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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Year ended December 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES ACT OF 1934
For Transition Period from __________ to __________
Commission File Number 0001067447
THE DERBY CYCLE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-1038896
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Simon Goddard
The Derby Cycle Corporation
22710 72nd Avenue South
Kent, Washington 98032
(Address of principal executive offices, including zip code)
Telephone: (253) 395-1100
(Registrant's telephone number, including area code)
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THE DERBY CYCLE CORPORATION
1998 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
PART I
ITEM 1. BUSINESS........................................................... 1
ITEM 2. PROPERTIES......................................................... 8
ITEM 3. LEGAL PROCEEDINGS.................................................. 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 9
PART II
ITEM 5. MARKET FOR THE REGISTRANTS UNITS AND RELATED UNITHOLDER
MATTERS ........................................................... 10
ITEM 6. SELECTED HISTORICAL FINANCIAL AND OPERATING DATA................... 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.......................................... 12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................ 25
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE................................ 25
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT................. 26
ITEM 11. EXECUTIVE COMPENSATION............................................. 29
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..... 31
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 36
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8 - K. 37
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PART I
ITEM 1. BUSINESS
Nature of the Business
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 through May 14, 1998. Up to that date DICSA owned
shares, either directly or indirectly, in a number of bicycle and bicycle
component companies worldwide that predominantly operate as stand-alone
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 have significant operations
in the Netherlands ("Gazelle"), the United Kingdom ("Raleigh UK", and "Sturmey
Archer"), Canada ("Raleigh Canada"), Germany ("Derby Germany"), South Africa
("Probike") and the United States (" the Raleigh USA" division of the Company).
Effective May 14, 1998, DICSA reorganized its businesses in connection with a
recapitalization agreement so that each of its bicycle and bicycle component
companies are owned directly or indirectly by The Derby Cycle Corporation, a
Delaware corporation with operations in the United States. The accompanying
consolidated financial statements have been prepared to reflect the financial
position and results of operations of the Company and its subsidiaries from May
14, 1998 through December 31, 1998. Accordingly, the financial statements have
been prepared in conformity with accounting principles generally accepted in the
United States and are presented in United States dollars.
References to the "Company" throughout this document mean The Derby Bicycle
Group through May 14, 1998 and The Derby Cycle Corporation and its subsidiaries
from May 14, 1998 through December 31, 1998.
Overview
The Company is a world-leading designer, manufacturer and marketer of bicycles.
The Company holds the leading market share in the United Kingdom, The
Netherlands, Canada 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, the Company
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. The Company 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.
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, the
Company expanded into the United States and Germany in 1988. Since then, the
Company has acquired additional well-known brands and leveraged its existing
manufacturing plants and component sourcing operations to
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lower unit costs for its acquired businesses.
Since 1990, the Company 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, the Company built a factory in Rostock, in the former German
Democratic Republic. The Company completed its internal reorganization and
investment program in 1996, having made major steps toward improving production
efficiency and increasing manufacturing flexibility.
The Company's operations are concentrated in the United Kingdom, the
Netherlands, Germany, the United States and Canada, with manufacturing
operations in these countries, each led by experienced local management.
The Company maintains marketing or purchasing operations in five additional
countries. (See Financial Statements page F-25 for details of segmental
information). 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.
Business Strategy
The Company intends to enhance and leverage its competitive strengths through
the following business strategies:
Capitalize on Strength of The Company's Brand Names.
The Company 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 the Company's local
operations and brands (e.g., more than 100 years each for Raleigh UK 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 Management
believes the Company is well-positioned to capitalize on this growth.
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.
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Acquisition History and Investment Program
The Company was organized in 1986 to acquire the Raleigh, Gazelle and
Sturmey-Archer bicycle and bicycle component businesses from TI Group plc. In
1988, the Company acquired the assets of Neue Kalkhoff, the second largest
bicycle manufacturer in the former Federal Republic of Germany at the time, and
established Derby Germany. Also in 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. The Company formed the 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, the Company
acquired Musing, the German bicycle manufacturer.
In 1997, the Company acquired the assets and operations of the Winora and
Staiger businesses, long-established bicycle manufacturer and distributor
located in southwestern Germany. In 1997, Derby acquired the worldwide rights to
the Univega brand name and its associated trade names, trademarks and designs
and formed Univega to serve as a holding company for the acquisition of the MS
Sport Group in Germany from Robert Holzer.
On February 4, 1999, the Company acquired the assets (and assumed certain
liabilities) of the Diamond Back Group for approximately $42.75 million in cash.
The Diamond Back Group consists of Diamond Back International Company Limited, a
private British Virgin Islands company, Western States Import Company Inc., a
Delaware corporation and Bejka Trading A.B., a private Swedish company , each of
which is engaged in the bicycle, bicycle parts and accessories and fitness
equipment distribution business.
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 months 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.
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
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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. The purpose of anti-dumping duties is to promote fair competition between
domestic and foreign suppliers of bicycles by increasing the cost of
foreign-supplied bicycles to domestic fair market value. Such anti-dumping
duties work by imposing a payment due to be made by the importer at the time of
clearing customs. The impact of such anti-dumping duties is to increase the
retail price of imported bicycles, thus enabling domestic manufacturers to
compete more fairly with imported bicycles. 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 continued in effect until
September 1998. The E.U. has also imposed anti-dumping duties and tariffs,
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. Subsequently, anti-dumping duties
were imposed by the E.U. on Taiwan on August 24, 1998 at various rates for
different manufacturers. With respect to the imposition of anti-dumping duties
on Taiwanese bicycles completely assembled at the time of import, management
believes the level of the anti-dumping duties imposed on Taiwanese bicycle
manufacturers is not sufficient to offset the impact of the current currency
devaluation in Taiwan. While management cannot predict how long the value of the
New Taiwan dollar may remain depressed relative to the value of the U.S dollar,
management believes the Company is able to realize significant offsetting gains
in its purchases of Taiwanese components which allow the Company, to a certain
extent, to offer lower prices on bicycles produced by the Company which utilize
such Taiwanese components.
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.
The Recapitalization
On May 14, 1998, the Company consummated a recapitalization. Pursuant to a
Recapitalization Agreement dated March 11, 1998 (as amended, the
"Recapitalization Agreement"), (i) the Company was restructured (the
"Restructuring") such that the Company 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
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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 the Company 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 the Company and Raleigh Canada having a value of $45.0
million (the "Retained Equity"), based on the amounts invested in the Company'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 the Company 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, the
Company and Raleigh Canada (the "Raleigh Canada Exchange Agreement"). In
addition, (i) the Company made a cash payment of approximately $146.2 million to
DFS (the "DFS 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 "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 $148.1 million;
(iv)the Company and certain of its subsidiaries borrowed approximately $84.9
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"), as of
May 14, 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".
Investor Group
Subsequent to the Recapitalization, and the issue of Class C common stock in
February 1999, the Company's shareholders are (i) a wholly-owned subsidiary of
Thayer, which controls approximately 65% of the total voting power of the
Company's capital stock, (ii) a wholly-owned subsidiary of Perseus, which
controls approximately 13% of the total voting power of the Company's capital
stock, and (iii) DFS, which controls approximately 20% of the total voting power
of the Company's capital stock. Prior to the Recapitalization, the Company was
wholly-owned by DICSA through its subsidiary, DFS.
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, a director of
the Company, 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
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a director of the Company and a director of DICSA and Mr. Pearl, a director of
the Company and a director of DICSA, own minority interests in DICSA.
Competitive Strengths
Global Industry Leader.
The Company is a world-leading designer, manufacturer and marketer of bicycles.
The Company holds the leading market share in the United Kingdom, The
Netherlands, Canada 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. The Company's leading market shares in
multiple markets position it as a global bicycle industry leader and reduce its
vulnerability to local economic cycles and changing consumer preferences.
Portfolio of Well-Recognized Brand Names.
The Company 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 97% prompted recognition in the United Kingdom
and is the second most recognized bicycle brand in the United States with
respect to brands sold through IBDs. 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. The Company'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. The Company'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 and Ireland. For example,
Raleigh UK has approximately 225 exclusive retail outlets, while its nearest
competitor has none. In The Netherlands, Gazelle distributes through
approximately 1,500 dealers, representing more than 60% of the IBDs in the
country, and in Germany, Derby Germany is one of the largest suppliers to the
Zweirad-Einkaufs-Genossenschaft ("ZEG"), a major retail cooperative that
supplies approximately 50% 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.
The Company 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
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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.
The Company 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.
The Company has a strong and experienced management team at both the corporate
and operating levels. The Company's twelve 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 the Company's brands and product lines. In mid-January 1999, the
Company hired Gary S. Matthews as the new chief executive officer to replace Mr.
Alan Finden-Crofts. Mr. Finden-Crofts will serve as a consultant to the Company
for four months thereafter in order to ensure a smooth transition. Mr.
Finden-Crofts will remain a shareholder of the Company (indirectly through DFS),
and a director of the Company.
Global Bicycle Industry Overview
The global bicycle industry, including bicycles, parts and accessories, is
estimated to have total retail sales in excess of $20 billion. 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.
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ITEM. 2. PROPERTIES
The Company manufactures at sites in the UK, the Netherlands, Germany, Canada
and the USA. Except for the USA, these manufacturing sites are owned by the
Company. The USA manufacturing site and certain warehouse and office facilities
in Europe, South Africa and Taiwan, are leased. See the following tables on
freehold and leasehold properties. The Company believes that it has satisfactory
title to or valid rights to the use of all of its material properties.
Operating entity Location Freehold property
Raleigh UK Nottingham, England Factory and offices
Gazelle Dieren, The Netherlands Factory and offices
Derby Germany Cloppenburg, Germany Factory and main offices
Derby Germany Rostock, Germany Factory
Derby Germany Sennfeld, Germany Factory and offices
Raleigh Canada Oakville, Canada Offices and warehouse
Raleigh Canada Waterloo, Canada Factory
Sturmey-Archer Nottingham, England Factory and offices
Sturmey-Archer Birmingham, England Factory
Operating entity Location Leasehold property
Raleigh USA Kent, Washington Factory, warehouses
and offices
Raleigh USA Hanover Park, Illinois Warehouse
Raleigh USA Paulsboro, New Jersey Warehouse
Derby Germany Osnabruck, Germany Offices
Derby Germany Kircheim, Germany Offices and warehouse
Derby Germany Isernhagen, Germany Offices and warehouse
Derby Germany Nidwailden, Switzerland Offices and warehouse
Raleigh Europe Amsterdam, The Netherlands Offices
Raleigh Europe Antwerp, Belgium Offices
Sturmey-Archer Amsterdam, The Netherlands Offices
Probike Bloemfontein, South Africa Offices and warehouse
Probike Sandton, South Africa Offices and warehouse
Probike Port Elizabeth, South Africa Offices and warehouse
Probike Durban, South Africa Offices and warehouse
Probike Ottery, Cape, South Africa Offices and warehouse
Raleigh Ireland Dublin, Republic of Ireland Offices and warehouse
Derby Trading Co Taipei, Taiwan Offices
Derby Trading Co Taichung, Taiwan Offices
Derby Trading Co Shen-zen, China Offices and warehouse
The Company 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.
All the freehold property and intellectual property is pledged as security for
the Company's seven year revolving credit facility of DM214,000,000.
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ITEM 3. LEGAL PROCEEDINGS
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 the Company'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.
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 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.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
9
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANTS UNITS AND RELATED UNITHOLDER MATTERS
There is no established public trading market for any class of equity.
The Company had the following shares in issue:
<TABLE>
<CAPTION>
December 31,
1997 through May December March
May 14, 1998 14, 1998 31, 1998 28, 1999
------------ -------- -------- --------
<S> <C> <C> <C> <C>
Common stock held by DFS(1) 3,000 - - -
Class A common stock held by DFS(1, 3) - 21,700 21,700 21,700
Class A common stock held by DC Cycle - 12,500 12,500 12,500
Class A common stock held by Perseus - 10,000 10,000 10,000
Class A common stock held by CEO(5) - - - 1,500
Class A common stock held by DICSA(3) - 8,300 8,300 8,300
Class B common stock held by DICSA(3) - 15,000 15,000 15,000
Class C common stock held by DC Cycle(4) - - - 22,750
Class A preferred stock(2) 5,000 - - -
Class B preferred stock(2) 5,000 - - -
Class C preferred stock(2) 53,432 - - -
Class D preferred stock(2) 45,000 - - -
Series A preferred stock held by DC Cycle - 25,000 25,000 25,000
Series B preferred stock held by DFS - 3,000 3,000 3,000
</TABLE>
(1) At the time of the Recapitalization, the 3,000 common stock of $1 each
held by DFS were converted into 21,700 Class A common stock of $0.01 each.
(2) Classes A, B, C and D preferred stock in issue before the
Recapitalization, were surrendered by the Company as part of the
Recapitalization.
(3) 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.
(4) Issued on acquisition of Diamond Back after December 31, 1998.
(5) Issued to CEO after December 31, 1998.
10
<PAGE>
ITEM 6. SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
Selected Historical Financial Data
Set forth below are selected historical financial data of the Company in $
millions as of the dates and for the periods presented. The selected historical
financial data as of December 31, 1996, 1997 and 1998 were derived from the
audited combined financial statements of the Company. The selected unaudited
historical financial data of the Company as of December 31, 1994, and 1995 were
prepared by management in a manner consistent with the audited consolidated
financial statements. The information contained in this table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations - ITEM 7" and the consolidated financial statements
and accompanying notes thereto in sections F1 to F30.
<TABLE>
<CAPTION>
For the years ended December 31,
---------------------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net revenues.................................... $ 432.6 $ 473.8 $ 452.6 $ 465.7 $ 465.3
Cost of sales................................... (332.5) (366.2) (339.1) (345.9) (350.3)
-------- -------- -------- -------- --------
Gross profit.................................... 100.1 107.6 113.5 119.8 115.0
Selling, general, and administrative expenses... (77.4) (81.3) (80.1) (90.1) (91.0)
Reorganization costs............................ - (4.4) - - -
Recapitalization costs.......................... - - - - (5.9)
-------- -------- -------- -------- --------
Operating income................................ 22.7 21.9 33.4 29.7 18.1
Interest expense................................ (10.5) (9.4) (8.0) (7.5) (16.9)
Interest income................................. 1.1 0.9 0.8 1.0 1.0
Other income (expense), net..................... (1.4) 10.0 (2.7) 0.1 (1.3)
-------- -------- -------- -------- --------
Income before income taxes, minority interest
and extraordinary item..................... 11.9 23.4 23.5 23.3 0.9
Provision for income taxes...................... (6.1) (10.1) (8.9) (10.6) (6.3)
Minority interest............................... (0.2) (0.1) - (0.1) (0.1)
Extraordinary item.............................. - - - - (0.4)
-------- -------- -------- -------- --------
Net income (loss)............................... 5.6 13.2 14.6 12.6 (5.9)
Dividends on preferred stock - - - - (4.9)
-------- -------- -------- -------- --------
Net income (loss) applicable to common
shareholders $ 5.6 $ 13.2 $ 14.6 $ 12.6 $ (10.8)
======== ======== ======== ======== ========
For the years ended December 31,
---------------------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
Depreciation and amortization................... $ 8.3 $ 9.2 $ 8.8 $ 9.2 $ 10.2
Amortization of pension transition asset........ (2.5) (2.7) (2.7) (2.5) (2.5)
Capital expenditures............................ $ 7.0 $ 11.1 $ 10.8 $ 7.4 $ 8.3
December 31,
---------------------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
Cash and cash equivalents....................... $ 21.8 $ 12.7 $ 8.8 $ 15.4 $ 17.5
Working capital................................. 96.9 85.3 80.0 63.3 73.2
Total assets.................................... 250.3 263.3 260.6 288.5 325.3
Total debt, including current portion........... 93.7 92.0 78.6 102.2 226.7
Preferred stock with redemption rights.......... - - - - 45.4
Stock rights (a)................................ - - - - 23.3
Shareholders' equity (deficit).................. $ 56.3 $ 66.1 $ 83.1 $ 81.9 $ (70.1)
</TABLE>
11
<PAGE>
(a) 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.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
The following discussion should be read in conjunction with the attached audited
consolidated financial statements.
The Company is a world-leading designer, manufacturer and marketer of bicycles.
Competing primarily in the medium- to premium-priced market, the Company 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 years ended December 31, 1996,
1997 and 1998, the Company had net revenues of $452.6 million, $465.7 million
and $465.3 million, respectively, and EBITDA of $39.0 million, $35.8 million and
$30.3 million, respectively.
The Company operates in ten countries around the world with a majority of its
operations conducted in countries other than the United States. In 1998, 55% of
the Company's net revenues were denominated in currencies within the European
Monetary System, 18% were denominated in pounds Sterling and 27% were
denominated in other currencies. 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. See Note 8 of the "Notes to
Consolidated Financial Statements".
The Company is a net importer of products from Asian markets and was adversely
impacted by the Asian currency depreciation in late 1997, as noted at Raleigh UK
and Raleigh International under the Net Revenues and Gross Profit sections of
this discussion respectively.
Results of Operations
Comparison of year ended December 31, 1998 to year ended December 31, 1997
All comparisons in the following discussion and analysis are against the
corresponding twelve month period ended December 31, 1997, unless otherwise
stated.
12
<PAGE>
Net Revenues: Year ended,
---------------------
$ millions Dec 31, Dec 31,
1997 1998
------- -------
Raleigh UK............................................. $ 107.3 $ 82.1
Gazelle................................................ 107.8 111.5
Derby Germany.......................................... 103.8 125.1
Raleigh USA............................................ 57.9 69.1
Raleigh Canada......................................... 29.5 28.8
Sturmey-Archer......................................... 29.6 23.8
Probike................................................ 20.6 17.0
Other companies and group transactions................. 9.2 7.9
------- -------
Total net revenues................................ $ 465.7 $ 465.3
======= =======
Net Revenues. Net revenues decreased by $0.4 million to $465.3 million for the
year ended December 1998. In local currencies, net revenues increased by 2.6%
over the same period. The decrease in U.S. dollar terms for the year compared
with the increase in local currency figures was due primarily to the
strengthening of the U.S. dollar against the Deutsche Mark and the Dutch
guilder.. Units sold decreased 46,000 units in the year ended December 1998.
In continental Europe, Gazelle's business benefited from the buoyant Dutch
market, while strong consumer demand through the end of 1997 drove beginning
1998 inventory levels down for Dutch retailers. Net revenues in local currency
increased 6.7% in the year ended December 1998.
Derby Germany benefited from sales of Univega bicycles, a business which the
Company did not own in the first seven months of 1997. The private label and
trade businesses also contributed to year-over-year revenue increases. In local
currency, Derby Germany's revenues increased 25.1% in the year ended December
1998, of which 5.2% of the increase was represented by Univega.
Revenues at Raleigh USA increased 21.7% in the year ended December 1998
respectively. The improvement is attributable to the improved product range as
well as to sales under the Univega brand. The Company purchased the previously
loss-making Univega brand in 1997 and successfully re-launched it in the USA in
the fall of that year, contributing 6.3% of the revenue increase in the year. In
Canada revenues grew by only 2.8% due to the postponement of an order by a major
private label account resulting from their poor retail sales.
The United Kingdom businesses (Raleigh UK and Sturmey-Archer) have been
negatively impacted by the strength of sterling, and by competitive pricing. As
an exporter of components, Sturmey-Archer's Dutch guilder based revenues have
been reduced on conversion into sterling by a 4.7% depreciation of the guilder,
whereas Shimano, the main competitor, gained from a 5.1% favorable movement in
the Japanese Yen. The other major competitor, Sachs, lowered prices aggressively
to reduce high inventory levels following a change in ownership. A slight
increase in Sturmey-Archer's selling prices in guilder terms to recoup some of
the margin loss, led to lower volume sales. Following resolution of an
intellectual property dispute, a redesigned 7-speed hub has been introduced for
the 1999 season, which should re-capture some of the business lost in 1998.
Revenues were further reduced by the loss of a major customer in the German
automotive industry, although new business has since been gained to replace
that. These factors produced an overall decline in revenues of 20.2% for the
year ended December 1998.
Raleigh UK specified its product range for the 1998 season to maintain selling
prices close to 1997 levels, giving enhanced margins through reduced component
costs due to the strength of sterling and price reductions gained from vendors.
However competitors, who gained a bigger cost advantage from the fall in Asian
currencies by having their own manufacturing based in Asia, passed their cost
savings on to consumers by giving more highly specified products at no increase
in price. This produced a
13
<PAGE>
12.9% drop in revenues for the half year ended June 1998 as compared to the
corresponding period in 1997. Management responded by upgrading the
specification of products to remain competitive. However the market was further
weakened by poor summer weather in the United Kingdom, Ireland and the
Netherlands and a supply chain temporarily over-stocked with Taiwanese products
imported to beat the introduction of EU anti-dumping duties on Taiwan in August
1998 and weak UK Christmas retail market conditions. The UK market is estimated
at 2.5 million units in 1998, a fall of approximately 10% compared with 1997,
which was predominantly in the second half of the year. As a result, revenues in
the half year ended December 1998 dropped by 32.2%. This resulted in revenues of
$82.1 million for the year ended December 1998, 23.4% less than the
corresponding period in 1997. Action has been taken at Raleigh UK to improve the
competitiveness of the product line for 1999, to further incentivise retailers
to sell Raleigh product and to reduce selling, general and administrative
expense in 1999.
Gross Profit. Gross profit for the year ended December 1998 fell by $4.8 million
on the same revenue dollars, representing a 1.0 percentage point margin
decrease. Margins were enriched at Raleigh USA by effective product management
and the effect of Japanese Yen weakness on component costs. However, this was
offset by the impact of the strength of sterling on the conversion of export
revenues at Sturmey-Archer, lower production recoveries at Sturmey-Archer and
Raleigh UK as production was cut-back in line with sales demand, together with
the cost to Raleigh UK of enhanced product specifications. In addition, the
worldwide licensing operations of Raleigh International included in "Other
Companies" saw a $0.8 million fall in licensing revenues following the
difficulties in Asian financial markets, which both inhibited licensees' ability
to pay royalties and reduced their US dollar value. Moreover the Raleigh
distribution operations in Ireland, Germany and The Netherlands (also included
in "Other Companies") saw a $1.7 million fall in gross profit due to lower sales
volume and margin erosion. These companies have been reorganized since the year
end to reduce selling, general and administrative expense to give a position
close to break-even.
Selling, General and Administrative Expenses. For the year ended December, 1998,
expenses of $91.0 million increased by $2.5 million, or 1.0%, over the
comparable period in 1997 when translated into US dollars: aggregate expenses in
local currency increased by 3.0%. The inclusion of costs from the acquisitions
of Winora-Staiger and Univega for the whole period in 1998, compared with their
gradual phasing-in during 1997, plus cost inflation, and one-time costs of $1.6
million in the quarter and year ended December 1998 were counter-balanced by
one-time cost items of $2.9 million which arose during the year ended December
1997 and currency gains of $2.0 million which were realized in September 1998.
Operating Income: Year ended,
----------------------
$ millions Dec 31, Dec 31,
------- -------
1997 1998
Raleigh UK............................................ $ 13.1 $ 3.2
Gazelle............................................... 13.4 14.8
Derby Germany......................................... (2.2) (0.5)
Raleigh USA........................................... (2.0) 2.7
Raleigh Canada........................................ 2.8 2.6
Sturmey-Archer........................................ 3.4 0.6
Probike............................................... 2.1 1.2
Other companies and group transactions................ (0.9) (0.6)
------- -------
Underlying operating income........................... 29.7 24.0
Recapitalization costs................................ - (5.9)
------- -------
Total operating income........................... $ 29.7 $ 18.1
======= =======
Operating Income. Underlying operating income of $24.0 million for the year
ended December 1998 decreased by $5.7 million, over the comparable period in
1997 due to the lower gross margin and higher
14
<PAGE>
selling general and administrative expense.
Recapitalization costs of $5.9 million include legal, accounting and investment
banking fees incurred in connection with implementing the Recapitalization on
May 14, 1998. These costs resulted in lower total operating income for the year
ended December 1998.
Interest expense. Interest expense increased by $9.5 million for the year ended
December 1998 to $16.9 million due to the increased debt and higher interest
rate margin following the Recapitalization.
Other Income (Expense), Net. The other expense of $1.0 million for the half year
ended June 1998, represented the reduction in market value of the outstanding
interest rate swap contracts upon their amortization over the remaining term and
the loss upon their early termination due to the Recapitalization. The expense
of $0.3 million for the quarter ended September 1998 represented the reduction
in mark-to-market value of currency options and interest caps. These were
purchased to safeguard the Company's ability to service its debt from any
weakening of the foreign currencies in which it earns its income and increases
in interest rates over the following three years.
Provision for Income Taxes. The effective tax rate on income before income taxes
and extraordinary item increased from 45% in 1997 to over 100% in 1998,
primarily due to Recapitalization expenses of $5.9 million and $6.5 million of
interest on the Senior Notes for which the related tax benefit has been fully
reserved, together with unrelieved current year losses in Germany of $6.4
million, which will be carried forward to future years.
Extraordinary Item. The extraordinary item of $0.4 million in the year ended
December 1998, represents a $0.6 million charge for the loss on the early
retirement of debt on May 14, 1998, in connection with the Recapitalization,
less the related tax benefit of $0.2 million.
Net Income. Net income decreased by $18.5 million in the year ended December
1998. The decreases were primarily the result of the $9.5 million increase in
interest expense, $6.0 million fall in underlying operating income that occurred
in the last quarter of the year, $5.9 million in Recapitalization costs May 1998
and the $0.6 million losses on the early retirement of debt and the early
termination of the swaps, less the $0.2 million related tax benefit.
EBITDA: Year ended,
---------------------
$ millions Dec 31, Dec 31,
1997 1998
Raleigh UK............................................. $ 14.9 $ 4.7
Gazelle................................................ 13.9 15.3
Derby Germany.......................................... 0.6 2.6
Raleigh USA............................................ (1.4) 3.1
Raleigh Canada......................................... 3.1 2.9
Sturmey-Archer......................................... 3.3 0.7
Probike................................................ 2.3 1.4
Other companies and group transactions................. (0.9) (0.4)
------- -------
Total EBITDA...................................... $ 35.8 $ 30.3
======= =======
EBITDA. EBITDA of $30.3 million for the year ended December 1998 decreased by
over $5 million due to changes in underlying operating income explained above.
Comparison of year ended December 31, 1997 to year ended December 31, 1996
15
<PAGE>
Net Revenues: Year ended
---------------------
$ millions Dec 31, Dec 31,
1996 1997
------- -------
Raleigh UK........................................ $ 107.4 $ 107.3
Gazelle........................................... 120.8 107.8
Derby Germany..................................... 82.4 103.8
Raleigh USA....................................... 53.5 57.9
Raleigh Canada.................................... 29.5 29.5
Sturmey-Archer.................................... 30.1 29.6
Probike........................................... 20.5 20.6
Other companies and group transactions............ 8.4 9.2
------- -------
Total net revenues........................... $ 452.6 $ 465.7
======= =======
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 UK's net revenues decreased $0.1 million, or 0.1%, from 1996. In local
currency, Raleigh UK's net revenues declined 4.5%. Raleigh UK'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%.
Derby Germany's net revenues increased $21.4 million, or 26%, from 1996. In
local currency, Derby Germany's net revenues increased 43.9%. Derby Germany'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 Derby
Germany 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 C$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.
Raleigh UK's gross profit increased by $4.9 million, or 19.2%, from 1996, and
gross margin increased
16
<PAGE>
from 23.6% to 28.2%. In local currency, gross profit increased (pound)2.3
million, or 14.2%. Favorable exchange rate movements and lower component costs
benefited Raleigh UK The benefits of factory reorganizations at Raleigh UK 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
f0.4 million, or 0.8%.
Derby Germany'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 Derby Germany, 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 Derby Germany and contributed to increased
labor costs. A favorable shift in product mix to high specification models at
Derby Germany required a greater amount of labor input than required for
traditional Derby Germany 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 C$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: Year ended
---------------------
$ millions Dec 31, Dec 31,
1996 1997
------- -------
Raleigh UK............................................ $ 7.5 $ 13.1
Gazelle............................................... 16.2 13.4
Derby Germany......................................... 1.1 (2.2)
Raleigh USA........................................... (0.7) (2.0)
Raleigh Canada........................................ 2.8 2.8
Sturmey-Archer........................................ 5.5 3.4
Probike............................................... 2.0 2.1
Other companies and group transactions................ (1.0) (0.9)
------- -------
Total operating income........................... $ 33.4 $ 29.7
======= =======
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.
17
<PAGE>
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 a 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.
Liquidity and capital resources
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. 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 months 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
extended credit terms during the months prior to the Peak Season, although the
Company encourages early payments through trade discounts.
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 $14.2 million to a $3.3
million outflow for 1998 from $11.0 million provided in 1997. This decrease was
due to a $12.7 million reduction in net income, excluding the Recapitalization
costs, and a $2.9 million greater inventory increase. Inventories increased by
$13.0 million in 1998, compared with $10.1 million in 1997 due to Gazelle's
higher in-transit inventories resulting from the greater use of imported
derailleurs and hub gears in the Dutch product range for the 1999 model. Net
cash flows from operating activities decreased $0.9 million to $11.0 million for
1997 from $11.9 million for 1996.
Net cash flows from financing activities increased in 1998 to $18.8 million
compared with $8.5 million provided by financing activities in 1997,
representing bank borrowings to fund the cash outflow from operating and
investing activities. 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.
The Company's contributions to its defined benefit pension plans were $2.2
million, $2.3 million and $1.6 million in 1996, 1997 and 1998 respectively. The
actuarial valuation of the UK pension schemes carried out as at April 1998
showed that the schemes were in surplus based on UK funding criteria and
employer's contributions ceased from mid-year. 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 $6.3 million, $5.8
million, and $5.4 million in 1996, 1997 and 1998 respectively. Net periodic
pension income includes amortization of the transition asset into income of $2.7
million, $2.5 million and $2.5 million in 1996, 1997 and 1998.
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The Company's capital expenditures were $10.8 million, $7.4 million and $8.3
million in 1996, 1997 and 1998 respectively. The Company had unconditional
purchase obligations for raw materials and bicycle components of $54,017,000 as
of December 31, 1998.
The Company is primarily financed by the equity purchased by Thayer, Perseus and
DFS as part of the Recapitalization and the Retained Equity of, in aggregate,
$108 million and debt in the form of Senior Notes and bank facilities. The
Company incurred significant indebtedness in connection with the
Recapitalization. As of December 31, 1998, the Company had approximately $226.7
million of combined indebtedness, including $165.9 million of indebtedness
pursuant to the Senior Notes, $56.7 million of borrowings under the Revolving
Credit Agreement, $2.6 million of borrowings under the South African credit
facility, and $1.5 million of bank overdraft borrowings by the Company's other
subsidiaries. The Senior Notes are issued under Indentures which contain certain
covenants that, among other things, restrict the ability of the Company and its
Restricted Subsidiaries to incur additional indebtedness, pay dividends, redeem
capital stock, redeem subordinated obligations, make investments, undertake
sales of assets and subsidiary stock, engage in transactions with affiliates,
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.
Accordingly, certain activities or transactions that the Company may want to
pursue or enter into may be restricted or prohibited, and such restrictions and
prohibitions could, from time to time, impact available cash on hand and the
liquidity of the Company.
The Company uses derivative financial instruments including currency swaps,
interest rate swaps, interest rate caps, forward foreign exchange contracts, and
currency options. The Company enters into currency and interest rate swaps 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 interest rate on the debt from United States
dollar rates to those applicable for that currency. The Company enters into
forward foreign exchange contracts and options 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.
Interest rate caps have been purchased to limit the blended interest rate paid
on the revolving credit facility to under 8% over the next 2 1/2 years. Currency
basket options have been purchased to substantially maintain the value of
foreign operating profits upon conversion into US dollars, in order to protect
the ability to service the US senior notes from the effect of changes in foreign
exchange rates.
The Revolving Credit Agreement provides for a seven-year DM214 million senior
secured revolving credit facility to be made available to the Company's
operating companies. Borrowings under the Revolving Credit Agreement are
available subject to a borrowing base determined as a percentage of eligible
assets. The Company's borrowings peak in March/April each year. The Company
believes that it has adequate headroom on its funding requirements for the next
year.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in foreign currency exchange
rates and interest rates. In order to manage the risk arising from these
exposures, the Company enters into a variety of foreign currency and interest
rate contracts and options.
The Company's accounting policies for derivative instruments are included in
Note 1 to the consolidated financial statements, with further disclosure in Note
8.
Foreign Currency Exchange Rate Risk
The Company has foreign currency exposures related to buying and selling in
currencies other than the functional currencies in which it operates. The
Company's net trading position is long in the Euro, Canadian Dollar and South
African Rand, arising from its revenues in those currencies, and short of
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the New Taiwan Dollar, Japanese Yen and U.S. Dollar as a result of components
purchased in those currencies. The Company has a natural currency hedge against
Pounds Sterling arising from its position as both an importer and exporter in
UK. Sturmey-Archer also has a competitive exposure to the currencies of Japan
and Germany in which its two main competitors manufacture.
The Company generally introduces its new bicycle model ranges annually in the
fall of each year, at a similar time to most of its competitors. Product
specifications, component costs and selling prices are kept as stable as
possible during the model year to satisfy the requirements of mass-merchandisers
and facilitate orderly marketing of branded products amongst IBDs. The Company
takes out foreign currency forward exchange contracts or options in the fall to
hedge most of its foreign currency trading transaction exposure for the upcoming
season. These foreign currency forward exchange contracts and options have been
designated as hedges as defined in SFAS133 and the mark-to-market value of $1.1
million has therefore been included in accumulated other comprehensive income in
the December 31, 1998 balance sheet. The potential loss in fair value for such
financial instruments from a hypothetical 10% adverse change in quoted foreign
currency exchange rates would be approximately $4.1 million for 1998. Each year
the Company changes the specification of its products to endeavor to optimize
its competitive position and margins. Since most of the Company's competitors
purchase comparable components from similar sources to the Company and are
believed not to hedge beyond the current season, the Company does not generally
hedge its transaction exposure beyond the end of the season to stay competitive.
Management believes the likelihood of obtaining a competitive advantage would
not justify the cost of hedging beyond the end of the season. Sales and
purchases in currencies other than the functional currencies in which the
Company operates were $31.6 million and $106.9 million respectively in 1998,
treating the currencies within the European Exchange Rate Mechanism as one.
The foreign currency element of the Company's debt under the Senior Notes and
revolving credit facility has, since September 1998, generally been arranged to
align with the denomination of the book value of net assets. By doing this, the
Company reduces the translation exposure of net worth to changes in foreign
currency exchange rates. The three principal exceptions are: (1) $38 million of
net assets denominated in Pounds Sterling arising from the Company's relatively
large presence in UK, (2) $38 million of foreign pension assets in UK and The
Netherlands, and, (3) $5 million denominated in South African Rand due to limits
placed by the South African Reserve Bank on the maximum indebtedness allowed by
foreign owned corporations. In 1997, and up to the Recapitalization on May 14,
1998, the Company was organized under DICSA who prepared consolidated financial
statements in Pounds Sterling. Accordingly the translation exposure in 1997 was
managed by reference to Pounds Sterling, accounting for the large translation
differences up to September 1998 shown in the consolidated financial statements
prepared in U.S. Dollars.
The Company generates most of its trading income in foreign currencies. In order
to ensure that such trading income can be converted to yield sufficient U.S.
Dollars to service 67% of the interest on the $100 million 10% Senior Notes
through May 2001, currency options were purchased in 1998. These currency
options are for $6.7 million per year, selling f6 million, (pound)2 million and
C$1.2 million. At December 31, 1998 the mark-to-market value of these currency
options was $0.1 million. As the purchaser of options has no obligations to
exercise them, any weakening of the value of the U.S. Dollar can do no more than
reduce the fair value of these currency options to zero.
In 1997 interest and currency swaps were held which achieved the effect of
synthetically converting the original U.S. Dollar denominated Series A and
Series C Senior Notes into foreign currency debt of those countries where the
Company had operations. This converted the interest on the debt from U.S.
Dollars to those foreign currencies in which trading income was generated.
Raleigh USA generated sufficient trading income to service the 7.66% Series B
Senior Note, withstanding certain one time items, in 1997.
Interest Rate Risk
The Company's debt instruments are listed in Notes 9 and 10 to the consolidated
financial statements. Interest expense relating to the Senior Notes was $4.9
million and $12.2 million in 1997 and 1998
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respectively, which were at fixed interest rates. The weighted average interest
rates on the Senior Notes were 6.6% in 1997, 6.9% in 1998 through May 13, 1998
and 10.3% effective May 14, 1998, after taking into account the effect of any
swaps and including $0.5 million and $0.8 million in amortization of deferred
financing costs for 1997 and 1998, respectively. The other major element of the
Company's interest expense was $1.9 million and $4.0 million on the revolving
credit facilities in 1997 and 1998 respectively. These were at floating rates of
1% above the London Interbank Offered Rate through May 13, 1998 and 2%
thereafter. This produced weighted average interest rates on the revolving
credit facilities of 5.1% and 6.6% in 1997 and 1998, respectively, after taking
into account the effect of any swaps and including $0.1 million and $0.5 million
in amortization of deferred financing costs for 1997 and 1998 respectively. A
hypothetical one percentage point shift in floating interest rates would have a
$0.7 million approximate impact on annual interest expense. As interest rates on
the revolving credit facilities have been capped at 7.9% effective August 1998
through July 2001, increases in floating interest rates above that level would
only have limited impact on expense.
Commodity Price Risk
The business of the Company does not carry a significant direct exposure to the
prices of commodities.
Unsecured status of Senior Notes and asset encumbrance
The Indentures permit the Company to incur certain secured indebtedness,
including indebtedness under the Revolving Credit Agreement, which is secured
and guaranteed by the obligors thereunder through a first priority fully
protected security interest in all the assets, properties and undertakings of
the Company and each other obligor thereunder where available and cost effective
to do so, and to the extent permissible by local laws. The Company has
indebtedness available under the Revolving Credit Agreement of DM214.0 million
($127.9 million). As of December 31, 1998, the Company had indebtedness
outstanding under the Revolving Credit Agreement of approximately $56.7 million.
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 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 Notes, notwithstanding the
existence of an event of default with respect to the 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 Notes and
other unsecured indebtedness of the Issuers. The Company may also incur other
types of secured indebtedness under the Indentures, including up to $20 million
in indebtedness of any type, indebtedness of an acquired company where the
Company would have been able to incur $1.00 of additional indebtedness under its
Consolidated Coverage Ratio, indebtedness in respect of performance bonds,
bankers' acceptances, letters of credit, and the like, purchase money
indebtedness and capitalized lease obligations in an aggregate amount not
exceeding $10 million, indebtedness incurred by foreign subsidiaries not
exceeding $5 million, and indebtedness incurred by a securitization entity.
Restrictive Loan Covenants
The Revolving Credit Agreement contains a number of covenants that, among other
things, restrict the ability of the Company 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 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 Notes, incur
liens and encumbrances and permit the amount of receivables and inventory to
exceed specified thresholds.
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<PAGE>
The Company was not in compliance with all of its borrowing covenants as at
December 31, 1998. The covenants under the Revolving Credit Agreement include a
maximum level of inventory days on hand, a minimum level of adjusted EBITDA, a
minimum interest coverage and leverage ratios and minimum net worth among other
restrictions. The inventory days covenant of 100-days is calculated as average
inventory net of provisions divided by cost of goods sold before depreciation
and amortization on a trailing 12-month basis. As of December 31, 1998 inventory
days were 103-days. Effective February 4, 1999, the revolving credit facility
agreement was amended in connection with the acquisition of Diamond Back. The
changes made included an increase in inventory days allowed to 110-days through
the first half of 1999 and 105-days in the third quarter of 1999, reverting to
100-days thereafter. Adjusted EBITDA is measured after the elimination of all
net periodic pension income of $5.4 million, whereas conventionally only the
amortization of the transition asset of $2.5 million is eliminated as used in
management's discussion and analysis. Adjusted EBITDA was covenanted at a level
of $35 million, rising to $38 million by December 31, 1999. The changes made to
the Revolving Credit Agreement effective February 4, 1999 included a reduction
in the adjusted EBITDA covenant to $25 million as at December 31, 1998 and $36
million at December 31, 1999, equivalent to conventional EBITDA figures of $27.9
million and $38.9 million. Corresponding changes were made to the interest
coverage and leverage covenants. Net worth, defined as subscribed equity
(comprising $63.0 million subscribed during the Recapitalization), together with
$45.0 million retained equity, plus the net income (excluding PIK dividends)
since January 1, 1998 less goodwill purchased since May 14, 1998, and
intellectual property was covenanted to stay above $100.0 million through
December 31, 1998, rising to $110.0 million at December 31, 1999. Net worth was
$98.7 million as at December 31, 1998, but has since been cured by the issue of
$22.75 million of Class C common stock in connection with the Diamond Back
acquisition, less approximately $16.0 million goodwill.
The ability of the Company to comply with the covenants 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 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. 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 Notes.
In addition, the Indentures contain certain covenants that, among other things,
restrict the ability of the Company 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.
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
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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 spent a total of
approximately $2.3 million in 1998 and expects to spend $1.1 million in 1999 to
achieve "Year 2000 compliance" for all of its operations. The Company plans to
complete all Year 2000 compliance efforts by the first half of 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.
The Company's plan for the Year 2000 calls for communication with significant
suppliers and customers to determine the readiness of third parties' remediation
of their own Year 2000 issues. As part of its assessment, the Company is
evaluating the level of validation it will require of third parties to ensure
their Year 2000 readiness. The Company believes that the purchasing patterns of
customers and potential customers may be affected by Year 2000 issues as
companies expend significant resources to correct or patch their current
software systems for Year 2000 compliance. These expenditures may result in
reduced funds available to purchase the Company's products, which could result
in a material adverse effect on the Company's business, financial condition and
results of operations. There can be no assurance that any Year 2000 compliance
problems of the Company's customers or suppliers will not have a material
adverse effect on the Company's business, financial condition and results of
operations.
To date, the Company has not encountered any material Year 2000 issues
concerning its computer systems. Accordingly, the Company has not at this time
developed a contingency plan if it fails to achieve Year 2000 compliance and
does not plan to develop such a plan until it learns of material impediments in
timely implementation of its plans for the Year 2000.
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 are 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
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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 and the Netherlands are signatories, on
January 1, 1999, a European single currency (the "Euro") replaced some of the
currencies of the member states of the European Union (the "E.U."), including
the Deutsche Mark and Dutch Guilder.
Following introduction of the Euro, the existing sovereign currencies (the
"legacy currencies") of the eleven participating member countries of the EU (the
"participating countries") who adopted the Euro as their common legal currency
are scheduled to remain legal tender in the participating countries as
denominations of the Euro until January 1, 2002 (the "transition period"). The
Euro conversion may impact the Company's competitive position as the Company may
incur increased costs to conduct business in an additional currency during the
transition period. Additionally, the participating countries' pursuit of a
single monetary policy through the European Central Bank may affect the
economies of significant markets of the Company. The Company will also need to
maintain and in certain circumstances develop information systems software to
(1) convert legacy currency amounts to Euro; (2) convert one legacy currency to
another; (3) perform prescribed rounding calculations to effect currency
conversions; and (4) permit transactions to take place in both legacy currencies
and the Euro during the transition period. Since the Company conducts extensive
business operations in, and exports its products to, several of the
participating countries, there can be no assurance that the conversion to the
Euro will not have a material adverse effect on the Company's business,
financial condition or results of operations. Similarly, in the event that the
Company materially underestimates the costs, timeliness and adequacy of
modifications to its information systems software, there could be a material
adverse effect on the Company's business, financial condition and results of
operations.
Substantial Leverage and Debt Service Obligations
The Company incurred substantial indebtedness in connection with the
Recapitalization and has a highly leveraged capital structure. As of December
31, 1998, the Company had combined total indebtedness of approximately $226.7
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 was approximately $(70.1) million. The Company's ability
to make scheduled interest payments and repayment of principal 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. For the years ended December 31, 1997
and 1998, on a pro forma basis after giving effect to the Recapitalization, the
Company's combined total interest expense would have been $19.6 million and
$21.9 million, respectively, and the Company's combined total ratio of earnings
to fixed charges would have been 1.5 to 1.0 and 1.1 to 1.0, respectively.
Although the Company believes that, based on current operations, it will have
sufficient cash flow from operations to service its 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, 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
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effective to allow the Company to service such obligations.
Forward looking statements
This discussion contains certain forward-looking statements that involve risks
and uncertainties. In addition, the Company may from time to time make oral
forward-looking statements. As discussed in the Company's prospectus on Form
S-4A filed with the SEC on December 4, 1998, actual results are uncertain and
may be impacted by the various factors. In particular, certain risks and
uncertainties that may impact the accuracy of the forward-looking statements
with respect to revenues, expenses and operating results include, without
limitation, cycles of customer orders, general economic and competitive
conditions and changing consumer trends, foreign exchange rates, technological
advances and the number and timing of new product introductions, shipments of
products and componentry from foreign suppliers, the timing of operating and
advertising expenditures and changes in the mix of products ordered by
independent bicycle dealers and mass merchants. As a result, the actual results
may differ materially from those projected in the forward-looking statements.
Because of these and other factors that may affect the Company's operating
results, past financial performance should not be considered an indicator of
future performance, and investors should not use historical trends to anticipate
results or trends in future periods.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements set forth on pages F1 to F30 of this Report are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Management
Directors and Executive Officers of the Company
The following table sets forth certain information regarding the directors and
executive officers of the Company:
Name Age Position
- ---------------------- --- ---------------------------------------------
Gary S. Matthews 41 Chief Executive Officer and Executive Director
of the Company
William W. Austin, Jr. 61 President, Raleigh USA
Colin Bateman 45 Managing Director, Sturmey-Archer
Klaas Dantuma 55 Managing Director, Gazelle
Simon J. Goddard 46 Chief Financial Officer of the Company
Robert Holzer 33 Managing Director, MS Sport Group
Peter Miller 51 Joint Managing Director, Probike
Kim Roether 35 Managing Director, Derby Germany
Irwin R. Slotar 50 Joint Managing Director, Probike
John V. Spon-Smith 45 Director, Raleigh UK
Mark J. Todd 39 Managing Director, Raleigh U.K
Farid Vaiya 55 President, Raleigh Canada
Alan J. Finden-Crofts 57 Director of the Company, Former Chief
Executive Officer
A. Edward Gottesman 61 Director of the Company
Frederic V. Malek 62 Chairman and Director of the Company
Frank H. Pearl 55 Director of the Company
Carl J. Rickertsen 38 Director of the Company
Dr. Thomas H. Thomsen 64 Director of the Company
Gary S. Matthews, Chief Executive Officer and Executive Director of the Company
Mr. Matthews, age 41, became the Chief Executive Officer of the Company
effective mid-January 1999. Mr. Matthews was the Managing Director of UK
Operations of Guinness Great Britain Limited from April 1998 until his
appointment to the Company. Prior to that, Mr. Matthews was President of
Guinness Import Company from 1996 to 1998. From 1990 to 1995, Mr. Matthews held
a variety of marketing and corporate strategy positions at PepsiCo, Inc.
William W. Austin, Jr., President of Raleigh USA
Mr. Austin, age 61, 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.
Colin Bateman, Managing Director of Sturmey-Archer
Mr. Bateman, age 45, has spent most of his career in the pharmaceutical industry
in sales, marketing and general management with Glaxo Laboratories and Wyeth.
He joined Sturmey-Archer on March 1 1999.
Klaas Dantuma, Managing Director of Gazelle
Mr. Dantuma, age 55, has been Managing Director of Gazelle since 1990. Mr.
Dantuma has held a variety of positions with the Company since 1973, including
Deputy Commercial Director for four
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years, before becoming Commercial Director in 1985.
Simon J. Goddard, Chief Financial Officer of the Company
Mr. Goddard, age 46, has held the senior financial post in the Company since
1990 and was appointed Chief Financial Officer of the Company in May 1998 with
the Recapitalization. Mr. Goddard began working at Raleigh UK in 1985 as the
management accountant for international operations. Prior to that, Mr. Goddard
was with Coopers & Lybrand.
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
Mr. Miller, age 51, has been Joint Managing Director of Probike since the
Company acquired Cycle Center Wholesalers in 1991, a company that Mr. Miller
founded.
Kim Roether, Managing Director of Derby Germany
Mr. Roether, age 35, has been Managing Director of Derby Germany since 1997. Mr.
Roether started with Derby Germany as its Controller in 1994. In 1995, he became
Derby Germany's Financial Director. From 1991 to 1994, Mr. Roether was a
consultant to Grant Thornton International.
Irwin R. Slotar, Joint Managing Director of Probike
Mr. Slotar, age 50, has been Joint Managing Director of Probike since the
Company acquired Probike in 1990. Prior to the acquisition Mr. Slotar was
Managing Director of Probike which had been owned by Mr. Slotar's family for
several generations.
John V. Spon-Smith, Director of Raleigh UK
Mr. Spon-Smith, age 45, has been Director of Raleigh UK and General Manager of
Raleigh Parts & Accessories-UK 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 UK
Mr. Todd, age 39, has been Managing Director of Raleigh UK since July 1997.
Prior to joining Raleigh UK, Mr. Todd was business unit director of Courage
Limited, the UK's largest brewing company, from 1994 to 1997. From 1993 to 1994,
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 UK, Limited from 1989 to 1993.
Farid Vaiya, President of Raleigh Canada
Mr. Farid Vaiya, age 55, 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.
Alan J. Finden-Crofts, Director of the Company
Mr. Finden-Crofts, age 57, was the Chief Executive Officer of the Company until
January 1999. 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
27
<PAGE>
in the United Kingdom.
A. Edward Gottesman, Director of the Company
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 the Company
Mr. Malek, age 62, 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 the Company
Mr. Pearl, age 55, 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 the Company
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.
Dr. Thomas H. Thomsen, Director of the Company
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.
28
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Compensation of Directors
The Company compensates non-executive directors for services provided as a
director by paying such directors a retainer of $10,000 per annum, plus $1,500
for each board meeting plus reasonable out-of-pocket expenses incurred by them.
The Company does not compensate salaried executive directors. In July 1998, the
Company's Board of Directors appointed a compensation committee.
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, 1998, 1997, and 1996, of those persons who served
as (i) the Chief Executive Officer of the Company during fiscal year 1998 and
(ii) the other four most highly compensated executive officers of the Company
for fiscal 1998 (each, a "Named Executive Officer"):
<TABLE>
<CAPTION>
Long
Annual Term Other
Compensation Compen- Annual
------------------- sation Compen-
Name Year Salary Bonus Awards sation
- ------------------------------- ---- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Alan J. Finden-Crofts (1) 1998 $ 332,005 $ - $ - $ -
Chief Executive Officer 1997 272,244 361,471 - 143,260
The Company 1996 272,244 683,783 - 142,679
William W. Austin, Jr.(2) 1998 262,500 126,000 561,034 -
President, Raleigh USA 1997 248,827 70,910 - -
1996 228,067 25,681 - -
Klaas Dantuma (3) 1998 180,688 75,881 - -
Managing Director, Gazelle 1997 167,402 60,265 - -
1996 164,213 82,107 - -
Mark J. Todd (4) 1998 167,663 - - -
Managing Director, Raleigh UK 1997 73,041 32,371 - 10,615
1996 - - - -
Farid Vaiya (5) 1998 124,635 62,318 - -
President, Raleigh Canada 1997 120,130 57,662 - -
1996 $ 110,390 $ 39,740 $ - $ -
</TABLE>
(1) Mr. Finden-Crofts is compensated in Pounds Sterling. The amounts reported in
the table have been converted at the rate of(pound)0.6024 per $1.00.
(2) Mr. Austin, Jr's long term compensation was in respect of change of control
obligations at the time of the Recapitalization.
(3) Mr. Dantuma is compensated in Dutch Guilders. The amounts reported in the
table have been converted at the rate of f1.8817 per $1.00.
(4) Mr. Todd joined Raleigh UK as Managing Director in July 1997. Mr. Todd is
compensated in Pounds Sterling. The amounts reported in the table have been
converted at the rate of (pounds)0.6024 per $1.00.
(5) Mr. Vaiya is compensated in Canadian dollars. The amounts reported in the
table have been converted at the rate of C$1.54 per $1.00.
29
<PAGE>
Employment Agreements
On October 20, 1998, the Company entered into an employment contract with Mr.
Gary S. Matthews to become the new Chief Executive Officer and President of the
Company effective mid-January 1999. Mr. Matthews' compensation package includes
a base annual salary of $450,000 and a bonus of up to 120% of his base salary.
The contract is for a four year term with a three year extension. The Company
issued Mr. Matthews stock options to purchase 1,625 shares of the Company's
Class A common stock which vest over three years, and performance stock options
for 3,250 shares of Class A common stock.
Pursuant to a Management Stock Purchase Agreement dated October 20, 1998, Mr.
Matthews purchased 1,500 shares of the Company's Class A common stock for $1,000
per share. Mr. Matthews paid for such shares with a secured promissory note that
is non-recourse except for 20% of the amount and all accrued interest. Upon the
termination of Mr. Matthews' employment with the Company, the Company has the
right or is required to repurchase, depending on the reason for such
termination, such Class A common stock, provided no event of default exists
under material financing agreements, including the Indentures.
Mr. Finden-Crofts' employment contract expires on May 14, 1999. It provides for
an annual base salary of $333,005 plus a targeted bonus of $415,007 for 1998
subject to adjustment based on the Company's performance.
The terms of Mr. Austin's employment agreement as President of Raleigh USA
provide for a base salary of $270,000 and a bonus ranging from 20% to 50% of
base salary tied to Raleigh USA's profit before interest payments and taxes,
inventory turns and account receivables turnover. DICSA paid Mr. Austin
approximately $561,034 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.
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 non-compete provisions.
Management Stock Option
On October 21, 1998, the Board of Directors of the Company adopted The Derby
Cycle Corporation 1998 Stock Option Plan (the "Stock Plan"), which authorizes
grants of stock options (including options intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code).
The Stock Plan authorizes the Company's Board of Directors to grant options at
any time in such quantity, at such price, on such terms and subject to such
conditions as established by the board. To date, the Company has granted an
aggregate of 4,875 stock options to its management, none of which have vested
yet.
30
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Description of Shareholders' Agreement and Registration Agreement
The Company, 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 Shareholders' Agreement provides, among other things, for the
following: (i) the Board of Directors of the Company 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 the
Company, 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 the Company's outstanding capital stock or a sale of all
or substantially all of the Company's assets by the Company'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 the Company. 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 the Company'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 are parties to a Registration Agreement (the "Registration
Agreement"), pursuant to which 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. The Company 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. The Company has agreed to
indemnify all holders of Registrable Securities for certain liabilities arising
out of such registrations, including certain liabilities under the Securities
Act.
Security ownership of certain beneficial owners and management
The authorized capitalization of the Company, as of March 28, 1999, is: 200,000
shares of Class A common stock; 15,000 shares of Class B common stock; 22,750
shares of Class C common stock; 25,000 shares of Series A preferred stock; 3,000
shares of Series B preferred stock and 100 shares of Series C prefered stock.
The issued and outstanding capital stock of the Company, as of March 28, 1999,
consists of: 45,700 shares Class A common stock; 22,750 shares of Class C 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 and Class C common stock are entitled to one vote per share on all
matters to be voted upon by the shareholders of the Company, 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 and Class C common stock as a
single class.
31
<PAGE>
The following table sets forth certain information, as of March 28,1999, with
respect to the beneficial ownership of the Company's Class A and Class C 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 the Company, (iii) each Named
Executive Officer of the Company and (iv) all directors of the Company 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.
32
<PAGE>
<TABLE>
<CAPTION>
Percent of the
Company's total
outstanding
Voting
Number of Percent of securities
Name and Address of Beneficial Owner (1) Class shares class Note (2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DC Cycle, L.L.C.......................... Class A common 12,500 27.35
Suite 350, Class C common 18,950 83.30
1455 Pennsylvania Avenue, Series A preferred 25,000 100.00
Washington, DC 20004 65.08
Note (3)
- -------------------------------------------------------------------------------------------------------------------
Derby Finance S.a.r.l.................... Class A common 21,700 47.48
5 Boulevard de la Foire' 20.48
L-1528 Luxembourg,
Grand Duchy of Luxembourg
Note (4)
- -------------------------------------------------------------------------------------------------------------------
Derby International Corporation S.A. Class A common 8,300 15.37
5 Boulevard de la Foire, 7.26
L-1528 Luxembourg,
Grand Duchy of Luxembourg
Note (5)
- -------------------------------------------------------------------------------------------------------------------
Perseus Cycle L.L.C...................... Class A common 10,000 21.88
1627 "I" Street NW, Suite 610, Class C common 3,800 16.70 13.03
Washington, D.C. 20006
Note (6)
- -------------------------------------------------------------------------------------------------------------------
Frederic V. Malek ....................... Class A common 12,500 27.35
Suite 350, Class C common 18,950 83.30
1455 Pennsylvania Avenue, Series A preferred 25,000 100.00
Washington, DC 20004 65.08
Note (7)
- -------------------------------------------------------------------------------------------------------------------
Carl J. Rickertsen ...................... Class A common 12,500 27.35
Suite 350, Class C common 18,950 83.30
1455 Pennsylvania Avenue, Series A preferred 25,000 100.00
Washington, DC 20004 65.08
Note (8)
- -------------------------------------------------------------------------------------------------------------------
A Edward Gottesman ...................... Class A common 30,000 55.55
38 Chester Terrace, London, 26.26
NW1 4ND, England
Note (9)
- -------------------------------------------------------------------------------------------------------------------
Alan J. Finden-Crofts.................... Class A common 30,000 55.55
Bequet Road, 26.26
St. Peter Port, Guernsey
GY1 2TH, Channel Islands
Note (10)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Percent of the
Company's total
outstanding
Voting
Number of Percent of securities
Name and Address of Beneficial Owner (1) Class shares class Note (2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frank H. Pearl........................... Class A common 40,000 74.07
1627 "I" Street NW, Suite 610', Class C common 3,800 16.70 38.34
Washington, D.C. 20006
Note (11)
- -------------------------------------------------------------------------------------------------------------------
Gary S. Matthews......................... Class A common 1,500 3.28
C/o Raleigh Industries Ltd., 1.42
Triumph Rd, Nottingham,
NG7 2DD, England
- -------------------------------------------------------------------------------------------------------------------
Dr. Thomas H. Thomsen....................
Falkensteinerstrasse 36,
Konigstein im Taunus,
Frankfurt, Germany - - - -
- -------------------------------------------------------------------------------------------------------------------
William W. Austin, Jr....................
C/o Raleigh USA Bicycle Co.,
22710 72nd Avenue South,
Kent, WA 98032-1926 - - - -
- -------------------------------------------------------------------------------------------------------------------
Mark J. Todd.............................
C/0 Raleigh Industries Ltd.,
Triumph Road, Nottingham,
England, NG7 2DD - - - -
- -------------------------------------------------------------------------------------------------------------------
Farid Vaiya..............................
C/o Raleigh Industries of
Canada Limited, 2124 London
Lane, Oakville, Ontario, L6H
5V8, Canada - - - -
- -------------------------------------------------------------------------------------------------------------------
Klaas Dantuma............................
C/o Koninklijke Gazelle B.V.,
Wilhelminaweg VII,
6951 BP Dieren,
The Netherlands - - - -
- -------------------------------------------------------------------------------------------------------------------
All Directors and Executive Class A common 54,000 100
Officers as a group (6 persons) Class C common 22,750 100
Note (12) Series A preferred 25,000 100 100
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The percentages of the Company'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 "PART 1 ITEM 1 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 the Company
beneficially owned by DICSA are deemed to be beneficially owned by DFS for
voting purposes and all other purposes thereunder
(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
34
<PAGE>
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.
(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
and Carl J. Rickertsen, directors of the Company, are general partners of
TC Capital Partners. As such, Messrs. Malek 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 and
Rickertsen may be deemed to be the beneficial owners of the 12,500 shares
of Class A common stock, the 18,950 shares of Class C 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 the Company, 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 the Company and a director of DICSA, and Mr. Pearl, a director
of the Company 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, the 18,950 shares of
Class C 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, the 18,950 shares of
Class C common stock and 25,000 shares of Series A preferred stock
beneficially owned by DC Cycle. See note 3 above.
(9) Includes 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 note 5 above.
(10) Includes 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 note 5 above.
(11) Includes the 10,000 shares of Class A common stock and 3,800 shares of
Class C 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.
(12) Includes (1) 12,500 shares of Class A common stock, the 18,950 shares of
Class C 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 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); (3) 10,000 shares of Class A common stock beneficially
owned by Perseus and 10,000 shares of Class A common stock and 3,800
shares of Class C common stock beneficially owned by Perseus which may be
deemed to be beneficially owned by Mr. Pearl (see note 5 above); and 1,500
shares of Class A common stock issued to Gary S. Matthews.
35
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Investor group
Subsequent to the Recapitalization and issue of Class C common stock in
February, 1999, the Company's shareholders are (i) a wholly-owned subsidiary of
Thayer, which controls approximately 65% of the total voting power of the
Company's capital stock, (ii) a wholly-owned subsidiary of Perseus, which
controls approximately 13% of the total voting power of the Company's capital
stock, and (iii) DFS, which controls approximately 20% of the total voting power
of the Company's capital stock. Prior to the Recapitalization, the Company was
wholly-owned by DICSA through its subsidiary, DFS.
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, a director of
the Company, 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, a director of the Company and a director of DICSA, and Mr. Pearl, a
director of the Company and a director of DICSA, own minority interests in
DICSA.
Payment of Certain Fees and Expenses
In connection with the Recapitalization, the Company 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, the Company paid all the
out-of-pocket expenses of Thayer and Perseus, certain expenses incurred in order
to effect the Recapitalization, and $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.
36
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial statements.
See "Index to Consolidated Financial Statements" set forth on page F-1
2. Financial Data Schedules.
Period Type YEAR
Fiscal Year End Dec 31 1998
Period End Dec 31 1998
Cash 17,453
Securities 0
Receivables 74,875
Allowances 8,074
Inventory 105,264
Current Assets 199,104
PP & E 118,977
Depreciation 69,463
Total Assets 325,290
Current Liabilities 125,941
Bonds 165,870
Preferred Mandatory 45,432
Preferred 0
Common 1
Other SE (70,121)
Total Liability and Equity 325,290
Sales 465,305
Total Revenues 465,305
CGS 350,346
Total Costs 350,346
Other Expenses 0
Loss Provision 1,467
Interest Expense 16,948
Income Pre Tax 904
Income Tax 6,294
Income Continuing 0
Discontinued 0
Extraordinary 431
Changes 0
Net Income (5,888)
EPS Primary 0
EPS Diluted 0
3. Exhibits.
See " Index to Exhibits" set forth on page E-1
(b) Reports of Form 8-K.
Report on Form 8-K filed February 22, 1999.
37
<PAGE>
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 re-substitution, 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 the Annual
Report on Form 10-K filed pursuant to the Securities Exchange Act of 1934, 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 Exchange Act of 1934, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- --------- -------- ----
<S> <C> <C>
/s/ Gary S Matthews
_________________________________ President, Chief April 1, 1999
GARY S MATTHEWS Executive Officer
and Director
(principal
executive officer)
/s/ Simon J. Goddard
_________________________________ Chief Financial April 1, 1999
SIMON J. GODDARD Officer (principal
financial and
accounting officer)
/s/ Frederic V. Malek Chairman of the
_________________________________ Board and Director April 1, 1999
FREDERIC V. MALEK
/s/ Alan Finden-Crofts
_________________________________ Director April 1, 1999
ALAN FINDEN-CROFTS
/s/ A. Edward Gottesman
_________________________________ Director April 1, 1999
A. EDWARD GOTTESMAN
/s/ Frank H. Pearl
_________________________________ Director April 1, 1999
FRANK H. PEARL
/s/ Carl J. Rickertsen
_________________________________ Director April 1, 1999
CARL J. RICKERTSEN
/s/ Thomas H. Thomsen
_________________________________ Director April 1, 1999
THOMAS H. THOMSEN
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Annual Report on Form 10-K to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Nottingham,
England on April 1, 1999.
The Derby Cycle Corporation
/s/ Simon J. Goddard
By: ______________________________
Name: Simon J. Goddard
Title: Chief Financial Officer
38
<PAGE>
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 re-substitution, for him and in
his name, place and stead, in any and all capacities (including his capacity as
a director and/or officer of Lyon Investments B.V.), the Annual Report on form
10-K filed pursuant to the Securities Exchange Act of 1934, 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 Exchange Act of 1934, this
Registration Statement and power of attorney have been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
<S> <C> <C>
/s/ K. Dantuma
_________________________________ Managing Director April 1, 1999
K. DANTUMA
/s/ S. J. Goddard
_________________________________ Managing Director April 1, 1999
S. J. GODDARD
/s/ F. E. Agar
_________________________________ Managing Director April 1, 1999
F. E. AGAR
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Annual Report on Form 10-K to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Nottingham,
England on April 1, 1999.
Lyon Investments B.V.
/s/ Simon J. Goddard
By: ______________________________
Name: Simon J. Goddard
Title: Managing Director
39
<PAGE>
INDEX TO EXHIBITS
Exhibit
No. Description
------- -----------
(1) 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
(1) 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.
(1) 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
(1) 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.
(1) 3.2 Bylaws of The Derby Cycle Corporation.
(1) 3.3 Articles of Association of Lyon Investments B.V.
(1) 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.
(1) 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.
(1) 4.3 Forms of 10% Senior Note and 9 3/8% Senior Note (contained in Exhibit
4.1 as Exhibit A thereto).
(1) 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.
(1) 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.
(1) 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.
(1) 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.
(1) 10.4 Trademark License Agreement dated as of May 14, 1998 between The
Derby Cycle Corporation and Derby International Corporation S.A.
(1) 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.
(1) 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.
(1) 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.
(1) 10.8 Employment Agreement dated as of May 14, 1998 between The Derby Cycle
Corporation and Alan J. Finden--Crofts.
E 1
<PAGE>
(1) 10.9 Employment Agreement dated as of May 14, 1998 between The Derby Cycle
Corporation and William W. Austin, Jr.
(1) 10.10 The Derby Cycle Corporation 1998 Stock Option Plan.
(1) 10.11 Employment Agreement dated as of October 20, 1998 between The Derby
Cycle Corporation and Gary S. Matthews.
(1) 10.12 Management Stock Purchase Agreement dated as of October 20, 1998
between The Derby Cycle Corporation and Gary S. Matthews.
* 10.13 Amendment and Restatement Agreement dated 4 February 1999 relating to
the Multi-Currency Credit Facility of up to DM214,000,000 dated 12
May 1998 between The Derby Cycle Corporation and others as borrowers
and/or Guarantors, Chase Manhattan plc as arranger, the financial
institutions named therein as Banks, Chase Manhattan International
Limited as security agent, and Chase Manhattan International Limited
as facility agent.
* 10.14 Revised Facility Agreement dated 12 May 1998 for Multi-Currency
Credit Facility of up to DM 214,000,000 between The Derby Cycle
Corporation and others as borrowers and/or guarantors, Chase
Manhattan plc as arranger, the financial institutions named therein
as banks, Chase Manhattan International Limited as facility agent,
Chase Manhattan International Limited as security agent (the
"Revolving Credit Agreement").
* 10.15 Senior Subordinated Loan Agreement dated as of February 4, 1999
between The Derby Cycle Corporation and the Government of Singapore
Investment Corporation, Pte Ltd
* 10.16 1998 stock option plan.
* 10.17 Form of Management stock purchase agreement.
* 10.18 Agreement between Diamond Back International Company Ltd, Western
States Import Company Inc., Bejka Trading AB as vendors and The Derby
Cycle Corporation and Derby Sweden AB as purchasers relating to the
sale and purchase of certain business assets and rights, and the
assumption of certain liabilities, involved in the bicycle, parts and
accessories and fitness equipment distribution business carried on
under the principal trade name "Diamondback".
* 10.19 Form of agreement evidencing a grant of a stock option under 1998
stock option plan.
* 10.20 Amended and Restated Shareholders Agreement of The Derby Cycle
Corporation dated as of February 3, 1999 by and among The Derby Cycle
Corporation, Derby Finance S.a.r.l., DC Cycle L.L.C. and Perseus
Cycle, L.L.C.
* 10.21 Securities Purchase Agreement dated as of February 3, 1999 between
The Derby Cycle Corporation, DC Cycle, L.L.C. and Perseus Cycle,
L.L.C.
* 21.1 Subsidiaries of The Derby Cycle Corporation.
* 27 Financial Data Schedule
(1) - Filed previously;
* - Filed herein
E 2
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Company Consolidated Financial Statements :
Report of the Auditors.......................................................F2
Consolidated Balance Sheets as of December 31, 1997 and 1998.................F3
Consolidated Statements of Income for the years ended December 31,
1996, 1997 and 1998.....................................................F4
Consolidated Statements of Shareholders' Equity (Deficit) for the years
ended December 31, 1996, 1997 and 1998 .................................F5
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998.....................................................F6
Notes to Consolidated Financial Statements...................................F8
F 1
<PAGE>
Report of the Auditors
To The Derby Cycle Corporation:
We have audited the accompanying consolidated balance sheets of The Derby Cycle
Corporation as of December 31, 1997 and 1998, and the related consolidated
statements of income, shareholders' equity (deficit) and cash flows for each of
the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. 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 financial position of the Company as of December 31,
1997 and 1998 and the consolidated results of its operations and cash flows for
each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles in the United States of America.
Arthur Andersen, April 1, 1999
Chartered Accountants and Registered Auditors
Nottingham, England.
F 2
<PAGE>
The Derby Cycle Corporation
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
Assets
December 31,
-------------------------
1997 1998
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................................... $ 15,426 $ 17,453
Receivables, net.................................................................... 65,264 66,801
Inventories......................................................................... 89,792 105,264
Other current assets................................................................ 13,881 9,586
----------- -----------
Total current assets........................................................... 184,363 199,104
----------- -----------
Property, plant, and equipment, net...................................................... 49,707 49,514
Intangibles, net......................................................................... 6,651 20,600
Prepaid pension assets................................................................... 47,777 56,072
----------- -----------
Total assets................................................................... $ 288,498 $ 325,290
=========== ===========
Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
Accounts payable.................................................................... $ 35,526 $ 34,394
Accrued liabilities................................................................. 22,738 20,161
Income taxes payable................................................................ 4,027 8,452
Short-term borrowings and current portion of long-term borrowings................... 51,160 60,831
Other current liabilities........................................................... 7,603 2,103
----------- -----------
Total current liabilities...................................................... 121,054 125,941
----------- -----------
Other liabilities:
Long-term debt, net of current portion ............................................. 51,059 165,870
Excess of assets acquired over cost of acquisitions................................. 11,235 11,120
Deferred income taxes............................................................... 17,451 18,896
Other liabilities................................................................... 4,950 4,224
----------- -----------
Total liabilities.............................................................. 205,749 326,051
----------- -----------
Minority interest........................................................................ 876 627
Commitments and contingencies
Preferred stock with redemption rights, $0.01 par value, 25,000 shares authorized,
issued, and outstanding of Series A and 3,000 shares authorized, issued, and
outstanding of Series B ........................................................... - 45,432
Stock rights............................................................................. - 23,300
Shareholders' equity(deficit):
Class A common stock, $0.01 par value, 200,000 shares authorized, 44,200 shares
issued and outstanding as of December 31, 1998................................. - 1
Class B common stock, $0.01 par value, 15,000 shares authorized, no shares issued
and outstanding as of December 31, 1998........................................ - -
Additional paid-in capital.......................................................... - 22,499
Capital investment.................................................................. 91,455 -
Accumulated deficit................................................................. (6,162) (87,346)
Accumulated other comprehensive income.............................................. (3,420) (5,274)
----------- -----------
Total shareholders' equity (deficit)........................................... 81,873 (70,120)
----------- -----------
Total liabilities and shareholders' equity (deficit)........................... $ 288,498 $ 325,290
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F 3
<PAGE>
The Derby Cycle Corporation
Consolidated Statements of Income
(Dollars in thousands, except per unit and unit data)
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------------------
1996 1997 1998
----------- ----------- ----------
<S> <C> <C> <C>
Net revenues.......................................... $ 452,584 $ 465,687 $ 465,305
Cost of sales......................................... (339,119) (345,885) (350,346)
----------- ----------- ----------
Gross profit..................................... 113,465 119,802 114,959
----------- ----------- ----------
Selling, general, and administrative expenses......... (80,083) (90,101) (90,968)
Recapitalization costs................................ - - (5,853)
----------- ----------- ----------
Operating income................................. 33,382 29,701 18,138
----------- ----------- ----------
Other income (expense):
Interest expense................................. (8,023) (7,490) (16,948)
Interest income.................................. 815 1,038 1,048
Other income (expense), net...................... (2,675) 107 (1,334)
----------- ----------- ----------
Income before income taxes minority interest
and extraordinary item........................... 23,499 23,356 904
Provision for income taxes............................ (8,924) (10,621) (6,294)
Minority interest..................................... (10) (51) (67)
----------- ----------- ----------
Income (loss) before extraordinary item............... 14,565 12,684 (5,457)
Extraordinary item - loss on early
extinguishment of debt (net of related tax
benefit of $233)................................. - - (431)
----------- ----------- ----------
Net income (loss)..................................... 14,565 12,684 (5,888)
Dividends on preferred stock.......................... - - (4,932)
----------- ----------- ----------
Net income (loss) applicable to common
stockholders..................................... $ 14,565 $ 12,684 $ (10,820)
=========== =========== ==========
Net income (loss) applicable to common
stockholders per share........................... $ 671.20 $ 584.52 $ (301.06)
=========== =========== ==========
Weighted average number of shares of common
stock outstanding................................ 21,700 21,700 35,940
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F 4
<PAGE>
The Derby Cycle Corporation
Consolidated Statements of Shareholders' Equity (Deficit)
(Dollars in thousands)
<TABLE>
<CAPTION>
Accumul-
ated
Addit- Other
Capital ional Accumul- Compre-
Common Invest- Paid-In ated hensive
Stock ment Capital Deficit Income Total
--------- --------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
January 1, 1996.................. $ - $ 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 ................. - - - (5,888) - (5,888)
Net gain on derivative
instruments............ - - - - 1,116 1,116
Translation adjustments..... - - - - (2,970) (2,970)
--------- --------- --------- ---------- ---------- ---------
Total comprehensive income....... - - - (5,888) (1,854) (7,742)
Capital contribution prior
to Recapitalization ... - 1,600 - 6,040 7,640
Issuance of common stock ... 1 - 22,499 - - 22,500
Issuance of stock rights ... - - - (23,300) - (23,300)
Accrued dividend on
preferred stock ....... - - - (4,932) - (4,932)
Distribution to
shareholders in
connection with
Recapitalization ...... - (93,055) - (53,104) - (146,159)
--------- --------- --------- ---------- ---------- ---------
December 31, 1998 ............... $ 1 $ - $ 22,499 $ (87,346) $ (5,274) $ (70,120)
========= ========= ========= ========== ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F 5
<PAGE>
The Derby Cycle Corporation
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
For the years ended December 31,
-------------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)..................................................... $ 14,565 $ 12,684 $ (5,888)
Adjustments to reconcile net income to net cash provided by operating
activities-
Depreciation..................................................... 9,400 9,362 9,407
Amortization..................................................... (642) (132) 806
Extraordinary loss on early extinguishment of debt............... - - 431
Minority interest................................................ 10 51 67
(Gain) loss on swaps............................................. 2,675 (107) 1,334
Net periodic pension income...................................... (6,261) (5,828) (5,403)
Recapitalization costs........................................... - - 5,853
Net changes in operating assets and liabilities, net of acquisitions-
(Increase) decrease in receivables............................... (5,490) (1,155) 647
(Increase) decrease in inventories............................... 2,753 (10,104) (12,980)
(Increase) decrease in other current assets...................... (14) (1,745) 795
Increase (decrease) in accounts payable.......................... (5,385) 4,405 (587)
Increase (decrease) in accrued liabilities....................... (146) 1,673 (3,752)
Increase (decrease) in income taxes payable...................... 882 209 4,491
Increase (decrease) in other current liabilities................. (138) (310) 953
Increase (decrease) in deferred income taxes..................... 1,954 2,371 1,009
Increase (decrease) in other liabilities......................... (2,249) (416) (457)
--------- --------- ---------
Net cash (used by) provided by operating activities......... 11,914 10,958 (3,274)
--------- --------- ---------
Cash flows from investing activities:
Purchases of property, plant, and equipment........................... (10,765) (7,413) (8,322)
Proceeds of property, plant, & equipment dispositions................. 3,933 882 1,135
Cash paid for acquisitions, net of cash acquired...................... - (6,650) -
Purchases of trademarks............................................... - (2,663) (1,108)
Purchase of minority interest......................................... - - (1,933)
Proceeds of sale of minority interest................................. - - 261
--------- --------- ---------
Net cash used in investing activities....................... $ (6,832) $ (15,844) $ (9,967)
========= ========= =========
</TABLE>
F 6
<PAGE>
The Derby Cycle Corporation
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
For the years ended December 31,
-------------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from share issue............................................. $ - $ - $ 63,000
Redemption of shares in subsidiaries.................................. - - (146,159)
Repayment of Series A, B and C Senior Notes, net...................... (14,570) (13,331) (53,334)
Proceeds from issuance of Senior Notes ............................... - - 161,867
Short term borrowings, net, prior to Recapitalization ................ 950 28,910 45,894
Repayment of short term borrowings at Recapitalization................ - - (82,721)
Proceeds from short term borrowings at Recapitalization............... - - 84,914
Short term borrowings, net, post Recapitalization..................... - - (25,873)
Repayment of term loan................................................ - - (9,057)
Deferred financing costs.............................................. - (596) (13,924)
Recapitalization costs................................................ - - (5,853)
Dividends paid........................................................ (5,607) (1,139) -
Contributions made to pension plans................................... (2,154) (2,335) (1,577)
Net contribution by (distribution to) DICSA........................... 5,645 (3,043) 1,600
--------- --------- ---------
Net cash (used in) provided by financing activities......... (15,736) 8,466 18,777
--------- --------- ---------
Effect of exchange rate changes............................................ 6,799 3,016 (3,509)
--------- --------- ---------
Net (decrease) increase in cash and cash equivalents....................... (3,855) 6,596 2,027
Cash and cash equivalents, beginning of year............................... 12,685 8,830 15,426
--------- --------- ---------
Cash and cash equivalents, end of year..................................... $ 8,830 $ 15,426 $ 17,453
========= ========= =========
Supplemental cash flow information:
Interest paid......................................................... $ 8,015 $ 7,202 $ 13,525
Income taxes paid..................................................... $ 6,088 $ 8,041 $ 6,372
Income taxes received................................................. $ - $ - $ 5,624
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
F 7
<PAGE>
The Derby Cycle Corporation
Notes to Consolidated Financial Statements
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 through May 14, 1998. Up to that date DICSA owned
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 "Company", have significant operations in The Netherlands
("Gazelle"), the United Kingdom ("Raleigh UK" and "Sturmey - Archer"), Canada
("Raleigh Canada"), Germany ("Derby Germany"), South Africa ("Probike") and the
United States (the "Raleigh USA" division of the Company). The Company 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 Kalkhoff, Musing,
Winora and Staiger in Germany.
Effective May 14, 1998, DICSA reorganized its businesses in connection with a
recapitalization agreement (the "Recapitalization Agreement," see Note 18) so
that each of its bicycle and bicycle component companies are owned directly or
indirectly by the Company, a Delaware corporation with operations in the United
States. The accompanying consolidated financial statements have been prepared to
reflect the financial position and results of operations of the Company and its
subsidiaries from May 14, 1998 through December 31, 1998. Accordingly, the
accompanying combined and consolidated 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 and consolidated financial statements, herein referred
to as the consolidated financial statements, have been prepared as if the
Company had been in existence for all periods presented. DICSA's historical
basis in the assets and liabilities of the Company has been carried over. All
material inter-company transactions and balances between entities included in
these consolidated financial statements have been eliminated. Certain expenses
were originally recorded by DICSA on behalf of the Company, such as
headquarters' management costs and other corporate expenses. These amounts have
been allocated in their entirety in the Company's financial statements, as such
costs were incurred on behalf of the Company except for an immaterial amount
that related to DICSA. The headquarters' management costs and other corporate
expenses were $2,069,000, $1,198,000 and $1,262,000 for the years ended December
31, 1996, 1997 and 1998, respectively. Management believes this allocation is
reasonable and represents the expenses as if the Company had been a stand-alone
operation.
For the purposes of calculating the net income (loss) applicable to Common
Shareholders, the Common Shares outstanding used assumes that the conversion of
pre-existing stock at the time of the Recapitalization is applicable to earlier
years.
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.
Foreign Currency Translation
The financial statements of the Company's subsidiaries have been translated in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 52
"Foreign Currency Translation". Current rates of
F 8
<PAGE>
exchange are used to translate the balance sheets of the Company's subsidiaries,
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 selling,
general, and administrative expenses in the accompanying statements of income.
Total foreign currency gains (losses) were $(4,000), $(19,000) and $2,042,000
for the years ended December 31, 1996, 1997 and 1998, respectively.
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
$11,329,000, $10,245,000 and $10,858,000 for the years ended December 31, 1996,
1997 and 1998, respectively.
Income Taxes
The Company 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.
Basis of Consolidation
The financial statements combine the financial position and results of
operations of the bicycle and bicycle component businesses of DICSA, through May
14, 1998, and consolidate the financial position and results of operations of
the Company and its subsidiaries from May 14, 1998 through December 31, 1998.
The results of subsidiaries are consolidated in the Statements of Income from
the date of acquisition. Goodwill arising on combination and consolidation is
being written off over 40 years.
Comprehensive Income
The Company adopted SFAS No. 130 "Reporting Comprehensive Income" during 1998.
The adoption of this standard did not have a material effect on the Company's
financial statements as the Company'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. The presentation of
comprehensive income for all years presented is included within the Statement of
Shareholders' Equity.
Cash and Cash Equivalents
The Company 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 9
<PAGE>
Inventories consist of the following (in thousands):
December 31,
------------------------
1997 1998
----------- ----------
Finished products..................................... $ 43,211 $ 48,498
Work in process....................................... 8,841 9,686
Raw materials......................................... 37,740 47,080
----------- ----------
Total inventories................................ $ 89,792 $ 105,264
=========== ==========
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 Company holds
excess inventory of that bicycle model, part or accessory, the Company may be
required to take significant price markdowns, which could have a material
adverse effect on the Company'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 amounts
amortized were $771,000, $567,000 and $547,000 for the years ended December 31,
1996, 1997, and 1998, respectively. The unamortized balance of capital grants
was $3,633,000 and $3,341,000 as of December 31, 1997 and 1998, respectively,
and is included in the accompanying balance sheets as other long-term
liabilities.
These grants relate to the factory completed in Rostock, Germany in 1993. The
total grants received for the Rostock factory were $10.3 million, and have
certain claw-back provisions relating to maintaining both the assets and a
minimum number of employees. These claw-back provisions expire at certain times
from December 31, 1998 to December 31, 2000.
