, not later than one Business Day prior to
the Purchase Date, a facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Security which was delivered by the
Holder for purchase and a statement that such Holder is withdrawing his election
to have such Security purchased. If at the expiration of the Offer Period the
aggregate principal amount of Securities included in the Offer surrendered by
Holders thereof exceeds the Offer Amount, the Issuers shall select the
Securities to be purchased in compliance with the requirements of the principal
securities exchange, if any, on which such Securities are listed and the
requirements of any depositary holding the global certificates representing the
Securities, or, if the Securities are not so listed or such exchange prescribes
no method of selection and the depositary, if any, holding the global
certificates representing the Securities imposes no requirement, subject to
applicable law, on a pro rata basis (with such adjustments as may be deemed
appropriate by the Issuers so that only Securities in denominations of DM1,000,
or integral multiples thereof, shall be purchased). Holders whose Securities
are purchased only in part shall be issued new Securities equal in principal
amount to the unpurchased portion of the Securities surrendered.
(4) At the time the Issuers deliver Securities to the Trustee which
are to be accepted for purchase, the Issuers shall also deliver an Officers'
Certificate stating that such Securities are to be accepted by the Issuers
pursuant to and in accordance with the terms of this Section 4.06. A Security
shall be deemed to have been accepted for purchase at the time the Trustee,
directly or through an agent, mails or delivers payment therefor to the
surrendering Holder.
(d) The Issuers shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations, including any securities laws of The Netherlands and the
requirements of the Luxembourg Stock Exchange or any other securities exchange
on which the Securities are listed, to the
<PAGE>
53
extent such laws or regulations or requirements are applicable, in connection
with the repurchase of Securities pursuant to this Section 4.06. To the extent
that the provisions of any securities laws or regulations conflict with
provisions of this Section 4.06, the Issuers shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this Section 4.06 by virtue thereof.
SECTION 4.07. Limitation on Transactions with Affiliates. (a) DCC
-------------------------------------------
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, enter into or conduct any transaction (including the purchase, sale,
lease or exchange of any property or the rendering of any service) with any
Affiliate of DCC (an "Affiliate Transaction") on terms (i) that are less
favorable to DCC or such Restricted Subsidiary, as the case may be, than those
that could be obtained at the time of such transaction in arm's-length dealings
with a Person who is not such an Affiliate, (ii) if such Affiliate Transaction
involves an aggregate amount in excess of $5,000,000, (1) set forth in writing
and (2) that have been approved by a majority of the members of the board of
directors of DCC or such Restricted Subsidiary, as the case may be, having no
personal stake in such Affiliate Transaction, or have been determined by a
nationally recognized appraisal or investment banking firm to be fair, from a
financial standpoint, to DCC and its Restricted Subsidiaries and (iii) if such
Affiliate Transaction involves an amount in excess of $10,000,000, that have
been determined by a nationally recognized appraisal or investment banking firm
to be fair, from a financial standpoint, to DCC and its Restricted Subsidiaries.
(b) The provisions of Section 4.07(a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant Section 4.04 or any Permitted
Investment, (ii) any issuance of securities, or other payments, awards or grants
in cash, or otherwise pursuant to, or the funding of, employment arrangements,
stock options and stock ownership plans approved by the board of directors of
DCC or such Restricted Subsidiary, as the case may be, (iii) the grant of stock
options or similar rights to employees and directors of DCC or such Restricted
Subsidiary pursuant to plans approved by the board of directors of DCC or such
Restricted Subsidiary, as the case may be, (iv) loans or advances to employees
in the ordinary course of business in accordance with past practices of DCC or
such Restricted Subsidiary, as the case may be, but in any event not to exceed
$4,000,000 in the aggregate outstanding at any one time, (v) the entering into,
maintaining or performance of any employment contract, collective bargaining
agreement, benefit plan, program or arrangement, related trust agreement or any
other similar arrangement for or with any employee, officer or director entered
into before or after the Closing Date in the ordinary course of business,
including vacation, health, insurance deferred compensation, retirement, savings
or other similar plans, (vi) the payment of customary annual management,
consulting and advisory fees and related expenses to the Investor Group and any
of their respective Affiliates made pursuant to any financial advisory,
financing,
<PAGE>
54
underwriting or placement agreement or in respect of other investment banking
activities, including, without limitation, in connection with acquisitions or
divestitures which are approved by the board of directors of DCC or any
Restricted Subsidiary in good faith; provided, however, that the aggregate
-------- -------
amount of such fees and related expenses shall not exceed $2,000,000 in any
calendar year, (vii) reasonable fees and compensation paid to, and indemnity
provided on behalf of, officers, directors, employees or consultants of DCC or
any of its Subsidiaries as determined in good faith by the board of directors of
DCC or such Subsidiary, as the case may be, (viii) any agreement in effect as of
the Closing Date or any amendment or replacement thereto or any transaction
contemplated thereby (including pursuant to any amendment or replacement
thereto) so long as any such amendment or replacement agreement is not more
disadvantageous to the holders of Securities in any material respect than the
original agreement as in effect on the Closing Date, (ix) transactions with
customers, clients, suppliers, joint venture partners or purchasers or sellers
of goods or services, in each case in the ordinary course of business
(including, without limitation, pursuant to joint venture agreements) and
otherwise in compliance with the terms of this Indenture and which are fair to
DCC and its Restricted Subsidiaries, in the reasonable determination of the
board of directors of DCC or such Restricted Subsidiary, as the case may be, or
are on terms at least as favorable as might reasonably have been obtained at
such time from an unaffiliated party, (x) transactions effected as part of a
Qualified Securitization Transaction, (xi) any transaction between DCC and a
Wholly Owned Subsidiary or between or among Wholly Owned Subsidiaries and (xii)
any sale of Excluded Assets undertaken in accordance with the terms of the
Recapitalization Agreement; provided that the consideration received by DCC or
--------
any Restricted Subsidiary in connection with such sale does not exceed $300,000.
SECTION 4.08. Change of Control. (a) Upon a Change of Control, each
------------------
Holder shall have the right to require that the Issuers repurchase all or any
part of such Holder's Securities at a purchase price in cash equal to 101% of
the principal amount thereof plus accrued and unpaid interest and Additional
Amounts, if any, to the date of repurchase (subject to the right of Holders of
record on a record date to receive interest due on the relevant payment date and
Additional Amounts, if any, in respect thereof), in accordance with the terms
contemplated in Section 4.08(b); provided, however, that notwithstanding the
-------- -------
occurrence of a Change in Control, the Issuers shall not be obligated to
purchase the Securities pursuant to this Section 4.08 in the event that they
have exercised their right to redeem all the Securities under paragraph 5 of the
Securities. In the event that at the time of such Change of Control the terms
of the Bank Indebtedness restrict or prohibit the repurchase of Securities
pursuant to this Section 4.08, then prior to delivery of the notice to Holders
provided for in Section 4.08(b) but in any event within
<PAGE>
55
30 days following any Change of Control, the Issuers shall (i) repay in full all
Bank Indebtedness or (ii) obtain the requisite consent under the agreements
governing the Bank Indebtedness to permit the repurchase of the Securities as
provided for in Section 4.08(b).
(b) Within 30 days following any Change of Control (except as
provided in the proviso to the first sentence of Section 4.08(a)), the Issuers
shall deliver a notice, in accordance with Section 11.02, to each Holder, with a
copy of such notice to the Trustee (the "Change of Control Offer"), stating:
(1) that a Change of Control has occurred and that such Holder has
the right to require the Issuers to purchase such Holder's Securities at a
purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest and Additional Amounts, if any, to the date of
repurchase (subject to the right of Holders of record on a relevant record
date to receive interest thereof);
(2) the circumstances and relevant facts and financial information
regarding such Change of Control;
(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is delivered, except as
otherwise may be required by applicable law); and
(4) the instructions determined by the Issuers, consistent with this
Section 4.08, that a Holder must follow in order to have its Securities
purchased.
(c) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Issuers at the address specified in the notice at least three Business Days
prior to the purchase date. Holders shall be entitled to withdraw their election
if the Trustee or the Issuers receive, not later than one Business Day prior to
the purchase date, a facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Security which was delivered for
purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the Issuers
under this Section 4.08 shall be delivered to the Trustee for cancelation, and
the Issuers shall pay the purchase price plus accrued and unpaid interest and
Additional Amounts, if any, to the Holders entitled thereto.
<PAGE>
56
(e) Notwithstanding the foregoing provisions of this Section 4.08,
the Issuers shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in Section 4.08(b) applicable to a Change of Control Offer made by the Issuers
and purchases all Securities validly tendered and not withdrawn under such
Change of Control Offer.
(f) The Issuers shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations, including any securities laws of The Netherlands and the
requirements of the Luxembourg Stock Exchange or any other securities exchange
on which the Securities are listed, to the extent such laws or regulations or
requirements are applicable, in connection with the repurchase of Securities
pursuant to this Section 4.08. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Section 4.08,
the Issuers shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached their obligations under this Section 4.08
by virtue thereof.
SECTION 4.09. Compliance Certificate. The Issuers shall deliver to
----------------------
the Trustee within 120 days after the end of each fiscal year of DCC an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Issuers they would normally have
knowledge of any Default and whether or not the signers know of any Default that
occurred during such period. If they do, the certificate shall describe the
Default, its status and what action the Issuers are taking or propose to take
with respect thereto. The Issuers also shall comply with Section 314(a)(4) of
the TIA.
SECTION 4.10. Further Instruments and Acts. Upon request of the
----------------------------
Trustee, the Issuers shall execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.11. Future Note Guarantors. DCC shall cause each Domestic
----------------------
Subsidiary that Incurs Indebtedness and each Restricted Subsidiary that is a
Guarantor of Indebtedness Incurred by either of the Issuers pursuant to clauses
(b)(i) or (b)(vii) of Section 4.03 to become a Note Guarantor, and, if
applicable, execute and deliver to the Trustee a supplemental indenture
substantially in the form of Exhibit C pursuant to which such Restricted
Subsidiary shall Guarantee payment of the Securities. Each Note Guarantee shall
be limited to an amount not to exceed the maximum amount that can be Guaranteed
by the applicable Restricted Subsidiary without rendering the Note Guarantee, as
it relates to such Restricted Subsidiary, voidable under applicable law
<PAGE>
57
relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.
SECTION 4.12. Limitation on Lines of Business. DCC shall not, and
-------------------------------
shall not permit any Restricted Subsidiary to, engage in any business, other
than a Related Business.
SECTION 4.13. Limitation on the Sale or Issuance of Capital Stock of
------------------------------------------------------
Restricted Subsidiaries. DCC shall not sell or otherwise dispose of any shares
- -----------------------
of Capital Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
shares of its Capital Stock except: (i) to DCC or a Wholly Owned Subsidiary;
(ii) if, immediately after giving effect to such issuance, sale or other
disposition, none of DCC or any of its Subsidiaries own any Capital Stock of
such Restricted Subsidiary, or (iii) if, immediately after giving effect to such
issuance or sale, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary and any Investment in such Person remaining after giving
effect thereto would have been permitted to be made under Section 4.04 if made
on the date of such issuance, sale or other disposition. The proceeds of any
sale of such Capital Stock permitted hereby shall be treated as Net Available
Cash from an Asset Disposition and must be applied in accordance with Section
4.06.
SECTION 4.14. Limitation on Liens. DCC shall not, and shall not
-------------------
permit any Restricted Subsidiary to, directly or indirectly, Incur or permit to
exist any Lien of any nature whatsoever on any of its property or assets
(including Capital Stock of a Restricted Subsidiary), whether owned on the
Closing Date or thereafter acquired, other than Permitted Liens, without
effectively providing that the Securities shall be secured equally and ratably
with (or prior to) the obligations so secured for so long as such obligations
are so secured; provided, however, that DCC may Incur other Liens to secure
-------- -------
Indebtedness as long as the amount of outstanding Indebtedness secured by Liens
Incurred pursuant to this proviso does not exceed 5% of Consolidated Net
Tangible Assets, as determined based on the consolidated balance sheet of DCC as
of the end of the most recent fiscal quarter for which financial statements are
available.
SECTION 4.15. Limitation on Sale/Leaseback Transactions. DCC shall
-----------------------------------------
not, and shall not permit any Restricted Subsidiary to, enter into any
Sale/Leaseback Transaction with respect to any property unless (i) DCC or such
Restricted Subsidiary would be entitled to (A) Incur Indebtedness in an amount
equal to the Attributable Debt with respect to such Sale/Leaseback Transaction
pursuant to Section 4.03 and (B) create a Lien on such property securing such
Attributable Debt without equally and ratably securing the Securities pursuant
to Section 4.14, (ii) the net proceeds received by DCC or such Restricted
Subsidiary in connection with such Sale/Leaseback Transaction are at
<PAGE>
58
least equal to the fair market value (as determined in good faith by the board
of directors) of DCC or such Restricted Subsidiary, as the case may be, of such
property and (iii) the transfer of such property is permitted by, and DCC
applies the proceeds of such transaction in compliance with, Section 4.06.
SECTION 4.16. Additional Amounts; Withholding Taxes. (a) All payments
-------------------------------------
made by the Issuers on the Securities shall be made without withholding or
deduction for, or on account of, any present or future taxes, duties,
assessments or governmental charges of whatever nature (collectively, "Taxes")
imposed or levied by or on behalf of the United States, The Netherlands or any
other jurisdiction in which either of the Issuers is organized or engaged in
business for tax purposes or, in each case, any political subdivision thereof or
any authority having power to tax therein (each a "Tax Authority"), unless the
withholding or deduction of such Taxes is then required by law. If any deduction
or withholding for, or on account of, any Taxes of any Tax Authority shall at
any time be required on any payments made by the Issuers with respect to the
Securities, including payments of principal, redemption price, interest,
liquidated damages or premium, the Issuers shall pay such additional amounts
(the "Additional Amounts") as may be necessary in order that the net amounts
received in respect of such payments by the holders of the Securities or the
Trustee, as the case may be, after such withholding or deduction, equal the
respective amounts which would have been received in respect of such payments in
the absence of such withholding or deduction.
(b) Section 4.16(a), however, shall not apply to (i) any Taxes which
would not have been imposed but for the existence of any present or former
connection between a holder of Securities and the United States, The Netherlands
or any other jurisdiction in which either of the Issuers is organized or engaged
in business for tax purposes other than the mere receipt of such payment or the
holding of such Securities; (ii) any Taxes which would not have been imposed but
for the presentation by a holder of Securities for payment on a date more than
30 days after the date on which such payment became due and payable or the date
on which payment thereof was duly provided for; (iii) the extent that such Taxes
would not have been imposed but for the failure of a holder of Securities to
comply with any certification, identification or other reporting requirements
concerning the nationality, residence, identity or connection with The
Netherlands of such holder if (A) such compliance is required or imposed by law
as a precondition to exemption from all or a part of such Taxes, (B) such holder
may legally comply with such requirements and (C) at least 30 days prior to the
date on which the Issuers shall apply this clause (iii), the Issuers shall have
notified all holder of Securities of such requirements; (iv) any estate,
inheritance, gift, sale, transfer, personal property or similar tax, assessment
or governmental charge; or (v) any combination of the items set forth in clause
(i), (ii), (iii) or (iv).
<PAGE>
59
(c) The Issuers shall pay any present or future stamp, court or
documentary taxes, or any other excise or property taxes, charges or similar
levies which arise in any jurisdiction from the execution, delivery or
registration of this Indenture or the Securities or any other document or
instrument referred to herein or therein, or the receipt of any payments with
respect to the Securities, excluding any such taxes, charges or similar levies
imposed by any jurisdiction outside of the United States, The Netherlands or any
jurisdiction in which a Paying Agent is located, other than those resulting
from, or required to be paid in connection with, the enforcement of the
Securities or any other such document or instrument following the occurrence of
any Event of Default with respect to the Securities.
(d) No Additional Amounts shall be paid with respect to any payment on
a Security to a holder that is a fiduciary or partnership or other than the sole
beneficial owner of such payment to the extent a beneficiary or settlor with
respect to such fiduciary or member of such partnership or beneficial owner
would not have been entitled to receive payment of the Additional Amounts had
the beneficiary, settlor, member or beneficial owner been the holder of the
Securities.
(e) Upon request, the Issuers shall provide the Trustee with
documentation satisfactory to the Trustee evidencing the payment of Additional
Amounts. Copies of such documentation shall be made available to the holders of
Securities upon request.
ARTICLE 5
Merger and Consolidation
------------------------
SECTION 5.01. (a) When Issuers May Merge or Transfer Assets. Neither
-----------------------------------------
of the Issuers shall consolidate with or merge with or into, or convey, transfer
or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a corporation organized and existing under the laws of
the United States, any state thereof or the District of Columbia, in the
case of DCC, or The Netherlands, in the case of Lyon, and the Successor
Company (if not an Issuer) shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, in form reasonably
satisfactory to the Trustee, all the obligations of such Issuer under the
Securities and this Indenture;
(ii) immediately after giving effect to such transaction (and treating
any Indebtedness which becomes an obligation of the Successor Company or
any
<PAGE>
60
Restricted Subsidiary as a result of such transaction as having been
Incurred by the Successor Company or such Restricted Subsidiary at the time
of such transaction), no Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a);
(iv) the Issuers shall have delivered to the Trustee Officers'
Certificates and Opinions of Counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture, if any, comply with
this Indenture; and
(v) the Issuers shall have delivered to the Trustee opinions of tax
counsel reasonably acceptable to the Trustee stating that (A) any payment
of principal, redemption price or purchase price of, premium, if any,
interest on, and, if any, Additional Amounts in respect of, the Securities
by the Successor Company to a holder of Securities after the consolidation,
merger, conveyance, transfer or lease of assets shall be exempt from the
Taxes described in Section 4.16 and (B) no other taxes on income (including
taxable capital gains) shall be payable under the laws of The Netherlands
and any other jurisdiction where the Successor Company is or becomes
located by a holder of Securities who is not deemed to be a resident of The
Netherlands or other jurisdiction where the Successor Company is or becomes
located and does not carry on any business activities through a branch,
agency or permanent establishment in The Netherlands or such other
jurisdiction where the Successor Company is or becomes located in respect
of the acquisition, ownership or disposition of Securities, including
receipt of principal, premium, if any, interest on, and, Additional
Amounts, if any, paid pursuant to such Securities.
The Successor Company shall succeed to, and be substituted for, and
may exercise every right and power of, such Issuer under this Indenture, but the
predecessor Issuer in the case of a conveyance, transfer or lease of all or
substantially all its assets shall not be released from the obligation to pay
the principal of and interest on the Securities.
(b) The Issuers shall not permit any Note Guarantor to consolidate
with or merge with or into, or convey, transfer or lease, in one transaction or
series of transactions, all or substantially all of its assets to any Person
unless: (i) the resulting, surviving or transferee Person (if not such Note
Guarantor) shall be a Person organized and existing under the laws of the
jurisdiction under which such Subsidiary was
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61
organized or under the laws of the United States, or any state thereof or the
District of Columbia, and such Person shall expressly assume, by an amendment to
this Indenture, in a form acceptable to the Trustee, all the obligations of such
Note Guarantor, if any, under its Note Guarantee; (ii) immediately after giving
effect to such transaction or transactions on a pro forma basis (and treating
any Indebtedness which becomes an obligation of the resulting, surviving or
transferee Person as a result of such transaction as having been issued by such
Person at the time of such transaction), no Default shall have occurred and be
continuing; and (iii) the Issuers deliver to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such amendment to this Indenture, if any, complies with
this Indenture.
Notwithstanding the foregoing, (a) any Restricted Subsidiary may
consolidate with, merge into or transfer all or part of its properties and
assets to either of the Issuers and (b) either of the Issuers may merge with an
Affiliate of the Issuers incorporated solely for the purpose of reincorporating
such Issuer in another jurisdiction to realize tax or other benefits.
ARTICLE 6
Defaults and Remedies
---------------------
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
-----------------
(1) the Issuers default in any payment of interest on, or Additional
Amounts, if any, with respect to any Security when the same becomes due and
payable, and such default continues for a period of 30 days;
(2) the Issuers default in the payment of the principal of any
Security when the same becomes due and payable at its Stated Maturity, upon
redemption, upon declaration or otherwise;
(3) either Issuer fails to comply with Section 5.01;
(4) either Issuer fails to comply with Section 4.02, 4.03, 4.04, 4.05,
4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 4.14, 4.15 or 4.16 (other than a
failure to purchase Securities when required under Section 4.06 or 4.08)
and such failure continues for 30 days after the notice specified below;
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62
(5) Either Issuer fails to comply with any of its agreements in the
Securities or this Indenture (other than those referred to in (1), (2), (3)
or (4) above) and such failure continues for 60 days after the notice
specified below;
(6) Indebtedness of either Issuer or any Significant Subsidiary (other
than a Securitization Entity) is not paid within any applicable grace
period after final maturity (giving effect to any extensions thereof) or
the acceleration by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $5,000,000 or its
foreign currency equivalent at the time and such failure continues for 10
days after the notice specified below;
(7) either Issuer or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against either Issuer or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of either Issuer or any Significant
Subsidiary or for any substantial part of its property; or
(C) orders the winding up or liquidation of either Issuer or any
Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days; or
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63
(9) any judgment or decree for the payment of money in excess of
$10,000,000 or its foreign currency equivalent at the time is entered
against either Issuer or any Significant Subsidiary and is not discharged,
waived or stayed and either (A) an enforcement proceeding has been
commenced by any creditor upon such judgment or decree or (B) there is a
period of 60 days following the entry of such judgment or decree during
which such judgment or decree is not discharged, waived or the execution
thereof stayed.
The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
------------------
similar federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clause (4), (5) or (9) is not an Event of Default
until the Trustee or the Holders of at least 25% in principal amount of the
outstanding Securities notify the Issuers of the Default and the Issuers do not
cure such Default within the time specified in clause (4), (5) or (9) after
receipt of such notice. Such notice must specify the Default, demand that it be
remedied and state that such notice is a "Notice of Default".
The Issuers shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (6) and any event which with the giving of
notice or the lapse of time would become an Event of Default under clause (4),
(5) or (9), its status and what action the Issuers are taking or propose to take
with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than an
------------
Event of Default specified in Section 6.01(7) or (8) with respect to either of
the Issuers) occurs and is continuing, the Trustee by notice to the Issuers, or
the Holders of at least 25% in principal amount of the outstanding Securities by
notice to the Issuers, may declare the principal of and accrued but unpaid
interest and Additional Amounts, if any, on all the Securities to be due and
payable by notice in writing to the Issuers and the Trustee specifying the Event
of Default and that the notice is a "notice of acceleration". Upon such a
declaration, such principal, interest and Additional Amounts shall be due and
payable immediately. If an Event of Default specified in Section 6.01(7) or (8)
with respect to either of the Issuers occurs, the principal of and interest and
Additional
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64
Amounts, if any, on all the Securities shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Securityholders. The Holders of a majority in principal
amount of the Securities by notice to the Trustee may rescind an acceleration
and its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest and Additional Amounts, if any, that has
become due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
--------------
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
-----------------------
principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences except (i) a Default in the payment of the
principal of or interest on a Security, (ii) a Default arising from the failure
to redeem or purchase any Security when required pursuant to the terms of this
Indenture or (iii) a Default in respect of a provision that under Section 9.02
cannot be amended without the consent of each Securityholder affected. When a
Default is waived, it is deemed cured, but no such waiver shall extend to any
subsequent or other Default or impair any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority in
-------------------
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
-------- -------
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
<PAGE>
65
SECTION 6.06. Limitation on Suits. Except to enforce the right to
--------------------
receive payment of principal, premium, interest or Additional Amounts, if any,
when due, no Securityholder may pursue any remedy with respect to this Indenture
or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the Securities
make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Securities do
not give the Trustee a direction inconsistent with the request during such
60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding
-------------------------------------
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and interest, any liquidated damages or Additional
Amounts, if any, on the Securities held by such Holder, on or after the
respective due dates expressed in the Securities, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
---------------------------
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Issuers for the whole amount of principal and accrued and unpaid interest and
Additional Amounts, if any, then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file
---------------------------------
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial
<PAGE>
66
proceedings relative to DCC, any Subsidiary of DCC or any Note Guarantor, their
creditors or their property and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee in
bankruptcy or other Person performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or
-----------
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal, interest, and Additional Amounts, if any,
ratably, and any liquidated damages without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal, interest, Additional Amounts, if any, and any liquidated
damages, respectively; and
THIRD: to the Issuers.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10. At least 15 days before such
record date, the Trustee shall mail to each Securityholder and each Issuer a
notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
----------------------
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of
more than 10% in principal amount of the Securities.
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67
SECTION 6.12. Waiver of Stay or Extension Laws. None of the Issuers
---------------------------------
or any Note Guarantor (to the extent it may lawfully do so) shall at any time
insist upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and each of the Issuers and each Note Guarantor (to the extent that
it may lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and shall not hinder, delay or impede the execution of any power
herein granted to the Trustee, but shall suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE 7
Trustee
-------
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has
------------------
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section 7.01;
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68
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuers.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 7.01 and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. Subject to Section 7.01: (a) The
------------------
Trustee may rely on any document believed by it to be genuine and to have been
signed or presented by the proper person. The Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on an
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
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69
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
-------- -------
misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, debenture,
note or other paper or document unless requested in writing to do so by the
Holders of not less than a majority in principal amount of the Securities at the
time outstanding, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of each of the
Issuers, personally or by agent or attorney.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
-----------------------------
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Issuers or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent or Registrar may do the
same with like rights. However, the Trustee must comply with Sections 7.10 and
7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
---------------------
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Issuers'
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Issuers in this Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
-------------------
continuing and if it is known to the Trustee, the Trustee shall deliver to each
Securityholder notice of the Default, in accordance with Section 11.02 and
otherwise in accordance with the procedures set forth in this Indenture, within
the earlier of 90 days after it occurs or 30 days after it is known to a Trust
Officer or written notice of it is received by the Trustee. Except in the case
of a Default in payment of principal or premium, if any, interest or Additional
Amounts, if any, on any Security (including payments pursuant to the redemption
provisions of such Security), the Trustee may withhold the notice if and so
<PAGE>
70
long as a committee of its Trust Officers in good faith determines that
withholding the notice is in the interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
------------------------------
practicable after each May 15 beginning with May 15, 1999, and in any event
prior to July 15 in each year, the Trustee shall mail to each Securityholder a
brief report dated as of May 15 that complies with Section 313(a) of the TIA.
The Trustee shall also comply with Section 313(b) of the TIA.
A copy of each report at the time of its mailing to Securityholders
shall be filed with the Commission and each stock exchange, if any, on which the
Securities are listed. The Issuers agree to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity. The Issuers shall pay to
---------------------------
the Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuers shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Issuers and each Note Guarantor, if any, jointly and severally
shall indemnify the Trustee against any and all loss, liability or expense
(including reasonable attorneys' fees) incurred by or in connection with the
administration of this trust and the performance of its their duties hereunder.
The Trustee shall notify the Issuers of any claim for which it may seek
indemnity promptly upon obtaining actual knowledge thereof; provided, however,
-------- --------
that any failure so to notify the Issuers shall not relieve the Issuers or any
Note Guarantor of its indemnity obligations hereunder. The Issuers shall defend
the claim and the indemnified party shall provide reasonable cooperation at the
Issuers' expense in the defense. Such indemnified parties may have separate
counsel and the Issuers and the Note Guarantors, as applicable, shall pay the
fees and expenses of such counsel; provided, however, that the Issuers shall not
-------- -------
be required to pay such fees and expenses if they assume such indemnified
parties' defense and, in such indemnified parties' reasonable judgment, there is
no conflict of interest between the Issuers and the Note Guarantors, as
applicable, and such parties in connection with such defense. The Issuers need
not reimburse any expense or indemnify against any loss, liability or expense
incurred by an indemnified party through such party's own wilful misconduct,
negligence or bad faith.
To secure the Issuers' payment obligations pursuant to this Section
7.07, the Trustee shall have a lien prior to the Securities on all money or
property held or
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71
collected by the Trustee other than money or property held in trust to pay
principal of and interest and any liquidated damages and Additional Amounts on
particular Securities.
The Issuers' payment obligations pursuant to this Section 7.07 shall
survive the satisfaction or discharge of this Indenture, any rejection or
termination of this Indenture under any bankruptcy law or the resignation or
removal of the Trustee. When the Trustee incurs expenses after the occurrence
of a Default specified in Section 6.01(7) or (8) with respect to the Issuers,
the expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign at any
-----------------------
time by so notifying the Issuers. The Holders of a majority in principal amount
of the Securities may remove the Trustee by so notifying the Trustee and may
appoint a successor Trustee. The Issuers shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Issuers or by the Holders of
a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Issuers shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal
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72
amount of the Securities may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section 7.08, the Issuers' obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
----------------------------
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
------------------------------
all times satisfy the requirements of TIA (S) 310(a). The Trustee shall have a
combined capital and surplus of at least $100,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
(S) 310(b); provided, however, that there shall be excluded from the operation
-------- -------
of TIA (S) 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Issuers are
outstanding if the requirements for such exclusion set forth in TIA (S)
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against the Issuers.
------------------------------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
<PAGE>
73
ARTICLE 8
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a)
-------------------------------------------------
When (i) the Issuers deliver to the Trustee all outstanding Securities (other
than Securities replaced pursuant to Section 2.07) for cancelation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the giving of a notice of redemption pursuant to Article 3 hereof and
the Issuers irrevocably deposit with the Trustee U.S. funds or U.S. Government
Obligations on which payment of principal and interest when due shall be
sufficient to pay at maturity or upon redemption all outstanding Securities,
including interest thereon and Additional Amounts, if any, to maturity or such
redemption date (other than Securities replaced pursuant to Section 2.07), and
if in either case the Issuers pay all other sums payable hereunder by the
Issuers, then this Indenture shall, subject to Section 8.01(c), cease to be of
further effect. The Trustee shall acknowledge satisfaction and discharge of
this Indenture on demand of the Issuers accompanied by an Officers' Certificate
and an Opinion of Counsel and at the cost and expense of the Issuers.
(b) Subject to Sections 8.01(c) and 8.02 and any applicable
requirements of the TIA, the Issuers at any time may terminate (i) all of their
obligations under the Securities and this Indenture ("legal defeasance option")
or (ii) their obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15 and 4.16 and the operation of
Section 5.01(a)(iii), 5.01(a)(iv), 6.01(4), 6.01(6), 6.01(7) (with respect to
Significant Subsidiaries of DCC only), 6.01(8) (with respect to Significant
Subsidiaries of DCC only) and 6.01(9) ("covenant defeasance option"). The
Issuers may exercise their legal defeasance option notwithstanding their prior
exercise of their covenant defeasance option. In the event that the Issuers
terminate all of their obligations under the Securities and this Indenture by
exercising either their legal defeasance option or their covenant defeasance
option, the obligations under any Note Guarantee shall each be terminated
simultaneously with the termination of such obligations.
If the Issuers exercise their legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the
Issuers exercise their covenant defeasance option, payment of the Securities may
not be accelerated because of an Event of Default specified in Section 6.01(4),
6.01(6), 6.01(7) (with respect to Significant Subsidiaries of DCC only), 6.01(8)
(with respect to Significant Subsidiaries of DCC only) and 6.01(9) or because of
the failure of the Issuers to comply with clauses (iii) and (iv) of Section
5.01(a).
<PAGE>
74
Upon satisfaction of the conditions set forth herein and upon request
of the Issuers, the Trustee shall acknowledge in writing the discharge of those
obligations that the Issuers terminate.
(c) Notwithstanding clauses (a) and (b) above, the Issuers'
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07, 7.08 and in
this Article 8 shall survive until the Securities have been paid in full.
Thereafter, the Issuers' obligations in Sections 7.07, 8.04, 8.05 and 8.06 shall
survive.
SECTION 8.02. Conditions to Defeasance. The Issuers may exercise
-------------------------
their legal defeasance option or their covenant defeasance option only if:
(1) the Issuers irrevocably deposit in trust with the Trustee money in
U.S. Dollars or U.S. Government Obligations for the payment of principal,
premium, if any, interest and Additional Amounts, if any, on the Securities
to maturity or redemption, as the case may be;
(2) the Issuers deliver to the Trustee a certificate from an
internationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment shall provide cash at such times and in
such amounts as shall be sufficient to pay principal and interest when due
on all the Securities to maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Section 6.01(7) or (8) with respect to the
Issuers occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default under any other
agreement binding on the Issuers;
(5) the Issuers deliver to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940;
(6) in the case of the legal defeasance option, the Issuers shall have
delivered to the Trustee an Opinion of Counsel stating that (i) (A) the
Issuers have received from, or there has been published by, the Internal
Revenue Service a ruling, or (B) since the Closing Date there has been a
change in the applicable U.S. federal income tax law, in either case to the
effect that, and based thereon
<PAGE>
75
such Opinion of Counsel shall confirm that, the Securityholders shall not
recognize income, gain or loss for U.S. federal income tax purposes as a
result of such defeasance and shall be subject to U.S. federal income tax
and income tax under applicable law of The Netherlands on same amount, in
the same manner and at the same times as would have been the case if such
defeasance had not occurred, (ii) after the 91st day following the deposit,
trust funds shall not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally under applicable U.S. federal or state law or applicable
law of The Netherlands and that the Trustee has a perfected security
interest in such trust funds for the ratable benefit of holders of the
Securities and (iii) payments from the defeasance trust shall be free and
exempt from any and all withholding taxes and other income taxes of
whatever nature imposed or levied by or on behalf of The Netherlands or any
political subdivision thereof or therein having the power to tax;
(7) in the case of the covenant defeasance option, the Issuers shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Security holders shall not recognize income, gain or loss for U.S. federal
income tax purposes as a result of such covenant defeasance and shall be
subject to U.S. federal income tax and income tax under applicable law of
The Netherlands on the same amount, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred, (ii) after the 91st day following the deposit, trust funds shall
not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally under
applicable U.S. federal or state law or applicable law of The Netherlands
and that the Trustee has a perfected security interest in such trust funds
for the ratable benefit of holders of the Securities and (iii) payments
from the defeasance trust shall be free and exempt from any and all
withholding taxes and other income taxes of whatever nature imposed or
levied by or on behalf of The Netherlands or any political subdivision
thereof or therein having the power to tax; and
(8) the Issuers deliver to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this Article
8 have been complied with.
Before or after a deposit, the Issuers may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
<PAGE>
76
SECTION 8.03. Application of Trust Money. The Trustee shall hold in
---------------------------
trust money in Deutsche Marks or German Government Obligations deposited with it
pursuant to this Article 8. It shall apply the deposited money and the money
from German Government Obligations through the Paying Agent and in accordance
with this Indenture to the payment of principal of, interest and Additional
Amounts, if any, on the Securities.
SECTION 8.04. Repayment to the Issuers. The Trustee and the Paying
-------------------------
Agent shall promptly turn over to the Issuers upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Issuers upon written request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Securityholders entitled to the money must look to the
Issuers for payment as general creditors; provided, however, that the Trustee or
-------- -------
such Paying Agent, before being required to make any such repayment, may at the
expense of the Issuers give notice to the Holders that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such notification, any unclaimed balance of such money
then remaining shall be repaid to the Issuers. Such notice shall also be given
in accordance with Section 11.02.
SECTION 8.05. Indemnity for Government Obligations. The Issuers
-------------------------------------
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited German Government Obligations or the
principal and interest received on such German Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
--------------
unable to apply any money in Deutsche Marks or German Government Obligations in
accordance with this Article 8 by reason of any legal proceeding or by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the Issuers' obligations
under this Indenture and the Securities shall be revived and reinstated as
though no deposit had occurred pursuant to this Article 8 until such time as the
Trustee or Paying Agent is permitted to apply all such money or German
Government Obligations in accordance with this Article 8; provided, however,
-------- -------
that, if the Issuers have made any payment of interest and Additional Amounts,
if any, on or principal of any Securities because of the reinstatement of its
obligations, the Issuers shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or German Government
Obligations held by the Trustee or Paying Agent.
<PAGE>
77
ARTICLE 9
Amendments
----------
SECTION 9.01. Without Consent of Holders. The Issuers and the
---------------------------
Trustee may amend this Indenture or the Securities without notice to or consent
of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
-------- -------
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to add Note Guarantees with respect to the Securities or to secure
the Securities;
(5) to add to the covenants of the Issuers for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Issuers;
(6) to comply with any requirements of the Commission in connection
with qualifying, or maintaining the qualification of, this Indenture under
the TIA;
(7) to make any change that does not adversely affect the rights of
any Securityholder;
(8) to provide for the issuance of the Exchange Securities or Private
Exchange Securities, which shall have terms substantially identical in all
material respects to the Initial Securities (except that the transfer
restrictions contained in the Initial Securities shall be modified or
eliminated, as appropriate), and which shall be treated, together with any
outstanding Initial Securities, as a single issue of securities; or
(9) to provide for the assumption by a Successor Company of the
obligations of either of the Issuers.
<PAGE>
78
After an amendment under this Section becomes effective, the Issuers
shall deliver to each Securityholder, in accordance with Section 11.02, a notice
briefly describing such amendment. The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the validity
of an amendment under this Section 9.01.
SECTION 9.02. With Consent of Holders. The Issuers and the Trustee
------------------------
may amend this Indenture or the Securities without notice to any Securityholder
but with the written consent of the Holders of at least a majority in principal
amount of the Securities then outstanding (including consents obtained in
connection with a tender offer or exchange offer for the Securities). However,
without the consent of each Securityholder affected, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest or
any liquidated damages on any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption of any Security or
change the time at which any Security may be redeemed in accordance with
Article 3;
(5) make any Security payable in money other than that stated in the
Security;
(6) make any change in Section 6.04 or 6.07 or the second sentence of
this Section 9.02; or
(7) make any change in Section 4.16 that adversely affects the rights
of any Holder of Securities or amend the terms of this Indenture in a way
that would result in a loss of an exemption from any of the Taxes described
thereunder or an exemption from any obligation to withhold or deduct Taxes
so described thereunder unless the Issuers agree to pay Additional Amounts,
if any, in respect thereof.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
<PAGE>
79
After an amendment under this Section 9.02 becomes effective, the
Issuers shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section 9.02.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment
------------------------------------
to this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
----------------------------------------------
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any
such Holder or subsequent Holder may revoke the consent or waiver as to such
Holder's Security or portion of the Security if the Trustee receives the notice
of revocation before the date the amendment or waiver becomes effective. After
an amendment or waiver becomes effective, it shall bind every Securityholder.
An amendment or waiver becomes effective once both (i) the requisite number of
consents have been received by the Issuers or the Trustee and (ii) such
amendment or waiver has been executed by the Issuers and the Trustee.
The Issuers may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an amendment
--------------------------------------
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Issuers or the Trustee so determines, the Issuers
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
<PAGE>
80
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any
---------------------------
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture and that such amendment
is the legal, valid and binding obligation of the Issuers and the Note
Guarantors, if any, enforceable against them in accordance with its terms,
subject to customary exceptions, and complies with the provisions hereof
(including Section 9.03).
SECTION 9.07. Payment for Consent. None of the Issuers or any
--------------------
Affiliate of the Issuers shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 10
Note Guarantees
---------------
SECTION 10.01. Execution of Supplemental Indenture for Future Note
---------------------------------------------------
Guarantors. Each Subsidiary which is required to become a Note Guarantor
- -----------
pursuant to Section 4.11 shall promptly execute and deliver to the Trustee a
supplemental indenture in the form of Exhibit C hereto pursuant to which such
Subsidiary shall become a Note Guarantor and shall guarantee the Guaranteed
Obligations (as defined in Exhibit C). Concurrently with the execution and
delivery of such supplemental indenture, the Issuers shall deliver to the
Trustee an Opinion of Counsel and an Officers' Certificate to the effect that
such supplemental indenture has been duly authorized, executed and delivered by
such Subsidiary and that, subject to the application of bankruptcy, insolvency,
moratorium, fraudulent conveyance or transfer and other similar laws relating to
creditors' rights generally and to the principles of equity, whether considered
in a proceeding at law or in equity, the Note Guarantee of such Note Guarantor
is a legal, valid and binding obligation of such Note Guarantor, enforceable
against such Note Guarantor in accordance with its terms.
<PAGE>
81
ARTICLE 11
Miscellaneous
-------------
SECTION 11.01. Trust Indenture Act Controls. If any provision of
-----------------------------
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 11.02. Notices. (a) Any notice or communication to the
--------
Issuers or the Trustee shall be in writing and delivered in person or mailed by
first-class mail addressed as follows:
if to the Issuers:
The Derby Cycle Corporation,
c/o Raleigh Industries Ltd.
Triumph Road
Nottingham NG7 2DD, England
(telecopier no.: 011-44-115-942-2178)
Attention of:
Mr. Alan J. Finden-Crofts
if to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street, 11th Floor
New York, New York 10004
(telecopier no.: (212) 858-2952)
Attention of:
Corporate Finance Trust Services
The Issuers or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications. Any
notice or communication to the Issuers or the Trustee shall be deemed to have
been given or made upon actual receipt thereof by the addressee.
(b) Notice regarding the Securities shall be (i) mailed by first-class
mail to each Holder's registered address and (ii) published in a leading
newspaper having a general circulation in (a) New York City (which is expected
to be the Wall Street Journal), (b) Frankfurt, Germany (which is expected to be
---- ------ -------
Frankfurter Allgemeine
- ----------- ----------
<PAGE>
82
Zeitung) and (c) if and so long as the Securities are listed on the Luxembourg
- -------
Stock Exchange and the rules of the Luxembourg Stock Exchange so require, a
newspaper having a general circulation in Luxembourg (which is expected to be
the Luxembourg Wort). If and so long as the Securities are listed on any other
---------------
securities exchange, notices shall also be given in accordance with any
applicable requirements of such securities exchange (which requirements, in the
case of any such securities exchange not located in the United States, shall be
specified by the Issuers in writing to the Trustee). Notices given by
publication shall be deemed to be given on the first date on which publication
is made, and notices given by first-class mail shall be deemed given five
calendar days after mailing.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is published or mailed in the
manner provided herein, it is duly given, whether or not the addressee reads or
receives it.
SECTION 11.03. Communication by Holders with Other Holders.
--------------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Issuers, the Trustee, the Registrar and anyone else shall have
the protection of TIA (S) 312(c).
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.
---------------------------------------------------
Upon any request or application by the Issuers to the Trustee to take or refrain
from taking any action under this Indenture, the Issuers shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion. Each
----------------------------------------------
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or opinion
has read such covenant or condition;
<PAGE>
83
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 11.06. When Securities Disregarded. In determining whether
----------------------------
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Issuers, any Note
Guarantor or by any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Issuers or any Note
Guarantor shall be disregarded and deemed not to be outstanding, except that,
for the purpose of determining whether the Trustee shall be protected in relying
on any such direction, waiver or consent, only Securities which the Trustee
knows are so owned shall be so disregarded. Subject to the foregoing, only
Securities outstanding at the time shall be considered in any such
determination.
SECTION 11.07. Rules by Trustee, Paying Agent and Registrar. The
---------------------------------------------
Trustee may make reasonable rules for action by or at a meeting of
Securityholders. If and so long as the Securities are listed on any securities
exchange, such rules shall, to the extent not inconsistent with the provisions
of this Indenture, comply with any applicable requirements of such securities
exchange. The Registrar and the Paying Agent may make reasonable rules for
their functions.
SECTION 11.08. Legal Holidays. A "Legal Holiday" is a Saturday, a
---------------
Sunday or a day on which banking institutions are not required to be open in the
State of New York, the Netherlands, Luxembourg or a place of payment. If a
payment date is a Legal Holiday, payment shall be made on the next succeeding
day that is not a Legal Holiday, and no interest shall accrue with respect to
such payment for the intervening period. If a regular record date is a Legal
Holiday, the record date shall not be affected.
SECTION 11.09. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES
--------------
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS
<PAGE>
84
OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION
WOULD BE REQUIRED THEREBY.
SECTION 11.10 Jurisdiction. Each of the Issuers agrees that any
-------------
suit, action or proceeding against such Issuer or any Note Guarantor brought by
any Holder or the Trustee arising out of or based upon this Indenture or the
Securities may be instituted in any state or U.S. federal court in the Borough
of Manhattan, The City of New York, New York, and any appellate court from any
thereof, and it irrevocably submits to the non-exclusive jurisdiction of such
courts in any suit, action or proceeding. Each of the Issuers irrevocably
waives, to the fullest extent permitted by law, any objection to any suit,
action, or proceeding that may be brought in connection with this Indenture or
the Securities, including such actions, suits or proceedings relating to
securities laws of the United States or any state thereof, in such courts
whether on the grounds of venue, residence or domicile or on the ground that any
such suit, action or proceeding has been brought in an inconvenient forum. Each
of the Issuers agrees that final judgment in any such suit, action or proceeding
brought in such court shall be conclusive and binding upon such Issuer and may
be enforced in any court to the jurisdiction of which such Issuer is subject by
a suit upon such judgment; provided that service of process is effected upon
--------
such Issuer in the manner provided by this Section 11.10. Each of the Issuers
has irrevocably appointed CT Corporation System, with offices on the date hereof
at 1633 Broadway, New York, New York 10019, as its authorized agent (the
"Authorized Agent"), upon whom process may be served in any suit, action or
proceeding arising out of or based upon this Indenture, the Securities or the
transactions contemplated herein which may be instituted in any state or U.S.
federal court in the Borough of Manhattan, The City of New York, New York, by
any Holder or the Trustee, and expressly accepts the non-exclusive jurisdiction
of any such court in respect of any such suit, action or proceeding. Each of
the Issuers hereby represents and warrants that the Authorized Agent has
accepted such appointment and has agreed to act as said agent for service of
process, and each of the Issuers agrees to take any and all action, including
the filing of any and all documents, that may be necessary to continue such
respective appointment in full force and effect as aforesaid. Service of
process upon the Authorized Agent shall be deemed, in every respect, effective
service of process upon each of the Issuers. Notwithstanding the foregoing, any
action involving the Issuers arising out of or based upon this Indenture or the
Securities may be instituted by any Holder or the Trustee in any court of
competent jurisdiction in any other jurisdiction.
SECTION 11.11. No Personal Liability of Directors, Officers,
---------------------------------------------
Employees and Stockholders. No director, officer, employee or stockholder of
- --------------------------
either of the Issuers, as such, shall have any liability for any obligations of
such Issuer under the Securities or this Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each holder of
a Security by accepting such Security waives
<PAGE>
85
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Securities. Such waiver may not be effective
to waive liabilities under U.S. federal securities laws and it is the view of
the Commission that such a waiver is against public policy.
SECTION 11.12. Successors. All agreements of the Issuers and each
-----------
Note Guarantor in this Indenture and the Securities shall bind its successors.
All agreements of the Trustee in this Indenture shall bind its successors.
SECTION 11.13. Multiple Originals. The parties may sign any number
-------------------
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 11.14. Table of Contents; Headings. The table of contents,
----------------------------
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
THE DERBY CYCLE CORPORATION,
by /s/ Alan J. Finden-Crofts
-------------------------------
Name: Alan J. Finden-Crofts
Title:
LYON INVESTMENTS B.V.,
by /s/ Alan J. Finden-Crofts
-------------------------------
Name: Alan J. Finden-Crofts
Title:
IBJ SCHRODER BANK & TRUST COMPANY, as Trustee
by /s/ Stephen J. Giurlando
--------------------------------
Name: Stephen J. Giurlando
Title:
<PAGE>
APPENDIX A
PROVISIONS RELATING TO INITIAL SECURITIES,
------------------------------------------
PRIVATE EXCHANGE SECURITIES
---------------------------
AND EXCHANGE SECURITIES
-----------------------
1. Definitions
-----------
1.1 Definitions
-----------
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Temporary Regulation S Global Security or beneficial
interest therein, the rules and procedures of the Depositary for such Global
Security, Euroclear and Cedel, in each case to the extent applicable to such
transaction and as in effect from time to time.
"Cedel" means Cedel Bank, S.A., or any successor securities clearing
agency.
"Definitive Security" means a certificated Initial Security or
Exchange Security (bearing the Restricted Securities Legend if the transfer of
such Security is restricted by applicable law) that does not include the Global
Securities Legend.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Euroclear" means the Euroclear Clearance System or any successor
securities clearing agency.
"Global Securities Legend" means the legend set forth under that
caption in Exhibit A to this Indenture.
"IAI" means an institutional "accredited investor" as described in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Private Exchange" means an offer by the Issuers, pursuant to a
Registration Agreement, to issue and deliver to certain purchasers, in exchange
for the Initial Securities held by such purchasers as part of their initial
distribution, a like aggregate principal amount of Private Exchange Securities.
<PAGE>
2
"Purchase Agreement" means the Purchase Agreement dated May 7, 1998,
among the Issuers and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registration Agreement" means the Exchange and Registration Rights
Agreement dated May 14, 1998, among the Issuers and the Initial Purchasers.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Securities" means all Initial Securities offered and
sold outside the United States in reliance on Regulation S.
"Regulation S Securities Legend" means the legend set forth under that
caption in Exhibit A to this Indenture.
"Restricted Period", with respect to any Securities, means the period
of 40 consecutive days beginning on and including the later of (i) the day on
which such Securities are first offered to persons other than distributors (as
defined in Regulation S under the Securities Act) in reliance on Regulation S
and (ii) the Issue Date with respect to such Securities.
"Restricted Securities Legend" means the legend set forth in Section
2.3(e)(i) herein.
"Rule 501" means Rule 501(a)(1), (2), (3) or (7) under the Securities
Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Securities" means all Initial Securities offered and sold
to QIBs in reliance on Rule 144A.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to a Global
Security (as appointed by the Depositary) or any successor person thereto, who
shall initially be the Trustee.
"Shelf Registration Statement" means a registration statement filed by
the Issuers in connection with the offer and sale of Initial Securities pursuant
to a Registration Agreement.
<PAGE>
3
"Transfer Restricted Securities" means Definitive Securities and any
other Securities that bear or are required to bear the Restricted Securities
Legend.
1.2 Other Definitions
-----------------
Term: Defined in Section:
---- ------------------
"Agent Members"................................................... 2.1(b)
"IAI Global Security.............................................. 2.1(a)
"Global Security"................................................. 2.1(a)
"Regulation S Global Security".................................... 2.1(a)
"Rule 144A Global Security"....................................... 2.1(a)
2. The Securities
--------------
2.1 Form and Dating
---------------
The Initial Securities issued on the date hereof shall be (i) offered
and sold by the Issuers pursuant to a Purchase Agreement and (ii) resold,
initially only to (A) QIBs in reliance on Rule 144A and (B) Persons other than
U.S. Persons (as defined in Regulation S) in reliance on Regulation S. Such
Initial Securities may thereafter be transferred to, among others, QIBs,
purchasers in reliance on Regulation S and, except as set forth below, IAIs in
accordance with Rule 501.
(a) Global Securities. Rule 144A Securities shall be issued
------------------
initially in the form of one or more permanent global Securities in definitive,
fully registered form (collectively, the "Rule 144A Global Security") and
Regulation S Securities shall be issued initially in the form of one or more
global Securities (collectively, the "Regulation S Global Security"), in each
case without interest coupons and bearing the Global Securities Legend, the
Restricted Securities Legend and, in the case of the Regulation S Global
Security, the Regulation S Securities Legend, which shall be deposited on behalf
of the purchasers of the Securities represented thereby with the Securities
Custodian, and registered in the name of the Depositary or a nominee of the
Depositary, duly executed by each of the Issuers and authenticated by the
Trustee as provided in this Indenture. One or more global securities in
definitive, fully registered form without interest coupons and bearing the
Global Securities Legend and the Restricted Securities Legend (collectively, the
"IAI Global Security") shall also be issued on the Closing Date, deposited with
the Securities Custodian, and registered in the name of the Depositary or a
nominee of the Depositary, duly executed by each of the Issuers and
authenticated by the Trustee as provided in this Indenture to accommodate
transfers of beneficial interests in the Securities to IAIs subsequent to the
initial distribution.
<PAGE>
4
Beneficial ownership interests in the Regulation S Global Security shall not be
exchangeable for interests in the Rule 144A Global Security, the IAI Global
Security or any other Security without a Restricted Securities Legend until the
expiration of the Restricted Period. The Rule 144A Global Security, the IAI
Global Security and the Regulation S Global Security are each referred to herein
as a "Global Security" and are collectively referred to herein as "Global
Securities." The aggregate principal amount of the Global Securities may from
time to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a
----------------------
Global Security deposited with or on behalf of the Depositary.
Each of the Issuers shall execute and the Trustee shall, in accordance
with this Section 2.1(b) and pursuant to an order of each of the Issuers,
authenticate and deliver initially one or more Global Securities that (a) shall
be registered in the name of the Depositary for such Global Security or Global
Securities or the nominee of such Depositary and (b) shall be delivered by the
Trustee to such Depositary or pursuant to such Depositary's instructions or held
by the Trustee as Securities Custodian.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary or by the Trustee as Securities Custodian or
under such Global Security, and the Depositary may be treated by the Issuers,
the Trustee and any agent of the Issuers or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwith standing the
foregoing, nothing herein shall prevent the Issuers, the Trustee or any agent of
the Issuers or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depositary or impair, as between
the Depositary and its Agent Members, the operation of customary practices of
such Depositary governing the exercise of the rights of a holder of a beneficial
interest in any Global Security.
(c) Definitive Securities. Except as provided in Section 2.3 or 2.4,
----------------------
owners of beneficial interests in Global Securities shall not be entitled to
receive physical delivery of certificated Securities.
2.2 Authentication. The Trustee shall authenticate and make available for
---------------
delivery upon a written order of each of the Issuers signed by two Officers (1)
Initial Securities for original issue on the date hereof in an aggregate
principal amount of $100,000,000 and (2) the (A) Exchange Securities for issue
only in a Registered Exchange Offer and (B) Private Exchange Securities for
issue only in a Private Exchange, in the case of each of (A) and (B) pursuant to
a Registration Agreement and for a like principal amount of Initial Securities
exchanged pursuant thereto. Such order shall specify the amount of the
Securities
<PAGE>
5
to be authenticated, the date on which the original issue of Securities is to be
authenticated and whether the Securities are to be Initial Securities, Exchange
Securities or Private Exchange Securities. The aggregate principal amount of
Securities outstanding at any time may not exceed $100,000,000 except as
provided in Section 2.07 of this Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
---------------------- -----------------------------------
Securities. When Definitive Securities are presented to the Registrar with a
- -----------
request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
-------- -------
that the Definitive Securities surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to each of the Issuers and the
Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to clause (A),
(B) or (C) below, and are accompanied by the following additional
information and documents, as applicable:
(A) if such Definitive Securities are being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect (in
the form set forth on the reverse side of the Initial Security);
(B) if such Definitive Securities are being transferred to the
Issuers, a certification to that effect (in the form set forth on the
reverse side of the Initial Security); or
(C) if such Definitive Securities are being transferred pursuant
to an exemption from registration in accordance with Rule 144 under
the Securities Act or in reliance upon another exemption from the
registration requirements of the Securities Act, (i) a certification
to that effect (in the form set forth on the reverse side of the
Initial Security) and (ii) if the Issuers so request, an opinion of
counsel or other evidence reasonably satisfactory to them as to the
<PAGE>
6
compliance with the restrictions set forth in the legend set forth in
Section 2.3(d)(i).
(b) Restrictions on Transfer of a Definitive Security for a
-------------------------------------------------------
Beneficial Interest in a Global Security. A Definitive Security may not be
- -----------------------------------------
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee
of a Definitive Security, duly endorsed or accompanied by a written instrument
of transfer in form reasonably satisfactory to the Issuers and the Registrar,
together with:
(i) certification (in the form set forth on the reverse side of the
Initial Security) that such Definitive Security is being transferred (A) to
a QIB in accordance with Rule 144A, (B) to an IAI that has furnished to the
Trustee a signed letter substantially in the form of Exhibit D or (C)
outside the United States in an offshore transaction within the meaning of
Regulation S and in compliance with Rule 904 under the Securities Act; and
(ii) written instructions directing the Trustee to make, or to direct
the Securities Custodian to make, an adjustment on its books and records
with respect to such Global Security to reflect an increase in the
aggregate principal amount of the Securities represented by the Global
Security, such instructions to contain information regarding the Depositary
account to be credited with such increase,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased by the aggregate principal amount of the Definitive Security to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Security
equal to the principal amount of the Definitive Security so canceled. If no
Global Securities are then outstanding and the Global Security has not been
previously exchanged for certificated securities pursuant to Section 2.4, the
Issuers shall issue and the Trustee shall authenticate, upon written order of
each of the Issuers in the form of an Officers' Certificate, a new Global
Security in the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. (i) The transfer
-------------------------------------------
and exchange of Global Securities or beneficial interests therein shall be
effected through the Depositary, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any) and the procedures
of the Depositary therefor. A transferor of a beneficial interest in a Global
Security shall deliver a written order given in accordance with the Depositary's
procedures containing information regarding the participant account of the
Depositary to be credited with a beneficial interest in such Global Security or
another Global
<PAGE>
7
Security and such account shall be credited in accordance with such order with a
beneficial interest in the applicable Global Security and the account of the
Person making the transfer shall be debited by an amount equal to the beneficial
interest in the Global Security being transferred. Transfers by an owner of a
beneficial interest in the Rule 144A Global Security or the IAI Global Security
to a transferee who takes delivery of such interest through the Regulation S
Global Security, whether before or after the expiration of the Restricted
Period, shall be made only upon receipt by the Trustee of a certification from
the transferor to the effect that such transfer is being made in accordance with
Regulation S or (if available) Rule 144 under the Securities Act and that, if
such transfer is being made prior to the expiration of the Restricted Period,
the interest transferred shall be held immediately thereafter through Euroclear
or Cedel. In the case of a transfer of a beneficial interest in either the
Regulation S Global Security or the Rule 144A Global Security for an interest in
the IAI Global Security, the transferee must furnish a signed letter
substantially in the form of Exhibit D to the Trustee.
(ii) If the proposed transfer is a transfer of a beneficial interest
in one Global Security to a beneficial interest in another Global Security,
the Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Global Security to which such
interest is being transferred in an amount equal to the principal amount of
the interest to be so transferred, and the Registrar shall reflect on its
books and records the date and a corresponding decrease in the principal
amount of Global Security from which such interest is being transferred.
(iii) Notwithstanding any other provisions of this Appendix (other
than the provisions set forth in Section 2.4), a Global Security may not be
transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(iv) In the event that a Global Security is exchanged for Definitive
Securities pursuant to Section 2.4 prior to the consummation of a
Registered Exchange Offer or the effectiveness of a Shelf Registration
Statement with respect to such Securities, such Securities may be exchanged
only in accordance with such procedures as are substantially consistent
with the provisions of this Section 2.3 (including the certification
requirements set forth on the reverse of the Initial Securities intended to
ensure that such transfers comply with Rule 144A, Regulation S or such
other applicable exemption from registration under the Securities Act, as
the case may be) and such other procedures as may from time to time be
adopted by the Issuers.
<PAGE>
8
(d) Restrictions on Transfer of Regulation S Global Security. (i)
--------------------------------------------------------
Prior to the expiration of the Restricted Period, interests in the Regulation S
Global Security may only be held through Euroclear or Cedel. During the
Restricted Period, beneficial ownership interests in the Regulation S Global
Security may only be sold, pledged or transferred through Euroclear or Cedel in
accordance with the Applicable Procedures and only (A) to the Issuers, (B) so
long as such security is eligible for resale pursuant to Rule 144A, to a person
whom the selling holder reasonably believes is a QIB that purchases for its own
account or for the account of a QIB to whom notice is given that the resale,
pledge or transfer is being made in reliance on Rule 144A, (C) in an offshore
transaction in accordance with Regulation S, (D) pursuant to an exemption from
registration under the Securities Act provided by Rule 144 (if applicable) under
the Securities Act, (E) to an IAI purchasing for its own account, or for the
account of such an IAI, in a minimum principal amount of Securities of $250,000
or (F) pursuant to an effective registration statement under the Securities Act,
in each case in accordance with any applicable securities laws of any state of
the United States. Prior to the expiration of the Restricted Period, transfers
by an owner of a beneficial interest in the Regulation S Global Security to a
transferee who takes delivery of such interest through the Rule 144A Global
Security or the IAI Global Security shall be made only in accordance with
Applicable Procedures and upon receipt by the Trustee of a written certification
from the transferor of the beneficial interest in the form provided on the
reverse of the Initial Security to the effect that such transfer is being made
to (i) a person whom the transferor reasonably believes is a QIB within the
meaning of Rule 144A in a transaction meeting the requirements of Rule 144A or
(ii) an IAI purchasing for its own account, or for the account of such an IAI,
in a minimum principal amount of the Securities of $250,000. Such written
certification shall no longer be required after the expiration of the Restricted
Period. In the case of a transfer of a beneficial interest in the Regulation S
Global Security for an interest in the IAI Global Security, the transferee must
furnish a signed letter substantially in the form of Exhibit D to the Trustee.
(ii) Upon the expiration of the Restricted Period, beneficial
ownership interests in the Regulation S Global Security shall be
transferable in accordance with applicable law and the other terms of this
Indenture.
(e) Legend.
-------
(i) Except as permitted by the following paragraphs (ii), (iii) or
(iv), each Security certificate evidencing the Global Securities and the
Definitive Securities (and all Securities issued in exchange therefor or in
substitution thereof) shall bear a
<PAGE>
9
legend in substantially the following form (each defined term in the legend
being defined as such for purposes of the legend only):
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR ANY
AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
OF SUCH SECURITY), ONLY (A) TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL INVESTOR ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE
SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR
FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE
<PAGE>
10
SECURITIES ACT, SUBJECT TO THE ISSUERS AND THE TRUSTEE'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON
THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
Each Definitive Security shall also bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR
AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER
AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted Security that
is a Definitive Security, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a Definitive Security that
does not bear the legends set forth above and rescind any restriction on
the transfer of such Transfer Restricted Security if the Holder certifies
in writing to the Registrar that its request for such exchange was made in
reliance on Rule 144 (such certification to be in the form set forth on the
reverse of the Initial Security).
(iii) After a transfer of any Initial Securities or Private Exchange
Securities during the period of the effectiveness of a Shelf Registration
Statement with respect to such Initial Securities or Private Exchange
Securities, as the case may be, all requirements pertaining to the
Restricted Securities Legend on such Initial Securities or such Private
Exchange Securities shall cease to apply and the requirements that any such
Initial Securities or such Private Exchange Securities be issued in global
form shall continue to apply.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which Holders of such Initial
Securities are offered Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to Initial Securities, including
that Initial Securities be issued in global form, shall continue to apply,
and Exchange Securities in global form without the Restricted Securities
Legend shall be available to Holders that exchange such Initial Securities
in such Registered Exchange Offer.
<PAGE>
11
(v) Upon the consummation of a Private Exchange with respect to the
Initial Securities pursuant to which Holders of such Initial Securities are
offered Private Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to such Initial Securities,
including that Initial Securities be issued in global form, shall continue
to apply, and Private Exchange Securities in global form with the
Restricted Securities Legend shall be available to Holders that exchange
such Initial Securities in such Private Exchange.
(vi) Upon a sale or transfer after the expiration of the Restricted
Period of any Initial Security acquired pursuant to Regulation S, all
requirements that such Initial Security bear the Restricted Securities
Legend shall cease to apply and the requirements requiring any such Initial
Security be issued in global form shall continue to apply.
(f) Cancelation or Adjustment of Global Security. At such time as
---------------------------------------------
all beneficial interests in a Global Security have either been exchanged for
Definitive Securities, transferred, redeemed, repurchased or canceled, such
Global Security shall be returned by the Depositary to the Trustee for
cancelation or retained and canceled by the Trustee. At any time prior to such
cancelation, if any beneficial interest in a Global Security is exchanged for
Definitive Securities, transferred in exchange for an interest in another Global
Security, redeemed, repurchased or canceled, the principal amount of Securities
represented by such Global Security shall be reduced and an adjustment shall be
made on the books and records of the Trustee (if it is then the Securities
Custodian for such Global Security) with respect to such Global Security, by the
Trustee or the Securities Custodian, to reflect such reduction.
(g) Obligations with Respect to Transfers and Exchanges of
----------------------------------------- ------------
Securities.
- -----------
(i) To permit registrations of transfers and exchanges, each of the
Issuers shall execute and the Trustee shall authenticate, Definitive
Securities and Global Securities at the Registrar's request.
(ii) No service charge shall be made for any registration of transfer
or exchange, but the Issuers, or the Paying Agent, as applicable, may
require payment of a sum sufficient to cover any transfer tax, assessments,
or similar governmental charge payable in connection therewith (other than
any such transfer taxes, assessments or similar governmental charge payable
upon exchange or transfer pursuant to Sections 3.06, 4.06, 4.08 and 9.05).
(iii) Prior to the due presentation for registration of transfer of
any Security, each of the Issuers, the Trustee, the Paying Agent or the
Registrar may deem and treat the Person in whose name a Security is
registered as the absolute owner of such
<PAGE>
12
Security for the purpose of receiving payment of principal of and interest
on such Security and for all other purposes whatsoever, whether or not such
Security is overdue, and none of the Issuers, any Note Guarantor, the
Trustee, the Paying Agent or the Registrar shall be affected by notice to
the contrary.
(iv) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(h) No Obligation of the Trustee.
-----------------------------
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Security, a member of, or a participant in the
Depositary or any other Person with respect to the accuracy of the records
of the Depositary or its nominee or of any participant or member thereof,
with respect to any ownership interest in the Securities or with respect to
the delivery to any participant, member, beneficial owner or other Person
(other than the Depositary) of any notice (including any notice of
redemption or repurchase) or the payment of any amount, under or with
respect to such Securities. All notices and communications to be given to
the Holders and all payments to be made to Holders under the Securities
shall be given or made only to the registered Holders (which shall be the
Depositary or its nominee in the case of a Global Security). The rights of
beneficial owners in any Global Security shall be exercised only through
the Depositary subject to the applicable rules and procedures of the
Depositary. The Trustee may rely and shall be fully protected in relying
upon information furnished by the Depositary with respect to its members,
participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers between
or among Depositary participants, members or beneficial owners in any
Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
<PAGE>
13
2.4 Definitive Securities
---------------------
(a) A Global Security deposited with the Depositary or with the
Trustee as Securities Custodian pursuant to Section 2.1 shall be transferred to
the beneficial owners thereof in the form of Definitive Securities in an
aggregate principal amount equal to the principal amount of such Global
Security, in exchange for such Global Security, only if such transfer complies
with Section 2.3 and (i) the Depositary notifies each of the Issuers that it is
unwilling or unable to continue as a Depositary for such Global Security or if
at any time the Depositary ceases to be a "clearing agency" registered under the
Exchange Act, and a successor depositary is not appointed by each of the Issuers
within 90 days of such notice, or (ii) an Event of Default has occurred and is
continuing or (iii) each of the Issuers, in its sole discretion, notifies the
Trustee in writing that it elects to cause the issuance of certificated
Securities under this Indenture.
(b) Any Global Security that is transferable to the beneficial owners
thereof pursuant to this Section 2.4 shall be surrendered by the Depositary to
the Trustee, to be so transferred, in whole or from time to time in part,
without charge, and the Trustee shall authenticate and deliver, upon such
transfer of each portion of such Global Security, an equal aggregate principal
amount of Definitive Securities of authorized denominations. Any portion of a
Global Security transferred pursuant to this Section shall be executed,
authenticated and delivered only in denominations of $1,000 and any integral
multiple thereof and registered in such names as the Depositary shall direct.
Any certificated Initial Security in the form of a Definitive Security delivered
in exchange for an interest in the Global Security shall, except as otherwise
provided by Section 2.3(e), bear the Restricted Securities Legend.
(c) Subject to the provisions of Section 2.4(b), the registered
Holder of a Global Security may grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(d) In the event of the occurrence of any of the events specified in
Section 2.4(a)(i), (ii) or (iii), the Issuers shall promptly make available to
the Trustee a reasonable supply of Definitive Securities in fully registered
form without interest coupons.
<PAGE>
EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR ANY
AFFILIATE OF THE ISSUERS
<PAGE>
2
WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A)
TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL
INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT
OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR
FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS' AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES
(D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
[Regulation S Securities Legend]
UNTIL 40 DAYS AFTER THE COMMENCEMENT OF THE OFFERING, AN OFFER OR SALE
OF SECURITIES WITHIN THE UNITED STATES BY A DEALER (AS DEFINED IN THE U.S.
SECURITIES ACT) MAY VIOLATE THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES
ACT IF SUCH OFFER OR SALE IS MADE OTHERWISE THAN IN ACCORDANCE WITH RULE 144A
UNDER THE U.S. SECURITIES ACT.
Each Definitive Security shall bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES
<PAGE>
3
AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM
THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
<PAGE>
No. $__________
10% Senior Note due 2008
CUSIP No. ______
THE DERBY CYCLE CORPORATION, a Delaware corporation, and LYON
INVESTMENTS B.V., a company organized under the laws of the Netherlands, as
joint and several obligors, promise to pay to Cede & Co., or registered assigns,
the principal sum [of Dollars] [listed on the Schedule of
Increases or Decreases in Global Security attached hereto]/1/ on May 15, 2008.
Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
_________________
/1/ Use the second set of bracketed language for a Global Security.
<PAGE>
Additional provisions of this Security are set forth on the other side
of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
THE DERBY CYCLE CORPORATION,
by
__________________________________
Name:
Title:
by
__________________________________
Name:
Title:
LYON INVESTMENTS B.V.,
by
__________________________________
Name:
Title:
by
__________________________________
Name:
Title:
<PAGE>
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by _________________________
Authorized Signatory
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
10% Senior Note due 2008
Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Indenture (as defined).
1. Interest
--------
(a) THE DERBY CYCLE CORPORATION, a Delaware corporation, and LYON
INVESTMENTS B.V., a company organized under the laws of the Netherlands, as
joint and several obligors, promise to pay interest on the principal amount of
this Security at the rate per annum shown above. The Issuers shall pay interest
semiannually on May 15 and November 15 of each year[, commencing [ ],
1998]/2/. Interest on the Securities shall accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from May 14,
1998. Interest shall be computed on the basis of a 360-day year of twelve 30-
day months. The Issuers shall pay interest on overdue principal at the rate
borne by the Securities plus 1% per annum, and they shall pay interest on
overdue installments of interest at the same rate to the extent lawful.
(b) Liquidated Damages. The Holder of this Security is entitled to
------------------
the benefits of an Exchange and Registration Rights Agreement, dated as of May
14, 1998, among the Issuers and the Initial Purchasers named therein (the
"Registration Agreement"). Capitalized terms used in this paragraph (b) but not
defined herein have the meanings assigned to them in the Registration Agreement.
If (i) the Shelf Registration Statement or Exchange Offer Registration
Statement, as applicable under the Registration Agreement, is not filed with the
Commission on or prior to 90 days after the Issue Date, (ii) the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
is not declared effective within 210 days after the Issue Date, (iii) the
Registered Exchange Offer is not consummated on or prior to 240 days after the
Issue Date, or (iv) the Shelf Registration Statement is filed and declared
effective within 210 days after the Issue Date but shall thereafter cease to be
effective (at any time that the Issuers are obligated to maintain the
effectiveness thereof) without being succeeded within 30 days by an additional
Registration Statement filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Issuers shall pay
liquidated damages to each Holder of Transfer Restricted Securities, during the
period of such Registration Default, in an amount equal to $0.192 per week per
$1,000 principal amount of the Securities constituting Transfer Restricted
Securities held by such Holder until the applicable Registration Statement is
filed
__________________
/2/ Use bracketed language for Initial Securities only.
<PAGE>
or declared effective, the Registered Exchange Offer is consummated or the
Shelf Registration Statement again becomes effective, as the case may be. All
accrued liquidated damages shall be paid to Holders in the same manner as
interest payments on the Securities on semi-annual payment dates which
correspond to payment dates for the Securities. Following the cure of all
Registration Defaults, the accrual of liquidated damages shall cease. The
Trustee shall have no responsibility with respect to the determination of the
amount of any such liquidated damages. For purposes of the foregoing, "Transfer
Restricted Securities" means (i) each Initial Security until the date on which
such Initial Security has been exchanged for a freely transferable Exchange
Security in the Registered Exchange Offer, (ii) each Initial Security or Private
Exchange Security until the date on which such Initial Security or Private
Exchange Security has been effectively registered under the Securities Act and
disposed of in accordance with a Shelf Registration Statement or (iii) each
Initial Security or Private Exchange Security until the date on which such
Initial Security or Private Exchange Security is distributed to the public
pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule
144(k) under the Securities Act.
2. Method of Payment
-----------------
The Issuers shall pay interest on the Securities (except defaulted
interest) to the Persons who are registered Holders of Securities at the close
of business on the May 1 or November 1 next preceding the payment date even if
Securities are canceled after the record date and on or before the payment date.
Holders must surrender Securities to a Paying Agent to collect principal
payments. The Issuers shall pay principal, premium, liquidated damages,
interest and Additional Amounts, if any, in money of the United States of
America that at the time of payment is legal tender for payment of public and
private debts. Payments in respect of the Securities represented by a Global
Security (including principal, premium, liquidated damages, interest and
Additional Amounts, if any) shall be made by wire transfer of immediately
available funds to the accounts specified by The Depository Trust Company. The
Issuers shall make all payments in respect of a certificated Security (including
principal, premium, liquidated damages, interest and Additional Amounts, if
any), by mailing a check to the registered address of each Holder thereof;
provided, however, that payments on the Securities may also be made, in the case
- -------- -------
of a Holder of at least $1,000,000 aggregate principal amount of Securities, by
wire transfer to a U.S. dollar account maintained by the payee with a bank in
the United States if such Holder elects payment by wire transfer by giving
written notice to the Trustee or the Paying Agent to such effect designating
such account no later than 30 days immediately preceding the relevant due date
for payment (or such other date as the Trustee may accept in its discretion).
<PAGE>
2
3. Paying Agent and Registrar
--------------------------
Initially, IBJ SCHRODER BANK & TRUST COMPANY, a New York banking
corporation (the "Trustee"), shall act as Paying Agent and Registrar. The
Issuers also intend to appoint THE INDUSTRIAL BANK OF JAPAN (LUXEMBOURG), S.A.
as Luxembourg Paying Agent once they apply for listing of the Securities on the
Luxembourg Stock Exchange. The Issuers may appoint and change any Paying Agent
or Registrar without notice. DCC or any of its domestically incorporated Wholly
Owned Subsidiaries may act as Paying Agent or Registrar. In all circumstances,
the Issuers shall ensure that (i) at least one Paying Agent shall be located in
the United States, (ii) at least one Paying Agent shall be, if and so long as
the Securities are listed on the Luxembourg Stock Exchange and the rules of such
exchange so require, located in Luxembourg or such other place as the Luxembourg
Stock Exchange may approve and (iii) if and so long as the Securities are listed
on any other securities exchange, any applicable requirements of such exchange
as to Paying Agents are satisfied.
4. Indenture
---------
The Issuers issued, as joint and several obligors, the Securities
under an Indenture dated as of May 14, 1998 (the "Indenture"), among the Issuers
and the Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) as in effect on the date
------
of the Indenture (the "TIA"). Terms defined in the Indenture and not defined
herein have the meanings ascribed thereto in the Indenture. The Securities are
subject to all terms and provisions of the Indenture, and Securityholders are
referred to the Indenture and the TIA for a statement of such terms and
provisions.
The Securities are senior unsecured obligations of the Issuers, as
joint and several obligors, limited to $100,000,000 aggregate principal amount
at any one time outstanding (subject to Section 2.07 of the Indenture). This
Security is one of the [Initial Securities] [Private Exchange Securities]
referred to in the Indenture. The Securities include the Initial Securities and
any Exchange Securities and Private Exchange Securities issued in exchange for
the Initial Securities pursuant to the Indenture. The Initial Securities, the
Exchange Securities and the Private Exchange Securities are treated as a single
class of securities under the Indenture. The Indenture imposes certain
limitations on the ability of DCC and its Restricted Subsidiaries to, among
other things, make certain Investments and other Restricted Payments, pay
dividends and other distributions, incur Indebtedness, enter into consensual
restrictions upon the payment of certain dividends and distributions by such
Restricted Subsidiaries, issue or sell shares of capital stock of such
Restricted Subsidiaries, enter into or permit certain transactions with
Affiliates, create or incur Liens, enter into additional lines of business,
enter into Sale/Leaseback Transactions and make asset sales.
<PAGE>
3
The Indenture also imposes limitations on the ability of the Issuers to
consolidate or merge with or into any other Person or convey, transfer or lease
all or substantially all of the property of either Issuer.
To guarantee the due and punctual payment of the principal, interest
and Additional Amounts, if any, on the Securities and all other amounts payable
by the Issuers under the Indenture and the Securities when and as the same shall
be due and payable, whether at maturity, by acceleration or otherwise, according
to the terms of the Securities and the Indenture, any Note Guarantors shall,
jointly and severally, unconditionally guarantee the Guaranteed Obligations on a
senior basis pursuant to the terms of the Indenture and the Supplemental
Indenture.
5. Optional Redemption
-------------------
Except as set forth below, the Securities shall not be redeemable at
the option of the Issuers prior to May 15, 2003. Thereafter, the Securities
shall be redeemable at the option of the Issuers, in whole or in part, on not
less than 30 nor more than 60 days' prior notice delivered to each Holder of
Securities in accordance with paragraph 7 herein, at the following redemption
prices (expressed as percentages of principal amount), plus accrued and unpaid
interest and Additional Amounts, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant payment date and Additional Amounts, if any, in respect
thereof), if redeemed during the 12-month period commencing on May 15 of the
years set forth below:
REDEMPTION
YEAR PRICE
------------------------------------------------------
2003 105.000%
2004 103.333%
2005 101.667%
2006 and thereafter 100.000%
At any time and from time to time prior to May 15, 2001, the Issuers
may, at their option, redeem up to a maximum of 33 1/3% of the original
aggregate principal amount of the Securities with all or a portion of the
proceeds of one or more Public Equity Offerings following which there is a
Public Market, at a redemption price equal to 110.000% of the principal amount
thereof, plus accrued and unpaid interest and Additional Amounts, if any, to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant payment date and Additional
Amounts, if any, in respect thereof); provided, however, that, after giving
-------- -------
effect to any such redemption, at least 66 2/3% of the original aggregate
principal amount of the Securities remains outstanding. Any
<PAGE>
4
such redemption shall be made within 60 days of such Public Equity Offering upon
not less than 30 nor more than 60 days' notice delivered to each Holder of
Securities being redeemed in accordance with paragraph 7 herein and otherwise in
accordance with the procedures set forth in the Indenture.
The Securities may be redeemed, at the option of the Issuers, in whole
but not in part, at any time upon giving not less than 30 nor more than 60 days'
notice delivered to each Holder of Securities in accordance with paragraph 7
herein (which notice shall be irrevocable), at a redemption price equal to the
principal amount thereof, together with accrued and unpaid interest, if any, to
the date fixed by the Issuers for redemption (a "Tax Redemption Date") and all
Additional Amounts, if any, then due and which shall become due on the Tax
Redemption Date as a result of the redemption or otherwise, if the Issuers
determine that, as a result of (i) any change in, or amendment to, the laws or
treaties (or any regulations, protocols or rulings promulgated thereunder) of
the United States or The Netherlands or any other jurisdiction in which either
of the Issuers is organized or engaged in business for tax purposes (or, in each
case, any political subdivision or taxing authority thereof or therein) or of
the jurisdiction from or through which payment is made or where the payor is
located affecting taxation, which change or amendment becomes effective on or
after the Closing Date, or (ii) any change in position regarding the
application, administration or interpretation of such laws, treaties,
regulations or rulings (including a holding, judgment or order by a court of
competent jurisdiction), which change, amendment, application or interpretation
becomes effective on or after the Closing Date, the Issuers are or shall be
required to pay Additional Amounts, and the Issuers determine that such payment
obligation cannot be avoided by the Issuers taking reasonable measures.
Notwithstanding the foregoing, no such notice of redemption shall be given
earlier than 90 days prior to the earliest date on which the Issuers would be
obligated to make such payment or withholding if a payment in respect of the
Securities were then due. Prior to the delivery of any notice of redemption of
the Securities pursuant to the foregoing, the Issuers shall deliver to the
Trustee an opinion of a tax counsel reasonably satisfactory to the Trustee to
the effect that the circumstances referred to above exist. The Trustee shall
accept such opinion as sufficient evidence of the satisfaction of the conditions
precedent described above, in which event it shall be conclusive and binding on
all Holders of Securities.
6. Sinking Fund
------------
The Securities are not subject to any sinking fund.
7. Notice of Redemption
--------------------
Notice of redemption shall be given at least 30 days but not more than
60 days before the redemption date. Such notice shall be (i) mailed by first-
class mail to the
<PAGE>
5
registered address of each Holder of Securities to be redeemed and (ii)
published in a leading newspaper having a general circulation in (a) New York
City (which is expected to be the Wall Street Journal), (b) Frankfurt, Germany
-------------------
(which is expected to be Frankfurter Allgemeine Zeitung) and (c) if and so long
------------------------------
as the Securities are listed on the Luxembourg Stock Exchange and the rules of
the Luxembourg Stock Exchange so require, a newspaper having a general
circulation in Luxembourg (which is expected to be the Luxembourg Wort)). If and
---------------
so long as the Securities are listed on any other securities exchange, notices
shall also be given in accordance with any applicable requirements of such
securities exchange. Notices given by publication shall be deemed to be given on
the first date on which publication is made, and notices given by first-class
mail shall be deemed given five calendar days after mailing. Securities in
denominations equal to or larger than $1,000 may be redeemed in part but only in
whole multiples of $1,000. If money sufficient to pay the redemption price of
and accrued and unpaid interest and Additional Amounts, if any, on all
Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to accrue
on such Securities (or such portions thereof) called for redemption.
8. Repurchase of Securities at the Option of Holders upon Change of Control
------------------------------------------------------------------------
Upon a Change of Control, each Holder of Securities shall have the
right, subject to certain conditions specified in the Indenture, to cause the
Issuers to repurchase all or any part of the Securities of such Holder at a
purchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued and unpaid interest and Additional Amounts, if any, to
the date of repurchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant payment date that
is on or prior to the date of purchase and Additional Amounts, if any, in
respect thereof) as provided in, and subject to the terms of, the Indenture.
9. Denominations; Transfer; Exchange
---------------------------------
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. Upon any transfer or exchange, the
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents, and the Issuers, or the Paying
Agent, as applicable, may require a Holder to pay any taxes required by law or
permitted by the Indenture. The Issuers shall not be required to transfer or
exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or to transfer or exchange any Securities for a period of 15 days prior to a
selection of Securities to be redeemed.
<PAGE>
6
10. Persons Deemed Owners
---------------------
Subject to the provisions hereof with respect to record dates, the
registered Holder of this Security may be treated as the owner of it for all
purposes.
11. Unclaimed Money
---------------
If money for the payment of principal, interest or Additional Amounts
remains unclaimed for two years, the Trustee or Paying Agent shall pay the money
back to the Issuers at their written request unless an abandoned property law
designates another Person. After any such payment, Holders entitled to the
money must look only to the Issuers and not to the Trustee for payment.
12. Discharge and Defeasance
------------------------
Subject to certain conditions, the Issuers at any time may terminate
some of or all of their obligations under the Securities and the Indenture if
the Issuers deposit with the Trustee money or U.S. Government Obligations for
the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.
13. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended without prior notice to any
Securityholder but with the written consent of the Holders of at least a
majority in aggregate principal amount of the outstanding Securities (including
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, such Securities) and (ii) any default or noncompliance with any
provision may be waived with the written consent of the Holders of at least a
majority in principal amount of the outstanding Securities. Subject to certain
exceptions set forth in the Indenture, without the consent of any Holder of
Securities, the Issuers and the Trustee may amend the Indenture or the
Securities (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to
comply with Article 5 of the Indenture; (iii) to provide for uncertificated
Securities in addition to or in place of certificated Securities; (iv) to add
Note Guarantees with respect to the Securities; (v) to secure the Securities;
(vi) to add additional covenants or to surrender rights and powers conferred on
the Issuers; (vii) to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the TIA; (viii) to
make any change that does not adversely affect the rights of any Securityholder;
(ix) to provide for the issuance of the Exchange Securities or Private Exchange
Securities; or (x) to provide for the assumption by a Successor Company of the
obligations of either of the Issuers.
<PAGE>
7
14. Defaults and Remedies
---------------------
If an Event of Default (other than an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of either Issuer)
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the outstanding Securities by notice to the Issuers may
declare the principal of and accrued but unpaid interest and Additional Amounts,
if any, on all the Securities to be due and payable. If an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of either
Issuer occurs, the principal of and interest and Additional Amounts, if any, on
all the Securities shall become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders. Under
certain circumstances, the Holders of a majority in principal amount of the
outstanding Securities may rescind any such acceleration with respect to the
Securities and its consequences.
If an Event of Default occurs and is continuing, the Trustee shall be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the Holders unless such Holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium, if any, interest or Additional Amounts, if any, when due, no
Holder may pursue any remedy with respect to the Indenture or the Securities
unless (i) such Holder has previously given the Trustee notice that an Event of
Default is continuing, (ii) Holders of at least 25% in principal amount of the
outstanding Securities have requested the Trustee in writing to pursue the
remedy, (iii) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense, (iv) the Trustee has not
complied with such request within 60 days after the receipt of the request and
the offer of security or indemnity and (v) the Holders of a majority in
principal amount of the outstanding Securities have not given the Trustee a
direction inconsistent with such request within such 60-day period. Subject to
certain restrictions, the Holders of a majority in principal amount of the
outstanding Securities are given the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would involve the Trustee in personal liability. Prior to taking
any action under the Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
15. Trustee Dealings with the Issuers
---------------------------------
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of
<PAGE>
8
Securities and may otherwise deal with and collect obligations owed to it by the
Issuers or their Affiliates and may otherwise deal with the Issuers or their
Affiliates with the same rights it would have if it were not Trustee. The
Indenture contains certain limitations on the rights of the Trustee, should it
become a creditor of either of the Issuers, to obtain payment of claims in
certain cases or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee shall be permitted to engage in
other transactions; provided, however, if it acquires any conflicting interest,
-------- -------
it must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
16. No Recourse Against Others
--------------------------
A director, officer, employee or stockholder, as such, of either
Issuer or any Note Guarantor shall not have any liability for any obligations of
the Issuers under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The
waiver and release are part of the consideration for the issue of the
Securities.
17. Authentication
--------------
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. Abbreviations
-------------
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. Governing Law
-------------
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITH OUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
<PAGE>
10
20. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuers have caused CUSIP numbers to be
printed on the Securities and have directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
THE ISSUERS SHALL FURNISH TO ANY HOLDER OF SECURITIES UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT
THE TEXT OF THIS SECURITY.
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Security on the books of
the Issuers. The agent may substitute another to act for him.
____________________________________________________________
Date: ________________ Your Signature: _____________________
Signature of Signature Guarantee: ______________________________________________
Sign exactly as your name appears on the other side of this Security. Signature
must be guaranteed by a participant in a recognized signature guaranty medallion
program or other signature guarantor acceptable to the Trustee.
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SECURITIES
This certificate relates to $_________ principal amount of Securities held in
(check applicable space) ____ book-entry or _____ definitive form by the
undersigned.
The undersigned (check one box below):
[_] has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Security held by the Depositary a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial
interest in such Global Security (or the portion thereof indicated above);
[_] has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Securities
are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) [_] to an Issuer; or
(2) [_] pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) [_] inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that such transfer is
being made in reliance on Rule 144A, in each case pursuant to and
in compliance with Rule 144A under the Securities Act of 1933; or
(4) [_] outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance
with Rule 904 under the Securities Act of 1933; or
<PAGE>
2
(5) [_] to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that
has furnished to the Trustee a signed letter containing certain
representations and agreements; or
(6) [_] pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee shall refuse to register
any of the Securities evidenced by this certificate in the name of any
Person other than the registered holder thereof; provided, however, that if
-------- -------
box (4), (5) or (6) is checked, the Trustee may require, prior to
registering any such transfer of the Securities, such legal opinions,
certifications and other information as the Issuers have reasonably
requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933.
________________________
Your Signature
Signature Guarantee:
Date: ______________________ __________________________
Signature must be guaranteed Signature of Signature
by a participant in a Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Trustee
____________________________________________________________________
<PAGE>
3
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Issuers as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated: ________________ _______________________________
NOTICE: To be executed by
an executive officer
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $[ ].
The following increases or decreases in this Global Security have been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date of Amount of decrease in Amount of increase in Principal amount of this Signature of authorized
Exchange Principal Amount of this Principal Amount of this Global Security following Signatory of Trustee or
Global Security Global Security such decrease or increase Securities Custodian
</TABLE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS SECURITY PURCHASED BY AN ISSUER
PURSUANT TO SECTION 4.06 (ASSET SALE) OR 4.08 (CHANGE OF CONTROL) OF THE
INDENTURE, CHECK THE BOX:
ASSET SALE [_] CHANGE OF CONTROL [_]
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS SECURITY PURCHASED BY
AN ISSUER PURSUANT TO SECTION 4.06 OR 4.08 OF THE INDENTURE, STATE THE AMOUNT:
$
DATE: __________________ YOUR SIGNATURE: __________________
(SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THE SECURITY)
SIGNATURE GUARANTEE:_______________________________________
SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A RECOGNIZED SIGNATURE GUARANTY
MEDALLION PROGRAM OR OTHER SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE
<PAGE>
EXHIBIT B
[FORM OF FACE OF EXCHANGE SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
<PAGE>
No. $__________
10% Senior Note due 2008
CUSIP No. ______
THE DERBY CYCLE CORPORATION, a Delaware corporation, and LYON
INVESTMENTS B.V., a company organized under the laws of the Netherlands, as
joint and several obligors, promise to pay to Cede & Co., or registered assigns,
the principal sum [of Dollars] [listed on the Schedule of Increases or
Decreases in Global Security attached hereto]/3/ on May 15, 2008.
Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
____________
/3/ Use the second set of bracketed language for a Global Security.
<PAGE>
Additional provisions of this Security are set forth on the other side
of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
THE DERBY CYCLE CORPORATION,
by
_________________________________
Name:
Title:
by
_________________________________
Name:
Title:
LYON INVESTMENTS B.V.,
by
_________________________________
Name:
Title:
by
_________________________________
Name:
Title:
<PAGE>
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
_____________________________
Authorized Signatory
<PAGE>
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY]
10% Senior Note due 2008
Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Indenture (as defined).
1. Interest
--------
THE DERBY CYCLE CORPORATION, a Delaware corporation, and LYON
INVESTMENTS B.V., a company organized under the laws of the Netherlands, as
joint and several obligors, promise to pay interest on the principal amount of
this Security at the rate per annum shown above. The Issuers shall pay interest
semiannually on May 15 and November 15 of each year[, commencing [ ],
1998]/4/. Interest on the Securities shall accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from May 14,
1998. Interest shall be computed on the basis of a 360-day year of twelve 30-
day months. The Issuers shall pay interest on overdue principal at the rate
borne by the Securities plus 1% per annum, and they shall pay interest on
overdue installments of interest at the same rate to the extent lawful.
2. Method of Payment
-----------------
The Issuers shall pay interest on the Securities (except defaulted
interest) to the Persons who are registered Holders of Securities at the close
of business on the May 1 or November 1 next preceding the payment date even if
Securities are canceled after the record date and on or before the payment date.
Holders must surrender Securities to a Paying Agent to collect principal
payments. The Issuers shall pay principal, premium, liquidated damages,
interest and Additional Amounts, if any, in money of the United States of
America that at the time of payment is legal tender for payment of public and
private debts. Payments in respect of the Securities represented by a Global
Security (including principal, premium, liquidated damages, interest and
Additional Amounts, if any) shall be made by wire transfer of immediately
available funds to the accounts specified by The Depository Trust Company. The
Issuers shall make all payments in respect of a certificated Security (including
principal, premium, liquidated damages, interest and Additional Amounts, if
any), by mailing a check to the registered address of each Holder thereof;
provided, however, that payments on the Securities may also be made, in the case
- -------- -------
of a Holder of at least $1,000,000 aggregate principal amount of Securities, by
wire transfer to a U.S. dollar account maintained by the
/4/ Use bracketed language for Initial Securities only.
<PAGE>
2
payee with a bank in the United States if such Holder elects payment by wire
transfer by giving written notice to the Trustee or the Paying Agent to such
effect designating such account no later than 30 days immediately preceding the
relevant due date for payment (or such other date as the Trustee may accept in
its discretion).
3. Paying Agent and Registrar
--------------------------
Initially, IBJ SCHRODER BANK & TRUST COMPANY, a New York banking
corporation (the "Trustee"), shall act as Paying Agent and Registrar. The
Issuers also intend to appoint THE INDUSTRIAL BANK OF JAPAN (LUXEMBOURG), S.A.
as Luxembourg Paying Agent once they apply for listing of the Securities on the
Luxembourg Stock Exchange. The Issuers may appoint and change any Paying Agent
or Registrar without notice. DCC or any of its domestically incorporated Wholly
Owned Subsidiaries may act as Paying Agent or Registrar. In all circumstances,
the Issuers shall ensure that (i) at least one Paying Agent shall be located in
the United States, (ii) at least one Paying Agent shall be, if and so long as
the Securities are listed on the Luxembourg Stock Exchange and the rules of such
exchange so require, located in Luxembourg or such other place as the Luxembourg
Stock Exchange may approve and (iii) if and so long as the Securities are listed
on any other securities exchange, any applicable requirements of such exchange
as to Paying Agents are satisfied.
4. Indenture
---------
The Issuers issued, as joint and several obligors, the Securities
under an Indenture dated as of May 14, 1998 (the "Indenture"), among the Issuers
and the Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) as in effect on the date
------
of the Indenture (the "TIA"). Terms defined in the Indenture and not defined
herein have the meanings ascribed thereto in the Indenture. The Securities are
subject to all terms and provisions of the Indenture, and Securityholders are
referred to the Indenture and the TIA for a statement of such terms and
provisions.
The Securities are senior unsecured obligations of the Issuers, as
joint and several obligors, limited to $100,000,000 aggregate principal amount
at any one time outstanding (subject to Section 2.07 of the Indenture). This
Security is one of the Exchange Securities referred to in the Indenture. The
Securities include the Initial Securities and any Exchange Securities and
Private Exchange Securities issued in exchange for the Initial Securities
pursuant to the Indenture. The Initial Securities, the Exchange Securities and
the Private Exchange Securities are treated as a single class of securities
under the Indenture. The Indenture imposes certain limitations on the ability of
DCC and its Restricted Subsidiaries to, among other things, make certain
Investments and other Restricted
<PAGE>
3
Payments, pay dividends and other distributions, incur Indebtedness, enter into
consensual restrictions upon the payment of certain dividends and distributions
by such Restricted Subsidiaries, issue or sell shares of capital stock of such
Restricted Subsidiaries, enter into or permit certain transactions with
Affiliates, create or incur Liens, enter into additional lines of business,
enter into Sale/Leaseback Transactions and make asset sales. The Indenture also
imposes limitations on the ability of the Issuers to consolidate or merge with
or into any other Person or convey, transfer or lease all or substantially all
of the property of either Issuer.
To guarantee the due and punctual payment of the principal, interest
and Additional Amounts, if any, on the Securities and all other amounts payable
by the Issuers under the Indenture and the Securities when and as the same shall
be due and payable, whether at maturity, by acceleration or otherwise, according
to the terms of the Securities and the Indenture, any Note Guarantors shall,
jointly and severally, unconditionally guarantee the Guaranteed Obligations on a
senior basis pursuant to the terms of the Indenture and the Supplemental
Indenture.
5. Optional Redemption
-------------------
Except as set forth below, the Securities shall not be redeemable at
the option of the Issuers prior to May 15, 2003. Thereafter, the Securities
shall be redeemable at the option of the Issuers, in whole or in part, on not
less than 30 nor more than 60 days' prior notice delivered to each Holder of
Securities in accordance with paragraph 7 herein, at the following redemption
prices (expressed as percentages of principal amount), plus accrued and unpaid
interest and Additional Amounts, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant payment date and Additional Amounts, if any, in respect
thereof), if redeemed during the 12-month period commencing on May 15 of the
years set forth below:
REDEMPTION
YEAR PRICE
------------------------------------------------------
2003 105.000%
2004 103.333%
2005 101.667%
2006 and thereafter 100.000%
At any time and from time to time prior to May 15, 2001, the Issuers
may, at their option, redeem up to a maximum of 33 1/3% of the original
aggregate principal amount of the Securities with all or a portion of the
proceeds of one or more Public Equity Offerings following which there is a
Public Market, at a redemption price equal to 110.000% of the
<PAGE>
4
principal amount thereof, plus accrued and unpaid interest and Additional
Amounts, if any, to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
payment date and Additional Amounts, if any, in respect thereof); provided,
however, that, after giving effect to any such redemption, at least 66 2/3% of
the original aggregate principal amount of the Securities remains outstanding.
Any such redemption shall be made within 60 days of such Public Equity Offering
upon not less than 30 nor more than 60 days' notice delivered to each Holder of
Securities being redeemed in accordance with paragraph 7 herein and otherwise in
accordance with the procedures set forth in the Indenture.
The Securities may be redeemed, at the option of the Issuers, in whole
but not in part, at any time upon giving not less than 30 nor more than 60 days'
notice delivered to each Holder of Securities in accordance with paragraph 7
herein (which notice shall be irrevocable), at a redemption price equal to the
principal amount thereof, together with accrued and unpaid interest, if any, to
the date fixed by the Issuers for redemption (a "Tax Redemption Date") and all
Additional Amounts, if any, then due and which shall become due on the Tax
Redemption Date as a result of the redemption or otherwise, if the Issuers
determine that, as a result of (i) any change in, or amendment to, the laws or
treaties (or any regulations, protocols or rulings promulgated thereunder) of
the United States or The Netherlands or any other jurisdiction in which either
of the Issuers is organized or engaged in business for tax purposes (or, in each
case, any political subdivision or taxing authority thereof or therein) or of
the jurisdiction from or through which payment is made or where the payor is
located affecting taxation, which change or amendment becomes effective on or
after the Closing Date, or (ii) any change in position regarding the
application, administration or interpretation of such laws, treaties,
regulations or rulings (including a holding, judgment or order by a court of
competent jurisdiction), which change, amendment, application or interpretation
becomes effective on or after the Closing Date, the Issuers are or shall be
required to pay Additional Amounts, and the Issuers determine that such payment
obligation cannot be avoided by the Issuers taking reasonable measures.
Notwithstanding the foregoing, no such notice of redemption shall be given
earlier than 90 days prior to the earliest date on which the Issuers would be
obligated to make such payment or withholding if a payment in respect of the
Securities were then due. Prior to the delivery of any notice of redemption of
the Securities pursuant to the foregoing, the Issuers shall deliver to the
Trustee an opinion of a tax counsel reasonably satisfactory to the Trustee to
the effect that the circumstances referred to above exist. The Trustee shall
accept such opinion as sufficient evidence of the satisfaction of the conditions
precedent described above, in which event it shall be conclusive and binding on
all Holders of Securities.
6. Sinking Fund
------------
The Securities are not subject to any sinking fund.
<PAGE>
5
7. Notice of Redemption
--------------------
Notice of redemption shall be given at least 30 days but not more than
60 days before the redemption date. Such notice shall be (i) mailed by first-
class mail to the registered address of each Holder of Securities to be redeemed
and (ii) published in a leading newspaper having a general circulation in (a)
New York City (which is expected to be the Wall Street Journal), (b) Frankfurt,
---- ------ -------
Germany (which is expected to be Frankfurter Allgemeine Zeitung) and (c) if and
----------- ---------- -------
so long as the Securities are listed on the Luxembourg Stock Exchange and the
rules of the Luxembourg Stock Exchange so require, a newspaper having a general
circulation in Luxembourg (which is expected to be the Luxembourg Wort)). If and
---------------
so long as the Securities are listed on any other securities exchange, notices
shall also be given in accordance with any applicable requirements of such
securities exchange. Notices given by publication shall be deemed to be given
on the first date on which publication is made, and notices given by first-class
mail shall be deemed given five calendar days after mailing. Securities in
denominations equal to or larger than $1,000 may be redeemed in part but only in
whole multiples of $1,000. If money sufficient to pay the redemption price of
and accrued and unpaid interest and Additional Amounts, if any, on all
Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to accrue
on such Securities (or such portions thereof) called for redemption.
8. Repurchase of Securities at the Option of Holders upon Change of Control
------------------------------------------------------------------------
Upon a Change of Control, each Holder of Securities shall have the
right, subject to certain conditions specified in the Indenture, to cause the
Issuers to repurchase all or any part of the Securities of such Holder at a
purchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued and unpaid interest and Additional Amounts, if any, to
the date of repurchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant payment date that
is on or prior to the date of purchase and Additional Amounts, if any, in
respect thereof) as provided in, and subject to the terms of, the Indenture.
9. Denominations; Transfer; Exchange
---------------------------------
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. Upon any transfer or exchange, the
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents, and the Issuers, or the Paying
Agent, as applicable, may require a Holder to pay any taxes required by law or
permitted by the Indenture. The Issuers shall not be required to
<PAGE>
6
transfer or exchange any Securities selected for redemption (except, in the case
of a Security to be redeemed in part, the portion of the Security not to be
redeemed) or to transfer or exchange any Securities for a period of 15 days
prior to a selection of Securities to be redeemed.
10. Persons Deemed Owners
---------------------
Subject to the provisions hereof with respect to record dates, the
registered Holder of this Security may be treated as the owner of it for all
purposes.
11. Unclaimed Money
---------------
If money for the payment of principal, interest or Additional Amounts
remains unclaimed for two years, the Trustee or Paying Agent shall pay the money
back to the Issuers at their written request unless an abandoned property law
designates another Person. After any such payment, Holders entitled to the
money must look only to the Issuers and not to the Trustee for payment.
12. Discharge and Defeasance
------------------------
Subject to certain conditions, the Issuers at any time may terminate
some of or all of their obligations under the Securities and the Indenture if
the Issuers deposit with the Trustee money or U.S. Government Obligations for
the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.
13. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended without prior notice to any
Securityholder but with the written consent of the Holders of at least a
majority in aggregate principal amount of the outstanding Securities (including
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, such Securities) and (ii) any default or noncompliance with any
provision may be waived with the written consent of the Holders of at least a
majority in principal amount of the outstanding Securities. Subject to certain
exceptions set forth in the Indenture, without the consent of any Holder of
Securities, the Issuers and the Trustee may amend the Indenture or the
Securities (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to
comply with Article 5 of the Indenture; (iii) to provide for uncertificated
Securities in addition to or in place of certificated Securities; (iv) to add
Note Guarantees with respect to the Securities; (v) to secure the Securities;
(vi) to add additional covenants or to surrender rights and powers conferred on
the Issuers; (vii) to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the TIA;
<PAGE>
7
(viii) to make any change that does not adversely affect the rights of any
Securityholder; (ix) to provide for the issuance of the Exchange Securities or
Private Exchange Securities; or (x) to provide for the assumption by a Successor
Company of the obligations of either of the Issuers.
14. Defaults and Remedies
---------------------
If an Event of Default (other than an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of either Issuer)
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the outstanding Securities by notice to the Issuers may
declare the principal of and accrued but unpaid interest and Additional Amounts,
if any, on all the Securities to be due and payable. If an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of either
Issuer occurs, the principal of and interest and Additional Amounts, if any, on
all the Securities shall become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders. Under
certain circumstances, the Holders of a majority in principal amount of the
outstanding Securities may rescind any such acceleration with respect to the
Securities and its consequences.
If an Event of Default occurs and is continuing, the Trustee shall be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the Holders unless such Holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium, if any, interest or Additional Amounts, if any, when due, no
Holder may pursue any remedy with respect to the Indenture or the Securities
unless (i) such Holder has previously given the Trustee notice that an Event of
Default is continuing, (ii) Holders of at least 25% in principal amount of the
outstanding Securities have requested the Trustee in writing to pursue the
remedy, (iii) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense, (iv) the Trustee has not
complied with such request within 60 days after the receipt of the request and
the offer of security or indemnity and (v) the Holders of a majority in
principal amount of the outstanding Securities have not given the Trustee a
direction inconsistent with such request within such 60-day period. Subject to
certain restrictions, the Holders of a majority in principal amount of the
outstanding Securities are given the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would involve the Trustee in personal liability. Prior to taking
any action under the Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
<PAGE>
8
15. Trustee Dealings with the Issuers
---------------------------------
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Issuers or their Affiliates and may otherwise deal with the Issuers
or their Affiliates with the same rights it would have if it were not Trustee.
The Indenture contains certain limitations on the rights of the Trustee, should
it become a creditor of either of the Issuers, to obtain payment of claims in
certain cases or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee shall be permitted to engage in
other transactions; provided, however, if it acquires any conflicting interest,
-------- -------
it must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
16. No Recourse Against Others
--------------------------
A director, officer, employee or stockholder, as such, of either
Issuer or any Note Guarantor shall not have any liability for any obligations of
the Issuers under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The
waiver and release are part of the consideration for the issue of the
Securities.
17. Authentication
--------------
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. Abbreviations
-------------
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
<PAGE>
9
19. Governing Law
-------------
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITH OUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
20. CUSIP Numbers
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuers have caused CUSIP numbers to be
printed on the Securities and have directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
THE ISSUERS SHALL FURNISH TO ANY HOLDER OF SECURITIES UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT
THE TEXT OF THIS SECURITY.
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of the Issuers. The agent may substitute another to act
for him.
____________________________________________________________
Date: ________________ Your Signature: _____________________
Signature of Signature Guarantee:_______________________________________________
Sign exactly as your name appears on the other side of this Security. Signature
must be guaranteed by a participant in a recognized signature guaranty medallion
program or other signature guarantor acceptable to the Trustee.
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $[ ].
The following increases or decreases in this Global Security have been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date of Amount of decrease in Amount of increase in Principal amount of this Signature of authorized
Exchange Principal Amount of this Principal Amount of this Global Security following Signatory of Trustee or
Global Security Global Security such decrease or increase Securities Custodian
</TABLE>
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS SECURITY PURCHASED BY AN ISSUER
PURSUANT TO SECTION 4.06 (ASSET SALE) OR 4.08 (CHANGE OF CONTROL) OF THE
INDENTURE, CHECK THE BOX:
ASSET SALE [_] CHANGE OF CONTROL [_]
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS SECURITY PURCHASED BY
AN ISSUER PURSUANT TO SECTION 4.06 OR 4.08 OF THE INDENTURE, STATE THE AMOUNT:
$
DATE: __________________ YOUR SIGNATURE: __________________
(SIGN EXACTLY AS YOUR NAME
APPEARS ON THE OTHER SIDE OF
THE SECURITY)
SIGNATURE GUARANTEE:_______________________________________
SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A
RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER
SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE
<PAGE>
EXHIBIT C
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated as
of , among [GUARANTOR] (the "New Guarantor"), THE
DERBY CYCLE CORPORATION (or its successor), a Delaware corporation,
LYON INVESTMENTS B.V. (or its successor), a company organized under
the laws of the Netherlands, and IBJ SCHRODER BANK & TRUST COMPANY, a
New York banking corporation, as trustee under the Indenture referred
to below (the "Trustee").
W I T N E S E T H :
WHEREAS the Issuers have heretofore executed and delivered to the
Trustee an Indenture (the "Indenture") dated as of May 14, 1998, providing for
the issuance of an aggregate principal amount of up to $100,000,000 of 10%
Senior Notes due 2008 (the "Securities");
WHEREAS Section 4.11 of the Indenture provides that under certain
circumstances the Issuers are required to cause the New Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the New
Guarantor shall unconditionally guarantee all the Issuers' obligations under the
Securities pursuant to a Note Guarantee on the terms and conditions set forth
herein;
WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the
Issuers and the Existing Guarantors are authorized to execute and deliver this
Supplemental Indenture; and
WHEREAS the terms used but not defined herein shall have the meanings
ascribed thereto in the Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Guarantor, the Issuers[, the Existing Guarantors] and the Trustee mutually
covenant and agree for the equal and ratable benefit of the Holders of the
Securities as follows:
1. Agreement to Guarantee. The New Guarantor hereby agrees[, jointly
-----------------------
and severally with all the Existing Guarantors,] to unconditionally guarantee
the Issuers' obligations under the Securities as a Note Guarantor on the terms
and subject to the conditions set forth below and to be bound by all other
applicable provisions of the Indenture and the Securities:
<PAGE>
2
a. Note Guarantees. The New Guarantor hereby jointly and severally
---------------
unconditionally and irrevocably guarantees, as a primary obligor and not
merely as a surety, to each Holder and to the Trustee and its successors
and assigns (i) the full and punctual payment of principal of and interest
and Additional Amounts, if any, on and liquidated damages in respect of the
Securities when due, whether at Stated Maturity, by acceleration, by
redemption or otherwise, and all other monetary obligations of the Issuers
under the Indenture (including obligations to the Trustee) and the
Securities and (ii) the full and punctual performance within applicable
grace periods of all other obligations of the Issuers whether for expenses,
indemnification or otherwise under the Indenture and the Securities (all
the foregoing being hereinafter collectively called the "Guaranteed
Obligations"). The New Guarantor further agrees that the Guaranteed
Obligations may be extended or renewed, in whole or in part, without notice
or further assent from the New Guarantor, and that the New Guarantor shall
remain bound under this Supplemental Indenture notwithstanding any
extension or renewal of any Guaranteed Obligation.
The New Guarantor waives presentation to, demand of, payment from and
protest to the Issuers of any of the Guaranteed Obligations and also waives
notice of protest for nonpayment. The New Guarantor waives notice of any
default under the Securities or the Guaranteed Obligations. The obligations
of the New Guarantor hereunder shall not be affected by (a) the failure of
any Holder or the Trustee to assert any claim or demand or to enforce any
right or remedy against the Issuers or any other Person under the
Indenture, the Securities or any other agreement or otherwise; (b) any
extension or renewal of any thereof; (c) any rescission, waiver, amendment
or modification of any of the terms or provisions of the Indenture, the
Securities or any other agreement; (d) the release of any security held by
any Holder or the Trustee for the Guaranteed Obligations or any of them;
(e) the failure of any Holder or Trustee to exercise any right or remedy
against any other guarantor of the Guaranteed Obligations; or (f) any
change in the ownership of the New Guarantor, except as provided in Section
1(b)(ii).
The New Guarantor hereby waives any right to which it may be entitled
to have its obligations hereunder divided among any other Note Guarantor,
such that the New Guarantor's obligations would be less than the full
amount claimed. The New Guarantor hereby waives any right to which it may
be entitled to have the assets of the Issuers first be used and depleted as
payment of the Issuers' or the New Guarantor's obligations hereunder prior
to any amounts being claimed from or paid by the New Guarantor hereunder.
The New Guarantor hereby waives any right to which it may be entitled to
require that the Issuers be sued prior to an action being initiated against
the New Guarantor.
The New Guarantor further agrees that its Note Guarantee herein
constitutes a guarantee of payment, performance and compliance when due
(and not a guarantee of
<PAGE>
3
collection) and waives any right to require that any resort be had by any
Holder or the Trustee to any security held for payment of the Guaranteed
Obligations.
Except as expressly set forth in Sections 8.01(b) and 10.01 of the
Indenture and Section 1(b) herein, the obligations of the New Guarantor
hereunder shall not be subject to any reduction, limitation, impairment or
termination for any reason, including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to any
defense of setoff, counterclaim, recoupment or termination whatsoever or by
reason of the invalidity, illegality or unenforceability of the Guaranteed
Obligations or otherwise. Without limiting the generality of the foregoing,
the obligations of the New Guarantor herein shall not be discharged or
impaired or otherwise affected by the failure of any Holder or the Trustee
to assert any claim or demand or to enforce any remedy under the Indenture,
the Securities or any other agreement, by any waiver or modification of any
thereof, by any default, failure or delay, wilful or otherwise, in the
performance of the obligations, or by any other act or thing or omission or
delay to do any other act or thing which may or might in any manner or to
any extent vary the risk of any Note Guarantor or would otherwise operate
as a discharge of any Note Guarantor as a matter of law or equity.
The New Guarantor agrees that its Note Guarantee shall remain in full
force and effect until payment in full of all the Guaranteed Obligations.
The New Guarantor further agrees that its Note Guarantee herein shall
continue to be effective or be reinstated, as the case may be, if at any
time payment, or any part thereof, of principal of or interest on any
Guaranteed Obligation is rescinded or must otherwise be restored by any
Holder or the Trustee upon the bankruptcy or reorganization of the Issuers
or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against the
New Guarantor by virtue hereof, upon the failure of the Issuers to pay the
principal of or interest or Additional Amounts, if any, on any Guaranteed
Obligation when and as the same shall become due, whether at maturity, by
acceleration, by redemption or otherwise, or to perform or comply with any
other Guaranteed Obligation, the New Guarantor hereby promises to and
shall, upon receipt of written demand by the Trustee, forthwith pay, or
cause to be paid, in cash, to the Holders or the Trustee an amount equal to
the sum of (i) the unpaid principal amount of such Guaranteed Obligations,
(ii) accrued and unpaid interest on such Guaranteed Obligations (but only
to the extent not prohibited by law) and (iii) all other monetary
obligations of the Issuers to the Holders and the Trustee.
The New Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any Guaranteed
Obligations guaranteed hereby until payment in full of all Guaranteed
Obligations. The New Guarantor further agrees that, as between it, on the
one hand, and the Holders and the Trustee, on the other hand, (x) the
<PAGE>
4
maturity of the Guaranteed Obligations guaranteed hereby may be accelerated
as provided in Article 6 of the Indenture for the purposes of any Note
Guarantee, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the Guaranteed Obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration
of such Guaranteed Obligations as provided in Article 6 of the Indenture,
such Guaranteed Obligations (whether or not due and payable) shall
forthwith become due and payable by the New Guarantor for the purposes of
this Section 1(a).
The New Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees and expenses) incurred by the Trustee
or any Holder in enforcing any rights under this Section 1(a).
Upon request of the Trustee, the New Guarantor shall execute and
deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the purpose of
the Indenture and this Supplemental Indenture.
b. Limitation on Liability. (i) Any term or provision of this
-----------------------
Supplemental Indenture to the contrary notwithstanding, the maximum,
aggregate amount of the Guaranteed Obligations guaranteed hereunder by the
New Guarantor shall not exceed the maximum amount that can be hereby
guaranteed without rendering this Supplemental Indenture voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.
(ii) This Note Guarantee as to the New Guarantor shall terminate and
be of no further force or effect and the New Guarantor shall be deemed to
be released from all obligations under this Supplemental Indenture upon (A)
the merger or consolidation of the New Guarantor with or into any Person
other than DCC or a Subsidiary or Affiliate of DCC where the New Guarantor
is not the surviving entity of such consolidation or merger or (B) the sale
by DCC or any Subsidiary of DCC (or any pledgee of DCC) of the Capital
Stock of the New Guarantor, where, after such sale, the New Guarantor is no
longer a Subsidiary of DCC; provided, however, that each such merger,
-------- -------
consolidation or sale (or, in the case of a sale by such a pledgee, the
disposition of the proceeds of such sale) shall comply with Section 4.06 of
the Indenture. At the request of the Issuers, the Trustee shall execute and
deliver an appropriate instrument evidencing such release.
c. Successors and Assigns. This Supplemental Indenture shall be
-----------------------
binding upon the New Guarantor and its successors and assigns and shall
inure to the benefit of the successors and assigns of the Trustee and the
Holders and, in the event of any transfer or assignment of rights by any
Holder or the Trustee, the rights and privileges conferred upon that party
in the Indenture, this Supplemental Indenture and in the Securities shall
automatically extend to and
<PAGE>
5
be vested in such transferee or assignee, all subject to the terms and
conditions of the Indenture and this Supplemental Indenture.
d. No Waiver. Neither a failure nor a delay on the part of either
----------
the Trustee or the Holders in exercising any right, power or privilege
under this Supplemental Indenture shall operate as a waiver thereof, nor
shall a single or partial exercise thereof preclude any other or further
exercise of any right, power or privilege. The rights, remedies and
benefits of the Trustee and the Holders herein expressly specified are
cumulative and not exclusive of any other rights, remedies or benefits
which either may have under this Supplemental Indenture at law, in equity,
by statute or otherwise.
e. Modification. No modification, amendment or waiver of any
-------------
provision of this Supplemental Indenture, nor the consent to any departure
by the New Guarantor therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Trustee, and then such waiver or
consent shall be effective only in the specific instance and for the
purpose for which given. No notice to or demand on the New Guarantor in any
case shall entitle the New Guarantor to any other or further notice or
demand in the same, similar or other circumstances.
2. Ratification of Indenture; Supplemental Indentures Part of
----------------------------------------------------------
Indenture. Except as expressly amended hereby, the Indenture is in all respects
- ----------
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every Holder of Securities
heretofore or hereafter authenticated and delivered shall be bound hereby.
3. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
--------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
4. Jurisdiction. The New Guarantor agrees that any suit, action or
-------------
proceeding against the New Guarantor brought by any Holder or the Trustee
arising out of or based upon the Indenture, this Supplemental Indenture or the
Securities may be instituted in any state or U.S. federal court in the Borough
of Manhattan, The City of New York, New York, and any appellate court from any
thereof, and it irrevocably submits to the non-exclusive jurisdiction of such
courts in any suit, action or proceeding. The New Guarantor irrevocably waives,
to the fullest extent permitted by law, any objection to any suit, action, or
proceeding that may be brought in connection with the Indenture, this
Supplemental Indenture or the Securities, including such actions, suits or
proceedings relating to securities laws of the United States or any state
thereof, in such courts whether on the grounds of venue, residence or domicile
or on the ground that any such suit, action
<PAGE>
6
or proceeding has been brought in an inconvenient forum. The New Guarantor
agrees that final judgment in any such suit, action or proceeding brought in
such court shall be conclusive and binding upon the New Guarantor and may be
enforced in any court to the jurisdiction of which the New Guarantor is subject
by a suit upon such judgment; provided that service of process is effected upon
--------
the New Guarantor in the manner provided by this Section 4. The New Guarantor
has irrevocably appointed CT Corporation System, with offices on the date hereof
at 1633 Broadway, New York, New York 10019, as its authorized agent (the
"Authorized Agent"), upon whom process may be served in any suit, action or
proceeding arising out of or based upon the Indenture, this Supplemental
Indenture, the Securities or the transactions contemplated herein which may be
instituted in any state or U.S. federal court in the Borough of Manhattan, The
City of New York, New York, by any Holder or the Trustee, and expressly accepts
the non-exclusive jurisdiction of any such court in respect of any such suit,
action or proceeding. The New Guarantor hereby represents and warrants that the
Authorized Agent has accepted such appointment and has agreed to act as said
agent for service of process, and the New Guarantor agrees to take any and all
action, including the filing of any and all documents that may be necessary to
continue such respective appointment in full force and effect as aforesaid.
Service of process upon the Authorized Agent shall be deemed, in every respect,
effective service of process upon the New Guarantor. Notwithstanding the
foregoing, any action involving the New Guarantor arising out of or based upon
the Indenture, this Supplemental Indenture or the Securities may be instituted
by any Holder or the Trustee in any court of competent jurisdiction in any other
jurisdiction.
5. Trustee Makes No Representation. The Trustee makes no
--------------------------------
representation as to the validity or sufficiency of this Supplemental Indenture.
6. Counterparts. The parties may sign any number of copies of this
-------------
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
7. Effect of Headings. The Section headings herein are for
-------------------
convenience only and shall not effect the construction thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
[NEW GUARANTOR],
by
_________________________________
Name:
Title:
THE DERBY CYCLE CORPORATION,
by
_________________________________
Name:
Title:
LYON INVESTMENTS B.V.,
by
_________________________________
Name:
Title:
[EXISTING GUARANTORS],
by________________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee,
by
_________________________________
Name:
Title:
<PAGE>
EXHIBIT D
Form of
Transferee Letter of Representation
The Derby Cycle Corporation
Lyon Investments B.V.
In care of
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Ladies and Gentlemen:
This certificate is delivered to request a transfer of $_______ principal
amount of the 10% Senior Notes due 2008 (the "Securities") of The Derby Cycle
Corporation, a Delaware corporation, and Lyon Investments B.V. (together, the
"Issuers").
Upon transfer, the Securities would be registered in the name of the new
beneficial owner as follows:
Name:________________________
Address:_____________________
Taxpayer ID Number:__________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act")), purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Securities, and we are acquiring the Securities not with a view to, or for offer
or sale in connection with, any distribution in violation of the Securities Act.
We have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Securities,
and we invest in or purchase securities similar to the Securities in the normal
course of our business. We, and any accounts for which we are acting, are each
able to bear the economic risk of our or its investment.
<PAGE>
2
2. We understand that the Securities have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any
investor account for which we are purchasing Securities to offer, sell or
otherwise transfer such Securities prior to the date that is two years after the
later of the date of original issue and the last date on which the Issuers or
any affiliate of the Issuers was the owner of such Securities (or any
predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the
Issuers, (b) pursuant to a registration statement that has been declared
effective under the Securities Act, (c) in a transaction complying with the
requirements of Rule 144A under the Securities Act ("Rule 144A"), to a person we
reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB")
that is purchasing for its own account or for the account of a QIB and to whom
notice is given that the transfer is being made in reliance on Rule 144A, (d) in
an offshore transaction within the meaning of, and in compliance with,
Regulation S under the Securities Act, (e) to an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act that is purchasing for its own account or for the account of such
an institutional "accredited investor," in each case in a minimum principal
amount of Securities of $250,000, or (f) pursuant to any other available
exemption from the registration requirements of the Securities Act, subject in
each of the foregoing cases to any requirement of law that the disposition of
our property or the property of such investor account or accounts be at all
times within our or their control and in compliance with any applicable state
securities laws. The foregoing restrictions on resale shall not apply
subsequent to the Resale Restriction Termination Date. If any resale or other
transfer of the Securities is proposed to be made pursuant to clause (e) above
prior to the Resale Restriction Termination Date, the transferor shall deliver a
letter from the transferee substantially in the form of this letter to the
Issuers and the Trustee, which shall provide, among other things, that the
transferee is an institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring
such Securities for investment purposes and not for distribution in violation of
the Securities Act. Each purchaser acknowledges that the Issuers and the
Trustee reserve the right prior to the offer, sale or other transfer prior to
the Resale Restriction Termination Date of the Securities pursuant to clause
(d), (e) or (f) above to require the delivery of an opinion of counsel,
certifications or other information satisfactory to the Issuers and the Trustee.
TRANSFEREE:_________________,
by _______________________
<PAGE>
EXECUTION COPY
EXHIBIT 4.2
================================================================================
THE DERBY CYCLE CORPORATION
LYON INVESTMENTS B.V.
9 3/3% Senior Notes due 2008
DM110,000,000
------------------------
INDENTURE
Dated as of May 14, 1998
------------------------
IBJ SCHRODER BANK & TRUST COMPANY,
Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions................................................. 1
SECTION 1.02. Other Definitions........................................... 29
SECTION 1.03. Incorporation by Reference of Trust Indenture Act........... 29
SECTION 1.04. Rules of Construction....................................... 30
ARTICLE 2
The Securities
--------------
SECTION 2.01. Form and Dating............................................. 31
SECTION 2.02. Execution and Authentication................................ 31
SECTION 2.03. Registrar and Paying Agent.................................. 32
SECTION 2.04. Paying Agent To Hold Money in Trust......................... 33
SECTION 2.05. Securityholder Lists........................................ 33
SECTION 2.06. Transfer and Exchange....................................... 33
SECTION 2.07. Replacement Securities...................................... 34
SECTION 2.08. Outstanding Securities...................................... 35
SECTION 2.09. Temporary Securities........................................ 35
SECTION 2.10. Cancelation................................................. 35
SECTION 2.11. Defaulted Interest.......................................... 36
SECTION 2.12. Common Code, CUSIP and ISIN Numbers......................... 36
SECTION 2.13. Currency Indemnity.......................................... 36
SECTION 2.14. Substitution of Currency.................................... 37
ARTICLE 3
Redemption
----------
SECTION 3.01. Notices to Trustee.......................................... 37
SECTION 3.02. Selection of Securities To Be Redeemed...................... 38
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 3.03. Notice of Redemption........................................ 38
SECTION 3.04. Effect of Notice of Redemption.............................. 39
SECTION 3.05. Deposit of Redemption Price................................. 40
SECTION 3.06. Securities Redeemed in Part................................. 40
ARTICLE 4
Covenants
---------
SECTION 4.01. Payment of Securities....................................... 40
SECTION 4.02. Reports to Holders of Securities............................ 40
SECTION 4.03. Limitation on Indebtedness.................................. 41
SECTION 4.04. Limitation on Restricted Payments........................... 44
SECTION 4.05. Limitation on Restrictions on Distributions
from Restricted Subsidiaries................................ 47
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock.......... 49
SECTION 4.07. Limitation on Transactions with Affiliates.................. 53
SECTION 4.08. Change of Control........................................... 55
SECTION 4.09. Compliance Certificate...................................... 56
SECTION 4.10. Further Instruments and Acts................................ 57
SECTION 4.11. Future Note Guarantors...................................... 57
SECTION 4.12. Limitation on Lines of Business............................. 57
SECTION 4.13. Limitation on the Sale or Issuance of
Capital Stock of Restricted Subsidiaries................... 57
SECTION 4.14. Limitation on Liens......................................... 57
SECTION 4.15. Limitation on Sale/Leaseback Transactions................... 58
SECTION 4.16. Additional Amounts; Withholding Taxes....................... 58
ARTICLE 5
Merger and Consolidation
------------------------
SECTION 5.01. When Issuers May Merge or Transfer Assets................... 60
</TABLE>
<PAGE>
<TABLE>
ARTICLE 6
Defaults and Remedies
---------------------
<S> <C>
SECTION 6.01. Events of Default........................................... 62
SECTION 6.02. Acceleration................................................ 64
SECTION 6.03. Other Remedies.............................................. 64
SECTION 6.04. Waiver of Past Defaults..................................... 65
SECTION 6.05. Control by Majority......................................... 65
SECTION 6.06. Limitation on Suits......................................... 65
SECTION 6.07. Rights of Holders to Receive Payment........................ 66
SECTION 6.08. Collection Suit by Trustee.................................. 66
SECTION 6.09. Trustee May File Proofs of Claim............................ 66
SECTION 6.10. Priorities.................................................. 66
SECTION 6.11. Undertaking for Costs....................................... 67
SECTION 6.12. Waiver of Stay or Extension Laws............................ 67
ARTICLE 7
Trustee
-------
SECTION 7.01. Duties of Trustee........................................... 67
SECTION 7.02. Rights of Trustee........................................... 69
SECTION 7.03. Individual Rights of Trustee................................ 69
SECTION 7.04. Trustee's Disclaimer........................................ 70
SECTION 7.05. Notice of Defaults.......................................... 70
SECTION 7.06. Reports by Trustee to Holders............................... 70
SECTION 7.07. Compensation and Indemnity.................................. 70
SECTION 7.08. Replacement of Trustee...................................... 71
SECTION 7.09. Successor Trustee by Merger................................. 72
SECTION 7.10. Eligibility; Disqualification............................... 73
SECTION 7.11. Preferential Collection of Claims Against the Issuers....... 73
ARTICLE 8
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.01. Discharge of Liability on Securities; Defeasance............ 73
SECTION 8.02. Conditions to Defeasance.................................... 74
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 8.03. Application of Trust Money.................................. 76
SECTION 8.04. Repayment to the Issuers.................................... 76
SECTION 8.05. Indemnity for Government Obligations........................ 77
SECTION 8.06. Reinstatement............................................... 77
ARTICLE 9
Amendments
----------
SECTION 9.01. Without Consent of Holders.................................. 77
SECTION 9.02. With Consent of Holders..................................... 78
SECTION 9.03. Compliance with Trust Indenture Act......................... 79
SECTION 9.04. Revocation and Effect of Consents and Waivers............... 79
SECTION 9.05. Notation on or Exchange of Securities....................... 80
SECTION 9.06. Trustee To Sign Amendments.................................. 80
SECTION 9.07. Payment for Consent......................................... 80
ARTICLE 10
Note Guarantees
---------------
SECTION 10.01. Execution of Supplemental Indenture for Future Note
Guarantors.................................................. 81
ARTICLE 11
Miscellaneous
-------------
SECTION 11.01. Trust Indenture Act Controls................................ 81
SECTION 11.02. Notices..................................................... 81
SECTION 11.03. Communication by Holders with Other Holders................. 82
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.......... 83
SECTION 11.05. Statements Required in Certificate or Opinion............... 83
SECTION 11.06. When Securities Disregarded................................. 83
SECTION 11.07. Rules by Trustee, Paying Agent and Registrar................ 84
SECTION 11.08. Legal Holidays.............................................. 84
SECTION 11.09. Governing Law............................................... 84
SECTION 11.10. Jurisdiction................................................ 84
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 11.11. No Personal Liability of Directors, Officers,
Employees and Stockholders.................................. 85
SECTION 11.12. Successors.................................................. 85
SECTION 11.13. Multiple Originals.......................................... 85
SECTION 11.14. Table of Contents; Headings................................. 85
</TABLE>
Appendix A - Provisions Relating to Initial Securities,
Private Exchange Securities and Exchange Securities
Exhibit A - Form of Initial Security
Exhibit B - Form of Exchange Security
Exhibit C - Form of Supplemental Indenture
Exhibit D - Form of Transferee Letter of Representation
<PAGE>
INDENTURE dated as of May 14, 1998 among THE DERBY
CYCLE CORPORATION, a Delaware corporation ("DCC"), LYON
INVESTMENTS B.V., a Company organized under the laws of The
Netherlands and a wholly owned subsidiary of DCC, which was
formerly known as LYON CYCLE B.V. ("Lyon" and, together with DCC,
the "Issuers"), as issuers, and IBJ SCHRODER BANK & TRUST
COMPANY, a New York banking corporation, as trustee (the
"Trustee").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of (i) the Issuers' 9 3/8%
Senior Notes due 2008 issued on the date hereof (the "Initial Securities"), (ii)
if and when issued as provided in the Registration Agreement (as defined in
Appendix A hereto (the "Appendix"), the Issuers' 9 3/8% Senior Notes due 2008
issued in the Registered Exchange Offer (as defined herein) in exchange for any
Initial Securities (the "Exchange Securities") and (iii) if and when issued as
provided in the Registration Agreement, the Private Exchange Securities (as
defined herein, and together with the Initial Securities and any Exchange
Securities issued hereunder, the "Securities") issued in the Private Exchange
(as defined in the Appendix). Except as otherwise provided herein, the
Securities shall be limited to DM110,000,000 in aggregate principal amount
outstanding.
ARTICLE 1
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions.
------------
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by DCC or a Restricted Subsidiary in
a Related Business, (ii) the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock by DCC or
another Restricted Subsidiary or (iii) Capital Stock constituting a minority
interest in any Person that at such time is a Restricted Subsidiary; provided,
--------
however, that any such Restricted Subsidiary described in clause (ii) or (iii)
- -------
above is primarily engaged in a Related Business.
"Additional Payment" means the contingent payment of up to $10,000,000
payable to DFS pursuant to the Recapitalization Agreement.
<PAGE>
2
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Sections 4.06 and 4.07 only, "Affiliate" shall also mean any
beneficial owner of shares representing 5% or more of the total voting power of
the Voting Stock (on a fully diluted basis) of DCC or of rights or warrants to
purchase such Voting Stock (whether or not currently exercisable) and any Person
who would be an Affiliate of any such beneficial owner pursuant to the first
sentence hereof.
"Asset Disposition" means any sale, lease (other than operating leases
entered into in the ordinary course of business), transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by DCC or any
Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes of this
definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than DCC or a Restricted
Subsidiary), (ii) all or substantially all the assets of any division or line of
business of DCC or any Restricted Subsidiary or (iii) any other assets of DCC or
any Restricted Subsidiary outside of the ordinary course of business of DCC or
such Restricted Subsidiary; provided, however, that Asset Dispositions shall not
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include (A) a disposition by a Restricted Subsidiary to DCC or by DCC or a
Restricted Subsidiary to a Wholly Owned Subsidiary, (B) for purposes of Section
4.06 only, a disposition subject to Section 4.04, (C) a disposition of assets
with a fair market value of less than $500,000, (D) the disposition of all or
substantially all of the assets of the Issuers as permitted under Article 5 or
any disposition that constitutes a Change of Control, (E) the sale or discount,
in each case without recourse, of accounts receivable arising in the ordinary
course of business, but only in connection with the compromise or collection
thereof, (F) the factoring of accounts receivable arising in the ordinary course
of business pursuant to arrangements customary in the industry, (G) the
licensing of intellectual property, (H) disposals or replacements of obsolete,
uneconomical, negligible, worn out or surplus property in the ordinary course of
business and (I) sales of accounts receivable, equipment and related assets
(including contract rights) of the type specified in the definition of the term
"Qualified Securitization Transaction" to a Securitization Entity for the fair
market value thereof, including cash in an amount at least equal to 75% of the
fair market value thereof. For the purposes of clause (I), Purchase Money
Securities shall be deemed to be cash.