Intangibles
Intangibles are stated net of accumulated amortization of $818,000 and
$1,581,000 as of December 31, 1997 and 1998, respectively. The Company has
goodwill related to 1997 and 1998 acquisitions of $3,462,000 and $5,033,000
included in intangibles as of December 31, 1997, and 1998, respectively, and
negative goodwill of $11,235,000 and $11,120,000 as of December 31, 1997, and
1998, respectively, in excess of assets acquired over cost of acquisitions in
the accompanying balance sheets. Both positive and negative goodwill are
amortized using the straight-line method over 40 years. Total amortization
expense on positive goodwill was $92,000 and $113,000 for the years ended
December 31, 1997 and 1998, respectively, and total amortization income related
to negative goodwill was $364,000, $408,000, and $392,000 for the years ended
December 31, 1996, 1997, and 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 Company periodically evaluates whether events or circumstances have occurred
indicating that the carrying amount of long-lived assets may not be recoverable.
If the sum of undiscounted expected future cash flows is less than the carrying
amount of an asset, the Company recognizes an impairment loss
F 10
<PAGE>
based on the amount by which the carrying amount of the asset exceeds the fair
value of the asset.
Derivative Financial Instruments
The Company 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.
Forwards - Forward foreign currency exchange contracts are used to minimize the
impact of currency exchange rate movements on purchases of inventory and sales
of goods. Changes in the market value of the forward contracts are recorded as
gains or losses through cost of sales in the accompanying statements of income.
Cash flows resulting from forwards are included in cash flows from operating
activities in the accompanying statements of cash flows.
Swaps - Currency and interest rate swaps have the effect of synthetically
changing the currency and interest rates of certain liabilities of the Company.
The net receivable or payable related to currency swaps is recorded as other
current assets or other current liabilities, respectively, in the accompanying
balance sheets. Changes in the market value of the currency and interest rate
swaps are recorded as gains or losses through other income (expense) in the
accompanying statements of income. Cash flows resulting from currency and
interest rate swaps are classified in repayment of long-term debt in the
accompanying statements of cash flows.
Options - Options are used to hedge foreign currency exchange rate movements on
inventory purchases and sales of goods and certain liabilities of the Company.
Changes in the market value of the options are recorded as gains or losses
through cost of sales for purchases and sales of goods or other income (expense)
for certain liabilities 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 and Caps - 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. The Company adopted FASB Statement No.
131 on December 31, 1998. The adoption of SFAS 131 did not have any effect on
the Company's primary financial statements, but did affect the disclosure of
segment information contained in note 15.
In February 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 132, Employers' Disclosures about Pensions
and Other Post-retirement Benefits. The Company adopted Statement 132 during
1998 and the disclosures in note 14 are made in accordance with the new
standard.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting
F 11
<PAGE>
Standards No. 133, Accounting for Derivative Instruments and Hedging Activities.
The Statement establishes accounting and reporting standards in the United
States requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. The Statement requires
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting.
Statement 133 is effective for fiscal years beginning after June 15, 1999. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and
thereafter). Statement 133 cannot be applied retroactively. Statement 133 must
be applied to (a) derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or substantively
modified after December 31, 1997.
The Company elected to adopt Statement 133 as of October 1, 1998. The impact of
this adoption on the Company is that certain activities qualify for hedge
accounting under SFAS 133 that did not qualify for hedge accounting under the
Company's prior policy. Gains and losses related to derivative instruments prior
to October 1, 1998 are included in the results of operations as cost of sales or
other income (expenses) as the market changes occur. Gains and losses related to
derivative instruments subsequent to the adoption of Statement 133 are included
in other comprehensive income as the market changes occur, and are recorded in
cost of sales or other income (expense) when the hedged forecasted transaction
impacts earnings.
3. Receivables:
Receivables consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1998
--------- ----------
<S> <C> <C>
Trade receivables........................................................................ $ 72,785 $ 74,591
Royalty receivables...................................................................... 738 284
--------- ----------
Total receivables................................................................... 73,523 74,875
Allowance for doubtful trade accounts.................................................... (4,419) (3,956)
Allowance for discounts and rebates...................................................... (2,862) (2,635)
Allowance for other items................................................................ (978) (1,483)
--------- ----------
Total receivables, net.............................................................. $ 65,264 $ 66,801
========= ==========
</TABLE>
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Allowance for doubtful trade accounts:
Balance January 1,......................................................... $ 3,859 $ 4,501 $ 4,419
Additions charged to costs and expenses.................................... 1,826 1,016 1,467
Deductions................................................................. (1,084) (993) (2,045)
Effect of exchange rate changes............................................ (100) (105) 115
--------- --------- ---------
Balance December 31,.................................................. $ 4,501 $ 4,419 $ 3,956
========= ========= =========
<CAPTION>
December 31,
-------------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Allowance for discounts and rebates:
Balance January 1,......................................................... $ 2,769 $ 2,314 $ 2,862
Additions charged to costs and expenses.................................... (272) 734 (233)
Effect of exchange rate changes ........................................... (183) (186) 6
--------- --------- ---------
Balance December 31,.................................................. $ 2,314 $ 2,862 $ 2,635
========= ========= =========
</TABLE>
F 12
exi
<PAGE>
4. Other Current Assets:
Other current assets consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1998
--------- ---------
<S> <C> <C>
Prepaid expenses......................................................................... $ 4,757 $ 5,011
Receivable on derivatives................................................................ 4,335 125
Sales taxes recoverable.................................................................. 827 908
Other receivables........................................................................ 3,962 3,542
--------- ---------
Total other current assets.......................................................... $ 13,881 $ 9,586
========= =========
</TABLE>
5. Property, Plant, and Equipment:
Property, plant, and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1998
--------- ---------
<S> <C> <C>
Land .................................................................................... $ 3,910 $ 4,200
Buildings................................................................................ 22,422 24,274
Equipment................................................................................ 82,838 90,503
--------- ---------
109,170 118,977
Accumulated depreciation................................................................. (59,463) (69,463)
--------- ---------
Net property, plant, and equipment.................................................. $ 49,707 $ 49,514
========= =========
</TABLE>
Depreciation expense was $9,400,000, $9,362,000 and $9,407,000 for the years
ended December 31, 1996, 1997 and 1998, respectively.
F 13
<PAGE>
6. Intangibles:
Intangible assets consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1998
--------- ---------
<S> <C> <C>
Trademarks purchased..................................................................... $ 2,665 $ 3,773
Goodwill purchased....................................................................... 3,462 5,033
Deferred financing costs................................................................. 1,342 13,375
--------- ---------
7,469 22,181
Accumulated amortization................................................................. (818) (1,581)
--------- ---------
Total intangibles, net.............................................................. $ 6,651 $ 20,600
========= =========
</TABLE>
7. Accrued Liabilities:
The following is a breakdown of accrued liabilities (in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1998
--------- ---------
<S> <C> <C>
Sales taxes payable...................................................................... $ 3,329 $ 2,389
Payroll taxes payable.................................................................... 3,089 3,858
Accrued vacation......................................................................... 1,269 1,485
Accrued unvouchered trade payables....................................................... 15,051 12,429
--------- ---------
Total accrued liabilities........................................................... $ 22,738 $ 20,161
========= =========
</TABLE>
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 Company enters
into forward foreign exchange contracts to minimize the impact of currency
movements for the following year, principally on purchases of inventory and
sales of goods denominated in currencies other than the subsidiaries' functional
currencies.
F 14
<PAGE>
The Company held forward foreign exchange contracts in the following gross
amounts (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------
1997 1998
----------------------- -----------------------
Buy Sell Buy Sell
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
US Dollars................................................... $ 53,673 $ 6,835 $ 32,115 $ 8,682
Japanese Yen................................................. 15,139 - 6,236 -
Dutch Guilders............................................... 1,153 9,643 119 9,276
Deutsche Marks............................................... - 1,900 - 1,482
Pounds Sterling.............................................. 1,579 - 283 -
Other........................................................ 2,984 - 59 -
--------- --------- --------- ---------
Total notional amounts.................................. $ 74,528 $ 18,378 $ 38,812 $ 19,440
========= ========= ========= =========
Fair value.............................................. $ 73,845 $ 18,502 $ 39,739 $ 19,274
========= ========= ========= =========
</TABLE>
Currency Options and Swaps and Interest Rate Caps and 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
Company 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 achieved the effect of synthetically converting the original
United States dollar denominated Series A, B and C Senior Notes into several
other foreign currencies to match related operating cash flows and converting
the fixed interest rate on the Series A and C Senior Notes to a floating
interest rate. The Series A and C Senior Notes and associated swaps were repaid
on May 14, 1998 (see Notes 10 and 17).
With the issuance of the $100,000,000 of 10 percent Senior Notes and
DM110,000,000 of 9 3/8 percent Senior Notes, and a seven-year revolving credit
facility of DM214,000,000 on May 14, 1998 (see Note 10) in connection with the
Recapitalization, the Company purchased currency options and interest rate caps.
The currency options hedge 67% of the Company's exposure from July, 1998 through
May, 2001 arising from operating cash flows being generated in different
currencies than that required to service the Company's debt. The interest rate
caps limit the Company's exposure to floating interest rate increases on the
primary portion of the drawdowns on the revolving credit facility.
The following is a summary of the Company's currency and interest rate swap,
currency option and interest rate cap net receivables as of December 31, 1997,
and 1998 (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------
1997 1998
----------------------- -----------------------
Carrying Fair Carrying Fair
Value Value Value Value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Currency options............................................. $ - $ - $ 251 $ 114
Interest rate cap............................................ - - 137 11
--------- --------- --------- ---------
Total currency options and interest rate cap............ - - 388 125
Swaps........................................................ 3,279 4,335 - -
--------- --------- --------- ---------
Total derivatives....................................... $ 3,279 $ 4,335 $ 388 $ 125
========= ========= ========= =========
</TABLE>
F 15
<PAGE>
Adoption of SFAS 133
The Company elected to adopt SFAS 133 as of October 1, 1998.
Income and expense related to the fair value accounting of the Company's
derivative instruments prior to October 1, 1998 are included in the statement of
income for the year ended December 31, 1998: a profit of $807,000 on the fair
value accounting of the forward foreign exchange contracts is shown within cost
of sales; a loss of $286,000 on the fair value accounting of the currency option
and interest rate cap and a loss of $1,048,000 on the fair value accounting of
the swaps, due to the amortisation of the swaps before the Recapitalization on
May 14, 1998, are shown as other income (expense). The Company recognized in
other income (expense) a gain (loss) on swaps of $(2,675,000), and $107,000 for
the years ended December 31, 1996, and 1997.
Income and expense related to the fair value accounting of derivative
instruments subsequent to the adoption of SFAS 133 are included in Accumulated
Other Comprehensive Income for the year ended December 31, 1998: a gain of
$1,093,000 on the fair value accounting of the forward foreign exchange
contracts and a gain of $23,000 on the fair value accounting of the currency
option and interest rate cap. The net gain of $1,116,000 in other comprehensive
income at December 31, 1998 will be released to income in 1999 as the related
sales, purchases or interest expense occurs.
Of the $263,000 loss due to fair value accounting of the currency option and
interest rate cap during the year ended December 31, 1998, the Company
recognized a loss of $286,000 in the income statement to September 30, 1998
prior to adoption of SFAS 133, and recognized a gain of $23,000 in Accumulated
Other Comprehensive Income from October 1, 1998 to December 31, 1998.
Credit Risk
The Company enters into derivative transactions with several counterparties
including Midland Bank and Banque National de Paris. The Company is exposed to
credit loss in the event of non-performance by these counterparties. However,
the Company does not anticipate non-performance by these counterparties. In the
event of non-performance, the Company would be subject to the following
counterparty risk (in thousands):
<TABLE>
<CAPTION>
December 31,
------------------------
1997 1998
---------- ----------
<S> <C> <C>
Currency options......................................................................... - 114
Interest rate cap........................................................................ - 11
Forwards................................................................................. 748 1,099
Swaps.................................................................................... 4,335 -
---------- ----------
Total credit risk................................................................. $ 5,083 $ 1,224
========== ==========
</TABLE>
9. Short-Term Borrowings:
Short-term borrowings consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
------------------------
1997 1998
---------- ----------
<S> <C> <C>
Short-term bank borrowings............................................................... $ 34,049 $ 56,693
Bank overdraft........................................................................... 2,778 4,138
Current portion of long-term debt (see Note 10).......................................... 14,333 -
---------- ----------
Total short-term borrowings......................................................... $ 51,160 $ 60,831
========== ==========
</TABLE>
F 16
<PAGE>
At December 31, 1996, the Company maintained 364-day aggregate unsecured
revolving credit facilities of (pound)26,500,000, 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 unsecured three year
aggregated revolving credit facility of (pound)60,000,000, and on which interest
was charged at one percent above the London Interbank Offer Rate. In addition
the Company's subsidiaries had available overdraft facilities of up to
$24,000,000 during the periods ended December 31, 1996, 1997, and up to May 14,
1998.
On May 14, 1998, all the revolving credit and overdraft facilities outstanding,
except for the Rand 31.0 million of facilities in South Africa, were repaid and
replaced by a seven year revolving credit facility of DM214,000,000 (see
Notes 10 and 18). Interest on the facility is charged at two percent above the
London Interbank Borrowing Rate. The weighted-average balance outstanding on
these facilities was $33,500,000 and $48,324,000 during the years ended
December 31, 1997 and 1998, respectively. The highest amount outstanding on
these facilities was $44,800,000, $60,300,000 and $86,032,000 during the years
ended December 31, 1996, 1997 and 1998, respectively. Management believes that
there is no material difference between the book values and fair values of
borrowings on revolving credit facilities and bank overdrafts as of December 31,
1997 and 1998.
The Company's interest expense was $1,927,000 and $3,953,000 on the revolving
credit facilities for the years ended December 31, 1997 and 1998 respectively.
These were at floating rates of 1% above the London Interbank Offered Rate
through May 14, 1998 and 2% thereafter. This produced weighted average interest
rates on the revolving credit facilities of 5.1% and 6.6% in 1997 and 1998,
respectively, after taking into account the effect of any swaps and including
$139,000 and $511,000 in amortization of deferred financing costs for 1997 and
1998 respectively. At December 31, 1998, the Company had $56,693,000 of bank
borrowings under the revolving credit facilities, on which the average interest
rate was 5.87%.
The Company was not in compliance with all of its borrowing covenants as at
December 31, 1998. The covenants under the seven year revolving credit facility
include a maximum level of inventory days on hand and a minimum level of
adjusted EBITDA. Effective February 4, 1999, the revolving credit facility
agreement was amended in connection with the acquisition of Diamond Back. The
changes made included an increase in inventory days allowed, a change in the
measurement of EBITDA and a reduction in the EBITDA covenant, such that the
Company is now in compliance with all its borrowing covenants.
10. Long Term Debt
In 1993, Derby Holding BV, which was a subsidiary of DICSA and is a subsidiary
of the Company, issued unsecured United States dollar denominated Series A, B
and C Senior Notes, 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
May 14, 1998. On May 14, 1998, these Senior Notes were repaid in full. The long-
term bank loan at December 31, 1997, represents a loan of DM16,250,000
equivalent to $9,059,000 as of December 31, 1997, assumed on the acquisition of
the Winora and Staiger businesses (see Note 13). The long-term bank loan was
repaid on May 14, 1998.
On May 14, 1998, the Company issued $79,750,000 of 10 percent Senior Notes,
and Lyon Investments BV, a subsidiary of the Company, issued $20,250,000 of
10 percent Senior Notes and DM110,000,000 of 9 3/8 percent Senior Notes (see
Note 18). The Senior Notes mature in full in 2008. The Senior Notes are issued
under indentures which contain certain covenants that, among other things,
restrict the ability of the Company 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 of the assets of the
Company.
The weighted average interest rates on the Senior Notes were 6.6% in 1997, 6.9%
in 1998 through May
F 17
<PAGE>
13, 1998 and 10.3% effective May 14, 1998, after taking into account the effect
of any swaps and including $0.5 million and $0.8 million in amortization of
deferred financing costs for 1997 and 1998, respectively.
As of December 31, 1997, and 1998, long-term debt consists of the following (in
thousands):
<TABLE>
<CAPTION>
December 31,
------------------------
1997 1998
---------- ----------
<S> <C> <C>
10% $100,000,000 Senior Notes............................................................ $ - $ 100,000
9 3/8% DM110,000,000 Senior Notes........................................................ - 65,870
Series A Senior Notes.................................................................... 33,000 -
Series B Senior Notes.................................................................... 20,000 -
Series C Senior Notes.................................................................... 3,333 -
Long-term bank loan...................................................................... 9,059 -
---------- ----------
Total long-term debt..................................................................... 65,392 165,870
Less current portion of long-term debt................................................... (14,333) -
---------- ----------
Non-current portion of long-term debt............................................... $ 51,059 $ 165,870
========== ==========
</TABLE>
The fair value of the Series A, B and C Senior Notes as of December 31, 1997 was
approximately $56,149,000. Management believes that there was no material
difference between the fair value and book value of the long-term bank loan as
of December 31, 1997, or the 10 percent $100,000,000 and the 9 3/8 percent
DM110,000,000 Senior Notes as of December 31, 1998.
11. Commitments and Contingencies:
Operating Leases
Total rent expense for operating leases, primarily in respect of land and
buildings and automobiles, was $5,153,000, $5,409,000 and $5,768,000 for the
years ended December 31, 1996, 1997, and 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, 1998,
are as follows (in thousands):
<TABLE>
<CAPTION>
For the years ended December 31,
- --------------------------------
<S> <C>
1999 ................................................................................................. $ 4,919
2000 ................................................................................................. 3,694
2001 ................................................................................................. 2,283
2002 ................................................................................................. 1,732
2003 ................................................................................................. 1,327
Thereafter............................................................................................ 10,261
----------
Total............................................................................................ $ 24,216
==========
</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 Company's facilities are subject to the requirements of
environmental regulations in their respective jurisdictions. There can be no
assurance that the Company is at all times in compliance with all such
requirements.
International Operations; Dependence on Foreign Suppliers and Sales
A significant portion of the Company'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 Company's
F 18
<PAGE>
business is highly dependent upon products manufactured by foreign suppliers
located primarily in Taiwan and Japan and the People's Republic of China. A
substantial majority of the Company's multi-speed bicycles contain components
supplied on a purchase order basis by one Japanese manufacturer. The Company'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 Company. In addition, several of the Company's manufacturing
operations are unionized.
Product Liability
Because of the nature of the Company's business, the Company 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 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 is 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 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 Company 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 Company's insurance coverage
could have a material adverse effect on the Company'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 Company had unconditional purchase obligations for raw materials and bicycle
components of $49,188,000 and $54,017,000 as of December 31, 1997, and 1998,
respectively, which are not recorded in the consolidated financial statements.
Common Stock and Preferred Stock
Following the Recapitalization, DC Cycle L.L.C. ("DC Cycle"), a wholly owned
subsidiary of Thayer, owns approximately 27% 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"). Holders of Series A preferred stock are entitled to 1.5 votes
per share, voting together with the Class A common stock. Perseus Cycle, L.L.C.
("Perseus Cycle"), a wholly owned subsidiary of Perseus, owns approximately 22%
of the Class A common stock. DFS owns approximately 47% of the Class A common
stock and all the Series B preferred stock, par value $.01 per share (the
"Series B preferred stock").
Following the issue of 22,750 shares of Class C common stock for the acquisition
of Diamond Back on February 4, 1999, under the terms of the Company's Amended
and Restated Certificate of Incorporation and the Shareholders' Agreement (as
defined), (i) Thayer currently controls approximately 65% of the total voting
power of the Company's capital stock; (ii) DFS controls approximately 20% of the
total voting power of the Company's capital stock; and (iii) Perseus controls
approximately 13% of the total voting power of the Company's capital stock.
In addition, following the Recapitalization, 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 the Company 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
F 19
<PAGE>
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.
Holders of shares of Class A and Class C 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 and Class C common stock and Series A
preferred stock will vote together as a single class on all matters submitted to
the shareholders of the Company 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 the
Company 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 the
Company that constitutes a Change of Control) the Company 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, the Company may
defer such repurchase until such prohibition no longer exists or such default
would no longer occur. the Company 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 the
Company 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 the Company that constitutes a Change of Control) the Company
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, the Company may defer such repurchase until such prohibition no
longer exists or such default would no longer occur. the Company must use
commercially reasonable efforts to obtain any consent necessary to permit such
payment.
Dividends on each share of Class C common stock shall accrue on a daily basis at
the rate of 20% per annum of the sum of the liquidation amount thereof plus all
accumulated and unpaid dividends thereon. Such dividends shall accrue whether
or not they have been declared and whether or not there are profits, surplus or
other funds of the Company legally available for the payment of dividends.
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
F 20
<PAGE>
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 the Company
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 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.
At any time, each holder of Class C common stock may convert all or any portion
of the Class C common shares as follows: each Class C common stock shall be
convertible into (i) one share of Class A common stock and (ii) the number of
shares of Class A common stock determined by dividing the accrued but unpaid
dividends on such Class C common stock through the date of conversion by
$1,000. At any time after August 3, 2000, the Company may redeem all or any
portion of the Class C common shares then outstanding. On any such redemption,
the Company shall pay a purchase price per Class C common share equal to the
product of (i) the Class C Common Redemption Premium (as defined) and (ii) the
liquidation amount (plus all accrued and accumulated but unpaid dividends
thereon).
12. Income taxes:
The Company does not have a formal tax sharing agreement with its subsidiaries.
The Company 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, minority interest and extraordinary item
consists of the following (in thousands):
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
United Kingdom............................................................. $ 14,544 $ 19,533 $ 208
Holland.................................................................... 8,136 8,541 5,971
Germany.................................................................... (6,031) (9,753) (5,348)
United States.............................................................. (1,293) (2,807) (5,858)
Canada..................................................................... 1,474 1,591 1,705
South Africa............................................................... 1,109 1,369 683
Others..................................................................... 5,560 4,882 3,543
---------- ---------- ----------
Total income before income taxes, minority interest and
extraordinary item............................................... $ 23,499 $ 23,356 $ 904
========== ========== ==========
</TABLE>
F 21
<PAGE>
The provision (benefit) for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Current tax provision (benefit):
United Kingdom........................................................ $ 1,411 $ 3,547 $ (144)
Holland............................................................... 4,185 3,271 3,988
Germany............................................................... 499 (196) 97
United States......................................................... - - 77
Canada................................................................ 400 525 735
South Africa.......................................................... 244 759 302
Others................................................................ 231 344 230
---------- ---------- ----------
Total current provision.......................................... 6,970 8,250 5,285
---------- ---------- ----------
Deferred tax provision (benefit):
United Kingdom........................................................ 2,102 1,844 537
Holland............................................................... (326) 498 410
Germany............................................................... - - -
United States......................................................... - - (92)
Canada................................................................ 129 93 122
South Africa.......................................................... (27) 45 (33)
Others................................................................ 76 (109) 65
---------- ---------- ----------
Total deferred tax provision..................................... 1,954 2,371 1,009
---------- ---------- ----------
Provision for income taxes ................................................ $ 8,924 $ 10,621 $ 6,294
========== ========== ==========
</TABLE>
The following table summarizes the significant differences between the United
States statutory tax rate and the Company's effective tax rate for financial
statement purposes:
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Statutory tax rate - US Federal............................................ 35% 35% 35%
Effect of foreign tax rates................................................ 3 (2) (89)
Utilization of losses brought forward...................................... - - (37)
Net operating losses for which no benefit is currently available........... 2 14 207
Permanent differences - interest not deductible for tax.................... - - 337
Permanent differences - other.............................................. (2) (2) 16
Recapitalization costs..................................................... - - 227
---------- ---------- ----------
Effective tax rate.................................................... 38% 45% 696%
========== ========== ==========
</TABLE>
The permanent differences - other, in 1998, relates to non-deductible items of
only $144,000, but which calculates to 16% of net income.
F 22
<PAGE>
Deferred income tax (assets) liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
December 31,
------------------------
1997 1998
---------- ----------
<S> <C> <C>
Deferred income tax assets:
Operating losses.................................................................... $ 66,830 $ 38,542
Provisions and accruals............................................................. 427 376
---------- ----------
Total deferred income tax assets............................................... 67,257 38,918
---------- ----------
Valuation allowance................................................................. (63,523) (35,281)
---------- ----------
Net deferred income tax assets................................................. 3,734 3,637
Deferred income tax liabilities:
Pension ............................................................................ (15,543) (18,086)
Depreciation........................................................................ (5,272) (4,504)
Other............................................................................... (370) 57
---------- ----------
Total deferred income tax liabilities.......................................... (21,185) (22,533)
---------- ----------
Net deferred income tax liabilities....................................... $ (17,451) $ (18,896)
========== ==========
</TABLE>
The operating losses, which arise in Germany and the United States, begin to
expire in 1999. The ability of the Company to utilize these losses may be
limited by a change in ownership of the Company.
13. Acquisitions:
In January 1997, the Company 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 as of December 31, 1997
(see Note 10). The results of this business are included in the consolidated
financial statements from February 1, 1997.
In August 1997, the Company 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
consolidated financial statements from September 1, 1997.
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)
----------
Purchase Price.................................................................................... $ 6,650
==========
</TABLE>
Pro forma net revenues and net income 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 Company 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
F 23
<PAGE>
bikes. In addition, further licenses were acquired during 1997 for $115,000.
In May 1998, the Company purchased the minority interest in its operations in
South Africa for $1,933,000, including $1,139,000 for goodwill that is being
written off over 40 years. The acquisition of the minority interest was
accounted for under the purchase method.
14. Pension Plans:
The Company 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 Company operates a 401(k) pension
contribution plan for certain of its employees, for which the Company paid
$120,000, $127,000 and $180,000 in the years ended December 31, 1996, 1997 and
1998 respectively. The plans are operated under trusts and their assets are
invested independently of the Company. 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 Company 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 Company's
adoption of SFAS No. 87.
The Company's defined benefit plan assets of $217,501,000 (1997 $180,664,000)
are approximately invested in UK quoted equities 36%, other equities 24%,
treasury instruments 25% and 15% invested in cash and other.
The Company adopted SFAS 132 during 1998 and the following disclosures are made
in accordance with the new standard (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
--------- ---------- ----------
<S> <C> <C> <C>
Total Pension Schemes
Change in Benefit Obligation
Projected benefit obligation at January 1, ........................... $ 99,042 $ 113,338 $ 130,143
Employer service cost................................................. 2,098 2,792 4,338
Interest cost......................................................... 7,599 8,386 8,821
Actual employee contributions......................................... 1,067 1,074 1,072
Actuarial Gain........................................................ 4,358 16,783 13,886
Actual distributions.................................................. (5,407) (5,588) (5,564)
Exchange adjustment................................................... 4,581 (6,642) 2,854
--------- ---------- ----------
Projected benefit obligation at December 31...................... $ 113,338 $ 130,143 $ 155,550
========= ========== ==========
Change in Plan Assets
Plan assets at January 1............................................, $ 52,293 $ 172,830 $ 180,664
Actual return on assets during........................................ 16,243 21,059 34,497
Actual employer contributions......................................... 2,154 2,335 1,577
Actual employee contributions......................................... 1,067 1,074 1,072
Actual distributions.................................................. (5,407) (5,588) (5,564)
Exchange adjustment................................................... 6,480 (11,046) 5,255
--------- ---------- ----------
Plan assets at December 31....................................... $ 172,830 $ 180,664 $ 217,501
========= ========== ==========
</TABLE>
F 24
<PAGE>
<TABLE>
1996 1997 1998
--------- ---------- ----------
<S> <C> <C> <C>
Net Amount Recognized
Funded status......................................................... $ 59,492 $ 49,834 $ 61,951
Unrecognized transition asset......................................... (19,048) (14,981) (12,472)
Unrecognized loss..................................................... 121 9,660 3,710
Unrecognized prior service cost....................................... 1,846 3,264 2,883
--------- ---------- ----------
Net amount recognized as prepaid expense......................... $ 42,411 $ 47,777 $ 56,072
========= ========== ==========
Weighted average Assumptions as of December 31
Discount rate......................................................... 8.00% 6.90% 5.42%
Expected return on assets............................................. 9.25% 9.35% 8.57%
Rate of compensation increase......................................... 5.62% 5.68% 3.92%
Components of Net Periodic Pension Cost for the years ended December 31
Service cost.......................................................... $ 2,098 $ 2,792 $ 4,338
Interest cost......................................................... 7,599 8,386 8,821
Expected return on plan assets........................................ (13,530) (14,852) (16,430)
Amortization of transition asset...................................... (2,652) (2,536) (2,514)
Amortization of prior service cost.................................... 224 382 382
--------- ---------- ----------
Net periodic pension income as total pension income.............. $ (6,261) $ (5,828) $ (5,403)
========= ========== ==========
</TABLE>
15. Segmental Information:
Reportable business segments
The Company manages its business in seven reportable segments as shown in the
following tables. Consolidation adjustments and certain small operating
companies and non operating companies are included in "other companies" The
reportable segments are managed separately because each business has differing
customer requirements, either as a result of the regional environment of the
country or differences in products and services offered. The accounting policies
of the business segments are the same as those described in the summary of
significant accounting policies (Note 2).
A summary of revenues, operating income, depreciation, identifiable assets and
capital additions categorized by the business segment is as follows (in
thousands):
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Net revenues:
Raleigh UK............................................................ $ 107,374 $ 107,254 $ 82,116
Gazelle, Holland...................................................... 120,788 107,793 111,512
Derby Germany......................................................... 82,390 103,813 125,089
Raleigh USA........................................................... 53,516 57,917 69,083
Raleigh Canada........................................................ 29,459 29,468 28,750
Sturmey - Archer, UK and Holland...................................... 30,130 29,588 23,834
Probike, South Africa................................................. 20,477 20,626 17,047
Other companies....................................................... 8,450 9,228 7,874
---------- ---------- ----------
Total net revenues............................................... $ 452,584 $ 465,687 $ 465,305
========== ========== ==========
</TABLE>
F 25
<PAGE>
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Operating income:
Raleigh UK............................................................ $ 7,532 $ 13,086 $ 3,195
Gazelle, Holland...................................................... 16,217 13,367 14,776
Derby Germany......................................................... 1,050 (2,202) (517)
Raleigh USA........................................................... (718) (1,980) 2,686
Raleigh Canada........................................................ 2,784 2,752 2,563
Sturmey - Archer, UK and Holland...................................... 5,544 3,385 613
Probike, South Africa................................................. 2,032 2,133 1,224
Other companies....................................................... (1,059) (840) (6,402)
---------- ---------- ----------
Total operating income........................................... $ 33,382 $ 29,701 $ 18,138
========== ========== ==========
Depreciation:
Raleigh UK............................................................ $ 1,990 $ 2,578 $ 2,758
Gazelle, Holland...................................................... 1,938 1,681 1,677
Derby Germany......................................................... 3,721 3,375 3,431
Raleigh USA........................................................... 598 612 476
Raleigh Canada........................................................ 366 327 307
Sturmey - Archer, UK and Holland...................................... 483 439 529
Probike, South Africa................................................. 203 164 123
Other companies....................................................... 101 186 106
---------- ---------- ----------
Total depreciation............................................... $ 9,400 $ 9,362 $ 9,407
========== ========== ==========
Capital additions:
Raleigh UK............................................................ $ 3,288 $ 1,434 $ 2,296
Gazelle, Holland...................................................... 1,836 1,658 1,852
Derby Germany......................................................... 2,149 2,430 2,003
Raleigh USA........................................................... 479 472 1,132
Raleigh Canada........................................................ 147 153 526
Sturmey - Archer, UK and Holland...................................... 643 991 332
Probike, South Africa................................................. 200 38 85
Other companies....................................................... 354 237 96
---------- ---------- ----------
Total capital additions.......................................... $ 9,096 $ 7,413 $ 8,322
========== ========== ==========
Identifiable assets:
Raleigh UK............................................................ $ 60,200 $ 63,605 $ 67,719
Gazelle, Holland...................................................... 48,719 44,448 55,784
Derby Germany......................................................... 56,089 79,604 91,789
Raleigh USA........................................................... 33,901 35,905 36,356
Raleigh Canada........................................................ 14,766 13,031 13,997
Sturmey - Archer, UK and Holland...................................... 19,376 23,327 25,060
Probike, South Africa................................................. 11,612 9,864 11,993
Other companies....................................................... 15,898 18,714 22,592
---------- ---------- ----------
Total identifiable assets........................................ $ 260,561 $ 288,498 $ 325,290
========== ========== ==========
</TABLE>
F 26
<PAGE>
Net Revenues by Geographic Region
The Company 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>
For the years ended December 31,
--------------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Net revenues:
United Kingdom........................................................ $ 101,260 $ 100,892 $ 78,559
Netherlands........................................................... 113,508 101,216 104,772
Germany............................................................... 97,347 117,990 130,747
United States......................................................... 52,903 58,316 67,859
Canada................................................................ 29,477 29,528 28,864
South Africa.......................................................... 20,010 20,631 17,047
Rest of the World..................................................... 38,079 37,114 37,457
---------- ---------- ----------
Total net revenues............................................... $ 452,584 $ 465,687 $ 465,305
========== ========== ==========
</TABLE>
16. Related-Party Transactions:
The Company rents land and buildings under operating leases from management in
Germany and South Africa. Rents charged under such leases were $326,000,
$495,000 and $447,000 for the years ended December 31, 1996, 1997, and 1998
respectively. Management consider these rents to be at fair value.
17. Chief Executive Officer's stock options and service contract:
On October 20, 1998, the Company entered into an employment contract with Gary
Matthews as Chief Executive Officer with effect from mid January 1999. The
contract is for a four year term with a three year extension. The Company issued
the stock options to purchase 1,625 shares of the Company's Class A common stock
for $1,000 per share which vest over three years, and performance-based stock
options to purchase 3,250 shares of Class A common stock for $1,000 per share to
Gary Matthews. Pursuant to a Management Stock Purchase Agreement dated October
20, 1998, Gary Matthews purchased 1,500 shares of the Company's Class A common
stock for $1,000 per share. Gary Matthews paid for such shares with a secured
promissory note that is non-recourse except for 20 percent of the principal
amount and all of the accrued interest. Upon the termination of Gary Matthews'
employment with the Company, the Company has the right or is required to
repurchase, depending on the reason for such termination, such Class A common
stock.
18. Recapitalization Agreement and Subsequent Events:
On May 14, 1998, Derby International Corporation SA ("DICSA") and two investment
groups, Thayer Equity Investors III L.P. and Perseus Capital L.L.C., completed
the Recapitalization of the Company, pursuant to a Recapitalization Agreement
signed on March 11, 1998. As part of the Recapitalization, DICSA transferred the
shares of all of its bicycle and bicycle component manufacturing and sales
subsidiaries, other than Raleigh Industries of Canada Limited ("RIC"), to a
wholly-owned company incorporated in Luxembourg, Derby Finance Sarl ("DFS"). The
Company issued new equity to the two investment groups, which diluted the
interest of DFS and DICSA in the Company to approximately 33 percent of the
voting rights. The Recapitalization Agreement also provided for the purchase by
the Company of the minority interests in the South African subsidiaries of the
Company.
As a result of the Recapitalization of the bicycle business, the Company and its
subsidiaries paid $146.2 million to DICSA and DFS to redeem certain equity
rights in the Company and its affiliates. In addition, existing long term debt
of $62.4 million net of $3.0 million of cash received on related swaps was
retired for which the Company recorded an extraordinary charge of $0.4 million
net of taxes upon this early extinguishment of debt. The Company financed this
from the issue of new stock, as detailed below, and $163.9 million in Senior
Notes (see Note 10). The existing $98.4 million ((pound)60 million) of revolving
bank facilities, together with local banking facilities except for those in
South Africa,
F 27
<PAGE>
were replaced with a seven-year secured syndicated bank facility of $127.9
million (DM214 million). In connection with the retirement of debt, the Company
terminated certain interest rate swaps related to the debt and recorded a loss
of $1.1 million in other income (expense) in the accompanying statements of
income for the year ended December 31, 1998.
Following the Recapitalization, DFS retained voting Class A common stock in the
Company with a value of $21.7 million. DFS's parent, DICSA, retained preferred
shares in its former subsidiary, RIC, which are exchangeable for an additional
$8.3 million of voting common stock and $15.0 million of non-voting Class B
common stock in the Company. In addition, DFS purchased 3,000 shares of
non-voting Series B preferred stock for the Company for $3.0 million. DC Cycle
L.L.C. (a subsidiary of Thayer Equity Investors III L.P.) and Perseus Cycle
L.L.C. (a subsidiary of Perseus Capital L.L.C.) purchased 22,500 shares of
voting Class A common stock of the Company for $22.5 million. The Company also
issued 25,000 shares of voting Series A preferred stock to DC Cycle L.L.C for
$37.5 million.
The Company incurred estimated fees and professional expenses of $5.9 million
related to the recapitalization. Fees and professional expenses paid to finance
the Recapitalization of $13.9 million have been deferred and will be amortized
over the term of the Senior Notes and the bank facility. These include
investment banking fees of $1.0 million payable to the management company of one
of the investment groups, $1.2 million to a company which is wholly owned by the
chairman and president of the other investment group, and $0.7 million to
Centenary Corporation, a company in which a director of the Company is a
shareholder.
On February 4, 1999, the Company acquired the assets (and assumed certain
liabilities) of the Diamond Back Group for approximately $42.75 million in cash.
The Diamond Back Group consists of Diamond Back International Company Limited, a
private British Virgin Islands company ("Diamond Back"), Western States Import
Company Inc., a Delaware corporation ("Western States") and Bejka Trading A.B.,
a private Swedish company ("Bejka"), each of which is engaged in the bicycle,
bicycle parts and accessories and fitness equipment distribution business.
Western States and Bejka had worldwide revenues of approximately $69.9 million
and $4.1 million, respectively, for their 1997 fiscal years. Diamond Back was
essentially a holding company for the Company's intellectual property and did
not generate material revenues. The Company financed the acquisition of the
Diamond Back Group by issuing $20 million principal amount in subordinated notes
(the "Subordinated Notes") to an affiliate of the Government of Singapore and
$22.75 million in newly issued Class C common stock to DC Cycle, L.L.C. and
Perseus Cycle L.L.C. The Subordinated Notes mature in 2010 and bear interest at
an annual rate of 19% compounded daily.
F 28
<PAGE>
18. Lyon Investments B.V. Summarized Financial Information:
Lyon Investments B.V. ("Lyon"), a Dutch Company, is a wholly owned subsidiary of
the Company. Prior to the Recapitalization, Lyon was a dormant subsidiary. As a
result of the Recapitalization, Lyon became a holding company and is a co-issuer
of $20,250,000 of the $100,000,000 of 10 percent Senior Notes and all of the
DM110,000,000 of 9 3/8 percent Senior Notes (collectively, the "Senior Notes").
As co-issuers, Lyon and the Company are joint and severally liable with respect
to the Senior Notes. The following summarized financial information sets forth
the combined financial position and results of operations of Lyon, together with
its subsidiaries, Derby Nederland and E. Wiener Bike Parts GmbH. Derby Nederland
is a holding company owning 100 percent of Gazelle, Sturmey-Archer B.V., and
Raleigh B.V.
Lyon Investments B.V.
Summarized Consolidated Balance Sheets
<TABLE>
<CAPTION>
Assets
December 31,
-------------------------
1997 1998
----------- -----------
<S> <C> <C>
Cash and cash equivalents................................................................ $ 6,285 $ 8,470
Accounts receivable, net................................................................. 16,411 15,875
Inventories.............................................................................. 20,477 26,433
Loans to internal group companies........................................................ - 137,768
Other current assets..................................................................... 2,820 3,002
----------- -----------
Total current assets................................................................ 45,993 191,548
----------- -----------
Property, plant, and equipment, net...................................................... 11,118 11,552
Intangibles.............................................................................. - 2,715
Prepaid pension asset.................................................................... 13,492 16,920
----------- -----------
Total assets........................................................................ $ 70,603 $ 222,735
=========== ===========
Liabilities and Shareholders' Deficit
December 31,
-------------------------
1997 1998
----------- -----------
Short-term borrowings - internal and current portion of long-term borrowings $ 28,343 $ 149,252
Bank overdraft........................................................................... 200 -
Other current liabilities................................................................ 17,794 24,015
----------- -----------
Total current liabilities........................................................... 46,337 173,267
Long-term borrowings - internal.......................................................... 44,188 -
10% $100,000,000 Senior Notes............................................................ - 20,250
9 3/8% DM110,000,000 Senior Notes........................................................ - 65,870
Other liabilities........................................................................ 5,671 5,971
----------- -----------
Total liabilities................................................................... 96,196 265,358
Shareholders' deficit.................................................................... (25,593) (42,623)
----------- -----------
Total liabilities and shareholders' deficit......................................... $ 70,603 $ 222,735
=========== ===========
</TABLE>
F 29
<PAGE>
Lyon Investments B.V.
Reconciliation of Shareholders' Deficit
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1998
----------- -----------
<S> <C> <C>
Shareholders' deficit, beginning balance................................................. $ (31,091) $ (25,593)
Capital contributions............................................................... 549 5,800
Net income.......................................................................... 598 4,843
Translation adjustments............................................................. 4,351 (2,043)
Distribution to shareholders in connection with the Recapitalization................ - (25,630)
----------- -----------
Shareholders' deficit, ending balance.................................................... $ (25,593) $ (42,623)
=========== ===========
</TABLE>
Lyon Investments B.V.
Summarized Combined Statements of Operations
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net revenues............................................................... $ 137,370 $ 137,025 $ 138,297
Cost of sales.............................................................. (103,362) (103,721) (104,760)
----------- ----------- -----------
Gross profit.......................................................... 34,008 33,304 33,537
Selling, general, and administrative expenses(1)........................... (20,898) (25,481) (18,579)
----------- ----------- -----------
Operating income...................................................... 13,110 7,823 14,958
Interest expense........................................................... (4,358) (4,395) (9,812)
Interest income............................................................ 181 197 3,158
Other income (expense), net(2)............................................. - - 900
----------- ----------- -----------
Income before income taxes............................................ 8,933 3,625 9,204
Provision for income taxes................................................. (4,309) (3,027) (4,361)
----------- ----------- -----------
Net income............................................................ $ 4,624 $ 598 $ 4,843
=========== =========== ===========
</TABLE>
(1) Selling, general, and administrative expenses include a foreign exchange
loss on a loan from the Company to Derby Nederland BV of $(3,489,000) and
$(5,697,000), for the years ended December 31, 1996, and 1997. The impact
of the foreign exchange loss on this loan eliminates in the consolidation
of the Company's financial statements. In addition, there was also a
foreign exchange gain on inter-company loans of $872,000 for the year
ended December 31, 1998.
(2) Other income (expense), net is comprised of the profit on the sale of
Curragh Finance Company to Derby Holding B.V. for the year ended December
31, 1998. The impact of the sale eliminates in the consolidation of the
Company's financial statements.
F 30
<PAGE>
EXHIBIT 3.1
AMENDED AND 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 act 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 265,850 shares, consisting of:
(i) 25,000 shares of Preferred Stock, Series A, par value $.01 per
share ("Series A Preferred Stock");
(ii) 3,000 shares of Preferred Stock, Series B, par value $.01 per
share ("Series B Preferred Stock");
<PAGE>
(iii) 100 shares of Preferred Stock, Series C, par value $.01 per share
("Series C Preferred Stock");
(iv) 200,000 shares of Class A Common Stock, par value $.01 per share
("Class A Common Stock");
(v) 15,000 shares of Class B Common Stock, par value $.01 per share
("Class B Common Stock");
(vi) 22,750 shares of Class C Common Stock, par value $.01 per share
("Class C Common Stock"; and together with the Class A Common
Stock and the Class B Common Stock, the "Common Stock").
The Series A Preferred Stock, the Series B Preferred Stock and the
Series C 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.
1A. 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 Amount 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 Amount 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.
Dividends on each share of the Series C Preferred Stock (a "Series C Preferred
Share") shall accrue at the rate of nineteen percent (19%) per annum, compounded
daily, for an annual effective yield of twenty and nine-tenths percent (20.9%)
on the
-2-
<PAGE>
sum of the Liquidation Amount thereof plus all accumulated and unpaid dividends
thereon from and including the date of issuance of such Series C Preferred Share
to and including the first to occur of (i) the date on which the Liquidation
Amount of such Series C Preferred Share (plus all accrued and accumulated but
unpaid dividends thereon) is paid to the holder thereof, or (ii) the date on
which such Series C Preferred Share is otherwise acquired by the Corporation.
Dividends on each Series C Preferred Share outstanding from time to time shall
be computed on the basis of a 360-day year, actual days elapsed from the date of
issuance of such Series C Preferred Share. 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 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, the Series B Preferred Shares and the Series C Preferred
Shares are referred to collectively as the "Preferred Shares."
1B. Dividend Reference Dates. To the extent not paid on December 31
of each year, beginning December 31, 1998 (the "Preferred 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
Preferred Dividend Reference Date) ending upon each such Preferred 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.
2A. Series C Preferred Shares. So long as any accrued but unpaid
dividends on the Series C Preferred Shares remain outstanding, without the prior
written consent of the holders of a majority of the outstanding Series C
Preferred Shares, the Corporation shall not, nor shall it permit any Subsidiary
to, (i) redeem, purchase or otherwise acquire directly or indirectly any Junior
A Securities, nor shall the Corporation directly or indirectly pay or declare
any dividend or make any distribution upon any Junior A Securities (including
any redemptions, purchases or acquisitions pursuant to Section 8 of Part C
hereof) or (ii) issue any equity security with rights equal or superior to the
rights of the Series C Preferred Shares.
2B. Series A Preferred Shares and Series B Preferred Shares. So long
as any accrued but unpaid dividends on the Series A Preferred Shares or the
Series B 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 B Securities,
nor shall the Corporation directly or indirectly pay or declare any dividend or
make any distribution upon any Junior B 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
-3-
<PAGE>
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 and the Series C Preferred Stock
shall not be entitled to voting rights.
Section 4. Conversion.
4A. 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 Amount 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).
4B. 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 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
Amount (plus all accrued and accumulated but unpaid dividends thereon) of such
Series A Preferred Share.
4C. 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 Amount 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).
4D. 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 Amount (plus all accrued and accumulated but
unpaid dividends thereon) of such Series A Preferred Share.
-4-
<PAGE>
4E. 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 Amount
(plus all accrued and accumulated but unpaid dividends thereon) of such Series B
Preferred Share.
4F. 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 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.
4G. 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.
4H. 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.
4I. 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).
-5-
<PAGE>
4J. 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 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.
5A. (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
Amount (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.
5B. (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"). 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 B Offering Holder of a proposed Sale of the
Corporation.
-6-
<PAGE>
5C. Upon a proposed Change of Control each holder of Series C
Preferred Stock (the "Series C Offering Holder") shall have the right to require
the Corporation to repurchase (the "Series C Put") all or any portion of the
Series C Preferred Shares held by such holder at a price per Series C Preferred
Share equal to the Series C Put Price (as defined below) 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 C Preferred Shares
that such holder desires that the Corporation repurchase (the "Series C Put
Notice," and together with the Series A Put Notice and the Series B Put Notices,
the "Put Notices"). A Series C Put Notice relating to a proposed Change of
Control must be delivered not later than 15 days after the date on which the
Corporation notifies a Series C Offering Holder of a proposed Change of Control.
The "Series C Put Price" shall mean (i) with respect to any Series C Put
occurring on or before February 3, 2003, an amount of cash equal to one hundred
and one percent (101%) of the Liquidation Amount (plus all accrued and
accumulated but unpaid dividends thereon through the date of the Put Closing) of
each Series C Preferred Share specified by a Series C Offering Holder in its
Series C Put Notice and (ii) with respect to any Series C Put occurring after
February 3, 2003, an amount of cash equal to the Liquidation Amount (plus all
accrued and accumulated but unpaid dividends thereon through the date of the Put
Closing) of each Series C Preferred Share specified by a Series C Offering
Holder in its Series C Put Notice. A Series A Offering Holder, a Series B
Offering Holder and a Series C Offering Holder shall be referred to herein as an
"Offering Holder."
5D. The Corporation shall purchase, and the Offering Holder shall
sell, the number of Preferred Shares specified in the Series A Put Notice,
Series B Put Notice or the Series C 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), (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) or (iii) on the repurchase date specified in
the Change of Control Offer delivered to the holders of the Senior Notes
pursuant to Section 4.08 of the Indentures in the case of the exercise of a put
right pursuant to Section 5C; provided, however, the Corporation shall not be
obligated to purchase any Preferred Shares upon exercise of the rights specified
in Sections 5A(i), 5B(i) and 5C if the related proposed Sale of the Corporation
or Change of Control, as the case may be, is not consummated; and provided
further that if, other than in connection with a Sale of the Corporation or
Change of Control, as the case may be, 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; and provided further that the holders of Series C Preferred Shares
shall not have any rights pursuant to this Section 5 of Part B of this ARTICLE
FOURTH that are greater than the rights of the holders of the Senior
Subordinated Notes under that certain GSIC Subordination Deed. 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, Series
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<PAGE>
B Put Price or Series C 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.
5E. 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, the Series B Put Price or the Series
C 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.
6A. 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 rata from all holders of
Series B Preferred Shares in proportion to their respective Series B Put Price.
6B. 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.
6C. At any time after the first anniversary of the Loan Closing Date,
the Corporation may redeem all or any portion of the Series C Preferred Shares
then outstanding. On any such redemption, the Corporation shall pay a purchase
price per Series C Preferred Share equal to the Liquidation Amount (plus all
accrued and accumulated but unpaid dividends thereon) as of the date of the
redemption plus a premium equal to the percentage set forth in Section 2.5.1.1
of the GSIC Loan Agreement of the Liquidation Amount (plus all accrued and
accumulated but unpaid dividends thereon) of the Series C Preferred Shares then
outstanding. Redemptions of Series C Preferred Shares pursuant to this Section
6C shall be made in connection with and at the same time as a prepayment of the
Senior Subordinated Notes pursuant to Section 2.5 of the GSIC Loan Agreement.
Any redemption of less than all of the Series C Preferred Shares shall be made
pro rata from all holders of Series C Preferred Shares in proportion to the
Liquidation Amount (plus all accrued and accumulated but unpaid dividends
thereon) of the Series C Preferred Shares held by such holders.
-8-
<PAGE>
6D. The Corporation shall redeem all of the Series C Preferred Shares
then outstanding on May 31, 2009. The Corporation shall pay a purchase price
per Series C Preferred Share equal to the Liquidation Amount (plus all accrued
and accumulated but unpaid dividends thereon) as of the date of the redemption.
6E. The Corporation shall mail written notice of each redemption of
any Preferred Shares to each record holder thereof and to each record holder of
Class C Common Shares 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.
6F. 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.
7A. 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 or (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 Amount (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.
7B. 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 or 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 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, to any
issuances of Class A Common Stock pursuant to the exercise of the Redemption
Right, or to any issuance of Class A Common Stock in connection with the
conversion of Class C Common Stock.
Section 8. Other Provisions Applicable to Series C Preferred
Shares. Notwithstanding anything contained herein to the Contrary, the holders
of the Series C Preferred Shares shall be entitled to the rights and privileges
of a Lender (i) set forth in Sections 4, 6.2, 6.3,
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6.4 and 6.10 of the GSIC Loan Agreement and subject to the restrictions set
forth in Sections 6.1, and 6.6 of the GSIC Loan Agreement and (ii) under the
GSIC Stockholders Agreement.
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 or as provided herein, holders of the Class A Common Stock and
the Class C 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 Stock shall not be entitled to voting rights.
Section 2. Conversion of Class B Common Stock.
2A. 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.
2B. 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 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).
2C. 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
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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.
2D. 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.
2E. 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.
2F. 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).
2G. 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.
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2H. 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 Preferred
Stock pursuant to this Section 2.
Section 3. Dividends on Class C Common Stock.
3A. 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 Class C Common Stock as
provided in this Section 3A and Part D of this ARTICLE FOUR. Dividends on each
share of the Class C Common Stock (a "Class C Common Share") shall accrue on a
daily basis at the rate of twenty percent (20%) 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 Class C Common Share to and
including the first to occur of (i) the date on which the Liquidation Amount of
such Class C Common Share (plus all accrued and accumulated but unpaid dividends
thereon) is paid to the holder thereof, (ii) the date on which such Class C
Common Share is converted to Class A Common Stock as set forth herein or (iii)
the date on which such Class C Common 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 Class C Common Share shall be deemed to be the
"date of issuance" of all Class C Common Shares (whether or not such Class C
Common Share was issued on such date) regardless of the number of times transfer
of any Class C Common 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 any Class C Common Share.
3B. Dividend Reference Dates. Dividends on the Class C Common
Shares, if and when declared by the Board of Directors, shall be payable
quarterly in cash on December 31, March 31, June 30, and September 30 of each
year, beginning on December 31, 1999 (each, a "Common Dividend Payment Date").
Dividends shall accrue on such accumulated dividends at the rate or rates
specified in Section 3A and all dividends which have accrued on each Class C
Common Share outstanding during the three-month period (or other period in the
case of the initial Common Dividend Reference Date) ending upon each such Common
Dividend Reference Date shall be accumulated and shall remain accumulated
dividends with respect to such Class C Common Share until paid to the holder
thereof. If and when the Board of Directors declares a dividend on the Class A
Common Stock, holders of Class C Common Shares shall participate in such
dividends on
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a share-by-share basis. Any dividend paid to holders of Class C Common Shares as
a result of a dividend declared on Class A Common Stock shall be credited
against accruing dividends.
Section 4. Priority of Class C Common Stock on Dividends and
Redemptions. So long as any accrued but unpaid dividends on the Class C Common
Shares remains outstanding, without the prior written consent of the holders of
a majority of the outstanding Class C Common Shares, the Corporation shall not,
nor shall it permit any Subsidiary to, redeem, purchase or otherwise acquire
directly or indirectly any Junior B Securities, nor shall the Corporation
directly or indirectly pay or declare any dividend or make any distribution upon
any Junior B Securities.
Section 5. Conversion.
5A. At any time, each holder of Class C Common Stock may convert all
or any portion of the Class C Common Shares held by such holder into shares of
Class A Common Stock as follows: each Class C Common Share shall be convertible
into (i) one share of Class A Common Stock and (ii) the number of shares of
Class A Common Stock determined by dividing the accrued and accumulated but
unpaid dividends on such Class C Common Stock through the date of conversion by
$1,000 (subject to adjustment as provided in Section 7B of this Part C).
5B. Except as otherwise provided herein, each conversion of Class C
Common Stock pursuant to this Section 5 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 C 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 C Common
Stock converted as a holder of such Class C 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.
5C. As soon as possible after a conversion pursuant to this Section 5
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 Class C Common Shares which
were represented by the certificate or certificates delivered to the Corporation
in connection with such conversion but which were not converted.
5D. The issuance of certificates for shares of Class A Common Stock
upon conversion of Class C Common Stock pursuant to this Section 5 shall be made
without charge to the holders of such Class C 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.
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5E. The Corporation shall assist and cooperate with any holder of
Class C Common Shares required to make any governmental filings or obtain any
governmental approval prior to or in connection with any conversion of Class C
Common Shares hereunder (including, without limitation, making any filings
required to be made by the Corporation).
5F. 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 C Common Stock pursuant
to this Section 5, such number of shares of Class A Common Stock issuable upon
the conversion of all outstanding Class C Common 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 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 C
Common Stock pursuant to this Section 5.
Section 6. Mandatory Redemption of Class C Common Stock.
6A. The Corporation shall redeem all of the Class C Common Shares
then outstanding on May 31, 2009. The Corporation shall pay a purchase price
per Class C Common Share equal to the Liquidation Amount (plus all accrued and
accumulated but unpaid dividends thereon) of such Class C Common Share as of the
date of the redemption.
6B. At any time after August 3, 2000, the Corporation may redeem
all or any portion of the Class C Common Shares then outstanding. On any such
redemption, the Corporation shall pay a purchase price per Class C Common Shares
equal to the product of (i) the Class C Common Redemption Premium and (ii) the
Liquidation Amount (plus all accrued and accumulated but unpaid dividends
thereon) of such Class C Common Share as of the Class C Redemption Date (as
defined below). Redemptions made pursuant to this Section 6B shall apply only
to the Class C Common Shares that are outstanding on the Class C Redemption
Date. Any redemption of less than all of the Class C Common Shares shall be
made pro rata from all holders of Class C Common Shares in proportion to the
Liquidation Amount of the Class C Common Shares held by such holders.
6C. The Corporation shall mail written notice of each redemption of
any Class C Common 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
(the "Class C Redemption Date"). In case fewer than the total number of Class C
Common Shares represented by any certificate are redeemed, a new certificate
representing the number of unredeemed Class C Common Shares shall be issued to
the holder thereof without cost to such holder within ten business days after
surrender of the certificate representing the redeemed Class C Common Shares.
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6D. Any Class C Common 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.
7A. 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 or (ii) combines (by reverse stock split or otherwise) shares
of Class A Common Stock into a smaller number of shares, then the Class C Common
Shares shall be subdivided or combined, as the case may be, in the same manner
and the Liquidation Amount (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.
7B. Issuance of Shares of Class A Common Stock below Fair Market
Value. If the Corporation issues (i) Common Stock for less than its fair market
value, or (ii) rights to acquire Common Stock for an exercise or 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 Class C Common Share may be
converted under clause (ii) of Sections 5A and 5C 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 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, or any issuance of Class A Common Stock in connection
with the conversion of Class C Common Stock.
Section 8. Put Rights.
8A. Upon a proposed Sale of the Corporation each holder of Class C
Common Stock (the "Class C Offering Holder") shall have the right to require the
Corporation to repurchase (the "Class C Put") all or any portion of the Class C
Common Shares held by such holder at a price per Class C Common Share equal to
the Class C 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 Class C Common Stock,
designate, specifying the number of Class C Common Shares that such holder
desires that the Corporation repurchase (the "Class C Put Notice"). A Class C
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 Class C
Offering Holder of a proposed Sale of the Corporation. The "Class C Put Price"
shall mean an amount of cash equal to the Liquidation Amount (plus all accrued
and accumulated but unpaid dividends thereon through the date of the Class C Put
Closing) of each Class C Common Share specified by a Class C Offering Holder in
its Class C Put Notice.
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8B. The Corporation shall purchase, and the Class C Offering Holder
shall sell, the number of Class C Common Shares specified in the Class C Put
Notice at a mutually agreeable place (the "Class C Put Closing") on the
repurchase date specified in the Change of Control Offer delivered to the
holders of the Senior Notes pursuant to Section 4.08 of the Indentures in the
case of the exercise of the Class C Put; provided, however, the Corporation
shall not be obligated to purchase any Class C Common Shares upon exercise of
the rights specified in Sections 8A 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 Class C Common 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 Class C Common Shares as to which Put Notices have been given, the
Corporation shall repurchase the maximum number of Class C Common Shares which
it is permitted to repurchase without violating such laws or creating a default
under such Financing Documents, selected from among the Class C Common Shares
held by all Class C Offering Holders pro rata in proportion to the aggregate
Class C Put Price, payable in respect of all of the Class C Common Shares
specified in the respective Class C Put Notices of each such Class C Offering
Holder.
8C. At any Class C Put Closing, each Class C Offering Holder shall
deliver to the Corporation certificates representing the Class C Common Shares
to be repurchased by the Corporation from such Class C Offering Holder and the
Corporation shall deliver to such Class C Offering Holder:
(a) the Class C Put Price for each Class C Common Share to be
purchased by the Corporation by cashier's or certified check payable to such
Class C Offering Holder or by wire transfer of immediately available funds to an
account designated by such Class C Offering Holder; and
(b) a certificate representing any Class C Common Shares which
were represented by the certificate or certificates delivered to the Corporation
in connection with such Class C Put Closing but which were not purchased at the
Class C Put Closing.
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:
1A. The holders of Series C Preferred Stock 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
Series C 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 C Preferred Stock as of the
time of such Distribution, and no Distribution or any portion thereof shall be
made under Sections 1B, 1C, 1D or 1E below until the entire amount of accrued
and accumulated but unpaid dividends on the
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outstanding shares of Series C Preferred Stock as of the time of such
Distribution has been paid in full.
1B. After the aggregate accrued and accumulated but unpaid dividends
on the outstanding Series C Preferred Shares has been paid in full pursuant to
Section 1A above, the holders of Series C Preferred Stock shall be entitled to
receive all or a portion of any Distribution (ratably among such holders based
upon the aggregate amount of Liquidation Amount of the Series C Preferred Shares
held by each such holder as of the time of the Distribution) equal to the
aggregate Liquidation Amount of the outstanding Series C Preferred Shares as of
the time of such Distribution less amounts previously paid under this Section
1B, if any. No Distribution or any portion thereof shall be made under Sections
1C, 1D or 1E below until the entire amount of the Liquidation Amount of the
outstanding Series C Preferred Shares as of the time of such Distribution has
been paid in full.
1C. After the amounts required to be paid pursuant to Sections 1A and
1B above have been paid in full, the holders of Series A Preferred Stock, Series
B Preferred Stock and Class C Common 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 Series A Preferred Shares, the Series B Preferred Shares and
the Class C Common 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, Series B
Preferred Stock and Class C Common Stock, respectively, as of the time of such
Distribution, and no Distribution or any portion thereof shall be made under
Sections 1D or 1E below until the entire amount of accrued and accumulated but
unpaid dividends on the outstanding shares of Series A Preferred Stock, Series B
Preferred Stock and Class C Common Stock, respectively, as of the time of such
Distribution has been paid in full.
1D. After the amounts required to be paid pursuant to Sections 1A,
1B and 1C above have been paid in full, the holders of Series A Preferred Stock,
Series B Preferred Stock and Class C Common 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 Liquidation Amount of the Series A Preferred
Shares, the Series B Preferred Shares and the Class C Common Shares, as the case
may be, held by each such holder as of the time of the Distribution) equal to
the aggregate Liquidation Amount of the outstanding Series A Preferred Shares,
Series B Preferred Shares and Class C Common Shares, as the case may be, as of
the time of such Distribution (with the holders of Series A Preferred Shares
entitled to receive the aggregate Liquidation Amount of such Series A Preferred
Shares, the holders of the Series B Preferred Shares entitled to receive the
aggregate Liquidation Amount of such Series B Preferred Shares and the holders
of the Class C Common Shares entitled to receive the aggregate Liquidation
Amount of such Class C Common Shares, less, in each case, amounts previously
paid in respect of such Shares under this Section 1D, if any). No Distribution
or any portion thereof shall be made under Section 1E below until the entire the
Liquidation Amount of the outstanding Series A Preferred Shares, Series B
Preferred Shares and Class C Common Shares, respectively, as of the time of such
Distribution has been paid in full.
1E. After the amounts required to be paid pursuant to Sections 1A,
1B, 1C and 1D above have been paid in full, the remainder of a Distribution (if
any) shall be distributed as follows:
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(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 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).
Notwithstanding the foregoing, in the event that the holders of Class C Common
Shares would be entitled to receive distributions on the Class A Common Shares
that such Class C Common Shares are convertible into in an amount greater than
the distributions such holders are entitled to receive in respect of such Class
C Common Shares, then for the purposes of this Part D, all of the issued and
outstanding Class C Common Shares shall be deemed to be converted to Class A
Common Shares in accordance with the provisions of Section 5 of Part C of this
ARTICLE FOURTH, and the holders thereof shall be entitled to receive
distributions pursuant to Section 1E above in lieu of and not in addition to the
distributions such holders of the Class C Common Shares would otherwise receive
pursuant to Sections 1C and 1D above.
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,
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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
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 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
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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.
"Change of Control" shall have the same meaning as in the GSIC Loan
Agreement.
"Change of Control Offer" shall have the same meaning as in the
Indentures.
"Class C Common Redemption Premium" means the percentage set forth
below for any redemption of Class C Common Shares pursuant to Section 6B of Part
C of this ARTICLE FOURTH during the 12-month periods indicated below:
12-Months Period Percentage
---------------- ----------
August 3, 2000 through August 3, 2001........ 103%
August 4, 2001 through August 4, 2002........ 102%
August 5, 2002 through August 5, 2003........ 101%
After August 5, 2003......................... 100%
"Closing Date" means the date on which the closing of the transactions
contemplated by the Recapitalization Agreement occurs.
"Conversion Element" means (a) 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 or (b) the right to
convert Class C Common Shares under Section 5A of Part C of this ARTICLE FOUR.
"Corporation" means The Derby Cycle Corporation.
"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
none of the following shall be a Distribution: (a) any
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redemption or repurchase by the Corporation of any Shares pursuant to Section 4
or Section 5 of Part B of this ARTICLE FOUR, (b) any redemption or repurchase by
the Corporation of any Shares pursuant to Section 8 of Part C of this ARTICLE
FOUR, or (c) 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.
"DM Indenture" means the Indenture dated as of May 14, 1998 by and
among the Borrower, Lyon and IBJ Schroder Bank and Trust Company, as Trustee
governing the 9 3/8% Senior Notes due May 14, 2008 in an original principal
amount equal to DM 110,000,000 issued by Borrower and Lyon Investments B.V.
"Dollar Indenture" means the Indenture dated as of May 14, 1998 by and
among the Borrower, Lyon and IBJ Schroder Bank and Trust Company, as Trustee
governing the 10% Senior Notes due May 14, 2008 in original principal amount
equal to US $100,000,000 issued by the Borrower and Lyon Investments B.V.
"Exchange Agreements" means the Exchange Agreements as defined in the
Recapitalization Agreement.
"Fair Market Value" means (1) with respect to a conversion 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.
"GSIC Loan Agreement" means that certain Senior Subordinated Loan
Agreement dated as of February 3, 1999 by and between the Corporation and the
Vencap Holdings (1992) Ptd Ltd.
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"GSIC Stockholders Agreement" shall have the same meaning as the term
"Stockholders' Agreement" as such term is defined in the GSIC Loan Agreement.
"GSIC Subordination Deed" shall have the same meaning as the term
"Subordination Deed" as such term is defined in the GSIC Loan Agreement.
"Indentures" means, collectively, the DM Indenture and the Dollar
Indenture.
"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
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 or
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 A Securities" means the Class A Common Stock, the Class B
Common Stock, the Class C Common Stock, the Series A Preferred Stock, the Series
B Preferred Stock and any other capital stock or other equity securities of the
Corporation, other than the Series C Preferred Stock.
"Junior B Securities" means the Class A Common Stock, the Class B
Common Stock and any other capital stock or other equity securities of the
Corporation, other than the Class C Common Stock and the Preferred Stock.
"Lender" shall have the same meaning as in the GSIC Loan Agreement.
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"Liquidation Amount" means (a) with respect to any Series A Preferred
Share as of any particular date an amount equal to $1,000, (b) with respect to
any Series B Preferred Share as of any particular date an equal to $1,000, (c)
with respect to any Series C Preferred Share as of any particular date an amount
equal to $1,000, and (d) with respect to any Class C Common Share as of any
particular date an amount equal to $1,000.
"Loan Closing Date" shall mean the Closing Date as such term is
defined in the GSIC Loan Agreement.
"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 1C or 1D 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 Sections 1C or 1D of Part D
of this Article FOUR).
"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 or upon conversion of Class
C Common Stock, (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 Sections 7A or 7B of Part B
and Sections 7A or 7B of Part C 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 that 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
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(a Luxembourg corporation) 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.
"Senior Notes" means, collectively, (i) the 9 3/8% Senior Notes due
May 14, 2008 in an original principal amount equal to DM 110,000,000 governed by
the DM Indenture and (ii) the 10% Senior Notes due May 14, 2008 in an original
principal amount equal to US $100,000,000 governed by the Dollar Indenture.
"Senior RIC Share" has the meaning assigned to such term in the
Exchange Agreement.
"Senior Subordinated Notes" shall have the same meaning as in the GSIC
Loan Agreement.
"Shareholders' Agreement means that certain shareholders' agreement
dated May 14, 1998, by and between the Corporation, DC Cycle, L.L.C., Derby
Finance S.a.r.l and Perseus Cycle, L.L.C., as amended.
"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 or issued upon the conversion of Class C Common Stock, 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
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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 Amount 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 1E 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.
ARTICLE SEVEN
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws of the Corporation may provide. The books of the
Corporation may be kept outside the State of Delaware at such place or places as
may be designated from time to time by the Board of Directors or in the by-laws
of the Corporation. Election of directors need not be by written ballot unless
the by-laws of the Corporation so provide.
ARTICLE EIGHT
To the fullest extent permitted by the General Corporation Law, a director
of this Corporation shall not be liable to the Corporation or its stockholders
for monetary damages for a breach of fiduciary duty as a director. Any repeal
or modification of this ARTICLE EIGHT shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE NINE
The Corporation expressly elects not to be governed by Section 203 of
the General Corporation Law.
ARTICLE TEN
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation in the manner now
or hereafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subjected to this
reservation.
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EXHIBIT 10.13
CONFORMED COPY
DATED 3 February 1999
AMENDMENT AND RESTATEMENT AGREEMENT
relating to the
REVOLVING MULTICURRENCY CREDIT FACILITY
of up to DM214,000,000
DATED 12 MAY 1998
between
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 Security Agent
CHASE MANHATTAN INTERNATIONAL LIMITED
as Facility Agreement
Dibb Lupton Alsop
125 London Wall
LONDON
EC2Y 5AE
Tel: 0345 26 27 28
Fax: 0171 600 1753
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
1. INTERPRETATION...................................................... 1
2. AMENDMENT AND RESTATEMENT OF THE CREDIT AGREEMENT................... 3
3. REPRESENTATIONS AND WARRANTIES...................................... 3
4. CONSENT AND UNDERTAKINGS............................................ 3
5. MISCELLANEOUS....................................................... 4
6. JURISDICTION........................................................ 4
7. GOVERNING LAW....................................................... 5
SCHEDULE 1............................................................. 6
The Borrowers........................................................ 6
SCHEDULE 2............................................................. 7
Guarantors........................................................... 7
SCHEDULE 3............................................................. 9
Conditions Precedent Documentation................................... 9
SCHEDULE 4............................................................. 13
The Banks............................................................ 13
SCHEDULE 5............................................................. 14
The Amended and Restated Credit Agreement............................ 14
</TABLE>
<PAGE>
THIS AMENDMENT AND RESTATEMENT AGREEMENT is made the 3 February 1999
BETWEEN:
(1) THE DERBY CYCLE CORPORATION, a company incorporated in Delaware, 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 4 (the "BANKS");
(6) CHASE MANHATTAN INTERNATIONAL LIMITED (the "FACILITY AGENT");
(7) CHASE MANHATTAN INTERNATIONAL LIMITED (the "SECURITY AGENT").
WHEREAS:
(A) By an agreement dated 12 May 1998 between the parties to this Amendment and
Restatement Agreement (as the same was amended pursuant to an Amendment
Agreement dated 12 November 1998) (the "CREDIT AGREEMENT") the Banks
agreed, subject to the terms and conditions stated therein, to make
available to the Borrowers a multicurrency revolving credit facility in a
maximum amount of up to DM214,000,000 (or the equivalent thereof in other
currencies).
(B) The parties to the Credit Agreement have agreed that the Credit Agreement
be amended and restated as set out in this Amendment and Restatement
Agreement.
NOW IT IS HEREBY as follows:
1. INTERPRETATION
1.1 The terms defined in the Credit Agreement shall, unless otherwise
defined herein, bear the same meaning herein (including the recitals
hereto).
1.2 In this Amendment and Restatement Agreement:
"AMENDMENT FEE LETTERS" means each of the fee letters dated on or
about the date of this Agreement and in the agreed form from the
Company and addressed respectively to the Banks and the Arranger;
"BEJKA ASSETS" means the assets of and business to be purchased by
Derby Sweden A.B. pursuant to the Diamond Back Acquisition Agreement
from Bejka Trading A.B.;
"DIAMOND BACK SECURITY DOCUMENTS" means all of the following:
1.2.1 Share pledge granted by the Derby Cycle Corporation over 66.6% of the
whole of the issued share capital of Derby Sweden A.B.;
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1.2.2 Security granted by Derby Sweden A.B. over such of its assets as the
Security Agent may require; and
1.2.3 the Further US Security Documents.
"DIAMOND BACK TRANSACTION COSTS" means all fees, out-of-pocket costs
and expenses and stamp duty (if any), registration, transfer and
similar taxes incurred by any Group Member in connection with the
negotiation, preparation and execution of the Diamond Back Acquisition
Agreement and this Amendment and Restatement Agreement or otherwise in
connection with, or resulting from the Diamond Back Acquisition, this
Amendment and Restatement Agreement and each of the conditions or
matters referred to therein or herein, each in the aggregate amount as
set out in a letter in an agreed form from the Company to the Facility
Agent entitled "Diamond Back Transaction Costs" and provided to the
Facility Agent pursuant to paragraph 5.9 of Schedule 3 (the "DIAMOND
BACK TRANSACTION COSTS LETTER");
"DIAMOND BACK FUNDS FLOW MEMORANDUM" means the funds flow memorandum
in the agreed form prepared by the Company containing the flow of
funds so as to complete the Diamond Back Acquisition;
"EFFECTIVE DATE" means the date that each of the Persons specified as
being a party to this Amendment and Restatement Agreement have become
a party to this Amendment and Restatement Agreement and the Facility
Agent has confirmed to the Company and the Banks that each of the
documents listed in Schedule 3 have been delivered to it in a form and
substance satisfactory to it;
"IRISH SUPPLEMENTAL DEED" means the agreement in the agreed form and
made between the Irish Subsidiaries and the Security Agent pursuant to
which the terms of the debenture dated 11 May 1998 and made between
the Irish Subsidiaries and the Security Agent are amended;
"IRISH SUBSIDIARIES" means Raleigh Ireland Limited and Curragh Finance
Company;
"GERMAN AMENDMENT AGREEMENT" means the agreement in the agreed form
and made between the German Subsidiaries and the Security Agent
pursuant to which the terms of the assignment by way of security of
the intercompany receivables dated 11-12 May 1998 and made between the
German Subsidiaries and the Security Agent, are amended;
"GERMAN SUBSIDIARIES" means Derby Holding (Deutschland), GmbH, Winora
Staiger GmbH, Englebert Wiener Bike Parts GmbH, Univega Bikes & Sports
Europe GmbH (formerly MS Sport Vertriebs GmbH) and Univega Worldwide
Licence GmbH;
"PURCHASERS" means, collectively, Derby Cycle Corporation and Derby
Sweden AB;
"FURTHER US SECURITY DOCUMENTS" means an amendment to Security
Agreement, an amendment to Patent and Trademark Security Agreement, an
amendment to the Pledge Agreement and a Patent Assignment for Security
Purposes each dated on or about the date of this Agreement and made
between the Company and the Security Agent;
2
<PAGE>
"VENDORS" means collectively, Diamond Back International Limited,
Western States Import Company Inc and Bejka Trading AB.
The provisions of Clause 1.3 of the Credit Agreement shall be deemed
to be incorporated herein mutatis mutandis save that references
therein to "this Agreement" shall be references to this Amendment and
Restatement Agreement and not the Credit Agreement.
2. AMENDMENT AND RESTATEMENT OF THE CREDIT AGREEMENT
On the Effective Date the Credit Agreement shall be amended and restated as
set out in the Schedule 5.
3. REPRESENTATIONS AND WARRANTIES
3.1 The Company represents that, as at the date hereof, the representations
and warranties set out in Clause 18.1 of the Credit Agreement (to the
extent that the same are repeated from time to time pursuant to Clause
18.2 of the Credit Agreement) are true.
3.2 The Company further represents that, as at the date hereof, the
representations and warranties set out in Clause 18.1 (k), (l), (m),
(r) and (ff) and which relate to all financial and other information
and Reports delivered post-Closing in respect of the Diamond Back
Acquisition are true.
4. CONSENT AND UNDERTAKINGS
4.1 Subject to the Effective Date occurring on or before 10 February 1999,
each of the Banks confirm that they consent to the Diamond Back
Acquisition provided that the maximum aggregate consideration payable
in respect thereof does not exceed $42,800,000 (or the equivalent
thereof in other currencies).
4.2 Subject to the Effective Date occurring on or before 10 February 1999,
each of the Banks confirm that they consent to the IGF Liquidation
provided that, two months following the filing with the Commercial
Register of the Chamber of Commerce in Curacao of the Plan of
Distribution (Plan van Uitkering) in connection with the IGF
Liquidation (and which will be made by no later than 6 weeks after the
date of this Agreement), all of InterDerby Group Finance NV's assets
which are (or were prior to the liquidation) charged in favour of the
Security Agent have been assigned to Derby Holding (Deutschland) GmbH
and are subject to the Security Documents granted by Derby Holding
(Deutschland) GmbH and that such notices of assignment and registration
as are necessary to effect such assignments in accordance with
applicable law are made forthwith Provided that, at all times, all such
assets are subject to an Encumbrance granted in favour of the Security
Agent, whether by InterDerby Group Finance NV or Derby Holding
(Deutschland) GmbH.
4.3 The Company undertakes to procure that as soon as is practicable and in
any event within 60 days of the date of this Amendment and Restatement
Agreement, Derby Sweden AB shall have obtained the appropriate
approvals from the relevant Swedish Authority such that the Guarantee
and any Finance Documents requiring such approvals and to which Derby
Sweden AB is a party, and which, pending such approvals are
conditional, become unconditional.
3
<PAGE>
4.4 The Company undertakes to procure that as soon as is practicable and in
any event within 10 days of this Amendment and Restatement Agreement,
that it shall have executed a leasehold deed of trust in a form
satisfactory to the Security Agent in respect of the Ventura
Headquarters, Ventura, California, and that promptly thereafter it
shall deliver to the Security Agent the original leasehold deed of
trust and shall promptly lodge the appropriate registration at the Land
Records, Ventura County, California.
5. MISCELLANEOUS
5.1 The Credit Agreement and this Amendment and Restatement Agreement
shall be read and construed as a single document.
5.2 On the date hereof, the Obligors represent and warrant that no Event of
Default or Potential Event of Default has occurred which has not been
remedied or otherwise waived by the Banks and no Event of Default or
Potential Event of Default would occur as a result of the Obligors
entering into this Amendment and Restatement Agreement.
5.3 The provisions of Clause 33 (NOTICES) of the Credit Agreement shall
apply to all communications or documents to be made or delivered
pursuant to this Amendment and Restatement Agreement.
5.4 This Amendment and Restatement 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.
5.5 The Guarantors confirm that the Guarantee contained in the Credit
Agreement at Clause 23 shall remain in full force and effect
notwithstanding this Amendment and Restatement Agreement.
6. JURISDICTION
6.1 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 Amendment and
Restatement Agreement or any of the other Senior Finance Documents and
therefore irrevocably submits to the jurisdiction of those courts.
6.2 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 Amendment and Restatement Agreement or
any of the other Senior Finance Documents in any other court of
competent jurisdiction, whether concurrently or not.
6.3 SERVICE OF PROCESS AGENT
(a) In addition to any other appropriate method of service, each of
the Non-UK Obligors irrevocably agrees that any suit, action or
proceeding may be served
4
<PAGE>
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 Amendment and
Restatement 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 of such notification
the Facility Agent shall be entitled to appoint such a Person.
6.4 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.
7. GOVERNING LAW
This Amendment and Restatement 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 Amendment and Restatement Agreement.
5
<PAGE>
SCHEDULE 1
THE BORROWERS
<TABLE>
<CAPTION>
NAME JURISDICTION OF INCORPORATION
<S> <C>
Raleigh Industries Limited England And Wales
Sturmey-Archer Limited England and Wales
Derby Holding (Deutschland) GmbH Germany
Koninklijke Gazelle BV Netherlands
The Derby Cycle Corporation The United States of America
Raleigh Industries of Canada Limited Canada
Raleigh Europe B.V. Netherlands
Raleigh B.V. Netherlands
Englebert Wiener Bike Parts GmbH Germany
Winora-Staiger GmbH Germany
Derby Holding Limited England and Wales
Raleigh Fahrrader GmbH Germany
Derby Cycle Werke GmbH Germany
Raleigh International Limited England and Wales
Curragh Finance Company Ireland
Raleigh Ireland Limited Ireland
</TABLE>
6
<PAGE>
SCHEDULE 2
GUARANTORS
<TABLE>
<CAPTION>
NAME JURISDICTION OF INCORPORATION
<S> <C>
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
The Derby Cycle Corporation The United States of America
Raleigh BV Netherlands
Raleigh Europe BV Netherlands
Koninklijke Gazelle BV Netherlands
Derby Nederland BV Netherlands
Derby Holding BV Netherlands
Sturmey-Archer Europa BV Netherlands
Lyon Investments BV Netherlands
Derby Holding (Deutschland) GmbH Germany
Raleigh Fahrrader GmbH Germany
NW Sportgerate GmbH Germany
Derby Cycle Werke GmbH Germany
Englebert Wiener Bike Parts GmbH Germany
Univega Worldwide Licence GmbH Germany
Univega Beteiligungen GmbH Germany
Univega Bikes & Sports Europe GmbH (formerly MS Germany
Sport Vertriebs GmbH)
Derby Fahrrader GmbH Germany
Derby WS Vermogenswerwaltungs GmbH Germany
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME JURISDICTION OF INCORPORATION
<S> <C>
Winora-Staiger GmbH Germany
Curragh Finance Company Ireland
Raleigh Ireland Limited Ireland
InterDerby Group Finance NV Netherlands Antilles
The British Cycle Corporation Limited England and Wales
Triumph Cycle Co. Limited England and Wales
Raleigh (Services) Limited England and Wales
BSA Cycles Limited England and Wales
</TABLE>
8
<PAGE>
SCHEDULE 3
CONDITIONS PRECEDENT DOCUMENTATION
1. RESOLUTIONS
GENERAL
A copy of a minute of the resolution of the Board of each Obligor certified
by the Secretary thereof (or appropriately authorised person) of such
Obligor approving this Amendment and Restatement Agreement and the terms of
the Credit Agreement as amended and restated pursuant hereto and authorising
the execution and delivery of this Amendment and Restatement Agreement and
any other communications or documents to be delivered by the Obligors
hereunder and thereunder.
2. ACCESSION AGREEMENT
At least two originals of the Guarantor Accession Agreement entered into by
Derby Sweden AB together with all conditions precedent relating thereto as
set out in Schedule 5 of the Credit Agreement. Provided that the Guarantee
and each of the Security Documents to be provided by Derby Sweden AB shall
be stated, in terms acceptable to the Banks' Swedish Counsel, as being
conditional upon consent to such Guarantee or, as the case may be, such
Security Documents, being provided by the appropriate Swedish Authority.
3. TRANSACTION DOCUMENTS
3.1 Evidence that the Diamond Back Acquisition Agreement has been entered
into by all parties thereto, and that such agreement is in full force
and effect, is in a form satisfactory to the Facility Agent, and that
no Group Member has a right to rescind such agreement.
3.2 An original or Certified Copy of the Diamond Back Acquisition Agreement
together with any disclosure letter relating thereto.
3.3 The Facility Agent being satisfied that no Financial Indebtedness or
Encumbrances will exist following the completion of the Diamond Back
Acquisition other than Permitted Financial Indebtedness and Permitted
Encumbrances and for avoidance of doubt that Foothill Capital
Corporation's and Forenings Sparkbanken AB's indebtedness (other than
that Permitted Financial Indebtedness referred to at paragraph (c)(vii)
of the Credit Agreement) has been satisfied, discharged and
encumbrances released.
3.4 Three Certified Copies of the German Amendment Agreement.
3.5 Three Certified Copies of the Irish Supplemental Deed.
3.6 A Certified Copy of the GSIC Indenture, the GSIC Notes, the
Stockholders' Agreement and the Side Letter.
4. SECURITY DOCUMENTS
4.1 Copies of all notices required to be despatched pursuant to the Diamond
Back Security Documents duly completed by an Authorised Signatory.
9
<PAGE>
4.2 At least three copies of each of the Diamond Back Security Documents
duly executed by all the parties thereto other than the Facility Agent
and/or the Security Agent together with:
4.2.1 share certificates in respect of any and all shares the subject
matter of the security created by the Diamond Back Security
Documents and (if applicable) executed transfer forms in respect
thereof or where shares are not evidenced by certificates that
notification of security over such shares has been entered in the
Share Register (or such other recording or notification has been
made in accordance with applicable laws), and all title documents
relating to any land or buildings mortgaged or otherwise charged
by the Diamond Back 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.
4.3 An original of each of the Intercreditor Agreements referred to in
paragraphs (ii) and (iii) of the definition "INTERCREDITOR AGREEMENTS".
4.4 A Certified Copy of an amendment to the Recapitalisation Agreement
relating to the Additional Payment in the agreed form.
5. INFORMATION
5.1 A duly executed application from Derby Sweden AB to the appropriate
Swedish Authority in a form acceptable to the Facility Agent requesting
the approval of such Swedish Authority to it providing a Guarantee and
the Security Documents as contemplated by this Amendment and
Restatement Agreement.
5.2 A Certified Copy of the due diligence report prepared by Kirkland &
Ellis and any disclosure letters thereto in respect of the Diamond Back
Acquisition and, in each case, addressed to the Facility Agent and the
Security Agent for and on behalf of themselves and the Secured
Beneficiaries in the agreed form.
5.3 A Certified Copy of the due diligence report prepared by Simmons and
Simmons in respect of the Diamond Back Acquisition in the agreed form.
5.4 Evidence that:
5.4.1 Thayer Equity Investors III have subscribed in full an aggregate
amount of not less than $22,750,000 in cash by way of equity in
the Company (the "EQUITY SUBSCRIPTION") in the agreed form;
5.4.2 the GSIC Note Issuer has received in aggregate not less than
$20,000,000 in cash in respect of the GSIC Notes (the "GSIC NOTE
PROCEEDS") and that such GSIC Notes are certified by the Company
as being "Contribution Indebtedness" as defined under the Note
Indentures;
and the Equity Subscription and the GSIC Note Proceeds have been or
will contemporaneously with the making of the Diamond Back Acquisition
be paid into and be made available to the Purchasers so as to enable
them to pay, in full, the purchase price, payable in respect of the
Diamond Back Acquisition together with the Diamond Back Transaction
Costs and any other payments and costs to be met by them pursuant to
the terms of the Diamond Back Acquisition Agreement.
10
<PAGE>
5.5 The Amendment Fee Letters duly executed.
5.6 A Certified Copy of the Diamond Back Funds Flow Memorandum.
5.7 Payment instructions in respect of all funds at the completion of the
Diamond Back Acquisition in accordance with the Diamond Back Funds Flow
Memorandum.
5.8 A Certified Copy of the Diamond Back Transaction Costs Letter.
5.9 Certified Copy of the Memorandum, in the agreed form, relating to the
IGF Liquidation.
5.10 Certified copies of each of the Structure Memorandum and Intra Group
Loan Memorandum updated to reflect the reorganisational steps to be
made upon completion of the Diamond Back Acquisition and IGF
Liquidation.
5.11 A Certified Copy of the Amended and Restated Certificate of
Incorporation of the Company.
6. OPINIONS
6.1 An Opinion from each of the counsel referred to at paragraphs 37 to 46
inclusive and 48 of Schedule 6 of the Credit Agreement, addressed to
the Facility Agent, to the effect that notwithstanding the
implementation of the matters referred to or contemplated by this
Amendment and Restatement Agreement, the Security Documents to which
their respective opinion related when issued previously in satisfaction
of paragraphs 37 to 46 inclusive and 48 of Schedule 6 of the Credit
Agreement remain valid and that the security taken pursuant thereto is
valid and subsisting and that all appropriate registrations in
connection therewith have been duly made and as to such matters
relating to Obligors within their jurisdictions and their obligations
under the Finance Documents to which they are a party as the Facility
Agent may reasonably require.
6.2 An opinion, addressed to the Facility Agent, the Security Agent and the
Banks of Vinge, Swedish legal advisers to the Facility Agent, the
Security Agent and the Banks, as to such matters relating to Derby
Sweden AB and its obligations under the Finance Documents to which they
are a party as the Facility Agent may reasonably require.
6.3 An opinion, addressed to the Facility Agent, the Security Agent and the
Banks of Kirkland & Ellis United States legal advisers to the Company,
the Security Agent and the Banks, as to the Obligors incorporated in
any state of the United States of America in respect of their
obligations under the GSIC Documents and confirming that the amendments
contemplated hereunder comply in all respects and are not inconsistent
with the terms of the Senior Notes, and the validity and enforceability
of the third amendment to the Recapitalisation Agreement.
6.4 An opinion addressed to the Facility Agent, the Security Agent and the
Banks of Brobeck, Phleger & Harrison LLP California legal advisers to
the Facility Agent, the Security Agent and the Banks, as to such
matters relating to Obligors within their jurisdictions and their
obligations under the Finance Documents to which they are a party as
the Facility Agent may reasonably require.
11
<PAGE>
6.5 An opinion, addressed to the Facility Agent, the Security Agent and the
Banks of Allen & Gledhill Singapore legal advisers to the Facility
Agent, the Security Agent and the Banks, as to each matter relating to
the Vencap Holdings (1992) Pte Limited's obligations under the
Intercreditor Agreement to which they are a party as the Facility Agent
may reasonably require.
12
<PAGE>
SCHEDULE 4
THE BANKS
Name
The Chase Manhattan Bank
ABN Amro Bank N.V.
The Governor and Company of the Bank of Scotland
BHF - Bank AG
Dresdner Bank AG, Grand Cayman branch
Lloyds Bank Plc
Midland Bank plc
ScotiaBank Europe Plc
The Sumitomo Bank, Limited
Banque Nationale de Paris
Istituto Bancario San Paolo di Torino SPA
Kredietbank (Nederland) N.V.
Oldenburgische Landesbank AG
The Governor and Company of the Bank of Ireland
The Industrial Bank of Japan, Limited
The Bank of Nova Scotia
13
<PAGE>
SCHEDULE 5
THE AMENDED AND RESTATED CREDIT AGREEMENT
14
<PAGE>
The Company
THE DERBY CYCLE CORPORATION
BY: FRANK AGAR
The Borrowers
THE DERBY CYCLE CORPORATION FOR AND ON BEHALF OF
THE COMPANIES IDENTIFIED AS BORROWERS IN SCHEDULE 1
BY: FRANK AGAR
The Guarantors
THE DERBY CYCLE CORPORATION FOR AND ON BEHALF OF
THE COMPANIES IDENTIFIED AS GUARANTORS IN SCHEDULE 2
BY: FRANK AGAR
The Banks
ABN AMRO BANK N.V.
By: JOHN EMPSON
SCOTIABANK EUROPE PLC
By: JOHN EMPSON
15
<PAGE>
DRESDNER BANK AG, GRAND CAYMAN BRANCH
By: JOHN EMPSON
BANK OF SCOTLAND
By: JOHN EMPSON
MIDLAND BANK PLC
By: JOHN EMPSON
LLOYDS BANK PLC
By: JILL MCCARTHY
THE SUMITOMO BANK, LIMITED
By: JOHN EMPSON
16
<PAGE>
BHF - BANK AG
By: JOHN EMPSON
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: JOHN EMPSON
SAO PAOLO IMI SPA
By: JOHN EMPSON
KREDIETBANK (NEDERLAND) N.V.
By: JOHN EMPSON
BANQUE NATIONALE DE PARIS
By: JOHN EMPSON
17
<PAGE>
THE GOVERNOR AND COMPANY OF
THE BANK OF IRELAND
By: JOHN EMPSON
OLDENBURGISCHE LANDESBANK AG
By: JOHN EMPSON
THE BANK OF NOVA SCOTIA
By: ROGER KEAN
JOHN EMPSON
18
<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
The Banks
CHASE MANHATTAN INTERNATIONAL LIMITED
AS AGENT AND SECURITY AGENT
By: JOHN EMPSON
19
<PAGE>
EXHIBIT 10.14
SCHEDULE 5
FACILITY AGREEMENT
DATED 12 MAY 1998
MULTICURRENCY CREDIT FACILITY
up to DM214,000,000
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
1. INTERPRETATION.............................................. 1
1.1 Definitions ........................................... 1
1.2 Financial Terms ....................................... 31
1.3 Construction .......................................... 37
1.4 Relationship with the Intercreditor Agreements......... 39
2. THE FACILITY................................................ 39
2.1 The Facility .......................................... 39
2.2 Nature of Banks' obligations and rights................ 40
2.3 Nature of Borrowers' rights and obligations hereunder.. 40
2.4 Maximum Total Commitments.............................. 41
3. PURPOSE OF FACILITIES....................................... 41
4. CONDITIONS PRECEDENT TO FIRST UTILISATION................... 42
5. CONDITIONS PRECEDENT TO EACH UTILISATION BY WAY OF ADVANCES AND STANDBY
L/CS 42
6. UTILISATION OF THE FACILITIES............................... 43
6.1 Delivery of a Drawdown Request........................ 43
6.2 Completion of Drawdown Request........................ 43
6.3 Amount of each Bank's participation in an Advance..... 44
6.4 Delivery of a Standby L/C Request..................... 45
6.5 Completion of Standby L/C Request..................... 45
6.6 Issuing of Standby L/Cs .............................. 46
6.7 Facility Agent's Authority............................ 47
6.8 Copy of Standby L/C ................................... 47
6.9 No Enquiry ........................................... 47
6.10 Definitions .......................................... 47
6.11 Calculation .......................................... 53
6.12 Determination......................................... 53
6.13 Undrawn amount........................................ 54
7. ANCILLARY FACILITIES......................................... 54
7.1 Ancillary Facilities ................................... 54
7.2 Operation of Ancillary Facilities....................... 56
8. INTEREST..................................................... 59
8.1 Standby L/C ............................................ 59
8.2 Interest rate .......................................... 59
<PAGE>
8.3 Due date ............................................... 59
8.4 Duration ............................................... 60
8.5 Notification of LIBOR by Facility Agent................. 60
9. DEFAULT INTEREST ............................................ 60
9.1 Failure to Pay.......................................... 60
9.2 Rate ................................................... 60
9.3 Default Interest Period................................. 60
9.4 Unexpired Portion ...................................... 61
10. MARKET DISRUPTION............................................ 61
10.1 Disruption events ..................................... 61
10.2 Effect ................................................ 62
11. REPAYMENT, PREPAYMENT AND CANCELLATION....................... 62
11.1 Reduction of the Facility ............................. 62
11.2 Repayment of Advances.................................. 63
11.3 Facility Agent to notify Banks of demand............... 63
11.4 L/C indemnity.......................................... 63
11.5 Banks' Discretion ..................................... 64
11.6 Voluntary cancellation................................. 64
11.7 Mandatory Prepayment on Listing........................ 64
11.8 Prepayment Fee......................................... 66
11.9 Cancellation and Prepayment of a Bank's Revolving
Commitment and Standby L/C Commitment.................. 66
11.10 Notices of prepayment and cancellation ................ 66
11.11 Notification of Bank(s) ............................... 67
11.12 Only method ........................................... 67
11.13 European Economic and Monetary Union .................. 67
12. PARTIAL PAYMENTS............................................. 69
13. PAYMENTS..................................................... 70
13.1 To Facility Agent ..................................... 70
13.2 Distribution by the Agents ............................ 70
13.3 Currency .............................................. 71
13.4 Set-off and counterclaim............................... 72
14. TAXES........................................................ 72
14.1 Payment of Taxes ...................................... 72
14.2 Gross-up .............................................. 73
14.3 Tax indemnity.......................................... 73
14.4 Notification of claims................................. 73
14.5 Tax receipts .......................................... 73
14.6 Tax Saving ............................................ 74
14.7 U.S Taxation-delivery of forms and statements.......... 74
14.8 Double tax-treaties ................................... 76
14.9 Qualifying Bank ....................................... 76
<PAGE>
15. INCREASED COSTS ............................................ 76
15.1 Indemnity for increased costs......................... 76
15.2 Exceptions ........................................... 77
15.3 Notification by Bank ................................. 78
15.4 Regulation D Compensation............................. 78
16. ILLEGALITY.................................................. 78
16.1 Illegality in relation to Advances.................... 78
16.2 Illegality in relation to Standby L/Cs................ 79
17. MITIGATION.................................................. 79
17.1 Mitigation ........................................... 79
17.2 Costs and Expenses of Mitigation...................... 80
18. REPRESENTATIONS AND WARRANTIES.............................. 80
18.1 General representations and warranties................ 80
18.2 Repetition of representations and warranties.......... 92
19. UNDERTAKINGS................................................ 93
19.1 Information undertakings.............................. 93
19.2 Form of financial statements.......................... 100
19.3 Variation of financial undertakings .................. 100
19.4 Positive undertakings................................. 101
19.5 Negative undertakings................................. 111
20. FINANCIAL UNDERTAKINGS...................................... 125
21. EVENTS OF DEFAULT........................................... 133
21.1 The Events of Default................................. 133
21.2 Acceleration ......................................... 139
22. ADDITIONAL BORROWERS........................................ 140
23. GUARANTEES.................................................. 141
23.1 Guarantee ............................................ 141
23.2 Continuing Guarantee.................................. 143
23.3 Reinstatement ........................................ 143
23.4 Waiver of Defences ................................... 143
23.5 Immediate Recourse ................................... 144
23.6 Preservation of Rights................................ 144
23.7 Non-competition ...................................... 145
23.8 Additional Security .................................. 146
23.9 Certificate .......................................... 146
23.10 Guarantee Fees
24. RELEASE OF GUARANTORS AND SECURITY.......................... 146
<PAGE>
24.1 Guarantors ........................................... 146
24.2 Assets ............................................... 146
24.3 Conditions for Release................................ 147
24.4 Release of Group Members.............................. 147
25. INDEMNITIES................................................. 147
25.1 Indemnifiable events ................................. 147
25.2 Stamp duty............................................ 148
26. FEES........................................................ 148
26.1 Commitment fee........................................ 148
26.2 Utilisation Fee ...................................... 149
26.3 Applicable Rate ...................................... 149
26.4 Calculation .......................................... 149
26.5 Payment of Utilisation Fee ........................... 150
26.6 Agency fees .......................................... 150
26.7 Arrangement fee ...................................... 150
27. COSTS AND EXPENSES.......................................... 150
27.1 Initial Costs ........................................ 150
27.2 Amendments ........................................... 150
27.3 Protection, enforcement, etc.......................... 151
28. THE AGENTS AND THE ARRANGER................................. 151
28.1 Appointment of the Agents ............................ 151
28.2 Duties of the Agents ................................. 152
28.3 Exculpatory provisions................................ 153
28.4 Assumptions .......................................... 153
28.5 Agents and Arranger not responsible to other Parties.. 154
28.6 Delegation and advisers............................... 154
28.7 Indemnity ............................................ 154
28.8 Resignation of the Agents ............................ 155
28.9 Separate entity ...................................... 156
28.10 Reliance ............................................. 156
28.11 Credit approval ...................................... 156
28.12 Tax Confirmation ..................................... 156
28.13 Miscellaneous provisions ............................. 157
29. TRANSFERS................................................... 157
29.1 Obligors ............................................. 157
29.2 Banks ................................................ 157
29.3 Time of transfer ..................................... 158
29.4 Administration fee ................................... 158
29.5 Additional amounts payable to transferee.............. 159
29.6 Disclosure of information ............................ 159
30. REDISTRIBUTION PROVISIONS................................... 159
30.1 Redistributions ...................................... 159
<PAGE>
30.2 Repayment of a Discharged Amount...................... 160
30.3 Exceptions ........................................... 160
31. CALCULATIONS AND EVIDENCE OF DEBT........................... 161
31.1 Calculations ......................................... 161
31.2 Financial Accounts ................................... 161
31.3 Control account ...................................... 161
31.4 Standby L/C Accounts.................................. 161
31.5 Actual amount received................................ 162
31.6 Prima facie evidence ................................. 162
31.7 Certificates and determinations....................... 162
31.8 Reference Banks ...................................... 163
31.9 Unavailability of ECU/ecu ............................ 163
32. AMENDMENTS AND WAIVERS...................................... 163
32.1 Majority Banks........................................ 163
32.2 All Banks ............................................ 164
32.3 Super Majority Banks.................................. 164
32.5 The Agents ........................................... 165
33. NOTICES..................................................... 165
33.1 Method of delivery ................................... 165
33.2 Addresses ............................................ 165
33.3 Agents' details ...................................... 165
33.4 Receipt of notices ................................... 166
33.5 Language ............................................. 166
34. PARTIAL INVALIDITY.......................................... 166
35. REMEDIES AND WAIVERS........................................ 166
36. COUNTERPARTS................................................ 167
37. SECURITY.................................................... 167
38. JURISDICTION................................................ 167
38.1 Courts of England .................................... 167
38.2 Non-exclusivity ...................................... 167
38.3 Service of process agent.............................. 167
38.4 Non-convenience of forum.............................. 168
39. GOVERNING LAW............................................... 168
SCHEDULE 1....................................................... 169
THE BORROWERS............................................... 169
SCHEDULE 2....................................................... 170
THE GUARANTORS ............................................. 170
<PAGE>
SCHEDULE 3....................................................... 172
THE BANKS.................................................... 172
SCHEDULE 4....................................................... 173
ACCESSION AGREEMENT ......................................... 173
SCHEDULE 5....................................................... 176
DOCUMENTS TO ACCOMPANY ADDITIONAL ........................... 176
SCHEDULE 6....................................................... 178
CONDITIONS PRECEDENT ........................................ 178
SCHEDULE 7....................................................... 185
Part 1 ...................................................... 185
FORM OF DRAWDOWN REQUEST .................................... 185
Part 2 ...................................................... 186
FORM OF STANDBY L/C REQUEST ................................. 186
Part 3 ...................................................... 188
FORM OF STANDBY L/C ......................................... 188
SCHEDULE 8....................................................... 196
NOVATION CERTIFICATE ........................................ 196
SCHEDULE 9....................................................... 200
ADDITIONAL COSTS ............................................ 200
SCHEDULE 10...................................................... 202
COMPLIANCE CERTIFICATE ...................................... 202
SCHEDULE 11...................................................... 204
MATERIAL GROUP MEMBERS ...................................... 204
SCHEDULE 12...................................................... 205
DESCRIPTION OF ECU .......................................... 205
SCHEDULE 13...................................................... 207
Nominee Notice .............................................. 207
SCHEDULE 14...................................................... 209
SECURITY DOCUMENTS .......................................... 209
<PAGE>
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 DM214,000,000 (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:
"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");
(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
1
<PAGE>
(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
(i) 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; and
(ii) the reports prepared by Arthur Andersen dated 31 January 1998 and August
1998 and made in relation to Western State Import Inc and Bejka Trading AB
and in connection with the Diamond Back Acquisition.
"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 other than a Group Member incorporated in
South Africa 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 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 and/or any charge
imposed by the Financial Services Authority (or any other authority which
replaces all or any of its functions) expressed as a percentage rate per annum.
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"Additional Guarantor" means any entity which becomes a party hereto as a
Guarantor pursuant to a Guarantor Accession Agreement or otherwise provides a
Guarantee.
"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
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<PAGE>
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);
(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
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<PAGE>
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.
"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 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;
and
(c) 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
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<PAGE>
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.
"Beneficiary" means, in respect of a Standby L/C, the Person in whose favour
such Standby L/C is issued provided that Person is not a Group Member
incorporated in South Africa or a financial institution providing credit to a
Group Member incorporated in South Africa.
"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.
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<PAGE>
"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;
(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 Gary S. Matthews or in his absence his deputy
(being an Authorised Signatory of the Company) and their respective successors
from time to time.
"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).
"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.
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<PAGE>
"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 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 Cycle Group Combined Budget" means the budget in an agreed form and
prepared by the Company in respect of the Diamond Back Acquisition and existing
operations of the Group for the financial year ended 31 December 1999;
"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..
"Diamond Back Acquired Assets" means the assets acquired by the Company, or as
the case may
8
<PAGE>
be, the Swedish Obligor pursuant to the Diamond Back Acquisition Agreement.
"Diamond Back Acquisition" means the proposed acquisition by the Company and
Derby Sweden AB of certain assets pursuant to the Diamond Back Acquisition
Agreement;
"Diamond Back Acquisition Agreement" means the acquisition agreement dated 8
December 1998 and made between the Company and Derby Sweden AB as purchasers and
Diamond Back International Limited, Western States Import Company Inc and Bejka
Trading AB as vendors;
"Diamond Back Acquisition Legal Due Diligence Report" means each of:
(i) the report prepared by Kirkland & Ellis dated 9 December 1998 in respect of
the Diamond Back Acquisition addressed to the Arranger, the Facility Agent
and the Security Agent; and
(ii) the report dated 17 December 1998 and prepared by Simmons & Simmons and
addressed to the Company and Derby Holding BV in respect of the Diamond
Back Acquisition Agreement.
"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.
"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.
9
<PAGE>
"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:
(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
10
<PAGE>
(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.
"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.
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<PAGE>
"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.
"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.
"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.
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<PAGE>
"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 12 May 1998.
"Finance Documents" means, the Senior Finance Documents, the Note Documents, the
Recapitalisation Documents, the GSIC Note 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.
"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.
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<PAGE>
"GSIC Loan" means the senior subordinated loan agreement in the agreed form and
made between the Company and the GSIC Noteholder dated on or around 28 January
1999 pursuant to which the Company is to issue a series of 19% fixed rate
subordinated unsecured loan notes due 2009 (with an annual effective rate of
20.9%) in an aggregate amount of US$20,000,000.
"GSIC Noteholder" means Vencap Holdings (1992) Pte Ltd.
"GSIC Note Documents" means the GSIC Loan, the GSIC Notes, the Stockholders'
Agreement and the Side Letter as at the date of the completion of the Diamond
Back Acquisition.
"GSIC Note Issuer" means The Derby Cycle Corporation (in its capacity as the
issuer of the GSIC Notes).
"GSIC Notes" means the unsecured, subordinated, payment-in-kind and non-
guaranteed notes issued or to be issued by the GSIC Note Issuer to the GSIC
Noteholder, pursuant to the GSIC Loan as at the date of the completion of the
Diamond Back Acquisition.
"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
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<PAGE>
Hedging Protection Agreements (each a "Hedging Protection Agreement").
"Holding Company" means, in respect of any Person, any company or corporation
(or for the purposes of Clause 19.5(aa) only) other legal entity of which such
Person is a Subsidiary.
"IGF Liquidation" means the proposed liquidation of the Inter Derby Group
Finance N.V. in a manner satisfactory to the Facility Agent.
"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 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. and Derby Sweden AB.
"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 Agreements" means:
(i) the agreement entitled "Intercreditor Agreement" dated 13 May 1998 made
between, amongst others, the parties to this Agreement and each Hedging
Party pursuant to which their respective interests in the Group and amongst
themselves are regulated;
(ii) the agreement dated on or about [28 January 1999] and made between,
amongst others, the parties to this Agreement, the Persons described
therein as the Subordinated Note Holders and the Subordinated Note Issuers
and pursuant to which the claims of the said Subordinated Note Holders
against the said Subordinated Note Issuers are subordinated to the
interests
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and rights of the Finance Parties under the Senior Finance Documents; and
(iii) the agreement dated on or about [28 January 1999] and made between,
amongst others, the parties to this Agreement and the GSIC Noteholder
pursuant to which the rights of the GSIC Noteholder are subordinated to
the interests and rights of the Finance Parties under the Senior Finance
Documents;
(each agreement referred to at (i), (ii) and (iii) above an "Intercreditor
Agreement").
"Intercreditor Agreement Accession Memorandum" means in respect of an
Intercreditor Agreement an Accession Memorandum as defined in and delivered
under or pursuant to such 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.
"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 dated
18 March 1998 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
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which 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.
"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.
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"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;
(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
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<PAGE>
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 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
19
<PAGE>
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.
"Maximum Amount" means the maximum extent of the obligations of the Swedish
Obligor under Clause 23 in accordance with the provisions of Clause 23.1(v).
"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.
"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.
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"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 12 May 1998 among the Note Issuers and the Initial Purchasers in
connection with the offering of Senior Notes.
"Note Trustee" means, as of 12 May 1998, 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 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.
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"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 in the annual
Accounting Period ending 31 December 1999 only $42,800,000 provided such
amount is used solely for the Diamond Back Acquisition) (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
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
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<PAGE>
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 12 May 1998, 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 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
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<PAGE>
(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 12 May 1998 to secure Financial Indebtedness
over the assets of a Group Member incorporated in South Africa;
(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; and
(i) For the avoidance of doubt, at no time shall a Group Member grant an
Encumbrance in respect of the GSIC Notes in favour of the GSIC Noteholder
and the GSIC Trustee and their permitted successors, assignees or
transferees.
(j) Encumbrances created as at the date of the completion of the Diamond Back
Acquisition granted by the Swedish Obligor to the issuing bank in respect
of the Financial Indebtedness referred to at part (vii) of the definition
of Permitted Financial Indebtedness provided that such Encumbrances are
released within 30 days of the completion of the Diamond Back Acquisition.
"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 a Group Member (other than the Company and Lyon
Investments B.V.), any indebtedness:
(i) incurred under the Finance Documents other than the GSIC Note
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:
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<PAGE>
[members of the South African Group may incur Financial Indebtedness
(in aggregate) in the aggregate principal amount of DM11,000,000 (or
the equivalent thereof in other currencies); and
(B) in respect of the Group as a whole (excluding the South African
Group) $1,000,000 (or the equivalent thereof in other currencies);
(v) Financial Indebtedness in respect of finance leases existing as
at the date of this Agreement which have been disclosed in writing to
the Facility Agent prior to the date of this Agreement;
(vi) Financial Indebtedness incurred by a Dormant Subsidiary as at Closing
to the extent disclosed prior to the date of this Agreement;
(vii) Financial Indebtedness existing as at the date of the completion of
the Diamond Back Acquisition in respect of letters of credit or, as
the case may be, custom guarantees issued at the request of Bejka
Trading AB in an amount not exceeding in aggregate US$360,000 and
details of which have been disclosed to the Facility Agent prior to
such date provided that they are cancelled within 30 days of the
completion of the Diamond Back Acquisition and an amount in cash
equal to the aggregate issued amount of such letters of credit is
credited to the account of the relevant issuing bank on the date of
the completion of the Diamond Back Acquisition.
"Permitted Recipient" is defined at Clause 29.6.
"Person" shall include any person, firm, company, corporation, Government, State
or agency of a State or any association or partnership (whether or not having a
separate legal personality) of two or more of the foregoing.
"Perseus" means Perseus Capital, a merchant banking venture headquartered in
Washington DC and managed by Perseus Management L.L.C..
"Plan" means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which the Company or any ERISA Affiliate
is (or, if such plan were terminated, would under Section 4069 of ERISA be
deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"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.
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"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
(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
26
<PAGE>
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.
"Relevant Purchaser" means for the purposes of Clause 19.5(aa)(1) only any
Person, and for the purposes of Clause 19.5(aa)(2) only DC Cycle LLC or Perseus
Cycle LLC, and for the purposes of Clause 19.5(aa)(3) only, DC Cycle LLC or any
of its Affiliates (other than a Group Member) or a Person carrying on the
business of a bicycle manufacturer or/and bicycle distributor which is not an
existing investor of the Company or, with the prior consent of the Facility
Agent, any Person.
"Repayment Date" means, in relation to any Advance, the last day of the Term
thereof.
"Reports" means each of the Accountant's Report, the Diamond Back Acquisition
Due Diligence 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:
(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
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its name in Schedule 3 under the heading "Revolving 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.
"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 in a form and substance satisfactory to the Security
Agent and such other security documents as may be required by the Security Agent
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.
"Senior Finance Documents" means this Agreement, each Standby L/C, each
Intercreditor Agreement, the Security Documents, the Accession Agreements, any
Guarantee, any Novation Certificate, , 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.
"Side Letter" means the letter in the agreed form dated on or about the date of
the completion of the Diamond Back Acquisition made between the GSIC Noteholder,
the Company and DC Cycle LLC in respect of the right to grant the GSIC
NoteholderPIK C Preferred Shares in lieu of further GSIC Notes pursuant to the
terms of the GSIC Loan.
"South Africa" mean the Republic of South Africa.
"South African Group" means Derby Investment Holdings (Pty) Limited and each of
its Subsidiaries.
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"South African Rand" 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.
"Stockholders' Agreement" means the agreement dated on or aboutthe date of the
completion of the Diamond Back Acquisition and made between DC Cycle LLC,
Perseus Cycle LLC and the GSIC Noteholder in relation to the GSIC Notes.
"Structure Memorandum" means the memorandum and charts provided pursuant to
paragraph 29 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 or as amended post Closing and agreed
and notified to the Facility Agent.
"Swedish Obligor" means Derby Sweden AB.
"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) is
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
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whether by virtue of ownership of share capital, contract or otherwise.
"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, the Structure Memorandum
and the Diamond Back Acquisition Agreement.
"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. Patent Assignment for Security Purposes" means the assignment for security
purposes dated 13 May 1998 and granted by the Company in favour of the Security
Agent as the same may be amended from time to time.
"U.S. Patent and Trademark Security Agreement" means the patent and trademark
agreement dated 13 May 1998 and granted by the Company in favour of the Security
Agent as the same may be amended from time to time.
"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.
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"U.S. Pledge Agreement" means the pledge agreement dated 13 May 1998 granted by
the Company in favour of the Security Agent as the same may be amended from time
to time;
"U.S. Security Agreement" means the security agreement dated 13 May 1998 and
granted by the Company in favour of the Security Agent as the same may be
amended from time to time;
"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.
"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 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.
"C Common Stock" means the voting C Common Stock of the Company authorised by
the constitutive documents of the Company as at the date of the completion of
the Diamond Back Acquisition.
"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" means 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:
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before taking into 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 aggregate amount of $6,200,000 in the
annual Accounting Period ending 31 December 1998 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 amortisation of any goodwill and amortisation of Transaction Costs in an
amount not exceeding $8,800,000 in aggregate in all Accounting Periods post
Closing;
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;
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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 and FAS 132 shall be deducted when
calculating Consolidated Adjusted EBITDA and any unrealised income or loss in
respect of the change in the mark to market value of foreign exchange contracts
recognised in accordance with FAS 52 and FAS 133 where such contracts are in
accordance with the Approved Hedging Programme, shall not be included 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;
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.
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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 or 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 interest accrued or payable on the GSIC Notes to the
extent the same is not payable in cash and 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 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.
"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 RIC
Preference Shares, the PIK C Preferred Shares and the "C" Common Stock 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:
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(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 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;
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(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
(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
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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 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.
"PIK C Preferred Shares" means the non-voting Series C Preferred Shares in the
Company authorised by the constitutive documents of the Company as at the date
of the completion of the Diamond Back Acquisition.
"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
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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;
(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;
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(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;
(l) all references to statutes and other legislation include all re-enactments
and amendments of those statutes and that legislation; and
(m) all references to "the date of this Agreement" or "as at the date hereof"
(or terms or phrases having a similar meaning) shall, unless otherwise
specified, mean 12 May 1998.
1.4 Relationship with the Intercreditor Agreements
This Agreement is entered into subject to, and with the benefit of, the terms of
the Intercreditor Agreements.
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 DM214,000,000 (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:
===========================================================================
Column 1 Column 2 Currency
Borrower Deutschmark Amount
===========================================================================
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$
===========================================================================
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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);
(ii) DM64,000,000 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.
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:
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(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 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 Maximum Total Commitments
The Total Commitment shall not at any time exceed DM214,000,000 (or its
equivalent thereof in Optional Currencies).
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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.
(e) For the avoidance of doubt no proceeds of any Utilisation shall be used in
respect of or in connection with the completion of the Diamond Back
Acquisition.
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 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
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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 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.
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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.
(e) The South African Group 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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(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 Date for
such Standby L/C Provided that the Facility Agent has previously confirmed
to the Company that Clause 4 has been satisfied).
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(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.
(e) The South African Group 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;
(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
(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.
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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 to 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, as the case
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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 40% 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
(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
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(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) (other than in respect of the Inventory owned, from time to
time, by the Swedish Obligor which shall not be included) the
sum of 40% of the aggregate of its Eligible Raw Materials and of
its Eligible Finished Goods; and
(iii) 100% of the 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,
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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 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;
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
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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:
(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:
(i) if 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) if 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) if the Account Debtor is a Group Member or an associate or employee
thereof;
(iv) if such Account(s) relate to a transaction entered into on a sale or
return or similar basis;
(v) if 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) if such Account(s) have been prepaid to the extent of such
prepayment;
(vii) if 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;
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(ix) if such Account(s) are not evidenced by an invoice or in writing;
(x) if 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) if such Account is owed by an Account Debtor to the Swedish Obligor;
and
(xii) 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 Debtors' creditworthiness and such
Account is not excluded pursuant to one or more of paragraphs (i) -
(xi) above;
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 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;
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"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 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.
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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:
(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
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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,
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) 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
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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.
(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.
(k) The South African Group 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.
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(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 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.
7.3 Nomination
Each of the parties hereto agrees that any Bank that has agreed, in
accordance with the terms and conditions of this Agreement, to provide an
Ancillary Facility may nominate its Affiliate (each such Affiliate being a
"Nominated Affiliate"), by giving written notice to the Facility Agent, to
discharge such Bank's obligations under this Agreement to provide such
Ancillary Facility. To the extent that a Nominated Affiliate provides an
Ancillary Facility on behalf of a Bank (the "Nominating Bank"), the
Nominating Bank shall be deemed to have discharged such obligations with
respect to such Ancillary Facility.
7.4 Delivery of Nominee Notice
Upon a Nominating Bank nominating an Affiliate in accordance with Clause
7.3, such Nominating Bank shall deliver to the Facility Agent a Nominee
Notice in the form of the document contained in Schedule 13.
7.5 Date of Accession
From the date of delivery of any executed Nominee Notice (the "Delivery
Date") by a Nominating Bank in respect of a nominated Affiliate such
Nominated Affiliate shall become an Ancillary Bank for the purposes of this
Agreement and in particular this Clause 7.
7.6 Execution of Nominee Notice
Upon receipt of each Nominee Notice duly executed by the relevant Nominated
Affiliate the Facility Agent shall execute such Nominee Notice on its own
behalf and on behalf of each other Finance Party. Each Finance Party
(other than the Facility Agent) hereby irrevocably
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authorises the Facility Agent to execute such Nominee Notice on its behalf
and each Obligor (other than the Company) hereby irrevocably authorises the
Company to execute such Nominee Notice on its behalf.
7.7 Rights and Obligations of the Parties
Each of the parties hereto, upon the Delivery Date, shall acquire the same
rights and assume the same obligations, as between themselves and to the
Nominated Affiliate, under the Senior Finance Documents, as they would have
acquired and assumed had such Nominated Affiliate been an original party to
the Facility Agreement. Each Nominated Affiliate shall upon the Delivery
Date acquire such rights and assume such obligations under the Senior
Finance Documents (including without limitation to be a Secured Beneficiary
as defined therein) to and against the parties hereto as if it were an
Ancillary Bank at the date of this Agreement.
7.8 Maximum Ancillary Commitment
The Ancillary Commitment under an Ancillary Facility, proposed to be given
by a Nominated Affiliate who has become an Ancillary Bank pursuant to
Clause 7.5, shall not, when aggregated with the actual and contingent
liability (calculated without reference to Clause 7.9) of the Nominating
Bank of such Nominated Affiliate, together with any other Ancillary
Facilities provided by such Nominating Bank and/or any of it Affiliates,
exceed such Nominating Bank's Revolving Commitment.
7.9 Calculations
For the purpose of this Agreement (including without limitation the
calculation of such Bank's Revolving Commitment, Standby L/C Commitment,
Revolving Facility Available Amount and Standby L/C Facility Available
Amount) any Ancillary Facility provided by a Nominated Affiliate of a
Nominating Bank, shall be deemed to have been provided by such Nominating
Bank.
7.10 Intercreditor
The parties hereto agree that any Nominated Affiliate that delivers a
Nominee Notice in accordance with the provisions of Clause 7.5 hereof
shall, become a party to each of the Intercreditor Agreements as a Bank.
7.11 Term of Ancillary Facility
Subject to the provisions of this Agreement, when an Ancillary Facility is
provided by a Nominated Affiliate it shall be provided on such terms and
conditions stipulated in this Agreement with respect to Ancillary
Facilities.
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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:
(a) "LIBOR" is to be determined to pursuant to paragraph (b) of the definition
thereof and no,
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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.
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Column 1 Column 2
Reduction Date Total Commitments
Fifth anniversary of the date
of this Agreement DM194,000,000
Sixth anniversary of the date
of this Agreement DM169,000,000
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 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.
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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 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;
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(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;
(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.
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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 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.
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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 1 January 1999;
"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 (known as the euro ), being in part the implementation of
the third stage of EMU;
"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 in a
national currency unit shall be redenominated 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
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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).
(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
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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 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
Agreements, 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.
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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 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.
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(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.
(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
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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.
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).
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.
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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 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) or 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 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. 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.
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.
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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.
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
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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 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.
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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 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
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(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
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interest thereon and any other amounts owing to that 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 its rights and obligations under the Senior Finance
Documents to another branch or financial institution acceptable to the
Obligors' Agent.
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(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.
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
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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 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;
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(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 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
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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 the Diamond Back Acquisition and the IGF
Liquidation;
(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 Diamond Back Acquisition and the IGF Liquidation 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 Diamond Back Acquisition
and the IGF Liquidation which are not shown in the Structure
Memorandum;
(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 the Diamond Back Acquisition and the IGF
Liquidation 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,
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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.
(iii) The Derby Group Consolidated Budget and the information contained
in it:
(a) was prepared by the Company based upon reasonable assumptions for
each entity included in Derby Cycle Group Consolidated Budget and
in the case of the Company and the Swedish Obligor such
assumptions take account of the revenues, income, expenditure,
assets and liabilities expected to result from the Diamond Back
Acquisition and the funding thereto;
(b) provided by any Person other than a Group Member is true and
complete and accurate in all material respects;
(c) has been prepared in accordance with Applicable Accounting
Principles; and
(d) all expressions of opinion or intention and all forecasts and
projections contained in the Derby Cycle Group Consolidated Budget
were arrived at after careful consideration, were fair and were
based on reasonable grounds, and the Derby Cycle Group
Consolidated Budget 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
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Derby Cycle Group Consolidated Budget being misleading in any
material respect in the context of this Agreement and the
transactions contemplated hereby; and
(iv) 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 Financial Accounts ending 29
November 1998.
(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 (including for the avoidance of doubt the Monthly Accounts for the
Accounting Period ending 31 November 1998) 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 which 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;
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(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 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;
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(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;
(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;
(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;
(vii) the Diamond Back Acquisition Agreement, as furnished to the
Facility Agent under this Agreement, contains all the terms of the
Diamond Back Acquisition; and
(viii) the Diamond Back Acquisition Agreement contains all the terms of the
agreements and arrangements between the Parties thereto.
(ix) the GSIC Note Documents contain all the terms of the agreements and
arrangements between the GSIC Note Issuer, the GSIC Noteholder and
each 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
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(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;
(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
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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;
(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
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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. 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.
(bb) 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;
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(cc) 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 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 and Trademark 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;
(dd) 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
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(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
(ee) 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.
(ff) Diamond Back Acquired Assets: all the Diamond Back Acquired Assets which
have been acquired by the Company or, as the case may be, the Swedish
Obligor (the "Relevant Acquirer") pursuant to the Diamond Back Acquisition
are beneficially owned by the Relevant Acquirer and the Relevant Acquirer
is, or is entitled to become the legal registered owner of the Diamond
Back Acquired Assets free from any Encumbrances, claims and competing
interests whatsoever save as is expressly permitted under this Agreement.
(gg) Disqualified Stock: none of the Company's share capital constitutes
Disqualified Stock as defined in the Senior Notes.
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 [120] 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 Accounting Period to the
end of such
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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,
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
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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 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.
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(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
(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)
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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);
(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
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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";
(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
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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.
(h) GSIC Notes: If at any time the Company elects to make any issuance of
GSIC Notes (whether in respect of or in lieu of interest on any GSIC Notes
then outstanding or otherwise), the Company will, at least ten days prior
to such issuance, furnish to the Facility Agent a report: (i) stating that
the Company is permitted under the Note Indentures to incur an amount of
indebtedness not less than the aggregate principal amount of GSIC Notes
intended to be issued; (ii) setting forth the provision of the Note
Indentures under which the Company is so permitted and (iii) setting forth
in reasonable detail calculations demonstrating that the conditions for
incurring indebtedness set forth therein have been complied with.
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:
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(a) necessary so as to take into account changes in applicable laws since the
date the above mentioned Financial Accounts were prepared;
(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 provided 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 one claim) are
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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) , (E) and F 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 or such part
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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 such Intercreditor Agreements as advised by
the Facility Agent 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 such Intercreditor Agreements as
advised by the Facility Agent 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,
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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 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 66.6% 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.
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(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 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
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(including, without prejudice to the generality of the foregoing, in
respect of employees' remuneration, Taxes and like obligations).
(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.
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(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 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
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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.
(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:
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(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 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 GSIC
Notes or in respect of 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)).
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(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 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.
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;
(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")
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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 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).
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(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 (D) 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, if made by a Note Issuer, is an
Obligor;
(D) 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 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;
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the loan is 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;
(E) 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 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 $72,800,000 (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
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(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:
(i) 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; and
(ii) no Person including any Group Member, other than the GSIC Note Issuer
shall guarantee or offer any financial accommodation or financial
assistance of any nature whatsoever in respect of the GSIC Note
Issuer's obligations under the GSIC Note Documents or of any other
Financial Indebtedness incurred by it in any capacity.
(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:
(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
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(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
which for the avoidance of doubt includes any Group Member incorporated in
South Africa.
(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 in 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 in 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 $72,800,000 (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 its members
or, as the case may be, the Company or 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 Company only, this Agreement (provided that each
such payment would not be in breach of any of the Senior Finance
Documents);
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(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) 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
(v) 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.
(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.
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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 or, in
respect of any Finance Document entered into post Closing as at the
date of the completion of the Diamond Back Acquisition),
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 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
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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").
====================================================================
(1) (2) $ (or the equivalent thereof
in other currencies
====================================================================
31 December 1998 9,000,000
- --------------------------------------------------------------------
31 December 1999 10,000,000
- --------------------------------------------------------------------
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
====================================================================
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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
(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.
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(w) Share Capital: The Company will not:
(i) redeem, repurchase, retire, return or repay any of its share
capital, or resolve to do so save that the Company shall be entitled
to redeem C Common Stock for an amount not exceeding
(Pounds)2,100,000 of its share capital provided by DC Cycle LLC in
connection with the Diamond Back Acquisition provided that an amount
equal to the amount of its share capital to be redeemed has been
irrevocably credited to the Company's account in cash by or on
behalf of Perseus Cycle LLC so as to enable Perseus Cycle LLC to
subscribe for an identical number of shares of C Common Stock of the
Company within 30 days of the completion of the Diamond Back
Acquisition and that no Event of Default has occurred and is
outstanding or would result from such redemption; or
(ii) redeem, repurchase, retire, return or repay any of its share
capital, or resolve to do so save that the Company shall be entitled
to redeem Class C Common Stock for an amount not exceeding
(Pounds)8,400,000 of its share capital provided by DC Cycle LLC in
connection with the Diamond Back Acquisition provided that an amount
equal to the amount of its share capital to be redeemed has been
irrevocably credited to the Company's account in cash by or on
behalf of Derby Finance Sarl so as to enable Derby Finance Sarl to
subscribe for an identical number of shares of Class C Common Stock
of the Company within 180 days of the completion of the Diamond Back
Acquisition and that no Event of Default has occurred and is
outstanding or would result from such redemption;
(iii) 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 provided
that no Event of Default has occurred and is outstanding or would result
as a consequence of the following:
(a) issue (x) ordinary share capital of a type similar to any class of
its shares in issue as at completion of the Diamond Back Acquisition
which is subscribed for in full in cash, or as contemplated in the
GSIC Note Documents including, for the avoidance of doubt, Clause 4
of the Stockholders' Agreement (as at the date of the completion of
the Diamond Back Acquisition) provided such issuance does not give
rise to any breach of the Senior Notes and is not Disqualified Stock
as defined in the Senior Notes 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
123
<PAGE>
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. For the avoidance of doubt, the Company shall not
issue and shall procure that no other Group Member shall issue
Excluded Share Capital or share capital which constitutes or may be
converted into Financial Indebtedness;
(b) issue shares to employees pursuant to the employee share ownership
scheme in existence as at the date of this Agreement or, if later,
as at the date of the completion of the Diamond Back Acquisition
(details of which have been provided to the Facility Agent pursuant
to paragraph 15 of Schedule 6 or have been provided to the Facility
Agent prior to the date of the completion of the Diamond Back
Acquisition and provided that the exercise of any rights under such
a scheme does not give rise to an Event of Default) and any other
similar or replacement scheme to which the Facility Agent has given
its prior written approval;
(c) as contemplated in connection with the MS Group Option; and
(d) take all such actions as are permitted pursuant to 19.5(aa).
(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 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(o) and
apply the same in accordance therewith.
(z) 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).
(aa) Payment - GSIC Notes: The Company shall not repay, redeem, cancel or
repurchase the GSIC Notes or make any other payment or distribution in
cash whatsoever in respect of the GSIC Notes and the Company shall procure
that no other Group Member shall make any payment or take any action on
behalf of the Company to or enter into any such
124
<PAGE>
arrangement on behalf of the Company save that the Company shall be
entitled to redeem or, as the case may be, cancel GSIC Notes (the
"Transferred GSIC Notes") purchased by a Relevant Purchaser either;
(1) pursuant to Clause 2 of the Stockholders' Agreement (as at the date
of the completion of the Diamond Back Acquisition); or
(2) pursuant to Clause 3 of the Stockholders' Agreement (as at the date
of the completion of the Diamond Back Acquisition); and
(3) pursuant to Clause 4 of the Stockholders' Agreement (as at the date
of the completion of the Diamond Back Acquisition to a Relevant
Purchaser.
Provided that in each case:
(A) the Transferred GSIC Notes are delivered to the Company by the
holder of the Transferred GSIC Notes for and on behalf of the
Relevant Purchaser for cancellation whereupon the Company shall
immediately cancel such Transferred GSIC Notes and issue to the
Relevant Purchaser, shares in the Company in an aggregate amount
equal to the aggregate principal amount (together with accrued
but unpaid interest thereon) of such Transferred GSIC Notes; or
(B) an amount in cash equal to the aggregate principal amount
(together with accrued but unpaid interest thereon) of the
Transferred GSIC
Notes has been irrevocably credited to the Company's account by
or on behalf of the Relevant Purchaser so as to enable the
Relevant Purchaser to subscribe, simultaneously with such
redemption, for shares in the Company in an aggregate amount
equal to the aggregate principal amount (together with accrued
but unpaid interest thereon) of the Transferred GSIC Notes;
And further provided in each case that all the following
conditions are met or fulfilled:
(i) no Event of Default has occurred which is still outstanding
or arises as a consequence of the foregoing;
(ii) the holder of the Transferred GSIC Notes has confirmed to
the Relevant Purchaser and the Company that any liability
of the GSIC Note Issuer to the holder of the GSIC Notes
under, or in respect of, the GSIC Note Documents in respect
of the Transferred GSIC Notes has been extinguished;
(iii) none of the shares issued by the Company pursuant to the
foregoing shall constitute Excluded Share Capital or
Disqualification Stock (as the latter term is defined in
the Note Documents), or which constitute or may be
converted into Financial Indebtedness.
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<PAGE>
(iv) that as a consequence of the steps set out in (A) and (B)
above, the aggregate amount of subordinated debt pursuant to
the GSIC Note Documents and equity shall not be for an
aggregate amount less than the aggregate amount of
subordinated debt pursuant to the GSIC Note Documents and
equity immediately prior to the transactions referred to at
(A) and (B) above.
For the avoidance of doubt, no other payment nor distribution of any kind
or character may be made in respect of the GSIC Notes other than the
issuance of further GSIC Notes in accordance with clause 2.3.2 of the GSIC
Loan (as at the date of the completion of the Diamond Back Acquisition)
(provided that no Event of Default is outstanding or occurs as a
consequence thereof) or, as the case may be, PIK C Preferred Shares in
accordance with the terms of the Side Letter (as at the same date).
(ab) GSIC Notes: the Company shall not make any issuance of GSIC Notes (whether
in respect of or in lieu of interest on any GSIC Notes then outstanding or
otherwise) that results in or would, upon the passage of time or giving of
notice, result in an Event of Default under the Note Indentures.
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:
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<PAGE>
(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
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:
================================================
Accounting Date Ratio
- ------------------------------------------------
27 September 1998 1.70:1
- ------------------------------------------------
31 December 1998 1.25:1
- ------------------------------------------------
28 March 1999 1.20:1
- ------------------------------------------------
27 June 1999 1.25:1
- ------------------------------------------------
26 September 1999 1.50:1
- ------------------------------------------------
31 December 1999 1.75:1
- ------------------------------------------------
2 April 2000 1.85:1
- ------------------------------------------------
2 July 2000 1.90:1
- ------------------------------------------------
1 October 2000 1.90:1
- ------------------------------------------------
31 December 2000 2.00:1
- ------------------------------------------------
127
<PAGE>
================================================
Accounting Date Ratio
- ------------------------------------------------
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
- ------------------------------------------------
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
================================================
(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:
===============================================================
Period Consolidated Net Worth ($)
- ---------------------------------------------------------------
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 110,000,000
1999
- ---------------------------------------------------------------
1 January 2000 - 2 April 2000 110,000,000
- ---------------------------------------------------------------
128
<PAGE>
===============================================================
Period Consolidated Net Worth ($)
- ---------------------------------------------------------------
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 140,000,000
2002
- ---------------------------------------------------------------
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 155,000,000
2003
- ---------------------------------------------------------------
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 170,000,000
2004
- ---------------------------------------------------------------
1 January 2005 - 3 April 2005 175,000,000
===============================================================
(c) the ratio of Net Average Financial Indebtedness (excluding, for the
avoidance of doubt, the GSIC Notes) 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:
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<PAGE>
=================================================
Accounting Date Ratio
- -------------------------------------------------
7 April 2000 5.45:1
- -------------------------------------------------
2 July 2000 5.30:1
- -------------------------------------------------
1 October 2000 5.15:1
- -------------------------------------------------
1 April 2001 5.00:1
- -------------------------------------------------
1 July 2001 4.80:1
- -------------------------------------------------
30 September 2001 4.75:1
- -------------------------------------------------
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 2004 3.60:1
=================================================
(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:
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<PAGE>
==================================================
Accounting Date Amount ($)
- --------------------------------------------------
27 September 1998 35,000,000
- --------------------------------------------------
31 December 1998 25,000,000
- --------------------------------------------------
28 March 1999 25,000,000
- --------------------------------------------------
27 June 1999 26,000,000
- --------------------------------------------------
26 September 1999 31,000,000
- --------------------------------------------------
31 December 1999 36,000,000
- --------------------------------------------------
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 2001 41,000,000
- --------------------------------------------------
1 July 2001 42,000,000
- --------------------------------------------------
30 September 2001 42,000,000
- --------------------------------------------------
31 December 2001 42,500,000
- --------------------------------------------------
31 March 2002 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
==================================================
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<PAGE>
(e) Debtor Days shall at all times be less than 80 days as the same is
determined, as at the end of each relevant monthly Accounting Period, by
reference to the relevant 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 the twelve
immediately preceding and consecutive monthly Accounting Periods
ending on the last day of the monthly Accounting Period for which the
calculation is to be determined, divided by 12; and
B = The Dollar Equivalent of sales in the twelve immediately preceding
and consecutive monthly Accounting Periods ending on the last day of
the monthly Accounting Period for which the calculation is to be
determined.
"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 during the period in Column 1 below be
less than the number specified opposite such period in Column 2 below:
=====================================================
Column 1 Column 2
- -----------------------------------------------------
From the date of this Agreement until 110
(and including) 30 June 1999
- -----------------------------------------------------
From 1 July 1999 until (and including) 26 105
September 1999
- -----------------------------------------------------
From 27 September 1999 and at all times 100
thereafter
=====================================================
and in all instances, the determination of Inventory Days shall be 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
last day of the monthly Accounting Period for which the calculation
is to be determined, divided by 12; and
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<PAGE>
B = the Dollar Equivalent of the cost of sales for the twelve
immediately and preceding and consecutive monthly Accounting Periods
ending on the last day of the monthly Accounting Period for which the
calculation is to be determined 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; and
(g) the aggregate amount of Financial Indebtedness of the Group (excluding,
the GSIC Notes, any amounts due under the Note Documents and any Financial
Indebtedness described at paragraph (h) of the definition "Financial
Indebtedness" (and without double-counting)) shall not, during any period
listed in Column 1 below exceed the amount specified opposite such period
in Column 2 below and, for the purposes of any such determination, any
Financial Indebtedness not denominated in Dollars shall be converted to
Dollars by reference to the Facility Agent's spot rate of exchange for
such currency and Dollars at or about 10.00 a.m. on the date such
determination is made:
======================================================
Column 1 Column 2 ($)
- ------------------------------------------------------
1 December 1998 to (and 70,000,000
including) 31 December 1998
- ------------------------------------------------------
1 January 1999 to (and 100,000,000
including) 31 January 1999
- ------------------------------------------------------
1 February 1999 to (and 115,000,000
including) 28 February 1999
- ------------------------------------------------------
1 March 1999 to (and 115,000,000
including) 28 March 1999
- ------------------------------------------------------
29 March 1999 to (and 110,000,000
including) 2 May 1999
- ------------------------------------------------------
3 May 1999 to (and including) 95,000,000
30 May 1999
- ------------------------------------------------------
31 May 1999 to (and 70,000,000
including) 27 June 1999
- ------------------------------------------------------
28 June 1999 to (and 50,000,000
including) 1 August 1999
- ------------------------------------------------------
2 August 1999 to (and 50,000,000
including) 29 August 1999
- ------------------------------------------------------
30 August 1999 to (and 45,000,000
including) 26 September 1999
- ------------------------------------------------------
133
<PAGE>
======================================================
Column 1 Column 2 ($)
- ------------------------------------------------------
27 September 1999 to (and 55,000,000
including) 31 October 1999
- ------------------------------------------------------
1 November 1999 to (and 65,000,000
including) 28 November 1999
- ------------------------------------------------------
29 November 1999 to (and 60,000,000
including) 31 December 1999
======================================================
All calculations in this Clause 20.1 shall be made on a 365 day year basis.
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
134
<PAGE>
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 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, any other
Note Document or the GSIC Notes or other GSIC Note Documents 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.
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<PAGE>
(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 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.
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(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).
(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
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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
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 Agreements, and Other Documents:
(i) Any Group Member, fails to comply with any of the material
provisions of, or its obligations under, the Intercreditor
Agreements; or
(ii) the Intercreditor Agreements are not, or cease to be, binding on or
enforceable against any Group Member expressed to be a party
thereto, the Note Trustee, the Noteholders, the GSIC Noteholders or
any permitted successors, transferees or assignees agreed by the
Facility Agent (as the case may be) or shall otherwise not be
effective;
(iii) any event, howsoever described, constituting default under the
Recapitalisation Documents shall occur thereunder and be continuing
unwaived; or
(iv) any event, however described, constituting default under the Diamond
Back Acquisition Agreement shall occur thereunder and be continuing;
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(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).
(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 or either or both of
them (or DC Cycle LLC and/or Perseus Cycle LLC) enters into any
arrangement or agreement, the effect of which is that Thayer and
Perseus will cease to hold (in aggregate) the beneficial interest in
at least 51 per cent of the voting rights of shares in the Company,
or cease colletively 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 of this Agreement 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.
(v) Without the prior written consent of all the Banks, there is a
Change of Control as such expression is defined in the GSIC Note
Documents and the Note Documents.
(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
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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.
(ab) Material Adverse Effect: Any event or series of events whether related or
not occurs which has a Material Adverse Effect.
(ac) GSIC Notes. The Company makes any issuance of GSIC Notes (whether in
respect or in lieu of interest on any GSIC Notes then outstanding or
otherwise) that results in or would, upon the passage of time or giving of
notice, result in an Event of Default under the Note Indentures.
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.
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(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.
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 relevant
Intercreditor Agreement(s) 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 relevant Intercreditor
Agreement(s) as an Obligor.
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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):
(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.
Provided that, in respect of the Swedish Obligor, the undertakings given by the
Swedish Obligor in this Clause 23 and any security undertaking hereunder by the
Swedish Obligor shall be conditional upon:
(i) receipt by the Swedish Obligor of a decision from the Swedish local tax
authority or from the Swedish Government which has gained legal force
(lagakraftvunnet beslut) holding that Chapter 12 Section 7 of the Swedish
Companies Act (aktiebolagslagen) is not applicable to such undertakings;
or
(ii) receipt by the Swedish Obligor of a decision from the Swedish local
tax authority or from the Swedish Government which has gained legal
force (lagakraftvunnet beslut) granting, pursuant to Chapter 12
Section 8 of the Swedish Companies Act, an exemption from Chapter 12
Section 7 of the Swedish Companies Act for such undertakings.
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The Swedish Obligor shall draft the application to the Swedish tax
authority, but shall make such amendments or additions, as the Banks'
local Swedish counsel shall reasonably require. The Swedish Obligor
undertakes to file the application to the Swedish tax authority promptly
following the Diamond Back Acquisition.
If the Swedish local tax authority fails to hold that Chapter 12 Section 7
of the Swedish Companies Act (aktiebolagslagen) is not applicable to such
undertakings, or fails to grant the appropriate exemptions, the Swedish
Obligor shall lodge an appeal with the Swedish Government if in the
reasonable opinion of the Bank's Swedish counsel (and after taking into
account any representations made by the Swedish Obligor's Swedish counsel)
such appeal is likely to be successful on the balance of probabilities.
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;
(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.
(iv) 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.
(v) the obligations of the Swedish Obligors hereunder shall be limited to the
greater of:
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(a) an amount equal to seven times the Consolidated EBITDA of such
Swedish Subsidiary; and
(b) the Total Assets of such Swedish Subsidiary;
and in each case, determined by reference to the Swedish Obligor's most
recently published audited financial statements and, for the purposes of
this paragraph only:
"Consolidated EBITDA" shall be determined in accordance with the
definition "Consolidated EBITDA" at Clause 1.2. but as if references
therein to the Company were references to the Swedish Obligor, references
therein to the Group were references to the Swedish Obligor and its
Subsidiaries (if any) and references therein to the audited annual
financial statements were references to the latest audited annual
financial statements of such Swedish Obligor as the same is determined in
accordance with Applicable Accounting Principles; and
"Total Assets" means, in respect of a Swedish Obligor, the sum of fixed,
intangible and current assets (including, for the avoidance of doubt,
amounts falling due after more than one year) of such Swedish Obligor and
its Subsidiaries (if any).
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
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(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 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:
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(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 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.
23.10 Guarantee Fees
(a) The Company undertakes to pay, or procure the payment of, a guarantee fee
to the Swedish Obligor. Such guarantee fee shall be payable yearly in
advance within 60 days of the end of each annual Accounting Period save
that the payment of the guarantee fee for the Accounting Period ending 31
December 1999 (the "First Guarantee Fee Payment") shall be paid to the
Swedish Obligor on the date on which the Swedish Obligor executes an
Accession Agreement.
(b) Each such guarantee fee shall be for an amount equal to 1.75% of the
Maximum Amount save that the First Guarantee Fee Payment shall be for an
amount equal to 1.75% of the value of assets acquired by the Swedish
Obligor pursuant to the Diamond Back Acquisition Agreement.
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
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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).
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.
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);
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(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.
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.
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(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
(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
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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.
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 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
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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.
(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.
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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
(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.
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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 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.
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(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 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
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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
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.
(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
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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.
(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;
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(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 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.
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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 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
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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.
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
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(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.
(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.
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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.
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.
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), (y) or (z), (aa), 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
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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);
(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) and Clause 20
shall not be amended, supplemented or modified or any consent given in
respect thereof;
(c) each of the Intercreditor Agreements shall not be amended, supplemented or
modified.
"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 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.
32.4 All Parties
Without the prior consent of all Parties, this Clause 32 may not be amended,
waived or supplemented.
32.5 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).
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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:
<TABLE>
<CAPTION>
Facility Agent:
<S> <C> <C>
(a) Address: Trinity Tower
9 Thomas More Street
London EC1 9YT
(b) Fax: 0171 777 2360
</TABLE>
(c) Officer/Department: Stephen Clarke, Agency Loans Department
<TABLE>
<CAPTION>
Security Agent:
<S> <C> <C>
(a) Address: Trinity Tower
9 Thomas More Street
London EC1 9YT
(b) Fax: 0171 777 2360
</TABLE>
(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:
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(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 orcommunication (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:
(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.
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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.
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 Derby Holding Limited 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.
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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
Englebert Wiener Bike Germany
Parts 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 Limited England and Wales
Raleigh International Limited England and Wales
Sturmey-Archer Limited England and Wales
Raleigh Industries of Canada Canada
Limited
The Derby Cycle Corporation The United States of America
Raleigh BV Netherlands
Raleigh Europe BV Netherlands
Koninklijke Gazelle BV Netherlands
Derby Nederland BV Netherlands
Derby Holding BV Netherlands
Sturmey-Archer Europa B.V Netherlands
Lyon Investments BV Netherlands
Derby Holding (Deutschland) Germany
GmbH
Raleigh Fahrrader GmbH Germany
NW Sportgerate GmbH Germany
Derby Cycle Werke GmbH Germany
Englebert Wiener Bike Parts Germany
GmbH
Univega Worldwide Licence Germany
GmbH
Univega Beteiligungen GmbH Germany
Univega Bikes & Sports Europe Germany
GmbH (formerly MS Sport
Vertriebs GmbH)
Derby Fahrrader GmbH Germany
Derby WS Vermogenswerwaltungs Germany
GmbH
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Name Jurisdiction of Incorporation
Winora-Staiger GmbH Germany
Curragh Finance Company Ireland
Raleigh Ireland Limited Ireland
InterDerby Group Finance N.V. Netherlands Antilles
The British Cycle Corporation England and Wales
Limited
BSA Cycles Limited England and Wales
Triumph Cycle Co. Limited England and Wales
Raleigh (Services) Limited England and Wales
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SCHEDULE 3
THE BANKS
<TABLE>
<CAPTION>
Name Revolving Standby L/C
Commitment Commitment
(DM) (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
Scotiabank Europe Plc) 16,250,000 1,139,019
The Bank of Nova Scotia)
The Sumitomo Bank, Limited 16,250,000 1,139,019
Banque Nationale de Paris 11,250,000 788,551
San Paolo IMI SPA 11,250,000 788,551
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[s] dated [ ] (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[s] dated [ ] as an Obligor
pursuant to the procedure established in Clause [9[1]] of the
Intercreditor Agreements 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.
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
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(a) The Additional [Borrower/Guarantor] hereby:
(i) confirms that it has received a copy of the Facility Agreement and
the Intercreditor Agreement[s], 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[s], agrees to be
bound in that capacity with effect from such date by the terms of
the Facility Agreement and the Intercreditor Agreement[s] 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[s] 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[s]
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[s] hereby agree amongst themselves and with the Additional
[Borrower/Guarantor] that the Additional [Borrower/Guarantor] shall
become party to the Facility Agreement and the Intercreditor Agreement[s]
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[s] 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
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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 a Certified Copy of the statutory report by its Auditors
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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;
(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
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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.
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
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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.
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
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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:
(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
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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.
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.
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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.
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
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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.
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 [ ].
6. 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:-
<TABLE>
<S> <C>
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
[ ] [ %]
[ ] [ %]
[ ] [ %]
</TABLE>
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<TABLE>
<S> <C>
Beneficiary: [Approved Bank details]
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).
</TABLE>
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.
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.
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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 DM214,000,000 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 Clauses [ ], [ ]
and [ ] of each of the Intercreditor Agreements 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
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required in connection herewith, (b) accepts and confirms the application of
the provisions of Clause 29 of the Facility Agreement and Clauses [ ], [ ]
and [ ] of each of the Intercreditor Agreements 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
Agreements; 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 each of the Intercreditor Agreements
that it will perform in accordance with its terms all those obligations
which by the terms of the Senior Facility Agreement and the Intercreditor
Agreements 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.
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.
194
<PAGE>
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.
195
<PAGE>
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 Agreements
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 DM214,000,000 and to the Intercreditor Agreements
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 Agreements to accept this
duly executed Novation Certificate as being delivered pursuant to and for
the purposes of Clause 29 of the Facility Agreement and Clauses 9, [ ] and
[ ] of the Intercreditor Agreements so as to take effect in accordance with
its terms under such Clauses on [date of novation].
196
<PAGE>
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 Clauses 9, [ ], [
] and [ ] of the Intercreditor Agreements 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 each of the Facility Agreement and the
Intercreditor Agreements; 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 Agreements that it
will perform in accordance with its terms all those obligations which by the
terms of the Senior Facility Agreement and the Intercreditor Agreements 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.
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
197
<PAGE>
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.
198
<PAGE>
THE SCHEDULE
1. Existing Bank's Revolving Commitment: (Portion Novated)
2. Existing Bank's portion of Outstanding Advances: (Portion Novated)
<TABLE>
<CAPTION>
DRAWDOWN DATE AMOUNT REPAYMENT DATE
<S> <C> <C>
[ ] [ ] [ ]
<CAPTION>
3. Existing Bank's Standby L/C Commitment: (Portion Novated)
4. Existing Bank's participation in Outstanding Standby L/Cs: (Portion Novated)
<S> <C> <C>
Issue Date Amount Expiry Date
[ ] [ ] [ ]
<CAPTION>
NB. PLEASE NOTE CLAUSE 29.2(C) REGARDING THE PROPORTION OF REVOLVING COMMITMENT
AND STANDBY L/C COMMITMENT THAT ARE REQUIRED TO BE TRANSFERRED.
</TABLE>
<TABLE>
<S> <C>
[Name of Existing Bank] [Name of New Bank]
By: By:
Date: Date:
[Name of Facility Agent]
By:
Date:
</TABLE>
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 Agreements
By:
Date:
199
<PAGE>
SCHEDULE 9
ADDITIONAL COSTS
1. For the purpose of this Agreement, the cost of compliance with existing
requirements of the Bank of England and/or the Financial Services Authority
(or any other authority which replaces all or any of their functions) in
respect of Advances will be calculated by the Facility Agent in relation to
each of the first day of each in respect of such Advance and, if the
Interest Period of such Advance exceeds three months, at three calendar
monthly intervals from the first day of such Term during its duration in
accordance with the following formula:
AB+C(B-D) + E x 0.01 per cent. per annum
--------------------
100 - (A+C)
Where:
A is the percentage of eligible liabilities (assuming these to be in
excess of any stated minimum) which the Facility Agent is from
time to time required to maintain as an interest free cash ratio
deposit with the Bank of England to comply with cash ratio
requirements;
B is the percentage rate per annum at which sterling deposits are
offered by the Facility Agent in accordance with its normal
practice, for a period equal to (a) the relevant Term (or, as the
case may be, remainder of such Term in respect of the relevant
Advance) or (b) three months, whichever is the shorter, to a
leading bank in the London Interbank Market at about 11.00 a.m. in
a sum approximately equal to the amount of such Advance;
C is the percentage of eligible liabilities which the Facility Agent
is required from time to time to maintain as interest bearing
special deposits with the Bank of England;
D is the percentage rate per annum payable by the Bank of England to
the Facility Agent on interest bearing special deposits; and
E is the rate payable by the Facility Agent to the Financial
Services Authority pursuant to the Fees Regulations (but, for this
purpose, the figure at paragraph 2.03b of the Fees Regulations
shall be deemed to be zero) and expressed in pounds per
(Pounds)1,000,000 of the Fee Base of the Agent.
2. For the Purpose of this Schedule:
(a) "eligible liabilities" and "special deposits" shall bear the
meanings as ascribed to them from time to time under or pursuant
to the Bank of England Act 1988 or (as appropriate) by the Bank of
England;
200
<PAGE>
(b) "Fee Regulations" means the Banking Supervision (Fees) Regulations
1998 or such other regulations as may be in force from time to
time in respect of the payment of fees for banking supervision;
and
(c) "Fee Base" shall bear the meaning ascribed to it, and shall be
calculated in accordance with, the Fees Regulations.
3. The percentage used in A and C above shall be those required to be
maintained on the first day of the relevant period as determined in
accordance with B above.
4. In application of the above formula, A, B, C and D will be included in the
formula as figures and not as percentages e.g. if A is 0.5 per cent. and B
is 12 per cent., AB will be calculated as 0.5 x 12 and not as 0.5 per cent.
x 12 per cent.
5. Calculations will be made on the basis of a 365 day year (or, if market
practice differs, in accordance with market practice).
6. A negative result obtained by subtracting D from B shall be taken as zero.
7. The resulting figures shall be rounded upwards, if not already such a
multiple, to the nearest whole multiple of one-thirty-second of one per
cent. per annum.
8. Additional amounts calculated in accordance with this Schedule are payable
on the last day of the Term to which they relate.
9. The determination of the Additional Costs by the Facility Agent in relation
to any period shall, in the absence of manifest error, be conclusive and
binding on all of the parties hereto.
10. The Facility Agent may from time to time, after consultation with the
Borrower and the Banks, determine and notify to all parties any amendments
or variations which are required to be made to the formula set out above in
order to comply with any requirements from time to time imposed by the Bank
of England or the Financial Services Authority (or any other authority which
replaces all or any of their functions) in relation to Advances (including
any requirements relating to sterling primary liquidity) and, any such
determination shall, in the absence of manifest error, be conclusive and
binding on all the parties hereto.
201
<PAGE>
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) [NB. ONLY INCLUDE IF THE CERTIFICATE RELATES TO PERIOD OCCURRING
AFTER 31 DECEMBER 1999] 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 [ ]; [and]
(g) [NB. ONLY INCLUDE IF THE CERTIFICATE IS IN RESPECT OF A PERIOD
PRIOR TO OR INCLUSIVE OF 31 DECEMBER 1999] The aggregate
Financial Indebtedness of the Group was [ ].
202
<PAGE>
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;
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
203
<PAGE>
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
Englebert Wiener Bike Parts GmbH
Univega Worldwide GmbH
Univega Beteiligungen GmbH
Univega Bikes & Sports Europe GmbH (formerly 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.
The British Cycle Corporation Limited
Derby Investment Holding (Pty) Limited
Pro Bike South Africa (Pty) Limited
204
<PAGE>
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.
205
<PAGE>
PREVIOUS SCHEDULE 13 (FORM OF BANK ACCESSION NOTICE) DELETED AS IT RELATED
SOLELY TO THE POTENTIAL INCREASE IN THE FACILITY AMOUNT.
206
<PAGE>
SCHEDULE 13
NOMINEE NOTICE
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 NOTICE ("NOMINEE NOTICE") relates to a facility agreement as amended by an
Amendment Agreement dated [ ] (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 12
May 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 DM214,000,000 and to the
Intercreditor Agreements 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. The Nominated Affiliate hereby requests the Obligors, the Arranger, the
Banks and the Agents and the other parties to the Intercreditor Agreement
to accept this duly executed Nominee Notice as being delivered pursuant
to Clause 7.3 of the Facility Agreement for the purposes of permitting it
to discharge the Nominating Banks' obligations under the Facility
Agreement to provide an Ancillary Facility.
2. AGREEMENTS, CONFIRMATIONS AND REPRESENTATIONS
2.1 The Nominated Affiliate hereby:
2.1.1 confirms that it has received a copy of the Facility
Agreement and the Intercreditor Agreements, together with
such other documents and information as it has required in
connection herewith and therewith;
2.1.2 agrees to become, with effect from the date of delivery of
this Nominee Notice, an Ancillary Bank under the Facility
Agreement, and a Bank under the Intercreditor Agreements,
agrees to be bound in that capacity with effect from such
date by the terms of the Facility Agreement and the
Intercreditor Agreements and undertakes accordingly to
perform its obligations as a Bank thereunder;
2.1.3 confirms the accuracy of the information set out under its
name at the end of this Nominee Notice;
207
<PAGE>
2.1.4 confirms that 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 Agreements or any other document referred to
therein or the accuracy or completeness of any such
information as is referred to in paragraph 2.1.1 above or
the creditworthiness, affairs, condition or status of any
of the parties to the Facility Agreement, the Intercreditor
Agreements or any such other document.
2.2 The Borrower(s), the Guarantor(s), the Arranger, the Facility Agent,
the Security Agent, the Banks and the parties to the Intercreditor
Agreements hereby agree amongst themselves and with the Ancillary
Bank that the Ancillary Bank shall become party to the Facility
Agreement and the Intercreditor Agreements with effect from the
date of this Accession Agreement.
3. LAW
This Nominee Notice shall be governed by and construed in accordance with
English law.
IN WITNESS WHEREOF the parties hereto have caused this Nominee Notice to be duly
executed on the date first written above.
SIGNATURES
NOMINATED AFFILIATE:
[ ]
<TABLE>
<CAPTION>
FACILITY AGENT:
<S> <C>
CHASE MANHATTAN INTERNATIONAL )
LIMITED for itself and as the Facility )
Agent and Security Agent for and on )
behalf of the Arranger and the Banks )
<CAPTION>
By:
OBLIGORS' AGENT
<S> <C>
DERBY CYCLE CORPORATION )
for itself as the Company )
and for and on behalf of each of the )
Borrowers and Guarantors )
</TABLE>
208
<PAGE>
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:
<TABLE>
<CAPTION>
DOCUMENT OBLIGOR GIVING SECURITY
-------- -----------------------
<S> <C>
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_%) The Derby Cycle Corporation
(ii) Derby Holding BV (66_%)
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
</TABLE>
209
<PAGE>
<TABLE>
<CAPTION>
2. CANADA
------
<S> <C>
(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%)
(c) US PATENT ASSIGNMENT FOR SECURITY The Derby Cycle Corporation
PURPOSES
(d) US PATENT AND TRADEMARK SECURITY The Derby Cycle Corporation
AGREEMENT
(e) US AMENDMENT TO SECURITY AGREEMENT The Derby Cycle Corporation
(f) US AMENDMENT TO PATENT AND TRADEMARK The Derby Cycle Corporation
SECURITY AGREEMENT
(g) US PATENT ASSIGNMENT FOR SECURITY The Derby Cycle Corporation
PURPOSES
</TABLE>
210
<PAGE>
<TABLE>
<S> <C>
(h) Leasehold Deed of Trust The Derby Cycle Corporation
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
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%)
(c) IRISH SUPPLEMENTAL DEED Raleigh Ireland Limited
Curragh Finance Company
7. GERMANY
-------
(a) SECURITY AGREEMENTS WITH FOLLOW UP Derby Cycle Werke GmbH
ASSIGNMENTS Englebert Wiener Bike-Parts GmbH
(each Obligor will enter into a Raleigh Fahrrader GmbH
separate document): Winora Staiger GmbH
Univega Bikes & Sports Europe GmbH
(formerly MS Sport Vertriebs GmbH)
Derby Fahrrader GmbH
</TABLE>
211
<PAGE>
<TABLE>
<S> <C>
(b) DEEDS OF ASSIGNMENT IN RESPECT OF Derby Cycle Werke GmbH
TANGIBLE MOVEABLE PROPERTY: Englebert Wiener 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 Englebert Wiener 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
Englebert Wiener Bike Parts GmbH
Univega Bikes & Sports Europe GmbH
(formerly MS Sport Vertriebs GmbH)
Derby Fahrrader GmbH
(e) INTELLECTUAL PROPERTY PLEDGE: Derby Cycle Werke GmbH
(each Obligor will enter into a Univega Bikes & Sports Europe GmbH
separate document): (formerly MS Sport Vertriebs GmbH)
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
Englebert Wiener Bike Parts GmbH
Univega Bikes & Sports Europe GmbH
(formerly MS Sport Vertriebs 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
Englebert Wiener Bike Parts GmbH
Univega Bikes & Sports Europe GmbH
(formerly MS Sport Vertriebs GmbH)
Winora-Staiger GmbH
</TABLE>
212
<PAGE>
<TABLE>
<S> <C>
(h) GERMAN AMENDMENT AGREEMENT: Univega Worldwide Licence GmbH
Winora-Staiger GmbH
Derby Holding (Deutschland) GmbH
Englebert Wiener Bike Parts GmbH
Univega Bikes & Sports Europe GmbH
(formerly MS Sport Vertriebs GmbH)
(i) BLANKET ASSIGNMENTS Univega Worldwide Licence GmbH
NW Sportgerate Vertriebs GmbH
(j) 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 Licence GmbH
Derby Cycle Werke GmbH Raleigh Fahrrader GmbH
Winora-Staiger GmbH Derby Vermogensverwaltungs
Gesellschaft GmbH
(i) Univega Bike & Sports Europe GmbH
(formerly MS Sport Vertriebs GmbH) Univega Beteiligungen GmbH
(ii) MS Sport AG
Engelbert Wiener Bike-Parts GmbH Lyon Investments BV
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
</TABLE>
213
<PAGE>
<TABLE>
<S> <C>
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 (66 2/3) The Derby Cycle Corporation
Various Raleigh (Services) Limited
9. SWEDEN
------
(a) Swedish Law Pledge over Shares in
the following Company:
Derby Sweden AB The Derby Cycle Corporation
(b) Derby Sweden AB
Floating Charge
(c) Pledge over Patents and Derby Sweden AB
Trademarks
</TABLE>
214
<PAGE>
THE DERBY CYCLE CORPORATION
By:
THE OTHER BORROWERS
RALEIGH INDUSTRIES LIMITED
By:
STURMEY-ARCHER LIMITED
By:
DERBY HOLDING (DEUTSCHLAND) GMBH
By:
KONINKLIJKE GAZELLE BV
By:
RALEIGH INDUSTRIES OF CANADA LIMITED
By:
RALEIGH EUROPE B.V.
By:
215
<PAGE>
RALEIGH B.V.
By:
ENGLEBERT WIENER BIKE PARTS GMBH
By:
WINORA-STAIGER GMBH
By:
DERBY HOLDING LIMITED
By:
RALEIGH FAHRRADER GMBH
By:
DERBY CYCLE WERKE GMBH
By:
RALEIGH INTERNATIONAL LIMITED
By:
CURRAGH FINANCE COMPANY
By:
216
<PAGE>
RALEIGH IRELAND LIMITED
By:
THE GUARANTORS
DERBY HOLDING LIMITED
By:
RALEIGH INDUSTRIES LIMITED
By:
RALEIGH INTERNATIONAL LIMITED
By:
STURMEY ARCHER LIMITED
By:
RALEIGH INDUSTRIES OF CANADA LIMITED
By:
THE DERBY CYCLE CORPORATION
By:
217
<PAGE>
RALEIGH BV
By:
RALEIGH EUROPE BV
By:
KONINKLIJKE GAZELLE BV
By:
DERBY NEDERLAND BV
By:
DERBY HOLDING BV
By:
STURMEY ARCHER EUROPA B.V.
By:
LYON INVESTMENTS BV
By:
DERBY HOLDING (DEUTSCHLAND) GMBH
By:
218
<PAGE>
RALEIGH FAHRRADER GMBH
By:
NW SPORTGERATE GMBH
By:
DERBY CYCLE WERKE GMBH
By:
ENGLEBERT WIENER BIKE PARTS GMBH
By:
UNIVEGA WORLDWIDE LICENCE GMBH
By:
UNIVEGA BETEILIGUNGEN GMBH
By:
UNIVEGA BIKER & SPORTS EUROPE GmbH
(formerly MS SPORT VERTRIEBS GMBH)
By:
219
<PAGE>
DERBY FAHRRADER GMBH
By:
DERBY WS VERMOGENSWERWALTUNGS GMBH
By:
WINORA-STAIGER GMBH
By:
CURRAGH FINANCE COMPANY
By:
RALEIGH IRELAND LIMITED
By:
INTER-DERBY GROUP FINANCE B.V.
By:
THE BRITISH CYCLE CORPORATION LIMITED
By:
BSA CYCLES LIMITED
By:
220
<PAGE>
TRIUMPH CYCLE CO. LIMITED
By:
RALEIGH (SERVICES) LIMITED
By:
The Banks
THE CHASE MANHATTAN BANK
By:
ABN AMRO BANK N.V.
By:
SCOTIABANK EUROPE PLC
By:
DRESDNER BANK AG, GRAND CAYMAN BRANCH
By:
221
<PAGE>
BANK OF SCOTLAND
By:
MIDLAND BANK PLC
By:
LLOYDS BANK PLC
By:
THE SUMITOMO BANK, LIMITED
By:
BHF - BANK AG
By:
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By:
SAO PAOLO IMI SPA
By:
222
<PAGE>
KREDIETBANK (NEDERLAND) N.V.
By:
BANQUE NATIONALE DE PARIS
By:
THE GOVERNOR AND COMPANY OF
THE BANK OF IRELAND
By:
OLDENBURGISCHE LANDESBANK AG
By:
THE BANK OF NOVA SCOTIA
By:
THE FACILITY AGENT
CHASE MANHATTAN INTERNATIONAL LIMITED
By:
THE SECURITY AGENT
CHASE MANHATTAN INTERNATIONAL LIMITED
By:
223
<PAGE>
The Arranger
CHASE MANHATTAN plc
By:
224
<PAGE>
EXHIBIT 10.15
================================================================================
SENIOR SUBORDINATED LOAN AGREEMENT
DATED AS OF
February 3, 1999
BETWEEN
THE DERBY CYCLE CORPORATION
AND
VENCAP HOLDINGS (1992) PTE LTD.
================================================================================
<PAGE>
SENIOR SUBORDINATED LOAN AGREEMENT
----------------------------------
This SENIOR SUBORDINATED LOAN AGREEMENT (this "Agreement") is entered
into as of this third day of February 1999, by and between the Derby Cycle
Corporation, a Delaware corporation ("Borrower"), and Vencap Holdings (1992) Pte
Ltd. ("Lender"), a Singapore corporation.
BACKGROUND
----------
WHEREAS, Diamond Back International Company Limited, a British Virgin
Islands corporation ("Diamond Back"), Western States Import Company, Inc., a
California corporation ("Western States"), Bejka Trading, A.B., a Swedish
corporation ("Bejka," and together with Diamond Back and Western States, the
"Vendors"), Borrower, and Derby Sweden A.B., a Swedish corporation which is
wholly-owned by Borrower ("Derby Sweden," and together with Borrower, the
"Purchasers"), entered into an Agreement Relating to the Sale and Purchase of
Certain of the Business Assets of Vendors, dated December 8, 1998 (the
"Acquisition Agreement") pursuant to which Purchasers agreed to purchase from
Vendors and Vendors agreed to sell to Purchasers, certain of the assets of
Vendors.
WHEREAS, Lender desires to make a loan to Borrower, and Borrower
desires to borrow from Lender, for the purposes of financing the purchase of the
assets of Vendors pursuant to the Acquisition Agreement.