<PAGE>
3
"Attributable Debt" in respect of a Sale/Leaseback Transaction means,
as at the time of determination, the present value (discounted at the interest
rate borne by the Securities, compounded annually) of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale/Leaseback Transaction (including any period for which such lease
has been extended).
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of the numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in
respect of the Revolving Credit Agreement and any Refinancing Indebtedness with
respect thereto, as amended from time to time, including principal, premium, if
any, interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to either of the Issuers
whether or not a claim for post-filing interest is allowed in such proceedings),
fees, charges, expenses, reimbursement obligations, guarantees and all other
amounts payable thereunder or in respect thereof.
"board of directors" means the board of directors or similar governing
body of either of the Issuers or any Restricted Subsidiary, or any committee
thereof duly authorized to act on behalf of such board of directors or governing
body.
"Business Day" means a day other than a Saturday, Sunday or other day
on which the banking institutions in the United States, Germany, Luxembourg or
The Netherlands or any place of payment are authorized or required by law to
close.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of,
or interests in (however designated), equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required
to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with U.S. GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with U.S. GAAP, and the Stated Maturity
thereof shall be the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease may be prepaid by
the lessee without payment of a penalty.
<PAGE>
4
"Change of Control" means the occurrence of any of the following
events:
(i) prior to an Initial Public Offering, the Permitted Holders cease
to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of a majority in the aggregate of
the total voting power of the Voting Stock of DCC, whether as a result of
issuance of securities of DCC, any merger, consolidation, liquidation or
dissolution of DCC, any direct or indirect transfer of securities by any
Permitted Holder or otherwise (for purposes of this clause (i) and clause
(ii) below, the Permitted Holders shall be deemed to beneficially own any
Voting Stock of an entity (the "specified entity") held by any other entity
(the "parent entity") so long as the Permitted Holders beneficially own (as
so defined), directly or indirectly, in the aggregate a majority of the
voting power of the Voting Stock of the parent entity);
(ii) (A) any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in clause (i) above, except that
for purposes of this clause (ii) such person shall be deemed to have
"beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 35% of the total
voting power of the Voting Stock of DCC and (B) the Permitted Holders
"beneficially own" (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the total voting power
of the Voting Stock of DCC than such other person and do not have the right
or ability by voting power, contract or otherwise to elect or designate for
election a majority of the board of directors of DCC (for the purposes of
this clause (ii), such other person shall be deemed to beneficially own any
Voting Stock of a specified corporation held by a parent corporation, if
such other person is the beneficial owner (as defined in this clause (ii)),
directly or indirectly, more than 35% of the voting power of the Voting
Stock of such parent corporation and the Permitted Holders "beneficially
own" (as defined in clause (i) above), directly or indirectly, in the
aggregate a lesser percentage of the voting power of the Voting Stock of
such parent corporation and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority
of the board of directors of such parent corporation;
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the board of directors of DCC
(together with any new directors whose election by such board of directors
or whose nomination for election by the shareholders of DCC was approved by
a vote of at least 50% of the directors of DCC then still in office who
were either directors at the
<PAGE>
5
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of
such board of directors then in office;
(iv) the adoption of a plan relating to the liquidation or dissolution
of either of the Issuers; or
(v) the merger or consolidation of DCC with or into another Person
(other than Lyon) or the merger of another Person (other than Lyon) with or
into DCC, or the sale of all or substantially all the assets of DCC to
another Person (other than a Person that is controlled by the Permitted
Holders), and, in the case of any such merger or consolidation, the
securities of DCC that are outstanding immediately prior to such
transaction and which represent 100% of the aggregate voting power of the
Voting Stock of DCC are changed into or exchanged for cash, securities or
property, unless pursuant to such transaction such securities are changed
into or exchanged for, in addition to any other consideration, securities
of the surviving Person or transferee that represent immediately after such
transaction, at least a majority of the aggregate voting power of the
Voting Stock of the surviving Person or transferee.
"Closing Date" means the date of this Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange
Commission.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters for which financial statements are
available to (ii) Consolidated Interest Expense for such four fiscal quarters;
provided, however, that (A) if DCC or any Restricted Subsidiary has Incurred any
- -------- -------
Indebtedness since the beginning of such period that remains outstanding on such
date of determination or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such Indebtedness as if such Indebtedness had
been Incurred on the first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had occurred on the first
day of such period, (B) if DCC or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of such period or if any
<PAGE>
6
Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in
each case other than Indebtedness Incurred under any revolving credit facility
unless such Indebtedness has been permanently repaid and has not been replaced)
on the date of the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such
period shall be calculated on a pro forma basis as if such discharge had
occurred on the first day of such period and as if DCC or such Restricted
Subsidiary has not earned the interest income actually earned during such period
in respect of cash or Temporary Cash Investments used to repay, repurchase,
defease or otherwise discharge such Indebtedness, (C) if, since the beginning of
such period (including on the date of the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio), DCC or any Restricted Subsidiary
shall have made any Asset Disposition, the EBITDA for such period shall be
reduced by an amount equal to the EBITDA (if positive) directly attributable to
the assets that are the subject of such Asset Disposition for such period or
increased by an amount equal to the EBITDA (if negative) directly attributable
thereto for such period, and Consolidated Interest Expense for such period shall
be reduced by an amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness of DCC or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to DCC and its
continuing Restricted Subsidiaries in connection with such Asset Disposition for
such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent DCC and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness after such
sale), (D) if, since the beginning of such period, DCC or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary) or an
acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any Indebtedness)
as if such Investment or acquisition occurred on the first day of such period
(and irrespective of the method (purchase or pooling) of accounting for such
Investment or acquisition of assets) and (E) if, since the beginning of such
period, any Person (that subsequently became a Restricted Subsidiary or was
merged with or into DCC or any Restricted Subsidiary since the beginning of such
period) shall have made any Asset Disposition or any Investment or acquisition
of assets that would have required an adjustment pursuant to clause (C) or (D)
above if made by DCC or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or acquisition
of assets occurred on the first day of such period. For all purposes of the
foregoing definition, with respect to any EBITDA (or component thereof) and any
Consolidated Interest Expense (unless
<PAGE>
7
subject to a Currency Agreement covering principal, premium, if any, and
interest payable on such Indebtedness) denominated in a currency other than U.S.
dollars, the amount of such EBITDA (or component thereof) or Consolidated
Interest Expense shall be calculated at the relevant currency exchange rate in
effect on the date of determination. For purposes of this definition, whenever
pro forma effect is to be given to an acquisition of assets, the amount of
income or earnings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection therewith, the
pro forma calculations shall be determined in good faith by a responsible
financial or accounting Officer of DCC. If any Indebtedness bears a floating
rate of interest and is being given pro forma effect, the interest expense on
such Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term as at the date of determination in
excess of 12 months).
"Consolidated Current Liabilities" as of the date of determination
means the aggregate amount of liabilities of DCC and its Consolidated Restricted
Subsidiaries which may properly be classified as current liabilities (including
taxes accrued as estimated), on a Consolidated basis, after eliminating (i) all
intercompany items between DCC and any Restricted Subsidiary and (ii) all
current maturities of long-term Indebtedness, all as determined in accordance
with U.S. GAAP consistently applied.
"Consolidated Interest Expense" means, for any period, the total
interest expense of DCC and its Consolidated Restricted Subsidiaries, plus, to
the extent Incurred by DCC or its Subsidiaries in such period but not included
in such interest expense, (i) interest expense attributable to Capitalized Lease
Obligations and the interest expense attributable to leases constituting part of
any Sale/Leaseback Transaction, (ii) the earned discount or yield with respect
to any sale of receivables or equipment by any Securitization Entity in
connection with any Qualified Securitization Transaction, (iii) amortization of
debt discount and debt issuance cost other than as related to the
Recapitalization, (iv) capitalized interest, (v) non-cash interest expense, (vi)
commissions, discounts and other fees and charges attributable to letters of
credit and bankers' acceptance financing, (vii) interest accruing on any
Indebtedness of any other Person to the extent such Indebtedness is Guaranteed
by DCC or any Restricted Subsidiary, (viii) net costs associated with Hedging
Obligations (including amortization of fees), (ix) dividends in respect of (A)
all Preferred Stock of DCC and any of its Subsidiaries and (B) Disqualified
Stock of DCC, in the case of clause (A), other than non-cash dividends, and, in
the case of each of clauses (A) and (B), to the extent held by Persons other
than DCC or a Wholly Owned Subsidiary, (x) interest Incurred in connection with
investments in discontinued operations and (xi) the cash contributions to any
employee stock ownership plan or similar trust to the extent such contributions
are
<PAGE>
8
used by such plan or trust to pay interest or fees to any Person (other than
DCC) in connection with Indebtedness Incurred by such plan or trust.
Notwithstanding the foregoing, for the purposes of Section 4.03 only, there
shall be excluded from Consolidated Interest Expense all non-cash interest
payable in respect of the Additional Payment.
"Consolidated Net Income" means, for any period, the net income of DCC
and its Consolidated Subsidiaries for such period; provided, however, that there
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shall not be included in such Consolidated Net Income:
(i) any net income of any Person (other than DCC) if such Person is
not a Restricted Subsidiary, except that (A) subject to the limitations
contained in clause (iv) below, the equity of DCC in the net income of any
such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Person during such period to DCC or a Restricted Subsidiary as a dividend
or other distribution (subject, in the case of a dividend or other
distribution made to a Restricted Subsidiary, to the limitations contained
in clause (iii) below) and (B) the equity of DCC in a net loss of any such
Person for such period shall be included in determining such Consolidated
Net Income;
(ii) any net income (or loss) of any Person acquired by DCC or any of
its Subsidiaries in a pooling of interests transaction for any period prior
to the date of such acquisition;
(iii) any net income (or loss) of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or indirectly,
on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to DCC, except that (A)
subject to the limitations contained in clause (iv) below, the equity of
DCC in the net income of any such Restricted Subsidiary for such period
shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Restricted Subsidiary during
such period to DCC or another Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution made
to another Restricted Subsidiary, to the limitation contained in this
clause (iii)); provided, however, that, for purposes of determining the
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Consolidated Coverage Ratio, any net income of any Restricted Subsidiary
subject only to any such direct or indirect restrictions on the payment of
dividends or the making of distributions by such Restricted Subsidiary,
directly or indirectly, to DCC that are permitted pursuant to Section 4.05
shall be included in Consolidated Net Income; and provided further, that,
----------------
for purposes of
<PAGE>
9
Section 4.04 the amount of Consolidated Net Income of DCC and its
Consolidated Subsidiaries to be included pursuant to Section 4.04(a)(3)(A)
shall be increased by 100% of any increase in Consolidated Net Income
resulting from cash distributions from Restricted Subsidiaries, but only to
the extent that such increase in Consolidated Net Income does not cause the
amount of Consolidated Net Income included pursuant to such Section
4.04(a)(3)(A) to exceed the amount of Consolidated Net Income that would
have been included if this clause (iii) were inapplicable to the net income
of Restricted Subsidiaries which are the source (direct or indirect) of
such cash distributions; provided, further, however, that, for purposes of
-------- ------- -------
the immediately foregoing proviso as it applies to amounts available for
-------
Restricted Investments, the Restricted Subsidiaries shall be deemed to have
distributed cash to DCC that they could have distributed to DCC (to the
extent such amount exceeds the cash distributions actually made); provided
--------
that any resulting increase in Consolidated Net Income shall be subject to
the overall limitation on increases set forth in such proviso and (B) the
-------
equity of DCC in a net loss of any such Restricted Subsidiary for such
period shall be included in determining such Consolidated Net Income;
(iv) any gain or loss realized upon the sale or other disposition of
any asset of DCC or any of its Consolidated Subsidiaries (including
pursuant to any Sale/Leaseback Transaction) that is not sold or otherwise
disposed of in the ordinary course of business and any gain or loss
realized upon the sale or other disposition of any Capital Stock of any
Person together with any related tax effects according to U.S. GAAP
associated with the foregoing;
(v) any extraordinary gain or loss;
(vi) any gain or loss included in other income that is attributable
to Hedging Obligations;
(vii) any gain or loss that is attributable to minority interests;
and
(viii) the cumulative effect of a change in accounting principles.
Notwithstanding the foregoing, for the purposes of Section 4.04 only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries to
DCC or any Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted under Section
4.04(a)(3)(D).
<PAGE>
10
"Consolidated Net Tangible Assets" as of any date of determination,
means the total amount of assets (less accumulated depreciation and
amortization, allowances for doubtful receivables, other applicable reserves and
other properly deductible items) which would appear on a consolidated balance
sheet of DCC and its Consolidated Restricted Subsidiaries, determined on a
Consolidated basis in accordance with U.S. GAAP, and after giving effect to
purchase accounting and after deducting therefrom Consolidated Current
Liabilities and, to the extent otherwise included, the amounts of: (i) minority
interests in consolidated Subsidiaries held by Persons other than DCC or a
Restricted Subsidiary; (ii) excess of cost over fair value of assets of
businesses acquired, as determined in good faith by the board of directors of
DCC; (iii) any revaluation or other write-up in book value of assets subsequent
to the Closing Date as a result of a change in the method of valuation in
accordance with U.S. GAAP consistently applied; (iv) unamortized debt discount
and expenses and other unamortized deferred charges, goodwill, patents,
trademarks, service marks, trade names, copyrights, licenses, organization or
developmental expenses and other intangible items; (v) treasury stock; (vi) cash
set apart and held in a sinking or other analogous fund established for the
purpose of redemption or other retirement of Capital Stock to the extent such
obligation is not reflected in Consolidated Current Liabilities; and (vii)
Investments in and assets of Unrestricted Subsidiaries.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of DCC and its Restricted Subsidiaries, determined on a
Consolidated basis, as of the end of the most recent fiscal quarter of DCC
ending at least 45 days prior to the taking of any action for the purpose of
which the determination is being made, as (i) the par or stated value of all
outstanding Capital Stock of DCC plus (ii) paid-in capital or capital surplus
relating to such Capital Stock plus (iii) any retained earnings or earned
surplus less (A) any accumulated deficit and (B) any amounts attributable to
Disqualified Stock.
"Consolidation" means the consolidation of the amounts of each of the
Restricted Subsidiaries with those of DCC in accordance with U.S. GAAP
consistently applied; provided, however, that "Consolidation" shall not include
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consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of DCC or any Restricted Subsidiary in an Unrestricted Subsidiary shall be
accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Contribution Indebtedness" means unsecured Indebtedness of DCC
incurred in connection with the acquisition of all or substantially all the
Capital Stock or assets of a Related Business in an aggregate principal amount
not greater than the aggregate amount of cash contributions made to the capital
of DCC, which amount shall not, in any event, exceed $40,000,000 in the
aggregate; provided that such Contribution
--------
<PAGE>
11
Indebtedness (i) has a Stated Maturity later than the Stated Maturity of the
Securities, (ii) is Incurred substantially concurrently with such cash
contributions and (iii) is so designated as Contribution Indebtedness pursuant
to an Officers' Certificate delivered on the date of Incurrence.
"Corporate Trust Office of the Trustee" means the office at which the
corporate trust business of the Trustee is principally administered.
"Currency Agreement" means, in respect of any Person, any foreign
exchange contract, currency swap agreement or other similar agreement as to
which such Person is a party or beneficiary.
"DCC" means The Derby Cycle Corporation, a corporation organized under
the laws of the State of Delaware.
"DC Cycle" means DC Cycle, L.L.C., a limited liability company
organized under the laws of the State of Delaware.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default, all as described in Section 6.01.
"Derby Holdings South Africa" means Derby Investment Holdings (Pty)
Limited.
"Designated Non-Cash Consideration" means any non-cash consideration
received by DCC or any of its Restricted Subsidiaries in connection with an
Asset Disposition that is so designated as Designated Non-Cash Consideration
pursuant to an Officers' Certificate executed by the Principal Executive Officer
and the Principal Financial Officer of DCC or such Restricted Subsidiary.
"DFS" means Derby Finance S.a.r.l., a corporation (societe a
responsibilite limitee) organized under the laws of the Grand Duchy of
Luxembourg.
"DICSA" means Derby International Corporation S.A., a corporation
(societe anonyme) organized under the laws of the Grand Duchy of Luxembourg.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event (i) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (ii) is convertible or exchangeable for
Indebtedness or Disqualified Stock (excluding capital
<PAGE>
12
stock which is convertible or exchangeable solely at the option of DCC or any of
its Restricted Subsidiaries) or (iii) is redeemable at the option of the holder
thereof, in whole or in part, in each case on or prior to the first anniversary
of the Stated Maturity of the Securities; provided, however, that only the
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portion of Capital Stock which so matures is mandatorily redeemable, is so
convertible or exchangeable or is so redeemable at the option of the holder
thereof prior to such date shall be deemed to be Disqualified Stock; provided,
--------
further, that any Capital Stock that would not constitute Disqualified Stock but
- -------
for provisions thereof giving holders thereof the right to require such Person
to repurchase or redeem such Capital Stock upon the occurrence of an "asset
sale" or "change of control" occurring prior to the first anniversary of the
Stated Maturity of the Securities shall not constitute Disqualified Stock if the
"asset sale" or "change of control" provisions applicable to such Capital Stock
are not more favorable to the holders of such Capital Stock than the provisions
of Sections 4.06 and 4.08.
"Domestic Subsidiary" means any Restricted Subsidiary other than a
Foreign Subsidiary.
"EBITDA" for any period means the Consolidated Net Income for such
period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) income tax expense of DCC and its Consolidated
Restricted Subsidiaries, (ii) Consolidated Interest Expense, (iii) depreciation
expense of DCC and its Consolidated Restricted Subsidiaries, (iv) amortization
of DCC and its Consolidated Restricted Subsidiaries (excluding amortization
attributable to a prepaid cash item that was paid in a prior period), (v) all
other non-cash charges of DCC and its Consolidated Restricted Subsidiaries
(excluding any such non-cash charge to the extent it represents an accrual of or
reserve for cash expenditures in any future period), in each case for such
period, (vi) all one time cash payments made for the payment (and amortization
thereof) of fees, expenses and charges incurred in connection with the
Recapitalization in an amount not to exceed $5,700,000 and (vii) all expenses
attributable to achieving Year 2000 compliance in an aggregate principal amount
not to exceed $1,900,000, less all amounts attributable to the amortization into
income of the transition asset related to the defined benefit pension plans of
DCC and its Subsidiaries, which transition asset was recognized upon the
adoption of Statement of Financial Accounting Standards No. 87. Notwithstanding
the foregoing, the provision for taxes based on the income or profits of, and
the depreciation and amortization and non-cash charges of, any Restricted
Subsidiary shall be added to Consolidated Net Income to compute EBITDA only to
the extent (and in the same proportion) that the net income of such Restricted
Subsidiary was included in calculating Consolidated Net Income and only if a
corresponding amount would be permitted at the date of determination to be
dividended to DCC by such Restricted Subsidiary without prior approval (that has
not been obtained) pursuant to the terms of its
<PAGE>
13
charter and all agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to such Restricted Subsidiary or
its shareholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange and Registration Rights Agreement" means the Exchange and
Registration Rights Agreement, to be dated the Closing Date, among the Issuers
and the Initial Purchasers.
"Exchange Securities" means, collectively, debt securities of the
Issuers that are identical in all material respects to the Securities, except
for transfer restrictions relating to the Securities, issued in a like aggregate
principal amount of the Securities originally issued pursuant to the Exchange
and Registration Rights Agreement.
"Excluded Assets" means the assets identified in the Recapitalization
Agreement as the assets to be transferred and sold to one or more affiliates of
DICSA and DFS.
"Foreign Subsidiary" means any Restricted Subsidiary that is not
organized under the laws of the United States or any State thereof or the
District of Columbia.
"German Government Obligations" means securities that are direct and
unconditional obligations of the Federal Republic of Germany or any of its
states (Bundeslander), as defined in Section 1807, No. 2 of the German Civil
Code (Burgerliches Gesetzbuch), as from time to time amended, and which are not
callable or redeemable at the issuer's option.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation of such other
Person (whether arising by virtue of partnership arrangements, or by agreement
to keep-well, to purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
-------- -------
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
<PAGE>
14
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Currency Agreement or Interest Rate Agreement.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
-------- -------
Person existing at the time such Person becomes a Subsidiary of another Person
(whether by merger, consolidation, acquisition or otherwise) shall be deemed to
be Incurred by such Person at the time it becomes a Subsidiary of such other
Person. The term "Incurrence" when used as a noun has a correlative meaning.
The accretion of principal of a non-interest bearing or other discount security
shall be deemed the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication),
(i) the principal of and premium, if any, in respect of indebtedness
of such Person for borrowed money;
(ii) the principal of and premium, if any, in respect of obligations
of such Person evidenced by bonds, debentures, notes or other similar
instruments;
(iii) all obligations of such Person in respect of letters of credit
or other similar instruments (including reimbursement obligations with
respect thereto);
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except accrued expenses and Trade
Payables), which purchase price is due more than six months after the date
of placing such property in service or taking delivery and title thereto or
the completion of such services;
(v) all Capitalized Lease Obligations and all Attributable Debt of
such Person;
(vi) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, any Preferred Stock (but
excluding, in each case, any accrued dividends);
<PAGE>
15
(vii) all Indebtedness of other Persons secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided, however, that the amount of Indebtedness of such Person
-------- -------
shall be the lesser of (A) the fair market value of such asset at such date
of determination and (B) the amount of such Indebtedness of such other
Persons;
(viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person; or
(ix) all obligations of the type referred to in clauses (i) and (ii)
of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
The amount of indebtedness of any person at any date shall be
determined as set forth above or otherwise in accordance with U.S. GAAP. For
purposes of calculating the amount of Indebtedness of a Securitization Entity
outstanding as of any date, the face or notional amount of any interest in
receivables or equipment that is outstanding as of such date shall be deemed to
be Indebtedness but any such interests held by Affiliates of such Securitization
Entity shall be excluded for purposes of such calculation.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Initial Public Offering" means the first underwritten public offering
of common stock (or ordinary shares) by either of the Issuers pursuant to a
registration statement filed with the Commission in accordance with the
Securities Act for aggregate net cash proceeds of at least $10,000,000.
"Initial Purchasers" means Chase Securities Inc., Chase Manhattan Bank
AG and Chase Manhattan International Limited.
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement,
<PAGE>
16
interest rate hedge agreement or other similar agreement or arrangement as to
which such Person is party or is a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extension of credit (including by way of Guarantee or similar arrangement, but
excluding any debt or extension of credit represented by a bank deposit) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of others)
or any purchase or acquisition of Capital Stock, Indebtedness or other similar
instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary" and Section 4.04, (i) "Investment" shall include the
portion (proportionate to the equity interest of DCC in such Subsidiary) of the
fair market value of the net assets of any Subsidiary of DCC at the time that
such Subsidiary is designated an Unrestricted Subsidiary; provided, however,
-------- -------
that, upon a redesignation of such Subsidiary as a Restricted Subsidiary, DCC
shall be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary in an amount (if positive) equal to (x) the "Investment" of DCC in
such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the equity interest of DCC in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the board of directors of
DCC.
"Investor Group" means, collectively, Thayer, Perseus and DICSA.
"Issue Date" means the date on which the Initial Securities are
originally issued.
"Issuers" means each of DCC and Lyon until replaced by a successor
and, thereafter, means the successor and, for purposes of any provision
contained herein and required by the TIA, each other obligor on the indenture
securities.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Lyon" means Lyon Investments B.V., a company organized under the laws
of The Netherlands and a Wholly Owned Subsidiary, which was formerly known as
Lyon Cycle B.V.
<PAGE>
17
"MS Sport Group" means, collectively, MS Sport Vertriebs AG and MS
Sport Vertriebs GmbH.
"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and proceeds
from the sale or other disposition of any securities received as consideration,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to the properties or assets that are the subject of such
Asset Disposition or received in any other non-cash form, and excluding
Designated Non-Cash Consideration) therefrom, in each case net of (i) all legal,
accounting and investment banking fees, and sales commissions, and all title and
recording tax expenses, commissions and other fees and expenses incurred, and
all federal, state, provincial, local and foreign taxes required to be paid or
accrued as a liability under U.S. GAAP, as a consequence of such Asset
Disposition, (ii) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition, in accordance with the terms of any
Lien upon or other security agreement of any kind with respect to such assets,
or which must by its terms, or in order to obtain a necessary consent to such
Asset Disposition, or by applicable law, be repaid out of the proceeds from such
Asset Disposition, (iii) all distributions and other payments required to be
made to minority interest holders in Subsidiaries of DCC or joint ventures as a
result of such Asset Disposition and (iv) appropriate amounts to be provided by
the seller as a reserve, in accordance with U.S. GAAP, against any liabilities
associated with the property or other assets disposed of in such Asset
Disposition and retained by DCC or any Restricted Subsidiary after such Asset
Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Non-Recourse Indebtedness" means Indebtedness (i) as to which neither
DCC nor any of its Restricted Subsidiaries (a) provides credit support of any
kind (including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise) or (c) constitutes the lender and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of DCC or
any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its state of maturity and
<PAGE>
18
(iii) as to which the lenders have been notified in writing they shall not have
recourse to the shares or assets of DCC or any of its Restricted Subsidiaries.
"Note Guarantee" means each Guarantee of the obligations with respect
to the Securities issued by a Subsidiary of DCC pursuant to the terms of this
Indenture. Each such Note Guarantee shall be evidenced by delivery of a
supplemental indenture substantially in the form of Exhibit C hereto.
"Note Guarantor" means any Person that has issued a Note Guarantee.
"Officer" means the Chairman of the Board, the Principal Executive
Officer, the Principal Financial Officer, the President, any Vice President, the
Treasurer or the Secretary of either of the Issuers, or any of the Restricted
Subsidiaries, as the case may be.
"Officers' Certificate" means a certificate signed by two Officers of
either of the Issuers, or any of the Restricted Subsidiaries, as the case may
be.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of, or counsel to,
DCC or the Trustee.
"Permitted Holders" means DC Cycle, Perseus Cycle and DFS, any of
their respective Affiliates, any Person who is a beneficial owner of DC Cycle,
Perseus Cycle or DFS on the Closing Date, and any investment fund managed by
Thayer or Perseus, and any Person acting in the capacity of an underwriter in
connection with a public or private offering of the Capital Stock of either of
the Issuers.
"Permitted Investment" means an Investment by DCC or any Restricted
Subsidiary in (i) DCC, any Restricted Subsidiary or any Person that shall, upon
the making of such Investment, become a Restricted Subsidiary; provided,
--------
however, that the primary business of such Restricted Subsidiary is a Related
- -------
Business; (ii) another Person if, as a result of such Investment, such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, DCC or any Restricted Subsidiary; provided,
--------
however, that the primary business of such Person is a Related Business; (iii)
- -------
Temporary Cash Investments; (iv) receivables owing to DCC or any Restricted
Subsidiary if created or acquired in the ordinary course of business and payable
or dischargeable in accordance with customary trade terms; provided, however,
-------- -------
that such trade terms may include such concessionary trade terms as DCC or any
such Restricted Subsidiary deems reasonable under the circumstances; (v)
payroll, travel and similar advances to cover matters that are expected at the
time of such advances
<PAGE>
19
ultimately to be treated as expenses for accounting purposes and that are made
in the ordinary course of business; (vi) loans or advances to employees made in
the ordinary course of business consistent with past practices of DCC or any
Restricted Subsidiary and not exceeding $2,000,000 in the aggregate outstanding
at any one time; (vii) stock, obligations or securities received in settlement
of debts created in the ordinary course of business and owing to DCC or any
Restricted Subsidiary or in satisfaction of judgments; (viii) any Person to the
extent such Investment represents the non-cash portion of the consideration
received for an Asset Disposition that was made pursuant to and in compliance
with Section 4.06; (ix) Investments existing on the Closing Date; (x) Hedging
Obligations otherwise in compliance with this Indenture; (xi) additional
Investments having an aggregate fair market value, taken together with all other
Investments made pursuant to this clause (xi) that are at the time outstanding,
not to exceed $10,000,000 (with a fair market value of each Investment being
measured at the time made and without giving effect to subsequent changes in
value); and (xii) any Investment by DCC or a Subsidiary of DCC in a
Securitization Entity or any Investment by a Securitization Entity in any other
Person in connection with a Qualified Securitization Transaction; provided that
--------
any Investment in a Securitization Entity is in the form of a Purchase Money
Securities or an equity interest.
"Permitted Liens" means, with respect to any Person, (i) Liens,
pledges or deposits by such Person under worker's compensation laws,
unemployment insurance and other types of social security laws or similar
legislation, or good faith deposits in connection with bids, tenders, contracts
(other than for the payment of Indebtedness), or leases to which such Person is
a party, or deposits to secure public or statutory obligations of such Person or
deposits of cash or government bonds to secure surety or appeal bonds to which
such Person is a party, or deposits as security for contested taxes or import
duties or for the payment of rent, in each case Incurred in the ordinary course
of business; (ii) statutory liens of landlords and other Liens imposed by law,
including carriers', warehousemen's, suppliers', material men's, repairmen's and
mechanics' Liens, in each case for sums not yet due or being contested in good
faith by appropriate proceedings or other Liens arising out of judgments or
awards against such Person with respect to which such Person shall then be
proceeding with an appeal or other proceedings for review; (iii) Liens for
taxes, assessments or governmental charges not yet due or payable or subject to
penalties for non-payment on which are being contested in good faith by
appropriate proceedings; (iv) Liens in favor of issuers of surety bonds or
letters of credit issued pursuant to the request of and for the account of such
Person in the ordinary course of its business; provided, however, that such
-------- -------
letters of credit do not constitute Indebtedness; (v) minor survey exceptions,
minor encumbrances, easements or reservations of, or rights of others for,
licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines
and other similar purposes, or zoning or other restrictions as to the use of
real property or Liens incidental to the conduct of the business of such
<PAGE>
20
Person or to the ownership of its properties which were not Incurred in
connection with Indebtedness and which do not in the aggregate materially
adversely affect the value of said properties or materially impair their use in
the operation of the business of such Person; (vi) Liens securing Indebtedness
Incurred to finance the construction, purchase or lease of, or repairs,
improvements or additions to, property of such Person; provided, however, that
-------- -------
the Lien may not extend to any other property owned by such Person or any of its
Subsidiaries at the time the Lien is Incurred, and the Indebtedness (other than
any interest thereon) secured by the Lien may not be Incurred more than 180 days
after the later of the acquisition, completion of construction, repair,
improvement, addition or commencement of full operation of the property subject
to the Lien; (vii) Liens to secure Indebtedness permitted pursuant to clause (b)
of Section 4.03; (viii) Liens existing on the Closing Date; (ix) Liens on
property or shares of stock of another Person at the time such other Person
becomes a Subsidiary of such Person; provided, however, that such Liens are not
-------- -------
created, Incurred or assumed in connection with, or in contemplation of, such
other Person becoming such a Subsidiary; provided further, however, that such
-------- ------- -------
Liens may not extend to any other property owned by such Person or any of its
Subsidiaries; (x) Liens on property at the time such Person or any of its
Subsidiaries acquires the property, including any acquisition by means of a
merger or consolidation with or into such Person or any Subsidiary of such
Person; provided, however, that such Liens are not created, Incurred or assumed
-------- -------
in connection with, or in contemplation of, such acquisition; provided further,
------- -------
however, that the Liens may not extend to any other property owned by such
- -------
Person or any of its Subsidiaries; (xi) Liens securing Indebtedness or other
obligations of a Subsidiary of such Person owing to such Person or a wholly
owned Subsidiary of such Person; (xii) Liens securing Hedging Obligations so
long as such Hedging Obligations relate to Indebtedness that is, and is
permitted to be under this Indenture, secured by a Lien on the same property
securing such Hedging Obligations; (xiii) Liens to secure any Refinancing (or
successive Refinancings) as a whole, or in part, of any Indebtedness secured by
any Lien referred to in the foregoing clauses (vi), (viii), (ix) and (x);
provided, however, that (x) such new Lien shall be limited to all or part of the
- -------- -------
same property that secured the original Lien (plus improvements to or on such
property) and (y) the Indebtedness secured by such Lien at such time is not
increased to any amount greater than the sum of (A) the outstanding principal
amount or, if greater, committed amount of the Indebtedness described under
clause (vi), (viii), (ix) or (x) at the time the original Lien became a
Permitted Lien under this Indenture and (B) an amount necessary to pay any fees
and expenses, including premiums, related to such Refinancings. Notwithstanding
the foregoing, "Permitted Liens" shall not include any Lien described in clause
(vi), (ix) or (x) above to the extent such Lien applies to any Additional Assets
acquired directly or indirectly from Net Available Cash pursuant to Section
4.06; (xiv) judgment Liens not giving rise to an Event of Default; (xv) an
interest or title of a lessor under any Capitalized Lease Obligation; (xvi)
Liens on specific items of inventory or other goods and proceeds of any
<PAGE>
21
Person securing such Person's obligations in respect of bankers' acceptances
issued or created for the account of such Person to facilitate the purchase,
shipment or storage of such inventory or other goods; (xvii) liens securing
reimbursement obligations with respect to commercial letters of credit which
encumber documents and other property relating to such letters of credit;
(xviii) leases or subleases granted to others that do not materially interfere
with the ordinary course of business of DCC and its Restricted Subsidiaries; and
(xix) Liens in favor of customers and revenue authorities arising as a matter of
law to secure payment of customer duties. For purposes of this definition, the
term "Indebtedness" shall be deemed to include interest on such Indebtedness.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Perseus" means Perseus Capital, L.L.C., a limited liability company
organized under the laws of the State of Delaware.
"Perseus Cycle" means Perseus Cycle, L.L.C., a limited liability
company organized under the laws of the State of Delaware.
"Preferred Stock", as applied to the Capital Stock of any Person,
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person,
over shares of Capital Stock of any other class of such Person.
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security that is due or overdue or is to become
due at the relevant time.
"Private Exchange Securities" means, collectively, debt securities of
the Issuers that are identical in all material respects to the Exchange
Securities, except for transfer restrictions relating to such Private Exchange
Securities, issued by the Issuers (under the same indenture as the Exchange
Securities) simultaneously with the delivery of the Exchange Securities in the
Registered Exchange Offer to any Securityholder that holds any Securities
acquired by it that have, or that are reasonably likely to be determined to
have, the status of an unsold allotment in an initial distribution, or to any
holder of Securities that is not entitled to participate in the Registered
Exchange Offer, upon the request of any such holder, in exchange for a like
aggregate principal amount of Securities held by such holder.
<PAGE>
22
"Public Equity Offering" means a primary public offering of common
stock, ordinary shares or equivalent equity interests (other than Disqualified
Stock) of either of the Issuers, following which shares of common stock,
ordinary shares or equivalent equity interests, as the case may be, of such
Issuer either (i) are listed on a nationally recognized stock exchange or
automated quotation system in the United States, Canada or a member of the
European Union or (ii) have been distributed in the United States by means of an
effective registration statement under the Securities Act or sales pursuant to
Rule 144 under the Securities Act.
"Public Market" means that at any time with respect to the common
stock, ordinary shares or equivalent equity interests of either of the Issuers
(i) at least 10% of the total issued and outstanding common stock, ordinary
shares or equivalent equity interests of such Issuer has been distributed prior
to such time by means of an effective registration statement under the
Securities Act or (ii) an established public trading market otherwise exists for
any such common stock, or ordinary shares or equivalent equity interests.
"Purchase Money Indebtedness" means Indebtedness (i) consisting of the
deferred purchase price of an asset, conditional sale obligations, obligations
under any title retention agreement and other purchase money obligations, in
each case where the maturity of such Indebtedness does not exceed the
anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition by DCC or a Restricted Subsidiary of such asset,
including additions and improvements; provided, however, that such Indebtedness
-------- -------
is incurred within 180 days after the acquisition by DCC or such Restricted
Subsidiary, as the case may be, of such asset.
"Purchase Money Securities" means a promissory note of a
Securitization Entity evidencing a line of credit, which may be irrevocable,
from DCC or any Restricted Subsidiary in connection with a Qualified
Securitization Transaction, which note shall be repaid from cash available to
the Securitization Entity, other than amounts required to be established as
reserves pursuant to agreements, amounts paid to investors in respect of
interest, principal and other amounts owing to such investors and amounts paid
in connection with the purchase of newly generated receivables or newly acquired
equipment.
"Qualified Securitization Transaction" means any transaction or series
of transactions pursuant to which DCC or any Restricted Subsidiary may sell,
convey or otherwise transfer to (a) a Securitization Entity (in the case of a
transfer by DCC or any of Restricted Subsidiary) and (b) any other Person (in
the case of a transfer by a Securitization Entity), or may grant a security
interest in, any accounts receivable or equipment (whether existing on the
Closing Date or arising or acquired thereafter) of
<PAGE>
23
DCC or any of its Restricted Subsidiaries, and any assets related thereto
including, without limitation, all collateral securing such accounts receivable
and equipment, all contracts and contract rights and all Guarantees or other
obligations in respect of such accounts receivable and equipment, proceeds of
such accounts receivable and equipment and other assets (including contract
rights) which are customarily transferred or in respect of which security
interests are customarily granted in connection with asset securitization
transactions involving accounts receivable and equipment.
"Recapitalization" means the recapitalization of DCC pursuant to the
Recapitalization Agreement.
"Recapitalization Agreement" means the Recapitalization Agreement
dated as of March 11, 1998, as amended as of the Closing Date, among DCC, DC
Cycle, Perseus Cycle, DICSA and DFS, and, for the purposes specified therein, A.
Edward Gottesman, Alan J. Finden-Crofts and Frank H. Pearl.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that is Incurred to
refund, refinance, replace, renew, repay or extend, modify, restate, defer,
substitute or supplement (including pursuant to any defeasance or discharge
mechanism) any Indebtedness of DCC or any Restricted Subsidiary existing on the
Closing Date or Incurred in compliance with this Indenture (including
Indebtedness of DCC or such Restricted Subsidiary that Refinances Refinancing
Indebtedness); provided, however, that (i) the Refinancing Indebtedness has a
-------- -------
Stated Maturity no earlier than the Stated Maturity of the Indebtedness being
Refinanced, (ii) the Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being refinanced, (iii) such Refinancing
Indebtedness is Incurred in an aggregate principal amount (or if issued with
original issue discount, an aggregate issue price) that is equal to or less than
the aggregate principal amount (or if issued with original issue discount, the
aggregate accreted value) then outstanding of the Indebtedness being Refinanced
(plus fees and expenses, including any premium and defeasance costs associated
with the Refinancing) and (vi) if the Indebtedness being Refinanced is
subordinated in right of payment to the Securities, such Refinancing
Indebtedness is subordinated in right of payment to the Securities at least to
the same extent as the Indebtedness being Refinanced; provided further, however,
-------- ------- -------
that Refinancing Indebtedness shall not include (x) Indebtedness of a
<PAGE>
24
Restricted Subsidiary that Refinances Indebtedness of DCC or (y) Indebtedness of
DCC or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted
Subsidiary.
"Registered Exchange Offer" means a registered exchange offer for the
Securities (i) undertaken by the Issuers pursuant to the Exchange and
Registration Rights Agreement and (ii) made to certain Holders of Initial
Securities, to issue and deliver to such Holders, in exchange for their Initial
Securities, a like aggregate principal amount of Exchange Securities registered
under the Securities Act.
"Related Business" means any business related, ancillary or
complementary to the businesses of DCC and the Restricted Subsidiaries on the
Closing Date.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of DCC other than an
Unrestricted Subsidiary.
"Revolving Credit Agreement" means the credit agreement, to be dated
as of the Closing Date, as amended, waived or otherwise modified from time to
time, among DCC, the subsidiaries of DCC identified therein, Chase Manhattan
plc, as Arranger, the financial institutions named therein as banks and Chase
Manhattan International Limited, as Facility Agent and Security Agent (except to
the extent, if any, that any such amendment, waiver or other modification
thereto would be prohibited by the terms of this Indenture, unless otherwise
agreed to by the holders of at least a majority in aggregate principal amount of
Securities at the time outstanding).
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired by DCC or a Restricted Subsidiary whereby DCC or
a Restricted Subsidiary transfers such property to a Person and DCC or such
Restricted Subsidiary leases it from such Person, other than leases between DCC
and a Wholly Owned Subsidiary or leases between Wholly Owned Subsidiaries.
"Secured Indebtedness" means any Indebtedness of either of the Issuers
secured by a Lien. "Secured Indebtedness" of any Subsidiary of either of the
Issuers has a correlative meaning.
"Securities" means the Securities issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended.
<PAGE>
25
"Securitization Entity" means a Wholly Owned Subsidiary (or a wholly
owned Subsidiary of another Person in which DCC or any Subsidiary of DCC makes
an Investment and to which DCC or any Subsidiary of DCC transfers accounts
receivable or equipment and related assets) that engages in no activities other
than in connection with financing of accounts receivable or equipment and that
is designated by the board of directors of DCC (as provided below) as a
Securitization Entity (A) no portion of the Indebtedness or any other
obligations (contingent or otherwise) of which (i) is Guaranteed by DCC or any
Restricted Subsidiary (excluding Guarantees of obligations (other than the
principal of, and interest on, Indebtedness)) pursuant to Standard
Securitization Undertakings, (ii) is recourse to or obligates DCC or any
Restricted Subsidiary in any way other than pursuant to Standard Securitization
Undertakings or (iii) subjects any property or asset of DCC or any Restricted
Subsidiary, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to Standard Securitization
Undertakings, (B) with which neither DCC nor any Restricted Subsidiary has any
material contract, agreement, arrangement or understanding other than on terms
no less favorable to DCC or such Restricted Subsidiary than those that might be
obtained at the time from Persons that are not Affiliates of DCC, other than
fees payable in the ordinary course of business in connection with servicing
receivables of such entity, and (C) to which neither DCC nor any Restricted
Subsidiary has any obligation to maintain or preserve such entities' financial
condition or cause such entity to achieve certain levels of operating results.
Any such designation by the board of directors of DCC shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the resolution of the
board of directors of DCC giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions.
"Senior Indebtedness"of either of the Issuers means the principal of,
premium, if any, and accrued and unpaid interest on (including interest accruing
on or after the filing of any petition in bankruptcy or for reorganization of
such Issuer, regardless of whether or not a claim for post-filing interest is
allowed in such proceedings), and fees and other amounts owing in respect of,
Bank Indebtedness and all other Indebtedness of such Issuer, whether outstanding
on the Closing Date or thereafter Incurred, unless in the instrument creating or
evidencing the same or pursuant to which the same is outstanding it is provided
that such obligations are not superior in right of payment to the Securities;
provided, however, that Senior Indebtedness shall not include (i) any obligation
- -------- -------
of DCC to any of its Subsidiaries or any obligation of Lyon to any of the
Subsidiaries of DCC, (ii) any liability for federal, state, provincial, local,
foreign or other taxes owed or owing by such Issuer, (iii) any accounts payable
or other liability to trade creditors arising in the ordinary course of business
(including Guarantees thereof or instruments evidencing such liabilities), (iv)
any Indebtedness or obligation of such Issuer (and any accrued and unpaid
interest in respect thereof) that by its terms is
<PAGE>
26
subordinate or junior in any respect to any other Indebtedness or obligation of
such Issuer, including any Subordinated Obligations, (v) any obligations with
respect to any Capital Stock or (vi) any Indebtedness Incurred in violation of
this Indenture. "Senior Indebtedness" of any Subsidiary of either of the Issuers
has a correlative meaning.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "Significant Subsidiary" of either of the Issuers within the meaning of Rule
1-02 under Regulation S-X promulgated by the Commission.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by DCC or any Subsidiary of
DCC that are reasonably customary in an accounts receivable or equipment
securitization transaction.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency beyond the control of the issuer unless such
contingency has occurred).
"Subordinated Obligation" means any Indebtedness of either of the
Issuers (whether outstanding on the Closing Date or thereafter Incurred) that is
subordinate or junior in right of payment to the Securities pursuant to a
written agreement. "Subordinated Obligation" of any Subsidiary of either of the
Issuers has a correlative meaning.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States or any agency thereof or
obligations Guaranteed by the United States or any agency thereof, (ii)
investments in time deposit accounts, certificates of deposit and money market
deposits maturing within 180 days of the date of acquisition thereof issued by a
bank or trust DCC that is organized under the laws of the United States, any
state thereof or any foreign country recognized by the United States having
capital, surplus and undivided profits aggregating in excess of
<PAGE>
27
$250,000,000 (or the foreign currency equivalent thereof) and whose long-term
debt is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities Act), (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an Affiliate
of DCC) organized and in existence under the laws of the United States or any
foreign country recognized by the United States with a rating at the time as of
which any investment therein is made of "P-1" (or higher) according to Moody's
Investors Service, Inc. ("Moody's") or "A-1" (or higher) according to Standard
and Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc.
("S&P"), and (v) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, or by any political subdivision
or taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's.
"Thayer" means Thayer Equity Investors III, L.P., a limited
partnership organized under the laws of the State of Delaware.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
------
77bbbb) as in effect on the Closing Date.
"Total Assets" means the total Consolidated assets of DCC and its
Restricted Subsidiaries, as set forth on DCC's most recent consolidated balance
sheet.
"Trade Payables" means, with respect to any Person, any accounts
payable or any Indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person arising in the ordinary course of business
in connection with the acquisition of goods or services.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
<PAGE>
28
"Univega" means Univega Beteiligungen GmbH.
"Unrestricted Subsidiary" means (i) any Subsidiary of DCC (other than
Lyon) that at the time of determination shall be designated an Unrestricted
Subsidiary by the board of directors of DCC in the manner provided below and
(ii) any Subsidiary of an Unrestricted Subsidiary. The board of directors of
DCC may designate any Subsidiary of DCC (other than Lyon) (including any newly
acquired or newly formed Subsidiary of DCC) to be an Unrestricted Subsidiary
unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or owns or holds any Lien on any property of, either of the
Issuers or any other Subsidiary of either of the Issuers that is not a
Subsidiary of the Subsidiary to be so designated; provided, however, that either
-------- -------
(A) the Subsidiary to be so designated has total Consolidated assets of $1,000
or less or (B) if such Subsidiary has Consolidated assets greater than $1,000,
then such designation would be permitted under Section 4.04. The board of
directors of DCC may designate any Subsidiary of DCC that is an Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
-------- -------
after giving effect to such designation, (x) DCC could Incur $1.00 of additional
Indebtedness under paragraph (a) of Section 4.03 and (y) no Default shall have
occurred and be continuing. Any such designation of a Subsidiary as a
Restricted Subsidiary or Unrestricted Subsidiary by the board of directors of
DCC shall be evidenced to the Trustee by promptly filing with the Trustee a copy
of the resolution of such board of directors giving effect to such designation
and an Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. GAAP" means generally accepted accounting principles in the
United States as in effect as of the Closing Date, including those set forth in
(i) the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the Commission
governing the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the
Commission. All ratios and computations based on U.S. GAAP contained in this
Indenture shall be computed in conformity with U.S. GAAP.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
<PAGE>
29
"Wholly Owned Subsidiary" means a Restricted Subsidiary of DCC all the
Capital Stock of which (other than directors' qualifying shares) is owned by DCC
or another Wholly Owned Subsidiary.
SECTION 1.02. Other Definitions.
------------------
<TABLE>
<CAPTION>
Defined in
Term Section
---- ------------
<S> <C>
"Additional Amounts".................................... 4.16
"Affiliate Transaction"................................. 4.07
"Authorized Agent"...................................... 11.01
"Bankruptcy Law"........................................ 6.01
"Change of Control Offer"............................... 4.08(b)
"covenant defeasance option"............................ 8.01(b)
"Custodian"............................................. 6.01
"Event of Default"...................................... 6.01
"legal defeasance option"............................... 8.01(b)
"Legal Holiday"......................................... 11.08
"Offer"................................................. 4.06(b)
"Offer Amount".......................................... 4.06(c)
"Offer Period".......................................... 4.06(c)
"Paying Agent".......................................... 2.03
"protected purchaser"................................... 2.07
"Purchase Date"......................................... 4.06(c)
"Registrar"............................................. 2.03
"Restricted Payment".................................... 4.04(a)
"Successor Company"..................................... 5.01(a)
"Tax Authority"......................................... 4.16
"Taxes"................................................. 4.16
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
--------------------------------------------------
This Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the United States Securities and Exchange
Commission.
<PAGE>
30
"indenture securities" means the Securities and the Note Guarantees.
"indenture security holder" means a Holder or Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Issuers, the Note
Guarantors and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
have the meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise
----------------------
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with U.S. GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(7) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with U.S. GAAP;
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory
<PAGE>
31
redemption or mandatory repurchase price with respect to such Preferred
Stock, whichever is greater.
ARTICLE 2
The Securities
--------------
SECTION 2.01. Form and Dating. Provisions relating to the Initial
----------------
Securities, the Private Exchange Securities and the Exchange Securities are set
forth in the Appendix, which is hereby incorporated in and expressly made a part
of this Indenture. The (i) Initial Securities and the Trustee's certificate of
authentication and (ii) Private Exchange Securities and the Trustee's
certificate of authentication shall each be substantially in the form of Exhibit
A hereto, which is hereby incorporated in and expressly made a part of this
Indenture. The Exchange Securities and the Trustee's certificate of
authentication shall each be substantially in the form of Exhibit B hereto,
which is hereby incorporated in and expressly made a part of this Indenture.
The Securities may have notations, legends or endorsements required by law,
stock exchange rule, agreements to which either of the Issuers or any Note
Guarantor is subject, if any, or usage (provided that any such notation, legend
or endorsement is in a form acceptable to the Issuers). Each Security shall be
dated the date of its authentication.
SECTION 2.02. Execution and Authentication. One or more Officers
-----------------------------
shall sign the Securities for each of the Issuers by manual or facsimile
signature.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate and make available for delivery
Securities as set forth in the Appendix.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Issuers to authenticate the Securities. Any such appointment shall be
evidenced by an instrument signed by a Trust Officer, a copy of which shall be
furnished to the Issuers. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Securities whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating
<PAGE>
32
agent has the same rights as any Registrar, Paying Agent or agent for service of
notices and demands.
SECTION 2.03. Registrar and Paying Agent. The Issuers shall maintain
---------------------------
an office or agency where Securities may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Issuers may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent, and the
term "Registrar" includes any co-registrars. The Issuers initially appoint the
Trustee as (i) Registrar and Paying Agent in connection with the Securities and
(ii) the Securities Custodian (as defined in the Appendix) with respect to the
Global Security (as defined in the Appendix). The Issuers also initially
appoint The Industrial Bank of Japan (Luxembourg), S.A. as principal Paying
Agent, and The Industrial Bank of Japan (Germany) as Paying Agent in Germany.
In all circumstances, the Issuers shall ensure that (i) at least one Paying
Agent shall be located in the Federal Republic of Germany, (ii) at least one
Paying Agent shall be, if and so long as the Securities are listed on the
Luxembourg Stock Exchange and the rules of such exchange so require, located in
Luxembourg or such other place as the Luxembourg Stock Exchange may approve and
(iii) if and so long as the Securities are listed on any other securities
exchange, any applicable requirements of such exchange as to Paying Agents are
satisfied.
The Issuers shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture, which shall incorporate
the terms of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such agent. The Issuers shall notify the Trustee of
the name and address of any such agent. If the Issuers fail to maintain a
Registrar or Paying Agent, the Trustee shall act as such and shall be entitled
to appropriate compensation therefor pursuant to Section 7.07. DCC or any of its
domestically organized Wholly Owned Subsidiaries may act as Paying Agent or
Registrar.
The Issuers may remove any Registrar or Paying Agent upon written
notice to such Registrar or Paying Agent and to the Trustee; provided, however,
-------- -------
that no such removal shall become effective until (1) acceptance of an
appointment by a successor as evidenced by an appropriate agreement entered into
by the Issuers and such successor Registrar or Paying Agent, as the case may be,
and delivered to the Trustee or (2) notification to the Trustee that the Trustee
shall serve as Registrar or Paying Agent until the appointment of a successor in
accordance with clause (1) above. The Registrar or Paying Agent may resign at
any time upon written notice; provided, however, that the
-------- -------
<PAGE>
33
Trustee may resign as Paying Agent or Registrar only if the Trustee also resigns
as Trustee in accordance with Section 7.08.
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due
------------------------------------
date of the principal, interest and Additional Amounts, if any, on any Security,
the Issuers shall deposit with the Paying Agent (or if DCC or any Subsidiary is
acting as Paying Agent, segregate and hold in trust for the benefit of the
Persons entitled thereto) a sum sufficient to pay such principal, interest and
Additional Amounts, if any, when so becoming due. The Issuers shall require
each Paying Agent (other than the Trustee) to agree that the Paying Agent shall
hold in trust for the benefit of Securityholders or the Trustee all money held
by the Paying Agent for the payment of principal of or interest or Additional
Amounts, if any, on the Securities and shall notify the Trustee of any default
by the Issuers in making any such payment. If DCC or a Subsidiary of DCC acts
as Paying Agent, it shall segregate the money held by it as Paying Agent and
hold it as a separate trust fund. The Issuers at any time may require a Paying
Agent to pay all money held by it to the Trustee and to account for any funds
disbursed by the Paying Agent. Upon complying with this Section 2.04, the Paying
Agent shall have no further liability for the money delivered to the Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as
---------------------
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Issuers shall furnish, or cause the Registrar to furnish, to the
Trustee, in writing at least five Business Days before each payment date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of Securityholders.
SECTION 2.06. Transfer and Exchange. The Securities shall be issued
----------------------
in registered form and shall be transferable only upon the surrender of a
Security for registration of transfer. When a Security is presented to the
Registrar with a request to register a transfer, the Registrar shall register
the transfer as requested if the requirements of Section 8-401(a)(l) of the
Uniform Commercial Code are met. When Securities are presented to the Registrar
with a request to exchange them for an equal principal amount of Securities of
other denominations, the Registrar shall make the exchange as requested if the
same requirements are met. To permit registration of transfers and exchanges,
the Issuers shall execute and the Trustee shall authenticate Securities at the
Registrar's request. The Issuers, or the Paying Agent, as applicable, may
require payment of a sum sufficient to pay all taxes, assessments or other
governmental charges in connection with any transfer or exchange pursuant to
this Section 2.06. The Issuers shall not be required to make and the Registrar
need not register transfers or exchanges of Securities selected for redemption
(except, in the case of Securities to be redeemed in part, the portion
<PAGE>
34
thereof not to be redeemed) or transfers or exchanges of Securities for a period
of 15 days before a selection of Securities to be redeemed.
Prior to the due presentation for registration of transfer of any
Security, and subject to the provisions of the Securities with respect to record
dates, the Issuers, the Note Guarantors, the Trustee, the Paying Agent or the
Registrar may deem and treat the Person in whose name a Security is registered
as the absolute owner of such Security for the purpose of receiving payment of
principal, interest, and Additional Amounts, if any, on such Security and for
all other purposes whatsoever, whether or not such Security is overdue, and none
of the Issuers, any Note Guarantor, the Trustee, the Paying Agent or the
Registrar shall be affected by notice to the contrary.
Any Holder of the Global Security shall, by acceptance of the Global
Security, agree that transfers of beneficial interest in the Global Security may
be effected only through a book-entry system maintained by (i) the Holder of the
Global Security (or its agent) or (ii) any Holder of a beneficial interest in
the Global Security, and that ownership of a beneficial interest in the Global
Security shall be required to be reflected in a book entry.
All Securities issued upon any transfer or exchange pursuant to the
terms of this Indenture shall evidence the same debt and shall be entitled to
the same benefits under this Indenture as the Securities surrendered upon such
transfer or exchange.
SECTION 2.07. Replacement Securities. If a mutilated Security is
-----------------------
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Issuers shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 of the Uniform Commercial Code are met, such that the Holder (i)
satisfies the Issuers or the Trustee within a reasonable time after he has
notice of such loss, destruction or wrongful taking and the Registrar does not
register a transfer prior to receiving such notification, (ii) makes such
request to the Issuers or the Trustee prior to the Security being acquired by a
protected purchaser as defined in Section 8-303 of the Uniform Commercial Code
(a "protected purchaser") and (iii) satisfies any other reasonable requirements
of the Trustee. If required by the Trustee or the Issuers, such Holder shall
furnish an indemnity bond sufficient in the judgment of the Trustee to protect
the Issuers, the Trustee, the Paying Agent and the Registrar from any loss that
any of them may suffer if a Security is replaced. The Issuers and the Trustee
may charge the Holder for their expenses in replacing a Security. In the event
any such mutilated, lost, destroyed or wrongfully taken Security has become or
is about to become due and payable, the Issuers in their discretion may pay such
Security instead of issuing a new Security in replacement thereof.
<PAGE>
35
Every replacement Security is an additional obligation of the Issuers.
The provisions of this Section 2.07 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, lost, destroyed or wrongfully taken
Securities.
SECTION 2.08. Outstanding Securities. Securities outstanding at any
-----------------------
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancelation and those described in this Section
2.08 as not outstanding. Subject to Section 11.06, a Security does not cease to
be outstanding because the Issuers or an Affiliate of the Issuers holds the
Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and the Issuers receive proof satisfactory to
them that the replaced Security is held by a protected purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all principal, interest and Additional Amounts, if any, payable on that date
with respect to the Securities (or portions thereof) to be redeemed or maturing,
as the case may be, and the Paying Agent is not prohibited from paying such
money to the Securityholders on that date pursuant to the terms of this
Indenture, then on and after that date such Securities (or portions thereof)
cease to be outstanding and interest and Additional Amounts, if any, on them
cease to accrue.
SECTION 2.09. Temporary Securities. In the event that Definitive
---------------------
Securities (as defined in the Appendix) are to be issued under the terms of this
Indenture, until such Definitive Securities are ready for delivery, the Issuers
may prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of Definitive Securities but may
have variations that the Issuers consider appropriate for temporary Securities.
Without unreasonable delay, the Issuers shall prepare and the Trustee shall
authenticate Definitive Securities and deliver them in exchange for temporary
Securities upon surrender of such temporary Securities at the office or agency
of the Issuers, without charge to the Holder.
SECTION 2.10. Cancelation. The Issuers at any time may deliver
------------
Securities to the Trustee for cancelation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel all
Securities surrendered for registration of transfer, exchange, payment or
cancelation and deliver canceled Securities to the Issuers pursuant to written
direction by an Officer. Subject to Section
<PAGE>
36
2.07, the Issuers may not issue new Securities to replace Securities they have
redeemed, paid or delivered to the Trustee for cancelation. The Trustee shall
not authenticate Securities in place of canceled Securities other than pursuant
to the terms of this Indenture.
SECTION 2.11. Defaulted Interest. If the Issuers default in a
-------------------
payment of interest on the Securities, the Issuers shall pay the defaulted
interest (plus interest on such defaulted interest to the extent lawful) in any
lawful manner. The Issuers may pay the defaulted interest to the Persons who
are Securityholders on a subsequent special record date. The Issuers shall fix
or cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee or Paying Agent, as applicable. At least
15 days before the subsequent special record date, the Issuers shall deliver, in
accordance with Section 11.02, a notice to each Holder of Securities, with a
copy to the Trustee and the Paying Agent, that states the subsequent special
record date, the payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid.
SECTION 2.12. Common Code, CUSIP and ISIN Numbers. The Issuers in
------------------------------------
issuing the Securities may use Common Code, CUSIP or ISIN numbers (if then
generally in use) and, if so, the Trustee shall use the applicable Common Code,
CUSIP or ISIN number in notices of redemption as a convenience to Holders;
provided, however, that any such notice may state that no representation is made
- -------- -------
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
SECTION 2.13. Currency Indemnity. Deutsche Marks is the sole
------------------
currency of account and payment for all sums payable by the Issuers under or in
connection with the Securities, including damages. Any amount received or
recovered in a currency other than Deutsche Marks (whether as a result of, or
the enforcement of, a judgment or order of a court of any jurisdiction, in the
winding-up or dissolution of either of the Issuers or otherwise) by any holder
of a Security in respect of any sum expressed to be due to it from the Issuers
shall only constitute a discharge to the Issuers to the extent of the Deutsche
Mark amount which the recipient is able to purchase with the amount so received
or recovered in that other currency on the date of that receipt or recovery (or,
if it is not practicable to make that purchase on the date, on the first date on
which it is practicable to do so). If the Deutsche Mark amount is less than the
Deutsche Mark amount expressed to be due to the recipient under any Security,
the Issuers shall indemnify the recipient against any loss sustained by it as a
result. In any event, the Issuers shall indemnify the recipient against the cost
of making any such purchase. For
<PAGE>
37
the purposes of this Section 2.14, the Holder of a Security shall certify in a
satisfactory manner to the Trustee (indicating the sources of information used)
that it would have suffered a loss had an actual purchase of Deutsche Marks been
made with the amount so received in that other currency on the date of receipt
or recovery (or, if a purchase of Deutsche Marks on such date had not been
practicable due to currency market conditions generally, on the first date on
which it would have been practicable, it being required that the need for a
change of date be certified in the manner mentioned above). These indemnities
constitute a separate and independent obligation from the other obligations of
the Issuers, shall give rise to a separate and independent cause of action,
shall apply irrespective of any indulgence granted by any holder of a Security
and shall continue in full force and effect despite any other judgment, order,
claim or proof for a liquidated amount in respect of any sum due under any
Security.
SECTION 2.14. Substitution of Currency. Under the treaty of the
-------------------------
European Economic and Monetary Union (the "Treaty"), to which the Federal
Republic of Germany is a signatory, on January 1, 1999, and subject to the
fulfillment of certain conditions, the "Euro", a European single currency, may
replace all or some of the currencies of the member states of the European
Union, including the Deutsche Mark. If, pursuant to the Treaty, the Deutsche
Mark is replaced by the Euro, the payment of principal of, or interest and
Additional Amounts, if any, on, the Securities shall be effected in Euro, and
all appropriate adjustments relating thereto, including, without limitation,
adjustments related to the denominations in which the Securities are issued,
shall be made, all in conformity with legally applicable measures taken pursuant
to, or by virtue of, the Treaty. In addition, the regulations of the European
Commission relating to the Euro shall then apply to the Securities and this
Indenture. The circumstances and consequences described in this Section 2.15 do
not entitle the Issuers or any Holder of Securities to early redemption,
rescission, notice, repudiation, adjustment or renegotiation of the terms and
conditions of the Securities or this Indenture or to raise any other defense or
to request any compensation or claim, nor shall they affect any of the
obligations of the Issuers under the Securities or this Indenture.
ARTICLE 3
Redemption
----------
SECTION 3.01. Notices to Trustee. If the Issuers elect to redeem
-------------------
Securities pursuant to paragraph 5 of the Securities, they shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which the redemption
shall occur.
<PAGE>
38
The Issuers shall give each notice to the Trustee provided for in this
Section 3.01 at least 60 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Issuers to the effect that such
redemption shall comply with the conditions herein. If fewer than all the
Securities are to be redeemed, the record date relating to such redemption shall
be selected by the Issuers and given to the Trustee, which record date shall be
not fewer than 15 days after the date of notice to the Trustee. Any such notice
may be canceled at any time prior to notice of such redemption being delivered
to any Holder and shall thereby be void and of no effect.
SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than
---------------------------------------
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed in compliance with the requirements of the principal securities
exchange, if any, on which such Securities are listed and the requirements of
any depositary holding the global certificates representing the Securities, or,
if such Securities are not so listed or such exchange prescribes no method of
selection and the depositary, if any, holding the global certificates
representing the Securities imposes no requirements, on a pro rata basis, by lot
or by such other method that the Trustee in its sole discretion shall deem to be
fair and appropriate and in accordance with methods generally used at the time
of selection by fiduciaries in similar circumstances (and in such manner as
complies with applicable legal and exchange requirements). Any such
requirements of any such securities exchange not located in the United States
shall be specified by the Issuers in writing to the Trustee. The Trustee shall
make the selection from outstanding Securities not previously called for
redemption. The Trustee may select for redemption portions of the principal of
Securities that have denominations equal to or larger than DM1,000. Securities
and portions of them the Trustee selects shall be in amounts of DM1,000 or a
whole multiple of DM1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption. The Trustee shall notify the Issuers promptly of the Securities or
portions of Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not more
---------------------
than 60 days before a date for redemption of Securities, the Issuers shall
deliver or cause to be delivered, in accordance with Section 11.02, a notice of
redemption to each Holder whose Securities are to be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
<PAGE>
39
(2) the redemption price and the amount of accrued and unpaid
interest, if any, and Additional Amounts, if any, to be paid;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price plus accrued and unpaid
interest, if any, and Additional Amounts, if any;
(5) if fewer than all the outstanding Securities are to be redeemed,
the certificate numbers and principal amounts of the particular Securities
(or portion thereof) to be redeemed;
(6) that, unless the Issuers default in making such redemption payment
or the Paying Agent is prohibited from making such payment pursuant to the
terms of this Indenture, interest and Additional Amounts, if any, on
Securities (or portion thereof) called for redemption ceases to accrue on
and after the redemption date;
(7) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed;
(8) the Common Code, CUSIP or ISIN number, if any, printed on the
Securities being redeemed; and
(9) that no representation is made as to the correctness or accuracy
of the Common Code, CUSIP or ISIN number, if any, listed in such notice or
printed on the Securities.
At the Issuers' request, the Trustee shall give the notice of
redemption in the Issuers' name and at the Issuers' expense. In such event, the
Issuers shall provide the Trustee with the information required by this Section
3.03.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
-------------------------------
redemption is given in accordance with Section 3.03, Securities called for
redemption become due and payable on the redemption date and at the redemption
price plus accrued and unpaid interest and Additional Amounts, if any, stated in
the notice. Upon surrender to the Trustee or Paying Agent, such Securities
shall be paid at the redemption price stated in the notice, plus accrued and
unpaid interest and Additional Amounts, if any, to the redemption date;
provided, however, that if the redemption date is after a regular record date
- -------- -------
and on or prior to the payment date, the accrued interest shall be payable to
<PAGE>
40
the Securityholder of the redeemed Securities registered on the relevant record
date. Failure to give notice or any defect in the notice to any Holder shall not
affect the validity of the notice to any other Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to 10:00 a.m.
----------------------------
London time on the redemption date, the Issuers shall deposit with the Paying
Agent (or, if DCC or a Subsidiary of DCC is the Paying Agent, shall segregate
and hold in trust) money in Deutsche Marks sufficient to pay the redemption
price of and accrued and unpaid interest and Additional Amounts, if any, on all
Securities to be redeemed on that date other than Securities or portions of
Securities called for redemption that have been delivered by the Issuers to the
Trustee for cancelation.
SECTION 3.06. Securities Redeemed in Part. Upon surrender of a
----------------------------
Security that is redeemed in part, the Issuers shall execute and the Trustee
shall authenticate for the Holder (at the Issuers' expense) a new Security equal
in principal amount to the unredeemed portion of the Security surrendered.
ARTICLE 4
Covenants
---------
SECTION 4.01. Payment of Securities. The Issuers shall promptly pay
----------------------
the principal of and interest, liquidated damages and Additional Amounts, if
any, on the Securities on the dates and in the manner provided in the Securities
and in this Indenture. Principal, interest and Additional Amounts shall be
considered paid on the date due if at 10:00 a.m. London time on such date the
Trustee or the Paying Agent holds in accordance with this Indenture money in
Deutsche Marks sufficient to pay all principal, interest, liquidated damages and
Additional Amounts then due.
The Issuers shall pay interest on overdue principal at the rate
specified therefor in the Securities, and they shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. Reports to Holders of Securities. Notwithstanding that
---------------------------------
DCC may not be subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, DCC shall file with the Commission and provide the Trustee and
holders of Securities and prospective holders of Securities (upon request)
within 15 days after DCC files them with the Commission, copies of its annual
report and the information, documents and other reports that are specified in
Sections 13 and 15(d) of the Exchange Act. In addition, following a Public
Equity Offering, DCC shall furnish to the Trustee
<PAGE>
41
and Securityholders, promptly upon their becoming available, copies of the
annual report to shareholders and any other information provided by such Issuer
to its public shareholders generally. The Issuers shall comply with the other
provisions of Section 314(a) of the TIA.
SECTION 4.03. Limitation on Indebtedness. (a) DCC shall not, and
---------------------------
shall not permit any Restricted Subsidiary to, Incur, directly or indirectly,
any Indebtedness; provided, however, that DCC or any Restricted Subsidiary may
-------- -------
Incur Indebtedness, if on the date of such Incurrence and after giving effect
thereto, the Consolidated Coverage Ratio would be greater than 2.00:1.00 if such
Indebtedness is Incurred on or prior to the second anniversary of the date of
the original issuance of the Securities and 2.25:1.00 if such Indebtedness is
Incurred thereafter.
(b) Notwithstanding Section 4.03(a), DCC and its Restricted
Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness outstanding at any one time in an aggregate
principal amount not to exceed the greater of (A) 100% of the total
commitment under the Revolving Credit Agreement on the Closing Date (DM225
million) less the aggregate amount of Indebtedness incurred by all
Securitization Entities in connection with Qualified Securitization
Transactions that is outstanding at such time; or (B) 75% of accounts
receivable and 35% of inventory, in each case net of reserves and as shown
on the consolidated balance sheet of DCC as of the most recent month for
which financial statements are available from time to time (so that
Indebtedness incurred pursuant to this clause (B) is not at any time
greater than the permitted amount based on the most recent such financial
statements);
(ii) Indebtedness of DCC owed to, and held by, any Restricted
Subsidiary or Indebtedness of a Restricted Subsidiary owed to, and held by,
DCC or any other Restricted Subsidiary; provided, however, that any
-------- -------
subsequent issuance or transfer of any Capital Stock or any other event
that results in any such Restricted Subsidiary ceasing to be a Restricted
Subsidiary or any subsequent transfer of any such Indebtedness (except to
DCC or a Restricted Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the issuer thereof;
(iii) Indebtedness (A) represented by the Securities, any Exchange
Securities or any Private Exchange Securities, (B) outstanding on the
Closing Date (other than the Indebtedness described in clauses (i) and (ii)
above), (C) consisting of Refinancing Indebtedness Incurred in respect of
any Indebtedness described in this clause (iii) (including Indebtedness
Refinancing Refinancing
<PAGE>
42
Indebtedness) or the foregoing clause (i) and (D) consisting of Guarantees
of any Indebtedness not prohibited by this Indenture;
(iv) (A) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Restricted Subsidiary was
acquired by DCC or a Restricted Subsidiary (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the funds
or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted Subsidiary became a
Subsidiary of DCC or a Restricted Subsidiary or was otherwise acquired by
DCC or a Restricted Subsidiary); provided, however, that on the date that
-------- -------
such Restricted Subsidiary is acquired by DCC or a Restricted Subsidiary,
DCC would have been able to Incur $1.00 of additional Indebtedness pursuant
to Section 4.03(a) after giving effect to the Incurrence of such
Indebtedness pursuant to this clause (iv) and (B) Refinancing Indebtedness
Incurred by a Restricted Subsidiary in respect of Indebtedness Incurred by
such Restricted Subsidiary pursuant to this clause (iv);
(v) Indebtedness (A) in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds provided by DCC
and its Restricted Subsidiaries in the ordinary course of business and (B)
under Currency Agreements and Interest Rate Agreements entered into for
bona fide hedging purposes of DCC and its Restricted Subsidiaries in the
ordinary course of business; provided, however, that such Currency
-------- -------
Agreements and Interest Rate Agreements do not increase the Indebtedness of
DCC and its Restricted Subsidiaries outstanding at any time other than as a
result of fluctuations in foreign currency exchange rates or interest rates
or by reason of fees, indemnities and compensation payable thereunder;
(vi) Purchase Money Indebtedness and Capitalized Lease Obligations
in an aggregate principal amount not in excess of $10,000,000 at any time
outstanding;
(vii) Indebtedness arising from agreements of DCC or any of its
Restricted Subsidiaries providing for indemnification, adjustment of
purchase price, earn out or other similar obligations, in each case,
incurred or assumed in connection with the disposition of a Restricted
Subsidiary or any business or assets of DCC or a Restricted Subsidiary,
other than Guarantees of Indebtedness incurred by any Person acquiring all
or any portion of such business, assets or such Restricted Subsidiary for
the purpose of financing such acquisition; provided that the maximum
--------
assumable liability in respect of all such Indebtedness shall at no time
<PAGE>
43
exceed the gross proceeds actually received by DCC or its Restricted
Subsidiaries in connection with such disposition;
(viii) Indebtedness incurred by a Securitization Entity in a Qualified
Securitization Transaction that is Non-Recourse Indebtedness with respect
to DCC and its other Restricted Subsidiaries (except for Standard
Securitization Undertakings);
(ix) the Incurrence of Indebtedness by Foreign Subsidiaries which
does not exceed $5,000,000 at any one time outstanding;
(x) Indebtedness (other than Indebtedness permitted to be Incurred
pursuant to the foregoing paragraph (a) or any other clause of this
paragraph (b)) in an aggregate principal amount on the date of Incurrence
that, when added to all other Indebtedness Incurred pursuant to this clause
(x) and then outstanding, shall not exceed $20,000,000; and
(xi) Contribution Indebtedness.
(c) Notwithstanding the foregoing, neither of the Issuers may Incur
any Indebtedness pursuant to paragraph (b) above if the proceeds thereof are
used, directly or indirectly, to repay, prepay, redeem, defease, retire, refund
or refinance any Subordinated Obligations of such Issuer unless such
Indebtedness shall be subordinated to the Securities to at least the same extent
as such Subordinated Obligations.
(d) Notwithstanding any other provision of this Section 4.03, the
maximum amount of Indebtedness that DCC or any Restricted Subsidiary may Incur
pursuant to this Section 4.03 shall not be deemed to be exceeded solely as a
result of fluctuations in the exchange rates of currencies. For purposes of
determining the outstanding principal amount of any particular Indebtedness
Incurred pursuant to this Section 4.03, (i) Indebtedness Incurred pursuant to
the Revolving Credit Agreement prior to or on the Closing Date shall be treated
as Incurred pursuant to Section 4.03(b)(i), (ii) Indebtedness permitted by this
Section 4.03 need not be permitted solely by reference to one provision
permitting such Indebtedness but may be permitted in part by one such provision
and in part by one or more other provisions of this Section 4.03 permitting such
Indebtedness and (iii) in the event that Indebtedness meets the criteria of more
than one of the types of Indebtedness described in this Section 4.03, DCC, in
its sole discretion, shall classify such Indebtedness and only be required to
include the amount of such Indebtedness in one of such clauses.
<PAGE>
44
SECTION 4.04. Limitation on Restricted Payments. (a) DCC shall not,
----------------------------------
and shall not permit any Restricted Subsidiary, directly or indirectly, to (i)
declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving DCC) or similar payment (including any payment in
respect of the Additional Payment) to the direct or indirect holders of its
Capital Stock except dividends or distributions payable solely in its Capital
Stock (other than Disqualified Stock) or in options, warrants or other rights to
purchase such Capital Stock and except dividends or distributions payable to DCC
or another Restricted Subsidiary (and, if such Restricted Subsidiary has
shareholders other than DCC or other Restricted Subsidiaries, to its other
shareholders on a pro rata basis), (ii) purchase, redeem, retire or otherwise
acquire for value any Capital Stock of DCC or any Restricted Subsidiary held by
Persons other than DCC or another Restricted Subsidiary, (iii) purchase,
repurchase, redeem, defease or otherwise acquire or retire for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition) or (iv) make any Restricted
Investment in any Person (any such dividend, distribution, purchase, redemption,
repurchase, defeasance, other acquisition, retirement or Investment being herein
referred to as a "Restricted Payment") if at the time DCC or such Restricted
Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) DCC could not Incur at least $1.00 of additional Indebtedness
under Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the board of directors of DCC, whose
determination shall be conclusive and evidenced by a resolution of such
board of directors) declared or made subsequent to the Closing Date would
exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal
quarter immediately following the fiscal quarter during which the
Closing Date occurs to the end of the most recent fiscal quarter for
which financial statements are available (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such
deficit);
<PAGE>
45
(B) the aggregate Net Cash Proceeds received by DCC from the
issue or sale of its Capital Stock (other than Disqualified Stock) or
other capital contributions subsequent to the Closing Date other than
an issuance or sale to (x) a Subsidiary of DCC or (y) an employee
stock ownership plan or other trust established by DCC or any of its
Subsidiaries to the extent such sale to an employee stock ownership
plan or similar trust is financed by loans from, or is Guaranteed by,
DCC or any Restricted Subsidiary unless such loans have been repaid in
cash prior to the date of such determination;
(C) the amount by which Indebtedness of DCC or its Restricted
Subsidiaries is reduced on DCC's consolidated balance sheet upon the
conversion or exchange (other than by a Subsidiary of DCC) subsequent
to the Closing Date of any Indebtedness of DCC or its Restricted
Subsidiaries convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of DCC (less the amount of any cash or the fair
market value of other property distributed by DCC or any Restricted
Subsidiary upon such conversion or exchange), plus the amount of cash
and the fair market value of any other property (determined as
provided above) received by DCC or any Restricted Subsidiary upon such
conversion or exchange; and
(D) the amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from (i) payments of dividends,
repayments of the principal of loans or advances or other transfers of
assets to DCC or any Restricted Subsidiary from Unrestricted
Subsidiaries or the disposal of such Investments or (ii) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries
(valued in each case as provided in the definition of "Investment")
not to exceed, in the case of any Unrestricted Subsidiary, the amount
of Investments previously made by DCC or any Restricted Subsidiary in
such Unrestricted Subsidiary, which amount was included in the
calculation of the amount of Restricted Payments, less (E) the
aggregate principal amount of any outstanding Contribution
Indebtedness.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any Restricted Payment made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Capital Stock of DCC
(other than Disqualified Stock and other than Capital Stock issued or sold
to a Subsidiary of DCC or an employee stock ownership plan or other trust
established by DCC or
<PAGE>
46
any of its Subsidiaries to the extent such sale to an employee stock
ownership plan or similar trust is financed by loans from, or is Guaranteed
by, DCC or any Restricted Subsidiary unless such loans have been repaid in
cash prior to the date of such determination) or a substantially concurrent
capital contribution to DCC; provided, however, that (A) such Restricted
-------- -------
Payment shall be excluded in the calculation of the amount of Restricted
Payments under clause (3) of Section 4.04(a) and (B) the Net Cash Proceeds
from such sale applied in the manner set forth in this clause (i) shall be
excluded from the calculation of amounts under clause (3)(B) of Section
4.04(a);
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations of DCC or
its Restricted Subsidiaries made by exchange for, or out of the proceeds
of, the substantially concurrent sale of, Indebtedness of DCC or its
Restricted Subsidiaries that is permitted to be Incurred pursuant to
Section 4.03(b); provided, however, that such purchase, repurchase,
-------- -------
redemption, defeasance or other acquisition or retirement for value shall
be excluded in the calculation of the amount of Restricted Payments under
clause (3) of Section 4.04(a);
(iii) any purchase or redemption of Subordinated Obligations of any
Subsidiary of DCC from Net Available Cash to the extent permitted by
Section 4.06; provided, however, that such purchase or redemption shall be
-------- -------
excluded in the calculation of the amount of Restricted Payments under
clause (3) of Section 4.04(a);
(iv) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with Section 4.04(a); provided, however, that such dividend shall be
-------- -------
included in the calculation of the amount of Restricted Payments under
clause (3) of Section 4.04(a);
(v) the repurchase or other acquisition of shares of, or options to
purchase shares of, common stock of DCC or any of its Subsidiaries from
employees, former employees, directors or former directors of DCC or any of
its Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors), pursuant to the terms of the
agreements (including employment agreements) or plans (or amendments
thereto) approved by the relevant board of directors under which such
individuals purchase or sell, or are granted the option to purchase or
sell, shares of such common stock; provided, however, that the aggregate
-------- -------
amount of such repurchases or acquisitions shall not exceed $2,000,000 in
any calendar year or $5,000,000 in total; provided further, however, that
---------------- -------
such
<PAGE>
47
repurchases and other acquisitions shall be excluded in the calculation of
the amount of Restricted Payments under clause (3) of Section 4.04(a);
(vi) repurchases of Capital Stock deemed to occur upon the exercise
of stock options if such Capital Stock represents a portion of the exercise
price thereof; provided further, however, that such repurchases shall be
-------- ------- -------
excluded in the calculation of the amount of Restricted Payments under
clause (3) of Section 4.04(a);
(vii) any purchases of Capital Stock of Univega or the MS Sport Group
for aggregate consideration not in excess of $7,000,000; provided, however,
-------- -------
that such purchases shall be included in the calculation of the amount of
Restricted Payments under clause (3) of Section 4.04(a);
(viii) any purchases of Capital Stock of Derby Holdings South Africa
for aggregate consideration not in excess of $2,000,000; provided, however,
-------- -------
that such purchases shall not be included in the calculation of the amount
of Restricted Payments under clause (3) of Section 4.04(a); or
(ix) any distribution on or in respect of any Capital Stock of DCC
or any Restricted Subsidiary or similar payment made in connection with any
sale of Excluded Assets undertaken in accordance with the terms of the
Recapitalization Agreement in an aggregate amount not in excess of
$300,000; provided, however, that such distribution or payment shall not be
-------- -------
included in the calculation of the amount of Restricted Payments under
clause (3) of Section 4.04(a).
SECTION 4.05. Limitation on Restrictions on Distributions from
------------------------------------------------
Restricted Subsidiaries. DCC shall not, and shall not permit any Restricted
- ------------------------
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligations owed to either of the
Issuers, (ii) make any loans or advances to either of the Issuers or (iii)
transfer any of its property or assets to either of the Issuers, except:
(1) any encumbrance or restriction pursuant to an agreement in effect
at, or entered into on, the Closing Date;
(2) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary prior to the date on which such Restricted
Subsidiary was acquired by DCC or another Restricted Subsidiary or of
another Person that is assumed by DCC or any Restricted Subsidiary in
connection with the acquisition of assets
<PAGE>
48
from, or merger or consolidation with, such Person (other than Indebtedness
Incurred as consideration paid in connection with, in contemplation of, or
to provide all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Restricted Subsidiary or was
otherwise acquired by DCC or another Restricted Subsidiary) and outstanding
on such date;
(3) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to any agreement not relating to any Indebtedness in
existence when a Person becomes a Subsidiary of DCC or any other Restricted
Subsidiary or when such assets are acquired by DCC or any Restricted
Subsidiary, that is not created in contemplation of such Person becoming
such a Subsidiary or such acquisition;
(4) any encumbrance or restriction pursuant to an agreement effecting
a refinancing of Indebtedness, including agreements that increase the
amount of such Indebtedness to the extent otherwise permitted by this
Indenture, Incurred pursuant to an agreement referred to in clause (1) or
(2) of this Section 4.05 or this clause (4) or contained in any amendment
to an agreement referred to in clause (1) or (2) of this Section 4.05 or
this clause (4); provided, however, that the encumbrances and restrictions
-------- -------
contained in any such refinancing agreement or amendment are no less
favorable to holders of the Securities than the encumbrances and
restrictions contained in such predecessor agreements;
(5) in the case of clause (iii) any encumbrance or restriction (A)
that restricts in a customary manner the subletting, assignment or transfer
of any property or asset that is subject to a lease, license or similar
contract, or the assignment or transfer of any lease, license or contract,
(B) that is or was created by virtue of any transfer of, agreement to
transfer, option or right with respect to, or Lien on, any property or
assets of DCC or any Restricted Subsidiary not otherwise prohibited by this
Indenture or (C) contained in security agreements securing Indebtedness of
a Restricted Subsidiary to the extent such encumbrance or restriction
restricts the transfer of the property subject to such security agreements;
(6) with respect to a Restricted Subsidiary, any restriction imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition;
(7) any agreement or instrument governing Capital Stock of any person
that is in effect on the date such Person is acquired by DCC or a
Restricted
<PAGE>
49
Subsidiary and that is not created in contemplation of such acquisition or
of such Person becoming a Subsidiary of DCC or a Restricted Subsidiary;
(8) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(9) any Purchase Money Security or other Indebtedness or other
contractual requirements of a Securitization Entity in connection with a
Qualified Securitization Transaction; provided, that such restrictions
--------
apply only to such Securitization Entity; and
(10) any agreement or instrument governing Indebtedness of Foreign
Subsidiaries operating in jurisdictions in which the Issuers, as of the
Closing Date, do not have any significant operations; provided, however,
-------- -------
that, at the time such agreement or instrument is executed by the parties
thereto, the aggregate earnings before interest, taxes, depreciation and
amortization of such Foreign Subsidiaries for the period of the most recent
four consecutive fiscal quarters for which financial statements are
available (calculated, in the case of each such Foreign Subsidiary, in a
manner consistent with the calculation of EBITDA, and, in the case of each
such Foreign Subsidiary that is acquired by DCC, on a pro forma basis as if
such acquisition had occurred on the first day of such period) shall not
exceed 10% of EBITDA for such period.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock. (a)
---------------------------------------------------
DCC shall not, and shall not permit any Restricted Subsidiary to, make any Asset
Disposition unless (i) DCC or such Restricted Subsidiary receives consideration
(including by way of relief from, or by any other Person assuming sole
responsibility for, any liabilities, contingent or otherwise) at the time of
such Asset Disposition at least equal to the fair market value, as determined in
good faith by the board of directors of DCC or such Restricted Subsidiary, as
the case may be, of the shares and assets subject to such Asset Disposition,
(ii) at least 80% of the consideration thereof received by DCC or such
Restricted Subsidiary is in the form of cash or cash equivalents and (iii) an
amount equal to 100% of the Net Available Cash from such Asset Disposition is
applied by DCC or such Restricted Subsidiary, as the case may be, (A) first, to
-----
the extent the Issuers elect (or are required by the terms of the Revolving
Credit Agreement or any secured refinancing thereof (including refinancings that
increase the amount of Indebtedness outstanding to the extent otherwise
permitted by this Indenture)), to prepay, repay, redeem or purchase Indebtedness
of the Issuers or a Restricted Subsidiary of DCC outstanding under the Revolving
Credit Agreement or any such refinancing referred to above within one year from
the later of the date of such Asset Disposition or the receipt of such Net
Available Cash; (B) second, to the extent of the balance of Net Available
------
<PAGE>
50
Cash after application in accordance with clause (A), to the extent DCC or such
Restricted Subsidiary elects, to reinvest in Additional Assets (including by
means of an Investment in Additional Assets by a Restricted Subsidiary with Net
Available Cash received by DCC or another Restricted Subsidiary) within one year
from the later of such Asset Disposition or the receipt of such Net Available
Cash (or DCC or such a Restricted Subsidiary enters into an agreement to
reinvest in Additional Assets within one year from the later of such Asset
Disposition or the receipt of such Net Available Cash, which reinvestment must
be consummated within 18 months from the later of such Asset Disposition or the
receipt of such Available Net Cash); (C) third, to the extent of the balance of
-----
such Net Available Cash after application in accordance with clauses (A) and
(B), to make an Offer (as defined in Section 4.06(b)) to purchase Securities
pursuant to and subject to the conditions of Section 4.06(b); provided, however,
-------- -------
that, if the Issuers elect (or are required by the terms of any other Senior
Indebtedness of the Issuers or any Restricted Subsidiary), such Offer may be
made ratably to purchase the Securities and other Senior Indebtedness of the
Issuers or any Restricted Subsidiary and (D) fourth, to the extent of the
------
balance of such Net Available Cash after application in accordance with clauses
(A), (B) and (C), for any other general corporate purpose not prohibited by this
Indenture, including Restricted Payments; provided, however that, in connection
-------- -------
with any prepayment, repayment or purchase of Indebtedness pursuant to clause
(A), (C) or (D) above, DCC or such Restricted Subsidiary shall retire such
Indebtedness and shall cause the related loan commitment, if any, to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. Notwithstanding the foregoing provisions of this Section
4.06, DCC and the Restricted Subsidiaries shall not be required to apply any Net
Available Cash in accordance with this Section 4.06(a) except to the extent that
the aggregate Net Available Cash from all Asset Dispositions that is not applied
in accordance with this Section 4.06(a) exceeds $5,000,000. The provisions of
this Section 4.06 shall not apply to any consideration received by DCC or any
Restricted Subsidiary in connection with any sale of Excluded Assets undertaken
in accordance with the terms of the Recapitalization Agreement to the extent
that the aggregate amount of such consideration does not exceed $300,000.
For the purposes of this Section 4.06, the following are deemed to be
cash: (x) the assumption of Indebtedness of DCC (other than Disqualified Stock
of DCC) or any Restricted Subsidiary and the release of DCC or such Restricted
Subsidiary from all liability on such Indebtedness in connection with such Asset
Disposition, (y) securities received by DCC or any Restricted Subsidiary from
the transferee that are promptly converted by DCC or such Restricted Subsidiary
into cash and (z) any Designated Non-Cash Consideration received by DCC or any
Restricted Subsidiary in such Asset Disposition having an aggregate fair market
value, taken together with all other Designated Non-Cash Consideration received
pursuant to this clause (z) that is at that time outstanding, not to exceed 3%
of Total Assets at the time of the receipt of such
<PAGE>
51
Designated Non-Cash Consideration (with the fair market value of each item of
Designated Non-Cash Consideration being measured at the time received without
giving effect to subsequent changes in value).
(b) In the event of an Asset Disposition that requires the purchase of
Securities (and other Senior Indebtedness of the Issuers or any Restricted
Subsidiary) pursuant to clause (a)(iii)(C) of this Section 4.06, the Issuers
shall be required to purchase Securities (and other Senior Indebtedness of the
Issuers or any Restricted Subsidiary) tendered pursuant to an offer by the
Issuers for the Securities (and other Senior Indebtedness of the Issuers or any
Restricted Subsidiary) (the "Offer") at a purchase price of 100% of their
principal amount (without premium) plus accrued and unpaid interest and
Additional Amounts, if any, to the date of purchase (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant payment date and Additional Amounts, if any, in respect thereof) in
accordance with the procedures (including prorationing in the event of
oversubscription) set forth in Section 4.06(d). If the aggregate purchase price
of Securities (and other Senior Indebtedness of the Issuers or any Restricted
Subsidiary) tendered pursuant to the Offer is less than the Net Available Cash
allotted to the purchase of the Securities (and other Senior Indebtedness of the
Issuers or any Restricted Subsidiary), the Issuers shall apply the remaining Net
Available Cash in accordance with clause (a)(iii)(D) of this Section 4.06. The
Issuers shall not be required to make an Offer for Securities (and other Senior
Indebtedness of the Issuers or any Restricted Subsidiary) pursuant to this
Section 4.06 if the Net Available Cash available therefor (after application of
the proceeds as provided in clauses (A) and (B) of Section 4.06 (a)(iii)) is
less than $10,000,000 for any particular Asset Disposition (which lesser amount
shall be carried forward for purposes of determining whether an Offer is
required with respect to the Net Available Cash from any subsequent Asset
Disposition). Upon completion of any such offer pursuant to Section 4.06
(a)(iii)(C), the Net Available Cash amount shall be reset at zero.
(c) (1) Promptly, and in any event within 10 days after the Issuers
become obligated to make an Offer, the Issuers shall be obligated to deliver to
the Trustee and to deliver or cause to be delivered, in accordance with Section
11.02, a notice of an Offer to each Holder whose Securities are to be
purchased. The notice shall state that the Holder may elect to have his
Securities purchased by the Issuers either in whole or in part (subject to
prorationing as hereinafter described in the event the Offer is oversubscribed)
in integral multiples of DM1,000 of principal amount, at the applicable purchase
price. The notice shall specify a purchase date not less than 30 days nor more
than 60 days after the date of such notice (the "Purchase Date") and shall
contain (or, in the case of a notice by publication, shall contain instructions
on how to obtain from the Issuers by first-class mail, postage prepaid) such
information concerning the business of the Issuers which the Issuers in good
faith believe shall enable such Holders to make an informed decision
<PAGE>
52
(which at a minimum shall include (i) the most recently filed Annual Report on
Form 10-K (including audited consolidated financial statements) of DCC, the most
recent subsequently filed Quarterly Report on Form 10-Q and any Current Report
on Form 8-K of DCC filed subsequent to such Quarterly Report, other than Current
Reports describing Asset Dispositions otherwise described in the offering
materials (or corresponding successor reports), (ii) a description of material
developments in the Issuers' business subsequent to the date of the latest of
such reports and (iii) if material, appropriate pro forma financial information)
and all instructions and materials necessary to tender Securities pursuant to
the Offer, together with the address referred to in clause (3).
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided above, the Issuers shall deliver to the
Trustee an Officers' Certificate as to (i) the amount of the Offer (the "Offer
Amount"), (ii) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (iii) the compliance
of such allocation with the provisions of Section 4.06(a). On such date, the
Issuers shall also irrevocably deposit with the Trustee or with a Paying Agent
(or, if DCC or a Subsidiary of DCC is the Paying Agent, segregate and hold in
trust) an amount equal to the Offer Amount to be invested in Temporary Cash
Investments and to be held for payment in accordance with the provisions of this
Section 4.06. Upon the expiration of the period for which the Offer remains
open ( the "Offer Period"), the Issuers shall deliver to the Trustee for
cancelation the Securities or portions thereof that have been properly tendered
to and are to be accepted by the Issuers. The Trustee (or the Paying Agent, if
not the Trustee) shall, on the date of purchase, mail or deliver payment to each
tendering Holder in the amount of the purchase price. In the event that the
aggregate purchase price of the Securities delivered by the Issuers to the
Trustee is less than the Offer Amount applicable to the Securities, the Trustee
shall deliver the excess to the Issuers immediately after the expiration of the
Offer Period for application in accordance with this Section 4.06.
(3) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Issuers at the address specified in the notice at least three Business Days
prior to the Purchase Date. Holders shall be entitled to withdraw their election
if the Trustee or the Issuers receive, not later than one Business Day prior to
the Purchase Date, a facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Security which was delivered by the
Holder for purchase and a statement that such Holder is withdrawing his election
to have such Security purchased. If at the expiration of the Offer Period the
aggregate principal amount of Securities included in the Offer surrendered by
Holders thereof exceeds the Offer Amount, the Issuers shall select the
Securities to be purchased in compliance with the requirements of the principal
securities exchange, if any, on which such Securities are listed and the
requirements of any
<PAGE>
53
depositary holding the global certificates representing the Securities, or, if
the Securities are not so listed or such exchange prescribes no method of
selection and the depositary, if any, holding the global certificates
representing the Securities imposes no requirement, subject to applicable law,
on a pro rata basis (with such adjustments as may be deemed appropriate by the
Issuers so that only Securities in denominations of DM1,000, or integral
multiples thereof, shall be purchased). Holders whose Securities are purchased
only in part shall be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered.
(4) At the time the Issuers deliver Securities to the Trustee which
are to be accepted for purchase, the Issuers shall also deliver an Officers'
Certificate stating that such Securities are to be accepted by the Issuers
pursuant to and in accordance with the terms of this Section 4.06. A Security
shall be deemed to have been accepted for purchase at the time the Trustee,
directly or through an agent, mails or delivers payment therefor to the
surrendering Holder.
(d) The Issuers shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations, including any securities laws of The Netherlands and the
requirements of the Luxembourg Stock Exchange or any other securities exchange
on which the Securities are listed, to the extent such laws or regulations or
requirements are applicable, in connection with the repurchase of Securities
pursuant to this Section 4.06. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Section 4.06,
the Issuers shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this Section 4.06 by
virtue thereof.
SECTION 4.07. Limitation on Transactions with Affiliates. (a) DCC
-------------------------------------------
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly, enter into or conduct any transaction (including the purchase, sale,
lease or exchange of any property or the rendering of any service) with any
Affiliate of DCC (an "Affiliate Transaction") on terms (i) that are less
favorable to DCC or such Restricted Subsidiary, as the case may be, than those
that could be obtained at the time of such transaction in arm's-length dealings
with a Person who is not such an Affiliate, (ii) if such Affiliate Transaction
involves an aggregate amount in excess of $5,000,000, (1) set forth in writing
and (2) that have been approved by a majority of the members of the board of
directors of DCC or such Restricted Subsidiary, as the case may be, having no
personal stake in such Affiliate Transaction, or have been determined by a
nationally recognized appraisal or investment banking firm to be fair, from a
financial standpoint, to DCC and its Restricted Subsidiaries and (iii) if such
Affiliate Transaction involves an amount in excess of $10,000,000, that have
been determined by a nationally recognized appraisal or
<PAGE>
54
investment banking firm to be fair, from a financial standpoint, to DCC and its
Restricted Subsidiaries.
(b) The provisions of Section 4.07(a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant Section 4.04 or any Permitted
Investment, (ii) any issuance of securities, or other payments, awards or grants
in cash, or otherwise pursuant to, or the funding of, employment arrangements,
stock options and stock ownership plans approved by the board of directors of
DCC or such Restricted Subsidiary, as the case may be, (iii) the grant of stock
options or similar rights to employees and directors of DCC or such Restricted
Subsidiary pursuant to plans approved by the board of directors of DCC or such
Restricted Subsidiary, as the case may be, (iv) loans or advances to employees
in the ordinary course of business in accordance with past practices of DCC or
such Restricted Subsidiary, as the case may be, but in any event not to exceed
$4,000,000 in the aggregate outstanding at any one time, (v) the entering into,
maintaining or performance of any employment contract, collective bargaining
agreement, benefit plan, program or arrangement, related trust agreement or any
other similar arrangement for or with any employee, officer or director entered
into before or after the Closing Date in the ordinary course of business,
including vacation, health, insurance deferred compensation, retirement, savings
or other similar plans, (vi) the payment of customary annual management,
consulting and advisory fees and related expenses to the Investor Group and any
of their respective Affiliates made pursuant to any financial advisory,
financing, underwriting or placement agreement or in respect of other investment
banking activities, including, without limitation, in connection with
acquisitions or divestitures which are approved by the board of directors of DCC
or any Restricted Subsidiary in good faith; provided, however, that the
-------- -------
aggregate amount of such fees and related expenses shall not exceed $2,000,000
in any calendar year, (vii) reasonable fees and compensation paid to, and
indemnity provided on behalf of, officers, directors, employees or consultants
of DCC or any of its Subsidiaries as determined in good faith by the board of
directors of DCC or such Subsidiary, as the case may be, (viii) any agreement in
effect as of the Closing Date or any amendment or replacement thereto or any
transaction contemplated thereby (including pursuant to any amendment or
replacement thereto) so long as any such amendment or replacement agreement is
not more disadvantageous to the holders of Securities in any material respect
than the original agreement as in effect on the Closing Date, (ix) transactions
with customers, clients, suppliers, joint venture partners or purchasers or
sellers of goods or services, in each case in the ordinary course of business
(including, without limitation, pursuant to joint venture agreements) and
otherwise in compliance with the terms of this Indenture and which are fair to
DCC and its Restricted Subsidiaries, in the reasonable determination of the
board of directors of DCC or such Restricted Subsidiary, as the case may be, or
are on terms at least as favorable as might reasonably have been obtained at
such time from an unaffiliated party, (x) transactions effected as part of a
Qualified Securitization Transaction, (xi) any transaction between
<PAGE>
55
DCC and a Wholly Owned Subsidiary or between or among Wholly Owned Subsidiaries
and (xii) any sale of Excluded Assets undertaken in accordance with the terms of
the Recapitalization Agreement; provided that the consideration received by DCC
--------
or any Restricted Subsidiary in connection with such sale does not exceed
$300,000.
SECTION 4.08. Change of Control. (a) Upon a Change of Control, each
------------------
Holder shall have the right to require that the Issuers repurchase all or any
part of such Holder's Securities at a purchase price in cash equal to 101% of
the principal amount thereof plus accrued and unpaid interest and Additional
Amounts, if any, to the date of repurchase (subject to the right of Holders of
record on a record date to receive interest due on the relevant payment date and
Additional Amounts, if any, in respect thereof), in accordance with the terms
contemplated in Section 4.08(b); provided, however, that notwithstanding the
-------- -------
occurrence of a Change in Control, the Issuers shall not be obligated to
purchase the Securities pursuant to this Section 4.08 in the event that they
have exercised their right to redeem all the Securities under paragraph 5 of the
Securities. In the event that at the time of such Change of Control the terms
of the Bank Indebtedness restrict or prohibit the repurchase of Securities
pursuant to this Section 4.08, then prior to delivery of the notice to Holders
provided for in Section 4.08(b) but in any event within 30 days following any
Change of Control, the Issuers shall (i) repay in full all Bank Indebtedness or
(ii) obtain the requisite consent under the agreements governing the Bank
Indebtedness to permit the repurchase of the Securities as provided for in
Section 4.08(b).
(b) Within 30 days following any Change of Control (except as
provided in the proviso to the first sentence of Section 4.08(a)), the Issuers
shall deliver a notice, in accordance with Section 11.02, to each Holder, with a
copy of such notice to the Trustee (the "Change of Control Offer"), stating:
(1) that a Change of Control has occurred and that such Holder has the
right to require the Issuers to purchase such Holder's Securities at a
purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest and Additional Amounts, if any, to the date of
repurchase (subject to the right of Holders of record on a relevant record
date to receive interest on the relevant payment date and Additional
Amounts, if any, in respect thereof);
(2) the circumstances and relevant facts and financial information
regarding such Change of Control;
(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is delivered, except as
otherwise may be required by applicable law); and
<PAGE>
56
(4) the instructions determined by the Issuers, consistent with this
Section 4.08, that a Holder must follow in order to have its Securities
purchased.
(c) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Issuers at the address specified in the notice at least three Business Days
prior to the purchase date. Holders shall be entitled to withdraw their election
if the Trustee or the Issuers receive, not later than one Business Day prior to
the purchase date, a facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Security which was delivered for
purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the Issuers
under this Section 4.08 shall be delivered to the Trustee for cancelation, and
the Issuers shall pay the purchase price plus accrued and unpaid interest and
Additional Amounts, if any, to the Holders entitled thereto.
(e) Notwithstanding the foregoing provisions of this Section 4.08,
the Issuers shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in Section 4.08(b) applicable to a Change of Control Offer made by the Issuers
and purchases all Securities validly tendered and not withdrawn under such
Change of Control Offer.
(f) The Issuers shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations, including any securities laws of The Netherlands and the
requirements of the Luxembourg Stock Exchange or any other securities exchange
on which the Securities are listed, to the extent such laws or regulations or
requirements are applicable, in connection with the repurchase of Securities
pursuant to this Section 4.08. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Section 4.08,
the Issuers shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached their obligations under this Section 4.08
by virtue thereof.
SECTION 4.09. Compliance Certificate. The Issuers shall deliver to
-----------------------
the Trustee within 120 days after the end of each fiscal year of DCC an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Issuers they would normally have
knowledge of any Default and whether or not the signers know of any Default that
occurred during such period. If they do, the certificate shall describe the
Default, its status and what action the Issuers are taking or propose to
<PAGE>
57
take with respect thereto. The Issuers also shall comply with Section 314(a)(4)
of the TIA.
SECTION 4.10. Further Instruments and Acts. Upon request of the
-----------------------------
Trustee, the Issuers shall execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.11. Future Note Guarantors. DCC shall cause each Domestic
-----------------------
Subsidiary that Incurs Indebtedness and each Restricted Subsidiary that is a
Guarantor of Indebtedness Incurred by either of the Issuers pursuant to clauses
(b)(i) or (b)(vii) of Section 4.03 to become a Note Guarantor, and, if
applicable, execute and deliver to the Trustee a supplemental indenture
substantially in the form of Exhibit C pursuant to which such Restricted
Subsidiary shall Guarantee payment of the Securities. Each Note Guarantee shall
be limited to an amount not to exceed the maximum amount that can be Guaranteed
by the applicable Restricted Subsidiary without rendering the Note Guarantee, as
it relates to such Restricted Subsidiary, voidable under applicable law relating
to fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally.
SECTION 4.12. Limitation on Lines of Business. DCC shall not, and
--------------------------------
shall not permit any Restricted Subsidiary to, engage in any business, other
than a Related Business.
SECTION 4.13. Limitation on the Sale or Issuance of Capital Stock of
------------------------------------------------------
Restricted Subsidiaries. DCC shall not sell or otherwise dispose of any shares
- ------------------------
of Capital Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
shares of its Capital Stock except: (i) to DCC or a Wholly Owned Subsidiary;
(ii) if, immediately after giving effect to such issuance, sale or other
disposition, none of DCC or any of its Subsidiaries own any Capital Stock of
such Restricted Subsidiary, or (iii) if, immediately after giving effect to such
issuance or sale, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary and any Investment in such Person remaining after giving
effect thereto would have been permitted to be made under Section 4.04 if made
on the date of such issuance, sale or other disposition. The proceeds of any
sale of such Capital Stock permitted hereby shall be treated as Net Available
Cash from an Asset Disposition and must be applied in accordance with Section
4.06.
SECTION 4.14. Limitation on Liens. DCC shall not, and shall not
--------------------
permit any Restricted Subsidiary to, directly or indirectly, Incur or permit to
exist any Lien of any nature whatsoever on any of its property or assets
(including Capital Stock of
<PAGE>
58
a Restricted Subsidiary), whether owned on the Closing Date or thereafter
acquired, other than Permitted Liens, without effectively providing that the
Securities shall be secured equally and ratably with (or prior to) the
obligations so secured for so long as such obligations are so secured; provided,
--------
however, that DCC may Incur other Liens to secure Indebtedness as long as the
- -------
amount of outstanding Indebtedness secured by Liens Incurred pursuant to this
proviso does not exceed 5% of Consolidated Net Tangible Assets, as determined
based on the consolidated balance sheet of DCC as of the end of the most recent
fiscal quarter for which financial statements are available.
SECTION 4.15. Limitation on Sale/Leaseback Transactions. DCC shall
------------------------------------------
not, and shall not permit any Restricted Subsidiary to, enter into any
Sale/Leaseback Transaction with respect to any property unless (i) DCC or such
Restricted Subsidiary would be entitled to (A) Incur Indebtedness in an amount
equal to the Attributable Debt with respect to such Sale/Leaseback Transaction
pursuant to Section 4.03 and (B) create a Lien on such property securing such
Attributable Debt without equally and ratably securing the Securities pursuant
to Section 4.14, (ii) the net proceeds received by DCC or such Restricted
Subsidiary in connection with such Sale/Leaseback Transaction are at least equal
to the fair market value (as determined in good faith by the board of directors)
of DCC or such Restricted Subsidiary, as the case may be, of such property and
(iii) the transfer of such property is permitted by, and DCC applies the
proceeds of such transaction in compliance with, Section 4.06.
SECTION 4.16. Additional Amounts; Withholding Taxes. (a) All payments
-------------------------------------
made by the Issuers on the Securities shall be made without withholding or
deduction for, or on account of, any present or future taxes, duties,
assessments or governmental charges of whatever nature (collectively, "Taxes")
imposed or levied by or on behalf of the United States, The Netherlands or any
other jurisdiction in which either of the Issuers is organized or engaged in
business for tax purposes or, in each case, any political subdivision thereof or
any authority having power to tax therein (each a "Tax Authority"), unless the
withholding or deduction of such Taxes is then required by law. If any deduction
or withholding for, or on account of, any Taxes of any Tax Authority shall at
any time be required on any payments made by the Issuers with respect to the
Securities, including payments of principal, redemption price, interest,
liquidated damages or premium, the Issuers shall pay such additional amounts
(the "Additional Amounts") as may be necessary in order that the net amounts
received in respect of such payments by the holders of the Securities or the
Trustee, as the case may be, after such withholding or deduction, equal the
respective amounts which would have been received in respect of such payments in
the absence of such withholding or deduction.
(b) Section 4.16(a), however, shall not apply to (i) any Taxes which
would not have been imposed but for the existence of any present or former
connection
<PAGE>
59
between a holder of Securities and the United States, The Netherlands or any
other jurisdiction in which either of the Issuers is organized or engaged in
business for tax purposes other than the mere receipt of such payment or the
holding of such Securities; (ii) any Taxes which would not have been imposed but
for the presentation by a holder of Securities for payment on a date more than
30 days after the date on which such payment became due and payable or the date
on which payment thereof was duly provided for; (iii) the extent that such Taxes
would not have been imposed but for the failure of a holder of Securities to
comply with any certification, identification or other reporting requirements
concerning the nationality, residence, identity or connection with The
Netherlands of such holder if (A) such compliance is required or imposed by law
as a precondition to exemption from all or a part of such Taxes, (B) such holder
may legally comply with such requirements and (C) at least 30 days prior to the
date on which the Issuers shall apply this clause (iii), the Issuers shall have
notified all holder of Securities of such requirements; (iv) any estate,
inheritance, gift, sale, transfer, personal property or similar tax, assessment
or governmental charge; or (v) any combination of the items set forth in clause
(i), (ii), (iii) or (iv).
(c) The Issuers shall pay any present or future stamp, court or
documentary taxes, or any other excise or property taxes, charges or similar
levies which arise in any jurisdiction from the execution, delivery or
registration of this Indenture or the Securities or any other document or
instrument referred to herein or therein, or the receipt of any payments with
respect to the Securities, excluding any such taxes, charges or similar levies
imposed by any jurisdiction outside of the United States, The Netherlands or any
jurisdiction in which a Paying Agent is located, other than those resulting
from, or required to be paid in connection with, the enforcement of the
Securities or any other such document or instrument following the occurrence of
any Event of Default with respect to the Securities.
(d) No Additional Amounts shall be paid with respect to any payment on
a Security to a holder that is a fiduciary or partnership or other than the sole
beneficial owner of such payment to the extent a beneficiary or settlor with
respect to such fiduciary or member of such partnership or beneficial owner
would not have been entitled to receive payment of the Additional Amounts had
the beneficiary, settlor, member or beneficial owner been the holder of the
Securities.
(e) Upon request, the Issuers shall provide the Trustee with
documentation satisfactory to the Trustee evidencing the payment of Additional
Amounts. Copies of such documentation shall be made available to the holders of
Securities upon request.
<PAGE>
60
ARTICLE 5
Merger and Consolidation
------------------------
SECTION 5.01. (a) When Issuers May Merge or Transfer Assets. Neither
------------------------------------------
of the Issuers shall consolidate with or merge with or into, or convey, transfer
or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a corporation organized and existing under the laws of
the United States, any state thereof or the District of Columbia, in the
case of DCC, or The Netherlands, in the case of Lyon, and the Successor
Company (if not an Issuer) shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, in form reasonably
satisfactory to the Trustee, all the obligations of such Issuer under the
Securities and this Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Restricted Subsidiary as a result of such transaction as
having been Incurred by the Successor Company or such Restricted Subsidiary
at the time of such transaction), no Default shall have occurred and be
continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a);
(iv) the Issuers shall have delivered to the Trustee Officers'
Certificates and Opinions of Counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture, if any, comply with
this Indenture; and
(v) the Issuers shall have delivered to the Trustee opinions of tax
counsel reasonably acceptable to the Trustee stating that (A) any payment
of principal, redemption price or purchase price of, premium, if any,
interest on, and, if any, Additional Amounts in respect of, the Securities
by the Successor Company to a holder of Securities after the consolidation,
merger, conveyance, transfer or lease of assets shall be exempt from the
Taxes described in Section 4.16 and (B) no other taxes on income (including
taxable capital gains) shall be payable under the laws of The Netherlands
and any other jurisdiction where the Successor Company is or becomes
located by a holder of Securities who is not deemed to be a resident of The
Netherlands or other jurisdiction where the Successor Company is or
<PAGE>
61
becomes located and does not carry on any business activities through a
branch, agency or permanent establishment in The Netherlands or such other
jurisdiction where the Successor Company is or becomes located in respect
of the acquisition, ownership or disposition of Securities, including
receipt of principal, premium, if any, interest on, and, Additional
Amounts, if any, paid pursuant to such Securities.
The Successor Company shall succeed to, and be substituted for, and
may exercise every right and power of, such Issuer under this Indenture, but the
predecessor Issuer in the case of a conveyance, transfer or lease of all or
substantially all its assets shall not be released from the obligation to pay
the principal of and interest on the Securities.
(b) The Issuers shall not permit any Note Guarantor to consolidate
with or merge with or into, or convey, transfer or lease, in one transaction or
series of transactions, all or substantially all of its assets to any Person
unless: (i) the resulting, surviving or transferee Person (if not such Note
Guarantor) shall be a Person organized and existing under the laws of the
jurisdiction under which such Subsidiary was organized or under the laws of the
United States, or any state thereof or the District of Columbia, and such Person
shall expressly assume, by an amendment to this Indenture, in a form acceptable
to the Trustee, all the obligations of such Note Guarantor, if any, under its
Note Guarantee; (ii) immediately after giving effect to such transaction or
transactions on a pro forma basis (and treating any Indebtedness which becomes
an obligation of the resulting, surviving or transferee Person as a result of
such transaction as having been issued by such Person at the time of such
transaction), no Default shall have occurred and be continuing; and (iii) the
Issuers deliver to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger or transfer and such
amendment to this Indenture, if any, complies with this Indenture.
Notwithstanding the foregoing, (a) any Restricted Subsidiary may
consolidate with, merge into or transfer all or part of its properties and
assets to either of the Issuers and (b) either of the Issuers may merge with an
Affiliate of the Issuers incorporated solely for the purpose of reincorporating
such Issuer in another jurisdiction to realize tax or other benefits.
<PAGE>
62
ARTICLE 6
Defaults and Remedies
---------------------
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
------------------
(1) the Issuers default in any payment of interest on, or Additional
Amounts, if any, with respect to any Security when the same becomes due and
payable, and such default continues for a period of 30 days;
(2) the Issuers default in the payment of the principal of any
Security when the same becomes due and payable at its Stated Maturity, upon
redemption, upon declaration or otherwise;
(3) either Issuer fails to comply with Section 5.01;
(4) either Issuer fails to comply with Section 4.02, 4.03, 4.04, 4.05,
4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 4.14, 4.15 or 4.16 (other than a
failure to purchase Securities when required under Section 4.06 or 4.08)
and such failure continues for 30 days after the notice specified below;
(5) Either Issuer fails to comply with any of its agreements in the
Securities or this Indenture (other than those referred to in (1), (2), (3)
or (4) above) and such failure continues for 60 days after the notice
specified below;
(6) Indebtedness of either Issuer or any Significant Subsidiary (other
than a Securitization Entity) is not paid within any applicable grace
period after final maturity (giving effect to any extensions thereof) or
the acceleration by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $5,000,000 or its
foreign currency equivalent at the time and such failure continues for 10
days after the notice specified below;
(7) either Issuer or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
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63
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against either Issuer or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of either Issuer or any Significant
Subsidiary or for any substantial part of its property; or
(C) orders the winding up or liquidation of either Issuer or any
Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days; or
(9) any judgment or decree for the payment of money in excess of
$10,000,000 or its foreign currency equivalent at the time is entered
against either Issuer or any Significant Subsidiary and is not discharged,
waived or stayed and either (A) an enforcement proceeding has been
commenced by any creditor upon such judgment or decree or (B) there is a
period of 60 days following the entry of such judgment or decree during
which such judgment or decree is not discharged, waived or the execution
thereof stayed.
The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
------------------
similar federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
<PAGE>
64
A Default under clause (4), (5) or (9) is not an Event of Default
until the Trustee or the Holders of at least 25% in principal amount of the
outstanding Securities notify the Issuers of the Default and the Issuers do not
cure such Default within the time specified in clause (4), (5) or (9) after
receipt of such notice. Such notice must specify the Default, demand that it be
remedied and state that such notice is a "Notice of Default".
The Issuers shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (6) and any event which with the giving of
notice or the lapse of time would become an Event of Default under clause (4),
(5) or (9), its status and what action the Issuers are taking or propose to take
with respect thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than an
-------------
Event of Default specified in Section 6.01(7) or (8) with respect to either of
the Issuers) occurs and is continuing, the Trustee by notice to the Issuers, or
the Holders of at least 25% in principal amount of the outstanding Securities by
notice to the Issuers, may declare the principal of and accrued but unpaid
interest and Additional Amounts, if any, on all the Securities to be due and
payable by notice in writing to the Issuers and the Trustee specifying the Event
of Default and that the notice is a "notice of acceleration". Upon such a
declaration, such principal, interest and Additional Amounts shall be due and
payable immediately. If an Event of Default specified in Section 6.01(7) or (8)
with respect to either of the Issuers occurs, the principal of and interest and
Additional Amounts, if any, on all the Securities shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Securityholders. The Holders of a majority in principal
amount of the Securities by notice to the Trustee may rescind an acceleration
and its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest and Additional Amounts, if any, that has
become due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
---------------
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquies-
<PAGE>
65
cence in the Event of Default. No remedy is exclusive of any other remedy. All
available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
------------------------
principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences except (i) a Default in the payment of the
principal of or interest on a Security, (ii) a Default arising from the failure
to redeem or purchase any Security when required pursuant to the terms of this
Indenture or (iii) a Default in respect of a provision that under Section 9.02
cannot be amended without the consent of each Securityholder affected. When a
Default is waived, it is deemed cured, but no such waiver shall extend to any
subsequent or other Default or impair any consequent right.
SECTION 6.05. Control by Majority. The Holders of a majority in
--------------------
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; provided, however, that the Trustee may take any other action deemed
-------- -------
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
SECTION 6.06. Limitation on Suits. Except to enforce the right to
--------------------
receive payment of principal, premium, interest or Additional Amounts, if any,
when due, no Securityholder may pursue any remedy with respect to this Indenture
or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the Securities
make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
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66
(5) the Holders of a majority in principal amount of the Securities do
not give the Trustee a direction inconsistent with the request during such
60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding
-------------------------------------
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and interest, any liquidated damages or Additional
Amounts, if any, on the Securities held by such Holder, on or after the
respective due dates expressed in the Securities, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of Default
---------------------------
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Issuers for the whole amount of principal and accrued and unpaid interest and
Additional Amounts, if any, then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file
---------------------------------
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to DCC, any Subsidiary of DCC or
any Note Guarantor, their creditors or their property and, unless prohibited by
law or applicable regulations, may vote on behalf of the Holders in any election
of a trustee in bankruptcy or other Person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder to
make payments to the Trustee and, in the event that the Trustee shall consent to
the making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects any money or
-----------
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Securityholders for amounts due and unpaid on the
Securities for principal, interest, and Additional Amounts, if any,
ratably, and any
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67
liquidated damages without preference or priority of any kind, according to
the amounts due and payable on the Securities for principal, interest,
Additional Amounts, if any, and any liquidated damages, respectively; and
THIRD: to the Issuers.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 6.10. At least 15 days before such
record date, the Trustee shall mail to each Securityholder and each Issuer a
notice that states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
----------------------
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of
more than 10% in principal amount of the Securities.
SECTION 6.12. Waiver of Stay or Extension Laws. None of the Issuers
---------------------------------
or any Note Guarantor (to the extent it may lawfully do so) shall at any time
insist upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and each of the Issuers and each Note Guarantor (to the extent that
it may lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and shall not hinder, delay or impede the execution of any power
herein granted to the Trustee, but shall suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE 7
Trustee
-------
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has
------------------
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
<PAGE>
68
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section 7.01;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuers.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
<PAGE>
69
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 7.01 and to the provisions of the TIA.
SECTION 7.02. Rights of Trustee. Subject to Section 7.01: (a) The
------------------
Trustee may rely on any document believed by it to be genuine and to have been
signed or presented by the proper person. The Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on an
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
-------- -------
misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, debenture,
note or other paper or document unless requested in writing to do so by the
Holders of not less than a majority in principal amount of the Securities at the
time outstanding, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of each of the
Issuers, personally or by agent or attorney.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
-----------------------------
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Issuers or its Affiliates with the same rights
it would have if it
<PAGE>
70
were not Trustee. Any Paying Agent or Registrar may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
---------------------
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Issuers'
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Issuers in this Indenture or in any document issued in
connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs and is
-------------------
continuing and if it is known to the Trustee, the Trustee shall deliver to each
Securityholder notice of the Default, in accordance with Section 11.02 and
otherwise in accordance with the procedures set forth in this Indenture, within
the earlier of 90 days after it occurs or 30 days after it is known to a Trust
Officer or written notice of it is received by the Trustee. Except in the case
of a Default in payment of principal or premium, if any, interest or Additional
Amounts, if any, on any Security (including payments pursuant to the redemption
provisions of such Security), the Trustee may withhold the notice if and so long
as a committee of its Trust Officers in good faith determines that withholding
the notice is in the interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
------------------------------
practicable after each May 15 beginning with May 15, 1999, and in any event
prior to July 15 in each year, the Trustee shall mail to each Securityholder a
brief report dated as of May 15 that complies with Section 313(a) of the TIA.
The Trustee shall also comply with Section 313(b) of the TIA.
A copy of each report at the time of its mailing to Securityholders
shall be filed with the Commission and each stock exchange, if any, on which the
Securities are listed. The Issuers agree to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity. The Issuers shall pay to
---------------------------
the Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuers shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Issuers and each Note Guarantor, if any, jointly and severally
shall indemnify the Trustee against any and all loss, liability or expense
(including reasonable
<PAGE>
71
attorneys' fees) incurred by or in connection with the administration of this
trust and the performance of its their duties hereunder. The Trustee shall
notify the Issuers of any claim for which it may seek indemnity promptly upon
obtaining actual knowledge thereof; provided, however, that any failure so to
-------- --------
notify the Issuers shall not relieve the Issuers or any Note Guarantor of its
indemnity obligations hereunder. The Issuers shall defend the claim and the
indemnified party shall provide reasonable cooperation at the Issuers' expense
in the defense. Such indemnified parties may have separate counsel and the
Issuers and the Note Guarantors, as applicable, shall pay the fees and expenses
of such counsel; provided, however, that the Issuers shall not be required to
-------- -------
pay such fees and expenses if they assume such indemnified parties' defense and,
in such indemnified parties' reasonable judgment, there is no conflict of
interest between the Issuers and the Note Guarantors, as applicable, and such
parties in connection with such defense. The Issuers need not reimburse any
expense or indemnify against any loss, liability or expense incurred by an
indemnified party through such party's own wilful misconduct, negligence or bad
faith.
To secure the Issuers' payment obligations pursuant to this Section
7.07, the Trustee shall have a lien prior to the Securities on all money or
property held or collected by the Trustee other than money or property held in
trust to pay principal of and interest and any liquidated damages and Additional
Amounts on particular Securities.
The Issuers' payment obligations pursuant to this Section 7.07 shall
survive the satisfaction or discharge of this Indenture, any rejection or
termination of this Indenture under any bankruptcy law or the resignation or
removal of the Trustee. When the Trustee incurs expenses after the occurrence
of a Default specified in Section 6.01(7) or (8) with respect to the Issuers,
the expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign at any
-----------------------
time by so notifying the Issuers. The Holders of a majority in principal amount
of the Securities may remove the Trustee by so notifying the Trustee and may
appoint a successor Trustee. The Issuers shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
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72
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Issuers or by the Holders of
a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Issuers shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section 7.08, the Issuers' obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the Trustee
----------------------------
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Securities so authenticated; and in
case at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities
<PAGE>
73
either in the name of any predecessor hereunder or in the name of the successor
to the Trustee; and in all such cases such certificates shall have the full
force which it is anywhere in the Securities or in this Indenture provided that
the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
------------------------------
all times satisfy the requirements of TIA (S) 310(a). The Trustee shall have a
combined capital and surplus of at least $100,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
(S) 310(b); provided, however, that there shall be excluded from the operation
-------- -------
of TIA (S) 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Issuers are
outstanding if the requirements for such exclusion set forth in TIA (S)
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against the Issuers.
------------------------------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 8
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a)
-------------------------------------------------
When (i) the Issuers deliver to the Trustee all outstanding Securities (other
than Securities replaced pursuant to Section 2.07) for cancelation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the giving of a notice of redemption pursuant to Article 3 hereof and
the Issuers irrevocably deposit with the Trustee Deutsche Marks or German
Government Obligations on which payment of principal and interest when due shall
be sufficient to pay at maturity or upon redemption all outstanding Securities,
including interest thereon and Additional Amounts, if any, to maturity or such
redemption date (other than Securities replaced pursuant to Section 2.07), and
if in either case the Issuers pay all other sums payable hereunder by the
Issuers, then this Indenture shall, subject to Section 8.01(c), cease to be of
further effect. The Trustee shall acknowledge satisfaction and discharge of
this Indenture on demand of the Issuers accompanied by an Officers' Certificate
and an Opinion of Counsel and at the cost and expense of the Issuers.
(b) Subject to Sections 8.01(c) and 8.02 and any applicable
requirements of the TIA, the Issuers at any time may terminate (i) all of their
obligations under the
<PAGE>
74
Securities and this Indenture ("legal defeasance option") or (ii) their
obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.14, 4.15 and 4.16 and the operation of Section 5.01(a)(iii),
5.01(a)(iv), 6.01(4), 6.01(6), 6.01(7) (with respect to Significant Subsidiaries
of DCC only), 6.01(8) (with respect to Significant Subsidiaries of DCC only) and
6.01(9) ("covenant defeasance option"). The Issuers may exercise their legal
defeasance option notwithstanding their prior exercise of their covenant
defeasance option. In the event that the Issuers terminate all of their
obligations under the Securities and this Indenture by exercising either their
legal defeasance option or their covenant defeasance option, the obligations
under any Note Guarantee shall each be terminated simultaneously with the
termination of such obligations.
If the Issuers exercise their legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the
Issuers exercise their covenant defeasance option, payment of the Securities may
not be accelerated because of an Event of Default specified in Section 6.01(4),
6.01(6), 6.01(7) (with respect to Significant Subsidiaries of DCC only), 6.01(8)
(with respect to Significant Subsidiaries of DCC only) and 6.01(9) or because of
the failure of the Issuers to comply with clauses (iii) and (iv) of Section
5.01(a).
Upon satisfaction of the conditions set forth herein and upon request
of the Issuers, the Trustee shall acknowledge in writing the discharge of those
obligations that the Issuers terminate.
(c) Notwithstanding clauses (a) and (b) above, the Issuers'
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07, 7.08 and in
this Article 8 shall survive until the Securities have been paid in full.
Thereafter, the Issuers' obligations in Sections 7.07, 8.04, 8.05 and 8.06 shall
survive.
SECTION 8.02. Conditions to Defeasance. The Issuers may exercise
-------------------------
their legal defeasance option or their covenant defeasance option only if:
(1) the Issuers irrevocably deposit in trust with the Trustee money
in Deutsche Marks or German Government Obligations for the payment of
principal, premium, if any, interest and Additional Amounts, if any, on the
Securities to maturity or redemption, as the case may be;
(2) the Issuers deliver to the Trustee a certificate from an
internationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited German Government Obligations plus any
deposited money without
<PAGE>
75
investment shall provide cash at such times and in such amounts as shall be
sufficient to pay principal and interest when due on all the Securities to
maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Section 6.01(7) or (8) with respect to the
Issuers occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default under any other
agreement binding on the Issuers;
(5) the Issuers deliver to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940;
(6) in the case of the legal defeasance option, the Issuers shall have
delivered to the Trustee an Opinion of Counsel stating that (i) (A) the
Issuers have received from, or there has been published by, the Internal
Revenue Service a ruling, or (B) since the Closing Date there has been a
change in the applicable U.S. federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that,
the Securityholders shall not recognize income, gain or loss for U.S.
federal income tax purposes as a result of such defeasance and shall be
subject to U.S. federal income tax and income tax under applicable law of
The Netherlands on same amount, in the same manner and at the same times as
would have been the case if such defeasance had not occurred, (ii) after
the 91st day following the deposit, trust funds shall not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally under applicable U.S. federal or
state law or applicable law of The Netherlands and that the Trustee has a
perfected security interest in such trust funds for the ratable benefit of
holders of the Securities and (iii) payments from the defeasance trust
shall be free and exempt from any and all withholding taxes and other
income taxes of whatever nature imposed or levied by or on behalf of The
Netherlands or any political subdivision thereof or therein having the
power to tax;
(7) in the case of the covenant defeasance option, the Issuers shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Security holders shall not recognize income, gain or loss for U.S. federal
income tax purposes as a result of such covenant defeasance and shall be
subject to U.S. federal income tax and income tax under applicable law of
The Netherlands on the same amount, in the same manner and at the same
times as would have been
<PAGE>
76
the case if such covenant defeasance had not occurred, (ii) after the 91st
day following the deposit, trust funds shall not be subject to the effect
of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally under applicable U.S. federal or
state law or applicable law of The Netherlands and that the Trustee has a
perfected security interest in such trust funds for the ratable benefit of
holders of the Securities and (iii) payments from the defeasance trust
shall be free and exempt from any and all withholding taxes and other
income taxes of whatever nature imposed or levied by or on behalf of The
Netherlands or any political subdivision thereof or therein having the
power to tax; and
(8) the Issuers deliver to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this Article
8 have been complied with.
Before or after a deposit, the Issuers may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee shall hold in
---------------------------
trust money in Deutsche Marks or German Government Obligations deposited with it
pursuant to this Article 8. It shall apply the deposited money and the money
from German Government Obligations through the Paying Agent and in accordance
with this Indenture to the payment of principal of, interest and Additional
Amounts, if any, on the Securities.
SECTION 8.04. Repayment to the Issuers. The Trustee and the Paying
-------------------------
Agent shall promptly turn over to the Issuers upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Issuers upon written request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Securityholders entitled to the money must look to the
Issuers for payment as general creditors; provided, however, that the Trustee or
-------- -------
such Paying Agent, before being required to make any such repayment, may at the
expense of the Issuers give notice to the Holders that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such notification, any unclaimed balance of such money
then remaining shall be repaid to the Issuers. Such notice shall also be given
in accordance with Section 11.02.
<PAGE>
77
SECTION 8.05. Indemnity for Government Obligations. The Issuers
-------------------------------------
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited German Government Obligations or the
principal and interest received on such German Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
--------------
unable to apply any money in Deutsche Marks or German Government Obligations in
accordance with this Article 8 by reason of any legal proceeding or by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the Issuers' obligations
under this Indenture and the Securities shall be revived and reinstated as
though no deposit had occurred pursuant to this Article 8 until such time as the
Trustee or Paying Agent is permitted to apply all such money or German
Government Obligations in accordance with this Article 8; provided, however,
--------- -------
that, if the Issuers have made any payment of interest and Additional Amounts,
if any, on or principal of any Securities because of the reinstatement of its
obligations, the Issuers shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or German Government
Obligations held by the Trustee or Paying Agent.
ARTICLE 9
Amendments
----------
SECTION 9.01. Without Consent of Holders. The Issuers and the
---------------------------
Trustee may amend this Indenture or the Securities without notice to or consent
of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
-------- -------
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to add Note Guarantees with respect to the Securities or to secure
the Securities;
<PAGE>
78
(5) to add to the covenants of the Issuers for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Issuers;
(6) to comply with any requirements of the Commission in connection
with qualifying, or maintaining the qualification of, this Indenture under
the TIA;
(7) to make any change that does not adversely affect the rights of
any Securityholder;
(8) to provide for the issuance of the Exchange Securities or Private
Exchange Securities, which shall have terms substantially identical in all
material respects to the Initial Securities (except that the transfer
restrictions contained in the Initial Securities shall be modified or
eliminated, as appropriate), and which shall be treated, together with any
outstanding Initial Securities, as a single issue of securities; or
(9) to provide for the assumption by a Successor Company of the
obligations of either of the Issuers.
After an amendment under this Section becomes effective, the Issuers
shall deliver to each Securityholder, in accordance with Section 11.02, a notice
briefly describing such amendment. The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the validity
of an amendment under this Section 9.01.
SECTION 9.02. With Consent of Holders. The Issuers and the Trustee
------------------------
may amend this Indenture or the Securities without notice to any Securityholder
but with the written consent of the Holders of at least a majority in principal
amount of the Securities then outstanding (including consents obtained in
connection with a tender offer or exchange offer for the Securities). However,
without the consent of each Securityholder affected, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest or
any liquidated damages on any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
<PAGE>
79
(4) reduce the premium payable upon the redemption of any Security or
change the time at which any Security may be redeemed in accordance with
Article 3;
(5) make any Security payable in money other than that stated in the
Security;
(6) make any change in Section 6.04 or 6.07 or the second sentence of
this Section 9.02; or
(7) make any change in Section 4.16 that adversely affects the rights
of any Holder of Securities or amend the terms of this Indenture in a way
that would result in a loss of an exemption from any of the Taxes described
thereunder or an exemption from any obligation to withhold or deduct Taxes
so described thereunder unless the Issuers agree to pay Additional Amounts,
if any, in respect thereof.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section 9.02 becomes effective, the
Issuers shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section 9.02.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment
------------------------------------
to this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
----------------------------------------------
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any
such Holder or subsequent Holder may revoke the consent or waiver as to such
Holder's Security or portion of the Security if the Trustee receives the notice
of revocation before the date the amendment or waiver becomes effective. After
an amendment or waiver becomes effective, it shall bind every Securityholder.
An amendment or waiver becomes effective once both (i) the requisite number of
consents have been received by the Issuers or the Trustee and (ii) such
amendment or waiver has been executed by the Issuers and the Trustee.