AGREEMENT
---------
NOW, THEREFORE, Borrower and Lender hereby agree as follows:
<PAGE>
SECTION 1
---------
DEFINITIONS
-----------
1.1. Certain Defined Terms. The following terms used in this Agreement
---------------------
have the following meanings:
"Accountant's Report" means (i) the audited consolidated balance sheet
-------------------
of Borrower and Borrower's Affiliated Companies and the related statements of
income and cash flows for the fiscal year ending December 31, 1997, and (ii) the
September 27, 1998 unaudited balance sheet of Borrower and Borrower's Affiliated
Companies and the related statements of income and cash flows for the nine-month
period ending September 27, 1998.
"Acquisition" means the acquisition of certain of Vendors' assets by
-----------
Purchasers pursuant to the Acquisition Agreement.
"Acquisition Agreement" means the Agreement between Vendors and
---------------------
Purchasers relating to the sale and purchase of certain of the business assets
and rights, and the assumption of certain liabilities, involved in the bicycle,
parts and accessories and fitness equipment distribution business carried on
under the principal trade name "Diamondback" dated December 8, 1998.
"Act" means the Securities Act of 1933, as amended from time to time,
---
or any successor statute.
"Affiliate" means, as to any Person, any other Person which directly
---------
or indirectly controls, or is under common control with, or is controlled by,
such Person. As used in this definition, "control" (including, with its
correlative meanings, "controlled by" and "under
3
<PAGE>
common control with") means possession, directly or indirectly, of power to
direct or cause the direction of management or policies (whether through
ownership of securities, or partnership or other ownership interests, by
contract or otherwise); provided that, in any event, any Person which owns
-------------
directly or indirectly five percent (5%) or more of the securities having
ordinary voting power for the election of directors or other members of the
governing body of a corporation or five percent (5%) or more of the partnership
or other ownership interests of any other Person (other than as a limited
partner of such other Person) will be deemed to control such corporation or
other Person.
"Affiliated Companies" means Borrower's Subsidiaries.
--------------------
"Agreement" means this Senior Subordinated Loan Agreement, as it may
---------
be amended from time to time.
"Bankruptcy Code" means the Bankruptcy Reform Act, Title 11 of the
---------------
United States Code, as amended or recodified from time to time, or any successor
statute.
"Board" means the Board of Governors of the Federal Reserve System.
-----
"Borrower" has the meaning set forth in the first paragraph of this
--------
Agreement.
"Business" means the business of Borrower and its Affiliated Companies
--------
as conducted immediately prior to the Closing Date.
"Business Day" means any day on which commercial banks in Singapore,
------------
London, New York, and Washington D.C. are required to be open for business.
4
<PAGE>
"Capital Lease" as applied to any Person, means any lease of any
-------------
property (real, personal or mixed) by that Person as lessee which, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Change of Control" has the same meaning as the term "Change of
-----------------
Control" as such term is defined in the Indenture Agreements.
"Closing Date" means the date hereof.
------------
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time, or any successor statute.
"Competitor" means any Person, business entity or enterprise which
----------
engages in or proposes to engage in the service, manufacture, merchandising,
distribution or sale of the services, products or goods that Borrower and
Borrower's Affiliated Companies manufacture, merchandise, distribute or sell.
"Debt Instruments" has the meaning set forth in Section 3.2.22.
----------------
"DM Senior Notes" means the 93/8% Senior Notes due May 14, 2008 in an
---------------
original principal amount equal to DM 110,000,000 issued by Borrower and Lyon
pursuant to the Indenture dated as of May 14, 1998 by and among Borrower, Lyon
and IBJ Schroder Bank and Trust Company, as Trustee.
"Dollars" and "$" mean the lawful money of the United States of
-------
America.
5
<PAGE>
"EBITDA" has the same meaning as the term "Consolidated Adjusted
------
EBITDA, as such term is defined in the Senior Credit Facility, as in effect
after being amended on or about the date hereof.
"Environmental Damages" means all claims, judgments, damages, losses,
---------------------
penalties, fines, liabilities (including strict liability), encumbrances, liens,
costs, and expenses of investigation and defense of any claim, whether or not
such claim is ultimately defeated, and of any good faith settlement of judgment,
of whatever kind or nature, contingent or otherwise, matured or unmatured,
foreseeable or unforeseeable, including without limitation reasonable attorneys'
fees and disbursements and consultants' fees, any of which are incurred at any
time as a result of the existence of Hazardous Material upon, about, beneath,
any properties owned, leased or operated by Borrower or any of its Affiliated
Companies or migrating or threatening to migrate to or from such properties, or
the existence of a violation of any Environmental and Safety Laws pertaining to
such properties, regardless of whether the existence of such Hazardous Material
or the violation of Environmental and Safety Laws arose prior to the present
ownership or operation of such properties.
"Environmental and Safety Laws" means any and all applicable current
-----------------------------
and future treaties, laws, statutes, regulations, enforceable requirements,
binding determinations, orders, decrees, judgments, injunctions, permits,
approvals, authorizations, licenses, permissions, notices or binding agreements
issued, promulgated or entered by any Governmental Authority, relating to the
environment, to employee health or safety, to preservation or reclamation of
natural resources, or to the management, release or threatened release of
contaminants or noxious odors, including, in the case of Persons subject to the
laws of the United States, the Hazardous Materials Transportation Act, the
Comprehensive Environmental Response, Compensation and Liability
6
<PAGE>
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986 ("CERCLA"), the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendments
of 1984, the Federal Water Pollution Control Act, as amended by the Clean Water
Act of 1977, the Clean Air Act of 1970, as amended by the Clean Air Act
Amendments of 1990, the Toxic Substances Control Act of 1976, the Occupational
Safety and Health Act of 1970, as amended, the Emergency Planning and Community
Right-to-Know Act of 1986, the Safe Drinking Water Act of 1974, as amended, and
any similar or implementing state law, and all amendments or regulations
promulgated thereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, or any successor statute.
"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 Borrower or any of
Borrower's Material Affiliated Companies which are domiciled in the United
States within the meaning of Section 414(b), (c), (m) or (o) of the Code and the
regulations promulgated under those sections, or within the meaning of Section
4001(b) of ERISA.
"Events of Default" means each of the events set forth in Section 5.1.
-----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Financial Statements" means (i) the audited consolidated balance
--------------------
sheet of Borrower and Borrower's Affiliated Companies and the related statements
of income and cash
7
<PAGE>
flows for the fiscal year ending December 31, 1997, and (ii) the September 27,
1998 unaudited balance sheet of Borrower and Borrower's Affiliated Companies and
the related statements of income and cash flows for the nine-month period ending
September 27, 1998.
"Fiscal Year" means the fiscal year of Borrower, which shall be the
-----------
twelve-month period ending on the last day in the month of December.
"GAAP" means generally accepted accounting principles and practices,
----
consistently applied, as promulgated in (i) the documents of Rule 203 of the
Code of Professional Conduct of the American Institute of Certified Public
Accountants, (ii) Statement of Accounting Standards No. 43 "Omnibus Statement on
Auditing Standards" of the Auditing Standards Board of the American Institute of
Certified Public Accountants and (iii) any superseding or supplemental
documentation of equal authority promulgating generally accepted accounting
principles and practices, all as in effect from time to time. Accounting
principles and practices are "consistently applied" when the accounting
principles and practices observed in a current period are comparable in all
material respects to the accounting principles and practices applied in the
preceding period.
"Governmental Authority" means any Federal, foreign, regional,
----------------------
territorial, state, or local court or governmental agency, authority,
commission, department, board, bureau, instrumentality or regulatory body,
including any central bank or comparable agency.
"Guaranteed Indebtedness" of any Person means all Indebtedness (x) of
-----------------------
any Person other than such Person and either (y) guaranteed directly or
indirectly in any manner by such Person, or in effect guaranteed directly or
indirectly by such Person through an agreement (a) to pay or purchase such
Indebtedness or to advance or supply funds for the payment or
8
<PAGE>
purchase of such Indebtedness, (b) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Indebtedness or to assure the holder
of such Indebtedness against loss, (c) to supply funds to or in any other manner
invest in the debtor (including any agreement to pay for property or services
irrespective of whether or not such property is received or such services are
rendered and any agreement to maintain working capital or other balance sheet
condition) or (d) otherwise to assure the holder of such Indebtedness against
loss, or (z) secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any lien, security
interest or other charge or encumbrance upon or in property (including without
limitation accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness.
"Hazardous Material" means any substance:
------------------
(a) the presence of which requires investigation or
remediation under any Environmental and Safety Law; or
(b) which is or becomes defined as a "hazardous waste,"
"hazardous substance," pollutant or contaminant under any Environmental and
Safety Law or which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic, or otherwise hazardous and is or becomes
regulated by any Governmental Authority; or
(c) the presence of which on any properties which Borrower
owns, leases or operates causes or threatens to cause a nuisance upon such
properties or to adjacent properties or poses or threatens to pose a hazard to
the health or safety of persons on or about such properties; or
9
<PAGE>
(d) the presence of which on adjacent properties could
constitute a trespass by Borrower; or
(e) without limitation which contains gasoline, diesel fuel
or other petroleum hydrocarbons.
"Indebtedness" means, for any Person, (i) all indebtedness or other
------------
obligations of such Person for borrowed money or for the deferred purchase price
of property or services, (ii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (iii) all obligations under leases which shall have
been or should be, in accordance with GAAP, recorded as Capital Leases in
respect of which such Person is liable as lessee, (iv) liabilities in respect of
unfunded accrued benefits under any Pension Plan, (v) all obligations owed
pursuant to any interest rate hedging arrangement or in respect of any letter of
credit established for the account of such Person (including without limitation
all obligations to reimburse the issuer thereof in respect of amounts drawn
thereunder), and (vi) all Guaranteed Indebtedness.
"Indenture Agreements" means (a) the Indenture governing the DM Senior
--------------------
Notes dated as of May 14, 1998 by and among Borrower, Lyon and IBJ Schroder Bank
and Trust Company, as Trustee; and (b) the Indenture governing the U.S. Senior
Notes dated as of May 14, 1998 by and among Borrower, Lyon and IBJ Schroder Bank
and Trust Company, as Trustee.
"Lender" has the meanings set forth in the first paragraph of this
------
Agreement.
10
<PAGE>
"Liabilities" means obligations of any nature, whether absolute,
-----------
accrued, contingent or otherwise, whether due or to become due and whether or
not required to be reflected or reserved against on a balance sheet under GAAP,
including without limitation, in the case of Borrower or any of its Affiliated
Companies, obligations arising from or in connection with the operation of the
Business prior to the consummation of the Acquisition, for which Borrower or any
of its Affiliated Companies could be liable after the consummation of the
Acquisition.
"Lien" means any mortgage, pledge, security interest, encumbrance,
----
lien or charge of any kind, whether voluntary or involuntary, including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of, or agreement to give, any financing statement under
the Uniform Commercial Code of any jurisdiction.
"Loan" means the total amount advanced by Lender to Borrower pursuant
----
to Section 2.1.
"Loan Documents" means this Agreement, the Senior Subordinated Notes,
--------------
and the Subordination Agreement.
"Lyon" means Lyon Investments B.V., a company organized under the laws
----
of the Netherlands, and a wholly-owned subsidiary of Borrower.
"Mandatory Prepayment Premium" has the meaning set forth in Section
----------------------------
2.4.2.1.
"Material Affiliated Companies" means the Subsidiaries of Borrower who
-----------------------------
are "Material Group Members" as such term is defined in the Senior Credit
Facility, as in effect as of the Closing Date.
11
<PAGE>
"Material Agreements" means the Loan Documents, the Senior Credit
-------------------
Facility and the Senior Notes.
"Multiemployer Plan" has the meaning set forth in Section 3.2.15.
------------------
"Obligations" means all obligations of every nature of Borrower from
-----------
time to time owed to Lender under any of the Loan Documents, including, without
limitation, all obligations of Borrower under this Agreement and the Senior
Subordinated Notes.
"Optional Prepayment Premium" has the meaning set forth in
---------------------------
Section 2.5.1.1.
"Pension Plan" means any employee pension plan (other than a
------------
Multiemployer Plan) subject to the provisions of Section 302 of ERISA or Section
412 of the Code.
"Permitted Holders" means Thayer and Perseus and their respective
-----------------
Affiliates, Persons who are beneficial owners, directly or indirectly, of Thayer
or Perseus and their respective Affiliates, and any investment fund managed by
Perseus Capital, L.L.C. or Thayer Capital Partners.
"Perseus" means Perseus Cycle, L.L.C., a Delaware limited liability
-------
company.
"Person" means and includes natural persons, corporations, limited
------
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts and other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"PIK Notes" has the meaning set forth in Section 2.3.2.
---------
12
<PAGE>
"Plan" means any employee pension benefit plan (other than a
----
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which Borrower or any
ERISA Affiliate is (or, if such plan were terminated, would under Section 4069
of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Potential Default" means any condition, event or act which, with the
-----------------
giving of notice, passage of time or both, would constitute an Event of Default.
"Prepayment Price" has the meaning set forth in Section 2.5.1.
----------------
"Primary Affiliated Companies" means each of the following
----------------------------
Subsidiaries of Borrower: Derby Holding Limited, a corporation formed under the
laws of England and Wales; Derby Cycle Werke GmbH, a corporation formed under
the laws of the Federal Republic of Germany; Koninklijke Gazelle BV, a
corporation formed under the laws of the Netherlands; Raleigh Industries of
Canada Limited, a corporation formed under the laws of Canada; and Probike S.A.
(Pty) Ltd., a corporation formed under the laws of South Africa.
"Purchasers" means Borrower and Derby Sweden, A.B., a Swedish
----------
corporation.
"Senior Credit Facility" means the Credit Agreement dated as of May
----------------------
12, 1998, as amended from time to time, by and among Borrower and certain of its
Subsidiaries and Chase Manhattan plc as Arranger, Chase Manhattan International
Limited, as both Facility Agent and Security Agent, and the financial
institutions named therein as banks.
"Senior Indebtedness" means any Indebtedness of Borrower or any of its
-------------------
Affiliated Companies, including, without limitation, the indebtedness of
13
<PAGE>
Borrower evidenced by the Senior Credit Facility and the Senior Notes, and any
refinancing, replacement, extension or modification of the Senior Credit
Facility or Senior Notes; provided that, indebtedness which is subordinated
-------- ----
explicitly by its terms to the Senior Subordinated Debt shall not be deemed
Senior Indebtedness.
"Senior Notes" means the DM Senior Notes and the U.S. Senior Notes.
------------
"Senior Subordinated Debt" means the Indebtedness of Borrower created
------------------------
pursuant to this Agreement, including the principal amount of the Senior
Subordinated Notes, and any interest and premium payable thereon.
"Senior Subordinated Notes" means any promissory notes evidencing all
-------------------------
or any part of the Senior Subordinated Debt, including the notes to be issued by
Borrower to Lender on the Closing Date in the aggregate principal amount of
Twenty Million Dollars ($20,000,000), any PIK Notes issued in satisfaction of
interest due on the Senior Subordinated Debt pursuant to Section 2.3.2 of this
Agreement, and any note or notes subsequently issued in place of such notes.
"Solvent" means, when used with respect to any Person, that: (a) the
-------
fair valuation of all of its property is in excess of the total amount of its
debts (including contingent liabilities as properly valued) as of the date
solvency is determined under the Bankruptcy Code or any applicable enactment of
the Uniform Fraudulent Transfer Act or similar statute; (b) the present fair
salable value of all of its property is more than the amount that will be
required to pay the Person's existing debts (including contingent liabilities
as properly valued) as they become absolute and matured, as determined in
accordance with any applicable enactment of the Uniform Fraudulent Conveyance
Act or similar statute; (c) it does not intend to incur, nor believe
14
<PAGE>
that it will incur, nor reasonably should believe that it will incur, debts
beyond its ability to pay as they mature, as determined in accordance with the
Bankruptcy Code, any applicable enactment of the Uniform Fraudulent Conveyance
Act, any applicable enactment of the Uniform Fraudulent Transfer Act or any
similar statute; and (d) is not engaged in a business or a transaction or about
to be engaged in a business or a transaction for which its property constitutes
(i) unreasonably small capital, for purposes of the Bankruptcy Code and any
applicable enactment of the Uniform Fraudulent Conveyance Act, or similar
statute, or (ii) unreasonably small assets, for purposes of any applicable
enactment of the Uniform Fraudulent Transfer Act, or similar statute.
"Stockholders Agreement" means the Agreement of Stockholders of the
----------------------
Derby Cycle Corporation, of even date herewith, by and among Lender, Thayer and
Perseus.
"Subordination Agreement" means the Subordination Deed of a date on or
-----------------------
about the date hereof by and among Chase Manhattan International Limited, Lender
and Borrower.
"Subsidiary" of any Person means a corporation of which more than
----------
fifty percent (50%) of the outstanding shares of capital stock of each class
having ordinary voting power is owned by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more of its
Subsidiaries.
"Thayer" means DC Cycle, L.L.C., a Delaware limited liability company.
------
"Transfer" means the sale, pledge, assignment or other transfer of the
--------
Senior Subordinated Notes, in whole or in part, and of the rights of the holders
thereof under the Senior Subordinated Notes and this Agreement.
15
<PAGE>
"Transfer Notice" shall have the meaning set forth in Section 6.1.1.1.
---------------
"U.S. Senior Notes" means the 10% Senior Notes due May 14, 2008 in an
-----------------
original principal amount equal to US $100,000,000 issued by Borrower and Lyon
pursuant to the Indenture dated as of May 14, 1998 by and among Borrower, Lyon
and IBJ Schroder Bank and Trust Company, as Trustee.
"Vendors" means Diamond Back International Company Limited, a British
-------
Virgin Islands corporation, Western States Import Company, a California
corporation, and Bejka Trading, A.B., a Swedish corporation.
1.2. Accounting Terms. For purposes of this Agreement, all accounting
----------------
terms not otherwise defined herein have the meanings assigned to them in
conformity with GAAP.
1.3. Other Definitional Provisions. Unless the context of this Agreement
-----------------------------
clearly requires otherwise, references to the plural include the singular, to
the singular include the plural, and to the part include the whole. The term
"including" is not limiting and the term "or" has the inclusive meaning
represented by the term "and/or." The words "hereof," "herein," "hereunder,"
and similar terms in this Agreement refer to this Agreement as a whole and not
to any particular provision of this Agreement. References to "Sections",
"Exhibits" and "Schedules" are to Sections, Exhibits and Schedules,
respectively, of this Agreement, unless otherwise specifically provided. Terms
defined herein may be used in the singular or the plural.
16
<PAGE>
SECTION 2
---------
THE LOAN
--------
2.1. The Loan. Lender agrees to make a term loan to Borrower on the
--------
Closing Date, upon the terms and conditions of this Agreement, of Twenty
Million Dollars ($20,000,000). The amount of the Loan shall be disbursed to
Borrower on the Closing Date, less any fees and expenses payable by Borrower
pursuant to Section 6.4 of this Agreement to the extent not otherwise paid by
Borrower. The amount of the Loan shall be deemed received by Borrower when
such amount has been wire transferred in accordance with instructions provided
by Borrower and Lender has provided Borrower with a FedWire identification
number with respect to such wire transfer.
2.2. The Senior Subordinated Notes
-----------------------------
2.2.1. Form of Notes. Borrower's obligation to repay the Loan shall
-------------
be evidenced by a Senior Subordinated Note or Notes in substantially the form
of Exhibit A, such note or notes in an aggregate in the principal amount of
---------
Twenty Million Dollars ($20,000,000.00), registered in the name of the Vencap
Holdings (1992) Pte Ltd.
2.3. Interest
--------
2.3.1. Interest Rate. The Senior Subordinated Notes shall bear
-------------
interest at a rate of nineteen percent (19%) per annum, compounded daily, for
an annual effective yield of twenty and nine-tenths percent (20.9%). Interest
on the amount of the Loan outstanding from time to time shall be computed on
the basis of a 360-day year, actual days elapsed, from the date of disbursement
until repayment.
2.3.2. Interest Payments. The payment of interest on the outstanding
-----------------
principal amount of the Senior Subordinated Notes shall be due and payable
17
<PAGE>
annually by Borrower to Lender in arrears on the first Business Day of each
calendar year, with the first such payment to be made on January 3, 2000, at
the place specified in the Senior Subordinated Notes. Payment of interest
shall be made, at Borrower's sole option, either (i) by payment of cash;
(ii) by issuance of additional Senior Subordinated Notes (the "PIK Notes"),
with the principal amount of the PIK Notes issued on such date equal to the
interest due on the date the interest payment is due. PIK Notes issued
pursuant to this Section 2.3.2 shall bear the same terms as the Senior
Subordinated Notes, and shall be subject to the terms and conditions set forth
in this Agreement for the Senior Subordinated Notes; or (iii) as otherwise
agreed in writing by Lender and Borrower. To the extent that Borrower elects
to make interest payments in cash, Borrower shall pay each such cash interest
payment by wire transfer in immediately available funds.
If, in connection with interest payments required to be made pursuant
to this Section 2.3, payments of such interest are not made in cash, by the
issuance of PIK Notes, or as otherwise agreed by Lender and Borrower in writing
pursuant to the terms of this Section 2.3, the principal amount of the Senior
Subordinated Note or Senior Subordinated Notes issued on the Closing Date shall
be deemed increased on the date such PIK Notes were scheduled to be issued under
this Section 2.3., by the principal amount of the PIK Notes that were required
to be issued pursuant to this Section 2.3 but which were not so issued. Such
increased principal amount of the Senior Subordinated Note or Senior
Subordinated Notes issued on the Closing Date shall bear interest as provided in
this Section 2.3.
2.4. Mandatory Repayment
-------------------
2.4.1. Scheduled Repayment. Borrower shall repay the original
-------------------
principal amount of the Senior Subordinated Notes then outstanding plus
18
<PAGE>
accrued but unpaid interest thereon at maturity on February 3, 2009. Payment
hereunder shall be paid by wire transfer in immediately available funds.
2.4.2. Mandatory Prepayment. Notwithstanding the provisions of
--------------------
Section 2.4.1, all outstanding principal and interest relating to the Senior
Subordinated Notes shall be due and payable (together with the Mandatory
Prepayment Premium, as defined in Section 2.4.2.1 below,) within one hundred
and ninety (190) days after the occurrence of a Change of Control.
2.4.2.1. Mandatory Prepayment Premium. In the event that
----------------------------
the Senior Subordinated Notes are prepaid due to the occurrence of a Change of
Control pursuant to Section 2.4.2, the outstanding principal amount of the
Senior Subordinated Notes (plus accrued but unpaid interest) shall be repaid by
Borrower plus a premium equal to a percentage of the outstanding principal
amount of the Senior Subordinated Notes as follows: (the "Mandatory Prepayment
Premium"):
<TABLE>
<CAPTION>
Change of Control Date Percentage
- ---------------------- ----------
<S> <C>
Through February 3, 2001: 3%
After February 3, 2001 through February 3, 2002: 2%
After February 3, 2002 through February 3, 2003: 1%
After February 3, 2003: 0%
</TABLE>
2.5. Optional Prepayment
-------------------
2.5.1. On or After First Anniversary. After the first anniversary
-----------------------------
of the Closing Date, Borrower may, at its sole option, prepay all or any
portion of the outstanding principal amount of the Senior Subordinated Notes
(plus accrued but unpaid interest), in integral multiples of the lesser of Five
Hundred Thousand Dollars ($500,000) or the entire principal amount then
19
<PAGE>
outstanding of the Senior Subordinated Notes, upon payment of the Optional
Prepayment Premium set forth in Section 2.5.1.1 and compliance with the
provisions of this Section 2.5. Upon such prepayment of the Senior Subordinated
Notes, Borrower shall pay to the holders thereof (i) all accrued but unpaid
interest on the Senior Subordinated Notes; (ii) the principal amount of the
Senior Subordinated Notes to be prepaid under this Section 2.5; and (iii) the
Optional Prepayment Premium set forth in Section 2.5.1.1 (the amounts described
in clauses (i), (ii) and (iii) being collectively referred to as the "Prepayment
Price"). Such prepayment shall be applied to reduce the principal amounts
payable under the Senior Subordinated Notes in the reverse order in which such
amounts are due. At least ten (10) but not more than ninety (90) days prior to
the date fixed for any prepayment, written notice shall be given to Lender of
the election of Borrower to prepay the principal amounts, or a permitted portion
thereof, of the Senior Subordinated Notes, specifying the amount to be prepaid
and the date upon which such prepayment is to be made.
2.5.1.1 Optional Prepayment Premium. In the event that some or all
---------------------------
Senior Subordinated Notes are prepaid by Borrower pursuant to Section 2.5.1 of
this Agreement, the Senior Subordinated Notes to be prepaid shall be repaid by
Borrower at the outstanding principal amount of the Senior Subordinated Notes to
be prepaid plus a premium equal to a percentage of the Senior Subordinated Notes
to be prepaid as follows) (the "Optional Prepayment Premium"):
<TABLE>
<CAPTION>
Date of Optional Prepayment Percent of Principal Amount
- --------------------------- ---------------------------
<S> <C>
After February 3, 2000 and through February 3, 2001: 3%
After February 3, 2001 and through February 3, 2002: 2%
After February 3, 2002 and through February 3, 2003: 1%
After February 3, 2003: 0%
</TABLE>
20
<PAGE>
2.5.2. Selection of Notes to be Prepaid. If less than all of the then
--------------------------------
outstanding principal amount of Senior Subordinated Notes is to be prepaid
under this Section 2.5, Borrower shall allocate the total principal amount to be
prepaid pro rata as nearly as practicable among the Senior Subordinated Notes,
based upon the then outstanding principal amounts thereof.
2.5.3. Notes Prepaid in Part. Any Senior Subordinated Note which is to be
---------------------
prepaid only in part shall be surrendered to Borrower, and Borrower shall
issue to the holder a new Senior Subordinated Note equal in principal amount
to the unprepaid portion of the Senior Subordinated Note surrendered and in
the form of Exhibit A.
---------
2.5.4. Rescission of Repurchase Option. Borrower shall have the right,
-------------------------------
prior to actual prepayment, to rescind and void its election to repurchase the
Senior Subordinated Notes called for prepayment under this Section 2.5.
2.6. Overdue Payments; Business Days. If any principal amount of, or
-------------------------------
interest or premium on, any Senior Subordinated Notes is not paid (or, in the
case of interest, such interest is not accrued pursuant to the second paragraph
of Section 2.3.2, above) when due (whether by acceleration or otherwise), or if
any other sum owed to Lender pursuant to this Agreement or any other Loan
Document is not paid when due, then interest shall accrue on such delinquent
amount from the date such delinquent amount was due (not giving effect to any
grace or cure periods) until paid at the rate of twenty-one percent (21%) per
annum, compounded daily, calculated on the basis of a 360-day year, actual days
elapsed, for an annual effective yield of twenty three and thirty six one
hundredths percent (23.36 %), or at the maximum rate permitted by law, whichever
is less. Whenever any payment of principal or interest on the Senior
21
<PAGE>
Subordinated Notes shall be stated to be due, or whenever any date specified
herein would otherwise occur, on a day other than a Business Day, such payment
shall be made, and such other date shall be deemed to occur, on the next
succeeding Business Day. Any such extension of time shall be included in the
computation of interest payable.
2.7. Ranking. The Senior Subordinated Notes will be subordinated and
-------
junior in right of payment and enforcement to the prior payment of the Senior
Indebtedness on the terms set forth in the Subordination Agreement, which
Subordination Agreement is incorporated herein by reference. The rights to
demand or receive any payments under this Section 2.7 of Persons holding Senior
Indebtedness (as defined herein) other than "Senior Liabilities" as defined
under the Subordination Agreement (such "Senior Liabilities" under the
Subordination Agreement being referred to as "First Priority Senior
Indebtedness" and such other Senior Indebtedness being referred to as "Second
Priority Senior Indebtedness") shall be subject and subordinate to the rights
under the Subordination Agreement of the holders of First Priority Senior
Indebtedness, such that the holders of the Second Priority Senior Indebtedness
shall have no right under this Section 2.7 to demand or receive amounts
otherwise payable to the Security Agent (as defined in the Subordination
Agreement) under the Subordination Agreement.
For purposes of this Section 2.7, in order to apply the Subordination
Agreement to Persons other than the Finance Parties originally executing the
Subordination Agreement, as used in the Subordination Agreement (i) "Senior
Liability" shall include all of the Senior Indebtedness of the Borrower and
Borrower Affiliated Companies; (ii) "Finance Parties" shall include each Person
who is a creditor with respect to Senior Indebtedness; (iii) "Senior Finance
Documents" shall include all documents pertaining to Senior Indebtedness of the
Borrower; (iv) "Security Agent" shall mean the Senior Creditors (as defined
below); (v) no consent of the Security Agents shall be required under
22
<PAGE>
Sections 5, 6 and 8 of the Subordination Agreement, provided that such sections
shall be deemed to prohibit the actions prohibited therein by the Borrower or
Lender, as the case may be, if such action will cause a default under "Covered
Debt" (as defined below); (vi) this Section 2.7 shall be governed and construed
in accordance with the laws of the State of New York applicable to contracts
entered into and to be performed wholly within New York by New York residents;
(vii) Section 17 of the Subordination Agreement shall be effective only with
respect to lenders under the Senior Credit Facility; and (viii) Section 24 of
the Subordination Agreement shall not be effective. "Covered Debt" shall mean
(i) the Senior Credit Facility, (ii) the Senior Notes, (iii) any replacement,
refunding, extension, amendment or renewal of Indebtedness described in clauses
(i) and (ii), and (iv) each issuance of Indebtedness exceeding $25,000,000
(including as outstanding Indebtedness any commitments under revolving credit
facilities, and treating any issuances pursuant to the same agreement or
indenture as one issuance of Indebtedness). Each holder of Senior Indebtedness
shall be entitled to the benefits of the Subordination Agreement, as modified in
this Section 2.7, as if it had executed said agreement. "Senior Creditor" means
the Security Agent as defined in the Subordination Agreement for so long as it
or its designees is acting as Security Agent under said document and,
thereafter, the entity serving a similar role under the documents governing any
amendments, replacements, renewals or refundings of the Senior Credit Facility
(as such term is defined in the Subordination Agreement). Nothing in this
Section 2.7 shall be deemed to modify, limit, reduce, enlarge or otherwise
affect any of the rights and obligations of the Finance Parties to the
Subordination Agreement.
2.8. Set Off for Taxes. Each payment or prepayment payable by Borrower
-----------------
under the Senior Subordinated Notes and the other Loan Documents shall be made
23
<PAGE>
without set off or counterclaim and free and clear of, exempt from and without
deduction or withholding for or on account of, any present or future Taxes.
Lender agrees not to make any Transfer or engage in any restructuring which
results in an obligation to set off or withhold for or on account of any
present or future Taxes. To induce Borrower not to make any deductions or
withholdings in respect of any Taxes from amounts payable to or for the
account of the Lender, (i) Lender shall deliver to the Borrower a properly
executed Internal Revenue Service Form 8709 (or such other form as the
Internal Revenue Service may require) for such year claiming eligibility for
the exemption from tax under Section 892 of the Code, and (ii) such
certificate shall be accurate in all material respects. Solely for purposes
of this Section 2.8, the term "Taxes" shall mean levies, assessments, impost
duties, withholdings or other charges of whatever nature levied, imposed,
collected, withheld or assessed by any Governmental Authority or any political
subdivision or taxing authority thereof having jurisdiction over the Borrower
other than taxes imposed on the net income earned by Lender.
SECTION 3
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
3.1. Representations and Warranties of Lender. Lender represents and
----------------------------------------
warrants to Borrower with respect to its purchase of the Senior Subordinated
Note that:
3.1.1. Investment. The Senior Subordinated Notes purchased by
----------
Lender are being acquired with the intention of holding such Senior
Subordinated Notes for purposes of investment for Lender's own account, not as
a nominee or agent, and not with a view to the distribution of any part
thereof, and not with the intention of selling such Senior Subordinated
24
<PAGE>
Notes in a public distribution in violation of Federal Securities laws or any
applicable foreign or state securities laws.
3.1.2. Sophistication. Lender has such knowledge and experience in
--------------
financial and business matters as to be capable of evaluating the merits and
risks of Lender's investment in the Senior Subordinated Notes; Lender has the
ability to bear the economic risks of such investment; Lender has the capacity
to protect Lender's own interests in connection with the transactions
contemplated by this Agreement; and Lender has had an opportunity to obtain such
financial and other information from Borrower as Lender deems necessary or
appropriate in connection with evaluating the merits of the investment in the
Senior Subordinated Notes; provided, however, that none of Lender's
-------- -------
representations hereunder are intended in any way to limit the scope or
applicability of Borrower's representations and warranties in this Agreement,
the truth, accuracy and completeness of which Lender has relied upon in its
investment in the Senior Subordinated Notes.
3.2. Representations and Warranties of Borrower. On and as of the Closing
------------------------------------------
Date, Borrower represents and warrants to Lender that, giving effect to the
consummation of the transactions contemplated hereunder and under the other
Material Agreements (but without giving effect to the Acquisition or
consummation of the transactions contemplated by the Acquisition Agreement):
3.2.1. Due Incorporation and Status. Except as set forth on
----------------------------
Schedule 3.2.1, each of Borrower and Borrower's Material Affiliated Companies
is a private limited company, duly incorporated and validly existing under the
laws of 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
25
<PAGE>
substantially as now being (or will immediately after the Closing Date be)
conducted and to own its property and other assets.
3.2.2. Corporate Power. Except as set forth on Schedule 3.2.2, each
---------------
of Borrower and Borrower's Material Affiliated Companies has the power to
execute, deliver and perform its obligations under each of the Loan Documents
and the other Material Agreements to which it is a party; all necessary
corporate, shareholder and other action has been taken or will be taken to
authorize the execution, delivery and performance of the same, and no limitation
on its powers to borrow will be exceeded as a result of the performance of the
transactions contemplated by such documents.
3.2.3. Binding Obligations. Except as set forth on Schedule 3.2.3,
-------------------
the Loan Agreements, the Material Agreements and any other document or
instrument executed or delivered or to be executed or delivered by any of
Borrower or Borrower's Affiliated Companies thereunder, constitute or, as the
case may be, will constitute, valid and legally binding obligations of each of
the Borrower and Borrower's Affiliated Companies which are expressed to be a
party thereto.
3.2.4. No Conflict with Other Obligations. Except as set forth on
----------------------------------
Schedule 3.2.4, the execution and delivery of each of the Loan Documents, the
other Material Agreements and any other document or instrument executed or
delivered or to be executed or delivered thereunder by Borrower or any of
Borrower's Affiliated Companies party thereto, and the performance of each of
their respective obligations thereunder, and compliance with their respective
provisions, will not (a) contravene any existing applicable law, statute, rule
or regulation or any judgment, decree or permit of any Governmental Authority
26
<PAGE>
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 Borrower or any of Borrower's Affiliated Companies 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 Lender to any third party by reason of any such conflict, (b) so far
as Borrower is aware, result in the creation of, or requirement to create, any
Lien on the assets of Borrower or any of Borrower's Material Affiliated
Companies, or (c) contravene or conflict with any provision of the Memorandum
and Articles of Association (or similar or analogous documents) or Borrower of
any of Borrower's Material Affiliated Companies.
3.2.5. Consents. Except as set forth in Schedule 3.2.5, all material
--------
authorizations, approvals, consents, licenses, exemptions, filings,
registrations and other matters required by law for or in consequence of (a) the
entry into and performance by Borrower and each of Borrower Affiliated Companies
of, or the validity of the Loan Documents and any of the Material Agreements to
which it/they are expressed to be a party or the transactions to be implemented
pursuant thereto or (b) the carrying on of the business of Borrower and each of
Borrower's Affiliated Companies in the ordinary course, have been obtained or
effected or will be obtained or effected prior to the date required by law.
3.2.6. No Winding Up. Except as set forth in Schedule 3.2.6, 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 taken or legal proceedings started or resolution passed for
the winding up of any of Borrower or Borrower's Material Affiliated Companies or
for an administration order in respect of Borrower or any of Borrower's Material
27
<PAGE>
Affiliated Companies, and no distress, execution or other process has been
levied on any assets of Borrower or any of Borrower's Material Affiliated
Companies which has not been discharged.
3.2.7. Solvency. Except as set forth in Schedule 3.2.7, no order
--------
has been made or petition presented or resolution passed for an administration
order in respect of Borrower or any of Borrower's Material Affiliated Companies
and no distress, execution or other process has been levied on any assets of
Borrower or any of Borrower's Material Affiliated Companies which has not been
discharged. At the date of this Agreement and after giving effect to the
transaction contemplated by the Loan Documents and the other Material
Agreements, Borrower and each of Borrower's Material Affiliated Companies
incorporated under the laws of any of the United States, is Solvent. None of
Borrower or any of Borrower's Material Affiliated Companies incorporated under
the laws of any of the United States is entering into this Agreement or any
other Material Agreement with the intent to hinder, delay or defraud either
present or future creditors.
3.2.8. No Default. Except as set forth in Schedule 3.2.8, none of
----------
Borrower or Borrower's Material Affiliated Companies is in breach of or default
under any Indebtedness or any other agreement to which it is a party or which is
binding on it or any of its assets which breach or default is reasonably likely
to have a material adverse effect on Borrower and Borrower's Affiliated
Companies taken as a whole.
3.2.9. No Litigation. Except as set forth in Schedule 3.2.9, no
-------------
action, litigation, arbitration, alternative dispute resolution or
administrative or regulatory proceeding is taking place or pending against
Borrower or any of Borrower's Material Affiliated Companies and, so far as
Borrower is aware, no such action, litigation, arbitration, alternative dispute
28
<PAGE>
resolution or administrative or regulatory proceeding is threatened nor are
there any current labor disputes involving Borrower or any of Borrower's
Material Affiliated Companies.
3.2.10. All Information Is Correct. Except as set forth in Schedule
--------------------------
3.2.10, all financial and other information provided in writing by, or on behalf
of Borrower or any of Borrower's Material Affiliated Companies to Lender in
connection with the Loan Documents or the other Material Agreements prior to the
date of this Agreement was true and accurate in all material respects when given
and (so far as Borrower is aware having made due and proper inquiries) there are
no other facts or matters the admission of which would have made any such
statement or information provided misleading or an 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.
3.2.11. Tax Liabilities. Except as set forth in Schedule 3.2.11, no
---------------
claims in excess of $250,000 (or the equivalent in other currencies) in
aggregate are being or are reasonably likely to be asserted against Borrower and
Borrower's Material Affiliated Companies (individually or as a whole), with
respect to taxes which are reasonably likely to be determined adversely to
Borrower or such Material Affiliated Company and neither Borrower nor any of
Borrower's Material Affiliated Companies 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 proceedings and for which adequate reserves have been established.
3.2.12. Ownership of Assets. Except as set forth in Schedule 3.2.12,
-------------------
with effect from and after the Closing Date, Borrower and each of Borrower's
29
<PAGE>
Material Affiliated Companies will have good title to, or valid leases or
licenses of, or are otherwise entitled to use and permit other Affiliated
Companies to use, all tangible assets necessary to conduct their business
substantially as conducted by it at the Closing Date.
3.2.13. Intellectual Property Rights.
----------------------------
Except as set forth in Schedule 3.2.13:
(a) So far as Borrower is aware (after due and careful
inquiry) (i) Borrower and each of Borrower's Material Affiliated Companies 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 as it is presently conducted, and (ii) none of Borrower or
Borrower's Material Affiliated Companies, in carrying on its business, infringes
any intellectual property rights of any third party in any way.
(b) None of the material intellectual property rights of
Borrower and of Borrower's Material Affiliated Companies is, to Borrower's
knowledge, being infringed, nor, to Borrower's knowledge, is there any
threatened infringement of such intellectual property rights by any third party.
(c) All material registered intellectual property rights owned
by Borrower and Borrower's Material Affiliated Companies are subsisting and all
actions (including payment of all fees) required to maintain the same in full
force and effect have been taken.
3.2.14. Environmental Matters.
---------------------
Except as set forth in Schedule 3.2.14:
30
<PAGE>
(a) So far as Borrower is aware (after due and careful
inquiry), Borrower and each of Borrower's Material Affiliated Companies has
obtained all requisite authorizations required for the carrying on of its
business as currently conducted and has at all times complied in all respects
with (i) the terms and conditions of such authorizations and (ii) all other
applicable Environmental and Safety Laws.
(b) So far as Borrower is aware (after due and careful
inquiry), no Hazardous Material has been used, disposed of, generated, stored,
transported, dumped, released, deposited, owned, leased, occupied or controlled
by Borrower or any of Borrower's Material Affiliated Company (including any off-
site waste management or disposal location utilized by Borrower or any of
Borrower's Material Affiliated Companies) in circumstances where this would be
reasonably likely to result in the imposition of a liability on Borrower or any
of Borrower's Material Affiliated Companies.
(c) So far as Borrower is aware (after due and careful inquiry)
there is no claim alleging a violation of any Environmental and Safety Laws
(whether in respect of any site previously or currently owned or occupied by
Borrower or any Material Affiliated Company 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 such claim (whether in respect of any
site previously or currently owned or occupied by Borrower or any Material
Affiliated Company), against Borrower or any Material Affiliated Company which
in each case is reasonably likely to be determined against Borrower or such
Material Affiliated Company, as the case shall be.
31
<PAGE>
(d) Neither Borrower nor any of its Material Affiliated
Companies has received any notice from any third party of any Environmental and
Safety Law.
3.2.15. ERISA.
-----
Except as set forth in Schedule 3.2.15:
(a) No act, omission or transaction has occurred which will
result in imposition on Borrower, any of Borrower's Material Affiliated
Companies, or any ERISA Affiliate (whether directly or indirectly) of (i) either
a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code, or (ii) breach of fiduciary duty liability damages
under Section 409 of ERISA.
(b) Neither Borrower, any of Borrower's Material Affiliated
Companies nor any 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 Code.
(c) Payment has been made of all amounts which Borrower, any of
Borrower's Material Affiliated Companies or any ERISA Affiliate is required,
under the terms of each multiemployer plan within the meaning of Section 3(37)
of ERISA (each such plan, a "Multiemployer Plan") or applicable law, to have
paid as contributions to such Multiemployer Plan.
(d) Each of Borrower, Borrower's Material Affiliated Companies
and the ERISA Affiliates are in compliance with the presently applicable
provisions of ERISA and the Code with respect to each Multiemployer Plan.
32
<PAGE>
(e) None of Borrower, Borrower's Material Affiliated Companies,
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.
3.2.16. Investment Company Status. Except as set forth in Schedule
--------------------------
3.2.16, each of Borrower and Borrower's Material Affiliated Companies either is
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.
3.2.17. U.S. Reserve Regulations. Except as set forth in Schedule
-------------------------
3.2.17, none of Borrower or any of Borrower's Material Affiliated Companies is
engaged in, principally or as one of its important activities, the business of
extending credit for the purpose of buying or carrying margin stock. No part of
the proceeds of the Loan 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 Board.
3.2.18. Year 2000. Except as set forth in Schedule 3.2.18, in
----------
relation to Borrower and each of Borrower's Material Affiliated Companies, the
management of Borrower believes that any reprogramming required to permit the
proper functioning, in and following the year 2000, of (a) each of Borrower's
and Borrower's Material Affiliated Company's computer systems and (b) equipment
containing embedded microchips (including systems and equipment supplied by
others or with which each of Borrower's and Borrower's Material Affiliated
Company's systems interface) and the testing of all such systems and equipment,
as so
33
<PAGE>
programmed, will be completed by December 31, 1999. Except as set forth in
Schedule 3.2.18, the cost to Borrower and each of Borrower's Material Affiliated
Companies of such reprogramming and testing and of the reasonably foreseeable
consequences of year 2000 to Borrower and each of Borrower's Material Affiliated
Companies (including, without limitation, reprogramming errors and the failure
of others' systems or equipment) will not result in a Default or likely have an
adverse effect on Borrower or its Borrower's Material Affiliated Companies.
Except as set forth in Schedule 3.2.18, and except for such of the reprogramming
referred to in the preceding sentence as may be necessary, the computer and
management information systems of Borrower and each of Borrower's Material
Affiliated Companies are and, with ordinary course upgrading and maintenance,
will continue for the term of this Agreement to be, sufficient to permit
Borrower and each of Borrower's Material Affiliated Companies to conduct its
business as if it is being conducted as of the Closing Date.
3.2.19. Financial Statements. Except as set forth in Schedule
---------------------
3.2.19:
(a) Save as fully and fairly disclosed in the Accountant's
Report, the financial information in relation to Borrower and Borrower's
Affiliated Companies contained in the Accountant's Report was prepared using
generally accepted accounting principles in the United States of America, and
give a true and fair view of the state of affairs of Borrower and Borrower's
Affiliated Companies as at the date to which they were prepared and as at such
date there were no material liabilities of Borrower and Borrower's Affiliated
Companies which were not disclosed by or shown as being provided for in the
Accountant's Report.
(b) There has been no material adverse change in the business,
operations, assets, prospects, or financial condition of Borrower and Borrower's
Affiliated Companies (taken as a whole) since September 27, 1998.
34
<PAGE>
(c) The Accountant's Report includes or consolidates into such
financial information the results of Borrower and each of Borrower's Affiliated
Companies and does not consolidate or include the results of any other company,
limited partnership or like entity or business.
3.2.20. Absence of Certain Changes. Since October 5, 1998, except as set
---------------------------
forth on Schedule 3.2.20, neither Borrower nor any of its Material Affiliated
Companies has:
(a) borrowed or agreed to borrow any funds except in the
ordinary course of business and consistent with past practice;
(b) sold, transferred, assigned or otherwise disposed of any of
its property or assets in excess individually of Two Hundred and Fifty Thousand
Dollars ($250,000) or permitted, or allowed, any of its property or assets to be
subjected to any Lien or restriction of any kind, except for properties and
assets sold or encumbered in the ordinary course of business and consistent with
past practice;
(c) declared, paid or set aside for payment any dividend or
other distribution in respect of its capital stock or other securities or equity
interests or, directly or indirectly, redeemed, purchased or otherwise acquired
any shares of its capital stock or other securities or equity interests;
(d) made any change in any method of accounting or accounting
practice or any change in depreciation or amortization policies or rates
theretofore adopted; or
(e) experienced any event resulting in a Change of Control.
35
<PAGE>
3.2.21. Insurance. Except as set forth in Schedule 3.2.21, there has
----------
been maintained for Borrower and each of its Material Affiliated Companies
insurance in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning or leasing similar
properties. All such policies are in full force and effect, and all premiums
with respect thereto are currently paid.
3.2.22. Debt Instruments. Schedule 3.2.22 contains a complete list
-----------------
of all loan agreements, promissory notes, letters of credit, security agreements
or other financing documents to which Borrower or any of its Primary Affiliated
Companies is a party or by which Borrower or any of its Primary Affiliated
Companies or any of their properties or assets (including, without limitation,
equipment subject to any equipment lease), is bound which individually involve
an obligation of Two Hundred and Fifty Thousand Dollars ($250,000) or more (the
"Debt Instruments"). Except as set forth in Schedule 3.2.22, there are no
existing defaults by Borrower or any of its Primary Affiliated Companies or any
other obligor under or party to any such Debt Instrument including, without
limitation, the Senior Credit Facility, and no event has occurred which (whether
with notice, lapse of time, or both, or the happening or occurrence of any other
event) would constitute a default by Borrower or any of its Primary Affiliated
Companies under any such Debt Instrument including, without limitation, the
Senior Credit Facility.
3.2.23. Certain Contracts and Commitments. Except as set forth in
----------------------------------
Schedule 3.2.23:
(a) Neither Borrower nor any of its Primary Affiliated Companies
has any collective bargaining or union contracts or agreements;
36
<PAGE>
(b) Neither Borrower nor any of its Primary Affiliated Companies
has entered into any written agreement restricting it from carrying on its
business within the United States or any subdivision thereof; and
(c) Neither Borrower nor any of its Primary Affiliated Companies
is a party to any "safe harbor lease" as defined in Section 168(f)(8) of the
Internal Revenue Code of 1954 as in effect prior to amendment by the Tax Equity
and Fiscal Responsibility Act of 1982.
3.2.24. Labor Matters. Except to the extent set forth in Schedule
--------------
3.2.24: (a) Borrower and each of its Primary Affiliated Companies is and has
been in compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
including, without limitation, any such laws respecting employment
discrimination, occupational safety and health, and unfair labor practices; (b)
there is no unfair labor practice complaint against Borrower or any of its
Primary Affiliated Companies pending or threatened before the National Labor
Relations Board or any comparable state, local, foreign, regional or territorial
agency; (c) there is no labor strike, dispute, slowdown or stoppage actually
pending or, to Borrower's knowledge, threatened against or directly affecting
Borrower or any of its Primary Affiliated Companies; (d) no union representation
question exists and, to Borrower's knowledge, no union organization effort is
underway, respecting the employees of Borrower or any of its Primary Affiliated
Companies; (e) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and no claims therefor exist; (f) no
collective bargaining agreement which is binding on Borrower or any of its
Primary Affiliated Companies restricts it from relocating or closing any of its
operations; (g) neither Borrower nor any of its Primary Affiliated Companies has
experienced any material work stoppage in the last eighteen (18) months; (h)
neither Borrower nor any of its
37
<PAGE>
Primary Affiliated Companies is delinquent in payments to any of its employees
for any wages, salaries, commissions, bonuses or other direct compensation for
any services performed by them to the Closing Date or amounts required to be
reimbursed to such employees; or (i) upon termination of the employment of any
of the employees of Borrower or any of its Primary Affiliated Companies after
the Closing Date, neither Borrower nor any of its Primary Affiliated Companies
will be liable to any one of its employees for severance pay in excess of
$50,000.
3.2.25. Compliance with Law. Except as set forth in Schedule 3.2.25,
--------------------
so far as Borrower is aware, Borrower and each of its Material Affiliated
Companies is in compliance with all laws, regulations and orders applicable to
the Business, including, without limitation, applicable building, zoning or
health laws, ordinances and regulations. Neither Borrower nor any of its
Material Affiliated Companies has received any notification that it is in
violation of any such laws, regulations or orders and neither Borrower nor any
of its Material Affiliated Companies nor any employee thereof (while acting in
such capacity), has made any payment to any Person, which payment violates any
statute or law.
3.2.26. No Subordination. Except as set forth in Schedule 3.2.26,
-----------------
other than as set forth in the Subordination Agreement and this Agreement, there
is no agreement, indenture, contract or instrument to which Borrower or any of
its Material Affiliated Companies is a party or by which it may be bound that
requires the subordination in right of payment of any of the Obligations to the
repayment of any other obligation of Borrower.
3.2.27. Foreign Corrupt Practices Act. Except as set forth in
------------------------------
Schedule 3.2.27, neither Borrower nor any of its Material Affiliated Companies
has made, offered or agreed to offer anything of value to any government
official, political party, candidate for political office
38
<PAGE>
or any person that Borrower or any of its Material Affiliated Companies knows or
has reason to know will offer anything of value to any government official,
political party or candidate for political office, nor has it taken any action
which would cause it to be in violation of any law of any foreign jurisdiction
or the United States of America, including the Foreign Corrupt Practices Act of
1977, as amended. There is not now nor has there ever been, for as long as all
present members of the senior management of Borrower have been employed by
Borrower or any of Borrower's Material Affiliated Companies, any employment of,
or beneficial ownership of Borrower or any of its Material Affiliated Companies
by, any foreign governmental or political official nor, to Borrower's knowledge,
has there ever been any employment of, or beneficial ownership of Borrower or
any of its Material Affiliated Companies by, any foreign government or political
official.
3.2.28. Valid Issuance. Except as set forth in Schedule 3.2.28, all
---------------
of the outstanding capital stock of Borrower and each of its Primary Affiliated
Companies has been duly authorized, validly issued, is fully paid and non-
assessable, and has been issued in compliance with the Act and all applicable
state securities laws, or any comparable laws, rules and ordinances.
3.2.29. Acquisition Agreement. Borrower has delivered to Lender a
----------------------
true, correct and complete copy of the Acquisition Agreement (including without
limitation all exhibits and schedules thereto) as in effect on and as of the
Closing Date; there are no other agreements or instruments between the parties
thereto pertaining to the Acquisition. Except as set forth in Schedule 3.2.29,
and subject to any limitations contained in the Acquisition Agreement, to the
best of Borrower's knowledge, each of the representations and warranties made by
Vendors in the Acquisition Agreement is true, correct and complete as of the
Closing Date. Except as set
39
<PAGE>
forth in Schedule 3.2.29, as of the Closing Date, (i) all of the conditions
precedent to the consummation of the Acquisition, as contemplated by the
Acquisition Agreement, have been satisfied or waived, and (ii) all of the
covenants therein to be performed or observed by the parties thereto prior to
the Closing Date have been so performed or observed or waived.
3.3. Remedies for Breaches of this Agreement.
---------------------------------------
(a) All of the representations and warranties of Lender and
Borrower under this Agreement shall survive the Closing Date (unless the damaged
Party knew or had reason to know of any misrepresentation or breach of warranty
at time of Closing Date) and continue in full force and effect for a period of
two years thereafter.
(b) Notwithstanding anything to the contrary hereunder, a
representation and warranty shall be deemed to have been breached by Borrower
hereunder if and only if (i) Lender makes a written claim of indemnification
against the Borrower within the survival period set forth in Section 3.3(a)
above (whether or not Lender has the right or ability to exercise any rights or
remedies with respect to such claim);and (ii) such breach of misrepresentation
and warranty by Borrower has a material adverse effect on the condition and
operations of Borrower and Borrower's Affiliated Companies on a consolidated
basis.
SECTION 4
---------
AFFIRMATIVE COVENANTS
---------------------
Borrower covenants that so long as any of the Obligations of Borrower
to Lender hereunder or under any of the other Loan Documents remains
outstanding, and until final payment in full of the Senior Subordinated Notes,
Borrower shall, and shall cause each of Borrower's Material Affiliated Companies
to:
40
<PAGE>
4.1. Punctual Payments. Pay when due: (a) the interest, principal and
------------------
premium (if any) on the Senior Subordinated Notes, at the times and place and in
the manner specified therein, subject to Borrower's right to satisfy interest
payment obligations on the Senior Subordinated Notes (i) through the issuance of
PIK Notes or accrual as provided in Section 2.3.2 of this Agreement or (ii) as
otherwise agreed in writing by Borrower and Lender, and (b) any fees or other
liabilities due hereunder at the times and place and in the manner specified
herein.
4.2. Accounting Records. Maintain adequate books and records in
-------------------
accordance with GAAP, and permit any representative of Lender, at any reasonable
time, and at Lender's cost and expense, to inspect, copy, audit and examine such
books and records and inspect the properties of Borrower and its Material
Affiliated Companies.
4.3. Reporting Requirements. Provide Lender all of the following:
-----------------------
(a) as soon as available and in any event within thirty (30)
Business Days after the end of each month, a copy of the unaudited monthly
management accounts for Borrower and its Affiliated Companies in the form
required to be provided by Borrower pursuant to Section 19.1(a)(iii) of the
Senior Credit Facility;
(b) as soon as available and in any event within forty five (45)
days after the end of each fiscal quarter, a copy of the unaudited quarterly
consolidated accounts for Borrower and its Affiliated Companies in the form
required to be provided by Borrower pursuant to Section 19.1(a)(ii) of the
Senior Credit Facility;
(c) as soon as available and in any event within one hundred and
fifty (150) days after and as of the end of each Fiscal Year, the audited
consolidated financial accounts
41
<PAGE>
for Borrower and its Affiliated Companies in the form required to be provided
pursuant to Section 19.1(a)(i)(A) of the Senior Credit Facility, and any audited
financial accounts provided pursuant to Sections 19.1(a)(i)(B) or 19.1(a)(i)(C)
of the Senior Credit Facility, if such audited financial accounts are prepared;
(d) from time to time, such other information or documents
respecting the business, properties or the condition or operations, financial or
otherwise, of Borrower or any of its Material Affiliated Companies as Lender may
reasonably from time to time request.
Notwithstanding any waiver of the reporting requirements contained in
Sections 19.1(a)(i), (ii), and (iii) of the Senior Facility Agreement, the
reporting requirements contained in subsections (a), (b), and (c) of this
Section 4.3 shall remain in force until the Obligations have been fully and
irrevocably paid.
4.4. Board Visitation Rights. Permit one authorized representative of
-------------------------
Lender (the "Representative") to attend all meetings of the Board of Directors
of Borrower in a nonvoting observer capacity; provide the Representative with
such notice of and other information with respect to such meetings as are
provided to members of the Board of Directors at the same time as so provided to
such Persons; notify the Representative, as promptly as practicable thereafter,
of the taking of any action by written consent of its Board of Directors in lieu
of a meeting thereof; and provide the Representative with a copy of any such
resolutions taken by unanimous written consent.
4.5. Visitation Rights. Upon reasonable notice being given by Lender,
------------------
permit Lender (at Lender's own cost) or any agents or representatives of Lender,
during normal business hours, to examine and make copies of and abstracts from
its records and books of account, and visit its
42
<PAGE>
properties, and those of its Affiliated Companies, and discuss its affairs,
finances and accounts with any of its officers or directors, it being understood
that nonpublic information provided by Borrower shall be maintained in
confidence by Lender.
4.6. Use of Funds. Use the proceeds of the Loan only for the purpose of
-------------
financing the Acquisition and the costs related thereto.
4.7. Insurance. Maintain and keep in force in all material respects
----------
insurance of the types and in amounts customarily carried in lines of business
similar to its line of business, including without limitation fire, extended
coverage, public liability, property damage, business interruption,
environmental liability and workers' compensation insurance.
4.8. Business. Continue the Business and refrain from engaging in any
---------
business activities or operations substantially different from or unrelated to
the Business.
SECTION 5
---------
EVENTS OF DEFAULT
-----------------
5.1. Events of Default. The occurrence of any of the following shall
------------------
constitute an "Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest,
premium or other amount payable under the Loan Documents;
(b) Borrower shall become insolvent, or shall suffer or consent
to or apply for the appointment of a receiver, trustee, custodian or liquidator
of itself or any of its property, or shall generally fail to pay its debts as
they become due, or shall make a general
43
<PAGE>
assignment for the benefit of creditors; Borrower shall file a voluntary
petition in bankruptcy, or seeking reorganization, in order to effect a plan or
other arrangement with creditors or any other relief under the Bankruptcy Code,
or under any state or federal law granting relief to debtors, whether now or
hereafter in effect; or any involuntary petition or proceeding pursuant to the
Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors is filed or commenced
against Borrower, which petition or proceeding (i) results in the entry of an
order for relief or any such adjudication of relief, or (ii) remains unreleased,
undischarged, or unbonded for a period of one hundred and eighty (180) days, or
(iii) shall result in Borrower filing an answer admitting jurisdiction of the
court and the material allegations of the petition; or Borrower shall be
adjudicated a bankrupt, or an order for relief shall be entered by any court of
competent jurisdiction under the Bankruptcy Code or any other applicable state
or federal law relating to bankruptcy, reorganization or other relief for
debtors;
(c) At any time that the total of all amounts outstanding and
all amounts available to be borrowed under all Senior Indebtedness is less than
Twenty Five Million Dollars ($25,000,000), (i) any of Borrower's Primary
Affiliated Companies shall become insolvent, or shall suffer or consent to or
apply for the appointment of a receiver, trustee, custodian or liquidator of
itself or any of its property, or shall generally fail to pay its debts as they
become due, or shall make a general assignment for the benefit of creditors;
(ii) any of Borrower's Primary Affiliated Companies shall file a voluntary
petition in bankruptcy, or seeking reorganization, in order to effect a plan or
other arrangement with creditors or any other relief under the Bankruptcy Code,
or under any state or federal law granting relief to debtors, whether now or
hereafter in effect; or any involuntary petition or proceeding pursuant to the
44
<PAGE>
Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors is filed or commenced
against any of Borrower's Primary Affiliated Companies, which petition or
proceeding (x) results in the entry of an order for relief or any such
adjudication of relief, or (y) remains unreleased, undischarged, or unbonded for
a period of one hundred and eighty (180) days, or (z) results in such Primary
Affiliated Company filing an answer admitting jurisdiction of the court and the
material allegations of the petition; (iii) or any of Borrower's Primary
Affiliated Companies shall be adjudicated a bankrupt, or an order for relief
shall be entered by any court of competent jurisdiction under the Bankruptcy
Code or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors;
(d) the dissolution or liquidation of Borrower; or Borrower or a
majority of the directors or shareholders of Borrower shall take action seeking
to effect the dissolution or liquidation of Borrower;
(e) at any time that the total of all amounts outstanding and
all amounts available to be borrowed under all Senior Indebtedness is less than
Twenty Five Million Dollars ($25,000,000), (i) the dissolution or liquidation of
any of Borrower's Primary Affiliated Companies; (ii) any of Borrower's Primary
Affiliated Companies or a majority of the directors or shareholders of any of
Borrower's Primary Affiliated Companies shall take action seeking to effect the
dissolution or liquidation of any of Borrower's Primary Affiliated Companies;
(f) Borrower shall fail to make the Mandatory Prepayment of the
Senior Subordinated Notes upon the occurrence of a Change of Control as required
by Section 2.4.2.
45
<PAGE>
(g) At any time that the total of all amounts outstanding and
all amounts available to be borrowed under all Senior Indebtedness is less than
Twenty Five Million Dollars ($25,000,000), breach of any financial covenant in
the Senior Credit Facility.
5.2. Remedies. If an Event of Default shall occur, any Indebtedness of
---------
Borrower under the Loan Documents, any term of any of the Senior Subordinated
Notes to the contrary notwithstanding, shall, subject to the terms of the
Subordination Agreement, (i) in the case of an Event of Default described in
clause (a) of Section 5.1, at the option of Lender, and (ii) in the case of any
other Event of Default, at the option of the holders of a majority in interest
of the then outstanding principal amount of the Senior Subordinated Notes, and
without notice, become immediately due and payable without presentment, demand,
protest or notice of dishonor, all of which are hereby expressly waived by
Borrower, and Lender or such holders shall have all rights, powers and remedies
available under any of the Loan Documents, or accorded by law; provided,
--------
however, that upon the occurrence of an Event of Default described in clause (b)
- ------
of Section 5.1, such Indebtedness shall become immediately due and payable
without any election on the part of the holders. Subject to the terms of the
Subordination Agreement, all rights, powers and remedies of Lender under this
Section 5.2 may be exercised by Lender at any time within ninety (90) days of
Lender learning of an Event of Default. All rights, powers and remedies of
Lender in connection with the Loan Documents are cumulative and not exclusive
and shall be in addition to any other rights, powers or remedies provided by law
or equity, including, without limitation, the right to set-off any liability
owing by Lender to Borrower against any liability of Borrower to Lender as
provided in Section 5.4.
5.3. No Waiver. No delay, failure or discontinuance of Lender, or any
----------
holder of any of the Senior Subordinated Notes, in exercising any right, power
or remedy under the Loan
46
<PAGE>
Documents shall affect or operate as a waiver of such right, power or
remedy; nor shall any single or partial exercise of any such right, power or
remedy preclude, waive or otherwise affect any other or further exercise thereof
or the exercise of any other right, power or remedy. Any waiver, permit,
consent or approval of any kind by Lender, or any holder of any of the Senior
Subordinated Notes, of any breach of or default under the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
5.4. Set-Off. In addition to any rights, powers or remedies now or
--------
hereafter granted under this Agreement or applicable law, and not by way of
limitation of any such rights, powers or remedies, upon the occurrence and
during the continuance of any Event of Default, Lender is hereby authorized by
Borrower at any time or from time to time, without notice to Borrower or to any
other Person (any such notice being hereby expressly waived), to the fullest
extent permitted by law, to set off, appropriate and apply all indebtedness or
obligations owing by Lender to or for the account of Borrower against all of the
obligations of Borrower to Lender now or hereafter arising under this Agreement
or any of the other Loan Documents.
SECTION 6
---------
MISCELLANEOUS
-------------
6.1. Transfers
---------
6.1.1. Transfers Permitted. Subject to the terms of the
--------------------
Subordination Agreement, Lender may make a Transfer to any Person provided that
such Transfer is made in compliance with the Act and any applicable state
securities laws. Borrower shall cooperate in connection with any such Transfer.
Upon any Transfer, the transferee shall, to the extent of such Transfer, be
entitled to exercise the rights of the Lender making such Transfer and shall
47
<PAGE>
thereafter be deemed a "Lender" under this Agreement. Any Transfer that does not
comply with the provisions of this Section 6.1 shall be void.
6.1.1.1. Limitations on Transferability of Senior
----------------------------------------
Subordinated Notes.
- -------------------
(a) No transfer of the Senior Subordinated Notes shall be made,
directly or indirectly, to any Competitor of Borrower or to any Person who owns,
directly or indirectly, more than five percent (5%) of the voting securities of
any Competitor of Borrower.
(b) Except for Transfers permitted under Section 6.1.1.2, no
transfer of the Senior Subordinated Notes shall be made, directly or indirectly,
prior to the second anniversary of the Closing Date.
(c) Except for Transfers permitted under Section 6.1.1.2, Lender
shall provide Borrower, Thayer and Perseus with Notice of any proposed direct or
indirect Transfer of Senior Subordinated Notes held by Lender (the "Transfer
Notice"). The Transfer Notice shall state in reasonable detail (i) the principal
amount of the Senior Subordinated Notes proposed to be Transferred; (ii)
Lender's bona fide intention to Transfer the principal amount of the Senior
---- ----
Subordinated Notes stated in the Transfer Notice; (iii) the identity of the
proposed transferee; and (iv) the material terms of the proposed Transfer,
including the purchase price and payment terms for the Senior Subordinated Notes
covered by the Transfer Notice. Borrower, Thayer and/or Perseus shall have the
right, exercisable within forty-five (45) Business Days after the giving of the
Transfer Notice, to purchase all (but not less than all) of the Senior
Subordinated Notes proposed to be Transferred pursuant to the Transfer Notice,
on terms no less favorable than those stated in the Transfer Notice. Lender
shall have thirty (30) Business Days after the termination of the forty-five
(45) Business Day period referenced above to Transfer the Senior Subordinated
48
<PAGE>
Notes that are the subject of the Transfer Notice on terms no more materially
favorable than those contained in the Transfer Notice.
(d) Any Transferee to whom Senior Subordinated Notes are
Transferred pursuant to this Section 6.1 shall (i) be bound by the terms and
conditions of this Agreement and, if applicable, the Subordination Agreement,
and shall execute a counterpart of this Agreement prior to the Transfer becoming
effective, and (ii) receive the benefits of Section 2.8 of this Agreement if and
only if (A) such Transferee delivers to Borrower the withholding tax exemption
certificate contemplated by Section 2.8 and (B) the terms of Section 2.8 are not
breached or violated.
(e) Nothing in this Section 6.1 shall be construed to limit or
otherwise restrict Lender's co-sale rights pursuant to the Stockholders
Agreement, or Lender's right to sell and transfer to Thayer and/or Perseus the
Put Securities pursuant to the Stockholders Agreement, or Lender's right to
sell, and Thayer's and Perseus' right to purchase, the Senior Subordinated Notes
pursuant to the optional purchase provision of the Stockholders Agreement.
6.1.1.2. Permitted Transferees. Notwithstanding the foregoing,
----------------------
Lender may make a Transfer at any time to any entity that is (i) a Subsidiary of
the Government of Singapore Investment Corporation Pte Ltd. or (ii) a Subsidiary
of an entity of which the Government of Singapore Investment Corporation Pte
Ltd. is also a Subsidiary. Any Transfer pursuant to this Section 6.1.1.2 shall
be subject to the requirements and limitations of Sections 6.1.1.1(a) and
6.1.1.1(d).
6.1.2. Mechanics of Transfer. Borrower shall keep at its principal
----------------------
office a register for the registration of the Senior Subordinated Notes as to
both principal and stated
49
<PAGE>
interest. In the event Lender desires to make a Transfer, Lender shall
surrender to Borrower the Senior Subordinated Note or Notes to be Transferred.
Upon such surrender, Borrower shall promptly issue a new Senior Subordinated
Note or Notes to the transferee (and to the transferor as to any portion not
Transferred) in the form of Exhibit A in the aggregate principal amount of the
---------
Senior Subordinated Note or Notes surrendered. Borrower shall register the new
Senior Subordinated Notes as to both principal and stated interest in the names
of the transferees (and the transferor as to any portion not Transferred). No
Transfer shall be effective until the issuance of the new Senior Subordinated
Note or Notes under this Section.
6.1.3. Further Assurance. Borrower shall, from time to time at the
------------------
request of Lender, execute and deliver to Lender or to such party or parties as
Lender may reasonably designate, all further instruments as may in Lender's
reasonable opinion be reasonably necessary or advisable to give full force and
effect to a Transfer and shall provide to Lender or to such party or parties as
Lender may reasonably designate, all such information as Lender may reasonably
request.
6.1.4. Information. In connection with any Transfer, Lender may
------------
disclose all documents and information which Lender now has or may hereafter
acquire relating to the Loan, the Loan Documents, Borrower or any of its
Affiliated Companies or the Business if the recipient of such documents and
information (i) is not a Competitor and (ii) has entered into a confidentiality
agreement containing the terms set forth in Section 6.6 of this Agreement.
6.2. Notices. In order to be effective, any notice or other
--------
communication required or permitted hereunder, shall, unless otherwise stated
herein, be in writing and shall be transmitted by messenger, delivery service,
mail, telegram, telecopy or cable, if to Borrower, at Borrower's
50
<PAGE>
address set forth under its name on the signature page, and if to Lender, to the
address set forth under its name on the signature page, with copies to:
Government of Singapore Investment Corporation, Pte. Ltd.
156 West 56th Street, Suite 1902
New York, New York 10019
Telecopier: (212) 265-8131
Attention: Mr. Andrew Kwee
with copy to
Heller Ehrman White & McAuliffe
333 Bush Street
San Francisco, California 94104
Telecopier: (415) 772-6268
Attention: Brett Dick
or at such other address as a party shall designate in a written notice to the
other parties hereto given in accordance with this Section 6.2. All notices and
other communications shall be effective (i) if sent by messenger or delivery
service, when delivered, (ii) if sent by mail, five days after having been sent
by certified mail, with return receipt requested, (iii) if sent by telegraph or
cable, when delivered to the telegraph or cable company or (iv) if sent by telex
or telecopier, when sent. In order to be effective, any notice transmitted to
an address outside the United States of America by any means other than telex or
telecopier shall at the time of transmittal be duplicated by counterpart telex
or telecopier notice.
6.3. Successors and Assigns. This Agreement shall be binding upon and
-----------------------
inure to the benefit of the parties hereto and their respective successors and
assigns, except that neither Borrower nor any of its Affiliated Companies may
assign or transfer its rights hereunder or any interest herein or delegate its
duties hereunder without the prior written consent of Lender, unless such
assignment or transfer of rights or interest, or delegation of duties, results
from a Change of Control.
51
<PAGE>
6.4. Costs, Expenses and Attorneys' Fees. Borrower shall reimburse
------------------------------------
Lender for all reasonable out-of-pocket costs and expenses (including, without
limitation, reasonable attorneys' fees) expended or incurred by Lender in the
negotiation and preparation of the Loan Documents and the closing of the
transactions contemplated by the Loan Documents. On the Closing Date, Borrower
shall pay all reasonable fees and expenses of Lender's counsel incurred in
connection with the negotiation and preparation of the Loan Documents and the
closing of the transactions contemplated by the Loan Documents. Any additional
reasonable fees and expenses incurred after the Closing Date in connection with
the negotiation and preparation of the Loan Documents and the closing of the
transactions contemplated by the Loan Documents will be billed as incurred and
shall be paid by Borrower within sixty (60) days of receipt by Borrower of the
invoice therefor.
6.5. Entire Agreement, Amendment. The Loan Documents (including the
----------------------------
Exhibits and Schedules thereto) executed by Borrower in connection with, or as
required by, this Agreement constitute the entire agreement between Borrower and
Lender with respect to the Loan; supersede all prior or contemporaneous
negotiations, communications, discussions and correspondence concerning the
subject matter hereof; and may be amended or modified only with the written
consent of Borrower and the holders of a majority in principal amount of the
Senior Subordinated Notes then outstanding, except that no such amendment or
modification shall become effective if it extends the maturity or reduces the
rate of interest payable with respect to the Senior Subordinated Notes, alters
the terms of payment of the principal, interest and premium (if any) under the
Senior Subordinated Notes, or reduces the percentage of holders of principal
amount of the Senior Subordinated Notes necessary to approve modifications or
amendments to this Agreement without the consent of the holders of Senior
Subordinated Notes
52
<PAGE>
who own sixty six and two-thirds percent (66 2/3%) of the principal amount of
the Senior Subordinated Notes affected thereby. Whenever the consent or approval
of Lender is required, such consent or approval must be given in writing by the
holders of a majority in principal amount of the Senior Subordinated Notes then
outstanding.
6.6. Confidentiality. The parties to this Agreement agree that any oral,
written or recorded information provided by a party (the "Disclosing Party") to
another party (the "Recipient Party") pursuant to the terms of this Agreement
(including, without limitation, the information, documentation, and other
disclosures made pursuant to Sections 4.2, 4.3, 4.4, and 4.5) shall be deemed
confidential (the "Confidential Information"); provided however, that
-------- -------
Confidential Information public other than as a result of disclosure directly or
indirectly by the Recipient Party or by an agent of the Recipient Party; (b) was
independently acquired or developed by the Recipient Party without breach of
this Agreement; (c) is disclosed by the Recipient Party pursuant to the order of
any Governmental Authority having jurisdiction over the Recipient Party; or (d)
becomes available to the Recipient Party on a nonconfidential basis from a
person (other than the Disclosing Party or the Disclosing Party's directors,
officers, employees, agents, or advisors) who, to the knowledge of the Recipient
Party (after reasonable inquiry), is not and was not bound by a confidentiality
agreement with the Disclosing Party, or is not and was not otherwise prohibited
from transmitting the information to the Recipient Party.
The parties to this Agreement agree that each Recipient Party shall
(x) keep all Confidential Information confidential and not to disclose any
Confidential Information to any person other than persons employed by such
Recipient Party who have a legitimate need to know the Confidential Information
(collectively, the "Representatives"); (y) use the Confidential
53
<PAGE>
Information solely for the purpose provided for in this Agreement and not for
any other purpose; and (z) not use or permit others to use or copy the
Confidential Information to the detriment of the Disclosing Party.
The parties to this Agreement also agree (i) to undertake reasonable
precautions to safeguard and protect the confidentiality of the Confidential
Information; (ii) to inform their Representatives of the confidential nature of
the Confidential Information; and (iii) to take all reasonable measures to
restrain their respective Representatives from prohibited or unauthorized
disclosure or uses of the Confidential Information.
6.7. Time. Time is of the essence of each and every provision of the
-----
Loan Documents.
6.8. Severability of Provisions. If any provision of this Agreement
---------------------------
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.
6.9. Governing Law. This Agreement and the Senior Subordinated Notes
--------------
shall be governed by and construed in accordance with the laws of the State of
New York applicable to contracts entered into and to be performed wholly within
New York by New York residents.
6.10. First Refusal Rights of Lender.
------------------------------
(a) At least ten (10) Business Days prior to Borrower
authorizing the issuance, sale or transfer of any equity stock of Borrower (the
"Borrower Stock") to a third party ("Stock Transfer"), Borrower shall deliver a
written notice (the "Offer Notice") to Lender. The Offer Notice shall disclose,
in reasonable detail, the material terms and conditions of the
54
<PAGE>
proposed Stock Transfer. Upon receipt of the Offer Notice, Lender shall have the
right, but not the obligation, to purchase some or all (but not less than all,
if, in the reasonable judgment of Borrower, the purchase by Lender of less than
all of the Borrower Stock covered by the Offer Notice would have a material
adverse effect on the proposed Stock Transfer) of the Borrower Stock covered by
the Offer Notice at the cash price and on the terms specified in the Offer
Notice by delivering written notice to Borrower of such election (the "Lender
Notice") within ten (10) Business Days after receipt of the Offer Notice (the
tenth Business Day after the giving of the Offer Notice being referred to herein
as the "Notice Deadline"). In the event that there is more than one Lender, each
Lender shall be entitled to purchase its pro rata share of the Borrower Stock
covered by the Offer Notice, based upon the percentage of the total outstanding
principal amount of the Senior Subordinated Notes owned by such Lender. Lenders
who purchase their full allotment of Borrower Stock shall have the right to
purchase, pro rata, any remaining Borrower Stock covered by the Offer Notice not
purchased by other Lenders; provided that, nothing herein shall be construed to
-------- ----
permit Lenders to deliver Lender Notices after the Notice Deadline.
(b) In the event Lender (or Lenders) have elected to purchase
some or all (but not less than all if, in the reasonable judgment of Borrower,
the purchase of by Lender of less than all of the Borrower Stock covered by the
Offer Notice would have a material adverse effect on the proposed Stock
Transfer) of the Borrower Stock offered pursuant to the Offer Notice, the
purchase and transfer of such Borrower Stock shall be consummated within fifteen
(15) Business Days after the Notice Deadline.
(c) If Lender (or Lenders) have not elected to purchase all of
the Borrower Stock offered pursuant to the Offer Notice, Borrower may, at its
sole option and within
55
<PAGE>
one hundred and eighty (180) Business Days after the Notice Deadline, issue,
sell, or transfer such Borrower Stock to one or more third parties at a price
(in cash and/or kind) no less than the price per share specified in the Offer
Notice and on other terms no more materially favorable than those contained in
the Offer Notice.
(d) Notwithstanding the foregoing, the first refusal rights
granted in this Section 6.10 shall not apply to issuances of Borrower Stock: (i)
to Borrower's management pursuant to a duly authorized management stock purchase
agreement or stock option plan; (ii) upon conversion of outstanding Borrower
Stock into another class of Borrower Stock; (iii) in connection with the
acquisition of another company or business by Borrower, so long as such Borrower
Stock is issued to the seller of such company or business being acquired in
payment therefore; (iv) pursuant to a public offering registered under the Act;
and (v) pursuant to a sale of Borrower Stock to any person that Borrower
reasonably determines is a "strategic investor," as such term is commonly used
in commercial transactions, but such term shall not include "vulture investors."
6.11. Third Party Beneficiaries. Borrower and Lender acknowledge that
--------------------------
the provisions of Section 6.1.1.1(c) of this Agreement are for the benefit of
Thayer and Perseus and their respective permitted successors and assigns.
Borrower and Lender acknowledge that the provisions of Section 2.7 of this
Agreement are for the benefit of the holders of the Senior Notes and the lenders
under the Senior Credit Facility.
6.12. Waiver of Sovereign Immunity. Lender acknowledges and agrees that
-----------------------------
the activities contemplated by the provisions of this Agreement are commercial
in nature rather than governmental or public, and therefore acknowledges and
agrees, to the extent permitted by
56
<PAGE>
applicable law, that it is not entitled to any right of immunity on the grounds
of sovereignty or otherwise with respect to such activities or in any legal
action or proceedings arising out of or relating to this Agreement.
Lender, in respect of itself, its process agents and its properties
and revenues, expressly and irrevocably waives (to the extent permitted by
applicable law) any such right of immunity that may now or hereafter exist
(including any immunity from any legal process, from the jurisdiction of any
court or from any execution or attachment in aid of execution prior to judgment
or otherwise) or claim thereto that may now or hereafter exist, and agrees not
to assert any such right or claim in any such action or proceeding, whether in
the United States or otherwise.
6.13. Consent to Jurisdiction. Each of Borrower and Lender hereby
------------------------
consents to the jurisdiction, venue and forum of any state or federal court in
the State of New York with respect to any action, whether commenced by Borrower,
Lender or any other Person, which, in whole or in part, in any way arises under
or relates to the Loan Documents.
6.14. Incorporation of Exhibits and Schedules by Reference. All Exhibits
-----------------------------------------------------
and Schedules to this Agreement are incorporated herein by this reference.
6.15. Counterparts. This Agreement may be executed in separate
-------------
counterparts, each of which, when so executed, shall be deemed to be an original
and all of which, when taken together, shall constitute but one and the same
agreement.
[THE REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
57
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
the day and year first written above.
THE DERBY CYCLE CORPORATION
By:
---------------------------------
Title:
------------------------------
Address for Notice:
The Derby Cycle Corporation
62 Triumph Road
Nottingham NG7 2DD
England
Telecopier: +44-115-942-2178
Attn: Chief Executive Officer
with copies to (delivery of such copies not to
----------------------------------------------
constitute notice hereunder):
-----------------------------
Thayer Capital Partners
1455 Pennsylvania Avenue, N.W., Suite 350
Washington, D.C. 20004
United States of America
Telecopier: +1-202-371-0391
Attn: Frederic Malek
and
Kirkland & Ellis
58
<PAGE>
655 Fifteenth Street, N.W.
Washington, D.C. 20005
United States of America
Telecopier: +1-202-879-5200
Attn: Jack Feder
VENCAP HOLDINGS (1992) PTE LTD.
By:
---------------------------------
Title:
------------------------------
By:
---------------------------------
Title:
------------------------------
59
<PAGE>
EXHIBITS
--------
Exhibit A: Form of Senior Subordinated Promissory Note
Exhibit B: Form of Legal Opinion
SCHEDULES
---------
60
<PAGE>
EXHIBIT A
---------
FORM OF SENIOR SUBORDINATED NOTE
--------------------------------
61
<PAGE>
EXHIBIT B
----------
[Financial Statements to be provided]
62
<PAGE>
EXHIBIT C
Form of Opinion of Borrower's Counsel
-------------------------------------
63
<PAGE>
EXHIBIT 10.16
EXECUTION
DERBY CYCLE CORPORATION
FORM OF AGREEMENT EVIDENCING A GRANT OF A STOCK OPTION
UNDER 1998 STOCK OPTION PLAN
Agreement made as of March ___, 1999, between Derby Cycle Corporation,
a Delaware corporation (the "Company"), and _____________ ("Grantee").
Capitalized terms used but not defined herein shall have the meanings assigned
to such terms in the Derby Cycle Corporation 1998 Stock Option Plan (the
"Plan").
1. Grant of Option. Pursuant to the Plan, the Company hereby grants
to Grantee a stock option intended to be a nonqualified stock option (the
"Option") to purchase (i) ___ shares of Class A Common Stock (which number of
shares may be adjusted as provided in the Plan) and (ii) ___ shares of Class C
Common Stock (which number of shares may be adjusted as provided in the Plan),
all at the exercise price per share of $1,000 (the "Exercise Price"). The
Option shall be deemed to have been granted as of August 6, 1998 (the "Grant
Date").
2. Grantee Bound by Plan. Attached hereto as Annex A is a copy of
the Plan which is incorporated herein by reference and made a part hereof.
Grantee hereby acknowledges receipt of a copy of the Plan and agrees to be bound
by all the terms and provisions thereof. The Plan should be carefully examined
before any decision is made to exercise the Option.
3. Exercise of Option. Subject to the earlier termination of the
Option as provided herein and in the Plan and subject to Section 7, the Option
may be exercised, in whole or in part, to the extent it has become vested, by
written notice to the Company at any time and from time to time after the Grant
Date. An Option shall not be exercisable in any event after the tenth
anniversary of the date of grant of the Option. An Option may not be exercised
for a fraction of an Option Share. Options are subject to cancellation as
provided in the Plan.
4. Vesting of Options. Subject to the provisions of Section 5, this
Option shall vest and become exercisable with respect to 25% of the Option
Shares subject to this Option on each of the first, second, third and fourth
anniversaries of the Grant Date, provided that (a) this Option shall vest and
become exercisable with respect to the portion of the Option Shares on the
relevant anniversary date hereof only if the Grantee remains continuously
employed by the Company or a Subsidiary from the Grant Date through such
anniversary of the Grant Date, (b) no vesting shall be recognized if the Grantee
voluntarily terminates the Grantee's employment with the Company or any
Subsidiary at any time prior to the second anniversary of the Grant Date, and
(c) all unvested Options shall vest effective upon a Sale of the Company, but
only if the Grantee is employed by the Company on the date such Sale of the
Company is consummated.
5. Sale of the Company.
(a) To the extent all or part of any Option becomes vested and
exercisable as a result of a consummation of a Sale of the Company (and for
purposes of participating in such
<PAGE>
Sale of the Company), vesting (to the extent permitted under Section 4 above)
will be deemed to occur immediately prior to the consummation of the Sale of the
Company.
(b) Notwithstanding any other provisions of this Agreement, if
all or any portion of the benefits provided under Section 5(a) hereof, either
alone or together with other payments or benefits which the Grantee receives or
is then entitled to receive from the Company and any of its Subsidiaries would
constitute a "parachute payment" within the meaning of Section 280G of the Code,
the Company shall take all commercially reasonable effort (other than reducing
such payments or benefits) to cause such payment or benefit not to be
characterized as or constitute a "parachute payment."
6. Repurchase of Stock.
(a) Repurchase; Repurchase Option. In the event that Grantee's
employment with the Company is terminated for any reason, the Option Shares held
by Grantee and Grantee's Permitted Transferees (collectively, the "Grantee
Group") will be repurchased by the Company pursuant to the terms and conditions
set forth in this Section 6 (the "Repurchase") at a price per share equal to the
Fair Market Value thereof determined as of the Termination Date; provided that,
in the case of a Termination for Cause by the Company or a voluntary termination
of employment by Grantee (other than due to Retirement), such Repurchase shall
be at the option of the Company (the "Repurchase Option").
(b) Repurchase Notice. The Company shall exercise the Repurchase by
delivery of written notice (the "Repurchase Notice") to each member of the
Grantee Group. The Repurchase Notice shall set forth the number of Option Shares
to be acquired from each member of the Grantee Group, the aggregate
consideration to be paid for such Option Shares, and the time and place for the
closing of the transaction.
(c) Repurchase Option Notice. The Company may exercise the Repurchase
Option by delivery of written notice (the "Repurchase Option Notice") to each
member of the Grantee Group. The Repurchase Option Notice shall set forth the
number of Option Shares to be acquired from each member of the Grantee Group,
the aggregate consideration to be paid for such Option Shares, and the time and
place for the closing of the transaction.
(d) Closing of Repurchases. The closing of the purchase of any Option
Shares pursuant to the Repurchase or the Repurchase Option will take place on
the date designated by the Company in the Repurchase Notice or the Repurchase
Option Notice, as the case may be, which date will not be more than 45 days nor
less than 10 days after the delivery of such Repurchase Notice or the Repurchase
Option Notice, as the case may be. The Company will pay for the Option Shares
to be purchased by delivering to each member of the Grantee Group, a check in an
amount equal to the aggregate purchase price for the Option Shares to be
repurchased from such member of the Grantee Group. Notwithstanding the
foregoing, in the event payment of the purchase price would cause a default
under any material financing agreement of the Company or any Subsidiary in
effect from time to time (the "Financing Agreements"), or is otherwise
prohibited under applicable law, the Company shall have the option of paying the
purchase price with a subordinated promissory note bearing interest at 6% per
annum, due on the eighth anniversary of the date of issuance, and payable upon
the earlier to occur of the maturity thereof or on the date of a Sale of the
Company. In the
-2-
<PAGE>
event the issuance of the subordinated promissory note is not permitted under
the Financing Agreements or applicable law, the Company may pay the purchase
price for the Option Shares by the issuance of preferred stock bearing a
dividend rate of 6% per annum with redemption dates and payment restructuring
similar to those set forth in the subordinated promissory notes. If issuance of
a subordinated promissory note or the preferred stock is not permitted by the
Financing Agreements or applicable law, the Company may defer the repurchase
until such time as a form of payment described in this Section 6 is permitted
under the Financing Agreements and/or applicable law. If the Company determines
that withholding tax is required with respect to the Repurchase or the exercise
of a Repurchase Option, the Company shall withhold an amount equal to such
withholding tax from the purchase price. At the closing, each member of the
Grantee Group will deliver the certificates representing the Option Shares to be
sold, duly endorsed in form for transfer to the Company or its designee, and the
Company will be entitled to receive customary representations and warranties
from each member of the Grantee Group regarding title to the Option Shares.
"Cause" shall mean (i) the commission of a felony or a crime involving
moral turpitude or the commission of any other act or omission involving
disloyalty, fraud or material dishonesty with respect to the Company or any of
its Subsidiaries or any of their customers or suppliers, (ii) conduct tending to
bring the Company or any of its Subsidiaries into substantial public disgrace or
disrepute, (iii) substantial and repeated failure to perform material duties as
reasonably directed by the Board or, (iv) gross negligence or willful misconduct
with respect to the Company or any of its Subsidiaries or (v) any other material
breach of this Agreement by the Grantee if such breach is not cured within 30
days of Grantee receiving written notice of such breach; provided that Cause
shall not be deemed to exist unless (A) the Company provides to the Grantee a
written notice specifying in detail the reasons for (and/or breaches leading to)
the existence of Cause within 30 days of becoming aware of the existence of such
Cause and (B) to the extent curable, the Grantee has had 30 days after receipt
of the Company's written notice to cure the existence of any such Cause.
"Retirement" means the retirement after age 65 pursuant to the normal
retirement policy of the Company.
7. Conditions to Exercise. The Option may not be exercised by
Grantee unless the following conditions are met:
(a) The Option has become vested with respect to the Option
Shares to be acquired pursuant to such exercise;
(b) Legal counsel for the Company must be satisfied at the time
of exercise that the issuance of the Option Shares upon exercise will be in
compliance with the Securities Act and applicable United States federal,
state, local and foreign laws; and
(c) Grantee becomes (or remains) a party to the Shareholders'
Agreement.
8. Transferability. The Option may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of by Grantee except in
accordance with section 6.3 of the Plan; provided that, prior to any sale,
assignment, transfer, pledge or other such disposal allowed
-3-
<PAGE>
thereunder, the transferee must provide to the Company a written agreement
(reasonably satisfactory to the Company), whereby such transferee agrees to be
bound by the obligations applicable to the Grantee hereunder. The Option is
exercisable during Grantee's lifetime only by Grantee or any other person to
whom the Option is transferred in accordance with Section 6.3 of the Plan. If
Grantee or anyone claiming under or through Grantee attempts to violate this
Section 8, such attempted violation shall be null and void and without effect,
and the Company's obligation hereunder shall terminate. If at the time of
Grantee's death the Option has not been fully exercised, Grantee (or Grantee's
estate or any person who acquires the right to exercise the Option by bequest or
inheritance or by reason of Grantee's death) may, at any time within one year
after the date of Grantee's death (but in no event after the expiration of ten
years from the grant date), exercise the Option with respect to the number of
shares, determined under Section 4 above, as to which Grantee could have
exercised the Option at the time of Grantee's death, or with respect to such
greater number of shares as determined by the Committee in its sole discretion.
The applicable requirements of Section 7 above must be satisfied at the time of
such exercise. Any Option Shares received upon exercise of this Option are
subject to the repurchase rights, restrictions on transfer and right of first
refusal set forth in the Management Stock Purchase Agreement dated as of the
date hereof between Grantee and the Company (the "Management Stock Purchase
Agreement").
9. Administration. Any action taken or decision made by the Company
or the Committee or its delegates arising out of or in connection with the
construction, administration, interpretation or effect of the Plan or this
Agreement shall lie within its sole and absolute discretion, as the case may be,
and shall be final, conclusive and binding on Grantee and all persons claiming
under or through Grantee. By accepting this grant or any other benefit under
the Plan, Grantee and each person claiming under or through Grantee shall be
conclusively deemed to have indicated acceptance and ratification of, and
consent to, any such action taken under the Plan by the Company or the Committee
or its delegates.
10. No Rights as Shareholder. Unless and until a certificate or
certificates representing such Option Shares shall have been issued to Grantee
(or any person acting under Section 8 above), Grantee shall not be or have any
of the rights or privileges of a shareholder of the Company with respect to
Option Shares acquirable upon exercise of the Option; provided that the Company
shall issue such certificate or certificates within five business days of the
exercise of (and the payment for) the Option.
11. Investment Representation. Grantee hereby acknowledges that the
Option Shares which Grantee may acquire by exercising the Option shall be
acquired for investment without a view to distribution, within the meaning of
the Securities Act, and shall not be sold, transferred, assigned, pledged or
hypothecated in the absence of an effective registration statement for the
Option Shares under the Securities Act and applicable state securities laws or
an applicable exemption from the registration requirements of the Act and any
applicable state securities laws. Grantee also agrees that the Option Shares
which Grantee may acquire by exercising the Option will not be sold or otherwise
disposed of in any manner which would constitute a violation of any applicable
federal or state securities laws.
-4-
<PAGE>
12. Sale of the Company.
(a) Consent to Sale of Company. If the Board and the holders of
50% of the Company's Common Stock then outstanding approve a Sale of the Company
(the "Approved Sale"), Grantee will (i) consent to and raise no objections
against the Approved Sale or the process pursuant to which the Approved Sale is
arranged, (ii) waive any dissenter's rights and any similar rights with respect
thereto and (iii) if the Approved Sale is structured as a sale of stock, sell
all (to the extent vested) of Option Shares and rights to acquire Option Shares
held by Grantee on the terms and conditions approved by the Board and the
holders of a majority of the Company's Stock then outstanding. Grantee will take
all necessary and desirable actions in connection with the consummation of the
Approved Sale as requested by the Board.
(b) Purchaser Representative. If the Company or the holders of
the Company's securities enter into any negotiation or transaction for which
Rule 506 (or any similar rule then in effect) promulgated by the Securities
Exchange Commission pursuant to the Securities Act may be available with respect
to such negotiation or transaction (including a merger, consolidation or other
reorganization), Grantee 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 Grantee appoints the purchaser representative
designated by the Company, the Company will pay the fees of such purchaser
representative, but if Grantee declines to appoint the purchaser representative
designated by the Company, Grantee will appoint another purchaser representative
(reasonably acceptable to the Company), and Grantee will be responsible for the
fees of the purchaser representative so appointed.
13. Notices. Any notice hereunder to the Company shall be addressed
to the Company, Attention: Board of Directors, and any notice hereunder to
Grantee shall be addressed to Grantee at Grantee's last address on the records
of the Company, subject to the right of either party to designate at any time
hereafter in writing some other address. Any notice shall be deemed to have
been duly given when delivered personally, one day following dispatch if sent by
reputable overnight courier, fees prepaid, or three days following mailing if
sent by registered mail, return receipt requested, postage prepaid and addressed
as set forth above.
14. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of any successors to the Company and all persons lawfully
claiming under Grantee.
15. GOVERNING LAW. THE VALIDITY, CONSTRUCTION, INTERPRETATION,
ADMINISTRATION AND EFFECT OF THE PLAN, AND OF ITS RULES AND REGULATIONS, AND
RIGHTS RELATING TO THE PLAN AND TO THIS AGREEMENT, SHALL BE GOVERNED, CONSTRUED
AND INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING ANY
EFFECT TO ANY CHOICE OF LAW RULES OF ANY STATE.
16. Arbitration. Section 4.8 of the Management Stock Purchase
Agreement is hereby incorporated herein by reference.
* * * * *
-5-
<PAGE>
IN WITNESS WHEREOF, the Company and Grantee have executed this Agreement as of
the date first above written.
THE DERBY CYCLE CORPORATION
By:
---------------------------------
Name:
Title:
---------------------------------
---------------------
-6-
<PAGE>
EXHIBIT 10.17
EXECUTION
FORM OF MANAGEMENT STOCK PURCHASE AGREEMENT
This MANAGEMENT STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
March __, 1999, by and between Derby Cycle Corporation, a Delaware corporation
(the "Company") and ______________ ("Employee").
This Agreement provides for the purchase by Employee of (a) ___ shares of
the Company's Class A Common Stock, par value $.01 per share (the "Class A
Common Stock") and (b) ___ shares of the Company's Class C Common Stock, par
value $.01 per share (the "Class C Common Stock;" and together with the Class A
Common Stock, the "Common Stock"), upon the terms and subject to the conditions
set forth herein. Capitalized terms used but not defined herein shall have the
meaning assigned to such terms in that certain Amended and Restated
Shareholders' Agreement dated February 3, 1999, by and among the Company and
certain shareholders of the Company (the "Shareholders' Agreement").
NOW, THEREFORE, in consideration of the mutual undertakings contained
herein, the parties agree as follows:
ARTICLE 1. PURCHASE OF STOCK.
1.1 Purchase and Sale of Stock. On the date hereof, the Company agrees to
sell Employee and Employee agrees to purchase from the Company (a) ___ shares of
Class A Common Stock and (b) __ shares of Class C Common Stock, all at a
purchase price of $1,000.00 per share for an aggregate purchase price of
$__________. Upon execution of this Agreement, (i) Employee will deliver to the
Company (A) a check for $__________ and (B) an executed promissory note in the
form attached hereto as Exhibit A in the principal amount of $__________, and
(ii) the Company shall deliver to Employee a certificate or certificates
representing the Common Stock.
1.2 Pledge of Stock. Employee hereby grants to the Company a security
interest in the Common Stock purchased by Employee hereunder to secure the
payment of the promissory note. In the event of Employee's death or disability
or in the event that Employee's employment with the Company or its subsidiaries
is terminated for any reason, the promissory note shall become immediately due
and payable, and Employee hereby authorizes the Company and its subsidiaries to
deduct such amount from any amount owed by the Company to Employee. Employee
shall be liable for any deficiency.
1.3 Shareholders' Agreement. The Company's obligations under this
Agreement are expressly conditioned upon Employee becoming a party to the
Shareholders' Agreement.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES.
2.1 Representations and Warranties of Employee. As a material inducement
to the Company to enter into this Agreement and sell the Common Stock, Employee
hereby represents and warrants to the Company that:
<PAGE>
(a) (i) this Agreement constitutes a legal, valid and binding
obligation of Employee, enforceable against Employee in accordance with its
terms, (ii) the execution, delivery and performance of this Agreement by
Employee does not and will not conflict with, breach, violate or cause a
breach of or default under any agreement, contract, instrument, order,
judgment or decree to which Employee is a party or by which he is bound,
and (iii) Employee is not a party to or bound by any employment agreement
or noncompete agreement with any other person or entity.
(b) Employee is acquiring the Common Stock purchased hereunder or
acquired pursuant hereto for his own account with the present intention of
holding such securities for purposes of investment, and Employee has no
intention of selling such securities in a public distribution in violation
of the federal securities laws or any applicable state securities laws.
(c) Employee is financially able to bear the economic risk of an
investment in the Common Stock, including the total loss thereof.
(d) Employee is able to bear the economic risk of the investment in
the Common Stock for an indefinite period of time and Employee understands
that the Common Stock has not been registered under the Securities Act and
cannot be sold unless subsequently registered under the Securities Act or
an exemption from such registration is available.
(e) Employee has had an opportunity to ask questions and receive
answers concerning the terms and conditions of the purchase of the Common
Stock and has had full access to such other information concerning the
Company as Employee has requested. Employee has reviewed, or has had an
opportunity to review, the following documents: (i) the Company's
Certificate of Incorporation and Bylaws; (ii) all material information
provided by the Company or its subsidiaries to any person providing
financing to the Company or its subsidiaries, including, but not limited
to, the Company's pro forma balance sheet, as well as financial
projections, estimates, forecasts, budgets, summaries, reports and other
related documents.
(f) No commission, fee or other remuneration is to be paid or given
directly or indirectly, to any person or entity for soliciting Employee to
purchase the Common Stock.
(g) Employee is employed by the Company or one of its subsidiaries, is
sophisticated in financial matters and is able to evaluate the risks and
benefits of the investment in the Common Stock and has determined that such
investment in the Common Stock is suitable for Employee, based upon
Employee's financial situation and needs, as well as Employee's other
securities holdings.
2.2 Representations and Warranties of the Company. As a material
inducement to the Employee to enter into this Agreement and purchase the Common
Stock, the Company hereby represents and warrants that:
(a) this Agreement constitutes a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its
terms and the execution, delivery and performance of this Agreement by the
Company does not and will not conflict
-2-
<PAGE>
with, breach, violate or cause a default under any agreement, contract,
instrument, order, judgment or decree to which the Company is a party or by
which it is bound;
(b) the Company is a corporation duly organized, validly existing and
in good standing under the laws of Delaware and is qualified to do business
in every jurisdiction in which its ownership of property or conduct of
business requires it to qualify, except where the lack of such
qualification would not have a material adverse effect on the financial
condition of the Company. The Company has all requisite corporate power
and authority to carry out the transactions contemplated by this Agreement;
and
(c) as of immediately following the consummation of the transactions
contemplated hereby, all of the outstanding shares of the Common Stock
shall be duly and validly issued and authorized, fully paid, nonassessable
and free and clear of all encumbrances.
ARTICLE 3. TRANSFERABILITY
3.1 Transfer of Stock. No Common Stock held by Employee may be sold,
transferred, assigned, pledged or otherwise disposed of (a "Transfer") by
Employee other than as provided in Section 3.3 hereof. Any attempt by Employee
to Transfer any Common Stock in violation of this Article 3 shall be null and
void, and the Company shall not give any effect to such attempted Transfer in
the stock records of the Company.
3.2 Legend. Each certificate evidencing the Common Stock and each
certificate issued in exchange for or upon the transfer of the Common Stock (if
such shares remain Common Stock upon such transfer) will be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "ACT") OR ANY STATE SECURITIES LAW OR REGULATION.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
REPURCHASE OPTIONS AND OTHER PROVISIONS SET FORTH IN A MANAGEMENT
STOCK PURCHASE AGREEMENT BETWEEN DERBY CYCLE CORPORATION (THE
"COMPANY") AND EMPLOYEE DATED AS OF MARCH ___, 1999, AS AMENDED AND
MODIFIED FROM TIME TO TIME, A COPY OF WHICH MAY BE OBTAINED BY THE
HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT
CHARGE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO THE
AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT DATED AS OF FEBRUARY 3,
-3-
<PAGE>
1999, AMONG COMPANY AND CERTAIN SHAREHOLDERS THEREOF. A COPY OF SUCH
SHAREHOLDERS' AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE
COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
The Company will imprint such legends on certificates evidencing the Common
Stock outstanding prior to the date hereof. The legend set forth in the third
paragraph above shall be removed from the certificates pursuant to the terms of
the Shareholders' Agreement.
3.3 Transfer Restriction.
(a) Employee may not transfer the Common Stock held by Employee except
pursuant to (i) a Public Sale, (ii) a Sale of the Company, (iii) a Permitted
Transfer, (iv) Section 3.4 hereof, or (v) Section 3.5 hereof.
"Permitted Transfer" means a transfer (1) by will or the laws of descent or
(2) to Employee's spouse or lineal descendants (whether natural or adopted) and
any trust solely for the benefit of such Employee's spouse and/or immediate
family.
"Permitted Transferee" means any person who receives Common Stock in a
Permitted Transfer.
(b) Except pursuant to a Sale of the Company or a Public Sale,
Employee may not Transfer any Common Stock of the Company without first
delivering to the Company (i) a written notice setting forth the date, price and
other terms of such Transfer, which notice shall be delivered to the Company at
least thirty (30) days prior to the consummation of such Transfer and (ii) if
the Company so requests, (A) an opinion of counsel acceptable in form and
substance to the Company that registration under the Securities Act is not
required in connection with such Transfer, (B) a written agreement (reasonably
satisfactory to the Company), whereby the transferee agrees to (x) be bound by
the obligations applicable to the Employee hereunder (including, without
limitation, becoming a party to the Shareholders' Agreement and complying with
the restrictions on Transfer of Common Stock as set forth in this Section 3),
and (C) such further evidence as the Company may reasonably require to confirm
to the Company's satisfaction that such sale, transfer or disposition is in
compliance with the terms of this Agreement and the Shareholders' Agreement.
3.4 Right of First Refusal.
(a) After the seventh anniversary of the date hereof, Employee may
transfer Common Stock in accordance with the provisions of this Section 3.4. At
least 60 days prior to making any transfer, Employee shall deliver a written
notice (the "Sale Notice") to the Company. The Sale Notice will disclose in
reasonable detail the identity of the prospective transferee(s) and the terms
and conditions of the proposed transfer. Employee shall not consummate any
such transfer until 60 days after the Sale Notice has been delivered to the
Company, unless the Company has notified Employee in writing that it will not
exercise its rights under this Section 3.4. The date of the first to occur of
such events is referred to herein as (the "Authorization Date").
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<PAGE>
(b) The Company may elect to purchase all or any portion of the Common
Stock to be transferred upon the same terms and conditions as those set forth in
the Sale Notice (the "Right of First Refusal") by delivering a written notice of
such election to Employee within 30 days after the receipt of the Sale Notice by
the Company (the "Election Notice"). If the Company has not elected to purchase
all of the Common Stock specified in the Sale Notice, Employee may transfer the
Common Stock not purchased by the Company to the prospective transferee(s) as
specified in the Sale Notice at a price and on terms no more favorable to the
transferee(s) thereof than specified in the Sale Notice during the 60-day period
immediately following the Authorization Date. Any Common Stock not so
transferred within such 60-day period must be reoffered to the Company in
accordance with the provisions of this Section 3.4 in connection with any
subsequent proposed transfer.
(c) The restrictions contained in this Section 3.4 will not apply with
respect to transfers of Common Stock pursuant to (i) a Public Sale, (ii) a Sale
of the Company, (iii) a Permitted Transfer, or (iv) Section 3.5 hereof.
3.5 Repurchase of Stock.
(a) In the event that Employee's employment with the Company is
terminated for any reason, the Common Stock held by Employee and Employee's
Permitted Transferees (collectively, the "Employee Group") will be repurchased
by the Company pursuant to the terms and conditions set forth in this Section
3.5 (the "Repurchase") at a price per share equal to the Fair Market Value
thereof determined as of the date of Employees termination (the "Termination
Date"); provided that, in the case of a termination for Cause by the Company or
a voluntary termination of employment by Employee (other than due to
Retirement), such Repurchase shall be at the option of the Company (the
"Repurchase Option").
(b) The Company shall exercise the Repurchase by delivery of written
notice (the "Repurchase Notice") to each member of the Employee Group. The
Repurchase Notice shall set forth the number of shares of Common Stock to be
acquired from each member of the Employee Group, the aggregate consideration to
be paid for such shares of Common Stock, and the time and place for the closing
of the transaction.
(c) The Company may exercise the Repurchase Option by delivery of
written notice (the "Repurchase Option Notice") to each member of the Employee
Group. The Repurchase Option Notice shall set forth the number of shares of
Common Stock to be acquired from each member of the Employee Group, the
aggregate consideration to be paid for such shares of Common Stock, and the time
and place for the closing of the transaction.
(d) The closing of the purchase of any shares of Common Stock pursuant
to the Repurchase or the Repurchase Option will take place on the date
designated by the Company in the Repurchase Notice or the Repurchase Option
Notice, as the case may be, which date will not be more than 45 days nor less
than 10 days after the delivery of such Repurchase Notice or the Repurchase
Option Notice, as the case may be. The Company will pay for the shares of
Common Stock to be purchased by delivering to each member of the Employee Group
a check in an amount equal to the aggregate purchase price for the shares of
Common Stock to be repurchased from such member of the Employee Group.
Notwithstanding the foregoing, in the event payment of the
-5-
<PAGE>
purchase price would cause a default under any material financing agreement of
the Company or any of its subsidiaries in effect from time to time (the
"Financing Agreements"), or is otherwise prohibited under applicable law, the
Company shall have the option of paying the purchase price with a subordinated
promissory note bearing interest at 6% per annum, due on the eighth anniversary
of the date of issuance, and payable upon the earlier to occur of the maturity
thereof or on the date of a Sale of the Company. In the event the issuance of
the subordinated promissory note is not permitted under the Financing Agreements
or applicable law, the Company may pay the purchase price for the shares of
Common Stock by the issuance of preferred stock bearing a dividend rate of 6%
per annum with redemption dates and payment restructuring similar to those set
forth in the subordinated promissory notes. If issuance of a subordinated
promissory note or the preferred stock is not permitted by the Financing
Agreements or applicable law, the Company may defer the repurchase until such
time as a form of payment described in this Section 3.5 is permitted under the
Financing Agreements and/or applicable law. If the Company determines that
withholding tax is required with respect to the Repurchase or the exercise of a
Repurchase Option, the Company shall withhold an amount equal to such
withholding tax from the purchase price. At the closing, each member of the
Employee Group will deliver the certificates representing the shares of Common
Stock to be sold, duly endorsed in form for transfer to the Company or its
designee, and the Company will be entitled to receive customary representations
and warranties from each member of the Employee Group regarding title to the
shares of Common Stock.
(e) In connection with any repurchase hereunder, the purchase price
payable by the Company shall be reduced, but not below zero, by any amounts
outstanding under any promissory notes issued by the Employee to acquire the
securities being purchased. The amounts due under such notes shall be deemed
paid to the extent of such reduction. In the event that (i) an Employee is
terminated for Cause or voluntarily terminates his employment (other than due to
Retirement), and (ii) the stock is not repurchased hereunder, the amounts due
under such promissory notes shall become immediately due and payable.
"Cause" shall mean (i) the commission of a felony or a crime involving
moral turpitude or the commission of any other act or omission involving
disloyalty, fraud or material dishonesty with respect to the Company or any of
its Subsidiaries or any of their customers or suppliers, (ii) conduct tending to
bring the Company or any of its Subsidiaries into substantial public disgrace or
disrepute, (iii) substantial and repeated failure to perform material duties as
reasonably directed by the Board of Directors or, (iv) gross negligence or
willful misconduct with respect to the Company or any of its Subsidiaries or (v)
any other material breach of this Agreement by the Employee if such breach is
not cured within 30 days of Employee receiving written notice of such breach;
provided that Cause shall not be deemed to exist unless (A) the Company provides
to the Employee a written notice specifying in detail the reasons for (and/or
breaches leading to) the existence of Cause within 30 days of becoming aware of
the existence of such Cause and (B) to the extent curable, the Employee has had
30 days after receipt of the Company's written notice to cure the existence of
any such Cause.
"Fair Market Value" per share on any given date means the average of the
closing price of the sales of such shares on all securities exchanges on which
such shares may at the time be listed, or, if there have been no sales on any
such exchange on any day, the average of the highest bid and lowest asked prices
on all such exchanges at the end of such day, or, if on any day such stock is
not so listed, the average of the representative bid and asked prices quoted on
the NASDAQ Stock Market as of 4:00 P.M., New York time, or, if on any day such
shares are not quoted on the NASDAQ Stock
-6-
<PAGE>
Market, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar organization. If at any time such shares
are not listed or quoted, the Fair Market Value per share shall be determined by
the Board of Directors or the compensation committee of the Board of Directors
(i) based on such factors as the members thereof, in the exercise of their
business judgment, consider relevant and (ii) consistent with fair market
valuation principles previously used by the Board of Directors to determine the
cost of the Common Stock acquired hereunder.
"Retirement" means the retirement after age 65 pursuant to the normal
retirement policy of the Company.
ARTICLE 4. GENERAL PROVISIONS.
4.1 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
4.2 Entire Agreement. This Agreement and those documents expressly
referred to herein embody the complete agreement and understanding among the
parties and supersede and preempt any prior understandings, agreements or
representations by or among the parties hereto with respect to the subject
matter hereof written or oral, which may have related to the subject matter
hereof in any way.
4.3 Amendments and Waivers. Any provision of this Agreement may be
amended or waived only with the prior written consent of Employee and the
Company.
4.4 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT
TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE
OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
4.5 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument.
4.6 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement or of any term or provision hereof.
-7-
<PAGE>
4.7 Arbitration.
(a) Employee and the Company agree that the arbitration procedure set
forth below shall be the sole and exclusive method for resolving and remedying
claims for money damages arising out of this Agreement (the "Disputes").
Nothing in this Section 4.7 shall prohibit a party hereto from instituting
litigation to enforce any Final Determination (as defined below) or availing
itself of the other remedies set forth in Section 4.8 below. The parties
hereby agree and acknowledge that, except as otherwise provided in this Section
4.7 or in the Commercial Arbitration Rules of the American Arbitration
Association as in effect from time to time, the arbitration procedures and any
Final Determination hereunder shall be governed by, and shall be enforced
pursuant to the Uniform Arbitration Act and applicable provisions of New York
law.
(b) In the event that any party asserts that there exists a Dispute,
such party shall deliver a written notice to each other party involved therein
specifying the nature of the asserted Dispute and requesting a meeting to
attempt to resolve the same. If no such resolution is reached within ten
business days after such delivery of such notice, the party delivering such
notice of Dispute (the "Disputing Person") may, within 45 business days after
delivery of such notice, commence arbitration hereunder by delivering to each
other party involved therein a notice of arbitration (a "Notice of Arbitration")
and by filing a copy of such Notice of Arbitration with the appropriate office
of the American Arbitration Association. Such Notice of Arbitration shall
specify the matters as to which arbitration is sought, the nature of any
Dispute, the claims of each party to the arbitration and shall specify the
amount and nature of any damages, if any, sought to be recovered as a result of
any alleged claim, and any other matters required by the Commercial Arbitration
Rules of the American Arbitration Association as in effect from time to time to
be included therein, if any.
(c) The Company and Employee shall attempt to agree within 10 business
days on an arbitrator. If they are unable to agree, the Company and the Employee
each shall select one independent arbitrator expert in the subject matter of the
Dispute (the arbitrators so selected shall be referred to herein as "Company's
Arbitrator" and "Employee's Arbitrator," respectively). In the event that
either party fails to select an independent arbitrator as set forth herein
within 20 days from delivery of a Notice of Arbitration, then the matter shall
be resolved by the arbitrator selected by the other party. Company's Arbitrator
and Employee's Arbitrator shall select a third independent arbitrator expert in
the subject matter of the dispute, and the arbitrator so selected shall resolve
the matter according to the procedures set forth in this Section 4.7. If
Company's Arbitrator and Employee's Arbitrator are unable to agree on a third
arbitrator within 20 days after their selection, Company's Arbitrator and
Employee's Arbitrator shall each prepare a list of three independent
arbitrators. Company's Arbitrator and Employee's Arbitrator shall each have the
opportunity to designate as objectionable and eliminate one arbitrator from the
other arbitrator's list within 7 days after submission thereof, and the third
arbitrator shall then be selected by lot from the arbitrators remaining on the
lists submitted by Company's Arbitrator and Employee's Arbitrator.
(d) The arbitrator jointly selected by the Company and the Employee
pursuant (or the third arbitrator selected pursuant) to paragraph (c) will
determine the allocation of the costs and expenses of arbitration.
-8-
<PAGE>
(e) The arbitration shall take place in New York City and shall be
conducted under the American Arbitration Association rules as in effect from
time to time in the State of New York, except as otherwise set forth herein or
as modified by the agreement of all of the parties to this Agreement. The
arbitrator shall conduct the arbitration so that a final result, determination,
finding, judgment and/or award (a "Final Determination") is made or rendered as
soon as practicable, but in no event later than 90 business days after the
delivery of the Notice of Arbitration nor later than 10 days following
completion of the arbitration. The Final Determination must be agreed upon and
signed by the arbitrator. The Final Determination shall be final and binding on
all parties and there shall be no appeal from or reexamination of the Final
Determination, except for fraud, perjury, evident partiality or misconduct by an
arbitrator prejudicing the rights of any party and to correct manifest clerical
errors.
(f) Employee and the Company may enforce any Final Determination in
any state or federal court having jurisdiction over the dispute. For the
purpose of any action or proceeding instituted with respect to any Final
Determination, each party hereto hereby irrevocably submits to the jurisdiction
of such courts, irrevocably consents to the service of process by registered
mail or personal service and hereby irrevocably waives, to the fullest extent
permitted by law, any objection which it may have or hereafter have as to
personal jurisdiction, the laying of the venue of any such action or proceeding
brought in any such court and any claim that any such action or proceeding
brought in such court has been brought in an inconvenient forum. The foregoing
shall in no way prevent or prejudice the prevailing party's right to enforce a
Final Determination in any other jurisdiction (whether domestic or foreign).
(g) If any party shall fail to pay the amount of any damages, if any,
assessed against it within 10 days of the delivery to such party of such Final
Determination, the unpaid amount shall bear interest from the date of such
delivery at the maximum rate permitted by applicable usury laws. Interest on
any such unpaid amount shall be compounded semi-annually, computed on the basis
of a 360-day year consisting of twelve 30-day months and shall be payable on
demand. In addition, such party shall promptly reimburse the other party for
any and all costs or expenses of any nature or kind whatsoever (including, but
not limited to, all attorneys' fees) incurred in seeking to collect such damages
or to enforce any Final Determination.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Management Stock Purchase
Agreement as of the date set forth above.
DERBY CYCLE CORPORATION
By:
--------------------------
Name:
Title:
-----------------------------
------------------
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<PAGE>
EXHIBIT A
PROMISSORY NOTE
-11-
<PAGE>
EXHIBIT 10.18
Agreement
between
Diamond Back International Company Limited
Western States Import Company Inc.
Bejka Trading A.B.
as Vendors
and
The Derby Cycle Corporation
and
Derby Sweden A.B.
as Purchasers
relating to
the sale and purchase of certain of the business assets and rights, and the
assumption of certain liabilities, involved in the bicycle, parts and
accessories and fitness equipment distribution business carried on under the
principal trade name "Diamondback".
SIMMONS & SIMMONS
21 Wilson Street Londson EC2M 2TX
Tel: 0171-628 2020/528 9292 Fax: 0171-628 2070 DX Box No 12
<PAGE>
CONTENTS
<TABLE>
<S> <C>
1. Interpretation...................................................... 1
2. Sale of Business Assets............................................. 10
3. Consideration....................................................... 12
4. Conditions to Completion............................................ 14
5. Completion.......................................................... 16
6. Treatment of Contracts.............................................. 20
7. Management of the Business prior to Completion...................... 23
8. Provisions relating to Tax and VAT.................................. 25
9. Provision of Information............................................ 26
10. Exclusivity......................................................... 28
11. Restrictions of Vendors' Group...................................... 29
12. Warranties.......................................................... 30
13. Indemnity........................................................... 32
14. Change of name...................................................... 33
15. Public Announcements................................................ 33
16. Employees of the Business........................................... 34
17. Provisions relating to this Agreement............................... 35
18. Dispute Resolution.................................................. 39
19. Law and Jurisdiction................................................ 40
20. Invalidity.......................................................... 41
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SCHEDULE 1:................................................................ 42
SCHEDULE 2: THE SALE COMPANIES............................................. 43
SCHEDULE 3: WARRANTIES AND REPRESENTATIONS................................. 44
PART 1: Warranties and Representations in Relation to the Business Assets.. 44
1. Interpretation........................................................ 44
2. Warranties and representations........................................ 45
3. The Vendor and the Vendor's Group..................................... 45
4. Licences, litigation and the law...................................... 46
5. Environmental......................................................... 49
6. The Vendor's solvency................................................. 51
7. Accounts, records and Tax............................................. 52
8. The Conduct of the Business and the effect of the sale................ 55
9. The Business and its assets........................................... 56
10. Contracts and contractual arrangements................................ 61
11. Employees............................................................. 64
12. Miscellaneous......................................................... 67
SCHEDULE 3: WARRANTIES AND REPRESENTATIONS................................. 68
PART 2: Specific Warranties................................................ 68
1. Interpretation........................................................ 68
2. US Warranties and Representations..................................... 68
3. Swedish Warranties and Representations................................ 70
SCHEDULE 4: ADJUSTMENT OF CONSIDERATION.................................... 71
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
1. Interpretation...................................................... 71
2. Completion Accounts................................................. 71
3. Stock valuation..................................................... 73
4. Procedure........................................................... 74
5. Adjustment of Consideration......................................... 75
SCHEDULE 5: ASSETS....................................................... 76
PART 1: Current Assets................................................... 76
PART 2: Properties....................................................... 77
PART 3: Fixed Assets..................................................... 78
PART 4: Distribution Agreements.......................................... 101
SCHEDULE 6: LIST OF EMPLOYEES............................................ 104
SCHEDULE 7: LIST OF ASSUMED LIABILITIES.................................. 128
SCHEDULE 8: VENDOR/WARRANTOR PROTECTION.................................. 133
1. (Intentionally Blank)............................................... 133
2. Relevant Claims..................................................... 133
3. Financial Limits.................................................... 133
4. Time Limits......................................................... 134
5. No duplication of recovery.......................................... 135
6. Relevance of limitations in circumstances of fraud etc.............. 135
7. Third party claims.................................................. 135
8. Events after Completion............................................. 136
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
EXHIBIT 1:............................................................... 137
1. Interpretation...................................................... 138
2. Indemnity........................................................... 138
3. Gross-up............................................................ 139
4. Deductions and withholdings......................................... 139
5. Payments under this Deed............................................ 140
6. Incorporation of provisions from the Agreement...................... 140
EXHIBIT 2:............................................................... 142
EXHIBIT 3:............................................................... 145
PART 1: Form of Assignment of Intellectual Property Rights............... 145
EXHIBIT 3:............................................................... 148
PART 2: Form of Assignment of Trade Marks................................ 148
EXHIBIT 3:............................................................... 150
PART 3: Form of Assignment of Patents/Designs............................ 150
EXHIBIT 4:............................................................... 152
PART 1: Form of Assignment of the Contracts.............................. 152
1. Definitions and Interpretation...................................... 152
2. Assignment of Contracts............................................. 152
3. Assignment of Third Party Rights.................................... 153
4. Further Assurance................................................... 153
5. Law and Jurisdiction................................................ 153
PART 2: Form of Novation of the Contracts................................ 154
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
1. Interpretation.................................................... 154
2. Novation.......................................................... 154
3. Warranties........................................................ 155
4. Confirmation of terms............................................. 156
5. Limitation Periods................................................ 156
6. Governing Law..................................................... 156
PART 3: Form of Assignment of U.S. Property............................ 158
</TABLE>
v
<PAGE>
THIS AGREEMENT is dated December 1998 and made
- --------------
BETWEEN:
- --------
(1) DIAMOND BACK INTERNATIONAL COMPANY LIMITED ("International") a company
------------------------------------------
incorporated in The British Virgin Islands whose principal/registered
office is at International Trust Building, Wickhams Cay, Road Town,
Tortola, The British Virgin Islands;
(2) WESTERN STATES IMPORT COMPANY, INC. ("Western States") a company
-----------------------------------
incorporated in California, USA whose principal/registered office is at
4030 Via Pescador, Camarillo, CA 93612-5008;
(3) BEJKA TRADING A.B. ("Bejka") a company incorporated in Sweden under number
------------------
556115-4609 whose principal office is at Gothenburg;
(each of parties (1) to (3) a "Vendor" and so that references to a "Vendor"
shall be to such one or more of the Vendors as the context requires, and
together the "Vendors")
(4) THE DERBY CYCLE CORPORATION ("Derby Cycle") a company incorporated in the
---------------------------
state of Delaware, USA whose principal/registered office is at 22710 72nd
Avenue South, Kent, Washington, WA 98032, United States of America; and
(5) DERBY SWEDEN A.B. ("Derby Sweden") a company incorporated in Sweden whose
-----------------
principal/registered office is at Gothenburg.
(each of parties (4) and (5) a "Purchaser" and so that references to a
"Purchaser" shall be to such one or more of the Purchasers as the context
requires, and together the "Purchasers").
WHEREAS:
- --------
The Purchasers wish to acquire from the Vendors (as defined herein) certain
Business Assets (as defined herein) from the Vendors on the terms of this
Agreement
NOW IT IS HEREBY AGREED as follows:
- -----------------------
1. Interpretation
- -----------------
1.1 Definitions
In this Agreement where the context admits:
1
<PAGE>
"Affiliate" means, in relation to a body corporate, any subsidiary or
-----------
holding company of such body corporate, and any subsidiary of any such
holding company for the time being.
"Agreed Form" means, in relation to any document, a document in the terms
-------------
signed or initialled by or on behalf of one or more of the Vendors or their
solicitors and one or more of the Purchasers or their solicitors for
identification.
"Amendment Agreement" means an Agreement made between Derby Cycle and
---------------------
certain of its subsidiaries, Chase Manhattan plc as Arranger, Chase
Manhattan International Limited as Security Agent and Facility Agent and
the Financial Institutions named therein as Banks (the "Purchasers' Banks")
-----------------
pursuant to which, and in accordance with the terms and conditions stated
therein, the parties thereto agree to amend the DM225,000,000 Revolving
Credit Facility (the "Facility Agreement") dated 12 May 1998 in order to
------------------
permit Completion on terms satisfactory to the Purchasers' Banks.
"Assumed Liabilities" means in respect of each Vendor those liabilities of
---------------------
that Vendor in relation to the Business at Completion specified in the list
of Assumed Liabilities set out in Schedule 7 to the extent that the same
are provided for or otherwise taken into account in the Completion Accounts
and no other liabilities whatsoever.
"Audited Accounts" means the respective audited financial statements of
------------------
each of the Sale Companies comprising in each case an audited balance sheet
made up as at the respective Balance Sheet Date and the audited profit and
loss account and cash flow (if any) statement of each of the Sale Companies
in respect of the financial year ended on the respective Balance Sheet Date
including, in each case, the notes thereto and the directors' report and
auditors' report and audited, in each case, by the accounting firm set out
opposite each Sale Company's name in Schedule 2 or, at the cost of the
Purchasers, such other accounting firm as may be approved by the
Purchasers.
"Balance Sheet Date" means in relation to Western States, 31 October 1997
--------------------
and in relation to Bejka, 31 December 1997.
"Book Debts" means all debts and other amounts owing to the Sale Companies
------------
as at Completion (whether due for payment then or later) in respect of
goods and services supplied by or on behalf of the Business as shown in the
Completion Accounts other than:
(A) any Prepayments;
(B) any debts owing to any of the Sale Companies on any closed account of a
customer and any debts owing by a customer with whom any of the Sale
2
<PAGE>
Companies is at the Completion Date no longer prepared to transact
business; and
(C) any debts in respect of which any of the Sale Companies has prior to
the date of this Agreement instructed solicitors to commence
proceedings for recovery of such debts to the extent that such debts
are not fully covered by reserves or provisions in the Completion
Accounts.
"Business" means the business of sourcing, manufacturing, assembling,
----------
marketing and/or distributing bicycles, bicycle components and accessories,
principally (but not exclusively) under the "Diamondback" trade mark and
fitness equipment hitherto carried on by the Sale Companies and/or using
the Business Assets except in The People's Republic of China and in respect
of each Vendor means that part of the Business at present carried on by it.
"Business Assets" means in respect of each Vendor the assets of the
-----------------
Business to be sold by it and purchased as specified in Sub-clause 2.1.
"Business Day" means a day (other than a Saturday or Sunday) on which banks
--------------
are open for ordinary banking business in New York.
"Closing Purchase Price" means that part of the consideration payable at
------------------------
Completion Date by the Purchasers for the Business Assets as referred to in
Sub-clause 3.2.
"Completion" means completion of the sale and purchase of the Business
------------
Assets in accordance with Clause 5.
"Completion Accounts" has the meaning given in paragraph 1 of Schedule 4.
---------------------
"Completion Date" means the date of Completion.
-----------------
"Conditions" means the conditions set out in Sub-clause 4.1.
------------
"Consideration" means the consideration payable by the Purchasers for the
---------------
Business Assets as referred to in Sub-clause 3.1.
"Contracts" means all contracts, contractual arrangements, engagements and
-----------
orders in any way relating to any aspect of the Business and subsisting at
Completion, a full list of which has been attached to the Disclosure
Letter, other than purchase orders where details have been summarised, and
to which any of the Sale Companies are a party and which shall include
(without limitation) the Intellectual Property Agreements, the Distribution
Agreements, and the Leased Asset Contracts, and the contracts of employment
(subject to the provisions of any local law or jurisdiction in relation to
the transfer of employment contracts on a sale and purchase of business
assets) of the Employees.
3
<PAGE>
"Creditors" means all debts and other amounts (except the Excluded
-----------
Liabilities) owing by either of the Sale Companies to the trade creditors
of the Sale Companies in the ordinary course of the Business as at
Completion (whether due for payment then or later) to the extent that
provision or reserve (but not note only) is made in the Completion Accounts
in respect of such liabilities.
"Current Assets" means the assets of the kinds described in Schedule 5 Part
----------------
1 which in any way are employed in, or arise from, the carrying on of the
Business as at Completion.
"Diamondback Deutschland" means Diamond Back Deutschland GmbH, a company
-------------------------
incorporated in Germany whose principal/registered office is at Fahrrad
GroBhandel, Derchinger Str. 155, 86165 Angsburg, Germany;
"Diamondback Europe" means Diamond Back Europe S.A., a company incorporated
--------------------
in France whose principal/registered office is at BP.26-Z.I. Route de
Pernay, 37230 Luynes;
"Diamondback France" means Diamond Back France S.A., a company incorporated
--------------------
in France whose principal/registered office is at 4, Rue de L'Abreuvoir,
92415 Courbevoie, Cedex, France;
"Disclosure Letter" means the letter dated the date hereof written and
-------------------
delivered by or on behalf of the Vendors to the Purchasers in the Agreed
Form.
"Distribution Agreements" means in relation to a Vendor those agreements to
-------------------------
which that Vendor is a party in relation to distribution carried on in the
course of the Business and which are listed in Schedule 5 Part 4.
"Employees" means in relation to a Vendor each of the employees of that
-----------
Vendor as at the date hereof, details of whom are contained in Schedule 6
but subject to any cessation of the employment of any of such employees
which occurs in the period between the date of this Agreement and
Completion by reason of resignation, death or the termination of such
employment by the relevant Vendor and no other employees.
"Encumbrance" includes any interest or equity of any person (including, but
-------------
without limitation, any right to acquire, option or right of pre-emption);
any mortgage, charge, pledge, lien, assignment, hypothecation, security
interest (including any created by law), title retention or other security
agreement or arrangement; and any rental, hire purchase, credit sale or
other agreement for payment on deferred terms.
"Excluded Assets" means the Intercompany Receivables, all deferred Tax and
-----------------
the benefit of the claims brought by Bejka against (i) Fritidsartikler A/S
for SEK 789,000
4
<PAGE>
and (ii) Peter Junge for SEK 207,000 and provisions for customer losses of
Bejka which as at 31 October 1998 were SEK 219,619.
"Excluded Liabilities" means all liabilities of any of the Vendors to pay
----------------------
Tax in respect of all periods ending on or prior to Completion and all
liabilities which are not Assumed Liabilities and the Intercompany
Payables.
"Fixed Assets" means all fixtures and fittings and other fixed plant,
--------------
machinery and equipment physically attached to the Properties at the date
of this Agreement (excluding landlord's fixtures and fittings at the
Leasehold Properties) and all the plant and machinery, tools and equipment,
vehicles and office furniture and other tangible assets now used by the
Vendors in or in connection with the Business (other than the Properties
and the Leased Assets) and at the date hereof includes (without limitation)
the items set out in part 3 of Schedule 5.
"Goodwill" means all the goodwill, interest and connection of each of the
----------
Vendors in and concerning the Business together with the right to represent
the Purchasers as carrying on the Business as a going concern in succession
to the Vendor.
"Hong Kong" means the Hong Kong Special Administrative Region of the
-----------
People's Republic of China.
"Intellectual Property" means all patents, trade marks, service marks,
-----------------------
rights (registered or unregistered) in any designs; applications for any of
the foregoing; trade or business names; copyright (including rights in
computer software) and topography rights; know-how; secret formulae and
processes; lists of suppliers and customers and other confidential and
proprietary knowledge and information; rights protecting goodwill and
reputation; database rights and all rights and forms of protection of a
similar nature to any of the foregoing or having equivalent effect anywhere
in the world and all rights under licences and consents in respect of any
of the rights and forms of protection mentioned in this definition.
"Intellectual Property Agreements" means all agreements or arrangements
----------------------------------
relating in any way, whether wholly or partly, to the Intellectual Property
Rights.
"Intellectual Property Rights" means all Intellectual Property owned by any
------------------------------
or all of the Vendors in relation to the Business in any part of the world
(except for (1) the registration of "Diamondback" trade mark in The
People's Republic of China to the extent that the same is for use on goods
made, furnished and sold therein but which does not of itself confer any
right to use that mark outside The People's Republic of China and (2) the
applications for or registrations of the "MARZOCCHI" and "RITCHEY" trade
marks in Sweden in the name of Bejka) including but not limited to the
Listed Intellectual Property Rights.
5
<PAGE>
"Intercompany Payables" means all amounts owing by any of the Vendors to
-----------------------
any member of the Vendors' Group including any of the other Vendors.
"Intercompany Receivables" means all amounts owed by any member of the
--------------------------
Vendors' Group including any of the Vendors to any of the other Vendors.
"Leased Assets" means assets supplied to or held by either of the Sale
---------------
Companies pursuant to any Leased Asset Contract.
"Leased Asset Contracts" includes (subject to the exceptions stated in this
------------------------
definition) leases (whether operating or finance), conditional sale, credit
sale, hire purchase and other similar contracts subsisting at the date of
this Agreement and entered into by or on behalf of any of the Sale
Companies pursuant to which tangible assets used by such Vendors in or in
connection with the Business at that date have been supplied to or are held
by such Vendors on hire or other rental, lease, licence, hire purchase or
otherwise on terms such that title thereto does not pass or will not at
the Completion Date have passed to such Vendors, and the Leased Asset
Contracts include (without limitation) those listed in the Disclosure
Letter.
"Listed Intellectual Property Rights" means the Intellectual Property
-------------------------------------
Rights identified as such in the Disclosure Letter.
"Management Accounts" means the management accounts of each of the Sale
---------------------
Companies for the period from the Balance Sheet Date to 31 August 1998 true
copies of which are attached to the Disclosure Letter.
"Outstanding Purchase Orders" means all orders for Stock made by any of the
-----------------------------
Sale Companies which have not as of the date of this Agreement been shipped
from their port of origination.
"Prepayments" means the prepayments made and other amounts paid by any of
-------------
the Sale Companies in respect of the outgoings of the Business to the
extent that they are wholly attributable to the Business Assets or the
Employees and relate to the period after the Completion Date, as shown in
the Completion Accounts.
"Private Label Product" means any product sold under any trade mark, brand
-----------------------
or trade name not owned or controlled by the Vendors or any member of the
Vendors' Group prior to the date of this Agreement.
"Properties" means the land and premises, particulars of which are set out
------------
in Schedule 5 Part 2.
"Purchasers' Group" means each of the Purchasers and each of their
-------------------
Affiliates.
6
<PAGE>
"Purchasers' Solicitors" means Simmons & Simmons of 21 Wilson Street,
------------------------
London EC2M 2TX.
"Records" means all the books, files, records and other documents and
---------
written material of each of the Vendors relating wholly or mainly to the
Business or any of the Business Assets in whatever medium held, including
without limitation the following:
(A) all books of account, ledgers, payroll records, income records,
information relating to clients, customers and suppliers and other
books, documents and computer records which relate to or are relevant
to the Business;
(B) all promotional material, sales publications, catalogues, price lists,
advertising materials, surveys, reports and other technical materials
and sales matter relating to the Business;
(C) the VAT Records; and
(D) all records and documents of title relating to the Intellectual
Property Rights.
"Reference Accounts" means the management accounts of each of the Sale
--------------------
Companies as at, and for the period ending on, 31 October 1998.
"Sale Companies" means Bejka and Western States.
----------------
"Stock" means those of the Current Assets specified in paragraphs (A), (B),
-------
and (C) of Schedule 5 Part 1.
"Tax" means all forms of taxation, duties, levies, imposts of whatever
-----
jurisdiction including (without limitation) corporation tax, income tax,
sales tax, value added tax, use tax, capital value tax, property tax,
franchise tax, excise customs and other import duties, all employment taxes
and all penalties, charges, costs and interest relating to the foregoing or
resulting from failure to comply with the provisions of any enactment
relating to tax.
"Tax Deed" means the deed of indemnity in the form attached at Exhibit A in
----------
relation to taxation to be executed and delivered to the Purchasers at
Completion.
"Third Party Rights" means in respect of a Vendor all rights of that Vendor
--------------------
against third parties arising out of or in connection with the Business
Assets or the conduct of the Business prior to Completion (including, but
not limited to):-
(A) all rights under or in respect of manufacturer's or supplier's
warranties, guarantees and other contractual obligations and
assurances (express or implied);
7
<PAGE>
(B) all rights against any person in respect of any defect in the title,
construction or condition of the Properties or in respect of any work
or treatment carried out on the Properties; and
(C) all rights against sub-contractors and others;
but excluding any claim by or right of the Vendor in respect of any of the
following:
(1) Tax; and
(2) insurance, save to the extent set out in clause 2.3.
"US$" or "$" means dollars being lawful currency of the United States of
------------
America.
"VAT" means Value Added Tax and/or sales and other similar taxes.
-----
"VAT Records" means such records relating to the Business of the Sale
-------------
Companies as are required to be preserved following Completion for the
purposes of applicable legislation relating to VAT.
"Vendors' Group" means each of the Vendors and each of their Affiliates,
----------------
other than the Sale Companies.
"Vendors' Solicitors" means Richards Butler of 20th Floor, Alexandra House,
---------------------
16-20 Chater Road, Central, Hong Kong.
"Warranties" means the warranties and representations set out in Schedule
------------
3.
1.2 Construction of certain references
In this Agreement, where the context admits:
(A) words and phrases the definitions of which are contained or referred
to in Part XXVI Companies Act 1985 shall be construed as having the
meanings thereby attributed to them;
(B) references to, or to any provision of, any treaty, directive, statute,
regulation, decision, order, instrument, by-law, or any other law of,
or having effect in, any jurisdiction ("Laws") shall be construed also
--------
as references to all other Laws made under the Law referred to, and to
all such Laws as amended, re-enacted, consolidated or replaced or as
their application is modified by other Laws from time to time, and
whether before or after the date of this Agreement;
8
<PAGE>
(C) where any statement to the effect that the Vendors are not aware of a
matter or circumstance, or is a statement qualified by the expression
"so far as the Vendors are aware" or "to the best of the Vendors'
knowledge and belief" or any similar expression, that statement shall
be deemed to include an additional statement that it has been made
after due and careful enquiry;
(D) references to Clauses, Sub-clauses and Schedules are references to
clauses and sub-clauses of and schedules to this Agreement, references
to Paragraphs and Sub-Paragraphs are unless otherwise stated,
references to paragraphs and sub-paragraphs of the Schedule in which
the reference appears, references to Exhibits are to documents in
Agreed Form, identified as such, and references to this Agreement
include the Schedules and Exhibits;
(E) references to the singular shall include the plural and vice versa and
words importing the neuter or gender shall include both genders and
the neuter;
(F) "person" includes any individual, partnership, company, body
--------
corporate, corporation sole or aggregate, state or agency of a state,
any joint stock company, any trust, any joint venture and any
unincorporated association or organisation, in each case whether or
not having separate legal personality, and shall include any trade
union; and
(G) "company" includes any body corporate.
---------
1.3 Joint and several liabilities
All warranties, representations, indemnities, undertakings, covenants,
agreements and obligations given or entered into by more than one person in
this Agreement are given or entered into jointly and severally as between
the persons giving or entering into such warranties, representations,
indemnities, undertakings, covenants, agreements and obligations, and where
warranties, representations, indemnities, undertakings, covenants,
agreements and obligations are given by only one Purchaser or Vendor (as
the case may be) the other Purchasers or Vendors shall be jointly and
severally liable with the Purchaser or Vendor in question in the case of
any warranty, representation or indemnity, and shall be jointly and
severally liable to procure performance by the relevant Purchaser or Vendor
in each other case.
1.4 Headings
The headings and sub-headings are inserted for convenience only and shall
not affect the construction of this Agreement.
9
<PAGE>
1.5 Schedules
Each of the schedules shall have effect as if set out herein.
2. Sale of Business Assets
---------------------------
2.1 Sale and purchase of Business Assets
Subject to the exclusions in clause 2.2,
(A) Western States shall sell with full title guarantee to Derby Cycle and
Derby Cycle (with a view to carrying on the Business as a going
concern in succession to Western States) shall purchase free from all
Encumbrances and with effect from Completion:
(1) the Current Assets;
(2) the Properties;
(3) the Fixed Assets;
(4) the Intellectual Property Rights;
(5) the Goodwill;
(6) the Records;
(7) the benefit of the Contracts together with any title, right or
interest of Western States to or in the Leased Assets; and
(8) all other property, assets and rights of Western States used in
or for the purposes of the Business or in connection with the
Business Assets or any of them
in each case in relation to Western States.
(B) Bejka shall sell with full title guarantee to Derby Sweden and Derby
Sweden (with a view to carrying on the Business as a going concern in
succession to Bejka) shall purchase free from all Encumbrances and
with effect from Completion:
(1) the Current Assets;
(2) the Properties;
10
<PAGE>
(3) the Fixed Assets;
(4) the Intellectual Property Rights;
(5) the Goodwill;
(6) the Records;
(7) the benefit of the Contracts together with any title, right or
interest of Bejka to or in the Leased Assets; and
(8) all other property, assets and rights of Bejka used in or for the
purposes of the Business or in connection with the Business
Assets or any of them
in each case in relation to Bejka.
(C) International shall at Completion sell with full title guarantee and
Derby Cycle shall purchase, free from all Encumbrances (except that
Derby Cycle acknowledges that the "Sabotage" trade mark in Germany has
not been fully registered following its assignment to International)
the Intellectual Property Rights in so far as they are owned by
International; and
(D) International shall at Completion sell with full title guarantee and
Derby Cycle shall purchase free from all Encumbrances the benefit
(subject to the burden) of the Contracts in so far as International is
a party to such Contracts and such Contracts relate to distribution
carried on in the course of the Business.
2.2 Exclusions
(A) The sale and purchase pursuant to this Agreement shall not include the
Excluded Assets.
(B) The Vendors acknowledge and agree that the Purchasers shall not assume
any liability or obligation in respect of the Business which is not
expressly and specifically assumed by it under this Agreement and,
without limitation, the Purchasers shall have no liability or
obligation in respect of the Excluded Liabilities. Accordingly, each
of the Vendors hereby agrees to indemnify the Purchasers and hold each
of them harmless against all liabilities and obligations of the
Vendors in respect of the Business not expressly and specifically
assumed by the Purchasers under this Agreement.
11
<PAGE>
2.3 Risk and insurance
(A) Risk in respect of the Business Assets shall pass to the Purchaser at
Completion.
(B) The Vendor shall maintain or procure to be maintained in force by the
relevant member of the Vendor's Group all the insurance policies
referred to in the Disclosure Letter up to the time that risk passes
under clause 23. If any of the Fixed Assets or the Properties shall
be lost, destroyed or damaged prior to the time that risk passes and
if the Purchaser shall not in that event exercise any right it may
have to rescind this Agreement the Purchaser may at its option by
notice to the Vendor either:
(1) require the consideration payable hereunder to be abated or
adjusted as a result or
(2) require that the insurance monies (if any) recoverable in respect
thereof shall be paid to the Purchaser in which case the Vendor
shall direct the insurance company accordingly and any such
insurance monies received by the Vendor shall be held by it on
trust for the Purchaser absolutely.
(C) Stock shall be sold in the condition in which it is at Completion,
which shall be reflected in the consideration payable therefor, as
determined in accordance with the provisions of Schedule 4.
2.4 Simultaneous completion
No party shall be obliged to complete the sale and purchase of any of the
Business Assets unless the sale and purchase of all of the Business Assets
is completed simultaneously.
3. Consideration
-----------------
3.1 Amount
The Consideration shall consist of (1) the payment of the Closing Purchase
Price, and (2) the assumption by the Purchasers of the Assumed Liabilities
and the Purchasers agree and acknowledge that they exclusively shall be
liable for the Assumed Liabilities following Completion and that (for all
purposes hereof) the Assumed Liabilities are expressly and specifically
assumed by the Purchasers.
12
<PAGE>
3.2 Closing Purchase Price
The Closing Purchase Price shall be the cash sum payable in accordance with
Sub-clause 5.3. of US$22,750,000 apportioned between the Business Assets as
follows:
(A) for the Business Assets of Western States the cash sum of
US$14,500,000;
(B) for the Business Assets of Bejka the cash sum of US$3,000,000;
(C) for the Intellectual Property Rights the cash sum of US$4,750,000; and
(D) for the Contracts transferred, assigned or novated by International
the cash sum of US$500,000;
and the Assumed Liabilities shall be apportioned as between the Business
Assets to which they relate.
3.3 Indemnity
(A) The Purchasers shall, upon receiving the Relevant Correspondence and
subject to sub-clauses 3.3(B),(C) and (D) below, indemnify and keep
indemnified Western States in respect of legal costs and expenses
reasonably and properly incurred by Western States for the exclusive
purpose of contesting any claim by or on behalf of the United States
Internal Revenue Service ("IRS") to reallocate in any way the Purchase
-----
Price as set out in Clause 3.2 amongst the various assets or to deem
that the same be reallocated so far as Western States is concerned for
the purposes of United States Tax (a "Reallocation Claim"). For the
--------------------
avoidance of doubt this indemnity is only intended to cover the legal
costs of Western States for this purpose and shall not extend to the
payment of any Tax or any other payment arising as a result of any
reallocation or any deemed reallocation of the Purchase Price by the
IRS.
(B) Western States shall, upon receiving from the IRS notice of, or a
purported, Reallocation Claim, forthwith notify the Purchasers of such
notice or purported Reallocation Claim and propose counsel ("Tax
----
Counsel") to be appointed for the purpose of contesting such
--------
Reallocation Claim, and upon, but not prior to, receiving the approval
of the appointment of Tax Counsel in writing by the Purchasers (such
approval not to be unreasonably withheld or delayed and such approval
shall be deemed to be given if the Tax Counsel to be appointed is the
firm of Neal, Gerber & Eisnberg of Chicago, Illinois), shall appoint
Tax Counsel.
(C) Western States shall keep the Purchasers informed of all material
developments in relation to negotiations with the IRS relating to any
Reallocation Claim by providing written monthly reports or reports
written
13
<PAGE>
more often if necessary to keep the Purchasers aware of timely
information containing such information as the Purchaser shall
reasonably require together with the Relevant Correspondence.
(D) In the event that Tax Counsel advises Western States to enter into a
settlement with the IRS in connection with a Reallocation Claim
Western States shall promptly inform the Purchasers of such
recommendation and the Purchasers shall only continue to be liable to
Western States under Sub-clause 3.4(A) above to the extent that
Western States follows the advice of Tax Counsel and that any fees or
expenses incurred thereafter are reasonably and properly incurred in
the finalisation of the arrangements for such settlement.
(E) For the purposes of this Clause 3.4 only, "Relevant Correspondence"
-------------------------
means all correspondence between any of the IRS, Western States and
Tax Counsel as the case may be and in each case in relation to a
Reallocation Claim.
4. Conditions to Completion
----------------------------
4.1 Conditions
Completion is conditional upon:
(A) written evidence having been produced to the satisfaction of the
Vendors that satisfactory financing and banking facilities are
available as at the Completion Date to fund the proposed acquisition
at Completion;
(B) receipt of evidence that, if required, all filings have been made and
all the waiting periods have expired or been terminated in relation to
the sale and purchase of the Business Assets under this Agreement
pursuant to (1) the Hart-Scott-Rodino Anti-Trust Improvement Act of
1976 (as amended) of the United States of America and (2) the Swedish
Competition Act;
(C) receipt by the Purchasers of all consents and authorisations necessary
for the purposes of the transfer of the Business Assets to the
Purchasers with effect from Completion and in particular all consents
and authorisations necessary for the purposes of the assignment of the
Contracts pursuant to Sub-clause 2.1(D) and all consents and
authorisations necessary for the purposes of the transfer of the
Intellectual Property Rights pursuant to Sub-clause 2.1(C) and all
consents and authorisations necessary for the purposes of the transfer
or assignment of the Properties.
(D) receipt by the Purchasers of legal opinions in or substantially in the
form attached to this Agreement in Exhibit 2 from the advisers of the
Vendors as to the power and authority of each Vendor to enter into,
and perform their respective obligations under, this Agreement.
14
<PAGE>
(E) the fixed and floating charge held by Foothills Bank over all the
assets for the time being of Western States being released and
discharged in full;
(F) the floating charge held by ForeningsSparbanken AB over all the assets
for the time being of Bejka being released and discharged in full;
(G) no winding up petitions, insolvency or liquidation proceedings being
instituted against any of the Vendors which are not discharged in full
before Completion and no arrangements with creditors of the type
referred to in Clause 1 of the Insolvency Act 1986 or anything
analogous thereto being made by any of the Vendors; and
(H) the Amendment Agreement having been duly executed by each of the
parties thereto and the Facility Agent (as defined therein) having
confirmed to Derby Cycle that the Amendment Agreement is unconditional
in all respects.
4.2 Satisfaction
The Purchasers shall use their reasonable endeavours to procure the
satisfaction of the Conditions set out in Sub-clauses 4.1(A), (B), (E),
(F), (G) and (H) and acknowledge that this may in some cases require
payments to be made by the Purchasers (and in the case of any Hart-Scott-
Rodino filing to be made by Western States in the United States (the
"Vendors' Hart-Scott-Rodino Filing"), by Western States) and that if any
such payment (apart from a payment pursuant to the Vendors' Hart-Scott-
Rodino Filing) is made such payment shall be for the account of the
Purchasers and they shall not thereby acquire any rights against the
Vendors or any of their assets (except to the extent such assets are
Business Assets and subject to Completion occurring). The Vendors shall
promptly and diligently provide all reasonable assistance and information
and shall otherwise provide their full co-operation to the Purchasers upon
request to enable Conditions 4.1(A),(B), (E), (F), (G) and (H) to be
fulfilled. The Vendors shall use all reasonable endeavours to satisfy or
procure satisfaction of the Conditions set out in Sub-clauses 4.1(C) and
(D). The Purchasers shall promptly and diligently provide all reasonable
assistance and information and shall otherwise provide their full co-
operation to the Vendors upon request to enable Condition 4.1(C) to be
fulfilled.
4.3 Lapse
Unless the Conditions are not satisfied or waived within 45 days of the
date of this Agreement (as the case may be) this Agreement (subject to
Clause 179) shall at 11.59pm Hong Kong time on that 45th day lapse and the
parties shall thereafter have no further right or cause of action against
the other hereunder or in respect of such termination (save for any prior
breach hereof).
15
<PAGE>
5. Completion
--------------
5.1 Date and place of Completion
Completion shall take place on the seventh Business Day following
satisfaction (or waiver) of the Conditions unless such satisfaction (or
waiver) shall be notified to the Vendors within seven Business Days before
the date falling 45 days after the date of this Agreement in which case
Completion shall take place on the date falling 45 days after the date of
this Agreement, and in any event (subject to Sub-clauses 5.4(A) or 17.2)
Completion shall take place no later than the date falling 45 days after
the date of this Agreement at the offices of the Purchasers' Solicitors in
Hong Kong.
5.2 Vendors' obligations
On Completion:
(A) The Sale Companies shall deliver or cause to be delivered to the
Purchaser, in each case where applicable:
(1) the Current Assets and all documents of title relating thereto;
(2) subject to the necessary consents having been delivered to the
Purchaser pursuant to Sub-clause 4.1(C) or to the provisions of
Clause 5.4 duly executed assignments or transfers of the
Properties (and in the case of the Properties of Western States,
assignments in or substantially in the form of assignment
attached hereto at Exhibit 4 Part 3) and the immovable Fixed
Assets situated thereon in Agreed Form together with all title
deeds and documents relating thereto in accordance with the
schedules of title deeds in Agreed Form (including, without
limit, all consents to the assignment/transfer thereof in favour
of the Purchaser);
(3) the movable Fixed Assets, the Leased Assets and all documents of
title relating thereto;
(4) subject to the necessary consents having been delivered to the
Purchaser pursuant to Sub-clause 4.1(C), or to the provisions of
Clause 5.4, assignments from each of the Sale Companies of the
Intellectual Property Rights owned by those Companies in the
appropriate Agreed Form;
(5) subject to the necessary consents having been delivered to the
Purchaser pursuant to Sub-clause 4.1(C), or to the provisions of
Clause 5.4, assignments of the Contracts and the Third Party
Rights, each in such form as the Purchaser shall reasonably
require;
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(6) the Records;
(7) in relation to the assets of Western States and Bejka a deed or
deeds, each in a form approved by the Purchaser (such approval
not to be unreasonably withheld), duly executed by the relevant
chargees, unconditionally releasing the Business Assets from the
security of all relevant chargees (including those charges
details of which are set out in the Disclosure Letter).
(B) the Vendors shall deliver to Derby Cycle on behalf of both of the
Purchasers the Tax Deed duly executed by the Vendors;
(C) International shall deliver or procure to be delivered to Derby Cycle
the assignments of the Intellectual Property Rights which are owned by
International in the appropriate Agreed Form;
(D) Subject to the necessary consents and authorisations having been
delivered to the Purchasers pursuant to Sub-clause 4.1(C) or to the
provisions of Sub-clause 5.4, the Vendors shall deliver or procure to
be delivered to the relevant Purchaser the assignments/novations of
the Contracts in the Agreed Form in accordance with Clause 6.1;
(E) The Vendors shall use all reasonable endeavours to take all necessary
steps to record the name of the relevant Purchaser as the registered
proprietor of any trade name, business name or Internet name which
contains any trade mark within the Intellectual Property Rights which
is the subject of a registration in any territory.
(F) The Vendors shall deliver to Derby Cycle on behalf of all the
Purchasers a list of Outstanding Purchase Orders.
(G) Western States shall deliver to Derby Cycle an Affidavit of Non-
Foreign Status in the Agreed Form.
5.3 Purchasers' obligations
(A) On Completion the Purchasers shall pay the Closing Purchase Price
specified in Clause 3.2 to be paid by telegraphic transfer to the
Vendors' Solicitors (or such other person as the Vendors may in
writing direct no later than three Business Days prior to the date of
Completion) for value on the Completion Date, receipt of which shall
be deemed to be an absolute discharge for all purposes of the
Purchasers' obligations under this Sub-clause 5.3;
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(B) Following Completion the Purchasers shall pay or discharge the Assumed
Liabilities (including any liabilities represented by Outstanding
Purchase Orders) as they fall due;
(C) The Purchasers shall at their own expense procure that there is in
effect from and after Completion for a period of 10 years from
Completion, an insurance policy with Derby's insurer covering the
Purchasers, the Vendors, the Sale Companies and Western States Import
Co., Inc. 401k Savings Plan, Diamondback Holding B.V., Diamondback
International N.V., Hannan Investments of Hong Kong, Via Pescador
Development Company (as respects ownership of Building in Camarillo)
and AST Multisport, Inc. against all losses, costs, claims and
expenses (except for those exclusions customarily made in this type of
insurance) incurred but not reported and related to allegations of
Product Liability (as defined in paragraph 4.6(A) of Part 1 of
Schedule 3, in relation to the Business or any assets sold in the
course of the Business and covering all periods since 1st November
1985. The Purchasers shall procure that the interests of the Vendors
and the Sale Companies are noted on the policy of insurance and shall
on demand deliver a copy of it to the Vendors and shall use their best
endeavours to do nothing (or omit nothing) the doing (or omission) of
which might allow the insurance company to avoid or otherwise restrict
its liabilities thereunder. This obligation is in addition to and
without prejudice to the obligation of the Purchasers hereunder to
indemnify the Vendors and assume fully the Assumed Liabilities.
(D) The Purchasers shall, on Completion and upon delivery to them by John
Barker of a Waiver of Future Claims letter in the Agreed Form and by
Burton Schatz of a General Release of Corporation (Civil Code Section
1542) and a Waiver of Future claims letter in the Agreed Form, pay to:
(1) John Barker the amount of US$234,000 (which amount is equal to one
year's salary) plus a payment of US$1,300 per month for a period
of twelve months following Completion (or equivalent, as agreed
between the Purchasers and John Barker prior to Completion); and
(2) Burton Schatz the amount of US$163,200 (which amount is equal to
one year's salary) plus a payment of US$736 per month for a period
of twelve months following Completion (or equivalent, as agreed
between the Purchasers and Burton Schatz prior to Completion)
and the Purchasers shall procure that each of John Barker and Burton
Schatz and each of their wives is covered for a period of one year
from Completion by medical insurance equivalent to that made available
to the employees of Derby Cycle and the payments referred to in this
sub-clause 5.3(E) shall in each case be by way of severance and the
contracts of employment of each of
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John Barker and Burton Schatz with Western States shall be terminated
for all purposes as from the date of Completion.
5.4 Failure to complete
If in any respect the preceding provisions of this Clause are not complied
with on the date for Completion set by Sub-clause (A) the party not in
default may:
(A) defer Completion to a date not more than 14 days after the date set by
Sub-clause 5.1 (and so that the provisions of this Sub-clause 5.4,
apart from this Item (A), shall apply to Completion as so deferred);
or
(B) proceed to Completion so far as practicable (without prejudice to its
rights hereunder); or
(C) rescind this Agreement.
5.5 Action deemed to be simultaneous
All actions to be taken at Completion shall be deemed to have occurred
simultaneously and every such action shall be conditional upon:
(A) the occurrence at Completion of every other such action; and
(B) the prior occurrence of every action to be taken or event to have
occurred hereunder before Completion.
5.6 Post Completion obligations
(A) All monies or other items belonging to the Purchasers which are
received by any of the Vendors on or after Completion in connection
with the Business or any of the Business Assets shall immediately be
paid or passed by the Vendors to the Purchaser.
(B) The Purchaser shall after Completion, on demand, indemnify the Vendors
in respect of:
(1) the Assumed Liabilities; and
(2) all costs, claims, expenses or liabilities reasonably and
properly incurred by the Vendors in consequence of any failure or
delay of the Purchaser to comply with Sub-clause 5.6(B)(1)
provided that if there are any amounts due and outstanding from the
Vendors to the Purchasers under Clause 5.6(A) then the Purchasers
shall be entitled to
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set such amounts against any amounts due and outstanding from the
Purchasers to the Vendors under this Clause 5.6(B) and to treat all
such amounts (except to the extent the amounts owed by the Purchasers
exceed those owed by the Vendors, in each case under this Clause 5.6)
as paid and discharged pro tanto.
(C) The Vendor shall promptly pass to the Purchaser all correspondence,
telephone enquiries and other communications ("Communications") which
----------------
the Vendor receives after Completion which in any way relate to the
Business or the Business Assets (excepting anything relating to the
Excluded Assets) and the Purchaser shall promptly pass to the Vendor
all Communications which the Purchaser receives after Completion
relating to the Excluded Assets.
(D) Provided the Purchasers have received notice and have consented (such
consent not to be unreasonably withheld or delayed), the Purchasers
shall at all reasonable times and only during business hours give the
Vendors and their representatives full access to the books and records
of the Business and the Business Assets and Assumed Liabilities (and
allow the Vendors at the cost of the Vendors to take copies thereof)
and to the staff and employees involved in the Business for the
purposes of the preparation of tax and all other statutory and
administrative returns and filings to the extent requested by the
Vendors.
6. Treatment of Contracts
-------------------------
6.1 Assignment
The Vendors shall:
(A) on or with effect from the Completion Date assign to Derby Cycle (in
the case of the Contracts of Western States) and Derby Sweden (in the
case of the Contracts of Bejka), or procure the assignment to such
Purchaser of, all the Contracts by assignments in the forms set out at
Exhibit 3 save, without prejudice to any rights the Purchasers may
have under Sub-clause 5.4, those which are incapable of assignment
without the consent of the other parties thereto and in respect of
which such consent has not been obtained; and
(B) in the case of those of the Contracts, if any, not assigned pursuant
to Sub-clause 6.1(A), and provided the Purchasers agree to proceed to
Completion pursuant to Sub-clause 5.4(B), as soon as practicable
following Completion, if the Purchasers shall so request, use all
reasonable endeavours to obtain all necessary consents for the
assignment of the same and upon receiving such consents then assign
the same to the Purchasers or arrange the novation thereof.
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6.2 Performance: Vendors' obligations
Unless and until such consents are obtained or novation is effected
pursuant to Sub-clause 6.1 the Vendors shall following Completion in
relation to the Contracts in question:
(A) subject to Sub-clause 6.2(C), sub-contract the obligations of the
relevant Vendor thereunder to the Purchasers, or procure that the same
is sub-contracted to the Purchasers, on the same terms (mutatis
mutandis) and for the same remuneration as apply to the Contracts in
question; or
(B) (where the relevant Vendor thereunder is contractually prevented from
so contracting) the Purchasers shall act as the Vendors' agent in
connection therewith; or
(C) (if and to the extent that the relevant Vendor is contractually
prevented from sub-contracting and it is not permissible in respect of
such Contract pursuant to Sub-clause 6.2(B) for the Purchasers to act
as the Vendors' agents in connection therewith) the Vendors shall
continue to perform their obligations and liabilities arising under
the Contracts;
(D) without prejudice to the generality of the foregoing the Purchasers
shall (save as set out in paragraph (C) above) perform the obligations
and liabilities of the relevant Vendors arising under the Contracts in
question so far as any obligation or liability arises or falls to be
performed on or after the Completion Date (other than by reason of any
breach of any Contracts occurring before Completion) and the
Purchasers shall indemnify and keep indemnified the relevant Vendors
in respect of any costs, claims, demands, expenses or liabilities of
any kind reasonably and properly incurred by such Vendors as a result,
directly or indirectly, of complying with the provisions of (C) above
in respect of the Contracts (other than by reason of any breach of
such Contracts (except for any breach or alleged breach arising out of
Product Liability claims which are covered by insurance) occurring
before Completion) to the extent that such costs, claims, demands,
expenses or liabilities are incurred in relation to an obligation or
liability thereunder which arises or falls to be performed on or after
the Completion Date, and the full benefit of all contractual rights,
benefits, claims under the Contracts whether arising before or after
Completion shall from Completion vest in and be held in trust by the
relevant Vendors for the Purchasers absolutely and the Purchasers
shall, on demand, indemnify and keep indemnified the Vendors in
respect of any costs, claims, demands, expenses or liabilities of any
kind reasonably and properly incurred by the Vendors, as a result,
directly or indirectly, of the failure by the Purchasers following
Completion to comply with any of the terms of the Contracts or with
the terms of any replacement of the Contracts;
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(E) give all reasonable assistance to the Purchasers to enable them to
enforce the rights of the relevant Vendors under the Contracts and
shall (subject to being fully and effectively indemnified by the
Purchasers in respect of the same including all legal and other
professional costs and expenses reasonably incurred by or on behalf of
the Vendors in taking any steps in or with a view to commencing
proceedings to enforce any Contracts provided that the Vendors in so
incurring such costs and expenses act in accordance with all requests
of the Purchasers) at all times and with regard to the Contracts act
in accordance with the Purchasers' reasonable instructions from time
to time (without incurring expense save in relation to reasonable
labour costs of the Vendors' employees) and for this purpose the
Vendors shall be entitled to rely on the instructions of any one or
more of the Purchasers as being on behalf of all of the Purchasers;
and
(F) not take any action in respect of the Contracts without the prior
written approval of the Purchasers (such consent not to be
unreasonably withheld or delayed).
6.3 Vendors holding on trust
The relevant Vendors shall from Completion hold any monies, goods or other
benefits or notifications received under the Contracts after Completion
(except to the extent that they do not fall within "Book Debts") as agent
of and trustee for the Purchasers and shall forthwith upon receipt of the
same account for and pay or deliver to the Purchasers without any deduction
or withholding whatsoever all such monies, goods and other benefits or
notifications.
6.4 Vendors' Undertaking
The Vendors shall, on demand, indemnify and keep indemnified the Purchasers
in respect of any costs, claims, demands, expenses or liabilities of any
kind reasonably and properly incurred by the Purchasers as a result,
directly or indirectly, of the failure by the Vendors prior to Completion
to comply with any of the terms of the Contracts.
6.5 Purchasers' Undertaking
To the extent that any of the Purchasers receive payment in respect of book
debts of any of the Vendors not transferred pursuant to this Agreement or
any documents or notifications relating to the Excluded Liabilities then
such Purchaser shall forthwith upon receipt of the same account for and pay
or deliver to the relevant Vendors without any deduction or withholding
whatsoever the amount of such payment except to the extent that any amounts
shall be due and outstanding from the Vendors under Clause 6.4 in which
case the Purchasers shall be entitled to set such amounts against any
amounts due and outstanding from the Purchasers to the Vendors under
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this Clause 6.5 and to treat all such amounts (except to the extent the
amounts owed by the Purchasers under Clause 6.5 exceed those owed by the
Vendors under Clause 6.4) as paid and discharged pro tanto and shall
deliver to the relevant Vendor such documents or notifications.
7. Management of the Business prior to Completion
- --------------------------------------------------
7.1 The Sale Companies shall during the period from the date hereof to
Completion procure that (save with the prior written consent of the
Purchasers):
(A) the Business will continue to be carried on in the ordinary and usual
course of trading so as to maintain the same as a going concern and in
relation to the Business or the Business Assets none of the Sale
Companies shall enter into any transaction other than on arms' length
terms or;
(B) neither of the Sale Companies shall declare or pay any dividend or
make any distribution or deemed distribution to its shareholders;
(C) neither of the Sale Companies shall purchase or agree to purchase any
shares or securities from any of its shareholders or any other person;
(D) neither of the Sale Companies acquires or disposes of or agrees to
acquire or dispose of any material assets or incurs in relation to the
Business or the Business Assets any material liabilities or capital
commitments otherwise than in the ordinary course of trading and for
this purpose a material asset, liability or commitment shall be deemed
to be one having a value or being in an amount of US$50,000 or more
for either one of the Sale Companies;
(E) neither of the Sale Companies disposes of, agrees to dispose of,
grants a lease over, or agrees to grant a lease over, or otherwise
permits any Encumbrance to subsist over any of the Business Assets or,
additionally in respect of the Intellectual Property Rights and unless
it cannot lawfully prevent it from happening, allows any such right to
lapse, be cancelled, any application to be withdrawn or fails to renew
any registration falling due;
(F) neither of the Sale Companies takes any loans, incurs any borrowings
or other form of indebtedness, funding or financial facility or
assistance (or agrees to do so) (whether debt or otherwise) without
the prior consent of the Purchasers, except in the case of short-term
debt for purchase of inventory and financing of accounts receivable
which is in the nature of working capital and in the ordinary course
of business or, with respect to Western States, for the purposes of
building out the warehouse facility at Camarillo, California;
(G) neither of the Sale Companies enters into or agrees to enter into
(whether or not in the ordinary course of trading) any contract of
more than three months'
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duration involving a commitment of more than US$50,000 and in relation
to any such contract which is proposed to be entered into and which is
considered by the Purchasers to be in the ordinary course of business,
the Purchasers' written consent shall not be unreasonably withheld and
if the Purchaser does not respond within 2 Business Days of written
notice being received then the Purchaser's consent shall be deemed to
be given;
(H) neither of the Sale Companies shall enter into or agree to enter into
any joint venture, partnership or agreement or arrangement for the
sharing of any profits or assets in relation to the Business or any
of the Business Assets (except where commissions are in the ordinary
course of business paid to sales agents of any of the Sale Companies);
(I) neither of the Sale Companies cancels or causes a breach of or varies
any manufacturing agreement (or agrees to do so) in connection with
the Business or any Distribution Agreement;
(J) neither of the Sale Companies shall appoint any new director, officer
or senior employee or consultant or enter into any new employment
agreement or any death, retirement, profit sharing, bonus, share
option, share incentive or other scheme for the benefit of any of the
Employees with any person or persons or materially alter the terms of
employment or engagement (or agree to do so) of any senior employee or
consultant;
(K) neither of the Sale Companies shall make or permit any change to be
made to the accounting methods of the Sale Companies used in
connection with the Business including (but without limitation)
pricing or inventory valuations;
(L) neither of the Sale Companies shall repay any intercompany
indebtedness owed to the Vendors and/or their Affiliates (other than
the other Sale Companies) unless such payment shall be made upon
delivery to such Sale Company (as shall be making the payment) of the
goods comprised in any Outstanding Purchase Order notified by the
Vendors to the Purchaser on the date of this Agreement;
(M) neither of the Sale Companies commences, compromises or discontinues
(or agrees to do so) any legal or arbitration proceedings relating to
the Business or the Business Assets (other than routine debt
collection);
(N) neither of the Sale Companies makes or permits any amendment,
variation, deletion, addition, renewal or extension to or of, or
terminates or gives any notice or intimation of termination of any of
the Contracts or breaches, repudiates, or fails to comply in any
material respect with the terms of any of the Contracts; or
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(O) neither of the Sale Companies shall take any other action which by
reference only to the facts actually known by the Vendors at the time
of such action is likely to result in a material adverse change in the
Business and does so within the relevant time limit set by paragraph 4
of Schedule 8.