<PAGE>
80
The Issuers may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.05. Notation on or Exchange of Securities. If an amendment
--------------------------------------
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Issuers or the Trustee so determines, the Issuers
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any
---------------------------
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture and that such amendment
is the legal, valid and binding obligation of the Issuers and the Note
Guarantors, if any, enforceable against them in accordance with its terms,
subject to customary exceptions, and complies with the provisions hereof
(including Section 9.03).
SECTION 9.07. Payment for Consent. None of the Issuers or any
--------------------
Affiliate of the Issuers shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
<PAGE>
81
ARTICLE 10
Note Guarantees
---------------
SECTION 10.01. Execution of Supplemental Indenture for Future Note
---------------------------------------------------
Guarantors. Each Subsidiary which is required to become a Note Guarantor
- -----------
pursuant to Section 4.11 shall promptly execute and deliver to the Trustee a
supplemental indenture in the form of Exhibit C hereto pursuant to which such
Subsidiary shall become a Note Guarantor and shall guarantee the Guaranteed
Obligations (as defined in Exhibit C). Concurrently with the execution and
delivery of such supplemental indenture, the Issuers shall deliver to the
Trustee an Opinion of Counsel and an Officers' Certificate to the effect that
such supplemental indenture has been duly authorized, executed and delivered by
such Subsidiary and that, subject to the application of bankruptcy, insolvency,
moratorium, fraudulent conveyance or transfer and other similar laws relating to
creditors' rights generally and to the principles of equity, whether considered
in a proceeding at law or in equity, the Note Guarantee of such Note Guarantor
is a legal, valid and binding obligation of such Note Guarantor, enforceable
against such Note Guarantor in accordance with its terms.
ARTICLE 11
Miscellaneous
-------------
SECTION 11.01. Trust Indenture Act Controls. If any provision of
-----------------------------
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 11.02. Notices. (a) Any notice or communication to the
--------
Issuers or the Trustee shall be in writing and delivered in person or mailed by
first-class mail addressed as follows:
if to the Issuers:
The Derby Cycle Corporation,
c/o Raleigh Industries Ltd.
Triumph Road
Nottingham NG7 2DD, England
(telecopier no.: 011-44-115-942-2178)
Attention of:
Mr. Alan J. Finden-Crofts
<PAGE>
82
if to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street, 11th Floor
New York, New York 10004
(telecopier no.: (212) 858-2952)
Attention of:
Corporate Finance Trust Services
The Issuers or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications. Any
notice or communication to the Issuers or the Trustee shall be deemed to have
been given or made upon actual receipt thereof by the addressee.
(b) Notice regarding the Securities shall be (i) mailed by first-class
mail to each Holder's registered address and (ii) published in a leading
newspaper having a general circulation in (a) New York City (which is expected
to be the Wall Street Journal), (b) Frankfurt, Germany (which is expected to be
---- ------ -------
Frankfurter Allgemeine Zeitung) and (c) if and so long as the Securities are
- ----------- ---------- -------
listed on the Luxembourg Stock Exchange and the rules of the Luxembourg Stock
Exchange so require, a newspaper having a general circulation in Luxembourg
(which is expected to be the Luxembourg Wort). If and so long as the Securities
---------------
are listed on any other securities exchange, notices shall also be given in
accordance with any applicable requirements of such securities exchange (which
requirements, in the case of any such securities exchange not located in the
United States, shall be specified by the Issuers in writing to the Trustee).
Notices given by publication shall be deemed to be given on the first date on
which publication is made, and notices given by first-class mail shall be deemed
given five calendar days after mailing.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is published or mailed in the
manner provided herein, it is duly given, whether or not the addressee reads or
receives it.
SECTION 11.03. Communication by Holders with Other Holders.
--------------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Issuers, the Trustee, the Registrar and anyone else shall have
the protection of TIA (S) 312(c).
<PAGE>
83
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.
---------------------------------------------------
Upon any request or application by the Issuers to the Trustee to take or refrain
from taking any action under this Indenture, the Issuers shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion. Each
----------------------------------------------
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 11.06. When Securities Disregarded. In determining whether
----------------------------
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Issuers, any Note
Guarantor or by any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Issuers or any Note
Guarantor shall be disregarded and deemed not to be outstanding, except that,
for the purpose of determining whether the Trustee shall be protected in relying
on any such direction, waiver or consent, only Securities which the Trustee
knows are so owned shall be so disregarded. Subject to the foregoing, only
Securities outstanding at the time shall be considered in any such
determination.
<PAGE>
84
SECTION 11.07. Rules by Trustee, Paying Agent and Registrar. The
---------------------------------------------
Trustee may make reasonable rules for action by or at a meeting of
Securityholders. If and so long as the Securities are listed on any securities
exchange, such rules shall, to the extent not inconsistent with the provisions
of this Indenture, comply with any applicable requirements of such securities
exchange. The Registrar and the Paying Agent may make reasonable rules for
their functions.
SECTION 11.08. Legal Holidays. A "Legal Holiday" is a Saturday, a
---------------
Sunday or a day on which banking institutions are not required to be open in the
State of New York, the Netherlands, Luxembourg or a place of payment. If a
payment date is a Legal Holiday, payment shall be made on the next succeeding
day that is not a Legal Holiday, and no interest shall accrue with respect to
such payment for the intervening period. If a regular record date is a Legal
Holiday, the record date shall not be affected.
SECTION 11.09. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES
--------------
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
SECTION 11.10. Jurisdiction. Each of the Issuers agrees that any
-------------
suit, action or proceeding against such Issuer or any Note Guarantor brought by
any Holder or the Trustee arising out of or based upon this Indenture or the
Securities may be instituted in any state or U.S. federal court in the Borough
of Manhattan, The City of New York, New York, and any appellate court from any
thereof, and it irrevocably submits to the non-exclusive jurisdiction of such
courts in any suit, action or proceeding. Each of the Issuers irrevocably
waives, to the fullest extent permitted by law, any objection to any suit,
action, or proceeding that may be brought in connection with this Indenture or
the Securities, including such actions, suits or proceedings relating to
securities laws of the United States or any state thereof, in such courts
whether on the grounds of venue, residence or domicile or on the ground that any
such suit, action or proceeding has been brought in an inconvenient forum. Each
of the Issuers agrees that final judgment in any such suit, action or proceeding
brought in such court shall be conclusive and binding upon such Issuer and may
be enforced in any court to the jurisdiction of which such Issuer is subject by
a suit upon such judgment; provided that service of process is effected upon
--------
such Issuer in the manner provided by this Section 11.10. Each of the Issuers
has irrevocably appointed CT Corporation System, with offices on the date hereof
at 1633 Broadway, New York, New York 10019, as its authorized agent (the
"Authorized Agent"), upon whom process may be served in any suit, action or
proceeding arising out of or based upon this Indenture, the Securities or the
transactions contemplated herein
<PAGE>
85
which may be instituted in any state or U.S. federal court in the Borough of
Manhattan, The City of New York, New York, by any Holder or the Trustee, and
expressly accepts the non-exclusive jurisdiction of any such court in respect of
any such suit, action or proceeding. Each of the Issuers hereby represents and
warrants that the Authorized Agent has accepted such appointment and has agreed
to act as said agent for service of process, and each of the Issuers agrees to
take any and all action, including the filing of any and all documents, that may
be necessary to continue such respective appointment in full force and effect as
aforesaid. Service of process upon the Authorized Agent shall be deemed, in
every respect, effective service of process upon each of the Issuers.
Notwithstanding the foregoing, any action involving the Issuers arising out of
or based upon this Indenture or the Securities may be instituted by any Holder
or the Trustee in any court of competent jurisdiction in any other jurisdiction.
SECTION 11.11. No Personal Liability of Directors, Officers,
---------------------------------------------
Employees and Stockholders. No director, officer, employee or stockholder of
- --------------------------
either of the Issuers, as such, shall have any liability for any obligations of
such Issuer under the Securities or this Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each holder of
a Security by accepting such Security waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the
Securities. Such waiver may not be effective to waive liabilities under U.S.
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
SECTION 11.12. Successors. All agreements of the Issuers and each
-----------
Note Guarantor in this Indenture and the Securities shall bind its successors.
All agreements of the Trustee in this Indenture shall bind its successors.
SECTION 11.13. Multiple Originals. The parties may sign any number
-------------------
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 11.14. Table of Contents; Headings. The table of contents,
----------------------------
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
THE DERBY CYCLE CORPORATION,
by Alan J. Finder-Crofts
------------------------------------
Name: Alan J. Finder-Crofts
Title:
LYON INVESTMENTS B.V.,
by Alan J. Finder-Crofts
------------------------------------
Name: Alan J. Finder-Crofts
Title:
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
by____________________________________
Name:
Title:
<PAGE>
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
THE DERBY CYCLE CORPORATION,
by _____________________________
Name:
Title:
LYON INVESTMENTS B.V.,
by _____________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee,
by STEPHEN J. GIURLANDO
-----------------------------
Name: STEPHEN J. GIURLANDO
Title: ASSISTANT VICE PRESIDENT
<PAGE>
APPENDIX A
PROVISIONS RELATING TO INITIAL SECURITIES,
------------------------------------------
PRIVATE EXCHANGE SECURITIES
---------------------------
AND EXCHANGE SECURITIES
-----------------------
1. Definitions
-----------
1.1 Definitions
-----------
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Applicable Procedures" means, with respect to any transaction
involving a transfer of a beneficial interest in the Global Note in accordance
with Regulation S, the rules and procedures of the Common Depositary, Euroclear
and Cedel for such transactions, in each case to the extent applicable to such
transaction and as in effect from time to time.
"Cedel" means Cedel Bank, S.A., or any successor securities clearing
agency.
"Common Depositary" means The Industrial Bank of Japan (Luxembourg),
S.A., as common depositary (as appointed by Euroclear and Cedel) for (i) Morgan
Guaranty Trust Company of New York, Brussels Office, as operator of Euroclear
and (ii) Cedel, its nominees and their respective successors.
"Definitive Security" means a certificated Initial Security or
Exchange Security (bearing the Restricted Securities Legend if the transfer of
such Security is restricted by applicable law) that does not include the Global
Securities Legend.
"Euroclear" means the Euroclear Clearance System or any successor
securities clearing agency.
"Global Securities Legend" means the legend set forth under that
caption in Exhibit A to this Indenture.
"IAI" means an institutional "accredited investor" as described in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Private Exchange" means an offer by the Issuers, pursuant to a
Registration Agreement, to issue and deliver to certain purchasers, in exchange
for the
<PAGE>
2
Initial Securities held by such purchasers as part of their initial
distribution, a like aggregate principal amount of Private Exchange Securities.
"Purchase Agreement" means the Purchase Agreement dated May 7, 1998,
among the Issuers and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registration Agreement" means the Exchange and Registration Rights
Agreement dated May 14, 1998, among the Issuers and the Initial Purchasers.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Securities" means all Initial Securities offered and
sold outside the United States in reliance on Regulation S.
"Regulation S Securities Legend" means the legend set forth under that
caption in Exhibit A to this Indenture.
"Restricted Securities Legend" means the legend set forth in Section
2.3(e)(i) herein.
"Rule 501" means Rule 501(a)(1), (2), (3) or (7) under the Securities
Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Securities" means all Initial Securities offered and sold
to QIBs in reliance on Rule 144A.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Custodian" means the custodian with respect to the Global
Security, or any successor person thereto, who shall initially be the Common
Depositary.
"Shelf Registration Statement" means a registration statement filed by
the Issuers in connection with the offer and sale of Initial Securities pursuant
to a Registration Agreement.
"Transfer Restricted Securities" means Definitive Securities and any
other Securities that bear or are required to bear the Restricted Securities
Legend.
<PAGE>
3
1.2 Other Definitions
-----------------
Term: Defined in Section:
---- ------------------
"Account Holders".................................................. 2.1(b)
"Global Security".................................................. 2.1(a)
2. The Securities
--------------
2.1 Form and Dating
---------------
The Initial Securities issued on the date hereof shall be (i) offered
and sold by the Issuers pursuant to a Purchase Agreement and (ii) resold,
initially only to (A) QIBs in reliance on Rule 144A and (B) Persons other than
U.S. Persons (as defined in Regulation S) in reliance on Regulation S. Such
Initial Securities may thereafter be transferred to, among others, QIBs,
purchasers in reliance on Regulation S and, except as set forth below, IAIs in
accordance with Rule 501.
(a) The Global Security. Rule 144A Securities and Regulation S
--------------------
Securities shall be issued initially in the form of one or more registered
permanent global Securities (collectively, the "Global Security"), without
interest coupons and bearing the Global Securities Legend, the Restricted
Securities Legend and the Regulation S Securities Legend, which shall be
deposited on behalf of the purchasers of the Securities represented thereby with
the Securities Custodian, and registered in the name of the Common Depositary or
a nominee of the Common Depositary, duly executed by each of the Issuers and
authenticated by the Trustee as provided in this Indenture. Transfers of
beneficial interests in the Securities to IAIs subsequent to the initial
distribution shall be accommodated by the Global Security. The aggregate
principal amount of the Global Security may from time to time be increased or
decreased by adjustments made on the records of the Trustee and the Common
Depositary or its nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to
----------------------
the Global Security so long as it is deposited with or on behalf of the Common
Depositary.
Each of the Issuers shall execute and the Trustee shall, in accordance
with this Section 2.1(b) and pursuant to an order of the Issuers, authenticate
and deliver initially the Global Security, which (a) shall be registered in the
name of the Common Depositary or the nominee of the Common Depositary and (b)
shall be delivered by the Trustee to the Common Depositary or pursuant to the
Common Depositary's instructions.
<PAGE>
4
Account holders and indirect account holders at Euroclear or Cedel
("Account Holders") shall have no rights under this Indenture with respect to
the Global Security held on their behalf by the Common Depositary or under the
Global Security, and the Common Depositary may be treated by the Issuers, the
Trustee and any agent of the Issuers or the Trustee as the absolute owner of the
Global Security for all purposes whatsoever. Notwith standing the foregoing,
nothing herein shall prevent the Issuers, the Trustee or any agent of the
Issuers or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Common Depositary or impair, as between the
Common Depositary and its Account Holders, the operation of customary practices
of the Common Depositary and Euroclear and Cedel, governing the exercise of the
rights of a holder of a beneficial interest in the Global Security.
(c) Definitive Securities. Except as provided in Section 2.3 or 2.4,
----------------------
owners of beneficial interests in the Global Security shall not be entitled to
receive physical delivery of certificated Securities.
2.2 Authentication. The Trustee shall authenticate and make available for
---------------
delivery upon a written order of each of the Issuers signed by two Officers (1)
Initial Securities for original issue on the date hereof in an aggregate
principal amount of DM110,000,000 and (2) the (A) Exchange Securities for issue
only in a Registered Exchange Offer and (B) Private Exchange Securities for
issue only in a Private Exchange, in the case of each of (A) and (B) pursuant to
a Registration Agreement and for a like principal amount of Initial Securities
exchanged pursuant thereto. Such order shall specify the amount of the
Securities to be authenticated, the date on which the original issue of
Securities is to be authenticated and whether the Securities are to be Initial
Securities, Exchange Securities or Private Exchange Securities. The aggregate
principal amount of Securities outstanding at any time may not exceed
DM110,000,000 except as provided in Section 2.07 of this Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
---------------------- -----------------------------------
Securities. When Definitive Securities are presented to the Registrar with a
- -----------
request:
(x) to register the transfer of such Definitive Securities; or
(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
<PAGE>
5
the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
-------- -------
that the Definitive Securities surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to each of the Issuers and the
Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(ii) are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act, pursuant to clause (A),
(B) or (C) below, and are accompanied by the following additional
information and documents, as applicable:
(A) if such Definitive Securities are being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect (in
the form set forth on the reverse side of the Initial Security);
(B) if such Definitive Securities are being transferred to the
Issuers, a certification to that effect (in the form set forth on the
reverse side of the Initial Security); or
(C) if such Definitive Securities are being transferred pursuant
to an exemption from registration in accordance with Rule 144 under
the Securities Act or in reliance upon another exemption from the
registration requirements of the Securities Act, (i) a certification
to that effect (in the form set forth on the reverse side of the
Initial Security) and (ii) if the Issuers so request, an opinion of
counsel or other evidence reasonably satisfactory to them as to the
compliance with the restrictions set forth in the legend set forth in
Section 2.3(d)(i).
(b) Restrictions on Transfer of a Definitive Security for a
-------------------------------------------------------
Beneficial Interest in the Global Security. A Definitive Security may not be
- -------------------------------------------
exchanged for a beneficial interest in the Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee
of a Definitive Security, duly endorsed or accompanied by a written instrument
of transfer in form reasonably satisfactory to the Issuers and the Registrar,
together with:
(i) certification (in the form set forth on the reverse side of the
Initial Security) that such Definitive Security is being transferred (A) to
a QIB in accordance with Rule 144A, (B) to an IAI that has furnished to the
Trustee a signed letter substantially in the form of Exhibit D or (C)
outside the United States in an
<PAGE>
6
offshore transaction within the meaning of Regulation S and in compliance
with Rule 904 under the Securities Act; and
(ii) written instructions directing the Trustee to make, or to direct
the Securities Custodian to make, an adjustment on its books and records
with respect to the Global Security to reflect an increase in the aggregate
principal amount of the Securities represented by the Global Security, such
instructions to contain information regarding the account to be credited
with such increase,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, the aggregate principal amount of Securities
represented by the Global Security to be increased by the aggregate principal
amount of the Definitive Security to be exchanged and shall credit or cause to
be credited to the account of the Person specified in such instructions a
beneficial interest in the Global Security equal to the principal amount of the
Definitive Security so canceled. If the Global Security is not then outstanding
and the Global Security has not been previously exchanged for certificated
securities pursuant to Section 2.4, the Issuers shall issue and the Trustee
shall authenticate, upon written order of each of the Issuers in the form of an
Officers' Certificate, a new Global Security in the appropriate principal
amount.
(c) Transfer and Exchange of Beneficial Interests in the Global
-----------------------------------------------------------
Security and Transfers of the Global Security. (i) The transfer and exchange of
- ----------------------------------------------
beneficial interests in the Global Security shall be effected through the Common
Depositary, in accordance with this Indenture (including applicable restrictions
on transfer set forth herein, if any) and the procedures of the Common
Depositary therefor. A transferor of a beneficial interest in the Global
Security shall deliver a written order given in accordance with the Common
Depositary's procedures containing information regarding the securities account
at Euroclear or Cedel, as the case may be, to be credited with a beneficial
interest in the Global Security and such account shall be credited in accordance
with such order with a beneficial interest in the Global Security and the
account of the Person making the transfer shall be debited by an amount equal to
the beneficial interest in the Global Security being transferred. Transfers of
a beneficial interest in the Global Security held in accordance with Rule 144A
to a transferee who takes delivery of such interest in accordance with
Regulation S shall be made only upon receipt by the Trustee of a certification
from the transferor to the effect that such transfer is being made in accordance
with Regulation S or (if available) Rule 144A. In the case of a transfer of a
beneficial interest in the Global Security held in accordance with either Rule
144A or Regulation S to an IAI, the transferee must furnish a signed letter
substantially to in the form of Exhibit D to the Trustee.
(ii) Notwithstanding any other provisions of this Appendix (other
than the provisions set forth in Section 2.4), the Global Security may not
be transferred as a
<PAGE>
7
whole except by the Common Depositary to a nominee of the Common Depositary
or by a nominee of the Common Depositary to the Common Depositary or
another nominee of the Common Depositary or by the Common Depositary or any
such nominee to a successor Common Depositary or a nominee of such
successor Common Depositary.
(iii) In the event that the Global Security is exchanged for
Definitive Securities pursuant to Section 2.4 prior to the consummation of
a Registered Exchange Offer or the effectiveness of a Shelf Registration
Statement with respect to such Securities, such Securities may be exchanged
only in accordance with such procedures as are substantially consistent
with the provisions of this Section 2.3 (including the certification
requirements set forth on the reverse of the Initial Securities intended to
ensure that such transfers comply with Rule 144A, Regulation S or such
other applicable exemption from registration under the Securities Act, as
the case may be) and such other procedures as may from time to time be
adopted by the Issuers.
(d) Restrictions on Transfer of Beneficial Interests in the Global
--------------------------------------------------------------
Security held in accordance with Regulation S. Beneficial interests in the
- ----------------------------------------------
Global Security held in accordance with Regulation S may only be sold, pledged
or transferred through Euroclear or Cedel in accordance with the Applicable
Procedures and only (A) to the Issuers, (B) so long as such security is eligible
for resale pursuant to Rule 144A, to a person whom the selling holder reasonably
believes is a QIB that purchases for its own account or for the account of a QIB
to whom notice is given that the resale, pledge or transfer is being made in
reliance on Rule 144A, (C) in an offshore transaction in accordance with
Regulation S, (D) pursuant to an exemption from registration under the
Securities Act provided by Rule 144 (if applicable), (E) to an IAI purchasing
for its own account, or for the account of such an IAI, in a minimum principal
amount of Securities of DM500,000 or (F) pursuant to an effective registration
statement under the Securities Act, in each case in accordance with any
applicable securities laws of any state of the United States. Transfers by an
owner of a beneficial interest in the Global Security held in accordance with
Regulation S to a transferee who takes delivery of such interest in accordance
with Rule 144A or who is an IAI shall be made only in accordance with Applicable
Procedures and upon receipt by the Trustee of a written certification from the
transferor of the beneficial interest in the form provided on the reverse of the
Initial Security to the effect that such transfer is being made to (i) a person
whom the transferor reasonably believes is a QIB within the meaning of Rule 144A
in a transaction meeting the requirements of Rule 144A or (ii) an IAI purchasing
for its own account, or for the account of such an IAI, in a minimum principal
amount of the Securities of DM500,000. In the case of a transfer of a
beneficial interest in the Global Security held in accordance with either Rule
144A or Regulation S to an IAI, the transferee must furnish a signed letter
substantially to in the form of Exhibit D to the Trustee.
<PAGE>
8
(e) Legend.
-------
(i) Except as permitted by the following paragraphs (ii), (iii) or
(iv), each Security certificate evidencing the Global Security and the
Definitive Securities (and all Securities issued in exchange therefor or in
substitution thereof) shall bear a legend in substantially the following
form (each defined term in the legend being defined as such for purposes of
the legend only):
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUERS OR ANY
AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
OF SUCH SECURITY), ONLY (A) TO THE ISSUERS, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL INVESTOR ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL
<PAGE>
9
AMOUNT OF THE SECURITIES OF DM500,000, FOR INVESTMENT PURPOSES AND NOT WITH
A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT
TO THE ISSUERS AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE.
Each Definitive Security shall also bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR
AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER
AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted Security that
is a Definitive Security, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a Definitive Security that
does not bear the legends set forth above and rescind any restriction on
the transfer of such Transfer Restricted Security if the Holder certifies
in writing to the Registrar that its request for such exchange was made in
reliance on Rule 144 (such certification to be in the form set forth on the
reverse of the Initial Security).
(iii) After a transfer of any Initial Securities or Private Exchange
Securities during the period of the effectiveness of a Shelf Registration
Statement with respect to such Initial Securities or Private Exchange
Securities, as the case may be, all requirements pertaining to the
Restricted Securities Legend on such Initial Securities or such Private
Exchange Securities shall cease to apply and the requirements that any such
Initial Securities or such Private Exchange Securities be issued in global
form shall continue to apply.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which Holders of such Initial
Securities are offered Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to Initial Securities, including
that Initial Securities be issued in global
<PAGE>
10
form, shall continue to apply, and Exchange Securities in global form
without the Restricted Securities Legend shall be available to Holders that
exchange such Initial Securities in such Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect to the
Initial Securities pursuant to which Holders of such Initial Securities are
offered Private Exchange Securities in exchange for their Initial
Securities, all requirements pertaining to such Initial Securities,
including that Initial Securities be issued in global form, shall continue
to apply, and Private Exchange Securities in global form with the
Restricted Securities Legend shall be available to Holders that exchange
such Initial Securities in such Private Exchange.
(f) Cancelation or Adjustment of the Global Security. At such time
-------------------------------------------------
as all beneficial interests in the Global Security have either been exchanged
for Definitive Securities, transferred, redeemed, repurchased or canceled, the
Global Security shall be returned by the Common Depositary to the Trustee for
cancelation. At any time prior to such cancelation, if any beneficial interest
in the Global Security is exchanged for Definitive Securities, redeemed,
repurchased or canceled, the principal amount of Securities represented by the
Global Security shall be reduced and an adjustment shall be made on the books
and records of the Securities Custodian for the Global Security) by the
Securities Custodian to reflect such reduction.
(g) Obligations with Respect to Transfers and Exchanges of
----------------------------------------- ------------
Securities.
- -----------
(i) To permit registrations of transfers and exchanges, each of the
Issuers shall execute and the Trustee shall authenticate, Definitive
Securities and a Global Security at the Registrar's request.
(ii) No service charge shall be made for any registration of transfer
or exchange, but the Issuers, or the Paying Agent, as applicable, may
require payment of a sum sufficient to cover any transfer tax, assessments
or similar governmental charge payable in connection therewith (other than
any such transfer taxes, assessments or similar governmental charge payable
upon exchange or transfer pursuant to Sections 3.06, 4.06, 4.08 and 9.05).
(iii) Prior to the due presentation for registration of transfer of
any Security, each of the Issuers, the Trustee, the Paying Agent or the
Registrar may deem and treat the Person in whose name a Security is
registered as the absolute owner of such Security for the purpose of
receiving payment of principal of and interest on such Security and for all
other purposes whatsoever, whether or not such Security is
<PAGE>
11
overdue, and none of the Issuers, any Note Guarantor, the Trustee, the
Paying Agent or the Registrar shall be affected by notice to the contrary.
(iv) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be
entitled to the same benefits under this Indenture as the Securities
surrendered upon such transfer or exchange.
(h) No Obligation of the Trustee.
-----------------------------
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of the Global Security, Euroclear or Cedel, or any account
holder or indirect account holder in Euroclear or Cedel, or any other
Person with respect to the accuracy of the records of the Common Depositary
or its nominee or of Euroclear or Cedel or any account holder or indirect
account holder in Euroclear or Cedel, with respect to any ownership
interest in the Securities or with respect to the delivery to any account
holder, member, beneficial owner or other Person (other than the Common
Depositary) of any notice (including any notice of redemption or
repurchase) or the payment of any amount, under or with respect to such
Securities. All notices and communications to be given to the Holders and
all payments to be made to Holders under the Securities shall be given or
made only to the registered Holders (which shall be the Common Depositary
or its nominee in the case of the Global Security). The rights of
beneficial owners in the Global Security shall be exercised only through
the Common Depositary subject to the applicable rules and procedures of the
Common Depositary. The Trustee may rely and shall be fully protected in
relying upon information furnished by the Common Depositary with respect to
its account holders, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers between
or among account holders in Euroclear or Cedel or beneficial owners in the
Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
<PAGE>
12
2.4 Definitive Securities
---------------------
(a) The Global Security deposited with the Common Depositary, as
Securities Custodian pursuant to Section 2.1, shall be transferred to the
beneficial owners thereof in the form of Definitive Securities in an aggregate
principal amount equal to the principal amount of the Global Security, in
exchange for the Global Security, only if such transfer complies with Section
2.3 and (i) the Common Depositary notifies the Issuers that it is unwilling or
unable to continue as a Common Depositary for the Global Security and a
successor to such Common Depositary is not appointed within 90 days of such
notice or (ii) if Euroclear and Cedel are no longer willing or able or cease to
be registered as a clearing agency under the Exchange Act and a successor
registered as a clearing agency under the Exchange Act is not appointed within
90 days of such cessation or (iii) an Event of Default has occurred and is
continuing or (iv) the Issuers, at their option, notify the Trustee in writing
that they elect to cause the issuance of certificated Securities under this
Indenture.
(b) If the Global Security is transferred to the beneficial owners
thereof pursuant to this Section 2.4, the Global security shall be surrendered
by the Common Depositary to the Trustee, to be so transferred, in whole or from
time to time in part, without charge, and the Trustee shall authenticate and
deliver, upon such transfer of each portion of the Global Security, an equal
aggregate principal amount of Definitive Securities of authorized denominations.
Any portion of the Global Security transferred pursuant to this Section 2.4
shall be executed, authenticated and delivered only in denominations of DM1,000
and any integral multiple thereof and registered in such names as the Common
Depositary shall direct. Any certificated Initial Security in the form of a
Definitive Security delivered in exchange for an interest in the Global Security
shall, except as otherwise provided by Section 2.3(e), bear the Restricted
Securities Legend.
(c) Subject to the provisions of Section 2.4(b), the registered
Holder of the Global Security may grant proxies and otherwise authorize any
Person, including Account Holders and Persons that may hold interests through
Account Holders, to take any action which a Holder is entitled to take under
this Indenture or the Securities.
(d) In the event of the occurrence of any of the events specified in
Section 2.4(a)(i), (ii), (iii) or (iv), the Issuers shall promptly make
available to the Trustee a reasonable supply of Definitive Securities in fully
registered form without interest coupons.
<PAGE>
EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE INDUSTRIAL BANK OF JAPAN (LUXEMBOURG), S.A. (THE "COMMON DEPOSITARY"),
LUXEMBOURG, TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF THE COMMON
DEPOSITARY OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE COMMON DEPOSITARY (AND ANY PAYMENT IS MADE TO THE COMMON DEPOSITARY, OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON
DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, THE COMMON
DEPOSITARY, HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF THE COMMON DEPOSITARY OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS
<PAGE>
2
TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH THE ISSUERS OR ANY AFFILIATE OF THE ISSUERS WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE ISSUERS, (B) PURSUANT TO
A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT THAT IS AN INSTITUTIONAL INVESTOR ACQUIRING THE SECURITY FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN
EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF DM500,000, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION
WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY
OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE ISSUERS' AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM. THIS LEGEND Shall BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER
THE RESALE RESTRICTION TERMINATION DATE.
[Regulation S Securities Legend]
AN OFFER OR SALE OF SECURITIES WITHIN THE UNITED STATES BY A DEALER
(AS DEFINED IN THE U.S. SECURITIES ACT) MAY VIOLATE THE REGISTRATION
REQUIREMENTS OF THE U.S. SECURITIES ACT IF SUCH OFFER OR SALE IS MADE OTHERWISE
THAN IN ACCORDANCE WITH RULE 144A UNDER THE U.S. SECURITIES ACT.
Each Definitive Security shall bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES
<PAGE>
3
AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM
THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
<PAGE>
No. DM__________
9 3/8% Senior Note due 2008
CUSIP No. ______
CINS No. ______
ISIN No. ______
COMMON Code ______
THE DERBY CYCLE CORPORATION, a Delaware corporation, and LYON
INVESTMENTS B.V., a company organized under the laws of the Netherlands, as
joint and several obligors, promise to pay to The Industrial Bank of Japan
(Luxembourg), S.A., as Common Depositary, or registered assigns, the principal
sum [of Deutsche Marks] [listed on the Schedule of Increases or
Decreases in Global Security attached hereto] /1/ on May 15, 2008.
Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
________________
/1/ Use the second set of bracketed language for a Global Security.
<PAGE>
2
Additional provisions of this Security are set forth on the other side
of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
THE DERBY CYCLE CORPORATION,
by
_______________________________________
Name:
Title:
by
_______________________________________
Name:
Title:
LYON INVESTMENTS B.V.,
by
_______________________________________
Name:
Title:
by
_______________________________________
Name:
Title:
<PAGE>
3
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by _________________________
Authorized Signatory
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
9 3/8% Senior Note due 2008
Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Indenture (as defined).
1. Interest
--------
(a) THE DERBY CYCLE CORPORATION, a Delaware corporation, and LYON
INVESTMENTS B.V., a company organized under the laws of the Netherlands, as
joint and several obligors, promise to pay interest on the principal amount of
this Security at the rate per annum shown above. The Issuers shall pay interest
semiannually on May 15 and November 15 of each year[, commencing [ ],
1998]/2/. Interest on the Securities shall accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from May 14,
1998. Interest shall be computed on the basis of a 360-day year of twelve 30-
day months. The Issuers shall pay interest on overdue principal at the rate
borne by the Securities plus 1% per annum, and they shall pay interest on
overdue installments of interest at the same rate to the extent lawful.
(b) Liquidated Damages. The Holder of this Security is entitled to
------------------
the benefits of an Exchange and Registration Rights Agreement, dated as of May
14, 1998, among the Issuers and the Initial Purchasers named therein (the
"Registration Agreement"). Capitalized terms used in this paragraph (b) but not
defined herein have the meanings assigned to them in the Registration Agreement.
If (i) the Shelf Registration Statement or Exchange Offer Registration
Statement, as applicable under the Registration Agreement, is not filed with the
Commission on or prior to 90 days after the Issue Date, (ii) the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
is not declared effective within 210 days after the Issue Date, (iii) the
Registered Exchange Offer is not consummated on or prior to 240 days after the
Issue Date, or (iv) the Shelf Registration Statement is filed and declared
effective within 210 days after the Issue Date but shall thereafter cease to be
effective (at any time that the Issuers are obligated to maintain the
effectiveness thereof) without being succeeded within 30 days by an additional
Registration Statement filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Issuers shall pay
liquidated damages to each Holder of Transfer Restricted Securities, during the
period of such Registration Default, in an amount equal to DM0.192 per week per
DM1,000 principal amount of the Securities constituting Transfer
_____________________
/2/ Use bracketed language for Initial Securities only.
<PAGE>
2
Restricted Securities held by such Holder until the applicable Registration
Statement is filed or declared effective, the Registered Exchange Offer is
consummated or the Shelf Registration Statement again becomes effective, as the
case may be. All accrued liquidated damages shall be paid to Holders in the same
manner as interest payments on the Securities on semi-annual payment dates which
correspond to payment dates for the Securities. Following the cure of all
Registration Defaults, the accrual of liquidated damages shall cease. The
Trustee shall have no responsibility with respect to the determination of the
amount of any such liquidated damages. For purposes of the foregoing, "Transfer
Restricted Securities" means (i) each Initial Security until the date on which
such Initial Security has been exchanged for a freely transferable Exchange
Security in the Registered Exchange Offer, (ii) each Initial Security or Private
Exchange Security until the date on which such Initial Security or Private
Exchange Security has been effectively registered under the Securities Act and
disposed of in accordance with a Shelf Registration Statement or (iii) each
Initial Security or Private Exchange Security until the date on which such
Initial Security or Private Exchange Security is distributed to the public
pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule
144(k) under the Securities Act.
2. Method of Payment
-----------------
The Issuers shall pay interest on the Securities (except defaulted
interest) to the Persons who are registered Holders of Securities at the close
of business on the May 1 or November 1 next preceding the payment date even if
Securities are canceled after the record date and on or before the payment date.
Holders must surrender Securities to a Paying Agent to collect principal
payments. The Issuers shall pay principal, premium, liquidated damages,
interest and Additional Amounts, if any, in money of the Federal Republic of
Germany that at the time of payment is legal tender for payment of public and
private debts. Payments in respect of the Securities represented by the Global
Security (including principal, premium, liquidated damages, interest and
Additional Amounts, if any) shall be made by wire transfer of immediately
available funds to the accounts specified by the Common Depositary on behalf of
Euroclear and Cedel. The Issuers shall make all payments in respect of a
certificated Security (including principal, premium, liquidated damages,
interest and Additional Amounts, if any), by mailing a check to the registered
address of each Holder thereof; provided, however, that payments on the
-------- -------
Securities may also be made, in the case of a Holder of at least DM2,000,000
aggregate principal amount of Securities, by wire transfer to a Deutsche Mark
account maintained by the payee with a bank in the Federal Republic of Germany
if such Holder elects payment by wire transfer by giving written notice to the
Trustee or the Paying Agent to such effect designating such account no later
than 30 days immediately preceding the relevant due date for payment (or such
other date as the Trustee may accept in its discretion).
<PAGE>
3
3. Paying Agent and Registrar
--------------------------
Initially, IBJ SCHRODER BANK & TRUST COMPANY, a New York banking
corporation (the "Trustee"), shall act as Paying Agent and Registrar. The
Issuers also initially appoint THE INDUSTRIAL BANK OF JAPAN (LUXEMBOURG), S.A.
as principal Paying Agent, and THE INDUSTRIAL BANK OF JAPAN (GERMANY) as Paying
Agent in Germany. The Issuers may appoint and change any Paying Agent or
Registrar without notice. DCC or any of its domestically incorporated Wholly
Owned Subsidiaries may act as Paying Agent or Registrar. In all circumstances,
the Issuers shall ensure that (i) at least one Paying Agent shall be located in
the Federal Republic of Germany, (ii) at least one Paying Agent shall be, if and
so long as the Securities are listed on the Luxembourg Stock Exchange and the
rules of such exchange so require, located in Luxembourg or such other place as
the Luxembourg Stock Exchange may approve and (iii) if and so long as the
Securities are listed on any other securities exchange, any applicable
requirements of such exchange as to Paying Agents are satisfied.
4. Indenture
---------
The Issuers issued, as joint and several obligors, the Securities
under an Indenture dated as of May 14, 1998 (the "Indenture"), among the Issuers
and the Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) as in effect on the date
------
of the Indenture (the "TIA"). Terms defined in the Indenture and not defined
herein have the meanings ascribed thereto in the Indenture. The Securities are
subject to all terms and provisions of the Indenture, and Securityholders are
referred to the Indenture and the TIA for a statement of such terms and
provisions.
The Securities are senior unsecured obligations of the Issuers, as
joint and several obligors, limited to DM110,000,000 aggregate principal amount
at any one time outstanding (subject to Section 2.07 of the Indenture). This
Security is the [Initial Security] [Private Exchange Security] referred to in
the Indenture. The Securities include the Initial Securities and any Exchange
Securities and Private Exchange Securities issued in exchange for the Initial
Securities pursuant to the Indenture. The Initial Securities, the Exchange
Securities and the Private Exchange Securities are treated as a single class of
securities under the Indenture. The Indenture imposes certain limitations on
the ability of DCC and its Restricted Subsidiaries to, among other things, make
certain Investments and other Restricted Payments, pay dividends and other
distributions, incur Indebtedness, enter into consensual restrictions upon the
payment of certain dividends and distributions by such Restricted Subsidiaries,
issue or sell shares of capital stock of such Restricted Subsidiaries, enter
into or permit certain transactions with Affiliates, create or incur Liens,
enter into additional lines of business, enter into Sale/Leaseback Transactions
and make asset sales.
<PAGE>
4
The Indenture also imposes limitations on the ability of the Issuers to
consolidate or merge with or into any other Person or convey, transfer or lease
all or substantially all of the property of either Issuer.
To guarantee the due and punctual payment of the principal, interest
and Additional Amounts, if any, on the Securities and all other amounts payable
by the Issuers under the Indenture and the Securities when and as the same shall
be due and payable, whether at maturity, by acceleration or otherwise, according
to the terms of the Securities and the Indenture, any Note Guarantors shall,
jointly and severally, unconditionally guarantee the Guaranteed Obligations on a
senior basis pursuant to the terms of the Indenture and the Supplemental
Indenture.
5. Optional Redemption
-------------------
Except as set forth below, the Securities shall not be redeemable at
the option of the Issuers prior to May 15, 2003. Thereafter, the Securities
shall be redeemable at the option of the Issuers, in whole or in part, on not
less than 30 nor more than 60 days' prior notice delivered to each Holder of
Securities in accordance with paragraph 7 herein, at the following redemption
prices (expressed as percentages of principal amount), plus accrued and unpaid
interest and Additional Amounts, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant payment date and Additional Amounts, if any, in respect
thereof), if redeemed during the 12-month period commencing on May 15 of the
years set forth below:
REDEMPTION
YEAR PRICE
-------------------------------------------------------
2003 104.688%
2004 103.125%
2005 101.563%
2006 and thereafter 100.000%
At any time and from time to time prior to May 15, 2001, the Issuers
may, at their option, redeem up to a maximum of 33 1/3% of the original
aggregate principal amount of the Securities with all or a portion of the
proceeds of one or more Public Equity Offerings following which there is a
Public Market, at a redemption price equal to 109.375% of the principal amount
thereof, plus accrued and unpaid interest and Additional Amounts, if any, to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant payment date and Additional
Amounts, if any, in respect thereof); provided, however, that, after giving
-------- -------
effect to any such redemption, at least 66 2/3% of the original aggregate
principal amount of the Securities remains outstanding. Any such redemption
shall be made within 60 days of such Public Equity Offering upon not less than
30 nor more than 60 days' notice delivered to each Holder of Securities being
redeemed
<PAGE>
5
in accordance with paragraph 7 herein and otherwise in accordance with the
procedures set forth in the Indenture.
The Securities may be redeemed, at the option of the Issuers, in whole
but not in part, at any time upon giving not less than 30 nor more than 60 days'
notice delivered to each Holder of Securities in accordance with paragraph 7
herein (which notice shall be irrevocable), at a redemption price equal to the
principal amount thereof, together with accrued and unpaid interest, if any, to
the date fixed by the Issuers for redemption (a "Tax Redemption Date") and all
Additional Amounts, if any, then due and which shall become due on the Tax
Redemption Date as a result of the redemption or otherwise, if the Issuers
determine that, as a result of (i) any change in, or amendment to, the laws or
treaties (or any regulations, protocols or rulings promulgated thereunder) of
the United States or The Netherlands or any other jurisdiction in which either
of the Issuers is organized or engaged in business for tax purposes (or, in each
case, any political subdivision or taxing authority thereof or therein) or of
the jurisdiction from or through which payment is made or where the payor is
located affecting taxation, which change or amendment becomes effective on or
after the Closing Date, or (ii) any change in position regarding the
application, administration or interpretation of such laws, treaties,
regulations or rulings (including a holding, judgment or order by a court of
competent jurisdiction), which change, amendment, application or interpretation
becomes effective on or after the Closing Date, the Issuers are or shall be
required to pay Additional Amounts, and the Issuers determine that such payment
obligation cannot be avoided by the Issuers taking reasonable measures.
Notwithstanding the foregoing, no such notice of redemption shall be given
earlier than 90 days prior to the earliest date on which the Issuers would be
obligated to make such payment or withholding if a payment in respect of the
Securities were then due. Prior to the delivery of any notice of redemption of
the Securities pursuant to the foregoing, the Issuers shall deliver to the
Trustee an opinion of a tax counsel reasonably satisfactory to the Trustee to
the effect that the circumstances referred to above exist. The Trustee shall
accept such opinion as sufficient evidence of the satisfaction of the conditions
precedent described above, in which event it shall be conclusive and binding on
all Holders of Securities.
6. Sinking Fund
------------
The Securities are not subject to any sinking fund.
7. Notice of Redemption
--------------------
Notice of redemption shall be given at least 30 days but not more than
60 days before the redemption date. Such notice shall be (i) mailed by first-
class mail to the registered address of each Holder of Securities to be redeemed
and (ii) published in a leading newspaper having a general circulation in (a)
New York City (which is expected to be the
<PAGE>
6
Wall Street Journal), (b) Frankfurt, Germany (which is expected to be
- ---- ------ -------
Frankfurter Allgemeine Zeitung) and (c) if and so long as the Securities are
- ----------- ---------- -------
listed on the Luxembourg Stock Exchange and the rules of the Luxembourg Stock
Exchange so require, a newspaper having a general circulation in Luxembourg
(which is expected to be the Luxembourg Wort)). If and so long as the Securities
---------- ----
are listed on any other securities exchange, notices shall also be given in
accordance with any applicable requirements of such securities exchange. Notices
given by publication shall be deemed to be given on the first date on which
publication is made, and notices given by first-class mail shall be deemed given
five calendar days after mailing. Securities in denominations equal to or larger
than DM1,000 may be redeemed in part but only in whole multiples of DM1,000. If
money sufficient to pay the redemption price of and accrued and unpaid interest
and Additional Amounts, if any, on all Securities (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying Agent on or before
the redemption date and certain other conditions are satisfied, on and after
such date interest ceases to accrue on such Securities (or such portions
thereof) called for redemption.
8. Repurchase of Securities at the Option of Holders upon Change of Control
------------------------------------------------------------------------
Upon a Change of Control, each Holder of Securities shall have the
right, subject to certain conditions specified in the Indenture, to cause the
Issuers to repurchase all or any part of the Securities of such Holder at a
purchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued and unpaid interest and Additional Amounts, if any, to
the date of repurchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant payment date that
is on or prior to the date of purchase and Additional Amounts, if any, in
respect thereof) as provided in, and subject to the terms of, the Indenture.
9. Denominations; Transfer; Exchange
---------------------------------
The Securities are in registered form without coupons in denominations
of DM1,000 and whole multiples of DM1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. Upon any transfer or exchange, the
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements or transfer documents, and the Issuers, or the Paying
Agent, as applicable, may require a Holder to pay any taxes required by law or
permitted by the Indenture. The Issuers shall not be required to transfer or
exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or to transfer or exchange any Securities for a period of 15 days prior to a
selection of Securities to be redeemed.
<PAGE>
7
10. Substitution of Currency
------------------------
If the Federal Republic of Germany adopts the Euro, the regulations of
the European Commission relating to the Euro shall then apply to the Securities
and the Indenture. The circumstances and consequences described in this
paragraph do not entitle the Issuers or any Holder of Securities to early
redemption, rescission, notice, repudiation, adjustment or renegotiation of the
terms and conditions of the Securities or the Indenture or to raise any other
defense or to request any compensation or claim, nor shall they affect any of
the obligations of the Issuers under the Securities or the Indenture.
11. Persons Deemed Owners
---------------------
Subject to the provisions hereof with respect to record dates, the
registered Holder of this Security may be treated as the owner of it for all
purposes.
12. Unclaimed Money
---------------
If money for the payment of principal, interest or Additional Amounts
remains unclaimed for two years, the Trustee or Paying Agent shall pay the money
back to the Issuers at their written request unless an abandoned property law
designates another Person. After any such payment, Holders entitled to the
money must look only to the Issuers and not to the Trustee for payment.
13. Discharge and Defeasance
------------------------
Subject to certain conditions, the Issuers at any time may terminate
some of or all of their obligations under the Securities and the Indenture if
the Issuers deposit with the Trustee money or German Government Obligations for
the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.
14. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended without prior notice to any
Securityholder but with the written consent of the Holders of at least a
majority in aggregate principal amount of the outstanding Securities (including
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, such Securities) and (ii) any default or noncompliance with any
provision may be waived with the written consent of the Holders of at least a
majority in principal amount of the outstanding Securities. Subject to certain
exceptions set forth in the Indenture, without the consent of any Holder of
Securities, the Issuers and the Trustee may amend the Indenture or the
Securities (i) to cure any ambiguity, omission, defect or inconsistency;
<PAGE>
8
(ii) to comply with Article 5 of the Indenture; (iii) to provide for
uncertificated Securities in addition to or in place of certificated Securities;
(iv) to add Note Guarantees with respect to the Securities; (v) to secure the
Securities; (vi) to add additional covenants or to surrender rights and powers
conferred on the Issuers; (vii) to comply with the requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the TIA; (viii) to make any change that does not adversely affect the
rights of any Securityholder; (ix) to provide for the issuance of the Exchange
Securities or Private Exchange Securities; or (x) to provide for the assumption
by a Successor Company of the obligations of either of the Issuers.
15. Defaults and Remedies
---------------------
If an Event of Default (other than an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of either Issuer)
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the outstanding Securities by notice to the Issuers may
declare the principal of and accrued but unpaid interest and Additional Amounts,
if any, on all the Securities to be due and payable. If an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of either
Issuer occurs, the principal of and interest and Additional Amounts, if any, on
all the Securities shall become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders. Under
certain circumstances, the Holders of a majority in principal amount of the
outstanding Securities may rescind any such acceleration with respect to the
Securities and its consequences.
If an Event of Default occurs and is continuing, the Trustee shall be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the Holders unless such Holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium, if any, interest or Additional Amounts, if any, when due,
no Holder may pursue any remedy with respect to the Indenture or the Securities
unless (i) such Holder has previously given the Trustee notice that an Event of
Default is continuing, (ii) Holders of at least 25% in principal amount of the
outstanding Securities have requested the Trustee in writing to pursue the
remedy, (iii) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense, (iv) the Trustee has not
complied with such request within 60 days after the receipt of the request and
the offer of security or indemnity and (v) the Holders of a majority in
principal amount of the outstanding Securities have not given the Trustee a
direction inconsistent with such request within such 60-day period. Subject to
certain restrictions, the Holders of a majority in principal amount of the
outstanding Securities are given the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to
<PAGE>
9
follow any direction that conflicts with law or the Indenture or that the
Trustee determines is unduly prejudicial to the rights of any other Holder or
that would involve the Trustee in personal liability. Prior to taking any action
under the Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
16. Trustee Dealings with the Issuers
---------------------------------
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Issuers or their Affiliates and may otherwise deal with the Issuers
or their Affiliates with the same rights it would have if it were not Trustee.
The Indenture contains certain limitations on the rights of the Trustee, should
it become a creditor of either of the Issuers, to obtain payment of claims in
certain cases or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee shall be permitted to engage in
other transactions; provided, however, if it acquires any conflicting interest,
-------- -------
it must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
17. No Recourse Against Others
--------------------------
A director, officer, employee or stockholder, as such, of either
Issuer or any Note Guarantor shall not have any liability for any obligations of
the Issuers under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The
waiver and release are part of the consideration for the issue of the
Securities.
18. Authentication
--------------
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
19. Abbreviations
-------------
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
<PAGE>
121
20. Governing Law
-------------
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITH OUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
21. Common Code and ISIN Numbers
----------------------------
The Issuers have caused Common Code numbers and ISIN numbers to be
printed on the Securities and have directed the Trustee to use Common Code
Numbers and ISIN numbers in notices of redemption as a convenience to
Securityholders. No representation is made as to the accuracy of such numbers
either as printed on the Securities or as contained in any notice of redemption
and reliance may be placed only on the other identification numbers placed
thereon.
THE ISSUERS SHALL FURNISH TO ANY HOLDER OF SECURITIES UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT
THE TEXT OF THIS SECURITY.
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of the Issuers. The agent may substitute another to act
for him.
____________________________________________________________
Date: ________________ Your Signature: _____________________
____________________________________________________________
Signature of Signature Guarantee:__________________________________________
Sign exactly as your name appears on the other side of this Security. Signature
must be guaranteed by a participant in a recognized signature guaranty medallion
program or other signature guarantor acceptable to the Trustee.
<PAGE>
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER RESTRICTED
SECURITIES
This certificate relates to DM_________ principal amount of Securities held in
(check applicable space) ____ book-entry or _____ definitive form by the
undersigned.
The undersigned (check one box below):
[_] has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Security held by the Common Depositary a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial
interest in the Global Security (or the portion thereof indicated above);
[_] has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Securities
are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) [_] to an Issuer; or
(2) [_] pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) [_] inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that such transfer is
being made in reliance on Rule 144A, in each case pursuant to and
in compliance with Rule 144A under the Securities Act of 1933; or
(4) [_] outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance
with Rule 904 under the Securities Act of 1933; or
<PAGE>
2
(5) [_] to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that
has furnished to the Trustee a signed letter containing certain
representations and agreements; or
(6) [_] pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee shall refuse to register
any of the Securities evidenced by this certificate in the name of any
Person other than the registered holder thereof; provided, however, that if
-------- -------
box (4), (5) or (6) is checked, the Trustee may require, prior to
registering any such transfer of the Securities, such legal opinions,
certifications and other information as the Issuers have reasonably
requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933.
________________________
Your Signature
Signature Guarantee:
Date: ___________________ __________________________
Signature must be guaranteed Signature of Signature
by a participant in a Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Trustee
____________________________________________________________
<PAGE>
3
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Issuers as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated: ________________ ______________________________
NOTICE: To be executed by
an executive officer
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS SECURITY PURCHASED BY AN ISSUER
PURSUANT TO SECTION 4.06 (ASSET SALE) OR 4.08 (CHANGE OF CONTROL) OF THE
INDENTURE, CHECK THE BOX:
ASSET SALE [_] CHANGE OF CONTROL [_]
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS SECURITY PURCHASED BY
AN ISSUER PURSUANT TO SECTION 4.06 OR 4.08 OF THE INDENTURE, STATE THE AMOUNT:
DM___________________
DATE: __________________ YOUR SIGNATURE: __________________
(SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THE SECURITY)
SIGNATURE GUARANTEE:_______________________________________
SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A
RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER
SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE
<PAGE>
EXHIBIT B
[FORM OF FACE OF EXCHANGE SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE INDUSTRIAL BANK OF JAPAN (LUXEMBOURG), S.A. (THE "COMMON DEPOSITARY"),
LUXEMBOURG, TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF THE COMMON
DEPOSITARY OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE COMMON DEPOSITARY (AND ANY PAYMENT IS MADE TO THE COMMON DEPOSITARY, OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON
DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, THE COMMON
DEPOSITARY, HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF THE COMMON DEPOSITARY OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
<PAGE>
No. DM_______
9 3/8% Senior Note due 2008
CUSIP No. ______
CINS No. ______
ISIN No. ______
COMMON Code ______
THE DERBY CYCLE CORPORATION, a Delaware corporation, and LYON
INVESTMENTS B.V., a company organized under the laws of the Netherlands, as
joint and several obligors, promise to pay to The Industrial Bank of Japan
(Luxembourg), S.A., as Common Depositary, or registered assigns, the principal
sum [of Deutsche Marks] on May 15, 2008.
Payment Dates: May 15 and November 15.
Record Dates: May 1 and November 1.
<PAGE>
Additional provisions of this Security are set forth on the other side
of this Security.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
THE DERBY CYCLE CORPORATION,
by
_________________________________
Name:
Title:
by
_________________________________
Name:
Title:
LYON INVESTMENTS B.V.,
by
_________________________________
Name:
Title:
by
_________________________________
Name:
Title:
<PAGE>
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee, certifies
that this is one of
the Securities referred
to in the Indenture.
by
_____________________________
Authorized Signatory
<PAGE>
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY]
9 2/8% Senior Note due 2008
Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Indenture (as defined).
1. Interest
--------
THE DERBY CYCLE CORPORATION, a Delaware corporation, and LYON
INVESTMENTS B.V., a company organized under the laws of the Netherlands, as
joint and several obligors, promise to pay interest on the principal amount of
this Security at the rate per annum shown above. The Issuers shall pay interest
semiannually on May 15 and November 15 of each year[, commencing [ ],
1998]/3/. Interest on the Securities shall accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from May 14,
1998. Interest shall be computed on the basis of a 360-day year of twelve 30-
day months. The Issuers shall pay interest on overdue principal at the rate
borne by the Securities plus 1% per annum, and they shall pay interest on
overdue installments of interest at the same rate to the extent lawful.
2. Method of Payment
-----------------
The Issuers shall pay interest on the Securities (except defaulted
interest) to the Persons who are registered Holders of Securities at the close
of business on the May 1 or November 1 next preceding the payment date even if
Securities are canceled after the record date and on or before the payment date.
Holders must surrender Securities to a Paying Agent to collect principal
payments. The Issuers shall pay principal, premium, liquidated damages,
interest and Additional Amounts, if any, in money of the Federal Republic of
Germany that at the time of payment is legal tender for payment of public and
private debts. Payments in respect of the Securities represented by the Global
Security (including principal, premium, liquidated damages, interest and
Additional Amounts, if any) shall be made by wire transfer of immediately
available funds to the accounts specified by the Common Depositary on behalf of
Euroclear and Cedel. The Issuers shall make all payments in respect of a
certificated Security (including principal, premium, liquidated damages,
interest and Additional Amounts, if any), by mailing a check to the registered
address of each Holder thereof; provided, however, that payments on the
-------- -------
Securities may also be made, in the case of a Holder of at least DM2,000,000
aggregate principal amount of Securities, by wire transfer
___________
/3/ Use bracketed language for Initial Securities only.
<PAGE>
to a Deutsche Mark account maintained by the payee with a bank in the Federal
Republic of Germany if such Holder elects payment by wire transfer by giving
written notice to the Trustee or the Paying Agent to such effect designating
such account no later than 30 days immediately preceding the relevant due date
for payment (or such other date as the Trustee may accept in its discretion).
3. Paying Agent and Registrar
--------------------------
Initially, IBJ SCHRODER BANK & TRUST COMPANY, a New York banking
corporation (the "Trustee"), shall act as Paying Agent and Registrar. The
Issuers also initially appoint THE INDUSTRIAL BANK OF JAPAN (LUXEMBOURG), S.A.
as principal Paying Agent, and THE INDUSTRIAL BANK OF JAPAN (GERMANY) as Paying
Agent in Germany. The Issuers may appoint and change any Paying Agent or
Registrar without notice. DCC or any of its domestically incorporated Wholly
Owned Subsidiaries may act as Paying Agent or Registrar. In all circumstances,
the Issuers shall ensure that (i) at least one Paying Agent shall be located in
the Federal Republic of Germany, (ii) at least one Paying Agent shall be, if and
so long as the Securities are listed on the Luxembourg Stock Exchange and the
rules of such exchange so require, located in Luxembourg or such other place as
the Luxembourg Stock Exchange may approve and (iii) if and so long as the
Securities are listed on any other securities exchange, any applicable
requirements of such exchange as to Paying Agents are satisfied.
4. Indenture
---------
The Issuers issued, as joint and several obligors, the Securities
under an Indenture dated as of May 14, 1998 (the "Indenture"), among the Issuers
and the Trustee. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) as in effect on the date
------
of the Indenture (the "TIA"). Terms defined in the Indenture and not defined
herein have the meanings ascribed thereto in the Indenture. The Securities are
subject to all terms and provisions of the Indenture, and Securityholders are
referred to the Indenture and the TIA for a statement of such terms and
provisions.
The Securities are senior unsecured obligations of the Issuers, as
joint and several obligors, limited to DM110,000,000 aggregate principal amount
at any one time outstanding (subject to Section 2.07 of the Indenture). This
Security is one of the Exchange Securities referred to in the Indenture. The
Securities include the Initial Securities and any Exchange Securities and
Private Exchange Securities issued in exchange for the Initial Securities
pursuant to the Indenture. The Initial Securities, the Exchange Securities and
the Private Exchange Securities are treated as a single class of securities
under the Indenture. The Indenture imposes certain limitations on the ability of
DCC and its Restricted
<PAGE>
Subsidiaries to, among other things, make certain Investments and other
Restricted Payments, pay dividends and other distributions, incur Indebtedness,
enter into consensual restrictions upon the payment of certain dividends and
distributions by such Restricted Subsidiaries, issue or sell shares of capital
stock of such Restricted Subsidiaries, enter into or permit certain transactions
with Affiliates, create or incur Liens, enter into additional lines of business,
enter into Sale/Leaseback Transactions and make asset sales. The Indenture also
imposes limitations on the ability of the Issuers to consolidate or merge with
or into any other Person or convey, transfer or lease all or substantially all
of the property of either Issuer.
To guarantee the due and punctual payment of the principal, interest
and Additional Amounts, if any, on the Securities and all other amounts payable
by the Issuers under the Indenture and the Securities when and as the same shall
be due and payable, whether at maturity, by acceleration or otherwise, according
to the terms of the Securities and the Indenture, any Note Guarantors shall,
jointly and severally, unconditionally guarantee the Guaranteed Obligations on a
senior basis pursuant to the terms of the Indenture and the Supplemental
Indenture.
5. Optional Redemption
-------------------
Except as set forth below, the Securities shall not be redeemable at
the option of the Issuers prior to May 15, 2003. Thereafter, the Securities
shall be redeemable at the option of the Issuers, in whole or in part, on not
less than 30 nor more than 60 days' prior notice delivered to each Holder of
Securities in accordance with paragraph 7 herein, at the following redemption
prices (expressed as percentages of principal amount), plus accrued and unpaid
interest and Additional Amounts, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant payment date and Additional Amounts, if any, in respect
thereof), if redeemed during the 12-month period commencing on May 15 of the
years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
-------------------------------------------------------
<S> <C>
2003 104.688%
2004 103.125%
2005 101.563%
2006 and thereafter 100.000%
</TABLE>
At any time and from time to time prior to May 15, 2001, the Issuers
may, at their option, redeem up to a maximum of 33 1/3% of the original
aggregate principal amount of the Securities with all or a portion of the
proceeds of one or more Public Equity Offerings
<PAGE>
following which there is a Public Market, at a redemption price equal to
109.375% of the principal amount thereof, plus accrued and unpaid interest and
Additional Amounts, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant payment date and Additional Amounts, if any, in respect thereof);
provided, however, that, after giving effect to any such redemption, at least
- -------- -------
66 2/3 % of the original aggregate principal amount of the Securities remains
outstanding. Any such redemption shall be made within 60 days of such Public
Equity Offering upon not less than 30 nor more than 60 days' notice delivered to
each Holder of Securities being redeemed in accordance with paragraph 7 herein
and otherwise in accordance with the procedures set forth in the Indenture.
The Securities may be redeemed, at the option of the Issuers, in whole
but not in part, at any time upon giving not less than 30 nor more than 60 days'
notice delivered to each Holder of Securities in accordance with paragraph 7
herein (which notice shall be irrevocable), at a redemption price equal to the
principal amount thereof, together with accrued and unpaid interest, if any, to
the date fixed by the Issuers for redemption (a "Tax Redemption Date") and all
Additional Amounts, if any, then due and which shall become due on the Tax
Redemption Date as a result of the redemption or otherwise, if the Issuers
determine that, as a result of (i) any change in, or amendment to, the laws or
treaties (or any regulations, protocols or rulings promulgated thereunder) of
the United States or The Netherlands or any other jurisdiction in which either
of the Issuers is organized or engaged in business for tax purposes (or, in each
case, any political subdivision or taxing authority thereof or therein) or of
the jurisdiction from or through which payment is made or where the payor is
located affecting taxation, which change or amendment becomes effective on or
after the Closing Date, or (ii) any change in position regarding the
application, administration or interpretation of such laws, treaties,
regulations or rulings (including a holding, judgment or order by a court of
competent jurisdiction), which change, amendment, application or interpretation
becomes effective on or after the Closing Date, the Issuers are or shall be
required to pay Additional Amounts, and the Issuers determine that such payment
obligation cannot be avoided by the Issuers taking reasonable measures.
Notwithstanding the foregoing, no such notice of redemption shall be given
earlier than 90 days prior to the earliest date on which the Issuers would be
obligated to make such payment or withholding if a payment in respect of the
Securities were then due. Prior to the delivery of any notice of redemption of
the Securities pursuant to the foregoing, the Issuers shall deliver to the
Trustee an opinion of a tax counsel reasonably satisfactory to the Trustee to
the effect that the circumstances referred to above exist. The Trustee shall
accept such opinion as sufficient evidence of the satisfaction of the conditions
precedent described above, in which event it shall be conclusive and binding on
all Holders of Securities.
<PAGE>
6. Sinking Fund
------------
The Securities are not subject to any sinking fund.
7. Notice of Redemption
--------------------
Notice of redemption shall be given at least 30 days but not more than
60 days before the redemption date. Such notice shall be (i) mailed by first-
class mail to the registered address of each Holder of Securities to be redeemed
and (ii) published in a leading newspaper having a general circulation in (a)
New York City (which is expected to be the Wall Street Journal), (b) Frankfurt,
---- ------ -------
Germany (which is expected to be Frankfurter Allgemeine Zeitung) and (c) if and
----------- ---------- -------
so long as the Securities are listed on the Luxembourg Stock Exchange and the
rules of the Luxembourg Stock Exchange so require, a newspaper having a general
circulation in Luxembourg (which is expected to be the Luxembourg Wort)). If and
---------------
so long as the Securities are listed on any other securities exchange, notices
shall also be given in accordance with any applicable requirements of such
securities exchange. Notices given by publication shall be deemed to be given
on the first date on which publication is made, and notices given by first-class
mail shall be deemed given five calendar days after mailing. Securities in
denominations equal to or larger than DM1,000 may be redeemed in part but only
in whole multiples of DM1,000. If money sufficient to pay the redemption price
of and accrued and unpaid interest and Additional Amounts, if any, on all
Securities (or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to accrue
on such Securities (or such portions thereof) called for redemption.
8. Repurchase of Securities at the Option of Holders upon Change of Control
------------------------------------------------------------------------
Upon a Change of Control, each Holder of Securities shall have the
right, subject to certain conditions specified in the Indenture, to cause the
Issuers to repurchase all or any part of the Securities of such Holder at a
purchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued and unpaid interest and Additional Amounts, if any, to
the date of repurchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant payment date that
is on or prior to the date of purchase and Additional Amounts, if any, in
respect thereof) as provided in, and subject to the terms of, the Indenture.
9. Denominations; Transfer; Exchange
---------------------------------
The Securities are in registered form without coupons in denominations
of DM1,000 and whole multiples of DM1,000. A Holder may transfer or exchange
Securities
<PAGE>
in accordance with the Indenture. Upon any transfer or exchange, the Registrar
and the Trustee may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents, and the Issuers, or the Paying Agent, as
applicable, may require a Holder to pay any taxes required by law or permitted
by the Indenture. The Issuers shall not be required to transfer or exchange any
Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or to transfer
or exchange any Securities for a period of 15 days prior to a selection of
Securities to be redeemed.
10. Substitution of Currency
------------------------
If the Federal Republic of Germany adopts the Euro, the regulations of
the European Commission relating to the Euro shall then apply to the Securities
and the Indenture. The circumstances and consequences described in this
paragraph do not entitle the Issuers or any Holder of Securities to early
redemption, rescission, notice, repudiation, adjustment or renegotiation of the
terms and conditions of the Securities or the Indenture or to raise any other
defense or to request any compensation or claim, nor shall they affect any of
the obligations of the Issuers under the Securities or the Indenture.
11. Persons Deemed Owners
---------------------
Subject to the provisions hereof with respect to record dates, the
registered Holder of this Security may be treated as the owner of it for all
purposes.
12. Unclaimed Money
---------------
If money for the payment of principal, interest or Additional Amounts
remains unclaimed for two years, the Trustee or Paying Agent shall pay the money
back to the Issuers at their written request unless an abandoned property law
designates another Person. After any such payment, Holders entitled to the
money must look only to the Issuers and not to the Trustee for payment.
13. Discharge and Defeasance
------------------------
Subject to certain conditions, the Issuers at any time may terminate
some of or all of their obligations under the Securities and the Indenture if
the Issuers deposit with the Trustee money or German Government Obligations for
the payment of principal and interest on the Securities to redemption or
maturity, as the case may be.
<PAGE>
14. Amendment, Waiver
-----------------
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended without prior notice to any
Securityholder but with the written consent of the Holders of at least a
majority in aggregate principal amount of the outstanding Securities (including
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, such Securities) and (ii) any default or noncompliance with any
provision may be waived with the written consent of the Holders of at least a
majority in principal amount of the outstanding Securities. Subject to certain
exceptions set forth in the Indenture, without the consent of any Holder of
Securities, the Issuers and the Trustee may amend the Indenture or the
Securities (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to
comply with Article 5 of the Indenture; (iii) to provide for uncertificated
Securities in addition to or in place of certificated Securities; (iv) to add
Note Guarantees with respect to the Securities; (v) to secure the Securities;
(vi) to add additional covenants or to surrender rights and powers conferred on
the Issuers; (vii) to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the TIA; (viii) to
make any change that does not adversely affect the rights of any Securityholder;
(ix) to provide for the issuance of the Exchange Securities or Private Exchange
Securities; or (x) to provide for the assumption by a Successor Company of the
obligations of either of the Issuers.
15. Defaults and Remedies
---------------------
If an Event of Default (other than an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of either Issuer)
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the outstanding Securities by notice to the Issuers may
declare the principal of and accrued but unpaid interest and Additional Amounts,
if any, on all the Securities to be due and payable. If an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of either
Issuer occurs, the principal of and interest and Additional Amounts, if any, on
all the Securities shall become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders. Under
certain circumstances, the Holders of a majority in principal amount of the
outstanding Securities may rescind any such acceleration with respect to the
Securities and its consequences.
If an Event of Default occurs and is continuing, the Trustee shall be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the Holders unless such Holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium, if any, interest or Additional Amounts, if any, when due, no
Holder may pursue any remedy with respect to the Indenture or the Securities
unless
<PAGE>
(i) such Holder has previously given the Trustee notice that an Event of Default
is continuing, (ii) Holders of at least 25% in principal amount of the
outstanding Securities have requested the Trustee in writing to pursue the
remedy, (iii) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense, (iv) the Trustee has not
complied with such request within 60 days after the receipt of the request and
the offer of security or indemnity and (v) the Holders of a majority in
principal amount of the outstanding Securities have not given the Trustee a
direction inconsistent with such request within such 60-day period. Subject to
certain restrictions, the Holders of a majority in principal amount of the
outstanding Securities are given the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or the Indenture or
that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would involve the Trustee in personal liability. Prior to taking
any action under the Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
16. Trustee Dealings with the Issuers
---------------------------------
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Issuers or their Affiliates and may otherwise deal with the Issuers
or their Affiliates with the same rights it would have if it were not Trustee.
The Indenture contains certain limitations on the rights of the Trustee, should
it become a creditor of either of the Issuers, to obtain payment of claims in
certain cases or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee shall be permitted to engage in
other transactions; provided, however, if it acquires any conflicting interest,
-------- -------
it must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
17. No Recourse Against Others
--------------------------
A director, officer, employee or stockholder, as such, of either
Issuer or any Note Guarantor shall not have any liability for any obligations of
the Issuers under the Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability. The
waiver and release are part of the consideration for the issue of the
Securities.
<PAGE>
18. Authentication
--------------
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
19. Abbreviations
-------------
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
20. Governing Law
-------------
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITH OUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
21. Common Code numbers and ISIN Numbers
------------------------------------
The Issuers have caused Common Code numbers and ISIN numbers to be
printed on the Securities and have directed the Trustee to use Common Code
numbers and ISIN numbers in notices of redemption as a convenience to
Securityholders. No representation is made as to the accuracy of such numbers
either as printed on the Securities or as contained in any notice of redemption
and reliance may be placed only on the other identification numbers placed
thereon.
THE ISSUERS SHALL FURNISH TO ANY HOLDER OF SECURITIES UPON WRITTEN
REQUEST AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT
THE TEXT OF THIS SECURITY.
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of the Issuers. The agent may substitute another to act
for him.
____________________________________________________________
Date: ________________ Your Signature: _____________________
____________________________________________________________
Signature of Signature Guarantee:__________________________________________
Sign exactly as your name appears on the other side of this Security. Signature
must be guaranteed by a participant in a recognized signature guaranty medallion
program or other signature guarantor acceptable to the Trustee.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS SECURITY PURCHASED BY AN ISSUER
PURSUANT TO SECTION 4.06 (ASSET SALE) OR 4.08 (CHANGE OF CONTROL) OF THE
INDENTURE, CHECK THE BOX:
ASSET SALE [_] CHANGE OF CONTROL [_]
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS SECURITY PURCHASED BY
AN ISSUER PURSUANT TO SECTION 4.06 OR 4.08 OF THE INDENTURE, STATE THE AMOUNT:
DM
DATE: __________________ YOUR SIGNATURE: _________________________
(SIGN EXACTLY AS YOUR NAME
APPEARS ON THE OTHER SIDE OF
THE SECURITY)
SIGNATURE GUARANTEE:_______________________________________
SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A RECOGNIZED
SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER SIGNATURE GUARANTOR
ACCEPTABLE TO THE TRUSTEE
<PAGE>
EXHIBIT C
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated as
of , among [GUARANTOR] (the "New Guarantor"), THE
DERBY CYCLE CORPORATION (or its successor), a Delaware corporation,
LYON INVESTMENTS B.V. (or its successor), a company organized under
the laws of the Netherlands, and IBJ SCHRODER BANK & TRUST COMPANY, a
New York banking corporation, as trustee under the Indenture referred
to below (the "Trustee").
W I T N E S S E T H :
WHEREAS the Issuers have heretofore executed and delivered to the
Trustee an Indenture (the "Indenture") dated as of May 14, 1998, providing for
the issuance of an aggregate principal amount of up to DM110,000,000 of 9 3/8%
Senior Notes due 2008 (the "Securities");
WHEREAS Section 4.11 of the Indenture provides that under certain
circumstances the Issuers are required to cause the New Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the New
Guarantor shall unconditionally guarantee all the Issuers' obligations under the
Securities pursuant to a Note Guarantee on the terms and conditions set forth
herein;
WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the
Issuers and the Existing Guarantors are authorized to execute and deliver this
Supplemental Indenture; and
WHEREAS the terms used but not defined herein shall have the meanings
ascribed thereto in the Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Guarantor, the Issuers[, the Existing Guarantors] and the Trustee mutually
covenant and agree for the equal and ratable benefit of the Holders of the
Securities as follows:
1. Agreement to Guarantee. The New Guarantor hereby agrees[, jointly
-----------------------
and severally with all the Existing Guarantors,] to unconditionally guarantee
the Issuers'
<PAGE>
obligations under the Securities as a Note Guarantor on the terms and subject to
the conditions set forth below and to be bound by all other applicable
provisions of the Indenture and the Securities:
a. Note Guarantees. The New Guarantor hereby jointly and severally
----------------
unconditionally and irrevocably guarantees, as a primary obligor and not merely
as a surety, to each Holder and to the Trustee and its successors and assigns
(i) the full and punctual payment of principal of and interest and Additional
Amounts, if any, on and liquidated damages in respect of the Securities when
due, whether at Stated Maturity, by acceleration, by redemption or otherwise,
and all other monetary obligations of the Issuers under the Indenture (including
obligations to the Trustee) and the Securities and (ii) the full and punctual
performance within applicable grace periods of all other obligations of the
Issuers whether for expenses, indemnification or otherwise under the Indenture
and the Securities (all the foregoing being hereinafter collectively called the
"Guaranteed Obligations"). The New Guarantor further agrees that the Guaranteed
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from the New Guarantor, and that the New Guarantor shall remain
bound under this Supplemental Indenture notwithstanding any extension or renewal
of any Guaranteed Obligation.
The New Guarantor waives presentation to, demand of, payment from and
protest to the Issuers of any of the Guaranteed Obligations and also waives
notice of protest for nonpayment. The New Guarantor waives notice of any
default under the Securities or the Guaranteed Obligations. The obligations of
the New Guarantor hereunder shall not be affected by (a) the failure of any
Holder or the Trustee to assert any claim or demand or to enforce any right or
remedy against the Issuers or any other Person under the Indenture, the
Securities or any other agreement or otherwise; (b) any extension or renewal of
any thereof; (c) any rescission, waiver, amendment or modification of any of the
terms or provisions of the Indenture, the Securities or any other agreement; (d)
the release of any security held by any Holder or the Trustee for the Guaranteed
Obligations or any of them; (e) the failure of any Holder or Trustee to exercise
any right or remedy against any other guarantor of the Guaranteed Obligations;
or (f) any change in the ownership of the New Guarantor, except as provided in
Section 1(b)(ii).
The New Guarantor hereby waives any right to which it may be entitled
to have its obligations hereunder divided among any other Note Guarantor, such
that the New Guarantor's obligations would be less than the full amount claimed.
The New Guarantor hereby waives any right to which it may be entitled to have
the assets of the Issuers first be used and depleted as payment of the Issuers'
or the New Guarantor's obligations hereunder prior to any amounts being claimed
from or paid by the New Guarantor hereunder. The New Guarantor hereby waives
any right to which it may be entitled to require that the Issuers be sued prior
to an action being initiated against the New Guarantor.
<PAGE>
The New Guarantor further agrees that its Note Guarantee herein
constitutes a guarantee of payment, performance and compliance when due (and not
a guarantee of collection) and waives any right to require that any resort be
had by any Holder or the Trustee to any security held for payment of the
Guaranteed Obligations.
Except as expressly set forth in Sections 8.01(b) and 10.01 of the
Indenture and Section 1(b) herein, the obligations of the New Guarantor
hereunder shall not be subject to any reduction, limitation, impairment or
termination for any reason, including any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to any defense of setoff,
counterclaim, recoupment or termination whatsoever or by reason of the
invalidity, illegality or unenforceability of the Guaranteed Obligations or
otherwise. Without limiting the generality of the foregoing, the obligations of
the New Guarantor herein shall not be discharged or impaired or otherwise
affected by the failure of any Holder or the Trustee to assert any claim or
demand or to enforce any remedy under the Indenture, the Securities or any other
agreement, by any waiver or modification of any thereof, by any default, failure
or delay, wilful or otherwise, in the performance of the obligations, or by any
other act or thing or omission or delay to do any other act or thing which may
or might in any manner or to any extent vary the risk of any Note Guarantor or
would otherwise operate as a discharge of any Note Guarantor as a matter of law
or equity.
The New Guarantor agrees that its Note Guarantee shall remain in full
force and effect until payment in full of all the Guaranteed Obligations. The
New Guarantor further agrees that its Note Guarantee herein shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of or interest on any Guaranteed Obligation is
rescinded or must otherwise be restored by any Holder or the Trustee upon the
bankruptcy or reorganization of the Issuers or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against the New
Guarantor by virtue hereof, upon the failure of the Issuers to pay the principal
of or interest or Additional Amounts, if any, on any Guaranteed Obligation when
and as the same shall become due, whether at maturity, by acceleration, by
redemption or otherwise, or to perform or comply with any other Guaranteed
Obligation, the New Guarantor hereby promises to and shall, upon receipt of
written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to
the Holders or the Trustee an amount equal to the sum of (i) the unpaid
principal amount of such Guaranteed Obligations, (ii) accrued and unpaid
interest on such Guaranteed Obligations (but only to the extent not prohibited
by law) and (iii) all other monetary obligations of the Issuers to the Holders
and the Trustee.
The New Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any Guaranteed Obligations
guaranteed
<PAGE>
hereby until payment in full of all Guaranteed Obligations. The New Guarantor
further agrees that, as between it, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the Guaranteed Obligations
guaranteed hereby may be accelerated as provided in Article 6 of the Indenture
for the purposes of any Note Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the Guaranteed
Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such Guaranteed Obligations as provided in Article 6 of the
Indenture, such Guaranteed Obligations (whether or not due and payable) shall
forthwith become due and payable by the New Guarantor for the purposes of this
Section 1(a).
The New Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees and expenses) incurred by the Trustee or
any Holder in enforcing any rights under this Section 1(a).
Upon request of the Trustee, the New Guarantor shall execute and
deliver such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purpose of the Indenture
and this Supplemental Indenture.
b. Limitation on Liability. (i) Any term or provision of this
------------------------
Supplemental Indenture to the contrary notwithstanding, the maximum, aggregate
amount of the Guaranteed Obligations guaranteed hereunder by the New Guarantor
shall not exceed the maximum amount that can be hereby guaranteed without
rendering this Supplemental Indenture voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally.
(ii) This Note Guarantee as to the New Guarantor shall terminate and
be of no further force or effect and the New Guarantor shall be deemed to be
released from all obligations under this Supplemental Indenture upon (A) the
merger or consolidation of the New Guarantor with or into any Person other than
DCC or a Subsidiary or Affiliate of DCC where the New Guarantor is not the
surviving entity of such consolidation or merger or (B) the sale by DCC or any
Subsidiary of DCC (or any pledgee of DCC) of the Capital Stock of the New
Guarantor, where, after such sale, the New Guarantor is no longer a Subsidiary
of DCC; provided, however, that each such merger, consolidation or sale (or, in
-------- -------
the case of a sale by such a pledgee, the disposition of the proceeds of such
sale) shall comply with Section 4.06 of the Indenture. At the request of the
Issuers, the Trustee shall execute and deliver an appropriate instrument
evidencing such release.
c. Successors and Assigns. This Supplemental Indenture shall be
-----------------------
binding upon the New Guarantor and its successors and assigns and shall inure to
the benefit of the successors and assigns of the Trustee and the Holders and, in
the event of any transfer or assignment of rights by any Holder or the Trustee,
the rights and privileges conferred upon
<PAGE>
that party in the Indenture, this Supplemental Indenture and in the Securities
shall automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions of the Indenture and this Supplemental
Indenture.
d. No Waiver. Neither a failure nor a delay on the part of either
----------
the Trustee or the Holders in exercising any right, power or privilege under
this Supplemental Indenture shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise of any
right, power or privilege. The rights, remedies and benefits of the Trustee and
the Holders herein expressly specified are cumulative and not exclusive of any
other rights, remedies or benefits which either may have under this Supplemental
Indenture at law, in equity, by statute or otherwise.
e. Modification. No modification, amendment or waiver of any
-------------
provision of this Supplemental Indenture, nor the consent to any departure by
the New Guarantor therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Trustee, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on the New Guarantor in any case shall entitle
the New Guarantor to any other or further notice or demand in the same, similar
or other circumstances.
2. Ratification of Indenture; Supplemental Indentures Part of
----------------------------------------------------------
Indenture. Except as expressly amended hereby, the Indenture is in all respects
- ----------
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every Holder of Securities
heretofore or hereafter authenticated and delivered shall be bound hereby.
3. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
--------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
4. Jurisdiction. The New Guarantor agrees that any suit, action or
-------------
proceeding against the New Guarantor brought by any Holder or the Trustee
arising out of or based upon the Indenture, this Supplemental Indenture or the
Securities may be instituted in any state or U.S. federal court in the Borough
of Manhattan, The City of New York, New York, and any appellate court from any
thereof, and it irrevocably submits to the non-exclusive jurisdiction of such
courts in any suit, action or proceeding. The New Guarantor irrevocably waives,
to the fullest extent permitted by law, any objection to any suit, action, or
proceeding that may
<PAGE>
be brought in connection with the Indenture, this Supplemental Indenture or the
Securities, including such actions, suits or proceedings relating to securities
laws of the United States or any state thereof, in such courts whether on the
grounds of venue, residence or domicile or on the ground that any such suit,
action or proceeding has been brought in an inconvenient forum. The New
Guarantor agrees that final judgment in any such suit, action or proceeding
brought in such court shall be conclusive and binding upon the New Guarantor and
may be enforced in any court to the jurisdiction of which the New Guarantor is
subject by a suit upon such judgment; provided that service of process is
effected upon the New Guarantor in the manner provided by this Section 4. The
New Guarantor has irrevocably appointed CT Corporation System, with offices on
the date hereof at 1633 Broadway, New York, New York 10019, as its authorized
agent (the "Authorized Agent"), upon whom process may be served in any suit,
action or proceeding arising out of or based upon the Indenture, this
Supplemental Indenture, the Securities or the transactions contemplated herein
which may be instituted in any state or U.S. federal court in the Borough of
Manhattan, The City of New York, New York, by any Holder or the Trustee, and
expressly accepts the non-exclusive jurisdiction of any such court in respect of
any such suit, action or proceeding. The New Guarantor hereby represents and
warrants that the Authorized Agent has accepted such appointment and has agreed
to act as said agent for service of process, and the New Guarantor agrees to
take any and all action, including the filing of any and all documents that may
be necessary to continue such respective appointment in full force and effect as
aforesaid. Service of process upon the Authorized Agent shall be deemed, in
every respect, effective service of process upon the New Guarantor.
Notwithstanding the foregoing, any action involving the New Guarantor arising
out of or based upon the Indenture, this Supplemental Indenture or the
Securities may be instituted by any Holder or the Trustee in any court of
competent jurisdiction in any other jurisdiction.
5. Trustee Makes No Representation. The Trustee makes no
--------------------------------
representation as to the validity or sufficiency of this Supplemental Indenture.
6. Counterparts. The parties may sign any number of copies of this
-------------
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
7. Effect of Headings. The Section headings herein are for
-------------------
convenience only and shall not effect the construction thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
[NEW GUARANTOR],
by
_____________________________________
Name:
Title:
THE DERBY CYCLE CORPORATION,
by
____________________________________
Name:
Title:
LYON INVESTMENTS B.V.,
by
____________________________________
Name:
Title:
[EXISTING GUARANTORS],
by____________________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee,
by
_____________________________________
Name:
Title:
<PAGE>
EXHIBIT D
Form of
Transferee Letter of Representation
The Derby Cycle Corporation
Lyon Investments B.V.
In care of
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Ladies and Gentlemen:
This certificate is delivered to request a transfer of DM_______ principal
amount of the 9 3/8% Senior Notes due 2008 (the "Securities") of The Derby Cycle
Corporation, a Delaware corporation, and Lyon Investments B.V. (together, the
"Issuers").
Upon transfer, the Securities would be registered in the name of the new
beneficial owner as follows:
Name:________________________
Address:_____________________
Taxpayer ID Number:__________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act")), purchasing for our own account or for the account of such an
institutional "accredited investor" at least DM500,000 principal amount of the
Securities, and we are acquiring the Securities not with a view to, or for offer
or sale in connection with, any distribution in violation of the Securities Act.
We have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Securities,
and we invest in or purchase securities similar to the Securities in the normal
course of our business. We, and any accounts for which we are acting, are each
able to bear the economic risk of our or its investment.
<PAGE>
2. We understand that the Securities have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any
investor account for which we are purchasing Securities to offer, sell or
otherwise transfer such Securities prior to the date that is two years after the
later of the date of original issue and the last date on which the Issuers or
any affiliate of the Issuers was the owner of such Securities (or any
predecessor thereto) (the "Resale Restriction Termination Date") only (a) to the
Issuers, (b) pursuant to a registration statement that has been declared
effective under the Securities Act, (c) in a transaction complying with the
requirements of Rule 144A under the Securities Act ("Rule 144A"), to a person we
reasonably believe is a qualified institutional buyer under Rule 144A (a "QIB")
that is purchasing for its own account or for the account of a QIB and to whom
notice is given that the transfer is being made in reliance on Rule 144A, (d) in
an offshore transaction within the meaning of, and in compliance with,
Regulation S under the Securities Act, (e) to an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act that is purchasing for its own account or for the account of such
an institutional "accredited investor," in each case in a minimum principal
amount of Securities of DM500,000, or (f) pursuant to any other available
exemption from the registration requirements of the Securities Act, subject in
each of the foregoing cases to any requirement of law that the disposition of
our property or the property of such investor account or accounts be at all
times within our or their control and in compliance with any applicable state
securities laws. The foregoing restrictions on resale shall not apply
subsequent to the Resale Restriction Termination Date. If any resale or other
transfer of the Securities is proposed to be made pursuant to clause (e) above
prior to the Resale Restriction Termination Date, the transferor shall deliver a
letter from the transferee substantially in the form of this letter to the
Issuers and the Trustee, which shall provide, among other things, that the
transferee is an institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring
such Securities for investment purposes and not for distribution in violation of
the Securities Act. Each purchaser acknowledges that the Issuers and the
Trustee reserve the right prior to the offer, sale or other transfer prior to
the Resale Restriction Termination Date of the Securities pursuant to clause
(d), (e) or (f) above to require the delivery of an opinion of counsel,
certifications or other information satisfactory to the Issuers and the Trustee.
TRANSFEREE:_________________,
by _______________________
<PAGE>
EXHIBIT 4.4
THE DERBY CYCLE CORPORATION
LYON INVESTMENTS B.V.
(formerly Lyon Cycle B.V.)
$100,000,000 10% Senior Notes due 2008
DM110,000,000 9 3/8% Senior Notes due 2008
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
May 14, 1998
CHASE SECURITIES INC.
CHASE MANHATTAN BANK AG
CHASE MANHATTAN INTERNATIONAL LIMITED
In care of
Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
The Derby Cycle Corporation, a Delaware corporation ("DCC"), and Lyon
Investments B.V., a company organized under the laws of The Netherlands and a
wholly owned subsidiary of DCC, which was formerly known as Lyon Cycle B.V.
("Lyon", and, together with DCC, the "Issuers"), propose to issue and sell to
Chase Securities Inc. ("CSI"), the Chase Manhattan Bank AG ("Chase AG") and
Chase Manhattan International Limited (together with CSI and Chase AG, the
"Initial Purchasers"), upon the terms and subject to the conditions set forth in
a purchase agreement dated May 7, 1998 (the "Purchase Agreement"), $100,000,000
aggregate principal amount of 10% Senior Notes due 2008 (the "Dollar
Securities") and DM110,000,000 aggregate principal amount of 9 3/8% Senior Notes
due 2008 (the "DM Securities", and, together with the Dollar Securities, the
"Securities"). Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Purchase Agreement.
<PAGE>
2
As an inducement to the Initial Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the Initial
Purchasers thereunder, each of the Issuers agrees with the Initial Purchasers,
for the benefit of the holders (including the Initial Purchasers) of the
Securities, the Exchange Securities (as defined herein) and the Private Exchange
Securities (as defined herein) (collectively, the "Holders"), as follows:
1. Registered Exchange Offer. The Issuers shall (i) prepare and, not
later than 90 days following the date of original issuance of the Securities
(the "Issue Date"), file with the Commission a registration statement (the
"Exchange Offer Registration Statement") on an appropriate form under the
Securities Act with respect to a proposed offer to the Holders of the Securities
(the "Registered Exchange Offer") to issue and deliver to such Holders, (A) in
exchange for the Dollar Securities, a like aggregate principal amount of debt
securities of the Issuers (the "Dollar Exchange Securities") that are identical
in all material respects to the Dollar Securities, except for the transfer
restrictions relating to the Dollar Securities, and (B) in exchange for the DM
Securities, a like aggregate principal amount of debt securities of the Issuers
(the "DM Exchange Securities", and, together with the Dollar Exchange
Securities, the "Exchange Securities") that are identical in all material
respects to the DM Securities, except for transfer restrictions relating to the
DM Securities, (ii) use their reasonable best efforts to cause the Exchange
Offer Registration Statement to become effective under the Securities Act no
later than 210 days after the Issue Date and the Registered Exchange Offer to be
consummated no later than 240 days after the Issue Date and (iii) keep the
Exchange Offer Registration Statement effective for not less than 30 days (or
longer, if required by applicable law) after the date on which notice of the
Registered Exchange Offer is mailed to the Holders (such period being called the
"Exchange Offer Registration Period"). The Dollar Exchange Securities will be
issued under the Dollar Securities Indenture or an indenture (the "Dollar
Exchange Securities Indenture") among the Issuers and the Dollar Securities
Trustee or such other bank or trust company that is reasonably satisfactory to
the Initial Purchasers, as trustee (the "Dollar Exchange Securities Trustee"),
such indenture to be identical in all material respects to the Dollar Securities
Indenture, except for the transfer restrictions relating to the Dollar
Securities (as described above). The DM Exchange Securities will be issued
under the DM Securities Indenture or an indenture (the "DM Exchange Securities
Indenture", and, together with the Dollar Exchange Securities Indenture, the
"Exchange Securities Indentures") among the Issuers and the DM Securities
Trustee or such other bank or trust company that is reasonably satisfactory to
the Initial Purchasers, as trustee (the "DM Exchange Securities Trustee", and,
together with the Dollar Exchange Securities Trustee, the "Exchange Securities
Trustees"), such indenture to be identical in all material respects to the DM
Securities Indenture, except for the transfer restrictions relating to the DM
Securities (as described above).
Upon the effectiveness of the Exchange Offer Registration Statement,
the Issuers shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Securities for Exchange Securities (assuming that such Holder (a) is
not an affiliate of the Issuers or an Exchanging Dealer (as defined herein) not
complying with the requirements of the next sentence, (b) is not an Initial
Purchaser holding Securities that have, or that are reasonably likely to have,
the status of an unsold allotment in an initial distribution, (c) acquires the
Exchange Securities in the ordinary course of such Holder's business and (d) has
no arrangements or understandings with any person
<PAGE>
3
to participate in the distribution of the Exchange Securities) and to trade such
Exchange Securities from and after their receipt without any limitations or
restrictions under the Securities Act and without material restrictions under
the securities laws of the several states of the United States. The Issuers, the
Initial Purchasers and each Exchanging Dealer acknowledge that, pursuant to
current interpretations by the Commission's staff of Section 5 of the Securities
Act, each Holder that is a broker-dealer electing to exchange Securities,
acquired for its own account as a result of market-making activities or other
trading activities, for Exchange Securities (an "Exchanging Dealer"), is
required to deliver a prospectus containing substantially the information set
forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section and in Annex
C hereto in the "Plan of Distribution" section of such prospectus in connection
with a sale of any such Exchange Securities received by such Exchanging Dealer
pursuant to the Registered Exchange Offer.
If, prior to the consummation of the Registered Exchange Offer, any
Holder holds any Securities acquired by it that have, or that are reasonably
likely to be determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Registered
Exchange Offer, the Issuers shall, upon the request of any such Holder,
simultaneously with the delivery of the Exchange Securities in the Registered
Exchange Offer, issue and deliver to any such Holder, (i) in exchange for the
Dollar Securities held by such Holder (the "Dollar Securities Private
Exchange"), a like aggregate principal amount of debt securities of the Issuers
(the "Dollar Private Exchange Securities") that are identical in all material
respects to the Dollar Exchange Securities, except for the transfer restrictions
relating to such Dollar Private Exchange Securities and (ii) in exchange for the
DM Securities held by such Holder (the "DM Securities Private Exchange", and,
together with the Dollar Securities Private Exchange the "Private Exchange"), a
like aggregate principal amount of debt securities of the Issuers (the "DM
Private Exchange Securities", and, together with the Dollar Private Exchange
Securities, the "Private Exchange Securities") that are identical in all
material respects to the DM Exchange Securities, except for the transfer
restrictions relating to such DM Private Exchange Securities. The Dollar Private
Exchange Securities will be issued under the same indenture as the Dollar
Exchange Securities, and the Issuers shall use their reasonable best efforts to
cause the Dollar Private Exchange Securities to bear the same CUSIP number as
the Dollar Exchange Securities. The DM Private Exchange Securities will be
issued under the same indenture as the DM Exchange Securities, and the Issuers
shall use their reasonable best efforts to cause the DM Private Exchange
Securities to bear the same CUSIP number as the DM Exchange Securities.
In connection with the Registered Exchange Offer, the Issuers shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date on which notice
of the Registered Exchange Offer is mailed to the Holders;
<PAGE>
4
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York City time, on the last business day on
which the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws that are applicable
to the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange
Offer and any Private Exchange, as the case may be, the Issuers shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(b) deliver to the Dollar Securities Trustee for cancelation all
Dollar Securities so accepted for exchange, and deliver to the DM
Securities Trustee for cancelation all DM Securities so accepted for
exchange; and
(c) cause the Dollar Securities Trustee or the Dollar Exchange
Securities Trustee, as the case may be, promptly to authenticate and
deliver to each Holder, Dollar Exchange Securities or Dollar Private
Exchange Securities, as the case may be, equal in principal amount to the
Dollar Securities of such Holder so accepted for exchange, and cause the DM
Securities Trustee or the DM Exchange Securities Trustee, as the case may
be, promptly to authenticate and deliver to each Holder, DM Exchange
Securities or DM Private Exchange Securities, as the case may be, equal in
principal amount to the DM Securities of such Holder so accepted for
exchange.
The Issuers shall use their reasonable best efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
prospectus contained therein in order to permit such prospectus to be used by
all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided that (i) in the case where
such prospectus and any amendment or supplement thereto must be delivered by an
Exchanging Dealer, such period shall be the lesser of 180 days and the date on
which all Exchanging Dealers have sold all Exchange Securities held by them and
(ii) the Issuers shall make such prospectus and any amendment or supplement
thereto available to any broker-dealer for use in connection with any resale of
any Exchange Securities for a period of not less than 90 days after the
consummation of the Registered Exchange Offer.
The Dollar Securities Indenture or the Dollar Exchange Securities
Indenture, as the case may be, shall provide that the Dollar Securities, the
Dollar Exchange Securities and the Dollar Private Exchange Securities shall vote
and consent together on all matters as one class and that none of the Dollar
Securities, the Dollar Exchange Securities or the Dollar Private Exchange
Securities will have the right to vote or consent as a separate class on any
matter. The DM
<PAGE>
5
Securities Indenture or the DM Exchange Securities Indenture, as the case may
be, shall provide that the DM Securities, the DM Exchange Securities and the DM
Private Exchange Securities shall vote and consent together on all matters as
one class and that none of the DM Securities, the DM Exchange Securities or the
DM Private Exchange Securities will have the right to vote or consent as a
separate class on any matter.
Interest on each Exchange Security and Private Exchange Security
issued pursuant to the Registered Exchange Offer and in the Private Exchange
will accrue from the last interest payment date on which interest was paid on
the Securities surrendered in exchange therefor or, if no interest has been paid
on the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Issuers that, at the time of the consummation of
the Registered Exchange Offer, (i) any Exchange Securities received by such
Holder will be acquired in the ordinary course of business, (ii) such Holder
will have no arrangements or understanding with any person to participate in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act and (iii) such Holder is not an affiliate of the Issuers or,
if it is such an affiliate, such Holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
Notwithstanding any other provisions hereof, the Issuers will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Exchange Offer Registration Statement and any
amendment thereto does not, when it becomes effective, contain 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 and
(iii) any prospectus forming part of any Exchange Offer Registration Statement,
and any supplement to such prospectus, does not, as of the consummation of the
Registered Exchange Offer, include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
2. Shelf Registration. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff the Issuers are not
permitted to effect the Registered Exchange Offer as contemplated by Section 1,
or (ii) any Securities validly tendered pursuant to the Registered Exchange
Offer are not exchanged for Exchange Securities within 240 days after the Issue
Date, or (iii) any Initial Purchaser so requests with respect to Securities or
Private Exchange Securities not eligible to be exchanged for Exchange Securities
in the Registered
<PAGE>
6
Exchange Offer and held by it following the consummation of the Registered
Exchange Offer, or (iv) any applicable law or interpretations do not permit any
Holder to participate in the Registered Exchange Offer, or (v) any Holder that
participates in the Registered Exchange Offer does not receive freely
transferable Exchange Securities in exchange for tendered Securities, or (vi)
the Issuers so elect, then the following provisions shall apply:
(a) The Issuers shall use their reasonable best efforts to file as
promptly as practicable (but in no event more than 30 days after so
required or requested pursuant to this Section 2) with the Commission, and
thereafter shall use their reasonable best efforts to cause to be declared
effective, a shelf registration statement on an appropriate form under the
Securities Act relating to the offer and sale of the Transfer Restricted
Securities (as defined below) by the Holders thereof from time to time in
accordance with the methods of distribution set forth in such registration
statement (hereafter, a "Shelf Registration Statement" and, together with
any Exchange Offer Registration Statement, a "Registration Statement").
(b) The Issuers shall use their reasonable best efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be used by Holders of Transfer
Restricted Securities for a period ending on the earlier of (i) two years
from the Issue Date or such shorter period that will terminate when all the
Transfer Restricted Securities covered by the Shelf Registration Statement
have been sold pursuant thereto and (ii) the date on which the Securities
become eligible for resale without volume restrictions pursuant to Rule 144
under the Securities Act (in any such case, such period being called the
"Shelf Registration Period"). The Issuers shall be deemed not to have used
their reasonable best efforts to keep the Shelf Registration Statement
effective during the requisite period if either of them voluntarily takes
any action that would result in Holders of Transfer Restricted Securities
covered thereby not being able to offer and sell such Transfer Restricted
Securities during that period, unless such action is required by applicable
law.
(c) Notwithstanding any other provisions hereof, the Issuers will
ensure that (i) any Shelf Registration Statement and any amendment thereto
and any prospectus forming part thereof and any supplement thereto complies
in all material respects with the Securities Act and the rules and
regulations of the Commission thereunder, (ii) any Shelf Registration
Statement and any amendment thereto (in either case, other than with
respect to information included therein in reliance upon or in conformity
with written information furnished to the Issuers by or on behalf of any
Holder specifically for use therein (the "Holders' Information")) does not
contain 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 and (iii) any prospectus forming part of any Shelf
Registration Statement, and any supplement to such prospectus (in either
case, other than with respect to Holders' Information), does not include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
3. Liquidated Damages. (a) The parties hereto agree that the
Holders of Transfer Restricted Securities will suffer damages if the Issuers
fail to fulfill their obligations
<PAGE>
7
under Section 1 or Section 2, as applicable, and that it would not be feasible
to ascertain the extent of such damages. Accordingly, if (i) the applicable
Registration Statement is not filed with the Commission on or prior to 90 days
after the Issue Date, (ii) the Exchange Offer Registration Statement or the
Shelf Registration Statement, as the case may be, is not declared effective
within 210 days after the Issue Date (or in the case of a Shelf Registration
Statement required to be filed in response to a change in law or the applicable
interpretations of Commission's staff, if later, within 30 days after
publication of the change in law or interpretation), (iii) the Registered
Exchange Offer is not consummated on or prior to 240 days after the Issue Date
or (iv) the Shelf Registration Statement is filed and declared effective within
210 days after the Issue Date (or in the case of a Shelf Registration Statement
required to be filed in response to a change in law or the applicable
interpretations of Commission's staff, if later, within 30 days after
publication of the change in law or interpretation) but shall thereafter cease
to be effective (at any time that the Company is obligated to maintain the
effectiveness thereof) without being succeeded within 30 days by an additional
Registration Statement filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Issuers will be
obligated to pay liquidated damages to each Holder of Transfer Restricted
Securities, during the period of one or more such Registration Defaults, in an
amount equal to $0.192 per week per $1,000 principal amount of Dollar Securities
constituting Transfer Restricted Securities held by such holder and DM0.192 per
week per DM1,000 principal amount of DM Securities constituting Transfer
Restricted Securities held by such Holder until (i) the applicable Registration
Statement is filed, (ii) the Exchange Offer Registration Statement is declared
effective and the Registered Exchange Offer is consummated, (iii) the Shelf
Registration Statement is declared effective or (iv) the Shelf Registration
Statement again becomes effective, as the case may be. Following the cure of all
Registration Defaults, the accrual of liquidated damages will cease. As used
herein, the term "Transfer Restricted Securities" means (i) each Security until
the date on which such Security has been exchanged for a freely transferable
Exchange Security in the Registered Exchange Offer, (ii) each Security or
Private Exchange Security until the date on which it has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iii) each Security or Private Exchange Security until
the date on which it is distributed to the public pursuant to Rule 144 under the
Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act.
Notwithstanding anything to the contrary in this Section 3(a), the Issuers shall
not be required to pay liquidated damages to a Holder of Transfer Restricted
Securities if such Holder failed to comply with its obligations to make the
representations set forth in the second to last paragraph of Section 1 or failed
to provide the information required to be provided by it, if any, pursuant to
Section 4(n).
(b) The Issuers shall notify each of the Trustees and each of the
paying agents under the Indentures immediately upon the happening of each and
every Registration Default. The Issuers shall pay the liquidated damages due on
the Transfer Restricted Securities by depositing with the applicable paying
agent (which may not be either of the Issuers for these purposes), in trust, for
the benefit of the Holders thereof, prior to 10:00 a.m., New York City time, on
the next interest payment date specified by the Indentures and the Securities,
sums sufficient to pay the liquidated damages then due. The liquidated damages
due shall be payable on each interest payment date specified by the Indentures
and the Securities to the record holder entitled to receive the interest payment
to be made on such date. Each obligation to pay liquidated damages shall be
deemed to accrue from and including the date of the applicable Registration
Default.
<PAGE>
8
(c) The parties hereto agree that the liquidated damages provided for
in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Securities by reason of the failure of (i) the Exchange Offer
Registration Statement or the Shelf Registration Statement to be filed, (ii) the
Shelf Registration Statement to remain effective or (iii) the Exchange Offer
Registration Statement to be declared effective and the Registered Exchange
Offer to be consummated, in each case to the extent required by this Agreement.
4. Registration Procedures. In connection with any Registration
Statement, the following provisions shall apply:
(a) The Issuers shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and shall use their reasonable best efforts to
reflect in each such document, when so filed with the Commission, such
comments as any Initial Purchaser may reasonably propose; (ii) include the
information set forth in Annex A hereto on the cover, in Annex B hereto in
the "Exchange Offer Procedures" section and the "Purpose of the Exchange
Offer" section and in Annex C hereto in the "Plan of Distribution" section
of the prospectus forming a part of the Exchange Offer Registration
Statement, and include the information set forth in Annex D hereto in the
Letter of Transmittal delivered pursuant to the Registered Exchange Offer;
and (iii) if requested by any Initial Purchaser, include the information
required by Item 507 or 508 of Regulation S-K, as applicable, in the
prospectus forming a part of the Exchange Offer Registration Statement.
(b) The Issuers shall advise each Initial Purchaser, each Exchanging
Dealer and the Holders (if applicable) and, if requested by any such
person, confirm such advice in writing (which advice pursuant to clauses
(ii) through (v) hereof shall be accompanied by an instruction to suspend
the use of the prospectus until the requisite changes have been made):
(i) when any Registration Statement and any amendment thereto
has been filed with the Commission and when such Registration
Statement or any post-effective amendment thereto has become
effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by either of the Issuers of any
notification with respect to the suspension of the qualification of
the Securities, the Exchange Securities or
<PAGE>
9
the Private Exchange Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the making of
any changes in any Registration Statement or the prospectus included
therein in order that the statements therein are not misleading and
do not omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(c) The Issuers will make every reasonable effort to obtain the
withdrawal at the earliest possible time of any order suspending the
effectiveness of any Registration Statement.
(d) The Issuers will furnish to each Holder of Transfer Restricted
Securities included within the coverage of any Shelf Registration
Statement, without charge, at least one conformed copy of such Shelf
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules and, if any such Holder so requests in
writing, all exhibits thereto (including those, if any, incorporated by
reference).
(e) The Issuers will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Securities included within
the coverage of any Shelf Registration Statement, without charge, as many
copies of the prospectus (including each preliminary prospectus) included
in such Shelf Registration Statement and any amendment or supplement
thereto as such Holder may reasonably request; and the Issuers consent to
the use of such prospectus or any amendment or supplement thereto by each
of the selling Holders of Transfer Restricted Securities in connection with
the offer and sale of the Transfer Restricted Securities covered by such
prospectus or any amendment or supplement thereto.
(f) The Issuers will furnish to each Initial Purchaser and each
Exchanging Dealer, and to any other Holder who so requests, without charge,
at least one conformed copy of the Exchange Offer Registration Statement
and any post-effective amendment thereto, including financial statements
and schedules and, if any Initial Purchaser or Exchanging Dealer or any
such Holder so requests in writing, all exhibits thereto (including those,
if any, incorporated by reference).
(g) The Issuers will, during the Exchange Offer Registration Period
or the Shelf Registration Period, as applicable, promptly deliver to each
Initial Purchaser, each Exchanging Dealer and such other persons that are
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement or the Shelf Registration Statement
and any amendment or supplement thereto as such Initial Purchaser,
Exchanging Dealer or other persons may reasonably request; and the Issuers
consent to the use of such prospectus or any amendment or supplement
thereto by any such Initial Purchaser, Exchanging Dealer or other persons,
as applicable, as aforesaid.
<PAGE>
10
(h) Prior to the effective date of any Registration Statement, the
Issuers will use their reasonable best efforts to register or qualify, or
cooperate with the Holders of Securities, Exchange Securities or Private
Exchange Securities included therein and their respective counsel in
connection with the registration or qualification of, such Securities,
Exchange Securities or Private Exchange Securities for offer and sale under
the securities or blue sky laws of such jurisdictions as any such Holder
reasonably requests in writing and do any and all other acts or things
necessary or advisable to enable the offer and sale in such jurisdictions
of the Securities, Exchange Securities or Private Exchange Securities
covered by such Registration Statement; provided that the neither of the
Issuers will be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which
would subject it to general service of process or to taxation in any such
jurisdiction where it is not then so subject.
(i) The Issuers will cooperate with the Holders of Securities,
Exchange Securities or Private Exchange Securities to facilitate the timely
preparation and delivery of certificates representing Securities, Exchange
Securities or Private Exchange Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such
denominations and registered in such names as the Holders thereof may
request in writing prior to sales of Securities, Exchange Securities or
Private Exchange Securities pursuant to such Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v) occurs
during the period in which the Issuers are required to maintain an
effective Registration Statement, the Issuers will promptly prepare and
file with the Commission a post-effective amendment to the Registration
Statement or a supplement to the related prospectus or file any other
required document so that, as thereafter delivered to purchasers of the
Securities, Exchange Securities or Private Exchange Securities from a
Holder, the prospectus will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Issuers will provide a CUSIP number for the Securities, the
Exchange Securities and the Private Exchange Securities, as the case may
be, and provide the applicable trustee with printed certificates for the
Securities, the Exchange Securities or the Private Exchange Securities, as
the case may be, in a form eligible for deposit with The Depository Trust
Company.
(l) The Issuers will comply with all applicable rules and regulations
of the Commission and will make generally available to its security holders
as soon as practicable after the effective date of the applicable
Registration Statement an earning statement satisfying the provisions of
Section 11(a) of the Securities Act; provided that in no event shall such
earning statement be delivered later than 45 days after the end of a
twelve-month period (or 90 days, if such period is a fiscal year) beginning
with the first month of the first fiscal quarter of DCC commencing after
the effective date of the applicable Registration Statement, which
statement shall cover such twelve-month period.
<PAGE>
11
(m) The Issuers will cause the Indentures or the Exchange Securities
Indentures, as the case may be, to be qualified under the Trust Indenture
Act as required by applicable law in a timely manner.
(n) The Issuers may require each Holder of Transfer Restricted
Securities to be registered pursuant to any Shelf Registration Statement to
furnish to the Issuers such information concerning the Holder and the
distribution of such Transfer Restricted Securities as the Issuers may from
time to time reasonably require for inclusion in such Shelf Registration
Statement, and the Issuers may exclude from such registration the Transfer
Restricted Securities of any Holder that fails to furnish such information
within a reasonable time after receiving such request.
(o) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Securities that, upon receipt of
any notice from the Issuers pursuant to Section 4(b)(ii) through (v), such
Holder will discontinue disposition of such Transfer Restricted Securities
until such Holder receives copies of the supplemental or amended prospectus
contemplated by Section 4(j) or until advised in writing (the "Advice") by
the Issuers that the use of the applicable prospectus may be resumed. If
the Issuers shall give any notice under Section 4(b)(ii) through (v) during
the period that the Issuers are required to maintain an effective
Registration Statement (the "Effectiveness Period"), such Effectiveness
Period shall be extended by the number of days during such period from and
including the date of the giving of such notice to and including the date
when each seller of Transfer Restricted Securities covered by such
Registration Statement shall have received (x) the copies of the
supplemental or amended prospectus contemplated by Section 4(j) (if an
amended or supplemental prospectus is required) or (y) the Advice (if no
amended or supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the Issuers shall
enter into such customary agreements (including, if requested, an
underwriting agreement in customary form) and take all such other action,
if any, as Holders of a majority in aggregate principal amount of the
Securities, Exchange Securities and Private Exchange Securities being sold
or the managing underwriters (if any) shall reasonably request in order to
facilitate any disposition of Securities, Exchange Securities or Private
Exchange Securities pursuant to such Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the Issuers shall
(i) make reasonably available for inspection by a representative of, and
Special Counsel (as defined below) acting for, Holders of a majority in
aggregate principal amount of the Securities, Exchange Securities and
Private Exchange Securities being sold and any underwriter participating in
any disposition of Securities, Exchange Securities or Private Exchange
Securities pursuant to such Shelf Registration Statement, all relevant
financial and other records, pertinent corporate documents and properties
of the DCC and its subsidiaries (including Lyon) and (ii) use their
reasonable best efforts to have their officers, directors, employees,
accountants and counsel supply all relevant information reasonably
requested
<PAGE>
12
by such representative, Special Counsel or any such underwriter (an
"Inspector") in connection with such Shelf Registration Statement.
(r) In the case of a Shelf Registration Statement, the Issuers shall,
if requested by Holders of a majority in aggregate principal amount of the
Securities, Exchange Securities and Private Exchange Securities being sold,
their Special Counsel or the managing underwriters (if any) in connection
with such Shelf Registration Statement, use their reasonable best efforts
to cause (i) their counsel to deliver an opinion relating to the Shelf
Registration Statement and the Securities, Exchange Securities or Private
Exchange Securities, as applicable, in customary form, (ii) their officers
to execute and deliver all customary documents and certificates requested
by Holders of a majority in aggregate principal amount of the Securities,
Exchange Securities and Private Exchange Securities being sold, their
Special Counsel or the managing underwriters (if any) and (iii) their
independent public accountants to provide a comfort letter or letters in
customary form, subject to receipt of appropriate documentation as
contemplated, and only if permitted, by Statement of Auditing Standards No.
72.
5. Registration Expenses. The Issuers will bear all expenses
incurred in connection with the performance of their obligations under Sections
1, 2, 3 and 4 and the Issuers will reimburse the Initial Purchasers and the
Holders for the reasonable fees and disbursements of one firm of attorneys (in
addition to any local counsel) chosen by the Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities to be sold pursuant to each Registration Statement (the
"Special Counsel") acting for the Initial Purchasers or Holders in connection
therewith.
6. Indemnification. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as
applicable, the Issuers shall indemnify and hold harmless each Holder
(including, without limitation, any such Initial Purchaser or Exchanging
Dealer), its affiliates, their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 6 and Section 7 as a Holder) from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, without limitation, any loss, claim, damage,
liability or action relating to purchases and sales of Securities, Exchange
Securities or Private Exchange Securities), to which that Holder may become
subject, whether commenced or threatened, under the Securities Act, the Exchange
Act, any other federal or state statutory law or regulation, at common law or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any such Registration Statement or any prospectus
forming part thereof or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and shall
reimburse each Holder promptly upon demand for any legal or other expenses
reasonably incurred by that Holder in connection with investigating or defending
or preparing to defend against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however,
<PAGE>
13
that the Issuers shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of, or is based upon,
an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with any
Holders' Information; and provided, further, that with respect to any such
untrue statement in or omission from any related preliminary prospectus, the
indemnity agreement contained in this Section 6(a) shall not inure to the
benefit of any Holder from whom the person asserting any such loss, claim,
damage, liability or action received Securities, Exchange Securities or Private
Exchange Securities to the extent that such loss, claim, damage, liability or
action of or with respect to such Holder results from the fact that both (A) a
copy of the final prospectus was not sent or given to such person at or prior to
the written confirmation of the sale of such Securities, Exchange Securities or
Private Exchange Securities to such person and (B) the untrue statement in or
omission from the related preliminary prospectus was corrected in the final
prospectus unless, in either case, such failure to deliver the final prospectus
was a result of non-compliance by the Issuers with Section 4(d), 4(e), 4(f) or
4(g).
(b) In the event of a Shelf Registration Statement, each Holder shall
indemnify and hold harmless each Issuer, its affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls such Issuer within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 6(b) and
Section 7 as the Issuers), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Issuers may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with any Holders' Information furnished to
the Issuers by such Holder, and shall reimburse the Issuers for any legal or
other expenses reasonably incurred by the Issuers in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that no such Holder
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Securities, Exchange
Securities or Private Exchange Securities pursuant to such Shelf Registration
Statement.
(c) Promptly after receipt by an indemnified party under this Section
6 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may
<PAGE>
14
have to an indemnified party otherwise than under this Section 6. If any such
claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the reasonable costs of investigation; provided, however,
that an indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 6(a) and 6(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party (which
consent shall not be unreasonably withheld), effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
7. Contribution. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Issuers from the offering and sale of the Securities,
on the one hand, and a
<PAGE>
15
Holder with respect to the sale by such Holder of Securities, Exchange
Securities or Private Exchange Securities, on the other, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Issuers, on
the one hand, and such Holder, on the other, with respect to the statements or
omissions that resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative benefits received by the Issuers, on the one hand, and a Holder, on the
other, with respect to such offering and such sale shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Securities
(before deducting expenses) received by or on behalf of the Issuers as set forth
in the table on the cover of the Offering Memorandum, on the one hand, bear to
the total proceeds received by such Holder with respect to its sale of
Securities, Exchange Securities or Private Exchange Securities, on the other.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to the Issuers or
information supplied by the Issuers, on the one hand, or to any Holders'
Information supplied by such Holder, on the other, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The parties hereto agree that it
would not be just and equitable if contributions pursuant to this Section 7 were
to be determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to herein.
The amount paid or payable by an indemnified party as a result of the loss,
claim, damage or liability, or action in respect thereof, referred to above in
this Section 7 shall be deemed to include, for purposes of this Section 7, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending or preparing to defend any such
action or claim. Notwithstanding the provisions of this Section 7, an
indemnifying party that is a Holder of Securities, Exchange Securities or
Private Exchange Securities shall not be required to contribute any amount in
excess of the amount by which the total price at which the Securities, Exchange
Securities or Private Exchange Securities sold by such indemnifying party to any
purchaser exceeds the amount of any damages which such indemnifying party has
otherwise paid or become liable to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
8. Rules 144 and 144A. The Issuers shall use their reasonable best
efforts to file the reports required to be filed by them under the Securities
Act and the Exchange Act in a timely manner and, if at any time the Issuers are
not required to file such reports, they will, upon the written request of any
Holder of Transfer Restricted Securities, make publicly available other
information so long as necessary to permit sales of such Holder's securities
pursuant to Rules 144 and 144A. The Issuers covenant that they will take such
further action as any Holder of Transfer Restricted Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Transfer Restricted Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rules 144 and 144A
(including, without limitation, the requirements of Rule 144A(d)(4)). Upon the
written request of any Holder of Transfer Restricted Securities, the Issuers
shall deliver to such Holder a written statement as to whether it has complied
with such requirements. Notwithstanding the foregoing, nothing in this
<PAGE>
16
Section 8 shall be deemed to require the Issuers to register any of their
securities pursuant to the Exchange Act.
9. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration Statement are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority in aggregate principal amount of such Transfer Restricted Securities
included in such offering, subject to the consent of the Issuers (which shall
not be unreasonably withheld or delayed), and such Holders shall be responsible
for all underwriting commissions and discounts in connection therewith.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. Luxembourg Stock Exchange Listing. The Issuers shall use their
reasonable best efforts to secure the listing of the Securities on the
Luxembourg Stock Exchange and shall pay all fees and expenses related thereto.
11. Miscellaneous. (a) Amendments and Waivers. The provisions of
this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Issuers have obtained (i) the written consent of Holders of a majority in
aggregate principal amount of the Dollar Securities, the Dollar Exchange
Securities and the Dollar Private Exchange Securities, taken as a single class,
and (ii) the written consent of the Holders of a majority in aggregate principal
amount of the DM Securities, the DM Exchange Securities and the DM Private
Exchange Securities, taken as a single class. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders whose Securities, Exchange
Securities or Private Exchange Securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities being sold by such Holders pursuant to such Registration
Statement.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by such Holder
to the Issuers in accordance with the provisions of this Section 11(b),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the registrar under the applicable Indenture,
with a copy in like manner to Chase Securities Inc., Chase Manhattan Bank
AG and Chase Manhattan International Limited;
<PAGE>
17
(2) if to an Initial Purchaser, initially at its address set forth
in the Purchase Agreement; and
(3) if to the Issuers, initially at the address of the Issuers set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day after
being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors And Assigns. This Agreement shall be binding upon
each of the Issuers and its successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Definition of Terms. For purposes of this Agreement, (a) the term
"business day" means any day on which the New York Stock Exchange, Inc. and the
Luxembourg Stock Exchange are open for trading, (b) the term "subsidiary" has
the meaning set forth in Rule 405 under the Securities Act and (c) except where
otherwise expressly provided, the term "affiliate" has the meaning set forth in
Rule 405 under the Securities Act.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(h) Consent to Jurisdiction; Appointment of Agent for Service of
Process; Judgment Currency. (i) Each of the Issuers agrees that any suit,
action or proceeding against such Issuer arising out of or relating to this
Agreement may be instituted in any state or U.S. Federal court in the Borough of
Manhattan, The City of New York, New York, and any appellate court from any
thereof, and it irrevocably submits to the non-exclusive jurisdiction of such
courts in any suit, action or proceeding. Each of the Issuers irrevocably
waives, to the fullest extent permitted by law, any objection to any suit,
action or proceeding that may be brought in connection with this Agreement,
including such actions, suits or proceedings relating to securities laws of the
United States of America or any state thereof, in such courts whether on the
grounds of venue, residence or domicile or on the ground that any such suit,
action or proceeding has been brought in an inconvenient forum. Each of the
Issuers agrees that final judgment in any such suit, action or proceeding
brought in such court shall be conclusive and binding upon such Issuer and may
be enforced in any court to the jurisdiction of which such Issuer is subject by
a suit upon such judgment; provided that service of process is effected upon
such Issuer in the manner provided by this Section 11(h).
<PAGE>
18
(ii) Each of the Issuers irrevocably appoints CT Corporation
System, with offices on the date hereof at 1633 Broadway, New York, New
York 10019, as its authorized agent (the "Authorized Agent"), upon whom
process may be served in any suit, action or proceeding arising out of or
relating to this Agreement or the transactions contemplated herein which
may be instituted in any state or U.S. Federal court in the Borough of
Manhattan, The City of New York, New York, and expressly accepts the non-
exclusive jurisdiction of any such court in respect of any such suit,
action or proceeding. Each of the Issuers hereby represents and warrants
that the Authorized Agent has accepted such appointment and has agreed to
act as said agent for service of process, and each of the Issuers agrees to
take any and all action, including the filing of any and all documents that
may be necessary to continue such respective appointment in full force and
effect so long as such Issuer has any outstanding obligations under this
Agreement, the Indentures or the Securities. Service of process upon the
Authorized Agent shall be deemed, in every respect, effective service of
process upon each of the Issuers. Notwithstanding the foregoing, any action
involving the Issuers arising out of or relating to this Agreement may be
instituted in any court of competent jurisdiction in any other
jurisdiction.
(iii) Any action, suit or proceeding brought by the Issuers against
any Initial Purchaser entitled to indemnification or contribution under
Section 6 or 7 arising out of or based upon this Agreement and the
transactions contemplated herein shall be brought solely in a U.S. Federal
or state court in the Borough of Manhattan, The City of New York, New York,
and the Issuers shall not initiate nor seek to initiate, in the State of
Delaware, The Netherlands or in any other jurisdiction other than in such
New York courts, any action, suit or proceeding against any Initial
Purchaser entitled to indemnification or contribution under Section 6 or 7
arising out of or based upon this Agreement and the transactions
contemplated hereby. The foregoing shall apply, without limitation, to any
action seeking to obtain any injunction or declaratory judgment against the
enforcement of, or a declaratory judgment concerning, any claim by any
Initial Purchaser in respect of this Agreement and any transaction
contemplated hereby, and any action challenging the enforceability of or
seeking to invalidate in any respect the submission by the Issuers
hereunder to the jurisdiction of such New York courts or the designation,
pursuant to this Section 11(h), of the laws of the State of New York as the
law applicable to this Agreement.
(iv) If for the purposes of obtaining judgment in any court it is
necessary to convert a sum due hereunder into any currency other than U.S.
dollars or Deutsche marks, the parties hereto agree, to the fullest extent
that they may effectively do so, that the rate of exchange used shall be
the rate at which in accordance with normal banking procedures the Initial
Purchasers could purchase U.S. dollars or Deutsche marks, as applicable,
with the other currency in New York City on the business day preceding that
on which final judgment is given. The obligation of the Issuers in respect
of any sum due to an Initial Purchaser shall, notwithstanding any judgment
in a currency other than U.S. dollars or Deutsche marks, not be discharged
until the first business day following receipt by such Initial Purchaser of
any sum adjudged to be so due in such other currency, on which (and only to
the extent that) such Initial Purchaser may in accordance with normal
banking
<PAGE>
19
procedures purchase U.S. dollars or Deutsche marks, as applicable,
with such other currency; if the U.S. dollars or Deutsche marks so
purchased are less than the sum originally due to an Initial Purchaser
hereunder, each of the Issuers agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify such Initial Purchaser
against such loss. If the U.S. dollars or Deutsche marks so purchased are
greater than the sum originally due to an Initial Purchaser hereunder, such
Initial Purchaser agrees to pay to the Issuers an amount equal to the
excess of the U.S. dollars or Deutsche marks, as the case may be, so
purchased over the sum originally due to such Initial Purchaser hereunder.
(v) The provisions of this Section 11(h) shall survive any
termination or cancelation of this Agreement.
(i) Remedies. In the event of a breach by the Issuers or by any
Holder of any of their obligations under this Agreement, each Holder or the
Issuers, as the case may be, in addition to being entitled to exercise all
rights granted by law, including recovery of damages (other than the recovery of
damages for a breach by the Issuers of their obligations under Section 1 or 2
for which liquidated damages have been paid pursuant to Section 3), will be
entitled to specific performance of its rights under this Agreement. Each of
the Issuers and each Holder agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agree that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(j) No Inconsistent Agreements. Each of the Issuers represents,
warrants and agrees that (i) it has not entered into, and shall not, on or after
the date of this Agreement, enter into, any agreement that is inconsistent with
the rights granted to the Holders in this Agreement or otherwise conflicts with
the provisions hereof, (ii) it has not previously entered into any agreement
which remains in effect granting any registration rights with respect to any of
its debt securities to any person and (iii) without limiting the generality of
the foregoing, without the written consent of the Holders of a majority in
aggregate principal amount of the then outstanding Transfer Restricted
Securities, it shall not grant to any person the right to request such Issuer to
register any debt securities of such Issuer under the Securities Act unless the
rights so granted are not in conflict or inconsistent with the provisions of
this Agreement.
(k) No Piggyback on Registrations. None of the Issuers or any of its
security holders (other than the Holders of Transfer Restricted Securities in
such capacity) shall have the right to include any securities of such Issuer in
any Shelf Registration or Registered Exchange Offer other than Transfer
Restricted Securities.
(l) Severability. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or
<PAGE>
20
restriction. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Issuers and the Initial Purchasers.
Very truly yours,
THE DERBY CYCLE CORPORATION,
by /s/ Alan J. Finden-Crofts
------------------------------------------
Name: Alan J. Finden-Crofts
Title:
LYON INVESTMENTS B.V.,
by /s/ Alan J. Finden-Crofts
-----------------------------------------
Name: Alan J. Finden-Crofts
Title:
Accepted:
On behalf of Chase Securities Inc.,
Chase Manhattan Bank AG and
Chase Manhattan International Limited
CHASE SECURITIES INC.,
by /s/ [SIGNATURE ILLEGIBLE]^^
---------------------------
Authorized Signatory
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Securities where such Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Issuers have agreed
that, for a period of 180 days after the Expiration Date (as defined herein),
they will make this Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution".
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution".
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Securities
received in exchange for Securities where such Securities were acquired as a
result of market-making activities or other trading activities. The Issuer have
agreed that, for a period of 180 days after the Expiration Date, they will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until , 1998,
all dealers effecting transactions in the Exchange Securities may be required to
deliver a prospectus.
The Issuers will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers
for their own account pursuant to the Registered Exchange Offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to the
Registered Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Securities and any commission or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Issuers will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Issuers have agreed to pay all expenses
incident to the Registered Exchange Offer (including the expenses of one counsel
for the Holders of the Securities) other than commissions or concessions of any
broker-dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
<PAGE>
ANNEX D
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE>
EXHIBIT 10.1
FACILITY AGREEMENT
DATED 12 MAY 1998
MULTICURRENCY CREDIT FACILITY
up to DM225,000,000
THE DERBY CYCLE CORPORATION AND OTHERS
as Borrowers and/or Guarantors
CHASE MANHATTAN PLC
as Arranger
THE FINANCIAL INSTITUTIONS
NAMED HEREIN
as Banks
CHASE MANHATTAN INTERNATIONAL LIMITED
as Facility Agent
CHASE MANHATTAN INTERNATIONAL LIMITED
as Security Agent
Dibb Lupton Alsop
125 London Wall
LONDON
EC2Y 5AE
Tel: 0345 26 27 28
Fax: 0171 600 1650
<PAGE>
CONTENTS
<TABLE>
<S> <C>
1. INTERPRETATION..................................................... 1
1.1 Definitions................................................... 1
1.2 Financial Terms............................................... 29
1.3 Construction.................................................. 35
1.4 Relationship with the Intercreditor Agreement................. 36
2. THE FACILITY....................................................... 37
2.1 The Facility.................................................. 37
2.2 Nature of Banks' obligations and rights....................... 38
2.3 Nature of Borrowers' rights and obligations hereunder......... 38
2.4 Bank Accession Notice......................................... 39
2.5 Maximum Total Commitments..................................... 40
3. PURPOSE OF FACILITIES.............................................. 40
4. CONDITIONS PRECEDENT TO FIRST UTILISATION.......................... 40
5. CONDITIONS PRECEDENT TO EACH UTILISATION BY
WAY OF ADVANCES AND STANDBY L/CS................................... 41
6. UTILISATION OF THE FACILITIES...................................... 42
6.1 Delivery of a Drawdown Request............................... 42
6.2 Completion of Drawdown Request............................... 42
6.3 Amount of each Bank's participation in an Advance............ 43
6.4 Delivery of a Standby L/C Request............................ 43
6.5 Completion of Standby L/C Request............................ 44
6.6 Issuing of Standby L/Cs...................................... 45
6.7 Facility Agent's Authority................................... 45
6.8 Copy of Standby L/C.......................................... 46
6.9 No Enquiry................................................... 46
6.10 Definitions.................................................. 46
6.11 Calculation.................................................. 52
6.12 Determination................................................ 52
6.13 Undrawn amount............................................... 52
7. ANCILLARY FACILITIES............................................... 53
7.1 Ancillary Facilities.......................................... 53
7.2 Operation of Ancillary Facilities............................. 55
8. INTEREST........................................................... 57
8.1 Standby L/C................................................... 57
8.2 Interest rate................................................. 57
8.3 Due date...................................................... 57
8.4 Duration...................................................... 57
8.5 Notification of LIBOR by Facility Agent....................... 57
</TABLE>
<PAGE>
<TABLE>
<S> <C>
9. DEFAULT INTEREST 58
9.1 Failure to Pay.............................................. 58
9.2 Rate........................................................ 58
9.3 Default Interest Period..................................... 58
9.4 Unexpired Portion........................................... 58
10. MARKET DISRUPTION.................................................. 58
10.1 Disruption events........................................... 58
10.2 Effect...................................................... 59
11. REPAYMENT, PREPAYMENT AND CANCELLATION............................. 60
11.1 Reduction of the Facility................................... 60
11.2 Repayment of Advances....................................... 60
11.3 Facility Agent to notify Banks of demand.................... 61
11.4 L/C indemnity............................................... 61
11.5 Banks' Discretion........................................... 61
11.6 Voluntary cancellation...................................... 61
11.7 Mandatory Prepayment on Listing............................. 62
11.8 Prepayment Fee.............................................. 63
11.9 Cancellation and Prepayment of a Bank's Revolving
Commitment and Standby L/C Commitment....................... 63
11.10 Notices of prepayment and cancellation...................... 64
11.11 Notification of Bank(s)..................................... 64
11.12 Only method................................................. 64
11.13 European Economic and Monetary Union........................ 64
12. PARTIAL PAYMENTS................................................... 67
13. PAYMENTS........................................................... 67
13.1 To Facility Agent........................................... 67
13.2 Distribution by the Agents.................................. 68
13.3 Currency.................................................... 69
13.4 Set-off and counterclaim.................................... 70
14. TAXES.............................................................. 71
14.1 Payment of Taxes............................................ 71
14.2 Gross-up.................................................... 71
14.3 Tax indemnity............................................... 71
14.4 Notification of claims...................................... 71
14.5 Tax receipts................................................ 72
14.6 Tax Saving.................................................. 72
14.7 U.S Taxation-delivery of forms and statements............... 73
14.8 Double tax-treaties......................................... 74
14.9 Qualifying Bank............................................. 74
15. INCREASED COSTS.................................................... 74
15.1 Indemnity for increased costs............................... 74
15.2 Exceptions.................................................. 75
</TABLE>
<PAGE>
<TABLE>
<S> <C>
15.3 Notification by Bank........................................ 76
15.4 Regulation D Compensation................................... 76
16. ILLEGALITY......................................................... 76
16.1 Illegality in relation to Advances.......................... 76
16.2 Illegality in relation to Standby L/Cs...................... 77
17. MITIGATION......................................................... 77
17.1 Mitigation.................................................. 77
17.2 Costs and Expenses of Mitigation............................ 78
18. REPRESENTATIONS AND WARRANTIES..................................... 79
18.1 General representations and warranties...................... 79
18.2 Repetition of representations and warranties................ 90
19. UNDERTAKINGS....................................................... 91
19.1 Information undertakings.................................... 91
19.2 Form of financial statements................................ 97
19.3 Variation of financial undertakings......................... 98
19.4 Positive undertakings....................................... 98
19.5 Negative undertakings....................................... 109
20. FINANCIAL UNDERTAKINGS............................................. 122
21. EVENTS OF DEFAULT.................................................. 130
21.1 The Events of Default....................................... 130
21.2 Acceleration................................................ 136
22. ADDITIONAL BORROWERS............................................... 137
23. GUARANTEES......................................................... 137
23.1 Guarantee................................................... 137
23.2 Continuing Guarantee........................................ 139
23.3 Reinstatement............................................... 139
23.4 Waiver of Defences.......................................... 139
23.5 Immediate Recourse.......................................... 140
23.6 Preservation of Rights...................................... 140
23.7 Non-competition............................................. 141
23.8 Additional Security......................................... 141
23.9 Certificate................................................. 142
24. RELEASE OF GUARANTORS AND SECURITY................................. 142
24.1 Guarantors.................................................. 142
24.2 Assets...................................................... 142
24.3 Conditions for Release...................................... 142
24.4 Release of Group Members.................................... 143
25. INDEMNITIES........................................................ 144
25.1 Indemnifiable events........................................ 144
</TABLE>
<PAGE>
<TABLE>
<S> <C>
25.2 Stamp duty.................................................. 144
26. FEES............................................................... 145
26.1 Commitment fee.............................................. 145
26.2 Utilisation Fee............................................. 145
26.3 Applicable Rate............................................. 145
26.4 Calculation................................................. 146
26.5 Payment of Utilisation Fee.................................. 146
26.6 Agency fees................................................. 146
26.7 Arrangement fee............................................. 146
27. COSTS AND EXPENSES................................................. 146
27.1 Initial Costs............................................... 147
27.2 Amendments.................................................. 147
27.3 Protection, enforcement, etc................................ 147
28. THE AGENTS AND THE ARRANGER........................................ 148
28.1 Appointment of the Agents................................... 148
28.2 Duties of the Agents........................................ 149
28.3 Exculpatory provisions...................................... 150
28.4 Assumptions................................................. 150
28.5 Agents and Arranger not responsible to other Parties........ 151
28.6 Delegation and advisers..................................... 151
28.7 Indemnity................................................... 151
28.8 Resignation of the Agents................................... 151
28.9 Separate entity............................................. 152
28.10 Reliance.................................................... 153
28.11 Credit approval............................................. 153
28.12 Tax Confirmation............................................ 153
28.13 Miscellaneous provisions.................................... 153
29. TRANSFERS.......................................................... 154
29.1 Obligors.................................................... 154
29.2 Banks....................................................... 154
29.3 Time of transfer............................................ 155
29.4 Administration fee.......................................... 155
29.5 Additional amounts payable to transferee.................... 155
29.6 Disclosure of information................................... 156
30. REDISTRIBUTION PROVISIONS.......................................... 156
30.1 Redistributions............................................. 156
30.2 Repayment of a Discharged Amount............................ 157
30.3 Exceptions.................................................. 157
31. CALCULATIONS AND EVIDENCE OF DEBT.................................. 158
31.1 Calculations................................................ 158
31.2 Financial Accounts.......................................... 158
31.3 Control account............................................. 158
31.4 Standby L/C Accounts........................................ 158
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<TABLE>
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31.5 Actual amount received...................................... 159
31.6 Prima facie evidence........................................ 159
31.7 Certificates and determinations............................. 160
31.8 Reference Banks............................................. 160
31.9 Unavailability of ECU/ecu................................... 160
32. AMENDMENTS AND WAIVERS............................................. 161
32.1 Majority Banks.............................................. 161
32.2 All Banks................................................... 161
32.3 Super Majority Banks........................................ 161
32.3 All Parties................................................. 162
32.4 The Agents.................................................. 162
33. NOTICES............................................................ 162
33.1 Method of delivery.......................................... 162
33.2 Addresses................................................... 162
33.3 Agents' details............................................. 162
33.4 Receipt of notices.......................................... 163
33.5 Language.................................................... 163
34. PARTIAL INVALIDITY................................................. 163
35. REMEDIES AND WAIVERS............................................... 164
36. COUNTERPARTS....................................................... 164
37. SECURITY........................................................... 164
38. JURISDICTION....................................................... 164
38.1 Courts of England........................................... 164
38.2 Non-exclusivity............................................. 164
38.3 Service of process agent.................................... 165
38.4 Non-convenience of forum.................................... 165
39. GOVERNING LAW...................................................... 165
SCHEDULE 1.............................................................. 166
THE BORROWERS...................................................... 166
SCHEDULE 2.............................................................. 167
THE GUARANTORS..................................................... 167
SCHEDULE 3.............................................................. 169
THE BANKS.......................................................... 169
SCHEDULE 4.............................................................. 170
ACCESSION AGREEMENT................................................ 170
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SCHEDULE 5
DOCUMENTS TO ACCOMPANY ADDITIONAL
BORROWER/GUARANTOR ACCESSION AGREEMENT............................. 173
SCHEDULE 6.............................................................. 175
CONDITIONS PRECEDENT............................................... 175
SCHEDULE 7.............................................................. 183
Part 1............................................................. 183
FORM OF DRAWDOWN REQUEST........................................... 183
Part 2............................................................. 185
FORM OF STANDBY L/C REQUEST........................................ 185
Part 3............................................................. 187
FORM OF STANDBY L/C................................................ 187
SCHEDULE 8.............................................................. 195
NOVATION CERTIFICATE............................................... 195
SCHEDULE 9.............................................................. 199
ADDITIONAL COSTS................................................... 199
SCHEDULE 10............................................................. 201
COMPLIANCE CERTIFICATE............................................. 201
SCHEDULE 11............................................................. 203
MATERIAL GROUP MEMBERS............................................. 203
SCHEDULE 12............................................................. 204
DESCRIPTION OF ECU................................................. 204
SCHEDULE 13............................................................. 205
FORM OF BANK ACCESSION NOTICE...................................... 205
SCHEDULE 14............................................................. 207
SECURITY DOCUMENTS................................................. 207
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THIS FACILITY AGREEMENT is made the 12th day of May 1998
BETWEEN:
(1) THE DERBY CYCLE CORPORATION a company incorporated in Delaware, the United
States of America, having its principal office at 22710 72nd Avenue South,
Kent, Washington 98032 (the "COMPANY");
(2) THE COMPANIES identified as Borrowers in Schedule 1;
(3) THE COMPANIES identified as Guarantors in Schedule 2;
(4) CHASE MANHATTAN PLC (the "ARRANGER");
(5) THE FINANCIAL INSTITUTIONS identified as Banks in Schedule 3;
(6) CHASE MANHATTAN INTERNATIONAL LIMITED (the "FACILITY AGENT"); and
(7) CHASE MANHATTAN INTERNATIONAL LIMITED (the "SECURITY AGENT").
WHEREAS
The Banks have agreed, subject to the terms and conditions of this Agreement, to
provide a revolving credit facility of up to DM225,000,000 (or the equivalent
thereof in other currencies) of which up to DM65,000,000 may be utilised by way
of Ancillary Facilities (less amounts utilised by the issuance of Standby L/Cs
under the Standby L/C Facility) and DM15,000,000 (or the equivalent in other
currencies) may be utilised by the issuance of Standby L/Cs.
PART 1
1. INTERPRETATION
1.1 DEFINITIONS
In this Agreement:
"ACCEDING BANK" means any financial institution that is to provide an Ancillary
Facility to one or more members of the South African Group that has executed a
Bank Accession Notice and the Company has delivered to the Facility Agent each
of the documents required to be provided therewith each in a form satisfactory
to the Facility Agent.
"ACCESSION AGREEMENT" means:
(a) when designated "BORROWER", an agreement substantially in the form of
Schedule 4 made pursuant to Clause 22 (together the "BORROWER ACCESSION
AGREEMENTS");
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(b) when designated "GUARANTOR", an agreement substantially in the form of
Schedule 4 made pursuant to Clauses 19.4(d), 19.4(e), 19.4(f) or 19.4(g)
(together the "GUARANTOR ACCESSION AGREEMENTS"); and
(c) without any such designation, a Borrower Accession Agreement or a Guarantor
Accession Agreement and "ACCESSION AGREEMENTS", without any such
designation means some or all (as the context requires) of the Borrower
Accession Agreements and the Guarantor Accession Agreements together.
"ACCOUNTANT'S REPORT" means each of the reports dated on or before Closing
prepared by Arthur Andersen on the Group as a result of separate letters of
instruction from each of the Company and the Arranger in relation thereto.
"ACCOUNTS" has the meaning given to such term in Clause 6.10.
"ACCOUNTING DATE" means each 31 December regardless of which day it falls upon,
and each 31 March, 30 June, 30 September, provided that if any such date does
not fall on a Sunday, then the date which is the Sunday immediately prior to or
after such date in accordance with the Company's usual accounting practice as
notified to the Facility Agent prior to the date of this Agreement.
"ACCOUNT DEBTOR" has the meaning given to such term in Clause 6.10.
"ACCOUNTING PERIOD" in relation to any Person means any period of approximately
one month, three months or one year for which Financial Accounts or, as the case
may be, Pre-Closing Proforma Accounts of such Person are required to be prepared
for the purposes of this Agreement ending, in the case of each quarterly and
each one year period, on an Accounting Date.
"ACQUIRED ASSETS" means the shares in the capital of the Subsidiaries of the
Company immediately following the Recapitalisation.
"ADDITIONAL BORROWER" means any entity which becomes party to this Agreement as
a Borrower pursuant to a Borrower Accession Agreement.
"ADDITIONAL COST" in relation to each Advance or Overdue Amount denominated in
Sterling means, for the Term relating to that Advance or, as the case may be,
Default Interest Period relating to that Overdue Amount, the cost as calculated
by the Facility Agent in accordance with Schedule 9 imputed to each Bank
participating in such Advance or Overdue Amount through a Facility Office in the
United Kingdom of compliance with the mandatory liquid assets requirements of
the Bank of England during that Term, or as the case may be, that Default
Interest Period expressed as a percentage rate per annum.
"ADDITIONAL GUARANTOR" means any entity which becomes a party hereto as a
Guarantor pursuant to a Guarantor Accession Agreement or otherwise provides a
Guarantee.
"ADDITIONAL PAYMENT" means amounts payable by the Company to the Sellers
pursuant to Clause 16.4 of the Recapitalisation Agreement.
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"ADJUSTED AVAILABLE AMOUNT" has the meaning given to such term in Clause 6.10.
"ADJUSTED BORROWING BASE" has the meaning given to such term in Clause 6.10.
"ADVANCE" means the principal amount of each borrowing under this Agreement
under the Revolving Facility or the principal amount of each such borrowing
outstanding from time to time, as the context requires.
"AFFILIATE" means, in relation to a body corporate, any of its Holding Companies
or Subsidiaries or any other Subsidiary of any of its Holding Companies.
"AGENT" means:
(a) when designated "FACILITY", includes any of its successors pursuant to
Clause 28.8;
(b) when designated "SECURITY", includes any of its successors pursuant to
Clause 28.8 and any corresponding provision of any Security Document; and
(c) without any such designation, the Facility Agent or the Security Agent, as
the context requires, and "AGENTS" without any such designation means one
or more of the Facility Agent and the Security Agent, as the context
requires.
"ANCILLARY BANK" means any Bank which becomes an Ancillary Bank by the operation
of Clause 7.
"ANCILLARY COMMITMENT" means in relation to an Ancillary Bank, the maximum
amount (actual or contingent) from time to time of the Ancillary Facilities to
be made available by that Ancillary Bank which has been authorised as such under
Clause 7.1(a) to the extent not cancelled under this Agreement.
"ANCILLARY OUTSTANDING" means, at any time, and with respect to any Ancillary
Bank, the Deutschmark Equivalent of all the following amounts outstanding at
such time under the Ancillary Facilities of that Ancillary Bank then in force:
(a) all amounts of principal then outstanding under any overdraft, BACS, cheque
drawing or other current account facilities;
(b) twenty per cent of the gross amounts payable to that Ancillary Bank under
any contracts (for a period not exceeding eighteen months) entered into for
the provision of spot or forward foreign exchange facilities or the
purchase of foreign exchange options for a period not exceeding eighteen
months (in each case in accordance with the Approved Hedging Programme) (or
such other amount as such Ancillary Bank may agree with the Facility Agent
and the Group Member to whom the relevant facilities are made available in
accordance with its usual practice for calculating exposure for similar
facilities);
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(c) the maximum face amount (excluding amounts stated to be in respect of
interest) of all guarantees, bonds and letters of credit then outstanding
under any guarantee, bonding or letter of credit facilities; and
(d) in respect of any other facility or financial accommodation such other
amount as the relevant Ancillary Bank may (acting reasonably and in
consultation with the Facility Agent and the Obligors' Agent) determine
fairly represents the aggregate exposure at such time of the Ancillary Bank
providing the same.
"AON INSURANCE REPORT" means the insurance review of Derby Bicycle Group
prepared by AON Mergers and Acquisitions Group dated February 1998.
"AON PENSIONS REPORT" means the employee benefits due diligence report on the
Derby Bicycle Group prepared by AON Consulting dated 4 December 1997.
"APPLICABLE ACCOUNTING PRINCIPLES" means, for the purposes of the preparation
and/or audit of the Pre-Closing Proforma Accounts, the Accountant's Report and
any Financial Accounts (whether combined, consolidated or unconsolidated) of the
Company and/or the Group, to be delivered under this Agreement, the accounting
principles and practices generally accepted in the United States of America, and
for Group Members other than the Company the accounting principles and practices
generally accepted in their respective country of incorporation and in each
case, approved by the relevant accounting standards board or other applicable
authority and which are the same as the accounting principles and practices
applied in the preparation of the Business Plan and any variation of such
accounting principles and practices which has been agreed in writing by the
Majority Banks.
"APPROVED BANK" means a Bank whose long term unsecured unsubordinated debt
rating is at least A2 (Moody's) or A (Standard & Poors) that has been given and
has acknowledged all notices reasonably required by the Facility Agent and in
substantially the agreed form and/or required by the Security Documents and
through a branch situated in Ireland, England, Germany or the Netherlands (as
applicable) or through such other branch of a Bank situated in a country not
specifically mentioned above provided that the Facility Agent has, in respect of
any such other branch, previously given its approval to such arrangement prior
thereto.
"APPROVED HEDGING PROGRAMME" means, as at the date of this Agreement, the paper
so entitled, in the agreed form provided by the Company for the purposes of
satisfying paragraph 27 of Schedule 6, as the same may be amended from time to
time with the prior written consent of the Facility Agent.
"APPROVED PROVISIONING PROCEDURE" means, the paper so entitled in the agreed
form provided by the Company for the purposes of satisfying paragraph 36 of
Schedule 6, as the same may be amended from time to time with the prior written
consent of the Facility Agent.
"ARTICLES OF ASSOCIATION" means, in relation to any Group Member, its articles
of association or by-laws (or equivalent in the country of its incorporation) as
the same are amended from time to time.
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"AUDITORS" means Arthur Andersen (or any successor through merger) and/or any
other firm of independent public accountants of international standing approved
by the Facility Agent, which is appointed to audit the consolidated annual
accounts of the Company.
"AUTHORISED SIGNATORY" in relation to any Obligor and any communication to be
made or document to be executed or certified by that Obligor means, at any time,
any Person:
(a) who is at such time duly authorised by a resolution of the board of
directors of that Obligor or by virtue of his appointment by that Obligor
to a particular office to make that communication or to execute or certify
that document on behalf of that Obligor and in respect of whom the Facility
Agent has received a certificate of a director or the secretary of that
Obligor setting out the name and signature of that Person and confirming
that Person's authority so to act; and
(b) in respect of whom no notice has been received by the Facility Agent from
that Obligor to the effect that that Person is no longer an Authorised
Signatory of that Obligor.
"AVAILABILITY PERIOD" means:
(a) in respect of the Revolving Facility and the Standby L/C Facility, the
period from the opening of business in London on the date of this Agreement
to close of business in London on the day falling one month prior to the
Final Repayment Date or such later date as all the Banks may agree in
writing on or after the date hereof; and
(b) in respect of an Ancillary Facility, as the same is determined in
accordance with Clause 7.
"BANK" means each of the following:
(a) each Bank and each Ancillary Bank;
(b) each bank or other financial institution to which rights and/or obligations
under this Agreement are assigned or transferred pursuant to Clause 29.2 or
which assumes rights and obligations pursuant to a Novation Certificate;
(c) each Acceding Bank; and
(d) any successor or successors in title to any of the foregoing,
(together the "BANKS"), provided that upon (i) termination in full of all the
Revolving Commitment, the Standby L/C Commitment and the Ancillary Commitment of
any Bank, and (ii) irrevocable payment in full of all amounts which may be or
become payable to such Bank under the Senior Finance Documents, such Bank shall
not be regarded as being a Bank for the purposes of determining whether any
provision of any of the Senior Finance Documents requiring consultation with or
the consent or approval of or instructions from the Banks or the Majority Banks
has been complied with.
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"BANK ACCESSION NOTICE" means a notice to be delivered by any Acceding Bank to
the Facility Agent substantially in the form set out in part one of Schedule 13.
"BENEFICIARY" means, in respect of a Standby L/C, the Person in whose favour
such Standby L/C is issued.
"BLOCKED ACCOUNT(S)" means the account(s) denominated in Deutschmarks, Guilders,
Sterling and Dollars held at The Chase Manhattan Bank, Nos. 22782101, 22782102,
22782103, 22782104 respectively in each case in the name of The Derby Bicycle
Group-Closing Account or such other account or accounts as the Arranger shall
nominate for this purpose.
"BORROWER" means each entity identified as a Borrower in Schedule 1 and each
Additional Borrower (together the "BORROWERS").
"BORROWING BASE" has the meaning given to such term in Clause 6.10.
"BORROWING BASE SUMMARY" has the meaning given to such term in Clause 6.10.
"BUSINESS DAY" means:
(a) a day (excluding a Saturday and Sunday) on which banks and foreign exchange
markets are open for business in London and Frankfurt; and
(b) (in respect of a day on which a payment or other transaction in an Optional
Currency is required under this Agreement) a day (not being a Saturday or
Sunday) on which banks and foreign exchange markets are also open for
business in the principal financial centre of the country of such Optional
Currency.
"BUSINESS PLAN" means the document dated on or about the date hereof in the
agreed form provided to the Facility Agent pursuant to paragraph 9 of Schedule 6
and identified by the Company and the Facility Agent as being the Business Plan.
"CANADIAN BORROWER" means any Borrower incorporated in Canada.
"CANADIAN DOLLARS" means the lawful currency for the time being of Canada.
"CASH" means any credit balances on any deposit, savings or current account with
a Bank and cash in hand.
"CASH COLLATERAL AMOUNT" has the meaning given to such term in Clause 6.10.
"CASH EQUIVALENT INVESTMENTS" means:
(a) debt securities denominated in Sterling issued by the Government of the
United Kingdom or Dollars issued by the Government of the United States of
America having not more than six months to final maturity which are not
convertible into any other form of security;
6
<PAGE>
(b) debt securities (denominated in Dollars or an Optional Currency) which have
not more than 180 days to final maturity, are not convertible into any
other form of security, are rated at least P-1 (Moody's) or A-1 (Standard &
Poors) and are not issued or guaranteed by any Group Member;
(c) any cash deposits which have not more than a 90 day term denominated in
Sterling or Dollars; and
(d) such other securities (if any) as are approved as such in writing by the
Facility Agent,
Provided that in each case the debt securities, cash deposits, or other
securities (as referred to in paragraphs (a) to (d) inclusive above), are
beneficially owned by an Obligor and are deposited with an Approved Bank.
"CERTIFICATE OF INCORPORATION" means the amended and restated Certificate of
Incorporation of the Company.
"CERTIFIED COPY" means, in respect of any document, agreement or communication
to be delivered in connection with this Agreement, a copy thereof which has been
certified by an Authorised Signatory of the Person providing the document,
agreement or communication as being a true copy of the original or their duly
appointed solicitor or other legal counsel.
"CHIEF EXECUTIVE OFFICER" means the managing director of the Company from time
to time (being Alan J. Finden-Crofts at Closing) or in his absence his deputy
(being an Authorised Signatory of the Company).
"CHIEF FINANCIAL OFFICER" means the Group Financial Controller of the Company
or, as the case may be, the Chief Financial Officer of the Company, (being Simon
J. Goddard at Closing) or in his absence his deputy (being an Authorised
Signatory of the Company)..
"CLAUSE" refers, unless otherwise stated, to a clause of this Agreement.
"CLOSING" means the completion of the Recapitalisation.
"COMPLETION ACCOUNTS" means the accounts that are to be prepared by the Company
on a proforma basis in respect of the period commencing on 1 January 1998 and
ending on the date of such accounts containing a proforma balance sheet prepared
on the assumption that the Recapitalisation had taken effect, a profit and loss
statement and a cash flow of statement of the Group as at 3 May 1998.
"COMPLIANCE CERTIFICATE" means a Compliance Certificate in substantially the
same form as is set out at Schedule 10.
"DANGEROUS SUBSTANCE" means any radioactive, radiowave, electromagnetic,
microwave emissions and any natural or artificial substance (whether in the form
of a solid, liquid, gas or vapour) the generation, transportation, storage,
treatment, use or disposal of which (whether alone or in combination with any
other substance) including (without limitation) any controlled, special
hazardous, toxic, radioactive or dangerous waste or discharge, gives
7
<PAGE>
rise to a risk of causing material harm to man or any other living organism or
materially damaging the Environment or public health or welfare.
"DEBENTURES" means each of the debentures governed by the laws of England
entered into by certain Group Members in favour of the Security Agent and
forming part of the Security Documents (each a "DEBENTURE").
"DEFAULT" means an Event of Default or a Potential Event of Default.
"DEFAULT INTEREST PERIOD" is defined at Clause 9.1.
"DERBY INTERNATIONAL" means Derby International Corporation S.A..
"DERBY L.L.C." means DC Cycle L.L.C..
"DEUTSCHMARKS" AND "DM" means the lawful currency for the time being of the
Federal Republic of Germany.
"DEUTSCHMARK AMOUNT" in relation to any Advance or Standby L/C means:
(a) (if denominated in Deutschmarks) the principal amount thereof; or
(b) (if denominated in an Optional Currency) the Deutschmark Equivalent of the
principal amount thereof calculated, in the case of an Advance not
denominated in Sterling, two Business Days prior to its Drawdown Date, in
the case of an Advance denominated in Sterling on its Drawdown Date and, in
the case of a Standby L/C, on the date that the Standby L/C Request
relating thereto was delivered to the Facility Agent under this Agreement.
"DEUTSCHMARK EQUIVALENT" in relation to an amount expressed or denominated in a
currency other than Deutschmarks means the equivalent thereof in Deutschmarks
converted at the Facility Agent's Spot Rate of Exchange on the date of the
relevant calculation.
"DFS" means Derby Finance S.a.r.l..
"DIRECTORS" means each of Frederic V. Malek, Carl J. Rickertsen, Paul G. Stern,
Alan J. Finden-Crofts, A. Edward Gottesman and Dr. Thomas H. Thomsen (each a
"DIRECTOR").
"DISCLOSURE EXHIBITS" means the disclosure exhibits given in respect of the
Recapitalisation Agreement on or about the date of the Recapitalisation
Agreement in the agreed form together with all schedules, annexures and exhibits
thereto forming the "Disclosure Exhibits" referred to in the Recapitalisation
Agreement.
"DISCLOSURE LETTER" means the letter accompanying the Disclosure Exhibits.
"DOLLARS" and "$" means the lawful currency for the time being of the United
States of America.
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"DORMANT COMPANY" means each Group Member which is not an Obligor, does not
trade (whether for its own account or for that of another), is not required to
make entries into its accounting records in accordance with Section 221 of the
Companies Act 1985 (or any equivalent legislation in the jurisdiction of
incorporation of such company) or, to the extent that there is no equivalent
legislation in the jurisdiction of incorporation of such company, would be a
Dormant Company if the principles enshrined in Section 221 of the Companies Act
1985 were applied to it and does not hold or own (whether legally or
beneficially) any assets or property with a book value in excess of $10,000 (or
its equivalent in other currencies) other than amounts due from other Group
Members of no more than $50,000; or owe or have outstanding any liabilities with
a book value in excess of $10,000 (or its equivalent in other
currencies)(excluding liabilities owed to Obligors) Provided that,
notwithstanding the foregoing, a Group Member that holds any interest in any
Material Intellectual Property Right shall not be a Dormant Company.
"DRAWDOWN DATE" means, in respect of an Advance, the date such Advance is made,
or is proposed to be made, under this Agreement.
"DRAWDOWN REQUEST" means a request substantially in the form set out at Part 1
of Schedule 7.
"DUTCH BORROWER" means a Borrower incorporated in the Netherlands.
"DUTCH GUILDERS" AND "DFL" means the lawful currency for the time being of the
Kingdom of the Netherlands.
"ECU" is defined at Schedule 12.
"ELIGIBLE FINISHED GOODS" has the meaning given to such term in Clause 6.10.
"ELIGIBLE RECEIVABLES" has the meaning given to such term in Clause 6.10.
"ELIGIBLE RAW MATERIALS" has the meaning given to such term in Clause 6.10.
"ENCUMBRANCE" means any security, assignation in security, bond and floating
charge, mortgage, pledge, lien, charge, assignment for the purpose of providing
security, hypothecation, right in security, security interest or trust
arrangement for the purpose of providing security, and any other security
agreement or other arrangement having the effect of providing security
(including, without limitation, the deposit of monies or property with a Person
with the primary intention of affording such Person a right of set-off or lien).
"ENVIRONMENT" means all, or any of, the following media, the air (including,
without limitation, the air within buildings and the air within other natural or
man-made structures above or below ground), water (including, without
limitation, ground and surface water) and land (including, without limitation
surface and sub-surface soil).
"ENVIRONMENTAL CLAIM" means any claim by any Person:
9
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(a) in respect of any loss or liability suffered or incurred by that Person as
a result of or in connection with any violation of Environment Law; or
(b) that arises as a result of or in connection with Environmental
Contamination and that could give rise to any remedy or penalty (whether
interim or final) that may be enforced or assessed by private or public
legal action or administrative order or proceedings including, without
limitation, any such claim that arises from injury to Persons, property or
natural resources.
"ENVIRONMENTAL CONTAMINATION" means each of the following and their
consequences:
(a) any material release, emission, leakage or spillage of any Dangerous
Substance at or from any site owned, occupied or used by any Group Member
into any part of the Environment; or
(b) any material accident, fire, explosion or sudden event at any site owned,
occupied or used by any Group Member which is directly or indirectly caused
by or attributable to any Dangerous Substance; or
(c) any other pollution of the Environment.
"ENVIRONMENTAL LAW" means all laws (including, without limitation, common law),
regulations, codes of practice, circulars, guidance notices and the like having
legal effect (whether in the United Kingdom, the United States of America or
elsewhere) concerning the protection of human health, the Environment, the
conditions of the work place or the generation, transportation, storage,
treatment or disposal of Dangerous Substances.
"ENVIRONMENTAL REPORTS" means each of the environmental reports prepared by ERM
dated December 1997 or January 1998 in relation to the Group and the Kirkland &
Ellis Memorandum dated 16 December 1997 entitled "Summary of Material
Environmental Issues" (each an "ENVIRONMENTAL REPORT").
"ENVIRONMENTAL LICENCE" means any permit, licence, authorisation, consent or
other approval required by any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974 of the USA as
amended from time to time or any successor statute and any regulations
promulgated thereunder.
"ERISA AFFILIATE" means each Person (as defined in Section 3(9) of ERISA whether
or not incorporated, which is a Subsidiary of or under common control or would
be considered a single employer with any Obligor domiciled in the United States
within the meaning of section 414(b), (c), (m) or (o) of the IRC and regulations
promulgated under those sections or within the meaning of section 4001(b) of
ERISA.
"ESCROW LETTER" means the letter from the Facility Agent acknowledged by the
Company dated on or about the date hereof regarding the various payments to be
made at or about the Closing in respect of the Closing.
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"EURO-DOLLAR RESERVE PERCENTAGE" means, for any day, that percentage (expressed
as a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System of the USA (or any successor), for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion Dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category or
extensions of credit or other assets which includes loans by a non-United States
of America office of any bank to United States of America residents).
"EVENT OF DEFAULT" means any one of the events specified in Clause 21.1.
"EXCHANGE AGREEMENT" means the exchange agreement executed and delivered or to
be executed and delivered (as the case may be) by Derby, L.L.C and Perseus Cycle
L.L.C pursuant to the terms of the Recapitalisation Agreement and in the form
exhibited thereto.
"EXCHANGE CONTROL APPROVAL" means in relation to any Obligor incorporated in The
Republic of South Africa a valid and current approval from the South African
Reserve Bank approving the borrowing and repayment of moneys by such Obligor
under the Senior Finance Documents to which it is expressed to be a party to be
paid in accordance therewith and the entry into guarantees by such Obligor as
contemplated in the Senior Finance Documents.
"EXECUTIVE" means any of Klaas Dantuma, William J. Austin Farid Vaiya, Kim
Roether, Mark Todd, John V. Spon-Smith and Irwin R. Slotar and Peter Miller and
any replacement for any of them (together the "EXECUTIVES").
"EXECUTIVE OFFICER" means any of the Chief Executive Officer and the Chief
Financial Officer.
"EXISTING FINANCIAL INDEBTEDNESS" means the Financial Indebtedness of the
Company and its Subsidiaries immediately prior to Closing that is defined as
such in the Funds Flow Memorandum and which is identified therein as being
required to be repaid in full, and the commitment in respect thereof (if any) is
to be cancelled and reduced to zero at Closing.
"EXPIRY DATE" means, in relation to a Standby L/C, the date specified as such in
the Standby L/C Request relating thereto.
"FACILITY" means
(a) when designated "Revolving", the revolving credit facility referred to in
Clause 2.1;
(b) when designated "Ancillary", one of the ancillary facilities referred to in
Clause 2.1;
(c) when designated "Standby L/C", the standby letter of credit facility
referred to in Clause 2.1; and
(d) without any such designation, the Revolving Facility, the Ancillary
Facilities or the Standby L/C Facility as the context requires;
and the "FACILITIES" means the Revolving Facility, the Ancillary Facility and
the Standby L/C Facility taken together.
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"FACILITY AGENT'S SPOT RATE OF EXCHANGE" with respect to any Optional Currency
on any day means the spot rate of exchange of the Facility Agent (as determined
by the Facility Agent based on market rates then prevailing and capable of being
obtained by the Facility Agent) for the purchase of the appropriate amount of
such Optional Currency with Deutschmarks in the London Foreign Exchange Market
in the ordinary course of business at or about 10.00 a.m. on the day in question
for delivery, if the Optional Currency is Sterling, on such day and, in all
other cases, two Business Days thereafter.
"FACILITY OFFICE" means, in respect of any Finance Party, the office through
which it will perform its obligations under this Agreement as notified to the
Facility Agent prior to it becoming a Finance Party or (unless otherwise agreed
by the Facility Agent) by five Business Days' notice.
"FEE LETTERS" means each of the letters referred to in Clause 26.6 and 26.7 in
relation to the agency fees and the arrangement fee respectively.
"FINAL REPAYMENT DATE" means the date falling 84 months after the date of this
Agreement.
"FINANCE DOCUMENTS" means, the Senior Finance Documents, the Note Documents, the
Recapitalisation Documents and any other document notified by the Facility Agent
(acting reasonably) to the Company as being a "Finance Document" (any such
document being a "Finance Document" from the date of the notification being
given in respect thereof by the Facility Agent) (each a "FINANCE DOCUMENT").
"FINANCE PARTY" means the Arranger, each Bank, the Security Agent and the
Facility Agent (together the "FINANCE PARTIES").
"FINANCIAL ACCOUNTS" means from time to time:
(a) the latest audited consolidated annual accounts of the Group;
(b) the latest unaudited consolidated quarterly accounts of the Group;
(c) the latest unaudited monthly management accounts of the Group;
(d) any other audited or unaudited consolidated or unconsolidated accounts or
management accounts (if any) of the Group or any Group Member; and
(e) in respect of any period prior to Closing, the Pre-Closing Proforma
Accounts of the Group for such period,
delivered or required to be delivered to the Facility Agent pursuant to this
Agreement, or such of those accounts as the context requires.
"FUNDS FLOW MEMORANDUM" means the flow of funds memorandum in the agreed form
prepared on behalf of the Company by Arthur Andersen containing details of the
flow of funds at Closing.
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"GAZELLE" means Koninklijke Gazelle BV.
"GENERAL PROVISIONS" is defined in the Approved Provisioning Procedure.
"GERMANY" means the Federal Republic of Germany.
"GROUP" means the Company and its Subsidiaries from time to time.
"GROUP MEMBER" means, at any time, a member of the Group at such time.
"GUARANTEE" means:
(a) in relation to any UK Obligor or U.S. Obligor the form of guarantee set out
in Clause 23 of this Agreement; and
(b) in relation to any other Obligor the form of guarantee set out in Clause 23
of this Agreement or such other form of guarantee as the relevant Obligor
shall be required to provide in accordance with the terms of this Agreement
so as to give either:
(i) at least the same level of support as such Obligor would have provided
had such Obligor been able to become a party to this Agreement as a
result of having executed and delivered a duly completed Guarantor
Accession Agreement if to do so would not be contrary to applicable
laws; or
(ii) the maximum level of support as such Obligor may provide having regard
to the applicable laws.
"GUARANTOR" means each entity identified as a Guarantor in Schedule 2 and each
Additional Guarantor (together the "GUARANTORS").
"HEDGING COUNTERPARTY" means any Bank who enters into a Hedging Protection
Agreement as permitted by and in accordance with the terms of this Agreement and
the Approved Hedging Programme.
"HEDGING PROTECTION AGREEMENTS" means any and all interest cap and/or other
hedging agreements entered into or committed to be entered into by a Group
Member in relation to the Group's floating rate interest and/or currency
exposure under the Finance Documents as have been (and/or as may hereafter be)
agreed in writing between the Company and the Facility Agent to constitute the
Hedging Protection Agreements (each a "HEDGING PROTECTION AGREEMENT").
"HOLDING COMPANY" means, in respect of any Person, any company or corporation of
which such Person is a Subsidiary.
"INDEMNITY UNDERTAKING" means the indemnity undertaking in the agreed form dated
on or about the date of this Agreement pursuant to which, inter alia, Derby
L.L.C and Perseus Cycle L.L.C agree to make claims arising in respect of Clauses
6 and 9 of the
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Recapitalisation Agreement and to apply the proceeds of any such
claim in the manner detailed therein.
"IMMEDIATE SUBSIDIARY" means each Group Member that is an immediate Subsidiary
of the Company or Lyon Investments B.V. being, as at the date of this Agreement
Lyon Investments B.V., Sturmey Archer Limited, Raleigh Industries of Canada
Limited, Derby Trading Co. Inc and Derby Holding B.V..
"INFORMATION MEMORANDA" means the information memorandum so entitled dated April
1998 prepared by the Arranger at the Company's request and on its behalf in
connection with this Agreement as supplemented by all relevant information
contained in the Senior Notes' Offering Memoranda dated April 1998 and May 1998
respectively.
"INFORMATION PACKAGE" means the Business Plan, the Information Memorandum, the
Reports, the Transaction Costs Letter and any other information distributed by
the Arranger at the Company's request and on its behalf in connection with this
Agreement.
"INITIAL NOTE PURCHASERS" means Chase Securities, Inc., Chase Manhattan Bank AG
and Chase Manhattan International Limited.
"INTELLECTUAL PROPERTY RIGHTS" means all know-how, patents, trademarks, service
marks, designs, business names, topographical or similar rights, copyrights and
other intellectual property rights and any interests (including by way of
licence) in any of the foregoing (in each case whether registered or not and
including all applications for the same) of any Group Member.
"INTERCREDITOR AGREEMENT" means the agreement so entitled dated the date of this
Agreement and made between, amongst others, the parties to this Agreement, and
each Hedging Counterparty pursuant to which their respective interests in the
Group and amongst themselves are regulated.
"INTERCREDITOR AGREEMENT ACCESSION MEMORANDUM" means an Accession Memorandum as
defined in and delivered under or pursuant to the Intercreditor Agreement.
"INTEREST DATE" means, in relation to any Advance or any Overdue Amount, the
last day of the Term or, as the case may be, the Default Interest Period
relating thereto.
"INTRA-GROUP LOAN MEMORANDUM" means the memorandum in the agreed form detailing
all intra-group loans existing at and which will be in existence immediately
after Closing prepared by the Company and delivered to the Facility Agent
hereunder.
"INVENTORY" has the meaning given to such term in Clause 6.10.
"INVESTMENT" is defined at Clause 19.5(n).
"INVESTORS" means each of those Persons that subscribe for (or agree to
subscribe for) Shares pursuant to or in connection with the Recapitalisation
Agreement or are a shareholder of the Company.
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<PAGE>
"IRC" means the Internal Revenue Code of 1986 (as amended from time to time) of
the USA.
"IRISH DEBENTURES" means each of the debentures governed by the laws of Ireland
entered into by certain Group Members in favour of the Security Agent and
forming part of the Security Documents (each an "IRISH DEBENTURE").
"ISSUE DATE" means, in relation to any Standby L/C, the date for the issue
thereof as specified in the Standby L/C Request relating thereto.
"JOINT VENTURE" means all joint venture entities, whether a company,
unincorporated firm, undertaking, joint venture, association, partnership or
other entity in which any Group Member has an interest from time to time.
"LEGAL DUE DILIGENCE REPORT" means the report prepared by Kirkland & Ellis
addressed to the Facility Agent for itself and on behalf of the Banks.
"LETTER OF ENGAGEMENT" means, in respect of any Report, the letter of
instruction pursuant to which the Person that prepared such Report was engaged
to do so.
"LIBOR" means in relation to any Advance or Overdue Amount, on any day, the
London Interbank Offered Rate for deposits in the specified currency, being
determined by the Facility Agent to be either:
(a) the offered rate (if any) for the specified term which appears on page 3750
of the Telerate screen which displays British Bankers Association Interest
Settlement Rates for deposits in the specified currency for the period for
which such rate is to determined at 11.00am London time on the relevant
Quotation Date or, if such page or such service shall cease to be
available, such other page or service displaying the London Interbank
Offered Rates in such currency of prime banks as the Facility Agent shall,
after consultation with the Banks and with the approval of the Company,
such approval not to be unreasonably withheld or delayed, select as at
11.00am London time on the relevant Quotation Date for the specified term;
or
(b) if no such display rate is then available for such period or currency and,
at the time, the Facility Agent has not selected any alternative service as
contemplated in (a) above, the arithmetic mean (rounded upwards, if not
already such a multiple, to the nearest whole multiple of one sixteenth of
one per cent. per annum) of the respective rates notified to the Facility
Agent by each of the Reference bank as the rate at which it is offered
deposits in an amount approximately equal to the relevant Advance or unpaid
sum in the specified currency and for the specified term by prime banks in
the London Interbank Market at 11.00am London time on the relevant
Quotation Date for the specified term,
and for the purpose of this definition "SPECIFIED CURRENCY" means the currency
of such Advance or, as the case may be, Overdue Amount and "SPECIFIED TERM"
means the Term of such Advance or, as the case may be, the period in respect of
which LIBOR falls to be determined on that day in relation to such unpaid sum.
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<PAGE>
"LISTING" means a listing of equity on the London Stock Exchange or any other
stock exchange as the same is determined by the Facility Agent acting reasonably
(and "LISTED" shall be construed accordingly).
"MAJORITY BANKS" means a Bank or group of Banks whose aggregate Revolving
Commitments amount to more than sixty-six and two thirds per cent. of the Total
Commitments or, if each Bank's Commitment has been reduced to zero, would have
amounted in aggregate to more than sixty-six and two thirds per cent. of the
Total Commitments, immediately prior to such reduction to zero and, for the
purposes of this definition, the provisions of Clause 7 and any Ancillary
Commitment of any Ancillary Bank shall be ignored and be treated as if such
Bank's Revolving Commitment had not been reduced in accordance with Clause 7.
"MANAGEMENT AGREEMENT" means the management agreement (if any) in the agreed
form between Thayer and the Company.
"MARGIN" means two per cent. (2.00%) per annum, provided that if at any time any
consolidated Financial Accounts of the Group delivered to the Facility Agent
pursuant to Clause 19.1(a)(i) for an annual Accounting Period or Clause
19.1(a)(ii) for a quarterly Accounting Period, disclose that:
(a) Consolidated Adjusted EBITDA calculated on a Rolling 4 Quarterly basis is
more than $45,000,000 and the ratio of Consolidated Adjusted EBITDA to
Consolidated Net Interest Payable calculated on a Rolling 4 Quarterly basis
is greater than 2.35:1 the Margin shall be 1.75 per cent. per annum;
(b) Consolidated Adjusted EBITDA calculated on a Rolling 4 Quarterly basis is
more than $50,000,000 and the ratio of Consolidated Adjusted EBITDA to
Consolidated Net Interest Payable calculated on a Rolling 4 Quarterly basis
is greater than 2.75:1 the Margin shall be 1.50 per cent. per annum; and
(c) Consolidated Adjusted EBITDA calculated on a Rolling 4 Quarterly basis is
more than $55,000,000 and the ratio of Consolidated Adjusted EBITDA to
Consolidated Net Interest Payable calculated on a Rolling 4 Quarterly basis
is greater than 3.00:1 the Margin shall be 1.25 per cent per annum,
in each case during (but only during) the period from (and including) the date
on which the Facility Agent has received the relevant Financial Accounts
pursuant to Clause 19 and the report and certificate relating thereto pursuant
to Clause 19 or has received the relevant Financial Accounts for each of those
four consecutive quarterly Accounting Periods pursuant to Clause 19 and the
certificates relating thereto pursuant to Clause 19, as the case may be, until
(but excluding) the earlier of the following dates:
(i) the date on which the Facility Agent next receives the relevant
Financial Accounts for an annual Accounting Period pursuant to Clause
19 and a report and certificate relating thereto pursuant to Clause
19;
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<PAGE>
(ii) the date on which the Facility Agent receives the relevant Financial
Accounts for the next succeeding quarterly Accounting Period of the
Group pursuant to Clause 19 and a certificate relating thereto
pursuant to Clause 19;
(iii) the latest date (the "LATEST DATE") by which the Facility Agent
should have received any such Financial Accounts and certificates in
accordance with the terms of such Clauses where the Facility Agent
has not received the same by such date.
Provided that:
(i) until the first anniversary of Closing the Margin will be two per
cent. (2.00%) per annum;
(ii) if the Facility Agent receives any such Financial Accounts, report
and/or certificates after the Latest Date and such Financial
Accounts and certificates show that the tests in sub-paragraphs (a),
(b) or, as the case may be, (c) are met then the Margin shall be
adjusted with effect from the date of such receipt (and without
retrospective effect) to the level provided for above; and
(iii) if a Default has occurred, the Margin will be two per cent. (2.00%)
per annum until such time, if any, as no Default is continuing that
has not been waived or remedied in accordance with the provisions of
this Agreement, as a different percentage should apply in accordance
with this definition.
"MARKET REPORTS" means the reports dated 28 January 1998 prepared by the Coba
Group entitled "Market Assessment of The Derby Bicycle Group" addressed to,
inter alios, the Company and the Facility Agent for itself and on behalf of the
Banks.
"MATERIAL ADVERSE EFFECT" means any effect which could reasonably be expected:
(a) to be materially adverse to (i) the ability of the Company or any other
Obligor to perform its obligations under any of the Finance Documents, or
(ii) the business, assets, prospects or financial condition of any Material
Group Member; and/or
(b) (where the context so admits) to result in any of the Transaction Documents
not being legal, valid and binding on, and enforceable substantially in
accordance with its material terms against any party to that Transaction
Document and/or (in the case of Security Documents) not providing to the
Security Agent for itself and on behalf of the Banks, perfected,
enforceable security over the assets expressed to be covered by that
Security Document, in a manner and to an extent reasonably considered by
the Majority Banks to be materially adverse to their interests under the
Senior Finance Documents.
"MATERIAL GROUP MEMBER" means each Obligor and each other Group Member (a) whose
earnings before interest, tax, depreciation and amortisation represent five per
cent. or any greater percentage, of the Consolidated Adjusted EBITDA of the
Group, or (b) the book value of whose gross assets is five per cent. or more of
the consolidated gross assets of the
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<PAGE>
Group, in either case determined in accordance with the Applicable Accounting
Principles, or (c) whose aggregate sales to non-Group Members in any annual
Accounting Period, in accordance with the Applicable Accounting Principles and
excluding VAT and/or sales tax, have been, or are budgeted to be, at least five
per cent. or more of the aggregate sales of the Group to non-Group Members
(similarly calculated), and for this purpose:
(i) in the case of a company which itself has Subsidiaries, the calculation
shall be made by using the consolidated earnings before interest, tax,
depreciation and amortisation, gross assets or aggregate sales, as the case
may be, of it and its Subsidiaries;
(ii) the calculation of consolidated earnings before interest, tax, depreciation
and amortisation or gross assets or aggregate sales shall be made by
reference to:
(A) the latest Financial Accounts of the relevant company (or, as the
case may be) (a consolidation of the Financial Accounts of it and
its Subsidiaries) used for the purpose of the then latest unaudited
quarterly or audited annual consolidated Financial Accounts of the
Group delivered to the Facility Agent under Clause 19.1;
(B) those unaudited quarterly or audited annual consolidated Financial
Accounts (as the case may be) of the Group; and
(C) shall exclude any intra-Group item; and
(iii) any Subsidiary not falling within paragraphs (a), (b) or (c) above but
which, as a result of any intra-Group transfer re-organisation or
acquisition would, adopting any of the tests referred to in paragraphs
(a), (b) or (c) above and as if the Financial Accounts referred to in
such paragraphs had been drawn up immediately following such transfer,
reorganisation or acquisition, be a Material Group Member Provided that
such Subsidiary shall only become a Material Group Member upon the
completion of such transfer, reorganisation or acquisition.
"MATERIAL INSURANCES" means the each of those insurances specified as being
material in the list provided pursuant to paragraph 17 of Schedule 6 and such
other insurances as are designated material insurances by the Facility Agent
(acting reasonably) for the purposes of this Agreement from time to time.
"MATERIAL INTELLECTUAL PROPERTY RIGHT" means, any Intellectual Property Right
which the Facility Agent has determined to be material for the purposes of the
Senior Finance Documents whether or not such Intellectual Property Right is
actively used by any Group Member at the time of such determination or has been
used by any Group Member previously or otherwise and shall include the
Intellectual Property Rights specifically listed in the Security Documents.
"MODEL" means the management case financial model for the Derby Bicycle
Corporation detailed in the Information Memorandum.
"MOODY'S" means Moody's Investor Services Limited.
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"MS GROUP OPTION" means the right of Robert Holzer to purchase such number of
shares of Univega Beteiligungen GmbH as shall represent 10% of the beneficial
ownership of MS Sport Vertriebs GmbH and MS Sport Vertriebs AG. Switzerland
under Section 8(b) of Part 2 of the notarial deed No. 270/1997 of the Hamburg
notary Jonetzi dated August 8, 1997).
"MONTH" means a period starting on one day in a calendar month and ending on the
numerically corresponding day in the following calendar month, unless such
corresponding day is not a Business Day, in which case it shall end on the next
day which is a Business Day or, if there is not a corresponding day in that
calendar month, the last Business Day in that calendar month.
"MULTIEMPLOYER PLAN" means a plan which is a multiemployer plan as defined in
section 4001 (a)(3) of ERISA.
"NETHERLANDS" means the Kingdom of the Netherlands.
"NEW BANK" means a bank or financial institution to which a Bank seeks to
transfer all or part of such Bank's rights and obligations hereunder.
"NON-UK OBLIGOR" means any Obligor that is not a UK Obligor.
"NOTE DOCUMENTS" means (to the extent that the same are entered into by the
entities expressed to be a party thereto) the Note Indentures, the Senior Notes,
the Note Purchase Agreement and the Registration Rights Agreement, any related
engagement, fee or indemnity agreements and any ancillary agreements
contemplated by the foregoing.
"NOTE INDENTURES" means the indentures in the agreed forms dated the date of
this Agreement among the Note Issuers, and the applicable Note Trustee pursuant
to which the Senior Notes will be issued.
"NOTE ISSUERS" means collectively The Derby Cycle Corporation and Lyon
Investments B.V. (each a "NOTE ISSUER").
"NOTE PURCHASE AGREEMENT" means the note purchase agreement in the agreed form
dated the date of this Agreement among the Note Issuers and the Initial
Purchasers in connection with the offering of Senior Notes.
"NOTE TRUSTEE" means, as of the date of this Agreement, the entity described
therein as Trustee under each of the Note Indentures, and any other Person
appointed to such position from time to time, in accordance with the provisions
of the applicable Note Indenture.
"NOTEHOLDER" means a Person who is the beneficial owner of one or more Senior
Notes (together "the NOTEHOLDERS").
"NOVATION CERTIFICATE" means a certificate substantially in the form set out at
Schedule 8.
"OBLIGOR" means each Borrower and each Guarantor and any other Group Member
which has been required to enter into (whether or not it has yet entered into)
any Accession
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Agreement and/or Security Document pursuant to Clauses 19.4(d), 19.4(e),
19.4(f), 19.4(g) or 23 (together the "OBLIGORS").
"OBLIGORS' AGENT" means the Company, appointed to act on behalf of each Obligor
in relation to the Finance Documents pursuant to Clause 2.3(c).
"OPTIONAL CURRENCY" means any currency which is freely transferable and freely
convertible into Deutschmarks and which is available to banks in the London
Interbank Market.
"OVERDUE AMOUNT" is defined at Clause 9.
"PARTY" means any Person party to this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.
"PERMITTED ACQUISITION" is defined at Clause 19.5(d)(v).
"PERMITTED AMOUNT" means, in any annual Accounting Period the aggregate of:
(i) to the extent that the Investment or, as the case may be, the Permitted
Acquisition, is to be financed by means of funds raised by means of the
issuance of ordinary shares in the Company or subordinated unsecured debt
on terms acceptable to the Majority Banks (in accordance with the
provisions of the Senior Finance Documents), $10,000,000 (or the equivalent
in other currencies); and
(ii) to the extent that the Investment or, as the case may be, the Permitted
Acquisition, is to be financed by means of Financial Indebtedness not
subordinated on terms satisfactory to the Majority Banks raised from third
party financial institutions;
(i) if the Margin at the beginning of the relevant annual Accounting
Period is 2.00 per cent. per annum, $5,000,000 (or its equivalent in
other currencies);
(ii) if the Margin at the beginning of the relevant annual Accounting
Period is 1.75 per cent. per annum, $7,500,000 (or its equivalent in
other currencies); and
(iii) if the Margin at the beginning of the relevant annual Accounting
Period is 1.50 per cent. per annum or less, $10,000,000 (as its
equivalent in other currencies),
Provided that, if all or any Investment or, as the case may be, the Permitted
Acquisition is to be financed (whether in whole or part) or, in the case of a
contingent liability or exposure of a Group Member in respect of an Investment,
will be financed (whether in whole or in part) by means of Financial
Indebtedness raised from third party financial institutions, the Facility Agent
shall have received at least 5 Business Days' prior notice thereof, together
with a certificate signed by both of the Executive Officers (without incurring
personal liability) confirming (i) that the Investment or, as the case may be,
the Permitted Acquisition will not, immediately thereafter, result in any Group
Member being responsible for any contingent liabilities as a result of such
Investment or, as the case may be, such Permitted Acquisition other than (if it
is the case) as a result of a guarantee given in respect thereof, the maximum
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contingent exposure thereunder of which has been included in determining whether
the Investment or, as the case may be, the Permitted Acquisition is permitted
pursuant to the provisions of the Senior Finance Agreements; and (ii) that in
the twelve months immediately following the date of such certificate, together
with such supporting evidence as the Facility Agent may request (including,
without limitation, a report prepared by the Auditors addressed to the Facility
Agent and the Banks), no Default could reasonably be expected to occur as a
result of the proposed Investment or, as the case may be, the proposed Permitted
Acquisition and that there will be no breach of Clause 20.
"PERMITTED ENCUMBRANCE" means:
(a) Encumbrances constituted or evidenced by the Security Documents;
(b) Encumbrances existing as at the date of this Agreement, details of which
have been disclosed in writing and which are acceptable to the Facility
Agent prior to the Closing Provided that the Financial Indebtedness to
which such Encumbrance relates is not owed to a Beneficiary of a Standby
L/C that has been provided in support of such Financial Indebtedness;
(c) Encumbrances arising by operation of law provided that the same do not
arise as a result of default and any such unpaid fees are discharged as
soon as is reasonably practicable after the Company (or the relevant Group
Member) becomes aware thereof;
(d) a lien arising in favour of a warehouseman or shipper that arises under the
standard terms and conditions of such warehouseman or, as the case may be,
such shipper that relates to unpaid fees payable to such warehousemen or,
as the case may be, such shipper in such capacity only Provided that the
same do not arise as a result of a default and are discharged as soon as is
reasonably practicable after the Company (or the relevant Group Member)
becomes aware thereof and, in any event within 30 days of such amount
becoming payable;
(e) any Encumbrance over or affecting any assets of any company which becomes a
Group Member (that is not an Obligor) after the date hereof, where such
Encumbrance is created prior to the date on which such company becomes a
Group Member Provided that:
(i) such Encumbrance was not created at the request of any Group Member
in contemplation of such company becoming a Group Member;
(ii) the amount thereby secured (save any overdrawn amount on the current
account of any such company within the terms (in existence on the
date when such company becomes a Group Member) of an overdraft (or
other equivalent facility granted to such company prior to its
becoming a Group Member) has not been increased in contemplation of,
or since the date of, such company becoming a Group Member;
(iii) the Person in whose favour the Encumbrance was granted does not have
recourse to any Group Member (or any of their respective assets)
(other than
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<PAGE>
the Group Member that granted the Encumbrance) in respect of the
indebtedness to which such Encumbrance relates; and
(iv) the Encumbrance relates only to assets of the relevant Group Member
that were in existence at the time such company became a Group
Member; and
(f) Encumbrances not referred to at paragraphs (a) - (e) above or (g) or (h)
below, provided that the aggregate book value of the asset or assets over
which all such Encumbrances have been granted by Obligors does not exceed
(in aggregate) $1,000,000 (or the equivalent in other currencies), and, in
respect of Group Members that are not Obligors, does not exceed (in
aggregate) $1,000,000 (or the equivalent in other currencies);
(g) Encumbrances existing as at the date of this Agreement to secure Financial
Indebtedness existing at the date of this Agreement of the members of the
South African Group to the extent that the Financial Indebtedness to which
such Encumbrance relates is not owed to a Beneficiary of a Standby L/C; and
(h) Encumbrances granted in favour of an Ancillary Bank arising solely out of
arrangements concerning the Ancillary Facility provided by such Ancillary
Bank to Group Members whereby outstanding debit and credit balances
thereunder may, from time to time, be netted off or consolidated.
"PERMITTED FINANCIAL INDEBTEDNESS" means (without double-counting):
(a) in respect of the Company, any indebtedness (i) incurred under the
Finance Documents, (ii) as permitted under Clause 19.5(c) of this
Agreement or (iii) as contemplated in the definition of Permitted
Amount;
(b) in respect of Lyon Investments B.V., any indebtedness (i) incurred
under the Note Documents and in respect of the Notes and (ii) as
permitted under Clause 19.5(c) of this Agreement; and
(c) in respect of Group Member (other than the Company and Lyon
Investments B.V.), any indebtedness:
(i) incurred under the Finance Documents;
(ii) as permitted by Clauses 19.5(c) and 19.5(d);
(iii) Financial Indebtedness owed to a Beneficiary of a Standby L/C
to the extent such Financial Indebtedness is supported by such
Standby L/C;
(iv) in addition to any Financial Indebtedness able to be incurred
or permitted to subsist pursuant to paragraphs (i), (ii),
(iii), (v), (vi) or (vii) of this definition:
(A) until such time (if any) as any member of the South
African Group receives an Exchange Control Undertaking and
becomes
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<PAGE>
"POTENTIAL EVENT OF DEFAULT" means:
(a) an event which, with the passage of time, the giving of notice or the
making of any determination (or any combination of those three), would, or
could reasonably be expected to, become an Event of Default; or
(b) the making of a Drawdown Request for the purpose of funding or supporting a
payment due under the Senior Notes which the Facility Agent, acting on the
instructions of the Majority Banks, reasonably considers it likely to
result in an Event of Default.
"PRE-CLOSING ACCOUNTS" means the combined balance sheet, income statement and
cashflow statement of the Group in the agreed form prepared in accordance with
Applicable Accounting Principles by the Company relating to the period
commencing 1 January 1997 and ending 31 December 1997.
"PROFORMA FINANCIAL ACCOUNTS" means a set of proforma quarterly and monthly
accounts in the agreed form detailing the type and level of information which
will be provided in each of the Accounts specified in Clauses 19.1(a)(ii) and
19.1(a)(iii) and the type of issues to be covered in any written report to be
provided by the Executive Officers as part of such Financial Accounts and
showing the heading, format and other characterisations of each of such
Financial Accounts.
"QUALIFYING BANK" means:
(a) in respect of a Borrower located in the United Kingdom a bank as defined in
Section 840A Taxes Act 1988 for the purposes of Section 349 of that Act
which is within the charge to UK Corporation tax in respect of any interest
payable or paid to it under this Agreement;
(b) in respect of a Borrower located in a jurisdiction other than the United
Kingdom or Canada:
(i) a bank for the time being lending through a branch, Affiliate or
agency in that other jurisdiction; or
(ii) a bank lending through any other branch, Affiliate or agency if, at
the time the bank becomes a party to this Agreement, the bank or
Affiliate (as the case may be) is resident or incorporated in a
country with which that other jurisdiction has an appropriate double
taxation treaty pursuant to which that bank or Affiliate (as the case
may be) is entitled to receive interest and fees under this Agreement
from the Borrower without deduction or withholding of that other
jurisdiction's income Tax, or is otherwise entitled to receive
interest and fees without such deduction or withholding and where, at
such time, there has been no public announcement made by the relevant
taxing authorities in such jurisdiction of an intention to change the
entitlement of the bank or Affiliate to receive principal, interest
and fees under this Agreement from any such Borrower without such
deduction or withholding; or
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(iii) any Bank that is a party to this Agreement as at the date hereof or
becomes a party hereto within thirty days of the date hereof; and
(c) in respect of a Borrower incorporated in Canada, any Bank.
"QUOTATION DATE" means, in relation to any period for which an interest rate is
to be determined hereunder, the day on which quotations would ordinarily be
given by prime banks in the London Interbank Market for deposits in the currency
in relation to which such rate is to be determined for delivery on the first day
of that period Provided that, if for any such period quotations would ordinarily
be given on more than one date, the Quotation Date for that period shall be the
last of those dates.
"RECAPITALISATION" means the reorganisation of Derby International and its
Subsidiaries and the recapitalisation of the Company (in each case) pursuant to
the Recapitalisation Agreement.
"RECAPITALISATION AGREEMENT" means the agreement dated 11 March 1998, as
amended, among Derby International, DFS, Derby L.L.C., Perseus Cycle L.L.C. and
the Company in relation to the Recapitalisation (and includes, inter alia, any
tax covenants, disclosure letters and all other documents delivered to or by any
party thereto pursuant or in relation to such agreement).
"RECAPITALISATION DOCUMENTS" means the Recapitalisation Agreement, the Exchange
Agreement, the Disclosure Exhibits, the Recapitalisation Agreement Assignment,
the Shareholders Agreement, the Registration Agreement, the Certificate of
Incorporation together with any other agreement or document relating to, or
giving effect to, the Recapitalisation.
"REFERENCE BANKS" means the principal London office of Chase Manhattan Bank,
Midland Bank PLC and ABN Amro N.V. and/or such other Banks as may become
Reference Banks pursuant to Clause 31.8.
"REGISTRATION AGREEMENT" means the Agreement so entitled among the Company, DFS,
Perseus Cycle L.L.C and Derby Cycle L.L.C in relation to the Recapitalisation.
"REGISTRATION RIGHTS AGREEMENT" means the Exchange and Registration Rights
Agreement in the agreed form dated the date of this Agreement among the Note
Issuers and the Initial Purchasers in connection with the offering of Senior
Notes.
"REPAYMENT DATE" means, in relation to any Advance, the last day of the Term
thereof.
"REPORTS" means each of the Accountant's Report, the Legal Due Diligence Report,
the Market Reports, the AON Insurance Report, the AON Pensions Report, the
Environmental Reports and the Property Report.
"REQUEST" means a Drawdown Request or a Standby L/C Request as the context may
require.
"REQUESTED AMOUNT" means:
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(a) in respect of a Drawdown Request, the principal amount requested to be
borrowed under that Drawdown Request; and
(b) in respect of a Standby L/C Request, the amount of the Standby L/C
requested to be issued under that Standby L/C Request.
"REVOLVING COMMITMENT" in relation to a Bank means the amount of the commitment
set opposite its name in Schedule 3 under the heading "Revolving Commitment" or
in the Novation Certificate, Bank Accession Notice or other document by which it
became a party to or acquired rights under this Agreement as reduced or
increased by substitution or transfer pursuant to Clause 29 and any Novation
Certificate to which such Bank is a party and to the extent not cancelled,
reduced or terminated under this Agreement.
"REVOLVING FACILITY AVAILABLE AMOUNT" has the meaning given to such term in
Clause 6.10.
"RIC" means Raleigh Industries of Canada Limited.
"SCHEDULE" refers, unless otherwise stated, to a schedule to this Agreement.
"SECURITY DOCUMENTS" means the share charges and other security documents
identified in Schedule 14 and such other security documents as may be required
to be entered into by any Obligor including in relation to the accession of any
Obligor hereunder at the request of the Facility Agent pursuant to any of the
Senior Finance Documents.
"SELLERS" means Derby International and DFS in their capacity as such under
thereof the Security Agent, in form and substance satisfactory to the Security
Agent a security interest Recapitalisation Agreement.in all of the personal
property of RIC as continuing collateral security for the indebtedness,
liabilities and obligations of RIC under this Agreement.
"SENIOR FINANCE DOCUMENTS" means this Agreement, each Standby L/C, the
Intercreditor Agreement, the Security Documents, the Accession Agreements, any
Guarantee, any Novation Certificate, any Bank Accession Notice, the Indemnity
Undertaking, the Fee Letters and any other document determined by the Facility
Agent, from time to time, as being a "SENIOR FINANCE DOCUMENT".
"SENIOR UNSECURED NOTES" means the unsecured, senior notes (including, for the
avoidance of doubt, the Initial Securities and the Exchange Securities, as
defined in each of the Note Indentures), issued or to be issued by the Note
Issuers (or either of them) pursuant to each of the Note Indentures in
substantially the forms attached as exhibits to the applicable Note Indenture.
"SERVICE CONTRACTS" means the contracts of service made between (i) each of the
Executives and a Group Member and (ii) each Director and a Group Member.
"SHAREHOLDERS AGREEMENT" means the agreement dated on or about the date of this
Agreement between the Company, DFS, Derby L.L.C. and Perseus Cycle L.L.C.
entitled "Shareholders' Agreement" pursuant to which, amongst other things, DFS,
Derby L.L.C. and Perseus Cycle L.L.C. agree to regulate their respective rights
with respect to the voting and transfer of shares in the Company.
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"SOUTH AFRICA" mean the Republic of South Africa.
"SOUTH AFRICAN BORROWER" means a Borrower incorporated in South Africa.
"SOUTH AFRICAN GROUP" means Derby Investment Holdings (Pty) Limited and each of
its Subsidiaries.
"SOUTH AFRICAN RAND" and "R" means the lawful currency for the time being of
South Africa.
"STANDARD & POOR'S" means Standard & Poor's Rating Services, a division of The
McGraw Hill Companies.
"STANDBY L/C" means a letter of credit in the form, or substantially in the
form, of that set out at Part 3 of Schedule 7, (or such other form as shall be
agreed by the Facility Agent acting on the instructions of the Majority Banks)
issued or to be issued to a Beneficiary under this Agreement.
"STANDBY L/C COMMITMENT" in relation to a Bank means the amount of the
commitment set opposite its name in Schedule 3 under the heading "Standby L/C
Commitment" or in the Novation Certificate or other document by which it became
a party to or acquired rights under this Agreement as reduced or increased by
substitution or transfer pursuant to Clause 29 and any Novation Certificate to
which such Bank is a party and to the extent not cancelled, reduced or
terminated under this Agreement, such commitment forming a sub-set of, and not
being additional to, such Bank's Revolving Commitment.
"STANDBY L/C REQUEST" means a request substantially in the form set out at Part
2 of Schedule 7.
"STERLING" and "(POUNDS") mean the lawful currency for the time being of the
United Kingdom.
"STRUCTURE MEMORANDUM" means the memorandum and charts provided pursuant to
paragraph 35 of Schedule 6 describing the capital and share ownership of the
Group (and giving details of any minority shareholdings in any Subsidiary),
identifying all Group Members and all interests of Group Members in other
companies, partnerships, Joint Ventures and the like, all as of and immediately
after Closing, and all reorganisational steps with respect to the Group Members
to be taken at or shortly prior to Closing.
"SUBSIDIARY" means (a) a subsidiary as defined in Section 736 of the Companies
Act 1985 as amended, and/or (b) a subsidiary undertaking as defined in Section
258 of the Companies Act 1985 as amended, or, in either case, any statutory re-
enactment or replacement thereof and/or (c), (whether or not falling within (a)
or (b) above, in relation to any Person, any entity which is controlled directly
or indirectly by that Person and any entity (whether or not so controlled)
treated as a subsidiary in the latest financial statements of that Person from
time to time, and "control" for this purpose means the direct or indirect
ownership of the majority of the voting share capital of such entity or the
right or ability to direct management to comply with the type of material
restrictions and obligations contemplated in this Agreement or to determine the
composition of a majority of the board of directors (or like board) of such
entity, in each case whether by virtue of ownership of share capital, contract
or otherwise.
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"TAX" shall be construed so as to include all present and future taxes, charges,
imposts, duties, levies, deductions, withholdings or amounts or charges of a
similar nature, or any amount payable on account of, or as security for, any of
the foregoing, including any penalties, fines, surcharges or interest payable in
connection with such amounts, and "TAXES" and "TAXATION" shall be construed
accordingly.
"TERM" means, in relation to an Advance, the period for which such Advance is
requested to be borrowed, as adjusted under this Agreement.
"THAYER" means Thayer Equity Investors III, L.P. .
"TOTAL COMMITMENTS" means, at any time, the aggregate for the time being of the
Banks' Revolving Commitments.
"TRANSACTION COSTS" means all fees, out-of-pocket costs and expenses and stamp
duty, registration, transfer and similar taxes incurred by the Company or any
Subsidiary thereof in connection with the negotiation, preparation and execution
of the Transaction Documents or otherwise in connection with, or resulting from,
the Recapitalisation each in the aggregate amount as set out in a letter in an
agreed form from the Company to the Facility Agent entitled "Transaction Costs"
and provided to the Facility Agent pursuant to paragraph 14 of Schedule 6 (the
"TRANSACTION COSTS LETTER").
"TRANSACTION DOCUMENTS" means the Recapitalisation Documents, the Finance
Documents, the Service Contracts, the Escrow Letter and the Structure
Memorandum.
"UK OBLIGORS" means, at any time, each of the Obligors, at such time,
incorporated in England and Wales, Scotland and Northern Ireland.
"USA" "UNITED STATES OF AMERICA" means the United States of America, any of its
states or territories and the District of Columbia.
"U.S. OBLIGOR" means, at any time, each Group Member at such time incorporated
in the United States and any other Obligor which is a U.S. Person.
"U.S. PERSON" means a Person who is a citizen or resident of the USA, and any
corporation of other entity created or organised in or under the laws of the
USA.
"UTILISATION" means:
(a) when designated "Standby L/C", a utilisation under this Agreement of the
Standby L/C Facility;
(b) when designated "Revolving", a utilisation under this Agreement of the
Revolving Facility; and
(c) without any such designation, a utilisation of the Standby L/C Facility or
the Revolving Facility as the context requires.
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"UTILISATION DATE" means in relation to each Advance, the date specified as such
in the relevant Drawdown Request.
"VAT" means value added tax owed to the United Kingdom Customs & Excise or any
similar or analogous tax in any jurisdiction owed to an equivalent authority or
body.
"YEAR 2000 EXPENDITURE" means, in respect of any Person, any expenditure
incurred relating to the reprogramming required to permit the proper
functioning, in and following the Year 2000 of such Person's computer systems
and equipment containing embedded microchips (including systems and equipment
supplied by others or with which such Person's systems interface) and the
testing of all such systems and equipment, as so reprogrammed.
1.2 FINANCIAL TERMS
"A COMMON STOCK" means the non-voting A Common Stock of the Company authorised
by the constitutive documents of the Company as at the date hereof.
"B COMMON STOCK" means the non-voting B Common Stock of the Company authorised
by the constitutive documents of the Company as at the date hereof.
"CAPITAL EXPENDITURE" means any expenditure which should be treated as capital
expenditure in the audited consolidated Financial Accounts of the Group in
accordance with the Applicable Accounting Principles.
"CONSOLIDATED ADJUSTED EBITDA" for any period comprising an annual Accounting
Period of the Company or four consecutive quarterly Accounting Periods of the
Company (taken together as one period) means the operating income of the Group
for such period:
BEFORE TAKING IN ACCOUNT all Extraordinary Items (whether positive or
negative) and one-off expenses not exceeding, in aggregate, $2,900,000
incurred in the annual Accounting Period ending 31 December 1997;
BEFORE TAKING INTO ACCOUNT any Transaction Costs required to be expensed
through the income statement up to a maximum of $6,200,000 whether an
Extraordinary Item or otherwise and any one-off payments of premia or
otherwise made by any Group Member in connection with Hedging Protection
Agreements entered into in accordance with the Approved Hedging Programme
within 30 days of the date of this Agreement;
BEFORE TAKING INTO ACCOUNT to the extent deducted from operating income any
amounts expended that relate solely to Year 2000 Expenditure to the extent
that such expenditure, when aggregated with any other Year 2000 Expenditure
incurred since the date of this Agreement and prior to 31 December 1999
does not exceed $2,700,000 (or the equivalent in other currencies);
BEFORE DEDUCTING income tax expense;
BEFORE DEDUCTING charges to depreciation and amortisation excluding
amortisation attributable to a prepaid cash item arising in the ordinary
course of business, the
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amortisation of any goodwill and amortisation of
Transaction Costs in an amount not exceeding $8,800,000;
BEFORE DEDUCTING Interest (whether accrued, paid, deferred or capitalised)
as an obligation of any Group Member or Interest accrued in favour of, or
paid to, any Group Member;
AFTER DEDUCTING (to the extent otherwise included in operating income) any
gain over book value arising in favour of the Group on the sale, lease or
other disposal of any fixed or intangible asset during such period and any
gain arising on any revaluation of any fixed or tangible asset during such
period;
AFTER ADDING BACK (to the extent otherwise deducted in operating income)
any loss against book value incurred by the Group on the sale, lease or
other disposal of any fixed or intangible asset during such period and any
loss arising on any revaluation of any fixed or intangible assets during
such period;
AFTER DEDUCTING (to the extent otherwise included) the amount of retained
profit (or adding back the retained loss) of any Group Member (other than
the Company) which is attributable to the interest of any shareholder of
or, as the case may be, partner in such Group Member which is not a Group
Member other than the amount of retained profit or the amount of the
retained loss of RIC which is attributable to such non-Group Member's
interest in RIC Preference Shares for so long as such shares may be
exchanged solely for B Common Stock of the Company and carry no rights
greater than as at the date of this Agreement and RIC is prohibited from
redeeming such RIC Preference Shares pursuant to the provisions of this
Agreement;
AFTER DEDUCTING items which have not, or are not due to be paid in cash,
including any amortisation, credit, income or provision release (where such
provision was not originally increased by reducing operating income) or
other credit where cash was received in an earlier period. For the
avoidance of doubt, any income related to the defined benefit pensions
plans of the Group recognised in accordance with FAS 87 shall be deducted
when calculating Consolidated Adjusted EBITDA,
and for the purposes of the foregoing no item shall be effectively taken into
account more than once in this calculation and all items shall be determined on
a consolidated basis and (subject only as may be required in order to reflect
the express inclusion or exclusion of items as specified in this definition) in
accordance with the Applicable Accounting Principles and as determined from the
consolidated Financial Accounts of the Group for such annual Accounting Period
or for the quarterly Accounting Periods falling within such period or, to the
extent that such period, or part thereof, relates to the period prior to
Closing, from the Pre-Closing Accounts relating to such period.
"CONSOLIDATED NET WORTH" means the amount (including any additional paid in
capital) for the time being paid up or credited as paid up on the issued share
capital of the Company (other than any Excluded Share Capital):
PLUS an amount (of up to $45,000,000) in respect of the value attributable
to equity retained by on or behalf of DFS;
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PLUS any amount standing to the credit of, or (as the case may be) MINUS
any amount standing to the debit of the consolidated income statement of
the Group before any adjustment made in respect of dividends on any class
of shares of the Company to the extent that the holder of such share(s) is
only entitled to receive, in respect thereof, payment in kind, and not cash
or other assets;;
MINUS any amount included in the above which is attributable to (a) the
aggregate of all goodwill (to the extent created or purchased after
Closing), titles, trademarks, copyrights, patents, capitalised research and
development expenditure (other than research and development expenditure
which is capitalised in accordance with the accounting policies of the
Company in force at the date of this Agreement) and other intangible
assets, and (b) any upwards revaluation of assets by any Group Member after
Closing; and
MINUS (to the extent otherwise included) the amount attributable to the
interests (if any) of outside holders of issued share capital in any Group
Member other than the Company other than RIC Preference Shares for so long
as the same are exchangeable solely for B Common Stock and carry no rights
greater than as at the date of this Agreement and RIC is prohibited from
redeeming such RIC Preference Shares pursuant to the provisions of this
Agreement.
For the avoidance of doubt, the amount of the Additional Payment (including
any accrued interest thereon) shall not be included in determining
Consolidated Net Worth.
For the purposes of the foregoing, no items shall be effectively taken into
account more than once in this calculation and all items shall be calculated on
a consolidated basis and (subject only as may be required in order to reflect
the express inclusion or exclusion of items as specified in this definition) in
accordance with the Applicable Accounting Principles and, where the calculation
is being made as at the end of any Accounting Period for which a consolidated
balance sheet of the Group has been or is required to be delivered to the
Facility Agent hereunder, shall be as determined from that balance sheet.
"CONSOLIDATED NET INTEREST PAYABLE" for any period comprising an annual
Accounting Period of the Company or four consecutive quarterly Accounting
Periods of the Company or less where such period ends on or before 28 March 1999
(taken together as one period) means, the Interest accrued during such period as
an obligation of any Group Member under of in respect of any Financial
Indebtedness (whether or not paid, capitalised or accrued during, or deferred
for payment after, such period) together with interest paid, payable,
capitalised, accrued or deferred for payment under any interest rate or currency
Hedging Protection Agreement or instruments under which the parties are in
compliance with their payment obligations or other obligations (excluding for
the avoidance of doubt any item comprised in Transaction Costs amortised in
accordance with Applicable Accounting Principles LESS Interest received in
respect of Cash and together with Cash Equivalent Investments during such period
together with Interest received or receivable by any Group Member during such
period under any interest rate and/or currency hedging agreements or instruments
(calculated on an accrual basis) under which all parties are in compliance with
their payment and other obligations all determined on a consolidated basis and
avoiding double counting and (subject only as may be required in order to
reflect the express inclusion or exclusion of items as
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specified in this definition) in accordance with the Applicable Accounting
Principles and as shown in the consolidated Financial Accounts of the Group for
such annual Accounting Period or for the quarterly Accounting Periods falling
within such period provided that interest in respect of the Additional Payment
shall not be included in Consolidated Net Interest Payable for so long as such
interest is paid in kind.
"DOLLAR EQUIVALENT" means, in respect of any currency other than Dollars, the
amount of Dollars able to be purchased with such currency at the rate of
exchange applied by the Company or, as the case may be, the Auditors, in
compiling the financial statements to which the calculation relates.
"EXCLUDED SHARE CAPITAL" of the Group means shares in the capital including
associated share premium of any Group Member owned by a Person which is not a
Group Member which by their terms are or may become redeemable (whether or not
subject to the occurrence of any contingency) at any time whilst any Advance or
other amount remains outstanding hereunder (whether or not due and payable) or
any commitment is in force, without the unanimous prior written consent of the
Banks Provided that PIK A Preferred Shares, PIK B Preferred Shares and RIC
Preference Shares shall not constitute Excluded Share Capital for the purposes
of this definition Provided further in the case of the RIC Preference Shares and
PIK B Preferred Shares that the holders of such shares do not have any greater
rights than in existence at the date of this Agreement and in the case of the
RIC Preference Shares RIC is prohibited from redeeming such Preference Shares
pursuant to the provisions of this Agreement.
"EXTRAORDINARY ITEMS" shall be determined in accordance with Applicable
Accounting Principles.
"FINANCIAL INDEBTEDNESS" means any indebtedness for, or for interest (or
dividends in the case of paragraph (c)) or other charges relating to, or
otherwise in respect of or pursuant to:
(a) monies borrowed or monies raised which are in the nature of borrowings or
having the commercial effect of borrowing, including, without limitation,
monies raised by the sales of receivables, invoices, bills or notes or
other financial assets on terms that recourse may be had to the vendor in
the event of non-payment of such receivables or financial assets when due
(but only to the maximum extent, actual or contingent, of such right of
recourse) and monies raised under acceptance credit facilities and through
the issue of bonds, notes, debentures, bills, loan stocks and other debt
securities (including any debt security convertible, but not at the
relevant time converted, into share capital);
(b) the acquisition cost of assets or services to the extent payable on
deferred payment terms after the time of acquisition or possession thereof
by the party liable (whether or not evidenced by any bond, note, debenture,
loan stock or other debt security), excluding (i) retentions of acquisition
consideration normal in the trade concerned, (ii) any payment relating to
construction works or the acquisition of fixed assets which will become
payable only upon completion or commissioning of certain stages in such
works or in the supply programme for such fixed assets and which has not
yet become payable by reason of the non-completion or non-commissioning (as
the case may be) of such stages, (iii) any such cost payable on deferred
payment terms which are
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normal in the trade concerned, and which do not involve any deferral of
payment of any sum for more than four months;
(c) any outstanding Excluded Share Capital (and notwithstanding anything to the
contrary contained in this Agreement or in any rule of law or accounting,
such Excluded Share Capital shall be deemed for the purposes of this
definition to constitute indebtedness of the issuer of it);
(d) moneys received in consideration for the supply of goods and/or services to
the extent received more than three months before the due date for such
supply (but excluding any liability in respect of bona fide progress
payments and deposits or annual subscriptions received from customers in
the ordinary course of trade);
(e) instalments under conditional sale agreements entered into primarily as a
method of raising finance;
(f) amounts payable under leases (whether in respect of land, machinery,
computers, equipment or otherwise) and amounts payable under hire purchase
agreements and similar agreements and instruments, in each case where such
leases, agreements or instruments are treated as finance leases in
accordance with the Applicable Accounting Principles;
(g) (i) any guarantee, indemnity, letter of credit or other legally binding
instrument to assure payment of, or against loss in respect of non-
payment of, any of the indebtedness specified in this definition and
any counter-indemnity in respect of any thereof; and/or
(ii) any legally binding agreement or other instrument entered into in
connection with any of the indebtedness specified in this definition
requiring, or giving any Person the right (contingently or otherwise)
to require, that any other Person invest in, make advances to,
purchase assets of or maintain the solvency or financial condition of
any other Person;
(h) any interest rate swap, currency swap, currency exchange transaction, cap,
floor, collar or option arrangement and any other hedging or treasury
transaction (or any combination of any such transactions) which is entered
into with a view to managing exposure to fluctuations in interest rates or
currency exchange rates (the amount of such Financial Indebtedness in
relation to any such transaction shall be calculated by the mark-to-market
valuation of such transaction at the time such valuation is carried out);
(i) transactions which involve or have the commercial effect of the borrowing
of commodities as part of an arrangement for or in substitution for the
raising of finance, the value of indebtedness concerned for this purpose
being the sum which must be paid and/or the value in money terms of the
commodities which must be delivered by the "borrower" to, or to the order
of, the "lender"; and
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(j) transactions involving an agreement to sell commodities and a related
agreement to purchase at a future date, the same or other commodities where
such transactions are entered into primarily as a means of raising finance.
Whenever an amount of Financial Indebtedness of any Person or Persons is to be
determined for any purpose, double counting shall be avoided.
"INTEREST" means:
(a) interest and amounts in the nature of interest (including, without
limitation, the interest element of finance leases) accrued;
(b) prepayment penalties or premiums incurred in repaying or prepaying any
Financial Indebtedness;
(c) discount fees and acceptance fees payable or deducted in respect of any
Financial Indebtedness (including all fees payable in connection with any
letter of credit or guarantee);
(d) any other costs, expenses and deductions of the like effect and any net
payment or amount payable or receipt receivable (or, if appropriate in the
context, receipt) under any interest rate hedging agreement or instrument
(including without limitation under the Hedging Protection Agreements)
taking into account any premiums payable for the same and the interest
element of any net payment (plus or minus any accrued exchange gains or
losses) under any currency hedging instrument or arrangement and dividends;
and
(e) any other distribution in respect of Excluded Share Capital.
For the avoidance of doubt "INTEREST" includes commitment, utilisation and non-
utilisation fees (including, without limitation, those payable under this
Agreement) but excludes agent's and front-end, management, arrangement and
participation fees with respect to any Financial Indebtedness (including,
without limitation, those payable under this Agreement) and (other than in
respect of paragraph (d) above) any up-front premium or front-end fee payable
pursuant to any Hedging Protection Agreement.
"NET AVERAGE FINANCIAL INDEBTEDNESS" means, in relation to any period, the
aggregate of the Dollar Equivalent of the Financial Indebtedness of the Group as
at the end of each of the twelve immediately preceding and consecutive monthly
Accounting Periods ending on the Accounting Date to which the calculation
relates, divided by twelve LESS:
(a) the aggregate of the Dollar Equivalent of the Cash and Cash Equivalent
Investments owned by the Group as at the end of each of the twelve
immediately preceding and consecutive monthly Accounting Periods ending on
the Accounting Date to which the calculation relates divided by twelve; and
(b) the aggregate of the Dollar Equivalent of duty deferment bonds, (including
letters of credit and guarantees of a similar nature to duty deferment
bonds, as at the end of each of the twelve immediately preceding and
consecutive monthly Accounting Periods
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ending on the Accounting Date to which the calculation relates divided by
twelve up to a maximum aggregate amount of $7,000,000,
provided that, if the Accounting Date is less than twelve months from Closing,
the "NET AVERAGE FINANCIAL INDEBTEDNESS" shall be determined in accordance with
the foregoing save that the figure twelve shall, in each case, be replaced by
the number of monthly Accounting Periods occurring between Closing and the
Accounting Date to which the calculation relates.
"PIK A PREFERRED SHARES" means the Series A Preferred Shares of the Company
authorised by the constitutive documents of the Company as at the date hereof.
"PIK B PREFERRED SHARES" means the non-voting Series B Preferred Shares of the
Company authorised by the constitutive documents of the Company as at the date
hereof.
"RIC" means Raleigh Industries of Canada.
"RIC PREFERENCE SHARES" means the non-voting Preference Shares of RIC authorised
by the constitutive documents of RIC that are exchangeable to A Common Stock
and/or B Common Stock pursuant to the terms of such constitutive documents as at
the date hereof.
"ROLLING 4 QUARTERLY BASIS" refers to the calculation of a ratio or an amount
made on an Accounting Date based on the sum of the amounts by reference to which
such ratio or amount is determined over the quarterly Accounting Period ending
on such Accounting Date and the immediately preceding and consecutive 3
quarterly Accounting Periods.
"TOTAL ASSETS" means the sum of fixed and current assets (including, for the
avoidance of doubt, Cash, Cash Equivalent Investments and amounts falling due
after more than one year) of the Group determined initially by aggregating the
fixed and current assets (including, for the avoidance of doubt, Cash and
amounts falling due after more than one year) specified in the Pre-Closing
Accounts and, following delivery to the Facility Agent pursuant to Clause 19.1
of the consolidated Financial Accounts of the Group subsequently determined by
reference to the consolidated Financial Accounts of the Group most recently
delivered to the Facility Agent in accordance with Clause 19.1 (adjusted as the
Facility Agent (after consultation with the Company) may reasonably consider
appropriate to take account of any change in circumstances which occur
thereafter).
1.3 CONSTRUCTION
In this Agreement, save where the context otherwise requires:
(a) references to documents being in the "AGREED FORM" means documents in a
form previously agreed in writing by or on behalf of the Company and the
Facility Agent;
(b) references to "ASSETS" shall include revenues and the right thereto and
property and rights of every kind, present, future and contingent and
whether tangible or intangible (including uncalled share capital),
references to "SHARES" shall include stock and references to "FREEHOLD
PROPERTY" shall include heritable property in Scotland and other similar
interests in real property in other jurisdictions;
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(c) the expressions "HEREOF", "HEREIN", "HEREUNDER" and similar expressions
shall be construed as references to this Agreement as a whole (including
all Schedules) and shall not be limited to the particular clause or
provision in which the relevant expression appears, and references to "THIS
AGREEMENT" and all like indications shall include references to this
Agreement as supplemented by the Accession Agreements, the Novation
Certificates and any other agreement or instrument supplementing or
amending this Agreement;
(d) references to "INDEBTEDNESS" shall be construed so as to include any
obligation or liability (whether present or future, actual or contingent)
for the payment, repayment or redemption of any obligation expressed by
reference to monetary value or quantity or value of commodities (whether
such obligation is performable by the payment of money or in some other
way);
(e) references to any of the Transaction Documents and any other agreement,
document or instrument shall be construed as a reference to the same as
amended, varied, supplemented or novated from time to time (including,
where relevant, by any Accession Agreement and/or Novation Certificate);
(f) references (by whatever term) to the Company, each Obligor, the Arranger,
each Bank, each Reference Bank, each Agent, each Executive, the Note
Trustee, each Noteholder or the parties to this Agreement shall, where
relevant and subject as otherwise provided in this Agreement, be deemed to
be references to or to include, as appropriate, their respective
successors, replacements and assigns, transferees and substitutes permitted
by the terms of the Senior Finance Documents;
(g) reference to a time of day is, unless otherwise stated, a reference to
London time;
(h) the contents page of, and headings in, this Agreement are for convenience
only and shall be ignored in construing this Agreement;
(i) any reference to "CERTIFICATE", "CERTIFICATIONS" (or any like term) in
relation to an amount shall be a reference to a certificate containing a
reasonable amount of detail as to how such amount was calculated;
(j) reference to a "JUDGMENT" shall include a decree;
(k) words importing the singular shall include the plural and vice versa; and
(l) all references to statutes and other legislation include all re-enactments
and amendments of those statutes and that legislation.
1.4 RELATIONSHIP WITH THE INTERCREDITOR AGREEMENT
This Agreement is entered into subject to, and with the benefit of, the terms of
the Intercreditor Agreement
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PART 2
2. THE FACILITY
2.1 THE FACILITY
Subject to the terms and conditions of this Agreement (and in the case of an
Ancillary Facility, the terms and conditions of the documents evidencing the
same) the Banks grant to the Borrowers facilities of up to DM225,000,000 (or the
equivalent thereof in Optional Currencies); of which:
(a) up to DM170,000,000 may be utilised by the Borrowers listed below in
Column 1 in the amount and currency set opposite such Borrower in
Column 2 on the Closing:
<TABLE>
<CAPTION>
================================================================================
COLUMN 1 COLUMN 2 CURRENCY
BORROWER Deutschmark Amount
================================================================================
<S> <C> <C>
Derby Holding Deutschland GmbH 76,000,000 DM
- --------------------------------------------------------------------------------
Gazelle 52,000,000 $
- --------------------------------------------------------------------------------
Raleigh Industries of Canada Ltd. 17,000,000 DFl
- --------------------------------------------------------------------------------
Raleigh Industries of Canada Ltd. 5,000,000 C$
================================================================================
</TABLE>
of which up to:
(i) DM64,000,000 (or the equivalent thereof in Optional Currencies)
may be made available by the Ancillary Banks to those Borrowers
as Ancillary Facilities LESS the Deutschmark Amount of any
outstanding Standby L/Cs at such time; and
(ii) up to DM15,000,000 (or its equivalent thereof in Optional
Currencies) may be utilised by those Borrowers by means of
Standby L/Cs; and
(b) the full amount of the Facilities may be utilised (in accordance with
the terms and conditions of this Agreement) by the Borrowers on the
Business Day immediately following Closing of which up to:
(i) DM214,000,000 (or its equivalent in Optional Currencies) (or, if
a Bank has acceded to the Agreement pursuant to Clause 2.4, DM
225,000,000, (or its equivalent thereof in Optional Currencies)
may be made available by way of Advances by the Banks under the
Revolving Facility;
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(ii) DM64,000,000 or the equivalent thereof in Optional Currencies
or, if a Bank has acceded to the Agreement pursuant to Clause
2.4, DM65,000,000 (or the equivalent thereof in Optional
Currencies) may be made available by the Ancillary Banks to the
Borrowers as Ancillary Facilities LESS the Deutschmark Amount of
any outstanding Standby L/Cs at such time; and
(iii) up to DM15,000,000 (or its equivalent thereof in Optional
Currencies) may be utilised by means of Standby L/Cs,
Provided that, subject to the terms and conditions of this Agreement, at no
time shall the aggregate Deutschmark Amount of outstanding Advances,
Standby L/Cs, amounts owing and unpaid under Clause 11.3 and Ancillary
Commitments exceed DM214,000,000 or, if a Bank has acceded to the Agreement
pursuant to Clause 2.4. DM225,000,000.
(c) Upon a Bank acceding to this Agreement as an Acceding Bank and the amount
of the Revolving Facility being increased by DM11,000,000 the Standby L/C
Commitment of each of the Banks (including the Acceding Bank) shall be
adjusted by the Facility Agent by reducing the Standby L/C Commitment of
each Bank by a factor of 214/225 such that, following such adjustment, the
aggregate of the Standby L/C Commitments equal DM15,000,000 (adjusted to
take into account any reduction or cancellation made hereunder as at such
time).
2.2 NATURE OF BANKS' OBLIGATIONS AND RIGHTS
(a) The obligations of each of the Banks under this Agreement are several. The
failure of a Bank to perform any of its obligations will not:
(i) increase the liability of any other Bank under this Agreement nor
impose any liability on the Facility Agent; or
(ii) relieve any other Party from their respective obligations under this
Agreement.
(b) The rights of a Finance Party under this Agreement are several. A Finance
Party may, except as otherwise stated in this Agreement, separately enforce
those rights.
2.3 NATURE OF BORROWERS' RIGHTS AND OBLIGATIONS HEREUNDER
(a) RIGHTS AND OBLIGATIONS: The obligations of the Borrowers under this
Agreement in their capacities as such shall be separate and independent and
not joint and several, provided that the Company and not the other
Borrowers (save in their capacity as Guarantors) shall be liable for:
(i) payment of all amounts becoming due under Clause 15 to the extent that
such amounts are not referable to Utilisations made by or to monies
received or receivable from or to Revolving Commitments or, as the
case may be, Standby L/C Commitments which are only available (subject
to satisfaction of conditions) for drawing by a particular Borrower or
Borrowers or are not
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otherwise in the reasonable opinion of the Facility Agent referable to
a particular Borrower or Borrowers: and
(ii) payment of all amounts due under Clause 25, to the extent that in the
reasonable opinion of the Facility Agent such amounts are not
referable to a particular Borrower or Borrowers.
(b) FACILITY AGENT'S DETERMINATION: The written determination of the Facility
Agent with regard to any matter which is to be determined according to its
reasonable opinion shall, in the absence of manifest error, be conclusive.
No Person shall have any recourse to the Facility Agent in relation to any
such determination if it proves to be the case that its opinion was
incorrect.
(c) COMPANY AS OBLIGORS' AGENT: Each Obligor (other than the Company) by its
execution of this Agreement or an Accession Agreement irrevocably
authorises the Company to act on its behalf as its agent in relation to the
Senior Finance Documents and irrevocably authorises the Company on its
behalf to give all notices and instructions (including, in the case of a
Borrower, any Request), to execute on its behalf any Accession Agreement
and to make such agreements capable of being given or made by any Obligor
notwithstanding that they may affect such Obligor without further reference
to or the consent of such Obligor and such Obligor shall be bound thereby
as though such Obligor itself had given such notices and instructions
(including, without limitation any Request) or executed or made such
agreements.
(d) COMPANY'S ACTS BINDING: Every act, omission, agreement, undertaking,
settlement, waiver notice or other communication given or made by the
Company under this Agreement, or in connection with this Agreement,
(whether or not known to any other Obligor and whether occurring before or
after such other Obligor became an Obligor under this Agreement) shall be
binding for all purposes on all other Obligors as if the other Obligors had
expressly made, given or concurred with the same. In the event of any
conflict between any notices or other communications of the Company and any
other Obligor, those of the Company shall prevail. For the avoidance of
doubt, references in this Clause 2.3(d) to "Company" shall include the
Company acting in its capacity as Obligors' Agent.
2.4 BANK ACCESSION NOTICE
Subject to Clause 2.5 the Company may, at any time prior to the date of
falling 3 months of this Agreement (the "ACCESSION DATE") nominate a
reputable financial institution to become an Acceding Bank on such
Accession Date in which event:
(i) the Company shall deliver to the Facility Agent, at least 5 Business
Days prior to the Accession Date a Bank Accession Notice from such
financial institution agreeing to be bound by the provisions of this
Agreement together with each of the documents referred to therein
(each in a form acceptable to the Facility Agent); and
(ii) upon such Accession Date, such financial institution shall become an
Acceding Bank for the purposes hereof, and the Facility Agent, such
Acceding Bank and
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each of the other parties hereto shall acquire the same rights and
assume the same obligations between themselves as they would have
acquired and assumed had such financial institution being an original
party hereto with a Revolving Commitment, a Standby L/C Commitment and
an Ancillary Commitment (which shall equal its Revolving Commitment)
equal to the amount expressed in its Bank Accession Notice.
2.5 MAXIMUM TOTAL COMMITMENTS
The Total Commitment shall not at any time exceed DM225,000,000 (or its
equivalent thereof in Optional Currencies).
3. PURPOSE OF FACILITIES
(a) The proceeds of each Utilisation (if any) made on the date of Closing shall
be applied as follows:
(i) first in or towards financing repayment in full by the relevant
Borrower its portion of the Existing Financial Indebtedness or, in the
case of any Standby L/C issued on behalf of a Borrower in or towards
the support of any of its existing Permitted Financial Indebtedness
and in each case in accordance with the Funds Flow Memorandum at
Closing; and
(ii) second in or towards financing payment by the Company of the
Transaction Costs.
(b) The proceeds of each Utilisation hereunder (other than the Utilisations (if
any) made on the date of Closing) shall be applied in or towards financing
the general working capital requirements and/or other corporate purposes of
the relevant Borrower and its Subsidiaries, or, in the case of a Standby
L/C, such standby L/C shall be issued to support the relevant Borrower's
Permitted Financial Indebtedness provided by the Beneficiary of such
Standby L/C to such Borrower.
(c) Without affecting the obligations of any of the Borrowers under (a) or (b)
above, no Finance Party shall be obliged to concern itself with the
application of amounts raised by any of the Borrowers under this Agreement.
(d) Each Borrower undertakes that no Advance,Standby L/C or Ancillary Facility
shall be used in any way which would be illegal under, or would cause the
invalidity or unenforceability (in whole or in part) of any Senior Finance
Document under any applicable law.
4. CONDITIONS PRECEDENT TO FIRST UTILISATION
The obligations of each Finance Party to the Company and the Borrowers under
this Agreement are subject to the condition precedent that on or before Closing:
(a) the Facility Agent shall have received all of the documents and evidence
listed in Schedule 6 in each case in the agreed form or, where there is no
agreed form, in form
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<PAGE>
and substance satisfactory to the Facility Agent. Each of the documents
referred to in Schedule 6 as being certified shall be certified by an
Authorised Signatory of the relevant Obligor as being genuine and in full
force and effect (and, if a copy, as being true and complete) as at the
date such document is required to be delivered; and
(b) all of the representations and warranties in Clause 18.1 being correct in
all material respects on Closing and no Default having occurred with
respect to the Company or any of its Subsidiaries and be continuing
immediately before the making of the Utilisations to be made on Closing and
the refinancing of the Existing Financial Indebtedness by reference to the
facts and circumstances subsisting immediately before the making of such
Utilisation nor will a Default occur if the initial Utilisations are made
as contemplated in this Agreement.
5. CONDITIONS PRECEDENT TO EACH UTILISATION BY WAY OF ADVANCES AND STANDBY
L/CS
The obligation of each Bank to participate in any Utilisation by way of
Advances or Standby L/Cs is subject to the condition precedent that:
(a) on both the date that the relevant Request is delivered to the
Facility Agent and the Drawdown Date for that Advance or Issue Date
for that Standby L/C (as the case may be):
(i) no Default has occurred which is either continuing or has not
been waived in writing by the Facility Agent pursuant to Clause
32;
(ii) the representations in Clause 18.1 which are to be repeated
pursuant to Clause 18.2 on those dates are true and correct;
and
(iii) no other event is outstanding which constitutes (or with the
giving of notice, lapse of time, determination of maturity or
the fulfilment of any other applicable condition or any
combination of the foregoing, is reasonably likely to
constitute) a default under any document which is binding on
any Obligor or any Material Group Member or any asset of such
Obligor or Material Group Member to an extent or in a matter
which might have a material adverse effect on the financial
condition of any Obligor or Material Group Member or the
ability of any Obligor to perform its obligations under the
Finance Documents; and
(b) if the information contained in the latest Borrowing Base Summary
delivered under this Agreement relates, in respect of Eligible
Finished Goods, Eligible Raw Materials or Trade Payables, to a date
occurring 50 or more days prior to such Request and, insofar as the
information relates to Eligible Receivables or Cash, such information
relates to a date occurring more than 10 days prior to the Request an
updated Borrowing Base Summary has been delivered to the Facility
Agent such that the information contained therein in respect of
Eligible Finished Goods, Eligible Raw Materials and Trade Payables
does not relate to a date occurring more than 50 days prior to such
Request and the
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<PAGE>
information contained therein in respect of Eligible Receivables and
Cash does not relate to a date occurring more than 10 days prior to
such Request.
6. UTILISATION OF THE FACILITIES
6.1 DELIVERY OF A DRAWDOWN REQUEST
(a) Subject to the terms and conditions of this Agreement (including, without
limitation, Clause 6.15) the Obligor's Agent may utilise the Revolving
Facility by delivering to the Facility Agent, not later than 11.00 a.m. on
the day falling three Business Days before the Drawdown Date for that
Advance, a duly completed Drawdown Request (save in respect of the
Utilisation of the Revolving Facility to be made on Closing which may be
requested by delivery of a duly completed Drawdown Request no later than
9.00 a.m. on the day falling two Business Days before the Drawdown Date for
such Advances provided that the Facility Agent has previously confirmed to
the Company that Clause 4 has been satisfied).
(b) Each Drawdown Request delivered to the Facility Agent shall oblige the
relevant Borrower to borrow the Requested Amount on its Drawdown Date on
the terms and on the conditions stated in this Agreement
(c) No more than 15 Advances may be outstanding at any time.
(d) Lyon Investments B.V. may not utilise or attempt to utilise the Revolving
Facility.
6.2 COMPLETION OF DRAWDOWN REQUEST
Each Drawdown Request delivered to the Facility Agent pursuant to Clause 6.1
shall be irrevocable and shall not be considered to have been duly completed
unless it specifies:
(a) the proposed Drawdown Date, which shall be a Business Day occurring during
the Availability Period;
(b) the identity of the Borrower;
(c) the Requested Amount of the proposed Advance which shall be a Deutschmark
Amount which is less than or equal to the Adjusted Available Amount for
such Utilisation and which, if less than the Adjusted Available Amount for
such Utilisation is a minimum amount of DM5,000,000 and an integral
multiple of DM1,000,000 and, in the case of the Company, shall be an amount
which when aggregated with all its other outstandings hereunder including,
for the avoidance of doubt, any contingent obligation the Company may have
in respect of any outstanding Standby L/C (other than in its capacity as a
Guarantor)) will not exceed the Deutschmark Equivalent of $7,500,000 taking
into account the Deutschmark Amount of any Advances scheduled to be made,
repaid or prepaid and any Standby L/Cs scheduled to be issued or to expire
by assuming that the same occurs when due.;
(d) the currency of the Advance (being Deutschmarks or an Optional Currency);
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<PAGE>
(e) the Term of the Advance being requested, which shall be a period of one,
two or three months (or such other duration as the Banks may have
previously agreed in writing for such Advances) which will begin on the
proposed Drawdown Date and end on a Business day which is or precedes the
Final Repayment Date save in respect of any Advance made between the date
of this Agreement and the date falling three months thereafter, each of
which shall be of such duration as the Facility Agent shall determine
(acting reasonably) having regard to the syndication process (provided that
each such Term shall be at least seven days and not exceed one month); and
(f) the account to which the proceeds of the proposed Utilisation are to be
paid (which, in the case of each of the Advances that are drawndown on the
date of Closing, shall be a Blocked Account).
6.3 AMOUNT OF EACH BANK'S PARTICIPATION IN AN ADVANCE
(a) Subject to the terms of this Agreement, each Bank shall, on the date
specified in any Drawdown Request for an Advance, make available to the
Facility Agent in the currency of the Advance concerned for the account of
the relevant Borrower the amount of its participation in that Advance in
the proportion (applied to the Requested Amount) which its Revolving
Commitment bears to the amount of the Total Commitments, the amount of a
Bank's Revolving Commitment and the Total Commitments being reduced to take
account of the amount of the Ancillary Commitment of any Ancillary Bank at
such time). All such amounts shall be made available to the Facility Agent
in accordance with Clause 13.1 for disbursement to or to the order of the
relevant Borrower in accordance with the provisions of this Agreement;
(b) If a Bank's Revolving Commitment is reduced in accordance with this
Agreement after the Facility Agent has received a Drawdown Request, then
such part of the proposed Utilisation as is attributable to that Bank and
exceeds its portion of the Revolving Facility Available Amount (as so
reduced) shall not be made and the amount of such Utilisation shall be
reduced accordingly.
6.4 DELIVERY OF A STANDBY L/C REQUEST
(a) Subject to the terms and conditions of this Agreement (including, without
limitation, Clause 6.15) the Obligors' Agent may utilise the Standby L/C
Facility by delivering to the Facility Agent, not later than 11.00 a.m. on
the day falling five Business Days or, if the Standby L/C requested on
behalf of a Borrower (the "REQUESTED STANDBY L/C") has an Issue Date that
coincides with the Expiry Date of an outstanding Standby L/C (the
"OUTSTANDING STANDBY L/C") issued on behalf of such Borrower, the
Beneficiary of the Requested Standby L/C is the same Beneficiary as the
Beneficiary of the Outstanding Standby L/C and the Requested Standby L/C is
requested to be in the same currency and for the same amount as the
Outstanding Standby L/C, three Business Days before the Issue Date for that
Standby L/C, a duly completed Standby L/C Request (save in respect of the
Utilisation of the Standby L/C Facility to be made on Closing which may be
requested by delivery of a duly completed Standby L/C Request no later than
9.00 a.m. on the day falling two Business Days before the Issue
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<PAGE>
Date for such Standby L/C Provided that the Facility Agent has previously
confirmed to the Company that Clause 4 has been satisfied).
(b) Each Standby L/C Request delivered to the Facility Agent shall oblige the
relevant Borrower to incur liabilities under this Agreement equal to the
Requested Amount on its Issue Date on the terms and on the conditions
stated in this Agreement.
(c) No more than 5 Standby L/Cs may be outstanding at any time.
(d) Lyon Investments B.V. may not utilise or attempt to utilise the Standby L/C
Facility.
6.5 COMPLETION OF STANDBY L/C REQUEST
Each Standby L/C Request delivered to the Facility Agent pursuant to Clause 6.4
shall be irrevocable and shall not be considered to have been duly completed
unless it specifies:
(a) the proposed Issue Date, which shall be a Business Day occurring during the
Availability Period;
(b) the identity of the Borrower;
(c) the Requested Amount of the proposed Utilisation which shall be a
Deutschmark Amount which is less than or equal to the lesser of (i) the
then Adjusted Available Amount and, (ii) the then Standby L/C Available
Facility Amount for such Utilisation and which, if less than the lesser of
the Adjusted Available Amount and the Standby L/C Available Amount for such
Utilisation is a minimum amount of DM3,000,000 and an integral multiple of
DM1,000,000, Provided that, without prejudice to the foregoing, in the case
of the Company, the Requested Amount shall be an amount which, when
aggregated with all its other outstandings hereunder (including, for the
avoidance of doubt, any contingent obligation the Company may have in
respect of any outstanding Standby L/C (other than in its capacity as a
Guarantor), will not exceed the Deutschmark Equivalent of $7,500,000 taking
into account the Deutschmark Amount of any Advances scheduled to be made,
repaid or prepaid and any Standby L/Cs scheduled to be issued or to expire
by assuming that the same occurs when due. Provided that and without
prejudice to the foregoing at no time shall the aggregate Deutschmark
Amount of Standby L/Cs issued on behalf of and Ancillary Facilities
outstanding to, the South African Borrowers exceed DM11,000,000;
(d) the currency of the Standby L/C (being Deutschmarks or an Optional
Currency);
(e) the Expiry Date of such Standby L/C which shall be no more than twelve
months after the Issue Date of such Standby L/C and be no later than the
Final Repayment Date save in respect of a Utilisation of the Standby
Facility made between the date of the Agreement and the date falling three
months thereafter, each of which shall have an Expiry Date determined by
the Facility Agent (acting reasonably) having regard to the syndication
process provided that it shall be at least seven days after its respective
Issue Date; and
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(f) the identity of the Beneficiary, together with such other details relating
thereto and the liabilities of the Borrower to which the Standby L/C
relates as the Facility Agent shall consider appropriate.
6.6 ISSUING OF STANDBY L/CS
(a) If a Borrower requests the issuing of a Standby L/C in accordance with this
Agreement, then, subject to sub-paragraph (c) below and Clause 16.2, with
effect from the proposed Issue Date for such Standby L/C the Facility Agent
on behalf of each of the Banks that are to participate in the issue of such
Standby L/C shall issue the same to the relevant Beneficiary, the amount of
each such Banks' participation in that Standby L/C being the proportion
(applied to the Requested Amount) which its Revolving Commitment bears to
the amount of the Total Commitments (the amount of a Ancillary Banks'
Revolving Commitment and the Total Commitments being reduced to take amount
of the amount of the Ancillary Commitment of any Ancillary Bank at such
time).
(b) If a Bank's Standby L/C Commitment is reduced in accordance with this
Agreement after the Facility Agent has received a Standby L/C Request, then
such part of the proposed Utilisation as is attributable to that Bank and
exceeds its portion of the Standby L/C Available Facility Amount (as so
reduced) shall not be made and the amount of such Utilisation shall be
reduced accordingly.
(c) If at any time following delivery of a Standby L/C Request, and prior to
the issuance of the Standby L/C requested therein any Bank notifies the
Facility Agent that it does not agree, by reason of, the Beneficiary
thereof being an institution which appears in the Specially Designated
National and Blocked Persons List produced by the U.S. Government Office of
Foreign Assets Control or on any other such Governmental list or list of
any Supranational authority in any other relevant jurisdiction in which
such Bank is resident, domiciled or has its Facility Office or is an
institution which is not similarly vetoed by any Government or
Supranational entity in relation to such Bank in such jurisdiction that
such Standby L/C be issued, the Facility Agent shall, promptly upon receipt
of such notification inform each of the other Finance Parties and such
Standby L/C Request shall be treated, for all purposes, as if it had not
been delivered and be void ab initio and the Standby L/C requested therein
shall not be made.
(d) The maximum amount required to be paid by the Banks under or in respect of
a Standby L/C shall not exceed the "Maximum Amount" (as defined in such
Standby L/C) notwithstanding any payments made in respect of such Standby
L/C by any Group Member, whether pursuant to Clause 11.3 or otherwise.
6.7 FACILITY AGENT'S AUTHORITY
For the purposes of Clause 6.6 each Bank hereby authorises the Facility Agent to
complete each Standby L/C in which such Bank is to participate (which it shall
do through its Facility Office) in the manner contemplated by the relevant
Standby L/C Request and this Agreement and to sign such Standby L/C on its
behalf and to issue the same to the relevant Beneficiary.
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6.8 COPY OF STANDBY L/C
The Facility Agent shall, promptly following the issue of a Standby L/C pursuant
to Clause 6.6, forward a copy thereof to the Company, the relevant Borrower on
whose behalf such Standby L/C was issued and to each Bank participating therein.
6.9 NO ENQUIRY
No Finance Party need, before the issue of any Standby L/C, make any enquiry or
otherwise concern itself as to whether any event has occurred which, under the
terms hereof, would relieve such Finance party from its obligations to issue or
to participate in the issue of such Standby L/C and accordingly no Borrower
shall have any right to resist any claim under Clause 11.3 or otherwise on the
ground that the relevant event had occurred before the issue of such Standby
L/C.
6.10 DEFINITIONS
For the purposes of determining the Adjusted Available Amount Clause 6.2(c) and
6.5(c), and the Standby L/C Available Facility Amount in Clause 6.5(c) and
otherwise in this Agreement:
"ACCOUNT DEBTOR" in relation to any Person means any other Person who is or may
become obligated to such Person under, with respect to, or on account of, an
Account;
"ACCOUNTS" in relation to any Person means all accounts, accounts receivable,
other receivables, contract rights, instruments, documents, and notes, whether
now owned or hereafter acquired by such Person arising out of the sale, lease or
disposal of goods or provision of services by such Person in the ordinary course
of its trade which constitute a legal, valid and binding obligation of the
relevant Account Debtor (each an "ACCOUNT");
"ADJUSTED AVAILABLE AMOUNT" in relation to an Obligor means the lesser of:
(a) in respect of the Revolving Facility, the amount of the Revolving Facility
Available Amount and in respect of the Standby L/C Facility, the amount of
the Standby L/C Facility Available Amount; and
(b) the Deutschmark Equivalent at or about 11:00 a.m. on the Business Day
preceding the date of the relevant Request delivered to the Facility Agent
in respect of the relevant Advance or, as the case may be, the relevant
Standby L/C of the Adjusted Borrowing Base of the relevant Obligor;
"ADJUSTED BORROWING BASE" in relation to any Obligor and any Request, means at
any time:
(a) the amount of the Borrowing Base relating to such Obligor;
(b) LESS the aggregate Deutschmark Amount of Ancillary Facilities (excluding
that portion of Ancillary Facilities which are solely available for foreign
exchange transactions) and Advances made to, and Standby L/Cs issued on
behalf of, such Obligor that are, at such time, outstanding and, in respect
of a Utilisation, not scheduled to be repaid or,
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as the case may be, expire prior to or at the same time as such Utilisation
and, taking into account any other Utilisations requested by such Obligor
that are scheduled to be made or, as the case may be issued;
(c) LESS the Deutschmark Amount of such Obligor's Borrowing Base (if any) that
has been utilised at such time so as to increase the Adjusted Borrowing
Base of another Obligor under the provisions of this definition contained
in paragraph (d) below and taking into account any repayment of any Advance
scheduled to be made and the amount of any Standby L/C which is scheduled
to expire on or before the proposed Utilisation in relation to the Request
in question in respect of which such Obligor's Borrowing Base was so
utilised;
Provided that for the purposes of this definition, the sum of (a) minus (b)
minus (c) shall never be less than zero,
(d) PLUS (except in the case of the Company) the aggregate of the lesser of (in
respect of each Obligor (other than such Obligor itself and without double-
counting)):
(i) the Adjusted Borrowing Base at such time of each such Obligor; and
(ii) the Maximum Guarantee Amount of each such other Obligor at such time,
as the same is determined by the Facility Agent acting, where it
considers appropriate, on the advice of local counsel;
"BORROWING BASE" means, at any time;
(a) in relation to any Obligor incorporated in Germany or such other
country or countries as the Facility Agent may, from time to time
specify for this purpose having regard to applicable laws and current
trade practices therein the aggregate of:
(i) the sum of 50% of the aggregate of its Eligible Raw Materials
and its Eligible Finished Goods LESS the Deutschmark Equivalent
of such Obligor's Trade Payables ;
(ii) 80% of its Eligible Receivables after deducting (A) any VAT
payable thereon, (B) to the extent that such Obligor's Trade
Payables exceeds the Deutschmark Equivalent of the sum of such
Obligor's Eligible Raw Materials and its Eligible Finished Goods
an amount equal to such excess and (C) General Provisions; and
(iii) 100% of its Cash Collateral Amount,
PROVIDED THAT:
(iv) such Obligor's Borrowing Base shall be determined in accordance
with the order stated above; and
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(vi) if any amount, determined in accordance with the above shall be
a negative figure, it shall be deemed to be zero for the purpose
of such determination; and
(b) in relation to any Obligor not incorporated in Germany or in respect
of which the Facility Agent has not specified as subject to paragraph
(a) above, the Deutschmark Equivalent of the aggregate of:
(i) 80% of its Eligible Receivables after deducting (A) VAT payable
thereon and (B) General Provisions;
(ii) the sum of 50% of the aggregate of its Eligible Raw Materials
and of its Eligible Finished Goods; and
(iii) 100% of its Cash Collateral Amount;
in each case determined by reference to the latest Borrowing Base
Summary.
"BORROWING BASE SUMMARY" means the information required to be prepared by or on
behalf of each Obligor and the Company pursuant to the terms hereof in the
agreed form in respect of each Obligor's Eligible Receivables, Eligible Finished
Goods, Eligible Raw Materials, Cash Collateral Amount and, if applicable, Trade
Payables and delivered on a monthly basis in any event and more frequently if
required pursuant to the terms hereof and all schedules appendices and other
documents exhibited or attached thereto;
CASH COLLATERAL AMOUNT" in relation to an Obligor, means the amount from time to
time standing to the credit of each account of such Obligor from time to time
subject to the terms of a Debenture or an Irish Debenture relating to such
Obligor;
"ELIGIBLE FINISHED GOODS" in relation to any Obligor, means an amount equal to
the lower of cost and the market value of the Inventory of such Obligor which
consists only of finished goods (as determined by reference to Applicable
Accounting Principles) and which is:
(a) subject to the security granted by or pursuant to the Security Documents
and in compliance therewith and;
(b) insured in accordance with the requirements of the Senior Finance
Documents,
Provided that, in respect of any Obligor:
(i) all finished goods:
(AA) against which such Obligor has made or should have made a provision or
reserve in accordance with the Approved Provisioning Procedure shall
not be included:
(BB) all finished goods which are held by or in the possession of Person(s)
other than the relevant Obligor in relation to whom "ELIGIBLE FINISHED
GOODS" falls to be determined (unless held by such Person to the order of
or on trust or as bailee (subject to the
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trustee or bailee having no right or interest thereto or therein other than
a Permitted Encumbrance) for the relevant Obligor) shall not be included;
and
Provided further that this definition may be amended, varied or supplemented by
the Facility Agent (acting on the advice of local counsel) so as to reflect any
changes to applicable laws or regulations so as to afford the Finance Parties
the same level of protection in respect of such Obligor and its "finished goods"
as at the date of this Agreement, or, in the case of an Acceding Borrower or as
the case may be, an Acceding Guarantor, as the date it became a party to this
Agreement; and
"ELIGIBLE RAW MATERIALS" in relation to any Obligor, means an amount equal to
the lower of cost and the net realisable value of the Inventory of such Obligor
which consists of raw materials and consumables (as defined by reference to
Applicable Accounting Principles) which is:
(a) subject to the security granted by or pursuant to the Security Documents
and in compliance therewith; and
(b) insured in accordance with the requirements of the Senior Finance
Documents;
(i) Provided that in respect of any Obligor:
(a) all Inventory which consists only of raw materials and consumables as
determined by reference to Applicable Accounting Principles against
which the Obligor has made or should have made a provision or reserve
in accordance with the Approved Provisioning Procedure shall not be
included to the extent of such provision or reserve shall not be
included; and
(b) all Inventory which consists only of raw materials and consumables (as
determined in accordance with Applicable Accounting Principles) which
is held by or in the possession of Person(s) other than the relevant
Obligor in relation to whom "ELIGIBLE RAW MATERIALS" falls to be
determined (unless held by such Person to the order of or on trust or
as bailee (subject to the trustee or bailee having no right or
interest thereto or therein other than pursuant to a Permitted
Encumbrance) for such Obligor shall not be included; and
(c) this definition may be amended, varied or supplemented by the Facility
Agent (acting on the advice of legal counsel) so as to reflect any
changes to applicable laws or regulations so as to afford the Finance
Parties the same level of protection in respect of the Obligor and its
Inventory which consists only of raw materials and consumables (as
determined in accordance with Applicable Accounting Principles) as at
the date of this Agreement, or, in the case of an Acceding Obligor or,
as the case may be, an Acceding Guarantor the date it became a party
to this Agreement:
"ELIGIBLE RECEIVABLES" in relation to any Obligor means the amount of the gross
outstanding balance, less all finance charges, late fees and other fees which
are unearned, of Accounts which are:
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(a) subject to the security granted by or pursuant to the Security Documents
and in compliance therewith and;
(b) insured in accordance with the requirements of the Senior Finance
Documents;
Provided that in respect of any Obligor, Accounts shall not be included if:
(i) the Account Debtor has taken any corporate action or other steps
have been taken or legal proceedings have been started for its
winding-up, administration, dissolution or re-organisation or for
the appointment of a receiver, administrator, administrative
receiver, trustee or similar officer of it or of any or all of its
revenues and assets or the Account Debtor is or has been deemed
unable to pay its debts as they fall due, commenced negotiations
with any one or more of its creditors with a view to the general
readjustment or rescheduling of its indebtedness or has made a
general assignment for the benefit of or a composition with its
creditors or a moratorium in respect of all or any indebtedness has
been applied for, ordered or declared;
(ii) such Account(s) are outstanding for a period exceeding 30 days after
the due date (provided that if the due date is not specified, the
due date shall be deemed to be 30 days after the date of the
relevant invoice) or such other period as the Facility Agent shall
in its discretion deem to be the minimum such period;
(iii) the Account Debtor is a Group Member or an associate or employee
thereof;
(iv) such Account(s) relate to a transaction entered into on a sale or
return or similar basis;
(v) such Account(s) are payable more than 270 days after the date of the
relevant invoice or if less such other ageing basis as is specified
in the Borrowing Base Summary relating to such Obligor and, in any
event, such that they do not give rise to a breach of Clause
20.2(e);
(vi) such Account(s) have been prepaid to the extent of such prepayment;
(vii) such Account(s) are payable otherwise than in cash;
(viii) to the extent such Account(s) are subject to Encumbrances (other
than pursuant to the Security Documents), set off or selling
arrangements or are the subject of any legal action or dispute by
the Account Debtor;
(ix) such Account(s) are not evidenced by an invoice or in writing;
(x) such Account(s) arise under any licence and the Account Debtor is
wholly or partly owned (directly or indirectly) by any Group Member;
and
(xi) any Account owed by an Account Debtor in respect of which the
Obligor has made a provision as a result of the Obligor's
determination of such Account
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Debtors' creditworthiness and such Account is not excluded pursuant
to one or more of paragraphs (i) -(x) above; and
Provided further that this definition may be amended, varied or supplemented by
the Facility Agent (acting on the advice of legal counsel) so as to reflect any
changes to applicable laws or regulations so as to afford the Finance Parties
the same level of protection in respect of such Obligor and its "Accounts" as at
the date of this Agreement, or, in the case of an Acceding Borrower or, as the
case may be, an Acceding Guarantor the date it became a party to this Agreement;
"INVENTORY" in relation to an Obligor, means any and all inventory and other
stocks in all of its forms, wherever located, now or hereafter existing and
whether acquired by purchase, merger or otherwise and all raw materials and
work-in-progress, all finished goods thereof and all materials used or consumed
in the manufacture, in each case, determined in accordance with Applicable
Accounting Principles;
"MAXIMUM GUARANTEE AMOUNT" means, in respect of any Obligor and a particular
Borrower, at any time, the maximum Deutschmark Amount such Obligor would be able
to pay (net of any Tax or other amounts payable (other than to the Facility
Agent) in connection therewith) to the Facility Agent under its Guarantee if a
demand was made thereunder at such time in accordance with the terms and
conditions of its Guarantee in respect of any amounts payable by such Borrower
under the Senior Finance Documents without contravening any existing applicable
law, statute, rule or regulation or any judgment, decree, consent (including, in
respect of a Guarantor incorporated in South Africa, the applicable Exchange
Control Undertaking) or permit to which such Obligor is subject, or conflict
with, or result in any breach of any of the terms of, or constitute a default
under any agreement or other instrument to which such Obligor is expressed to be
party or is subject to or by which it, or any of its property is bound;
"REVOLVING FACILITY AVAILABLE AMOUNT" at any time means the aggregate amount of
the Revolving Commitments (taking into account any reduction in the Revolving
Commitment of a Bank which is an Ancillary Bank, as provided for in Clause 7 and
the reduction in the Total Commitments, as provided for in Clause 11.1) LESS the
aggregate of:
(a) the Deutschmark Amount of the outstanding Advances at such time, taking
into account, in respect of a proposed Utilisation, any Advances scheduled
to be made, repaid or prepaid by assuming that the same occurs when due;
and
(b) the undrawn portion of all Standby L/Cs issued under this Agreement that
are outstanding at such time PLUS any amounts due and payable by any
Borrower under Clause 11.3 in respect of any Standby L/C but unpaid and
taking into account any Standby L/Cs scheduled to be issued or expire by
assuming that the same occurs when so scheduled;
"STANDBY L/C FACILITY AVAILABLE AMOUNT" at any time in respect of the Standby
L/C Facility means the lesser of:
(a) the amount of the Standby L/C Commitments taking into account any reduction
in the Standby L/C Commitment of a Bank which is an Ancillary Bank, as
provided for at
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Clause 7 LESS (i) the aggregate of the undrawn portion of all Standby L/Cs
issued under this Agreement that are outstanding at such time and (ii) any
amount due and payable by any Borrower under Clause 11.3 in respect of any
Standby L/C but unpaid and taking into account any Standby L/Cs scheduled
to be issued or to expire by assuming that the same occurs when so
scheduled; and
(b) the Revolving Facility Available Amount; and
"TRADE PAYABLES" means, in relation to an Obligor and at any time, the amount
owed to trade creditors (other than another Group Member) in respect of the
supply of Inventory to such Obligor at such time by such Obligor.
6.11 CALCULATION
When calculating the Eligible Receivables, Eligible Finished Goods, the Eligible
Raw Materials or Trade Payables of any Obligor such calculation shall be made in
the Local Currency of such Obligor.
6.12 DETERMINATION
The Facility Agent shall determine from time to time the Adjusted Available
Amount by reference to each of the then latest relevant Borrowing Base Summaries
delivered to the Facility Agent pursuant to the terms hereof provided that the
Facility Agent shall not be required to have regard to any Borrowing Base
Summary which is delivered to it later than two Business Days prior to the date
of such determination.
6.13 UNDRAWN AMOUNT
Any part of the Facilities undrawn or unutilised at the end of its respective
Availability Period shall be immediately cancelled.
6.14 DEUTSCHMARKS IN LIEU OF OPTIONAL CURRENCY
Notwithstanding that any Borrower has in any Request delivered hereunder made a
request for a Utilisation in an Optional Currency any Bank may by notification
to the Facility Agent at any time up to the notification of LIBOR in respect of
such Utilisation or, in relation to a Utilisation by way of Standby L/C's issue,
confirm that it is unwilling to participate in such Utilisation in such Optional
Currency in which case it shall, if it would otherwise be required to
participate in such Utilisation in such Optional Currency, not be obliged to do
so, but instead be required to participate in such Utilisation in Deutschmarks.
6.15 DUTCH BORROWERS
At all times following the date falling 30 days after the date of this Agreement
the Company shall procure that no Borrower, other than the Company, shall
utilise the Revolving Facility or the Standby L/C Facility at any time if, at
such time, the aggregate Deutschmark Amount of Advances drawn down by Gazelle is
less than the Deutschmark equivalent of 75 per cent of the sum of the book value
of the gross assets of Gazelle at such time determined in accordance with
Applicable Accounting Principles and for this purpose:
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(a) If Gazelle has Subsidiaries, the calculation shall be made by using the
gross assets of it and its Subsidiaries; and
(b) the calculation of gross assets shall be made by reference to the latest
Financial Accounts of Gazelle or, as the case may be a consolidation of the
Financial Accounts of it and its Subsidiaries used for the purpose of the
then latest unaudited quarterly or audited annual consolidated Financial
Accounts of the Group delivered to the Facility Agent under Clause 19.1.
7. ANCILLARY FACILITIES
7.1 ANCILLARY FACILITIES
(a) Subject to the terms and conditions of this Agreement the Obligors' Agent
may from time to time by notice in writing to the Facility Agent, request
the establishment of an Ancillary Facility by an Ancillary Bank, each such
Ancillary Facility to become available with effect from the date (the
"EFFECTIVE DATE") (or such later date as the Obligors' Agent and the
Facility Agent may agree from time to time) specified in such notice being
a date not less than seven Business Days after the date such notice is
received by the Facility Agent. Any such notice shall specify:
(i) the proposed Borrower;
(ii) the proposed Effective Date and expiry date for the Ancillary
Facility concerned being, in the case of the expiry date, a Business
Day on or prior to the Final Repayment Date;
(iii) the type of the proposed Ancillary Facility which may be a committed
overdraft facility, BACS, cheque drawing, letter of credit,
guarantee, foreign exchange, banking and/or such other cash
management facility as such Ancillary Bank may agree provided that
no Ancillary Facility shall be made available in respect of any
currency other than Deutschmarks or an Optional Currency or such
other currencies as are notified to the Facility Agent by the
Borrower;
(iv) the proposed Ancillary Bank;
(v) the Ancillary Commitment under the proposed Ancillary Facility at
any time (which, when aggregated with the actual and contingent
liability of such Ancillary Bank under all other Facilities made
available by it, shall not exceed such Ancillary Bank's Revolving
Commitment); and
(vi) the portion (if any) of the Ancillary Facility that may be utilised
by way of overdraft, advance, letter of credit or similar facilities
and the portion (if any) that may be utilised for the purpose of
foreign exchange transactions; and
(vii) such other details as to the nature, amount and operation of the
proposed Ancillary Facility as the Facility Agent may reasonably
require,
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and the Facility Agent shall promptly notify each Bank upon receipt of any
such notice.
(b) Subject to the terms and conditions of this Agreement, any Bank so
nominated shall make the proposed Ancillary Facility available with effect
on and from the Effective Date subject to the approval of the Facility
Agent (acting reasonably) and the Facility Agent having received
notification from such Ancillary Bank that it approves of the proposed
Ancillary Facility.
(c) Any material variation in any Ancillary Facility or any proposed increase
or reduction in the amount thereof shall be effected on, and subject to the
provisions, mutatis mutandis, of this Clause 7.
(d) The maximum aggregate Ancillary Commitments under all of the Ancillary
Facilities at any time shall not exceed the lesser of (i) the Revolving
Facility Available Amount and (ii) DM64,000,000 or (its equivalent in
Optional Currencies) (or following the accession to this Agreement by the
Acceding Bank, DM75,000,000 (or its equivalent in Optional Currencies) LESS
(in either case), the sum of the Deutschmark Amount of any outstanding
Standby L/Cs at such time and any amounts due and payable by any Borrower
under Clause 11.3 in respect of any Standby L/C but unpaid and taking into
account any Standby L/Cs scheduled to be issued or expire by assuming that
the same occurs when so scheduled.
(e) Without prejudice to paragraph (d) the sum of the portions of the Ancillary
Facilities that may be utilised by way of overdraft, advance, letter of
credit or similar facilities may not exceed DM43,000,000 or its equivalent
in Optional Currencies and the sum of the portions of the Ancillary
Facilities that may be utilised for the purpose of foreign exchange
transactions may not exceed DM32,000,000 or its equivalent in Optional
Currencies in each case determined by reference to the definition
"Ancillary Outstanding".
(f) Any Ancillary Facility provided by an Ancillary Bank shall terminate no
later than the Final Repayment Date.
(g) Any amounts owing or outstanding under any Ancillary Facility and all
banking facilities provided thereunder on the Final Repayment Date shall be
repaid and/or, as the case may be, cancelled in full by the relevant
Borrower on the Final Repayment Date.
(h) Subject to the terms and conditions of this Agreement and without prejudice
to the proviso contained in Clause 7.2(f), the Revolving Commitment of an
Ancillary Bank shall be reduced by an amount equal to such Ancillary Bank's
Ancillary Commitment and its Standby L/C Commitment shall be reduced by a
proportionate amount, until such time as all or part of its Ancillary
Facility is cancelled, whereupon such Bank's Revolving Commitment shall be
increased by the amount its Ancillary Facility has been so cancelled and
its Standby L/C Commitment shall be increased by a proportionate amount.
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(i) The maximum amount outstanding under Ancillary Facilities made to the
Company shall not at any time (when aggregated with all other outstandings
hereunder (including, for the avoidance of doubt, any contingent obligation
the Company may have in respect of any outstanding Standby L/C (other than
in its capacity as a Guarantor)) exceed the Deutschmark Equivalent of
$7,500,000 (determined by reference to the definition "Ancillary
Outstanding") taking into account any Advances scheduled to be made to, or
repaid or prepaid by the Company and Standby L/Cs issued on behalf of the
Company scheduled to be issued or expire by assuming that the same occurs
when so scheduled.
(j) Lyon Investments B.V. may not utilise or attempt to utilise the Ancillary
Facilities.
7.2 OPERATION OF ANCILLARY FACILITIES
(a) The rate of interest, fees and other remuneration in respect of each
Ancillary Facility shall be determined by agreement between the Ancillary
Bank and the relevant Borrower concerned and the interest, fees and other
remuneration for all Ancillary Facilities shall be based upon the normal
market rates and terms from time to time of the Ancillary Bank and shall
not be more onerous than the corresponding provisions (if any) of this
Agreement.
(b) In the case of inconsistency between any term of an Ancillary Facility and
of this Agreement, the terms of this Agreement shall prevail.
(c) Subject to Clause 7.2(a) and (b) above, the terms governing the operation
of any Ancillary Facility (including the terms of any counter-indemnity
required in connection therewith) shall be those determined by agreement
between the Ancillary Bank and the Borrower concerned, provided that such
terms are based upon normal commercial terms, save as may be varied by this
Agreement. A copy of any such terms shall on request by the Facility Agent
be provided by the Ancillary Bank to the Facility Agent (and each Borrower
consents to such copies being provided to the Facility Agent and, if
requested, any Bank).
(d) Each Borrower and each Ancillary Bank agrees with and for the benefit of
each Bank that the Ancillary Outstandings under any Ancillary Facility
provided by that Ancillary Bank shall not exceed the Revolving Commitment
of that Ancillary Bank or the amount of the relevant Ancillary Facility.
(e) Each Borrower and the Ancillary Bank will, promptly upon request by the
Facility Agent, supply the Facility Agent with such information relating to
the operation of each Ancillary Facility provided by such Ancillary Bank to
such Borrower (including, without limitation, the Ancillary Outstandings
thereunder) as the Facility Agent may from time to time request. Each
Borrower consents to all such information being released to the Facility
Agent and each Bank.
(f) No Ancillary Bank may, until notice has been served under Clause 21.2,
demand repayment of any moneys made available by it or demand cash cover in
respect of any guarantees, documentary credits or similar contingent
liabilities made available by it, under its Ancillary Facility or take any
action analogous to any of the foregoing under
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any other type of banking arrangements provided by it under its Ancillary
Facility unless there is at such time an Advance available to be drawn down
under this Agreement in an amount equal to the amount so demanded under the
Ancillary Facility (provided that for the purposes of determining whether
or not an Advance is then available for drawdown the Revolving Commitment
of the relevant Ancillary Bank shall be deemed to be increased by the
amount (not exceeding the amount of its Ancillary Commitment) so demanded)
such Advance to be used to repay or provide cash cover in respect of the
amount so demanded under the Ancillary Facility. On and subject to the
terms of this Agreement, each of the Banks shall participate in any such
Advance in such amount as will result, after the making of such Advance, in
the proportion which the aggregate amount of its participation in the
Advances then outstanding bears to the aggregate amount of the Advances
then outstanding, being equal to the proportion which its Revolving
Commitment bears to the aggregate of the Revolving Commitments.
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PART 3
8. INTEREST
8.1 STANDBY L/C COMMISSION
(a) The Borrower identified as such in the Standby L/C Request relating to a
Standby L/C shall, on the expiry of each period of three months after the
Issue Date of such Standby L/C and on the Expiry Date of such Standby L/C,
pay to the Facility Agent for the account of the Banks participating in
that Standby L/C a commission, such commission calculated by the Facility
Agent at the rate of the Margin on the amount of the undrawn portion of
that Standby L/C on each day during the period beginning on the Issue Date
of that Standby L/C is issued and ending on the Expiry Date of such Standby
L/C.
(b) If a Borrower procures the release of a Bank from its obligations under a
Standby L/C pursuant to Clause 16.2 such Bank shall not be entitled to any
commission occurring thereon after the date of such release.
8.2 INTEREST RATE
Subject to Clause 9, the rate of interest which shall accrue on each Advance
during its Term is the rate, per annum, determined by the Facility Agent to be
the aggregate of:
(a) LIBOR relative to such Advance for such Term;
(b) the Margin; and
(c) in the case of an Advance denominated in Sterling, the Additional Cost
applicable thereto from time to time during such Term.
8.3 DUE DATE
Save as otherwise provided in this Agreement, accrued interest on each Advance
during its Term is payable by the relevant Borrower in arrears on its Repayment
Date and, if any Term exceeds six months, on the expiry of each period of six
months during such Term.
8.4 DURATION
Interest shall accrue (both before and after judgment) from (and including) the
Drawdown Date for the relevant Advance to (but excluding) the date that such
Advance is repaid in full.