7.2 Provided the Vendors have received prior notice and given their consent
(such consent not to be unreasonably withheld or delayed), each of the Sale
Companies during the period from the date hereof to Completion shall permit
representatives of the Purchasers during normal office hours to:-
(A) consult with the management, executives and auditors of each of the
Sale Companies about the conduct of the Business during the financial
year ended 31 October 1997 and the period from 1 November 1997 to the
date hereof;
(B) have access to the Properties, the Employees and the Records of each
of the Sale Companies for the purpose of discussing any aspects of the
Business and to take copies of and extracts from the Records at its
own expense; and
(C) review the business performance and forecasts of each of the Sale
Companies for the year ending 31 December 1998.
7.3 Notwithstanding the provisions of Sub-clause 7.2 the sole responsibility
for the management, control and operation of the Business until the
Completion Date shall remain with the Vendors and each of the Sale
Companies subject only to the provisions of this Agreement.
8. Provisions relating to Tax and VAT
- --------------------------------------
8.1 Each of the Vendors and the Purchasers undertake to co-operate and provide
the others of them with all such information and assistance as is
reasonably necessary to enable the other party to respond to any enquiry in
connection with Tax raised by any tax authority or other governmental
authority in respect of either the Business or any of the Business Assets.
Each party will bear its own costs of providing all such information and
assistance.
8.2 Each of the Vendors and the Purchasers undertake to co-operate and provide
the others of them with all such information and assistance as is
reasonably necessary to enable the other party to make any return to the
relevant tax authority or other governmental authority which is due after
Completion and which relates, either in whole or in part, to a period
before Completion. Each party will bear its own costs of providing all
such information and assistance.
8.3 The Vendors and the Purchasers will co-operate to obtain any tax clearances
and to comply with any bulk sale notification procedures or similar
procedures which are required by any relevant tax authority, governmental
authority, state, county or
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<PAGE>
municipality. The Vendors agree to provide the Purchasers, at the Vendors'
own cost and expense, with all such information and assistance as the
Purchasers reasonably require to obtain any such tax clearance or to comply
with any such notification procedures. The Purchasers may deduct and
withhold from the Closing Purchase Price any amount that they are required
by law to pay to any relevant tax authority, governmental authority, state,
county or municipality to enable them to obtain any necessary tax clearance
or to comply with any necessary notification procedure.
8.4 The Vendors agree that they will co-operate with the Purchasers and will,
at the Vendors' own cost and expense, provide the Purchasers with all such
information and assistance as the Purchasers may reasonably require in
respect of the transfer of any unemployment tax experience ratings or fund
balances.
8.5 Transfer as a going concern
The Vendors and the Purchasers intend that, and shall use all reasonable
endeavours to secure that, in so far as is applicable to the transfer of
the Business of any one or more of the Sale Companies, the sale and
transfer of the Business Assets of the Sale Companies shall be treated as
neither a supply of goods nor a supply of services for the purpose of VAT.
9. Provision of Information
- ----------------------------
9.1 Confidentiality
The Purchasers hereby acknowledge and undertake that:
(A) any information they have received or will receive regarding the
purchase of Sale Companies will be received by the Purchasers under a
duty of confidentiality to the Vendors and for the exclusive purpose
of the present transaction;
(B) the Purchasers will hold such information in confidence and will not
disclose or make, or permit to be made, available to any other person
any of such information and will not use any of such information for
any purpose other than that stated in Sub-clause 9.1 (A) above;
(C) the Purchasers may make copies of such information solely for their
internal use for such purpose and may make such information available
to those of their directors, shareholders, senior employees,
professional advisers and lenders who are directly concerned in this
transaction;
(D) the Purchasers will ensure that such directors, shareholders,
employees, advisers and lenders are fully aware of the obligations of
the Purchasers under this section and will use their best efforts to
ensure that such persons act in
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accordance with the Purchasers' obligations;
(E) any other use of such information must have the prior written approval
of the Vendors; and
(F) the Purchasers shall only be released from their obligations in this
Sub-clause 9.1 upon Completion taking place and (without prejudice to
the generality of the foregoing) execution of this Agreement is
without prejudice to any claims the Vendors have or have alleged
against the Purchasers and their Affiliates in connection with breach
of confidence and interference with business (which claims the
Purchasers have not admitted).
9.2 No Completion
If this Agreement does not for any reason proceed to Completion:
(A) the Purchasers will forthwith upon request return all such information
to the Vendors and destroy all copies thereof, whether or not in the
possession of the Purchasers, and certify to the Vendors that all such
copies have been destroyed; and
(B) the Purchasers will not use, or permit the use of, any such
information for any commercial purpose whatsoever without the prior
written consent of the Vendors.
9.3 No disclosure
Except as specifically provided below or with the prior written consent of
the Purchasers, neither the Vendors nor any person controlled by the
Vendors nor any of the directors, officers, employees or agents of either
of them, shall disclose to any person or use for its or his own account or
business at any time before or after Completion any confidential
information, observations, data, written materials, records or documents
(including any offer letters, proposals or projections) which the
Purchasers may disclose or deliver to the Vendors in the course of the
negotiations for this Agreement or the actions taken pursuant to this
Agreement.
9.4 Public knowledge
The obligations of confidentiality of the parties hereto shall not apply in
the event and to the extent that such information, observations, data,
written materials, records or documents (or such offer letters, proposals
or projections) become generally known to or available for use by third
parties, other than by an act or omission of either party hereto or their
respective representatives in violation of mutual undertakings herein
contained.
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10. Exclusivity
- ----------------
10. In consideration of the Purchasers entering into this Agreement the Vendors
hereby represent, undertake and agree that:
(A) they will not:
(1) solicit any alternative offer for the Sale Companies or the
Business Assets (save in the ordinary course of business); or
(2) enter into discussions or negotiations with, or provide any
information concerning the Sale Companies or the Business Assets
to any third party in contemplation of any alternative offer;
(B) subject to such obligations of secrecy as may be imposed on them by
any relevant party, they will notify the Purchasers forthwith of the
terms of any alternative offers received from a third party for the
purchase of the Sale Companies or the Business Assets (save for offers
received in the ordinary course of business) or any of them.
10.2 Obligations Cease
The obligations contained in this Clause 10 shall cease to apply upon:
(A) the Completion Date; or
(B) the prior termination or lapse of this Agreement between the
Purchasers and the Vendors,
without prejudice to any antecedent breaches of the terms of this
Agreement.
10.3 Definitions
In this Clause 10:
"third party" means any person other than the Purchasers; and
-------------
"alternative offer" means any offer by any third party for any part of the
-------------------
issued share capital of the Sale Companies or for any of the Business
Assets.
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11. Restrictions of Vendors' Group
- -----------------------------------
11.1 Restricted Business
In this Clause 11, "Restricted Business" means the business of designing,
manufacturing, marketing and/or distributing bicycles or bicycle spares
and accessories or fitness equipment which directly or indirectly competes
with the Business as carried on at the date of this Agreement.
11.2 Undertakings
The Vendors undertake with the Purchasers that they will not and that none
of their Affiliates will for the period of three years after Completion,
either on their own account or in conjunction with or on behalf of any
person, firm or company, carry on, or be engaged, concerned or interested
in carrying on, directly or indirectly, the Restricted Business (other than
as a holder of less than 5 per cent. of any class of shares or debentures
listed on any stock exchange anywhere in the world).
11.3 Exceptions
The restrictions set out in Sub-clause 11.2 shall not apply to (1) the
ownership by either of the Vendors or their Affiliates of minority
shareholding interests in Shenzhen China Bicycle Company (Holdings) Limited
or the manufacture and/or sale by that company of bicycles and bicycle
spares and equipment within The People's Republic of China but without any
use of the Intellectual Property Rights, (2) ownership of any shareholding
interest in The Apollo bicycle distribution business in Australia, (3) the
sales by Shenzhen China Bicycle Company (Holdings) Limited of Private Label
Products to retailers who are not Independent Bicycle Dealers provided that
no use is made of the "Diamondback" trade mark or trade name in connection
with any product sold or to the knowledge of the relevant Vendor or its
Affiliate destined to be sold outside The People's Republic of China and
(4) the activities of Diamondback France and Diamondback Deutschland to the
extent they are permitted by the distribution agreements granted to those
companies by the Purchasers.
11.4 Vendors to procure compliance
The Vendors undertake to take all such steps as shall from time to time be
necessary or as may be reasonably required by the Purchasers to ensure that
no breach of Sub-clause 11.2 arises as a result of any action by any of the
Vendors' Affiliates, or any employee or agent of the Vendors or any such
Affiliate (for so long only as the relevant person remains such an employee
or agent).
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11.5 Reasonableness
The Vendors agree that the restrictions and undertakings contained in Sub-
clause 11.2 are reasonable and necessary for the protection of the
Purchasers' legitimate interests in the goodwill of the Business, but if
any such restriction or undertaking shall be found to be void or voidable
but would be valid and enforceable if some part or parts of the restriction
or undertaking were deleted, such restriction or undertaking shall apply
with such modification as may be necessary to make it valid and
enforceable.
11.6 Void or unenforceable restrictions
Without prejudice to Sub-clause 11.5, if any restriction or undertaking is
found by any court or other competent authority to be void or unenforceable
the parties shall negotiate in good faith to replace such void or
unenforceable restriction or undertaking with a valid provision which, as
far as possible, has the same legal and commercial effect as that which it
replaces.
12. Warranties
- ---------------
12.1 General
(A) The Vendors hereby warrant and represent to and for the benefit of the
Purchasers in the terms of the Warranties and acknowledge and accept
that the Purchasers are entering into this Agreement in reliance upon
each of the Warranties each of which is given on the basis that,
unless otherwise disclosed, it will remain true and accurate up to and
including Completion.
(B) Schedule 3 Part 1 contains Warranties in relation to the Business
Assets sold and purchased pursuant to this Agreement, the Sale
Companies and the Vendors and Schedule 3 Part 2 contains Warranties in
relation to Swedish and US jurisdictions.
(C) Where the Warranties make reference to matters of English law such
Warranties shall be deemed to be referring to the nearest equivalent
provision or provisions of the law to which each Sale Company and
Vendor, as the case may be, is subject in the jurisdiction in which
they are resident.
12.2 Purchasers' knowledge
The Warranties are given subject to matters fairly disclosed in this
Agreement or in the Disclosure Letter, but no other information relating to
the Sale Companies or their Affiliates of which the Purchasers have
knowledge (actual or constructive) shall prejudice any claim made by the
Purchasers under the Warranties or operate to reduce any amount
recoverable. The provisions of s.6(2) of the Law of Property
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(Miscellaneous Provisions) Act 1994 are hereby excluded.
12.3 Warranties to be independent
Each of the Warranties shall be separate and independent and, save as
expressly provided, shall not be limited by reference to any other Warranty
or anything in this Agreement.
12.4 No acts or omissions contrary to Warranties
The Vendors shall procure that (save only as may be necessary to give
effect to this Agreement) neither the Vendors nor any member of the
Vendors' Group shall do, allow or procure any act or omission before
Completion which would constitute a breach of any of the Warranties in any
material respect if they were given at any and all times from the date
hereof down to Completion or which would make any of the Warranties
inaccurate or misleading in any material respect if they were so given.
12.5 Further disclosure by Vendors
The Vendors shall forthwith disclose in writing to the Purchasers any
matter or thing which may arise or become known to the Vendors after the
date hereof and before Completion which is inconsistent in any material
respect with any of the Warranties or which can reasonably be expected to
make any of them inaccurate or misleading in any material respect if they
were given at any and all times from the date hereof down to Completion or
which is a breach of Sub-clause 12.4 or Clause 7.
12.6 Rescission
(A) In the event of it becoming apparent on or before Completion that the
Vendors are in material breach of any of the Warranties or any other
term of this Agreement or any act, omission, matter or thing has
occurred which would be a material breach of the Warranties if they
were given on the basis set out in Sub-clause 12.4, the Purchasers may
at their option either:
(1) rescind this Agreement by notice in writing to the Vendors; or
(2) proceed to Completion but without prejudice to its right to claim
for breach of this Agreement or such Warranties,
(B) In the event of it becoming apparent on or before Completion that the
Vendors are in breach (other than a material breach) of any of the
Warranties or any other term of this Agreement or any act, omission,
matter or thing has occurred which would be a breach (other than a
material breach) of the Warranties if they were given on the basis set
out in Sub-clause 12.4, subject to paragraph 3.2(A) of Schedule 8 the
Purchasers may include the amount of
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any claim (including all reasonable costs expenses, damages, and
liabilities which may be incurred by reason of any such claim)
resulting from such breach in the calculation of the aggregate
liability of the Vendors for the purposes of paragraph 3.2(B) of
Schedule 8.
(C) For the purposes of this Clause 12.6 (but not of any other Clause of
this Agreement) a material breach shall be a breach which, (including
all costs, expenses and liabilities which may be reasonably and
properly incurred by reason of any such claim), results in or could
reasonably be expected to result in loss to the Purchasers of $500,000
or more.
12.7 Waiver of claims
The Vendors undertake to and for the benefit of the Purchasers that they
will not make or pursue any claim or action howsoever arising against any
of the Employees in respect of any loss or liability the Vendors may incur
pursuant to this Agreement (or any other document referred to herein) or
otherwise in connection with the sale of the Business Assets to the
Purchasers or the preparation of the Disclosure Letter provided that the
Vendors shall not be precluded from bringing any such claim against an
Employee insofar as the Employee is not entitled to any right of indemnity
or other right of recovery from or against either of the Sale Companies in
relation to any such claim.
13. Indemnity
- --------------
13.1 Vendor's undertaking
Save as otherwise herein expressly provided the Vendors undertake to the
Purchaser that in relation to the Business Assets they will pay, satisfy,
discharge and fulfil all costs, claims, expenses, liabilities, obligations
and undertakings whatsoever relating to the Business arising in respect of
or by reference to any period up to Completion and shall indemnify and hold
harmless the Purchaser in respect of the same and from and against all
costs, claims, liabilities and reasonable expenses which the Purchaser may
reasonably suffer or incur in consequence of any failure or delay by the
Vendors to comply with this clause 131.
13.2 The Vendors undertake fully and effectively to indemnify and to keep so
indemnified the Purchasers against or in respect of any costs, claims,
demands, expenses, taxes and liabilities of any kind incurred by either of
the Sale Companies, whether arising before or after Completion, in
relation, directly or indirectly, to, or which would not otherwise have
been incurred but for:
(A) the discontinued operations of Western States concerning a facility
for producing cycle helmets in Montreal, Canada;
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(B) the contingent liabilities of Bejka in respect of claims by third
parties in relation to underlying purchases by Bejka from Shenzhen
China Bicycle Company (Holdings) Limited.
14. Change of name
- -------------------
14.1 Vendors' Obligations
The Vendors (apart from Bejka) shall each procure that at Completion (or
within three Business Days thereafter) they and Diamondback France,
Diamondback Europe and Diamondback Deutschland shall pass a resolution
changing their respective names to a name which does not include the name
"Diamond" or "Diamondback" or any colourable imitation thereof in English
or any other language or any name which includes a word or words the same
as or similar to any trade mark within the Intellectual Property Rights, in
English or any other language.
14.2 Restriction
The Vendors agree that they will not, and will procure that none of their
Affiliates will, use the name and or trade marks "Diamond" or "Diamondback"
or any colourable imitation thereof in English or any other language or any
name which includes a word or words the same as or similar to any trade
mark within the Intellectual Property Rights, in English or any other
language as part of their corporate or business or trading name anywhere in
the world (except in The People's Republic of China) or (save for the
"Diamondback" trade mark as registered in The People's Republic of China)
as a trade mark or product name provided that the "Diamondback" trade mark
may only be used on goods sold in and not for export from The People's
Republic of China.
14.3 Exception
The restrictions in Clause 14.2 shall not apply to the use of the
"Diamondback" trade mark by Diamondback France or Diamondback Deutschland
to the extent only that the same is permitted by the distribution
agreements granted to those companies by the Purchasers.
15. Public Announcements
- -------------------------
15.1 Prior to Completion
None of the parties hereto shall make any public announcement relating to
the transactions contemplated by this Agreement in any circumstances prior
to Completion without the prior consent of the other parties which consent
shall not be unreasonably withheld.
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15.2 Following Completion
The text of any public announcement which any party proposes to make with
respect to the transactions contemplated by this Agreement following
Completion shall be submitted to the other parties five (5) Business Days
before the date on which the announcement is to be made, and the parties
shall consult prior to the time of such public announcement to settle the
final agreed text of such announcement. The foregoing shall not apply to
any announcement that may be required by law and the party required to make
such announcement shall give the other parties notice thereof at least
twenty-four (24) hours prior to such announcement.
15.3 Announcements to Employees
In relation to any announcement to employees of the Sale Companies of the
transactions contemplated by this Agreement, the parties hereto shall
consult and shall agree the text of such announcement on the date of this
Agreement.
16. Employees of the Business
- ------------------------------
16.1 Contracts of employment
The Purchasers acknowledge and agree that the respective written contracts
of employment of the Employees shall have effect from and after Completion
as if originally made between each of the Employees and the relevant
Purchaser and that to the extent that any of the Employees have not entered
into written employment contracts, the Purchasers acknowledge and agree
that the employment of such Employees shall continue with the relevant
Purchaser after Completion on terms no less favourable than those on which
equivalent employees of the relevant Purchaser are employed by such
Purchaser and in the case of those Employees who have entered into written
contracts of employment the relevant Purchaser shall procure at its expense
that the relevant Employee is offered a new contract of employment on terms
which release, or effectively release the Vendor from all liability
(accrued or not) in respect of that Employee.
16.2 Informing Employees
As soon as practicable after satisfaction of the Conditions at Clause
4.1(H) of this Agreement the Vendors shall send to each Employee a letter
in Agreed Form outlining the consequences of the transfer.
16.3 Vendor indemnity
The Vendors shall indemnify the Purchasers and hold the Purchasers harmless
against all and any costs (including reasonably and properly incurred legal
costs on a full indemnity basis), expenses, liabilities, damages and
losses reasonably and properly
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incurred and arising out of any claim, action or proceeding which:
(A) is made or brought by an Employee and relates to facts or events
occurring prior to Completion in relation to or arising out of his or
her employment; or
(B) is made or brought by any person who is not an Employee but who was,
or is alleged to have been, employed in the Business at any time
prior to Completion and relates to facts or events occurring at any
time before Completion, in relation to or arising out of his or her
employment or alleged employment (including without limitation, any
dismissal or alleged dismissal of any such person by the Purchaser).
16.4 Purchaser indemnity
The Purchasers shall indemnify the Vendors and hold the Vendors harmless
against all and any costs (including reasonably and properly incurred legal
costs on a full indemnity basis), expenses, liabilities, damages and
losses reasonably and properly incurred and arising out of any claim,
action or proceeding which is made or brought by an Employee and relates to
facts or events occurring after Completion in relation to or arising out of
his or her employment.
16.5 Employment records
As soon as practicable after Completion, the Vendors shall deliver to the
Purchasers originals of all payroll and social security records and of any
other documents or records (including, without limitation, personnel
records and files) which are relevant to the Employees provided that the
Vendors shall be entitled to retain a copy of any such record or document
where the original is delivered to the Purchasers.
17. Provisions relating to this Agreement
- ------------------------------------------
17.1 This Agreement shall be binding upon and enure for the benefit of the
successors of the parties but shall not be assignable, except in the
following circumstances:
(A) the Purchasers may assign the benefit of the Warranties to any
transferee of the Business Assets provided such transferee is one of
the Purchasers' Affiliates which as a condition precedent to such
assignment agrees with the Vendors that such assignment shall ipso
facto lapse on the transferee ceasing to be one of the Purchasers'
Affiliates; and
(B) the benefit of the Agreement and any assignments or novations made to
or in connection with the Agreement shall be assignable to Chase
Manhattan International Limited as Security Agent for itself, the
Purchasers' Banks and Chase Manhattan International Limited as the
Facility Agent under the Facility Agreement.
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17.2 Whole agreement and variations
(A) This Agreement, together with any documents referred to in it,
constitutes the whole agreement between the parties relating to its
subject matter and supersedes and extinguishes any prior drafts,
agreements (and in particular the Letter of Intent dated 18 July 1998
and entered into among the Vendors and Derby Cycle), representations,
warranties and undertakings, whether in writing or oral, relating to
such subject matter, except to the extent that the same are repeated
in this Agreement and the Purchasers acknowledge and agree that except
in the case of fraud they shall have no remedy for any
misrepresentation not contained in this Agreement or for breach of any
warranty not contained in this Agreement and the Purchasers waive any
and all rights in respect thereof.
(B) No variation of this Agreement shall be effective unless made in
writing and signed by each of the parties.
17.3 Agreement survives completion
The Warranties and all other provisions of this Agreement, in so far as the
same shall not have been performed at Completion, shall remain in full
force and effect notwithstanding Completion.
17.4 Rights etc cumulative and other matters
(A) The rights, powers, privileges and remedies provided in this Agreement
are cumulative and are not exclusive of any rights, powers, privileges
or remedies provided by law or otherwise.
(B) No failure to exercise nor any delay in exercising any right, power,
privilege or remedy under this Agreement shall in any way impair or
affect the exercise thereof or operate as a waiver thereof in whole or
in part.
(C) No single or partial exercise of any right, power, privilege or remedy
under this Agreement shall prevent any further or other exercise
thereof or the exercise of any other right, power, privilege or
remedy.
17.5 Release
The Purchasers may release or compromise the liability of any of the
Vendors hereunder and the Purchasers may release or compromise the
liability of any of the Purchasers hereunder without affecting the
liability of the other Vendors or Purchasers (as the case may be).
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17.6 Further assurance
At any time after the Completion the Vendors shall, at the request and cost
of the Purchasers, execute or procure the execution of such documents and
do or procure the doing of such acts and things as the Purchasers may
reasonably require for the purpose of vesting the Business Assets in the
Purchasers or their nominees and giving to the Purchasers the full benefit
of all the provisions of this Agreement.
17.7 Payment to the Vendors and the Purchasers
Any payment falling to be made to the Vendors or to the Purchasers under
any provision of this Agreement may be made to the Vendors' Solicitors or
the Purchasers' Solicitors respectively (as the case may be) whose receipt
shall be an absolute discharge for all of them.
17.8 Counterparts
This Agreement may be executed in any number of counterparts, which shall
together constitute one Agreement. Any party may enter into this Agreement
by signing any such counterpart.
17.9 Costs
Subject to Sub-clause 17.6, each party shall bear its own costs arising out
of or in connection with the preparation, negotiation and implementation of
this Agreement.
17.10 Investment Banking Fees
(A) The Vendors shall, on demand, indemnify and hold harmless the
Purchasers against any claims by any banker, broker, investment banker
or agent for any fees or expenses claimed to be due to such party in
connection with or in respect of the transactions provided for in this
Agreement as a result of any agreement with or commitment by or on
behalf of any of the Vendors or either of the Sale Companies.
(B) The Purchasers shall, on demand, indemnify and hold harmless the
Vendors against any claims by any banker, broker, investment banker or
agent for any fees or expenses claimed to be due to such party in
connection with or in respect of the transactions provided for in this
Agreement as a result of any agreement with or commitment by or on
behalf of either of the Purchasers.
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17.11 Notices
(A) Any notice or other communication required to be given under this
Agreement or in connection with the matters contemplated by it shall,
except where otherwise specifically provided, be in writing in the
English language and shall be addressed as provided in Sub-clause
17.11(B) and may be:
(1) personally delivered, in which case it shall be deemed to have
been given upon delivery at the relevant address; or
(2) sent by pre-paid registered priority airmail, in which case it
shall be deemed to have been given seven (7) Business Days after
the date of posting; or
(3) sent by fax, in which case it shall be deemed to have been given
when despatched, subject to confirmation of uninterrupted
transmission by a transmission report provided that any notice
despatched by fax after 17.00 hours (at the place where such fax
is to be received) on any day shall be deemed to have been
received at 09.00 on the next Business Day at the place where
such fax is to be received.
(B) The addresses and other details of the parties referred to in Sub-
clause 17.11(A) are, subject to Sub-clause 17.11(C):
Name: Diamond Back International Company Limited,
Western States Import Company Inc. or Bejka
Trading A.B.
For the attention of: Jerome Sze
Address: 37th Floor, Tower 2, Metroplaza,
223 Hing Fong Road,
Kwai Chung,
New Territories
Hong Kong
Fax number: 852 2610 1530
Name: The Derby Cycle Corporation or Derby Sweden AB
For the attention of: Robert E Michalik
Address: 1455 Pennsylvania Avenue NW
Suite 350
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Washington DC, 20004
USA
Fax number: 1 202 371 0391
(C) Any party to this Agreement may notify the other parties of any change
to its address or other details specified in Sub-clause 16.11(B),
provided that such notification shall only be effective on the date
specified in such notice or five (5) Business Days after the notice is
given, whichever is later.
18. Dispute Resolution
- -----------------------
18.1 Disputes to be referred to arbitration
Any dispute arising out of or in connection with this Agreement, including
any question regarding the existence, scope, validity, or termination of
this Agreement or this Clause, shall be referred to and finally resolved
under the Rules of the London Court of International Arbitration, which
Rules are deemed to be incorporated by reference into this Clause.
18.2 Number of arbitrators
The number of arbitrators shall be 1.
18.3 Place of arbitration
The place of arbitration shall be London, England.
18.4 Language of arbitration
The arbitration proceedings shall be conducted in the English language and
the Award shall be in English.
18.5 Governing law
The proceedings of the arbitration shall be governed by the laws of
England.
18.6 Confidentiality
The parties agree that information concerning any arbitration, including,
without limitation, information concerning any arbitration award, shall be
treated as confidential and not disclosed to any third party without the
consent in writing of all of the parties unless:
(A) the information has come into the public domain other than through the
fault
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of the party disclosing it;
(B) such disclosure is required by law or by any securities exchange or
regulatory or governmental body having jurisdiction over the party
disclosing the information, whether or not the requirement has the
force of law;
(C) such disclosure is necessary in order to establish or protect any
legal right of the party disclosing the information; or
(D) the disclosure is limited to the directors and officers, professional
advisers, auditors, bankers or insurers of the person disclosing the
information, acting as such, or to a person intended to be called as a
witness in the arbitration by the person disclosing the information,
for the purpose of preparing his testimony, but provided that in any
such case a written confidentiality undertaking in a form equivalent
to this Clause has first been obtained from such person.
19. Law and Jurisdiction
- -------------------------
19.1 English Law
This Agreement shall be governed by, and construed in accordance with,
English law.
19.2 Jurisdiction
In relation to any legal action or proceedings to enforce this Agreement or
arising out of or in connection with this Agreement ("Proceedings") each of
-----------
the parties irrevocably submits to the jurisdiction of the English courts
and waives any objection to Proceedings in such courts on the grounds of
venue or on the grounds that the Proceedings have been brought in an
inconvenient forum.
19.3 Process Agent
(A) The Vendors appoint Richards Butler of 15 St. Botolph Street, London
EC3 as their process agent to receive on their behalf service of
process in any proceedings in England. Service upon the process agent
shall be good service upon the Vendors whether or not it is forwarded
to and received by the Vendors. If for any reason the process agent
ceases to be able to act as process agent, or no longer has an address
in England, the Vendors irrevocably agree to appoint a substitute
process agent with an address in England acceptable to the Purchasers
and to deliver to the Purchasers a copy of the substitute process
agent's acceptance of that appointment within twenty (20) Business
Days. In the event that the Vendors fail to appoint a substitute
process agent, it shall be effective service for the Purchasers to
serve the process upon the last known address in England of the last
known process agent for the Vendors
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notified to the Purchasers, notwithstanding that such process agent is
no longer found at such address or has ceased to act.
(B) The Purchasers appoint Simon Goddard of Raleigh Industries Limited,
Triumph Road, Nottingham NG7 2DD, United Kingdom as their process
agent to receive on their behalf service of process in any proceedings
in England. Service upon the process agent shall be good service upon
the Purchasers whether or not it is forwarded to and received by the
Purchasers. If for any reason the process agent ceases to be able to
act as process agent, or no longer has an address in England, the
Purchasers irrevocably agree to appoint a substitute process agent
with an address in England acceptable to the Vendors and to deliver to
the Vendors a copy of the substitute process agent's acceptance of
that appointment within twenty (20) Business Days. In the event that
the Purchasers fail to appoint a substitute process agent, it shall be
effective service for the Vendors to serve the process upon the last
known address in England of the last known process agent for the
Purchasers notified to the Vendors, notwithstanding that such process
agent is no longer found at such address or has ceased to act.
20. Invalidity
- ---------------
If any provision of this Agreement shall be held to be illegal, void, invalid or
unenforceable under the laws of any jurisdiction, the legality, validity and
enforceability of the remainder of this Agreement in that jurisdiction shall not
be affected, and the legality, validity and enforceability of the whole of this
Agreement in any other jurisdiction shall not be affected.
AS WITNESS the hands of the duly authorised representatives of the parties on
- ----------
the date first before written.
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SCHEDULE 2 : THE SALE COMPANIES
Sale Company Firm of Accountants
Western States Import Company Inc. Ernst & Young
Bejka Trading A.B. Ernst & Young
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SCHEDULE 3: WARRANTIES AND REPRESENTATIONS
PART 1: Warranties and Representations in Relation to the Business Assets
1. Interpretation
------------------
1.1 Definitions
In this Schedule, where the context admits:
"Company" means all, any or each of the Sale Companies.
---------
"Computer Systems" means the Hardware, Software and Data.
------------------
"Data" means any data or information used by or for the benefit of the
------
Company at any time and stored electronically at any time.
"EC" means European Community.
----
"ECU" means the ECU as defined in Council Regulation (EC) No. 3320/94 of 22
-----
December 1994.
"GAAP" means generally accepted accounting principles in the country of
------
incorporation of the Company at the applicable time.
"Hardware" means any computer equipment used by or for the benefit of the
----------
Company at any time including, without limitation, personal computers,
mainframes, screens, terminals, keyboards, disks, printers, cabling,
associated and peripheral electronic equipment but excluding all Software.
"Material Contract" means any Contract falling within paragraph 10.1(D) or
-------------------
10.2.
"Member States" means the Member States of the European Union from time to
---------------
time.
"Software" means any set of instructions for execution by microprocessor
----------
used by or for the benefit of the Company at any time irrespective of
application, language or medium.
1.2 Construction
In this Schedule where the context admits:
(A) any question whether a person is connected with another shall be
determined
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in accordance with s.839 Income and Corporation Taxes Act 1988,
(subject to the deletion of the words from "Except" to "arrangements"
in sub-section (4) thereof) which shall apply in relation to this
Schedule as it applies in relation to that Act;
(B) reference to any Act, statutory instrument, regulation, bye-law or
other requirement of English law and to any English legal term for any
action, remedy, method of judicial proceeding, legal document, legal
status, court, official or any legal concept or thing shall in respect
of any jurisdiction other than England be deemed to include that which
most nearly approximates in that jurisdiction to the English legal
term; and
(C) where, in this Schedule 3, a term is defined in and for the purposes
of a particular Paragraph or Sub-Paragraph, the relevant definition
shall apply, where the context admits, for all other purposes of this
Schedule.
2. Warranties and representations
- ----------------------------------
The Vendors hereby warrant and represent to and for the benefit of the
Purchasers in the terms set out in the following paragraphs of this schedule.
3. The Vendor and the Vendor's Group
- -------------------------------------
3.1 Capacity
Each of the Vendors has full power and authority to enter into and perform
this Agreement and has full power and authority to carry on the Business as
it is now being carried on and to sell the Business and the Business Assets
(and each of them) to the Purchaser on the terms of this Agreement and may
execute and deliver this Agreement and perform their obligations under this
Agreement without in any such case requiring or obtaining the consent of
their shareholders or any other person, authority or body and this
Agreement constitutes valid and binding obligations on the Vendors in
accordance with its terms.
3.2 Competing interests
Neither the Vendors nor any Affiliate of the Vendors nor any person
connected with any of them (and a connected person shall be defined in
accordance with Section 346 of the Companies Act 1985) has any interest,
direct or indirect, in any company or business (other than the Business)
which is or is likely to be or become competitive with the Business as the
same is presently carried on.
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3.3 Associations
None of the Vendors is, nor have any of them agreed to become, in relation
to the Business, a member of any partnership, joint venture, consortium or
other unincorporated association, body or undertaking in which any of them
is to participate with any other in any business or investment.
4. Licences, litigation and the law
- -------------------------------------
4.1 Compliance with laws
The Business has been conducted in all material respects in accordance with
all applicable laws and regulations and there is no order, decree or
judgment of any court or any governmental or other competent authority or
agency outstanding which can reasonably be expected to have a material
adverse effect upon the Business or the Business Assets.
4.2 Licences etc.
(A) All licences, consents, permits, approvals and authorisations (public
and private) necessary for utilising any of the Business Assets in the
Business or carrying on effectively any aspect of the Business or any
business now being carried on at any of the Properties have been
obtained by the Vendor, are in full force and effect and are not
limited in duration or subject to conditions which are uncommon or
unusual in that type of licence.
(B) All reports, returns and information required by law or as a condition
of any licence, consent, permission, approval or other authorisation
to be made or given to any person or authority in connection with the
Business have been made or given to the appropriate person or
authority.
(C) The utilisation of any of the Business Assets or the carrying on of
any aspect of the Business or any business now being carried on at any
of the Properties is not in breach of any of the terms and conditions
of any of such licences, consents, permits, approvals and
authorisations and so far as the Vendor is aware there is no
circumstance which indicates that any such licence, consent, permit,
approval or authorisation is likely to be suspended, cancelled or
revoked or that any of them will expire within a period of one year
from the date of this Agreement.
4.3 Breach of statutory provisions
Neither the Vendor, nor any of its officers, agents or employees have, in
relation to the Business, committed, or omitted to do, any act or thing the
commission or omission of which is in contravention of any Act, Order,
Regulation, or the like
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which is punishable by fine or other penalty and no notice or communication
has been received with respect to any alleged, actual or potential
violation of, or failure to comply with, any of the same.
4.4 Litigation
(A) Neither the Vendor nor any of its officers or agents nor any of the
employees of the Business is engaged in or the subject of any
litigation or arbitration, administrative or criminal proceedings,
whether as plaintiff, defendant or otherwise, which adversely affects
or is likely to have an adverse effect on the Business or any of the
Business Assets or the ability of the Vendor or any purchaser to carry
on the Business in the same manner and to the same extent as
previously carried on.
(B) No such litigation or arbitration, administrative or criminal
proceedings are pending, threatened or expected by or against the
Vendor or any such officers, agents or employees, and so far as the
Vendor is aware, there are no facts or circumstances likely to give
rise to any such litigation or arbitration or administrative or
criminal proceedings.
(C) Neither the Vendor nor any Affiliate of the Vendor (nor so far as the
Vendor is aware officer or employee of any of them) nor so far as the
Vendor is aware any predecessor (if any) of the Vendor has or have
been a party to any undertaking or assurance given to any court or
governmental agency or the subject of any injunction relating to the
Business or any of the Business Assets which is still in force.
4.5 Fair trading
(A) No agreement practice or arrangement carried on in connection with or
in relation to the Business or to which the Vendor is a party
(including, but not limited to, any Contract):
(1) infringes Article 85 of the Treaty of Rome establishing the
European Economic Community or constitutes an abuse of a dominant
position contrary to Article 86 of that Treaty or infringes any
regulation or other enactment made under Article 87 and/or
Article 235 of that Treaty or is or has been the subject of any
enquiry, complaint, investigation or proceeding in respect
thereof; or
(2) has so far as the Vendor is aware been notified to the
Directorate General for Competition of the European Commission
and/or to the EFTA Surveillance Authority; or
(3) infringes any other competition, restrictive trade practice,
anti-trust,
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fair trading or consumer protection law or legislation applicable
in any jurisdiction in which the Business is carried on or in
which the activities of the Business may have an effect.
(B) In relation to the Business, there has not been given by or on behalf
of the Vendor and there has been no default or contravention of any
assurance or undertaking (written or oral) by or on behalf of the
Vendor to the European Commission, the EFTA Surveillance Authority or
the Courts of Justice of the European Communities, or to any other
court, person or body and the Vendor in respect of the Business is not
subject to or in default or contravention of any Article, Act,
decision, regulation, order or other instrument or undertaking
relating to any matter referred to in this paragraph 45.
4.6 Product liability
(A) There is no claim in respect of Product Liability (as hereinafter
defined) outstanding or threatened against or expected by the Vendor
or any other party in relation to the Business and so far as the
Vendor is aware there are no circumstances which are likely to give
rise to any such claim. For this purpose "Product Liability" means a
-------------------
liability arising out of death, personal injury or damage to property
caused by a defective product or defective services sold, supplied or
provided in the course of the Business on or prior to the date hereof.
(B) During the course of the Business there has not been manufactured,
sold or supplied any product or service which:
(1) is or was in any material respect faulty or defective; or
(2) does not comply in any material respect with any warranty or
representation expressly or impliedly made by or on behalf of the
Vendor in respect of it or with all applicable regulations,
standards and requirements in respect thereof; or
(3) was sold on terms that the Vendor accepts an obligation to
service or repair or replace such products after delivery save
any obligation imposed by law.
(C) There has not been received a prohibition notice, a notice to warn or
a suspension notice under the Consumer Protection Act 1987 in relation
to any product or service of the Business.
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4.7 Inducements
So far as the Vendor is aware no officer, agent or employee of the Vendor
in relation to the Business has paid any bribe (monetary or otherwise) or
used any of the Business Assets unlawfully to obtain an advantage for any
person.
5. Environmental
- -----------------
5.1 Definitions
For the purpose of this paragraph 5, the following terms shall have the
following meanings:
"Environment" means all or any of the media of air, water and land
-------------
(wherever occurring) and in relation to the media of air and water includes
without limitation the air and water within buildings and the air and water
within other natural or man-made structures above or below ground.
"Environmental Law" means all or any applicable EC, national or local law
-------------------
or regulation arising through statute, subordinate legislation, judicial or
administrative under or common law or any relevant code of practice,
guidance, note, standard or other advisory material issued by any competent
authority relating to Environmental Matters and in relation to paragraph 52
includes Part IIA Environmental Protection Act 1990 whether or not in
force.
"Environmental Liability" means any cost, expense, liability, claim,
-------------------------
damages, penalty or fine arising from any of the following:
(A) any legal requirement, direction, notice, order or obligation served
or imposed by any competent authority or court of competent
jurisdiction under Environmental Law.
(B) the carrying out of any investigatory, monitoring, precautionary,
remedial or engineering works (whether on the Premises or elsewhere)
which are necessary to avoid the issue, service or imposition of any
notice, requirement or obligation by any competent authority or court
of competent jurisdiction under Environmental Law;
(C) the carrying out of any investigatory, monitoring, precautionary,
remedial or engineering works (whether on the Premises or elsewhere)
which are necessary to ensure the continued operation of the Business
or the protection of the goodwill of the Business or otherwise in the
interests of the Business; and
(D) the repair, replacement or rebuilding of any part of the Premises or
any disruption of the Business necessitated or caused by the carrying
out of any
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investigatory, monitory, precautionary, remedial or engineering works
(whether on the Premises or elsewhere) in connection with any
Environmental Matters;
including in each case all reasonable legal, consulting, monitoring,
laboratory and other professional fees and other reasonable costs and
expenses associated therewith.
"Environmental Matters" means the pollution of the Environment, the
-----------------------
protection of the Environment and human health, health and safety of
employees in the work place, the protection of natural amenity, production,
the disposal, release, use, storage, spillage, deposit, escape, discharge,
leak, emission, recovery, transport of, or radiation from any Hazardous
Material or Waste.
"Environmental Permits" means the permits, licences, consents or
-----------------------
authorisations required under Environmental Law in relation to the carrying
on of the Business or the occupation or use of the Premises.
"Hazardous Material" means any pollutant, or any hazardous, toxic,
--------------------
radioactive, noxious, corrosive or caustic substance whether in solid,
liquid or gaseous form.
"Waste" includes any unwanted or surplus substance irrespective of whether
-------
it is capable of being recycled or recovered.
5.2 Environmental Matters
(A) The Business and the Business Assets have at all times complied with
Environmental Law.
(B) All Environmental Permits have been lawfully obtained and are in full
force and effect and all conditions and limitations in all
Environmental Permits have at all times been complied with.
(C) The Vendor is not aware of any circumstances which would make it
impossible or difficult for the Purchaser to cause the Business to
comply with the conditions or limitations in any Environmental Permits
in the future and no communication has been received revoking,
suspending, modifying or varying any of the Environmental Permits and
the Vendor is not aware of any circumstances which might give rise to
any such communication being received.
(D) No litigation, arbitration, administrative or criminal proceedings or
negotiations are in progress with any person or body relating to any
actual or potential Environmental Liability affecting the Business or
the Business Assets and none are pending, threatened or envisaged.
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(E) There has not been received at any time in relation to the Business or
the Business Assets any communication
(1) regarding any actual or alleged violation of Environmental Law or
any liability or potential liability thereunder; or
(2) failure to comply with which would constitute a breach of
Environmental Law, or compliance with which could be secured by
further proceedings under Environmental Law, or which relates in
any way to any actual or potential Environmental Liability and
the Vendor is not aware of any circumstances, which might give
rise to any such communication being received.
6. The Vendor's solvency
- --------------------------
6.1 Winding up
No order has been made, petition presented or resolution passed for the
winding up of the Vendor and no meeting has been convened for the purpose
of winding up the Vendor.
6.2 Administration and receivership
No steps have been taken for the appointment of an administrator or
receiver (including an administrative receiver) in respect of the Vendor or
of all or any part of the Business Assets.
6.3 Compositions
The Vendor has not made or proposed any arrangement or composition with its
creditors or any class of its creditors.
6.4 Insolvency
None of the Vendors is insolvent.
6.5 Unsatisfied judgments
No distress, execution or other process has been levied against the Vendor
or action taken to repossess any of the Business Assets which has not been
satisfied in full. No unsatisfied judgment is outstanding against the
Vendor.
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6.6 Floating charges
No floating charge created by the Vendor has crystallised and, so far as
the Vendor is aware, there are no circumstances likely to cause such a
floating charge to crystallise.
6.7 Analogous events
No event analogous to any of the foregoing has occurred.
7. Accounts, records and Tax
- -----------------------------
7.1 Accounts
(A) Accounts - The Audited Accounts:-
(1) were prepared in accordance with the requirements of all relevant
statutes and applicable accounting practices generally accepted
at the time they were audited save to the extent the accounting
bases and policies stated in the Audited Accounts differ
therefrom;
(2) present fairly the assets and liabilities of the relevant Vendor
and that part of the Business carried on by it as at, and the
profits of the relevant Vendor and that part of the Business
carried on by it for the accounting reference period ended on,
the Balance Sheet Date; and
(3) are not affected by any unusual or non-recurring items save as
specified therein; and
(B) Provisions for liabilities - Full provision has been made in the Audited
Accounts for all actual liabilities of the relevant Vendor in relation to
the Business outstanding at the Balance Sheet Date and proper provision
(or note) in accordance with accounting practices generally accepted in
each relevant country at the time they were audited has been made in the
Audited Accounts for all other liabilities of the relevant Vendor then
outstanding in relation to the Business whether contingent, quantified,
disputed or not, including the cost of any work or material for which
payment has been received or credit taken, any future loss which was at
the Balance Sheet Date anticipated in connection with uncompleted
contracts and any claims against such Vendor in respect of completed
contracts.
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(C) Valuation of Stock and work in progress -
(1) For the purposes of the Audited Accounts all Stock was valued at the
lower of cost and net realisable value and all work in progress was
valued on a basis excluding profit, including proper provision for
losses which are or could reasonably be anticipated.
(2) The respective amounts of raw materials, work in progress, finished
goods, packaging and promotional material held or on order by the
Business are appropriate and normal for its present level of
business.
(D) Management Accounts - The Management Accounts have been carefully prepared
in accordance with accounting policies consistent with those used in
preparing the Audited Accounts and on a basis consistent with the
management accounts prepared in the preceding year. The cumulative
profits, assets and liabilities of the Business stated in the Management
Accounts have not been materially mis-stated and are not materially
inaccurate and the Vendor does not consider the Management Accounts
misleading.
7.2 Books and records
(A) All the books and other material comprised in the Records which are to
be delivered or otherwise made available to the Purchaser in
accordance with the terms of this Agreement:
(1) have been fully, properly and accurately maintained in all
material respects on a consistent basis and are and will at
Completion be up to date and contain true, complete and accurate
records of all aspects of the Business and/or the Business Assets
to which they relate and of all matters required by law to be
entered therein;
(2) do not contain or reflect any material inaccuracies or
discrepancies;
(3) are within the possession and control of the Vendor; and
(4) give a true and fair view of the contractual and trading position
of the Business and of its fixed and current assets, liabilities
(actual and contingent), debtors and creditors (as appropriate)
and all other matters which ought or would normally be expected
to appear therein
and no notice or allegation that any of the same is incorrect or
should be rectified has been received;
(B) Without prejudice to the generality of the foregoing, the Records will
fully reflect and provide full and sufficient details of:
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(1) all entitlements of customers of the Business to any special terms,
discounts, rebates, allowances and the like in respect of or by
reference to the terms on which goods or services have been supplied
by the Vendor to such customers prior to Completion;
(2) the names and addresses of all customers and suppliers of the
Business, all dealings between the relevant Vendor and such customers
and suppliers during the last three years together with full details
of all known or likely defaulters;
(3) all items of Current Assets and Fixed Assets held at the
Completion Date together with proof of ownership thereof; and
(4) the location of all tangible Business Assets which are not
physically located on the Properties at the Completion Date and
the terms and conditions upon which they are being held.
7.3 Tax
(A) The Vendors have maintained all records for Tax (including, without
limit, VAT, payroll, federal, foreign, state, county, municipal and
local income, excise, customs, capital, franchise, sales, use,
transfer, business and property taxes) and other purposes required to
be kept by them in relation to the Business and the Business Assets or
necessary to support the preparation of any tax return and all proper
payments and returns (including all extensions to returns) which are
due or claimed to be due have been made to the relevant taxation
authority or other governmental authority within the required period
or at the required time.
(B) All tax returns made by the Vendors or any of them to the relevant tax
authority were accurate and correct, properly reflected the tax due
for the periods in respect of which they were made and none of the
same is subject to or are likely to be the subject of any dispute.
(C) None of the Vendors has waived any law or regulation which fixes, or
consents to the extension of, any period of time for the assessment of
any Tax and which is in effect at the date of this Agreement.
(D) None of the Vendors has made or entered into any election, consent or
agreement with a relevant tax authority other than any such election,
consent or agreement as appears on a tax form or return filed with the
relevant tax authority.
(E) None of the Business Assets is a capital item for the purposes of
Part XV Value Added Tax Regulations 1995 or the equivalent
provisions in relevant
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jurisdictions.
8. The Conduct of the Business and the effect of the sale
- ----------------------------------------------------------
8.1 Business since the Balance Sheet Date
Since the Balance Sheet Date:
(A) the Business has been carried on in the ordinary and usual course so
as to maintain it as a going concern and without any interruption or
alteration in the nature, scope or manner of the Business;
(B) there has been no significant event or occurrence (including, but not
limited to the loss of any significant customer or supplier) which has
had or can reasonably be expected following Completion to have a
material adverse affect on the Business or its value, profitability or
prospects or on the value of any of the Business Assets;
(C) there has been no unusual change in the stock in trade or work in
progress of the Business; and
(D) no substantial customer or supplier representing more than 5 per cent.
of sales or supplies of any product or service of the Company for the
purpose of the Business has:
(1) ceased or reduced the level of its trade with or supplies to the
Business or indicated an intention to do any of the foregoing; or
(2) changed or indicated an intention to change the terms on which it
is prepared to trade with or supply the Business.
8.2 Consequence of acquisition of the Business by the Purchaser
(A) The acquisition of the Business and the Business Assets by the
Purchaser in compliance with the terms of this Agreement:
(1) will not cause the Purchaser to lose the benefit of any right or
privilege in relation to the Business presently enjoyed by the
Vendor or relieve any person of any obligation(whether
contractual or otherwise) to the Vendor of which the Purchaser is
to acquire the benefit, or enable any person to determine any
such obligation or any contractual right or benefit now enjoyed
by the Vendor in relation to the Business or to exercise any
right whether under an agreement or otherwise in respect of the
Business;
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(2) will not give rise to or cause to become exercisable any right of
pre-emption relating to the Business or any of the Business
Assets; and
(3) will not result in a breach of, or constitute a default under
(a) any agreement, understanding, arrangement or instrument
(including, but not limited to, any of the Contracts) or
(b) any order, judgment or decree of any court or governmental
agency to which the Vendor is party or by which the Vendor
or the Business or any of the Business Assets is bound or
subject;
and so far as the Vendor is aware the goodwill of the Business
and its relationship with clients, customers, suppliers and
employees will not be adversely affected thereby.
(B) The exchange and/or performance of this Agreement will not relieve
any party to any of the Contracts other than the Vendor from any
obligation thereunder or enable any of them to determine any of the
Contracts.
(C) The Vendor has not been explicitly informed that any person who now
has business dealings with the Business would or might cease to do so
after Completion which cessation can reasonably be expected to have a
material adverse effect on the Business.
9. The Business and its assets
- -------------------------------
9.1 Business Assets
(A) The Vendor is the owner both legally and beneficially and has good and
marketable title to (or is otherwise able to procure the sale
hereunder to the Purchaser by the legal and beneficial owner who has
good and marketable title to) all the Business Assets free from any
Encumbrance or any third party claim and all such assets are within
the control or possession of the Vendor.
(B) No Encumbrance is outstanding nor is there any agreement or commitment
to give or create or allow any Encumbrance over or in respect of the
whole or any part of the Business Assets and no claim has been made by
any person that he is entitled to any such Encumbrance.
(C) No asset used in the Business is shared by the Vendor with any other
person. The Business does not require or depend for its continuation
or for the continuation of the method or manner or scope of operation
of its business in the same way or manner or on the same basis as
heretofore upon any assets,
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premises, facilities or services (other than those included in the
Business Assets)
(D) Save for the Excluded Assets the Business Assets comprise all of the
assets, rights and privileges (other than cash, stock in trade or
stocks of materials and work in progress which has been sold or used
in the ordinary course of the Business) which are currently or have
since the Balance Sheet Date been used or required by the Vendor to
carry on the Business.
9.2 Book Debts
The Book Debts are good and collectable in the ordinary course of business
and will realise their full face value for Western States of US$14,062,515
and for Bejka of SEK 4,003,056 as stated in the Reference Accounts less any
amounts for which full provision has been made in the Reference Accounts
within one year after Completion. The rights of the Vendor in respect of
the Book Debts are valid and enforceable
9.3 Condition and use of Fixed Assets
Each of the Fixed Assets:
(A) is in good repair and condition (taking into account its age and level
of use), is in satisfactory working order and has been regularly and
properly serviced and maintained and none is in need of renewal or
replacement and each is capable of being properly used over its
estimated useful life for the current requirements of the Business for
the same purposes and to no lesser extent than heretofore;
(B) is not unsafe, dangerous or in such a physical condition as to
contravene any health and safety legislation, statute, regulation or
order having the force of law, or the terms of any contract (express
or implied) between the Vendor and any of its employees, customers or
any other person, and does not contravene or infringe any law
applicable to the Vendor or any obligation to which it is subject or
breach any duty of care which it owes.
9.4 Levels, value and quality of Stock
(A) The Stock (other than stock which is featured in the sales catalogues
for the Business for the year 1999) is all capable of being sold in
the ordinary course of the Business for an aggregate amount not less
than, or is otherwise (on the basis of the lower of cost and net
realisable value) worth in aggregate not less than, for Western States
US$15,924,252 and for Bejka SEK16,642,497 as stated in the Reference
Accounts. The Stock which is featured in the sales catalogues for the
Business for the year 1999 is all capable of being sold in the
ordinary
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course of the Business for an aggregate amount not less than for
Western States US$4,765,605 and for Bejka SEK 0.
(B) All finished goods included in the Stock are in good condition and
meet all relevant statutory, regulatory and industry-accepted
standards.
(C) The levels of stocks of materials and partly and fully finished goods
included in the Stock are sufficient for the normal requirements of
the Business and are adequate (but not excessive) in relation to the
current trading requirements of the Business as a whole.
9.5 Intellectual Property Rights
(A) The Vendor is the sole legal and beneficial owner free from
Encumbrances of the Intellectual Property Rights and (save for
copyrights and unregistered design rights not included in the Listed
Intellectual Property Rights) owns no other Intellectual Property
material to the Business.
(B) Save as may appear from the Intellectual Property Agreements no person
has been authorised to make any use whatsoever of any Intellectual
Property Rights.
(C) Save as may appear from the Intellectual Property Agreements all the
Intellectual Property Rights are owned by the Vendor and the Vendor
does not use any Intellectual Property Rights in respect of which any
third party has any right, title or interest.
(D) All the Intellectual Property Rights are valid and enforceable and
nothing has been done, omitted or permitted whereby any of them has
ceased or can reasonably be expected to cease to be valid and
enforceable.
(E) So far as the Vendor is aware none of the processes or products of the
Vendor and/or used in the Business infringes any Intellectual Property
or any right of any other person relating to Intellectual Property or
involves the unlicensed use of confidential information disclosed to
the Vendor in relation to the Business by any person in circumstances
which might entitle that person to make a claim against the Vendors.
(F) None of the Intellectual Property Rights is being used, claimed,
applied for, opposed or attacked by any person.
(G) The Vendor is not aware of any infringement of the Intellectual
Property Rights or of any rights relating to them by any person.
(H) There are no outstanding claims against the Vendor for infringement of
any
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Intellectual Property or of any rights relating to it used (or
which has been used) in the Business and during the last three years
no such claims have been settled by the giving of any undertakings
which remain in force. The Vendor has not received any actual or
threatened claim that any of the Intellectual Property Rights is
invalid nor is the Vendor aware of any reason why any patents included
in the Intellectual Property Rights should be amended.
(I) Confidential information and know-how used in the Business is kept
strictly confidential and the Vendor operates and fully complies with
procedures which maintain such confidentiality. The Vendor is not
aware of any such confidentiality having been breached. The Vendor has
not disclosed (except in the ordinary course of its business or to the
Purchaser or its Affiliates) any of its know-how, trade secrets or
list of customers to any other person.
(J) All application and renewal fees, costs, charges and taxes required
for the maintenance or protection of the Intellectual Property Rights
have been duly paid on time and all other steps so required have been
taken and so far as the Vendor is aware none of such rights is subject
to any existing challenge or attack by a third party or competent
authority and a list of all pending applications and in each case the
status of such application is attached to the Disclosure Letter.
(K) So far as the Vendor is aware each of the Intellectual Property
Agreements is valid and binding and the Vendor is not in breach of any
such agreement and Completion will not result in a breach of any of
the Listed Intellectual Property Agreements.
(L) All current advertising, marketing and sales promotions by the
Business comply with all applicable codes of practice and self-
regulatory schemes. The Vendor has not been disciplined under any
scheme or code in respect of any such advertising, marketing or sales
promotion and no complaint has been made against it in respect thereof
and there are no outstanding complaints or disciplinary proceedings
against the Vendor in respect thereof.
(M) All persons retained or employed by the Vendor who in the course of
their work in the Business will or might reasonably be expected to
bring into existence Intellectual Property or things protected by
Intellectual Property are, so far as is reasonably practicable,
individually bound by agreements with the Vendor whereby all
Intellectual Property which such persons may bring into existence
during their work in the Business vests in the Vendor and all such
agreements contain terms which, so far as is reasonably practicable,
prevent such persons disclosing any confidential information about the
Vendor and the Business.
(N) None of the Intellectual Property Rights is subject to compulsory
licensing or
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the granting of any licences of right nor, so far as the Vendor is
aware, will it become so by operation of law.
(O) The Business does not use on its letterhead, brochures, sales
literature or vehicles, nor does it otherwise carry on its business
under, any name other than the name(s) set out in the Disclosure
Letter.
9.6 Computer Systems
(A) The Hardware has been satisfactorily maintained and supported and the
systems contracts include an appropriate maintenance and support
agreement.
(B) The Hardware and Software have adequate capability and capacity for
the current requirements of the Business for the processing and other
functions required to be performed for the purposes of the Business.
(C) Disaster recovery plans are in effect and are adequate to ensure that
the Hardware, Software and Data can be replaced or substituted without
material disruption to the Business.
(D) In the event that any person providing maintenance or support services
for the Hardware, Software and Data ceases or is unable to do so, the
systems contracts provide all necessary rights and information to
procure the carrying out of such services by employees or by a third
party without undue expense or delay.
(E) The Business has sufficient technically competent and trained
employees to ensure proper handling, operation, monitoring and use of
its computer systems.
(F) The Business has adequate procedures to ensure internal and external
security of the Hardware, Software and Data, including (without
limitation) procedures for preventing unauthorised access, preventing
the introduction of a virus, taking and storing on-site and off-site
back-up copies of Software and Data.
(G) Where any of the records of the Business are stored electronically,
the systems contracts confer upon the Vendor all hardware and software
licences necessary to enable it to keep, copy, maintain and use such
records in the course of the Business and the Business does not share
any hardware or software relating to the records with any person
(including the Vendor).
(H) The systems contracts confer upon the Vendor all the rights necessary
(including rights over the source code) to obtain, without undue
expense or delay, modified versions of the Software which are required
at any time to
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improve in any regard the operation and/or efficiency of the Software.
(I) The Vendor owns, and is in possession and control of, original copies
of all the manuals, guides, instruction books and technical documents
(including any corrections and updates) required to operate
effectively the Hardware and the Software which are included in the
Business Assets.
(J) The Hardware and Software have never unduly interrupted or hindered
the running or operation of the Business, and have no defects in
operation which so affect the Business.
(K) The Hardware is the absolute property of the Vendor free from
encumbrances and is included in the Fixed Assets.
9.7 Title retention
The Vendor has not acquired or agreed to acquire any of the Business Assets
on terms that property therein or title thereto does not pass until full
payment is made or (if it has) the property therein and title thereto has
now fully passed to the Vendor and no supplier or other third party has any
rights or claims against or in respect of such Business Assets accordingly.
9.8 Insurances
(A) Full copies of all the insurance policies in which the Vendor has an
interest in relation to the Business (the "Insurances") are annexed to
------------
the Disclosure Letter. The Insurances afford to the Business cover
against fire and such other risks as persons carrying on a similar
business as the Business commonly cover by insurance.
(B) All the Insurances are in full force and effect and will be maintained
in full force without alteration in accordance with clause 23 and all
premiums have been paid on time. There are no circumstances which can
reasonably be expected to lead to any liability under any of the
Insurances being avoided by the insurers. The Vendor is unaware of
any circumstances likely to give rise to a claim under any of the
Insurances.
10. Contracts and contractual arrangements
- -------------------------------------------
10.1 The Contracts
(A) Each of the Contracts is valid and binding on the parties thereto and
is capable of being assigned by the Vendor to the Purchaser without
the consent of any other party thereto (save to the extent otherwise
expressly stated in the Disclosure Letter) and no notice of
termination of any such Contract has been
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received or served by the Vendor.
(B) Save for the Contracts, there are not now any agreements,
undertakings, understandings, arrangements or other engagements,
whether written or oral, in relation to the Business or any of the
Business Assets to which the Vendor or any Affiliate of the Vendor is
a party or of which it has the benefit or to which it is otherwise
subject, the benefit of which would be required to be assigned to or
otherwise vested in a purchaser of the Business and the Business
Assets to enable it to carry on the Business and/or to enjoy all the
rights and privileges attaching thereto and/or to any of the Business
Assets in the same manner and scope and to the same extent and on the
same basis as the Vendor has so carried it on or enjoyed prior to the
date hereof, or the burden of which has passed or will pass or will be
alleged to pass to the Purchaser.
(C) Apart from those of the Contracts of which complete and accurate
copies have been disclosed to the Purchaser in the Disclosure Letter
the Vendor is not now in relation to the Business a party to or
subject to any agreement, transaction, obligation, commitment,
understanding, arrangement or liability which:
(1) is of six months or greater duration or is incapable of complete
performance in accordance with its terms within six months after
the date on which it was entered into or undertaken or is
otherwise of a length that is greater than is customary in
businesses of a similar nature to the Business; or
(2) is known by the Vendor to be likely to result in a loss to the
Vendor or to the Business on completion of performance; or
(3) cannot readily be fulfilled or performed by the Vendor on time
and without undue or unusual expenditure of money or effort; or
(4) involves or is likely to involve obligations, restrictions,
expenditure or receipts of any unusual onerous or exceptional
nature; or
(5) is a contract for services (other than contracts for the supply
of electricity or other utility or other normal office services)
or in the nature of an agency, distribution, franchise or
management agreement; or
(6) requires the Vendor to pay any commission, finders fee, royalty
or the like; or
(7) involves liabilities which may fluctuate in accordance with an
index or rate of currency exchange or interest or movements in
the price of any securities or commodities; or
62
<PAGE>
(8) is (save for the Leased Asset Contracts) a contract for the
supply of assets to the Vendor on hire, lease, hire purchase,
conditional sale, credit or deferred payment terms; or
(9) is dependent on the guarantee or covenant of or security provided
by any other person; or
(10) is in any way otherwise than in the ordinary course of business.
(D) There is no agreement or arrangement relating to the Business or any
part thereof to which the Vendor or any Affiliate of the Vendor is a
party (including, but not limited to the Contracts) which in any way
restricts the freedom of the Vendor to carry on the Business in whole
or in part or to use or exploit any of the Business Assets in any part
of the world as it thinks fit.
10. Substantial or significant contracts
Apart from those of the Contracts of which full and complete copies have
been disclosed to the Purchaser and which are listed in the Disclosure
Letter no contract, agreement, transaction, obligation, commitment,
understanding, arrangement or liability entered into by the Vendor in
connection with the Business and now outstanding or unperformed involves
any of the following:
(A) obligations on the part of the Vendor which will cause or are likely
to cause the Vendor to incur expenditure or an obligation to pay money
in excess of US$50,000;
(B) obligations on the part of the Vendor to purchase any specified
minimum quantity or any specified minimum percentage of its total
requirement for bicycles, bicycle parts and accessories or fitness
equipment or other stock in trade from any one supplier;
(C) the supply by the Vendor of bicycles, bicycle parts and accessories or
fitness equipment or other products or services whether by way of
lease or outright sale or otherwise to any one customer such that the
value of such supplies exceeds or is likely to exceed (if the Vendor
were to carry on the Business after Completion) five per cent. of the
total turnover of the Vendor in relation to the Business in the
current financial year or in any subsequent year.
10.3 Defaults
(A) Neither the Vendor nor any other party to any agreement with the
Vendor in relation to the Business is in default thereunder, and the
Vendor is not aware of any invalidity or grounds for termination,
avoidance, rescission or repudiation of any such agreement which in
any such case would be material
63
<PAGE>
in the context of the financial or trading position of the Business or
in the context of the Business Assets nor (so far as the Vendor is
aware) are there any circumstances likely to give rise to any such
event.
(B) Full details of any customers or any party to any of the Distribution
Agreements (or any persons to whom the Vendor in the course of
Business has supplied goods or services in the 12 months ended on the
date hereof) who have defaulted in the payment when due of any monies
to the Vendor or the Business are specified in the Disclosure Letter.
10.4 Powers of Attorney
There is not in force any power of attorney or other authority (express,
implied or ostensible) given by or on behalf of the Vendor in connection
with the Business or the conduct thereof or any of the Business Assets
which is still outstanding or effective to any person to enter into any
contract, commitment or obligation on behalf of or which might affect the
Business or the conduct thereof or any of the Business Assets (save to
competent and responsible Employees to enter into routine contracts in the
ordinary course of business in the normal course of their duties).
10.5 Non-arm's length contracts
The Vendor has not in relation to the Business been a party to, nor have
the profits or financial position of the Business during the last three
years been affected by, any agreement or arrangement which is not entirely
of an arm's length nature.
10.6 Documents
All title deeds and agreements relating to the Business and the Business
Assets to which the Vendor is party (including, without limitation, the
Contracts) and other documents relating to the Business and the Business
Assets owned by or which ought to be in the possession or control of the
Vendor are in the possession or control of the Vendor, are properly stamped
where relevant, are free from any Encumbrance and will be delivered or made
available to the Purchaser on Completion.
11. Employees
- --------------
11.1 Employment matters generally
(A) The Employees are all employed by the Vendor in the Business at the
date of this Agreement. There are no other individuals employed at
the date of this Agreement in the Business.
(B) The contract of service of each of the Employees is terminable on not
more than three months notice without compensation.
64
<PAGE>
(C) To the fullest extent permitted by relevant law the Disclosure Letter
contains true, accurate and complete details of the names, ages and
lengths of continuous service of all of the Employees and the
remuneration payable and other benefits provided by the Vendor or any
Affiliate of the Vendor or which the Vendor is bound to provide
(whether now or in the future) to each category of the Employees at
the Completion Date or any person connected with any such Employee and
(without limiting the generality of the foregoing) contains
particulars of all profit sharing, incentive, bonus, commission and
other similar arrangements and any other benefit to which any such
category of the Employees is entitled or which is regularly provided
or made available to them (including details of their notice period
and their entitlement to holiday) in any case whether legally binding
on the Vendor or not.
(D) There are no subsisting contracts for the provision by any person of
any consultancy services to the Business.
(E) None of the Employees has given notice terminating his contract of
employment.
(F) Save as disclosed in the Disclosure Letter none of the Employees is
under notice of dismissal or has any outstanding dispute with the
Vendor or any Affiliate of the Vendor in connection with or arising
from his employment. There is no liability outstanding to any such
person except for remuneration or other benefits accruing due and no
such remuneration or other benefit which has fallen due for payment
has not been paid.
(G) During the period of six months ended on the date of this Agreement
neither the Vendor nor any Affiliate of the Vendor nor any other
person carrying on the Business has directly or indirectly terminated
the employment of any person employed in or by the Business where the
reason or principal reason for such termination was the transfer of
the Business.
(H) None of the Employees belongs or has belonged at any material time to
an independent trade union recognised by the Vendor or any Affiliate
of the Vendor in relation to the Business.
(I) There are no employee representatives representing all or any of the
Employees.
(J) The Vendor has complied with all of its statutory obligations to
inform and consult appropriate representatives as required by law.
(K) There is no plan, scheme, commitment, policy, custom or practice
(whether legally binding or not) relating to redundancy affecting any
of the Employees more generous than the statutory redundancy
requirements.
65
<PAGE>
(L) All schemes and plans whereby benefits are provided to Employees
comply in all respects with all relevant statutes, regulations and
other laws and all necessary consents in relation to such schemes and
plans have been obtained and all governmental filings in relation to
such schemes and plans have been made.
(M) There are no loans owed by any of the Employees to the Vendor or any
Affiliate of the Vendor.
(N) Since the Balance Sheet Date no change has been made or agreed to be
made in (i) the rate of remuneration, or the emoluments or pension
benefits or other contractual benefits, of any of the Employees or
(ii) the terms of engagement of any of the Employees.
(O) There is no outstanding undischarged liability to pay any governmental
or regulatory authority in any jurisdiction any contribution, taxation
or other duty arising in connection with the employment or engagement
of any of the Employees.
(P) None of the Employees will become entitled by virtue of their contract
of service to any payment or enhancement in or improvement to their
remuneration, benefits or terms and conditions of service only by
reason of the execution of this Agreement or the completion of the
sale and purchase under or pursuant to this Agreement.
11.2 Pensions
The Vendor is not under any present or future liability to pay to any of
the Employees or to any other person who has been in any manner connected
with the Business any pension, superannuation allowance, death benefit,
retirement gratuity or like benefit or to contribute to any life assurance
scheme or medical insurance scheme and the Vendor has not made any such
payments or contributions on a voluntary basis nor is it proposing to do
so.
11.3 Disputes with Employees
There is no:
(A) outstanding claim by any person who is now or has been an employee of
the Vendor or any Affiliate of the Vendor in relation to the Business
or any dispute outstanding with any of the said persons or with any
union or any other body representing all or any of them in relation to
their employment in the Business and there are no circumstances likely
to give rise to any such claim or dispute;
66
<PAGE>
(B) industrial action involving any employee, whether official or
unofficial, currently occurring or threatened; or
(C) industrial relations matter which has been referred to any
governmental agency for advice, conciliation or arbitration.
12. Miscellaneous
- ------------------
12.1 Off-Balance Sheet Financing
The Vendor has not in relation to the Business engaged in any borrowing or
financing which is not reflected in the Audited Accounts other than in
relation to the Leased Assets.
12.2 All material matters disclosed
All information relating to the Business or the Vendor contained or
referred to in this Agreement and all documents in Agreed Form and in the
Disclosure Letter or any annexure thereto is true and accurate in all
material respects and the Vendor is not aware of any other fact or matter
which renders any such information misleading because of any omission or
ambiguity or for any other reason.
67
<PAGE>
SCHEDULE 3 : WARRANTIES AND REPRESENTATIONS
PART 2 : Specific Warranties
1. Interpretation
- ------------------
1.1 Definitions
In this Part 2 of Schedule 3 where the context admits:
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of ERISA
and Code (S)4980B;
"Code" means the United States Internal Revenue Code of 1986, as amended;
"Company" means any of the Sale Companies (including the US Company);
"ERISA" means the United States Employee Retirement Income Security Act of
1974, as amended;
"IRS" means the Internal Revenue Service of the United States.
"Swedish Company" means Bejka Trading A.B.
"US Company" means Western States Import Co., Inc.
2. US Warranties and Representations
- -------------------------------------
The Vendors hereby warrant and represent to and for the benefit of the
Purchasers in the following terms:
2.1 Employee plans
(A) The Disclosure Letter lists each of the following plans which
currently is sponsored, maintained or contributed to by (or required
to be contributed to by) the US Company, or with respect to which the
US Company has any liability or potential liability: (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 incentive, bonus, deferred compensation, retirement, severance,
vacation or any other employee benefit plan, policy or arrangement
(each such plan, policy and arrangement being herein referred to as an
"Employee Plan").
(B) With respect to each Employee Plan, the US Company has provided the
Purchasers with true and complete copies of each current plan
document, policy statement, summary plan description and other written
material
68
<PAGE>
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) 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. Each
Employee Plan that is intended to be qualified under Section 401(a) of
the Code has received a determination from the IRS that such Employee
Plan is so qualified, and nothing has occurred since the date of such
determination that could adversely affect the qualified status of such
Employee Plan. 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
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) The US Company has never maintained, sponsored, or contributed to, and
has no liability or potential liability with respect to, any employee
benefit plan (as defined in Section 3(3) of ERISA) that is a defined
benefit plan (as defined in Section 3(35) of ERISA or Section 414(j)
of the Code) or any multiemployer plan (as defined in Section 3(37) of
ERISA), including any liability on account of a "partial withdrawal"
or a "complete withdrawal" (within the meaning of Sections 4205 and
4203, respectively, of ERISA). No asset of any Company is subject to
any lien under Title IV of ERISA or the Code.
(E) 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 transaction 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) Save as set out in the Disclosure Letter, (i) the US Company has
complied with the health care continuation requirements of COBRA; and
(ii) no Company has any obligation under any Employee Plan or
otherwise to provide health or life insurance benefits to former
employees of any Company or any other person, except as specifically
required by COBRA.
(G) No Company has any liability with respect to any "employee benefit
plan" (as defined in Section 3(3) of ERISA) 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 US Company.
69
<PAGE>
(H) The US Company does not contribute to, maintain or sponsor nor does it
have any liability with respect to any Employee Plan or other employee
benefit plan, agreement or arrangement applicable to employees located
outside the United States.
(I) 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 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.
2.2 Environmental
(A) The Vendor has not either expressly or by operation of law, assumed or
undertaken any liability, including without limitation any obligation
for corrective or remedial action, of any other person relating to
Environmental Law.
(B) The Vendor has not treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or released any
Hazardous Material, or owned or operated any property or facility (and
no such property or facility is contaminated any such Hazardous
Material) in a manner that has given or could give rise to liabilities
of the Vendor pursuant to Environmental Law.
3. Swedish Warranties and Representations
- ------------------------------------------
The Vendors hereby warrant and represent to and for the benefit of the
Purchasers in the following terms:
3.1 All obligations to consult and negotiate with the employees of Bejka under
the Codetermination Act (1976:580) have been fully complied with.
3.2 Bejka is not bound by any collective agreement.
3.3 No former employee of the Vendors or Bejka will have a right of re-
employment with the Purchasers or Bejka.
70
<PAGE>
SCHEDULE 4 : ADJUSTMENT OF CONSIDERATION
1. Interpretation
- ------------------
In this schedule, where the context admits:
"Completion Accounts" means the accounts prepared in accordance with paragraph 2
- ---------------------
and agreed or determined in accordance with paragraph 4.
"Net Tangible Assets" means the sum of the values of:
- ---------------------
(1) the Fixed Assets; and
(2) the Current Assets.
(together referred to as the "Tangible Assets"),
-----------------
less
(1) the Creditors; and
(2) the Assumed Liabilities; and
(3) any other provisions specifically required under this Schedule 4
(all as shown in or derived from the Completion Accounts).
"Purchaser's Accountants" means Arthur Andersen.
- -------------------------
"Vendor's Accountants" means in each case the firm of Accountants set out
- ---------------------
opposite the name of each of the Vendors in Schedule 2 to this Agreement.
2. Completion Accounts
- -----------------------
2.1 Preparation
The Purchaser shall, as soon as practicable, and in any event within 90
Business Days after Completion, procure that accounts for the Business
shall be prepared in accordance with this schedule and the parties shall
use their best endeavours to secure compliance with this schedule by their
respective accountants. The Vendor shall promptly supply all such
information and provide access to all such records and personnel as the
Purchaser and any independent firm of accountants appointed under paragraph
4.3 shall reasonably require, including all working papers of the Vendor
relating to the preparation of the Audited Accounts and the Management
Accounts.
71
<PAGE>
The Vendor, if so required by the Purchaser or such independent firm shall
use all reasonable endeavours to obtain for the Purchaser or such
independent firm, access to the working papers of the Auditors, prepared in
relation to the audit of the Audited Accounts.
2.2 Description
The Completion Accounts shall consist of a balance sheet of the Business
drawn up as at the Completion Date.
2.3 General requirements
Subject to the specific requirements of paragraph 2.4 which shall take
priority over the general requirements of this paragraph 2.3, the
Completion Accounts shall apply and adopt the same policies, bases,
methods, practices and procedures of accounting as applied or adopted for
the purposes of the Audited Accounts.
2.4 Specific requirements
In preparing the Completion Accounts:-
(A) Stock shall be determined in accordance with paragraph 3 and valued
applying and adopting the same policies, bases, methods, practices and
procedures of accounting as applied or adopted for the purposes of the
Audited Accounts;
(B) no value shall be attributed to any Business Asset except to the
extent the Purchaser shall have the full benefit of it after
Completion;
(C) the Goodwill, the Intellectual Property Rights, the Listed
Intellectual Property Rights, the Third Party Rights, the Contracts,
the Leased Assets and the Records shall be excluded;
(D) Prepayments shall be included as an asset in the Completion the
Accounts and there shall be included therein as a liability the amount
of all outgoings relating to the Business which will fall to be
discharged by the Purchaser to the extent that they are attributable
to any period prior to Completion and the amounts of such prepayments
and outgoings shall be determined in accordance with the same
policies, bases, methods, practices and procedures of accounting as
applied or adopted for the purposes of the Audited Accounts but:-
(1) where a discount or excess charge will be incurred in relation to
any accrued liability the whole amount of such discount or excess
shall be excluded from the Completion Accounts if it would not
have been obtained or incurred had not usage, volume or purchases
after
72
<PAGE>
Completion exceeded those prior to Completion, but otherwise
shall be deemed to accrue evenly over the period to which such
discount or excess charge relates and;
(2) there shall be included as a liability in the Completion Accounts
an amount equal to the holiday pay accrued or which would accrue
to each Employee at the Completion Date on the basis of the
holidays taken by each Employee up to Completion (calculated on
the assumption that entitlement to holidays accrues evenly over
the calendar year).
(E) where any of the Fixed Assets or the Properties has been destroyed or
damaged prior to Completion, the Completion Accounts shall:-
(1) if the Purchaser has selected the first alternative in clause
2.3(B), be adjusted in such manner as is necessary to reflect the
revised Consideration or the manner in which it is to be abated or
adjusted; or
(2) if the Purchaser has selected the second alternative in clause
2.3(B), not be adjusted to reflect the damage or destruction, on
the basis that the Purchaser will receive the insurance proceeds
in lieu of such adjustment.
3. Stock valuation
- -------------------
For the purposes of the preparation of the Completion Accounts, the value of the
Stock shall be ascertained in accordance with the following provisions of this
paragraph 3:-
(A) the Vendor and the Purchaser shall cause a stocktaking to be made on
the Completion Date of all the Stock;
(B) unless otherwise agreed by the parties such stocktaking shall consist
of a physical check of the amount, quality and condition of the Stock
situated on the Properties at the Completion Date and an inspection of
the books and records and contractual documentation for all Stock not
so situated together with confirmation from the person or persons
having physical possession of such Stock of the extent of any interest
in or Encumbrance claimed over such Stock (if any); and
(C) when such stocktaking has been completed the Stock shall be valued by
the Purchaser in accordance with the same policies, bases, methods,
practices and procedures of accounting as applied or adopted for the
purposes of the Audited Accounts, and included in the Completion
Accounts.
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<PAGE>
4. Procedure
- -------------
4.1 Submission of draft
(A) As soon as the Completion Accounts shall have been prepared the
Purchaser shall send a copy to the Vendor together with such working
papers used in connection with the preparation of the same as it
considers necessary or appropriate to understand and agree the
Completion Accounts and shall in addition, and at the same time, send
to the Vendor its calculation of the Net Tangible Assets.
(B) Unless the Vendor shall within one calendar month after receipt of the
Completion Accounts (and associated papers and calculation as provided
in paragraph 4.1(A)) serve a notice in writing on the Purchaser that
it objects to the Completion Accounts (identifying the reason for any
objection and the amount(s) or item(s) in the Completion Accounts
and/or calculation which is/are in dispute) (such notification being,
for the purposes of this paragraph 4, an "Objection Notice") the
------------------
Vendor shall be deemed to have agreed to the Completion Accounts and
the Purchaser's calculation of the Net Tangible Assets for all
purposes of this Agreement.
4.2 Agreement of draft
If, within the period referred to in paragraph 4.1(B), the Vendor shall
give the Purchaser an Objection Notice then the Purchaser and the Vendor
shall use their best endeavours to reach agreement upon adjustments to the
draft and the value of Net Tangible Assets.
4.3 Independent accountant
In the event that the Vendor and the Purchaser are unable to reach
agreement within 20 days Business Days following service of the Objection
Notice, either the Vendor or the Purchaser shall be entitled to refer the
matter or matters in dispute to an independent firm of accountants agreed
upon between them and in any event such firm of accountants must be one of
the "Big Five" firms of accountants except Arthur Anderson and Ernst &
Young. Such independent firm of accountants shall act as experts not as
arbitrators and shall determine the matter or matters in dispute and their
decision shall be binding. The costs of the independent firm of
accountants shall be borne equally by the Vendor and the Purchaser.
4.4 Report
If the Vendor accepts, or is deemed to accept, that the said draft complies
with paragraph 2 the Purchasers Accountants shall sign a report to the
effect that the Completion Accounts comply with paragraph 2 and any
Completion Accounts so
74
<PAGE>
reported on, or (if paragraph 4.3 shall apply) the final draft of the
Completion Accounts as adjusted so as to be in accordance with the
determination of the independent firm of accountants, shall be the
Completion Accounts for the purposes of this Agreement and shall be final
and binding on the parties.
4.5 Information and explanations
The Purchaser and the Purchaser's Accountants shall provide such
information and explanations relating to the draft Completion Accounts and
their preparation as the Vendor's Accountants, or any independent firm of
accountants appointed pursuant to paragraph 4.3, shall reasonably require.
5. Adjustment of Consideration
- -------------------------------
5.1 Repayment of Consideration
When the Completion Accounts have become binding, the Vendors shall
forthwith repay to the Purchasers the amount (if any) by which the Net
Tangible Assets are less than for Western States US$10,038,550 and for
Bejka SEK18,980,000 as adjusted upwards or downwards by the amount of any
ordinary operating income or loss (as the case may be) made by the Business
between the date of the Reference Accounts and Completion.
5.2 Currency Translation
Where currency translation is required the rate to be applied shall be the
rate for buying each relevant currency with US Dollars on the Completion
Date as quoted by the Foreign Exchange Rates column of the Wall Street
Journal at the close of business on that day.
75
<PAGE>
SCHEDULE 5 : ASSETS
PART 1 : Current Assets
(A) All stocks of raw materials, components and consumables including, without
limitation, fuel, office supplies, packaging and labelling, spares and
spare parts;
(B) All stocks of partly finished goods and all work-in-progress;
(C) All stocks of unsold finished goods;
(D) the Prepayments;
(E) the Book Debts;
(F) Cash at bank relating to the Business;
(G) Employee advances (as referred to in doc W63.17 of Exhibit A to the
Disclosure Letter).