8.5 NOTIFICATION OF LIBOR BY FACILITY AGENT
The Facility Agent shall promptly notify each of the other Parties of any
determination of LIBOR made by it under this Agreement.
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9. DEFAULT INTEREST
9.1 FAILURE TO PAY
If any Borrower fails to pay any amount payable by it under this Agreement
or under the Security Documents on the due date (the unpaid balance being
an "OVERDUE AMOUNT"), such Borrower shall, pay default interest on the
Overdue Amount from (and including) the due date to (but excluding) the
date such Overdue Amount is repaid in full, both before and after judgment.
9.2 RATE
Subject to Clause 9.4, default interest shall be payable on an Overdue
Amount at a rate, per annum, determined by the Facility Agent to be equal
to the aggregate of two per cent. (2.00%) plus the Margin (which shall be
two per cent. (2.00%) per annum (and, in the case of an Overdue Amount
denominated in Sterling, the Additional Cost applicable thereto from time
to time) and LIBOR.
9.3 DEFAULT INTEREST PERIOD
The period during which an Overdue Amount is outstanding shall be divided
into successive periods (each a "DEFAULT INTEREST PERIOD"), each of which
(apart from the first) shall start on the last day of the preceding Default
Interest Period. The duration of each Default Interest Period shall (save
as provided at Clause 9.4) be selected by the Facility Agent having regard,
where possible, to the likely date that the relevant Overdue Amount will be
repaid in full.
9.4 UNEXPIRED PORTION
If any Overdue Amount corresponds to the principal amount payable in
respect of an Advance which has become repayable prior to its Repayment
Date, the first Default Interest Period which shall be selected by the
Facility Agent shall be of a duration equal to the unexpired portion of the
Term of such Advance. The rate of the default interest payable in respect
of such Overdue Amount during that unexpired period shall be two per cent.
(2.00%) over the rate which would have been applicable to such Advance had
it not so fallen due provided that the Margin applicable thereto shall, in
all circumstances, be two per cent. (2.00%) per annum.
9.5 ON DEMAND
Any interest which shall have accrued under this Clause 9 in respect of an
Overdue Amount shall be payable on demand and, if not paid, compounded at
the end of its then current Default Interest Period.
10. MARKET DISRUPTION
10.1 DISRUPTION EVENTS
If, in relation to any Advance and its Term relative thereto:
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(a) "LIBOR" is to be determined to pursuant to paragraph (b) of the definition
thereof and no, or where there is more than one Reference Bank only one,
Reference Bank supplies an interest rate to the Facility Agent as required
by the definition of LIBOR after the Facility Agent has requested such a
rate from the Reference Banks; or
(b) the Facility Agent shall have received notification from a Bank or Banks
whose participations in such Advance constitute at least thirty five per
cent. (35%) by value of such Advance that by reason of circumstances
affecting the London Interbank Market generally:
(i) deposits in the currency of such Advance for the same period as such
Term will not be readily available to them in the London Interbank
Market in sufficient amounts in the ordinary course of business to
fund their respective participations in such Advance for such Term;
or
(ii) whilst such deposits are so available, the cost of such deposits
exceeds LIBOR as determined in relation to such Advance for such
Term; or
(c) the Facility Agent shall have received notification from any Bank (an
"AFFECTED BANK") that by reason of applicable law or regulation it is
unable to fund its participation in such Advance during such Term by
deposit(s) in the currency of such Advance obtained in the London Interbank
Marketing the ordinary course of business;
the Facility Agent shall promptly give written notice of such determination or
notification to the Obligors' Agent and each of the Banks.
10.2 EFFECT
After the giving of any notice by the Facility Agent following the occurrence of
any of the events referred to in Clause 10.1 if the requested Advance was to be
denominated:
(a) in an Optional Currency (other than Sterling or Dollars) such Advance shall
not be made; or
(b) in Deutschmarks, Sterling or Dollars, the requested Advance will, subject
to the terms and conditions of this Agreement, be made by the Banks, have a
Term of one month and bear interest during its Term at the rate determined
by the Facility Agent to be the aggregate of the Margin plus the rate
determined by each Bank before the Repayment Date of the Advance to be the
rate which expressed (as a percentage rate per annum) the cost of that Bank
of funding its portion of the Advance from whatever source it may select
(acting reasonably).
Within three Business Days of the Facility Agent giving a notice under Clause
10.1, the Facility Agent and the Company will enter into negotiations with a
view to agreeing a substitute basis for determining the rate of interest which
may be applicable to any future Advances. Any substitute basis that is agreed
shall be confirmed in writing, be deemed to be a term of this Agreement, take
effect in accordance with its terms and be binding on the Parties. The Facility
Agent confirms to the Banks that it will not agree to any substitute basis
without the prior consent of each Bank.
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PART 4
11. REPAYMENT, PREPAYMENT AND CANCELLATION
11.1 REDUCTION OF THE FACILITY
On each date specified in Column 1 below (each such date being a "REDUCTION
DATE") the Total Commitments shall be reduced such that they are equal to
the amount set opposite such Reduction Date in Column 2 below LESS the
aggregate amount of Commitments that have been previously cancelled under
this Agreement prior to that Reduction Date otherwise than solely as a
result of the operation of this Clause 11.1 or Clause 7, whereupon the
Revolving Commitment of each Bank (including, for the avoidance of doubt,
the Revolving Commitment of each Ancillary Bank disregarding, for this
purpose its Ancillary Commitment) shall be reduced by a proportionate
amount and pro rata to their respective Revolving Commitments at such time
and the Standby L/C Commitments of the Banks shall be reduced by a
proportionate amount pro rata and the Company shall procure that the
aggregate Deutschmark Amount of all outstanding Advances, Standby L/Cs
Ancillary Facilities and amounts owing under Clause 11.3 (if any) shall on
such date (and at all times thereafter) not exceed the Total Commitments on
such date.
COLUMN 1 COLUMN 2
Reduction Date Total Commitments
Fifth anniversary of the date
of this Agreement DM194,000,000 (or, if a Bank has acceded as
an Acceding Bank, DM205,000,000)
Sixth anniversary of the date
of this Agreement DM169,000,000 (or, if a Bank has acceded as
an Acceding Bank, DM180,000,000)
Final Repayment Date Zero
11.2 REPAYMENT OF ADVANCES
(a) Each Borrower shall repay the full amount of each Advance made to it on the
Repayment Date relating to that Advance, provided always that the full
amount of each Advance outstanding on the Final Repayment Date shall be
repaid in full on the Final Repayment Date.
(b) Without prejudice to a Borrower's obligation to repay the full amount of
each Advance made to it on the due date, and without any change to the
amount of any Advance involved, subject to any contrary legal requirement,
where on the same day as such Borrower is due to repay an Advance such
Borrower also requests to draw down (and is entitled pursuant to the terms
of this Agreement to so draw down) an Advance in the same currency, the
amount to be so repaid and the payment by the Facility Agent to such
Borrower of the proceeds of the Advance being drawn shall be
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settled by netting off the one against the other so that the amount
actually paid in cash shall be the net amount only.
(c) Without prejudice to the provisions of Clauses 9 or this Clause, all
amounts outstanding under this Agreement, whether principal, interest,
costs and expenses or otherwise, shall be repayable or payable (as the case
may be) in full on the Final Repayment Date.
11.3 FACILITY AGENT TO NOTIFY BANKS OF DEMAND
As soon as practicable after it receives a demand for payment under a
Standby L/C, the Facility Agent shall notify the Borrower on whose behalf
it was issued and the Banks that participated in such Standby L/C of the
amount of that demand and the date on which the amount demanded is required
to be paid, whereupon that Borrower shall be obliged to pay to the Facility
Agent for account of such Banks on such date an amount equal to the amount
demanded, as reduced by any sum then standing to the credit of the Standby
L/C Accounts (as defined in Clause 31.4) relating to that Standby L/C.
11.4 L/C INDEMNITY
Each Borrower hereby undertakes to indemnify and to hold harmless each Bank
from and against all liabilities, costs, losses, damages and expenses which
such Bank may at any time incur or sustain as a result of its participation
in any Standby L/C requested by such Borrower.
11.5 BANKS' DISCRETION
The Banks that participated in each Standby L/C shall at all times be
entitled to make any payment under such Standby L/C for which a request,
demand or other claim has been made thereunder in accordance with the terms
thereof without further investigation or enquiry and none of them nor the
Facility Agent on their behalf need in any way concern itself with the
propriety of any claim made or purported to be made under and in the manner
required by the terms of such Standby L/C accordingly, it shall not be a
defence to any demand made of any Borrower hereunder, nor shall any of the
obligations of any Borrower hereunder be impaired by the fact (if it be the
case), that any such Bank or the Facility Agent on its behalf was or might
have been justified in refusing payment, in whole or in part, of the
amounts so claimed.
11.6 VOLUNTARY CANCELLATION
The Obligors' Agent may, by giving to the Facility Agent not less than 10
Business Days' prior notice to that effect, cancel the whole or any part (being
a minimum amount of DM1,000,000) of the Total Commitments whereupon the
Revolving Commitment of each Bank (including, for the avoidance of doubt, the
Revolving Commitment of each Ancillary Bank disregarding, for this purpose its
Ancillary Commitment) shall be reduced by a proportionate amount and pro rata to
their respective Revolving Commitments at such time and the Standby L/C
Commitment of each Bank shall be reduced by a proportionate amount
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pro rata. Provided that the Revolving Facility shall not be reduced pursuant to
this Clause 11.6 to below the Deutschmark Amount of outstanding (or scheduled to
be outstanding under this Agreement) Advances or the Standby L/C Facility be
reduced to below the Deutschmark Amount of Standby L/Cs issued that have not
expired or, in respect of which an amount is due and payable by any Borrower
under Clause 11.3, or scheduled to be issued (in accordance with this Agreement)
on the relevant date, on the assumption that any Advances due to be repaid, in
accordance with the provisions of this Agreement are so repaid and that any
Standby L/Cs due to expire so expire without the Banks party to such Standby
L/Cs being required to make any (or any further) payment thereunder.
11.7 MANDATORY PREPAYMENT ON LISTING
(a) If any steps are taken in or towards the Company or any Group Member being
Listed the Company shall immediately notify the Facility Agent thereof
specifying the date on which the proposed Listing is to occur.
(b) Following receipt of a notice under Clause 11.7(a) above the Facility Agent
shall consult with the Company during the period of 30 days following such
receipt and shall, if so instructed by the Banks, give a notice of
continuance notwithstanding the proposed Listing (a "LISTING NOTICE OF
CONTINUANCE") of the Facilities. During such period a Borrower shall only
be permitted to:
(i) serve a Drawdown Request hereunder which specifies that the Repayment
Date for the Advance requested in such Drawdown Request will fall on
a date not more than 30 days after the expiration of such period;
(ii) serve a Standby L/C Request hereunder which specifies that the Expiry
Date for the Standby L/C requested in such Standby L/C request will
fall on a date not more than 30 days after the expiry of such period;
and
(iii) utilise an Ancillary Facility such that the obligation of the
relevant Borrower thereunder in respect of such utilisation will be
able to be fulfilled on a date not more than 30 days after the expiry
of such period.
Upon receipt of a Listing Notice of Continuance, the right of each Borrower
to serve a Drawdown Request or, as the case may be, a Standby L/C Request
and to utilise any Ancillary Facility made available to it at such time
without such limitation shall be reinstated.
(c) If at the end of the period referred to in Clause 11.7(b), the Company has
not received a Listing Notice of Continuance then the Facility Agent may,
and shall if so instructed by the Majority Banks, declare:
(i) that any unutilised portion of the Facilities shall be cancelled
whereupon the same shall be cancelled and the Revolving Commitment,
Ancillary Commitment and Standby L/C Commitment of each Bank shall be
reduced to zero;
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(ii) any outstanding Advances with a Repayment Date falling on a date
later than the relevant Listing, (the "LISTING DATE") shall be
prepaid on or before the Listing Date, together with accrued interest
thereon up to the date of payment and all other amounts payable to
the Facility Agent and each Bank hereunder (including any amounts
payable under Clause 25.1(b));
(iii) each Borrower on whose behalf a Standby L/C was issued with an Expiry
Date falling on a date later than the Listing Date shall pay to the
Facility Agent no later than the Listing Date for the credit of each
Bank that participated in such Standby L/C an amount in cash equal to
the undrawn amount of such Standby L/C less any sum then standing to
the credit of the Standby L/C Accounts (as defined at Clause 31.4)
relating to that Standby L/C or procure the release of each such Bank
from its obligations under each such Standby L/C; and
(iv) any outstanding amounts under the Ancillary Facility shall be prepaid
or repaid on or before the Listing Date or, in respect of any
contingent obligations of the relevant Borrower thereunder cash
collateralised by the relevant Borrower unless on or prior to the
Listing Date, the relevant Borrower has procured the release of the
relevant Ancillary Bank from such contingent liability.
11.8 PREPAYMENT FEE
Any prepayment or cash collaterisation of any Utilisation made under any
provision of this Agreement may be made without any fee or penalty (but without
prejudice to any amount due pursuant to Clause 25.1(b)).
11.9 CANCELLATION AND PREPAYMENT OF A BANK'S REVOLVING COMMITMENT AND STANDBY
L/C COMMITMENT
(a) If a Borrower is required to make any additional payment to a Bank pursuant
to Clause 14 or a Bank claims indemnification under Clause 14 or Clause 15,
the Obligors' Agent may, provided that the relevant circumstances are still
continuing, serve a notice on such Bank through the Facility Agent,
whereupon such Bank's Revolving Commitment, Ancillary Commitment (if any)
and Standby L/C Commitment shall immediately be cancelled.
(b) Five Business Days after the date of service of any such notice or on such
later date as may be agreed between the Facility Agent, the Obligors' Agent
and such Bank, each Borrower shall:
(i) repay the relevant Bank's proportion of the outstanding Advances
together with accrued interest thereon and any other amounts payable
by each Borrower to such Bank under this Agreement, including any
amount payable in respect of breakage costs on the amount prepaid
pursuant to Clause 25.1(b); and
(ii) pay to the Facility Agent for the credit to the relevant Standby L/C
Account on such Bank's books relating to each Standby L/C in which
such Bank has participated an amount equal to the amount of its
participation in that Standby
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L/C or alternatively procure the release of such Bank from its
obligations under such Standby L/C; and
(iii) repay any outstanding amounts under any Ancillary Facility provided
to it by such Bank and cash collateralise any contingent obligation
thereunder or, if the contingent liability is that of the Ancillary
Bank, procure the release of the Ancillary Bank from such contingent
liability.
11.10 NOTICES OF PREPAYMENT AND CANCELLATION
(a) Any notice of prepayment and cancellation delivered under this Agreement is
irrevocable.
(b) Subject to the provisions of this Agreement each notice shall specify the
date upon which such prepayment and cancellation is to be made and the
amount of such prepayment and cancellation.
11.11 NOTIFICATION OF BANK(S)
The Facility Agent shall notify the relevant Bank(s) promptly upon receipt of
any notice of prepayment and cancellation.
11.12 ONLY METHOD
No payment, prepayment or cancellation is permitted other than in accordance
with the provisions of this Agreement.
11.13 EUROPEAN ECONOMIC AND MONETARY UNION
(a) DEFINITIONS In this Clause 11.13 and in each other provision of this
Agreement to which reference is made in this Clause 11.13 expressly or
impliedly (including, without limitation, Clause 15), the following terms
have the meanings given to them is this Clause 11.13:
"COMMENCEMENT OF THE THIRD STAGE OF EMU" means the date of commencement of
the third stage of EMU (at the date of this Agreement expected to be 1
January 1999) or the date on which circumstances arise which (in the
opinion of the Majority Banks) have substantially the same effect and
result in substantially the same consequences as commencement of the third
stage of EMU as contemplated by the Treaty on European Union];
"EMU" means Economic and Monetary Union as contemplated in the Treaty on
European Union;
"EMU LEGISLATION" means legislative measures of the European Council for
the introduction of, changeover to or operation of a single or unified
European currency (whether known as the euro or otherwise), being in part
the implementation of the third stage of EMU;
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"EURO" means the single currency of participating member states of the
European Union;
"EURO UNIT" means the currency unit of the euro;
"NATIONAL CURRENCY UNIT" means the unit of currency (other than a euro
unit) of a participating member state;
"PARTICIPATING MEMBER STATE" means each state so described in any EMU
legislation; and
"TREATY ON EUROPEAN UNION": means the Treaty of Rome of 25 March 1957, as
amended by the Single European Act 1986 and the Maastricht Treaty (which
was signed at Maastricht on 7 February 1992 and came into force on 1
November 1993), as amended from time to time.
(b) COMING INTO EFFECT OF PROVISIONS: The provisions of Clauses 11.13(c) to
11.13(j) (inclusive) shall come into effect on and from the commencement of
the third stage of EMU, PROVIDED THAT, if and to the extent that any such
provision relates to any state (or the currency of such state) which shall
not be a participating member state on the commencement of the third stage
of EMU, such provision shall come into effect in relation to such state
(and the currency of such state) on and with effect from the date on which
such state becomes a participating member state.
(c) REDENOMINATION AND ALTERNATIVE CURRENCIES: Each obligation under this
Agreement of a party to this Agreement which has been denominated into the
euro unit in accordance with EMU legislation PROVIDED THAT, if and to the
extent that any EMU legislation provides that following the commencement of
the third stage of EMU an amount denominated either in the euro or in the
national currency unit of a participating member state and payable within
that participating member state by crediting an account of the creditor can
be paid by the debtor either in the euro unit or in that national currency
unit, each party to this Agreement shall be entitled to pay or repay any
such amount either in the euro unit or in such national currency unit.
(d) UTILISATIONS: Any utilisation in the currency of a participating member
state shall be made in the euro unit.
(e) BUSINESS DAYS: In relation to any amount denominated or to be denominated
in the euro or a national currency unit, any reference to a business day
shall be construed as a reference to a day (other than a Saturday or
Sunday) on which bank are generally open for business in:
(a) London; and
(b) Frankfurt (or such principal financial centre or centres in such
participating member state or states as the Facility Agent may from
time to time nominated for this purpose).
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(f) PAYMENTS TO THE FACILITY AGENT: Clause 13.1 (Payments to the Facility
Agent) shall be construed so that, in relation to the payment of any amount
of euro units or national currency units, such amounts shall be made
available to the Facility Agent in immediately available, freely
transferable, cleared funds so such account with such bank in Frankfurt (or
such other principal financial centre in such participating member state as
the Facility Agent may from time to time nominate for this purpose).
(g) PAYMENTS BY THE FACILITY AGENT TO THE BANKS: Any amount payable by the
Facility Agent to a Bank under this Agreement in the currency of a
participating member state shall be paid in the euro unit.
(h) PAYMENTS BY THE FACILITY AGENT: In relation to the payment of any amount
denominated in the euro or in a national currency unit, the Facility Agent
shall not be liable to any Obligor or any Bank in any way whatsoever for
any delay, or the consequences of any delay, in the crediting to any
account of any amount required by this Agreement to be paid by the Facility
Agent if the Facility Agent shall have taken all relevant steps to achieve,
on the date required by this Agreement, the payment of such amount in
immediately available, freely transferable, cleared funds (in the euro unit
or, as the case may be, in a national currency unit) to the account in the
principal financial centre in the participating member state which the
relevant Obligor or, as the case may be, any Bank shall have specified for
such purpose. In this Clause 11.13, "all relevant steps" means all such
steps as may be prescribed from time to time by the regulations or
operating procedures of such clearing or settlement system as the Agent may
from time to time determine for the purpose of clearing or settling
payments of the euro.
(i) BASIS OF ACCRUAL: If, in relation to the currency of any state which
becomes a participating member state, the basis of accrual of interest or
commitment commission expressed in this Agreement in respect of that
currency shall be inconsistent with any convention or practice in the
London Interbank Market for the basis of accrual of interest or commitment
commission in respect of the euro, such expressed basis shall be replaced
by such convention or practice with effect on the date on which such state
becomes a participating member state PROVIDED THAT, if any Advance in the
currency of such state is outstanding immediately prior to such date, such
replacement shall take effect, with respect to such Advance, at the end of
the then current Term.
(j) ROUNDING AND OTHER CONSEQUENTIAL CHANGES: Without prejudice and in
addition to any method of conversion or rounding prescribed by any EMU
legislation and without prejudice to the respective liabilities for
indebtedness of the Obligors to the Banks and the Banks to the Obligors
under or pursuant to this Agreement:
(a) each reference in this Agreement to a minimum amount (or an integral
multiple thereof) in a national currency unit to be paid to or by the
Facility Agent shall be replaced by a reference to such reasonably
comparable and convenient amount (or an integral multiple thereof) in
the euro unit as the Facility Agent may from time to time specify; and
(b) save as expressly provided in this Clause 11.13(j), each provisions of
this Agreement shall be subject to such reasonable changes of
construction as the
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Facility Agent may from time to time specify to be necessary or
appropriate to reflect the introduction of or changeover to the euro
in participating member states.
12. PARTIAL PAYMENTS
If the Facility Agent receives a payment which is insufficient to discharge all
the amounts due and payable by an Obligor under this Agreement on the day such
payment is received, the Facility Agent shall, subject to the Intercreditor
Agreement, apply that payment in or towards the discharge of such Obligor's
obligations under this Agreement in the following order:
(a) firstly (and at its discretion), in or towards payment of any unpaid costs
and expenses of the Agents incurred by it in connection with this
Agreement;
(b) secondly, in or towards payment (pro rata) of any unpaid fees under Clause
26;
(c) thirdly, in or towards payment (pro rata) of any unpaid interest (including
default interest) and commission;
(d) fourthly, in or towards repayment (pro rata) of any unpaid principal; and
(e) fifthly, in or towards payment of any other amounts due and payable by such
Obligor under this Agreement.
13. PAYMENTS
13.1 TO FACILITY AGENT
Subject to the provisions of Clause 13.2, on each date that a Party (other than
the Facility Agent) is obliged to make a payment under any of the Senior Finance
Documents, that Party shall make the same available to the Facility Agent:
(a) if the amount is denominated in Deutschmarks by payment in Deutschmarks and
in same day funds (or in such funds as may be customary in Frankfurt for
the settlement in Frankfurt of international banking transactions in
Deutschmarks) to the Facility Agent at Chase, Frankfurt Manhattan Bank AG
Account No. 9080002101 in the name of Derby Cycle Corporation or such other
account as the Facility Agent may have stipulated for such purpose;
(b) if the amount is denominated in Dollars, by payment in Dollars and in same
day funds (or in such funds as may be customary in New York City for the
settlement in New York City of international banking transactions in
Dollars) to the Facility Agent at The Chase Manhattan Bank, New York, 270
Park Avenue New York, NY, 10017 USA, Account No. 544-714108 in the name of
Derby Cycle Corporation or such other account as the Facility Agent may
have specified for this purpose;
(c) if the amount is denominated in Sterling, by payment in Sterling in
immediately available, freely transferable, cleared funds, by CHAPS Sort
Code 40-52-06 to the
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Facility Agent at The Chase Manhattan Bank, 125 London Wall, London EC2Y
5AJ or such other account as the Facility Agent may have specified for this
purpose;
(d) if the amount is denominated in Dutch Guilders by payment in Dutch Guilders
and in same day funds (or in such funds as may be customary in Amsterdam
for the settlement in Amsterdam of international banking transactions in
Dutch Guilders) to the Facility Agent at ING Barings, Amsterdam Account No.
0051612607 in the name of Derby Cycle Corporation or such other account as
the Facility Agent may have stipulated for such purpose; and
(e) if the amount is denominated in an Optional Currency (other than Sterling,
Dutch Guilders or Dollars), by payment in such Optional Currency and in
immediately available, freely transferable, cleared funds to such account
with such bank in the principal financial centre of the country of such
Optional Currency as the Facility Agent shall have specified for this
purpose.
13.2 DISTRIBUTION BY THE AGENTS
(a) All payments to be made by any Obligor under any Senior Finance Document
shall be paid to or to the order of the Security Agent, provided that the
Security Agent hereby consents to all such payments being made to the
Facility Agent in accordance with the terms of this Agreement until the
Security Documents shall become enforceable and the Security Agent
withdraws such consent by notice to the Facility Agent and the Obligors.
(b) Each payment received by any Agent for the account of another Person
pursuant to Clause 13.1 shall:
(i) in the case of a payment received for the account of any Borrower, be
made available by that Agent to that Borrower by application, on the
date and in the funds of receipt:
(A) first, in or towards payment of any amounts then due and payable
(and unpaid) by that Borrower under any of the Senior Finance
Documents; and
(B) second, in payment to such account as that Borrower shall have
properly designated for the purpose in the relevant Drawdown
Request or otherwise in writing; and
(ii) in the case of any other payment, be made available by the Facility
Agent to the Person for whose account the payment was received (in
the case of a Bank, for the account of its Facility Office) on the
date and in the currency and funds of receipt to such account of the
Person with the office or bank in the country of the currency
concerned as that Person shall have previously notified to the
Facility Agent for the purposes of this Agreement.
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(c) The Facility Agent or the Security Agent (as the case may be) shall
promptly distribute payments received for the account of the Banks among
the Banks pro rata to their respective entitlements and in the funds and
currency of receipt.
13.3 CURRENCY
(a) Interest and commission accrued under this Agreement shall be payable in
the currency in which the relevant amount in respect of which it has
accrued was denominated during the period of accrual.
(b) The principal of each Advance shall be repaid or prepaid in the currency in
which it is denominated.
(c) Amounts payable to the credit of a Standby L/C Account (as defined in
Clause 31.4) relating to a Standby L/C shall be payable in the currency in
which the relevant Standby L/C is denominated.
(d) Any amount (other than of principal and/or interest) calculated on or by
reference to or payable in respect of another amount shall be payable in
the currency in which that other amount is denominated at the time of
payment.
(e) Any other amount payable under this Agreement, unless otherwise provided,
shall be payable in Deutschmarks.
(f) If the Facility Agent receives a payment for the account of another Party
in connection with this Agreement, the Facility Agent shall make that
payment available to such Party for value the same day by transfer to such
account of such Party with such bank in the principal financial centre of
the country of the currency of such payment as that Party shall have
previously notified to the Facility Agent in writing for this purpose.
(g) If a sum is paid under this Agreement to the Facility Agent for the account
of another Party, the Facility Agent shall not be obliged to pay that
amount to that Party until the Facility Agent has established, to its
satisfaction, that it has actually received and retained that sum.
(h) The Facility Agent may, but shall not be obliged to assume that it has
received and retained all amounts payable to it under this Agreement on the
due date and, in reliance on that assumption, make available to the
relevant Party a corresponding amount. If, however, such a sum has not been
received and retained by the Facility Agent, the relevant Party shall, on
demand by the Facility Agent, promptly refund the corresponding amount to
the Facility Agent together with interest on that amount from (and
including) the date of payment by the Facility Agent to (but excluding) the
date such amount is repaid to the Facility Agent in full, at a rate
calculated by the Facility Agent so as to reflect its cost of funding such
payment.
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13.4 SET-OFF AND COUNTERCLAIM
(a) All payments required to be made by the Obligors' under any of the Senior
Finance Documents shall be made without reference to any set-off or
counterclaim and shall be made free and clear of and without any deduction
for or on account of any set-off or counterclaim.
(b) For so long as an Event of Default has occurred which is still continuing,
each Obligor authorises each Bank to apply any credit balance to which such
Obligor under any of the Finance Documents is entitled on any account of
such Obligor with that Bank in satisfaction of any sum due and payable from
such Obligor to that Bank under any of the Finance Documents but unpaid.
Each Bank is, accordingly, authorised to purchase with any credit balance
of any such account such other currencies as may be necessary to effect
such application. No Bank shall be obliged to exercise any right given to
it by this Clause 13.4(b).
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PART 5
14. TAXES
14.1 PAYMENT OF TAXES
All payments to be made by any Obligor under or in respect of any of the Senior
Finance Documents shall be made free and clear of and without any deduction or
withholding of Tax unless (but without prejudice to this Clause 14) any such
Obligor is required by law to make such payment subject to the deduction or
withholding of Tax.
14.2 GROSS-UP
Subject to prompt compliance by the Finance Parties with the provisions of this
Clause 14.2 and Clauses 14.7, 14.8 and 14.9, if any Taxes or amounts in respect
thereof must be deducted from any such payment by an Obligor under any Senior
Finance Document (other than in respect of any Tax imposed or a payment which
would not have been imposed on that payment if the relevant Finance Party to
which or for whose account that payment was made had been at the date of the
payment a Qualifying Bank) must be made from any amounts paid by any Obligor (or
from any corresponding payment by any Finance Party to any other Finance Party
under this Agreement), or any such payment shall otherwise be required to be
made subject to any Tax, such Obligor shall pay such additional amounts as may
be necessary to ensure that the relevant Finance Party receives a net amount
equal to the full amount which it would have received had payment not been made
subject to the relevant Tax. Each Finance Party shall notify each Obligor
through the Facility Agent of the application of this Clause 14 to any payment
then due or to become due to it under any Senior Finance Document promptly upon
its becoming aware of the same.
14.3 TAX INDEMNITY
Without prejudice to the provisions of Clauses 14.1 and 14.2 if any Finance
Party, or any other Person through which a payment relating to this Agreement or
the Security Documents is made, is required to make any payment on account of
Tax (other than Tax on its overall net income) on or in relation to any sum
received or receivable under this Agreement or, as the case may be, the relevant
Security Document by that Finance Party, or any other Person through which such
a payment is made, the Borrower shall, upon demand by the Facility Agent,
indemnify the relevant Finance Party against such payment, together with any
interest, penalties and expenses payable or incurred in connection therewith.
14.4 NOTIFICATION OF CLAIMS
Without prejudice to Clauses 14.2 or 14.3, 29.2 if the relevant Borrower so
requests, the relevant Finance Party shall notify such Borrower of the reason
for making a claim under Clauses 14.2 or 14.3, 29.2. This Clause 14.4 shall not
oblige any Finance Party to disclose any information relating to the
organisation of its business or tax affairs or how the amount requested was
calculated if it considers, in its sole opinion, that such information is
confidential.
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14.5 TAX RECEIPTS
If, as a result of a payment being made by or on behalf of the Borrower under
this Agreement or the Security Documents, the Borrower is required to pay any
Tax, the Borrower shall pay such Tax in full to the relevant authority within
the time allowed for such payment under applicable law. The Borrower shall, as
soon as reasonably practicable after payment falls due to the relevant
authority, deliver to the Facility Agent any original (or a Certified Copy) of a
receipt issued by the relevant authority evidencing that payment in full has
been received by the relevant authority.
14.6 TAX SAVING
(a) In the event that, following the imposition of any Tax on any payment by
any Obligor (or any corresponding payment by any Finance Party to any other
Finance Party under this Agreement) in consequence of which such Obligor is
required under Clauses 14.2 or 14.3, to pay such Tax or to pay any
additional amount in respect of it, any Finance Party shall in its sole
opinion and based on its own interpretation of any relevant laws or
regulations (but acting in good faith) receive or be granted a credit
against or remission for or deduction from or in respect of any Tax payable
by it, or shall obtain any other relief in respect of Tax on its profits or
income, which in such Finance Party's opinion in good faith is both
identifiable and quantifiable by it without requiring such Finance Party or
its professional advisers to expend a material amount of time or incur a
material cost in so identifying or quantifying or at the written request of
the Obligor and if the Finance Party is of the opinion that it will recover
the cost incurred, after incurring such cost (any of the foregoing, to the
extent so identifiable and quantifiable, being referred to as a "SAVING"),
such Finance Party shall, to the extent that it can do so without prejudice
to the retention of the relevant saving and subject to deduction for
reasonable costs and subject further to such Obligor's obligation to repay
the amount to such Finance Party if the relevant saving is subsequently
disallowed or cancelled (which repayment shall be made promptly on receipt
of notice by such Finance Party of such disallowance or cancellation),
reimburse such Obligor promptly after receipt of such saving by such
Finance Party with such amount as such Finance Party shall in its sole
opinion but in good faith have concluded to be the amount or value of the
relevant saving.
(b) Nothing contained in this Agreement shall interfere with the right of any
Finance Party to arrange its Tax and other affairs in whatever manner it
thinks fit and, in particular, no Finance Party shall be under any
obligation to claim relief from Tax on its corporate profits, or from any
similar Tax liability, in respect of the Tax, or to claim relief in
priority to any other claims, reliefs, credits or deductions available to
it or to disclose details of its Tax affairs. No Finance Party shall be
required to disclose any confidential information relating to the
organisation of its affairs.
(c) Each Finance Party will notify the relevant Obligor promptly of the receipt
by such Finance Party of any saving and of such Finance Party's opinion as
to the amount or value of that saving.
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14.7 U.S TAXATION-DELIVERY OF FORMS AND STATEMENTS
(a) Each Finance Party which is not a U.S. Person shall (as soon as it is
reasonably practicable for it to do so after the date hereof or upon
becoming a party to this Agreement (as the case may be)) deliver (through
the Facility Agent) to each U.S. Obligor which is a Borrower duly completed
and signed, two copies of such form or forms as may be required to indicate
that such Finance Party is entitled to receive payments under this
Agreement without deduction, withholding or payment by the U.S. Obligor of
any United States federal Taxes, including without limitation, either:-
(i) two copies of Form 1001 of the Internal Revenue Service of the United
States of America (relating to an applicable double revenue tax treaty
concluded by the United States of America); or
(ii) two copies of Form 4224 of the Internal Revenue Service of the United
States of America (relating to income effectively connected with the
conduct of a trade of business in the United States of America).
Each such Finance Party , subject as otherwise provided in Clause 14.7(b),
shall deliver (through the Facility Agent) to each U.S. Obligor additional
duly completed copies of any of the above forms and/or such additional or
successor forms as shall be adopted form time to time by the Internal
Revenue Service of the U.S.A. if it is notified by the U.S. Obligor or the
Internal Revenue Service of the U.S.A. that any previous such form
delivered by it pursuant to this Clause 14.7 has expired or that Finance
Party becomes aware that any such form shall have become incomplete or
inaccurate in any respect unless prior to that delivery any event occurs
which renders the relevant form inapplicable.
(b) Each Finance Party which is a U.S. Person shall deliver (through the
Facility Agent) to each U.S. Obligor a statement signed by an authorised
signatory of the Finance Party to the effect that it is a U.S. Person and
if necessary to avoid United States backup withholding, two a duly
completed and signed copies of Internal Revenue Service Form W-9 (or
successor form) establishing that such Finance Party is organised under the
laws of the United States and is not subject to United States backup
withholding.
(c) Each Finance Party that is not a U.S. Person that is entitled to an
exemption from or reduction of withholding tax under the IRC with respect
to payments under this Agreement shall deliver to the Company (with a copy
to the Facility Agent), at the time or times prescribed by applicable laws,
properly completed and executed documentation prescribed by applicable law
or reasonably requested by the Company as will permit such payments to be
made without withholding or at a reduced rate.
(d) The Facility Agent shall have no responsibility or liability for and no
obligation to check the accuracy or appropriateness of any form or
statement delivered by any Finance Party pursuant to Clauses 14.7(a) or
14.7(b) respectively.
(e) If any Finance Party determines, as a result of any change in applicable
law, regulation or treaty, or in any official application or interpretation
thereof, that it is unable to
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submit to any U.S. Obligor any form or certificate that the Finance party
is obliged to submit pursuant to Clauses 14.7(a) or 14.7(b), or that such
Finance Party is required to withdraw or cancel any form or certificate
previously submitted, the Finance Party shall promptly notify the U.S.
Obligor of that fact.
14.8 DOUBLE TAX-TREATIES
Each Bank and the Facility Agent or the relevant Obligor (as the case may be)
shall as soon as reasonably practicable after the date hereof or upon becoming a
party to this Agreement or (as the case may be) after the date a Borrower not
incorporated in the United Kingdom accedes to this Agreement submit the form or
forms to the appropriate revenue authorities as may reasonably be necessary in
order to comply with the requirements of any applicable law or relevant double
taxation (if any) in relation to the payment of any interest and commitment
commission hereunder to such Bank or the Facility Agent free (or subject to any
applicable reduced rate) of deduction or withholding of or on account of any Tax
which would otherwise be applicable and, if such Bank or the Facility Agent
fails to comply with this Clause 14.8 the relevant Obligor shall not have any
obligation to pay any increased amount required by Clauses 14.2 or 14.3 if and
to the extent that it would not have been required to make any deduction or
withholding (or would only have been required to make any such deduction or
withholding at any applicable reduced rate) of or on account of any Tax had such
Bank or the Facility Agent complied with this Clause 14.8.
14.9 QUALIFYING BANK
Each Bank that becomes a party to this Agreement on a date occurring 30 days or
more after the date of this Agreement confirms to each of the Obligors that as
at the date it becomes a party to this Agreement it is a Qualifying Bank and
agrees to notify the Obligors' Agent (through the Facility Agent) promptly if it
becomes aware that it is not a Qualifying Bank.
15. INCREASED COSTS
15.1 INDEMNITY FOR INCREASED COSTS
If any Bank determines that, as a result of:
(a) the introduction or variation of any law or any change in the
administration or interpretation of any law; and/or
(b) compliance with any request from or requirement of any central bank or
other fiscal, monetary or other authority (including any request or
requirement which affects the manner in which a Bank or any Holding Company
of such Bank is required to, or does, maintain capital resources having
regard to such Bank's obligations under this Agreement and to amounts which
are owing to it under this Agreement); and/or
(c) the introduction, or changeover or operation of the euro in any
participating member state;
(i) such Bank, or any Holding Company of such Bank, incurs a cost (being
a cost which it would not otherwise have incurred) as a result of it
having entered
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into and/or it performing its obligations under this Agreement
and/or it assuming or maintaining its Revolving Commitment or its
Standby L/C Commitment under any this Agreement and/or it making one
or more Advances under this Agreement and/or assuming or maintaining
a contingent liability under any Standby L/C; or
(ii) such Bank, or any Holding Company of such Bank, is unable to obtain
the rate of return on its overall capital which it would have been
able to obtain but for it having entered into and/or assuming or
maintaining its Revolving Commitment or its Standby L/C Commitment
under this Agreement; or
(iii) there is any increase in the cost to such Bank, or any Holding
Company of such Bank, of funding or maintaining all or any of the
assets or liabilities comprised in a class of assets or liabilities
formed by, or including, those referable to this Agreement; or
(iv) such Bank, or any Holding Company of such Bank, becomes liable to
make any payment on account of Tax (other than Tax on its overall
net income) or otherwise on or calculated by reference to the amount
of Advances made or to be made by it under this Agreement and/or any
sum received or receivable by it under this Agreement,
then the relevant Obligor shall, from time to time on demand by the
Facility Agent, pay to the Facility Agent for the account of that Bank,
amounts sufficient to indemnify that Bank against, as the case may be, (i)
such costs, (ii) such reduction, (iii) such increased costs (or such
proportion of such increased costs as is, in the opinion of that Bank,
attributable to its funding, maintaining or assuming assets or liabilities
referable to this Agreement) or (iv) such liability.
15.2 EXCEPTIONS
No Bank shall be entitled to make any claim under Clause 15.1 which:
(a) is compensated for by the operation of Clause 14;
(b) is attributable to any change in the rate of Tax on the overall net income
of such Bank (or the overall net income of the Bank or its Holding
Company);
(c) arises as a result of a breach by such Bank of any regulation, guideline
or requirement of any central bank or other fiscal, monetary or other
authority (whether or not having the force of law);
(d) arises as a result of the implementation by any authority after the date
of this Agreement of any of the matters set out in the paper prepared by
the Basle Committee on Banking Regulation and Supervisory Practice dated
July 1988 (as amended in November 1991) entitled "International
Convergence of Capital Measurement and Capital Standings".
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15.3 NOTIFICATION BY BANK
Any Bank proposing to make a claim pursuant to Clause 15.1 shall promptly upon
becoming aware of its entitlement to make such a claim notify the Obligors'
Agent (through the Facility Agent), setting out, in reasonable detail, the
calculation and cause of the amounts claimed. No Bank shall be required to
disclose any information relating to the organisation of its affairs which it
considers to be confidential.
15.4 REGULATION D COMPENSATION
Any Bank which is required by Regulation D issued by the Board of Governors of
the Federal Reserve System of the USA to maintain and does maintain any reserves
against "EUROCURRENCY LIABILITIES" (as defined in such Regulation) pursuant to
such Regulation may require any U.S. Obligor to pay, contemporaneously with each
payment of interest on any Advance (in respect of which the Eurodollar Reserve
Percentage applies) made to such U.S. Obligor for any Term relative thereto,
additional interest on the participation of such Bank in that Advance at the
rate per annum determined from the formula (i) LIBOR applicable to such Advance
for that Term divided by (ii) one minus the Euro-Dollar Reserve Percentage minus
LIBOR applicable to such Advance for that Term. Any Bank requiring payment by
any U.S. Obligor of such additional interest shall notify such U.S. Obligor and
the Facility Agent at least five Business Days prior to the last day of each
Term each relevant Advance of the amount due to be paid to it with respect to
such Advance pursuant to this Clause 15.4 (certifying in that notice that the
amount claimed does not exceed such part of the cost to such Bank of maintaining
such reserves as in the opinion of that Bank should fairly and reasonably be
apportioned to such Advance), which notice shall be final and binding in the
absence of manifest error. No Bank shall be required to disclose in support of
any claim hereunder any information reasonably regarded by such Bank as being
confidential.
16. ILLEGALITY
16.1 ILLEGALITY IN RELATION TO ADVANCES
If, as a result of the introduction, imposition or variation of any law,
regulation or regulatory requirement of any authority (including any fiscal or
monetary authority), it is unlawful for any Bank to make, maintain or fund any
Advance, or be a party to this Agreement then, unless such illegality is avoided
in accordance with Clause 17:
(a) after delivery of a notice to the Facility Agent detailing the unlawful
circumstances, the relevant Bank shall not be obliged to make any Advances
or make available any Facilities under any Ancillary Facility to which it
is a party and its Revolving Commitment (including part thereof that is,
at such time, being utilised under an Ancillary Facility) shall be
cancelled and reduced to zero, whereupon its Ancillary Commitment (if any)
shall be cancelled and reduced to zero);
(b) on the date specified in the notice delivered under Clause 16 (a) (which
shall not be earlier than the last date on which the relevant Bank
determines (acting reasonably) it may legally maintain its participation
in the Advances and/or its Revolving Commitment), the Borrower shall repay
such Bank's participation in each outstanding Advance, together with
accrued interest thereon and any other amounts owing to that
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Bank under the Senior Finance Documents or, if the relevant Bank is party
to an Ancillary Facility, cash collateralise any contingent obligations
owed to such Ancillary Bank under such Ancillary Facility.
16.2 ILLEGALITY IN RELATION TO STANDBY L/CS
If, as a result of the introduction, imposition or variation of any law,
regulation or regulatory requirement of any authority (including any fiscal or
monetary authority), it is unlawful for any Bank to participate in or perform
its obligations in respect of all or any of the Standby L/Cs issued or to be
issued hereunder, then unless such illegality is avoided in accordance with
Clause 17:
(a) after delivering of a notice to the Facility Agent detailing the unlawful
circumstances, the relevant Bank shall cease to be obliged to participate
in such Standby L/Cs hereunder; and
(b) if the Facility Agent on behalf of such Bank so requires, the Borrower
that requested each Standby L/C in which that Bank has participated shall,
on such date (which shall not be earlier than the last date on which the
relevant bank determines (acting reasonably) it may lawfully perform its
obligations under each Standby L/C in which such Bank has participated
hereunder) pay to the Facility Agent for credit of that Bank for credit to
the appropriate Standby L/C Account on such Bank's books relating to that
Standby L/C, an amount equal to the amount of its participation in that
Standby L/C.
17. MITIGATION
17.1 MITIGATION
(a) If, in respect of any Finance Party, circumstances arise which would, or
on the giving of notice would, result in:
(i) the application of Clause 10; or
(ii) an increase in the amount of any payment to be made to it under
Clause 14.1; or
(iii) any claim for indemnification being made or any obligation to
increase the amount any payment under any of Clauses 14.2, 14.3 and
Clause 15.1; or
(iv) any prepayment or cancellation under Clause 16,
then, without limiting the obligations of any Obligor under this
Agreement, and without prejudice to the terms and conditions of those
Clauses, that Finance Party will (provided that it considers that it is
reasonably practicable for it to do so), promptly upon becoming aware of
the same, notify the Facility Agent and, in consultation with the Facility
Agent and the Obligors' Agent, take steps to mitigate the effects of such
circumstances, including, if appropriate, changing its Facility Office
and/or transferring
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its rights and obligations under the Senior Finance Documents to another
branch or financial institution acceptable to the Obligors' Agent.
(b) No Finance Party shall be obliged to take any steps under this Clause 17
if it considers, in its opinion, that to do so might have an adverse
effect on its business, operation, financial condition, or its return
under this Agreement or it considers such steps to be unreasonable. This
Clause 17.1 shall not oblige any Finance Party to disclose any information
relating to the organisation of its business, operations, financial
condition or any other matters if it considers, in its sole opinion, that
such information is confidential.
(c) In the circumstances where the relevant Borrower would otherwise be
entitled or required to prepay any Bank's participation in the
Utilisations or make a payment into such Bank's Standby L/C Accounts (or
any of them) or procure such Bank's release from its obligations under
each Standby L/C (other than as a result of the application of Clause 16
or Clause 21), such Bank will, if requested by the Company, transfer by
means of a Novation Certificate pursuant to Clause 29.2, such
participation (and the related Revolving Commitment and Standby L/C
Commitment) to any bank or financial institution which is a Qualifying
Bank and is specified by the Company and has confirmed to such Bank its
willingness to acquire such participation, such Revolving Commitment and
such Standby L/C Commitment by means of a Novation Certificate, subject to
receipt by such Bank from the proposed transferee of an amount equal to
such Bank's entitlement to all principal, accrued interest and other sums
payable by the Obligors or any of them under the Senior Finance Documents
(whether or not then due) and any amounts then standing to the credit of
its Standby L/C Accounts and provided further that any consents required
from any Beneficiary in respect thereof has been obtained.
17.2 COSTS AND EXPENSES OF MITIGATION
Any costs and expenses reasonably incurred by any Finance Party pursuant to this
Clause 17 shall be paid by the Obligors' Agent within five Business Days after
receipt of a demand specifying the same in reasonable detail.
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PART 6
18. REPRESENTATIONS AND WARRANTIES
18.1 GENERAL REPRESENTATIONS AND WARRANTIES
The Company acknowledges that the each of the Finance Parties have entered into
the Finance Documents in full reliance on the following statements and
represents and warrants to each of the Finance Parties that :
(a) DUE INCORPORATION AND STATUS: each Obligor is a private limited company,
duly incorporated and validly existing under the place of its
incorporation, possesses the capacity to sue and be sued in its own name,
and has the power to carry on its business substantially as now being (or
will immediately after the Closing be) conducted and to own its property
and other assets;
(b) CORPORATE POWER: each Obligor has the power to execute, deliver and
perform its obligations under each of the Transaction Documents to which
it is a party, and any other document or instrument executed, delivered or
to be executed or delivered by it under any of the Transaction Documents;
all necessary corporate, shareholder and other action has been taken or
will be taken to authorise the execution, delivery and performance of the
same and no limitation on its powers to borrow, to guarantee and to grant
security will be exceeded as a result of the performance of the
transactions contemplated by such documents;
(c) BINDING OBLIGATIONS: the Transaction Documents, and any other document or
instrument executed or delivered or to be executed or delivered by any
Group Member thereunder, constitute or, as the case may be, will
constitute valid and legally binding obligations of each of the Obligors
which are expressed to be a party thereto and, as far as the Company is
aware, in the case of the Recapitalisation Documents and the Note
Documents of the other parties thereto and, without limiting the
generality of the foregoing (and subject to registration under Section 395
Companies Act 1985 (as amended), the filing of Uniform Commercial Code
financing statements and filings with the United States Patent and
Trademark Office and the United States Copyright Office, in each case as
contemplated by the Security Documents, the Filing of Forms 47 in the
Companies Registry Office in Dublin in respect of the Irish Debentures,
the registration of the Debentures entered into by those Obligors
incorporated in the United Kingdom at the Land Registry or the Land
Charges Registry (as appropriate), (to the extent necessary) registration
in the Land Registry in Ireland in respect of property charges to be
created by the Irish Debentures, the filing of particulars of the relevant
trade marks (if any) assigned or charged under such mortgage debenture,
the registration of the transfers of the shares which are the subject of
the relevant mortgages and other Encumbrances created by the Security
Documents and other filings and registrations necessary in connection with
the Security Documents (including any filings required to be made in
connection with Sections 155 to 158 of the Companies Act 1985), and
compliance with and registration under any analogous requirements in any
other jurisdiction) each of the Security Documents creates the security
interest which that Security Document purports to create or, as the case
may be, accurately evidences a security
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interest which has been validly created (except that no warranty is given
as to whether any such Encumbrance is of a fixed or floating nature);
(d) NO CONFLICT WITH OTHER OBLIGATIONS: the execution and delivery of each of
the Transaction Documents, and any other document or instrument executed
or delivered or to be executed or delivered thereunder by any Obligor
party thereto, and the performance of each of their respective obligations
thereunder, and compliance with their respective provisions, will not (i)
contravene any existing applicable law, statute, rule or regulation or any
judgment, decree or permit to which any of them are subject, conflict
with, or result in any breach of any of the terms of, or constitute a
default under, any agreement or other instrument to which any Group Member
is expressed to be a party or is subject to or by which it, or any of its
property is bound in a manner which is reasonably likely to result in any
liability on the part of the Finance Parties (or any of them) to any third
party by reason of any such conflict, (ii) nor, so far as the Company is
aware, will it result in the creation, or requirement to create, any
Encumbrance on the assets of any Obligor (save for any Encumbrance created
pursuant to the Security Documents), or (iii) contravene or conflict with
any provision of the Memorandum and Articles of Association (or similar or
analogous documents) of any Obligor;
(e) CONSENTS: all material, authorisations, approvals, consents, licences,
exemptions, filings, registrations and other matters required by law for
or in consequence of (i) the Recapitalisation, and/or (ii) the entry into
and performance by each Obligor of and/or the validity of any of the
Transaction Documents to which it/they are expressed to be a party or the
transactions to be implemented pursuant thereto and/or (iii) the carrying
on of the business of each Obligor and each Material Group Member in the
ordinary course have been obtained or effected or will be obtained or
effected prior to the date required by law, save (in the case of (ii)) for
the filing in the United Kingdom of the prescribed particulars of the
Security Documents pursuant to Section 395 of the Companies Act 1985 (as
amended), the Filing of Forms 47 in the Companies Registry Office in
Dublin in respect of the Irish Debentures, the registration of the
Debentures entered into by those Obligors incorporated in the United
Kingdom at the Land Registry or the Land Charges Registry (as
appropriate), (to the extent necessary) registration in the Land Registry
in Ireland in respect of property charges to be created by the Irish
Debentures, the filing of particulars of the relevant trade marks (if any)
assigned or charged under the Debentures, the registration of the
transfers of the shares which are the subject of the relevant mortgages
and other Encumbrances created by the Security Documents and other filings
and registrations necessary in connection with the Security Documents, all
of which filings and registrations will be effected promptly after
execution;
(f) NO WINDING-UP: no order has been made or petition presented (which has not
been discharged or stayed within 14 days of it being so presented) or any
corporate action taken, or any other steps been taken or legal proceedings
started or resolution passed for the winding-up of any Group Member or for
an administration order in respect of any Group Member and no distress,
execution or other process has been levied on any assets of any Group
Member which has not been discharged or which
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in the bona fide opinion of the Facility Agent is not being contested by
the relevant Group Member in good faith;
(g) INSOLVENCY: no order has been made or petition presented or resolution
passed for an administration order in respect of any Group Member and no
distress, execution or other process has been levied on any assets of any
Group Member which has not been discharged, no Group Member has stopped
payment and is insolvent or unable to pay its debts within the meaning of
Section 123(1) Insolvency Act 1986 (construed as if the figure stated at
section 123(1)(a) was $100,000), it has not been determined that any Group
Member is unable to pay its debts in accordance with Section 123(2)
Insolvency Act, no administrative receiver or receiver or receiver and
manager, trustee or similar officer has been appointed by any Person of
any part of the business or assets of any Group Member;
(h) NO DEFAULT: (i) no Event of Default has occurred and is continuing which
has not been waived; (ii) (so far as the Company is aware) save as
previously notified to the Facility Agent in accordance with Clause
19.1(e)(vii)no Potential Event of Default has occurred and is continuing
which has not been waived; and (iii) no Group Member is in breach of or
default under any agreement to which it is a party or which is binding on
it or any of its assets which could have a Material Adverse Effect;
(i) NO LITIGATION: no action, litigation, arbitration, alternative dispute
resolution, or administrative or regulatory proceeding is taking place or
pending against any Group Member, and, so far as the Company is aware, no
such action, litigation or administrative proceeding is threatened nor are
there any current labour disputes involving any Group Member which:
(i) in the case of any such action, litigation, alternative dispute
resolution, arbitration, administrative or regulatory proceedings are
reasonably likely to be determined adversely to the relevant Group
Member, and which, if so adversely determined would have a Material
Adverse Effect; or
(ii) in the case of any such labour disputes, would have a Material
Adverse Effect;
(j) GROUP STRUCTURE:
(i) the Structure Memorandum contains descriptions which are true,
complete and correct, of the corporate and ownership structure of the
Group and the Intra-Group Loan Memorandum contains descriptions which
are true, complete and correct of all inter-company loans as they
will be immediately after Closing;
(ii) there are no companies, partnerships, Joint Ventures, businesses or
the like having material assets or indebtedness or trading activities
(a) which are or will be a Subsidiary of the Company immediately
after the Closing whose intended ownership and corporate structure
are not shown in the Structure Memorandum or (b) in which it or any
of its Subsidiaries will have an interest immediately after the
Closing which are not shown in the Structure Memorandum;
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(iii) there are no re-organisational steps affecting the Company or any of
its Subsidiaries (including, without limitation, any significant
transfers of business or assets from one Person to another and
significant disposals) which are not described in the Structure
Memorandum; and
(iv) immediately following Closing there will be no Material Group
Members other than those companies set out at Schedule 11;
(k) ACCOUNTANT'S REPORT:
(i) save as fully and fairly disclosed in the Accountant's Report, the
financial information in relation to the Group contained in the
Accountant's Report was prepared using generally accepted accounting
principles in the United Kingdom, and give a true and fair view of
the state of affairs of the Group as at the date to which they were
prepared and as at such date there were no material liabilities of
the Group which were not disclosed by or shown as being provided for
in the Accountant's Report;
(ii) there has been no material adverse change in the business,
operations, assets, prospects, or financial condition of the Group
(taken as a whole) since the date the Accountant's Report was
prepared; and
(iii) the Accountant's Report includes or consolidates into such financial
information the results of each Group Member and does not
consolidate or include the results of any other company, limited
partnership or like entity or business other than Derby
International;
(l) INITIAL INFORMATION:
(i) all information contained in the Information Package was true in all
material respects (or, in the case of information provided by any
Person other than the Company or its advisors as far as the board of
directors of the Company is aware, was true to the best of its
knowledge and belief in all material respects at the date (if any)
ascribed thereto in the Information Package) and, in respect of the
Group's Pre-Closing Accounts was prepared in accordance with
Applicable Accounting Principles, all expressions of opinion or
intention and all forecasts and projections contained in the
Information Package were arrived at after careful consideration,
were fair and were based on reasonable grounds, and the Information
Package as of its date was not misleading in any material respect
and did not omit to disclose any matter, failure to disclose which
would result in any information contained in the Information Package
being misleading in any material respect in the context of this
Agreement and the transactions contemplated hereby; and
(ii) there has been no material adverse change in the business,
operations, assets, prospects or financial condition of the Group
(taken as a whole) since the date of the annual consolidated
accounts referred to at paragraph (i) above.
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(m) ALL INFORMATION IS CORRECT: all financial and other information provided
in writing by, or on behalf of, any Group Member to any Finance Party in
connection with this Agreement or the Finance Documents after the date of
this Agreement was true and accurate in all material respects when given
and (so far as it is aware having made due and proper enquiries) there are
no other facts or matters, the admission of which would have made any such
statement or information provided misleading or a materially inaccurate
representation of the situation described therein and all opinions,
projections and forecasts given or made have been honestly made and based
upon reasonable assumptions;
(n) FINANCIAL ACCOUNTS: the Business Plan and the Financial Accounts most
recently delivered to the Facility Agent under this Agreement after the
Closing have been prepared in accordance with Applicable Accounting
Principles and (in the case of audited annual Financial Accounts) give a
true and fair view or (in the case of unaudited Financial Accounts) fairly
present of the state of affairs of the such Group Member (consolidated if
prepared on that basis pursuant to Applicable Accounting Principles or if
required to be prepared on that basis pursuant to the terms of this
Agreement) as at the date to which they are made up and as at such date
there were no material liabilities of any Group Member not disclosed in
the Financial Accounts which according to Applicable Accounting Principles
should have been disclosed and since the Financial Accounts most recently
delivered to the Facility Agent under this Agreement after Closing there
has been no material adverse change in the financial condition or
prospects of the Group (as a whole);
(o) TAX LIABILITIES: no claims in excess of $50,000 (or the equivalent in
other currencies) in aggregate are being or are reasonably likely to be
asserted against the Group (as a whole), any Group Member or Group Members
with respect to Taxes which are reasonably likely to be determined
adversely to such Group Member and no Group Member is overdue in the
filing of any Tax returns required to be filed by it and has paid all
Taxes shown to be due on Tax returns or any assessments made against it
other than those contested in good faith by appropriate proceedings and
for which adequate reserves have been established in accordance with
Applicable Accounting Principles;
(p) ACQUIRED ASSETS: all of the Acquired Assets which have been acquired by
the Company pursuant to the Recapitalisation are beneficially owned by the
Company the Company is, or is entitled to become, the legal registered
owner of the Acquired Assets free from all Encumbrances, claims and
competing interests whatsoever save as expressly permitted under this
Agreement;
(q) OWNERSHIP OF ASSETS:
(i) (save to the extent that such may be disposed of without breaching the
terms of any of the Finance Documents) with effect from and after the
Closing, each Material Group Member will have good title to or valid
leases or licences of or is otherwise entitled to use and permit other
Group Members to use all assets necessary to conduct its business
substantially as conducted by it at the Closing or reflected in the
Accountant's Report and without limiting the generality of the
foregoing, save as aforesaid each Obligor has, with effect from and
after the
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Closing a good and valid title in its own name of its interest in
all properties specifically referred to by address or title number
in the Security Documents; and
(ii) each Obligor is the absolute legal and beneficial owner of all
rights, title and interest in and to the assets, free from any right
of set-off, counterclaim, dispute or Encumbrance (other than a
Permitted Encumbrance) comprising the Eligible Finished Goods, the
Eligible Receivables, the Eligible Raw Materials and the Cash
Collateral Amount that are taken into account when computing such
Borrower's Borrowing Base;
(r) INTELLECTUAL PROPERTY RIGHTS:
(i) so far as it is aware (after due and careful enquiry) it (and each
Group Member) owns or has licensed to it all the Intellectual
Property Rights which are material in the context of its business
and which are required by it in order for it to carry on its
business in accordance with the Business Plan and it does not (nor
do any of its Subsidiaries), in carrying on its business, infringe
any Intellectual Property Rights of any third party in any way;
(ii) none of the Material Intellectual Property Rights is, to its
knowledge, being infringed nor, to its knowledge, is there any
threatened infringement of the Intellectual Property Rights, by any
third party; and
(iii) all registered material Intellectual Property Rights owned by it (or
any Subsidiary of it) are subsisting and all actions (including
payment of all fees) required to maintain the same in full force and
effect have been taken;
(s) REPRESENTATIONS UNDER RECAPITALISATION DOCUMENTS: it has no reason to
believe that any representation or warranty by any Person party thereto in
any of the Recapitalisation Documents is untrue or inaccurate in any
material respect;
(t) PARI PASSU: the obligations of the Obligors under this Agreement and of
the Group Members under the Senior Finance Documents to which they are
expressed to be a party (to the extent that any such obligations do not
acquire enhanced priority by virtue of the security created and/or
conferred by the Security Documents) rank at least pari passu with all
other present and future unsecured and unsubordinated obligations of such
Group Member with the exception of any obligations which are mandatorily
preferred by law or arise by equity and not only by contract;
(u) CONSTITUTIONAL DOCUMENTS: the documents delivered to the Facility Agent
pursuant to Clause 4 or pursuant to an Accession Agreement are, if such
documents relate to a Borrower, as at the date the first Advance (if any)
is made to such Borrower and, in the case of a Guarantor, as at the date
such documents are delivered, true, up to date and complete copies in all
material respects, of originals which had not been amended, varied,
supplemented or superseded in any way which would be likely to affect the
interest of the Finance Parties under any of the Senior Finance Documents;
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(v) TRANSACTION DOCUMENTS:
(i) the Recapitalisation Documents, as furnished to the Facility Agent
under this Agreement, contains all the terms of the
Recapitalisation;
(ii) the Recapitalisation Documents contain all the terms of the
agreements and arrangements between the Investors and the Company
(or any Group Member);
(iii) other than as provided in (iv) below the Service Contracts and the
Articles of Association of the Company contain all the material
terms of all the agreements and arrangements between the Executives
and the Investors and Derby International and between the Executives
and the Company (or any other Group Member);
(iv) the Management Agreement (if any) contains all the terms and
arrangements between Thayer and the Company;
(v) the Service Contracts of each of the Executives will be in full
force and effect in the respective agreed forms at Closing; and
(vi) the Note Documents and any agreements or documents referred to
therein or contemplated thereby contain all the terms of the
agreements and arrangements between the Note Issuers, the Note
Trustee and the Noteholders, and each of the other Persons expressed
to be a party thereto in connection therewith;
(w) ENCUMBRANCES AND FINANCIAL INDEBTEDNESS:
(i) immediately following the Closing no Encumbrances (save for
Permitted Encumbrances (if any)) will exist over any assets of any
Group Member; and
(ii) immediately following the Closing no Group Member will have any
Financial Indebtedness outstanding (save for Permitted Financial
Indebtedness) and no Group Member will have any Financial
Indebtedness owed to it by another Group Member (other than under
the Finance Documents) that is not stated in the Intra-Group Loan
Memorandum; and
(iii) the execution of the Transaction Documents by each Obligor
expressed to be a party thereto will not create any Encumbrances
except as required by the Security Documents and such Obligor's
exercise of its rights and performance of its obligations
thereunder will not result in the existence of, nor oblige it to,
create, any Encumbrance over all or any of its present of future
revenues or assets except a Permitted Encumbrance;
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(x) ENVIRONMENTAL MATTERS:
(i) so far as the Company is aware, (after due and careful enquiry)
each Group Member has obtained all requisite Environmental
Licences required for the carrying on of its business as currently
conducted and has at all times complied in all material respects
with (a) the terms and conditions of such Environmental Licences
and (b) all other applicable Environmental Law;
(ii) so far as the Company is aware (after due and careful enquiry) no
Dangerous Substance has been used, disposed of, generated, stored,
transported, dumped, released, deposited, owned, leased, occupied
or controlled by any Group Member (including any offsite waste
management or disposal location utilised by any Group Member) in
circumstances where this would be likely to result in the
imposition of a liability on any Group Member which would have a
Material Adverse Effect;
(iii) so far as the Company is aware (after due and careful enquiry)
there is no Environmental Claim (whether in respect of any site
previously or currently owned or occupied by any Group Member or
otherwise) pending or threatened, and there are no past or present
acts, omissions, events or circumstances that would be likely to
form the basis of any Environmental Claim (whether in respect of
any site previously or currently owned or occupied by any Group
Member or otherwise), against any Group Member which in each case
is reasonably likely to be determined against that Group Member
and which if so decided would have a Material Adverse Effect;
(iv) without limiting the generality of Clause 18.1(x)(i), (ii) or
(iii) above, so far as the Company is aware (after due and careful
enquiry) as at the Closing (a) there is no Environmental Claim
(whether in respect of any site previously or threatened which is
reasonably likely to be determined against any Group Member and
which if so decided would have a Material Adverse Effect, (b) so
far as it is aware (after due enquiry) there are no past or
present acts or omissions, events or circumstances that would be
likely to form the basis of any material Environmental Claim
(whether in respect of such site or otherwise) against any Group
Member (which is, or will upon the Closing be a Group Member
which, if adversely determined, would have a Material Adverse
Effect and, (c) so far as it is aware (after due enquiry), since
Closing, each Group Member has complied in all material respects
with the terms and conditions of all requisite Environmental
Licences and applicable Environmental Laws which in each case, if
not complied with, would have a Material Adverse Effect and
neither it nor any Group Member has received any notice from any
third party of any breach of such Environmental Licence or
Environmental Law which would have a Material Adverse Effect;
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(y) ERISA:
(i) no act, omission or transaction has occurred which will result in
imposition on any U.S. Obligor or any ERISA Affiliate (whether
directly or indirectly) of:-
(1) either a civil penalty assessed pursuant to section 502(i)
of ERISA or a tax imposed by section 4975 of the IRC; or
(2) breach of fiduciary duty liability damages under section 409
of ERISA;
(ii) no U.S. Obligor or ERISA Affiliate has maintained or contributed
to any Plan that is or was subject to Title IV or ERISA or to the
minimum funding requirements of Section 302 of ERISA or Section
412 of the IRC;
(iii) payment has been made of all amounts which any U.S. Obligor or any
ERISA Affiliate is required under the terms of each Multiemployer
Plan or applicable law to have paid as contributions to such
Multiemployer Plan;
(iv) each U.S. Obligor and each ERISA Affiliate are in compliance with
the presently applicable provisions of ERISA and the IRC with
respect to each Multiemployer Plan;
(v) neither any U.S. Obligor nor any ERISA Affiliate (nor any trade or
business that was an ERISA Affiliate) has at any time contributed
to or been obliged to contribute to any Multiemployer Plan which,
upon the complete or partial withdrawal from such Multiemployer
Plan, could result in the imposition of complete or partial
withdrawal liability;
(z) INVESTMENT COMPANY STATUS: each U.S. Obligor is either not an "investment
company" within the meaning of the United States Investment Company Act of
1940, as amended or is exempt from all provisions of such Act, as amended;
(aa) SOLVENCY OF U.S. OBLIGORS: at the date of this Agreement and after giving
effect to the transactions contemplated by the Transaction Documents and
after giving effect to each Advance, each U.S. Obligor is, and after
consummation of this Agreement and after giving effect to all obligations
incurred and Encumbrances created by such U.S. Obligor in connection
herewith, will be Solvent. No U.S. Obligor is entering into this
Agreement or the transactions contemplated hereby with actual intent to
hinder, delay or defraud either present or future creditors. As used
herein, "SOLVENT" means, with respect of any U.S. Obligor on a particular
date, that on such date (i) the fair saleable value of the property of
such U.S. Obligor is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such U.S.
Obligor, (ii) the amount that will be required to pay the probable
liabilities of such U.S. Obligor on its debts as they become absolute and
matured will not be greater than the fair saleable value of the assets of
such U.S. Obligor at such time, (iii) such U.S.
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Obligor is able to realise upon its assets and pay its debts and other
liabilities, contingent obligations and other commitments as they mature
in the normal course of business, (iv) such U.S. Obligor does not intend
to, and does not believe that it will, incur debts or liabilities beyond
such U.S. Obligor's ability to pay as such debts and liabilities mature,
and (v) such U.S. Obligor is not engaged in a business or a transaction,
and is not about to engage in a business or a transaction, for which such
U.S. Obligor's property would constitute unreasonably small capital after
giving due consideration to prevailing practices in the industry in which
such U.S. Obligor is engaged. In computing the amount of any contingent
liability at any time, it is intended that such liability will be computed
at the amount which, in light of all the facts and circumstances existing
at such time, represents the amount that might reasonably be expected to
become an actual or matured liability. For purposes of determining whether
any U.S. Obligor is solvent such U.S. Obligor shall take place into
account all rights of contribution, reimbursement, subrogation and other
similar rights that such U.S. Obligor may have from any other Obligor by
virtue of such U.S. Obligor making any payment in its capacity as a
Guarantor hereunder.
(ab) U.S. RESERVE REGULATIONS:
(i) no Group Member is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of
buying or carrying Margin Stock (as defined herein);
(ii) no part of the proceeds of any Advance will be used, whether
directly or indirectly, and whether immediately, incidentally or
ultimately, for any purpose that entails a violation of, any of
Regulation G, T, U or X of the Federal Reserve Board of the U.S.A;
(ac) U.S. SECURITY DOCUMENTS:
(i) the U.S. Pledge Agreement is, or when executed will be, effective
to create in favour of the Security Agent for the ratable benefit
of the Secured Beneficiaries (as defined in the U.S. Security
Agreement), a legal, valid and enforceable security interest in
Collateral (as defined in the U.S. Pledge Agreement) and, when
such Collateral is the Pledged delivered to the Security Agent,
the U.S. Pledge Agreement shall constitute a fully perfected first
priority lien on, and security interest in, all right, title and
interest of the pledgors thereunder in such Collateral, in each
case prior and superior in right to any other person, subject to
Permitted Encumbrances that have a priority as a matter of law;
(ii) the U.S. Security Agreement is, or when executed will be,
effective to create in favour of the Security Agent for the
ratable benefit of the Secured Beneficiaries (as defined in the
U.S. Security Agreement) and, when financing statements in
appropriate form are filed in the offices specified in Schedule 5
to the Perfection Certificate (as defined in the U.S. Security
Agreement), the U.S. Security Agreement shall create a fully
perfected lien on, and security interest in, all right, title and
interest of the grantors thereunder in such Collateral in which a
security interest
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may be perfected by the filing of financing statements in each
case prior and superior in right to any other person, other than
with respect to Permitted Encumbrances that have a priority as a
matter of law;
(iii) to the extent that the laws of the United States are applicable
thereto, when the U.S. Patent Trademark, the U.S. Security
Agreement and the U.S. Patent Assignment for Security Purposes
(the "US IP SECURITY DOCUMENTS") are recorded in the United States
Patent and Trademark Office , the U.S. IP Security Documents shall
create a fully perfected lien on, and security interest in, all
right, title and interest of the grantors thereunder in the
federally registered and applied for Patents and Trademark
Collateral (as defined in the U.S. IP Security Documents), in each
case prior and superior in right to any other Person (it being
understood that subsequent recordings in the United States Patent
and Trademark Office and the United States Copyright Office may be
necessary to perfect a lien on U.S. registered trademarks,
trademark applications, U.S. patents and patent applications and
copyrights acquired by the grantors after the date hereof and the
registration of any copyright may be required to perfect a lien in
such copyright), subject to Permitted Encumbrances that have a
priority as a matter of law;
(ad) U.S. OBLIGORS:
(i) no Obligor has any ownership interest in any capital stock of any
Person organized under the laws of any State of the United States,
except for such ownership interests that are Collateral under the
U.S. Pledge Agreement; and
(ii) No Obligor directly owns any assets located in the United States,
except for (x) assets constituting real property, (y) assets that
are subject to the U.S. Pledge Agreement in accordance with clause
(i) above and (z) assets that are Collateral under the U.S.
Security Agreement; and
(ae) YEAR 2000: in relation to each Obligor which is not a Dormant Company, any
reprogramming required to permit the proper functioning, in and following
the year 2000, of (i) each such Obligor's computer systems and (ii)
equipment containing embedded microchips (including systems and equipment
supplied by others or with which each such Obligor's systems interface)
and the testing of all such systems and equipment, as so reprogrammed,
will be completed by March 31, 1999 in the case of (i) and 30 September
1999 in the case of (ii). The cost to each such Obligor of such
reprogramming and testing and of the reasonably foreseeable consequences
of year 2000 to each such Obligor (including, without limitation,
reprogramming errors and the failure of others' systems or equipment) will
not result in a Default or a Material Adverse Effect. Except for such of
the reprogramming referred to in the preceding sentence as may be
necessary, the computer and management information systems of each such
Obligor are and, with ordinary course upgrading and maintenance, will
continue for the term of this Agreement to be, sufficient to permit each
Obligor to conduct its business without Material Adverse Effect.
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18.2 REPETITION OF REPRESENTATIONS AND WARRANTIES
The representations and warranties contained in Clause 18.1;
(a) are made by the Company on the date of this Agreement; and
(b) will be deemed to be repeated by the Company on each date that a Request
is delivered to the Facility Agent, on each Drawdown Date, each Issue
Date, each Interest Date and each Expiry Date as if made with reference to
the facts and circumstances existing at that time,
Provided that the representations and warranties set out in Clause 18.1, (k),
(l), (m) (to the extent that it relates to information delivered prior to
Closing), (n) (to the extent it relates to the Business Plan), (p), and (s) of
Clause 18.1 shall not be repeated after Closing.
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PART 6
19. UNDERTAKINGS
19.1 INFORMATION UNDERTAKINGS
(a) FINANCIAL ACCOUNTS
The Company undertakes it shall furnish or procure that there shall be
furnished to the Facility Agent in sufficient copies for each of the
Finance Parties:
(i) AUDITED FINANCIAL ACCOUNTS:
(A) promptly upon the same being available but in any event not
later than 150 days from the end of the annual Accounting
Period to which the Financial Accounts relate the audited
consolidated Financial Accounts of the Group for such
Accounting Period ending after the date hereof (comprising at
least an audited consolidated balance sheet, profit and loss
account and historic cash flow statement (and the notes
thereto) for such Accounting Period);
(B) (without prejudice to (A) above) promptly after the same have
been prepared the audited Financial Accounts of any Group
Member to the extent that the same are prepared; and
(C) promptly upon the same being available but in any event prior
to the date falling 150 days from the end of the Accounting
Period to which the Financial Accounts relate or, if later,
150 days from the date the relevant request by the Facility
Agent was made, the audited Financial Accounts of any
Material Group Member previously requested by the Facility
Agent (acting reasonably) for such Accounting Period
(comprising at least an audited consolidated (if such Group
Member has a Subsidiary or Subsidiaries) balance sheet,
profit and loss account and historic cash flow statement (and
the notes thereto) for such Accounting Period),
together, in each case, with the report of the auditors thereon,
the notes thereto and the directors' report thereon;
(ii) QUARTERLY FINANCIAL ACCOUNTS: as soon as practicable, and in any
event within 45 days after the end of each quarterly Accounting
Period copies of the unaudited consolidated accounts for such
Accounting Period of the Group, such unaudited consolidated
accounts to show the detailed financial information provided for
quarterly financial reporting in the Proforma Financial Accounts
(comprising at least (A) a consolidated balance sheet and profit
and loss account for such quarter and cumulatively for the period
from the beginning of the current annual
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Accounting Period to the end of such quarterly Accounting Period,
(B) a year to date consolidated cash flow statement for the period
from the beginning of the current annual Accounting Period to the
end of such quarterly Accounting Period, (C) details of each item
of Capital Expenditure which was not included in the budget for
such period delivered pursuant to Clause 19.1(b) in excess of
$100,000 (or the equivalent in other currencies) in such quarterly
Accounting Period, and (D) with a report on the main operational,
commercial and financial issues arising during such Accounting
Period and explaining any variances of more than five per cent.
(5%) against the budget for such quarterly Accounting Period ;
(iii) MONTHLY MANAGEMENT FINANCIAL ACCOUNTS: as soon as practicable, and
in any event within 30 days after the end of the monthly
Accounting Period to which they relate copies of the unaudited
monthly management accounts of the Group such unaudited monthly
management accounts split out monthly and on a year to date basis
to show the detailed information provided for monthly financial
reporting in the Proforma Financial Accounts, including a written
report by an Executive Officer on the main operating and financial
issues (if any) arising during such Accounting Period and
confirmation that all premiums payable in that monthly Accounting
Period in respect of all Material Insurances maintained by the
Group (or any Group Member) have been paid by such time so as to
ensure that those Material Insurances remain in full force, all
such Financial Accounts to be approved by an Executive Officer (or
in their absence one other director of the Company) and one other
director of the Company (in each case without incurring personal
liability) as giving an accurate and reasonable view of the
financial condition and trading performance of the Group;
(iv) BORROWING BASE SUMMARY: in addition to any Borrowing Base Summary
required to accompany a Request under Clause 6, the Company shall
deliver a completed Borrowing Base Summary as soon as practicable,
and in any event within 15 days after the end of each monthly
Accounting Period;
(v) AUDITOR'S CONFIRMATIONS:
(A) at the same time as the Financial Accounts for the annual
Accounting Period in each year are delivered (or, if not
delivered, required to be delivered) pursuant to Clause
19.1(a)(i); and
(B) upon the Facility Agent notifying the Company that it is of
the opinion that the process by which one or more of the
Borrowing Base Summaries is prepared requires further review
and input, as soon as practicable after any such
notification, and within 30 days thereafter,
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the Company undertakes that it will procure that the Auditors
shall deliver a certificate to the Facility Agent confirming
whether or not each of the Borrowing Base Summaries most recently
delivered under this Agreement (or such other Borrowing Base
Summaries as are identified for such purpose by the Facility
Agent) were, in all material respects, true, complete and accurate
and prepared in accordance with the provisions of this Agreement
and whether or not the Company has in place satisfactory methods
and procedures for obtaining and collating the information
required in order for it to be able to compile accurate Borrowing
Base Summaries for this Agreement having regard, where
appropriate, to each of the specific requirements of this
Agreement relating thereto including, without limitation, Clause
6.
(b) BUDGETS
The Company undertakes it shall furnish, or procure that there shall be
furnished, to the Facility Agent in sufficient copies for each of the Finance
Parties to the Facility Agent:
(i) not later than 15 days before the commencement of each annual
Accounting Period a budgeted consolidated balance sheet, profit
and loss account, cash flow statement, rolling monthly cash
forecast of the Group and budgeted monthly Capital Expenditure of
the Group, for (or in the case of a balance sheet, as at the end
of) the following annual Accounting Period, together with details
of the principal assumptions underlying such projections and a
description of the proposed activities of the Group during such
annual Accounting Period, all as approved by the board of
directors of the Company and in each case, the format, heading and
characterisation shall be consistent with the form of monthly
management accounts delivered pursuant to Clauses 19.1(a)(ii) and
19.1(a)(iii);
(ii) not later than the date on which the monthly Financial Accounts in
respect of January in each year are required to be delivered
pursuant to the terms Clause 19.1(a)(iii) a revision of the
budgets furnished to the Facility Agent pursuant to Clause
19.1(b)(i) adjusted so as to reflect the actual opening balance
sheet of the annual Accounting Period to which they relate;
(iii) if, in the course of any annual Accounting Period, the Company
updates or revises any of the budgets furnished to the Facility
Agent pursuant to Clause 19.1(b)(i) or Clause 19.1(b)(ii) in any
material respect, the Borrower shall furnish, or procure that
there shall be furnished (as soon as possible and in any event
within fourteen days of such revision), to the Facility Agent,
sufficient copies for each of the Finance Parties, such updated or
revised forecasts, together with a statement explaining the
requirement for such updating or revision; and
(iv) at the same time as it is required to deliver to the Facility
Agent Financial Accounts required by Clauses 19.1(a)(ii) and
19.1(a)(iii) , the
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Company shall deliver to the Facility Agent, in the agreed form,
in sufficient copies for each of the Finance Parties a cash flow
forecast for the Group to the end of the current annual Accounting
Period together with the basis of the assumptions used in its
preparation.
(c) CERTIFICATES
The Company undertakes it shall furnish or procure that there shall be
furnished to the Facility Agent in sufficient copies for each of the
Finance Parties:
(i) at the same time as the Financial Accounts for any annual
Accounting Period are delivered (or, if not delivered, required to
be delivered) pursuant to Clause 19.1(a)(i):
(A) a report of the Company in a form reasonably satisfactory to
the Facility Agent setting out in reasonable detail
computations establishing, as at the date of such Financial
Accounts, whether each of the financial undertakings set out
in Clause 20 were complied with, (B) setting out in
reasonable detail computations demonstrating the application
of the financial ratios set out in Clause 20 for such
Accounting Period such report being confirmed by the
Auditors as being true and accurate; and
(B) a certificate signed by two Authorised Signatories of the
Company (one of whom shall be an Executive Officer (in each
case without incurring personal liability)), stating that as
the date of such certificate no Event of Default has
occurred and is then continuing, and that so far as the
Company is aware having made due and diligent enquiry, no
Potential Event of Default has occurred and is continuing,
or providing details of any such Defaults and of any
remedial action proposed to be taken; and
(ii) at the same time as the Financial Accounts for any quarterly
Accounting Period are delivered (or, if not delivered, required to
be delivered) pursuant to Clause 19.1(a)(ii) above a Compliance
Certificate, signed by two Authorised Signatories of the Company
(one of which shall be an Executive Officer (in each case without
incurring personal liability)):
(A) setting out in reasonable detail computations establishing,
as at the date of such Financial Accounts, whether each of
the financial conditions set out in Clause 20 was complied
with; and
(B) stating that as at the date of such certificate no Event of
Default has occurred and is then continuing and that so far
as the Company is aware having made due and diligent
enquiry, or providing details of any such Default and of any
remedial action proposed to be taken ; and
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(iii) at the same time as the Financial Accounts for the annual
Accounting Period in each year are delivered (or, if not
delivered, required to be delivered) pursuant to Clause 19.1(a)(i)
above the Company shall procure that the Auditors shall, confirm
(by reference to the relevant Financial Accounts) whether or not
each of the Financial conditions set out in Clause 20 was complied
with.
(d) REVIEWS: The Majority Banks shall be entitled to request the Facility
Agent no more frequently than quarterly to conduct a review of books and
accounting records of each Borrower to examine the basis of the
information used by the Company to compile the Borrowing Base Summaries
delivered to the Facility Agent hereunder provided that:
(i) such a review does not take place more than once in any annual
Accounting Period unless the Facility Agent (acting reasonably) is
of the opinion that some or all of the information contained in
any of the Borrowing Base Summaries may be inaccurate:
(ii) any Bank may request on reasonable notice a copy of the results of
any such review carried out by or on behalf of the Facility Agent;
(iii) neither the Facility Agent nor any of its employees, directors,
agents or advisers shall have any responsibility or liability
whatsoever for the accuracy or completeness of any such review;
and
(iv) the Company shall indemnify the Facility Agent on demand for all
reasonable costs and expenses incurred in connection with any such
review;
(e) NOTIFICATIONS: The Company undertakes it shall furnish, or procure that
there shall be furnished to the Facility Agent, in sufficient copies for
each of the Finance Parties:
(i) promptly upon their despatch (and in any event within ten Business
Days), all notices, reports or other documents despatched by or on
behalf of any Obligor to (a) its shareholders (in their capacity
as shareholders) generally (or any class of them); (b) to its
creditors generally (in their capacity as creditors), or any class
of them; and; (c) (without prejudice to (b) above) the Noteholders
or, the Note Trustee, or any SEC filings made in connection with
all or any of the Note Documents or otherwise;
(ii) promptly, and in any event within ten Business Days of the same
being instituted or, to its knowledge, threatened, details of any
litigation, arbitration or administrative proceedings involving it
or any of its Subsidiaries which, if adversely determined might,
have a Material Adverse Effect or which would involve liability or
potential liability or alleged liability in excess of $250,000 (or
its equivalent in other currencies);
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(iii) at the same time as the monthly Financial Accounts in respect of
the period during which the same becomes known to the Company or
any other Group Member is delivered under Clause 19.1(a)(ii),
19.1(a)(iii) (or, if not delivered, the latest date by which they
are required to be delivered) reasonable details of all warranty
and indemnity claims in excess of $100,000 made by or against any
Group Member or any shareholder of the Company pursuant to, or in
respect of, the Recapitalisation Documents or which could be so
made if Clause 9(b) of the Recapitalisation Agreement was
disregarded ;
(iv) promptly, and in any event within ten Business Days of the same
being delivered or received, and in any event by 15 June 1998 the
Completion Accounts;
(v) promptly (and in any event within ten Business Days or such other
period as the Facility Agent may require) upon being so requested,
such further information regarding its financial condition,
business and assets and that of the Group and/or any Group Member
(including any requested amplification or explanation of any item
in any Financial Accounts, budgets, projections or other material
provided by any Group Member under this Agreement) as the Facility
Agent or any Finance Party through the Facility Agent may
reasonably request from time to time;
(vi) at the same time as the monthly Financial Accounts in respect of
the period during which the same occurs are delivered under Clause
19.1(a)(ii) or Clause 19.1(a)(iii) (or, if not delivered, the
latest date by which they are required to be delivered), details
of all transfers of shares of any Group Member (which when taken
together with any other transfer made to Persons connected with or
associated with the relevant transferee equate to 3 per cent or
more of the issued share capital of such Group Member) in the
share capital of any Group Member (including any change in the
beneficial ownership of any such shares of which any of the
directors of the Company become aware) and details of the issue
and allocation of any shares in the capital of the Company;
(vii) written details of any Default forthwith upon the Company becoming
aware of the same, and of any remedial steps being taken and
proposed to be taken in respect of that Default;
(viii) (other than to a transferee or in respect of replacement Senior
Notes) promptly (and in any event within ten Business Days) upon
the Company being aware, details of any Additional Securities (as
defined in the Note Indentures) being issued after Closing under
or pursuant to the Note Documents;
(ix) promptly (and in any event, within ten Business Days) upon the
Company being aware, details of any Group Member that is not
listed at Schedule 12 that becomes a "Material Group Member";
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(x) promptly (and in any event, within ten Business Days) upon the
Company being aware, details of any Group Member that is a Dormant
Company, ceasing to be a Dormant Company;
(xi) promptly upon the Company being aware (and in any event within ten
Business Days), details of any change in any applicable
Environmental Law which is reasonably likely to have a Material
Adverse Effect; and
(xii) promptly (and in any event within ten Business Days) after receipt
or despatch thereof deliver to the Facility Agent sufficient
copies for each of the Finance Parties certified copies of all
notices given by any Group Member under any of the Transaction
Documents.
(f) LISTINGS: The Company shall promptly (and in any event within 14 days of
the relevant proposal) inform the Facility Agent of any Listing of any
Group Member proposed by the Board of Directors.
(g) AUDIT AND ACCOUNTING DATES: The Company will ensure that:
(i) the annual Financial Accounts to be delivered to the Facility
Agent pursuant to Clause 19.1 are audited by the Auditors;
(ii) it shall at all times have duly appointed Auditors;
(iii) each Accounting Period of the Group shall end on an Accounting
Date; and
(iv) each annual Accounting Period of each Group Member shall, with the
exception of Derby Nederland BV and its Subsidiaries (which annual
Accounting Period shall end on 30 November or, if such annual
Accounting Period is changed at any time after the date of this
Agreement, 31 December) no later than 30 June 1998, end on 31
December, and no Group Member will change its financial year end
without prior written consent of the Facility Agent other than to
conform its financial year end to 31 December.
19.2 FORM OF FINANCIAL STATEMENTS
Each set of consolidated financial statements delivered by or on behalf of the
Company in connection with this Agreement shall, subject to Clause 19.3 and the
proviso stated below be prepared (and if appropriate, audited) on the same basis
as the Pre-Closing Accounts and in accordance with Applicable Accounting
Principles provided that if the Auditors have confirmed in writing to the
Facility Agent that a change in the basis on which the Financial Accounts are
prepared is:
(a) necessary so as to take into account changes in applicable laws since the
date the above mentioned Financial Accounts were prepared;
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(b) necessary so that the Financial Accounts to which such proposed change
relates are not qualified by the Auditors in a manner which they would
otherwise have been qualified; or
(c) in their opinion, appropriate;
and, in the case of a proposed change to which paragraph (b) or (c) above
applies the Facility Agent, acting on the instructions of the Majority Banks has
approved the proposed change (such approval not to be unreasonably withheld or
delayed), from such date each set of financial statements delivered by or on
behalf of any Group Member in connection with this Agreement shall be prepared
as aforesaid, but subject to such change.
19.3 VARIATION OF FINANCIAL UNDERTAKINGS
In the case of any change in Applicable Accounting Principles, any change to be
made in accordance with Clause 19.2 or any proposed change in accounting
reference date of the Company the Company shall, promptly upon becoming aware,
notify the Facility Agent of such change or such proposed change, and as soon as
practicable after receipt of such notice, the Company and the Facility Agent
shall (for a period of up to 7 days) negotiate with a view to agreeing such
varied financial undertakings as would provide the Finance Parties with no less
protection as the financial undertakings set out in Clause 20 as at the date of
the Agreement to the extent that any revised financial undertakings will, as
nearly as practicable, be based on a similar differential as that between the
financial projections in the Business Plan and the financial undertakings as at
the date of this Agreement). If, after any negotiations conducted between the
Facility Agent and the Company, an agreement is not able to be reached as to
what adjustments (if any) are required to be made to the financial undertakings
contained in this Agreement, within the said 7 day period (or such negotiations
are not commenced within 7 days of the receipt of the Facility Agent of the
relevant notice (or such longer period as the Facility Agent may agree)) the
matter shall be referred to the Auditors to determine, as experts and not as
arbitrators. The costs of the Auditors shall be for the account of the Company.
For the avoidance of doubt, during any such period of consultation, the
financial undertakings set out in Clause 20 shall be calculated in accordance
with Applicable Accounting Principles prevailing before the relative
determination, introduction or implementation.
19.4 POSITIVE UNDERTAKINGS
(a) TAXES: The Company shall, and shall procure that each other Group Member
shall, pay and discharge all Taxes and governmental charges prior to the
date on which the same become overdue other than in respect of Taxes and
governmental charges which, in aggregate, are less than $10,000 (or the
equivalent in other currencies) and overdue by no more than 30 days,
unless, and only to the extent that such Taxes, shall be contested in good
faith by appropriate proceedings, pending determination of which payment
may lawfully be withheld, and there shall be set aside adequate reserves
with respect to any such Taxes or charges so contested in accordance with
Applicable Accounting Principles.
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(b) INSURANCES:
(i) The Company shall, and shall procure that each other Group Member
shall, maintain in full force and effect prudent insurances on and in
relation to its business and assets and in particular and without
limitation:
(A) maintain in full force and effect insurances covering the risks
covered by the insurances set out in Schedule 15 or replacements
therefor as the case may be, and in each case: to the same level
of sums insured as detailed in Schedule 15 and if the Security
Agent shall so stipulate in an insurance office with
underwriters approved by the Security Agent or if and to the
extent that the Security Agent does not so stipulate, in such
insurance office of repute as shall have been selected by the
Company or with Lloyd's underwriters and in the joint names of
the relevant insured Group Member or Group Members (as the case
may be) or, to the extent that the Facility Agent has confirmed
to the Company that, in its opinion (acting reasonably) it is
not practicable or possible for any such insurance to be in the
joint names of the relevant Group Member or Group Members (as
the case may be) and the Security Agent, the Security Agent
shall be named thereon as "Loss Payee";
(B) without prejudice to Clause 19.4(b)(i)(A), cause all Inventory,
Receivables, buildings, trade and other fixtures, fixed and
other plants and machinery forming part of the Secured Property
to be insured and to be kept insured:
(1) (if the Security Agent shall so stipulate) in an insurance
office with underwriters approved by the Security Agent
against loss or damage by fire, explosion, aircraft and all
such other risks as the Security Agent shall direct to the
full reinstatement value thereof adequate provision also
being made for the cost of clearing the site and architects
engineers, surveyors and other professional fees incidental
thereto and the loss of rents or prospective rents (for a
period of not less than three years) in the joint names of
the Group Member that occupies or owns the relevant Secured
Property and the Security Agent; or
(2) (if and to the extent that the Security Agent does not so
stipulate) in such insurance office of repute as shall have
been selected by the Company or with Lloyd's underwriters
on the same basis as insurances are maintained by prudent
companies carrying on businesses comparable with that of
the relevant Group Member and on a comparable scale as
regards the property and assets insured the insured risks
and the classes of risk to be covered;
(C) without prejudice to Clauses 19.4(b)(i)(A) and 19.4(b)(i)(B),
maintain such other insurances (including, but without
limitation, product liability insurance with a deductible of not
more than $250,000 in respect of any
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one claim) are as normally made by prudent companies carrying on
similar businesses including business interruption insurances,
public liability insurances and employers liability insurance;
(D) promptly and in any event within 20 days following any request
to do so, provide the Facility Agent with such information in
relation to insurances maintained or previously maintained by
any Group Member as the Facility Agent may (acting reasonably)
request from time to time;
(E) duly and punctually pay all other premiums and other monies
payable under such insurances as aforesaid and promptly upon
request by the Security Agent produce the premium receipts or
other evidence of the payments thereof;
(F) (if so required by the Security Agent but subject to the
provisions of any lease of the Secured Property) deposit all
policies and other contracts of insurance relating to the
Secured Property or any part thereof with the Security Agent or
produce to the Security Agent for inspection; and
(G) if default shall be made by any Group Member in complying with
paragraphs (A), (B), (C), (D) or (E) above it shall be lawful
for the Security Agent but not obligatory on the Security Agent
to effect or renew any such insurance as is mentioned in that
paragraph either in its own name or in its name and that of the
relevant Group Member or in the name of the Company with an
endorsement of the Security Agent's interest, the monies
expended by the Security Agent in so effecting or renewing any
such insurance shall be reimbursed by the Company to the
Security Agent on demand and shall until so reimbursed shall
carry interest at the rate (as well after as before any
judgment) as provided for in Clause 9 of this Agreement mutatis
mutandis from the date of payment to the date of reimbursement.
(ii) The Company undertakes that:
(A) if an Event of Default has occurred and is continuing (and has
not been waived in writing by the Facility Agent on behalf of
the Banks); or
(B) (otherwise) to the extent not applied in repair, replacement or
reinstatement of physical loss or damage;
(and without prejudice to the provisions of any Security Document) it
will procure that the proceeds of any policy of insurance (other than
any such policy in respect of third party liabilities) maintained by
any Group Member shall:
(C) if such proceeds relate to an asset or assets which, in the
opinion of the Facility agent were utilised by the relevant
Group Member in or towards the generation of income and are more
than $250,000 (or the equivalent in other currencies), be
applied in or towards prepayment of the whole
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or such part of the Facilities as the Facility Agent (acting on
the instructions of the Majority Banks) shall direct whereupon
the Total Commitments shall be cancelled by an amount equal to
such proceeds and the Standby L/C Commitment of each Bank shall
be reduced by a proportionate amount pro rata and the Revolving
Commitment of each Bank (including, for the avoidance of doubt,
the Revolving Commitment of each Ancillary Bank disregarding,
for this purpose, its Ancillary Commitment) shall be reduced by
a proportionate amount and pro rata to their respective
Revolving Commitments at such time.
(c) HEDGING ARRANGEMENTS: The Company shall put or cause there to be put into
effect as soon as possible and in any event within 30 days from the first
Drawdown Date in form and substance satisfactory to the Facility Agent
with such counterparty as is (or counterparties as are) acceptable to the
Facility Agent (acting reasonably) and then maintain in full force and
effect, exercisable by and for its benefit interest rate hedging or
protection arrangements and currency rate protection arrangements in
accordance with the Approved Hedging Programme.
(d) SECURITY - UK OBLIGORS If requested to do so by the Facility Agent, the
Company shall procure that in respect of any Group Member incorporated in
England and Wales, Scotland or Northern Ireland (that is not a Dormant
Company) to which such request relates there is delivered to the Facility
Agent within 45 days (or such longer period as the Majority Banks may
agree) a Guarantor's Accession Agreement and/or a Guarantee together with
a notice of accession under the Intercreditor Agreement duly executed by
such company and the Company and a Security Document, together with each
of the conditions precedent documents required to be provided in
connection therewith, all in a form and substance reasonably satisfactory
to the Facility Agent. Notwithstanding anything to the contrary in this
Agreement, only the Company shall be liable for its obligations under this
Agreement and nothing herein shall oblige an Obligor to guarantee or act
as a guarantor for any obligation of the Company under this Agreement.
(e) SECURITY - NON-UK OBLIGORS If requested to do so in writing by the
Facility Agent, the Company shall procure that in respect of a Group
Member not incorporated in England and Wales (that is not a Dormant
Company) to which such request relates there is delivered to the Facility
Agent within 45 days (or such longer period as the Majority Banks may
agree) of any such request a Guarantor's Accession Agreement and/or a
Guarantee duly executed by such Non-UK Obligor, a Security Document
together with a notice of accession under the Intercreditor Agreement and
each of the conditions precedent documents required to be provided in
connection therewith, all in a form and substance reasonably satisfactory
to the Facility Agent save that, notwithstanding the foregoing, (x) only
the Company shall be liable for its obligations under this Agreement and
nothing herein shall oblige an Obligor to guarantee or act as a guarantor
for any obligation of the Company under this Agreement and (y) nothing
herein shall oblige the Company to pledge (as determined by applicable
law) more than 65% of its interest in the voting share capital in any of
its Immediate Subsidiaries and the Company shall not be obliged to procure
that a Non-UK Obligor (the "RELEVANT COMPANY") becomes an Obligor:
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(i) if it is unlawful in the Relevant Company's jurisdiction of
incorporation for it to support the obligations of the Company under
the Finance Documents and, for the purposes of this Clause 19.4 it
shall not be unlawful if an amendment to the Relevant Company's
constitutive documents may be made which would enable it lawfully to
become an Obligor; or
(ii) if, as a result of the Relevant Company becoming an Obligor, the
directors of the Relevant Company in their capacity as directors of
an Obligor otherwise than solely as a result of any such director
failing to properly discharge all of his obligations and duties in
his capacity as a director of such Relevant Company would be liable
to criminal prosecution solely as a result of the Relevant Company
becoming an Obligor,
and, in each case, the maximum level of support provided by an Obligor
shall not exceed the maximum amount able to be provided by such Relevant
Company having regard to generally applicable laws in its country of
incorporation.
(f) SECURITY THRESHOLD: Without prejudice to Clauses 19.4(d), 19.4(e) and
19.4(g) the Company shall procure that if:
(i) the consolidated earnings before interest, tax depreciation and
amortisation of the Obligors as at the last day of the quarterly
Accounting Period of the Group last ended is less than 85 per cent of
the Consolidated Adjusted EBITDA in respect of such quarterly
Accounting Period (as determined by reference to the Compliance
Certificate delivered pursuant to Clause 19 in respect of such
Accounting Period); and
(ii) at any time the total assets of the Obligors is less than 85 per cent
of the sum of the Total Assets less the value of pre-paid pension
assets shown in the latest annual Financial Accounts of the Company
at such time,
then promptly after service of a notice to that effect on the Company by
the Facility Agent and in any event within forty five days (or such longer
period as the Facility Agent acting on the instructions of the Majority
Banks may agree) thereafter, in the event that the shortfall was with
respect to paragraph (i) above, a Group Member or Group Members whose
earnings before interest, tax depreciation and amortisation in aggregate
in respect of the financial year to which such shortfall relates was equal
to or greater than such shortfall and/or in the event that the shortfall
was with respect to paragraph (ii) above a Group Member or Group Members
whose total assets at such time in aggregate is equal to or greater than
such shortfall shall each execute a Guarantor's Accession Agreement or
enter into a Guarantee and in each case execute a Security Document over
all of its assets (both present and future) and an Intercreditor Agreement
Accession Notice and deliver them to the Facility Agent together with the
conditions precedent documents required to be provided in connection
therewith, all in a form and substance satisfactory to the Facility Agent,
Provided that for the purposes of this Clause 19.4(f) the terms "adjusted
earnings before interest, tax, depreciation and amortisation" and "total
assets" of a company shall be determined in accordance with the
capitalised defined terms contained in
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Clauses 1.1 and 1.2 (namely "Consolidated Adjusted EBITDA" and "Total
Assets" respectively), but as if references therein to the Company were
references to such company, references therein to the Group were
references to such company, references to the relevant period were
references to the annual Accounting Period of such company, and references
therein to the consolidated financial statements were references to the
latest audited financial statements of such company and on the basis that
all intra-Group items and investments shall be excluded.
(g) ADDITIONAL SECURITY
(i) The Company shall procure that (a) on acquiring (and in any event
within 45 days of such acquisition) any asset of material value, or
material to the operation of the business of any Obligor or to the
value of any other asset over which the Banks have security, the
Obligor acquiring such asset shall (if such asset is not, in the
reasonable opinion of the Security Agent, subject to any existing
Security Document giving equivalent security to that provided by the
Security Documents over similar assets held by any Obligor at
Closing and (subject to sub-paragraph (iii) below) it is legal,
practical and (in the opinion of the Facility Agent, acting
reasonably and having regard to the value of the asset or its
materiality to the operation of the business of such Obligor) cost
effective to do so) execute and deliver to the Security Agent such
further or additional Security Documents in relation to such assets
as the Majority Banks may require in substantially the same terms as
the Security Documents charging similar assets entered into at
Closing, and (b) if there has, in the reasonable opinion of the
Majority Banks, been a material and adverse change in the business,
assets or financial condition of any Obligor, such Obligor shall
execute and deliver to the Security Agent such further or additional
Security Documents in such form and in relation to such of its
assets as the Majority Banks shall require, subject in each case to
any provisions of law prohibiting such person from entering into
such Security Documents provided that notwithstanding the foregoing
(y) only the Company shall be liable for its obligations under this
Agreement and nothing herein shall oblige an Obligor to guarantee or
act as a guarantor for any obligation of the Company under this
Agreement and (z) nothing herein shall oblige the Company to pledge
(as determined by applicable law) more than 65% of its interest in
the voting share capital in any of its Immediate Subsidiaries.
(ii) The Company shall procure that any entity which becomes a Material
Group Member after Closing shall (within 45 days of becoming a
Material Group Member) execute and deliver to the Security Agent
such further or additional Security Documents in such form and in
relation to such of its assets as the Majority Banks shall require
subject to any provision of law prohibiting such person from
entering into such Security Documents.
(iii) Where any such prohibition as is referred to above exists, the
Obligors shall use their reasonable endeavours lawfully to overcome
the prohibition, and the Security Agent may (but shall not be
obliged to) agree with the relevant Obligor limitations on the
extent of the security granted by it to the extent
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that in its opinion, based on the advice of independent legal
counsel acceptable to the Security Agent in the relevant
jurisdiction, it is necessary to do so in order to overcome the
prohibition.
(iv) The Obligors shall at their own expense execute and do all such
assurances, acts and things as the Security Agent or the Majority
Banks may reasonably require for perfecting or protecting the
security intended to be afforded by the Security Documents or for
facilitating the realisation of all or any part of the assets which
are subject to the Security Documents and the exercise of all
powers, authorities and discretion's vested in the Security Agent or
in any receiver of all or any part of those assets and in particular
shall execute all transfers, conveyances, assignments and releases
of that property whether to the Security Agent or to its nominees
and give all notices, orders and directions which the Security Agent
may reasonably think expedient.
(v) The Company shall procure that in relation to each further or
additional Security Document the relevant Borrower or Guarantor
shall do all things necessary duly to perfect in the jurisdiction of
its incorporation and in the jurisdiction wherein the assets which
are the subject of the further or additional Security Documents are
located, the security to be afforded to the Finance Parties under
such further or additional Security Documents and shall deliver to
the Security Agent such directors and shareholders resolutions,
legal opinions, notices, certificates or documents of title or other
items as the Facility Agent shall require.
(h) NEW AUDITORS: Other than in circumstances where the outgoing auditor has
resigned the Company may appoint any one or more of Coopers Lybrand, Ernst
& Young, KPMG, Deloitte & Touche, Arthur Andersen, or Price Waterhouse (or
such other firm or firms as the Facility Agent may agree from time to
time) without the prior approval of the Facility Agent and in all other
cases the Company may only change its auditors with the prior approval of
the Facility Agent. If the Company wishes to change its auditors it will
notify the Facility Agent as to the reasons for any such proposed change
and if the Facility Agent so requests, will instruct the audit partner of
each of the outgoing firm of auditors and the replacement firm of auditors
to discuss the financial position of the Group with the Facility Agent.
The Company shall procure that, within ten Business Days of the date of
their appointment as Auditors, the accountants shall deliver to the
Facility Agent a letter from such newly appointed Auditors confirming that
they are aware of the provisions of this Agreement, including Clauses 6.3,
6.10, 19.1 and 20.
(i) PARI PASSU RANKING: The Company shall ensure that the obligations of each
Group Member under the Senior Finance Documents to which they are
expressed to be a party rank, and will at all times rank, at least pari
passu in right and priority of payment and in point of security (save by
reason of and to the extent of the security afforded thereto by the
Security Documents) with all its other present and future unsecured and
unsubordinated obligations, other than obligations applicable generally to
companies incorporated in its jurisdiction of incorporation which have
priority by operation of law (including, without prejudice to the
generality of the foregoing, in respect of employees' remuneration, Taxes
and like obligations).
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(j) COMPLIANCE WITH LAWS: The Company shall, and shall procure that each
Obligor and other Material Group Member shall procure that each other
Group Member shall, comply with all applicable laws, rules, regulations
and orders of any governmental authority, whether domestic or foreign,
having jurisdiction over it or any of its assets, failure to comply with
which might have a Material Adverse Effect.
(k) CONSENTS: The Company shall, and shall procure that each Obligor and each
Material Group Member (that is not an Obligor) shall, obtain, promptly
renew from time to time and maintain in full force and effect, and if so,
requested promptly furnish certified copies thereof to the Facility Agent,
all such material authorisations, approvals, consents, licences and
exemptions as may be required under any applicable law or regulation:
(i) to enable each Obligor to perform its respective material obligations
under the Finance Documents to which it is a party or required for
the validity or enforceability of such Finance Documents or of any
Encumbrances provided for thereby; and/or
(ii) to carry on its business as it is being conducted from time to time.
(l) THE PAYMENT OF EXISTING FINANCIAL INDEBTEDNESS: The Company shall pay
(or, as the case may be, procure that each other Group Member shall pay)
all amounts payable to Derby International and any other Persons to whom
the Existing Financial Indebtedness is owed and will otherwise perform its
material obligations in accordance with the terms of each of the
Recapitalisation Documents, and the Company will ensure that appropriate
action is taken to ensure receipt by the Company (or the relevant Group
Member) of any sums payable by any Person to any Group Member under any of
the Recapitalisation Documents.
(m) BOOKS AND RECORDS: The Company shall, and shall procure that each other
Group Member shall, keep or cause or procure to be kept proper books of
account and records relating to the business.
(n) GROUP ACTIVITY: The Company shall, and shall procure that each Group
Member shall, conduct any trading business it has with any other Group
Member on an arm's length basis and on terms and conditions similar to
those such Group Member offers (or, if it does not so offer, might
reasonably be expected to offer) to Persons that are not a Group Member or
consistent with practice applicable at the date hereof.
(o) ACCESS: Upon reasonable notice being given by the Facility Agent , the
Company will procure that any one or more representatives of the Facility
Agent and/or accountants or other professional advisers appointed by the
Facility Agent shall be entitled to have access during normal business
hours (i) to the Persons involved in the management of the Group as the
Facility Agent may reasonably request), and (ii) to the assets, books and
records of each Group Member that is not a Dormant Company, and are able
to inspect and copy the same at reasonable times.
(p) PENSION SCHEMES: The Company will, if requested by the Facility Agent
deliver to the Facility Agent (i) at such time as those reports are
prepared in order to comply with
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then current statutory or auditing requirements and (ii) not more than
once in any period of three years, if the Facility Agent reasonably
believes that the requirements of this Clause 19.4(p) are not being
complied with, actuarial reports in relation to each of the pension
schemes with an actuarial valuation of liabilities of more than $1,000,000
(or the equivalent thereof in other currencies) for the time being
operated by the Group Members (in sufficient copies for each of the
Finance Parties), and will, save as fully and fairly disclosed in the
Accountant's Report, ensure that all such pension schemes are fully funded
in accordance with reasonable actuarial assumptions applicable in the
jurisdiction in which the relevant pension scheme is maintained and in
accordance with Applicable Accounting Principles or, to the extent that
any such pension scheme is not fully funded, promptly upon being aware
thereof, take such action as is required to ensure that such pension
scheme is fully funded in accordance with the recommendations made or
instructions given in such respect of the relevant actuaries.
(q) SYNDICATION: The Company shall ensure that all Group Members will provide
assistance to the Facility Agent and the Arranger in the preparation of
the information memorandum for syndication of the Facilities, make the
Executives available, comply with all reasonable requests for information
from potential syndicate members and provide reasonable opportunities for
potential syndicate members to have access to their respective managers
and other personnel and to any sites operated by any Group Member.
(r) REGISTERED OFFICE: The Company shall, and shall procure that each Obligor
(that is not a Material Group Member) and each Material Group Member
shall, promptly (and in any event within 4 days) notify the Facility Agent
in writing of any change in its name or in the address of its registered
or principal office.
(s) EXECUTIVES: The Company undertakes that if (i) either the Chief Financial
Officer, or the Chief Executive Officer ceases or (ii) more than one
Executive together cease (whether by reason of death, retirement at normal
retiring age, ill health or otherwise) to perform the functions for which
he was or they were (as the case may be) employed it will within 6 months
of such Executive ceasing to perform such functions have offered to a
Person or Persons (as the case may be) having the appropriate
qualifications, background and experience, the position of the relevant
Executive or Executives (as the case may be) and such Person or Persons
(as the case may be) shall have accepted such offer in writing and the
Company will procure that each such Person shall have taken up his duties
as the relevant Executive of the Company within 6 months of each such
Executive ceasing to perform such functions.
(t) DORMANT COMPANIES: Each Obligor will procure that, save as permitted by
the Facility Agent or unless it becomes an Obligor and a party to the
Debenture or such other Security Document satisfactory to the Facility
Agent and provides to the Facility Agent each of the condition precedent
documents required to be provided in connection therewith, no Dormant
Company shall commence to trade (whether for its own account or for that
of another) after Closing or the date it became a Group Member (if later)
or incur any further liabilities or hold or acquire (whether legally or
beneficially) any material assets or property after such date.
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(u) ERISA: Each U.S. Obligor will not, and will procure that no ERISA
Affiliate will engage in any transaction in connection with which any U.S.
Obligor or any ERISA Affiliate could be subjected to either a civil
penalty assessed pursuant to section 502(i) of ERISA, a tax imposed by
section 4975 of the IRC or breach of fiduciary duty liability damages
(whether directly or indirectly);
(v) COMPLIANCE WITH MARGIN STOCK REGULATION: Each U.S. Obligor shall not, and
shall procure that its Subsidiaries shall not:
(i) (A) sell, carry, pledge or otherwise dispose of any margin stock
("MARGIN STOCK") within the meaning of Regulation U of the Board
of Governors of the Federal Reserve System of the U.S.A. as in
effect from time to time ("REGULATION U"), now owned or acquired
after the date of this Agreement; or
(B) incur any Financial Indebtedness directly or indirectly secured
(within the meaning of Regulation U) by any Margin Stock;
if such transaction would cause any of the Advances or any part thereof to
be in violation of Regulation U, or Regulation X of the Board of Governors
of the Federal Reserve System of the U.S.A., as in effect from time to
time ("REGULATION X");
(ii) use the proceeds of any Advance, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of purchasing or
carrying any Margin Stock or for the purpose of maintaining, reducing
or retiring any indebtedness which was originally incurred to
purchase or carry any stock that is currently a Margin Stock or for
any other purpose which might constitute any of the Facilities or
this Agreement a "purpose credit" within the meaning of Regulation U
or Regulation X. No Obligor and no agent acting on its behalf will
take or has taken any action which might cause this Agreement or the
Advances to violate Regulation U or Regulation X or any other
regulation of the Board of Governors of the Federal Reserve System.
(w) UCC FILINGS: Each U.S. Obligor at its own expense will make and renew
promptly or request the Facility Agent to instruct appropriate United
States counsel to make and renew, and, in any event, in the case of
renewal such that the renewal is made before any UCC filing relating to
any Senior Finance Document expires, all UCC filings relating to any
Senior Finance Document reasonably required by the Facility Agent and will
pay all applicable fees.
(x) INTELLECTUAL PROPERTY RIGHTS: The Company shall and shall procure that
each Group Member shall:
(i) make such registrations and pay such fees, registration Taxes and
similar amounts as are necessary to keep those Intellectual Property
Rights which are material in the context of the business of any Group
Member and which are required by it in order for it to carry on its
business in accordance with
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the Business Plan in force and to record its interest in those
Intellectual Property Rights;
(ii) take such steps as are necessary and commercially reasonable
(including, without limitation, the institution of appropriate legal
proceedings) to prevent third parties infringing the Material
Intellectual Property Rights and (without prejudice to paragraph (i)
above) take such other steps as are reasonably practicable to
maintain and preserve its interests in those rights;
(iii) promptly upon being required to so by the Security Agent, comply
with all proper instructions of the Security Agent which the
Security Agent is entitled to give under the Security Documents in
respect of the Intellectual Property Rights referred to in paragraph
(i) above; and
(iv) own or have licensed to it all Intellectual Property Rights which
are material in the context of its business and which are required
by it in order for it to carry on its business in accordance with
the Business Plan and that in carrying on its business it does not
infringe any Intellectual Property Rights of any third party in any
way.
(y) CLEAN DOWN: The Company shall ensure that for a continuous period of at
least 30 days during the period of 1 July to 31 October (inclusive) during
each annual Accounting Period the aggregate Deutschmark Equivalent of all
Financial Indebtedness of the Group (excluding any Financial Indebtedness
owed by a Group Member to another Group Member) other than under the Note
Documents and foreign exchange transactions (and without double-counting)
outstanding at any time during such period does not exceed DM 80,000,000
(or the equivalent thereof in other currencies).
(z) DISTRIBUTIONS: The Company shall ensure that:
(i) no agreement, instrument, Articles of Association or any other
arrangement (other than the Senior Finance Documents) shall restrict
or prevent any Group Member (excluding the Company) from declaring
or making payment of any dividend or make any other distributions of
capital or income profits (any such payment being a "GROUP COMPANY
DISTRIBUTION") to the maximum amount permitted by generally
applicable laws in the jurisdiction in which such Group Member is
incorporated provided that no Group Company Distribution shall be
paid to any Person in breach of Clause 19.5(o); and
(ii) each Group Member (that is not an Obligor) makes Group Company
Distributions in each annual Accounting Period to the maximum extent
permitted by generally applicable laws in the jurisdiction in which
such Group Member is incorporated, to the extent not restricted by
the terms and conditions of any of the Senior Finance Documents
(including without limitation Clause 19.5(o)).
(aa) NOTE EXCHANGE: Notwithstanding any other provision of this Agreement
nothing herein shall be construed as prohibiting any Note Issuer, from
time to time, agreeing
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to the exchange of one type of Senior Note for another type of Senior Note
or the refinancing of a Senior Note from the proceeds of the issuance of
new Senior Notes in accordance with the provisions of the Note Documents
and taking such action as is required to facilitate the same.
(ab) EXCHANGE CONTROL UNDERTAKING: The Company shall use its reasonable
endeavours to ensure that both members of the South African Group obtain
and maintain an Exchange Control Undertaking as soon as it is practicable
to do after the date of this Agreement and accede to this Agreement as
Borrowers and Guarantors.
19.5 NEGATIVE UNDERTAKINGS
(a) NEGATIVE PLEDGE: The Company shall not, and shall procure that no other
Group Member shall, create or permit to subsist any Encumbrances on the
whole or any part of its respective present or future business, assets or
undertaking (including its Intellectual Property Rights) other than
Permitted Encumbrances.
(b) DISPOSALS: The Company shall not, and shall procure that no other Group
Member shall, sell, transfer, lease, lend or otherwise dispose of or enter
into any agreement under which it may be or become obliged to sell,
transfer, lease, lend or otherwise dispose of any of its shares in any
Group Member or undertaking and assets from time to time either in a
single transaction or a series of transactions otherwise than:
(i) (in the case of any Group Member which is a trading company)
disposals of trading assets in the ordinary course of trading on
arm's-length terms;
(ii) disposals of assets on arm's length terms not otherwise permitted
under this Clause 19.5(b) provided that the aggregate fair market
value of the assets disposed of during any annual Accounting Period
does not exceed $500,000 (or the equivalent thereof in other
currencies);
(iii) disposal of assets in exchange for other assets comparable or
superior as to type, value and quality;
(iv) disposals of surplus, obsolete or redundant plant and equipment, or
of land or buildings not required for the efficient operation of its
business, on arm's length terms and at fair market value;
(v) the expenditure of Cash in payment for assets or services acquired
at market value in the course of its business carried on in
compliance with the terms of the Senior Finance Documents;
(vi) the lending of Cash and payment or repayment of Cash lent in
compliance with the terms of the Senior Finance Documents;
(vii) the disposal of assets by one UK Obligor to another UK Obligor on
an arm's length basis on normal commercial terms;
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(viii) (to the extent that paragraph (vii) does not apply) the disposal of
assets by one Obligor (the "DISPOSING OBLIGOR") to another Obligor
(the "RECIPIENT OBLIGOR") on an arm's length basis on normal
commercial terms provided that the recipient Obligor has received
prior confirmation from the Facility Agent that it is satisfied
that the Encumbrance that the recipient Obligor has given (or, as
the case may be, will give promptly after the proposed disposal
pursuant to a Security Document) is such that the Encumbrance
granted thereby, should the proposed disposal be permitted pursuant
to this paragraph (viii), over the relevant asset or assets is, or
will be, at least as favourable to the Finance Parties as the
Encumbrance that the disposing Obligor provided to the Finance
Parties over such assets or assets immediately before the proposed
disposal;
(ix) the payment of dividends in compliance with the terms of the Senior
Finance Documents;
(x) the payment of amounts payable under or in respect of or in the
performance of obligations under the Note Documents to the extent
that such payment does not breach the provisions of Clause 19.5(p);
(xi) the transfer of the legal title to the property situated on the
west side of Triumph Road, Nottingham, England (Postcode WE7 2EL)
by Raleigh Industries Limited (together, in respect of one part of
the said property, with Derby Holdings Limited to Sturmey-Archer
Limited of Triumph Road, Nottingham, England and the transfer of
the legal title to the property at the corner of Downing Street and
Cornwall Road, Nottingham from British Cycle Limited to Sturmey-
Archer Limited;
(xii) the disposal of assets as contemplated by Exhibit 8.10A of the
Recapitalisation Agreement, provided that the aggregate book value
of such assets does not exceed South African rand 1,300,000; and
(xii) disposals of assets which were acquired after the date of this
Agreement in accordance with, and as permitted by, the terms of
this Agreement the future disposal of which was in the opinion of
the Facility Agent contemplated at the time of their acquisition.
All such sales, transfers, leases or other disposals shall (other than
intra-Group transfers to which the Facility Agent has previously consented
(such consent not to be unreasonably withheld), be made only for a cash
consideration payment of which may not be deferred for more than three
months from the date of such sale, transfer, lease or other disposal.
Provided that, without prejudice to the foregoing, no Group Member (other
than the Company or a Group Member that is an Immediate Subsidiary ) may
sell, transfer, lease, lend or otherwise dispose of or enter into any
agreement under which it may be or become obliged to sell, transfer,
lease, lend or otherwise dispose of any of its shares in any Group Member
or undertaking and assets, either in a single transaction
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or a series of transactions to the Company or an Immediate Subsidiary
other than as specifically contemplated, at Clause 19.5(c) or, as the case
may be, Clause 19.5(o).
(c) LOANS OUT: The Company shall not and shall procure that no other Group
Member shall, grant or make available to another Person any Financial
Indebtedness, save for:
(i) any Financial Indebtedness where trade credit is extended by any
Group Member on normal commercial terms and in the ordinary course of
its business on substantially the same terms (or terms more
favourable to it) and in similar circumstances as for trade credit
extended prior to the Closing;
(ii) loans made by one Group Member to another Group Member where:
(A) the loan is specified in the Intra-Group Loan Memorandum;
(B) (subject to paragraph (E) below) the recipient of the loan, if
made by a Group Member is an Obligor that is not a Note Issuer;
(C) the recipient of the loan is a Group Member incorporated in
South Africa and the loan is applied by such Group Member in or
towards the purchase of all minority shareholdings in such Group
Member as at the date of this Agreement provided that the loan
does not exceed (when aggregated with any similar loans)
$2,000,000 LESS any amounts remitted to Group Members in South
Africa for such purpose pursuant to Clause 19.5(o)(vi) and such
loan is made within 30 days of the date of this Agreement;
(D) the recipient of the loan, if made by a Note Issuer, is an
Obligor;
(E) the recipient of the loan is the Company or, as the case may be,
Lyon Investments B.V. provided that:
(i) such loan is required to be made to the Company or, as the
case may be, Lyon Investments B.V. (having regard to the
available assets of the Company or, as the case may be,
Lyon Investments B.V. at such time) so as to enable the
Company or, as the case may be, Lyon Investments B.V. to
make payment of interest or liquidated damages as defined
in the Note Documents when due under the Note Documents
(provided that such payment would not be in breach of any
of the Senior Finance Documents and such loan is promptly,
and in any event within 7 days of it being made, so
applied); or
(ii) the loan is made to the Company to enable it to pay:
(AA) fees of an amount which is, in the context,
reasonable, payable to any of its non-executive
directors pursuant to
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the terms of the contracts or other formal
arrangements entered into by the Company with such
non-executives;
(BB) management fees payable to Thayer by the Company at
any time after 31 December 1998 pursuant to the
Management Agreement (if any) not exceeding $400,000
in aggregate in any Financial Year provided that
payment of the same could not reasonably be expected
to (were such payment made) result in a breach of any
provision of this Agreement;
(CC) provided that the prior consent of the Banks (through
the Facility Agent) has been obtained all or any part
of the Additional Payment; and
to the Company by each other Group Member to enable the
Company to pay amounts due to the Internal Revenue Service
in the United States on account of tax due in respect of
such Group Member's operations or the Company's operations
and payable by the Company on behalf of such Group Member
or by the Company; or
(F) the recipient of the loan (made by an Obligor) is a Group
Member that is not an Obligor provided that the aggregate
amount of any such loans does not exceed in aggregate
$1,000,000 (or the equivalent in other currencies); and
(iii) (in addition to paragraphs (i) and (ii) Financial Indebtedness in an
aggregate principal amount (for the Group as a whole) not exceeding
$250,000 (or the equivalent in other currencies) at any time.
(d) ACQUISITIONS: The Company shall not, and shall procure that no other
Group Member shall acquire any asset otherwise than:
(i) in the ordinary course and for the purposes of its business;
(ii) Cash Equivalent Investments;
(iii) the acquisition of shares in a wholly-owned Subsidiary acquired or
established solely for the purpose of holding the assets of and/or
administering the pensions of employees of Group Members;
(iv) in accordance with the disposal provisions in Clause 19.5(b); or
(v) in addition to Clauses 19.5(d)(i) to (d)(iv) above, acquisitions
made pursuant to this paragraph (v) (each a "PERMITTED ACQUISITION")
the aggregate consideration (whether in cash or otherwise, and
whether actual or contingent) paid or payable by a Group Member in
respect thereof, or exposure thereto or in respect thereof (when
taken together with all other
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Permitted Acquisitions and Investments made during the relevant
annual Accounting Period) does not and will not, in such annual
Accounting Period, exceed the Permitted Amount for such period and,
in any event (when taken together with all other Permitted
Acquisitions and Investments made after the date of this Agreement),
does not and will not exceed $30,000,000 (or the equivalent in other
currencies).
(e) SALES WITH RECOURSE: Without prejudice to Clause 19.5(b) and Clause
19.5(h) the Company shall not, and shall procure that no other Group
Member shall:
(i) sell or otherwise dispose of any of their respective assets on terms
whereby such asset or assets are or may be leased to, or re-acquired
or acquired by, any Group Member; or
(ii) sell or dispose of any of its receivables (including, without
limitation to the Financial Accounts, as defined at Clause 6) on
recourse terms or enter into any factoring (or similar) arrangement
without respect thereto,
unless the aggregate book value of the assets and receivables so sold or
disposed does not exceeds $500,000 per annum (or the equivalent in other
currencies).
(f) CHANGE OF BUSINESS: The Company shall not, and shall procure that no other
Group Member shall, make or threaten to make any change in its business as
presently conducted, which would result in a change in the general nature
of business carried on by the Group as a whole (other than where this is
due to acquisitions permitted under Clause 19.5(d) above or disposals made
consistent with the Business Plan), or carry on any other business which
is substantial in relation to the business of the Group as conducted at
the date of this Agreement.
(g) MERGERS: The Company shall not, and shall procure that no other Group
Member shall enter into any merger or consolidation or make any
acquisition of any other company, Person or business save as otherwise
specifically permitted pursuant to this Agreement.
(h) FINANCIAL INDEBTEDNESS: The Company shall not, and shall procure that no
other Group Member shall incur or permit to subsist any Financial
Indebtedness other than Permitted Financial Indebtedness and, without
prejudice to the foregoing the Company shall procure that no Person
including any Group Member, other than a Note Issuer shall guarantee or
offer any financial accommodation or financial assistance of any nature
whatsoever in respect of the Note Issuers' obligations under the Note
Documents or any of them or of any other Financial Indebtedness incurred
by them in any capacity and further, no Group Member shall incur any
Financial Indebtedness which has the economic effect of being Financial
Indebtedness but which is an "off balance sheet" arrangement.
(i) THIRD PARTY GUARANTEES: The Company shall not, and will procure that no
other Group Member shall, incur or permit to be outstanding, any Financial
Indebtedness falling within the provisions of paragraph (g) of the
definition of that term in Clause 1.2 other than any such Financial
Indebtedness:
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(i) arising under the Senior Finance Documents;
(ii) arising out of the endorsement of negotiable instruments for the
purpose and in the ordinary course of carrying on the relevant
entity's trade; or
(iii) arising out of guarantees in favour of a Bank to facilitate the
operation of bank accounts of such Group Members (other than the
Note Issuers) maintained with such Bank on a net balance basis for
the purposes of cash management.
Provided that, notwithstanding the foregoing, no Obligor may incur or
permit to be outstanding any Financial Indebtedness falling within
paragraph (g) of the definition of that term in Clause 1.2 to the extent
that it relates to any Financial Indebtedness incurred by or on behalf of
a Note Issuer (in any capacity), or a Group Member that is not an Obligor.
(j) OPTIONS: Other than the exercise of an option entered into in accordance
with, and not prohibited by the Approved Hedging Programme or in respect
of the MS Group Option the Company shall not, and will procure that no
other Group Member shall, enter into or permit to subsist any arrangement
whereby any Person:
(i) has the right (whether or not exercisable only a contingency) to
require any Group Member to purchase or otherwise acquire any
property or any interest in any property; or
(ii) has the right (whether or not exercisable only a contingency) to
require any Group Member to sell or otherwise dispose of any
property or interest in any property.
(k) TREASURY TRANSACTIONS: The Company shall not, and will procure that no
other Group Member shall, enter into any interest rate, swap, cap,
ceiling, collar or floor or any currency swap, futures, foreign exchange
or commodity contract or option (whether over the counter or exchange
traded) or any similar treasury transaction, other than the Hedging
Protection Arrangements, spot foreign exchange contracts entered into in
the ordinary course of business and transactions entered into for the
hedging of actual or projected exposures arising in the ordinary course of
ordinary trading activities of the Group and in accordance with the
Approved Hedging Programme carried on, in each case, in compliance with
the terms of the Senior Finance Documents and which in any such case are
entered into with an Approved Bank.
(l) INVESTMENTS: Save to the extent permitted by Clause 19.5(d) the Company
shall not, and will procure that no other Group Member shall acquire (by
subscription or otherwise) any business or any shares or other securities
(or any interest therein) or otherwise establish other than the Acquired
Assets and Cash Equivalent Investments save as disclosed in the Structure
Memorandum.
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(m) SUBSIDIARIES:
(i) Save to the extent permitted by Clause 19.5(d) the Company shall not
acquire any Subsidiaries which are not Subsidiaries immediately
following the Closing or acquire any businesses after the Closing or
enter into any agreement which it may be or become bound to acquire
any Subsidiary or business unless such Subsidiary is incorporated in
the United Kingdom and each of the other provisions of this Agreement
and the Finance Documents are complied with.
(ii) The Company shall not incorporate any Subsidiaries without the prior
consent of the Facility Agent (acting on the instructions of the
Majority Banks).
(n) JOINT VENTURES: The Company shall not, and will procure that no other
Group Member shall, without the consent of the Majority Banks, acquire any
shares, stock, securities or other interest in, or transfer any assets,
to, or lend to or guarantee the obligations of any Joint Venture, or
commit to any third party or enter into any Joint Venture or become party
to any joint venture agreement or arrangement where it has any obligation
(whether to such Joint Venture or to any other Person, and whether actual
or contingent) to lend to or guarantee or transfer assets to or otherwise
fund or incur any liability in respect of such Joint Venture or any other
Person (each such acquisition, transfer, loan, guarantee, commitment,
agreement and arrangement being an "INVESTMENT"), save that Group Members
may make, or agree to make any Investment, provided that as a result
thereof the aggregate consideration (whether in cash or otherwise, and
whether actual or contingent) paid or payable by a Group Member in respect
thereof, or exposure thereto or in respect thereof (when taken together
with all other Investments made during the relevant annual Accounting
Period and Permitted Acquisitions in such annual Accounting Period) does
not and will not, in such annual Accounting Period, exceed the Permitted
Amount for such period and, in any event (when taken together with all
other Investments made and Permitted Acquisitions after the date of this
Agreement), does not and will not exceed $30,000,000 (or the equivalent in
other currencies).
(o) DISTRIBUTIONS: the Company shall not, and shall procure that Lyon
Investments B.V. and each of the Company's and Lyon Investments B.V.'s
respective immediate Subsidiaries shall not, at any time declare or make
payment of any dividend or make any other distribution of capital or
income or profits or payment of any fees, management charges or other
amounts whatsoever to any of its members, make any other redemption or
purchase of its own shares or create or issue or reissue any loan or
debenture stock (any such payment being a "DISTRIBUTION") to the Company
or as the case may be Lyon Investments B.V. other than:
(i) to the extent required (having regard to the available assets of the
Company or as the case may be, Lyon Investments B.V. at such time) so
as to enable the Company or, as the case may be, Lyon Investments
B.V. to make payment of interest (including liquidated damages (as
defined in the Note Documents) when due under the Note Documents or,
in the case of the
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Company only, this Agreement (provided that each such payment would
not be in breach of any of the Senior Finance Documents);
(ii) to enable the Company to pay fees of an amount which is, in the
context, reasonable, payable to any of its non-executive directors
pursuant to the terms of the contracts or other formal arrangements
entered into by the Company with such non-executive directors;
(iii) to enable the Company to pay management fees payable to Thayer by
the Company pursuant to the Management Agreement (if any) not
exceeding $400,000 in aggregate in any Financial Year after 31
December 1998 provided that payment of the same could not reasonably
(were such payment made) result in a breach of any provision of this
Agreement;
(iv) (with the prior written consent of the Banks) so as to enable the
Company to pay all or part of the Additional Payment;
(v) payments required to be made to the Company by each other Group
Member to enable the Company to pay amounts due to the Internal
Revenue Service in the United States on account of tax due in
respect of such Group Member's operations or the Company's
operations and payable by the Company on behalf of such Group Member
or by the Company; and
(vi) so as to enable the Company to remit monies to Group Members
incorporated in The Republic of South Africa in order to enable
those companies to purchase all of the minority shareholdings in
such Group Member as at the date of this Agreement for an amount not
exceeding $2,000,000 LESS any amounts loaned to Group Members
incorporated in South Africa for such purpose as contemplated by
Clause 19.5(c)(ii)(C) at Closing (or within 30 days thereof).
The Company shall procure that no Group Member may make any payment or
take any action on behalf of the Company or any other Group Member or
enter into any arrangement on behalf of the Company or any other Group
Member if the Company or any other Group Member, is restricted from making
such payment, taking such action or entering into such arrangement
pursuant to the provisions hereof.
(p) PAYMENTS - NOTE DOCUMENTS:
(i) None of the Note Issuers shall:
(A) repay, prepay, redeem or repurchase all or any (or any part) of
the Senior Notes (other than to the extent the same is required
in order to effect an exchange or refinancing of the Senior
Notes as permitted by Clause 19.4(aa)); or
(B) make any deposits pursuant to the "Defeasance" provisions
contained in the Note Documents.
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(ii) Save to the extent prohibited under paragraph (i) above, the Note
Issuers shall be entitled to make payments they are obligated to
make under the Note Documents in the manner and at the time any such
payment is required to be made thereunder.
The Company shall procure that no Group Member may make any payment or
take any action on behalf of any of the Note Issuers or enter into any
arrangement on behalf of any of the Note Issuers if such Note Issuer
itself, is restricted from making such payment, taking such action or
entering into such arrangement pursuant to the provisions hereof.
(q) AMENDMENTS: The Company shall not, and shall procure that no other Group
Member shall, permit or effect any variations, novations or amendments or
waive any conditions to any of:
(i) the objects clause of the Memorandum of Association (or, if the
country of incorporation of the relevant Group Member is not England
and Wales, the applicable similar or analogous documents) of any
Obligor or Material Group Member (that is not an Obligor) (as at the
date of this Agreement);
(ii) the Articles of Association of any Group Member (or, if the country
of incorporation of the relevant Group Member is not England and
Wales, the applicable similar or analogous documents) (as at the
date of this Agreement);
(iii) the Recapitalisation Documents (as at the date of this Agreement);
(iv) the Finance Documents (as at the date of this Agreement),
unless such variation, novation, amendment or waiver (when taken together
with any other variation, novation, amendment or waiver) is of a purely
technical or administrative nature or has previously been agreed to in
writing by the Facility Agent in respect of the Senior Finance Documents,
in accordance with the provisions of this Agreement).
(r) ADMINISTRATION AND WINDING-UP ORDERS ETC.: The Company shall not, and
shall procure that no other Group Member shall, make or join in making any
application to any court for an administration, winding-up, receivership
or other similar order to be made in relation to any Group Member, other
than in respect of a solvent winding-up or dissolution of a Group Member
which is not an Obligor.
(s) ARM'S-LENGTH TERMS: The Company shall not, and shall procure that no
other Group Member shall, enter into any material transaction with any
Person otherwise than on arms-length terms and for full market value save
for inter-company loans permitted pursuant to this Clause 19.5.
(t) BANK ACCOUNTS: The Company shall not, and shall procure that no other
Group Member shall, open or maintain any account with any branch of any
bank or other
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financial institution providing like services (other than an account
maintained pursuant to the requirements of the Senior Finance Documents)
unless:-
(i) such branch and bank or financial institution shall be an Approved
Bank save that to the extent not otherwise prohibited under this
Agreement, a Group Member that is not an Obligor or a Material Group
Member may be entitled to open or maintain an account with a bank or
branch or financial institution which is not an Approved Bank (an
"ALTERNATIVE BANK" ) provided that the Alternative Bank does not have
an Encumbrance (other than a Permitted Encumbrance) over such account
or any other assets of any Group Member in respect of such account
and any liabilities of the relevant Group Member relating thereto; or
(ii) such account was maintained by such Obligor or, as the case may be,
such Material Group Member prior to the date of this Agreement and
(within 30 days of the date of this Agreement) such Obligor or, as
the case may be, such Material Group Member has put in place
arrangements satisfactory to the Facility Agent whereby the amount
standing to the credit of such account is transferred (without any
specific instructions being given in respect thereof on a regular
basis) to an account held by an Approved Bank at the end of each
Business Day.
(u) CAPITAL EXPENDITURE: The Company may request the Facility Agent to approve
and the Facility Agent (acting on the instructions of the Majority Banks)
may approve in writing prior to the commencement of any annual Accounting
Period the figure for Capital Expenditure (the "REVISED CAPEX LEVEL")
shown in the budget for any annual Accounting Period delivered to the
Facility Agent pursuant to Clause 19.1. If the Facility Agent so approves
the Revised Capex Level for any annual Accounting Period then the Group
taken as a whole may make Capital Expenditure on assets in an amount up to
(but not in excess of) the amount of the Revised Capex Level for such
Annual Accounting Period, and the Company will procure that the Group
taken as a whole will not make Capital Expenditure on assets during such
annual Accounting Period in an amount in excess of the Revised Capex
Level. In respect of the period from the Closing to the date set out in
the first line of column (1) below and, in the absence of any such written
approval by the Facility Agent of a Revised Capex Level for any following
annual Accounting Period, the Company undertakes that in respect of each
of the annual Accounting Periods ending on the dates set out in column (1)
below, it will procure that the Group, taken as a whole, will not make
Capital Expenditure on assets in an amount for each such Accounting Period
or period in excess of the amount set out in column (2) below against the
relevant date (the Capital Expenditure in respect of any period listed
below, or, as the case may be, the Revised Capex Level relating thereto
being the "ORIGINAL CAPITAL EXPENDITURE LEVEL").
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<TABLE>
<CAPTION>
===================================================================
(1) (2) $ (or the equivalent thereof
in other currencies
-------------------------------------------------------------------
<S> <C>
31 December 1998 9,000,000
31 December 1999 9,000,000
31 December 2000 8,500,000
31 December 2001 8,500,000
31 December 2002 8,500,000
31 December 2003 8,500,000
31 December 2004 8,500,000
31 December 2005 8,500,000
===================================================================
</TABLE>
provided that:
(i) the amount of any such Original Capital Expenditure Level not
utilised in any annual Accounting Period may be carried forward for
twelve months only and added (otherwise than for the purposes of the
further application of this proviso) to the Original Capital
Expenditure Level for the next annual Accounting Period and, for the
purpose of this Clause 19.5(u), to the extent that any Capital
Expenditure limit is carried forward pursuant to the provisions
herewith, to the next annual Accounting Period, Capital Expenditure
made in such annual Accounting Period shall be deemed to relate first
to such Capital Expenditure limit so carried forward to such annual
Accounting Period;
(ii) in addition to the Original Capital Expenditure Level applicable to
any period set out in column (1) above, the Group may make additional
Capital Expenditure on assets during such period equal to 50% of the
amount by which Consolidated Adjusted EBITDA for the immediately
preceding period exceeded the amount of Consolidated Adjusted EBITDA
shown in the Model for such period LESS amounts paid by the Company
in respect of the management fee, under the Management Agreement (if
any) or otherwise in such immediately preceding period(in each case
the "EXCESS AMOUNT") having regard to the financial statements
delivered pursuant to Clause 19, Provided that the application of an
amount equal to such Excess Amount in making such additional Capital
Expenditure, ought not, on a balance of probabilities, having regard
to the relevant budget or budgets provided pursuant to Clause 19.1(b)
or any other financial information provided under Clause 19 or
otherwise give rise to the breach of any of the said financial
conditions, as the same is determined by the Facility Agent (acting
reasonably); and
119
<PAGE>
(iii) the Original Capital Expenditure Level in respect of any period set
out in column (1) above ending on or prior to 31 December 1999,
shall be reduced by an amount equal to the amount by which Year 2000
Expenditure was expensed by the Group through its income statement
during such period.
(v) REAL PROPERTY: Save to the extent that the aggregate amount applied by the
Group for such purpose in any annual Accounting Period does not exceed
$250,000 (or the equivalent thereof in other currencies) the Company shall
not, and shall procure that no other Group Member shall develop or
redevelop all or any part of any real property owned by it or in which it
has a freehold or leasehold (or any other) interest, save for its own
occupation and use and in each case where the cost of so doing is within
the Capital Expenditure limits set out in Clause 19.5(u) above.
(w) SHARE CAPITAL: The Company will not:
(i) redeem, repurchase, retire, return or repay any of its share capital,
or resolve to do so; or
(ii) save as contemplated by the Recapitalisation Documents (as at the
date of this Agreement) issue any new share capital or grant any
option to any Person to subscribe for any shares in its capital other
than another Group Member (provided that if the Security Agent
already has security over the shares of the issuer of any such new
shares then the Company will procure that the Group Member to whom
such new shares are issued promptly provides security over such
shares to the Security Agent to the reasonable satisfaction of the
Security Agent),
Provided that, notwithstanding the foregoing, the Company may:
(a) issue (x) ordinary share capital of a type substantially similar to
any class of its shares in issue at the Closing, which is subscribed
for in full in Cash, in respect of which no dividend or distribution
may be declared, made or paid unless to do so would not result in a
breach of this Agreement and where such issue would not result in a
breach of Clause 21.1(y) or any other provision of this Agreement and
(y) classes of shares other than ordinary shares provided that at the
time of their issue and subsequently, their issue would not (or could
not, if any rights attached thereto were to be exercised) breach
Clause 21.1(y) hereof or any other provision of this Agreement;
(b) issue shares to employees pursuant to the employee share ownership
scheme in existence as at the date of this Agreement (details of
which have been provided to the Facility Agent pursuant to paragraph
15 of Schedule 6) and any other similar or replacement scheme to
which the Facility Agent has given its prior written approval; and
(c) as contemplated in connection with MS Group Option.
(x) PREPAYMENT OF OTHER FINANCIAL INDEBTEDNESS: The Company will not, and will
procure that no Group Member will prepay any Financial Indebtedness
earlier than its
120
<PAGE>
original scheduled maturity which, in the case of the Senior Notes' is
approximately May 2008 (i) other than to the Banks under the Senior
Finance Documents in accordance with the provisions of this Agreement;
(ii) to an Obligor; or (iii) to another Group Member not exceeding
$100,000 in aggregate in any Financial Year.
(y) SURPLUS CASH: Neither the Company nor any of the Immediate Subsidiaries
will, at any time, hold any Cash or Cash Equivalent Investments greater
than required for its projected cashflow requirements for the next 30 days
(the amount of any such excess being the "CASH BALANCE") and the Company
shall, promptly upon being aware of such a situation procure that such
Cash Balance shall be lent by itself or, as the case may be, the relevant
Immediate Subsidiary to an account situated in England, Wales or Ireland,
provided that such account and any credit balance standing to the credit
thereof is subject to a Debenture or, as the case may be, an Irish
Debenture. save that, notwithstanding the foregoing, the Company may hold
Cash that has been remitted to it in accordance with Clause 19.5(p) and
apply the same in accordance therewith.
(z) ADDITIONAL PAYMENT: The Company shall pay or agree to pay all or any of
the Additional Payment (whether in cash or otherwise) nor any Person to
take any steps to enforce any rights they may have in respect of the
Additional Payment without, in each case, having obtained the Facility
Agent's prior approval (acting on the instructions of each of the Banks).
(ac) REDEMPTION: RIC shall not redeem or agree to redeem all or any of its
shares, including, without limitation any of the RIC Preferred Shares nor
permit the holder of any of the RIC Preferred Shares to redeem or attempt
to redeem all or any of the RIC Preferred Shares without, in each case,
having obtained the Facility Agent's prior approval (acting on the
instructions of each of the Banks).
121
<PAGE>
PART 7
20. FINANCIAL UNDERTAKINGS
20.1
(a) The Company shall ensure that in calculating Consolidated Adjusted EBITDA
and Consolidated Net Interest Payable, for any Accounting Period (other
than in respect of in the case of Consolidated Net Interest Payable, to
the extent that the calculation relates to the periods ending on 27
September 1998, 31 December 1998 and 28 March 1999 respectively) an
adjustment shall be made so as to ensure that such calculations are made
on a fully annualised basis in accordance with the following formula:
A x 365
-
B
Where:
A = The amount (being Consolidated Adjusted EBITDA or, as the case may
be, Consolidated Net Interest Payable, in each case, having been
determined on a Rolling 4 Quarterly basis in accordance with Clause
20.2 (including, for the avoidance of doubt, any such amount
determined in accordance with Clause 20.2(a)(i)) to which the
calculation relates.
B = the number of actual days comprising the four consecutive quarterly
Accounting Periods to which the relevant determination relates.
20.2 The Company shall ensure that, the consolidated financial condition of the
Group shall be such that:
(a) the ratio of Consolidated Adjusted EBITDA to Consolidated Net Interest
Payable;
(i) in respect of each of the periods ending on the Accounting Dates 27
September 1998, 31 December 1998 and 28 March 1999 respectively,
where Consolidated Adjusted EBITDA is calculated on a Rolling 4
Quarterly basis and Consolidated Net Interest Payable is, for the
purposes of this sub-paragraph (i), calculated on a fully annualised
basis as per the formula:
A x 365
---
B
where:
A = the Consolidated Net Interest Payable for the period from 1 July
1998 to the Accounting Date at the end of the relevant quarterly
Accounting Period; and
122
<PAGE>
B = the number of days elapsed from the Closing to (and including)
the last day of the relevant quarterly Accounting Period Date
relates;
and
(ii) in respect of each of the subsequent Accounting Dates, calculated on
a Rolling 4 Quarterly basis for any period ending on an Accounting
Date specified in the table below,
shall, in each case, not be less than the ratio set opposite such
Accounting Date in the table below:
<TABLE>
<CAPTION>
================================================================================
ACCOUNTING DATE RATIO
--------------------------------------------------------------------------------
<S> <C>
27 September 1998 1.70:1
--------------------------------------------------------------------------------
31 December 1998 1.70:1
--------------------------------------------------------------------------------
28 March 1999 1.75:1
--------------------------------------------------------------------------------
27 June 1999 1.75:1
--------------------------------------------------------------------------------
26 September 1999 1.80:1
--------------------------------------------------------------------------------
31 December 1999 1.80:1
--------------------------------------------------------------------------------
2 April 2000 1.85:1
--------------------------------------------------------------------------------
2 July 2000 1.90:1
--------------------------------------------------------------------------------
1 October 2000 1.90:1
--------------------------------------------------------------------------------
31 December 2000 2.00:1
--------------------------------------------------------------------------------
1 April 2001 2.00:1
--------------------------------------------------------------------------------
1 July 2001 2.05:1
--------------------------------------------------------------------------------
30 September 2001 2.05:1
--------------------------------------------------------------------------------
31 December 2001 2.10:1
--------------------------------------------------------------------------------
31 March 2002 2.15:1
--------------------------------------------------------------------------------
30 June 2002 2.20:1
--------------------------------------------------------------------------------
29 September 2002 2.25:1
--------------------------------------------------------------------------------
31 December 2002 2.25:1
--------------------------------------------------------------------------------
30 March 2003 2.35:1
--------------------------------------------------------------------------------
29 June 2003 2.35:1
--------------------------------------------------------------------------------
28 September 2003 2.40:1
--------------------------------------------------------------------------------
31 December 2003 2.40:1
--------------------------------------------------------------------------------
</TABLE>
123
<PAGE>
<TABLE>
<CAPTION>
================================================================================
ACCOUNTING DATE RATIO
--------------------------------------------------------------------------------
<S> <C>
28 March 2004 2.50:1
--------------------------------------------------------------------------------
27 June 2004 2.50:1
--------------------------------------------------------------------------------
26 September 2004 2.55:1
--------------------------------------------------------------------------------
31 December 2004 2.55:1
--------------------------------------------------------------------------------
3 April 2005 2.60:1
================================================================================
</TABLE>
(b) the Consolidated Net Worth, during each of the periods specified in the
table below shall be more than the amount set opposite to such period in
the table below:
<TABLE>
<CAPTION>
================================================================================
PERIOD CONSOLIDATED NET WORTH ($)
--------------------------------------------------------------------------------
<S> <C>
Closing - 27 September 1998 100,000,000
--------------------------------------------------------------------------------
1 October 1998 - 31 December 1998 100,000,000
--------------------------------------------------------------------------------
1 January 1999 - 28 March 1999 105,000,000
--------------------------------------------------------------------------------
29 March 1999 - 27 June 1999 110,000,000
--------------------------------------------------------------------------------
28 June 1999 - 26 September 1999 110,000,000
--------------------------------------------------------------------------------
27 September 1999 - 31 December 1999 110,000,000
--------------------------------------------------------------------------------
1 January 2000 - 2 April 2000 110,000,000
--------------------------------------------------------------------------------
3 April 2000 - 2 July 2000 120,000,000
--------------------------------------------------------------------------------
3 July 2000 - 1 October 2000 120,000,000
--------------------------------------------------------------------------------
2 October 2000 - 31 December 2000 120,000,000
--------------------------------------------------------------------------------
1 January 2001 - 1 April 2001 120,000,000
--------------------------------------------------------------------------------
2 April 2001 - 1 July 2001 127,500,000
--------------------------------------------------------------------------------
2 July 2001 - 30 September 2001 127,500,000
--------------------------------------------------------------------------------
1 October 2001 - 31 December 2001 130,000,000
--------------------------------------------------------------------------------
1 January 2002 - 31 March 2002 130,000,000
--------------------------------------------------------------------------------
1 April 2002 - 30 June 2002 140,000,000
--------------------------------------------------------------------------------
1 July 2002 - 29 September 2002 140,000,000
--------------------------------------------------------------------------------
30 October 2002 - 31 December 2002 140,000,000
--------------------------------------------------------------------------------
</TABLE>
124
<PAGE>
<TABLE>
<CAPTION>
================================================================================
PERIOD CONSOLIDATED NET WORTH ($)
--------------------------------------------------------------------------------
<S> <C>
1 January 2003 - 30 March 2003 150,000,000
--------------------------------------------------------------------------------
31 March 2003 - 29 June 2003 150,000,000
--------------------------------------------------------------------------------
30 June 2003 - 28 September 2003 155,000,000
--------------------------------------------------------------------------------
29 September 2003 - 31 December 2003 155,000,000
--------------------------------------------------------------------------------
1 January 2004 - 28 March 2004 162,500,000
--------------------------------------------------------------------------------
29 March 2004 - 27 June 2004 162,500,000
--------------------------------------------------------------------------------
28 June 2004 - 26 September 2004 170,000,000
--------------------------------------------------------------------------------
27 September 2004 - 31 December 2004 170,000,000
--------------------------------------------------------------------------------
1 January 2005 - 3 April 2005 175,000,000
================================================================================
</TABLE>
(c) the ratio of Net Average Financial Indebtedness (excluding, for the
avoidance of doubt, the Additional Payment) to Consolidated Adjusted
EBITDA, calculated on a Rolling 4 Quarterly basis for any period ending on
an Accounting Date specified in the table below shall be less than the
ratio set opposite such Accounting Date in the table below:
<TABLE>
<CAPTION>
================================================================================
ACCOUNTING DATE RATIO
--------------------------------------------------------------------------------
<S> <C>
27 September 1998 5.55:1
--------------------------------------------------------------------------------
31 December 1998 5.55:1
--------------------------------------------------------------------------------
28 March 1999 5.75:1
--------------------------------------------------------------------------------
27 June 1999 5.60:1
--------------------------------------------------------------------------------
26 September 1999 5.60:1
--------------------------------------------------------------------------------
31 December 1999 5.45:1
--------------------------------------------------------------------------------
7 April 2000 5.45:1
--------------------------------------------------------------------------------
2 July 2000 5.30:1
--------------------------------------------------------------------------------
1 October 2000 5.15:1
--------------------------------------------------------------------------------
31 December 2000 5.00:1
--------------------------------------------------------------------------------
1 April 2001 5.00:1
--------------------------------------------------------------------------------
1 July 2001 4.80:1
--------------------------------------------------------------------------------
30 September 2001 4.75:1
--------------------------------------------------------------------------------
</TABLE>
125
<PAGE>
<TABLE>
<CAPTION>
================================================================================
ACCOUNTING DATE DATE
--------------------------------------------------------------------------------
<S> <C>
31 December 2001 4.70:1
--------------------------------------------------------------------------------
31 March 2002 4.60:1
--------------------------------------------------------------------------------
30 June 2002 4.50:1
--------------------------------------------------------------------------------
29 September 2002 4.40:1
--------------------------------------------------------------------------------
31 December 2002 4.40:1
--------------------------------------------------------------------------------
30 March 2003 4.30:1
--------------------------------------------------------------------------------
29 June 2003 4.20:1
--------------------------------------------------------------------------------
28 September 2003 4.00:1
--------------------------------------------------------------------------------
31 December 2003 4.00:1
--------------------------------------------------------------------------------
28 March 2004 3.90:1
--------------------------------------------------------------------------------
27 June 2004 3.75:1
--------------------------------------------------------------------------------
26 September 2004 3.75:1
--------------------------------------------------------------------------------
31 December 2004 3.60:1
--------------------------------------------------------------------------------
3 April 2005 3.60:1
================================================================================
</TABLE>
(d) the Consolidated Adjusted EBITDA calculated on a Rolling 4 Quarterly basis
for any period ending on an Accounting Date specified in the table below
shall not be less than the amount set opposite such Accounting Date in the
table below:
126
<PAGE>
<TABLE>
<CAPTION>
================================================================================
ACCOUNTING DATE AMOUNT ($)
--------------------------------------------------------------------------------
<S> <C>
27 September 1998 35,000,000
--------------------------------------------------------------------------------
31 December 1998 35,000,000
--------------------------------------------------------------------------------
28 March 1998 36,000,000
--------------------------------------------------------------------------------
27 June 1999 37,000,000
--------------------------------------------------------------------------------
26 September 1999 37,000,000
--------------------------------------------------------------------------------
31 December 1999 38,000,000
--------------------------------------------------------------------------------
2 April 2000 38,000,000
--------------------------------------------------------------------------------
2 July 2000 39,000,000
--------------------------------------------------------------------------------
1 October 2000 40,000,000
--------------------------------------------------------------------------------
31 December 2000 41,000,000
--------------------------------------------------------------------------------
1 April 2000 41,000,000
--------------------------------------------------------------------------------
1 July 2001 42,000,000
--------------------------------------------------------------------------------
30 September 2001 42,000,000
--------------------------------------------------------------------------------
30 September 2001 42,500,000
--------------------------------------------------------------------------------
31 March 2001 43,000,000
--------------------------------------------------------------------------------
30 June 2002 44,000,000
--------------------------------------------------------------------------------
29 September 2002 44,000,000
--------------------------------------------------------------------------------
31 December 2002 44,000,000
--------------------------------------------------------------------------------
30 March 2003 44,000,000
--------------------------------------------------------------------------------
29 June 2003 44,000,000
--------------------------------------------------------------------------------
28 September 2003 45,000,000
--------------------------------------------------------------------------------
31 December 2003 45,000,000
--------------------------------------------------------------------------------
28 March 2004 46,000,000
--------------------------------------------------------------------------------
27 June 2004 46,000,000
--------------------------------------------------------------------------------
26 September 2004 47,000,000
--------------------------------------------------------------------------------
31 December 2004 47,000,000
--------------------------------------------------------------------------------
3 April 2005 48,000,000
================================================================================
</TABLE>
(e) Debtor Days shall at all times be less than 80 days as the same is
determined, as at each Accounting Date, by reference to the relevant
127
<PAGE>
financial statements delivered pursuant to Clauses 19.1(a)(i),
19.1(a)(ii) and 19.1(a)(iii):
Debtor Days = A x 365
-
B
A = The aggregate of the Dollar Equivalent of trade receivables
payable by non-Group Members to Group Members as at the end of
each of the twelve immediately preceding and consecutive monthly
Accounting Periods ending on the Accounting Date to which the
calculation relates, divided by 12; and
B = The Dollar Equivalent of sales in the preceding consecutive four
quarterly Accounting Periods ending on the Accounting Date to
which the calculation relates.
"Dollar Equivalent" means, in respect of any currency other than
Dollars, the amount of Dollars able to be purchased with such other
currency at the rate of exchange applied by the Company or, as the
case may be, the Auditors, in compiling the financial statements to
which the calculation relates.
(f) Inventory Days shall at all times be less than 100, as the same is
determined, as at each Accounting Date, by reference to the relevant
financial statements delivered pursuant to Clauses 19.1(a)(i),
19.1(a)(ii) and 19.1(a)(iii):
Inventory Days = A x 365
-
B
A = The aggregate of the Dollar Equivalent of the value of Inventory
held by Group Members as at the end of each of the twelve
immediately proceeding and consecutive monthly Accounting
Periods ending on the Accounting Date to which the calculation
relates, divided by 12; and
B = the Dollar Equivalent of the cost of sales for the preceding
consecutive four quarterly Accounting Periods ending on the
Accounting Date to which the calculation relates LESS
depreciation relating thereto.
"Dollar Equivalent" means, in respect of any currency other than
Dollars, the amount of Dollars able to be purchased with such other
currency at the rate of exchange applied by the Company or, as the
case may be, the Auditors, in compiling the financial statements to
which the calculation relates.
128
<PAGE>
All calculations in this Clause 20.1 shall be made on a 365 day year
basis.
129
<PAGE>
PART 8
21. EVENTS OF DEFAULT
21.1 THE EVENTS OF DEFAULT
Each of the events listed in this Clause 21, provided the same is continuing, is
an Event of Default, irrespective of whether it occurs as a result of any action
taken, or not taken, by any Person, including the Company or any other Group
Member.
(a) FAILURE TO PAY: The Company or any other Group Member fails to pay when
due any amount payable by it under any Finance Document in the currency in
which the same is expressed to be payable (other than where such failure to
pay results solely from an error in relation to the transmission of the
relevant payment and such payment is actually received within 3 Business
Days of its due date).
(b) BREACH OF UNDERTAKING: The Company or any Group Member fails to comply
with any of the provisions of Clauses 19 or 20.
(c) BREACH OF OTHER UNDERTAKINGS: Other than the provisions referred to in
paragraphs (a) and (b) above, any of the Obligors fails to comply with any
provision of this Agreement and/or any provision of any other Finance
Document (irrespective of whether or not such provision is valid and
enforceable against such Person) and, (other than the provisions referred
to in paragraphs (a) and (b) above) if such failure is in the reasonable
opinion of the Majority Banks capable of remedy within such period, such
Obligor shall have failed to remedy such failure within 21 days after the
earlier of the relevant Obligor becoming aware of such default and receipt
by the relevant Obligor of written notice from the Facility Agent to the
Company requiring the failure to be remedied.
(d) REPRESENTATIONS AND WARRANTIES: Any representation or warranty or
statement made, or deemed to be made, or repeated by or on behalf of the
Company or any Group Member in, or in connection with, any Finance Document
or any notice, certificate, statement delivered by it in connection with
any Finance Document is, or proves to have been, untrue or misleading in
any material way or material respect when made or deemed to be repeated or
supplied in accordance with or in respect of any Finance Document by
reference to the facts and circumstances then subsisting and, if the
circumstances causing such misrepresentation are, in the reasonable opinion
of the Majority Banks, capable of remedy within such period, such Group
Member shall have failed to remedy such circumstances within 14 days after
the earlier of the relevant Group Member becoming aware of such
misrepresentation and receipt by the Company of written notice from the
Facility Agent to such Group Member requiring the circumstances causing
such misrepresentation to be remedied such that if the relevant
representation was repeated by each such Group Member
130
<PAGE>
at the end of such 14 day period, such representation would, at such time,
be true and correct in all material respects.
(e) CROSS-DEFAULT:
(i) Any Financial Indebtedness under any of the Senior Notes or any other
Note Document is not paid when due, or becomes (or becomes capable of
being declared) due and payable or due for redemption before its
originally scheduled maturity date or are placed on demand, in each
such case by reason of the occurrence of an event of default
(howsoever characterised) or any event having the same effect, or any
such Financial Indebtedness which is payable on demand shall have
been demanded; or
(ii) any Financial Indebtedness of one or more Group Members (taken
together if more than one) aggregating $1,000,000 (or the equivalent
in other currencies) or more at any one time outstanding is not paid
when due, becomes (or becomes capable of being declared) due and
payable or due for redemption before its originally scheduled
maturity date or are placed on demand, in each such case by reason of
the occurrence of an event of default (howsoever characterised) or
any event having the same effect, or any such Financial Indebtedness
which is payable on demand shall have been demanded; or
(iii) any Encumbrances over assets of any one or more Group Members (taken
together if more than one) securing an aggregate of $100,000 (or its
equivalent in other currencies) or more become enforceable and steps
are taken to enforce the same.
(f) REPUDIATION: The Company or any Group Member rescinds or repudiates (or
purports to rescind or repudiate) any Transaction Document (excluding the
Service Contracts) to which it is expressed to be a party.
(g) DISTRESS: Any distress, execution, attachment, registration or other
process affects any assets of the Group or any of the Group Members having
an aggregate value of $100,000 (or the equivalent thereof in other
currencies) save where (i) the relevant Group Member is, in good faith,
contesting the distress, execution, attachment, sequestration or other
process by appropriate proceedings diligently pursued and (ii) the Majority
Banks acting reasonably are satisfied that the ability of any Obligor to
comply with its obligations under the Finance Documents to which it is a
party will not be materially and adversely affected whilst such distress,
execution, attachment, diligence or other process is being so contested.
(h) INVALIDITY: Any of the Finance Documents shall cease to be in full force
and effect (except as a result of a specific release in writing by the
Banks) or shall cease to constitute the legal, valid and binding obligation
of any Obligor party to it or, in the case of any Security Document, fail
to provide effective perfected security in favour of the of the Security
Agent and the Banks over the
131
<PAGE>
assets over which the Encumbrance is intended to be given by that Security
Document, in any such case concerning the Company or an Obligor in a manner
and to an extent reasonably considered by the Majority Banks to be
materially adverse to their interests under the Senior Finance Documents or
in any such case concerning any Obligor in a manner and to an extent
reasonably considered by the Majority Banks to have a Material Adverse
Effect or it shall be unlawful for any Obligor to perform any of its
material obligations under any of the Finance Documents.
(i) UNABLE TO PAY DEBTS: The Company or any Group Member:
(i) suspends payment of its debt or is unable or admits its inability to
pay its debts as they fall due or is deemed unable to pay its debts
within the meanings contained in Section 123(1) of the Insolvency Act
1986 (construed as if the figure stated at Section 123(1)(a) was
$100,000 or is determined pursuant to Section 123(2) Insolvency Act
that it is unable to pay its debts (as that Section may be amended);
or
(ii) commences negotiations with its creditors generally with a view to
the general readjustment or rescheduling of all or part of its
indebtedness which it would otherwise not be able to pay as it falls
due; or
(iii) proposes or enters into any composition or other arrangement for the
benefit of its creditors generally or any class of creditors.
(j) INSOLVENCY: Any Group Member is declared or deemed pursuant to any
applicable legislation to be insolvent or is or is deemed pursuant to any
applicable legislation to be unable, or admits in writing its inability, to
pay its debts as they fall due or stops or threatens to stop payment of its
debts as they fall due or stops or threatens to stop payment of its debts
generally or becomes insolvent within the terms of any applicable law
Provided that, for the purposes of this paragraph (j) in determining
whether a Group Member is to be deemed to be insolvent or unable to pay its
debts as they fall due under Section 123 Insolvency Act (i) the figure
stated at Section 123(1)(a) shall be deemed to be $100,000 and (ii) Section
123(2) shall only apply if such a determination has been made in accordance
with the terms of that Section.
(k) LIQUIDATION: Any order is made or resolution passed or any steps are
initiated or are consented to by any Group Member or otherwise commenced by
any Person or any petition shall be presented (and not, where that Person
is unconnected with that Group Member save for being a creditor of such
Group Member, discharged or stayed within fourteen days in the case of both
legal proceedings and such petition) for the suspension of payments
generally or for any process giving protection against creditors or for the
dissolution, termination of existence, liquidation, winding up, bankruptcy
or other like process of any Group Member (other than a solvent
liquidation, dissolution or winding up of a Group Member (not being an
Obligor) that has been previously approved by the Facility Agent in
writing).
132
<PAGE>
(l) ADMINISTRATION: An application is made to the Court for an administration
order under the Insolvency Act 1986 with respect of the Company or any
other Group Member or an effective resolution is passed by the directors or
shareholders of the Company or any other Group Member for such an
application to be made or an administrator or administrative receiver is
appointed in respect of any Group Member.
(m) U.S. BANKRUPTCY: Any Group Member shall commence a voluntary case under
the U.S. Bankruptcy Code, or an involuntary case is commenced under the
U.S. Bankruptcy Code against that Group Member and the petition is not
controverted within 10 days and is not dismissed within 30 days, after
commencement of the case, or a custodian, receiver, trustee or similar
officer is appointed for, or takes charge of, all or substantially all of
the property of that Group Member.
(n) RECEIVER: A liquidator or provisional liquidator (save as excepted by the
proviso to paragraph (k) above) or, trustee, receiver, administrative
receiver, manager (being a Person acting on behalf of all or any creditors)
or similar officer is appointed in respect of any Group Member or in
respect of (or takes possession of) all or any part of its assets with an
aggregate value in excess of $100,000 or more (or the equivalent in other
currencies).
(o) ANALOGOUS ACTS: Any event occurs or proceeding is taken with respect to the
Company or any other Group Member in any jurisdiction to which it is
subject which has an effect equivalent or substantially similar to any of
the events mentioned in paragraphs (k) to (n) inclusive above.
(p) UNLAWFULNESS: It becomes unlawful at any time for any Group Member to
perform all or any of its obligations under any Finance Document to which
it is a party.
(q) QUALIFICATION OF FINANCIAL ACCOUNTS: The Auditors qualify their report on
the audited consolidated accounts of the Group (taken as a whole) in a
manner which is material in the context of the Finance Documents and the
transactions contemplated thereby.
(r) CESSATION: Any Group Member ceases to carry on all or any material part of
its business (save in consequence of any reorganisation, reconstruction or
amalgamation permitted under this Agreement and save as may result from any
disposal of assets permitted by the terms of this Agreement or any solvent
liquidation, dissolution or winding-up of any Group Member (not being an
Obligor)).
(s) OWNERSHIP OF OBLIGORS: Any Group Member shall cease to own, directly or
indirectly, at least the percentage ownership interest in any Group Member
owned by it immediately following the Closing or immediately following
implementation of the steps recorded in the Structure Memorandum contained
in the Reports or (if later) the date on which the relevant entity became a
Group Member unless such Group Member was a Dormant Subsidiary at the
133
<PAGE>
Closing and has remained a Dormant Subsidiary until such time as it is
wound-up on a solvent basis in accordance with paragraph (k) above.
(t) PROCEEDINGS: There is current or pending at the Closing or there shall
occur thereafter any litigation, arbitration, administrative, regulatory or
other proceedings or enquiry (including, without limitation, any such by
the Office of Fair Trading, the Monopolies and Mergers Commission, the
Department of Trade and Industry, or any equivalent body in any other
jurisdiction or the European Commission or any division of any thereof or
authority deriving power from any thereof) concerning or arising in
consequence of any of the Transaction Documents and/or the implementation
of any matter or transaction provided for in the Transaction Documents
(excluding, in each case, the Service Contracts) or otherwise.
(u) RECAPITALISATION WARRANTIES: Any warranty made by any Person in any of the
Recapitalisation Documents is incorrect in a material respect, any breach
by any Person of its obligations under any of the Recapitalisation
Documents occurs or any other claim is made by any Group Member against any
Person under any of the Recapitalisation Documents in each case, which (in
aggregate) results in or might reasonably be expected to result in breach
of Clause 20 .
(v) INTERCREDITOR AGREEMENT, AND OTHER DOCUMENTS:
(i) Any Group Member, fails to comply with any of the material provisions
of, or its obligations under, the Intercreditor Agreement; or
(ii) the Intercreditor Agreement is not, or ceases to be, binding on or
enforceable against any Group Member expressed to be a party thereto,
the Note Trustee or shall otherwise not be effective; or
(iii) any event, howsoever described, constituting default under the
Recapitalisation Documents shall occur thereunder and be continuing
unwaived,
and (in the case of paragraphs (i) and (ii) only), in the reasonable
opinion of the Majority Banks, the interest of the Banks under the Senior
Finance Documents or any of them shall be materially prejudiced thereby.
(w) ERISA: Any U.S. Obligor or any Subsidiary or any ERISA Affiliate has
incurred or is likely to incur a material liability to or on account of a
Multiemployer Plan or employee pension benefit plan (as defined in Section
3(2) of ERISA) under Section 409, 502(i), 502(1), 4062, 4063, 4064, 4201 or
4204 of ERISA or Section 4971 or 4975 of the Code, or any U.S. Obligor or
any Subsidiary has incurred or is likely to incur material liabilities
pursuant to one or more employee welfare benefit plans (as defined in
Section 3(1) of ERISA) which provide benefits to retired employees (other
than as required by Section 601 of ERISA).
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(x) EXPROPRIATION: The authority or ability of any Material Group Member or
Obligor to conduct its business is wholly or substantially curtailed by any
seizure, expropriation, intervention or other action by or on behalf of any
governmental, regulatory or other authority.
(y) CONTROL:
(i) Without the prior written consent of all the Banks, any single Person
or group of Persons acting in concert (as defined in the City Code on
Takeovers and Mergers) acquires control (as defined in Section 416 of
the Income and Corporation Taxes Act 1988) of the Company; or
(ii) Thayer and Perseus cease collectively to hold (in aggregate) the
beneficial interest in at least 51 per cent of the voting rights of
shares in the Company, or cease collectively to hold the largest
economic interest in the Company of all the shareholders in the
Company, or cease together to be able nominate the majority of the
Board of Directors of the Company; or
(iii) Thayer Capital Partners ceases to be the General Partner of Thayer
and/or to manage Thayer or Perseus Management L.L.C. ceases to be the
managing member of Perseus; or
(iv) The Persons holding the majority of the voting share capital of the
Company at the date hereof cease to hold the majority of its voting
share capital and one or more other Persons (if more than one acting
in concert) own the majority of the voting share capital of the
Company, and for the purposes of this paragraph (iv) "acting in
concert" means acting together by agreement.
(z) AUDITOR'S CONFIRMATIONS: Any confirmation required to be delivered
pursuant to Clause 19.1(a)(v) is not delivered in accordance therewith or
it is delivered but does not confirm that the Borrower Base Summary
referred to therein is, in all material respects accurate or does not
confirm that the Company has in place satisfactory methods and procedures
for obtaining and collating the information required in order for it to be
able to compile accurate Borrowing Base Summaries for the purposes of this
Agreement having regard, where appropriate, to each of the specific
requirements of this Agreement relating thereto including, without
limitation, Clause 6.
(aa) ADJUSTED BORROWING BASE: If at any time, the aggregate Adjusted Borrowing
Base of the Borrowers exceeds the aggregate Deutschmark Amount of the
Ancillary Facilities, Advances and Outstanding Standby L/C's at such time
and such breach is not remedied within ten Business Days of the Borrowing
Base Summary which identified such breach being delivered hereunder.
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(ad) MATERIAL ADVERSE EFFECT: Any event or series of events whether related or
not occurs which has a Material Adverse Effect.
21.2 ACCELERATION
Upon the occurrence of an Event of Default and at any time thereafter while the
same is continuing unremedied or unwaived in accordance with this Agreement, the
Facility Agent may, and shall if so directed by the Majority Banks, by notice to
the Company:
(a) declare that an Event of Default has occurred; and/or
(b) declare that the Revolving Commitments and the Standby L/C Commitments
shall be cancelled forthwith, whereupon the same shall be so cancelled and
all fees payable in relation to the Revolving Commitments and the Standby
L/C Commitments shall become immediately due and payable; and/or
(c) declare that the Advances to some or all of the Borrowers (as specified in
such notice), together with all interest accrued on those Advances and all
other amounts payable by some or all of the Obligors (as specified in such
notice) or any of them under the Senior Finance Documents from time to
time, shall thenceforth be repayable on demand being made by the Facility
Agent (and in the event of any such demand those Advances, such interest
and such other amounts shall be immediately due and payable); and/or
(d) declare some or all of the Advances to some or all of the Borrowers (as
specified in such notice) immediately due and payable, whereupon they shall
become immediately due and payable together with all interest accrued on
those Advances and all other amounts payable by those Borrowers under the
Senior Finance Document; and/or
(e) require some or all of the Borrowers to pay in cash (whereupon each such
Borrower shall be obliged to pay) to the Facility Agent for the account of
each Bank for credit to the Standby L/C Account on its books relating to
each Standby L/C issued at the request of any such Borrower and which is
then outstanding an amount equal to the portion of that Standby L/C for
which that Bank is liable.
(f) Notwithstanding anything in this Clause 21.2 to the contrary, if an Event
of Default arising from filing by or against the Company or any proceeding
in respect of the Company under the United States Bankruptcy Code, all sums
owing under the Senior Finance Documents whether for principal, interest or
otherwise shall become immediately due without further demand, and the
Revolving Commitments, the Standby L/C Commitments and any other
obligations under the Senior Finance Documents to make credit available
shall immediately terminate, all without notice of any kind whatsoever.
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PART 9
22. ADDITIONAL BORROWERS
(a) If any Subsidiary of the Company wishes to become a Borrower under this
Agreement, it and the Obligors' Agent shall each so notify the Facility
Agent (which shall in turn notify the Banks and the Security Agent).
(b) If all the Banks confirm to the Facility Agent in writing that they are
prepared to accept that Subsidiary as a Borrower hereunder (subject to such
limitations as they may advise) and an Obligor under the Intercreditor
Agreement the Facility Agent shall so notify the Banks and shall prepare
and deliver to the Obligor's Agent a Borrower Accession Agreement
(appropriately completed and subject to such limitations as are imposed).
(c) Upon receipt by the Facility Agent of the Borrower Accession Agreement,
signed on behalf of the Obligors' Agent (for itself and the existing
Borrowers, Guarantors and the Obligors) and by the proposed Additional
Borrower, the Facility Agent shall execute the same (for itself and on
behalf of the Finance Parties) and shall as promptly as practicable give
notice of such execution to all of the parties to the Borrower Accession
Agreement.
(d) Upon execution of any Borrower Accession Agreement as aforesaid, it shall
take effect in accordance with, but subject to, the terms hereof and
thereof.
(e) The obligations of each Finance Party to each Additional Borrower under
this Agreement with respect to the making of the first Utilisation by it
under this Agreement are subject to the condition precedent that the
Facility Agent shall have received in respect of the Additional Borrower
and the Borrower Accession Agreement all of the documents listed in
Schedule 5 and such other reports, opinions and documents (if any) as the
Facility Agent may reasonably require, each in form and substance
satisfactory to the Facility Agent and that the Facility Agent has
confirmed to the Obligors' Agent that it is satisfied that such Additional
Borrower has effectively become party to the Intercreditor Agreement as an
Obligor.
23. GUARANTEES
23.1 GUARANTEE
In consideration of the Finance Parties entering into this Agreement and/or
becoming party to this Agreement pursuant to a Novation Certificate and/or (in
the case of the Banks) participating in any Utilisation, each Guarantor hereby
irrevocably and unconditionally and jointly and severally but only to the extent
permitted under applicable law (which, in the case of any Guarantor incorporated
in the Netherlands shall be determined by reference to the fair market value
determined, on a going concern basis, between a willing buyer and a willing
seller, of its net assets (determined in accordance with Applicable Accounting
Principles):
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(a) guarantees to each Finance Party, as principal obligor and not merely as
surety (or similar in any applicable jurisdiction), prompt performance by
each other Obligor (other than the Company and Lyon Cycle Investments B.V.)
of all its obligations under the Senior Finance Documents and the payment
of all sums payable now or in the future to each Finance Party by each
other Obligor (other than the Company and Lyon Cycle Investments B.V.)
under or in connection with the Senior Finance Documents when and as the
same shall become due;
(b) undertakes with each Finance Party that, if and whenever any other Obligor
(other than the Company and Lyon Cycle Investments B.V.) shall be in
default in the payment of any sum whatsoever due from it under or in
connection with any Senior Finance Document, such Guarantor will on demand
pay such sum as if such Guarantor instead of such other Obligor were
expressed to be the primary Obligor, together with interest on that sum at
the rate per annum from time to time payable by such other Obligor on that
sum from the date when that sum becomes payable by such Guarantor under
this Agreement until payment of that sum in full; and
(c) agrees to indemnify each Finance Party on demand against any loss or
liability suffered by it under any Senior Finance Document as a result of
any obligation guaranteed by any Guarantor (other than the Company and Lyon
Investments B.V.) being or becoming unenforceable, invalid or illegal.
Anything contained in this Agreement to the contrary notwithstanding:
(i) the obligations of each U.S. Obligor hereunder shall be limited to a
maximum aggregate amount equal to the greatest amount that would not
render such U.S. Obligor's obligations hereunder subject to avoidance as a
fraudulent transfer or conveyance under Section 548 of Title 11 of the
United States Bankruptcy Code or any provisions of applicable state law
(collectively, the "FRAUDULENT TRANSFER LAWS"), in each case after giving
effect to all other liabilities of such U.S. Obligor, contingent or
otherwise, that are relevant under the Fraudulent Transfer Laws
(specifically excluding, however, any liabilities of such U.S. Obligor (a)
in respect of intercompany indebtedness to the extent that such
indebtedness would be discharged in an amount equal to the amount paid by
such U.S. Obligor hereunder and (b) under any guarantee of senior
unsecured indebtedness or indebtedness subordinated in right of payment to
the obligations hereunder which guarantee contains a limitation as to
maximum amount similar to that set forth in this paragraph, pursuant to
which the liability of such U.S. Obligor hereunder is included in the
liabilities taken into account in determining such maximum amount) and
after giving effect as assets to the value (as determined under the
applicable provisions of the Fraudulent Transfer Laws) of any rights to
similar rights of such U.S. Obligor pursuant to (A) applicable law or (B)
any agreement providing for an equitable allocation among such U.S.
Obligor and other Group Members of obligations arising under guarantees by
such parties;
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(ii) only the Company shall be liable for its obligations under this Agreement,
and in no event shall any other Obligor guarantee or act as a Guarantor
for any obligation of the Company under this Agreement; and
(iii) the Company shall pledge its assets, provided that it shall not pledge
more than or an amount equal to 66 2/3% of the voting stock in any
Subsidiary.
Notwithstanding anything contained in this Agreement to the contrary, the
obligations of Raleigh Industries of Canada hereunder in its capacity as a
Guarantor shall be limited to a maximum aggregate amount of C$13,000,000.
23.2 CONTINUING GUARANTEE
This guarantee is a continuing guarantee and shall extend to the ultimate
balance of all sums payable by the Obligors (other than the Company and Lyon
Cycle Investments B.V. or any of them under the Senior Finance Documents.
23.3 REINSTATEMENT
Where any discharge (whether in respect of the obligations of any Obligor, any
security for such obligations or otherwise) is made in whole or in part or any
arrangement is made on the faith of any payment, security or other disposition
which is avoided or must be repaid on insolvency, administration, liquidation or
otherwise without limitation, the liability of the Guarantors under this
guarantee shall continue as if there had been no such discharge or arrangement.
Each Finance Party shall be entitled to concede or compromise any claim that any
such payment, security or other disposition is liable to avoidance or repayment.
23.4 WAIVER OF DEFENCES
Except to the extent that any Guarantor is specifically released in writing and
except to the extent that its obligations are specifically waived in writing the
obligations of each Guarantor under this Agreement shall not be affected by any
circumstance, act, omission, matter or thing which but for this provision might
operate to release or otherwise exonerate such Guarantor from its obligations
hereunder in whole or in part, including without limitation and whether or not
known to any Obligor or any Finance Party:
(a) any time, indulgence or waiver granted to or composition with any other
Obligor or any other Person; or
(b) the taking, variation, compromise, exchange, renewal or release of or
refusal or neglect to perfect, take up or enforce any rights or remedies
against, or any security over any assets of, any other Obligor or any
other Person or any non-presentment or non-observance of any formality or
other requirements in respect of any instruments or any failure to obtain
the full value of any security; or
(c) any legal limitation, disability, incapacity, lack of power, authority or
legal personality of, or dissolution or change in the members or status
of, or other
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circumstances relating to any other Obligor or any other Person and
including, without limiting the generality of the foregoing, any limitation
on the amount guaranteed by any other Guarantor hereunder or provided for
in any Guarantor Accession Agreement or any Guarantee; or
(d) any variation (however fundamental and whether or not involving any
increase in the liability of any Obligor thereunder) or replacement of any
Senior Finance Document or any other document or security (including
without limitation any substitute basis agreed pursuant to Clause 10 and
any agreement contemplated by this Agreement) so that references to such
Senior Finance Document or other document or security in this guarantee
shall include each such variation or replacement; or
(e) any unenforceability, illegality, invalidity or frustration of any
obligations of any other Obligor or any other Person under any Senior
Finance Document or any other document or security, or any failure of any
other Obligor or proposed Additional Borrower or Additional Guarantor to
become bound by the terms of any other Senior Finance Document, in each
case whether through any want of power or authority or otherwise; or
(f) any postponement, discharge, reduction, non-provability or other similar
circumstance affecting any obligation of any Obligor under a Senior Finance
Document resulting from any insolvency, liquidation or dissolution
proceedings or from any law, regulation or order,
to the intent that such Guarantor's obligations under this Agreement shall
remain in full force and this guarantee be construed accordingly as if there
were no such circumstance, act, variation, limitation, omission, matter or
thing.
23.5 IMMEDIATE RECOURSE
Each Guarantor waives any right it may have of first requiring any Finance Party
to proceed against or enforce any other rights or security of or claim payment
from or file any proof or claim in any insolvency, administration, winding up,
bankruptcy or liquidation proceedings relating to, any other Obligor or any
other Person before claiming from such Guarantor under this Agreement.
23.6 PRESERVATION OF RIGHTS
Until all amounts which may be or become payable by any and all Obligors under
or in connection with the Senior Finance Documents have been irrevocably paid
and discharged in full (whether by any Borrower or by one or more Guarantors or
otherwise), after a claim has been made pursuant to this guarantee each Finance
Party may:
(a) refrain from applying or enforcing any other security, monies or rights
held or received by that Finance Party in respect of (or capable of being
applied in respect of) such amounts or apply and enforce the same in such
manner and order as that Finance Party sees fit (whether against such
amounts or
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otherwise) and the Guarantors shall not be entitled to the benefit of the
same; and
(b) hold in a suspense account (with liability to pay interest on the monies
held therein at the rate payable to its corporate customers for deposits in
the same currency on like terms and in like amounts) any monies received
from any Guarantee or on account of any Guarantor's liability under this
Agreement.
23.7 NON-COMPETITION
Until all amounts which may be or become payable by any and all Obligors under
or in connection with the Senior Finance Documents have been irrevocably paid in
full (whether by any Borrower or by one or more Guarantors or otherwise), no
Guarantor shall, after a claim has been made pursuant to this guarantee:
(a) be subrogated to any rights, security or monies held, received or
receivable by any Finance Party or be entitled to any right of contribution
or indemnity in respect of any payment made or monies received on account
of any Obligor's liability under any Senior Finance Document and, to the
extent that any Guarantor is so subrogated or entitled by law, that
Guarantor hereby (to the fullest extent permitted by law) waives and agrees
not to exercise those rights or security or that right of contribution or
indemnity;
(b) be entitled or claim to rank as a creditor in the insolvency,
administration, winding-up, bankruptcy or liquidation of any other Obligor
in competition with any Finance Party unless otherwise required by the
Facility Agent or by law (in which case the proceeds, if any, of any claim
in respect of any rights, security or monies of any Finance Party to which
such Guarantor was subrogated, filed by the Guarantor with a receiver or
other similar official, will be paid by such Guarantor to the Facility
Agent to be applied in accordance with the provisions of the Senior Finance
Documents); or
(c) be entitled to receive, claim or have the benefit of any payment,
distribution or security from or on account of any other Obligor or
exercise any right of set-off as against any other Obligor (and, without
prejudice to the foregoing, each Guarantor shall forthwith pay to the
Facility Agent for the Finance Parties an amount equal to any such set-off
in fact exercised by it and forthwith pay or transfer, as the case may be,
to the Facility Agent for the Finance Parties any such payment or
distribution or benefit of security in fact received by it).
23.8 ADDITIONAL SECURITY
This guarantee shall be in addition to and shall not in any way be prejudiced by
any other security (including, without limitation, the Security Documents) now
or hereafter held by any Finance Party as security for or capable of being
applied against the obligations of any Obligor.
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23.9 CERTIFICATE
A certificate of the Facility Agent as to any amount due from any Borrower under
this Agreement shall, in the absence of manifest error, be prima facie evidence
of such amount as against each Guarantor.
24. RELEASE OF GUARANTORS AND SECURITY
24.1 GUARANTORS
Subject to Clause 24.3, at the time of completion of any sale or other disposal
to a Person or Persons outside (and which will remain outside) the Group of all
of the shares in the capital of any Guarantor (or of all of the shares in any
other Group Member such that any Guarantor ceases as a result thereof to be a
Group Member) and in such other circumstances (if any) as all the Banks may from
time to time agree in writing, such Guarantor shall be released from all past,
present and future liabilities (both actual and contingent) hereunder and under
the Security Documents to which it is a party (other than liabilities which it
has in its capacity as a Borrower), and the security provided over its assets
under such Security Documents shall be released.
24.2 ASSETS
Subject to Clause 24.3, at the time of completion of any sale or other disposal
to a Person or Persons outside (and which will remain outside) the Group of any
assets owned by an Obligor over which security has been created by the Security
Documents to which that Obligor is expressed to be a party, those assets shall
be released from such Security.
24.3 CONDITIONS FOR RELEASE
The release of the guarantees and security referred to in Clause 24.1 and 24.2
above shall only occur if:
(a) either (i) such disposal will not result directly or indirectly in any
breach of any of the terms of this Agreement, or (ii) such disposal is
being effected at the request of the Majority Banks in circumstances where
any of the security created by the Security Documents has become
enforceable, or (iii) such disposal is being effected by enforcement of the
Security Documents;
(b) any assets to be transferred to another Group Member before completion of
such disposal shall have been so transferred and (if so required by the
Majority Banks) security over such assets shall have been granted to the
Security Agent to its satisfaction; and
(c) the Security Agent shall have executed such documents effecting such
release as shall be reasonably required to achieve such release as
aforesaid (and the Security Agent shall execute such documents at the
expense of the relevant Obligor promptly upon (and only upon) it being
satisfied that the conditions in (a), (b) and (c) above are satisfied).
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24.4 RELEASE OF GROUP MEMBERS
If any Person which is a Group Member shall cease to be such a member in
consequence of the enforcement of any of the Security Documents or in
consequence of a disposal of the shares therein effected at the request of the
Majority Banks in circumstances where any of the security created by the
Security Documents has become enforceable, any claim which any Obligor may have
against such Person or any of its Subsidiaries or which that Person or any of
its Subsidiaries may have against any Obligor in or arising out of this
Agreement or any of the Security Documents (including, without limitation, any
claim by way of subrogation to the rights of the Finance Parties against such
Person under the Senior Finance Documents and any claim by way of contribution
or indemnity) shall be released automatically and immediately upon such Person
ceasing to be a Group Member.
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PART 10
25. INDEMNITIES
25.1 INDEMNIFIABLE EVENTS
Each Obligor agrees to indemnify each Finance Party on demand against any loss
or expense, including legal fees, and any applicable VAT, which any of them may
sustain or incur as a result or a consequence of any of the events referred to
in this Clause 25.1 having occurred:
(a) ADVANCE NOT MADE: the funding of an Advance following delivery of a
Drawdown Request but not borrowed because of the application of one or more
of the provisions of this Agreement (but not, for the avoidance of doubt
because of any default by such Finance Party);
(b) BROKEN FUNDING: receiving or recovering all or any part of any Advance
other than on the last day of the Term relating thereto or at the end of
any period selected by the Facility Agent under Clause 9, including any
amount required to compensate that Finance Party in respect of any loss,
premium, penalty or other compensating payment sustained or incurred by it
in liquidating, employing or redeploying deposits acquired or arranged or
entered into in order to make, fund or maintain such Advance;
(c) OCCURRENCE OF AN EVENT OF DEFAULT: the occurrence of an Event of Default or
any other breach of an Obligor's obligations expressed to be assumed by it
under this Agreement or under the Security Documents; or
(d) CURRENCY INDEMNITY: if any amount paid or received in respect of this
Agreement or any of the Security Documents, whether as a result of any
order, judgment or otherwise, is not received or recovered by or on behalf
of that Finance Party in the currency in which the same is expressed to be
payable hereunder or thereunder.
25.2 STAMP DUTY
(a) The Company will pay all stamp, documentary, registration and other similar
duties or Taxes, including any penalties, additions, surcharges or interest
relating to such amounts, which are imposed or chargeable on or in
connection with this Agreement and the Security Documents or any judgment
given in connection herewith and therewith.
(b) The Facility Agent may, but shall not be obliged to, pay any amounts which
are referred to at 25.2(a). If the Facility Agent does so, the Company
shall, on demand, indemnify the Facility Agent against any such payment,
together with any costs and expenses, including legal fees, and any
applicable VAT, incurred by or on behalf of the Facility Agent in
connection with such payment.
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26. FEES
26.1 COMMITMENT FEE
(a) The Company will pay (or will procure that there is paid) to the Facility
Agent for distribution among the Banks pro rata to the aggregate of their
respective Revolving Commitments, a commitment fee computed at the rate of
one half of one per cent. (0.5%) per annum on the daily unutilised balance
of the Revolving Commitments (for the avoidance of doubt, taking into
account the undrawn balance of any Standby L/C outstanding during such
period) during the period from and including the date hereof until the
expiry of the Revolving Availability Period. Accrued commitment fees shall
be payable quarterly in arrears on the last day of each quarterly
Accounting Period of the Group (provided that the first such payment shall
be due on the last day of the first complete quarterly Accounting Period of
the Group after the Closing) and also on the date on which the Revolving
Commitments shall be terminated.
(b) Commitment fees are payable three monthly in arrears commencing on the date
falling three months from the date of this Agreement and ending on the date
on which the Total Commitments are cancelled and reduced to zero.
(c) If any Bank's Revolving Commitment is cancelled and reduced to zero, any
commitment fee which had accrued at such time in relation to that Bank and
which has not been paid, shall be payable by the Company on the date the
cancellation is effective.
26.2 UTILISATION FEE
The Company will pay (or will procure that there is paid) to the Facility Agent
for distribution among the Banks pro rata to the aggregate of their respective
Revolving Commitments in respect of each Utilisation Period (as defined below) a
utilisation fee calculated at the rate per annum determined pursuant to Clause
26.3 on an amount equal to the sum of the average daily Deutschmark Amount of
the Ancillary Facilities during such Utilisation Period and the average daily
utilisation of the Revolving Facility and the Standby L/C Facility during such
Utilisation Period (without double counting).
26.3 APPLICABLE RATE
The applicable rate of utilisation fee for any Utilisation Period shall be
determined by reference to the average daily Deutschmark Amount of the Ancillary
Facilities, Advances and Standby L/Cs during such Utilisation Period and in
accordance with the following scale:
(a) if the average daily Deutschmark Amount of the Ancillary Facilities,
Advances and Standby L/Cs expressed as a percentage of the average daily
Total Commitments during such Utilisation Period less than 50 per cent.,
zero per cent. per annum; and
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(b) if the average daily Deutschmark Amount of the Ancillary Facilities,
Advances and Standby L/Cs expressed as a percentage of the average daily
Total Commitments during such Utilisation Period is equal to or greater
than 50 per cent. 0.25 per cent. per annum.
26.4 CALCULATION
For the purposes of Clause 26.2:
(i) "UTILISATION PERIOD" means each successive period of three months during
the period from the date hereof and ending on the Final Repayment Date
(except that if the last such period would otherwise extend beyond the
Final Repayment Date, it shall be shortened so as to end on that date),
the first of which shall commence on the date hereof;
(ii) a year shall have 360 days; and
(iii) the average daily Total Commitments during a Utilisation Period shall
equal the aggregate of the Total Commitments (less any portion thereof
which in accordance with the provisions hereof may not be utilised at any
time after the day in question) on each day during such Utilisation Period
divided by the number of days in such Utilisation Period.
26.5 PAYMENT OF UTILISATION FEE
The Facility Agent shall promptly after the end of each Utilisation Period,
notify the Company and the Banks of the amounts payable by (or on behalf of) the
Company under Clause 26.2 in respect of such Utilisation Period and the Company
shall pay such amount to the Facility Agent for account of the Banks in
proportion to their respective participation in the Facility during the
applicable Utilisation Period within 5 Business Days of such notification.
26.6 AGENCY FEES
The Company shall pay to the Facility Agent, for its own account and the account
of the Security Agent agency fees in the amounts and at the times specified in
the letter relating to the Agents' fees.
26.7 ARRANGEMENT FEE
The Company shall pay to the Facility Agent, an arrangement fee in the amount
and at the time specified in the letter relating to the arrangement fee.
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27. COSTS AND EXPENSES
27.1 INITIAL COSTS
The Company shall pay to the Facility Agent an amount equal to all reasonable
costs and expenses, including reasonable legal fees and any applicable VAT
incurred by the Agents and/or the Arranger in connection with the negotiation,
preparation and execution of this Agreement and the Security Documents, subject
to agreed limits.
27.2 AMENDMENTS
The Company shall pay to the Facility Agent an amount equal to all reasonable
costs and expenses, including reasonable legal fees, and any VAT payable
thereon, incurred by the Agents and/or the Arranger in connection with the
negotiation, preparation and execution of any amendment, waiver, release or
consent (each such event being on "APPROVAL") which any of the Finance Parties
is requested to give in connection with the Senior Finance Documents and the
transactions contemplated by it and them to the extent that the Facility Agent
(acting reasonably) determines that such Approval (either taken in isolation, or
aggregated with any other Approval requested in the annual Accounting Period to
which such Approval relates), is in excess of the time and resource the Facility
Agent could reasonably have been expected to expend on such matters in the
ordinary course of events having regard to its annual agency fee and, for the
avoidance of doubt, the said annual agency fees does not contemplate any work
that the Facility Agent may be required to undertake in that capacity following
the occurrence of a Default or a restructuring or refinancing of the Facilities.
27.3 PROTECTION, ENFORCEMENT, ETC.
The Company shall pay, through the Facility Agent, an amount equal to all proper
costs and expenses, including, reasonable legal fees, and any applicable VAT
incurred by any Finance Party in connection with protecting, preserving or
enforcing (or attempting to do so) any of their rights under or arising out of
any of the Senior Finance Documents.
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PART 11
28. THE AGENTS AND THE ARRANGER
28.1 APPOINTMENT OF THE AGENTS
(a) Each Bank and the Arranger irrevocably appoints the Facility Agent and the
Security Agent to act as its agent in connection with this Agreement and
with respect to the Senior Finance Documents and the transactions
contemplated hereby and thereby.
(b) The Agents are authorised to take such action and to exercise and carry out
all the discretions, authorisations, rights, powers and duties as are
specifically delegated to it in this Agreement and the other Senior Finance
Documents, together with such discretions, rights and powers as such
Facility Agent reasonably considers to be incidental and each of the
Finance Parties irrevocably authorises the Facility Agent and the Security
Agent on such Finance Party's behalf to enter into any Accession Agreement
or Security Document (whereupon and by which act such Finance Party shall
become bound thereby).
(c) The Agents are not, nor will they be considered to be, acting as trustee or
in a fiduciary capacity under or in connection with this Agreement or any
of the other Senior Finance Documents other than the Security Agent in its
capacity as such, under and in respect of the Security Documents. The
duties of the Agents are restricted to those expressly stated in this
Agreement.
(d) Each Bank and the Agents agree (or shall be deemed to have agreed) that,
where Security Documents are to be granted, or have been granted, in favour
of the Security Agent, inter alia, for the benefit of the Banks, then the
Security Agent may enter into such Security Documents on behalf of the
Banks and shall hold the benefit of such Security Documents on trust for
the Banks and the Facility Agent to the extent of their respective
interests for the time being and that the terms and conditions of this
paragraph (d) shall apply to the Security Agent in its capacity as trustee
for the Banks and the Facility Agent under such Security Documents. The
Security Agent agrees with the Banks and the Facility Agent that it shall
hold on trust for each of them the assets secured by the Security
Documents. The perpetuity period applicable to the trusts created hereby
and pursuant hereto shall be eighty years.
(e) Unless expressly excluded in the Security Documents the Security Agent may
rely on, exercise and be protected by the discretions, protections, powers
and rights conferred on trustees, mortgagees or receivers under the Law of
Property Act 1925, the Trustee Act 1925, the Trustee Investments Act 1961
and the Insolvency Act 1986 and if there is any ambiguity or conflict
between the same and any of the Security Documents or where the terms of
the same are less extensive or more restricted than those of the Security
Documents, the terms
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of the Security Documents shall prevail to the extent permitted by the
applicable laws.
(f) The Security Agent in its capacity as trustee or otherwise shall not be
liable for any failure, omission, or defect in perfecting the security
constituted by any Security Document or any security created thereby
including, without limitation, any failure to (i) register the same in
accordance with the provisions of any of the documents of title of the
relevant Obligor to any of the property thereby charged, or (ii) effect or
procure registration of or otherwise protect the floating charge or any
other such security created or pursuant to the Security Documents under the
Land Registration Act 1925 or any other registration laws in any
jurisdiction.
(g) The Security Agent in its capacity as trustee or otherwise may accept
without enquiry such title as any Obligor may have to the property over
which security is intended to be created by any Security Document.
(h) Save where the Security Agent holds a legal mortgage over or over an
interest in, real property or shares, the Security Agent in its capacity as
trustee or otherwise shall not be under any obligation to hold any title
deeds. Security Documents or any other documents in connection with the
property charged by any Security Document or any other such security in its
own possession or to take any steps to protect or preserve the same. The
Security Agent may permit the relevant Obligor to retain all such title
deeds and other documents in its possession.
(i) Save as otherwise provided in the Security Documents, all moneys which
under the trusts herein or therein contained are received by the Security
Agent in its capacity as trustee or otherwise may be invested in the name
of or under the control of the Security Agent in any investment for the
time being authorised by English law for the investment by trustees of
trust money or in any other investments which may be selected by the
Security Agent with the consent of the Majority Banks. Additionally, the
same may be placed on deposit in the name of or under the control of the
Security Agent at such bank or institution (including any Agent) and upon
such terms as the Security Agent may think fit. Any and all such monies and
all interest thereon shall be paid over the Facility Agent forthwith upon
demand by the Facility Agent.
(j) Each Bank hereby confirms its approval of the Senior Finance Documents and
any security created or to be created pursuant thereto and hereby
authorises, empowers and directs the Security Agent (by itself or by such
Person(s) as it may nominate) to execute and enforce the same as trustee or
as otherwise provided (and whether or not expressly in the Banks' names) on
its behalf.
28.2 DUTIES OF THE AGENTS
(a) The Agents will promptly forward to the relevant Party the original or a
copy of any notice or document received by it in its capacity as Facility
Agent or, as relevant, Security Agent for such Party.
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(b) The Facility Agent and, where applicable, the Security Agent will promptly
notify the Banks if it receives notice from any Party of the occurrence of
a Default or any other breach of this Agreement or any of the other Senior
Finance Documents by an Obligor and that notice states the Default or
breach and makes reference to the specific Event of Default and/or the
Clause that has been breached.
(c) Except as otherwise stated in this Agreement and the Security Documents,
the Facility Agent and the Security Agent will act in accordance with any
instructions given to it by the Majority Banks, such instructions being
binding on all the Banks whether or not they form part of the Majority
Banks.
28.3 EXCULPATORY PROVISIONS
Except where this Agreement or the Security Documents specifically provides
otherwise, the Facility Agent or, as the case may be, the Security Agent is not
obliged:
(a) to review or check the accuracy or completeness of any document, notice or
other communication it receives or forwards to another Party;
(b) to monitor or enquire if a Default has occurred, or if the representations
made by any Obligor under or in connection with any of the Senior Finance
Documents and the Security Documents are true, correct or accurate, or
whether any Obligor has performed each of the obligations expressed to be
assumed by it under any of the Senior Finance Documents;
(c) to disclose to any Party any information (whether in a documentary form or
otherwise) if such disclosure would or might, in its opinion, constitute a
breach of law, regulation, its duty of confidentiality or otherwise be
actionable at the suit of any Person;
(d) to take any action or exercise any right, power or discretion under any of
the Senior Finance Documents, unless specifically instructed to do so by
the Majority Banks, the Banks or any other Finance Party which is entitled
to instruct it under any of the Senior Finance Documents and the manner in
which such right, power or discretion should be exercised; or
(e) to begin any legal action or proceeding under or in connection with any of
the Senior Finance Documents, unless it is satisfied that it has received
such security as it may require in respect of any costs, claims, liability
or loss, including legal fees, and any applicable VAT, which it will or may
incur in respect of, or in connection with, such actions or proceedings.
28.4 ASSUMPTIONS
The Agents may assume that:
(a) no Default has occurred and that no Obligor is not in breach of its
obligations any of the Senior Finance Documents; and
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(b) each representation made by the Obligors under or in connection with any of
the Senior Finance Documents is correct,
unless it has, in its capacity as an Agent received notice to the contrary from
any Party; and
(c) that the Facility Office of any Bank is that office which has been notified
to it by that Bank for such purpose by ten Business Days' notice, until
such Bank informs the Facility Agent that it has designated another office
as its Facility Office.
28.5 AGENTS AND ARRANGER NOT RESPONSIBLE TO OTHER PARTIES
None of the Agents nor the Arranger are responsible to any other Party for:
(a) the execution, validity or enforceability of any of the Finance Documents
or any documentation or communication delivered or made in connection
therewith;
(b) the accuracy and/or completeness of any information supplied by or on
behalf of an Obligor, including the Information Package;
(c) taking, or omitting to take, any action in connection any of the Senior
Finance Documents, unless such Party suffers loss directly as a result of
such Agent's or as the case may be, the Arranger's gross negligence or
wilful misconduct; or
(d) any breach by any other Party of this Agreement or any of the other Senior
Finance Documents.
28.6 DELEGATION AND ADVISERS
Each of the Agents may:
(a) engage, pay for and rely on the advice or services of any expert or
professional (whether a lawyer, accountant, surveyor or otherwise); and
(b) act through any of its, or its Affiliates', personnel and agents.
28.7 INDEMNITY
Upon demand by an Agent, each Bank shall, in its pro rata share, indemnify such
Agent, from and against any liabilities, costs, claims, losses and expenses,
including legal fees, and any applicable VAT which it may incur in any way
relating to or arising out of it acting in its capacity as an Agent, save to the
extent that such liability, cost, claim, loss or expense was incurred as a
result of such Agent's gross negligence or wilful misconduct.
28.8 RESIGNATION OF THE AGENTS
(a) Each Agent may resign its appointment under this Agreement by giving not
less than thirty days' prior written notice to that effect to each of the
other Parties
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stating whether or not it has appointed its Affiliate as its successor. No
Agent's resignation shall become effective until a successor has been
appointed pursuant to this Clause 28.8, and in respect of the resignation
of a retiring Security Agent, shall not become effective until the Facility
Agent is satisfied that all things required to be done in order that the
Security Documents or replacements therefor shall provide for effective and
perfected security in favour of the replacement Security Agent have been
done. The Obligors shall take such action as may be necessary in order that
the Security Documents or replacements therefor shall provide for effective
and perfected security in favour of any replacement Security Agent.
(b) Without prejudice to the provisions of Clause 28.8(a), the Majority Banks
may require the Agents to retire from their respective appointments under
this Agreement at any time without assigning any reason therefor by giving
not less than thirty days' prior written notice to that effect to the
Facility Agent, provided that no such retirement shall become effective
until a successor for the Agents is appointed pursuant to this Clause 28.8.
(c) If the successor to the Agents or is to be:
(i) one of its Affiliates, such Affiliate shall become the Agent under
this Agreement upon notice to that effect being given by the resigning
Agent and its successor to each of the other Parties; or
(ii) other than one of its Affiliates, its successor shall be appointed by
the Majority Banks following consultation with the Company. If the
Majority Banks have not appointed a successor within 30 days of the
Agents' notice given under (a) above, the Agents may appoint their
successor, such appointment becoming effective upon notice to that
effect being given by the resigning Agents and their successor to each
of the other Parties.
(d) After a successor to the Agents has been appointed, the retiring Agents
shall continue to be entitled to the benefits of this Clause 28 but solely
in respect of any actions taken or omitted to be taken by it while it was
acting as an Agent under this Agreement and its successor and each of the
Parties shall have the same rights and obligations amongst themselves as if
the successor had been a Party to this Agreement instead of the retiring
Agents.
(e) The retiring Agents will make available to its successor any documents,
records and advice which their successor reasonably requires in order to
enable it to perform its functions as an Agent.
28.9 SEPARATE ENTITY
Each of the Agents' agency divisions shall be treated as a separate entity from
any of its other departments or divisions. Therefore, unless an Agent receives
any information concerning an Obligor in connection with this Agreement or the
facilities contemplated
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by any of the Senior Finance Documents in its capacity as an Agent it shall be
entitled to treat that information as confidential.
28.10 RELIANCE
Each Agent may rely on any communication or document reasonably believed by it
to be genuine and correct and, without limiting the generality of the foregoing,
may rely on any statement made by a director or employee or any Person regarding
any matters which may reasonably be assumed to be within his knowledge or within
his power to verify. Each Agent may engage, pay for and rely on legal or other
professional advisers selected by it and shall be protected in so relying.
28.11 CREDIT APPROVAL
Each of the Banks severally represents and warrants to the Agents and the
Arranger that it has made its own independent investigation and assessment of
the financial condition and affairs of each Obligor and their related entities
and other parties considered by it to be relevant in connection with its
participation in this Agreement and has not relied exclusively on any
information, including the Information Package, the Reports and any information
distributed on behalf of any Obligor during syndication, provided to such Bank
by any Agent or any Arranger in connection therewith. Each Bank represents,
warrants and undertakes to each Agent and the Arranger that it shall continue to
make its own independent appraisal of the creditworthiness of the Obligors and
other parties considered by it to be relevant in connection with the Senior
Finance Documents and their related entities while any amount is or may be
outstanding under the Senior Finance Documents.
28.12 TAX CONFIRMATION
Each Bank confirms in favour of the Facility Agent (on the date of this
Agreement, or in the case of a Bank which becomes a party hereto pursuant to a
transfer or assignment, on the date on which the relevant transfer or assignment
becomes effective) that either:
(a) it is not resident for tax purposes in the United Kingdom and is
beneficially entitled to its share of the Advances and the interest
thereon; or
(b) it is a bank as defined for the purposes of Section 349 of the Income and
Corporation Taxes Act 1988 and is beneficially entitled to its share of
the Advances and the interest thereon,
and each Bank agrees in favour of the Facility Agent to notify the Facility
Agent if there is any change in its position from that set out above.
28.13 MISCELLANEOUS PROVISIONS
(a) Each of the Agents, and the Arranger shall, if they are also a Bank, have
the same rights and obligations under this Agreement as if they were not
an Agent, or an Arranger and exercise those rights and perform those
obligations accordingly.
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(b) Each of the Agents and the Arranger may contract any banking or other
business with any of the Obligors.
(c) None of the Banks will assert against any individual any claim which it may
have against any of the Agents or the Arranger.
(d) Each Agent may refrain from doing anything which would or might in its
reasonable opinion (a) be contrary to the law of any applicable
jurisdiction or any applicable official directive or (b) render it liable
to any Person, and may do anything which in its reasonable opinion (acting
on legal advice) is necessary to comply with any such law or directive.
29. TRANSFERS
29.1 OBLIGORS
Save as expressly provided in this Agreement, no Obligor may without the prior
written consent of the Banks, assign, transfer, novate or dispose of all or any
of its rights or obligations under this Agreement.
29.2 BANKS
(a) Subject to Clause 29.5, any Bank (the "EXISTING BANK") may, at any time,
assign transfer or novate all or any part of its rights, benefits and
obligations under this Agreement (including its Revolving Commitment and
its Standby L/C Commitment) in a minimum amount of DM 5,000,000 (or, if
less, equal to its Revolving Commitment and its Standby L/C Commitment) and
each of the other Senior Finance Documents to another financial institution
(the "NEW BANK") with the consent of the Company, such consent not to be
unreasonably withheld or delayed and to have been deemed to have been given
if not refused within 14 days of the relevant request by delivering, or
causing to be delivered, to the Facility Agent, in the case of a transfer
or a novation, a Novation Certificate duly completed and executed by the
Existing Bank and the New Bank and to be executed upon receipt by the
Facility Agent and upon details of such transfer or novation having been
reflected in the control account referred to at Clause 31.3.
(b) Unless otherwise expressly provided in any Security Document or otherwise
expressly agreed between the Existing Bank and the New Bank and notified by
the Existing Bank to the Trustee at the time at which the relevant transfer
or novation takes effect under Clause 29.3 there shall automatically be
transferred with any transfer or novated with any novation of the Existing
Bank's rights and/or obligations under this Agreement, the Existing Bank's
rights under or in respect of each of the other Senior Finance Documents
which relate to that portion of the Existing Bank's rights and/or
obligations under this Agreement and each of the other Senior Finance
Documents which are the subject matter of such transfer or novation.
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(c) A Bank shall only be entitled to transfer or novate all or part of its
rights, benefits and obligations under this Agreement to the extent that it
transfers its rights, benefits and obligations under the Revolving Facility
and the Standby L/C Facility in the same proportion that the Revolving
Commitments of each of the Banks bears to the Standby L/C Commitments of
each of the Banks at such time and, for the purposes of this paragraph (c),
any Ancillary Commitment of any Ancillary Bank shall be ignored and treated
as if such Bank's Revolving Commitment had not been reduced in accordance
with Clause 7.
29.3 TIME OF TRANSFER
Upon execution of an Intercreditor Agreement Accession Memorandum and a Novation
Certificate by the New Bank, the Existing Bank and the Facility Agent (or if
later, the date specified for this purpose in the Novation Certificate) and to
the extent that they are expressed to be subject to the transfer or novation
stated therein:
(a) the Existing Bank shall be released from its obligations to each other
Party (the "RELEASED OBLIGATIONS") and each other Party shall be released
from its obligations to the Existing Bank;
(b) the New Bank will assume obligations towards each other Party which differ
from the released obligations only in so far as they are owed to or assumed
by the New Bank and not the Existing Bank;
(c) the rights of the Existing Bank against the other Parties and vice versa
(the "CANCELLED RIGHTS") will be cancelled; and
(d) the New Bank and the other Parties will acquire rights against each other
which differ from the cancelled rights only insofar as they are exercisable
by or against the New Bank and not the Existing Bank.
Each Party (other than the Existing Bank and the New Bank) irrevocably
authorises the Facility Agent to execute each Novation Certificate on its
behalf.
29.4 ADMINISTRATION FEE
Not later than on the date a transfer becomes effective in accordance with
Clause 29.3, the New Bank will pay to the Facility Agent, for its own account,
an administration fee of $1,000.
29.5 ADDITIONAL AMOUNTS PAYABLE TO TRANSFEREE
No Bank may effect a transfer pursuant to this Clause 29 if, at the time of the
transfer, or immediately after, or if a payment of interest, principal or
otherwise was to be made by an Obligor under this Agreement at such time to or
for the account of the proposed transferee, such Obligor would be liable to pay
an additional amount, including an indemnity payment (the "ADDITIONAL AMOUNT")
under Clause 14 and/or Clause 15 which would not have been payable to the
proposed transferor, unless the proposed transferee
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has confirmed to the Facility Agent and the Obligors' Agent that it will
promptly reimburse the relevant Obligor an amount equal to the additional
amount.
29.6 DISCLOSURE OF INFORMATION
(a) Any Finance Party may provide to a Permitted Recipient, which has entered
into a Confidentiality Undertaking, a copy of this Agreement; each of the
Transaction Documents and such information concerning the Group or any
Group Member, including without limitation, the Recapitalisation as it
considers appropriate.
(b) A "PERMITTED RECIPIENT" means, in respect of any Finance Party:
(i) its Affiliates;
(ii) any Person with which that Finance Party is considering entering into
contractual relations in connection with this or any of the Senior
Finance Documents;
(iii) its advisers;
(iv) the courts, regulatory and other bodies in accordance with whose
orders or regulations it is required or is accustomed to comply; and
(v) any other Person who that Finance Party reasonably considers
appropriate to receive such information in order to protect or
preserve that Finance Party's position.
30. REDISTRIBUTION PROVISIONS
30.1 REDISTRIBUTIONS
(a) Subject to Clause 30.3, if all or any part of an Obligor's obligations
under this Agreement and each of the other Senior Finance Documents owed to
any Finance Party are discharged, whether by way of set-off, payment,
combination of accounts or otherwise, other than as a result of an Agent
receiving payment and distributing such payment in accordance with Clause
13, that Finance Party (the "RECOVERING PARTY") shall promptly pay to the
Facility Agent an amount equal to the amount so discharged (the "DISCHARGED
AMOUNT").
(b) The Facility Agent shall treat each Discharged Amount received by it from a
Recovering Party as if it had received the Discharged Amount from the
relevant Obligor and distribute it amongst the Finance Parties (including
the Recovering Party) in accordance with Clause 13.2 .
(c) Upon a Discharged Amount being distributed by the Facility Agent, the
relevant Recovering Party shall be subrogated to the rights of each of the
other Finance Parties which received such a distribution to the extent of
such
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distribution and relevant Obligor will owe the Recovering Party a debt
which is equal to the amount so distributed to each of the other Finance
Parties.
30.2 REPAYMENT OF A DISCHARGED AMOUNT
If a Recovering Party is required to return or repay an amount which it
determines relates to a Discharged Amount made by it under Clause 30.1, it shall
promptly inform the Facility Agent. Each of the Finance Parties (other than the
Recovering Party which received a payment as a result of the Discharged Amount
being distributed) shall pay to the Facility Agent (for the account of the
Recovering Party) all that it has received of the Discharged Amount. Upon such
payment being made, the rights of subrogation provided in Clause 30.1(c) above
shall be operated in reverse to the extent of the reimbursement.
30.3 EXCEPTIONS
(a) A Recovering Party is not obliged to pay any amount under Clause 30.1 if,
in its opinion (acting reasonably), after such payment it would not have a
valid claim against the relevant Obligor by way of subrogation or otherwise
in respect of such payment.
(b) A Finance Party shall not be obliged to make any payment under Clause 30.1
if the obligations owed to that Finance Party are discharged as a result of
it receiving payment from a New Bank in respect of a Novation Certificate.
(c) A Recovering Party which has commenced or joined in an action or proceeding
in any court to recover any amount due to it under this Agreement or any of
the other Senior Finance Documents and pursuant to a judgment obtained in
such court or a settlement or compromise of that action or proceeding shall
have received any amount, shall not be obliged to share all or any
proportion of that amount with any Finance Party which has the legal right
to, but does not, join in such action or proceeding or commence and
diligently prosecute a separate action or proceeding to enforce its rights
under this Agreement or, as the case may be, such other Senior Finance
Document in the same or another court.
(d) If a notice is served under Clause 21.2 each Bank and each Ancillary Bank
shall adjust by corresponding transfers (to the extent necessary) their
claims in respect of amounts outstanding to them under the Revolving
Facility, the Standby L/C Facility and Ancillary Facilities so that after
such transfers each such Bank shall have the same amount of outstandings
under the Revolving Facility and Ancillary Facilities and the same
liabilities under the Standby L/C Facility pro rata corresponding to the
proportion of each Bank's Revolving Commitment to the aggregate Revolving
Commitments, each as at the date the notice is served under Clause 21.2.
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PART 12
31. CALCULATIONS AND EVIDENCE OF DEBT
31.1 CALCULATIONS
Interest and commitment commission shall accrue from day to day and shall be
calculated on the basis of a year of 360 days (or, if market practice differs,
in accordance with market practice) and the actual number of days elapsed.
31.2 FINANCIAL ACCOUNTS
Each of the Banks shall, in accordance with its usual practices, maintain on its
books an account reflecting the amount which it has lent and the amount owing to
it under this Agreement and the each of the other Senior Finance Documents from
time to time.
31.3 CONTROL ACCOUNT
(a) The Facility Agent shall, in accordance with its usual practices, maintain
on its books a control account reflecting any amounts received or recovered
by it in connection with this Agreement and each of the other Senior
Finance Documents and any amounts which are payable by any Party in
connection with this Agreement and each of the other Senior Finance
Documents and the Parties' respective interests in such amounts.
(b) With respect to any Bank, the assignment, transfer or novation of all or a
part of such Bank's interests under the Senior Finance Documents shall not
be effective until such assignment, transfer or novation is reflected in
the control account maintained by the Facility Agent with respect to such
interests, and prior to such reflection in the control account, all amounts
owing to the transferor with respect to such interests shall remain owing
to such transferor. In addition to its capacity as agent for the Banks,
solely for purposes of this Clause 31.3, the Facility Agent's maintenance
of the control account shall also be as the Company's agent without
incurring any liability to the Company in such capacity whatsoever.
31.4 STANDBY L/C ACCOUNTS
(a) On the Issue Date of each Standby L/C each Bank participating in such
Standby L/C shall open its books at its Facility Office in accordance with
its usual practices an account (a "STANDBY L/C ACCOUNT") each in the name
of the Borrower on whose behalf the same was issued and entitled "RALEIGH
STANDBY L/C" (together with a reference to such Standby L/C) and
denominated in the currency of payment of sums payable under that Standby
L/C.
(b) The Borrowers shall make such payments to each Bank for credit to each
Standby L/C Account on the books of such Bank as are provided for in this
Agreement.
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(c) The amount from time to time standing to the credit of each Standby L/C
Account on the books of a Bank shall bear interest at its overnight rate
for call deposits in the relevant currency from time to time, such interest
to be compounded daily and to be credited to such Standby L/C Account
quarterly in arrear on the last Business Day of each calendar quarter and
on the date on which such Standby L/C Account is closed.
(d) Each Bank shall be entitled to pay out of the amount standing to the credit
of the Standby L/C Account relating to any Standby L/C any amount which it
is obliged to pay out under such Standby L/C. However, subject to the
provisions of paragraph (e) below, no withdrawals may be made by any
Borrower from a Standby L/C Account (subject to the Senior Finance
Documents) until such time as all actual and contingent liabilities of such
Borrower hereunder in respect of the Standby L/C to which that Standby L/C
Account relates have been satisfied in full.
(e) If the amount of the Standby L/C is reduced, the Bank that issued that
Standby L/C shall, if so requested by the Borrower on whose behalf that
Standby L/C was issued by not later than 12 noon on any Business Day after
such reduction, pay out of the amount standing to the credit of the Standby
L/C Account relating to such Standby L/C on such business day:
(i) a sum equal to the excess (if any) of the amount standing to the
credit of such Standby L/C Account over the amount of such Bank's
participation in the Standby L/C; and
(ii) a sum which bears to the amount (if any) standing to the credit of
such Standby L/C Account as a result of payments made to the Facility
Agent for credit thereof pursuant to Clause 16.2 the proportion borne
by the amount of the reduction in such Banks' participation in that
Standby L/C to the amount thereof immediately before that reduction.
31.5 ACTUAL AMOUNT RECEIVED
The amount owed by an Obligor to any Finance Party under this Agreement and each
of the other Senior Finance Documents shall be reduced by the amount actually
received or recovered by such Finance Party and not by reference to any rate of
exchange applied by any court or other body in calculating how much is payable
by such Obligor under any judgment or order given in connection with this
Agreement or any of the Senior Finance Documents.
31.6 PRIMA FACIE EVIDENCE
The accounts referred to in Clauses 31.2, 31.3 and 31.4 are prima facie evidence
of the amount and details recorded in those accounts.
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31.7 CERTIFICATES AND DETERMINATIONS
Any certificate delivered or determination made by a Finance Party, whether in
relation to an amount payable to it under this Agreement or the any other Senior
Finance Documents or, in respect of an indemnity given by an Obligor or
otherwise shall, in the absence of manifest error, be conclusive evidence of the
matters to which such certificate or determination relates.
31.8 REFERENCE BANKS
(a) If any Reference Bank fails to provide the Facility Agent with a
quotation when required for the purposes of this Agreement, the rate for
which such quotation was required shall (provided that, if there are, at
the relevant time, four or more Banks, there are at least two) be
determined by reference to the quotations that are received by the
Facility Agent.
(b) Additional or replacement banks may, by agreement between the Obligors'
Agent and the Majority Banks, be appointed as a Reference Bank.
31.9 UNAVAILABILITY OF ECU/ECU
If the Facility Agent at any time prior to the commencement of the third stage
of EMU determines (after consultation with the Reference Banks and the Banks)
that:
(a) the ECU has ceased to be utilised as the basic accounting unit of the
European Community;
(b) for reasons affecting the market in ECU generally, ECU are not freely
traded between banks internationally; or
(c) it is illegal, impossible or impracticable for payments to be made
hereunder in ECU,
then the Facility Agent may, in its own discretion but after consultation with
the Company and the Banks, declare (such declaration to be binding on all
parties hereto) that any payment made or to be made thereafter which, but for
this provision, would have been payable in ECU shall be made in a component
currency of the ECU or dollars (as selected by the Facility Agent after
consultation with the Reference Banks and the Banks) (the "SELECTED CURRENCY").
The calculation of any amount to be paid in a Selected Currency shall be made by
the Facility Agent on the Valuation Day for value on the day that such payment
is due (or, if such day is not a Business Day in the relevant Selected Currency,
the next succeeding Business Day). The amount of the Selected Currency shall be
the equivalent on the Valuation Day of the components of the ECU when it was
most recently used in the European Monetary System, PROVIDED THAT, if the ECU is
being sued by public institutions of or within the European Communities on the
Valuation Day, the Facility Agent shall calculate the equivalent of such payment
in the Selected Currency by using the currency amounts that are components of
the ECU which are used by such public institutions on the Valuation Day.
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32. AMENDMENTS AND WAIVERS
32.1 MAJORITY BANKS
Unless prohibited by Clause 32.2, Clause 32.3 or Clause 32.4 , any provision of
this Agreement or the other Senior Finance Documents may be amended, waived or
supplemented or any consent given by written agreement made between the Company
and the Majority Banks or, if the Facility Agent has received the Majority
Banks' prior approval, the Facility Agent on their behalf.
32.2 ALL BANKS
The provisions contained in this Agreement and which relate to the following
shall not be amended, supplemented or modified or any consent given without the
prior consent of all Banks:
(a) the definitions of "Availability Period", "Margin", "LIBOR",
"Encumbrance", "Event of Default", "Repayment Date", "Final Repayment
Date", "Financial Indebtedness", "Majority Banks", "Potential Event of
Default" and Reduction Date;
(b) Clauses 6 (other than Clause 6.15), 19.4(y), 19.5 (a), (f), (g), (h),
(i), (o), (p), (r), (t), (u), (v), (w), (x) or (y), 20 and 30 and the
definitions contained or referred to therein;
(c) any provision of this Agreement which expressly requires the consent of
each Bank; and
(d) the amount of either of the Facilities, a Bank's Revolving Commitment,
Standby L/C Commitment, the amount (including both principal and
interest) or currency or due date for payment of any amount payable under
any of the Senior Finance Documents or the Expiry Date of a Standby L/C.
32.3 SUPER MAJORITY BANKS
Without the prior consent of a Super Majority:
(a) the Security Agent shall not (other than in accordance with Clause 24)
release any asset which is subject to a fixed Encumbrance granted in
favour of the Security Agent (unless such consent is given so as to
facilitate a disposal permitted to be made, or not prohibited from being
made, under this Agreement); and
(b) the provisions contained in this Agreement and which relate to Clauses
19.5(b), (c), (d), (e), (j), (k), (l), m(i),(n),(q) or (s) shall not be
amended, supplemented or modified or any consent given in respect
thereof.
"SUPER MAJORITY BANKS" means a Bank or group of Banks whose aggregate
Revolving Commitments amount to more than eighty-five per cent of the
Total
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Commitments or if each Banks' Commitment has been reduced to zero, would
have amounted in aggregate to eighty-five per cent of the Total
Commitments immediately prior to such reduction to zero and, for the
purposes of this definition, the provisions of Clause 7 and the Ancillary
Commitment of any Ancillary Bank shall be ignored and be treated as if
such Bank's Revolving Commitment had not been reduced in accordance with
Clause 7.
32.3 ALL PARTIES
Without the prior consent of all Parties, this Clause 32 may not be amended,
waived or supplemented.
32.4 THE AGENTS
Without the prior consent of the relevant Agent, none of such Agent's rights or
obligations under any of the Senior Finance Documents may be amended, waived or
supplemented.
33. NOTICES
33.1 METHOD OF DELIVERY
All notices or other communications made or given in connection with this
Agreement and each of the other Senior Finance Documents shall be made in
writing by facsimile, letter or tested telex (unless such notice or
communication relates to the making or advice of any payment, in which case it
shall be made by tested telex only).
33.2 ADDRESSES
Each communication or document to be made or delivered in connection with this
Agreement and each of the other Senior Finance Documents to a Party shall be
delivered or sent to the address or facsimile number that has been:
(a) notified to the Facility Agent by that Party before it became a Party; or
(b) notified to the Facility Agent by at least five Business Days' notice.
33.3 AGENTS' DETAILS
Unless the relevant Agent has given the other Parties five Business Days' notice
to that effect, its address and facsimile number are:
FACILITY AGENT:
(a) Address: Trinity Tower
9 Thomas More Street
London EC1 9YT
(b) Fax: 0171 777 2360
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(c) Officer/Department: Stephen Clarke, Agency Loans Department
SECURITY AGENT:
(a) Address: Trinity Tower
9 Thomas More Street
London EC1 9YT
(b) Fax: 0171 777 2360
(c) Officer/Department: Stephen Clarke, Agency Loans Department
33.4 RECEIPT OF NOTICES
(a) Any notice or communication will be deemed to have been given, if sent by
post, when delivered and, if sent by facsimile, when received and, if
sent by telex, when an appropriate answer back is received by the sender.
However, if the notice or communication is for an Agent, it shall only be
effective when the same is received by the department or the officer
referred to at, Clause 33.3 or as otherwise notified by the relevant
Agent under that Clause.
(b) The Company shall forthwith on demand indemnify each Finance Party
against any direct loss or liability which that Finance Party incurs (and
that Finance Party shall not be liable to an Obligor in any respect) as a
consequence of:
(i) any Person to whom any notice or communication under or in
connection with this Agreement is sent by facsimile failing to
receive that notice or communication (unless such loss or liability
is directly caused by that Person's negligence or wilful default);
or
(ii) any facsimile communication which appears to that Finance Party
(acting reasonably) to have been sent by an Obligor having in fact
been sent by a Person other than an Obligor.
33.5 LANGUAGE
Each notice, communication and document given under or in connection with this
Agreement and each of the other Senior Finance Documents shall be in English or,
if not, accompanied by an accurate translation thereof which has been confirmed
by an Authorised Signatory of the Party giving the same as being a true and
accurate translation.
34. PARTIAL INVALIDITY
If any provision of this Agreement or any of the other Senior Finance Documents
is or becomes illegal, invalid or unenforceable in any respect under the law of
any jurisdiction, it shall not affect or impair the legality, validity or
enforceability of:
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(a) any other provision of this Agreement or any of the other Senior Finance
Documents; or
(b) that provision, under the law of any other jurisdiction.
35. REMEDIES AND WAIVERS
(a) If any of the Finance Parties do not exercise, or delay in exercising,
any of their respective rights or remedies under or in connection with
this Agreement, it shall not operate as a waiver of any such right or
remedy.
(b) The single or partial exercise of any right or remedy shall not prevent
any further or other exercise of that right or remedy.
(c) The rights and remedies provided in this Agreement or each of the other
Senior Finance Documents are additional to any rights or remedies
provided by law.
36. COUNTERPARTS
This Agreement may be executed in any number of counterparts and by different
Parties on separate counterparts each of which, when executed and delivered,
shall constitute an original and all the counterparts shall together constitute
but one and the same instrument.
37. SECURITY
The obligations and liabilities of the Obligors to the Security Agent under the
Security Documents shall be secured by the interests and rights granted in
favour of the Security Agent under the Security Documents.
38. JURISDICTION
38.1 COURTS OF ENGLAND
For the benefit of each Finance Party, each of the Obligors agree that the
courts of England have jurisdiction to hear and settle any action, suit,
proceeding or dispute in connection with this Agreement or any of the other
Senior Finance Documents and therefore irrevocably submits to the jurisdiction
of those courts.
38.2 NON-EXCLUSIVITY
The submission to the jurisdiction of the English courts does not restrict the
right of a Finance Party to take proceedings against an Obligor in connection
with this Agreement or any of the other Senior Finance Documents in any other
court of competent jurisdiction, whether concurrently or not.
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38.3 SERVICE OF PROCESS AGENT
(a) In addition to any other appropriate method of service, Non-UK Obligors
irrevocably agrees that any suit, action or proceeding may be served on
it by being delivered to Derby Holding Limited at 62 Triumph Road,
Nottingham, NG7 2DD, England or its registered office and confirms that
it has appointed the Company as its agent for such purpose.
(b) Each of the Non-UK Obligors confirms that failure by its process agent to
notify it of receipt of any process will not invalidate the proceedings
to which it relates.
(c) If the appointment of a process agent ceases to be effective, the
relevant Non-UK Obligor shall immediately appoint a further Person in
England as its process agent in respect of this Agreement and each of the
other Senior Finance Documents and notify the Facility Agent of such
appointment. If such a Person is not appointed within 15 days the
Facility Agent shall be entitled to appoint such a Person.
38.4 NON-CONVENIENCE OF FORUM
Each of the Non-UK Obligors confirms that the English courts are not an
inconvenient forum and irrevocably waives any right it may have to object to
them on the grounds of inconvenience or otherwise.
39. GOVERNING LAW
This Agreement is governed by and shall be construed in accordance with English
law.
This Agreement has been entered into by the Parties on the date stated at the
beginning of this Agreement.
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SCHEDULE 1
THE BORROWERS
NAME JURISDICTION OF INCORPORATION
Raleigh Industries England and Wales
Limited
Sturmey-Archer Limited England and Wales
Derby Holding Germany
(Deutschland) GmbH
Koninklijke Gazelle BV Netherlands
The Derby Cycle The United States of America
Corporation
Raleigh Industries of Canada
Canada Limited
Raleigh Europe B.V. Netherlands
Raleigh B.V. Netherlands
E. Weiner Bike Parts Germany
GmbH
Winora Staiger GmbH Germany
Derby Holdings Limited England and Wales
Raleigh Fahrrader Germany
GmbH
Derby Cycle Werke Germany
GmbH
Raleigh International England and Wales
Limited
Curragh Finance Ireland
Company
Raleigh Ireland Limited Ireland
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SCHEDULE 2
THE GUARANTORS
NAME JURISDICTION OF INCORPORATION
Derby Holding Limited England and Wales
Raleigh Industries England and Wales
Limited
Raleigh International England and Wales
Limited
Sturmey-Archer Limited England and Wales
Raleigh Industries of Canada
Canada Limited
The Derby Cycle The United States of America
Corporation
Raleigh BV Netherlands
Raleigh Europe BV Netherlands
Koninklijke Gazelle BV Netherlands
Derby Nederland BV Netherlands
Derby Holding BV Netherlands
Sturmey-Archer Europa Netherlands
B.V
Lyon Investments BV Netherlands
Derby Holding Germany
(Deutschland) GmbH
Raleigh Fahrrader GmbH Germany
NW Sportgerate GmbH Germany
Derby Cycle Werke Germany
GmbH
E Weiner Bike Parts Germany
GmbH
Univega Worldwide Licence Germany
GmbH
Univega Beteiligung Germany
GmbH
MS Sport Vertriebs Germany
GmbH
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NAME JURISDICTION OF INCORPORATION
Derby Fahrrader GmbH Germany
Derby WS Germany
Vermogenswerwaltungs
GmbH
Winora Staiger GmbH Germany
Curragh Finance Ireland
Company
Raleigh Ireland Limited Ireland
InterDerby Group Netherlands Antilles
Finance N.V.
The British Cycle England and Wales
Corporation Limited
BSA Cycles Limited England and Wales
Triumph Cycle Co. England and Wales
Limited
Raleigh (Services) Limited England and Wales
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SCHEDULE 3
THE BANKS
<TABLE>
<CAPTION>
NAME REVOLVING COMMITMENT STANDBY L/C
(DM) COMMITMENT (DM)
<S> <C> <C>
The Chase Manhattan Bank 16,500,000 1,156,542
ABN Amro Bank N.V. 16,250,000 1,139,019
Bank of Scotland 16,250,000 1,139,019
BHF - Bank AG 16,250,000 1,139,019
Dresdner Bank AG, Grand Cayman 16,250,000 1,139,019
branch
Lloyds Bank Plc 16,250,000 1,139,019
Midland Bank Plc 16,250,000 1,139,019
Scotia Bank Europe Plc 16,250,000 1,139,019
The Sumitomo Bank, Limited 16,250,000 1,139,019
Banque Nationale de Paris 11,250,000 788,551
Istituto Bancario San Paolo di 11,250,000 788,551
Torino SPA
Kredietbank (Nederland) N.V. 11,250,000 788,551
Oldenburgische Landesbank AG 11,250,000 788,551
The Governor and Company of the 11,250,000 788,551
Bank of Ireland
The Industrial Bank of Japan, 11,250,000 788,551
Limited
DM214,000,000 DM15,000,000
</TABLE>
NB: The Standby L/C Commitment of each Bank is a sub-set of the Revolving
Commitment of such Bank and NOT additional to its Revolving Commitment.
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SCHEDULE 4
ACCESSION AGREEMENT
THIS ACCESSION AGREEMENT is dated the day of 199
and made BETWEEN [ ] (the "ADDITIONAL
[BORROWER/GUARANTOR]") (1), [ ] (the "COMPANY" and an "EXISTING
BORROWER" and an "EXISTING GUARANTOR") on behalf of itself and each of the other
Borrowers and Guarantors [ ] (each an "EXISTING
GUARANTOR" and together with the Company the "EXISTING GUARANTORS") (2), and
Chase Manhattan International Limited in its capacities as Facility Agent and
Security Agent under the Facility Agreement referred to in Recital (A) hereof
and on behalf of the Arranger and the Banks parties to and defined as such in
such Facility Agreement and on behalf of each of the parties to the
Intercreditor Agreement (3).
WHEREAS:
(A) By and upon and subject to the terms of a facility agreement (the
"FACILITY AGREEMENT"), which term includes any supplements and amendments
thereto which may at any time be made in relation thereto and also any
Novation Certificates and Accession Agreements) dated [ ], 1998 made
between, inter alios, the Company, the Borrowers and the Guarantors as
therein defined, Chase Manhattan plc as Arranger, Chase Manhattan
International Limited as Facility Agent and Security Agent and the
financial institutions named therein as banks, a multicurrency revolving
credit facility was made available to the Company and/or certain of the
Borrowers (as defined in the Facility Agreement).
(B) Each of the entities expressed to be party hereto, whether directly or
through signature hereof by the Facility Agent or the Company on its
behalf, is a party to the Facility Agreement either by having been an
original party thereto or pursuant to an Accession Agreement or a
Novation Certificate to which it is party or otherwise.
(C) The Additional [Borrower/Guarantor] wishes to become party to the
Facility Agreement as a [Borrower/Guarantor] pursuant to the procedure
established in Clause [22/19.4] of the Facility Agreement and a party to
the Intercreditor Agreement as an Obligor pursuant to the procedure
established in Clause 9[1] of the Intercreditor Agreement by the
execution of this Accession Agreement.
(D) It is the intention of the parties that this Accession Agreement shall
take effect as a deed.
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NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS
Terms used herein (including the Recitals hereto) which are defined in or
to which a meaning or construction is assigned by or in the Facility
Agreement shall, unless otherwise defined herein, have the same meaning
and construction herein as therein.
2. AGREEMENTS, CONFIRMATIONS AND REPRESENTATIONS
(a) The Additional [Borrower/Guarantor] hereby:
(i) confirms that it has received a copy of the Facility Agreement and
the Intercreditor Agreement, together with such other documents
and information as it has required in connection herewith and
therewith;
(ii) agrees to become, with effect from the date of this Accession
Agreement, a [Borrower/Guarantor] under the Facility Agreement,
and an Obligor under the Intercreditor Agreement, agrees to be
bound in that capacity with effect from such date by the terms of
the Facility Agreement and the Intercreditor Agreement and
undertakes accordingly to perform its obligations as a
[Borrower/Guarantor] (or, as the case may be, Obligor) thereunder;
(iii) confirms the accuracy of the information set out under its name at
the end of this Accession Agreement;
(iv) represents and warrants as a [Borrower/Guarantor] to the Arranger,
the Banks and the Facility Agent in the terms of Clause 18 of the
Facility Agreement by reference to the facts and circumstances
existing at the date hereof;
(v) confirms it encloses herewith in respect of itself the documents
and evidence listed in Schedule 5;
(vi) confirms it has not relied on the Arranger, the Banks, the
Facility Agent or the Security Agent to assess or inform it as to
the legality, validity, effect or enforceability of the Facility
Agreement or the Intercreditor Agreement or any other document
referred to therein or the accuracy or completeness of any such
information as is referred to in paragraph (i) above or the
creditworthiness, affairs, condition or status of any of the
parties to the Facility Agreement, the Intercreditor Agreement or
any such other document.
(b) The Borrower(s), the Guarantor(s), the Arranger, the Facility Agent, the
Security Agent, the Banks and the parties to the Intercreditor Agreement
hereby agree amongst themselves and with the Additional
[Borrower/Guarantor] that the Additional [Borrower/Guarantor] shall
become
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party to the Facility Agreement and the Intercreditor Agreement with
effect from the date of this Accession Agreement.
3. LAW
(a) This Accession Agreement shall be governed by and construed in accordance
with English law.
(b) [The Additional [Borrower/Guarantor] hereby irrevocably designates,
appoints and empowers the Company to receive, for and on behalf of
itself, service of process out of the English Courts in any proceedings
with respect to the Facility Agreement and/or the Intercreditor Agreement
and/or this Accession Agreement or any judgment in connection therewith
and agrees that failure by such process agent to give notice of such
service of process to the Additional [Borrower/Guarantor] shall not
impair or affect the validity of such service or of any judgment based
thereon.]
IN WITNESS WHEREOF the parties hereto have caused this Accession Agreement to be
duly executed on the date first written above.
SIGNATURES
ADDITIONAL [BORROWER/GUARANTOR]:
[ ]
COMPANY:
[ ]
for itself and as agent for and on
behalf of the Borrowers and
Guarantors
By:
FACILITY AGENT:
CHASE MANHATTAN INTERNATIONAL LIMITED
for itself and as Facility Agent and
Security Agent for and on behalf of the
Arranger and the Banks
By:
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SCHEDULE 5
DOCUMENTS TO ACCOMPANY ADDITIONAL
BORROWER/GUARANTOR ACCESSION AGREEMENT
1. The proposed Additional [Guarantor/Borrower] shall deliver each in a form
and substance satisfactory to the Facility Agent:
(a) A Certified Copy of its constitutive documents.
(b) A Certified Copy of its board resolution approving the execution, delivery
and performance by the proposed Additional [Borrower/Guarantor] of an
Accession Agreement in the form set out in Schedule 4 and each of the
Senior Finance Documents to which it is expressed to be a party and other
documents to be delivered pursuant thereto and the terms and conditions
thereof and authorising a Person or Persons (by name, or to the extent
that the same is permitted so as to bind the relevant Group Member by
applicable laws, by title) to sign the [Borrower's/Guarantor's] Accession
Agreement, the Senior Finance Documents and such other documents and to
give any notices on behalf of the proposed Additional [Borrower/Guarantor]
in connection with such Senior Finance Documents, or to give such notices,
to another Person or Persons;
(c) A list of its Authorised Signatories.
(d) A certificate of an Authorised Signatory of the proposed Additional
[Borrower/Guarantor] confirming that neither the execution and delivery of
the Additional [Borrower/Guarantor Accession Agreement and the Finance
Documents to which the proposed Additional [Borrower/Guarantor] is
expressed to be a party nor the exercise of the proposed Additional
[Borrower'/Guarantor's] rights, and the performance of the proposed
Additional [Borrower/Guarantor's] obligations, under such
[Borrower/Guarantor] Accession Agreement and other Senior Finance
Documents would result in any breach of the proposed Additional
[Borrower/Guarantor] constitutive documents.
(e) An opinion of the proposed Additional [Borrower/Guarantor's] local counsel
addressed to the Facility Agent and Security Agent for themselves and for
and on behalf of the Banks and acceptable to the Banks.
(f) A Security Document and an Intercreditor Agreement Accession Memorandum.
(g) If applicable, an Exchange Control Approval.
(h) Such other documents as the Facility Agent may on the advice of local
counsel to the Banks require.
[2. In relation to any proposed Additional [Borrower/Guarantor] incorporated
in the United Kingdom certified copies of the statutory declaration made
in the prescribed form (and in the agreed form) by all the directors of
such Companies as required by Section 155 of the Companies Act 1985
together with
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a Certified Copy of the statutory report by its Auditors required under
Section 156(4) of the 1985 Act and confirmation by the Auditors in a form
acceptable to the Facility Agent that such company has net assets (as
defined in Section 152(2) of the Companies Act 1985) and that the net
assets are not reduced by the giving of the financial assistance or any
reduction in net assets does not exceed distributable profits.]
3. In relation to any proposed Additional [Borrower/Guarantor] not
incorporated in any part of the United Kingdom evidence that Derby Holding
Limited has agreed to act as the proposed Additional
[Borrower/Guarantor's] service of process agent.
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SCHEDULE 6
CONDITIONS PRECEDENT
CONSTITUTIONAL DOCUMENTS
1. In respect of each Obligor:
(a) a Certified Copy of its Certificate of Incorporation and
Memorandum and Articles of Association or of its statutes, by-laws
or other constitutional or governing documents together with
certified copies of the minutes of the meetings of its
shareholders (if necessary) or written resolutions of its
directors or officers adopting such changes to the Memorandum and
Articles of Association or its statutes, by-laws or other
constitutional or governing documents as the Facility Agent shall
have required, and a certificate of a duly authorised officer of
each such company confirming that such resolutions were duly and
properly passed at duly convened and constituted meetings of that
Obligor;
(b) a Certified Copy of the resolutions of the board of directors of
the company certifying that such board resolutions have been duly
and properly passed at a duly convened and constituted meeting of
that company and confirming that such resolutions are still in
effect and have not been varied or rescinded;
(i) authorising the execution, delivery and performance on
behalf of that company of those of the Finance Documents to
which that company is a party; and
(ii) authorising a Person or Persons (by name, or to the extent
that the same is permitted so as to bind the relevant Group
Member by applicable laws, by title) (each an "AUTHORISED
SIGNATORY") specified therein to execute on behalf of that
company those of the Finance Documents to which that
company is expressed to be a party and to give any notices
or certificates required in connection therewith;
(c) (which is also a Guarantor incorporated in England and Wales) a
Certified Copy of a resolution of the members of that company
approving the execution delivery and performance of those Finance
Documents to which such company is a party and confirming that
such action is in the commercial interests of the company in
accordance with the terms thereof;
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(d) a certificate of an Authorised Signatory of that company
confirming that at Closing the aggregate Financial Indebtedness of
that company (including any Financial Indebtedness which may be
incurred under any of the Finance Documents) does not or, as the
case may be, would not, if fully drawn, exceed any borrowing limit
contained in that company's constitutional documents or in any
trust deed or other agreement or instrument to which that company
is a party or which is binding on its assets; and
(e) a certificate of an Authorised Signatory of that company in the
agreed terms to the effect that the execution of the Finance
Documents by that company is lawful and complies with its
constitution.
2. A specimen of the signature of each Person (each being an Authorised
Signatory) authorised to execute any of the Finance Documents on behalf
of any Obligor and/or to sign all notices, certificates and other
documents or communications to be delivered by such Obligor thereunder.
3. If the initial Drawdown Date is not the same date as the date of receipt
by the Facility Agent of the Memorandum and Articles of Association of
the Obligors (or their equivalent constitutive documents), a certificate
from a duly authorised officer of the Obligors confirming that as at the
initial Drawdown Date the Memorandum and Articles of Association of the
Obligors (or their constitutive documents) as provided to the Facility
Agent continue in full force and effect without amendment.
CONSENTS
4. A Certified Copy of (or, to the extent that the Banks have agreed that
such documents may be delivered to the Facility Agent after the date of
this Agreement, of all applications for) such approvals, consents,
licences, exemptions and other requirements of governmental and other
authorities required, for the entering into or performance of the Finance
Documents and any other Transaction Document for.
TRANSACTION DOCUMENTS
5. Evidence that each of the Transaction Documents has been entered into by
all parties thereto, that each such agreement is in full force and
effect, that the conditions precedent to such agreements have been, or
will, simultaneously with the initial Utilisation be satisfied, that no
conditions or obligations contained therein have been waived or modified
except with the consent of the Facility Agent , that each of the
Transaction Documents is in a form satisfactory to the Facility Agent and
that no Group Member, at the Closing, has the right to rescind any such
agreements save for material breach by Derby International or, as the
case may be, DFS under any of the Recapitalisation Documents.
6. An original or a Certified Copy of each of the Transaction Documents.
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SECURITY DOCUMENTS
7. At least three copies each of the Security Documents duly executed by all
the parties thereto other than the Facility Agent and/or the Security
Agent together with:
(i) share certificates in respect of any and all shares the subject
matter of the created by the Security Documents and (if
applicable) executed transfer forms in respect thereof and undated
letters of resignation from each of the relevant directors
together with irrevocable authority for the Facility Agent to date
the same or where shares are not evidenced by certificates that
notification of security over such shares has been entered in the
Share Register, and all title documents relating to any land or
buildings mortgaged or otherwise charged by the Security Documents
or confirmation that such documents are held to the order of the
Security Agent or are in course of being lodged with the
appropriate registration authority and will thereafter be
delivered to the order of the Security Agent;
(ii) copies of all notices required to be despatched pursuant to the
Security Documents duly completed by an Authorised Signatory.
INFORMATION
8. A Certified Copy of each of the Disclosure Exhibits.
9. A Certified Copy of the Information Package.
10. A Certified Copy of the Financial Accounts prepared by the management of
each of the Borrowers and the Guarantors in respect of the Group for the
monthly and, quarterly Accounting Periods since the latest annual audited
Financial Accounts of each Borrower and Guarantor in each case in the
form required by respectively Clause 19.1(a)iii) and Clause 19.1(a)(ii).
11. A Certified Copy of the audited consolidated Financial Accounts in
respect of the annual Accounting Period to 31st December 1997 in the form
required by Clause 19.1(a).
12. A Certified Copy of the Reports together with a Certified Copy of each
the Letters of Engagement relating thereto.
Each of such Reports which, if not addressed to the Facility Agent on
behalf of itself and the Banks, to be accompanied by written confirmation
from the company or firm which produced such Report that it can be relied
upon by the Arranger, Security Agent and Facility Agent on behalf of
itself and by the Facility Agent and Security Agent on behalf of the
Banks.
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13. A Certified Copy of the final forms of each of the Recapitalisation
Documents.
14. A Certified Copy of the Transaction Costs Letter.
15. A Certified Copy of the, Company's employee share ownership scheme and
management incentive scheme.
16. Evidence that each Group Member will, contemporaneously with completion
of the Recapitalisation, be released from:
(a) all guarantees and indemnities and similar documents granted by
any of them in respect of the obligations of any third party other
than any other Group Member or third party providers of Financial
Indebtedness of each South African Borrower existing as at Closing
which Financial Indebtedness has been disclosed to the Facility
Agent in accordance with paragraph 18 below;
(b) all Encumbrances (other than Permitted Encumbrances) existing
immediately prior to the Closing including without limitation all
mortgages or charges appearing as undischarged in the mortgages
register of each Group Member at the Companies Registration
Office; and
(c) all the Existing Financial Indebtedness will be fully repaid upon
the making of the initial Advances under this Agreement.
17. A Certified Copy of details of all insurance policies in existence in
respect of the Group as at Closing and copies of all policies of Material
Insurance and evidence as that the Security Agent's interest has been
noted thereon in accordance with the requirements of Clause 19.1(b)
together with evidence that such policies are in full force and effect
with premiums paid to date in full.
18. A certificate of the Chief Financial Officer of the Company summarising
all Existing Financial Indebtedness and all Financial Indebtedness of
Group Members as at immediately prior to the Closing and immediately
following Closing.
19. Certified Copies of the Service Contracts of each of the Executives and
the Directors on terms satisfactory to the Facility Agent.
20. Confirmation from an Authorised Signatory of the Company that Clause
18.1(v) is complete, true and accurate.
21. Requests in relation to the Utilisations to be made at Closing.
22. Payment instructions in respect of all funds at Closing in accordance
with the Funds Flow Memorandum.
23. Evidence that:
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(i) the Investors have subscribed or contemporaneously with the making
of the initial Advances will subscribe in full in cash an
aggregate amount of not less than $63,000,000 (the "INVESTORS'
EQUITY SUBSCRIPTION") for shares in the capital of the Company
issued to them pursuant to the Recapitalisation Agreement at
Closing;
(ii) the Note Issuers shall have received or contemporaneously with the
making of the initial Advances will receive in aggregate not less
than $160,000,000 pursuant to the Note Purchase Agreement in
respect of the issuance and sale of the Notes (the "NOTE
PROCEEDS") on terms satisfactory to the Facility Agent; and
(iii) the maximum aggregate amount payable to Derby International and
DFS in cash at Closing will not exceed US$147,000,000 (or the
equivalent in other currencies);
and that the Investors Equity Subscription and the Note Proceeds have
been or will contemporaneously with the making of the initial Advances
will be paid into and be standing to the credit of a Blocked Account;
24. The Facility Agent shall be satisfied, and shall have received such
evidence as it may reasonably require, that the aggregate monies payable
in respect of the Investors Equity Subscription the Note Proceeds and the
proceeds of each of the initial Utilisations that may be drawn down or
make on the date of Closing in accordance with the provisions of this
Agreement are at least equal to the amount required to refinance all of
the Existing Financial Indebtedness owed to third parties at Closing, and
(when considered together with any relevant Hedging Protection
Agreements) in the same currency(ies) thereof (together with accrued
interest and all other charges thereon) which are required to be repaid
and discharged in order that it may comply with Clause 18.1(w) and to pay
all of the Transaction Costs;
25. Receipt by the Facility Agent of each of the Pre-Closing Accounts.
26. Proforma Financial Accounts.
27. A Certified Copy of the Approved Hedging Programme.
28. Details of any Encumbrances existing over all or any of the Group's
assets (including, for the avoidance of doubt, any Encumbrances existing
over all or any of the Group's assets) as at Closing (other than pursuant
to the Security Documents).
29. A certified copy of the Structure Memorandum.
30. A Certified Copy of the Funds Flow Memorandum.
31. A Certified Copy of the Intra-Group Loan Memorandum.
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32. Details of any bank accounts held by Obligors other than with any
Approved Bank together with evidence that, in respect of each such
account Clause 19.5(t)(ii) would be satisfied.
33. The bank mandates relating to the blocked accounts, duly completed.
34. A duly executed copy of each of the Fee Letters.
35. Evidence that at Closing the Company or its Subsidiaries will be the
beneficial and (subject only to the payment of the relevant stamp and
documentary Taxes in respect thereof by no later than the date on which
the same are required to be paid by applicable law or regulation and to
the making of the necessary entries in the shareholders' registers of the
relevant members of the Subsidiaries that comprise the Acquired Assets)
legal owner of all the Acquired Assets (save, in the case of legal
ownership, to the extent that the Security Agent shall be the legal owner
thereof pursuant to the Security Documents), free from all Encumbrances
other than Permitted Encumbrances and that the Obligors will be in
compliance with their obligations under Clause 19.5(a) in all other
respects immediately after Closing.
36. A Certified Copy of the Approved Provisioning Procedure.
OPINIONS
37. An opinion of Dibb Lupton Alsop, addressed to the Facility Agent, the
Security Agent and the Banks, the English legal advisers to the Facility
Agent, the Security Facility Agent and the Banks as to such matters
relating to the Obligors and their obligations under the Senior Finance
Documents as the Facility Agent may reasonably require.
38. An opinion, addressed to the Facility Agent, the Security Agent and the
Banks of Bogel & Gates, United States of America legal advisors to the
Facility Agent and the Security Agent as to such matters relating to the
United States of America, the obligations of the Obligors under the
Senior Finance Documents to which they are a party as the Facility Agent
may reasonably require.
39. An opinion addressed to the Facility Agent, the Security Agent and the
Banks of Kirkland & Ellis, United States of America legal advisors to the
Company as to such matters relating to due authorisation and execution of
Senior Finance Documents by Obligors incorporated in the United States of
America as the Facility Agent may reasonably require.
40. An opinion, addressed to the Facility Agent, the Security Agent and the
Banks of Boekel de Neree Dutch legal advisors to the Facility Agent, the
Security Agent and the Banks as to such matters relating to the
Netherlands, the Obligors and their obligations under the Senior Finance
Documents to which they are a party as the Facility Agent may reasonably
require.
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41. An opinion, addressed to the Facility Agent, the Security Agent and the
Banks of Aird & Berlis Canadian legal advisors to the Facility Agent, the
Security Agent and the Banks as to such matters relating to Canada, the
Obligors and their obligations under the Senior Finance Documents to
which they are a party as the Facility Agent may reasonably require.
42. An opinion, addressed to the Facility Agent, the Security Agent and the
Banks of Lapointe Rosenstein Canadian legal advisors to the Company as to
such matters relating to Canada, the Obligors and their obligations under
the Senior Finance Documents to which they are a party as the Facility
Agent may reasonably require.
43. An opinion, addressed to the Facility Agent, the Security Agent and the
Banks of Sander Steinberg Canadian legal advisors to the Facility Agent,
the Security Agent and the Banks as to such matters relating to Canada,
the Obligors and their obligations under the Senior Finance Documents to
which they are a party as the Facility Agent may reasonably require.
44. An opinion, addressed to the Facility Agent, the Security Agent and the
Banks of Promes Trente van Doorne Netherland Antilles legal advisors to
the Facility Agent, the Security Agent and the Banks as to such matters
relating to the Netherlands Antilles, the Obligors and their obligations
under the Senior Finance Documents to which they are a party as the
Facility Agent may reasonably require.
45. An opinion, addressed to the Facility Agent, the Security Agent and the
Banks of A & L Goodbody Irish legal advisors to the Facility Agent, the
Security Agent and the Banks as to such matters relating to Ireland, the
Obligors and their obligations under the Senior Finance Documents to
which they are a party as the Facility Agent may reasonably require.
46. An opinion, addressed to the Facility Agent, the Security Agent and the
Banks of Johnston Stokes Master Hong Kong legal advisors to the Facility
Agent, the Security Agent and the Banks as to such matters relating to
Hong Kong, the Obligors and their obligations under the Senior Finance
Documents to which they are a party as the Facility Agent may reasonably
require.
47. An opinion, addressed to the Facility Agent, the Security Agent and the
Banks of Feddersen, Laule, Scherzberg & Ohle Lansen Gwerwahn German legal
advisors to the Company as to such matters relating to Germany, the
Obligors and their obligations under the Senior Finance Documents to
which they are a party as the Facility Agent may reasonably require.
48. An opinion, addressed to the Facility Agent, the Security Agent and the
Banks of Woedtke Reszel & Partner German legal advisors to the Facility
Agent, the Security Agent and the Banks, as to such matters relating to
Germany, the Obligors and their obligations under the Senior Finance
Documents to which they are a party as the Facility Agent may reasonably
require.
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49. Memoranda of Satisfaction in respect of charges registered against each
of Sturmey-Archer, Derby Holdings Limited, Raleigh International Limited
and The British Cycle Corporation Limited.
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SCHEDULE 7
PART 1
FORM OF DRAWDOWN REQUEST
To: Chase Manhattan International Limited as Facility Agent.
From: [ ] as Obligors' Agent
Date: [ ]
Dear Sirs,
RE DM 214,000,000 MULTICURRENCY CREDIT FACILITY DATED [ ] (THE
"FACILITY AGREEMENT")
1. We request that the Banks, in accordance with the terms of the Facility
Agreement and upon the terms and conditions contained therein, make [an]
Advance(s) as follows:
(a) Requested Amount [DM[ ]; and
(b) Currency;
(c) Drawdown Date: [ ].
(d) Term: [ ].
(e) Borrower: [ ].
2. The Advance(s) should be credited to [insert account details].
3. We confirm that, at the date hereof, the representations set out in
Clause 18 that are to be repeated in accordance with Clause 18.2 are true
and correct and no Default has occurred and is continuing.
4. Terms used in this Drawdown Request and not otherwise defined shall bear
the same meaning as in the Facility Agreement.
5. This Advance is to be applied solely for the purpose of [ ].
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5. This Drawdown Request is governed by and shall be construed in accordance
with and subject to English law.
Yours faithfully
OBLIGORS' AGENT
Authorised Signatory
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PART 2
FORM OF STANDBY L/C REQUEST
To: Chase Manhattan International Limited as Facility Agent.
From: [ ] as Obligors' Agent
On behalf of [ ] ("ACCOUNT PARTY")
Date: [ ]
Dear Sirs,
RE DM214,000,000 MULTICURRENCY REVOLVING CREDIT AGREEMENT DATED [ ]
(the "FACILITY AGREEMENT")
1. We request that the Banks, in accordance with the terms of the Facility
Agreement and upon the terms and conditions contained therein,
participate in a Standby L/C in the form annexed hereto as follows:
(a) Amount of Standby L/C [eg DM ];
(b) Currency of Standby L/C;
(c) Issue Date: [ ];
(d) Expiry Date of Standby L/C: [ ];
(e) Account Party: [ ];
(f) Beneficiary: [ ];
(g) Beneficiary's Account details: [ ].
2. We confirm that, as at the date of this Standby L/C Request, no Default
has occurred and is continuing, and the representations contained in
Clause 18 of the Agreement that are repeated in accordance with Clause
18.2 are true and correct.
3. Terms used in this Standby L/C Request and not otherwise defined shall
bear the same meaning as in the Agreement.
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4. This Standby L/C Request is governed by and shall be construed in
accordance with and subject to English law.
Yours faithfully
OBLIGORS' AGENT
Authorised Signatory
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PART 3
FORM OF STANDBY L/C
TO: [ ]
For the attention of:
[Date]
Dear Sirs
IRREVOCABLE NON-TRANSFERABLE LETTER OF CREDIT NO. [ ]
The Banks (as defined below) in their several Participation Percentages (as
defined below) hereby issue this Irrevocable Non-Transferable Letter of Credit
No. [ ] )the "CREDIT"), details of which are as follows:-
Account Party: [Borrower under Facility Agreement]
Facility Agent: [Chase Manhattan International Limited] as Facility
Agent for the Banks or any other person notified from
time to time by the Facility Agent to the Beneficiary
as being the Facility Agent for the purposes of the
Credit.
Facility Agent's Office: [ ] or such other office from time to time
notified by the Facility Agent to the Beneficiary.
Availability: By payment against delivery of Required Documents:
Bank: NAME PARTICIPATION PERCENTAGE
[ ] [ %]
[ ] [ %]
[ ] [ %]
Beneficiary: [Approved Bank details]
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Charges: Any banking or other charges and commissions (other
than our own) are for the Beneficiary's account.
Maximum Amount: [ ]
Payment Currency: [ ]
Expiry Date: [ ]
Partial Payment: Partial payments are permitted, provided that the
Payment Amounts shall not in the aggregate exceed the
Maximum Amount.
Participation Percentage: In relation to a Bank, the percentage set out opposite
its name above, as varied by any novation referred to
below.
Payment Amount: An amount in the Payment Currency certified in a
Certificate of Beneficiary to be a Payment Amount.
Required Document: A Certificate of Beneficiary in the form set out in
Appendix A hereto (duly completed in a manner
consistent with the requirements of this credit and
signed on behalf of the Beneficiary).
Each Bank engages with the Beneficiary that within five working days in London
and the principal financial centre of the Payment Currency (each a "BUSINESS
DAY") after receipt by the Facility Agent at the Agent's Office of the related
Required Document conforming to the terms of this Credit, such Bank will pay to
or to the order of the Beneficiary, in the Payment Currency in funds providing
same day value, by credit to the account specified in the related Certificate of
Beneficiary, its Participation Percentage of the lesser of:
(i) each Payment Amount, as stated in the Required Documents; and
(ii) the balance of the Maximum Amount after deducting the amount of any and all
previous payments by the Banks under this Credit.
This Credit shall be non-transferable and shall be payable only against
presentation of the Required Document. This Credit shall expire on, and no
payment shall be made pursuant hereto after, the Expiry Date.
The obligations of the Banks under this Credit are several according to their
respective participation Percentages and not joint and several and neither the
Facility Agent nor any Bank shall be liable for the failure of any other Bank to
perform its obligations hereunder. The aggregate amount payable by each Bank
hereunder shall not exceed its Participation Percentage of the Maximum Amount.
The Facility Agent shall have no liability hereunder except in its capacity as a
Bank.
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A Bank (the "EXISTING BANK") may with the prior written consent of the
Beneficiary, such consent not to be unreasonably withheld or delayed, novate all
or part of its rights and/or obligations under this Credit to another bank or
financial institution (the "NEW BANK"). Such consent of the Beneficiary shall
not be withheld where an Existing Bank wishes to novate all or part of its
obligations to a New Bank which is at the time of such novation rated BBB or
above by Standard & Poor's Corporation or Baa2 by Moody's Investor Services Inc.
A novation of rights and/or obligations will only be effected if the Existing
Bank and the New Bank deliver to the Facility Agent a duly completed
certificate, substantially in the form of Annex B hereto (an "LC TRANSFER
CERTIFICATE") duly executed by each of them and the Beneficiary (which shall be
obliged to execute the same where not entitled to withhold consent to the
transaction) and then countersigned by the Facility Agent on behalf of the other
Banks.
Upon the novation becoming effective in the manner referred to in the previous
paragraph, the Existing Bank shall be relieved of its obligations under this
Credit to the extent that they are novated to the new Bank and any reference in
this Credit to a Bank shall include the New Bank. Each Bank (other than the
Existing Bank and the New Bank) irrevocably authorises the Facility Agent to
execute a duly completed LC Transfer Certificate on its behalf.
Failure by the Beneficiary (within ten Business Days or receiving a written
request therefore) to give consent to any novation pursuant to and to execute an
LC Transfer Certificate, which by the terms of this Credit it is not entitled to
withhold or fail to execute will result in all obligations of the Existing Bank
which were to have been novated being cancelled at the expiry of such ten
Business Day period, such cancellation to result in non-payment by that Existing
Bank of its Participation Percentage of any further Payment Amount without
affecting the payments to be made by the other Banks in respect thereof.
On the date of execution of the Transfer Certificate by the Facility Agent and
(if the Beneficiary's consent is required but not deemed give) the Beneficiary
of, if later, the date specified in the LC Transfer Certificate:
i. the Facility Agent, the other Banks and the Beneficiary (the "EXISTING
PARTIES") and the Existing Bank will be released from their obligations to
each other under this Credit (the "DISCHARGED OBLIGATIONS");
ii. the New Bank and the Existing Parties will assume obligations towards each
other which differ from the Discharged Obligations only insofar as they
are owed to or assumed by the New Bank instead of the Existing Bank;
iii. the rights of the Existing Bank against the Existing Parties and vice
versa (the "DISCHARGED RIGHTS") will be cancelled; and
iv. the New Bank and the Existing Parties will acquire rights against each
other which differ from the Discharged Rights only insofar as they are
exercisable by or against the New Bank instead of the Existing Bank.
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In each case to the extent only that the same relate to or arise out of the
amount of the Existing Bank's Participation Percentage specified in the LC
Transfer Certificate.
Save insofar as such provisions may be inconsistent with the express terms of
this Credit, this Credit is subject to the provisions of the Uniform Customs and
Practice for Documentary Credits (1993 Revision) ICC Publication No. 500.
This Letter of Credit and the Credit established hereby shall be governed by
English law. For the avoidance of doubt, it is confirmed that demand may be
made hereunder by tested telex.
Yours faithfully
.............................
[Facility Agent to sign
on behalf of each Bank]
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EXHIBIT A
CERTIFICATE OF BENEFICIARY
To: [ ] as Facility Agent
Dear Sirs,
IRREVOCABLE NON-TRANSFERABLE LETTER OF CREDIT NO. [ ] (THE "CREDIT")
With reference to the above Credit, we hereby certify that:
(a) we have provided general banking facilities to [ ] [and its
subsidiaries] incorporated in [ ];
(b) an aggregate amount (the "PAYMENT AMOUNT") of [ ] (comprising
[ ] of principal and [ ] of interest and/or
other charges) fell due for payment in [ ] by [
] on [ ] and remains due and unpaid at the date of this
Certificate;
(c) save for the Credit, there is no security (whether in the nature of a
mortgage, charge, pledge, lien or other security interest), guarantee,
indemnity or other like arrangements securing payment to us of the Payment
Amount granted or provided by any other member of the Group.
Accordingly, we hereby request payment pursuant to the Credit of the Payment
Amount. Payment is to be made to our account (A/c No. [ ]) with [
] at [ ].
Yours faithfully,
........................
for and on behalf of
[ ]
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EXHIBIT B
To: Chase Manhattan International Limited (the "FACILITY AGENT")
for itself and on behalf of
the other parties to the Facility
Agreement and the Intercreditor Agreement
referred to below.
This Certificate ("NOVATION CERTIFICATE") relates to a facility agreement
(together with and as supplemented and amended by all Accession Agreements,
Novation Certificates and other agreements from time to time entered into in
relation to it, the "FACILITY AGREEMENT") dated [ ], 1998 made between,
amongst others, The Derby Cycle Corporation and various of its Subsidiaries as
Borrowers and Guarantors, Chase Manhattan plc as Arranger, the financial
institutions named therein as Banks, Chase Manhattan International Limited as
Facility Agent and as Security Agent for the Banks in respect of a revolving
credit facility of up to DM225,000,000 and to the Intercreditor Agreement
referred to in the Facility Agreement. Terms defined in the Facility Agreement
shall unless defined herein, have the same meanings herein as in the Facility
Agreement.
1. [Existing Bank] (the "EXISTING BANK"):
(a) confirms that the details appearing in the Schedule hereto under
the headings "Existing Bank's Commitments (Portion Substituted)",
"Existing Bank's Participations in Advances (Portion Novated)" and
"Outstanding Standby L/Cs of Credit" are accurate; and
(b) requests [ ] (the "NEW BANK") to accept and procure the
substitution pursuant to Clause 29 of the Facility Agreement [and
Clause [ ] of the Intercreditor Agreement] of the Existing
Bank by the New Bank in respect of the portion of its relevant
Commitment(s) specified under the heading "Existing Bank's
Revolving Commitment (Portion Novated)" and "Existing Bank's
Standby L/C Commitment (Portion Novated)" in the Schedule hereto
and/or in respect of the Advance(s) referred to under the heading
"Existing Bank's portion of Outstanding Advances (Portion
Novated)" and/or in respect of the Standby L/Cs referred to under
the heading "Existing Bank's participation in Outstanding Standby
L/Cs (Portion Novated)" by counter-signing the copy of this
Novation Certificate executed by the Existing Bank and delivering
the same to the Facility Agent.