76
<PAGE>
PART 2 : Properties
<TABLE>
<CAPTION>
Facility Size Expiration Monthly
Date Payment
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Gothenburg, Sweden: 2,895 sq ml (of Sept 2001 $ 10,000
Office and Warehouse which 450 sq
mt. is used for
office)
- -----------------------------------------------------------------------
US:
Camarillo, CA 90,000 sq ft March 1999 $ 64,856
headquarters and
warehouse
Camarillo R&D facility 5,000 sq ft Monthly $ 4,095
Bolingbrook, IL warehouse 66,452 sq ft Lease $ 17,222
Jan 2004
Dayton, NJ warehouse 73,800 sq ft Dec 2000 $ 20,295
Camarillo, Ventura construction 31 October, $56,312.50
County, CA (new appears to have 2008
headquarters will replace been delayed-
facility described as was supposed
"headquarters and to commence
warehouse" above 01 November,
1998
- -----------------------------------------------------------------------
</TABLE>
77
<PAGE>
PART 3: Fixed Assets
LIST OF ASSETS
Western States
78
<PAGE>
DIAMONDBACK - BOOK DEPRECIATION AS OF 10/31/98 FOR PRINT DATE - 10/06/98
PURCHASES THROUGH FISCAL PERIOD # 11
<TABLE>
<CAPTION>
Purch Depr Depr Exp Accum Depr
Description Fp Yr Cost Meth Life 1998 10-98
- -------------------------------------------- --- --- --------------- -------- ------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY
LOCATION 1
---------------------------------
13/1400-1 TOTAL MACHINERY & EQUIP 221,789.22 15,141.02 206,735.25
13/1405-1 TOTAL TOOLING - DB 137,434.27 11,030.63 38,744.24
13/1410-1 TOTAL OFFICE EQUIP & FURN 714,967.59 40,534.81 672,546.10
13/1420-1 TOTAL COMPUTER EQUIP 739,486.72 69,215.38 562,779.84
13/1430-1 TOTAL LEASEHOLD IMPROVEMENTS 89,972.36 8,251.73 61,909.22
13/1440-1 TOTAL VEHICLES 119,568.82 24,778.95 91,507.39
--------------- ------------------------------
TOTAL ASSETS - LOCATION 1 2,023,218.98 168,952.52 1,634,222.04
--------------- ------------------------------
LOCATION 2
---------------------------------
13/1405-2 TOTAL TOOLING - FITNESS 723,374.48 130,002.88 425,565.51
--------------- ------------------------------
TOTAL ASSETS - LOCATION 2 723,374.48 130,002.88 425,565.51
--------------- ------------------------------
LOCATION 3
---------------------------------
13/1400-3 TOTAL MACHINERY & EQUIP 149,221.36 14,717.92 140,356.33
13/1410-3 TOTAL OFFICE EQUIP & FURNITURE 21,931.56 0.00 21,931.56
13/1420-3 TOTAL COMPUTER EQUIPMENT 19,890.56 1,256.22 19,024.46
13/1430-3 TOTAL LEASEHOLD IMPROVEMENTS 14,371.50 1,437.15 7,006.11
--------------- ------------------------------
TOTAL ASSETS - LOCATION 3 205,414.98 17,411.29 188,318.46
--------------- ------------------------------
LOCATION 4
---------------------------------
13/1400-4 TOTAL MACHINERY & EQUIPMENT 252,665.80 33,624.03 239,195.53
13/1410-4 TOTAL OFFICE EQUIP & FURNITURE 24,737.19 0.00 24,737.19
13/1420-4 TOTAL COMPUTER EQUIPMENT 10,239.77 915.14 9,515.11
13/1430-4 TOTAL LEASEHOLD IMPROVEMENTS 5,653.00 565.30 2,449.03
--------------- ------------------------------
TOTAL ASSETS - LOCATION 4 293,295.76 35,104.47 275,896.86
--------------- ------------------------------
TOTAL COMPANY 3,245,304.20 351,471.16 2,524,002.87
=============== ==============================
</TABLE>
79
<PAGE>
<TABLE>
<CAPTION>
DIAMONDBACK - BOOK DEPRECIATION AS OF 10/31/98 FOR PRINT DATE - 10/06/98
PURCHASES THROUGH FISCAL PERIOD #11
Purch Depr Depr Exp Accum Depr
Description FP YR Cost Meth Life 1998 10-98
- ------------------------------------------- -- -- -------- ---- ---- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
MACHINERY & EQUIPMENT - 1300 & 1400-1
---------------------------------
CLARK POWER FORK LIFT TRUCK 6 81 9,540.00 SL 7 0.00 9,540.00
FORK LIFT - DATSUN NISSAN 10 84 9,232.30 SL 7 0.00 9,232.30
FORKLIFT - NISSAN 86 19,145.72 SL 7 0.00 19,145.72
Power Machinery: Order Selector 86 19,492.34 SL 7 0.00 19,492.34
American Whse Equip: Beams 1 89 11,912.40 SL 7 0.00 11,912.40
Power Machinery: Conveyor 4 89 1,608.27 SL 7 0.00 1,608.27
American Whse Equip: Beams 5 89 3,344.10 SL 7 0.00 3,344.10
Power Machinery: Pallet Jacks 6 89 909.48 SL 7 0.00 909.48
Clarklift: Forklift 7 89 11,978.00 SL 7 0.00 11,978.00
Mike Barbey: Wheel Trees 8 89 800.00 SL 7 0.00 800.00
American Whse Equip: Beams 8 89 5,353.28 SL 7 0.00 5,353.28
American Whse Equip: Beams 9 89 1,500.00 SL 7 0.00 1,500.00
Paper & Plastics: Tape Dispenser 10 89 731.40 SL 7 0.00 731.40
Power Machinery: Conveyor 10 89 611.62 SL 7 0.00 611.62
Paper & Plastics: Tape Dispenser 10 89 690.00 SL 7 0.00 690.00
Kent Landsberg: Ladder 11 89 810.90 SL 7 0.00 810.90
Photo-scan: Cameras 12 89 4,793.41 SL 7 0.00 4,793.41
Probar: Inspector II 1 90 1,588.51 SL 7 0.00 1,588.51
Grainger: 20 Gal ASME Comp 6 90 527.24 SL 7 0.00 527.24
Quinn: Forklift 9 90 27,468.81 SL 7 0.00 27,468.81
Big Joe: Pallet Jack 12 90 1,241.19 SL 7 0.00 1,241.19
Power Machinery: Wheel Baskets 4 91 3,048.56 SL 5 0.00 3,048.56
McMaster/Carr: Lockers 6 91 936.76 SL 7 93.68 936.76
Caterpillar: Forklift 8 91 13,694.36 SL 7 1,369.44 13,694.36
Clarklift: Racks - Uprights & Beams 3 92 4,055.88 SL 7 579.41 3,708.23
M.C. Woodworks: 6 92 325.00 SL 7 46.43 297.14
Certified Weigh Systems: Counting Scale 3 93 2,734.88 SL 5 502.11 2,734.88
R.L. Spear: Pallets 4 93 10,550.66 SL 5 1,937.03 10,550.66
Photo-scan: Surveylance System 10 93 1,213.09 SL 5 222.72 1,213.09
Fleet Industrial: Flex Conveyor 3 95 3,714.31 SL 5 74?.?8 2,816.69
Lodi Metal: Bike Picking Racks 4 95 41,128.75 SL 5 8,225.75 30,503.82
Embly Ranch: 2 Lift Trucks 10 95 1,500.00 SL 5 300.00 962.50
B of A: PD Tools 1 96 1,542.87 SL 5 308.57 912.86
JV 01-52: PD Tools out of Inventory 1 96 653.16 SL 5 130.63 386.45
Morton Machinery: Lathe & Mill via Barter 6 96 762.90 SL 5 152.58 387.81
Anthony Martino 7 96 2,649.07 SL 5 529.81 1,302.46
---------- --------- ----------
TOTAL MACHINERY & EQUIP 221,789.22 15,141.02 206,735.25
---------- --------- ----------
</TABLE>
80
<PAGE>
<TABLE>
<CAPTION>
DIAMONDBACK - BOOK DEPRECIATION AS OF 10/31/98 FOR
PURCHASES THROUGH FISCAL PERIOD #11 PRINT DATE - 10/06/98
PURCH DEPR DEPR EXP ACCUM DEPR
??? DESCRIPTION FP YR COST METH LIFE 1998 10-98
- --------- ----------------------- ----- -- ---------- ---- ---- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOOLING - DB - 1305 & 1405-1
-----------------------
Ramiko/A-Plus: 6 96 29,397.89 SL 5 0.00 14,943.93
Ramiko/A-Plus: 9 96 14,575.00 SL 5 0.00 6,680.21
Hodaka: 9 96 5,000.00 SL 5 0.00 2,291.67
Hodaka: 9 96 2,395.55 SL 5 0.00 1,097.96
Dayton: 6 97 24,100.00 SL 5 4,820.00 7,430.83
Ramiko/A-Plus: 9 97 1,145.00 SL 5 229.00 295.79
Vigorousport 12 97 2,666.67 SL 5 533.33 555.56
Anodizing Inc.: 3 98 17,192.50 SL 5 2,722.15 2,722.15
19902 Anodizing Inc.: 6 98 1,500.00 SL 5 162.50 162.50
980505/NK Ramiko: 7 98 7,851.52 SL 5 719.72 719.72
97888 Dayton: 9 98 24,100.00 SL 5 1,405.83 1,405.83
980626/NK Ramiko/A-Plus: 9 98 7,510.14 SL 5 438.09 438.09
---------- --------- ---------
TOTAL TOOLING - DB 137,434.27 11,030.63 38,744.24
---------- --------- ---------
</TABLE>
81
<PAGE>
DIAMONDBACK - BOOK DEPRECIATION AS OF 10/31/98 FOR PRINT DATE- 10/06/98
PURCHASES THROUGH FISCAL PERIOD # 11
<TABLE>
<CAPTION>
Purch Depr Depr Exp Accum Depr
Description Fp Yr Cost Meth Life 1998 10-98
- ----------------------------------------------------------- -- -- -------- ---- ---- -------- ----------
FURNITURE & FIXTURES - 1310 & 1410-1
------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BOOK CASES 2 9 81 776.08 SL 7 0.00 776.08
CABINETS, DESKS, CALCULATOR 9 81 2,566.95 SL 7 0.00 2,566.95
COPIER, MAILER, SCALE - PITNEY 6 82 16,187.90 SL 7 0.00 15,187.90
TYPEWRITER - REMINGTON 9 82 683.70 SL 7 0.00 683.70
TYPEWRITER - IBM 9 82 482.30 SL 7 O.00 482.30
CABINETS, DESKS, CALCULATOR 9 82 2,018.13 SL 7 0.00 2,018.13
COPIER TABLE - PITNEY BOWES 2 83 2,424.20 SL 7 0.00 2,424.20
DESK, CHAIRS - JULES SELTZER 5 83 2,967.09 SL 7 0.00 2,967.09
BLUEPRINT CABINET 11 84 619.90 SL 7 0.00 619.90
API: Phone System 88 90,330.50 SL 7 0.00 90,330.50
More Copy: Fax 1 89 4,128.70 SL 7 0.00 4,128.70
NFSA: Gym Equip 1 89 4,693.12 SL 7 0.00 4,693.12
Drapery Affair: Blinds 1 89 1,780.74 SL 7 0.00 1,780.74
Save More: Furniture 2 89 559.84 SL 7 0.00 559.84
Economy Office Equip: Cabinets 3 89 331.53 SL 7 0.00 331.53
API: Phone 3 89 4,296.12 SL 7 0.00 4,296.12
Hayworth: Modular Furniture & Partitions 3 89 101,769.62 SL 7 0.00 101,769.62
H.G. Daniels: Ref Table 3 89 861.91 SL 5 0.00 861.91
API: Phone System 4 89 24,226.66 SL 7 0.00 24,226.66
YES: Chairs 4 89 477.00 SL 7 0.00 477.00
Save More: File Cabinets 4 89 956.28 SL 7 0.00 956.28
Drapery Affair: Blinds 4 89 434.95 SL 7 0.00 434.95
More Copy: Shredder 5 89 3,199.70 SL 7 0.00 3,199.70
EOF: Files 5 89 1,293.66 SL 7 0.00 1,293.66
EOF: Files 5 89 300.91 SL 7 0.00 300.91
Save More: 5 89 954.83 SL 7 0.00 954.83
EOF: Files 5 89 354.81 SL 7 0.00 354.81
Bayless: Files 5 89 571.84 SL 7 0.00 571.84
Metropolitan: 5 89 2,141.00 SL 7 0.00 2,141.00
H.G. Daniels: Files 6 89 1,054.72 SL 7 0.00 996.83
Linecraft: Racks 6 89 996.93 SL 7 0.00 996.93
Jax International: 6 89 2,149.54 SL 7 0.00 2,149.54
Grainge Cabinet 8 89 617.44 SL 7 0.00 617.44
Model Display: Showroom 10 89 974.54 SL 7 0.00 974.54
Universal Exhibits: Show Material 11 89 760.41 SL 5 0.00 760.41
Croppers Fire Extinguishers 3 90 1,099.84 SL 7 0.00 1,099.84
David Thompson: Addrays 4 90 755.41 SL 7 0.00 755.41
Drapery Affair: 6 90 845.38 SL 7 0.00 845.38
Hayworth: Modular Furniture & Partitions 8 90 648.33 SL 7 0.00 648.33
Hayworth: Modular Furniture & Partitions 8 90 24,448.66 SL 7 0.00 24,448.66
Xerox: 5065 Copier 7 90 28,196.88 SL 7 0.00 28,196.88
Zenders: 3 Outside Tables 9 90 1,701.20 SL 7 (0.00) 1,701.20
Rapport: Exec. Conf. Room. Furn. 11 90 2,235.88 SL 7 0.00 2,235.88
Rapport: Exec. Conf. Room. Furn. 11 90 2,485.88 SL 7 0.00 2,485.88
Tri-Country: Chairs 11 90 2,234.65 SL 7 0.00 2,234.65
Hayworth: Modular Furniture & Partitions 9 90 440.89 SL 7 0.00 440.89
Office Club: Chairs & Keyboard Drawers 10 91 466.48 SL 7 46.65 466.48
Office Club: Chairs 9 91 343.16 SL 7 34.32 343.16
Hayworth: Modular Furniture & Partitions 10 91 994.53 SL 7 99.45 994.53
Hayworth: Modular Furniture & Partitions 10 91 740.88 SL 7 74.09 740.88
Hayworth: Modular Furniture & Partitions 10 91 740.88 SL 7 51.36 740.88
NEC Business: Phones 10 91 513.60 SL 7 51.31 513.60
Ikea: 12 91 513.11 SL 5 0.00 513.11
Skyline: Showroom 7 91 13,583.87 SL 5 0.00 13,583.87
Aderson's Woodcraft: Showbooth 9 91 575.00 SL 5 0.00 575.00
Procraft: Showbooth 9 91 54,310.00 SL 5 0.00 54,310.00
Procraft: Showbooth 9 91 38,411.75 SL 5 0.00 38,411.75
Procraft: Showbooth 9 91 40,732.50 SL 5 0.00 40,732.50
Procraft: Showbooth 11 91 1,729 .13 SL 5 0.00 1,729 .13
Display Whse: Showbooth 11 91 73.60 SL 5 0.00 73.60
</TABLE>
82
<PAGE>
<TABLE>
<CAPTION>
Purchases Through Fiscal Period # 11
Purch Depr Depr Exp Accum Depr
Description FP YR Cost Meth Life 1998 10-98
- --------- ------------------------------------------ ---- -- ---------- ---- ---- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Display Whse: Showbooth 11 91 404.93 SL 5 0.00 404.93
Bill Immerisk: Showbooth 11 91 375.37 SL 5 0.00 375.37
Steve Miller: Showbooth 11 91 1,804.49 SL 5 0.00 1,804.49
Hayworth: Modular Furniture & Partitions 2 92 401.84 SL 5 26.79 401.84
Steve Miller: Ikea-3 Bookcases 2 92 318.26 SL 5 21.22 318.26
NEC: A109925 2 92 2,915.38 SL 5 194.36 2,915.38
Office Depot: 4500 Fax 9 92 531.94 SL 5 35.46 531.94
Pacific Office Interiors: 12 92 1,033.47 SL 5 68.90 1,033.47
JLJ Construction: 4 Crates 5 92 1,650.00 SL 5 110.00 1,650.00
IMS Enterprise: Oak Bike Displays 10 92 1,294.50 SL 5 86.33 1,294.90
IMS Enterprise: Oak Bike Displays 10 92 75.00 SL 5 5.00 75.00
Procraft: Showbooth 11 92 5,850.36 SL 5 390.02 5,850.36
Procraft: Showbooth 11 92 5,986.16 SL 5 399.08 5,986.16
Central Copy: FAX UF-128M + ZMG MEM 93 3,720.67 SL 5 951.28 3,720.67
I-Med: Slide Projectors for Reps 6 93 21,505.90 SL 5 3,948.34 21,505.90
MODULAR FURNITURE 3 94 1,694.94 SL 5 338.99 1,624.32
NEAX 2400 SIM 5200 UPGRADE 6 94 45,908.00 SL 5 9,181.60 41,699.77
NEC - 2nd Console 9 94 3,151.45 SL 5 630.29 2,704.99
Hayworth modular furniture 9 94 32,447.01 SL 5 6,489.40 27,850.35
Com-Aid 20 new phones 10 94 2,740.12 SL 5 548.02 2,306.27
NEC - 28 post cards 11 94 4,151.30 SL 5 830.26 3,424.82
PJP - add art room data station 11 94 138.00 SL 5 27.60 113.85
PJP - 17 terminal & phone wiring 11 94 2,295.00 SL 5 459.00 1,893.38
PJP - 3 fax & 8 phone lines 11 94 430.98 SL 5 86.20 355.56
PJP - Prod Dev - Wiring 12 94 241.50 SL 5 48.30 195.21
GTE: 30 Headsets 1 95 4,265.12 SL 5 853.02 3,376.55
Office Mart: Training room furniture 2 95 2,098.57 SL 5 419.71 1,626.39
Reid Nansen: 3 movable offices in Art Dept. 3 95 8,800.00 SL 5 1,760.00 6,673.33
Hunt Commm: Cindi 10 hr Harddrive 4 95 2,250.00 SL 5 450.00 1,668.75
Morasi: Show Booth upgrades 11 95 5,343.17 SL 5 1,068.63 3,339.48
Continental: 2 Time Clocks 11 95 5,422.09 SL 5 1,084.42 3,388.81
Keith Willingham: Show Booth Logos 11 95 1,269.24 SL 5 253.85 793.28
Interior Office: Cubicle Shelving 12 95 1,660.17 SL 5 332.03 1,009.94
Vision Comm: PO Phone System 1 96 10,735.58 SL 5 2,147.12 6,351.88
Office World: PO 4 96 4,492.71 SL 5 898.54 2,433.55
Xiox: Call Accounting 6 96 3,619.86 SL 5 723.97 1,840.10
Stephanie Schmidt Nikon EZ digital camer 6 96 14,005.00 SL 5 2,801.00 7,119.21
Office Depot: Desk, Credenza & File Cab 7 96 879.40 SL 5 175.88 432.37
Office Mart: 8 96 3,071.91 SL 5 614.38 1,459.16
Office Mart: 8 96 650.10 SL 5 130.02 308.80
Office Mart: 8 96 3,421.10 SL 5 684.22 1,625.02
Office Mart: 1 97 1,548.88 SL 5 309.78 606.64
Bryan Seti: 35" Color TV 8 97 1,095.23 SL 5 219.05 301.19
Sharon Reisinger: 9 97 1,507.45 SL 5 301.49 389.42
---------- ------------- --------------
TOTAL OFFICE EQUIP & FURN 714,967.59 40,534.81 672,546.10
---------- ------------- --------------
</TABLE>
83
<PAGE>
PURCHASES THROUGH FISCAL PERIOD # 11
<TABLE>
<CAPTION>
PURCH DEPR DEPR EXP ACCUM DEPR
DESCRIPTION FP YR COST METH LIFE 1998 10-98
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMPUTER EQUIPMENT - 1320 & 1420 - 1
--------------------------------------
Computers Unlimited: 2 ATs 1 89 1,969.00 SL 7 0.00 1,969.00
Tan-data: Manifest System 2 89 6,953.26 SL 7 0.00 6,953.26
Microamerica: 6 WYSE Terminals & Keybo 2 89 5,260.85 SL 7 0.00 5,260.85
Acme-Ware: AT 2 89 3,041.00 SL 7 0.00 3,041.00
IDS Inc Port Contender 2 89 693.23 SL 7 0.00 693.23
IDS Inc Port Contenders 2 89 1,343.32 SL 7 0.00 1,343.32
Acme Ware: B ATs 2 89 8,739.00 SL 7 0.00 ?,739.00
Data Vue: 24 Sparks Laptops 3 89 25,030.00 SL 7 0.00 25,030.00
Pactel Infosystems: Monitor 4 89 4,955.50 SL 5 0.00 4,955.50
SOS Computer: Mac RAM 5 89 2,604.99 SL 7 0.00 2,604.99
Micro Telesis: Computer 286 5 89 1,317.95 SL 7 0.00 1,317.95
Lewis & Lewis: Plotter, Printer & Tape Drive 5 89 7,022.50 SL 7 0.00 7,022.50
PC House: AT 386 5 89 2,545.01 SL 7 0.00 2,545.01
High Technology: 19 Citizen Printers 6 89 2,861.55 SL 7 0.00 2,861.55
P.C. & C.: 2 286s 7 89 2,347.90 SL 7 0.00 2,347.90
Datavue: 19 Sparks Laptops 7 89 19,285.00 SL 7 0.00 19,285.00
Personnel Computer: 2 286s & Printer 8 89 7,416.82 SL 7 0.00 7,416.82
Micro: Keyboards 10 89 595.40 SL 7 0.00 595.40
SOS Computer: Mac II 10 89 4,513.47 SL 7 0.00 4,513.47
Soft Whse: 2 286s 11 89 1,894.22 SL 7 0.00 1,894.22
P&C Research: AT 11 89 2,260.00 SL 7 0.00 2,260.00
Triathon: Computer - RT 135 11 89 21,800.00 SL 7 0.00 21,800.00
Triathon: Computer - RT 135 12 89 91,880.00 SL 7 0.00 91,880.00
Pickblue/Triathon: RT 135 1 90 1,360.00 SL 7 0.00 1,360.00
State Board: Sales Tax - RT 135 12 89 5,421.64 SL 7 0.00 5,421.64
P.C. & C. Research: Harddrive 40 mb 12 89 413.40 SL 7 0.00 413.40
Personnel Computer: 386 2 90 4,259.56 SL 7 0.00 4,259.56
WCS: 4 Turbo XTs 3 90 4,322.87 SL 7 0.00 4,322.87
Data Vue: 2 Sparks 3 90 3,389.00 SL 7 0.00 3,389.00
PCA: 4 mb Ram 4 90 808.75 SL 7 0.00 808.75
Wizard: 4 mb Ram 4 90 900.00 SL 7 0.00 900.00
Sun Computers: Toshiba Laptop 5 90 1,888.13 SL 7 0.00 1,888.13
Sun Computers: HP Laser Jet II 5 90 1,227.63 SL 7 0.00 1,227.63
Sun Computers: AST 286 5 90 1,371.06 SL 7 0.00 1,371.06
Sun Computers: AST 386 & Monitor 7 90 2,983.66 SL 7 0.00 2,983.66
Sun Computers: Math ????? & 4 mb Ram 7 90 1,040.81 SL 7 0.00 1,040.81
Hewlett Packard: New System Translations 11 90 1,062.50 SL 7 0.00 1,062.50
MST Dist: Phone System 11 90 1,507.75 SL 7 0.00 1,507.75
Datagram: 5 Portable Modems 11 90 1,250.94 SL 7 0.00 1,250.94
DA/COM Services: Install Phone System 12 90 2,919.00 SL 7 0.00 2,919.00
MST Dist: Phone System 11 90 16,219.00 SL 7 0.00 16,219.00
MST Dist: Phone System 11 90 1,507.75 SL 7 0.00 1,507.75
Dell: 33 mhz 386DX & Monitor 12 90 7,588.38 SL 7 0.00 7,588.38
MST Dist: Phone System 12 90 637.50 SL 7 0.00 637.50
Phil Bachman: Toshiba Power 1 91 400.00 SL 5 0.00 400.00
Shepard Info: 7 WYSE Terminals & Keyboa 4 91 2,975.12 SL 5 0.00 2,975.12
Shepard Info: 8 WYSE Terminals & Keyboa 9 91 3,337.36 SL 5 0.00 3,337.36
Tan-data: UPS Manifest Printer 10 91 1,867.31 SL 5 0.00 1,867.31
Dell: 33 mhz 386DX w/ Tape Drive & Monit 10 91 5,622.32 SL 5 0.00 5,622.32
Patrick Lowe: Mono Monitor 11 91 353.76 SL 5 0.00 353.76
Oxnard Computer Cntr (Bofa): 3 Citizen Pri 7 91 1,555.43 SL 5 0.00 1,555.43
Technic: Hi Speed Printer 11 91 18,133.70 SL 5 0.00 18,133.70
Contemporary City: 91 4,239.00 SL 5 0.00 4,239.00
Computer Village: Mac 1?fx w/ Scanner Las 11 92 18,151.00 SL 5 0.00 18,151.00
Computer Village: Max 2/4D. Monitor & Prin 2 92 2,899.68 SL 5 0.00 2,899.68
Teltron: Panasonic Printer 2 92 802.23 SL 5 0.00 802.23
Mac Whyse: Monitor 2 92 652.00 SL 5 0.00 652.00
LA Data: 7 Monitors 2 92 2,777.78 SL 5 0.00 2,777.78
JTI: Modem 7 92 486.92 SL 5 0.00 486.92
Computer Village Microage: Apple Classic 1 8 92 1,725.65 SL 5 0.00 1,725.65
</TABLE>
84
<PAGE>
PURCHASES THROUGH FISCAL PERIOD # 11
<TABLE>
<CAPTION>
PURCH DEPR DEPR EXP ACCUM DEPR
DESCRIPTION FP YR COST METH LIFE 1998 10-98
- ------------------------------------------------- ----- ----- --------- ----- ---- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Tan-data: #IN52811 12 92 2,410.00 SL 5 0.00 2,410.00
Computer Village: Quadra 950 & 20" Monito 1 93 12,161.00 SL 5 1,216.17 12,161.70
Computer Village: Quadra 950 & 20" Monito 1 93 12,834.37 SL 5 1,283.44 12,834.37
Computer Village: Apple Mac II SI 5/80 & M 1 93 2,719.07 SL 5 271.91 2,719.07
Computer Village: External Removable Hard 1 93 683.18 SL 5 68.32 683.18
Computer Village: Laserwriter II 1 93 3,547.29 SL 5 354.73 3,547.29
Computer Village: GCC 50S Ultra Drive Ext 1 93 461.41 SL 5 46.14 461.41
Computer Village: Suprafax Modem 1 93 356.31 SL 5 35.63 356.31
Computer Village: Umax 1200S Flatbed Sc 1 93 3,678.67 SL 5 367.87 3,678.67
Computer Village: Umax Transparency Ada 1 93 788.29 SL 5 78.83 788.29
Teltron: Various Depts 1 93 2,184.84 SL 5 121.70 2,184.84
PC Connection: Laptop Modems 5 93 600.00 SL 5 33.42 600.00
PC Connection: Laptop Modems 5 93 714.00 SL 5 39.77 714.00
Computer Village: PD 6 93 1,061.00 SL 5 59.10 1,061.00
Computer Village: Pwr Bk - J. Stevenson 8 93 2,859.29 SL 5 159.27 2,859.29
Apple: Monitor 12 93 186.62 SL 5 10.40 186.62
QUADRA 840AV 8/230 1 94 3,378.38 SL 5 675.68 3,350.22
13 8MB MEMORY UPGRADES 1 94 2,199.00 SL 5 439.80 2,180.68
1 DELL DIMENSION 486SX 2 94 1,464.57 SL 5 292.91 1,427.96
1 QUADRA 610 8/230 3 94 1,794.82 SL 5 358.96 1,720.04
1 APPLE MONITOR & KEYBOARD 3 94 353.93 SL 5 70.79 339.18
1 FUTURA II LX Video Card 3 94 822.95 SL 5 164.59 788.66
2 QUADRA 605s & 1 POWERBOOK 4 94 4,976.40 SL 5 995.28 4,686.11
10 MEG POWERBOOK MEMORY 4 94 1,314.50 SL 5 262.90 1,237.82
1 POWERBOOK 4 94 3,265.76 SL 5 653.15 3,075.26
1 HP LASERJET PRINTER 4 94 1,445.67 SL 5 289.13 1,361.34
1 PRO DAT TAPE BACKUP 5 94 1,202.95 SL 5 240.59 1,112.73
DELL DIMENSION PC 4SX33 6 94 1,555.08 SL 5 311.02 1,412.53
Compaq Presano PC w/ Monitor 9 94 1,797.51 SL 5 359.50 1,542.86
2 Compaq Presano PCs w/ 1 Monitor 9 94 2,989.07 SL 5 597.81 2,565.62
Pionix PC 4DX2/66 w/ Monitor 9 94 2,049.55 SL 5 409.91 1,759.20
Comp USA - 11 94 262.76 SL 5 52.55 216.78
Comp USA: Laptop & Printer-Ron B. 12 94 2,207.21 SL 5 441.44 1,784.16
Comp USA: Mac - Sales Admin Assist 12 94 1,885.46 SL 5 377.09 1,524.08
Comp USA: HP 4L Laserjet - Finance 12 94 574.60 SL 5 114.92 464.47
Comp USA: Compaq 486 SX266 - Liz 1 95 1,561.56 SL 5 312.31 1,236.24
Comp USA: PWR Mac 7100 - Dan Shirey 1 95 2,999.78 SL 5 599.96 2,374.83
Comp USA: 486 DX50 laptop - Brian 1 95 2,528.95 SL 5 505.79 2,002.09
Comp USA: Compaq 486DX266 - Victor 1 95 2,394.52 SL 5 478.90 1,895.66
Comp USA: Compaq 486 SX266 - Kim Binn 1 95 1,531.13 SL 5 306.23 1,212.14
Comp USA: HP 4Plus Laserjet - Finance 1 95 1,569.00 SL 5 313.80 1,242.13
Comp USA: Compuayne 486DX2/66 & HP 3 95 1,919.31 SL 5 383.86 1,455.48
Comp USA: 486DX266 - Wende 4 95 1,563.62 SL 5 312.72 1,159.68
Mac Whse: DRI 0658 8GB Mac network ba 4 95 1,202.00 SL 5 240.40 891.48
Comp USA: 486DX266 & HP 540 Printer - 4 95 1,862.85 SL 5 372.57 1,381.61
Teltron: 486 PC - Stephanie-T 6 95 1,201.20 SL 5 240.24 850.85
Comp USA: Monitor - Carolyn 7 95 235.95 SL 5 47.19 163.20
Comp USA: PC P75 8/850 - Carolyn 7 95 2,016.96 SL 5 403.39 1,395.06
Comp USA: Laptop & Printer - Jamison 8 95 2,445.97 SL 5 489.19 1,651.03
Mac Whse: Scanner - Art Dept. 10 95 2,728.00 SL 5 545.60 1,750.47
Comp USA: Laptop - Brent 10 95 3,569.28 SL 5 713.86 2,290.29
Comp USA: Laptop - Liz 10 95 3,043.76 SL 5 608.75 1,953.08
Comp USA: Laptop - Renee 10 95 2,851.78 SL 5 570.38 1,829.89
Comp USA: DEC STR915 P100 8/850 - Re 12 95 1,854.57 SL 5 370.91 1,128.20
Technic: Hi Speed Printer 12 95 3,081.40 SL 5 616.28 1,874.52
Comp USA: 2 Tosh T2135CS Kari & Eric 1 96 6,517.59 SL 5 1,303.52 3,856.24
Comp USA: PC Network 1 96 29,486.28 SL 5 5,897.26 17,446.05
Comp USA: Toshiba Laptop - Chris 1 96 3,053.42 SL 5 610.68 1,806.61
PJP Comm: Install Network Jacks 2 96 2,899.40 SL 5 579.88 1,667.16
Comp USA: Windows NT Server 2 96 736.81 SL 5 147.36 423.67
Comp USA: Toshiba Laptop - Ron Blocher 3 96 2,467.54 SL 5 493.51 1,377.71
</TABLE>
85
<PAGE>
<TABLE>
<CAPTION>
PURCHASES THROUGH FISCAL PERIOD # 11
PURCH DEPR DEPR EXP ACCUM DEPR
DESCRIPTION FP YR COST METH LIFE 1998 10-98
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Comp USA: Laptop P75 - Hans 4 88 3,056.42 SL 5 611.28 1,655.56
Comp USA: Laptop P75 & Printer - Peter O. 4 96 3,467.02 SL 5 693.40 1,877.97
Teltron: PC P75 - Alex 4 95 2,239.38 SL 5 447.88 1,213.00
Teltron: PC P75 - Jamie 4 98 2,239.38 SL 5 447.88 1,213.00
JV 04-30A: Vanous Network Equipment 4 96 3,933.78 SL 5 786.76 2,130.80
Comp USA: Toshiba Port Replicator - Peter 5 95 358.85 SL 5 71.77 188.40
Cad/Cam Consult Autocad C3 & Designer 5 98 5,280.76 SL 5 1,056.15 2,772.40
Pick: Advanced Pick Software & Training 5 95 8,800.00 SL 5 1,760.00 4,620.00
Inmac Network Relay Rack 5 96 339.23 SL 5 67.85 178.10
Teltron: P75 & Monitor - Julie 5 98 1,781.42 SL 5 356.28 935.25
Teltron: P75 & Monitor - Call Acctg 5 98 1,781.42 SL 5 356.28 935.25
Teltron: Pro 200 - McWethy 5 88 8,472.75 SL 5 1,694.55 4,448.19
Teltron: P75 & Monitor - Louise 6 95 1,781.42 SL 5 358.28 905.56
Best Products: Fixed Asset Software 6 95 1,618.34 SL 5 323.67 822.88
Comp USA: UPS for RS6000 6 98 2,323.46 SL 5 464.69 1,181.09
Comp USA: Mirror harddrive - Network 6 98 1,173.37 SL 5 234.67 596.45
Pick 7 95 290.63 SL 5 58.13 142.89
Comp USA: 7 96 3,700.11 SL 5 740.02 1,819.22
Teltron: P75 & Monitor - Linda-E 7 96 1,542.79 SL 5 308.56 758.?4
Comp USA: Apple PM8500 - Mktg 7 96 4,422.99 SL 5 884.60 2,174.64
Teltron: 9 98 1,822.18 SL 5 364.44 835.17
Comp USA: 9 96 3,144.52 SL 5 628.90 1,441.24
Comp USA: 9 96 4,337.59 SL 5 867.52 1,988.06
HKL: Distribution Software 10 96 6,468.30 SL 5 1,293.66 2,856.83
Hardware ????: Terminals 11 96 738.00 SL 5 147.60 313.65
Teltron: 11 96 1,847.92 SL 5 369.58 785.37
Technic: 11 96 3,333.44 SL 5 666.69 1,416.71
AT Plus: 11 96 1,874.73 SL 5 374.95 796.76
Teltron: 12 96 1,386.74 SL 5 277.35 566.25
AT Plus: 12 96 583.07 SL 5 112.61 229.92
Comp USA: 12 96 2,815.32 SL 5 563.06 1,149.59
AT Plus: 12 98 2,357.36 SL 5 471.47 962.59
Comp USA: 12 95 2,678.47 SL 5 535.69 1,093.71
AT Plus: 12 96 232.73 SL 5 46.55 95.03
AT Plus: 1 97 1,178.68 SL 5 235.74 461.65
Comp USA: 1 97 2,827.11 SL 5 565.42 1,107.28
AT Plus: 2 97 1,178.68 SL 5 235.74 442.01
AT Plus: 2 97 1,639.85 SL 5 327.97 614.94
AT Plus: 2 97 1,167.95 SL 5 233.59 437.98
Comp USA: 3 97 2,968.24 SL 5 593.65 1,063.62
Comp USA: 3 97 3,339.32 SL 5 667.86 1,196.59
PC Connection: 3 97 1,234.85 SL 5 246.97 442.49
Comp USA: JV 08-30A.6: 3 97 2,932.14 SL 5 586.43 1,050.68
Comp USA: 5 97 2,286.57 SL 5 457.31 743.14
Ambertech: 5 97 3,202.49 SL 5 640.50 1,040.81
Renee Buckly: 7 97 2,693.67 SL 5 538.73 785.65
AT Plus: 8 97 1,016.73 SL 5 203.35 279.60
Comp USA: 9 97 2,917.17 SL 5 583.43 753.60
AT Plus: 9 97 1,016.73 SL 5 203.35 262.66
AT Plus: 9 97 1,016.73 SL 5 203.35 262.66
AT Plus: 9 97 1,423.21 SL 5 284.64 367.66
Comp USA: 9 97 1,224.49 SL 5 244.90 316.33
Unipress Software: 9 97 2,750.00 SL 5 550.00 710.42
AT Plus: 10 97 1,246.25 SL 5 249.25 301.18
18931.910 Intosh: 12 97 9,307.10 SL 5 1,861.42 1,938.98
18991 NEC: 12 97 24,194.48 SL 5 4,838.90 5,040.40
18986 Comp USA: 12 97 1,394.15 SL 5 278.83 291.27
18988 Comp USA: 12 97 1,740.74 SL 5 348.15 361.06
18990 Comp USA: 12 97 1,549.83 SL 5 309.97 322.88
Comp USA: JV 12-300.2: 12 97 2,269.90 SL 5 453.98 472.90
19203 Pinpoint Software: 1 98 1,301.09 SL 5 249.38 249.38
</TABLE>
86
<PAGE>
<TABLE>
<CAPTION>
DIAMONDBACK - BOOK DEPRECIATION AS OF 10/31/98 FOR PRINT DATE - 10/06/98
PURCHASES THROUGH FISCAL PERIOD # 11
PURCH DEPR DEPR EXP ACCUM DEPR
DESCRIPTION FP YR COST METH LIFE 1998 10-98
- --------------------------------------------------- --- -- ----------------- ----- ------ --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
19206 Comp USA: 1 98 4,929.67 SL 5 944.85 944.85
19208 Comp USA: 1 98 2,570.20 SL 5 492.62 492.62
18987 Comp USA: 1 98 1,329.87 SL 5 254.89 254.89
19065 Mac Warehouse: 1 98 8,210.75 SL 5 1,573.73 1,573.73
19068 Comp USA: 2 98 2,501.82 SL 5 437.82 437.82
19122 Cad/Cam Consult 2 98 1,067.14 SL 5 186.75 186.75
Dataworks: Infoflo software 4 98 192,867.68 SL 5 27,322.92 27,322.92
Dataworks: returned software 4 98 (122,800.48) SL 5 (17,396.73) (17,396.73)
Dataworks: refund received 4 98 (70,067.20) SL 5 (9,926.19) (9,926.19)
19307 Comp USA: 2 98 5,209.63 SL 5 911.69 911.69
19117 Comp USA: 2 98 1,144.88 SL 5 200.35 200.35
19375 Comp USA: 3 98 0.00 SL 5 0.00 0.00
19570 Insight: 4 98 1,049.94 SL 5 148.74 148.74
19546 Insight: 4 98 11,009.76 SL 5 1,559.72 1,559.72
19534 Insight: 4 98 2,014.26 SL 5 285.35 285.35
19539 Insight: 4 98 1,050.93 SL 5 148.88 148.88
19543 Insight: 4 98 5,779.44 SL 5 818.75 818.75
19542 Insight: 4 98 26,205.88 SL 5 3,712.50 3,712.50
19894 Insight: 4 98 1,061.90 SL 5 150.44 150.44
19893 Insight: 6 98 1,209.48 SL 5 131.03 131.03
19880 Insight: 6 98 6,194.86 SL 5 671.11 671.11
19893 Insight: 6 98 10,600.05 SL 5 1,148.34 1,148.34
19893 Insight: 6 98 651.98 SL 5 70.63 70.63
19880 Insight: 6 98 10,289.76 SL 5 1,114.72 1,114.72
19880 Insight: 6 98 14,474.70 SL 5 1,568.09 1,568.09
10181 Insight: 6 98 1,539.94 SL 5 166.83 166.83
3879774 Insight: 7 98 12,949.26 SL 5 1,187.02 1,187.02
3882815 Insight: 7 98 699.75 SL 5 64.14 64.14
3847871 Insight: 7 98 369.15 SL 5 33.84 33.84
9534 Insight: 3 notebooks purch in Feb. 7 98 6,042.82 SL 5 553.?3 553.?3
10270 Insight: 8 98 4,289.90 SL 5 321.74 321.74
Financing of 2/98 - 6/98 PCs above: 9 98 (117,483.76) SL 5 (13,855.80) (13,855.80)
10325 Insight: 8 98 2,389.92 SL 5 179.24 179.24
120997 Mac Warehouse: 9 98 489.00 SL 5 28.53 28.53
110485 Micro Warehouse: 9 98 3,276.30 SL 5 191.12 191.12
110533 Unipress 9 98 6,038.00 SL 5 352.22 352.22
Insight: 10 98 1,139.94 SL 5 47.50 47.50
Micro Warehouse: 10 98 1,470.15 SL 5 61.26 61.26
----------- ---------- ----------
TOTAL COMPUTER EQUIP 739,486.72 69,215.38 562,779.84
</TABLE>
87
<PAGE>
PURCHASES THROUGH FISCAL PERIOD & 11
<TABLE>
<CAPTION>
PURCH DEPR DEPR EXP ACCUM DEPR
DESCRIPTION FP YR COST METH LIFE 1998 10-98
- --------- -------------------------------- -- -- --------- ---- ---- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
LEASEHOLD IMPROVEMENTS -1330 & 1430-1
--------------------------------
Arbon: Dockboards 2 89 18,593.00 SL 10 1,859.30 18,593.00
Mulcahey Plumbing: Air Systemm 2 89 3,350.00 SL 10 335.00 3,350.00
Power Machinery: Beam Install 3 89 2,785.00 SL 10 278.50 2,785.00
Coastel Telephone: Closed Circuit 3 89 518.50 SL 10 51.85 518.50
Dale Barnett: Electrical 3 89 750.00 SL 10 75.00 750.00
Dale Barnett: Electrical 3 89 1,898.95 SL 10 189.90 1,898.95
Arbon: Install Dock Doors 5 89 2,238.47 SL 10 223.85 2,238.47
Dale Barnett: Electrical 5 89 1,200.00 SL 10 120.00 1,200.00
Morris: Security 5 89 244.00 SL 10 24.40 244.00
Eric Meyer: Partition 9 89 872.00 SL 10 87.20 872.00
Computer Room Services: Floor 9 89 3,650.00 SL 10 365.00 3,650.00
Computer Room Services: Floor 9 89 1,866.50 SL 10 186.65 1,866.50
Dale Barnett: Mail Room 30 amp Circuit 6 90 825.00 SL 10 82.50 577.50
Dale Barnett: Added Circuits 8 90 1,827.00 SL 10 182.70 1,278.90
Dale Barnett: Outlets 10 90 1,804.50 SL 10 180.45 1,263.15
Dale Barnett: Outlets, Lights & Switches 10 90 1,897.57 SL 10 189.76 1,328.30
Power Machinery: 185 Anchors 11 91 804.38 SL 10 80.44 643.50
Challenge Fire: Sprinklers 2 92 8,800.00 SL 10 880.00 6,160.00
Variety Lighting: Exit Signs 3 92 1,880.00 SL 10 188.00 1,316.00
JLI Construction: Electrical 4 92 950.00 SL 10 95.00 665.00
Scotty Chitwood: 7 94 4,004.72 SL 10 400.47 1,785.44
Venco power to modulars 9 94 850.00 SL 10 85.00 389.58
Randall Fire sprinkler over electric room 10 94 390.00 SL 10 39.00 172.25
Lloyd Henry - 2 showroom offices 10 94 9,002.00 SL 10 900.20 3,975.88
Lloyd Henry - wnse slider & fencing 10 94 4,300.00 SL 10 430.00 1,899.17
Capps - Archive lighting 10 94 1,138.00 SL 10 113.80 502.62
Terry - Showroom Wall Slats 11 94 740.03 SL 10 74.00 314.51
Lloyd Henry: Showroom Office Work 12 94 607,00 SL 10 60.70 247.86
Signature Signs - Front DB sign 9 95 1,375.00 SL 10 137.50 767.71
Reid Nansen: 10 95 500.00 SL 10 50.00 270.83
ITC: 9 96 383.34 SL 10 38.33 137.36
Solargy: Energy Calcs 9 98 4,850.00 SL 10 141.46 141.46
Semco. Sweet & Meyer: Consulting 10 98 5,077.40 SL 10 105.78 105.78
---------- --------- ---------
TOTAL LEASEHOLD IMPROVEMENTS 89,972.36 8,251.73 61,909.22
</TABLE>
88
<PAGE>
PURCHASES THROUGH FISCAL PERIOD 11
<TABLE>
<CAPTION>
Purch Depr Depr Exp Accum Depr
Description FP YR Cost Meth Life 1998 10-98
- --------- ---------------------------------------- --- --- ---------- ---- ---- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
VEHICLES - 1340 & 1440-1
----------------------------------------
1986 Chevy Astro Van - General 4 86 11,691.99 SL 4 1,169.20 11,691.99
Kemp Ford: Team Van 4 93 10,000.00 SL 5 1,621.06 10,000.00
Kemp Ford: Team Van 5 93 16,545,98 SL 5 2,682.20 16,545.98
Signs of Distinction: Logos and Paint 6 93 2,168.60 SL 5 351.54 2,168.60
William Woodul: Team Van Cabinets 7 93 2,042.00 SL 5 331.02 2,042.00
William Woodul: Team Van Cabinets 8 93 1,294.00 SL 5 209.75 1,294.00
Ed Green - Executive Auto: Lincoln - Todd 4 93 19,000.00 SL 5 2,755.00 19,000.00
Disposed - Executive Auto: Lincoln - Todd 5 98 (19,000.00) SL 5 0.00 (19,000.00)
Jeep Grand Cherokee - Burt 4 94 25,000.00 SL 5 5,000.00 22,041.67
Disposal - Jeep Grand Cherokee - Burt 10 98 (25,000.00) SL 5 (1,041.67) (1,041.67)
GMC Yukon - Fred 6 95 25,000.00 SL 5 5,000.00 17,708.33
Fillmore Central: Promo Trailer & spare tire 6 95 4,634.07 SL 5 926.81 3,282.47
19355 Performance Trailers: 5th wheel awning 5 98 10,381.17 SL 5 1,297.65 1,297.65
Rusnak BMW: John Barker 5 98 35,811.01 SL 5 4,476.38 4,476.38
----------- ---------- -----------
</TABLE>
89
<PAGE>
DIAMONDBACK - BOOK DEPRECIATION AS OF 10/31/98 FOR PRINT DATE - 10/06/98
PURCHASES THROUGH FISCAL PERIOD #11
<TABLE>
<CAPTION>
PURCH DEPR DEPR EXP ACCUM DEPR
DESCRIPTION FP YR COST METH LIFE 1998 10-98
- ---------- -------------------------------------------- ---- ----- ------------- ------ ----- ------------ -------------
TOTAL VEHICLES 119,568.82 24,778.95 91,507.39
------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOOLING - FITNESS - 1305 & 1405-2
--------------------------------------------
JOHNSON METAL 91 147,607.00 SL 7 24,249.72 147,607.00
JOHNSON METAL 93 45,000.00 SL 5 19,2?5.71 45,000.00
U.S. CUSTOM SERVICE 8 94 7,818.32 SL 5 1,563.66 6,541.03
Johnson Metal 1 95 3,655.00 SL 5 731.00 2,893.54
Emotion Fitness: Dvlpmt of noise reduction 1 95 2,479.90 SL 5 495.98 1,963.25
JMI: HRT 1000 side case tooling 4 95 90,389.81 SL 5 18,077.95 67,039.11
Arex: HRT 1000 Console Tooling 7 95 26,720.00 SL 5 5,344.00 18,451.33
JMI: 1000 senes jig & fixture 8 95 31,120.31 SL 5 6,224.06 21,006.21
Arex: HRT 1000 Tooling 10 95 29,166.00 SL 5 5,837.20 16,727.68
JMI: 7 96 23,340.23 SL 5 4,668.05 11,475.61
JMI: 7 96 58,903.85 SL 5 11,780.77 28,961.06
JMI: 7 96 1,000.00 SL 5 200.00 491.67
JMI: 12 96 99,551.69 SL 5 19,910.34 40,650.27
JMI: sWSI-970110 3 97 17,642.00 SL 5 3,528.40 6,321.72
19651 Abler: 9 98 5,333.33 SL 5 311.11 311.11
19691 Abler: 9 98 10,666.67 SL 5 622.22 622.22
19685 Master Patern: 9 98 14,700.00 SL 5 857.50 857.50
19693 Pierson Designs: 9 98 1,480.00 SL 5 8?.33 8?.33
19697 Pierson Designs: 9 98 5,000.00 SL 5 291.67 291.67
19686 Vytron: 9 98 3,200.00 SL 5 186.67 186.67
JV 09-153 - 1200T treadmill tooling 9 98 98,580.37 SL 5 5,750.52 5,750.52
------------- ------------ -------------
</TABLE>
90
<PAGE>
DIAMONDBACK - BOOK DEPRECIATION AS OF 10/31/98 FOR PRINT DATE - 10/06/98
PURCHASES THROUGH FISCAL PERIOD #11
<TABLE>
<CAPTION>
PURCH DEPR DEPR EXP ACCUM DEPR
DESCRIPTION FP YR COST METH LIFE 1998 10-98
- ---------- -------------------------------------------- ---- ----- ------------- ------ ----- ------------ -------------
TOTAL TOOLING - FITNESS 723,374.48 130,002.88 425,565.51
------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
MACHINERY & EQUIPMENT - 1300 & 1400-3
--------------------------------------------
BIG JOE STOCK SELECTOR 12 78 10,309.20 200DB 7 0.00 10,309.20
RACKS - W.W. CANNON 9 81 1,204.37 SL 7 0.00 1,204.37
LADDER, PLATFORM TRUCKS 10 81 514.61 SL 7 0.00 514.61
WHEEL CAGES - MARK LAWERANCE 12 82 2,343.00 SL 7 0.00 2,343.00
DIGITAL SCALE 12 82 808.89 SL 7 0.00 808.89
RIG-U-RACK BEAMS 12 82 516.05 SL 7 0.00 516.05
RIG-U-RAK BEAMS 8 83 462.99 SL 7 0.00 462.99
FRAMES & BEAMS - LYNCH 11 83 1,403.31 SL 7 0.00 1,403.31
POWER LIFT TRUCK 11 83 10,345.00 SL 7 0.00 10,345.00
CONVEYOR - ASTON EQUIP. 1 84 627.90 SL 7 0.00 627.90
PALLET JACK - R.L. SPEAR 1 84 285.77 SL 7 0.00 285.90
FRAMERS & BEAMS - LYNCH 2 84 1,388.87 SL 7 0.00 1,388.87
POWER LIFT TRUCK 11 84 10,468.03 SL 7 0.00 10,468.03
POWER LIFT BATTERY 11 84 1,884.00 SL 7 0.00 1,884.00
PRIME MOVER 12 87 12,691.35 SL 7 0.00 12,691.35
W.W. Transport Racks & Beams 1 89 12,000.00 SL 7 0.00 12,000.00
Thornell: 4 Workbenchs 2 89 573.52 SL 7 0.00 573.52
Thornell: Conveyer 2 89 4,053.16 SL 7 0.00 4,053.16
Illinois Storage 8 92 1,353.89 SL 5 0.00 1,353.89
Interstate Pallet 4 93 5,099.64 SL 5 540.36 5,099.64
REB: Rack System 1 94 28,595.74 SL 5 5,719.15 25,617.02
Amer. Ind.: Mitsubishi Forklift FGC15 4 94 9,406.87 SL 5 1,881.37 8,858.14
Assoc Mat: Raymond Ordernicker 7 94 21,051.82 SL 5 4,210.36 18,771.21
REB: 164 Pallet Rack Beams 4 95 3,513.50 SL 5 702.70 2,605.85
Assoc Mat: Raymond elect pallet jack 4 95 8,319.88 SL 5 1,663.98 6,170.58
------------- ------------ -------------
</TABLE>
91
<PAGE>
DIAMONDBACK - BOOK DEPRECIATION AS OF 10/31/98 FOR
PURCHASES THROUGH FISCAL PERIOD # 11 PRINT DATE - 10/05/98
<TABLE>
<CAPTION>
PURCH DEPR DEPR EXP ACCUM DEPR
DESCRIPTION FP YR COST METH LIFE 1998 10-98
- --------- ----------------------------------------- -- -- ------------ ------- ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL MACHINERY & EQUIP 149,221.36 14,717.92 1?0,358.33
------------ ---------- ------------
FURNITURE & FIXTURES - 1310 & 1410-3
-----------------------------------------
ADT: Security System 1 89 895.87 SL 7 0.00 895.87
TIE Systems: Phone System-Ultra com CX 4 89 5,176.61 SL 7 0.00 5,176.61
Aarons Office Furn: Desks & Chairs 5 89 7,969.43 SL 7 0.00 7,969.43
Office Mart 6 89 1,029.07 SL 7 0.00 1,029.07
Communitech: 7 89 603.20 SL 7 0.00 603.20
Panasonic Copier 90 6,257,38 SL 7 0.00 6,257.38
------------ ---------- ------------
</TABLE>
92
<PAGE>
PURCHASES THROUGH FISCAL PERIOD # 11
<TABLE>
<CAPTION>
PURCH DEPR DEPR EXP ACCUM DEPR
DESCRIPTION FP YR COST METH LIFE 1998 10-98
- -------- ---------------------------------------- -- -- ---------- -------- ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL OFFICE EQUIP & FURNITURE 21,931.56 0.00 21,931.56
---------- ---------- ------------
COMPUTER EQUIPMENT - 1320 & 1420-3
----------------------------------------
Tan-data: Manifest System 1 89 8,866.88 SL 7 0.00 8,866.88
Burlington Computers: 5 WYSE Terminals 2 89 1,921.50 SL 7 0.00 1,921.50
Burlington Computers: Harddrive 4 89 608.48 SL 7 0.00 608.48
Pacific Mtn Computers: Printer 8 89 1,530.50 SL 7 0.00 1,530.50
Elec-tek: PC - L Coleman 2 93 1,967.40 SL 5 325.02 1,967.40
Elec-tek: PC - L Coleman 8 93 1,953.00 SL 5 322.64 1,953.00
Comp USA: Laptop & Printer-Wally 12 94 2,304.80 SL 5 460.96 1,863.05
Hardware Periphrials: Terminals 11 96 738.00 SL 5 147.60 313.65
-- ---------- ---------- ------------
</TABLE>
93
<PAGE>
DIAMONDBACK - BOOK DEPRECIATION AS OF 10/31/98 FOR PRINT DATE - 10/06/98
PURCHASES THROUGH FISCAL PERIOD # 11
<TABLE>
<CAPTION>
PURCH DEPR DEPR EXP ACCUM DEPR
DESCRIPTION FP YR COST METH LIFE 1998 10-98
- ---- ----------------------------------- -- -- ----------- ------ ------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL COMPUTER EQUIPMENT 19,890.56 1,256.22 19,024.46
-- ----------- --------- ------------
LEASEHOLD IMPROVEMENTS - 1330 & 1430-3
-----------------------------------
LIGHTING 2 94 14,371.50 SL 10 1,437.15 7,006.11
----------- --------- ------------
</TABLE>
94
<PAGE>
DIAMONDBACK - BOOK DEPRECIATION AS OF 10/31/98 FOR PRINT DATE - 10/06/98
PURCHASES THROUGH FISCAL PERIOD # 11
<TABLE>
<CAPTION>
PURCH DEPR DEPR EXP ACCUM DEPR
DESCRIPTION FP YR COST METH LIFE 1998 10-98
- ---------- -------------------------------------------- -- -- ------------- ------ ----- ------------ -------------
TOTAL LEASEHOLD IMPROVEMENTS 14,371.50 1,437.15 7,006.11
------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MACHINERY & EQUIPMENT - 1300 & 1400-4
--------------------------------------------
WHEEL BASKETS - R.L. SPEAR 10 83 1,725.30 SL 7 0.00 1,725.30
FORK LIFTS - JERSEY CO. 11 83 61,226.80 SL 7 0.00 61,226.80
JERSEY LIFT TRUCK CO. 12 83 1,677.98 SL 7 0.00 1,677.98
COMPRESSOR - JERSEY CO. 12 83 1,480.00 SL 7 0.00 1,480.00
LIFT DOCK PLATES - JERSEY CO. 12 83 702.36 SL 7 0.00 702.36
STEEL - JERSEY CO. 12 83 1,293.20 SL 7 0.00 1,293.20
CROSS BARS - STOR DYNAMICS 2 84 1,049.40 SL 7 0.00 1,049.40
SCALE - EASTERN 3 84 1,325.00 SL 7 0.00 1,325.00
BATTERY CHARGER 87 1,425.58 SL 7 0.00 1,425.58
FORKLIFT 87 12,433.88 SL 7 0.00 12,433.88
PALLET TRUCK 88 573.30 SL 7 0.00 573.30
C&C Lift Truck 91 1,872.50 SL 7 187.25 1,872.50
Barclay - Stack Picker 6 93 7,950.00 SL 5 1,391.25 7,950.00
Raymond: 31R40TT Forklift 8 93 19,564.42 SL 5 4,010.71 19,564.42
Raymond: 31R40TT Forklift 9 93 18,080.42 SL 5 3,977.69 18,080.42
Intertake: Rack System 2 94 105,438.06 SL 5 21,087.61 93,576.28
Raymond: 2 Walkie/Riders 7 94 14,847.60 SL 5 2,969.52 13,239.11
------------- ------------ -------------
</TABLE>
95
<PAGE>
DIAMONDBACK - BOOK DEPRECIATION AS OF 10/31/98 FOR PRINT DATE - 10/06/98
PURCHASES THROUGH FISCAL PERIOD # 11
<TABLE>
<CAPTION>
PURCH DEPR DEPR EXP ACCUM DEPR
DESCRIPTION FP YR COST METH LIFE 1998 10-98
- --------- --------------------------------- -- -- ----------- ------- ------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL MACHINERY & EQUIPMENT 252,665.80 33,624.03 239,195.53
----------- ----------- --------------
FURNITURE & FIXTURES - 1310 & 1410-4
---------------------------------
PHONE SYSTEM 87 12,192.87 SL 7 0.00 12,192.87
FILE CABINETS 87 556.50 SL 7 0.00 556.50
Office Bus Sys: Fax 5 89 1,440.00 SL 7 0.00 1,440.00
Metro Bus: Copier 9 89 5,905.00 SL 7 0.00 5,905.00
Raritan Valley: Desk & Chair 9 89 820.50 SL 7 0.00 820.00
Raritan Valley: Desk & Credenza 10 89 1,166.00 SL 7 0.00 1,166.00
Tel Plus: 1648 10 89 581.83 SL 7 0.00 581.83
Allegheny Shredder 90 2,074.49 SL 7 0.00 2,074.49
----------- ----------- --------------
</TABLE>
96
<PAGE>
<TABLE>
<CAPTION>
DIAMONDBACK - BOOK DEPRECIATION AS OF 10/31/98 FOR PRINT DATE - 10/06/98
PURCHASES THROUGH FISCAL PERIOD # 11
PURCH DEPR DEPR EXP ACCUM DEPR
DESCRIPTION FP YR COST METH LIFE 1998 10-98
-------- --------------------------------------- ----- -- --------- ---- ---- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TOTAL OFFICE EQUIP & FURNITURE 24,737,19 0.00 24,737,19
--------- -------- ----------
COMPUTER EQUIPMENT - 132D & 1420-4
---------------------------------------
UCR Bus Cntr: Star NX-2400 Printer 1 89 731.40 SL 7 0.00 731.40
Pacific Mtn: Datasouth matrix printer 4 90 1,529.06 SL 7 0.00 1,529.08
Daven/Tan Data 91 1,887.50 SL 7 188.75 1,887.50
Tan-Data: 11 92 2,410.00 SL 5 160.67 2,410.00
Tan-Data: UPS Equip 5 93 885.00 SL 5 6.36 885.00
Comp USA: Laptop & Printer Jim-Z 12 94 2,304.81 SL 5 460.96 1,863.05
Hardware Periphrals: Terminals 11 95 492.00 SL 5 98.40 209.10
---------- --------- ---------
</TABLE>
97
<PAGE>
PURCHASES THROUGH FISCAL PERIOD # 11
<TABLE>
<CAPTION>
PURCH DEPR DEPR EXP ACCUM DEPR
DESCRIPTION FP YR COST METH LIFE 1998 10-98
- ---- ---------------------------------- -- -- ----------- ------- ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL COMPUTER EQUIPMENT 10,239.77 915.14 9,515.11
----------- -------- ----------
LEASEHOLD IMPROVEMENTS - 1330 & 1430-4
-----------------------------
EMERGENCY EXIT LIGHTS 3 94 4,540.00 SL 10 454.00 2,175.42
AG Teleconsultants: Cable runs 7 95 1,113.00 SL 10 111.30 273.61
----------- -------- ----------
TOTAL LEASEHOLD IMPROVEMENTS 5,653.00 565.30 2,449.03
----------- -------- ----------
</TABLE>
98
<PAGE>
LIST OF ASSETS
Bejka
99
<PAGE>
List of Movable Fixed Assets
<TABLE>
<CAPTION>
Asset Current Book Value
-------------------------------------------------------------
<S> <C>
Electronic Equip. 9 884.75 kr
Camera 19 275.25 kr
Computer Hardware 7 620.00 kr
Computer Hardware 19 000.00 kr
Office Furniture 9 110.00 kr
Electronic Equip. 3 495.25 kr
Office Furniture 3 492.90 kr
Office Fixtures 2 000.00 kr
Computer System 205 781.00 kr
Computer Equip. 6 525.80 kr
Sale Deposit Box 5 241.80 kr
Diamondback Tent 4 178.00 kr
Cell Phone 1 293.60 kr
Snow Blower 2 688.00 kr
Telephone 5 385.00 kr
Camera Equip. 2 253.60 kr
Camera Equip. 2 671.00 kr
Laser Printer 2 792.00 kr
Table Tennis Equip. 320.00 kr
Cell Phone 892.80 kr
Typewriter 378.00 kr
Cleaning Equipment 438.80 kr
Carpeting 1 008.00 kr
Fax Machine 6 532.00 kr
Cell Phone 1 840.00 kr
Cell Phone 797.60 kr
Tarpolin 476.60 kr
Alarm System 10 400.00 kr
Office Furniture 911.20 kr
Computer Terminal 2 880.00 kr
Cell Phone 1 107.00 kr
Computer Hardware 2 008.00 kr
Fax Machine 799.20 kr
Diamondback sign 282.40 kr
Forklift 4 200.00 kr
Alarm/stereo sys. 3 337.00 kr
Sound Equip. 1 076.00 kr
Sound Equip. 1 480.00 kr
Iveco Delivery Vehicle 120 000.00 kr
Trailer 16 000.00 kr
Warehouse Fixtures
Shelving 330.00 kr
Shelving 570.00 kr
Shelving 600.00 kr
Shelving 672.00 kr
Pallet Racks 41 485.00 kr
</TABLE>
100
<PAGE>
PART 4 : Distribution Agreements
1. Distribution agreement between Western States and Cyclos De Mexico dated 1
January, 1990 - valid until 31 December, 1994;
2. Distribution agreement between Western States and Moore Large & Co Ltd
dated 29 December 1988 - valid for 5 years, and shall continue in force
thereafter until either party gives the other 6 months' notice of
termination;
3. Distribution agreement between Western States and Freewheeling di Liliana
Riamondi dated 11 August 1989 - valid for 5 years, and shall continue in
force thereafter until either party gives the other 6 months' notice of
termination;
4. Distribution agreement between Diamond Back (Hong Kong) Co Ltd and Roslyn
Bicycles - Ross Gilchrist dated 1 March 1993 - valid until 1 July 1998;
5. Distribution agreement between Diamond Back (Hong Kong) Co Ltd and OY
Brandt AB dated 1 October 1994 - valid until 30 September 1997;
6. Distribution agreement between Western States and Cape Cycle Systems dated
1 January 1990 - valid until 31 December 1994;
7. Distribution agreement between Diamond Back (Hong Kong) Co Ltd and
Transport-Peter Kunstl GesmbH + Co dated 1 March 1993 - valid until 31 July
1996;
8. Distribution agreement between Diamond Back International Company Limited
and Harfa Bike Sport dated 15 September 1998 - valid until 14 September
2001;
9. Distribution agreement between Diamond Back International Company Limited
and Veloplus Ou dated 15 September 1998 - valid until 14 September 2001;
10. Distribution agreement between Diamond Back International Company Limited
and Michael Agrotis Trading dated 15 September 1998 - valid until 14
September 2001;
11. Distribution agreement between Diamond Back International Company Limited
and Komersia AS dated 15 September 1998 - valid until 14 September 2001;
12. Distribution agreement between Diamond Back International Company Limited
and G.B.S. Hellas dated 13 July 1998 - valid until 31 August 2001;
13. Distribution agreement between Diamond Back (Hong Kong) Co Ltd and Adamo
Kereskedelmi es Szolgaltato KFT dated 1 March 1993 - commencing on 1
January 1993 and valid until 1 January 1996;
101
<PAGE>
14. Distribution agreement between Diamond Back International Co Ltd and Repco
Cycle Company, Australia dated 1 June 1994 - valid until 1 June 1999;
15. Distribution agreement between Diamond Back (Hong Kong) Co Ltd and Repco
Cycle Company, Australia dated 1 October 1994 - valid until 30 September
1997 (not signed);
16. Distribution agreement between Western States Import Co Inc and Pacific
Dunlop Limited, trading as Repco Cycle Company dated 26 May 1989 - valid
for 5 years and shall continue in force thereafter until either party gives
the other 6 months' notice of termination;
17. Distribution agreement between Diamond Back International Company Limited
and Rosen & Meents dated 15 September 1998 - valid until 14 September 2001;
18. Distribution agreement between Western States Import Co Inc d.b.a.,
Diamondback and Asama Enterprises Corp dated 7 August 1998 - valid until 7
August 2001;
19. Distribution agreement between Diamond Back International Co Ltd and Roslyn
Cycles and Fitness dated 15 September 1998 - commencing on 15 September
1998 at 24:00 hours and terminating on 14 September 2003 at 24:00 hours;
20. Distribution agreement between Diamondback and Repco Cycles and Fitness
dated 15 September 1998 - commencing on 15 September 1998 at 24:00 hours
and terminating on 14 September 2003 at 24:00 hours;
21. Distribution agreement between Diamondback and Ferraris S.R.L. dated 15
September 1998 - valid until 14 September 2001;
22. Distribution agreement between Diamondback and Toedy Pte Ltd dated 15
September 1998 - valid until 14 September 2001;
23. Distribution agreement between Diamondback and Bike Sports dated 15
September 1998 - valid until 14 September 1999;
24. Distribution agreement between Diamondback and Promex dated 15 September
1998 - valid until 14 September 1999;
25. Distribution agreement between Diamondback and Asia International Co Ltd
dated 15 September 1998 - valid until 14 September 2001;
26. Distribution agreement between Diamondback and Xcesso Departive S.A. dated
15 September 1998 - valid until 14 September 2001;
27. Distribution agreement between Diamondback and Marathon Sports dated
102
<PAGE>
15 September 1998 - valid until 14 September 2001;
28. Distribution agreement between Diamondback and Merlin Genuine Spare Parts
Ltd dated 15 September 1998 - valid until 14 September 1999;
29. Distribution agreement between Diamondback and Classic's Imports & Exports
USA dated 15 September 1998 - valid until 14 September 2001;
30. Distribution agreement between Diamondback International Company Limited
and Freewheeling s.r.l. dated 27 March 1996 - commencing on 28 March 1996
and terminating on 30 June 2002;
31. Distribution agreement between Diamondback International Company Limited
and Intercycle, Switzerland dated 27 March 1996 - commencing on 30 April
1996 and terminating on 30 June 2000;
32. Distribution agreement between Western States Import Co Inc and Repco
Cycles and Fitness - commencing at 24:00 on 1 June 1998 and terminating at
24:00 on 30 May 2000 (undated and unsigned);
33. Distribution agreement between Western States Import Co Inc and Asama
Enterprises Corp dated 7 August 1998 - valid until 7 August 2001;
34. Distribution agreement between Diamondback International Company Limited
and Cape Cycle Systems dated 15 September 1998 - valid until 14 September
2001;
35. Distribution agreement between Diamondback International Company Limited
and and Diamondback France S.A. subject to execution immediately prior to
Completion; and
36. Distribution agreement between Diamondback International Company Limited
and and Diamondback Deutschland GmbH subject to execution immediately prior
to Completion.
103
<PAGE>
SCHEDULE 6: LIST OF EMPLOYEES
LIST OF EMPLOYEES
Western States
104
<PAGE>
WESTERN STATES
--------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date of Position/ Age Salary as at Salary as at Insurance, Other benefits
Name of Employee Employ Title 31.10.97 31.10.98 pension (e.g company car,
- ----------------
(including (including etc. housing)
bonus/commission) bonus/commission)
(USD per annum) (USD per annum)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Administration
- --------------
- ------------------------------------------------------------------------------------------------------------------------------------
1. *Barker John General N/A 234,000.00 Y CAR
Manager
- ------------------------------------------------------------------------------------------------------------------------------------
2. Bobrick, Michael 07/31/92 Director N/A 15,000.00 15,000.13 Y N/A
- ------------------------------------------------------------------------------------------------------------------------------------
3. Briggs, Carolyn 02/26/90 Executive N/A
Assistant 45,000.00 45,000.00 Y N/A
- ------------------------------------------------------------------------------------------------------------------------------------
4. Gargiulo, Sossity 11/16/96 Administrative N/A
Assistant 28,000.13 28,000.13 Y N/A
- ------------------------------------------------------------------------------------------------------------------------------------
5. Mays, Tucker 04/15/96 Contract paid N/A
through
4/15/99 N/A N/A N N/A
(Terminated)
- ------------------------------------------------------------------------------------------------------------------------------------
6. Turnham, Todd 02/01/90 To be paid N/A
through
10/15/98 N/A N/A N N/A
(Terminated)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Severance("S") & Notice
Name Of Employee Retention("R") Period
- ----------------
bonuses (No. of
days)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Administration
- --------------
- -----------------------------------------------------------------------------------------------------------------------------------
1. *Barker John S-12 months' salary N/A
- -----------------------------------------------------------------------------------------------------------------------------------
2. Bobrick, Michael N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
60
3. Briggs, Carolyn N/A
- -----------------------------------------------------------------------------------------------------------------------------------
60
4. Gargiulo, Sossity N/A
- -----------------------------------------------------------------------------------------------------------------------------------
N/A
5. Mays, Tucker N/A
- -----------------------------------------------------------------------------------------------------------------------------------
N/A
6. Turnham, Todd N/A
- -----------------------------------------------------------------------------------------------------------------------------------
* denotes employee has service agreement Y indicates employee has elected to be covered by Western States' medical plan (N - not
covered)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
WESTERN STATES
--------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date of Position/ Age Salary as at Salary as at Insurance, Other benefits(e.g.
Name of Employee Employ Title 31.10.97 31.10.98 Pension company car,
- ---------------- (including (including etc. housing)
bonus/commission) bonus/commission)
(USD per annum) (USD per annum)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Finance
- -------
- ------------------------------------------------------------------------------------------------------------------------------------
1. Aguilar, Tina 01/17/95 Accounts N/A 18,408.00 19,240.00 N N/A
Receivable
- ------------------------------------------------------------------------------------------------------------------------------------
2. Alton, Patricia 10/06/97 Accounts N/A 17,680.00 18,200.00 N N/A
Receivable
- ------------------------------------------------------------------------------------------------------------------------------------
3. Armstrong, John 02/16/93 Accounting N/A 48,800.00 50,508.02 Y N/A
Manager
- ------------------------------------------------------------------------------------------------------------------------------------
4. Crosby, Linda 12/20/85 Credit N/A 34,000.00 36,000.00 Y N/A
Specialist &
A/R - Fitness
- ------------------------------------------------------------------------------------------------------------------------------------
5. Freeman, Steve 08/28/92 Controller N/A 83,472.00 88,500.00 Y N/A
- ------------------------------------------------------------------------------------------------------------------------------------
6. Lobas, Cynthia 02/10/97 Credit N/A 30,000.00 31,200.00 Y N/A
Specialist
- ------------------------------------------------------------------------------------------------------------------------------------
7. Lacono, Linda 05/16/94 Accounts N/A 19,968.00 20,592.00 N N/A
Payable
Specialist
- ------------------------------------------------------------------------------------------------------------------------------------
8. Esposito, DeAnna 10/13/92 Credit N/A 48,848.00 52,000.00 Y N/A
Manager
- ------------------------------------------------------------------------------------------------------------------------------------
9. Leon-Guerrero, Theresa 06/23/97 Credit N/A 22,880.00 25,000.00 Y N/A
Specialist
- ------------------------------------------------------------------------------------------------------------------------------------
10. Mazza, Arlene 02/01/98 Credit N/A 24,000.00 25,000.00 Y N/A
Specialist
- ------------------------------------------------------------------------------------------------------------------------------------
11. Reza, Roxxanne 10/01/97 Credit N/A 18,720.00 21,000.00 Y N/A
Specialist
- ------------------------------------------------------------------------------------------------------------------------------------
12. Schatz, Burton 06/01/93 Vice- N/A 160,000.00 163,199.92 Y CAR
President
Finance
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------
Severance ("S") & Notice
Name of Employee Retention ("R") Period
- ---------------- bonuses (No. of days)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Finance
- -------
1. Aguilar, Tina N/A 60
- ----------------------------------------------------------------------------------------
2. Alton, Patricia N/A 60
- ----------------------------------------------------------------------------------------
3. Armstrong, John N/A 60
- ----------------------------------------------------------------------------------------
4. Crosby, Linda N/A 60
- ----------------------------------------------------------------------------------------
5. Freeman, Steve S-4 months' salary N/A
- ----------------------------------------------------------------------------------------
6. Lobas, Cynthia N/A 60
- ----------------------------------------------------------------------------------------
7. Lacono, Linda N/A 60
- ----------------------------------------------------------------------------------------
8. Esposito, DeAnna N/A 60
- ----------------------------------------------------------------------------------------
9. Leon-Guerrero, Theresa N/A 60
- ----------------------------------------------------------------------------------------
10. Mazza, Arlene N/A 60
- ----------------------------------------------------------------------------------------
11. Reza, Roxxanne N/A 60
- ----------------------------------------------------------------------------------------
12. Schatz, Burton S-12 months' salary N/A
R-3 months' salary
- ----------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
WESTERN STATES
--------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Name of Date of Position/ Age Salary as of Salary as at Insurance Other benefits Severance Notice
Employee Employ Title 31.10.97 31.10.98 Pension (e.g. company ("S") & Period
- -------- (including (including etc. car, housing) Retention (No. of
bonus/commission) bonus/commission ("R") bonuses days)
(USD per annum) (USD per annum)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
13. Kinnison, 05/16/98 Credit N/A N/A 15,600.00 Y N/A N/A 60
Christine Clerk
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
WESTERN STATES
--------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Date of Position/ Age Salary as at Salary as at Insurance Other Severance Notice
Name of Employee Employ Title 31.10.97 31.10.98 Pension benefits ("S") & Period
- ----------------
(including (including etc. (e.g Retention (No. of
bonus/commis- bonus/commis- company ("R) bonuses days)
sion) (USD) sion) (USD) car,
per annum) per annum) housing
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Warehouse - West
- ----------------
- -----------------------------------------------------------------------------------------------------------------------------------
1. Avila, Ruben 03/12/96 Warehouse N/A 14,560.00 15,600.00 Y N/A N/A 60
- -----------------------------------------------------------------------------------------------------------------------------------
2. ????, Randall 05/26/98 Distribution N/A N/A 45,000.07 Y N/A N/A 60
Manager
- -----------------------------------------------------------------------------------------------------------------------------------
3. Cancino, Everardo 06/10/95 Receiving N/A 33,432.00 34,798.00 N N/A N/A 60
Supervisor
- -----------------------------------------------------------------------------------------------------------------------------------
4. Dennis, Charles 12/21/92 Warehouse N/A 19,656.00 20,072.00 N N/A N/A 60
- -----------------------------------------------------------------------------------------------------------------------------------
5. Estrade, Reynaldo 03/10/97 Warehouse N/A 14,560.00 15,600.00 Y N/A N/A 60
- -----------------------------------------------------------------------------------------------------------------------------------
6. Flores, Rutilio Warehouse N/A 18,720.00 19,760.00 Y N/A N/A 60
- -----------------------------------------------------------------------------------------------------------------------------------
7. Garcia, Daniel 03/20/95 Warehouse N/A 15,288.00 15,600.00 Y N/A N/A 60
- -----------------------------------------------------------------------------------------------------------------------------------
8. Meyer, Lynn 03/06/89 Warehouse N/A 33,600.00 36,000.00 Y N/A N/A 60
Manager
- -----------------------------------------------------------------------------------------------------------------------------------
9. Munoz, Pascual 08/21/95 Warehouse N/A 15,600.00 16,640.00 Y N/A N/A 60
- -----------------------------------------------------------------------------------------------------------------------------------
10. Nuno, Oscar 03/25/96 Warehouse N/A 15,288.00 16,640.00 Y N/A N/A 60
- -----------------------------------------------------------------------------------------------------------------------------------
11. Rodriguez, Rogelio 02/19/91 Warehouse N/A 22,214.00 22,880.00 N N/A N/A 60
- -----------------------------------------------------------------------------------------------------------------------------------
12. Ruiz, Ramon 02/21/95 Warehouse N/A 15,600.00 16,640.00 Y N/A N/A 60
- -----------------------------------------------------------------------------------------------------------------------------------
13. Salcedo, Eduardo 03/15/93 Warehouse N/A 21,424.00 21,840.00 Y N/A N/A 60
- -----------------------------------------------------------------------------------------------------------------------------------
14. Smith, Daryl 08/16/96 Warehouse N/A 17,784.00 18,720.00 Y N/A N/A 60
- -----------------------------------------------------------------------------------------------------------------------------------
15. Taylor, William 02/22/90 Warehouse N/A 17,784.00 17,368.00 Y N/A N/A 60
- -----------------------------------------------------------------------------------------------------------------------------------
16. Jimenez, Rosaura 06/01/98 Warehouse N/A N/A 13,520.00 Y N/A N/A 60
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
WESTERN STATES
--------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Date of Position/ Age Salary as at Salary as at Insurance Other Severance Notice
Name of Employee Employ Title 31.10.97 31.10.98 Pension benefits ("S") & Period
- ----------------
(including (including etc. (e.g Retention (No. of
bonus/commis- bonus/commis- company ("R) bonuses days)
sion) (USD sion) (USD car,
per annum) per annum) housing
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Warehouse - Central
- -------------------
- -----------------------------------------------------------------------------------------------------------------------------------
1. Bellinghiere, Philip 06/01/93 Warehouse N/A 23,400.00 24,440.00 y N/A N/A 60
Person
- -----------------------------------------------------------------------------------------------------------------------------------
2. Dorelti, Patrick 09/24/90 Warehouse N/A 24,960.00 26,000.00 N N/A N/A 60
Lead
- -----------------------------------------------------------------------------------------------------------------------------------
3. Falk, Robert 11/14/88 Warehouse N/A 33,384.00 34,789.00 y N/A N/A 60
Manager
- -----------------------------------------------------------------------------------------------------------------------------------
4. Hannan, William 07/31/95 Warehouse N/A 20,800.00 21,632.00 y N/A N/A 60
Person
- -----------------------------------------------------------------------------------------------------------------------------------
5. Preikschat, Allan 07/07/97 Warehouse N/A 17,680.00 18,408.00 y N/A N/A 60
Person
- -----------------------------------------------------------------------------------------------------------------------------------
6. Rivas, Ricardo 02/23/98 Warehouse N/A 16,640.00 17,680.00 y N/A N/A 60
Person
- -----------------------------------------------------------------------------------------------------------------------------------
7. Shively, William 05/18/98 Warehouse N/A 19,760.00 20,800.00 y N/A N/A 60
Person
- -----------------------------------------------------------------------------------------------------------------------------------
8. Stroud, Stewart 09/29/97 Warehouse N/A 17,680.00 18,408.00 y N/A N/A 60
Person
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
WESTERN STATES
--------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Date of Position/ Age Salary as of Salary as at Insurance
Name of Employee Employ Title 31.10.97 31.10.98 Pension
- ----------------
(including (including etc.
bonus/commission) bonus/commission)
(USD per annum) (USD per annum)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Warehouse- East
- ---------------
- -----------------------------------------------------------------------------------------------------------------------
1. Barrientos, Edgar 04/04/94 Warehouse N/A 18,720.00 ??,968.00 Y
Person
- ------------------------------------------------------------------------------------------------------------------------
2. DeLeon, Luis 11/10/97 Warehouse N/A N/A ??,120.00 Y
Person
- ------------------------------------------------------------------------------------------------------------------------
3. Jones, Clark 03/17/97 Warehouse N/A 16,120.00 ??,952.00 Y
Person
- ------------------------------------------------------------------------------------------------------------------------
4. Marzigliano, Leonard 08/14/89 Warehouse N/A 30,900.00 ??,136.00 Y
Manager
- ------------------------------------------------------------------------------------------------------------------------
5. Moore, William 08/12/96 Warehouse N/A 16,536.00 ??,368.00 Y
Person
- ------------------------------------------------------------------------------------------------------------------------
6. Torres, Reno 04/04/94 Warehouse N/A 17,680.00 ??,720.00 Y
Person
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Other benefits Severance Notice
Name of Employee (e.g. company ("S") & Period
- ----------------
car, housing) Retention (No. of
("R") bonuses days)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Warehouse- East
- ---------------
- ---------------------------------------------------------------------------------------------------------------------------
1. Barrientos, Edgar N/A N/A 60
- ---------------------------------------------------------------------------------------------------------------------------
2. DeLeon, Luis N/A N/A 60
- ---------------------------------------------------------------------------------------------------------------------------
3. Jones, Clark N/A N/A 60
- ---------------------------------------------------------------------------------------------------------------------------
4. Marzigliano, Leonard N/A N/A 60
- ---------------------------------------------------------------------------------------------------------------------------
5. Moore, William N/A N/A 60
- ---------------------------------------------------------------------------------------------------------------------------
6. Torres, Reno N/A N/A 60
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
WESTERN STATES
--------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Name of Date of Position/ Age Salary as of Salary as at Insurance Other benefits Severance Notice
Employee Employ Title 31.10.97 31.10.98 Pension (e.g. company ("S") & Period
- --------
(including (including etc. car, housing) Retention (No. of
bonus/commission) bonus/commission) ("R") bonuses days)
(USD per annum) (USD per annum)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Office
- ------
Services
- --------
- -----------------------------------------------------------------------------------------------------------------------------------
1. Gana, 06/21/95 Office N/A 20,800.00 22,880.00 Y N/A N/A 60
Tammy Services
Lead
- -----------------------------------------------------------------------------------------------------------------------------------
2. Jensen, 12/09/92 Office N/A 19,344.00 19,968.00 Y N/A N/A 60
Tracy Services
- -----------------------------------------------------------------------------------------------------------------------------------
3. Petralba, 03/09/98 Office N/A N/A 14,560.00 Y N/A N/A 60
Juvelyn Services
- -----------------------------------------------------------------------------------------------------------------------------------
4. Revelez, 11/01/97 Office N/A N/A 15,600.00 Y N/A N/A 60
Buffi Services
- ----------------------------------------------------------------------------------------------------------------------------------
6. Miana, 10/05/98 Recept. N/A N/A 19,760.00 N N/A N/A 60
Marci
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
WESTERN STATES
--------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date of Position/ Age Salary as at Salary as at Insurance, Other Benefits
Name of Employee Employ Title 31.10.97 31.10.98 Pension (e.g company car,
- ----------------
(including (including etc. housing)
bonus/commission) bonus/commission)
(USD per annum) (USD per annum)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Warranty
- --------
- ------------------------------------------------------------------------------------------------------------------------------------
1. Bosman, Joe 09/01/96 Warranty N/A 29,000.19 32,000.00 Y N/A
Tech
- ------------------------------------------------------------------------------------------------------------------------------------
2. Gentile Michael 10/16/96 Warranty N/A 26,200.10 31,000.00 Y N/A
Tech
- ------------------------------------------------------------------------------------------------------------------------------------
3. Rodrigues, Ignacio 08/15/92 Warranty N/A 28,995.00 29,580.00 Y N/A
Tech
- ------------------------------------------------------------------------------------------------------------------------------------
4. Davenport, Dwayne 10/12/92 Warranty N/A 28,995.00 29,500.02 N N/A
Tech -
Fitness
- ------------------------------------------------------------------------------------------------------------------------------------
5. Nakohiro, Shawn 04/23/98 Warranty N/A N/A 27,000.06 Y N/A
Tech -
Fitness
- -----------------------------------------------------------------------------------------------------------------------------------
6. *Hernandes, Joseph Ware Tech N/A N/A 14,560.00 N N/A
- -----------------------------------------------------------------------------------------------------------------------------------
7. Ober, Brandon 10/12/98 Ware Tech N/A N/A 25,000.00 Y N/A
- -----------------------------------------------------------------------------------------------------------------------------------
8. *Peterson, Brian Ware Tech N/A N/A 16,640.00 Y N/A
- -----------------------------------------------------------------------------------------------------------------------------------
9. *Tyminski, Jonathan Ware Tech N/A N/A 17,680.00 Y N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Transferred from Warehouse
<CAPTION>
- -----------------------------------------------------------------
Severance("S") & Notice
Name of Employee Retention("R") Period
- ----------------
bonuses (No. of
days)
- -----------------------------------------------------------------
<S> <C> <C>
Warranty
- --------
- -----------------------------------------------------------------
1. Bosman, Joe N/A 60
- -----------------------------------------------------------------
2. Gentile Michael N/A 60
- -----------------------------------------------------------------
3. Rodrigues, Ignacio N/A 60
- -----------------------------------------------------------------
4. Davenport, Dwayne N/A 60
- -----------------------------------------------------------------
5. Nakohiro, Shawn N/A 60
- -----------------------------------------------------------------
6. *Hernandes, Joseph N/A 60
- -----------------------------------------------------------------
7. Ober, Brandon N/A 60
- -----------------------------------------------------------------
8. *Peterson, Brian N/A 60
- -----------------------------------------------------------------
9. *Tyminski, Jonathan N/A 60
- -----------------------------------------------------------------
Transferred from Warehouse
- -----------------------------------------------------------------
</TABLE>
10
<PAGE>
WESTERN STATES
--------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Name of Date of Position/ Age Salary as of Salary as at Insurance, Other benefits Severance
Employee Employ Title 31.10.97 31.10.98 Pension (e.g. company ("S") &
- --------
(Including (including etc. car, housing) Retention
bonus/commission) bonus/commission ("R") bonuses
(USD per annum) (USD per annum)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
M.I.S.