2. The New Bank hereby requests the Obligors, the Arranger, the Banks, and the
Agents and the other parties to the Intercreditor Agreement to accept this
duly executed Novation Certificate as being delivered pursuant to and for
the purposes of Clause 29 of the Facility Agreement and Clause [ ] of the
Intercreditor
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Agreement so as to take effect in accordance with its terms under such
Clauses on [date of novation].
3. The New Bank hereby (a) confirms receipt of a copy of the Finance Documents
as at the date hereof and all such other documents and information as it has
required in connection herewith, (b) accepts and confirms the application of
the provisions of Clause 29 of the Facility Agreement and Clause [ ] of the
Intercreditor Agreement as they apply in connection herewith and the
transactions and matters to occur in consequence hereof, and (c) confirms
the correctness of the details specified in respect to it in the Schedule
hereto.
4. The New Bank confirms that:
(a) it has received a copy of the Finance Document together with such
other documents and information as it has required in connection
with this transaction;
(b) it has not relied and will not hereafter rely on the Existing Bank
to check or enquire on its behalf into the legality, validity,
effectiveness, adequacy, accuracy or completeness of any such
documents or information;
(c) it has made its own independent investigation and assessment of
the financial affairs of each Obligor and their related entities
and the other parties considered by it to be relevant in
connection with this transaction and agrees that it has not relied
and will not rely on the Existing Bank, the Arranger, the Facility
Agent, the Security Agent or the Banks to assess or keep under
review on its behalf the financial condition, creditworthiness,
condition, affairs, status or nature of any member of the Group or
any other party to the Finance Documents (save as otherwise
expressly provided therein);
(d) it has power and authority to become a party to the Finance
Documents and has taken all necessary action to authorise
execution of this Novation Certificate and has obtained all
necessary approvals and consents to the assumption of its
obligations under the Facility Agreement and the Intercreditor
Agreement; and
(e) it is a Qualifying Bank;
5. The New Bank hereby undertakes with the Existing Bank and each of the other
parties to the Facility Agreement and the Intercreditor Agreement that it
will perform in accordance with its terms all those obligations which by the
terms of the Senior Facility Agreement and the Intercreditor Agreement will
be assumed by it under the Senior Finance Documents after delivery of the
executed copies of this Novation Certificate to the Facility Agent and
countersignature thereof by the Facility Agent, and the New Bank hereby
undertakes to be bound by the provisions of the Senior Finance Documents.
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6. The Existing Bank hereby gives notice that nothing herein or any Senior
Finance Document (or any other document relating thereto) shall oblige the
Existing Bank (i) to accept a re-transfer from or novation by the New Bank
of the whole or any part of its rights, benefits and/or obligations under
the Finance Documents or (ii) to support any losses directly or indirectly
sustained or incurred by the New Bank for any reason whatsoever including,
without limitation, the non-performance by any Obligor or any other party to
the Finance Documents (or any document relating thereto) of their
obligations under any such document. The New Bank hereby acknowledges the
absence of any such obligation as is referred to in paragraphs (i) and (ii)
above.
7. This Novation Certificate shall be governed by and construed in accordance
with English law.
8. This Novation Certificate may be executed in any number of counterparts and
all of such counterparts taken together shall be deemed to constitute one
and the same instrument.
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SCHEDULE 8
FORM OF NOVATION CERTIFICATE
To: Chase Manhattan International Limited (the "FACILITY AGENT")
for itself and on behalf of
the other parties to the Facility
Agreement and the Intercreditor Agreement
referred to below.
This Certificate ("NOVATION CERTIFICATE") relates to a facility agreement
(together with and as supplemented and amended by all Accession Agreements,
Novation Certificates and other agreements from time to time entered into in
relation to it, the "FACILITY AGREEMENT") dated [ ], 1998 made between,
amongst others, The Derby Cycle Corporation and various of its Subsidiaries as
Borrowers and Guarantors, Chase Manhattan plc as Arranger, the financial
institutions named therein as Banks, Chase Manhattan International Limited as
Facility Agent and as Security Agent for the Banks in respect of a revolving
credit facility of up to DM225,000,000 and to the Intercreditor Agreement
referred to in the Facility Agreement. Terms defined in the Facility Agreement
shall unless defined herein, have the same meanings herein as in the Facility
Agreement.
1. [Existing Bank] (the "EXISTING BANK"):
(a) confirms that the details appearing in the Schedule hereto under
the headings "Existing Bank's Commitments (Portion Substituted)",
"Existing Bank's Participations in Advances (Portion Novated)" and
"Outstanding Standby L/Cs of Credit" are accurate; and
(b) requests [ ] (the "NEW BANK") to accept and procure the
substitution pursuant to Clause 29 of the Facility Agreement [and
Clause 9 of the Intercreditor Agreement] of the Existing Bank by
the New Bank in respect of the portion of its relevant
Commitment(s) specified under the heading "Existing Bank's
Revolving Commitment (Portion Novated)" and "Existing Bank's
Standby L/C Commitment (Portion Novated)" in the Schedule hereto
and/or in respect of the Advance(s) referred to under the heading
"Existing Bank's portion of Outstanding Advances (Portion
Novated)" and/or in respect of the Standby L/Cs referred to under
the heading "Existing Bank's participation in Outstanding Standby
L/Cs (Portion Novated)" by counter-signing the copy of this
Novation Certificate executed by the Existing Bank and delivering
the same to the Facility Agent.
2. The New Bank hereby requests the Obligors, the Arranger, the Banks, and the
Agents and the other parties to the Intercreditor Agreement to accept this
duly executed Novation Certificate as being delivered pursuant to and for
the purposes of Clause 29 of the Facility Agreement and Clause 9 of the
Intercreditor
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Agreement so as to take effect in accordance with its terms under such
Clauses on [date of novation].
3. The New Bank hereby (a) confirms receipt of a copy of the Finance Documents
as at the date hereof and all such other documents and information as it has
required in connection herewith, (b) accepts and confirms the application of
the provisions of Clause 29 of the Facility Agreement and Clause 9 of the
Intercreditor Agreement as they apply in connection herewith and the
transactions and matters to occur in consequence hereof, and (c) confirms
the correctness of the details specified in respect to it in the Schedule
hereto.
4. The New Bank confirms that:
(a) it has received a copy of the Finance Document together with such
other documents and information as it has required in connection
with this transaction;
(b) it has not relied and will not hereafter rely on the Existing Bank
to check or enquire on its behalf into the legality, validity,
effectiveness, adequacy, accuracy or completeness of any such
documents or information;
(c) it has made its own independent investigation and assessment of
the financial affairs of each Obligor and their related entities
and the other parties considered by it to be relevant in
connection with this transaction and agrees that it has not relied
and will not rely on the Existing Bank, the Arranger, the Facility
Agent, the Security Agent or the Banks to assess or keep under
review on its behalf the financial condition, creditworthiness,
condition, affairs, status or nature of any member of the Group or
any other party to the Finance Documents (save as otherwise
expressly provided therein);
(d) it has power and authority to become a party to the Finance
Documents and has taken all necessary action to authorise
execution of this Novation Certificate and has obtained all
necessary approvals and consents to the assumption of its
obligations under the Facility Agreement and the Intercreditor
Agreement; and
(e) it is a Qualifying Bank;
5. The New Bank hereby undertakes with the Existing Bank and each of the other
parties to the Facility Agreement and the Intercreditor Agreement that it
will perform in accordance with its terms all those obligations which by the
terms of the Senior Facility Agreement and the Intercreditor Agreement will
be assumed by it under the Senior Finance Documents after delivery of the
executed copies of this Novation Certificate to the Facility Agent and
countersignature thereof by the Facility Agent, and the New Bank hereby
undertakes to be bound by the provisions of the Senior Finance Documents.
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6. The Existing Bank hereby gives notice that nothing herein or any Senior
Finance Document (or any other document relating thereto) shall oblige the
Existing Bank (i) to accept a re-transfer from or novation by the New Bank
of the whole or any part of its rights, benefits and/or obligations under
the Finance Documents or (ii) to support any losses directly or indirectly
sustained or incurred by the New Bank for any reason whatsoever including,
without limitation, the non-performance by any Obligor or any other party to
the Finance Documents (or any document relating thereto) of their
obligations under any such document. The New Bank hereby acknowledges the
absence of any such obligation as is referred to in paragraphs (i) and (ii)
above.
7. This Novation Certificate shall be governed by and construed in accordance
with English law.
8. This Novation Certificate may be executed in any number of counterparts and
all of such counterparts taken together shall be deemed to constitute one
and the same instrument.
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THE SCHEDULE
1. Existing Bank's Revolving Commitment: (Portion Novated)
2. Existing Bank's portion of Outstanding Advances: (Portion Novated)
DRAWDOWN DATE AMOUNT REPAYMENT DATE
[ ] [ ] [ ]
3. Existing Bank's Standby L/C Commitment: (Portion Novated)
4. Existing Bank's participation in Outstanding Standby L/Cs: (Portion Novated)
ISSUE DATE AMOUNT EXPIRY DATE
[ ] [ ] [ ]
NB. PLEASE NOTE CLAUSE 29.2(C) REGARDING THE PROPORTION OF REVOLVING COMMITMENT
AND STANDBY L/C COMMITMENT THAT ARE REQUIRED TO BE TRANSFERRED.
[Name of Existing Bank] [Name of New Bank]
By: By:
Date: Date:
[Name of Facility Agent]
By:
Date:
CHASE MANHATTAN INTERNATIONAL LIMITED
for itself and as the Facility Agent, Security
Agent, and for and on behalf of the Obligors,
the Arranger, the Banks and for and on behalf
of the parties to the Intercreditor Agreement
By:
Date:
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SCHEDULE 9
ADDITIONAL COSTS
(a) The Additional Costs for each Advance or Overdue Amount whole (and to the
extent that) the Banks making such Advance are subject to the Additional
Costs requirements of the Bank of England, shall be calculated in accordance
with the following formulae:
Additional = AB+C(B-D) + E (B-F) % per annum
-------------------
Costs 100 - (A+E)
Where, on the day the formula is applied:
A is the percentage of Facility Agent's liabilities which it is
required by the Bank of England, to hold on a non-interest bearing
deposit account.
B is the rate at which the Facility Agent offers to leading banks
Sterling deposits in the London interbank market at or about 10.00
a.m. on the date for the relevant Term.
C is the percentage of eligible liabilities which the Facility Agent
is required by the Bank of England to maintain with financial
institutions (recognised for this purpose by the Bank of England).
D is the average of the rates at which financial institutions
(recognised for this purpose by the Bank of England) are bidding
for Sterling deposits at or about 11.00 a.m. on that date for the
relevant Term.
E is the percentage of the Facility Agent's eligible liabilities
which it is required by the Bank of England to place as a special
deposit.
F is the rate of interest, per annum, paid by the Bank of England on
special deposits.
(b) In this Schedule 9 "ELIGIBLE LIABILITIES" and "SPECIAL DEPOSITS" have the
meanings given to them, at the date the formula is applied, by the Bank of
England.
(c) Each of A, B, C, D, E and F are to be included in the formula as figures and
not as percentages. Therefore, if A = 0.5% and B = 10%, AB = 5 and not 5%.
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(d) If more than one rate is provided in respect of the above formula, the
applicable rate shall be the average of the rates so provided, rounded up to
five decimal places.
(e) If the Facility Agent determines that the application of the above formula
is no longer appropriate as a result of a change occurring after the date of
this Agreement, the Facility Agent shall notify the Borrowers and the Banks
of such fact the manner in which the Additional Costs shall be determined,
and, if appropriate, shall substitute a new formula. Any determination made
by the Facility Agent shall, in the absence of manifest error, be binding on
all the Parties.
200
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SCHEDULE 10
COMPLIANCE CERTIFICATE
To: The Facility Agent and each of the Banks
(as defined in the Facility Agreement)
[Date]
The undersigned hereby certifies that to the best of their information,
knowledge and belief after all due enquiry but without personal liability:
1. This certificate is given pursuant to Clause 19.1 (Compliance Certificate)
of an agreement dated [ ] (the "FACILITY AGREEMENT") made
between inter alios, The Derby Cycle Corporation and certain of its
Subsidiaries as Borrowers and Guarantors and the parties defined therein as
the Facility Agent, the Arranger, the Security Agent and the Banks. Terms
defined in the Facility Agreement shall, unless otherwise defined herein,
bear the same meaning when used herein.
2. Terms defined in the Facility Agreement shall bear the same meaning herein.
3. We confirm that as at [insert appropriate Accounting Date]:
(a) The ratio of Consolidated Adjusted EBITDA to Consolidated Net
Interest Payable, was [ ];
(b) Consolidated Net Worth was [ ];
(c) The ratio of Net Average Financial Indebtedness to Consolidated
Adjusted EBITDA was [ ];
(d) Consolidated Adjusted EBITDA was [ ];
(e) Debtor Days was [ ]; and
(f) Inventory Days was [ ].
4. We set out below the computations giving rise to the above ratios and
figures, each of which has been made in accordance with the provisions of
the Facility Agreement;
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5. We therefore confirm, that as at [insert relevant Accounting Date] each of
the financial conditions specified at Clause 20 of the Facility Agreement
[was/was not] satisfied.
6. No Default has occurred and is continuing as of the date hereof.
....................
for and on behalf of
THE DERBY CYCLE CORPORATION
202
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SCHEDULE 11
MATERIAL GROUP MEMBERS
Derby Holding Limited
Raleigh Industries Limited
Raleigh International Limited
Sturmey-Archer Limited
Raleigh Industries of Canada Limited
The Derby Cycle Corporation
Raleigh BV
Raleigh Europe BV
Koninklijke Gazelle BV
Derby Nederland BV
Derby Holding BV
Sturmey-Archer Limited B.V
Lyon Investments BV
Derby Holding (Deutschland) GmbH
Raleigh Fahrrader GmbH
NW Sportgerate GmbH
Derby Cycle Werke GmbH
E Weiner Bike Parts GmbH
Univega Worldwide GmbH
Univega Beteiligung GmbH
MS Sport Vertiebs GmbH
Derby Farrader GmbH
Derby WS
Vermogenswerwaltungs GmbH
Winora Staiger GmbH
Curragh Finance Company
Raleigh Ireland Limited
InterDerby Group Finance N.V.
Derby Finance N.V.
The British Cycle Corporation Limited
Derby Investment Holding (Pty) Limited
Pro Bike South Africa (Pty) Limited
203
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SCHEDULE 12
DESCRIPTION OF ECU
The ECU is from time to time used as the unit of account of the European
Communities. Changes to the ECU may be made by the European Communities, in
which event the ECU will change accordingly. However, under Article 109G of the
Treaty establishing the European Communities, as amended by the Treaty on
European Union (the "TREATY"), the currency composition of the ECU may not be
changed. The Treaty contemplates that European monetary union will occur in
three stages, the second of which began on 1 January 1994 (following the entry
into force of the Treaty on European Union). The Treaty provides that, at the
start of the third stage of European monetary union, the value of the ECU as
against the currencies of the member states participating in the third stage
(and the conversion rates at which such currencies shall be substituted by the
ECU) will be irrevocably fixed, and the ECU will become a currency in its own
right. In contemplation of that third stage, the European Council meeting in
Madrid on 16 December 1995 decided that the name of that currency will be the
euro and that, in accordance with the Treaty, substitution of the euro for the
ECU (and of references to the euro for references to the ECU) will be at the
rate of one euro for one ECU. From the start of the third stage of European
monetary union, all payments expressed to be payable in ECU, or sums to be
calculated by reference to ECU, will be payable in, or calculated by reference
to, euro at the rate then established in accordance with the Treaty.
204
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SCHEDULE 13
FORM OF BANK ACCESSION NOTICE
To: CHASE MANHATTAN INTERNATIONAL LIMITED as Facility Agent
BANK ACCESSION NOTICE
1. We refer to the Agreement (the "AGREEMENT") dated [ ] and made
between inter alias, The Derby Cycle Corporation and certain of its
Subsidiaries as Borrowers and Guarantors, the parties defined therein as the
Facility Agent, the Arranger, the Security Agent and the Banks and to the
letter dated [ ] pursuant to which The Derby Cycle Corporation
nominated [INSERT NAME OF ACCEDING BANK] as an Acceding Bank with a
Revolving Commitment of DM 11,000,000, a Standby L/C Commitment of DM771,028
(as reduced pursuant to Clause 2.1(c)) and an Ancillary Commitment of
DM11,000,000.
2. This undertaking is given pursuant to Clause 2.4 of the Agreement.
3. In consideration of our being nominated as an Acceding Bank for the purposes
of the Agreement we hereby undertake and agree to be bound by all the
provisions of the Agreement as if we had originally been a party thereto.
4. We enclose the following:
(i) Ancillary Facility pursuant to which we agree to make available the
facilities detailed therein to the member(s) of the South African
Group stated therein in an aggregate amount of DM11,000,000; and
(ii) Borrower Accession Agreement(s) and Guarantor Accession Agreement(s)
in respect of [state identities of each member of the South African
Group to which the said Ancillary Facilities are to be provided]
together with each of the documents required to be provided therewith
pursuant to Schedule 5 of the Agreement.
5. For the purposes of Clause 33 of the Agreement and until further notice to
you our address, telex and telefax numbers shall be as follows:
Address:
Telex No.
Telefax No.
205
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6. Terms used herein and not otherwise defined shall have the same meaning as
in the Agreement.
DATED this [ ] day of [ ], [19 ]
For and on behalf of
[Acceding Bank]
...........................
206
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SCHEDULE 14
SECURITY DOCUMENTS
THE SECURITY AGENT WILL BE A PARTY TO THE FOLLOWING SECURITY DOCUMENTS WHICH
WILL BE GOVERNED BY AND SUBJECT TO THE APPLICABLE LAWS OF THE COUNTRIES AS
INDICATED BELOW:
DOCUMENT OBLIGOR GIVING SECURITY
-------- -----------------------
1. NETHERLANDS
-----------
(a) FIRST PLEDGE OF INTELLECTUAL Koninklijke Gazelle BV
PROPERTY RIGHTS
(b) FIRST PLEDGE OF RECEIVABLES Lyon Investments BV
(each Obligor will enter into a Derby Nederland BV
separate pledge) Sturmey-Archer Europa BV
Raleigh BV
Raleigh Europe BV
Derby Holding BV
Koninklijke Gazelle BV
(c) FIRST PLEDGE OF TANGIBLES Raleigh BV
(each Obligor will Koninklijke Gazelle BV
enter into a separate pledge)
(d) MORTGAGE OF REAL PROPERTY Koninklijke Gazelle BV
(e) DUTCH LAW SHARE PLEDGES: over the
following shares:
(i) Lyon Investments BV (66 2/3%) The Derby Cycle Corporation
(ii) Derby Holding BV (66 2/3%)
Derby Nederland BV Lyon Investments BV
(i) Sturmey-Archer Europa BV Derby Nederland BV
(ii) Raleigh BV
(iii) Koninklijke Gazelle BV
NV Dierense Maatschapij Tot Koninklijke Gazelle BV
Exploitatie van Woningen en Asuranien
Raleigh Europe BV Derby Holding BV
207
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2. CANADA
------
(a) GENERAL SECURITY AGREEMENT Raleigh Industries of Canada Limited
(b) CHARGE/MORTGAGE OF LAND Raleigh Industries of Canada Limited
(c) HYPOTHEC ON MOVEABLE PROPERTY Raleigh Industries of Canada Limited
(Les Industries Raleigh du Canada
Limitee)
(d) HYPOTHEC ON IMMOVEABLE PROPERTY Raleigh Industries of Canada Limited
(Les Industries Raleigh du Canada
Limitee)
(e) CANADIAN LAW PLEDGE over shares
in the following:
Century Cycle Manufacturing Raleigh Industries of Canada Limited
Corporation
3. UNITED STATES OF AMERICA
------------------------
(a) SECURITY AGREEMENT The Derby Cycle Corporation
(b) US LAW SHARE PLEDGE over shares
in the following:
(i) Derby Trading Co. Inc. The Derby Cycle Corporation
(ii) Lyon Investments BV (66 2/3%)
(iii) Sturmey-Archer Limited (66 2/3%)
(iv) Derby Holding BV (66 2/3%)
(v) Raleigh Industries of Canada
Limited (66 2/3%)
(vi) Derby Holding (Deutschland) GmbH
(5%)
4. DUTCH ANTILLES
--------------
(a) SECURITY AGREEMENT InterDerby Group Finance NV
(b) DUTCH ANTILLES LAW PLEDGE over shares
in the following:
InterDerby Group NV Derby Holding (Deutschland) GmbH
in respect of its shares in:
5. HONG KONG
---------
(a) HONG KONG LAW CHARGE Over Shares in
208
<PAGE>
the following:
Derby (HK) Trading Company Limited Derby Trading Co. Inc.
6. IRELAND
-------
(a) DEBENTURE
(each Obligor will enter into a Raleigh Ireland Limited
separate Debenture) Curragh Finance Company
(b) IRISH LAW PLEDGES over the share
in the following:
Curragh Finance Company Limited N.W. Sportgerate GmbH
(49%)
(i) Raleigh Ireland Limited Derby Holding BV
(ii) Curragh Finance Company Limited
(50%)
7. GERMANY
-------
(a) SECURITY AGREEMENTS WITH FOLLOW UP Derby Cycle Werke GmbH
ASSIGNMENTS E Weiner Bike-Parts GmbH
(each Obligor will enter into a Raleigh Fahrrader GmbH
separate document): Winora Staiger GmbH
MS Sport Vertriebs GmbH
Ms Sport AG
Derby WS Vermogensverwaltungs
GmbH
Univega Worldwide Licence GmbH
(80%)
Univega Beteilingungen GmbH (80%)
Derby Fahrrader GmbH
InterDerby Group Finance N.V.
(b) DEEDS OF ASSIGNMENT IN RESPECT OF Derby Cycle Werke GmbH
TANGIBLE MOVEABLE PROPERTY: E Weiner Bike-Parts GmbH
(each Obligor will enter into a Derby Fahrrader GmbH
separate document): Winora Staiger GmbH
(c) ASSIGNMENTS OF OWNER'S LAND CHARGES: Derby Cycle Werke GmbH
(each Obligor will enter into a E Weiner Bike-Parts GmbH
separate document):
(d) INSURANCE ASSIGNMENT AGREEMENTS: Derby Cycle Werke GmbH
(each Obligor will enter into a Raleigh Fahrrader GmbH
separate document): Winora Staiger GmbH
E. Weiner Bike-Parts GmbH
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<PAGE>
MS Sport Vertriebs GmbH
Derby Fahrrader GmbH
(e) INTELLECTUAL PROPERTY PLEDGE: Derby Cycle Werke GmbH
(each Obligor will enter into a MS Sports Vertriebs GmbH
separate document): Univega Worldwide Licence GmbH
Winora Staiger GmbH
(f) ASSIGNMENT OF INTER-COMPANY Raleigh Fahrrader GmbH
INDEBTEDNESS: Derby Cycle Werke GmbH
(each Obligor will enter into a Univega Worldwide Licence GmbH
separate document): Winora Staiger GmbH
Derby Holding (Deutschland) GmbH
E. Weiner Bike Parts GmbH
MS Sport Vertrieb GmbH
(g) SECURITISATION PLAN Derby Cycle Werke GmbH
Derby Holding (Deutschland) GmbH
Derby Fahrrader GmbH
Derby WS Vermogensverwaltungs
GmbH
NW Sportgerate GmbH
Univega Beteiligungen GmbH
Univega Worldwide Licence GmbH
Raleigh Fahrrader GmbH
E. Weiner Bike Parts GmbH
MS Sport Vertriebs GmbH
(h) GERMAN LAW PLEDGES over the following
shares:
Derby Holding (Deutschland) GmbH The Derby Cycle Corporation
(i) Derby Fahrrader GmbH Derby Holding (Deutschland) GmbH
(ii) Raleigh Fahrrader GmbH
(iii) Derby WS Vermogensverwaltungs
GmbH
(iv) Univega Beteilingungen GmbH
(v) Univega Worldwide GmbH
Derby Cycle Werke GmbH Raleigh Fahrrader GmbH
Winora Staiger GmbH Derby Vermogensverwaltungs
Gesellschaft GmbH
(i) M.S. Sport Vertriebs GmbH Univega Beteiligungen GmbH
(ii) MS Sport AG
E. Wiener Bike-Parts GmbH Lyon Investments BV
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NW Sportgerate GmbH Derby Cycle Werke GmbH
NW Sportgerate GmbH Derby Cycle Werke GmbH
Curragh Finance Company (49%) NW Sportgerate GmbH
Derby Holding (Deutschland) GmbH Derby Holding BV
8. ENGLAND
-------
(a) English Debenture Derby Holding Limited
(global debenture for all English Raleigh Industries Limited
Obligors) Raleigh International Limited
Sturmey-Archer Limited
The British Cycle Corporation
Limited
BSA Cycles Limited
The Triumph Cycle Company
Corporation
(b) English Law Charge over Shares in
the following Company:
Sturmey-Archer Limited (662/3) The Derby Cycle Corporation
Various Raleigh (Services) Limited
211
<PAGE>
THE DERBY CYCLE CORPORATION
By: Simon J. Goddard
THE OTHER BORROWERS
RALEIGH INDUSTRIES LIMITED
By: Simon J. Goddard
STURMEY-ARCHER LIMITED
By: Simon J. Goddard
DERBY HOLDING (DEUTSCHLAND) GMBH
By: Simon J. Goddard
KONINKLIJKE GAZELLE BV
By: Simon J. Goddard
RALEIGH INDUSTRIES OF CANADA LIMITED
By: Simon J. Goddard
RALEIGH EUROPE B.V.
By: Simon J. Goddard
212
<PAGE>
RALEIGH B.V.
By: Simon J. Goddard
E. WEINER BIKE PARTS GMBH
By: Simon J. Goddard
WINORA STAIGER GMBH
By: Simon J. Goddard
DERBY HOLDINGS LIMITED
By: Simon J. Goddard
RALEIGH FAHRRADER GMBH
By: Simon J. Goddard
DERBY CYCLE WERKE GMBH
By: Simon J. Goddard
RALEIGH INTERNATIONAL LIMITED
By: Simon J. Goddard
CURRAGH FINANCE COMPANY
By: Simon J. Goddard
213
<PAGE>
RALEIGH IRELAND LIMITED
By: Simon J. Goddard
THE GUARANTORS
DERBY HOLDING LIMITED
By: Simon J. Goddard
RALEIGH INDUSTRIES LIMITED
By: Simon J. Goddard
RALEIGH INTERNATIONAL LIMITED
By: Simon J. Goddard
STURMEY ARCHER LIMITED
By: Simon J. Goddard
RALEIGH INDUSTRIES OF CANADA LIMITED
By: Simon J. Goddard
THE DERBY CYCLE CORPORATION
By: Simon J. Goddard
RALEIGH BV
By: Simon J. Goddard
214
<PAGE>
RALEIGH EUROPE BV
By: Simon J. Goddard
KONINKLIJKE GAZELLE BV
By: Simon J. Goddard
DERBY NEDERLAND BV
By: Simon J. Goddard
DERBY HOLDING BV
By: Simon J. Goddard
STURMEY ARCHER EUROPA LIMITED B.V.
By: Simon J. Goddard
LYON INVESTMENTS BV
By: Simon J. Goddard
DERBY HOLDING (DEUTSCHLAND) GMBH
By: Simon J. Goddard
RALEIGH FAHRRADER GMBH
By: Simon J. Goddard
215
<PAGE>
NW SPORTGERATE GMBH
By: Simon J. Goddard
DERBY CYCLE WERKE GMBH
By: Simon J. Goddard
E. WEINER BIKE PARTS GMBH
By: Simon J. Goddard
UNIVEGA WORLDWIDE LICENCE GMBH
By: Simon J. Goddard
UNIVEGA BETEILIGUNGEN GMBH
By: Simon J. Goddard
MS SPORT VERTRIEBS GMBH
By: Simon J. Goddard
DERBY FAHRRADER GMBH
By: Simon J. Goddard
DERBY WS VERMOGENSWERWALTUNGS GMBH
By: Simon J. Goddard
216
<PAGE>
WINORA STAIGER GMBH
By: Simon J. Goddard
CURRAGH FINANCE COMPANY
By: Simon J. Goddard
RALEIGH IRELAND LIMITED
By: Simon J. Goddard
INTER-DERBY GROUP FINANCE B.V.
By: Simon J. Goddard
BSA CYCLES LIMITED
By: Simon J. Goddard
TRIUMPH CYCLE CO. LIMITED
By: Simon J. Goddard
217
<PAGE>
RALEIGH (SERVICES) LIMITED
By: Simon J. Goddard
THE BANKS
THE CHASE MANHATTAN BANK
By: John Empson
ABN AMRO BANK N.V.
By: John Empson
SCOTIA BANK EUROPE PLC
By: John Empson
DRESDNER BANK AG, GRAND CAYMAN BRANCH
By:
BANK OF SCOTLAND
By: John Empson
MIDLAND BANK PLC
By: John Empson
LLOYDS BANK PLC
By:
218
<PAGE>
THE SUMITOMO BANK, LIMITED
By: John Empson
BHF - BANK AG
By: John Empson
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: John Empson
ISTITUTO BANCARIO SAO PAOLO DI TORINO SPA
By: John Empson
KREDIETBANK (NEDERLAND) N.V.
By: John Empson
BANQUE NATIONALE DE PARIS
By: John Empson
THE GOVERNOR AND COMPANY OF
THE BANK OF IRELAND
By: John Empson
OLDENBURGISCHE LANDESBANK AG
By: John Empson
219
<PAGE>
The Facility Agent
CHASE MANHATTAN INTERNATIONAL LIMITED
By: John Empson
THE SECURITY AGENT
CHASE MANHATTAN INTERNATIONAL LIMITED
By: John Empson
THE ARRANGER
CHASE MANHATTAN PLC
By: John Empson
220
<PAGE>
EXHIBIT 10.2
THE DERBY CYCLE CORPORATION
SHAREHOLDERS' AGREEMENT
THIS AGREEMENT is made this 14th day of May, 1998 by and among:
(1) THE DERBY CYCLE CORPORATION (dba Raleigh USA Bicycle Company), a
corporation organized and existing under the laws of the State of Delaware,
having its registered office at 1209 Orange Street, Wilmington, Delaware 19801
(the "Company");
(2) DERBY FINANCE S.a.r.l., a corporation (societe a responsibilite
limitee) incorporated under the laws of the Grand Duchy of Luxembourg, with its
registered office at 15 rue de la Chapelle, L-1325 Luxembourg, Grand Duchy of
Luxembourg ("DFS");
(3) DC CYCLE, L.L.C., a limited liability company organized and
existing under the laws of the State of Delaware, having its registered office
at 1209 Orange Street, Wilmington, Delaware 19801 ("Cycle LLC"); and
(4) PERSEUS CYCLE, L.L.C., a limited liability company organized and
existing under the laws of the State of Delaware, having its registered office
at Suite 610, 1627 "I" Street NW, Washington, D.C. 20006 ("Perseus").
WHEREAS, DFS, Perseus and Cycle LLC are the owners of the respective
numbers of shares of the Company's Common Stock and Preferred Stock (as each
such term is defined in Section 1 of this Agreement) set forth in Exhibit A;
WHEREAS, DFS, Perseus and Cycle LLC wish to set forth certain
agreements with respect to the voting and transfer of their shares of the
Company's Common Stock and Preferred Stock;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, the parties hereto agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings
set out in this Section 1:
"Affiliate" shall mean, with respect to any Person, each other Person
which is directly or indirectly controlling, controlled by or under common
control with such Person.
"Approval Amount" shall mean (i) five million dollars ($5,000,000)
with respect to acquisitions of shares or assets by the Company and/or its
Subsidiaries; (ii) ten million dollars ($10,000,000) with respect to (A) any
disposition or series of related dispositions of assets or shares
<PAGE>
of the Company or its Subsidiaries and (B) any individual or series of related
capital expenditures by the Company or its Subsidiaries occurring in any one
fiscal year; and (iii) fifteen million dollars ($15,000,000) with respect to the
incurrence of new debt or similar obligations (or the settlement or compromise
of obligations in such amounts) by the Company or its Subsidiaries (other than
borrowings under revolving credit facilities, provided that such facilities have
been approved by the Board of Directors).
"Approved Sale" shall have the meaning set forth in Section 11(a)
hereof.
"Board of Directors" shall mean, unless otherwise specified, the Board
of Directors of the Company.
"Cash" shall mean cash and cash equivalents (with amounts deposited in
a Cash escrow deemed as Cash).
"Cause" shall mean (i) the commission by such member of the Board of
Directors of a felony or a crime involving moral turpitude, (ii) the commission
by such member of the Board of Directors of any other act or omission involving
dishonesty, disloyalty or fraud (A) with respect to the Company or any of its
Subsidiaries or any of their employees, customers or suppliers, or (B) adversely
affecting the reputation or standing of the Company or any of its Subsidiaries
or (iii) gross negligence or willful misconduct by such member of the Board of
Directors with respect to the Company or any of its Subsidiaries.
"Certificate of Incorporation" shall mean the Certificate of
Incorporation of the Company as in effect from time to time (a copy of the
Certificate of Incorporation, as amended and restated on the date hereof, is
attached to this Agreement as Exhibit B and made a part hereof).
"Chairman" shall mean the chairman of the Board of Directors.
"Class A Common Stock" shall mean the shares of common stock, Class A,
of the Company, par value $.01 per share, authorized by the Certificate of
Incorporation and such other common equity of the Company into which the Class A
Common Stock shall be converted.
"Class B Common Stock" shall mean the shares of common stock, Class B,
of the Company, par value $.01 per share, authorized by the Certificate of
Incorporation.
"Closing Date" shall mean the date of the closing of the transactions
contemplated by the Recapitalization Agreement.
"Common Stock" shall mean the Class A Common Stock and the Class B
Common Stock.
"Converted Common" shall mean Class A Common Stock which can be
acquired under clause (ii) of Sections 4B and 4D of Part B of Article Four of
the Certificate of Incorporation.
-2-
<PAGE>
"Cycle Shareholders" shall mean Cycle LLC and its Permitted
Transferees; provided that a Cycle Shareholder should not be considered a Cycle
Shareholder unless it is controlled by (directly or indirectly) Thayer.
"DCC Share Option Agreement" shall mean that certain DCC Share Option
Agreement by and among the Company, DFS, Cycle LLC, Perseus and Raleigh
Industries of Canada Limited dated May 14, 1998.
"Deemed Common Stock" shall mean the Class A Common Stock and the
shares of Class A Common Stock issuable upon conversion of the Series A
Preferred Stock in accordance with the terms of the Certificate of Incorporation
(for purposes of this Agreement, such shares of Class A Common Stock shall be
deemed to be outstanding), provided that Deemed Common Stock shall not include
Converted Common.
"Derby International" shall mean Derby International Corporation, S.A.
"Derby Group" shall mean the Company, together with all present or
future Subsidiaries of the Company (so long as they remain Subsidiaries).
"Designee" shall mean any wholly-owned Subsidiary of the Company which
is designated by the Company, in its sole discretion, under the provisions of
Section 9(a) hereof.
"DFS Shareholders" shall mean DFS and its Permitted Transferees;
provided that a DFS Shareholder shall not be considered a DFS Shareholder unless
it is controlled by (directly or indirectly) The International Heart Foundation
Trust.
"dollars" shall mean the currency of the United States of America.
"Eligible Group" shall mean the DFS Shareholders, so long as the DFS
Shareholders own at least 5% of the voting power of the outstanding capital
stock of the Company, the Cycle Shareholders, so long as the Cycle Shareholders
own at least 5% of the voting power of the outstanding capital stock of the
Company and the Perseus Shareholders so long as (i) the Perseus Shareholders own
any shares of capital stock of the Company and (ii) Frank H. Pearl controls,
directly or indirectly, Perseus.
"Employee" shall mean any individual who is employed by a member of
the Derby Group or any individual whose services are made available to a member
of the Derby Group on a full-time (or substantially full-time) basis under the
terms of an agreement between a member of the Derby Group and any Person which
is not a member of the Derby Group.
"Exchange Agreements" shall have the meaning ascribed to it in Section
3.2(b)(viii) of the Recapitalization Agreement.
"Exempt Transfer" shall mean, with respect to any Shareholder, (a)
Transfers of Class A Common Stock by such Shareholder after the date of this
Agreement that in the aggregate do not
-3-
<PAGE>
exceed 25% of the Class A Common Stock held by such Shareholder on the date of
this Agreement, (b) Transfers of Series A Preferred Stock by such Shareholder
after the date of this Agreement that in the aggregate do not exceed 25% of the
Series A Preferred Stock held by such Shareholder on the date of this Agreement,
(c) a Public Sale, (d) a purchase, redemption or conversion of Preferred Stock
as provided in the Certificate of Incorporation and (e) Transfers permitted
under Section 7 hereof.
"Family Trust" shall have the meaning set forth in Section 7 of this
Agreement.
"Financing Documents" shall have the meaning set forth in the
Recapitalization Agreement.
"Implied Class B Purchase Price" shall mean the amount per share of
Class B Common Stock that would be distributed in respect of such share of Class
B Common Stock if the Company were liquidated and distributions were made
pursuant to Part D of Article Four of the Certificate of Incorporation of an
amount equal to the sum of (i) the product of (a) the price per share of Deemed
Common Stock payable in a Proposed Disposition or an Approved Sale, as
applicable, and (b) the number of outstanding shares of Deemed Common Stock and
(ii) an amount, when added to the amount determined pursuant to clause (i) of
this definition, that would have yielded proceeds to the Deemed Common Stock
equal to the amount determined under clause (i) of this definition upon a
liquidation of the Company pursuant to Part D of Article Four of the Certificate
of Incorporation.
"Initial DFS Shares" shall mean the shares of Common Stock acquired by
DFS on or prior to the Closing Date (without duplication), and those shares
which affiliates of DFS are entitled to acquire pursuant to the Exchange
Agreements and those shares of Common Stock distributed to DFS pursuant to the
adjustment mechanism in Sections 4 and 5 of the DCC Share Option Agreement but
shall not mean any Shares redeemed from DFS pursuant to such sections.
"Initial Cycle Shares" shall mean collectively the shares of Common
Stock and Series A Preferred Stock acquired by Cycle LLC on the Closing Date.
"Initial Perseus Shares" shall mean the shares of Common Stock
acquired by Perseus on the Closing Date.
"Initial Public Offering" shall mean a public offering and sale of the
Company's equity securities (i) pursuant to an effective registration statement
under the Securities Act if immediately thereafter the Company has publicly held
equity securities listed on a national securities exchange or the NASD automated
quotation system or (ii) made on any recognized stock exchange in any country
which is a member of the Organization of Economic Cooperation and Development.
"IRR" shall have the meaning set forth in the Certificate of
Incorporation.
"Payment Inflows" shall have the meaning set forth in the Certificate
of Incorporation.
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"Payment Outflows" shall have the meaning set forth in the Certificate
of Incorporation.
"Permitted Transferee" shall mean any Family Trust, Qualified
Affiliate or a transferee under and pursuant to the provisions of Section 8(d)
of this Agreement.
"Perseus" shall mean Perseus Cycle, L.L.C., a Delaware limited
liability company.
"Perseus Director" shall mean the members of the Board of Directors,
if any, appointed by the Perseus Shareholders, pursuant to Section 3(a).
"Perseus Shareholders" shall mean Perseus and its Permitted
Transferees; provided that a Perseus Shareholder shall not be considered a
Perseus Shareholder unless it is controlled by (directly or indirectly) Perseus
Capital, L.L.C.
"Person" shall mean an individual, trust, partnership, company,
corporation or other legal entity.
"Preferred Stock" shall mean the Series A Preferred Stock and the
Series B Preferred Stock.
"Proposed Disposition" shall have the meaning set forth in Section
8(a) hereof.
"Public Sale" shall mean any sale of Common Stock (i) pursuant to an
offering registered under the Securities Act, (ii) made pursuant to Rule 144
promulgated under the Securities Act or any successor provision serving the same
purpose, or (iii) made on any recognized stock exchange in any country which is
a member of the Organization of Economic Cooperation and Development.
"Recapitalization Agreement" shall mean a certain Recapitalization
Agreement, dated March 10, 1998, by and among the Company, Derby International,
Perseus, Cycle LLC and DFS, as amended.
"Rule 144 Public Sale" shall mean any sale of securities to the public
pursuant to an offering made pursuant to Rule 144 promulgated under the
Securities Act or any successor provision.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Senior RIC Shares" shall mean the Class A Preferred Shares of Raleigh
Industries of Canada Limited as defined in the Exchange Agreements.
"Series A Preferred Stock" shall mean the shares of the Preferred
Stock, Series A, of the Company, par value $.01 per share, authorized by the
Certificate of Incorporation.
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"Series B Preferred Stock" shall mean the shares of the Preferred
Stock, Series B, of the Company, par value $.01 per share, authorized by the
Certificate of Incorporation.
"Shares" shall mean the issued shares of Common Stock and Preferred
Stock of the Company from time to time.
"Shareholder" shall mean DFS, Perseus and Cycle LLC, their Permitted
Transferees, and such other Persons to the extent provided in Section 6(b).
"Shareholder Group" shall mean any of the DFS Shareholders, the Cycle
Shareholders or the Perseus Shareholders, as applicable.
"Shareholder Group Shares" shall mean the sum of the total number of
shares of Class A Common Stock and the total number of shares of Series A
Preferred Stock held by each Shareholder, and any Shares held by Derby
International acquired pursuant to the Exchange Agreements.
"Simultaneous Offer" shall have the meaning set forth in Section 9(a)
of this Agreement.
"Simultaneous Offer Date" shall have the meaning set forth in Section
9(a) of this Agreement.
"Subsidiary" shall mean a corporation (or equivalent legal entity
under the law of any country) of which the Company owns directly or indirectly
more than fifty percent (50%) of the shares the holders of which are ordinarily
and generally, in the absence of contingencies or special arrangements, entitled
to vote for the election of directors (or the equivalent governing body of the
corporation).
"Term of this Agreement" shall mean the period beginning on the date
of this Agreement and continuing until the earliest of (i) the date there no
longer are at least two (2) Shareholder Groups owning Shareholder Group Shares,
(ii) the date more than fifty percent (50%) of the outstanding Deemed Common
Stock is beneficially owned by a Person or Persons who are not Shareholders, and
(iii) upon the consummation of an Approved Sale.
"Thayer" shall mean Thayer Equity Investors III, L.P.
"Transfer" shall have the meaning set forth in Section 2(a) of this
Agreement.
"Transfer Notice" and "Transferor" shall have the meanings set forth
in Section 8(a) of this Agreement.
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2. TRANSFER OF SHARES
(a) Restriction on Transfer of Shares
During the Term of this Agreement, no Shareholder shall be entitled to
sell, transfer, assign, pledge, charge or otherwise encumber ("Transfer") any
interest in the Shares to any Person other than the Company, and the Company
shall not register any Transfer of any of the Shares from a Shareholder to any
Person (other than the Company), unless such Transfer is made in accordance with
the terms and conditions of this Agreement.
(b) Restrictions to be Endorsed on Certificates
Each Shareholder shall acquire the Shares subject to all of the
rights, obligations and restrictions provided for in the Certificate of
Incorporation and this Agreement. Each share certificate issued to a
Shareholder or to any Person to whom a Shareholder sells, assigns or otherwise
transfers Shares (other than in a Public Sale) shall be endorsed with a legend
in substantially the following terms:
"THE SHARES OF [COMMON STOCK/PREFERRED STOCK] OF THE DERBY
CYCLE CORPORATION (THE "COMPANY") REPRESENTED BY THIS
CERTIFICATE ARE ENTITLED TO CERTAIN RIGHTS AND ARE SUBJECT
TO CERTAIN RESTRICTIONS, INCLUDING RESTRICTIONS ON THE
TRANSFER THEREOF, CONTAINED IN THE CERTIFICATE OF
INCORPORATION OF THE COMPANY AND/OR SPECIFIED IN THE
SHAREHOLDERS' AGREEMENT AMONG THE COMPANY AND THE HOLDERS OF
THE SHARES OF THE COMPANY DATED MAY 14, 1998 (AND ALL
AMENDMENTS THERETO), COPIES OF WHICH ARE AVAILABLE AT THE
REGISTERED OFFICE OF THE COMPANY. THE SHARES OF THE COMPANY
REPRESENTED BY THIS CERTIFICATE ARE NOT TRANSFERABLE UPON
THE BOOKS OF THE COMPANY UNLESS AND UNTIL ALL OF THE TERMS
AND CONDITIONS OF THE CERTIFICATE OF INCORPORATION AND THE
SHAREHOLDERS' AGREEMENT (AND ALL AMENDMENTS THERETO) HAVE
BEEN COMPLIED WITH."
3. DIRECTORS OF THE COMPANY AND ITS SUBSIDIARIES
(a) Nomination and Election of Directors of the Company
The following persons have been appointed as directors of the Company
for the period ending with the annual general meeting of shareholders of the
Company for the fiscal year ending December 31, 1998:
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Alan J. Finden-Crofts Frank H. Pearl
A. Edward Gottesman Dr. Thomas H. Thomsen
Frederic V. Malek Carl J. Rickertsen
Paul Stern
Each of the Shareholders shall vote all of the Shares owned by such Shareholder
that are entitled to vote on matters submitted to the stockholders of the
Company in favor of the appointment to the Board of Directors of each Person
nominated by the DFS Shareholders, the Perseus Shareholders and the Cycle
Shareholders in accordance with the following:
(i) for so long as the Cycle Shareholders hold Shares representing:
(1) not less than sixty percent (60%) of the aggregate voting power of the
Initial Cycle Shares (for this purpose, loss in voting power attributable
to dilution resulting from the issuance of Shares by the Company to any
Person shall be ignored); or (2) greater voting power than the Shares held
by the DFS Shareholders, then;
(A) the Board of Directors shall consist of seven (7) directors;
and
(B) (x) the DFS Shareholders shall have the right at all times to
nominate two (2) persons for appointment as members of the Board of
Directors of the Company; (y) the Cycle Shareholders shall have the
right at all times to nominate four (4) persons for appointment as
members of the Board of Directors of the Company; and (z) the Perseus
Shareholders shall have the right at all times to nominate one (1)
person for appointment as a member of the Board of Directors of the
Company; provided, however, that if the Perseus Shareholders are no
longer part of the Eligible Group, then the Shareholder Group that
holds a majority of the voting power of the Shares held by the
Eligible Group shall be entitled to nominate such person as a member
of the Board of Directors; or
(ii) at such time as the Cycle Shareholders hold Shares representing:
(1) less than sixty percent (60%) of the aggregate voting power of the
Initial Cycle Shares (for this purpose, loss in voting power attributable
to dilution resulting from the issuance of Shares by the Company to any
Person shall be ignored); and (2) voting power equal to or less than the
voting power of the Shares held by the DFS Shareholders (such occurrence
being referred to as the "Trigger Event"), then:
(A) the Board of Directors shall consist of seven (7) directors;
and
(B) (x) the Shareholder Group, if any, that holds a majority of
the voting power of the Shares held by the Eligible Group shall be
entitled to nominate and elect four directors, the Shareholder Group
that holds the second largest amount of the voting power of the Shares
held by the Eligible Group shall be entitled to nominate and elect two
directors, and the Shareholder Group that holds the smallest amount of
the voting power of the Shares held by the Eligible Group shall be
entitled to nominate and elect one director; provided that if the
Eligible Group only consists of
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any two of the DFS Shareholders, the Cycle Shareholders and the
Perseus Shareholders, then the Shareholder Group that holds a majority
of the voting power of the Shares held by the Eligible Group shall be
entitled to nominate and elect four directors and the Shareholder
Group and the Shareholder Group that holds the second largest amount
of the voting power of the Shares held by the Eligible Group shall be
entitled to nominate and elect three directors, and, provided further,
that if the Eligible Group only consists of any one of the DFS
Shareholders, the Cycle Shareholders and the Perseus Shareholders,
then such Shareholder Group shall be entitled to nominate and elect
seven directors; and (y) if no Shareholder Group hold a majority of
the voting power of the Shares held by the Eligible Group, then the
Shareholder Group that holds the largest amount of the voting power of
the Shares held by the Eligible Group shall be entitled to nominate
and elect three directors, the Shareholder Group that holds the second
largest amount of the voting power of the Shares held by the Eligible
Group shall be entitled to nominate and elect three directors and the
Shareholder Group that holds the smallest amount of the voting power
of the Shares held by the Eligible Group shall be entitled to nominate
and elect one director; provided that if the difference between the
percentage voting power of the two Shareholder Groups holding the
least amount of the voting power of the Shares held by the Eligible
Group (expressed as a percentage of the total voting power of Shares
held by the Eligible Group) is less than ten percentage points, then
each of such Shareholder Groups shall be entitled to nominate and
elect two directors; and
(iii) if, at any time after the Trigger Event, the number of seats on
the Board of Directors of the Company that the Eligible Group is entitled to
nominate and elect is changed (including, for example, upon an Initial Public
Offering, in connection with the offer and sale of equity securities of the
Company to new investors or otherwise), then the number of seats shall be
allocated among the Eligible Group in proportion (as close as practicable) to
the respective voting power held by each Shareholder Group; and
(iv) if prior to a Trigger Event, the number of seats on the Board of
Directors of the Company that the Eligible Group is entitled to nominate and
elect is changed (including, for example, upon an Initial Public Offering, in
connection with the offer and sale of equity securities of the Company to new
investors or otherwise), then the number of seats which each Shareholder Group
is entitled to nominate shall be adjusted proportionately so as to achieve (as
close as practicable) the same proportion of nominees for each Shareholder Group
as applicable prior to such change.
(b) Directors to be Elected Annually; Removal
All members of the Board of Directors shall be elected or re-elected
annually and shall serve until their respective successors are elected. The
removal from the Board of Directors (with or without Cause) of any Person
appointed under Section 3(a) hereof by the DFS Shareholders, the Cycle
Shareholders or the Perseus Shareholders shall be at the DFS Shareholders', the
Cycle Shareholders' or the Perseus Shareholders' written request, respectively,
but only upon such written
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<PAGE>
request and under no other circumstances (except as otherwise required by this
Agreement, by law or by the other members of the Board of Directors for Cause).
In the event that any Person designated under Section 3(a) hereof by the DFS
Shareholders, the Cycle Shareholders or the Perseus Shareholders for any reason
ceases to serve as a member of the Board of Directors, the resulting vacancy on
the Board of Directors shall be filled by a Person designated or appointed by
the same Shareholder that designated or appointed the Person that will no longer
serve on the Board of Directors (or by such other Person then entitled to
designate and elect such member in accordance with Section 3(a)(ii)).
(c) Quorum for Meetings of the Board of Directors
At all meetings of the Board of Directors, a majority of the members
shall constitute a quorum for the transaction of business.
(d) Meetings of the Board of Directors
Meetings of the Board of Directors may be convened by the Chairman and
shall be called at the request of any two (2) members of the Board of Directors.
Notice of any meeting of the Board of Directors shall be given to each Director
in person, by letter or by telephone, telex, telefax or other electronic means
so that such notices are received by each member of the Board of Directors not
less than five (5) days before the date of the meeting, unless such notice is
waived by all members of the Board of Directors. All notices of meetings of the
Board of Directors shall state in reasonable detail the business to be
transacted at such meetings.
(e) Action by the Directors without a Meeting
The Board of Directors may take action without a meeting by unanimous
written consent expressed in one or more documents, letters or telefaxes.
(f) Board of Directors of Subsidiaries
The Board of Directors of each Subsidiary shall be nominated and
elected by the Board of Directors of the Company.
(g) Termination of DFS Voting Rights
The right of the DFS Shareholders to nominate and remove members of
the Board of Directors under this Section 3 shall terminate if (1) the DFS
Shareholders are no longer part of the Eligible Group or (2) during the lifetime
of A. Edward Gottesman ("AEG"), AEG ceases to be the chairman of either DFS or
Derby International; provided however, that if AEG dies or is physically or
mentally disabled, then this right of the DFS Shareholders to nominate and elect
directors pursuant to this Section 3 shall continue and the DFS Shareholders
shall be entitled to nominate, elect and remove directors pursuant to Section 3
hereof if and only if at least one of the directors that the DFS Shareholders
are entitled to nominate and elect is a person who is independent from and not a
shareholder, director or employee of DFS, Derby International or The
International
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<PAGE>
Heart Foundation Trust or any of their Affiliates, is experienced in business
matters and is reasonably acceptable to the Cycle Shareholders and the Perseus
Shareholders.
(h) Termination of Cycle LLC Voting Rights
The right of the Cycle Shareholders to nominate and remove members of
the Board of Directors under this Section 3 shall terminate if (1) Thayer shall
own and control, directly or indirectly, less than 51% of the outstanding voting
and equity interests in the Cycle Shareholders or (2) the Cycle Shareholders are
no longer part of the Eligible Group.
(i) Termination of Perseus Voting Rights
The right of the Perseus Shareholders to nominate and remove members
of the Board of Directors under this Section 3 shall terminate if Perseus is no
longer a member of the Eligible Group.
(j) Reallocation of Nominees
In the event that either the Cycle Shareholders or the DFS
Shareholders lose their rights to nominate directors under Sections 3(g) and
3(h) above, the Shareholder Group owning stock with the largest amount of voting
power on such date shall succeed to the right to nominate such directors, except
to the extent otherwise provided in Section 3(a)(ii) hereof.
4. APPOINTMENT OF AUDITORS
During the Term of this Agreement, for each fiscal year of the Company
and each of the Subsidiaries which begins after December 31, 1997, each
Shareholder shall vote all of the Shares held by such Shareholder which are
entitled to vote thereon in favor of the election of any recognized accounting
firm of international standing nominated by a majority of the Board of Directors
of the Company as auditor for the Company.
5. PRINCIPAL CORPORATE ACTION BY THE COMPANY AND SUBSIDIARIES
(a) Corporate Action by the Company not in the Ordinary Course of Business
During the Term of this Agreement but only for so long as (1) the DFS
Shareholders own at least 9% of the voting power of the outstanding Shareholder
Group Shares and at least 6% of the voting power of the outstanding capital
stock of the Company, (2) the Cycle Shareholders own at least 15% of the voting
power of the outstanding Shareholder Group Shares and at least 10% of the voting
power of the outstanding capital stock of the Company and (3) no Shareholder
Group owns more than 82.5% of the voting power of the outstanding Shareholder
Group Shares, the Company shall not take any of the following actions unless (I)
if the provisions of Section 3(a)(ii) are not then operative, such action is
approved by the affirmative vote of a majority of the Board of Directors of the
Company, which majority must include either a director nominated by the Perseus
Shareholders or a director nominated by the DFS Shareholders or (II) if the
provisions of
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Section 3(a)(ii) are then operative, such action is approved by the
affirmative vote of five members of the Board of Directors of the Company:
(i) make any material change in the nature of the business of the
Company and the Subsidiaries, taken as a whole;
(ii) purchase, acquire, manage or launch any new business or any part
of a new business, or purchase or acquire more than five percent (5%) of
the shares or other securities of any Person (other than a Person which is
a Subsidiary before the date of such purchase or acquisition), for a total
consideration in excess of the Approval Amount or the equivalent thereof in
any other currency;
(iii) make any investment of any kind in any corporation, company,
firm or business enterprise controlled by one or more Shareholders or their
Affiliates (other than a member of the Derby Group) or employees of the
Shareholder s or their Affiliates (other than a member of the Derby Group);
(iv) purchase or lease any fixed assets or property from any
Shareholder or Employee or any of their Affiliates (other than from a
member of the Derby Group);
(v) lend any money, make any guarantee or pledge the credit of the
Company (or the credit of any Subsidiary) to or for the benefit of any
Person other than a member of the Derby Group, except in the ordinary
course of business of the Company;
(vi) enter into any plan of liquidation or dissolution;
(vii) sell, lease, charge or encumber any of the assets, revenues or
property, tangible or intangible, or transfer or dispose of all or any
substantial part of the undertaking, assets or revenue of the Company or
any of its Subsidiaries for total consideration exceeding the Approval
Amount, except: (A) in the ordinary course of business and on arm's-length
terms; or (B) if the assets, revenues or undertakings are not material to
the business of the Derby Group, taken as a whole, provided such
transaction is on arm's-length terms; or (C) to, or in favor of, a member
of the Derby Group;
(vi) amalgamate or merge with any other company or business
enterprise (other than a member of the Derby Group);
(ix) enter into any plan of reorganization or recapitalization which
results in a change of ownership of the outstanding Shares (other than with
a member of the Derby Group);
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(x) pay any dividends or distributions to Shareholders,
except in accordance with the terms and conditions of this
Agreement;
(xi) incur any liability, commitment or obligation, or
settle or compromise any claim, which is not otherwise
specifically described above and which is out of the ordinary
course of business of the Derby Group for an amount in excess of
the Approval Amount or the equivalent thereof in any other
currency;
(xii) issue or sell any shares of Class A Common Stock
(other than shares not subject to the Preemptive Rights as
described in Section 12(a) of this Agreement) for no
consideration or for a consideration less than the fair market
value thereof (as such fair market value is determined in good
faith by the Company's independent auditors); or
(xiii) take steps or omit to take steps which will result in
the termination of the rights to use the Derby trademark in any
jurisdiction under that certain Trademark License Agreement of
even date herewith.
(b) Prohibitions on Action by Subsidiaries
During the Term of this Agreement but only for so long as (1) the DFS
Shareholders own at least 9% of the voting power of the outstanding Shareholder
Group Shares and at least 6% of the voting power of the outstanding capital
stock of the Company, (2) the Cycle Shareholders own at least 15% of the voting
power of the outstanding Shareholder Group Shares and at least 10% of the voting
power of the outstanding capital stock of the Company and (3) no Shareholder
Group owns more than 82.5% of the voting power of the outstanding Shareholder
Group Shares, the Company and each of the Shareholders shall take such action as
may be necessary or appropriate (by voting the Shares held by such Shareholder,
by causing action to be taken by the Board of Directors of the Company or any
Subsidiary, or otherwise) to prevent any Subsidiary from taking the following
actions unless (I) if the provisions of Section 3(a)(ii) are not then operative,
such action is approved by the affirmative vote of a majority of the Board of
Directors of the Company, which majority must include either a director
nominated by the Perseus Shareholders or a director nominated by the DFS
Shareholders or (II) if the provisions of Section 3(a)(ii) are then operative,
such action is approved by the affirmative vote of five members of the Board of
Directors of the Company:
(i) make any material change in the nature of the business
of such Subsidiary; or
(ii take any of the actions described in clauses (ii)
through (xiii) of Section 5(a).
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(c) Cycle Shareholders Exit and Distress Situations.
Sections 5(a) and 5(b) shall not apply and only a simple majority vote
of the members of the Board of Directors of the Company shall be required to
approve any action by the Company or any Subsidiary:
(i) during the period that a payment default under the
Financing Documents is not cured or after any acceleration of
Indebtedness under the Financing Documents;
(ii) during the period that an event of default under the
Financing Documents resulting from unpaid judgments, the
insolvency of the Company, the filing for bankruptcy protection
(whether voluntary or involuntary) or similar event until such
event of default is cured;
(iii) during any period during which the financial covenants
under the Financing Documents are not satisfied, resulting in a
default under such documents, provided that the provisions of
Sections 5(a) and 5(b) hereof shall continue to apply to the sale
of any Principal Subsidiary (as defined in the Recapitalization
Agreement) or the actions described in Sections 5(a)(vii) and
(viii) until such default continues for two consecutive fiscal
quarters of the Company;
(iv) in connection with or in order to effect a transaction
in which a majority of the Cycle Shareholders' equity interest in
the Company is being exchanged for cash or other property or in
which a dividend or other distributions outside the ordinary
course of business is being paid pro rata (based upon the
ownership of Deemed Common Stock) by the Company; and
(v) in connection with or in order to effect the completion
of one or more Public Sales as a part of a course of action for
the sale of a majority of the Cycle Shareholders' equity interest
in the Company; provided that following completion of the Initial
Public Offering, Common Stock having a market value of at least
$40 million, or stock equal to at least twenty-five percent (25%)
of the outstanding common equity of the Company will be publicly-
traded.
(d) Affiliated Transactions.
Notwithstanding anything to the contrary herein, the Company and its
Subsidiaries shall not enter into any transaction with, or make any payments to,
any Shareholder or its Affiliates (other than the Company or its Subsidiaries)
or the officers, directors, employees or shareholders of any of them unless the
Parties to such transaction have received the prior written approval of the
Shareholder Group (with respect to Perseus, Cycle LLC and DFS) not a party to
such transaction, provided that such approval shall not be required if such
transaction is contemplated by this Agreement or the Certificate of
Incorporation.
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6. CONDITIONS OF CERTAIN TRANSFERS
(a) It shall be a condition of any transaction permitted under Section 7 or
8(d) of this Agreement, other than a Public Sale or a Transfer described in
clause (a)(ii) of Section 7 hereof, that any Person to whom any interest in the
Shares has been issued, sold, transferred, assigned, pledged, charged or
otherwise encumbered shall, on the date on which such Person becomes entitled to
any interest in the Shares, become a party to this Agreement, and thereupon be
deemed to be a "Shareholder" for all purposes hereof, by executing a counterpart
of this Agreement and by entering into valid and binding obligations to perform
all of the executory terms and provisions of this Agreement applicable to such
Person.
(b) It shall be a condition of any Transfer permitted under this Agreement
(other than a Transfer pursuant to Section 7 of this Agreement, to the Company
or in a Public Sale), that any Person to whom any interest in the Shares has
been issued, sold, transferred, assigned, pledged, charged or otherwise
encumbered shall, on the date on which such Person becomes entitled to any
interest in the Shares, become a party to this Agreement, and thereupon be bound
by this Agreement as a "Shareholder" for purposes of Sections 2, 3(a), 11(a)
through (d), 13, and 14(b) hereof, by executing a counterpart of this Agreement
and by entering into valid and binding obligations to perform all of the
executory terms and provisions of this Agreement applicable to such Person
pursuant to such Sections; provided, however, that such Person shall have none
of the rights of a Shareholder under this Agreement (other than rights
incidental to the obligations contained in such Sections).
7. CERTAIN PERMITTED TRANSFERS OF SHARES
(a) Subject to the condition contained in Section 6(a) of this Agreement,
(i) any Shareholder who is an individual may at any time sell, assign or
otherwise transfer all or part of the Shares owned by such Shareholder to or
among any trust or trusts established for the benefit of such Shareholder or the
spouse, issue, siblings or parents of such Shareholder (a "Family Trust") and
for purposes of Sections 3, 8, 9, 10, 11 and 12 of this Agreement, any Shares
held by a Family Trust shall be treated as if they were still owned by the
Shareholder who sold, assigned or otherwise transferred such Shares to the
Family Trust, (ii) at any time after an Initial Public Offering, Perseus or
Thayer may distribute Shares to their members or partners without consideration
pro rata in accordance with the terms of the partnership agreement of Thayer
Equity Investors III, L.P. or the limited liability company agreement of Perseus
Capital, L.L.C., as the case may be, and (iii) any Shares owned by any
Shareholder who is not an individual may be sold, assigned or transferred to any
Affiliate of such Shareholder (a "Qualified Affiliate"); provided, however, any
subsequent Transfer, whether direct or indirect, of an interest in a Qualified
Affiliate to a Person that is not an Affiliate transferor or shall be deemed to
be a Transfer of the Shares held by such Qualified Affiliate subject to the
terms and conditions of this Agreement and, upon such subsequent transfer, such
Qualified Affiliate shall no longer be deemed to be a Shareholder for purposes
of this Agreement except to the extent provided in Section 6(b) hereof or a DFS
Shareholder, Cycle Shareholder or Perseus Shareholder, as the case may be.
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(b) Any Transfer permitted under Section 7(a) hereof shall not relieve the
transferor of any liabilities and obligations it has under the Recapitalization
Agreement. In connection with, and as a condition to, any Transfer under
clauses (i) and (iii) of Section 7(a) hereof, the transferee must agree to
assume such obligations of the transferor under the Recapitalization Agreement.
8. RIGHT OF FIRST OFFER
(a) Transfer Notice to Board of Directors
Except as otherwise permitted under Section 7 of this Agreement or in
connection with a Public Sale, no Shareholder shall sell, transfer, assign,
pledge, charge or otherwise encumber all or any part of such Shareholder's
interest in the Class A Common Stock or the Series A Preferred Stock (any such
action being referred to as a "Proposed Disposition"), unless such Shareholder
(a "Transferor") shall give a written notice (the "Transfer Notice") to the
other Shareholders stating that the Transferor wishes to make a Proposed
Disposition. The Transfer Notice shall state the material terms of the Proposed
Disposition, including the number of Shares to be sold and the cash purchase
price per Share and, if known at such time, the name(s) of any proposed
transferee(s). The delivery of the Transfer Notice to the other Shareholders
shall constitute an offer to sell in accordance with the provisions of this
Section 8 all (but not less than all) of the Class A Common Stock and the Series
A Preferred Stock covered in such Transfer Notice (the "Offered Shares") on the
same terms, including the same price, as specified in such Transfer Notice on a
date not earlier than thirty (30) days and not later than sixty (60) days after
the date of the Transfer Notice.
(b) Response from Other Shareholders
Within thirty (30) days after the date of receipt of a Transfer
Notice, the Other Shareholders shall give notice to the Transferor indicating
such Shareholder's willingness to purchase the Offered Shares. If the Offered
Shares are accepted for purchase by more than one Shareholder, the Offered
Shares shall be allocated among such accepting Shareholders pro rata based on
their respective ownership of Deemed Common Stock. Once accepted by a
Shareholder (and subject to the foregoing pro ration) such agreement between the
Transferor and such Shareholder(s) shall become unconditional.
(c) Disposals in the Event of Non-Acceptance of Offered Shares
If the Offered Shares are not accepted by one or more of the other
Shareholders under Section 8(b) hereof: (i) the Transferor may withdraw the
Transfer Notice; or (ii) the Transferor may make the Proposed Disposition of the
whole (but not part) of the Offered Shares on terms no less favorable to the
Transferor than those set out in the Transfer Notice, provided that the price
per Offered Share received in the actual sale can be as little as ninety-five
percent (95%) of the cash price specified in the Transfer Notice, provided
further, that if the entire price per Offered Share received in the actual sale
is not in cash, then the Company's independent auditors shall determine the
value of the non-cash consideration received in the actual sale of the Offered
Shares in order to determine whether the aggregate price per Offered Share
received in the actual sale exceeds or is equal to ninety-five percent (95%) of
the cash price per Offered Share specified in the Transfer
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Notice. Any Proposed Disposition permitted by this Section 8(c) may be made at
any time within one hundred and ninety (190) days after the date of the Transfer
Notice.
(d) Special Provision
Subject to the fulfilment of the condition contained in Section 6(a)
of this Agreement, the provisions of Sections 8(a) through 8(c) hereof shall not
apply to any transfer of any Shares from a Shareholder to his estate upon death,
to his heirs by operation of the laws of intestacy, to his heirs or legatees
under the terms of a will or codicil or to any legal representative of such
Shareholder who is appointed by a court of law in the event of the incapacity of
such Shareholder (and such estate, heirs, legatees or legal representative may
acquire and hold good and valid title to any such Shares so transferred without
payment of consideration, subject to fulfilment of the condition contained in
Section 6(a) of this Agreement).
(e) Waiver of Right of First Offer
Notwithstanding anything to the contrary, if the approval of the
Perseus Director is required for any Proposed Disposition pursuant to Section
11(e), then the provisions of Sections 8(a) through 8(c) hereof shall not apply.
9. ACTION IN THE EVENT OF TRANSFERS NOT PERMITTED BY THIS AGREEMENT
(a) Events Resulting in a Simultaneous Offer
If any of the following events shall occur, each Shareholder involved
in such event shall be deemed to have made a simultaneous offer (the
"Simultaneous Offer") to sell to the Company or its Designee all of the Shares
owned by such Shareholder on the date on which the event occurs (the
"Simultaneous Offer Date"):
(i) a Shareholder takes any action or makes any attempt to Transfer
any Shares, or omits to take any action that would prevent a Transfer of
any Shares, owned by such Shareholder except in accordance with the terms
and conditions of this Agreement and the Certificate of Incorporation;
(ii) any order, judgment or decree is made by a court having
jurisdiction in the matter adjudging a Shareholder bankrupt or insolvent;
(iii) any order, judgment or decree is made by a court having
jurisdiction in the matter which results in the appointment of a receiver,
liquidator, trustee or assignee in bankruptcy or insolvency of a
Shareholder (or his or its property), and such order, judgment or decree
shall have continued undischarged or unstayed for a period of sixty (60)
days;
(iv) a Shareholder institutes proceedings to be adjudicated a
voluntary bankrupt, or consents to the filing of a bankruptcy or insolvency
petition against such
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Shareholder or consents to the appointment of a receiver, liquidator,
trustee or assignee in bankruptcy or insolvency of such Shareholder (or his
or its property), or makes an assignment for the benefit of creditors;
(v) any judgment is obtained in any legal or equitable proceeding
against a Shareholder and a sale of all or any part of the Shares is
threatened under legal process as a result of such judgment, or any
execution process is issued against any such Shareholder or any Shares
owned by him or it, or any other form of legal proceeding or process is
instituted as a result of which any Shares are threatened to be sold and
such execution is not dismissed, discontinued or stayed within a period of
ninety (90) days from the occurrence thereof;
provided that the Shareholder involved in the event which causes the
Simultaneous Offer shall have ninety (90) days from the Simultaneous Offer Date
to cure the event which caused such Simultaneous Offer.
(b) Purchase Price
(i) The price for each Share for which a Simultaneous Offer is deemed
to be made in accordance with Section 9(a)(i) shall be the lesser of (i) eighty
percent (80%) of the fair market value of such Share (as determined by the
independent auditors of the Company in good faith) and (ii) the book value of
such Share, in each case as of the Simultaneous Offer Date, plus interest at the
"Base Rate" for dollars of Citibank N.A., in effect from time to time, from the
Closing Date (or, if later, the date of purchase or issue of such Shares) until
the Simultaneous Offer Date.
(ii) The purchase price for each Share for which a Simultaneous Offer
is deemed to be made in accordance with any of Section 9(a)(ii) through (v)
shall be determined as follows: (A) the price for each share of Common Stock
shall be $800.00, plus interest at the "Base Rate" for dollars of Citibank N.A.,
in effect from time to time, from the Closing Date (or, if later, the date of
purchase or issue of such Shares) until the Simultaneous Offer Date; (B) the
price for each share of Series A Preferred Stock shall be $1,200, plus interest
at the "Base Rate" for dollars of Citibank N.A., in effect from time to time,
from the Closing Date (or, if later, the date of purchase or issue of such
Shares) until the Simultaneous Offer Date; and (C) the price for each share of
Series B Preferred Stock shall be $800, plus interest at the "Base Rate" for
dollars of Citibank N.A., in effect from time to time, from the Closing Date
(or, if later, the date of purchase or issue of such Shares) until the
Simultaneous Offer Date.
(c) Payment of Purchase Price
The price to be paid for each Share purchased pursuant to this Section
9 shall be paid in dollars at the registered office of the Company sixty (60)
days after the date on which the Board of Directors gives notice to the relevant
Shareholder of the Company's intent to purchase such Common Stock, and any
member of the Board of Directors of the Company is hereby authorized to take all
action necessary to carry out on behalf of the Shareholders concerned the
transfer of all Shares included in the Simultaneous Offer.
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(d) Extension of Simultaneous Offer
Within thirty (30) days after the date on which the Board of Directors
learn of the event which causes the Simultaneous Offer to be made, the Board of
Directors may, but shall not be required to, extend the Simultaneous Offer as to
all or part of any Shares included in the Simultaneous Offer to all of the other
Shareholders pro rata based upon the Payment Outflows made by each such
Shareholder in respect of the Shares held by such Shareholder on the
Simultaneous Offer Date, and such other Shareholders may purchase the Shares so
offered in place of the Company or its Designee. Acceptance of such offer must
be made and the sale must be completed within twenty-one (21) days and thirty
(30) days, respectively, after the date on which the Board of Directors extends
the offer to the other Shareholders pursuant to this Section 9(d).
10. RIGHTS ON CERTAIN DISPOSITIONS
(a) At least 30 days prior to any Transfer of Class A Common Stock or
Series A Preferred Stock by any Shareholder, the transferring Shareholder (the
"Selling Shareholder") will deliver written notice (the "Sale Notice") to the
Company and all other Shareholders who hold Common Stock and Preferred Stock
(the "Other Stockholders"), specifying in reasonable detail the identity of the
prospective transferee(s) and the terms and conditions of the Transfer. The
Other Stockholders may elect to participate in the contemplated Transfer by
delivering written notice (the "Election Notice") to the Selling Shareholder
within 10 days after delivery of the Sale Notice. If any Other Stockholders
have elected to participate in such Transfer, the Selling Shareholder and each
such Other Stockholders will be entitled to sell in the contemplated Transfer
(A) a number of shares (in the case of each Other Stockholder, not to exceed the
number specified in such Other Stockholder's Election Notice) of (1) Deemed
Common Stock equal to the product of the Selling Percentage (as defined below)
and the number of shares of Deemed Common Stock owned by such Person, (2) Class
B Common Stock equal to product of the Selling Percentage and the number of
shares of Class B Common Stock owned by such Person, (3) Converted Common (if
any) equal to the product of the Selling Percentage and the number of shares of
Converted Common such Person could acquire under Section 4D(ii) of Part B of
Article IV of the Certificate of Incorporation at the purchase price provided
below and (4) Series B Preferred Stock equal to the product of the Selling
Percentage and the number of shares of Series B Preferred Stock owned by such
Person plus (B) a pro rata share (based upon the ownership of Shares) of the
Shares requested to be sold in the Sale Notice and the Election Notices but not
otherwise allocated to the Selling Shareholder and the Other Stockholders under
clause (A) above. The Selling Shareholder will not Transfer any of its shares
of Class A Common Stock or Series A Preferred Stock to the prospective
transferee(s) unless simultaneously with such Transfer, the prospective
transferee or transferees purchase from the Other Stockholders all of the shares
of Common Stock, Preferred Stock and Converted Common, as the case may be, which
the Other Stockholders are entitled to sell to such prospective transferee(s)
pursuant to this Section 10(a) and subject to the terms and conditions of
Section 10(c) hereof. The "Selling Percentage" means the percentage derived by
dividing (x) the number of shares of Deemed Common Stock being offered for sale
by the Selling Shareholder by (y) the number of shares of Deemed Common Stock
outstanding as of the date of the Sale Notice. None of the provisions of
Section 10 hereof shall apply to an Exempt Transfer.
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(b) In the event that:
(i) a Shareholder wishes to make a Proposed
Disposition of Shares pursuant to Section 8 of this Agreement
(other than a transaction permitted by Section 7 of this
Agreement); and
(ii) such Proposed Disposition complies with all of
the terms and conditions of Section 8; and
(iii) after the Proposed Disposition (taking into
account the exercise of any rights of other Shareholders under
this Section 10), Shareholders on the date on which the notice of
such Proposed Disposition is received, will own, in the
aggregate, less than fifty-one percent (51%) of the voting power
of the outstanding capital stock of the Company,
then the Persons who have given notice of the Proposed Disposition shall obtain
from any Person to or with which the Proposed Disposition is to be made, an
offer to each Shareholder to acquire all of their Shares.
(c) The terms and conditions applicable to the Shares to be sold by
the Other Shareholders under this Section 10 are as follows: (i) with respect to
the Class A Common Stock owned by such Shareholder, at the same price applicable
to, and on terms and subject to conditions substantially identical to those
offered in the Proposed Disposition with respect to, the Deemed Common Stock,
(ii) with respect to the Series B Preferred Stock owned by such Shareholder, on
terms and subject to conditions substantially identical to those offered in the
Proposed Disposition, and at a price per share equal to the Liquidation Amount
(as defined in the Certificate of Incorporation) thereof plus all accrued and
accumulated but unpaid dividends thereon, and (iii) with respect to the Class B
Common Stock owned by such Shareholder, at a price per share equal to the
Implied Class B Purchase Price, and on terms and subject to conditions
substantially identical to those offered in the Proposed Disposition.
Notwithstanding the foregoing, in the event that all of the outstanding equity
securities of the Company are to be sold in a Proposed Disposition, each
Shareholder shall be paid, in respect of the Shares held by such Shareholder,
the amount that such Shareholder would have received if such aggregate
consideration payable in such Proposed Disposition had been distributed by the
Company in complete liquidation pursuant to the rights and preferences set forth
in Part D of Article Four of the Certificate of Incorporation.
11. APPROVED SALE
(a) Obligation to "Go Along"
Subject to Sections 5(a) and 5(c) of this Agreement, if the Board of
Directors of the Company approves a sale of all or substantially all of the
Company's assets determined on a consolidated basis or a sale of all or
substantially all (i.e., greater than 66 2/3%) of the Company's outstanding
capital stock (whether by sale of stock, merger, recapitalization,
consolidation, reorganization, combination or otherwise) to any Person or group
of Persons (collectively an
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"Approved Sale"), each Shareholder will consent to and raise no objections
against such Approved Sale. If the Approved Sale is structured as (i) a merger
or consolidation, each Shareholder will waive any dissenter's rights, appraisal
rights or similar rights in connection with such merger or consolidation or (ii)
sale of stock, each Shareholder will agree to sell all of its Shares and rights
to acquire Shares on the terms and conditions approved by the Board of Directors
of the Company. Each Shareholder will take all reasonable actions in connection
with the consummation of the Approved Sale as requested by the Company.
(b) Conditions
The obligations of the Shareholders with respect to an Approved Sale
are subject to the satisfaction of the condition that upon the consummation of
the Approved Sale; (A) all of the Class A Common Stock to be sold in such
Approved Sale shall be sold at the same price applicable to, and on terms and
subject to conditions substantially identical to those applicable to, the Deemed
Common Stock in such Approved Sale, (B) all of the Series B Preferred Stock to
be sold in such Approved Sale shall be sold on the same terms (other than with
respect to price) and subject to conditions substantially identical to those
applicable to the Deemed Common Stock in such Approved Sale, and at a price per
share equal to the Liquidation Amount (as defined in the Certificate of
Incorporation) thereof plus all accrued and accumulated but unpaid dividends
thereon, and (C) all of the Class B Common Stock to be sold in such Approved
Sale shall be sold at a price per share equal to the Implied Class B Purchase
Price, and on terms (other than with respect to price) and subject to conditions
substantially identical to those applicable to the Deemed Common Stock in such
Approved Sale. Notwithstanding the foregoing, in the event that all of the
outstanding equity securities of the Company are to be sold in an Approved Sale,
each Shareholder shall be paid, in respect of the Shares held by such
Shareholder, the amount that such Shareholder would have received if such
aggregate consideration payable in such Approved Sale had been distributed by
the Company in complete liquidation pursuant to the rights and preferences set
forth in Part D of Article Four of the Certificate of Incorporation.
(c) Appointment of Purchaser Representative
If the Company or a Shareholder enters into any negotiation or
transaction for which Rule 506 (or any similar rule then in effect) promulgated
under the Securities Act may be available with respect to such negotiation or
transaction (including a merger, consolidation or other reorganization), each
Shareholder will, at the request of the Company, appoint a purchaser
representative (as such term is defined in Rule 501) reasonably acceptable to
the Company. If any Shareholder appoints a purchaser representative designated
by the Company, the Company will pay the fees of such purchaser representative.
If any Shareholder declines to appoint the purchaser representative designated
by the Company such Shareholder will appoint another purchaser representative,
and such Shareholder will be responsible for the fees of the purchaser
representative so appointed. This Section 11(c) shall apply only to
Shareholders that are required to appoint a purchaser representative under
Regulation D (or any successor regulation then in effect) promulgated under the
Securities Act.
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(d) Costs
Shareholders will bear their pro-rata share (based upon the proceeds
to be received by each Shareholder) of the costs of any sale of Shares pursuant
to an Approved Sale to the extent such costs are incurred for the benefit of all
Shareholders and are not otherwise paid by the Company or the acquiring party.
For purposes of this Section 11(d), costs incurred in exercising reasonable
efforts to take all necessary actions for the consummation of an Approved Sale
in accordance with Section 11(a) hereof shall be deemed to be for the benefit of
all Shareholders. Costs incurred by Shareholders on their own behalf will not be
considered costs of the transaction hereunder.
(e) Perseus Approval
Notwithstanding anything to the contrary, if the consideration to be
received by the Shareholders in an Approved Sale is other than Cash, then the
approval of the Perseus Director shall be required unless any one of the
following conditions are met:
(i) the IRR on each of the Shareholder Groups' investment
in Class A Common Stock (including for this purpose, Class A
Common Stock issuable upon conversion of the Series A Preferred
Stock) shall be more than twenty percent (20%) based solely on
the Cash portion of the total Payment Inflows received prior to
the date of such Approved Sale and to be received upon
consummation of such Approved Sale in respect of such investment;
(ii) (A) the Cash portion of the consideration to be
received in such Approved Sale exceeds fifty percent (50%) of the
total value of such consideration, (B) the non-Cash portion of
the consideration to be received in such Approved Sale is in the
form of securities of another Person that has consolidated net
worth at least equal to at least $500,000,000, and (C) Perseus
and DFS shall each have the ability to sell or otherwise
liquidate such securities of such other Person pursuant to puts,
calls or other such devices within three years of the
consummation of the Approved Sale; and
(iii) the Cash portion of the consideration to be received
in such Approved Sale exceeds ninety percent (90%) of the total
value of such consideration;
(iv) the IRR on the total investment of the Cycle
Shareholders in the Company would be less than twenty percent
(20%) after taking into account all Payment Inflows to be
received by the Cycle Shareholders in such Approved Sale (where
any notes included in such Payment Inflows are valued at their
face value and any securities included in such Payment Inflows
are valued without applying any discount of any nature);
(v) if the consideration received by the Shareholders is
in the form of securities of another Person, the market
capitalization (as determined in the Board
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of Directors' good faith judgement) of such Person is (or prior
to giving effect to the Approved Sale is) greater than eight
hundred million dollars ($800,000,000); or
(vi) each of the Perseus Shareholders and the DFS
Shareholders can sell or otherwise liquidate any consideration it
receives which is in the form of securities of another company,
corporation or other legal entity within nine (9) months after
the consummation of the Approved Sale under Rule 144 Public Sales
(based on the trading volume of such securities at the time the
Approved Sale was approved by the Board of Directors) taking into
account the ability to exercise any demand registration rights
granted to the Perseus Shareholders or the DFS Shareholders in
such Approved Sale;
provided that this Section 11(e) shall not apply if there are no Perseus
Directors elected to the Board of Directors.
12. PREEMPTIVE RIGHTS
(a) Right to Purchase
Except for the issuance of Common Stock (and/or securities exercisable
for or convertible into Common Stock) (i) to the Company's or its Subsidiaries'
directors or employees (other than an Affiliate of any Shareholder) in their
capacity as such, (ii) in connection with an Approved Sale, (iii) in connection
with any merger, consolidation, acquisition of stock, acquisition of assets,
business combination or similar transaction permitted by this Agreement, (iv)
pursuant to a Public Sale (v) to any providers of debt financing to the Company
or any of its Subsidiaries, (vi) upon the conversion or exercise of securities
convertible or exchangeable into or containing options or rights to acquire
Common Stock or in connection with the issuance of Shares pursuant to the
Exchange Agreements, (vii) pursuant to any adjustments required under Section 7A
or 7B of Part B of the Certificate of Incorporation, or (viii) the issuance of
Common Stock to the holders of Class A Common Stock in connection with a
subdivision or combination of Class A Common Stock, a reverse stock split or a
stock dividend payable solely in shares of Class A Common Stock, in each case if
each holder of Class A Common Stock receives Common Stock proportionate to its
ownership of Class A Common Stock in connection with the transaction described
in this clause (viii), the Company shall first offer to sell to each Shareholder
a portion of such stock or securities determined based on the relative voting
power of the Shares held by such Shareholder; provided, however, that if such
Shareholders do not subscribe for the total amount of stock or securities
offered to such Shareholders, then the holders of shares of Class B Common
Stock or Series B Preferred Stock shall be entitled to subscribe for such
unsubscribed for stock or securities pro rata, based on the Payment Outflows
made by each such holder in respect of its Class B Common Stock and Series B
Preferred Stock. Each Shareholder shall be entitled to purchase such stock or
securities at the most favorable price and on the most favorable terms as such
stock or securities are to be offered to any other Person. The purchase price
for all stock and securities offered to each Shareholder shall be payable in
cash by wire transfer of immediately available funds or if such Common Stock is
being offered to Persons not a party to this Agreement on such other terms as
offered to such Persons.
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(b) Exercise of Right
In order to exercise its purchase rights hereunder, each Shareholder
must deliver a written notice to the Company describing its election hereunder
within thirty (30) days after receipt of written notice from the Company
describing in reasonable detail the stock or securities being offered, the
purchase price thereof, the payment terms and such Shareholder's percentage
allotment.
Upon the expiration of the offering periods described above, the
Company shall be entitled to sell such stock or securities which the
Shareholders have not elected to purchase during the one hundred ninety (190)
days following such expiration on terms and conditions no more favorable to the
purchasers thereof than those offered to Shareholders. Any stock or securities
offered or sold by the Company to any Person after such 190-day period must be
reoffered to the Shareholders pursuant to the terms of this Section 12.
13. GENERAL PROVISION WITH RESPECT TO SHARE TRANSFERS
The Company shall not register any transfer of any Shares from any
Shareholder to any Person unless such transfer is made pursuant to the terms and
conditions of this Agreement and the Certificate of Incorporation. The Company
shall take all lawful action necessary or appropriate to implement the
provisions of this Agreement and the Certificate of Incorporation and to prevent
the acquisition, disposition or transfer by a Shareholder of any Shares except
in accordance with the terms and conditions of this Agreement and the
Certificate of Incorporation. Such action may include (but shall not be limited
to) the execution and delivery of all instruments and documents and the taking
of all such other action as the Company may deem reasonably necessary or
appropriate, on behalf of and in the name of any Shareholder, in order to carry
out the terms, provisions and purposes of this Agreement and the Certificate of
Incorporation. Each Shareholder hereby appoints the Company his or its agent or
attorney-in-fact for the purpose of taking any action provided for in this
Section 13. The power given by the Shareholders to the Company pursuant to this
Section 13 shall survive the death or bankruptcy of any Shareholder and may be
revoked only with the written consent of the Company.
14. BOOKS AND RECORDS; CONFIDENTIALITY
(a) Maintenance of Accounts, Books and Records
The Company shall take the following action with respect to financial
record-keeping, and the Company shall cause its Subsidiaries to take
corresponding action appropriate to local conditions and requirements:
(i) maintain books, records and accounts which, in
reasonable detail, accurately and fairly reflect the transactions
of the Company or such Subsidiary and dispositions of the assets
and liabilities of the Company or such Subsidiary; and
(ii) devise and maintain a system of internal accounting
controls sufficient to provide reasonable assurances that:
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(A) transactions are executed in accordance with
management's general or specific authorization;
(B) transactions are recorded as necessary to permit
preparation of financial statements in conformity with
generally accepted accounting principles or any other
criteria applicable to such statements and to maintain
accountability for assets;
(C) access to assets is permitted only in accordance
with management's general or specific authorization; and
(D) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(b) Confidentiality
Each Shareholder covenants and agrees that he or it will not (and, in
the case of a corporate, limited liability or partnership Shareholder, shall use
its best efforts to procure that its directors, members, officers, partners,
employees or agents will not), at any time during the Term of this Agreement or
thereafter, communicate or disclose to any unauthorized person or use for his or
its own account or business any information, observations, data, written
materials, records or documents which are prepared or obtained by such
Shareholder or which come into his or its possession during the Term of this
Agreement and which relate to the performance by the Derby Group of its business
or affairs. The obligations contained in this Section 14(b) (i) shall not apply
in the event and to the extent that the information, observations, data, written
materials, records or documents referred to in this Section 14(b) become
generally known to or available for use by the public other than by an act or
omission of a Shareholder in violation of the terms of this Agreement, (ii) are
disclosed to the Shareholder's auditors, lenders, professional advisors or, in
the case of a corporate Shareholder, its directors, officers, shareholders and
warrant holders, or in the case of a Shareholder that is a partnership or
limited liability company to its partners or members, as the case may be
(subject in each case to the terms of the first parenthetical clause in this
Section 14(b), or (iii) to potential transferees of any Shares (provided that
such potential transferee agrees to be bound by the provisions of this Section
14(b)). The obligations of each of the Shareholders under this Section 14(b)
shall not be affected by any sale, assignment, transfer or other disposition of
the Shares and shall survive the termination of this Agreement. In the event
that any Shareholder is required by a governmental agency or otherwise by law to
disclose any information relating to the Derby Group, the Shareholder shall
provide the Company with prompt notice of such request, including a description
of the request and the information to be disclosed, so that the Company may seek
an appropriate protective order and/or waive the Shareholder's compliance with
the provisions of this Section 14(b). If, in the absence of a protective order
or the receipt of a waiver from the Company, the Shareholder is nonetheless, in
the written opinion of the Shareholder's legal advisers, compelled to disclose
information concerning the Derby Group to any court or other tribunal or else
stand liable for contempt or suffer other censure or penalty, the Shareholder
may disclose such information to such tribunal without liability under this
Agreement; provided, however, that the Shareholder shall
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give the Company notice of the information to be so disclosed as far in advance
of its disclosure as is practicable, and the Shareholder shall use his or its
best efforts to obtain an order or other reliable assurance that confidential
treatment will be accorded to such portion of the information required to be
disclosed as the Company designates.
15. ADDITIONAL ACTION
Each party to this Agreement shall execute and deliver such other
documents and do such other acts and things as may be necessary or desirable to
carry out the terms, provisions and purposes of this Agreement.
16. AMENDMENTS
No amendment, interpretation or waiver of any of the provisions of
this Agreement shall be effective unless made in writing and signed by the
parties to this Agreement.
17. COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which shall constitute one agreement, and each such counterpart shall be deemed
to have been made, executed and delivered on the date set out at the head of
this Agreement, without regard to the dates or times when any such counterparts
may actually have been made, executed or delivered.
18. ASSIGNMENT BY THE PARTIES
This Agreement shall be binding upon and shall inure to the benefit of
each party, his heirs and legal representatives or its or his successors or
assigns, except that the obligations of each party under this Agreement may only
be assigned or transferred in conjunction with a sale, assignment or transfer of
the Shares owned by such party which is permitted by the terms and conditions of
this Agreement.
19. ENFORCEMENT
The failure to enforce or to require the performance at any time of
any of the provisions of this Agreement shall in no way be construed to be a
waiver of such provisions, and shall not affect either the validity of this
Agreement or any part hereof or the right of any party thereafter to enforce
each and every provision in accordance with the terms of this Agreement.
20. ENTIRE AGREEMENT
This Agreement contains the entire agreement of the parties with
respect to the subject matter of this Agreement and supersedes all prior
agreements between the parties, whether written or oral, with respect to the
subject matter of this Agreement.
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21. EXHIBITS AND HEADINGS
The exhibits to this Agreement are an integral part hereof. The
headings of Sections and subsections are used for convenience only and shall not
affect the meaning or construction of the contents of this Agreement.
22. GOVERNING LAW
THE CORPORATE LAW OF DELAWARE WILL GOVERN ALL ISSUES CONCERNING THE
RELATIVE RIGHTS OF THE COMPANY AND THE SHAREHOLDERS. ALL OTHER ISSUES
CONCERNING THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR
CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAW OF ANY JURISDICTION
OTHER THAN THE STATE OF NEW YORK. EACH PARTY HERETO HEREBY SUBMITS TO THE CO-
EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY,
OVER ANY LAWSUIT UNDER THIS AGREEMENT AND WAIVES ANY OBJECTION BASED ON VENUE OR
FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED THEREIN. EACH PARTY
HEREBY WAIVES THE NECESSITY FOR PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT
AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL (RETURN RECEIPT REQUESTED), WITH A COPY ALSO BEING SENT BY
FACSIMILE (WITH RECEIPT CONFIRMED), IN EACH CASE DIRECTED TO SUCH PARTY AT ITS
ADDRESS SET FORTH IN AND WITH COPIES SENT AS REQUIRED BY, SECTION 23 BELOW, AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED ON THE DATE OF ACTUAL RECEIPT.
EACH PARTY HEREBY CONSENTS TO SERVICE OF PROCESS AS AFORESAID. NOTHING
CONTAINED IN THIS SECTION 22 WILL PROHIBIT PERSONAL SERVICE IN LIEU OF THE
SERVICE BY MAIL CONTEMPLATED HEREIN.
23. NOTICES
All notices, demands or other communications under this Agreement
shall be given or made in writing, and shall be delivered personally, sent by
certified or registered air mail (with return receipt requested) or sent by
telefax or courier service, addressed to the other party at the address set out
in Exhibit C to this Agreement or at such other address as may be designated by
notice from such party to each other party, provided that any notice, demand or
other communication which is sent by telefax shall also be confirmed by airmail
in the manner provided for above. Any notice, demand or other communication
given or made by mail in the manner prescribed in this Section 23 shall be
deemed to have been received five (5) days after the date of mailing. Any
notice, demand or other communication given or made by telefax in the manner
provided for in this
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<PAGE>
Section 23 shall be deemed to have been received when actually received by the
addressee or five (5) days after the date of mailing of the confirmation,
whichever is earlier.
24. PARTNERSHIP OR AGENCY
Nothing in this Agreement shall be deemed to constitute a partnership
or joint venture between the parties. Except as expressly provided for, nothing
contained in this Agreement shall authorize any party to act as agent or
representative of any other party or to authorize any party to assume or create
any obligations on behalf of any other party.
25. SUCCESSORS OF THE COMPANY
This Agreement shall be binding upon and shall inure to the benefit of
the Company and any successor of the Company, and any such successor shall be
deemed substituted for the Company under the provisions of this Agreement. For
purposes of this Section 25, the term "successor" shall mean any Person which at
any time, whether by purchase, merger, assignment or otherwise, acquires all or
substantially all of the assets or business of the Company.
26. SEVERABILITY
If any severable provision of this Agreement is held to be invalid or
unenforceable by any judgment of a tribunal of competent jurisdiction, the
remainder of this Agreement shall not be affected by such judgment, and the
Agreement shall be carried out as nearly as possible according to its original
terms and intent.
27. SPECIAL PROVISIONS UPON AN INITIAL PUBLIC OFFERING
(a) The parties hereto agree that, notwithstanding any other provision
herein to the contrary, if in connection with the Initial Public Offering the
sole or managing underwriter thereof advises the Company that in its opinion the
continuation of any provision contained in this Agreement would adversely affect
the distribution of the securities being offered in the Initial Public Offering,
the price that will be paid in such Initial Public Offering or the marketability
thereof, then the parties shall amend this Agreement to the extent requested by
such sole or managing underwriter to prevent such effect and this Agreement, as
so amended, shall continue thereafter in full force and effect. The parties
further agree that, notwithstanding the foregoing, each of the parties hereto
shall use commercially reasonable efforts to cause all of this Agreement to
remain in effect following an Initial Public Offering.
(b) Each party to this Agreement agrees to take all such actions as may be
reasonably required to cause each share of Class A Common Stock outstanding
immediately prior to an Initial Public Offering (including Class A Common Stock
acquired pursuant to Section 2B of Part C of the Certificate of Incorporation)
to be converted in connection with the closing of the Initial Public Offering,
on a share for share basis, into shares of the common equity securities of the
Company offered in the Initial Public Offering.
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<PAGE>
(c) The parties hereto agree that in connection with the Initial Public
Offering each such party shall take all such actions as are reasonably requested
by the sole or managing underwriter thereof in connection with such Initial
Public Offering, including without limitation, entering into customary
standstill agreements or other agreements that may be reasonably required of the
Company's stockholders to facilitate such Initial Public Offering.
28. SEVERABILITY
If any provision of this Agreement is held to be invalid or unenforceable
by any judgement of a tribunal of competent jurisdiction, the remainder of the
provisions of this Agreement shall not be affected by such judgement, and the
understanding of the parties embodied in this Agreement shall be carried out as
nearly as possible according to their original terms and intent.
29. SENIOR RIC SHARES
For all purposes of this Agreement, the DFS Shareholders (without
duplication) shall be deemed to own any securities of the Company which would be
acquired in exchange for the Senior RIC Shares under the Exchange Agreement, and
such shares shall be deemed outstanding capital stock of the Company as of May
14, 1998. The parties hereto agree that, in the event any matter is submitted
to the Shareholders for their approval, the DFS Shareholders shall be deemed to
own any voting securities of the Company which can be obtained in exchange for
the Senior RIC Shares pursuant to the Exchange Agreement. For purposes of
determining whether any such matter has been approved by the requisite number of
votes, such voting securities shall be deemed outstanding, and the votes of such
securities shall be counted. Any Shares issued to DICSA pursuant to the
Exchange Agreements shall be deemed to have been issued as of May 14, 1998. The
Company agrees to take all actions necessary to effect the Transactions
described in the Exchange Agreements, including, without limitation, consenting
to and waiving any restrictions on redemptions or the issuance of new Shares at
less than fair market value.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date and year set out at the head of this Agreement.
THE DERBY CYCLE CORPORATION
By:_______________________________
Name:
Title:
THE SHAREHOLDERS
DERBY FINANCE S.A.R.L.
By:_______________________________
Name:
Title:
DC CYCLE, L.L.C.
By:_______________________________
Name:
Title:
PERSEUS CYCLE, L.L.C.
By:_______________________________
Name:
Title:
<PAGE>
SHAREHOLDERS
<TABLE>
<CAPTION>
SHARES OF SHARES OF SHARES OF SHARES OF
CLASS A CLASS B PREFERRED PREFERRED
COMMON COMMON STOCK, STOCK,
NAME STOCK STOCK SERIES A SERIES B
- ----------------------
<S> <C> <C> <C> <C>
Derby Finance S.a.r.l. 21,700 0 0 3,000
DC Cycle, L.L.C. 12,500 0 25,000 0
Perseus Cycle, L.L.C. 10,000 0 0 0
----------- ---------- --------- ---------
TOTAL SHARES OUTSTANDING 44,200 0 25,000 3,000
</TABLE>
EXHIBIT A
TO THE SHAREHOLDERS' AGREEMENT FOR
THE DERBY CYCLE CORPORATION
-31-
<PAGE>
ADDRESSES FOR NOTICES
CERTIFICATE OF INCORPORATION
EXHIBIT B
TO THE SHAREHOLDERS' AGREEMENT FOR
THE DERBY CYCLE CORPORATION
-32-
<PAGE>
ADDRESSES FOR NOTICES
Derby Finance S.a.r.l.
15, rue de la Chapelle
L-1325 Luxembourg
Grand Duchy of Luxembourg
Telefax:
DC Cycle, L.L.C.
c/o Thayer Capital Partners
1455 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Attention: Frederic V. Malek
Telefax: +1-202-371-0391
Perseus Cycle, L.L.C.
Suite 610
1627 Eye Street, N.W.
Washington, D.C. 20006
Attention: Frank H. Pearl
Telefax: +1-202-429-0558
EXHIBIT C
TO THE SHAREHOLDERS' AGREEMENT FOR
THE DERBY CYCLE CORPORATION
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<PAGE>
EXHIBIT 10.3
REGISTRATION AGREEMENT
THIS REGISTRATION AGREEMENT (this "Agreement") is made as of May 14,
1998, by and among The Derby Cycle Corporation, a corporation organized and
existing under the laws of the State of Delaware (the "Company"), Derby Finance
S.a.r.l., a corporation (societe a responsibilite limitee) organized and
existing under the laws of the Grand Duchy of Luxembourg ("DFS"), Perseus Cycle,
L.L.C., a limited liability company organized and existing under the laws of the
State of Delaware ("Perseus") and DC Cycle, L.L.C., a limited liability company
organized and existing under the laws of the State of Delaware ("DCL").
The parties to this Agreement are parties to a Recapitalization
Agreement, dated March 11, 1998, as amended (the "Recapitalization Agreement").
In order to induce DCL, Perseus and DFS to enter into the Recapitalization
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement. The execution and delivery of this Agreement is a condition
to the Closing under the Recapitalization Agreement. Unless otherwise provided
in this Agreement, capitalized terms used herein shall have the meanings set
forth in paragraph 7 hereof.
The parties hereto agree as follows:
1. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register any
of its securities under the Securities Act and the registration form to be used
may be used for the registration of Registrable Securities (a "Piggyback
Registration"), the Company shall give prompt written notice to all holders of
Registrable Securities of its intention to effect such a registration and shall
include in such registration, subject to the provisions of paragraph 1(c) and
paragraph 1(d), as the case may be, all Registrable Securities with respect to
which the Company has received written requests for inclusion therein within 20
days after the receipt of the Company's notice.
(b) Piggyback Expenses. The Registration Expenses of the holders of
Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering without adversely affecting the marketability
of the offering, the Company shall include in such registration (i) first, the
securities the Company proposes to sell, (ii) second, without limiting and after
giving effect to the DCL/Perseus Preference (as defined in Section 1(f) below),
the Registrable Securities requested to be included in such registration, pro
rata among the holders of such Registrable Securities on the basis of the number
of shares of Registrable Securities requested to be included in such
registration by each such holder, and (iii) third, other securities requested to
be included in such registration.
<PAGE>
(d) Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, the Company shall include
in such registration (i) first, the securities requested to be included therein
by the holders requesting such registration, (ii) second, without limiting and
after giving effect to the DCL/Perseus Preference (as defined in Section 1(f)
below), the Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable Securities on the
basis of the number of shares of Registrable Securities requested to be included
in such registration by each such holder, and (iii) third, other securities
requested to be included in such registration.
(e) Other Registrations. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 1, and if such previous registration has not been withdrawn or
abandoned, the Company shall not file or cause to be effected any other
registration of any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities
Act (except on Form S-8 or S-4 or any successor form), whether on its own behalf
or at the request of any holder or holders of such securities, until a period of
at least 90 days has elapsed from the effective date of such previous
registration.
(f) DCL/Perseus Preference. Notwithstanding anything to the
contrary herein, (i) no DFS Registrable Securities shall be included in any
Piggyback Registration until Registrable Securities having an anticipated sale
price to the public in an aggregate of twenty million United States dollars
($20,000,000) has been allocated to the Registrable Securities requested to be
included by the holders of DCL Registrable Securities and Perseus Registrable
Securities (83% of such amount shall be allocated to the holders of DCL
Registrable Securities and 17% to holders of Perseus Registrable Securities)
(the "DCL/Perseus Preference") and (ii) once the DCL/Perseus Preference has been
fulfilled, all holders of Registrable Securities shall have the priority rights
set forth in Sections 1(c) and 1(d) above.
2. Holdback Agreements.
(a) Each holder of Registrable Securities shall not effect any public
sale or distribution (including sales pursuant to Rule 144) of equity securities
of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and the 180-day
period beginning on the effective date of any underwritten Piggyback
Registration in which Registrable Securities are included (except as part of
such underwritten registration), unless the underwriters managing the registered
public offering otherwise agree.
(b) The Company (i) shall not effect any public sale or distribution
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and during the
180-day period beginning on the effective date of any underwritten Piggyback
Registration (except as part of such underwritten registration or pursuant to
registrations on Form S-8 or any successor form), unless the underwriters
managing the registered
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<PAGE>
public offering otherwise agree, and (ii) shall use its best efforts to cause
each holder of its common stock or common equity, or any securities convertible
into or exchangeable or exercisable for common stock or common equity, purchased
from the Company at any time after the date of this Agreement (other than in a
registered public offering) to agree not to effect any public sale or
distribution (including sales pursuant to Rule 144) of any such securities
during such period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered public
offering otherwise agree.
3. Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company shall use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company shall
as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective (provided
that before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company shall furnish to the legal counsel selected by
the holders of a majority of the Registrable Securities covered by such
registration statement copies of all such documents proposed to be filed);
(b) notify each holder of Registrable Securities of the effectiveness
of each registration statement filed hereunder and prepare and file with the
Securities and Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than 180 days and 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
sellers thereof set forth in such registration statement;
(c) furnish to each seller of 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 disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller (provided that the Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
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<PAGE>
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASDAQ National Market or
other automated quotation system;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) 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 effecting a stock split or a combination of
shares);
(i) 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; and
(j) otherwise use its best efforts to comply with all applicable rules
and regulations of the Securities and Exchange Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the first day of
the Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder.
4. Registration Expenses.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and disbursements
of custodians, and fees and disbursements of legal counsel for the Company and
all independent certified public accountants, underwriters (excluding discounts
and commissions) and other Persons retained by the Company (all such expenses
being herein called
-4-
<PAGE>
"Registration Expenses"), shall be borne as provided in this Agreement, except
that the Company shall, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of any liability insurance and the expenses and
fees for listing the securities to be registered on each securities exchange on
which similar securities issued by the Company are then listed or on the NASDAQ
National Market or other automated quotation system.
(b) In connection with each Piggyback Registration, the Company shall
reimburse the holders of Registrable Securities included in such registration
for the reasonable fees and disbursements of one legal counsel chosen by the
holders of a majority of the Registrable Securities included in such
registration and for the reasonable fees and disbursements of each additional
legal counsel retained by any holder of Registrable Securities for the purpose
of rendering a legal opinion on behalf of such holder in connection with any
underwritten Piggyback Registration.
(c) To the extent Registration Expenses are not required to be paid by
the Company, each holder of securities included in any registration hereunder
shall pay or bear all discounts, commissions and Registration Expenses allocable
to the registration of such holder's securities so included, and any
Registration Expenses not so allocable shall be borne by all sellers of
securities included in such registration in proportion to the aggregate selling
price of the securities to be so registered.
5. Indemnification.
(a) The Company agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers and directors and each
Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for use
therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company shall indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder shall furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus
-5-
<PAGE>
or preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission is contained in any information or
affidavit so furnished in writing by such holder; provided that the obligation
to indemnify shall be individual, not joint and several, for each holder and
shall be limited to the net amount of proceeds received by such holder from the
sale of Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt notice
shall not impair any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with legal
counsel reasonably satisfactory to the indemnified party. If such defense is
assumed, the indemnifying party shall not be subject to any liability for any
settlement made by the indemnified party without its consent (but such consent
shall not be unreasonably withheld). An indemnifying party who is not entitled
to, or elects not to, assume the defense of a claim shall not be obligated to
pay the fees and expenses of more than one legal counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim.
(d) The indemnification provided for under this Agreement shall remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of securities. The Company
also agrees to make such provisions, as are reasonably requested by any
indemnified party, for contribution to such party in the event the Company's
indemnification is unavailable for any reason.
6. Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements.
7. Definitions.
"DFS Registrable Securities" means (i) any shares of common stock or
common equity (other than Class B Common Stock) of the Company owned by DFS or
any of its permitted transferee (as set forth in paragraph 7 of the
Shareholders' Agreement) and (ii) any shares of common stock or common equity
(other than Class B Common Stock) of the Company issued or issuable with respect
to the securities referred to in clause (i) by way of a stock dividend or stock
-6-
<PAGE>
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.
"DCL Registrable Securities" means (i) any shares of common stock or
common equity (other than Class B Common Stock) of the Company owned by DCL or
any of its permitted transferees (as set forth in paragraph 7 of the
Shareholders' Agreement) and (ii) any shares of common stock or common equity
(other than Class B Common Stock) of the Company issued or issuable with respect
to the securities referred to in clause (i) by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.
"Perseus Registrable Securities" means (i) any shares of common stock
or common equity (other than Class B Common Stock) of the Company owned by
Perseus or any of its permitted transferee (as set forth in paragraph 7 of the
Shareholders' Agreement) and (ii) any shares of common stock or common equity
(other than Class B Common Stock) of the Company issued or issuable with respect
to the securities referred to in clause (i) by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.
"Registrable Securities" means DFS Registrable Securities, Perseus
Registrable Securities and DCL Registrable Securities. As to any particular
Registrable Securities, such securities shall cease to be DFS Registrable
Securities, Perseus Registrable Securities or DCL Registrable Securities when
they have been distributed to the public pursuant to a offering registered under
the Securities Act or sold to the public through a broker, dealer or market
maker in compliance with Rule 144 under the Securities Act (or any similar rule
then in force). For purposes of this Agreement, a Person shall be deemed to be
a holder of Registrable Securities whenever such Person has the right to acquire
such Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Securities and Exchange Commission" includes any governmental body or
agency succeeding to the functions thereof.
"Shareholders' Agreement" means the Shareholders' Agreement, dated as
of the date hereof, by and between DCL, Perseus, DFS and the Company
Unless otherwise stated, other capitalized terms contained herein have
the meanings set forth in the Shareholders' Agreement.
8. Miscellaneous.
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<PAGE>
(a) No Inconsistent Agreements. The Company shall not hereafter enter
into any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement.
(b) Adjustments Affecting Registrable Securities. The Company shall
not take any action, or permit any change to occur, with respect to its
securities which would materially and adversely affect the ability of the
holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement or which would materially and
adversely affect the marketability of such Registrable Securities in any such
registration (including, without limitation, effecting a stock split or a
combination of shares).
(c) Remedies. Any Person having rights under any provision of this
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company, DFS, Perseus and DCL.
(e) Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.
(f) Incorporation of Shareholders' Agreement Provisions. The
paragraphs entitled "SEVERABILITY," "COUNTERPARTS," "EXHIBITS AND HEADINGS,"
"NOTICES" and "GOVERNING LAW" of the Shareholders' Agreement are hereby
incorporated in this Agreement by reference and made a part hereof, except that
the provisions of such paragraphs shall refer to this Agreement rather than the
Shareholders' Agreement and shall continue to apply hereto regardless of whether
or not the Shareholders' Agreement is in effect.
* * * * *
-8-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
THE DERBY CYCLE CORPORATION
By _________________________________
Its ________________________________
DERBY FINANCE S.A.R.L.
By _________________________________
Its ________________________________
DC CYCLE, L.L.C.
By _________________________________
Its ________________________________
PERSEUS CYCLE, L.L.C.
By _________________________________
Its ________________________________
<PAGE>
Exhibit 10.4
TRADEMARK LICENSE AGREEMENT
---------------------------
THIS AGREEMENT is made and entered into as of the 14th day of May, 1998, by
and among Derby International Corporation, S.A., a corporation (societe anonyme)
---------------
incorporated under the laws of the Grand Duchy of Luxembourg, having its
registered office at 5 Boulevard de la Foire, L-1528 Luxembourg, Grand Duchy of
Luxembourg (the "Licensor") and The Derby Cycle Corporation (dba Raleigh USA
Bicycle Company) a corporation organized and existing under the laws of
Delaware, having an office at 22710 72nd Avenue South, Kent, Washington 98032
(the "Company") (the Company and its Subsidiaries, as defined below, being
referred to together as the "Licensees").
WHEREAS, the Licensor is the exclusive owner of certain rights in the
trademark and trade name "Derby" (the "Trademark");
WHEREAS, the Licensor and the Company are parties to a certain
Recapitalization Agreement dated as of March 11, 1998, as amended (the
"Recapitalization Agreement"), pursuant to which the Licensor agreed to license
to the Licensees the Trademark in connection with certain undertakings of the
Licensees;
WHEREAS, the Licensees desire to make use of the Trademark owned by the
Licensor in connection with the Business (as defined below), and the Licensor is
willing to license the Trademark to the Licensees for such purposes, subject to
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual premises contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
ARTICLE I: DEFINITIONS
1.1 Whenever used in this Agreement, unless otherwise clearly indicated by the
context, the terms defined below shall have the indicated meanings:
<PAGE>
-2-
(i) "Business" shall have the meaning set forth in the
Recapitalization Agreement, which is incorporated herein by this reference.
(ii) "Subsidiaries" shall have the meaning set forth in the
Recapitalization Agreement. The term "Subsidiary" shall also include any entity
engaged in the Business at least fifty percent (50%) of the voting equity of
which is held, directly or indirectly, by the Company during the term of this
Agreement, but only so long as the voting equity of such entity is held by the
Company.
(iii) "Term of this Agreement" shall mean the thirty (30) year period
from the date of this Agreement, which term shall be automatically extended for
successive twenty (20) year periods unless either party delivers written notice
of termination to the other party not less than one (1) year before the
expiration of the Term of this Agreement.
(iv) "Territory" shall mean worldwide.
ARTICLE II: GRANT OF RIGHTS
2.1 The Licensor hereby grants to the Licensees a paid-up, royalty-free
license to use the Trademark in connection with the business in the Territory.
Except for the license granted to the Licensees herein, the Licensor shall not
otherwise use, or cause or grant a license to any other party to use, the
Trademark in connection with the Business in the Territory; provided, however,
that the Licensor retains all rights to use, cause or permit the use of, and
license the Trademark in connection with a business other than the Business in
the Territory.
2.2 The Licensor acknowledges that the grant of rights set forth in this
Article II confirms the Licensor's existing grant of rights to the Company.
ARTICLE III: QUALITY CONTROL
3.1 The Licensees will not permit the quality of the products or services
advertised, produced, sold or provided by Business in connection with which the
Licensees use the Trademark to deteriorate so as to adversely affect the good
will associated with the Trademark.
<PAGE>
-3-
3.2 The Licensees shall, upon request of the Licensor, from time to time
furnish the Licensor, without charge, specifications and samples of products or
services advertised, produced, sold or provided Business materials in connection
with the Licensees are using the Trademark for quality review by the Licensor.
3.3 The Licensees shall, upon request of the Licensor, from time to time,
permit representatives of the Licensor to inspect any premises in which the
Business is conducted at all reasonable times for purposes of determining or
ascertaining compliance with Section 3.1.
ARTICLE IV: USE OF TRADEMARK
4.1 The Licensees shall use the Trademark only in connection with the
Business and in the manner and style which shall have the prior approval of the
Licensor in writing, such approval not to be reasonably withheld; provided,
however, that the manner and style in which the Trademark are used on the
effective date of this Agreement shall be deemed to have the Licensor's
approval.
4.2 If any of the Licensor or the Licensees deems it necessary to record
this Agreement with the authorities of any jurisdiction in the Territory, the
other party agrees to execute any applications or documentation necessary or
desirable, in recording party's reasonable judgement, to complete such recordal
at the recording party's expense.
4.3 Except as provided in Article II, the Licensees agree not to claim or to
assert any right of ownership in or to the Trademark or the goodwill associated
therewith and shall not initiate any regulatory or other action respecting the
Trademark which may destroy, damage or impair in any way the ownership or rights
of the Licensor in and to the Trademark. In connection with the use of the
Trademark, none of the Licensees shall in any manner represent that it has any
ownership in the Trademark or registrations thereof, and the Licensees
acknowledge that use of the Trademark shall not create in the Licensees' favor
any right, title or interest in or to the Trademark, but any and all uses of the
Trademark by the Licensees shall inure to the benefit of the Licensor. Upon
termination of this Agreement, the Licensees will
<PAGE>
-3-
3.2 The Licensees shall, upon request of the Licensor, from time to time
furnish the Licensor, without charge, specifications and samples of products or
services advertised, produced, sold or provided Business materials in connection
with which the Licensees are using the Trademark for quality review by the
Licensor.
3.3 The Licensees shall, upon request of the Licensor, from time to time,
permit representatives of the Licensor to inspect any premises in which the
Business is conducted at all reasonable times for purposes of determining or
ascertaining compliance with Section 3.1.
ARTICLE IV: USE OF TRADEMARK
4.1 The Licensees shall use the Trademark only in connection with the
Business and in the manner and style which shall have the prior approval of the
Licensor in writing, such approval not to be unreasonably withheld; provided,
however, that the manner and style in which the Trademark are used on the
effective date of this Agreement shall be deemed to have the Licensor's
approval.
4.2 If any of the Licensor or the Licensees deems it necessary to record
this Agreement with the authorities of any jurisdiction in the Territory, the
other party agrees to execute any applications or documentation necessary or
desirable, in recording party's reasonable judgment, to complete such recordal
at the recording party's expense.
4.3 Except as provided in Article II, the Licensees agree not to claim or
to assert any right of ownership in or to the Trademark or the goodwill
associated therewith and shall not initiate any regulatory or other action
respecting the Trademark which may destroy, damage or impair in any way the
ownership or rights of the Licensor in and to the Trademark. In connection with
the use of the Trademark, none of the Licensees shall in any manner represent
that it has any ownership in the Trademark or registrations thereof, and the
Licensees acknowledge that use of the Trademark shall not create in the
Licensees' favor any right, title or interest in or to the Trademark, but any
and all uses of the Trademark by the Licensees shall inure to the benefit of the
Licensor. Upon termination of this Agreement, the Licensees will
<PAGE>
-4-
cease and desist from all use of the Trademark in any way, and the Licensees
shall at no time adopt or use, without the Licensor's prior written consent, any
name or mark which is likely to be similar to or confusing with the Trademark.
None of the Licensees shall register anywhere in the world in its own name, or
on behalf of any other person or entity, the Trademark. None of the Licensees
shall associate the Trademark with any business other than the Business. The
Licensees shall, upon request by the Licensor with respect to the use of the
Trademark used in connection with the business in any country, do all such
lawful acts and things and execute all such documents, at the Licensor's
expense, as the Licensor shall in its reasonable discretion consider necessary
or proper to register the Trademark in the name of the Licensor in such country.
If any of the Licensees' acts or omissions which constitute a breach of this
Agreement which breach materially injures, damages or renders less valuable the
Trademark as it may be used outside of the Business or the goodwill associated
therewith owned and retained by the Licensor, the Licensees' rights to use the
Trademark in any jurisdiction in which the Trademark is affected by such act or
omission shall terminate.
ARTICLE V: INFRINGEMENT OF TRADEMARK
5.1 In the event of any of the Licensees or the Licensor learns that any
Trademark pertaining to the Business is being infringed in the Territory by any
third party, it shall promptly notify the other of such infringement. The
Licensees shall (subject to the terms contained in this Section 5.1) use all
commercially reasonable efforts to terminate any such third-party infringement,
including, without limitation, prosecuting a lawsuit or other legal proceeding,
at the Licensees' own expense; and the Licensees may retain any recovery it may
receive as a result of its actions to terminate such infringement.
Notwithstanding anything to the contrary contained herein, the Licensees may
deliver a written notice to the Licensor of the Licensees' desire not to pursue
a particular action to terminate a third-party infringement, which notice shall
constitute an acknowledgment of the Licensees that they have forfeited any
right to use the Trademark (a "Forfeited Trademark") in the affected
jurisdictions (a "Forfeited Jurisdiction") immediately upon receipt of such
notice. The Licensees shall remain responsible for any costs and expenses
required to "wind down" any action already commenced or joined by any Licensee
with respect to a Forfeited Trademark in any Forfeited Jurisdiction. The
Licensor shall fully cooperate with the Licensees in any such action taken by
the Licensees, including
<PAGE>
- 5 -
without limitation agreeing to be joined as party plaintiff and approving any
reasonable settlement agreement achieved by the Licensees, and shall be
reimbursed by the Licensees for all reasonable expenses incurred in connection
with such request by the Licensees, including legal costs and expenses.
5.2 If the Licensees fail to take any action with respect to such
third-party infringement within sixty (60) days after the Licensor's request,
the Licensor shall have the right but not the duty to act as it sees fit and in
its sole discretion to terminate the infringement, including without limitation,
prosecuting a lawsuit or other legal proceeding, at the Licensor's expense; and
the Licensor may retain any recovery it may receive as a result of its actions
to terminate such infringement. The Licensees shall fully cooperate with the
Licensor in any such action taken by the Licensor to terminate any such
infringement, including without limitation agreeing to be joined as party
plaintiff and approving any reasonable settlement agreement achieved by the
Licensor, and shall be reimbursed by the Licensor for all reasonable expenses
incurred in connection with such request by the Licensees, including legal costs
and expenses; provided, however, that the Licensees shall not be entitled to
reimbursement for any expense incurred to the extent that the Licensees derive
any benefit, economic or otherwise, from any action taken by the Licensor in
terminating such infringement.
ARTICLE VI: WARRANTIES AND INDEMNITIES
6.1 The Licensor warrants that, to its knowledge, it is the owner of the
Trademark and that the Licensees are and shall be free to use the same pursuant
to the terms and conditions of this Agreement. To the knowledge of the Licensor,
there is no unauthorized use, infringement or misappropriation of the Trademark
in connection with the Business by any third party, including without limitation
any employee or former employee of the Licensor. To the Licensor's knowledge, no
person or entity has asserted or threatened to assert any claim with respect to
the Trademark. To the Licensor's knowledge, the Licensees' use of the Trademark
in connection with the Business in accordance with this Agreement will not
infringe, misappropriate or otherwise conflict with any proprietary rights of
third parties.
6.2 The Licensor shall have no obligation to register, maintain or renew any
registrations of the Trademark. The Licensees shall have the right to register,
<PAGE>
-6-
maintain and renew, in Licensor's name, any registrations of the Trademark in
connection with the Business provided that (i) the Licensees shall assume all
costs relevant to the maintenance and renewal of such Trademark; (ii) Licensees
shall first consult with the Licensor as to the registration, maintenance and
renewal of the Trademark; and (iii) the Licensees shall furnish to the Licensor
promptly copies of documents relevant to any such registration, maintenance or
renewal. The Licensor agrees to cooperate with the Licensees to execute all
papers and instruments necessary to enable the Licensee to register, maintain
and renew the Trademark in connection with the Business. The Licensees shall
provide to the Licensor prompt notice as to all material matters which come to
their attention and which may affect the registration, maintenance or renewal of
any such Trademark. If the Licensees elect to no longer pay the expenses of
registration, maintenance or renewal of such Trademark in connection with the
Business, the Licensees shall notify the Licensors not less than sixty (60) days
prior to such action and shall thereby surrender their rights with respect to
such Trademark in any affected jurisdiction.
6.3 The Licensees agree to indemnify and hold the Licensor and its
officers, directors, employees, and agents harmless against any action, claims,
damages, injuries, losses, costs and expenses (including reasonable attorney's
fees and disbursements) arising from or claimed to arise from (i) the use of the
Trademark in the operation of the Business, and (ii) any material breach by the
Licensees of their obligations or warranties under this Agreement.
Notwithstanding the foregoing, the Licensees shall have no liability or
obligation hereunder unless the Licensor notifies the Licensees promptly in
writing of any such claim or suit and give the Licensees full and complete
authority, information and assistance to defend such claim or proceeding, and
further provided that the Licensor gives the Licensees sole control of the
defense of any such claim or suit and all negotiation for its compromise or
settlement.
6.4 In the event that the Licensor intends to terminate any Licensee's
right to use the Trademark, the Licensor shall deliver to the Company written
notice of such intent, with such notice including reasonable detail about the
basis for such intended termination, and provide the relevant Licensee and the
Company a sixty (60) day period in which to cure or otherwise eliminate such
basis. In the event the Licensees' right to use the Trademark is terminated with
respect to a jurisdiction, during the term of this Agreement, the Licensor shall
refrain from using the Trade-
<PAGE>
-7-
mark in that jurisdiction in connection with the Business and shall refrain from
licensing the Trademark in that jurisdiction if such use or such license would
permit the Trademark to be used, directly or indirectly, in competition with the
Business.
6.5 The provisions and obligations of this Article VI shall survive any
termination of this Agreement.
ARTICLE VII: TERM AND TERMINATION
7.1 This Agreement shall remain in full force and effect for the Term of
this Agreement, unless earlier terminated in accordance with provision 7.2 of
this Article VII.
7.2 The Licensor may terminate this Agreement (a) in accordance with
provision 1.1(iii); (b) for any reason by assigning the Trademark in question
and the goodwill associated therewith to the Licensees; (c) if the Licensees
materially breach any of the provisions of this Agreement, and such breach is
not cured within sixty (60) days after delivery of a written notice thereof by
the Licensor to the Licensees; and (d) in accordance with provision 7.3 below.
Notwithstanding the foregoing a Licensee's actions or failures to act which
directly result in the forfeit of the rights to use the Trademark in a
particular jurisdiction as set forth in: (1) the last sentence of Section 4.3:
(2) the third sentence of Section 5.1; (3) the last sentence of Section 6.2; and
(4) the first sentence of Section 6.4 (provided that such basis is cured or
eliminated in accordance with such provision); shall not constitute a "material
breach" for purposes of Section 6.3 or this Section 7.2, and the forfeit of such
rights shall be the sole remedy of the Licensor with respect to such actions or
omissions.
7.3 (a) If the Company shall (i) become insolvent, (ii) make an
assignment for the benefit of creditors, (iii) file or become subject to a
filing for reorganization, receivership or bankruptcy under any insolvency or
bankruptcy laws, provided that if such filing is made without the acquiescence
of the party subject to such filing, such filing remains undismissed for ninety
(90) days, or (iv) be dissolved, liquidated or wound-up or otherwise cease or be
compelled to cease business, then in any such event, this Agreement shall
automatically terminate one hundred twenty (120) days after written notice is
received from the Licensor.
<PAGE>
-8-
(b) If any Licensee other than the Company shall (i) become
insolvent, (ii) make an assignment for the benefit of creditors, (iii) file or
become subject to an filing for reorganization, receivership or bankruptcy under
any insolvency or bankruptcy laws, provided that if such filing is made without
the acquiescence of the party subject to such filing, such filing remains
undismissed for ninety (90) days, or (iv) be dissolved, liquidated or wound-up
or otherwise cease or be compelled to cease business, then in any such event,
such Licensee and its subsidiaries shall cease to be Subsidiaries for purposes
of this Agreement.
7.4 Upon the termination of this Agreement pursuant to provision 7.2 by
reason of the Company's insolvency, the Licensees shall cease and discontinue
all use of the Trademark in the Territory, effective upon the date of such
termination, and the Licensor may take, and the Licensees shall cooperate at
their expense in taking, all necessary actions to cancel any entry of the
Licensees as registered users.
ARTICLE VIII: MISCELLANEOUS
8.1 The Licensees agree to carry out this Agreement as an independent
contractor and not as an employee, servant or agent of or joint venturer with
the Licensor. Except as specifically provided herein, neither party shall have
authority to bind or otherwise render the other party liable in any way, whether
by agreement, contract, representation or order, written or oral, or by
instrument or action of any kind. Unless otherwise specifically provided for
herein the obligations undertaken by each party hereto and set forth in this
Agreement shall be at the expense of the party which incurred the expense. All
relationships entered into by any Licensee shall be for its exclusive account
and risk, and the Licensees shall have no power to bind the Licensor in any way
with respect to third parties unless previously specifically authorized in
writing.
8.2 This Agreement shall not be assignable by the Licensees, in whole or
in part, without the prior written consent of the Licensor, which consent shall
not be unreasonably withheld, provided that assignment shall not affect the
Licensees' obligations under Article VI of this Agreement.
<PAGE>
-9-
8.3 All communications required or permitted to be given by one party to
the other hereunder (each, a "Notice") shall be given in the manner and subject
to the provisions of Section 15.8 of the Recapitalization Agreement, which is
incorporated herein by this reference.
8.4 The failure of a party at any time to require or enforce the strict
performance by the other party of any term or condition of this Agreement shall
not constitute a surrender or waiver of that particular breach or failure, or of
any subsequent breach or failure by said other party with respect to any term or
condition of this Agreement, or the waiver by a party of a breach or default
committed by the other party with respect to any term or condition of this
Agreement, and shall not to any extent prejudice or adversely effect the other
party's rights, interest or remedies available or provided to it by law or
otherwise which it may exercise or invoke with respect to that particular breach
or failure or any subsequent breach or failure.
8.5 No right or remedy given to a party under this Agreement or by
applicable law is intended to be exclusive of, or constitute a waiver of, any
other right or remedy. Each right or remedy may be pursued singly, concurrently,
successively, or otherwise, at the sole discretion of either party.
8.6 All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by and construed in
accordance with the domestic laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York. Any legal action
or proceeding with respect to any matter arising under or in connection with
this Agreement or the subject matter hereof may be brought in the courts of the
State of New York or of the United States of America for the Southern District
of New York, and, by execution and delivery of this Agreement, each party hereto
hereby accepts for themselves and in respect of their property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each party hereto
hereby waives, and agrees not to assert, as a defense in any action, suit or
proceeding provided for in this Section 8.7 that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable
in said courts or that this Agreement may not be enforced in or by said courts
or that its property is exempt or immune from execution, that the suit, action
or proceeding is
<PAGE>
-10-
brought in an inconvenient forum, that the venue of the suit, action or
proceeding is improper or (provided that process shall be served in any manner
referred to in the following sentence) that service or process upon such party
is ineffective. Each of the parties hereto agrees that service of process in any
such action, suit or proceeding may be made upon it in any manner permitted by
the laws of the State of New York or the federal laws of the United States or as
follows; (a) by personal service or by certified or registered mail to the
party's designated agent for such service in such state, or (b) by certified or
registered mail to the party for which intended at its address set forth herein.
Service of process in any manner referred to in the preceding sentence shall be
deemed, in every respect, effective service of process upon such party.
8.7 The provisions of this Agreement, together with the provisions of the
Recapitalization Agreement, to the extent relevant to the Trademark and in
addition to the extent incorporated herein by reference, represent the entire
understanding and agreement between the parties with respect to the subject
matter hereof, and supersede all previous agreements, statements,
representations, promises, warranties, covenants, undertakings or writing
relating thereto, other than those contained herein. Any changes in or
amendments to the terms of this Agreement shall be in writing and signed by duly
authorized representatives of each of the parties hereto.
8.8 The parties represent to each other that each has all the requisite
power and authority to enter into this Agreement and to perform each and every
provision of this Agreement. Neither the execution nor delivery nor performance
of this Agreement will conflict with or result in a breach of the provisions
of, or constitute a default under, any other agreement under which the party is
obligated.
8.9 Each person executing this Agreement individually and personally
represents and warrants that he or she is duly authorized to execute and deliver
the same on behalf of the corporation for which he or she is signing and that
this Agreement is binding upon the corporation in accordance with its terms.
8.10 Any part or provision of this Agreement which may be held for any
reason to be illegal, invalid, unenforceable in or in conflict with the
applicable laws or regulations of any jurisdiction shall be ineffective to the
extent of such illegality, invalidity, unenforceability or conflict, and shall
be replaced with a provision that
<PAGE>
VIII/903108 -11-
accomplishes, to the extent possible, the original purpose of such part or
provision in a valid and enforceable manner, without affecting, impairing or
invalidating the remaining provisions in any other jurisdiction, which
provisions shall remain binding upon the parties hereto and in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to execute this Agreement as of the date first above
written.
DERBY INTERNATIONAL THE DERBY CYCLE
CORPORATION S.A. CORPORATION
By: By:
------------------------------- -------------------------------
Title: Title:
<PAGE>
Exhibit 10.5
SUPPORT AGREEMENT
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS AND INTERPRETATION
Section 1.1 Defined Terms. .....................................2
Section 1.2 Interpretation Not Affected by Headings, Etc. ......2
Section 1.3 Number, Gender, Etc. ...............................2
Section 1.4 Date for Any Action. ...............................2
ARTICLE 2
COVENANTS OF PARENT CO AND THE COMPANY
Section 2.1 Covenants of ParentCo Regarding Exchangeable
Shares. ............................................2
Section 2.2 Issuance and Reservation of ParentCo Common
Shares. ............................................3
Section 2.3 Notification of Certain Events. ....................3
Section 2.4 Delivery of ParentCo Common Shares. ................4
Section 2.5 Qualification of ParentCo Common Shares. ...........4
Section 2.6 Equivalence. .......................................5
Section 2.7 Tender Offers, Etc. ................................5
Section 2.8 Delivery of Company Common Shares. .................5
Section 2.9 Qualification of Company Common Shares. ............6
ARTICLE 3
GENERAL
Section 3.1 Term. ..............................................6
Section 3.2 Changes in Capital of ParentCo and the Company. ....6
Section 3.3 Severability. ......................................7
Section 3.4 Amendments, Modifications, Etc. ....................7
Section 3.5 Ministerial Amendments. ............................7
Section 3.6 Meeting to Consider Amendments. ....................7
Section 3.7 Amendments Only in Writing. ........................8
Section 3.8 Enurement. .........................................8
Section 3.9 Notices to Parties. ................................8
Section 3.10 Counterparts. .....................................10
Section 3.11 Jurisdiction. .....................................10
Section 3.12 Attornment. .......................................10
(i)
<PAGE>
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT (the "Agreement") is made this 12th day of May, 1998 by
and among THE DERBY CYCLE CORPORATION (dba Raleigh USA Bicycle Company), a
corporation organized and existing under the laws of Delaware, having its
principal office at 22710 72nd Avenue South, Kent, Washington 98032 (the
"ParentCo"), DERBY INTERNATIONAL CORPORATION S.A., a corporation (societe
-------
anonyme) organized and existing under the laws of the Grand Duchy of
- -------
Luxembourg, having its registered office at 5 Boulevard de la Foire, L-1528
Luxembourg, Grand Duchy of Luxembourg ("Derby International"), DERBY FINANCE
S.a.r.l., a corporation (societe a responsibilite limitee) organized and
existing under the laws of the Grand Duchy of Luxembourg, having its registered
office at 15, rue de la Chapelle, L-1325 Luxembourg, Grand Duchy of Luxembourg
("DFS"), DC CYCLE, L.L.C., a limited liability company organized and existing
under the laws of Delaware, having its registered office at 1209 Orange Street,
Wilmington, Delaware ("LLC"), PERSEUS CYCLE, L.L.C., a limited liability company
organized and existing under the laws of Delaware, having its principal office
at Suite 610, 1627 I Street, N.W., Washington, D.C. 20006 ("Perseus") and
RALEIGH INDUSTRIES OF CANADA LIMITED, a corporation continued and existing under
the laws of Canada, having its registered office at 2124 London Lane, Oakville,
Ontario, L6H5V8 Canada (the "Company").
RECITALS
WHEREAS, pursuant to a reorganization of the capital structure of the Company
(the "Reorganization"), the Company issued to Derby International certain
non-voting, cumulative, exchangeable and retractable preferred shares (the
"Exchangeable Shares" and the holder or holders of the issued and outstanding
Exchangeable Shares are referred to herein as the "Holder") having attached
thereto certain rights, privileges, restrictions and conditions contained in
the Articles of Continuance of the Company, as amended by Articles of Amendment
dated May 12, 1998 and as they may otherwise be amended from time to time
(collectively, the "Exchangeable Share Provisions");
WHEREAS, Derby International, LLC and Perseus hold or will hold all of the
issued and outstanding Class A Common Shares of ParentCo, and in their capacity
as shareholders of ParentCo, wish to agree to, and to agree to cause ParentCo to
perform, its obligations under this Agreement;
WHEREAS, the parties hereto desire to make appropriate provision and to
establish a procedure whereby ParentCo will take certain actions and make
certain payments and deliveries necessary to ensure that the Company will be
able to satisfy its obligations under the Exchangeable Share Provisions with
respect to the payment and satisfaction
1
<PAGE>
of dividends, Liquidation Amount and Retraction Price, all in accordance with
the Exchangeable Share Provisions;
WHEREAS, the parties desire that ParentCo and the Company shall execute and
deliver this Agreement,
NOW, THEREFORE, in consideration of the respective covenants and Agreements
provided in this Agreement and for other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties agree as
follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
Section 1.1 Defined Terms.
Each term denoted herein by initial capital letters and not otherwise
defined herein shall have the meaning attributed thereto in the Exchangeable
Share Provisions, unless the context requires otherwise.
Section 1.2 Interpretation Not Affected by Headings, Etc.
The division of this Agreement into articles, Sections and paragraphs and
the insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement.
Section 1.3 Number, Gender, Etc.
Words importing the singular number only shall include the plural and
vice versa. Words importing the use of any gender shall include all genders.
Section 1.4 Date for Any Action.
If any date on which any action is required to be taken under this
Agreement is not a Business Day, such action shall be required to be taken on
the next succeeding Business Day.
ARTICLE 2
CONVENANTS OF PARENT CO AND THE COMPANY
Section 2.1 Covenants of ParentCo Regarding Exchangeable Shares.
So long as any Exchangeable Shares are outstanding, ParentCo will
(1) take all such actions and do all such things as are necessary or desirable
to enable and permit the Company, in accordance with applicable law, to
pay and
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otherwise perform its obligations with respect to the satisfaction of the
Exchangeable Share Consideration representing the Liquidation Amount in
respect of each issued and outstanding Exchangeable Share upon the
liquidation, dissolution or winding-up of the Company or any other
distribution of the assets of the Company for the purpose of winding up
its affairs, including without limitation all such actions and all such
things as are necessary or desirable to enable and permit the Company to
cause to be delivered ParentCo CommonShares to the holders of Exchangeable
Shares in accordance with the provisions of Article 5 of the Exchangeable
Share Provisions;
(2) take all such actions and do all such things as are necessary or
desirable, including to purchase additional Common Shares of the Company
having an aggregate purchase price equal to amounts which the Company
requires to enable and permit the Company, in accordance with applicable
law, to pay and otherwise perform its obligations with respect to the
payment of dividends or the satisfaction of the Retraction Price to the
holders of the Exchangeable Shares in accordance with the Exchangeable
Share Provisions; and
(3) not prior to the fifth anniversary of the Effective Date exercise its vote
as a shareholder to initiate the voluntary liquidation, dissolution or
winding-up of the Company nor take any action or omit to take any action
that is designed to result in the liquidation, dissolution or winding-up
of the Company.
Section 2.2 Issuance and Reservation of ParentCo Common Shares.
ParentCo hereby represents, warrants and covenants that it has irrevocably
reserved for issuance and will at all times keep available, free from pre-
emptive and other rights, out of its authorized and unissued capital shares such
number of ParentCo Common Shares (or other shares or securities into which
ParentCo Common Shares may be reclassified or changed as contemplated by Section
2.6 hereof) as are now and may hereafter be required to enable and permit the
Company to meet its obligations under the Exchangeable Share Provisions.
Section 2.3 Notification of Certain Events.
In order to assist ParentCo to comply with its obligations hereunder, the
Company will give ParentCo and the Holder notice of each of the following events
at the time set forth below:
(1) in the event of any determination by the Board of Directors of the Company
in accordance with the constating documents of the Company to institute
voluntary liquidation, dissolution winding-up proceedings with respect to
the Company or to effect any other distribution of the assets of the
Company among its shareholders for the purpose of winding-up its affairs,
at least sixty (60) days
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prior to the proposed effective date of such liquidation, dissolution,
winding-up or other distribution;
(2) immediately, upon the earlier of (i) receipt by the Company of notice
of, and (ii) the Company otherwise becoming aware of, any threatened or
instituted claim, suit, petition or other proceedings with respect to
the involuntary liquidation, dissolution or winding-up of the Company
or to effect any other distribution of the assets of the Company among
its shareholders for the purpose of winding-up its affairs;
(3) prior to the setting of a payment date by the board of directors of the
Company for the payment of dividends on the Exchangeable Shares if the
company requires ParentCo to purchase Common Shares of the Company in
order to fund its obligations to pay such dividends; and
(4) immediately, upon receipt by the Company of a Retraction Notice (as
defined in the Exchangeable Share Provisions).
Section 2.4 Delivery of ParentCo Common Shares.
(1) ParentCo and the Company hereby agree that, upon a liquidation of the
Company (unless after receipt of the notice from Company described in
Section 2.3 hereof, ParentCo serves a ParentCo Notice (as defined in the
Put and Call Option Agreement of even date between the parties hereto),
the Company shall purchase and ParentCo shall issue the Equivalent
Number of ParentCo Common Shares (as defined in the Exchangeable Share
Provisions) at an issue price of United States Dollars ("USD") one
thousand (1,000.00) per ParentCo Common Share and ParentCo agrees that
the Company may setoff the subscription price payable by ParentCo to the
Company pursuant to Section 2.8 hereof against the subscription price
payable by the Company pursuant to this Section 2.4; and
(2) in furtherance of its obligations hereunder, upon receipt of notice of a
liquidation of the Company, ParentCo shall forthwith issue and deliver
the requisite ParentCo Common Shares to or to the order of the former
holder of the surrendered Exchangeable Shares, as the Company shall
direct. All such ParentCo Common Shares described herein shall be duly
issued as fully paid and non-assessable and shall be free and clear of
any lien, claim, encumbrance, security interest or adverse claim or
interest.
Section 2.5 Qualification of ParentCo Common Shares.
ParentCo covenants that if any ParentCo Common Shares to be issued and
delivered hereunder require registration or qualification with or approval of or
the filing of any document including any prospectus or similar document, the
taking of any proceeding with or the obtaining of any order, ruling or consent
from any governmental or regulatory authority under any Canadian or United
States federal,
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Provincial or state law or regulation or pursuant to the rules and regulations
of any regulatory authority, or the fulfilment of any other legal requirement
(collectively, the "Applicable Laws") before such shares may be issued and
delivered by ParentCo hereunder, ParentCo shall take all such actions and do all
such things in order to comply with all such Applicable Laws in regard thereto.
Section 2.6 Equivalence.
ParentCo hereby covenants and agrees to effect or as the case may be to
cause the Company to effect, all necessary amendments to ParentCo's constating
documents or, as the case may be, to the constating documents of the Company, to
ensure that the Equivalent Number of ParentCo Shares and the maximum number of
such shares referred to in Section 2.1 of the Exchangeable Share Provisions are
adjusted to fully reflect the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
ParentCo Common Shares) conversion, reorganization, recapitalization or other
like change with respect to the ParentCo Common Shares occurring after the
Effective Time.
Section 2.7 Tender Offers, Etc.
In the event that a tender offer, share exchange offer, issuer bid,
take-over bid or similar transaction with respect to ParentCo Common Shares
(an"Offer") is proposed by ParentCo or is proposed to ParentCo or its
shareholders and is recommended by the Board of Directors of ParentCo, or is
other effected or to be effected with the consent or approval of the Board of
Directors of ParentCo, ParentCo shall, in good faith, take all such actions and
do all such things as are necessary or desirable to enable and permit holders of
Exchangeable Shares to participate in such Offer to the same extent and on an
equivalent basis as the holders of ParentCo Common Shares, without
discrimination, including, without limiting the generality of the foregoing,
ParentCo will use its good faith efforts expeditiously to (and shall, in the
case of a transaction proposed by ParentCo or where ParentCo is a participant in
the negotiation thereof) ensure that holders of Exchangeable Shares may
participate in all such Offers without being required to retract Exchangeable
Shares as against the Company (or, if so required, to ensure that any such
retraction shall be effective only upon, and shall be conditional upon, the
closing of the Offer and only to the extent necessary to tender or deposit to
the Offer).
Section 2.8 Delivery of Company Common Shares.
(1) For purposes of funding the payment by the Company of dividends, the
Retraction Price and the subscription price for ParentCo Common Shares
under Section 2.4 ParentCo agrees that, upon receipt of a notice
pursuant to Section 2.3 hereof it shall (unless after receipt of such
notice it serves a ParentCo Notice) subscribe for, and the Company
hereby agrees that it shall issue to ParentCo, at the fair market value
thereof, on the dividend payment date, Liquidation Date or Retraction
Date, as the case may be, such number of Common Shares of the
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<PAGE>
Company as is necessary in the aggregate to fund the dividend,
subscription price or the Retraction Price, as the case may be, payable by
the Company on such date; and
(2) in furtherance of its obligations hereunder, upon notice by the Company,
ParentCo shall forthwith pay the purchase price of the Common Shares of
the Company to or to the order of such holder or former holder of
Exchangeable Shares, all as the Company shall direct. Upon such payment,
all such Common Shares of the Company described herein shall be duly
issued as fully paid and non-assessable and shall be free and clear of any
lien, claim, encumbrance, security interest or adverse claim or interest.
Section 2.9 Qualification of Company Common Shares.
The Company covenants that if any Common Shares of the Company to be
issued and delivered hereunder require registration or qualification with or
approval of or the filing of any document including any prospectus or similar
document, the taking of any proceeding with or the obtaining of any order,
ruling or consent from any governmental or regulatory authority under any
Canadian or United States federal, provincial or state law or regulation or
pursuant to the rules and regulations of any regulatory authority, or the
fulfilment of any other legal requirement (collectively, the "Applicable Laws")
before such shares may be issued and delivered by the Company hereunder, the
Company shall take all such actions and do all such things in order to comply
with all such Applicable Laws in regard thereto.
ARTICLE 3
GENERAL
Section 3.1 Term.
This Agreement shall come into force and be effective as of the date
hereof and shall terminate and be of no further force and effect at such time as
no Exchangeable Shares (or securities or rights convertible into or exchangeable
for or carrying rights to acquire Exchangeable Shares) are held by any party
other than ParentCo or any of its Subsidiaries.
Section 3.2 Changes in Capital of ParentCo and the Company.
Notwithstanding the provisions of Section 3.4 hereof, at all times after
the occurrence of any event effected pursuant to Section 2.6 hereof, as a result
of which either ParentCo Common Shares or the Exchangeable Shares or both are in
any way changed, this Agreement shall forthwith be amended and modified as
necessary in order that it shall apply with full force and effect, mutatis
mutandis, to all new securities into which ParentCo Common Shares or the
Exchangeable shares or both are so changed, and the parties hereto shall execute
and deliver an agreement in writing giving effect to and evidencing such
necessary amendments and modifications.
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Section 3.3 Severability.
If any provision of this Agreement is held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the remainder of this
Agreement shall not in any way be affected or impaired thereby and this
Agreement shall be carried out as nearly as possible in accordance with its
original terms and conditions.
Section 3.4 Amendments, Modifications, Etc.
This Agreement may not be amended or modified except by an agreement in
writing executed by the Company and ParentCo and approved by the holders of the
Exchangeable shares in accordance with Section 10.1 of the Exchangeable Share
Provisions.
Section 3.5 Ministerial Amendments.
Notwithstanding the provisions of Section 3.4 hereof, the parties to
this Agreement may in writing, at any time and from time to time, without the
approval of the holders of the Exchangeable Shares, amend or modify this
Agreement for the purposes of:
(1) adding to the covenants of either or both parties for the protection of
the holders of the Exchangeable Shares;
(2) making such amendments or modifications not inconsistent with this
Agreement as may be necessary or desirable with respect to matters or
questions which, in the opinion of the board of directors of each of the
Company and ParentCo, it may be expedient to make, provided that each
such board of directors shall be of the opinion that such amendments or
modifications will not be prejudicial to the interests of the holders of
the Exchangeable Shares; or
(3) making such changes or corrections which, on the advice of counsel to
the Company and ParentCo, are required for the purpose of curing or
correcting any ambiguity or defect or inconsistent provision or clerical
omission or mistake or manifest error; provided that the boards of
directors of each of the Company and ParentCo shall be of the opinion
that such changes or corrections will not be prejudicial to the
interests of the holders of the Exchangeable Shares.
Section 3.6 Meeting to Consider Amendments.
The Company, at the request of ParentCo, shall call a meeting or
meetings of the holders of the Exchangeable Shares for the purpose of
considering any proposed amendment or modification requiring approval of such
holders. Any such meeting or meetings shall be called and held in accordance
with the constating documents of the Company, the Exchangeable Share
Provisions and all applicable laws.
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Section 3.7 Amendments Only in Writing.
No amendment to or modification or waiver of any of the provisions of this
Agreement otherwise permitted hereunder shall be effective unless made in
writing and signed by the parties hereto.
Section 3.8 Enurement.
This Agreement shall be binding upon and enure to the benefit of the
parties hereto and the holders, from time to time, of Exchangeable Shares and
each of their respective heirs, successors and assigns.
Section 3.9 Notices to Parties.
All notices and other communications between the parties shall be in
writing and shall be deemed to have been given if delivered personally or by
confirmed telecopy to the parties at the following addresses (or at such other
address for either such party as shall be specified in like notice):
(1) if to ParentCo to:
The Derby Cycle Corporation
22710 72nd Avenue South
Kent, Washington 98032
Attention: Sharon Robinson
Fax: 253-872-9490
Tel: 253-395-2311
with copies to:
(2) if to the Company to:
Raleigh Industries of Canada Limited
2124 London Lane
Oakville, Ontario, CANADA L6H 5V8
Attention: Kenneth B. Morrison
Fax: 905-829-2699
Tel: 905-829-5555
<PAGE>
(3) if to LLC and Perseus at the address indicated at the head of this
Agreement with copy to:
Kirkland & Ellis
655 15th Street N.W.
Washington, D.C. 20005
Attention: Jack M. Feder, Esquire
Facsimile: 202-879-5200
(4) if to Dervy International or DFS, to either or both at:
5 Boulevard de la Foire
L-1528 Luxembourg
Grand Duchy of Luxembourg
Telefax: 352-451-23201
Attention: Chairman
with a copy to:
Gottesman Jones & Partners
8 New Fetter Lane
London EC4A 1AP
Telefax: 44-171-203-5205
Attention: Sonya C. Park
and a copy to:
Stikeman, Elliott
1155 Rene-Levesque Boulevard West
40th Floor
Montreal, Canada H2B 3V2
Telefax: 514-397-3222
Attention: Elinore J. Richardson
Any notice or other communication given personally shall be deemed to have been
given and received upon delivery thereof and if given by telecopy shall be
deemed to have been given and received on the date of confirmed receipt thereof,
unless such day is not a Business Day, in which case it shall be deemed to have
been given and received upon the immediately following Business Day.
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Section 3.10 Counterparts.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which taken together shall constitute one and the
same instrument.
Section 3.11 Jurisdiction.
This Agreement shall be construed and enforced in accordance with the laws
of the Province of Ontario and the laws of Canada applicable therein.
Section 3.12 Attornment.
ParentCo agrees that any action or proceeding arising out of or relating to
this Agreement may be instituted in the courts of Ontario, waives any objection
which it may have now or hereafter to the venue of any such action or
proceeding, irrevocably submits to the jurisdiction of such courts in any such
action or proceeding, agrees to be bound by any judgement of such courts and not
to seek, and hereby waives, any review of the merits of any such judgement by
the courts of any other jurisdiction and hereby appoints the Company at its
registered office in the Province of Ontario as ParentCo's attorney for service
of process.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their respective officers thereunder duly authorized, all as of the date
first written above.
THE DERBY CYCLE CORPORATION DC CYCLE L.L.C.
By: /s/ Signature appears here By: /s/ Signature appears here
DERBY INTERNATIONAL CORPORATION S.A. PERSEUS CYCLE L.L.C.
By: /s/ Signature appears here By: /s/ Signature appears here
DERBY FINANCE S.a.r.l. RALEIGH INDUSTRIES OF CANADA
LIMITED
By: /s/ Signature appears here By: /s/ Signature appears here
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<PAGE>
EXHIBIT 10.6
THIS PUT AND CALL OPTION AGREEMENT (the "Agreement") is made this
13/th/ day of May, 1998 by and among THE DERBY CYCLE CORPORATION (dba Raleigh
USA Bicycle Company), a corporation organized and existing under the laws of
Delaware, having its principal office at 22710 72nd Avenue South, Kent,
Washington 98032 (the "Company"), DERBY INTERNATIONAL CORPORATION S.A., a
corporation (societe anonyme) organized and existing under the laws of the Grand
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Duchy of Luxembourg, having its registered office at 5 Boulevard de la Foire, L-
1528 Luxembourg, Grand Duchy of Luxembourg ("Derby International"), DERBY
FINANCE S.a.r.l, a corporation (societe a responsibilite limitee) organized and
--------------------------------
existing under the laws of the Grand Duchy of Luxembourg, having its registered
office at 15, rue de la Chapelle, L-1325 Luxembourg, Grand Duchy of Luxembourg
("DFS"), DC CYCLE, L.L.C., a limited liability company organized and existing
under the laws of Delaware, having its registered office at 1209 Orange Street,
Wilmington, Delaware ("LLC"), PERSEUS CYCLE, L.L.C., a limited liability company
organized and existing under the laws of Delaware, having its principal office
at Suite 610, 1627 1 Street, N.W., Washington, D.C. 20006 ("Perseus") and
RALEIGH INDUSTRIES OF CANADA LIMITED, a corporation organized and existing under
the laws of Canada, having its registered office at 2124 London Lane, Oakville,
Ontario, L6H 5V8 Canada ("RIC").
WHEREAS, the Company, Derby International, DFS, LLC. and Perseus are
also parties to a certain Recapitalization Agreement dated as of March 11, 1998,
as amended (the "Recapitalization Agreement");
WHEREAS, DFS, LLC. and Perseus hold all of the issued and outstanding
Class A Common Shares of the Company and, in their capacity as shareholders of
the Company, wish to agree to, and to agree to cause the Company to perform its
obligations under this Agreement;
WHEREAS, in connection with the Recapitalization Agreement and the
transactions contemplated therein, the Company and RIC desire to agree to grant
and receive the options described in this Agreement and to take such other steps
as may be required to give effect thereto;
WHEREAS, pursuant to a reorganization of the capital structure of RIC
(the "Reorganization"), RIC issued to Derby International fifteen thousand
(15,000) non-voting, cumulative, exchangeable and retractable preferred shares
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(the "Exchangeable Shares") having attached thereto certain rights, privileges,
restrictions and conditions contained in the Articles of Continuance of the
Company, as amended by Articles of Amendment dated May 13, 1998 attached hereto
as Exhibit A, and as they may otherwise be amended from time to time
---------
(collectively, the "Exchangeable Share Provisions");
NOW, THEREFORE, in consideration of the mutual premises contained in
this Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. Capitalized terms not otherwise defined herein shall have
-----------
the same meanings contained in the Exchangeable Share Provisions, the
Recapitalization Agreement and the Shareholders' Agreement (as defined in the
Recapitalization Agreement).
2. EXCHANGEABLE SHARES. It is the intention of all of the parties that
-------------------
the RIC Exchangeable Shares shall have a Fair Market Value at least equal to the
Fair Market Value of all of the issued and outstanding common shares of the
capital stock of RIC immediately before the Effective Time. Fair Market Value
means, for these purposes, the amount determined by an independent evaluator
chosen by agreement between RIC and Derby International (the "Appraised
Value"), as may be approved or adjusted by the board of directors of RIC acting
in good faith in accordance with the Articles of Continuance of RIC, provided
that the Fair Market Value determined as hereinabove provided for shall also be
subject to revision (a "Tax Adjustment Event") in accordance with a final
determination resulting from a binding agreement with, or decision by, the
appropriate Canadian taxation authorities, or any judgement of a Canadian court
of competent jurisdiction. Such final determination shall reflect any assessment
by the Minister of National Revenue or other Canadian taxing authority from
which no appeal is taken or any agreement reached by RIC or the Company or Derby
International and a said taxing authority in settlement of a dispute regarding
such assessment or proposed assessment, or any decision by a Canadian court or
tribunal of competent jurisdiction, in regard thereto from which no appeal may
be taken or the period during which an appeal may be taken has expired.
<PAGE>
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3. RIGHT AND PRIORITY OF EXCHANGEABLE SHARES. The parties agree to take
-----------------------------------------
all actions to ensure, and shall cause RIC to ensure, that the Exchangeable
Shares remain senior in right and priority to any other class of the capital
stock of RIC throughout the period during which any Exchangeable Shares remain
issued and outstanding and are held by any party to this Agreement other than
RIC or until such earlier time as the Exchangeable Shares are transferred in
consideration of the issue of shares of Class B Common Shares and Class A Common
Shares of the Company pursuant to this Agreement.
4. OPTIONS.
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(a) At any time following the issue of the Exchangeable Shares, the
holder of such Exchangeable Shares shall have the right (the "Put Option") to
require the Company to acquire the Exchangeable Shares in consideration of the
following (the "Put Entitlement"):
(i) the issue by the Company to such holder of such number of Class B
Common Shares and Class A Common Shares as is equal to the Equivalent
Number of ParentCo Common Shares (as defined in the Exchangeable Share
Provisions) in respect of such Exchangeable Shares; and
(ii) payment or transfer by the Company to such holder of all
distributions, dividends and other payments (other than any such
distributions, dividends or payments which effect a return of capital to
the holders of the Class A Common Shares or the Class B Common Shares of
the Company, as the case may be, which return would be included in the
definition of the Equivalent Number of ParentCo Common Shares) whether in
cash or in kind, accrued, declared or made on or before the Put Date that
the holder of the Equivalent Number of ParentCo Common Shares would have
received had such shares been issued to and held by such holder at all
times from the Effective Time to the Put Date;
(b) At any time after January 31, 2001, the Company may require (the
"Call Option") such holder of Exchangeable Shares, to transfer to the Company
the Exchangeable Shares in consideration of the following (the "Call
Entitlement"):
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(i) the issue by the Company to such holder of such number of Class B
Common Shares and Class A Common Shares as is equal to the Equivalent
Number of ParentCo Common Shares (as defined in the Exchangeable Share
Provisions) in respect of such Exchangeable Shares; and
(ii) payment or transfer by the Company to such holder of all
distributions, dividends and other payments (other than any such
distributions, dividends or payments which effect a return of capital to
the holders of the Class A Common Shares of the Class B Common Shares of
the Company,as the case may be which included in the definition of the
Equivalent Number of ParentCo Common Shares) whether in cash or in kind,
accrued, declared or made on or before the Call Date that a holder of the
Equivalent Number of the ParentCo Common Shares would have received had
such shares been issued to and held by such holder at all times from the
Effective Time to the Call Date;
(c) The holders of the Exchangeable Shares shall give notice to the
Company that they wish to effect the Put Option by delivering written notice
thereof, stating the date on which such Put Option shall become effective (the
"Put Date"), which notice shall be accompanied by the original share
certificate(s) representing the Exchangeable Shares, duly endorsed for transfer
to the Company. Upon receipt of such share certificate(s), the Company shall
deliver the Put Entitlement to the holders of the Exchangeable Shares, and the
Exchangeable Shares shall be cancelled and the holders thereof shall have no
further rights against the Company except to receive the Put Entitlement
described in this Section 4.
(d) The Company shall give notice to the holders of the Exchangeable
Shares that it wishes to effect the Call Option by delivering written notice
thereof, stating the date on which such Call Option shall become effective (the
"Call Date"), and on the Call Date, the Call Option shall be deemed to occur
notwithstanding any failure by the holders of the Exchangeable Shares to
surrender the certificate(s) thereof. Following delivery of such notice, and
immediately upon delivery by the Company of the Call Entitlement to the holders
of the Exchangeable Shares, the Exchangeable Shares shall be cancelled and the
holders thereof shall have no further right against the Company except to
receive the Call Entitlement described in this Section 4.
<PAGE>
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(e) If the Class A Common Shares or the Class B Common Shares of the
Company which are included in the Equivalent Number of ParentCo Common Shares
had been issued and outstanding at the Effective Time and (i) would have been
coverted or exchanged before the Call Date or the Put Date, as the case may be,
for Class A Common Shares of the Company or any other securities or property
(including, without limitation, cash) as a result of a corporate reorganization,
a change in the capital structure of the Company or otherwise (the "Change"),
which Change occurs before the Put Date or the Call Date, as the case may, or
(ii) would have been transferred, redeemed, sold or otherwise disposed of as a
result of an Approved Sale or a transaction described in Section 10(b) of the
Shareholders' Agreement (the "Disposition"), which Disposition occurs before the
Put Date or the Call Date, as the case may be (property described in (i) and
(ii) above being together referred to herein as the "Substitute Property"), the
holders of the Exchangeable Shares shall receive, in consideration of such
Exchangeable Shares, such Substitute Property as was or would have been remitted
in exchange for the number of Class A Common Shares or Class B Common Shares of
the Company as would have otherwise been included in the Equivalent Number of
ParentCo Common Shares. Interest shall be paid on any cash included in such
property at an annual rate equal to the Base Rate for dollars of Citibank N.A.
in effect from time to time from the date on which such conversion, redemption,
exchange or other event with respect to such Class A Common Shares or Class B
Common Shares of the Company had or would have taken place up to the Call Date
or the Put Date, as the case may be. In the event that the Substitute Property
would itself have been converted or exchanged by reason of a Change or redeemed,
transferred, sold or otherwise disposed of on a Disposition which Change or
Disposition would have occured prior to the Call Date or the Put Date, as the
case may be, then the provisions of this paragraph 4 shall apply mutatis
mutandis to any such Substitute Property. For purposes of clarification, it is
the intention of clarification, it is the intention of the parties that upon the
full exercise of the Put Option or the Call Option hereunder a holder of the
Exchangeable Shares would be in the same economic and legal position as it would
have been in had it held the Equivalent Number of ParentCo Common Shares at the
Effective Time and at all other times up to the Call or the Put Date, as the
case may be.
<PAGE>
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5. PREEMPTIVE RIGHTS OF THE COMPANY
--------------------------------
(a) RIC shall inform the Company and any holder of Exchangeable
Shares of each of the following events at the time set forth below:
(1) in the event of any determination by the Board of Directors of the RIC in
accordance with the constating documents of the RIC to institute voluntary
liquidation, dissolution or winding-up proceedings with respect to the RIC
or to effect any other distribution of the assets of the RIC among its
shareholders for the purpose of winding-up its affairs, at least sixty (60)
days prior to the proposed effective date of such liquidation, dissolution,
winding-up or other distribution;
(2) immediately, upon the earlier of (i) receipt by the RIC of notice of, and
(ii) the RIC otherwise becoming aware of, any threatened or instituted
claim, suit, petition or other proceedings with respect to the involuntary
liquidation, dissolution or winding-up of the RIC or to effect any other
distribution of the assets of the RIC among its shareholders for the
purposes of winding-up its affairs;
(3) immediately, in the event of any adjustment by the Board of Directors of
RIC to the Equivalent Number of the ParentCo Common Shares or the maximum
number of such shares referred to in Section 2.1 of the Exchangeable Share
Provisions pursuant to the Exchangeable Share Provisions or otherwise
pursuant to the Articles of Continuance of RIC as they may be from time to
time amended varied or replaced; and
(4) immediately, upon receipt by the RIC of a Retraction Notice (as defined in
the Exchangeable Share Provisions).
(b) On receipt of the notice provided for in 5(a)(1), (2) or (4)
above, the Company shall, if it is otherwise entitled to do so, give notice to
the holders of the Exchangeable Shares that it wishes to effect the Call Option
in accordance with section 4 hereof. If, at the time that it receives such a
notice, the Company is not entitled to give notice in accordance with Section 4,
then Derby International, if is the holder of the Exchangeable Shares at the
time that the notice is given, shall give notice to the Company that it wishes
effect the Put
<PAGE>
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Option in accordance with Section 4 hereof and if it does not give such a notice
within ten (10) days of receipt of the notice described in (a) above, it shall
be deemed to have given the notice to the Company that it wishes to effect the
Put Option.
(c) The Company shall, upon giving the notice that it wishes to
effect the Call Option or upon receipt or deemed receipt of the notice from the
holder effecting the Put Option, and in any event not later than fifty (50) days
after receipt of the notice referred to in Section 5(a), give notice in writing
(the "ParentCo Notice") to RIC that it intends to purchase the Exchangeable
Shares in exercise of its Liquidation Purchase Right or its Retraction Purchase
Right (as such rights are defined in the Exchangeable Share Provisions), as the
case may be.
6. RESERVE. The Company shall, and LLC, Perseus and DFS shall cause the
-------
Company to, maintain sufficient Class B Common Shares and Class A Common Shares
as are required to perform its obligations under the Put Option or the Call
Option, together with sufficient funds or other property as is required to fund
the payment or make delivery to the holder of the Exchangeable Shares of Put
Entitlement or the Call Entitlement in accordance with Section 4.
7. FURTHER ACTION. In case at any times any further action is necessary
--------------
to carry out the purposes of this Agreement, each of the parties will take such
further action (including the execution and delivery of additional instruments
and documents) as any other party reasonably may request, all at the cost and
expense of the Company or RIC, as appropriate.
8. AMENDMENTS. This Agreement may not be waived, changed, modified or
----------
discharged orally, unless an agreement in writing is signed by all parties to
this agreement.
9. ASSIGNMENT. Except as otherwise specifically provided herein, no party
----------
may assign any of its rights, interest or obligations hereunder without the
prior written consent of the other parties, which consent shall not be
unreasonably withheld; provided, however, that the holder may collaterally
assign its rights hereunder to any Person providing financing to the holder.
10. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, all of which shall constitute one agreement, and each such
<PAGE>
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counterpart shall be deemed to have been made, executed and delivered on the
date set out at the head of this Agreement, without regard to the date when any
of such counterparts may actually have been made, executed or delivered.
11. HEADINGS. The descriptive headings contained in this Agreement are
--------
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement.
12. NOTICES. Any consent, communication or notice required or permitted
-------
to be given under this Agreement shall be made in writing and shall be deemed
to have been duly and validly given; (i) in the case of notice sent by letter or
cable, upon the receipt of the same; and (ii) in the case of notice sent by
telefax, upon express acknowledgment (also by telefax) of receipt of
transmission by the receiving party, addressed, in each case as follows:
(a) if to LLC and Perseus at the addresses indicated at the head of
this Agreement with copy to:
Kirkland & Ellis
655 15th Street N.W.
Washington D.C, 20005
Attention: Jack M. Feder, Esquire
Facsimile: 202-879-5200
(b) if to Derby International or DFS, to either or both at:
5 Boulevard de la Foire
L-1528 Luxembourg
Grand Duchy of Luxembourg
Telefax: 352-451-23201
Attention: Chairman
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with a copy to:
Gottesman Jones & Partners
8 New Fetter Lane
London EC4A 1AP
Telefax: 44-171-203-5205
Attention: Sonya C. Park
and a copy to:
Stikeman, Elliott
1155 Rene-Levesque Boulevard West
40th Floor
Montreal, Canada H2B 3V2
Telefax: 514-397-3222
Attention: Elinore J. Richardson
(c) if to RIC or the Company, at their addresses set out at the
head of this Agreement or at such other address and/or telefax number as either
party may hereafter furnish to the other by written notice, as herein provided.
13. NO WAIVER. The failure to enforce or to require the performance at any
---------
time of any of the binding provisions of this Agreement shall not be construed
to be a waiver of such provisions and shall not effect either the validity of
this Agreement or any part thereof or the right of either party to this
Agreement thereafter to enforce each and every provision in accordance with this
Agreement.
14. FURTHER ASSISTANCE. Each of the parties to this Agreement shall take
------------------
all actions necessary to effect the actions contemplated in this Agreement,
including without limitation, preparing and filing of Articles of Amendment to
the Articles of Continuance of RIC in respect of the Exchangeable Shares, blue
sky and other securities filings and transfer forms, and to execute and deliver
such further instruments and take such other additional action as the other
parties to the Agreement may reasonably request to effect, consummate and
confirm the transactions contemplated in this Agreement.
<PAGE>
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15. GOVERNING LAW AND JURISDICTION. All questions concerning the
------------------------------
construction, validity and interpretation of this Agreement shall be governed by
and construed in accordance with the domestic laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York. Any legal action or proceeding with respect to any matter arising under or
in connection with this Agreement or the subject matter hereof may be brought in
the courts of the State of New York or of the United States of America for the
Southern District of New York, and, by execution and delivery of this Agreement,
each party hereto hereby accepts for themselves and in respect of their
property, generally and unconditionally, the jurisdiction of the aforesaid
courts.
16. SEVERABILITY. If any provision of this Agreement is held to be invalid
------------
or unenforceable by any judgement of a tribunal of competent jurisdiction, the
remainder of the provisions of this Agreement shall not be affected by such
judgement, and the understanding of the parties embodied in this Agreement shall
be carried out as nearly as possible according to their original terms and
intent.
<PAGE>
EXHIBIT "A"
EXCERPT FROM ARTICLES OF AMENDMENT OF RIC DATED MAY 13, 1998
SETTING OUT THE PROVISIONS ATTACHING
TO THE EXCHANGEABLE SHARE
<PAGE>
PROVISIONS ATTACHING TO THE EXCHANGEABLE SHARES
The Exchangeable Shares in the capital of the Corporation shall have the
following rights, privileges, restrictions and conditions:
ARTICLE 1
INTERPRETATION
--------------
For the purposes of these rights, privileges, restrictions and
conditions:
Section 1.1 DEFINITIONS
-----------
"AFFILIATE" has the meaning provided in the Recapitalization
Agreement.
"ACT" means the Canada Business Corporations Act as amended,
consolidated or re-enacted from time to time.
"BOARD OF DIRECTORS" means the Board of Directors of the
Corporation and any committee thereof acting within its authority.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or
a day when banks are not open for business in Toronto, Ontario provided that if
any date on which an action is required to be taken hereunder is not a Business
Day, Business Day for the purpose of the provision requiring such action shall
mean the next succeeding Business Day.
"COMMON SHARES" means the common shares in the capital of the
Corporation.
"CORPORATION" means Raleigh Industries of Canada Limited - Les
Industries Raleigh du Canada Limitee, a corporation continued and existing under
the Act;
"EFFECTIVE TIME" means the earliest time of issuance of any
Exchangeable Shares by the Corporation.
"EQUIVALENT NUMBER OF PARENTCO COMMON SHARES" when used in
respect of the Exchangeable Shares as a whole, has the meaning provided in
Section 2.1 and when used in respect of each Exchangeable Share means the number
of ParentCo Class B Common Shares and ParentCo Class A Common Shares for which
all the Exchangeable Shares issued at the Effective Time are
<PAGE>
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exchangeable divided by the number Exchangeable Shares so issued.
"EXCHANGEABLE SHARE CONSIDERATION" means, with respect to each
Exchangeable Share, for any acquisition of, or redemption of, or distribution of
assets of the Corporation in respect of, Exchangeable Shares pursuant to these
share provisions, for that part of the consideration which is:
(a) a ParentCo Common Share, or any fraction thereof, such consideration
shall be fully paid and satisfied by the delivery of such ParentCo
Common Share or such fraction thereof, as evidenced by a certificate
representing such ParentCo Common Share;
(b) the amount of all accumulated and unpaid cash dividends deliverable
in connection with such action, a cheque or cheques payable at par
at any branch of the bankers of the payor; and
(c) all accumulated and unpaid non-cash dividends deliverable in
connection with such action, such consideration shall be fully paid
and satisfied by the delivery of such non-cash items;
provided that (i) any such share shall be duly issued as fully paid and non-
assessable and any such property shall be delivered free and clear of any lien,
claim, encumbrance,security interest or adverse claim or interest and (ii) such
consideration shall be paid after deduction and withholding of any tax required
by applicable law to be deducted and withheld therefrom and without interest.
"EXCHANGEABLE SHARE ISSUANCE CONSIDERATION" means, in respect of
each Exchangeable Share, the amount equal to the Fair Market Value of all of the
issued and outstanding shares of the Corporation immediately before the
Effective Time divided by the number of Exchangeable Shares issued at the
Effective Time.
"EXCHANGEABLE SHARE PRICE" means, for each Exchangeable Share, at
any given date, an amount equal to the aggregate of:
(a) the Fair Market value on such date of the Equivalent Number of
ParentCo Common Shares; plus
(b) an additional amount equal to the full amount of all cash
dividends accumulated and unpaid on such Exchangeable Share;
plus
(c) an additional amount representing the Fair Market Value of the
non-cash dividends accumulated and unpaid on such Exchangeable
Share.
<PAGE>
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"EXCHANGEABLE SHARES" means the non-voting cumulative exchangeable
preferred shares of the Corporation having the rights, privileges, restrictions
and conditions set forth herein.
"FAIR MARKET VALUE" means, with respect to any particular property
(including, for greater certainty, all of the issued and outstanding shares of
the Corporation immediately before the Effective Time and the ParentCo Common
Shares) at any particular time, the amount determined from time to time by the
Board of Directors in good faith to be the fair market value thereof; provided,
however, that the fair market value determined as hereinabove provided for shall
be subject to revision (a "Tax Adjustment Event") in accordance with any final
determination resulting from any binding agreement with, or decision by, the
appropriate Canadian taxation authorities, or any judgement of a Canadian court
of competent jurisdiction. Such final determination shall reflect any assesment
by the Minister of National Revenue or other Canadian taxing authority from
which no appeal is taken or any agreement reached by the Corporation or ParentCo
or the Holder and a said taxing authority in settlement of a dispute regarding
such assessment or proposed assessment, or any decision by a Canadian court or
tribunal of competent jurisdiction, in a matter to which the Corporation or
ParentCo or the Holder is a party, regarding the fair market value of such
property from which no appeal may be taken or the period during which an appeal
may be taken has expired.
"FINANCING DOCUMENTS" has the meaning provided in the Recapitalization
Agreement.
"HOLDER" means Derby International Corporation S.A., a corporation
organized under the laws of Luxembourg.
"LIQUIDATION AMOUNT" has the meaning provided in Section 5.1 hereof.
"LIQUIDATION DATE" has the meaning provided in Section 5.1 hereof.
"LIQUIDATION PURCHASE RIGHT" means a purchase by ParentCo of the
Exchangeable Shares pursuant to the exercise of an option under Section 4 of
the Put and Call Option Agreement.
"PARENTCO" means The Derby Cycle Corporation, a corporation organized
and existing under the laws of the State of Delaware and includes any successor
corporation.
"PARENTCO CLASS A COMMON SHARES" means the shares of Class A Common
Stock of ParentCo, with a par value of $0.01 per share, having voting
<PAGE>
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rights of one vote per share, and/or any other securities resulting from the
application of Section 10.1 hereof.
"PARENTCO CLASS B COMMON SHARES" means the shares of Class B Common
Stock of ParentCo, with a par value of $0.01 per share, and/or any other
securities resulting from the application of Section 10.1 hereof.
"PARENTCO COMMON SHARES" means the ParentCo Class A Common Shares and
the ParentCo Class B Common Shares.
"PARENTCO NOTICE" mean a notice in writing given by ParentCo pursuant
to Section 5(c) of the Put and Call Option Agreement that it intends to
purchase the Exchangeable Shares.
"PUT AND CALL OPTION AGREEMENT" means the Put and Call Option
Agreement between ParentCo, the Holder, the Corporation, Derby Finance S.a.r.l.,
DC Cycle, L.L.C. and Perseus Capital L.L.C., made as of the Effective Time as
the same may be amended, varied or replaced from time to time.
"RECAPITALIZATION AGREEMENT" means the Recapitalization Agreement
between ParentCo, the Holder, Derby Finance S.a.r.l., DC Cycle, L.L.C., Perseus
Capital L.L.C. and A. Edward Gottesman, Alan J. Finden-Crofts, Frank H. Pearl
and Thayer Equity Investors, III L.P., dated March 11, 1998 as the same may be
amended, varied, or replaced from time to time.
"RETRACTED SHARES" has the meaning provided in Section 6.1 hereof.
"RETRACTION PURCHASE RIGHT" means a purchase by ParentCo of the
Exchangeable Shares pursuant to the exercise of an option under Section 4 of the
Put and Call Option Agreement.
"RETRACTION DATE" has the meaning provided in Subsection 6.1(ii)
hereof.
"RETRACTION PRICE" has the meaning provided in Section 6.1 hereof.
"RETRACTION NOTICE" has the meaning provided in Section 6.1 hereof.
"SENIOR FINANCE AGREEMENT" means the credit agreement dated on or
about 12 May 1998 made between ParentCo, certain of its subsidiaries as
obligors, Chase Manhattan International Limited as Facility Agent and Security
Agent, Chase Manhattan plc as Arranger and the financial institutions named
therein as Banks, as the same may be amended, varied, replaced or refinanced
from time to time.
<PAGE>
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"SHAREHOLDERS AGREEMENT" means the Shareholders Agreement between
ParentCo, Derby Finance S.a.r.l., DC Cycle, L.L.C. and Perseus Capital L.L.C,
dated on or about May 14, 1998 as the same may be amended, varied or replaced
from time to time.
"SUPPORT AGREEMENT" means the Support Agreement between ParentCo, the
Corporation, the Holder, Derby Finance S.a.r.l., DC Cycle, L.L.C. and Perseus
Capital L.L.C., made as of the Effective Time as the same may be amended, varied
or replaced from time to time.
ARTICLE 2
EXCHANGE RATIO AND RANKING OF EXCHANGEABLE SHARES
-------------------------------------------------
SECTION 2.1 As soon as practicable after the Effective Time, the board
of directors will determine the Fair Market Value immediately prior to the
Effective Time of (a) all of the issued and outstanding shares of the
Corporation; and (b) each ParentCo Common Share and will establish the number
(the "Equivalent Number of ParentCo Common Shares") of ParentCo Class B Common
Shares (up to an aggregate 15,000 such shares) and ParentCo Class A Common
Shares (up to an aggregate 30,000 such shares) for which the Exchangeable Shares
issued at the Effective Time are exchangeable such that the Fair Market Value at
the Effective Time of the Exchangeable Shares then issued having regard to the
Fair Market Value of the ParentCo Common Shares for which they are Exchangeable
is equal to the Fair Market Value, immediately prior to the Effective Time, of
all of the issued and outstanding shares of the Corporation. The Equivalent
Number of ParentCo Common Shares will be adjusted by the Board of Directors if
there is any revision as contemplated hereby in the Fair Market Value of either
the shares of the Corporation or the ParentCo Common Shares as of the Effective
Time.
SECTION 2.2 The Exchangeable Shares shall be entitled to a preference
over the Common Shares, and any other shares ranking junior to the Exchangeable
Shares, with respect to the payment of dividends and to the distribution of
assets in the event of the liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, or any other distribution of the
assets of the Corporation among its shareholders for the purpose of winding-up
its affairs.
<PAGE>
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ARTICLE 3
DIVIDENDS
---------
SECTION 3.1 Subject to Section 6.5, a holder of Exchangeable Shares shall
be entitled to cumulative preferential dividends on the Exchangeable Shares
which shall accrue on a daily basis at the rate of twenty percent (20%) per
annum of the sum of the Exchangeable Share Issuance Consideration in respect of
such share plus all accumulated and unpaid dividends thereon from and including
the date of issuance of such share to but not including the date on which such
share ceases to be outstanding. A holder of an Exchangeable Share shall not be
entitled to receive any dividend on such share in excess of the amount
determined in accordance with the first sentence of this Section 3.1. Such
dividends shall be paid out of money, assets or property of the Corporation
properly applicable to the payment of dividends, or out of authorized but
unissued shares of the Corporation.
SECTION 3.2 The issue of a certified cheque of the Corporation payable at
par at any branch of the bankers of the Corporation or payment in immediately
available funds as directed by the holder shall effect payment in respect of any
cash dividends contemplated by Section 3.1 hereof and the sending of such a
cheque or the transfer of such funds to each holder of an Exchangeable Share
(less any tax required to be deducted and withheld from such dividends paid or
credited by the Corporation) shall satisfy the cash dividends represented there
unless the cheque is not paid on presentation. Certificates registered in the
name of the registered holder of Exchangeable Shares shall be issued or
transferred in respect of any share dividends contemplated by Section 3.1 hereof
and the sending of such a certificate to each holder of an Exchangeable Share
shall satisfy the share dividend represented thereby. Such other type and
amount of property in respect of any dividends contemplated by Section 3.1
hereof shall be issued, distributed or transferred by the Corporation in such
manner as it shall determine and the issuance, distribution or transfer thereof
by the Corporation to each holder of an Exchangeable Share shall satisfy the
dividend represented thereby. In all cases any such dividends shall be subject
to any reduction or adjustment for tax required to be deducted and withheld from
such dividends paid or credited by the Corporation. No holder of an
Exchangeable Share shall be entitled to recover by action or other legal process
against the Corporation any dividend which is represented by a cheque that has
not been duly presented to the Corporation's bankers for payment or which
otherwise remains unclaimed for a period of six years from the date on which
such dividend was payable.
SECTION 3.3 To the extent not paid on December 31 of each year, beginning
December 31, 1998 (the "Dividend Reference Date"), all dividends
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which have accrued on each Exchangeable Share outstanding during the 12-month
period (or other period in case of the initial Dividend Reference Date) ending
upon each such Dividend Reference Date shall be accumulated and remain
accumulated dividends with respect to such Exchangeable Share until paid to the
holder thereof.
SECTION 3.4 If on any Dividend Reference Date on which any
dividends are payable on the Exchangeable Shares under Section 3.1 hereof the
dividends are not paid in full on all of the Exchangeable Shares then
outstanding, any such dividends which remain unpaid shall be paid on a
subsequent Dividend Reference Date on which the Corporation shall have
sufficient moneys, assets or property properly applicable to the payment of such
dividends.
SECTION 3.5 The record date for the determination of the holders
of Exchangeable Shares entitled to receive payment of, and the payment date for,
any dividend on the Exchangeable Shares under Section 3.1 hereof shall be the
date determined as the record date and payment date by the Board of
Directors.
ARTICLE 4
CERTAIN RESTRICTIONS
--------------------
SECTION 4.1 So long as any of the Exchangeable Shares are
outstanding, the Corporation shall not without, but may at any time with, the
approval of the holders of the Exchangeable Shares given as specified in Section
9.2 of these share provisions:
(a) at any time amend the constating documents of the Corporation in a
manner which would prejudicially affect the holders of Exchangeable
Shares in any material respect; or
(b) initiate the voluntary liquidation, dissolution or winding-up of the
Corporation nor take any action or omit to take any action that is
designed to result in the liquidation, dissolution or winding-up of
the Corporation.
SECTION 4.2 So long as any of the Exchangeable Shares are
outstanding and there exist any accrued and unpaid dividends on the outstanding
Exchangeable Shares, the Corporation shall not at any time without, but may at
any time with, the approval of the holders of the Exchangeable Shares given as
specified in Section 9.2 of these share provisions:
(a) pay any dividends on the Common Shares, or any other shares ranking
junior to be Exchangeable Shares, other than share
<PAGE>
-8-
dividends payable in any such other shares ranking junior to the
Exchangeable Shares;
(b) redeem or purchase or make any capital distribution in respect of
Common Shares or any other shares ranking junior to the Exchangeable
Shares with respect to the payment of dividends or on any
distribution; or
(c) redeem or purchase any other shares of the Corporation ranking equally
with the Exchangeable Shares with respect of the payment of dividends
or on any distribution.
SECTION 4.3 The Corporation shall not at any time after the
Effective Time issue any Exchangeable Shares.
ARTICLE 5
LIQUIDATION, DISSOLUTION OR WINDING-UP
--------------------------------------
SECTION 5.1 In the event of the liquidation, dissolution or winding-up
of the Corporation or any other distribution of the assets of the Corporation
among its shareholders for the purpose of winding-up its affairs, a holder of
Exchangeable Shares shall be entitled, subject to the exercise by ParentCo of
the Liquidation Purchase Right and otherwise upon compliance with the provisions
of this Article 5 and applicable law, to receive from the assets of the
Corporation in respect of each Exchangeable Share held by such holder on the
effective date of such liquidation, dissolution or winding-up (the "Liquidation
Date"), before any distribution of any part of the assets of the Corporation to
the holders of the Common Shares or any other shares ranking junior to the
Exchangeable Shares, an amount equal to the Exchangeable Share Price applicable
on the last Business Day prior to the Liquidation Date (the "Liquidation
Amount"), which as set forth in Section 5.2 shall, subject to the exercise by
ParentCo of the Liquidation Purchase Right, be fully paid and satisfied by the
delivery by or on behalf of the Corporation of the Exchangeable Share
Consideration representing such holder's Liquidation Amount. In connection with
payment of the Exchangeable Share Consideration representing the Liquidation
Amount, the Corporation shall be entitled to liquidate some of the ParentCo
Common Shares which would otherwise be deliverable to the particular holder of
Exchangeable Shares in order to fund any statutory withholding tax obligation.
On or before the Liquidation Date, the holder shall present and surrender at the
chief executive office of the Corporation the certificate or certificates
representing the Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of
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Exchangeable Shares under the Act and the constating documents of the
Corporation and such additional documents and instruments as the Corporation may
reasonable require.
SECTION 5.2 On or promptly after the Liquidation Date, and subject
to the exercise by ParentCo of the Liquidation Purchase Right, the Corporation
shall cause to be delivered to the holders of the Exchangeable Shares the
Exchangeable Share Consideration representing the Liquidation Amount for each
such Exchangeable Share upon presentation and surrender of the certificates
representing such Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
the Act and the constating documents of the Corporation and such additional
documents and instruments as the Corporation may reasonably require, at the
chief executive office of the Corporation. The Exchangeable Share Consideration
representing the Liquidation Amount for such Exchangeable Shares shall be
delivered to each holder at the address of the holder recorded in the securities
register of the Corporation for the Exchangeable Shares. On and after the
Liquidation Date, the holders of the Exchangeable Shares shall cease to be
holders of such Exchangeable Shares and shall not be entitled to exercise any of
the rights of holders in respect thereof, other than the right to receive their
proportionate share of the Exchangeable Share Consideration representing the
Liquidation Amount, unless payment of the Exchangeable Share Consideration
representing the Liquidation Amount for such Exchangeable Shares shall not be
made upon presentation and surrender of share certificates in accordance with
the foregoing provisions, in which case the rights of the holders shall remain
unaffected until the Exchangeable Share Consideration representing the
Liquidation Amount has been paid in the manner hereinbefore provided. The
Corporation shall have the right at any time on or after the Liquidation Date to
deposit or cause to be deposited the Exchangeable Share Consideration in respect
of the Exchangeable Shares represented by certificates that have not at the
Liquidation Date been surrendered by the holders thereof in a custodial account
or for safekeeping, in the case of non-cash items, with any chartered bank or
trust company in Canada. Upon such deposit being made, the rights of the holders
of Exchangeable Shares after such deposit shall be limited to receiving their
proportionate share of the Exchangeable Share Consideration representing the
Liquidation Amount for such Exchangeable Shares so deposited, against
presentation and surrender of the said certificates held by them, respectively,
in accordance with the foregoing provisions. Upon such payment or deposit of
such Exchangeable Share Consideration, the holders of the Exchangeable Shares
shall thereafter be considered and deemed for all purposes to be the holders of
the ParentCo Common Shares delivered to them.
SECTION 5.3 The Corporation, upon becoming aware that a liquidation,
dissolution or winding up may occur, shall immediately notify ParentCo thereof.
If ParentCo does not give a ParentCo Notice within fifty (50)
<PAGE>
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Business Days of such notification, the Corporation will notify the holder as
soon as possible thereafter that ParentCo will not exercise the Liquidation
Purchase Right. If ParentCo delivers the ParentCo Notice within such fifty (50)
Business Days, ParentCo shall be obliged to purchase the Exchangeable Shares in
accordance with the Put and Call Option Agreement. In such event, the
Corporation shall not make any distribution of the Liquidation Amount to the
holders of the Exchangeable Shares under Section 5.1 and for greater certainty,
the holders of the Exchangeable Shares shall have no right against the
Corporation in respect thereof. In the event that ParentCo does not deliver a
ParentCo Notice within fifty (50) Business Days, the Corporation shall
distribute the Liquidation Amount to the holders of the Exchangeable Shares on
or before the Liquidation Date in the manner otherwise contemplated in this
Article 5.
SECTION 5.4 After the Corporation has satisfied its obligations to
pay the holders of the Exchangeable Shares the Exchangeable Share Consideration
representing the Liquidation Amount per Exchangeable Share, such holders shall
not be entitled to share in any further distribution of the assets of the
Corporation.
ARTICLE 6
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
-------------------------------------------
SECTION 6.1 Subject to Section 6.5 hereof, a holder of Exchangeable
Shares shall be entitled at any time, on or after April 1, 2001 on giving the
Retraction Notice to the Corporation and subject to the exercise by ParentCo of
the Retraction Purchase Right, and otherwise upon compliance with the provisions
of this Article 6 and applicable law, to require the Corporation to redeem all
but not less than all of the Exchangeable Shares registered in the name of such
holder (the "Retracted Shares") for an amount equal to the Exchangeable Share
Price applicable on the last Business Day prior to the Retraction Date (the
"Retraction Price"), which as set forth in Section 6.4, shall, subject to the
exercise by ParentCo of the Retraction Purchase Right, be fully paid and
satisfied by the delivery by or on behalf of the Corporation of the Retraction
Price. In connection with payment of the Retraction Price, the Corporation
shall be entitled to deduct and withhold such amount as is required by
applicable law in order to fund any statutory withholding tax obligation. To
effect such retraction, the holder shall present and surrender at the chief
executive office of the Corporation the certificate or certificates representing
the Retracted Shares, together with such other documents and instruments as may
be required to effect a transfer of Exchangeable Shares under the Act and the
constating documents of the Corporation and such additional documents and
instruments as the Corporation may reasonably require, and together with a duly
executed statement (the "Retraction Notice") in the form of Schedule A hereto or
in such other form as may be acceptable to the Corporation:
<PAGE>
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(i) specifying that the holder desires to have all of the
Exchangeable Shares represented by such certificate or certificates
redeemed by the Corporation;
(ii) specifying the Retraction Date, which must be a Business Day
and which shall be the sixtieth (60/th/) day from the date on which the
Retraction Notice is received by the Corporation pursuant to Section 8.3
hereof (the "Retraction Date"), provided that in the event that no such
Business Day is specified by the holder in the Retraction Notice, the
Retraction Date shall be deemed to be the sixtieth (60/th/) day after the
date on which the Retraction Notice is received by the Corporation pursuant
to Section 8.3 hereof; and
(iii) acknowledging the Retraction Purchase Right - providing
ParentCo with the overriding right to purchase all but not less than all of
the Retracted Shares directly from the holder and that the Retraction
Notice shall be deemed to be a revocable offer by the holder to sell the
Retracted Shares in accordance with the Retraction Purchase Right on the
terms and conditions set out in Section 6.3 below.
SECTION 6.2 Subject to the exercise by ParentCo of the Retraction
Purchase Right, upon receipt by the Corporation in the manner specified in
Section 6.1 hereof of a certificate or certificates representing the Retracted
Shares, together with a Retraction Notice, and provided that the Retraction
Notice is not revoked by the holder in the manner specified in Section 6.6
hereof, the Corporation shall redeem the Retracted Shares effective at the close
of business on the Retraction Date and shall effect payment to the holder by
causing to be delivered to such holder a certified cheque of the Corporation
payable at par at any branch of the bankers of the Corporation or paying in
immediately available funds as directed by the holder in the amount of the
Retraction Price with respect to such shares in accordance with Section 6.4
hereof.
SECTION 6.3 Upon receipt by the Corporation of a Retraction Notice,
the Corporation shall immediately notify ParentCo thereof. If ParentCo does not
give a ParentCo Notice to the Corporation within fifty (50) Business Days of
such notification, the Corporation will notify the holder as soon as possible
thereafter that ParentCo will not exercise the Retraction Purchase Right. If
ParentCo delivers the ParentCo Notice within such fifty (50) Business Days, and
provided that the Retraction Notice is not revoked by the holder in the manner
specified in Section 6.6, ParentCo shall be considered to have agreed to
purchase the Retracted Shares from the holder and shall be obliged to purchase
such shares from the holder on the Retraction Date under the Put and Call Option
Agreement. In such event, the Corporation shall not redeem the Retracted Shares
and, for greater certainty, no redemption by the Corporation of such Retracted
Shares shall
<PAGE>
-12-
take place on the Retraction Date. In the event that ParentCo does not deliver
a ParentCo Notice within fifty (50) Business Days, and provided that the
Retraction Notice is not revoked by the holder in the manner specified in
Section 6.6 hereof, the Corporation shall redeem the Retracted Shares on the
Retraction Date and in the manner otherwise contemplated in this Article 6.
SECTION 6.4 On and after the close of business on the Retraction
Date, the holder of the Retracted Shares shall not be entitled to exercise any
of the rights of a holder in respect thereof, other than the right to receive
his proportionate share of the Retraction Price unless upon presentation and
surrender of certificates in accordance with the foregoing provisions, payment
of the Retraction Price shall not be made, in which case the rights of such
holder shall remain unaffected until the Retraction Price has been paid in the
manner hereinbefore provided. On and after the close of business on the
Retraction Date, provided that presentation and surrender of certificates and
payment of the Retraction Price has been made in accordance with the foregoing
provisions, the holder of the Retracted Shares so redeemed by the Corporation
shall thereafter be considered and deemed for all purposes not to be a holder of
the Retracted Shares.
SECTION 6.5 Notwithstanding any other provision of this Article 6
and of Article 3 hereof, the Corporation shall not have any obligation (whether
legal or otherwise) to redeem or to make any payment of dividends or redeem
Exchangeable Shares (or Retracted Shares) and no holder of Exchangeable Shares
(or Retracted Shares) shall be entitled to deliver a Retraction Notice or make
any request in any manner whatsoever for the Corporation to redeem or make any
payment in respect of any or all of the Exchangeable Shares (or Retracted
Shares) if to do so might:
(i) be contrary to liquidity or solvency requirements or other
provisions of applicable law, or
(ii) result in or give rise to a breach or default of any provision
of any contract or agreement relating to the financing of the
Corporation or any Affiliate, including without limitation the
Senior Finance Agreement and the Financing Documents ("the
Restrictive Provisions").
If the Corporation, in its discretion, believes that it would be permitted by
reasons of the Restrictive Provisions to redeem the Exchangeable Shares (or the
Retracted Shares) tendered for redemption, it shall not be required to so redeem
such Exchangeable Shares (or Retracted Shares) or any of them and the
Exchangeable Shares (or Retracted Shares) or any of them and the Retraction
Notice, or such other request, shall be null and void and of no effect
whatsoever.
<PAGE>
-13-
As at the date hereof, the Corporation is prohibited, pursuant to the Senior
Finance Agreement, from redeeming all or any of the Exchangeable Shares (or the
Retracted Shares) without the prior written consent to such redemption being
given in accordance with the provisions of the Senior Finance Agreement.
SECTION 6.6 A holder of Retracted Shares may, by notice in writing
given by the holder to the Corporation before the close of business on the
Business Day immediately preceding the Retraction Date, withdraw its Retraction
Notice in which event such Retraction Notice shall be null and void.
ARTICLE 7
REPURCHASE OF EXCHANGEABLE SHARES BY THE CORPORATION
----------------------------------------------------
SECTION 7.1 Subject to the Restrictive Provisions and applicable law,
the Corporation may by agreement with any holder of the Exchangeable Shares
repurchase such shares from time to time at a purchase price and on such terms
and conditions as are mutually agreed between the parties.
ARTICLE 8
VOTING RIGHTS
-------------
SECTION 8.1 Except as required by applicable law and the provisions
hereof, the holders of the Exchangeable Shares shall not be entitled as such to
receive notice of or to attend any meeting of the shareholders of the
Corporation or to vote at any such meeting.
ARTICLE 9
AMENDMENT AND APPROVAL
----------------------
SECTION 9.1 Subject to the Restrictive Provisions, the rights,
privileges, restrictions and conditions attaching to the Exchangeable Shares may
be added to, changed or removed but, except as hereinafter provided, only with
the approval of the holders of the Exchangeable Shares given as hereinafter
specified.
<PAGE>
-14-
SECTION 9.2 Subject to the Restrictive Provisions, any approval given
by the holders of the Exchangeable Shares to add to, change or remove any right,
privilege, restriction or condition attaching to the Exchangeable Shares or any
other matter requiring the approval or consent of the holders of the
Exchangeable Shares shall be deemed to have been sufficiently given if it shall
have been given in accordance with applicable law subject to a minimum
requirement that such approval be evidenced by a resolution passed by not less
than 66 2/3% of the votes cast on such resolution by persons represented in
person or by proxy or such other authorized person at a meeting of holders of
Exchangeable Shares duly called and held at which the holders of at least 50% of
the outstanding Exchangeable Shares at that time are present or represented by
proxy or such other authorized person. If at any such meeting the holders of at
least 50% of the outstanding Exchangeable Shares at that time are not present or
represented by proxy or such other authorized person within one-half hour after
the time appointed for such meeting then the meeting shall be adjourned to such
date not less than ten (10) days thereafter and to such time and place as may be
designated by the Chairman of such meeting. At such adjourned meeting the
holders of Exchangeable Shares present or represented by proxy or such other
authorized person thereat may transact the business for which the meeting was
originally called and a resolution passed thereat by the affirmative vote of not
less than 66 2/3% of the votes cast on such resolution by persons represented in
person or by proxy or such other authorized person at such meeting shall
constitute the approval or consent of the holders of the Exchangeable Shares.
For the purposes of this Section 9.2, any spoiled votes, illegible votes,
defective votes and abstinences shall be deemed to be votes not cast.
ARTICLE 10
RECIPROCAL CHANGES, ETC. IN RESPECT OF
PARENTCO COMMON SHARES
----------------------
ARTICLE 10.1 The Equivalent Number of ParentCo Common Shares and the
maximum number of such shares referred to in Section 2.1 hereof shall be
adjusted to fully reflect the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
ParentCo Common Shares), conversion, reorganization, recapitalization or other
like change with respect to ParentCo Common Shares occurring after the Effective
Time.
<PAGE>
-15-
ARTICLE 11
ACTIONS BY THE CORPORATION UNDER
SUPPORT AGREEMENT
-----------------------------
SECTION 11.1 The Corporation will take all such actions and do all
such things as shall be necessary or advisable to perform and comply with and to
ensure performance and compliance by ParentCo with all provisions of the Support
Agreement applicable to the Corporation and ParentCo, respectively, in
accordance with the terms thereof including, without limitation, taking all such
actions and doing all such things as shall be necessary or advisable to enforce
to the fullest extent possible for the direct benefit of the Corporation all
rights and benefits in favour of the Corporation under or pursuant thereto.
SECTION 11.2 The Corporation shall not propose, agree to or
otherwise give effect to any amendment to, or waiver or forgiveness of its
rights or obligations under, the Support Agreement without the approval of the
holders of Exchangeable Shares given in accordance with Section 9.1 of these
share provisions other than such amendments, waivers and/or forgiveness as may
be necessary or advisable for the purpose of:
(a) adding to the covenants of the other party or parties to such
agreement for the protection of the Corporation or the holders of
Exchangeable Shares; or
(b) making such provisions or modifications not inconsistent with such
agreement as any be necessary or desirable with respect to matters or
questions arising thereunder which, in the opinion of the Board of
Directors, it may be expedient to make, provided that the Board of
Directors shall be of the opinion, after consultation with counsel,
that such provisions and modifications will not be prejudicial to the
interests of the holders of the Exchangeable Shares; or
(c) making such changes in or corrections to such agreement which, on the
advice of counsel to the Corporation, are required for the purpose of
curing or correcting any ambiguity or defect or inconsistent provison
or clerical omission or mistake or manifest error contained therein,
provided that the Board of Directors shall be of the opinion, after
consultation with counsel, that such changes or corrections will not
be prejudicial to the interests of the holders of the Exchangeable
Shares.
<PAGE>
-16-
ARTICLE 12
LEGEND
------
SECTION 12.1 The certificate evidencing the Exchangeable Shares shall
contain or have affixed thereto a legend, in form and on terms approved by the
Board of Directors, with respect to or with reference to the Support Agreement,
the Put and Call Option Agreement, the Liquidation Purchase Right and the
Retraction Purchase Right.
ARTICLE 13
MISCELLANEOUS
-------------
SECTION 13.1 Any notice, request or other communication to be given to
the Corporation by a holder of Exchangeable Shares shall be in writing and shall
be valid and effective if given by mail (postage prepaid) or by telecopy or by
delivery to the chief executive office of the Corporation and addressed to the
attention of the President. Any such notice, request or other communication, if
given by mail, telecopy or delivery, shall only be deemed to have been given and
received upon actual receipt thereof by the Corporation.
SECTION 13.2 Any presentation and surrender by a holder of
Exchangeable Shares to the Corporation of certificates representing Exchangeable
Shares in connection with the liquidation, dissolution or winding-up of the
Corporation or the retraction or repurchase of Exchangeable Shares shall be made
by registered mail (postage prepaid) or by delivery to the chief executive
office of the Corporation addressed to the attention of the President of the
Corporation. Any such presentation and surrender of certificates shall only be
deemed to have been made and to be effective upon actual receipt thereof by the
Corporation and the method of any such presentation and surrender of
certificates shall be at the sole risk of the holder.
<PAGE>
-17-
SECTION 13.3. Any notice, request or other communication to be given
to a holder of Exchangeable Shares by or on behalf of the Corporation shall be
in writing and shall be valid and effective if given by mail (postage prepaid)
or by delivery to the address of the holder recorded in the securities register
of the Corporation or, in the event of the address of any such holder not being
so recorded, then at the last known address of such holder. Any such notice,
request or other communication, if given my mail, shall be deemed to have been
given and received on the fifth (5th) Business Day following the date of mailing
and, if given by delivery, shall be deemed to have been given and received on
the date of delivery. Accidental failure or omission to give any notice, request
or other communication to one or more holders of Exchangeable Shares shall not
invalidate or otherwise alter or affect any action or proceeding to be or
intended to be taken by the Corporation.
SECTION 13.4 For greater certainty, the Corporation shall not be
required for any purpose under these share provisions to recognize or take
account of persons who are not so recorded in such securities register.
SECTION 13.5 All Exchangeable Shares acquired by the Corporation upon
the redemption or repurchase thereof shall be cancelled.
SECTION 13.6 The Exchangeable Shares may be transferred by a holder
thereof without the approval of the Board of Directors to a "related person" of
such holder as defined in the Income Tax Act (Canada).
<PAGE>
SCHEDULE "A"
NOTICE OF RETRACTION
To the Corporation and ParentCo
This notice is given pursuant to Article 6 of the provisions (the
"Share Provisions") attaching to the share(s) represented by this certificate
and all capitalized words and expressions used in this notice which are defined
in the Share Provisions have the meaning attributed to such words and
expressions in such Share Provisions.
The undersigned hereby notifies the Corporation that, subject to the
Retraction Purchase Right referred to below, the undersigned desires to have the
Corporation redeem in accordance with Article 6 of the Share Provisions all
share(s) represented by this certificate.
The undersigned hereby notifies the Corporation that the Retraction
Date shall be _______________.
NOTE: The Retraction Date must be a Business Day and must be the sixtieth
(60/th/) day after the date upon which this notice is received by the
Corporation. In the event that no such Business Day is correctly
specified above, the Retraction Date shall be deemed to be the
sixtieth (60/th/) day being a Business Day after the date on which
this notice is received by the Corporation.
The undersigned acknowledges the Retraction Purchase Right of ParentCo
to purchase all but not less than all the Retracted Shares from the undersigned
and that this notice shall be deemed to be a recoverable offer by the
undersigned to sell the Retracted Shares to ParentCo in accordance with the
Retraction Purchase Right on the Retraction Date for the Retraction Price and on
the other terms and conditions set out in Section 6.3 of the Share Provisions.
If ParentCo determines not to exercise the Retraction Purchase Right, the
Corporation will notify the undersigned of such fact as soon as possible. This
notice of retraction, and offer to sell the Retracted Shares to ParentCo, may be
revoked and withdrawn by the undersigned by notice in writing given to the
Corporation at any time before the close of business on the Business Date
immediately preceding the Retraction Date.
<PAGE>
-2-
The undersigned hereby represents and warrants to the Corporation and
ParentCo that the undersigned has good title to, and owns, the share(s)
represented by this certificate to be acquired by the Corporation or ParentCo,
as the case may be, free and clear of all liens, claims, encumbrances, security
interests and adverse claims or interests.
___________________ ___________________________ _____________________________
(Date) (Signature of Shareholder) (Guarantee of Signature)
[_] Please check box if the legal or beneficial owner of the Retracted Shares
is a non-resident of Canada.
__________________________________________ __________________________________
Name of Person in Whose Name Securities or Date
Cheque(s) or Other Non-cash Assets Are To
Be Registered, Issued or Delivered (please
print)
__________________________________________ __________________________________
Street Address or P.O. Box Signature of Shareholder
__________________________________________ _________________________________
City, Province Signature Guaranteed by
<PAGE>
-11-
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date set out on the first page hereof.
DERBY INTERNATIONAL DERBY FINANCE S.a.r.l.
CORPORATION S.A.
By:________________ By:___________________
Title: Title:
THE DERBY CYCLE
DC CYCLE, L.L.C CORPORATION
By:________________ By:___________________
Title: Title:
RALEIGH INDUSTRIES OF
CANADA LIMITED PERSEUS CYCLE, L.L.C.
By:________________ By:___________________
Title: Title:
<PAGE>
-11-
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date set out on the first page hereof.
DERBY INTERNATIONAL DERBY FINANCES, S.a.r.l
CORPORATION S.A
By:_____________________ By:________________________
Title: Title:
THE DERBY CYCLE
DC CYCLE, LLC CORPORATION
By:_____________________ By:________________________
Title: Title:
RALEIGH INDUSTRIES OF
CANADA LIMITED PERSEUS CYCLE, LLC
By:_____________________ By: /s/[SIGNATURE ILLEGIBLE]^^
-----------------------
Title: Title:
<PAGE>
-11-
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date set out on the first page hereof.
DERBY INTERNATIONAL DERBY FINANCIAL S.a.r.l.
CORPORATION S.A.
By:____________________________ By:_______________________
Title: Title:
THE DERBY CYCLE
DC CYCLE, L.L.C. CORPORATION
By: /s/ [SIGNATURE ILLEGIBLE]^^ By:_______________________
----------------------------
Title: Title:
RALEIGH INDUSTRIES OF
CANADA LIMITED PERSEUS CYCLE, L.L.C.
By:____________________________ By:_______________________
Title: Title:
<PAGE>
-11-
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date set out on the first page hereof.
DERBY INTERNATIONAL DERBY FINANCE S.a.r.l
CORPORATION S.A
By:/s/ Alan J. Finden-Crofts By:/s/ Alan J. Finden-Crofts
--------------------------- ---------------------------
Title: Title:
THE DERBY CYCLE
DC CYCLE, L.L.C. CORPORATION
By:/s/ Alan J. Finden-Crofts By:/s/ Alan J. Finden-Crofts
--------------------------- ---------------------------
Title: Title:
RALEIGH INDUSTRIES OF
CANADA LIMITED PERSEUS CYCLE, L.L.C.
By:/s/ Alan J. Finden-Crofts By:/s/ Alan J. Finden-Crofts
--------------------------- ---------------------------
Title: Title:
<PAGE>
EXHIBIT 10.7
DCC SHARE OPTION AGREEMENT
THIS DCC SHARE OPTION AGREEMENT (the "Agreement") is made this 13/th/ day
of May, 1998 by and among THE DERBY CYCLE CORPORATION (dba Raleigh USA Bicycle
Company), a corporation organized and existing under the laws of Delaware,
having its principal office at 22710 72nd Avenue South, Kent, Washington 98032
(the "Company"), DERBY INTERNATIONAL CORPORATION S.A., a corporation (societe
-------
anonyme) organized and existing under the laws of the Grand Duchy of Luxembourg,
- -------
having its registered office at 5 Boulevard de la Foire, L-1528 Luxembourg,
Grand Duchy of Luxembourg ("Derby International"), DERBY FINANCE S.a.r.l., a
corporation (societe a responsibilite limitee) organized and existing under the
--------------------------------
laws of the Grand Duchy of Luxembourg, having its registered office at 15, rue
de la Chapelle, L-1325 Luxembourg, Grand Duchy of Luxembourg ("DFS"), DC CYCLE,
L.L.C., a limited liability company organized and existing under the laws of
Delaware, having its registered office at 1209 Orange Street, Wilmington,
Delaware ("LLC"), PERSEUS CYCLE, L.L.C., a limited liability company organized
and existing under the laws of Delaware, having its principal office at Suite
610, 1627 I Street, N.W., Washington, D.C 20006 ("Perseus") and RALEIGH
INDUSTRIES OF CANADA LIMITED, a corporation organized and existing under the
laws of Canada, having its registered office at 2124 London Lane, Oakville,
Ontario, L6H 5V8 Canada ("RIC").
WHEREAS, the Company, Derby International, DFS, LLC and Perseus are parties
to a certain Recapitalization Agreement dated as of March 11, 1998, as amended
(the "Recapitalization Agreement");
WHEREAS, DFS, LLC and Perseus hold or will hold all of the issued and
outstanding Class A Common Shares of the Company (the "Class A Common Shares")
and, in their capacity as shareholders of the Company, wish to agree to, and to
agree to cause the Company to perform its obligations under this Agreement;
WHEREAS, Derby International, holds or will hold all of the issued and
outstanding shares in the capital stock of DFS and, in its capacity as the sole
shareholder of DFS, Derby International wishes to agree to, and to agree to
cause DFS to perform its obligations under this Agreement;
<PAGE>
-2-
WHEREAS, pursuant to a reorganization of the capital structure of RIC (the
"Reorganization"), RIC has issued to Derby International fifteen thousand
(15,000) non-voting, cumulative, exchangeable and retractable preferred shares
(the "Exchangeable Shares") having attached thereto certain rights, privileges,
restrictions and conditions contained in the Articles of Continuance of the
Company, as amended by Articles of Amendment dated May 13, 1998, and as they may
otherwise be amended, varied or replaced from time to time (collectively, the
"Exchangeable Share Provisions");
WHEREAS, it is the intention of the parties that the Exchangeable Shares
shall have a fair market value at the Effective Time equal to the full fair
market value of RIC at the Effective Time, which fair market value was fully
reflected in the issued and outstanding Common Shares of RIC immediately before
the effective Time;
WHEREAS, in accordance with the Articles of Continuance of RIC, as amended,
and in order to implement the intention of the parties that, at the Effective
Time, the fair market value of the Exchangeable Shares is equal to the full fair
market value of RIC at the Effective Time, the Board of Directors of RIC have,
by resolution dated May 13, 1998, determined the Equivalent Number of ParentCo
Common Shares to be 15,000 Class B Common Shares (the "Class B Common Shares")
and 8,300 Class A Common Shares of the Company;
WHEREAS, in accordance with the Articles of Continuance of RIC, as amended,
and in particular in accordance with the Exchangeable Share Provisions, the
Board of Directors of RIC may, from time to time, adjust the Equivalent Number
of ParentCo Common Shares in order to insure that the fair market value of the
Exchangeable Shares at the Effective Time is equal to the full fair market value
of RIC at the Effective Time;
WHEREAS, pursuant to the Exchangeable Share Provisions, the holder of the
Exchangeable Shares may in certain circumstances receive the Equivalent Number
of ParentCo Common Shares as defined in the Exchangeable Share Provisions;
WHEREAS, pursuant to a Put and Call Option Agreement of even date between
the parties (the "Put and Call Option Agreement"), the holder of the
Exchangeable Shares may put and the Company may call the Exchangeable Shares.
<PAGE>
-3-
in certain circumstances, in exchange for the Equivalent Number of ParentCo
Common Shares (as defined in the Exchangeable Share Provisions);
WHEREAS, Derby International and the other parties hereto have agreed
pursuant to the Recapitalization Agreement on a value for the assets of Derby
International to be transferred to the Company (which value for this purpose
includes the fair market value of RIC) to be satisfied in part in cash, in part
by retention by DFS of Class A Common Shares of the Company and the purchase by
DFS of Class B Preferred Shares of the Company and in part by retention by Derby
International of the Exchangeable Shares;
WHEREAS, it is the intention of the parties that, at no time, shall
DFS and Derby International (and their respective Affiliates), hold or be deemed
to hold through exchange entitlements under the Exchangeable Shares from time
to time, by reason of rights or the exercise thereof under this Agreement, the
Put and Call Option Agreement, the Support Agreement of even date between the
parties hereto or otherwise, Class A Common Shares (in excess of an aggregate of
30,000 of such shares) and Class B Common Shares (in excess of an aggregate of
15,000 of such shares) of the Company, such holdings, for this purpose, to
include any Class A Common Shares or Class B Common Shares from time to time
held or to be held by DFS and the Equivalent Number of ParentCo Common Shares,
as determined by the Board of Directors of RIC, from time to time, in
accordance with the Exchangeable Share Provisions in respect of the
Exchangeable Shares held or to be held by Derby International; but shall not
include Class A Common Shares or Class B Common Shares of the Company purchased
by DFS, Derby International or their respective Affiliates or acquired by any of
them as Substitute Property (as defined in the Put and Call Option Agreement),
as a result of a Change or a Disposition (as such terms are defined in the Put
and Call Option Agreement), or as a result of dividends, distributions or other
payments on such shares; and
WHEREAS, pursuant to the Recapitalization Agreement, DFS will retain
21,700 Class A Common Shares in the Company at the Effective Time;
WHEREAS, in the event of an adjustment to the Equivalent Number of
ParentCo Common Shares, the parties have acknowledged and agreed that the value
of the other assets of Derby International transferred to the Company and of the
consideration received and retained by DFS and Derby International must be
increased or decreased, as the case may be, by a consequential and equal
offsetting
<PAGE>
-4-
adjustment so as to reflect the proper value of RIC and of the other assets
transferred;
WHEREAS, in furtherance of the intentions of the parties as described
above, the Company and DFS desire to agree to grant and receive the options
described in this Agreement and to take such other steps as may be required to
give effect thereto;
NOW, THEREFORE, in consideration of the mutual premises contained in
this Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Capitalized terms not otherwise defined herein shall have
-----------
the same meanings contained in the Exchangeable Share Provisions, the
Recapitalization Agreement, the Shareholders' Agreement (as defined in the
Recapitalization Agreement) and the Put and Call Agreement.
2. Calculations. For the purposes of calculating the Class A Entitlement
-------------
and the Class B Entitlement hereunder, no regard should be had to the effect of
any stock splits, reverse stock splits, combinations, consolidations or
recapitalizations and the like effecting the Class A Common Shares or the Class
B Common Shares of the Company (the "Adjustment Events"). For purposes of
determining the rights and obligations of the Company and DFS hereunder, the
Class A Deficit, the Class A Excess and the Class B Deficit as described herein
shall then be deemed to be the number of Class A Common Shares or Class B Common
Shares of the Company or Substitute Property (as defined in the Put and Call
Option Agreement) as shall be obtained by applying the terms and conditions of
the Adjustment Event(s) to the number of such shares included in such excess or
deficit before the adjustment.
3. Notice of Adjustment to Equivalent Number of ParentCo Common Shares.
-------------------------------------------------------------------
If the Equivalent Number of ParentCo Common Shares is at any time after the
Effective Time adjusted by the Board of Directors of RIC otherwise than as a
result of the application of Section 10.1 of the Exchangeable Share Provisions,
RIC shall immediately give notice in writing to the Company and the holders of
the Exchangeable Shares specifying the adjusted Equivalent Number of ParentCo
Common Shares and detailing the number of Class A Common Shares (the initial
number of such Class A Common Shares and any adjusted number of such Class A
<PAGE>
-5-
Common Shares being herein referred to as the "Class A Entitlement") and Class B
Common Shares (the initial number of such Class B Common Shares and any adjusted
number of such Class B Common Shares being herein referred to as the "Class B
Entitlement") of the Company included in such adjusted Equivalent Number of
ParentCo Common Shares and providing the basis on which such adjustment has been
made.
4. Class A Common Stock Options.
----------------------------
(a) On receipt of the notice from RIC described in Section 3 above,
and if the Class A Entitlement is less than eight thousand three hundred (8,300)
Class A Common Shares of the Company, then the parties agree to cause the
Company to issue to DFS, at one cent ($0.01) a share, such number of Class A
Common Shares of the Company as is equal to the number by which 8,300 Class A
Common Shares exceeds the Class A Entitlement (the "Class A Deficit").
(b) On receipt of the notice from RIC described in Section 3 above,
and if Class A Entitlement is greater than eight thousand three hundred (8,300)
Class A Common Shares of the Company, then the Company shall have the right to
require DFS to sell to the Company, for one cent ($0.01) a share, such number of
Class A Common Shares of the Company as is equal to the number by which the
Class A Entitlement exceeds 8,300 Class A Common Shares but is not more than
21,700 Class A Common Shares (the "Class A Excess").
5. Class B Common Stock Options.
----------------------------
(a) On receipt of the notice from RIC described in Section 3 above and if the
Class B Entitlement is less than fifteen thousand (15,000) Class B Common Shares
of the Company, then the parties agree to cause the Company to issue to DPS, at
one cent ($0.01) a share, such number of Class B Common Shares of the Company as
is equal to the number by which 15,000 Class B Common Shares exceeds the Class B
Entitlement (the "Class B Deficit").
<PAGE>
-6-
6. Precondition.
------------
(a) to the Exchangeable Share Provisions shall not be operative in
determining the rights and obligations of the parties under this Agreement and
the Put and Call Option Agreement to the extent that DFS does not, at the time
the adjustment is made, own such number of Class A Common Shares of the Company
as will permit it to perform its obligations hereunder or otherwise compensate
the Company for the adjustment on a basis mutually agreed by the parties hereto
or to the extent that if DFS owns such number of Class A Common Shares, DFS
fails to transfer such shares under Section 4(b) hereof or, after payment by DFS
of the subscription price therefor, the Company fails to issue such number of
Class A Common Shares or Class B Common Shares as it is required to issue to DFS
under Section 4(a) or 5(a) hereof.
(b) For purposes of clarification, the parties acknowledge and agree
that DFS, Derby International and their respective Affiliates (the Derby
Affiliates") shall not, by virtue of the provisions of this Agreement, the
Support Agreement, the Put and Call Option Agreement or the Exchangeable Share
Provisions have greater rights in respect of ownership of and/or voting powers
of the Company than the Derby Affiliates (including for avoidance of any doubt
DFS and Derby International) in the aggregate would have had if the only
interest that they had in the Company and its Subsidiaries at the Effective Time
was 30,000 Class A Common Shares and 15,000 Class B Common Shares and not, for
the avoidance of any doubt any Exchangeable Shares.
7. Consents and Waivers.
--------------------
(a) The parties hereby consent to any new issue of shares as
described in sections 4(a) and 5(a) above and consent to and waive all
restrictions (including, without limitation, any anti-dilution, rights of first
offer and any other restrictions or adjustments) contained in the Shareholders'
Agreement.
(b) The parties hereby consent to the redemption of shares as
described in Section 4(b) above and waive all restrictions (including, without
limitation, any rights of first offer and any other restrictions or adjustments)
otherwise contained in the Shareholders' Agreement and the Certificate of
Incorporation of the Company.
<PAGE>
-7-
(c) The parties agree to cause the Company to take all actions which
may be necessary or desirable to effect the issue or redemption of such Class A
Common Shares and Class B Common Shares of the Company in accordance with the
terms and conditions contained in its Certificate of Incorporation, as amended
and restated from time to time.
(d) The parties further agree to cause the Company to take all
actions which may be necessary or desirable to enable the Company to effect the
issue or redemption of such Class A Common Shares and Class B Common Shares of
the Company in accordance with the terms and conditions contained in its
Financing Documents, as amended and restated from time to time.
8. Reserve. The Company shall, and LLC, Perseus and DFS shall cause the
-------
Company to, maintain sufficient Class A Common Shares and Class B Common Shares
necessary to allow the issue of additional such shares in accordance with
Sections 4(a) and 5(a) above.
9. Further Action. In case at any time any further action is necessary to
--------------
carry out the purposes of this Agreement, each of the parties will take such
further action (including the execution and delivery of additional instruments
and documents) as any other party reasonably may request, all at the cost and
expense of the Company.
10. Amendments. This Agreement may not be waived, changed, modified or
----------
discharged orally, unless an agreement in writing is signed by all parties to
this agreement.
11. Assignment. Except as otherwise specifically provided herein, no party
----------
may assign any of its rights, interests or obligations hereunder without the
prior written consent of the other parties, which consent shall not be
unreasonably withheld; provided, however, that the Company may collaterally
assign its rights hereunder to any person providing financing to the Company.
12. Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which shall constitute one agreement, and each such
counterpart shall be deemed to have been made, executed and delivered on the
date set out at
<PAGE>
-8-
the head of this Agreement, without regard to the date when any of such
counterparts may actually have been made, executed or delivered.
13. Headings. The descriptive headings contained in this Agreement are for
--------
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
14. Notices. Any consent, communication or notice required or permitted to be
-------
given under this Agreement shall be made in writing and shall be deemed to have
been duly and validly given: (i) in the case of notice sent by letter or cable,
upon receipt of same; and (ii) in the case of notice sent by telefax, upon
express acknowledgment (also by telefax) of receipt of transmission by the
receiving party, addressed, in each case, as follows;
(a) if to LLC and Perseus at the address indicated at the head of this
Agreement with copy to:
Kirkland & Ellis
655 15th Street N.W.
Washington D.C 20005
Attention: Jack M. Feder, Esquire
Facsimile: 202-879-5200
(b) if to Derby International or DFS, to either or both at:
5 Boulevard de la Foire
L-1528 Luxembourg
Grand Duchy of Luxembourg
Telefax: 352-451-23201
Attention: Chairman
with a copy to:
Gottesman Jones & Partners
8 New Fetter Lane
London EC4A 1AP
Telefax: 44-171-203-5205
Attention: Sonya C. Park.
<PAGE>
-9-
and a copy to:
Stikeman, Elliott
1155 Rene-Levesque Boulevard West
40th Floor
Montreal, Canada H2B 3V2
Telefax: 514-397-3222
Attention: Elmore J. Richardson
(c) if to RIC or the Company, at their addresses set out at the head
of this Agreement
or at such other address and/or telefax number as either party may hereafter
furnish to the other by written notice, as herein provided.
15. No Waiver. The failure to enforce or to require the performance at any
---------
time of any of the binding provisions of this Agreement shall not be construed
to be a waiver of such provisions and shall not affect either the validity of
this Agreement or any part thereof or the right of either party to this
Agreement thereafter to enforce each and every provision in accordance with this
Agreement.
<PAGE>
-10-
16. Further Assistance. Each of the parties to this Agreement shall take
------------------
all actions necessary to effect the actions contemplated in this Agreement,
including without limitation, preparing and filing of Articles of Amendment to
create the Exchangeable Shares, blue sky and other securities filings and
transfer forms, and to execute and deliver such further instruments and take
such other additional action as the other parties to the Agreement may
reasonably request to effect, consummate and confirm the transactions
contemplated in this Agreement.
17. Governing Law and Jurisdiction. All questions concerning the
------------------------------
construction, validity and interpretation of this Agreement shall be governed by
and construed in accordance with the domestic laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York. Any legal action or proceeding with respect to any matter arising under or
in connection with this Agreement or the subject matter hereof may be brought in
the courts of the State of New York or of the United States of America for the
Southern District of New York, and, by execution and delivery of this Agreement,
each party hereto hereby accepts for themselves and in respect of their
property, generally and unconditionally, the jurisdiction of the aforesaid
courts.
<PAGE>
-11-
18. SEVERABILITY. If any provision of this Agreement is held to be
------------
invalid or unenforceable by any judgment of a tribunal of competent
jurisdiction, the remainder of the provisions of this Agreement shall not be
affected by such judgement and the understanding of the parties embodied in this
Agreement shall be carried out as nearly as possible according to their original
terms and intent.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date set out on the first page hereof.
DERBY INTERNATIONAL DERBY FINANCE S.a.r.l.
CORPORATION S.A.
By:________________ By:___________________
Title: Title:
THE DERBY CYCLE
DC CYCLE, L.L.C CORPORATION
By:________________ By:___________________
Title: Title:
RALEIGH INDUSTRIES OF
CANADA LIMITED PERSEUS CYCLE, L.L.C.
By:________________ By:___________________
Title: Title:
<PAGE>
-11-
18. SEVERABILITY. If any provision of this Agreement is held to be invalid
------------
or unenforceable by any judgment of a tribunal of competent jurisdiction the
remainder of the provisions of this Agreement shall not be affected by such
judgment, and the understanding of the parties embodied in this Agreement shall
be carried out as nearly as possible according to their original terms and
intent.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date set out on the first page hereof.
DERBY INTERNATIONAL DERBY FINANCIAL S.a.r.l
CORPORATION S.A.
By:/s/ Alan J. Finden-Crofts By:/s/ Alan J. Finden-Crofts
--------------------------- ---------------------------
Title: Title:
THE DERBY CYCLE
DC CYCLE, L.L.C. CORPORATION
By:/s/ Alan J. Finden-Crofts By:/s/ Alan J. Finden-Crofts
--------------------------- ---------------------------
Title: Title:
RALEIGH INDUSTRIES OF
CANADA LIMITED PERSEUS CYCLE, L.L.C.
By:/s/ Alan J. Finden-Crofts By:/s/ Alan J. Finden-Crofts
--------------------------- ---------------------------
Title: Title:
<PAGE>
-11-
18. Severability. If any provision of this Agreement is held to be invalid or
------------
unenforceable by any judgment of a tribunal of competent jurisdiction, the
remainder of the provisions of this Agreement shall not be affected by such
judgement, and the understanding of the parties embodied in this Agreement shall
be carried out as nearly as possible according to their original terms and
intent.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date set out on the first page hereof.
DERBY INTERNATIONAL DERBY FINANCE S.a.r.l.
CORPORATION S.A.
By:____________________________ By:____________________________
Title: Title:
THE DERBY CYCLE
DC CYCLE, L.L.C. CORPORATION
By: /s/ SIGNATURE ILLEGIBLE ^^ By:____________________________
----------------------------
Title: Title:
RALEIGH INDUSTRIES OF PERSEUS CYCLE, L.L.C.
CANADA LIMITED
By:____________________________ By:____________________________
Title: Title:
<PAGE>
-11-
18. SEVERABILITY. If any provision of this Agreement is held to be invalid or
------------
unenforceable by any judgment of a tribunal of competent jurisdiction, the
remainder of the provisions of this Agreement shall not be affected by such
judgement, and the understanding of the parties embodied in this Agreement shall
be carried out as nearly as possible according to their original terms and
intent.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date set out on the first page hereof.
DERBY INTERNATIONAL DERBY FINANCE S.a.r.l.
CORPORATION S.A.
By:_______________________ By:_______________________
Title: Title:
THE DERBY CYCLE
DC CYCLE, L.L.C CORPORATION
By:/s/ [SIGNATURE ILLEGIBLE]^^ By:
---------------------------
Title: _______________________
Title:
RALEIGH INDUSTRIES OF
CANADA LIMITED PERSEUS CYCLE, L.L.C.
By:_______________________ By:_______________________
Title: Title:
<PAGE>
-11-
18. Severability. If any provision of this Agreement is held to be invalid or
------------
unenforceable by any judgment of a tribunal of competent jurisdiction, the
remainder of the provisions of this Agreement shall not be affected by such
judgement, and the understanding of the parties embodied in this Agreement shall
be carried out as nearly as possible according to their original terms and
intent.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date set out on the first page hereof.
DERBY INTERNATIONAL DERBY FINANCE S.a.r.l.
CORPORATION S.A.
By:____________________________ By:____________________________
Title: Title:
THE DERBY CYCLE
DC CYCLE, L.L.C. CORPORATION
By:____________________________ By:____________________________
Title: Title:
RALEIGH INDUSTRIES OF PERSEUS CYCLE, L.L.C.
CANADA LIMITED
By:____________________________ By: /s/ SIGNATURE ILLEGIBLE ^^
----------------------------
Title: Title:
<PAGE>
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made this 14th day of May 1998 by and
between THE DERBY CYCLE CORPORATION, a corporation organized and existing under
the laws of the State of Delaware, with its registered office in the State of
Delaware at Corporation Trust Center, c/o CT Corporation, 1209 Orange Street,
Wilmington, DE 19801 (the "Company") and ALAN J. FINDEN-CROFTS, a British
subject residing at Willowhayne House, Tamarisk Way, The Willowhayne, East
Preston, Littlehampton, West Sussex BN16 2TE, England (the "Executive").
WHEREAS, the Company, Derby International Corporation SA ("DIC"),
Derby Finance S.a.r.l. ("DFS"), DC Cycle, L.L.C. ("LLC") and Perseus Cycle,
L.L.C. ("Perseus") have entered into a Recapitalization Agreement, dated March
11, 1998, contemplating the recapitalization of the Company (the
"Recapitalization") upon satisfaction of certain conditions;
WHEREAS, it is a condition to consummation of the Recapitalization
that Executive enter into an employment agreement with the Company to be
effective upon consummation of the Recapitalization;
WHEREAS, the Company and the Executive have agreed to execute this
Employment Agreement (this "Agreement") to set forth the rights and duties of
the Executive in respect of his employment with the Company following
consummation of the Recapitalization;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants set forth in this Agreement, the parties hereto agree as follows:
1. EFFECTIVENESS
Executive and the Company agree that the terms and conditions of
employment set forth below herein shall become effective immediately upon the
consummation of the Recapitalization (the "Effective Date"). At the Effective
Date, Executive acknowledges and agrees that his existing Second Amended &
Restated Employment Agreement dated December 31, 1994 with DIC shall terminate.
2. SERVICES OF EMPLOYEE
The Company hereby agrees to employ the Executive during the
Employment Period, as defined in paragraph 4 below, to perform the duties
specified in Appendix A attached to this Agreement and made a part hereof, and
the Executive hereby agrees to accept such employment by the Company, all on and
subject to the terms and conditions contained in this Agreement.
3. HOURS AND PLACES OF EMPLOYMENT
The Executive's services will be rendered primarily in the United
Kingdom of Great Britain and Northern Ireland, Germany, the Netherlands, the
other countries of continental Europe,
-1-
<PAGE>
the Republic of Ireland, South Africa, Canada and the United States of America.
The Executive will be required to travel on the Company's business to such
places as the Board of Directors or any duly authorized director or officer of
the Company shall designate from time to time. Executive shall report to the
Company's Board of Directors, and Executive shall devote his best efforts and
his full business time and attention, both within and outside working hours, to
the business and affairs of the Company and its Subsidiaries and performance of
his duties under this Agreement; provided that, the Executive shall be entitled
to devote up to 20 days per year to oversee his property business and to Exeter
International Corporation S.A., in each case so long as such activity does not
conflict with Executive's duties and obligations to the Company and its
Subsidiaries. Executives duties hereunder will require significant amount of
time working overseas and may necessitate residence in the Channel Islands
and/or North America. The Executive may engage in charitable and personal
business activities which do not conflict with his duties under this Agreement,
but the Executive shall not, without the consent of the Company, enter into any
other paid employment or agreement to provide services during the Employment
Period except with the consent of the Company.
4. EMPLOYMENT PERIOD
(a) The term of the Executive's employment under this Agreement (the
"Employment Period") shall begin on the Effective Date of this Agreement and
shall continue for a period of twelve (12) months (with the last day of such
twelve month period being referred to herein as the "Termination Day");
provided, however, that the Employment Period may be terminated as follows:
(i) in the event the Executive dies during the Employment Period,
the Employment Period shall terminate on the date of death, but the Executive's
remuneration shall continue until the end of the month in which his death
occurs;
(ii) in the event the Executive, by reason of physical or mental
disability (excluding infrequent and temporary absences due to ordinary
transitory illnesses), shall be unable for more than one hundred and eighty
(180) days in the aggregate during any consecutive twelve (12) month period to
perform the services required of him under this Agreement, the Employment Period
shall terminate at the end of the month following the month in which the Company
shall have given notice to the Executive of its intention to terminate the
Employment Period because of such disability; or
(iii) in the event the Executive shall become bankrupt or compound
with his creditors, or if the Executive shall be guilty of any serious or
persistent default or misconduct in connection with or affecting the business of
the Company, or of serious negligence in performing his duties hereunder, or if
the Executive shall be in breach of any law or any rule or regulation of any
regulatory authority which shall disqualify him from performing his duties under
this Agreement, the Employment Period shall terminate immediately upon receipt
by the Executive of notice in writing from the Company of termination of the
Employment Period.
(b) Should the Employment Period terminate by notice as provided for
in sub-paragraph (a) of this paragraph 4, the Executive shall not be entitled to
receive any payment from
-2-
<PAGE>
the Company under the United Kingdom Redundancy Payments Act 1965. For the
purposes of this Agreement, the Employment Period shall include and be deemed to
be continuous with the period of employment under the Employment Agreement.
5. REMUNERATION OF EMPLOYEE
The full and complete remuneration of the Executive for his services
under this Agreement shall be as set forth in Appendix B attached to this
Agreement and made a part hereof.
6. EXPENSES
The Executive is authorized to incur reasonable expenses in the
performance of his duties under this Agreement, on a basis consistent with the
policies of the Company and its Subsidiaries (as defined below) from time to
time, including expenses for business entertainment, travel and subsistence.
The Executive shall submit all claims for reimbursement of such expenses
directly to the Company or the Subsidiary for which such expenses were incurred,
and the Company shall ensure that such expenses are reimbursed to the Executive
within a reasonable time after submission by the Executive of an itemized
account of such expenses, together with such vouchers or receipts for individual
expense items as the Company or such Subsidiary may reasonably require.
7. PENSION AND LIFE ASSURANCE PLANS
The Company shall make provision for the Executive's inclusion in any
pension and/or life insurance plan which the Company or its Subsidiaries may
establish or maintain from time to time for senior executive employees, subject
to any conditions which the Company or the insurance company underwriting such
plan may impose with respect to participation in the plan; provided, however,
that the pension benefits provided shall be no less favourable to the Executive
than those set out in Appendix B to this Agreement.
8. VACATION
The Executive shall be entitled to five (5) weeks' vacation in each
calendar year during the Employment Period (in addition to the usual public
holidays in the United Kingdom), provided that such vacation shall be taken at
such time or times as the Board of Directors of the Company approves in advance.
9. REPORTS AND WRITTEN MATERIALS
The Executive shall promptly communicate and disclose to the Company
all information, data and materials obtained by him in the course of his
employment under this Agreement. All written reports, recommendations, advice,
records, documents and other materials prepared or obtained by the Executive or
coming into his possession in the course of his employment under this Agreement
shall, as between the Company and the Executive, be the sole and exclusive
property of the Company and, at the end of the Employment Period, or at the
request of the Company during the Employment Period, the Executive shall
promptly deliver all
-3-
<PAGE>
such materials to the Company or to such other person as the Company may direct.
The Executive shall prepare and submit to the Company such regular periodic
reports as the Company may request with respect to the activities undertaken by
him or conducted under his direction in the course of his employment under this
Agreement. As between the Company and the Executive, such reports and the
information contained therein shall be and remain the sole property of the
Company.
10. CONFIDENTIAL INFORMATION
Except as otherwise specifically agreed between the parties, the
Executive shall not, at any time during the Employment Period or thereafter,
communicate or disclose to any unauthorized person or use for his own account or
business any information, data, reports, recommendations, advice, records,
documents or other material referred to in paragraph 9 of this Agreement above,
or any other information concerning the business or affairs of the Company or
any of its Subsidiaries or associated companies. The obligations contained in
this paragraph 10 shall not apply in the event and to the extent that the
information, data, reports, recommendations, advice, records, documents or other
materials referred to in this paragraph 10 become generally known to or
available for use by the public, other than by an act or omission of the
Executive in violation of the terms of this Agreement.
11. ANNOUNCEMENTS
Neither party to this Agreement shall make any public announcement
relating to the Executive's employment by the Company without the prior consent
of the other party to this Agreement, which shall not be unreasonably withheld.
12. OFFICE FACILITIES
The Company shall make available to the Executive during the
Employment Period full office and secretarial facilities at such places as the
Company and the Executive shall agree.
13. NOTICES
All notices, demands, consents or other communications under this
Agreement shall be given or made in writing, and shall be delivered personally,
sent by certified or registered airmail with postage prepaid or transmitted by
telefax or courier service, addressed to the other party at the address set out
at the head of this Agreement or at such other address as may be designated by
notice from such other party; provided, however, that any communication sent by
telefax shall be confirmed by mail as prescribed in this paragraph. Any notice,
demand, consent or other communication given or made by mail in the manner
prescribed in this paragraph shall be deemed to have been received seven (7)
days after the date of mailing.
14. ADDITIONAL ACTION
-4-
<PAGE>
Each party to this Agreement shall execute and deliver such other
documents and do such other acts and things as may be necessary or desirable to
carry out the terms, provisions and purposes of this Agreement.
15. AMENDMENTS
This Agreement and the relationships of the parties in connection with
the subject matter of this Agreement may, upon the desire of the parties hereto
expressed in writing, be reviewed by the parties from time to time for such
purposes as the parties may choose to consider. Notwithstanding the foregoing,
no amendment, interpretation or waiver of any of the provisions of this
Agreement shall be effective unless made in writing and signed by the parties to
this Agreement.
16. ASSIGNMENT BY THE COMPANY; SUBSIDIARIES
This Agreement shall be binding upon and shall inure to the benefit of
the Company, its successors and assigns and any such successor or assigns shall
be deemed substituted for the Company as a party to this Agreement. The term
"successor" shall mean any person, firm, corporation or business entity which at
any time, whether by purchase, merger, assignment or otherwise, acquires all or
substantially all of the assets or business of the Company. The term
"Subsidiary" shall mean a corporation (or equivalent legal entity under the law
of any country) of which the Company owns directly or indirectly more than fifty
percent (50%) of the shares the holders of which are ordinarily and generally,
in the absence of contingencies or special arrangements, entitled to vote for
the election of directors (or the equivalent governing body of the corporation).
The Executive may be required to provide services under this Agreement to any
Subsidiary or associated company of the Company, and all such Subsidiaries or
associated companies shall be deemed to be included in the term "Company" for
the purposes of this Agreement, where the context so requires or permits.
17. ASSIGNMENT BY THE EXECUTIVE
This Agreement shall be binding upon and shall inure to the benefit of
the Executive, his legal representatives and assigns, except that the
Executive's obligations to perform services under this Agreement are personal
and are expressly declared to be non-assignable and non-transferable without the
consent of the Company.
18. ENFORCEMENT
The failure to enforce or to require the performance at any time of
any of the provisions of this Agreement shall in no way be construed to be a
waiver of such provisions, and shall not affect either the validity of this
Agreement or any part hereof or the right of any party thereafter to enforce
each and every provision in accordance with the terms of this Agreement. The
Executive acknowledges and agrees that a breach by him of his obligations under
paragraph 10 of this Agreement may cause the Company and any Subsidiary or
associated company to which the Executive provides services during the
Employment Period irreparable injury and damage. The Executive, therefore,
expressly agrees that, in addition to whatever other remedies may be available
-5-
<PAGE>
to the Company or such Subsidiaries and associated companies, the Company or any
other company which may be injured by default in the performance of such
obligations shall be entitled to injunctive and/or other equitable relief to
prevent a breach of such obligations and to secure their enforcement.
19. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement of the parties up to
the date hereof with respect to the Executive's employment by the Company and
his remuneration therefor.
20. GOVERNING LAW
This Agreement and the relationships of the parties in connection with
the subject matter of this Agreement shall be governed by and determined in
accordance with the laws of England.
21. SEVERABILITY
If any severable provision of this Agreement is held to be invalid or
unenforceable by any judgment of a tribunal of competent jurisdiction, the
remainder of this Agreement shall not be affected by such judgment, and the
Agreement shall be carried out as nearly as possible according to its original
terms and intent.
* * *
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year set out at the head of this Agreement.
THE DERBY CYCLE CORPORATION
By:_____________________________________ _________________________________
William W. Austin, Jr. ALAN J. FINDEN-CROFTS
Vice-President
<PAGE>
APPENDIX A
TO EMPLOYMENT AGREEMENT
The Executive's duties shall be to:
(a) serve as president and chief executive officer of the Company and
such of its Subsidiaries as shall be agreed between the Executive and the Board
of Directors of the Company;
(b) in cooperation with the chairman and the Board of Directors of the
Company, formulate and implement the overall policies and operating procedures
for the Company and its Subsidiaries;
(c) ensure that full, timely and accurate financial reports and
budgets are prepared and submitted for the Company and each of its Subsidiaries,
and participate in the presentation of such reports to the Board of Directors of
the Company, with the Executive's comments and recommendations thereon;
(d) take responsibility for the achievement of all financial
objectives and budgets for the Company and its Subsidiaries which are mutually
agreed by the Board of Directors of the Company and the Executive;
(e) establish and maintain contacts with senior executives of major
companies in the sporting goods and bicycle industries throughout the world, and
with government officials, representatives of trade and professional
organizations and members of the press and other media in order to maintain and
promote the name, reputation and business of the Company and its Subsidiaries;
(f) take responsibility for the recruitment, appointment, direction
and dismissal (where appropriate) of all senior executives of the Company and
its Subsidiaries;
(g) establish standards and procedures for evaluation of the
performance of senior executives of the Company and its Subsidiaries at all
times;
(h) to the extent elected by the Company's shareholders, serve as a
member of the Board of Directors of the Company and those Subsidiaries of the
Company agreed between the Executive and the chairman of the Company;
(i) in cooperation with the Board of Directors and the chairman of the
Company, maintain communication with the shareholders of and lenders to the
Company and its Subsidiaries;
(j) obtain and review data and information with respect to the
business of the Company and its Subsidiaries, as well as the sporting goods and
bicycle industries throughout the world, for the purpose of evaluating the
competitive position of the Company and its Subsidiaries and formulating
recommendations to the Board of Directors for acquisitions, disposals or
cooperative business arrangements appropriate for the Company or its
Subsidiaries; and
A-1
<PAGE>
(k) perform such other duties as may be assigned to the Executive by
the Board of Directors of Company from time to time which are consistent with
the status of the Executive as president and chief executive of the Company.
A-2
<PAGE>
APPENDIX B
TO EMPLOYMENT AGREEMENT
1. As the full and complete remuneration of the Executive for his
services under the Agreement to which this Appendix B is attached, the Company
shall:
(a) pay to the Executive during the Employment Period, by transfer to
a bank of the Executive's choice, a base salary at the rate of two hundred
thousand pounds sterling ((Pounds)200,000) a year, payable on the fifteenth
(15th) day of each month in twelve (12) equal installments;
(b) pay to the Executive a bonus for the 1998 fiscal year as follows:
(i) (Pounds)125,000 so long as PBIT (as defined below) is at
least (Pounds)14 million; plus
(ii) 2.5% of PBIT over (Pounds)14 million; plus
(iii) 2.5% of PBIT over (Pounds)15 million; plus
(iv) 1% of PBIT over (Pounds)18 million.
For example purposes only, Executive's bonus can be illustrated in tabular form
as follows:
<TABLE>
<CAPTION>
PBIT (im million pounds sterling) Bonus
--------------------------------- -----
<S> <C>
less than 14 (Pounds)0
14 (Pounds)125,000
15 (Pounds)150,000
16 (Pounds)200,000
17 (Pounds)250,000
18 (Pounds)300,000
19 (Pounds)360,000
20 (Pounds)420,000
21 (Pounds)480,000
</TABLE>
"PBIT" means consolidated profits on ordinary activities before interest
payments and taxation of the Company and its Subsidiaries for the 1998 fiscal
year, as shown on the audited financial statements of the Company and its
Subsidiaries for such year. PBIT shall include profits from acquisitions with
the exception of Diamondback, GT and other acquisitions of similar scope and
size. PBIT excludes non-executive director's fees and expenses.
Any bonus due the Executive shall be paid by the Company to the Executive within
the earlier of (i) seven (7) days after the date on which the Company's auditors
have both signed the Company's accounts and produced a certificate setting forth
the amount of, and calculations for, any bonus payment due the Executive, or
(ii) a later mutually agreed upon date .
(c) keep and maintain in effect during the Employment Period non-
contributory pension arrangements which provide to the Executive a pension at
age sixty (60) equal to two-thirds (2/3) of average annual base salary during
the last three (3) years of his employment prior to
B-1
<PAGE>
retirement age (or during the last year of such employment, if higher), with
lump-sum commutation benefits equal to the maximum permitted for approved
pension plans by the United Kingdom Inland Revenue.
(d) keep and maintain in effect during the Employment Period life and
disability insurance for the Executive which provides to his beneficiaries a
lump-sum benefit equal to four (4) times his base salary during the preceding
calendar year, together with widow's or dependent's pension and child allowances
related to the pension and life insurance benefits provided for herein;
(e) keep and maintain in effect during the Employment Period such
medical insurance and other employee health or accident benefits for the
Executive as shall be provided for from time to time in accordance with the
policy of the Company for persons of employee's age, grade and status, but in
any event to include all members of the Executive's immediate family; and
(f) pay or reimburse an agreed proportion of providing to the
Executive a suitable car approved by the chairman of the Company for use by him
in connection with his duties, including all charges and expenses in respect of
licenses, comprehensive insurance, repairs and maintenance, as well as the cost
of petrol and oil used by the Executive.
2. The Executive shall promptly apply for any social security benefits to
which he may become entitled in respect of ill-health or incapacity, and the
Executive shall forthwith notify the Company of the amount of any payment he
receives. The Company shall be entitled to deduct an amount equivalent to any
such payment from any amount which becomes due to the Executive under this
Agreement.
3. The Company shall be entitled to deduct and retain from any amounts
owed by the Company to the Executive any sum properly paid by the Company on
behalf of or at the request of the Executive, or any other sum due to the
Company by the Executive.
B-2
<PAGE>
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT is made this 14th day of May 1998 by and
between THE DERBY CYCLE CORPORATION, a corporation organized and existing under
the laws of the State of Delaware, with its registered office in the State of
Delaware at Corporation Trust Center, c/o CT Corporation, 1209 Orange Street,
Wilmington, DE 19801 (the "Company") and WILLIAM W. AUSTIN, JR. a United States
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citizen residing at 14626 S.E. 244th Street, Kent, Washington 98042, in the
United States of America (the "Executive").
---------
WHEREAS, the Company, Derby International Corporation SA ("DIC"),
---
Derby Finance S.a.r.l. ("DFS"), DC Cycle, L.L.C. ("LLC") and Perseus Cycle,
--- ---
L.L.C. ("Perseus") have entered into a Recapitalization Agreement, dated March
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11, 1998, contemplating the recapitalization of the Company (the
"Recapitalization") upon satisfaction of certain conditions;
- -----------------
WHEREAS, it is a condition to consummation of the Recapitalization
that Executive enter into an employment agreement with the Company to be
effective upon consummation of the Recapitalization;
WHEREAS, the Company and the Executive have agreed to execute this
Employment Agreement (this "Agreement") to set forth the rights and duties of
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the Executive in respect of his employment with the Company following
consummation of the Recapitalization;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants set forth in this Agreement, the parties hereto agree as follows:
1. EFFECTIVENESS
-------------
Executive and the Company agree that the terms and conditions of
employment set forth below herein shall become effective immediately upon the
consummation of the Recapitalization (the "Effective Date"). At the Effective
--------------
Date, Executive acknowledges and agrees that his existing Amended & Restated
Employment Agreement dated August 29, 1997 with DIC shall terminate.
2. SERVICES OF EMPLOYEE
--------------------
The Company hereby agrees to employ the Executive during the
Employment Period, as defined in paragraph 4 below, to perform the duties
specified in Appendix A attached to this Agreement and made a part hereof, and
the Executive hereby agrees to accept such employment by the Company, all on and
subject to the terms and conditions contained in this Agreement.
<PAGE>
3. HOURS AND PLACES OF EMPLOYMENT
------------------------------
The Executive's services will be rendered primarily in the United
States of America. The Executive may be required to travel on the Company's
business to such places outside the United States of America as the chief
executive or any duly authorized director or officer of the Company shall
designate from time to time. The Executive shall devote such time and attention
to the performance of his duties under this Agreement, both within and outside
normal working hours, as shall reasonably be required by the Company. The
Executive shall not, without the consent of the Company, enter into any other
paid employment or agreement to provide services during the Employment Period.
The Executive shall not be required to change his principal residence without
his prior consent.
4. EMPLOYMENT PERIOD
-----------------
The term of the Executive's employment under this Agreement (the
"Employment Period") shall begin on the Effective Date of this Agreement and
- ------------------
shall continue under this Agreement until the 65th birthday of the Executive on
October 3, 2002; provided, however, that the Employment Period may be terminated
by notice from either party to the other given at any time and received not less
than eighteen (18) months before the date of termination. The Employment Period
may also be terminated as follows:
(a) by the Company for any reason, the Employment Period shall
terminate immediately upon receipt by the Executive of notice in writing from
the Company of termination of the Employment Period, provided that, if the
Employment Period is terminated under this Section 4(a), the Executive shall be
entitled to his base salary (based upon the Executive's base salary set forth in
Appendix B, Section (a)) for the period through the earlier of (i) eighteen
months after such termination or (ii) October 3, 2002;
(b) in the event the Executive dies during the Employment Period, the
Employment Period shall terminate on the date of death, but the Executive's
remuneration shall continue until the end of the month in which his death
occurs;
(c) in the event the Executive, by reason of physical or mental
disability (excluding infrequent and temporary absences due to ordinary
transitory illnesses), shall be unable for more than one hundred and eighty
(180) days in the aggregate during any consecutive twelve (12) month period to
perform the services required of him under this Agreement, the Employment Period
shall terminate at the end of the month following the month in which the Company
shall have given notice to the Executive of its intention to terminate the
Employment Period because of such disability; or
(d) in the event the Executive shall become bankrupt or compound with
his creditors, or if the Executive shall be guilty of any serious or persistent
default or misconduct in connection with or affecting the business of the
Company, or of serious negligence in performing his duties hereunder, or if the
Executive shall be in breach of any law or any rule or regulation of any
regulatory authority which shall disqualify him from performing his duties under
this Agreement,
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<PAGE>
the Employment Period shall terminate immediately upon receipt by the Executive
of notice in writing from the Company of termination of the Employment Period.
5. REMUNERATION OF EMPLOYEE
------------------------
The full and complete remuneration of the Executive for his services
under this Agreement shall be as set forth in Appendix B attached to this
Agreement and made a part hereof.
6. EXPENSES
--------
The Executive is authorized to incur reasonable expenses in the
performance of his duties under this Agreement, on a basis consistent with the
policies of the Company and its Subsidiaries (as defined below) from time to
time, including expenses for business entertainment, travel and subsistence.
The Executive shall submit all claims for reimbursement of such expenses
directly to the Company or the Subsidiary for which such expenses were incurred,
the Chief Executive Officer of the Company shall review such expenses on a
monthly basis, and, upon the approval of the Chief Executive Officer of the
Company of such expenses, the Company shall ensure that such expenses are
reimbursed to the Executive within a reasonable time after submission by the
Executive of an itemized account of such expenses, together with such vouchers
or receipts for individual expense items as the Company or such Subsidiary may
reasonably require.
7. PENSION AND LIFE ASSURANCE PLANS
--------------------------------
The Company shall make provision for the Executive's inclusion in the
Company's 401K Savings Plan and such medical and dental benefit plans as the
Company shall make available to senior employees located in the United States
from time to time.
8. VACATION
--------
The Executive shall be entitled to four (4) weeks' vacation in each
calendar year during the Employment Period (in addition to the usual public
holidays in the United States), provided that such vacation shall be taken at
such time or times as the chief executive of the Company approves in advance.
9. REPORTS AND WRITTEN MATERIALS
-----------------------------
The Executive shall promptly communicate and disclose to the Company
all information, data and materials obtained by him in the course of his
employment under this Agreement. All information, data, reports,
recommendations, advice, records, documents and other materials prepared or
obtained by the Executive or coming into his possession in the course of his
employment under this Agreement shall, as between the Company and the Executive,
be the sole and exclusive property of the Company and, at the end of the
Employment Period, or at the request of the Company during the Employment
Period, the Executive shall promptly deliver all such materials to the Company
or to such other person as the Company may direct. The Executive shall prepare
and submit to the Company such regular periodic reports as the Company may
request with respect
-3-
<PAGE>
to the activities undertaken by him or conducted under his direction in the
course of his employment under this Agreement. As between the Company and the
Executive, such reports and the information contained therein shall be and
remain the sole property of the Company.
10. CONFIDENTIAL INFORMATION
------------------------
Except as otherwise specifically agreed between the parties, the
Executive shall not, at any time during the Employment Period or thereafter,
communicate or disclose to any unauthorized person or use for his own account or
business any information, data, reports, recommendations, advice, records,
documents or other material referred to in paragraph 9 of this Agreement above,
or any other information concerning the business or affairs of the Company or
any of its Subsidiaries or associated companies. The obligations contained in
this paragraph 10 shall not apply in the event and to the extent that the
information, data, reports, recommendations, advice, records, documents or other
materials referred to in this paragraph 10 become generally known to or
available for use by the public, other than by an act or omission of the
Executive in violation of the terms of this Agreement.
11. REVIEW OF THIS AGREEMENT
------------------------
On July 1, 1999 and July 1 of each calendar year thereafter during the
Employment Period, the parties shall review all of the provisions of this
Agreement to determine if any mutually agreed amendments or additions should be
made to the terms and conditions contained herein.
12. NON-COMPETITION
---------------
During the Employment Period and for a period of twelve (12) months
thereafter, the Executive shall not, except with the prior consent of the Board
of Directors of the Company, be directly or indirectly engaged, concerned or
interested in any activities which involve the manufacture, importing,
distribution or marketing of bicycle parts or accessories at any place where the
Company or its Subsidiaries are engaged in those activities at that time;
provided, however, that the Executive may remain or become a holder for the
purpose of investment only of any shares or other investments in any
partnership, company or corporation the business of which is competitive with
the business of the Company, its Subsidiaries or associated companies at such
time, so long as the Executive owns (together with his wife, siblings and
children) not more than five percent (5%) of the issued shares (or securities
convertible into shares) of such partnership, company or corporation.
13. NOTICES
-------
All notices, demands, consents or other communications under this
Agreement shall be given or made in writing, and shall be delivered personally,
sent by certified or registered airmail with postage prepaid or transmitted by
telefax or courier service, addressed to the other party at the address set out
at the head of this Agreement or at such other address as may be designated by
notice from such other party; provided, however, that any communication sent by
telefax shall be confirmed by mail as prescribed in this paragraph. Any notice,
demand, consent or other
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<PAGE>
communication given or made by mail in the manner prescribed in this paragraph
shall be deemed to have been received seven (7) days after the date of mailing.
14. ADDITIONAL ACTION
-----------------
Each party to this Agreement shall execute and deliver such other
documents and do such other acts and things as may be necessary or desirable to
carry out the terms, provisions and purposes of this Agreement.
15. AMENDMENTS
----------
No amendment, interpretation or waiver of any of the provisions of
this Agreement shall be effective unless made in writing and signed by the
parties to this Agreement.
16. ASSIGNMENT BY THE COMPANY; SUBSIDIARIES
---------------------------------------
This Agreement shall be binding upon and shall inure to the benefit of
the Company, its successors and assigns and any such successor or assigns shall
be deemed substituted for the Company as a party to this Agreement. The term
"successor" shall mean any person, firm, corporation or business entity which at
- ----------
any time, whether by purchase, merger, assignment or otherwise, acquires all or
substantially all of the assets or business of the Company. The term
"Subsidiary" shall mean a corporation (or equivalent legal entity under the law
- -----------
of any country) of which the Company owns directly or indirectly more than forty
percent (40%) of the shares the holders of which are ordinarily and generally,
in the absence of contingencies or special arrangements, entitled to vote for
the election of directors (or the equivalent governing body of the corporation).
The Executive may be required to provide services under this Agreement to any
Subsidiary or associated company of the Company, and all such Subsidiaries or
associated companies shall be deemed to be included in the term "Company" for
the purposes of this Agreement, where the context so requires or permits.
17. ASSIGNMENT BY THE EXECUTIVE
---------------------------
This Agreement shall be binding upon and shall inure to the benefit of
the Executive, his legal representatives and assigns, except that the
Executive's obligations to perform services under this Agreement are personal
and are expressly declared to be non-assignable and non-transferable without the
consent of the Company.
18. ENFORCEMENT
-----------
The failure to enforce or to require the performance at any time of
any of the provisions of this Agreement shall in no way be construed to be a
waiver of such provisions, and shall not affect either the validity of this
Agreement or any part hereof or the right of any party thereafter to enforce
each and every provision in accordance with the terms of this Agreement. The
Executive acknowledges and agrees that a breach by him of his obligations under
paragraphs 10 and 11 of this Agreement may cause the Company and any Subsidiary
or associated company to which
-5-
<PAGE>
the Executive provides services during the Employment Period irreparable injury
and damage. The Executive, therefore, expressly agrees that, in addition to
whatever other remedies may be available to the Company or such Subsidiaries and
associated companies, the Company or any other company which may be injured by
default in the performance of such obligations shall be entitled to injunctive
and/or other equitable relief to prevent a breach of such obligations and to
secure their enforcement.
19. ENTIRE AGREEMENT
----------------
This Agreement constitutes the entire agreement of the parties up to
the date hereof with respect to the Executive's employment by the Company and
his remuneration therefor.
20. GOVERNING LAW
-------------
This Agreement and the relationships of the parties in connection with
the subject matter of this Agreement shall be governed by and determined in
accordance with the laws of the State of Washington, in the United States of
America.
21. SEVERABILITY
------------
If any severable provision of this Agreement is held to be invalid or
unenforceable by any judgment of a tribunal of competent jurisdiction, the
remainder of this Agreement shall not be affected by such judgment, and the
Agreement shall be carried out as nearly as possible according to its original
terms and intent.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year set out at the head of this Agreement.
THE DERBY CYCLE CORPORATION
By: ______________________________
Alan J. Finden-Crofts
President and CEO
______________________________
WILLIAM W. AUSTIN, JR.
<PAGE>
APPENDIX A
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TO EMPLOYMENT AGREEMENT WITH
----------------------------
WILLIAM W. AUSTIN, JR.
----------------------
The Executive's duties shall be to:
(a) serve as the president of the Company's United States operations
as currently conducted and in such other executive positions of the Company and
its Subsidiaries as shall be agreed between the Executive and the Board of
Directors of the Company;
(b) in cooperation with and under the direction of the chief executive
of the Company, formulate and implement the overall policies and operating
procedures for the Company's United States operations as currently conducted by
Raleigh USA Bicycle Company ("Raleigh USA");
-----------
(c) in cooperation with and under the direction of the chief executive
of the Company, formulate and implement strategic planning and marketing, sales,
manufacturing, distribution and financial policies for Raleigh USA;
(d) in cooperation with and under the direction of the chief executive
of the Company, formulate and implement operating procedures for Raleigh USA,
including operating procedures on marketing, sales, manufacturing, importing,
distribution, financial reporting, internal cost controls, budgeting and
budget/cost analysis, working capital management, banking and capital spending
controls, product pricing and credit management;
(e) ensure that full, timely and accurate financial reports and
budgets are prepared and submitted by Raleigh USA to the Company, and
participate in the presentation of such reports to the Board of Directors of the
Company, with the Executive's comments and recommendations thereon;
(f) take responsibility for the achievements of all financial
objectives and budgets for Raleigh USA;
(g) establish and maintain contacts with senior executives of major
companies in the bicycle industry throughout the world, and with governmental
officials, representatives of trade and professional organizations and members
of the press and other media in order to maintain and promote the name,
reputation and business of Raleigh USA, as well as the brands of bicycles,
bicycle parts and accessories and related products manufactured and sold by that
company;
(h) establish and maintain contacts with banking institutions,
external auditors, legal counsel, tax counsel and government tax officials;
-8-
<PAGE>
(i) in cooperation with and under the direction of the chief executive
of the Company, take responsibility for the recruitment, appointment, direction
and dismissal (where appropriate) of senior executive and financial staff of
Raleigh USA;
(j) in cooperation with and under the direction of the chief executive
of the Company, establish standards and procedures for evaluation of the
performance of the senior executive staff of Raleigh USA at all times;
(l) in cooperation with the Board of Directors and the chief executive
of the Company, participate in communications with the shareholders of and
lenders to the Company and its Subsidiaries;
(m) assist the chairman of the Board of Directors and chief executive
of the Company in the identification and development of new products,
appropriate manufacturing technology, additional markets, proposed acquisitions,
dispositions and cooperative business arrangements and improved management
controls and operating procedures of and for companies in the bicycle industry;
and
(n) perform such other duties as may be assigned to the executive by
the Board of Directors and chief executive of the Company from time to time
which are consistent with the status of the Executive as the president of
Raleigh USA.
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<PAGE>
APPENDIX B
----------
TO EMPLOYMENT AGREEMENT WITH
----------------------------
WILLIAM W. AUSTIN, JR.
----------------------
1. The full and complete remuneration of the Executive for his services
under the Agreement to which this Appendix B is attached shall be as follows:
(a) the Company shall pay to the Executive during the Employment
Period, by transfer to a bank of the Executive's choice, a base salary at the
rate of two hundred and fifty-five thousand United States dollars ($255,000) a
year, payable semi-monthly in arrears in twenty-four (24) equal installments
each year;
(b) for each calendar year during the Employment Period, beginning
with calendar year 1998, the Company shall pay to the Executive a bonus of up to
fifty percent (50%) of his base salary upon the achievement of financial targets
for Raleigh USA for such calender year, with such financial targets to be agreed
between the Executive and the chief executive of the Company;
(c) the Company shall pay during the Employment Period the lease and
insurance costs for an automobile for the Executive's use with a list price of
up to thirty-six thousand United States dollars ($36,000), based on a four year
lease of such vehicle; and
(d) the Company shall reimburse to the Executive for the cost of
professional subscriptions which are relevant to his position and duties with
the Company or Raleigh USA.
2. The Executive shall promptly apply for any social security benefits to
which he may become entitled in respect of ill-health or incapacity, and the
Executive shall forthwith notify the Company of the amount of any payment he
receives. The Company shall be entitled to deduct an amount equivalent to any
such payment from any amount which becomes due to the Executive under this
Agreement.
3. The Company shall be entitled to deduct and retain from any amounts
owed by the Company to the Executive any sum properly paid by the Company on
behalf of or at the request of the Executive, or any other sum due to the
Company by the Executive.
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<PAGE>
EXHIBIT 12.1
PAGE 1 OF 1
THE DERBY BICYCLE GROUP
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS, EXCEPT RATIO AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR THREE MONTHS ENDED
------------------------------------------- -----------------------
PRO FORMA
PRO FORMA MARCH 29, MARCH 29,
1993 1994 1995 1996 1997 1997 1998 1998
----------- ---- ---- ---- ---- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income from operations
before income taxes.... 17.8 11.9 23.5 23.5 23.4 10.4 6.5 3.0
Add
Fixed charges.......... 12.3 12.7 11.6 10.1 9.7 22.0 2.6 6.2
Capitalized interest... -- -- -- -- -- -- -- --
Amortization of
capitalized interest.. -- -- -- -- -- -- -- --
Net losses related to
certain 50% or less
owned affiliate....... -- -- -- -- -- -- -- --
Minority interest in
consolidated
affiliates............ 1.1 1.0 0.1 -- -- -- -- --
---- ---- ---- ---- ---- ---- --- ---
Adjusted earnings....... 31.2 25.6 35.2 33.6 33.1 32.4 9.1 9.2
==== ==== ==== ==== ==== ==== === ===
Fixed charges:
Interest on debt and
capitalized leases.... 10.5 10.5 9.4 8.0 7.5 19.3 1.8 5.3
Amortization of debt
financing............. 0.1 0.5 0.5 0.5 0.6 1.1 0.2 0.3
Portion of rents repre-
sentative of the in-
terest factor......... 1.7 1.7 1.7 1.6 1.6 1.6 0.6 0.6
Debt service guarantee
interest expense of
unconsolidated
affiliates............ -- -- -- -- -- -- -- --
---- ---- ---- ---- ---- ---- --- ---
Total fixed charges..... 12.3 12.7 11.6 10.1 9.7 22.0 2.6 6.2
==== ==== ==== ==== ==== ==== === ===
Ratio of earnings to
fixed charges.......... 2.5 2.0 3.0 3.3 3.4 1.5 3.5 1.5
==== ==== ==== ==== ==== ==== === ===
</TABLE>
<PAGE>
EXHIBIT 21.1
Subsidiaries of Derby Cycle Corporation
---------------------------------------
Abingdon Rubber & Tyre Co. (1970) Ltd.
Abraham Brothers (P&A) (Pty) Ltd.
Armstrong Cycles Ltd.
Auto Velos Ltd.
Beatty & Crabbe Ltd.
Bicycle Manufacturers Ltd.
Bike Handels GmbH
The British Cycle Corporation Ltd.
BSA Cycles Ireland Ltd.
BSA Cycles Ltd.
Carlton Cycles Ltd.
Centurn Investments N.V.
Century Cycle Manufacturing Corporation
Curragh Finance Co.
Cycle Finance Co. (Pty) Ltd.
Cyclemark Trust
Cycsad Engineering (Pty) Ltd.
Derby Component Manufacturing (Pty) Ltd.
The Derby Cycle Corporation
Derby Cycle Werke GmbH
Derby Fahrrader GmbH
Derby Nederland BV
Derby Finance NV
Derby Holding BV
Derby Holding Ltd.
Derby Industries Ltd.
Derby Industries (Pty) Ltd.
Derby Investments Holdings (Pty) Ltd.
Derby Holding (Deutschland) GmbH
Derby (HK) Trading Co. Ltd.
Derby Trading Co. Inc.
E. Wiener Bike-Parts GmbH
Gazelle Cycle Co. Ltd.
The Hercules Cycle & Motor Co. (Ireland) Ltd.
The Hercules Cycle & Motor Co. Ltd.
InterDerby Group Finance NV
The Irish Engineering Co. Ltd.
The Irish Raleigh Cycle Co. Ltd.
J.A. Phillips & Co. Ltd.
JB Brooks & Co. Ltd.
J.H. Slotar & Co. (Pty) Ltd.
Koninklinjke Gazelle B.V.
<PAGE>
Lyon Cycle BV
Moulton Bicycles Ltd.
MS Sport Vertriebs AG
MS Sport Vertriebs GmbH
New Hudson Cycle Co. Ltd.
NV Dierense Maatschapij Tot Exploitatie van Wonigen en Assurantien
NW Sportergate GmbH
Norman Cycles Ltd.
Phillips Cycles Ltd.
PI Manufacturing (Pty) Ltd.
Probike South Africa (Pty) Ltd.
Raboisen Zweihunderterste (201) Vermogensverwaltungs GmbH (to be renamed Derby
WS Vermogensverwaltungs GmbH, pending registration of approval of name change by
German authorities)
Raleigh Cycles (South Africa) (Pty) Ltd.
Raleigh BV
Raleigh BVBA
Raleigh Fahrrader GmbH
Raleigh Industries Limited
Raleigh Industries of Canada Limited
Raleigh Ireland Ltd.
Raleigh Europe BV
Raleigh Technical Services S.A.
Raleigh (Services) Ltd.
The Raleigh Cycle Corporation
Raleigh International Limited
Raleigh Technical Services Ltd.
The Rambler Cycle Co. Ltd.
Reliable Cycle Co. (Pty) Ltd.
The Robin Hood Cycle Co. Ltd.
Rudge Whitworth Ltd.
Rudge-Whitworth (Ireland) Ltd.
Sturmey Archer Europa BV
Sturmey-Archer Limited
Sturmey-Archer of America Inc.
The Sun Cycle & Fittings Co. Ltd.
Sunbeam Cycle Co. Ltd.
Shenzen Raleigh Industrial Development Co. Ltd.
Triumph Cycle Co. Ltd.
Univega Beteiligungen GmbH
Univega Worldwide GmbH
Winora-Staiger GmbH
The Wright Saddle Co. Ltd.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our firm included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
Washington, D.C.
August 10, 1998