- ------
- -------------------------------------------------------------------------------------------------------------------------
. Henderson, 10/15/97 Systems N/A 22,880.00 22,880.00 Y N/A N/A
Jeff Technician
- -------------------------------------------------------------------------------------------------------------------------
. Lee, 06/13/91 Manager, N/A 73,500.00 77,000.00 Y N/A N/A
Victor Programming
(Da-ming)
- -------------------------------------------------------------------------------------------------------------------------
. Lowe, 02/01/97 Systems N/A 52,000.00 56,000.26 Y N/A N/A
Patrick Administrator
- -------------------------------------------------------------------------------------------------------------------------
. Buckly, 04/02/84 H/R N/A 61,152.00 63,000.00 Y N/A S-4 months'
Rence Manager salary
& Treasury
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------
Name of Notice
Employee Period
- -------- (No. of
days)
- -------------------------------
<S> <C>
M.I.S.
- ------
- -------------------------------
. Henderson, 60
Jeff
- -------------------------------
. Lee, 60
Victor
(Da-ming)
- -------------------------------
. Lowe, 60
Patrick
- -------------------------------
. Buckly, N/A
Rence
- -------------------------------
</TABLE>
11
<PAGE>
WESTERN STATES
--------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date of Position/ Age Salary as at Salary as at Insurance Other benefits (e.g
Name of Employee Employ Title 31.10.97 31.10.98 Pension company car,
- ----------------
(including (including etc. housing)
bonus/commission bonus/commis-
(USD per annum) sion
(USD per
annum
- ------------------------------------------------------------------------------------------------------------------------------------
FITNESS
- -------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1. Abbott, Chris 08/22/95 Inside Sales N/A 39,947.00 34,578.00 Y N/A
- ------------------------------------------------------------------------------------------------------------------------------------
2. Leazor, John 03/15/95 Regional N/A 58,719.00 58,165.00 Y N/A
Manager-
East
- ------------------------------------------------------------------------------------------------------------------------------------
3. Turkel, Scott 07/01/97 Regional N/A 16,867.00 40,543.00 Y N/A
Manager
West
- ------------------------------------------------------------------------------------------------------------------------------------
4. Puerling, Donald 11/01/94 Marketing N/A 40,000.000 41,200.02 N N/A
Assistant
- ------------------------------------------------------------------------------------------------------------------------------------
5. Liu, Pei-ju Anita 06/09/97 Product N/A 38,001.00 39,520.00 Y N/A
Development
Assistant
- ------------------------------------------------------------------------------------------------------------------------------------
6. Murray, Brian 04/15/96 Senior Product N/A 80,080.00 85,000.00 Y N/A
Development
Manager
- ------------------------------------------------------------------------------------------------------------------------------------
7. Thompson-Wright, Steph 06/15/92 Administrative N/A 26,000.00 30,000.05 Y N/A
Assistant
- ------------------------------------------------------------------------------------------------------------------------------------
8. Rodriguez, Susan 09/01/97 Administrative N/A 32,000.00 32,000.18 Y N/A
Assistant
- ------------------------------------------------------------------------------------------------------------------------------------
9. Sparks, Stephen 10/16/96 P.D. Asst N/A N/A 36,000.00 Y N/A
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Severance ("S") & Notice
Name of Employee Retention("R") Period
- ----------------
bonuses (No. of
days)
- ---------------------------------------------------------------------
FITNESS
- -------
- ---------------------------------------------------------------------
<S> <C> <C>
1. Abbott, Chris N/A 60
- ---------------------------------------------------------------------
2. Leazor, John N/A 60
- ---------------------------------------------------------------------
3. Turkel, Scott N/A 60
- ---------------------------------------------------------------------
4. Puerling, Donald N/A 60
- ---------------------------------------------------------------------
5. Liu, Pei-ju Anita N/A 60
- ---------------------------------------------------------------------
6. Murray, Brian N/A 60
- ---------------------------------------------------------------------
7. Thompson-Wright, Steph N/A 60
- ---------------------------------------------------------------------
8. Rodriguez, Susan N/A 60
- ---------------------------------------------------------------------
9. Sparks, Stephen N/A 60
- ---------------------------------------------------------------------
</TABLE>
12
<PAGE>
WESTERN STATES
--------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date of Position/ Age Salary as at
Name of Employee Employ Title 31.10.97
- ----------------
(including
bonus/commission
(USD per annum)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PURCHASING
- ----------
- ------------------------------------------------------------------------------------------------------------------------------------
1. Greenslitt, Liz 12/17/84 Director- N/A 83,928.00
Purchasing
(Bikes)
- ------------------------------------------------------------------------------------------------------------------------------------
2. Souza, Sandy 02/01/97 Administrative N/A 34,611.00
Assistant
- ------------------------------------------------------------------------------------------------------------------------------------
3. Clubb, Janet 06/18/81 Traffic N/A 27,539.00
Coordinator
- ------------------------------------------------------------------------------------------------------------------------------------
4. Ramirez, Maria 07/31/95 Traffic N/A 23,795.00
Coordinator
- ------------------------------------------------------------------------------------------------------------------------------------
5. Weiss, Patricia 04/14/97 Traffic N/A 42,500.00
Manager
- ------------------------------------------------------------------------------------------------------------------------------------
6. Gottesfeld, Eric 10/30/95 After Market N/A 61,200.00
Buyer
- ------------------------------------------------------------------------------------------------------------------------------------
7. Drenhouse, Fred 03/07/95 VP - Purchasing N/A 110,000.00
- ------------------------------------------------------------------------------------------------------------------------------------
8. Murphy, Keven 06/22/98 Parts Buyer N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
9. Cohn, Chandra 08/17/98 ADM Asst. N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
10. Willis, Sandee 08/03/98 Purch. EXp N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Salary as at Insurance Other benefits (e.g Severance ("S") & Notice
Name of Employee 31.10.98 Pension company car, Retention ("R") Period
- ----------------
(including etc. housing) bonuses (No. of
bonus/commission days)
(USD per annum)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PURCHASING
- ----------
- ------------------------------------------------------------------------------------------------------------------------------------
1. Greenslitt, Liz 89,999.94 Y N/A S-12 months' salary N/A
- ------------------------------------------------------------------------------------------------------------------------------------
2. Souza, Sandy 38,000.00 Y N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
3. Clubb, Janet 28,100.80 Y N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
4. Ramirez, Maria 24,502.00 N N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
5. Weiss, Patricia 44,200.42 Y N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
6. Gottesfeld Eric 63,650.08 Y N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
7. Drenhouse, Fred 120,016.00 Y CAR S-12 months' salary N/A
- ------------------------------------------------------------------------------------------------------------------------------------
8. Murphy, Keven 60,000.00 Y N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
9. Cohn, Chandra 32,000.00 N N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
10. Willis, Sandee 22,880.00 Y N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
WESTERN STATES
--------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date of Position/ Age Salary as at Salary as at Insurance, Other Benefits (e.g.
Name of Employee Employ Title 31.10.97 31.10.98 Pension company car,
- ----------------
(including (including etc. housing)
bonus/commission) bonus/commission)
(USD per annum) (USD per annum)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Product Development/Q.C.
- ------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
1. Edlauer, Ken 05/09/90 Bicycle N/A 50,000.00 60,000.00 Y N/A
Product
Manager
- ------------------------------------------------------------------------------------------------------------------------------------
2. Malone T.K. 09/01/97 Assistant N/A 32,000.00 38,000.00 Y N/A
Product
Manager
- ------------------------------------------------------------------------------------------------------------------------------------
3. McWethy, Robert 10/22/90 Design N/A 65,000.00 67,600.00 Y N/A
Eng/QC
Coordinator
- ------------------------------------------------------------------------------------------------------------------------------------
4. Sloan, Brandon 03/01/97 Asst. Product N/A 32,000.00 40,000.00 Y N/A
Manager
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------
Severance ("S") & Notice
Name of Employee Retention ("R") Period
- ----------------
bonuses (No. of days)
- ------------------------------------------------------------------------------
<S> <C> <C>
Product Development/Q.C.
- ------------------------
- ------------------------------------------------------------------------------
1. Edlauer, Ken S-1 year N/A
- ------------------------------------------------------------------------------
2. Malone T.K. N/A 60
- ------------------------------------------------------------------------------
3. McWelhy, Robert N/A 60
- ------------------------------------------------------------------------------
4. Sloan, Brandon N/A 60
- ------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
WESTERN STATES
--------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date of Position/ Age Salary as at Salary as at Insurance, Other benefits
Name of Employee Employ Title 31.10.97 31.10.98 Pension etc. (e.g company car,
- ----------------
(including (including housing)
bonus/commission bonus/commission
(USD) per annum (USD) per annum
- ------------------------------------------------------------------------------------------------------------------------------------
Marketing/I.D.
- --------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1. Dlexroid, Adam 09/22/97 Promotions N/A 31,990.00 36,000.00 Y N/A
Coordinator
- ------------------------------------------------------------------------------------------------------------------------------------
2. Greczyk, Marcus 06/07/93 Creative N/A 43,742.00 50.000.08 N N/A
Services
Manager
- ------------------------------------------------------------------------------------------------------------------------------------
3. Jones, Ricki 10/16/95 Marketing N/A 20.000.00 25.000.00 N N/A
Coordinator
- ------------------------------------------------------------------------------------------------------------------------------------
4. Ketterer, Keith 11/16/93 Team N/A 42,198.00 43.886.13 Y N/A
Manager
- ------------------------------------------------------------------------------------------------------------------------------------
5. Koniocki, Lusha 05/26/98 Marketing N/A N/A 17,680.00 Y N/A
Assistant
- ------------------------------------------------------------------------------------------------------------------------------------
6. Schmidit, Stephanie 12/16/85 Marketing N/A 41,098.00 50,000.00 Y N/A
Manager
- ------------------------------------------------------------------------------------------------------------------------------------
7. Walt, Tiffany 01/26/98 Graphic N/A N/A 25,000.14 N N/A
Designer
- ------------------------------------------------------------------------------------------------------------------------------------
8. Duhborf, Corey 09/01/97 International N/A 36,006.40 35.006.40 Y N/A
Sales
Manager
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Severance ("S") & Notice Period
Name of Employee Retention ("R") bonuses (No. of days)
- ----------------
- --------------------------------------------------------------------------------
Marketing/I.D.
- --------------
- --------------------------------------------------------------------------------
<S> <C> <C>
1. Dlexroid, Adam N/A 60
- --------------------------------------------------------------------------------
2. Greczyk, Marcus N/A 60
- --------------------------------------------------------------------------------
3. Jones, Ricki N/A 60
- --------------------------------------------------------------------------------
4. Ketterer, Keith N/A 60
- --------------------------------------------------------------------------------
5. Koniocki, Lusha N/A 60
- --------------------------------------------------------------------------------
6. Schmidit, Stephanie N/A 60
- --------------------------------------------------------------------------------
7. Walt, Tiffany N/A 60
- --------------------------------------------------------------------------------
8. Duhborf, Corey N/A 60
- --------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
WESTERN STATES
--------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Date of Position/ Age Salary as at Salary as at Insurance, Other Benefits (e.g
Name of Employee Employ Title 31.10.97 31.10.98 Pension company car,
- ----------------
(including (including etc. housing)
bonus/commission) bonus/commission)
(USD per annum) (USD per annum)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INSIDE SALES
- ------------
- -----------------------------------------------------------------------------------------------------------------------------------
1. Johnson, Tracy 01/01/96 Customer N/A 22,880.00 26,000.00 Y N/A
Service Rep
- -----------------------------------------------------------------------------------------------------------------------------------
2. Kami Griswold 08/10/98 Customer N/A N/A 22,880.00 Y N/A
Service Rep
- -----------------------------------------------------------------------------------------------------------------------------------
3. Turner, Karen 07/26/93 Inside Sales N/A 28,042.00 40,000.06 Y N/A
Manager
- -----------------------------------------------------------------------------------------------------------------------------------
4. Anderson, Jim 02/23/98 Inside Sales N/A N/A 24,048.00 Y N/A
Rep.
- ----------------------------------------------------------------------------------------------------------------------------------
5. Cliatt, Gene 02/23/98 Inside Sales N/A N/A 19,255.00 Y N/A
Rep.
- ----------------------------------------------------------------------------------------------------------------------------------
6. Dvoretzky, Aaron 01/15/90 Inside Sales N/A 34,502.00 33,075.00 Y N/A
Rep.
- ----------------------------------------------------------------------------------------------------------------------------------
7. Harms, John Ivan 11/18/96 Inside Sales N/A 23,380.00 32,500.00 Y N/A
Rep.
- ----------------------------------------------------------------------------------------------------------------------------------
8. Kirwin, Angela 08/08/94 Inside Sales N/A 23,831.00 23,998.00 N N/A
Rep.
- ----------------------------------------------------------------------------------------------------------------------------------
9. LeHouillier, Daniel 11/01/97 Inside Sales N/A N/A 26,387.00 Y N/A
Rep.
- ----------------------------------------------------------------------------------------------------------------------------------
10. Moore, Marc 02/01/98 Inside Sales N/A N/A 23,224.00 Y N/A
Rep.
- ----------------------------------------------------------------------------------------------------------------------------------
11. Ramirez, Robert 08/30/90 Inside Sales N/A 36,492.00 34,030.00 Y N/A
Rep.
- ----------------------------------------------------------------------------------------------------------------------------------
12. Santy, Lisa 06/08/98 Inside Sales N/A N/A 11,368.00 Y N/A
Rep.
- ----------------------------------------------------------------------------------------------------------------------------------
13. Schofield, Bruce 07/30/96 Inside Sales N/A 25,607.00 32,237.00 Y N/A
Rep.
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Severance ("S") & Notice
Name of Employee Retention ("R") Period
- ----------------
bonuses (No. of Days)
- ----------------------------------------------------------------------
<S> <C> <C>
INSIDE SALES
- ------------
- ----------------------------------------------------------------------
1. Johnson, Tracy N/A 60
- ----------------------------------------------------------------------
2. Kami Griswold N/A 60
- ----------------------------------------------------------------------
3. Turner, Karen N/A 60
- ----------------------------------------------------------------------
4. Anderson, Jim N/A 60
- ----------------------------------------------------------------------
5. Cliatt, Gene N/A 60
- ----------------------------------------------------------------------
6. Dvoretzky, Aaron N/A 60
- ----------------------------------------------------------------------
7. Harms, John Ivan N/A 60
- ----------------------------------------------------------------------
8. Kirwin, Angela N/A 60
- ----------------------------------------------------------------------
9. LeHoullier, Daniel N/A 60
- ----------------------------------------------------------------------
10. Moore, Marc N/A 60
- ----------------------------------------------------------------------
11. Ramirez, Robert N/A 60
- ----------------------------------------------------------------------
12. Santy, Lisa N/A 60
- ----------------------------------------------------------------------
13. Schofield, Bruce N/A 60
- ----------------------------------------------------------------------
</TABLE>
16
<PAGE>
WESTERN STATES
--------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Date of Position/ Age Salary as al Salary as at Insurance, Other benefits (e.g
Name of Employee Employ Title 31.01.97 31.10.98 Pension company car,
- ----------------
(including (including etc. housing)
bonus/commission) bonus/commission
(USD per annum) (USD per annum)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
14. Wood, Steven 09/29/97 Inside Sales N/A 2,048.00 25,633.00 Y N/A
Rep.
- -------------------------------------------------------------------------------------------------------------------------------
15. Shaw, Lisa 09/01/97 Administrative N/A 26,000.00 26,000.00 Y N/A
Assistant
- -------------------------------------------------------------------------------------------------------------------------------
16. Cratzor, Michael 07/22/98 Inside Sales N/A N/A 7291 Y N/A
Rep.
- -------------------------------------------------------------------------------------------------------------------------------
17. Omess, Jake 07/22/98 Inside Sales N/A N/A 7293 Y N/A
Rep.
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------
Severance ("S") & Notice
Name of Employee Retention ("R") Period
- ----------------
bonuses (No. of
days)
- -------------------------------------------------------
<S> <C> <C>
14. Wood, Steven N/A 60
- -------------------------------------------------------
15. Shaw, Lisa N/A 60
- -------------------------------------------------------
16. Cratzor, Michael N/A 60
- -------------------------------------------------------
17. Omess, Jake N/A 60
- -------------------------------------------------------
</TABLE>
17
<PAGE>
WESTERN STATES
--------------
<TABLE>
<CAPTION>
Date of Position/ Age Salary as at Salary as at Insurance, Other benefits
Name of Employee Employ Title 31.10.97 31.10.98 Pension (e.g company
- ---------------- etc. car, housing)
(including including bonus/
bonus/commission) commission USD
(USD per annum) per annum)
- ------------------------------------------------------------------------------------------------------------------------------------
Sales
- -----
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1. Gray, Wayne D 02/06/95 National Sales N/A 65,000.00 78,000.0? Y N/A
Manager
- ------------------------------------------------------------------------------------------------------------------------------------
2. Harris, Paul 07/27/94 Sales Manager, N/A N/V 60,000.1? Y N/A
West
- ------------------------------------------------------------------------------------------------------------------------------------
3. Hoopingarner, Marc 08/28/96 Sales N/A 54,999.00 54,999.9? Y N/A
Administrator
- ------------------------------------------------------------------------------------------------------------------------------------
4. Reisinger, Sharon 05/04/92 Administrative N/A 33,571.00 35,000.1? Y N/A
Assistant
- ------------------------------------------------------------------------------------------------------------------------------------
5. Wallace, Ronald 08/12/91 Vice President N/A 92,592.00 100,000? Y N/A
Sales
- ------------------------------------------------------------------------------------------------------------------------------------
6. Holcomb, Thomas 10/17/88 Sales Manager, N/A 65,000.00 75,000.00 Y N/A
East
- ------------------------------------------------------------------------------------------------------------------------------------
7. Blocher, Ron 11/01/87 Sales Manager, N/A 75,000.00 76,499.9? Y N/A
Central
- ------------------------------------------------------------------------------------------------------------------------------------
8. Bellefeuille, Steve 11/16/94 National N/A 50,000.00 52,000.00 Y N/A
Accounts
Manager
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Severance("S") & Notice
Name of Employee Retention("R") Period
- ----------------
bonuses (No. of days)
- -----------------------------------------------------------------------------
Sales
- -----
- -----------------------------------------------------------------------------
<S> <C> <C>
1. Gray, Wayne D N/A 60
- -----------------------------------------------------------------------------
2. Harris, Paul N/A 60
- -----------------------------------------------------------------------------
3. Hoopingarner, Marc N/A 60
- -----------------------------------------------------------------------------
4. Relsinger, Sharon N/A 60
- -----------------------------------------------------------------------------
5. Wallace, Ronald 5-6 months' salary N/A
- -----------------------------------------------------------------------------
6. Holcomb, Thomas N/A 60
- -----------------------------------------------------------------------------
7. Blocher, Ron N/A 60
- -----------------------------------------------------------------------------
8. Bellefeuille, Steve N/A 60
- -----------------------------------------------------------------------------
</TABLE>
18
<PAGE>
WESTERN STATES
--------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date of Position/ Age Salary as at Salary as at Insurance Other benefits (e.g.
Name of Employee Employ Title 31.10.97 31.10.98 Pension company car,
- ----------------
(including (including etc. housing)
bonus/commission) bonus/commission)
(USD per annum) (USD per annum)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Expense
- -------
- ------------------------------------------------------------------------------------------------------------------------------------
1. Allen, Robert 12/01/87 Western N/A 58,554.87 54,946.42 Y N/A
Region Sales
Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
2. Carpenter, Scott 02/01/98 Central N/A N/A 44,292.73 Y N/A
Region Sales
Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
3. Coyne, Anthony 07/12/93 Western N/A 44,728.67 50,478.21 Y N/A
Region Sales
Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
4. DeSouza, David 01/11/90 Western N/A 70,085.63 62,844.54 Y N/A
Region Sales
Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
5. Heaton, Steve 08/08/94 Western N/A 23,380.21 50,000.00 Y N/A
Region Sales
Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
6. Henry, Bill 08/01/89 Western N/A 54,785.09 61,540.62 N N/A
Region Sales
Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
7. Holliday, Dennis 07/22/98 Central N/A N/A 40,000.00 Y N/A
Region Sales
Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
8. Letford, Gary 01/03/78 Western N/A 60,613.82 50,448.26 Y N/A
Region Sales
Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
9. McElravey, Tobias 09/07/95 Western N/A 30,159.05 50,527.92 Y N/A
Region Sales
Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------
Severance ("S") & Notice
Name of Employee Retention ("R") Period
- ----------------
bonuses (No. of days)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Expense
- -------
- ------------------------------------------------------------------------------------
1. Allen, Robert N/A 60
- ------------------------------------------------------------------------------------
2. Carpenter, Scott N/A 60
- ------------------------------------------------------------------------------------
3. Coyne, Anthony N/A 60
- ------------------------------------------------------------------------------------
4. DeSouza, David N/A 60
- ------------------------------------------------------------------------------------
5. Heaton, Steve N/A 60
- ------------------------------------------------------------------------------------
6. Henry, Bill N/A 60
- ------------------------------------------------------------------------------------
7. Holliday, Dennis N/A 60
- ------------------------------------------------------------------------------------
8. Letford, Gary N/A 60
- ------------------------------------------------------------------------------------
9. McElravey, Tobias N/A 60
- ------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
Western States
--------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Date of Position/ Age Salary as at Salary as at Insurance Other benefits e.g.
Name of Employee Employ Title 31.10.97 31.10.98 Pension company car,
- ----------------
(including (including etc. housing)
bonus/ bonus/
commission) commission)
USD per annum) USD per annum)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10. Middents, David 02/01/82 Western N/A 75,623.48 62,007.36 Y N/A
Region
Sales Rep.
- ---------------------------------------------------------------------------------------------------------------------------
11. Niermeyer, Todd 09/29/97 Western N/A 4,200.79 37,635.86 Y N/A
Region
Sales Rep.
- ---------------------------------------------------------------------------------------------------------------------------
12. Santiago, Gary 01/15/90 Western N/A 51,656.61 62,096.06 Y N/A
Region
Sales Rep.
- ---------------------------------------------------------------------------------------------------------------------------
13. Wehmeyer, Phil 09/16/93 Western N/A 55,618.68 58,252.78 Y N/A
Region
Sales Rep.
- ---------------------------------------------------------------------------------------------------------------------------
14. Ayers, Michael 05/03/93 Central N/A 40,995.66 47,566.23 Y N/A
Region
Sales Rep.
- ---------------------------------------------------------------------------------------------------------------------------
15. Clark, Geoffrey 10/14/96 Central N/A 57,123.31 56,531.29 Y N/A
Region
Sales Rep.
- ---------------------------------------------------------------------------------------------------------------------------
16. Dixon, John 10/14/96 Central N/A 37,875.14 32,569.60 Y N/A
Region
Sales Rep.
- ---------------------------------------------------------------------------------------------------------------------------
17. James, Scott 07/10/95 Central N/A 59,651.99 50,680.50 Y N/A
Region
Sales Rep.
- ---------------------------------------------------------------------------------------------------------------------------
18. Kroeger, Richard 04/07/97 Central N/A 28,995.61 40,172.95 Y N/A
Region
Sales Rep.
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------
Severance ("S") & Notice Period
Name of Employee Retention (R) (No. of days)
- ----------------
bonuses
- -------------------------------------------------------------
<S> <C> <C>
10. Middents, David N/A 60
- --------------------------------------------------------------
11. Niermeyer, Todd N/A 60
- --------------------------------------------------------------
12. Santiago, Gary N/A 60
- --------------------------------------------------------------
13. Wehineyer, Phil N/A 60
- --------------------------------------------------------------
14. Ayers, Michael N/A 60
- -------------------------------------------------------------
15. Clark, Geoffrey N/A 60
- -------------------------------------------------------------
16. Dixon, John N/A 60
- -------------------------------------------------------------
17. James, Scott N/A 60
- -------------------------------------------------------------
18. Kroeger, Richard N/A 60
- -----------------------------------------------------------
</TABLE>
20
<PAGE>
WESTERN STATES
--------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date of Position/ Age Salary as at
Name of Employee Employ Title 31.10.97
- ----------------
(including
bonus/commission)
(USD per annum)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
19. Price, Terry 01/10/94 Central N/A 70,676.92
Region Sales
Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
20. Schall, Michael 01/16/89 Central N/A 46,837.27
Region Sales
Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
21. Stephens, Jeff 07/??/98 Central N/A N/A
Region Sales
Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
22. Abney, John Davic 05/15/95 East Region N/A 38,375.21
Sales Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
23. Frye, David 08/10/97 East Region N/A 8,978.68
Sales Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
24. Hagstrom Doug 04/01/94 East Region N/A 70,117.47
Sales Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
25. Harouff, Steve 07/22/98 East Region N/A N/A
Sales Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
26. Henderson, Randa 02/01/98 East Region N/A N/A
Sales Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
27. Hibberts, William 07/29/96 Central N/A 32,513.11
Region Sales
Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
28. Moore, S.D. Roberts 05/15/97 East Region N/A 30,330.80
Sales Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
29. Peszek, David 09/08/97 East Region N/A 7,781.28
Sales Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
30. Sanossian, David 02/18/98 East Region N/A N/A
Sales Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Salary as at Insurance, Other Benefits (e.g Severance ("S") & Notice
Name of Employee 31.10.98 Pension company car, Retention ("R") period
- ----------------
(including etc. housing) bonuses (No. of
bonus/commission) days)
(USD per annum)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
19. Price, Terry 53,645.04 Y N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
20. Schall, Michael 62,911.74 Y N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
21. Stephens, Jeff 14,356.38 Y N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
22. Abney, John Davic 23,883.26 Y N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
23. Frye, David 32,966.09 Y N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
24. Hagstrom Doug 69,714.86 Y N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
25. Harouff, Steve 40,000.00 N N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
26. Henderson, Randa 38,074.33 Y N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
27. Hibberts, William 32,400.15 Y N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
28. Moore, S.D. Roberts 70,120.99 Y N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
29. Peszek, David 53,155.50 Y N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
30. Sanossian, David 38,397.77 Y N/A N/A 60
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
WESTERN STATES
--------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date of Position/ Age Salary as at Salary as at Insurance, Other benefits (e.g
Name of Employee Employ Title 31.10.97 31.10.98 Pension company car,
- ----------------
(including (including etc. housing)
bonus/commision bonus/commision
(USD per annum) (USD per annum)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
31. Thornhill, Don 11/14/88 East Region N/A 45,304.13 31,526.58 Y N/A
Sales Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
32. Thomton, Gary 09/01/96 East Region N/A 29,645.59 48,456.12 Y N/A
Sales Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
33. Zimmenman, Greg 01/06/86 East Region N/A 55,375.34 46,254.84 Y N/A
Sales Rep.
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
Severance ("S") & Notice Period
Name of Employee Retention ("R") bonuses (No. of days)
- ----------------
- --------------------------------------------------------------------------------
<S> <C> <C>
31. Thornhill, Don N/A 60
- --------------------------------------------------------------------------------
32. Thomton, Gary N/A 60
- --------------------------------------------------------------------------------
33. Zimmenman, Greg N/A 60
- --------------------------------------------------------------------------------
</TABLE>
(???? denotes monthly expenses)
22
<PAGE>
LIST OF EMPLOYEES
Bejka
125
<PAGE>
BEJKA
-----
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Period of Position/ Age Salary as at Salary as at Insurance, Other benefits
Name of Employee Employment Title 31.10.97 31.10.98 Pension (e.g company car,
- ----------------
(including (including etc. housing)
bonus/commission) bonus/commission)
(SEK/per annum) (SEK/per annum)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1. *Stefan Spang 5 years Man. Dir. 42 422,500.00 480,000.00 Pension, Company car
(SEK5,600/
mth) Life
Health
- ------------------------------------------------------------------------------------------------------------------------------------
2. Margaretha Jonholl 20 years Respons. 62 287,800.00 297,600.00 Pension,
Economics Health
(SEK3,056/
mth)
- ------------------------------------------------------------------------------------------------------------------------------------
3. James Krueger 2 years Economics 32 18,000.00 250,000.00 Pension
half-time employed Purchaser (for full-time) (for full-time) Health
during 1998,
full-time from June
1999
- ------------------------------------------------------------------------------------------------------------------------------------
4. Ninni Alvesten 7 years Economics 36 194,000.00 201,000.00 Pension
Invoicing Health
(SEK
1,194/mth)
- ------------------------------------------------------------------------------------------------------------------------------------
5. Stefan Zachrisson 7 years Purchaser 29 199,000.00 201,600.00 Pension,
Health
(SEK
1,164/mth)
- -----------------------------------------------------------------------------------------------------------------------------------
6. Peter Olsson 7 years Salesman 25 214,000.00 261,900.00 Pension, Access to company
(plus 1% bonus) plus 1% bonus Health car
(SEK
1,123/mth)
- -----------------------------------------------------------------------------------------------------------------------------------
7. Fredrik Andersson ? months Salesman 26 228,000.00 Pension, Access to company
employed half-time (for full-time) Health car
till September 1st.
Thereafter on
probation for six
months
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------
Severance("S") & Notice Period
NAME OF EMPLOYEE Retention("R")
- ----------------
bonuses
- -----------------------------------------------------------------
<S> <C> <C>
1. *Stefan Spang N/A Acc. to
contract
- -----------------------------------------------------------------
2. Margaretha Jonholl N/A Acc. to
Swedish law: 6
months
- -----------------------------------------------------------------
3. James Krueger N/A Acc. to
half-time employed Swedish law: 3
during 1998, months
full-time from June
1999
- -----------------------------------------------------------------
4. Ninni Alvesten N/A Acc. to
Swedish law: 5
months
- -----------------------------------------------------------------
5. Stefan Zachrisson N/A Acc. to
Swedish law: 3
months
- -----------------------------------------------------------------
6. Peter Olsson R Acc. to
Swedish law: 3
months
- -----------------------------------------------------------------
7. Fredrik Andersson N/A
employed half-time
till September 1st.
Thereafter on
probation for six
months
- -----------------------------------------------------------------
</TABLE>
1
<PAGE>
BEJKA
-----
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Period of Position/ Age Salary as at Salary as at Insurance
Name of Employee Employment Title 31.10.97 31.10.98 Pension
- ----------------
(including (including etc.
Bonus/commission) bonus/commission)
(Sek/per annum) (Sek/per annum))
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
8. Lima Rosenquist 11 years Order Stock 36 189,000.00 201,000.00 Pension, Health
(SEK 1,128/mth)
- ------------------------------------------------------------------------------------------------------------------------------------
9. Peter Wold 3 years Warehouse 24 175,600.00 182,700.00 AMF
- ------------------------------------------------------------------------------------------------------------------------------------
10. ?rgen Schmitt Warehouse 24 150,000.00 AMF
Employed on probation till
Dec. 1st 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Other benefits (e.g Severance("S") Notice Period
Name of Employee company car, &
- ----------------
housing) Retention("R")
bonuses
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
8. Lima Rosenquist N/A N/A Acc. to Swedish
law: 5 months
- -----------------------------------------------------------------------------------------------------------------------------------
9. Peter Wold N/A N/A Acc. to Swedish
law: 1 month
- -----------------------------------------------------------------------------------------------------------------------------------
10. ?rgen Schmitt N/A N/A Acc. to Swedish
Employed on probation till law: 1 month
Dec. 1st 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Notes: *denotes employee has service agreement
Under Swedish law, an employer is obliged to pay an "employer's fee" of 33.03% of the gross salary and bonuses paid to its
employees, and on other benefits, such as company cars.
In addition, tax is levied against the employer at the rate of 25.03% of all pension payments made by the employer. Under
Swedish law, employees are entitled to 5 weeks' paid leave per annum.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
SCHEDULE 7 : LIST OF ASSUMED LIABILITIES
WESTERN STATES
Liabilities Amount US$
- ----------- ----------
Notes payable to bank 12,054,181.15
Accounts payable-trade 8,199,973.00
Payroll tax payable 0.00
Sales tax payable - West 1,084.00
Sales tax payable - Central 0.00
Sales tax payable - East 0.00
Deposit payable sales computers - West 0.00
Deposit payable sales computers - Central 0.00
Deposit payable sales computers - East 0.00
Accrued expenses - other 80,787.00
Accrued freight out bikes 20,000.00
Accrued freight out bikes 6,000.00
Accrued freight out bikes 10,000.00
Accrued freight out bikes 10,000.00
Accrued freight out parts 9,000.00
Accrued freight out parts 1,000.00
Accrued freight out parts 2,000.00
Accrued freight out parts 2,000.00
Accrued workers compensation 53,422.00
Accrued product liability 550,000.00
Accrued insurance - medical 119,456.00
Accrued interest with foreign vendor 9,356.00
Accrued payroll and tax - West 132,979.00
Accrued payroll and tax - Fitness 0.00
128
<PAGE>
Liabilities Amount US$
- ----------- ----------
Accrued payroll and tax - Central 7,211.00
Accrued payroll and tax - East 6,529.00
Accrued payroll and tax - South 2,074.00
Accrued commission and tax - West 14,164.00
Accrued commission and tax - Fitness 7,832.00
Accrued commission and tax - Central 1,404.00
Accrued commission and tax - East 9,610.00
Accrued commission and tax - South 15,227.00
Accrued bonus and tax - West 77,159.00
Accrued bonus and tax - Fitness - 8,000.00
Accrued bonus and tax - Central 2,342.00
Accrued bonus and tax - East 24,745.00
Accrued bonus and tax - South 6,335.00
Accrued bonus and tax - Taiwan 18,239.00
Accrued vacation, sickness and tax - West 125,005.00
Accrued vacation, sickness and tax - Fitness 13,500.00
Accrued vacation, sickness and tax - Central 13,296.00
Accrued vacation, sickness and tax - East 5,198.00
Accrued vacation, sickness and tax - South 4,366.00
Accrued profit sharing 0.00
Accrued rebates - West 0.00
Accrued rebates - Central 0.00
Accrued rebates - East 0.00
Accrued rebates - South 0.00
Accrued discounts - West 100,000.00
Accrued discounts - Fitness 15,000.00
Accrued discounts - Central 40,000.00
129
<PAGE>
Liabilities Amount US$
- ----------- ----------
Accrued discounts - East 50,000.00
Accrued discounts - South 0.00
Accrued development - paid Diamondback 0.00
Accrued development - paid - Fitness 0.00
Accrued development - Quality Control 0.00
Accrued development - Quality Control 0.00
Accrued trade show - West 0.00
Accrued trade show - Fitness 0.00
Accrued trade show - Central 0.00
Accrued trade show - East 0.00
Accrued trade show - South 0.00
Accrued dealer clinic - West 0.00
Accrued dealer clinic - Fitness 0.00
Accrued dealer clinic - Central 0.00
Accrued dealer clinic - East 0.00
Accrued dealer clinic - South 0.00
Accrued dealer focus - West 0.00
Accrued dealer focus - Fitness 0.00
Accrued dealer focus - Central 0.00
Accrued dealer focus - East 0.00
Accrued dealer focus - South 0.00
Accrued sales meeting - West 0.00
Accrued sales meeting - Fitness 0.00
Accrued sales meeting - Central 0.00
Accrued sales meeting - East 0.00
Accrued meetings - South 0.00
Accrued travel - sales - West 0.00
130
<PAGE>
Liabilities Amount US$
- ----------- ----------
Accrued travel - Fitness 0.00
Accrued travel - sales - Central 0.00
Accrued travel - sales - East 0.00
Accrued travel - sales - South 0.00
Accrued travel - paid - Diamondback 0.00
Accrued travel - paid - Fitness 0.00
Accrued travel - Quality Control 0.00
Accrued travel ID 0.00
Accrued outside services - West 70,000.00
Accrued outside services - Fitness 0.00
Accrued outside services - Central 0.00
Accrued outside services - East 0.00
Accrued abandoned space - Central 91,399.00
Accrued abandoned space - East 29,917.00
==============
TOTAL 22,003,790.15
BEJKA
Liabilities Amount (SEK)
- ----------- ------------
Swedish payables 559,586.00
International payable 1,626,817.00
Short term debt 32,124.00
Prepaid Salary expenses (vac) 98 40,000.00
Prepaid Salary expenses (vac) 99 142,203.00
Prepaid Salary expenses 0.00
Prepaid Salary expenses 60,180.00
131
<PAGE>
Liabilities Amount (SEK)
- ----------- ------------
Net VAT 304,771.00
Income tax for personnel 0.00
Letter of Credit debt 0.00
Long loan, Sparbank 1,250,000.00
Loan, ADB System 87,497.00
==============
TOTAL 4,103,178.00
132
<PAGE>
SCHEDULE 8 : VENDOR/WARRANTOR PROTECTION
1. (Intentionally Blank)
- ------------------------
2. Relevant Claims
- ------------------
In this Schedule, "Relevant Claim" means any claim under this Agreement for
--------------
breach of the Warranties.
3. Financial Limits
- -------------------
3.1 Aggregate limit
The aggregate liability of the Vendors under this Agreement in respect of
the Warranties shall be limited to the sum of US$22,750,000 plus the amount
of the Assumed Liabilities and for this purpose any sum which the Vendors
incur in respect of professional fees and expenses incurred in connection
with a Relevant Claim shall not be taken into account.
3.2 Thresholds
The Vendors shall not be liable in respect of a Relevant Claim unless:
(A) the liability of the Vendors in respect of that Relevant Claim (and
all other Relevant Claims arising out of or related to the same or
similar subject matter) exceeds US$25,000; and
(B) the aggregate liability of the Vendors in respect of all Relevant
Claims (excluding any for which liability is excluded by Sub-Paragraph
3.2(A)) exceeds US$500,000 in which case the Vendors shall be liable
for the whole amount and not merely the excess over US$500,000.
3.3 Excess provisions
If and to the extent that the amount of any provision made in the
Completion Accounts in relation to the Book Debts or the Stock is found by
or notified to the Purchasers to be in excess of the matter for which such
provision was made then the Purchasers shall notify the Vendors of such
finding as soon as reasonably practicable and the amount of any such excess
(the "Excess Amount") shall, only to the extent that it has resulted in any
repayment of monies by the Vendors by reason of the application of the
provisions of Paragraph 5 of Schedule 4, be credited against and applied in
relieving the Vendor from any liability it would otherwise incur in respect
of Relevant Claims (but only to the extent of the amount of such repayment
and not otherwise).
133
<PAGE>
3.4 No applications
The limits set out in this Paragraph 3 shall be without effect in relation
to the Warranties contained in Paragraph 3.1 of Part 1 of Schedule 3.
3.5 Single Price
The Purchasers' rights to claim damages in respect of any specific matter
shall not be limited by reference to the apportionment of the Consideration
pursuant to Clause 3 of this Agreement.
4. Time limits
- --------------
The Vendors shall have no liability in respect of any Relevant Claim unless the
Purchasers shall have given notice in writing to the Vendors of such claim
specifying (in reasonable detail) the matter which gives rise to the claim, the
nature of the claim and the amount claimed in respect thereof not later than:
(A) in the case of a Relevant Claim under or in connection with any of the
Warranties contained in Paragraph 3.1 of Part 1 of Schedule 3, six (6)
years after the date of this Agreement;
(B) in the case of a Relevant Claim under or in connection with or any of
the Warranties contained in Paragraph 7.3 of Part 1 of Schedule 3 the
latest time permitted under the law of the relevant jurisdiction in
which the Company is incorporated or otherwise subject to by which
proceedings must be commenced in respect of the Relevant Claim;
(C) in the case of a Relevant Claim under or in connection with any
regulatory, environmental or social security liabilities (including,
for the avoidance of doubt, ERISA and other employee benefits), 31 May
2001; or
(D) in any other case, 31 May 2000.
and any Relevant Claim which has been made against the Vendors and which
has not been previously satisfied, settled or withdrawn shall be deemed to
have been withdrawn and shall become fully barred and unenforceable unless
proceedings in respect of the claim shall have been issued and served on
the Vendors on or before the date falling 12 months after the date by which
notice of claims must have been given to the Vendors pursuant to the
foregoing provisions of this Clause.
134
<PAGE>
5. No duplication of recovery
- -----------------------------
5.1 No double recovery
The Purchasers shall not be entitled to recover damages or otherwise obtain
reimbursement or restitution more than once in respect of the same loss
(but, for the avoidance of doubt, this shall not apply to damages,
reimbursement or other restitution in respect of common circumstances which
give rise to different heads of loss).
5.2 Claims under Warranties
In the event that the Purchasers are entitled to claim under the Tax Deed
or under the Warranties contained in Schedule 3 in respect of the same
subject matter, the Purchasers may claim under either or both but payments
under the Tax Deed shall pro tanto satisfy and discharge any claim which is
--- -----
capable of being made under the Warranties contained in Schedule 3 in
respect of the same subject matter and vice versa.
----------
6. Relevance of limitations in circumstances of fraud etc
- ---------------------------------------------------------
Notwithstanding anything to the contrary contained herein, the provisions of
Paragraphs 3, 4 and 5 shall not apply in respect of a Relevant Claim to the
extent that the matter giving rise to the Relevant Claim or the delay in the
discovery of such matter would not have arisen but for any act involving the
fraud, wilful misconduct or wilful concealment by any of the Vendors or any
member of the Vendors' Group or any officer or employee or agent or former
officer or employee of the Vendors' or any member of the Vendors' Group.
7. Third party claims
- ---------------------
(A) If the Vendors pay to the Purchasers an amount in respect of a breach of
any of the Warranties and the Purchasers subsequently recover a sum which
is referable to that breach, the Purchasers shall forthwith repay to
International on behalf of the Vendors (and the receipt of International
shall be deemed to be an absolute discharge for all purposes of the
Purchasers' obligations hereunder) so much of the amount paid by them as
does not exceed the sum recovered from the third party less all reasonable
costs, charges and expenses incurred by the Purchasers, as the case may be,
in obtaining that payment and in recovering that sum from the party.
(B) By way of covenant but not (except in relation to Sub-paragraph 7(B)(4)
below compliance with which is a condition precedent to liability unless
security has not been provided under paragraph 7(B)(3) of this Schedule) by
way of condition precedent to any Relevant Claim, each of the Purchasers
undertakes that if it becomes aware of any matter which might give rise to
a claim under any of the Warranties, the Purchasers shall or shall procure
that the relevant Sale Company shall:-
135
<PAGE>
(1) as soon as reasonably practicable give notice to the Vendors of the
matter and shall consult with the Vendors with respect to the matter;
(2) give the Vendors and the Vendors' professional advisers reasonable
access to premises and personnel and to any relevant assets, documents
and records within the power, possession or control of the relevant
Purchaser to enable the Vendors to examine and to take copies or
photocopies of any of such documents or records at the Vendors'
expense;
(3) take such action and institute such proceedings, and give such
information and assistance, as the Vendors may reasonably request to:-
(a) dispute, resist, appeal, compromise, defend, remedy or mitigate
the matter; or
(b) enforce against any person (other than the Vendors) the rights of
the relevant Sale Companies in relation to the matter;
provided that the Vendors shall provide to the Purchasers and the
Purchasers' shareholders such security as they may reasonably require
for all reasonable costs, expenses, damages, and liabilities which may
be incurred by reason of any such action and the amount of the
relevant claim under the Warranties;
(4) not admit liability in respect of or compromise or settle the matter
without the prior written consent of the Vendors, such consent not to
be unreasonably withheld or delayed.
8. Events after Completion
- --------------------------
The Vendors shall have no liability whatsoever in respect of any Relevant Claim
to the extent that the matter giving rise to such claim would not have arisen
but for:
(A) any act after Completion by any of the Purchasers or any of their
respective Affiliates, or any director, officer or employee or agent
of any of them; or
(B) the passing of, or change in, after the date of this Agreement any
law, rule or regulation of any governmental department, agency or
regulatory body or the interpretation thereof.
136
<PAGE>
EXHIBIT 1:
Form of Tax Deed
THIS DEED is dated [ ] and made
- ---------
BETWEEN:
- --------
(1) DIAMOND BACK INTERNATIONAL COMPANY LIMITED ("International") a company
------------------------------------------
incorporated in The British Virgin Islands whose principal/registered
office is at International Trust Building, Wickhams Cay, Road Town,
Tortola, The British Virgin Islands;
(2) WESTERN STATES IMPORT COMPANY, INC. ("Western States") a company
-----------------------------------
incorporated in California, USA whose principal/registered office is at
4030 Via Pescador, Camarillo, CA 93612-5008;
(3) BEJKA TRADING A.B. ("Bejka") a company incorporated in Sweden under number
------------------
556115-4609 whose principal office is at Gothenburg;
(each of parties (1) to (3) a "Vendor" and together the "Vendors")
(4) THE DERBY CYCLE CORPORATION ("Derby Cycle") a company incorporated in the
---------------------------
state of Delaware, USA whose principal/registered office is at 22710 72nd
Avenue South, Kent, Washington, WA 98032, United States of America;
(5) DERBY SWEDEN ("Derby Sweden") a company incorporated in Sweden whose
------------
principal/registered office is at Gothenburg.
(each of parties (4) and (5) a "Purchaser" and together the "Purchasers").
BACKGROUND:
- -----------
This Deed has been entered into pursuant to an agreement dated [ ] 1998 made
between the Vendors and the Purchasers (the "Agreement") under which the
Purchasers have agreed to purchase certain Business Assets from the Vendors,
with the intention that an amount calculated by reference, inter alia, to
certain tax liabilities of the Purchasers relating to the Business and the
Business Assets shall be paid by the Vendors to the Purchasers subject as
mentioned herein.
137
<PAGE>
THE PARTIES AGREE THAT:
- -----------------------
1. Interpretation
- ------------------
1.1 Definitions
In this Deed, unless the contrary intention appears or the context
otherwise requires:
(A) words and expressions defined in the Agreement have the same
respective meanings in this Deed and any provisions in the Agreement
concerning matters of construction or interpretation shall also apply
in this Deed.
(B) "Tax" means all forms of taxation, duties, levies, imposts of whatever
-----
jurisdiction including (without limitation) corporation tax, income
tax, sales tax, value added tax, use tax, capital value tax, property
tax, franchise tax, excise customs and other import duties, all
employment taxes and all penalties, charges, costs and interest
relating to the foregoing or resulting from failure to comply with the
provisions of any enactment relating to tax.
(C) "Relief" means any relief, allowance or credit in respect of Tax or
--------
any right to repayment of Tax or any deduction, exemption or set-off
relevant in computing income, profits or gains for the purposes of Tax
pursuant to any legislation in any jurisdiction or otherwise.
1.2 Joint and Several Liability
All covenants, indemnities, agreements and obligations given under this
Deed by more than one person are given jointly and severally.
2. Indemnity
- ------------
2.1 Covenant
The Vendors undertake to the Purchasers that in relation to the Business
and Business Assets they will pay, satisfy, discharge and fulfil any and
all liabilities to Tax relating to the Business arising in respect of or by
reference to any period up to Completion (unless specifically assumed by
the Purchasers and save for any such liability provision for which is made
in the Completion Accounts) and in any jurisdiction whatsoever and shall
indemnify and hold harmless the Purchasers in respect of the same and from
and against all costs, claims, interest (including default interest),
liabilities and reasonable expenses which the Purchasers or any of them may
reasonably and properly suffer or incur in consequence of any failure or
delay by the Vendors to comply with this clause 2.1.
138
<PAGE>
2.2 Disclosure not relevant
The Vendors' obligation to make payments under Sub-Clause 2.1 shall not be
affected by the Purchasers' knowledge or the disclosure, in the Disclosure
Letter or otherwise, of the liability to Tax giving rise to the payment, or
of the circumstances giving rise to that liability.
3. Gross-up
- -----------
If any amount paid or due to the Purchasers under this Deed is a taxable receipt
of the Purchasers then the amount so paid or due (the "Net Amount") shall be
------------
increased to an amount which, after subtraction of the amount of any Tax on such
increased amount which arises, or would but for the availability of any Relief
arise, shall equal the Net Amount provided that if any payment is initially made
on the basis that the amount due is not taxable in the hands of the Purchasers
and it is subsequently determined that it is, or vice versa, appropriate
adjustments shall be made between the Purchasers and the Vendors.
4. Deductions and withholdings
- ------------------------------
4.1 No deductions, etc.
Any amount payable pursuant to this Deed shall be paid free and clear of
all deductions, withholdings, counter-claims or set-off whatsoever, save
only as may be required by law.
4.2 Deduction, etc. required by law
(A) If any deductions or withholdings are required by law to be made from
any sums, the Vendors shall be obliged to pay the Purchasers such
amount as will, after the deduction or withholding has been made,
leave the Purchasers with the same amount as they would have been
entitled to receive in the absence of such requirement to make a
deduction or withholding.
(B) To the extent the Purchasers obtain a tax credit in relation to such
deduction or withholding the Purchasers shall repay such credit to the
Vendors by way of adjustment to the Consideration.
4.3 Accounting for deductions and withholdings
If the Vendors are required by law to make a deduction or withholding as is
referred to in Sub-Clause 4.2, the Vendors shall:
(A) make such deduction or withholding;
139
<PAGE>
(B) account for the full amount deducted or withheld to the relevant
authority in accordance with applicable law; and
(C) provide to the Purchasers the original, or a certified copy, of a
receipt or other documentation evidencing the above.
5. Payments under this Deed
- ---------------------------
5.1 Date for payment
Where any amount is required to be paid to the Purchasers by the Vendors in
respect of a liability to Tax under Clause 2.1, the Vendors shall pay such
amount in cleared funds on or before the date 3 Business Days before the
date on which the Tax in question is due for payment to the relevant tax
authority or, if later, 10 Business Days following the date on which the
Vendors are deemed pursuant to Sub-Clause 17.11 of the Agreement to receive
notice of their liability to make such payment. Any dispute as to the
amount contained in such notice shall be determined by the Auditors acting
as experts and not arbitrators (at the Vendors' expense).
5.2 Payments due on days other than Business Days
Any payment which becomes due on a day which is not a Business Day shall be
paid on the previous Business Day, and any payment which is made after noon
on any day shall, for the purposes of calculating interest, be deemed to
have been paid on the next following Business Day.
5.3 Payment in cleared funds
The Vendors shall make all payments under this Deed in immediately
available funds before noon on the due date for payment without deduction
or withholding on any account (save as expressly provided in this Deed) and
if any amount is not paid when due the Vendors shall pay to the Purchasers
interest on such amount accruing from day to day (as well after judgment as
before) at the rate of 3 per cent. per annum above the base rate of
Barclays Bank plc from time to time from the due date until the date of
actual payment (or the next Business Day if such day of actual payment is
not a Business Day) compounded quarterly.
6. Incorporation of provisions from the Agreement
- -------------------------------------------------
The provisions of the following sub-clauses of the Agreement shall have effect
as if incorporated into this Deed mutatis mutandis namely:-
Sub-clause 17.1 - Assignment
Sub-clause 17.11 - Notices
Clause 19 - Law and Jurisdiction.
140
<PAGE>
IN WITNESS WHEREOF this Deed was executed by the parties on the day and date
first above written.
141
<PAGE>
EXHIBIT 2:
Form of Opinion to be given by Vendors' Solicitors
The Derby Cycle Corporation and
Derby Sweden
[date]
Dear Sirs,
The Acquisition by The Derby Cycle Corporation and Derby Sweden of business
- ---------------------------------------------------------------------------
assets from, inter alia, [ ]
- -------------------------------------------------------
1. We act as legal advisers in [Country] to [ ].
2. This opinion is confined to and given on the basis of the law of [Country]
as currently applied by the courts of [Country]. We have made no
independent investigation of the laws of England as a basis for this
opinion and do not express or imply any opinion thereon. We have assumed
that there is nothing in the law of any other place which affects this
opinion.
3. For the purposes of this opinion we have examined the documents listed in
Schedule One to this letter. Other words and expressions defined in the
Sale and Purchase Agreement shall bear the same meanings herein.
4. In giving this opinion we have assumed in relation to the documents listed
in the Schedule to this letter that:
(A) all such documents are within the capacity and powers of and have been
validly authorised, executed and delivered by and are binding on the
parties thereto other than [ ] and there has been
no breach of any of the terms thereof
(B) there is nothing under English law to prevent the Sale and Purchase
Agreement or the Tax Deed from being valid, binding and enforceable
(C) all such documents submitted to us as copy, draft or specimen
documents conform to the originals
5. Based upon and subject to the foregoing and subject to clause [6] below we
are of the opinion that:
(A) [ ] is a company duly incorporated and existing
in good standing
142
<PAGE>
in [Country] under the [Companies Act .] [law of Country] and is
properly qualified and entitled to carry on the business as currently
carried on and to sell the Business Assets as defined in the Sale and
Purchase Agreement.
(B) [ ] has power to enter into and execute and to
perform all of its obligations under the Sale and Purchase Agreement
and the Tax Deed.
(C) [ ] has taken all necessary corporate action to
authorise the execution, delivery and performance of the Sale and
Purchase Agreement and the Tax Deed.
(D) the Sale and Purchase Agreement and the Tax Deed constitute direct,
unconditional, legal, valid, binding and enforceable obligations of [
].
(E) the submission by [ ], for the purposes of the
Sale and Purchase Agreement and the Tax Deed, to the jurisdiction of
the English courts, and the appointment of the person therein
mentioned as its agent for service in respect of any action arising
out of or relating to it, are valid and binding on [ ]
and the courts of [Country] would recognise as a valid judgment and
would register for enforcement any judgment for a sum of money
obtained in an English court against [ ] in an
action connected with the Sale and Purchase Agreement or the Tax Deed
and would give effect thereto.
6. This opinion is subject to the following:
(A) enforcement may be limited by bankruptcy, insolvency, liquidation,
reorganisation, limitation and other laws of general application
relating to or affecting the rights of creditors;
7. This opinion is addressed to and is solely for the benefit of The Derby
Cycle Corporation and Derby Sweden AB and except with our express consent
is not to be transmitted to any other person nor is to be relied upon by
any other person or for any purpose other than in connection with the Sale
and Purchase Agreement and the Tax Deed.
Yours faithfully,
143
<PAGE>
Schedule 1:
1. Sale and Purchase Agreement among Diamond Back International Company
Limited, Western States Import Company, Inc., Bejka Trading A.B., The Derby
Cycle Corporation and Derby Sweden dated [ ] (the "Sale and Purchase
Agreement").
2. Tax Deed among Diamond Back International Company Limited, Western States
Import Company, Inc., Bejka Trading A.B., The Derby Cycle Corporation and
Derby Sweden and dated [ ] (the "Tax Deed").
144
<PAGE>
[LETTERHEAD OF STANARD, BLENDER & SCHWARTZ APPEARS HERE]
December 7, 1998
The Derby Cycle Corporation
Derby Sweden A.B.
(Address)
Re: The Acquisition by the Derby Cycle Corporation ("Derby Cycle")
(Purchaser of the assets of Western States Import Co., Inc.
("WSI"))
--------------------------------------------------------------
Gentlemen:
This opinion is furnished to you pursuant to Clause 2.1 of the Sale
and Purchase Agreement dated December 4, 1998 (the "Agreement") between
Diamond Back International Company Limited, Hejka Trading A.B., and WSI
("Sellers") and Derby Cycle and Derby Sweden A.B. Only Derby Cycle
purchases the assets of WSI; however, Derby Sweden A.B. is a party to the
Agreement and Derby Cycle and Derby Sweden are collectively defined as
"Purchaser." The firm has acted as general counsel to WSI in connection
with the transactions contemplated in the Agreement.
For the purposes of this letter, the capitalized terms used herein but
not otherwise defined shall have the same meanings as defined in the
Agreement.
In rendering this opinion, we have examined originals or copies of
such documents, records and other writings as we consider relevant for
purposes of this opinion. In our examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted
to us as originals, and the conformity of all original documents submitted
to us as certified or photostatic copies. As to questions of fact material
to this opinion, we have, when relevant facts were not independently
established by us, relied on appropriate representations and
certifications.
144A
<PAGE>
The Derby Cycle Corporation
December 7, 1998
Page 2 of 5
Specifically, we have examined the following documents:
1. The Agreement;
2. Tax Deed (as defined in the Agreement);
3. Articles of Incorporation of WSI;
4. By-Laws of WSI; and
5. Corporate Minutes of WSI.
The opinions expressed herein are subject to and qualified in all respects
by the following:
a. We have made no physical inspection of the principal place of
business of WSI, and express no opinion with respect to any matter which may be
disclosed through a physical inspection; and
b. We have not participated in the day-to-day management and
operation of WSI, and, except as specifically set forth herein, express no
opinion with respect to the day-to-day operation of WSI.
Please be advised that the use of the phrase "to our knowledge" in the
opinions expressed below does not imply that we have done any independent
investigation of the facts referenced. We are qualified to practice in the State
of California and, for the purpose of this opinion, have made no review of and
express no opinion regarding the laws of any other state or jurisdiction, except
for the applicable laws of the United States of America.
In our capacity as such counsel, we have been furnished with and have
examined originals or copies, certified or otherwise identified to our
satisfaction as being true copies, of such records, agreements, instruments, and
documents as, in our judgment, are necessary or relevant as the basis for the
opinions expressed below.
We have obtained and relied upon such certificates and assurances from
public officials as we have deemed necessary. We have investigated such
questions of law and fact for the purpose of rendering this opinion as we have
deemed necessary.
144B
<PAGE>
The Derby Cycle Corporation
December 7, 1998
Page 3 of 5
References to sections of the UCC are to sections of the Uniform Commercial
Code as in effect in California, and any and all terms used in this opinion
which are defined in the UCC shall be construed and defined in accordance with
the meaning and definition ascribed to such terms under the UCC as in effect in
California.
Certain of the opinions rendered herein are qualified by the discussion
following the numbered paragraphs.
On the basis of the foregoing, and in reliance thereon, we are of the
opinion that:
1. WSI is a corporation duly organized, validly existing, and in good
standing under the laws of the State of California and has all requisite
corporate power and corporate authority to enter into and perform all of its
obligations under the Agreement and the Tax Deed, thereto, to own and operate
its properties and assets, and to carry on its business as it is currently being
conducted and as it is contemplated to be conducted.
2. WSI is duly qualified to own and operate its properties and assets and
to carry on its business as it is currently being conducted and as it is
contemplated to be conducted, and is in good standing in each jurisdiction where
the conduct of its business or the ownership or operation of its properties and
assets makes such qualification necessary.
3. The Agreement, the Tax Deed, and all other agreements, instruments,
and documents referred to therein or delivered in connection therewith or
ancillary thereto, to the extent WSI is a party thereto, have been duly
authorized by all necessary corporate action on the part of WSI under the laws
of its state or incorporation and have been duly executed and delivered by WSI.
4. The Agreement, the Tax Deed, and all other agreements, instruments,
and documents referred to therein or delivered in connection therewith or
ancillary thereto, to the extent WSI is a party thereto, constitute the legal,
valid, and binding obligations of WSI, enforceable against WSI in accordance
with their respective terms.
5. WSI has full corporate power and authority to execute and deliver, and
to perform and observe the provisions of, the Agreement, the Tax Deed and all
other agreements, instruments and documents referred to therein or delivered in
connection therewith or ancillary thereto, to the extent WSI is a party thereto.
144C
<PAGE>
The Derby Cycle Corporation
December 7, 1998
Page 4 of 5
6. WSI has the power and authority to cause its appropriate officers,
directors or authorized agents acting for and on its behalf, to execute and
deliver the Agreement and the Tax Deed and all other agreements, instruments and
documents referred to therein or delivered in connection therewith or ancillary
thereto, to the extent WSI is a party thereto and to cause its appropriate
officers, employees and agents, acting for and on its behalf, to satisfy the
obligations of WSI and take any discretionary actions permitted to be taken by
WSI under the Agreement and/or the Tax Deed and all other agreements,
instruments and documents referred to therein or delivered in connection
therewith or ancillary thereto, to the extent WSI is a party thereto.
7. The execution, delivery, and performance of the Agreement and the Tax
Deed by WSI, the compliance with the terms and conditions thereof, and the
consummation of the transactions contemplated thereby, do not and will not: (a)
violate or conflict with, result in a breach of, or constitute a default under,
any of the terms, conditions, or provisions of: (i) any present statutes, rules,
or regulations applicable to WSI: (ii) the articles of incorporation or bylaws
of WSI: (iii) any order, judgment, or decree of any domestic court or other
agency of domestic government, known to us, after due inquiry, which is binding
on charge, security interest, or other encumbrance upon any of the properties or
assets of WSI.
8. To the best of our knowledge, there are no actions, suits, arbitration
proceedings or claims pending or threatened against or involving WSI or
maintained by WSI at law on in equity or before any foreign, federal, state,
municipal or other government, or any department, commission, board, bureau,
agency, public authority or instrumentality thereof or any court or arbitrator,
which, if adversely determined, would have a material adverse effect upon the
business, operations, property, reasonably foreseeable prospects, profits or
condition (financial or otherwise) (a "Material Adverse Effect") of WSI.
9. To our knowledge, WSI is not in default under any agreement to which it
is a party or by which it or any of its property is bound, the effect of which
default would have a Material Adverse Effect. To our knowledge, no
authorization, consent, approval or other action by, and no notice to or filing
with, any governmental body or any other person which has not already been
obtained, taken or filed, as applicable, is required for the due execution,
delivery or performance by WSI of any of the aforementioned agreements.
144D
<PAGE>
The Derby Cycle Corporation
December 7, 1998
Page 5 of 5
All opinions herein contained with respect to the enforceability of
documents and instruments are qualified:
(a) to the extent that the availability to the remedy of specific
performance or specific enforcement is subject to the discretion of the court
before which any proceedings therefor may be brought; and
(b) to the extent that certain remedies provided in the Agreement, the Tax
Deed, or documents delivered pursuant thereto may be limited by applicable
bankruptcy, reorganization, arrangement, insolvency, moratorium or similar laws
affecting the enforcement of creditors' rights generally as at the time in
effect.
Our opinion is limited to the laws of the State of California and the
applicable laws of the United States of America, and we assume no responsibility
as to the applicability or the effect of the laws (including the blue sky and
insolvency laws) of any other jurisdiction.
This letter and the opinion rendered herein are effective only as of the
date hereof and provided solely for the purpose of partially fulfilling the
requirements imposed on WSI in order to consummate the transactions contemplated
by the Agreement and the Tax Deed. This opinion may not be relied on by any
person or party other than Purchaser or its counsel, unless otherwise expressly
authorized in writing, by this firm.
Very truly yours,
GARY N. SCHWARTZ
GNS: jgb
Enclosures
144E
<PAGE>
[ ] 1998
The Derby Cycle Corporation
22710, 72/nd/ Avenue South,
Kent, Washington WA 98032
DERBY SWEDEN A.B.
c/o 1455 Pennsylvania Avenue N.W.,
Suite 350
Washington DC 2004,
U.S.A
Dear Sirs,
Re: Diamond Back International Company Limited (the "Company")
1. We are qualified, practising lawyers in the British Virgin Islands
("B.V.I") who have been asked to provide this legal opinion with
regard to B.V.I law in connection with a sale and purchase agreement
dated [ ] 1998 (the "Agreement") and a tax deed dated [ ] 1998
(the "Tax Deed"), both made between, inter alias, you and the Company.
2. For the purpose of this opinion we have examined originals or copies
certified or otherwise indentified to our satisfaction of the
following:
(a) the executed Agreement;
(b) the executed Tax Deed
((a) and (b) are together referred to herein as the "Documents");
(c) (i) the Company's Certificate of Incorporation;
(ii) the Company's current Memorandum and Articles of
Association; and
(iii) a registered Agent's Certificate issued by the Company's
B.V.I registered agent.
144F
<PAGE>
THE DERBY CYCLE CORPORATION
DERBY SWEDEN A.B.
[ ] 1998
Page 3
(d) minutes of a meeting of the Company's board of directors held on
[ ] 1998 at which resolutions were passed approving the Company's
execution and delivery of the Documents;
(e) written resolutions dated [ ] 1998 of the Company's members
approving the execution and delivery of the Documents
((d) and (e) above are together referred to as the "Authorising
Resolutions"); and
(f) the Company's public records (the "Public Records") on file on
[ ] 1998 with, and available for inspection at, the B.V.I.
Registry of Companies (the "Registry").
We have also made such other enquiries and reviewed such matters of law,
and examined the originals or copies certified or otherwise identified to
our satisfaction of such other documents, records, agreements, and
certificates as we have considered relevant for the purpose of giving the
opinions expressed below.
3. For the purposes of giving this opinion we have assumed without further
enquiry:
(a) that all signatures and seals on documents submitted to us are
genuine; that all documents submitted to us as originals are authentic
and complete; and that all documents submitted to us as copies conform
to the originals (and we have found nothing to indicate such
assumptions are not justified);
(b) that the Documents constitute valid and binding obligations of the
Company under the laws of England, by which laws they are expressed to
be governed;
(c) that all factual statements made in such documents we have examined
are correct;
(d) that the Authorising Resolutions remain in full force and effect up to
and including the time of execution of the Documents and have not been
amended or rescinded; and
(e) that the Public Records which we have examined are accurate and that
the information disclosed by the company searches which we have
conducted is true and complete; that such information has not since
then been altered; and that such searches did not fail to disclose any
information which had been delivered for registration but did not
appear on the Registry's file at the date of our search.
This legal opinion is confirmed to and given on the basis of B.V.I. law as
currently applied by the B.V.I. courts. We have not investigated, and do
not express or imply any opinion on the laws of any other jurisdiction.
144G
<PAGE>
THE DERBY CYCLE CORPORATION
DERBY SWEDEN A.B
[ ] 1998
PAGE 3
4. The opinions set out herein are subject to the following qualifications:
(a) Rights and obligations may be limited or affected by applicable
bankruptcy, insolvency, liquidation, or other similar laws of general
application in the B.V.I.
(b) Certain equitable remedies such as injunction or specific performance
will only be available under B.V.I. law at the court's discretion and
will not normally be available where damages are considered to be an
adequate remedy.
(c) Where obligations are to be performed in a jurisdiction outside the
B.V.I. they may not be enforceable under B.V.I. law to the extent that
such performance would be contrary to public policy under the laws of
that outside jurisdiction.
(d) Claims may become barred under the B.V.I. Limitation Act, pursuant to
which an action based upon a contract must be brought within six (6)
years of the date when the cause of action arises and an action based
upon a deed must be brought within twelve (12) years of such date. A
cause of action is generally understood to arise when there is in
existence a person who can sue and another who can be sued, and when
there are present all the facts which are material to be proved to
entitle the plaintiff to succeed. Regarding a cause of action to
enforce a foreign judgement, the limitation period will begin to run
when the cause of action arises, that is, from the date of such
foreign judgement.
(e) A B.V.I. court will determine in its discretion whether an illegal or
unenforceable provision may be severed.
(f) The B.V.I. courts may refuse to give effect to a provision in respect
of the cost of unsuccessful litigation brought before those courts or
where the courts have themselves made an order for costs.
5. Based upon and subject to the foregoing paragraphs of this letter, we are
of the opinion that:
(a) The Company is a company duly incorporated with limited liability and
validity existing in good standing under the B.V.I. law with full
statutory and corporate capacity, power, authority, and right to own
its property and assets and to carry on its business as envisaged in
the Documents. To the best of our knowledge after due enquiry, no
steps have been or are being taken to appoint a receiver, liquidator,
or similar officer of, or to wind up or dissolve, the Company. It
should be noted, however, that B.V.I. law does not require notice of a
receiver's appointment to be filed anywhere in the B.V.I.
(b) The Company has full statutory and corporate capacity, power,
authority, and right to enter into and perform its obligations under
the Documents, including the giving of security pursuant to the
Documents, and has taken and obtained all necessary corporate and
other action and consents to authorise the execution and delivery of,
and the performance of its obligations under, the Documents.
144H
<PAGE>
THE DERBY CYCLE CORPORATION
DERBY SWEDEN A.B.
[ ] 1998
PAGE 4
(c) The Documents have been duly executed for and on behalf of the Company
and constitute valid and binding obligations of the Company.
(d) The execution and delivery of, and the performance of its obligations
and the exercise of any of its rights under, the Documents by the
Company will not violate, contravene, or conflict with any provisions
of its constitutional documents or any existing B.V.I. law or
regulation to which the Company is subject, or cause any limit on the
powers to give security of the Company or its directors to be
exceeded.
(e) It is not necessary to ensure the legality, validity, enforceability,
or admissibility in evidence in proceedings of the Documents that they
or either of them or any other document be notarised, filed,
registered, or recorded in the B.V.I. or that any tax, stamp duty, or
similar fee be paid in respect thereof.
(f) The Company's obligations under the Documents constitute primary,
direct, unconditional, and general obligations and rank at least pari
passu in point of priority and security with all the Company's other
direct or contingent unsecured liabilities.
(g) The Company is generally subject to civil and commercial law with
respect to its obligations under the Documents and neither it nor any
of its assets is entitled to any immunity or privilege (sovereign or
otherwise) from suit, proceedings, set-off, judgement, execution,
attachment, or other legal process in the B.V.I. The Company's
execution and performance of the Documents do and will constitute
private and commercial acts.
(h) The Documents are in acceptable and proper legal form for enforcement
in the B.V.I., and in any proceedings taken in the B.V.I. for such
enforcement the choice of English law as the governing and proper law
will be recognised and upheld and applied in the B.V.I. courts. The
Company's submission to the non-exclusive jurisdiction of the English
courts is valid and irrevocable and the Company's irrevocable
appointment of an agent in England to accept service of process in
respect of the jurisdiction of such courts is valid and binding on the
Company.
(i) Any final and conclusive monetary judgement for a definite sum
obtained against the Company in the High Court of England in respect
of either of the Documents may, subject as hereinafter provided, be
registered and enforced as a judgement of the B.V.I. court. In order
for a judgement to be so registered three conditions must be
fulfilled: First, application must be made for registration of the
said judgement within twelve months of the date thereof or such longer
period as the court may allow; second, the judgement debtor must not
be appealing or have the right and intention to appeal; and third, the
B.V.I. court must consider it just and convenient that the judgement
be so enforced. Alternatively, the judgement may be treated as a cause
of action in itself so that no retrial of the issue would be necessary
in which case of an appeal is irrelevant unless a stay of execution
has been granted. In either case, it will be necessary that in respect
to the court issuing the final judgement:
144I
<PAGE>
The Derby Cycle Corporation
Derby Sweden A.B.
[ ]1998
Page 5
(i) the court had jurisdiction in the matter and the judgement
debtor either submitted to such jurisdiction or was resident or
carrying on business within such jurisdiction and was duly
served with process;
(ii) the judgement given by the court was not in respect of
penalties, taxes, fines or similar fiscal or revenue
obligations;
(iii) in obtaining judgement there was no fraud on the part of the
person in whose favour judgement was given or on the part of
the court;
(iv) recognition or enforcement of the judgement in the B.V.I. would
not be contrary to public policy; and
(v) the proceedings pursuant to which judgement was obtained were
not contrary to natural justice.
(j) An award in the B.V.I. courts in respect of a claim brought with
regard to the Documents in United States dollars would be expressed in
United States dollars.
(k) There is no applicable usury or interest limitation law in the B.V.I.
which may restrict the recovery of payments under the Documents.
(l) The Company is not required by B.V.I. law to deduct or withhold from
any payment (whether of principal, interest, commitment commission,
fees, or other amount) becoming due under either of the Documents any
amount in respect or on account of tax in the B.V.I.
(m) No authorisations, licences, consents, or approvals are required by
the Company from any government and other authorities in the B.V.I. in
connection with its performance of its obligations under the
Documents.
(n) You are not and will not be deemed to be resident, domiciled, or
carrying on or transacting business or subject to taxation in the
B.V.I. or in violation of any law thereof by reason only of the
negotiation or preparation of the Documents or the entering into of,
or the exercise of your rights or the performance of your obligations
under, the Documents.
(o) You are not required to be licensed, qualified, or otherwise entitled
to carry on business in the B.V.I. in order to enforce your rights
under, or as a consequence of the execution, delivery, and performance
of, the Documents.
This opinion is addressed to you and may be relied upon by you and your counsel.
It is limited to the
144J
<PAGE>
THE DERBY CYCLE CORPORATION
DERBY SWEDEN A.H
[ ] 1998
Page 6
matters herein and is not to be read as an opinion with respect to any other
matter; nor is it to be transmitted to any other person without our prior
express written consent.
Yours faithfully,
HARNEY WESTWOOD & RIEGELS
/s/ Fred L.A. Phillips
144K
<PAGE>
EXHIBIT 3:
PART 1 : Form of Assignment of Intellectual Property Rights
THIS ASSIGNMENT is dated [ ] and made
- ---------------
BETWEEN:
- --------
(1) [ ] a company incorporated
---------------------------------------------------
in [ ][No. ] whose principal/registered office is
at [ ] (the "Assignor"); and
----------
(2) THE DERBY CYCLE CORPORATION a company incorporated in the state of
---------------------------
Delaware, USA [no. ] whose principal/registered office is at 22710
72nd Avenue south, Kent, Washington, WA 98032, United States of America
(the "Assignee").
----------
WHEREAS:
- -------
(A) Pursuant to an agreement dated [ ] between (inter alia) the
Assignor and the Assignee (the "Sale and Purchase Agreement"), the Assignor
has agreed to enter assignments to assign to the Assignee the Intellectual
Property Rights (as defined in the Sale and Purchase Agreement);
(B) Accordingly, the parties hereto have agreed to enter into this Assignment
to assign to the Assignee all Intellectual Property Rights (as defined in
the Sale and Purchase Agreement) owned by the Assignor which are not the
subject of the Assignments listed in the Schedule hereto (such rights
being referred to herein as the "IP Rights").
NOW IT IS HEREBY AGREED as follows:
- -----------------------
1. In consideration of the sum of US$ now paid by the
Assignee to the Assignor (the receipt of which the Assignor hereby
acknowledges) the Assignor HEREBY ASSIGNS with full title guarantee to the
Assignee absolutely free from all liens, charges, security interests and/or
encumbrances whatsoever all its right, title and interest in and to the IP
Rights including all statutory and common law rights attaching thereto and
the right to sue for past infringements and to retain any damages obtained
as a result of such action, to hold unto the Assignee absolutely.
2. It is agreed that the IP Rights hereby assigned to the Assignee include
(without limitation) such right title and interest as the Assignor has in
the Intellectual Property Rights in respect of which no trade mark
registrations or applications or patents or patent applications or
registered designs or applications for the same are included in the
Assignments listed in the Schedule hereto and, in particular, all goodwill
of the business in relation to which any trade marks within the IP Rights
have been used
145
<PAGE>
and all statutory and common law rights attaching thereto and the right to
sue for past infringements and to retain any damages as a result of such
action.
3. The Assignor hereby agrees and undertakes to render to the Assignee (at its
request) all such assistance with any proceedings which may be brought by
or against the Assignee against or by a third party in relation to the IP
Rights and the Assignee shall indemnify the Assignor in respect of all
costs and expenses (including reasonable legal costs) actually incurred by
it in providing the Assignee with such assistance.
4. The Assignor hereby covenants that at the costs and request of the Assignee
at any time and from time to time it will execute such deeds or documents
and do such acts or things and provide such assistance as may in each case
be necessary or desirable to give effect to this Assignment including, in
particular executing confirmatory assignments in such forms as the Assignee
may reasonably require for the purpose of recording/registering the
assignment hereby effected with any registry.
5. This Assignment shall be governed by and construed in accordance with
English law and the parties hereby submit to the exclusive jurisdiction of
the English courts.
IN WITNESS whereof this Assignment has been executed the day and year first
above written.
THE SCHEDULE
------------
- --------------------------------------------------------------------------------
Assignment Parties Date
- --------------------------------------------------------------------------------
Trade Marks (1) [ ] of even date herewith
(2) THE DERBY CYCLE
CORPORATION
- --------------------------------------------------------------------------------
Patents/Designs (1)[ ] of even date herewith
2) THE DERBY CYCLE
CORPORATION
- --------------------------------------------------------------------------------
146
<PAGE>
Signed by duly )
authorised for and on behalf of )
[ ] )
in the presence of: )
Signed by duly )
authorised for and on behalf of )
THE DERBY CYCLE CORPORATION )
in the presence of: )
147
<PAGE>
EXHIBIT 3:
PART 2: Form of Assignment of Trade Marks
THIS ASSIGNMENT is dated [ ] and made
- ---------------
BETWEEN:
- --------
(1) [ ] a company incorporated
----------------------------------------------------
in [ ] [no. ] whose principal/registered office is at [
] (the "Assignor"); and
----------
(2) THE DERBY CYCLE CORPORATION a company incorporated in the state of
---------------------------
Delaware, USA [no. ] whose principal/registered office is at
22710 72nd Avenue South, Kent, Washington, WA 98032, United States of
America (the "Assignee").
----------
W H E R E A S :
(A) The Assignor is the beneficial owner of and the registered proprietor of or
applicant for the trade marks listed in the Schedule hereto ("the Trade
Marks").
(B) The Assignor has agreed to assign all its right title and interest in and
to the Trade Marks to the Assignee for the consideration hereinafter
mentioned.
NOW THIS ASSIGNMENT WITNESSETH as follows :
- ------------------------------
1. In consideration of the sum of [ ] now paid by the
Assignee to the Assignor (the receipt of which sum the Assignor hereby
acknowledges) the Assignor HEREBY ASSIGNS with full title guarantee to the
Assignee absolutely free from all liens, charges, security interests and/or
encumbrances whatsoever all its right title and interest in and to the
Trade Marks including the benefit of the applications for registration with
the intention that when the applications are granted the registrations will
vest in the Assignee and including any common law rights and all the
goodwill attaching to the Trade Marks.
2. The Assignment hereby effected shall include the right for the Assignee to
bring proceedings against any third party in respect of the Trade Marks
(including proceedings against any third party for infringement of the
Trade Marks or for passing off or for otherwise infringing the rights of
the Assignor in the Trade Marks). The Assignor hereby agrees and
undertakes to render to the Assignee (at its request) all such assistance
with any proceedings which may be brought by or against the Assignee
against or by any third party in relation to the Trade Marks and the
Assignee shall indemnify the Assignor in respect of all costs and expenses
(including reasonable legal costs) actually incurred by it in providing the
Assignee with such assistance.
148
<PAGE>
3. The Assignor hereby covenants that at the cost and request of the Assignee
at any time and from time to time it will execute such deeds or documents
and do such acts or things and provide such assistance as may, in each
case, be necessary or desirable to give effect to this Assignment
including, in particular, executing confirmatory assignments in such form
as the Assignee may reasonably require for the purpose of
recording/registering the assignment hereby effected at any registry.
4. This Assignment shall be governed by and construed in accordance with
English Law and the parties hereto submit to the exclusive jurisdiction of
the English courts.
IN WITNESS WHEREOF this Assignment has been executed the day and year first
- ------------------
above written
SCHEDULE
--------
[Provide following details as appropriate]
Trade Marks
-----------
- --------------------------------------------------------------------------------
Country Mark No. Class Status
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signed by duly )
authorised for and on behalf of )
[ ] )
in the presence of: )
Signed by duly )
authorised for and on behalf of )
THE DERBY CYCLE CORPORATION )
in the presence of: )
149
<PAGE>
EXHIBIT 3:
PART 3: Form of Assignment of Patents/Designs
THIS ASSIGNMENT is dated [ ] and made
- ---------------
BETWEEN:
- --------
(1) [ ] a company incorporated
----------------------------------------------------
in [ ] [no. ] whose principal/registered office is at [
] (the "Assignor"); and
----------
(2) THE DERBY CYCLE CORPORATION a company incorporated in the state of
---------------------------
Delaware, USA [no. ] whose principal/registered office is at
22710 72nd Avenue south, Kent, Washington, WA 98032, United States of
America (the "Assignee").
----------
W H E R E A S :
(A) The Assignor is the beneficial owner of and the registered proprietor of or
applicant for the patents and designs listed in the Schedule hereto
(collectively "the Patents").
(B) The Assignor has agreed to assign all its right title and interest in and
to the Patents to the Assignee for the consideration hereinafter mentioned.
NOW THIS ASSIGNMENT WITNESSETH as follows :
- ------------------------------
1. In consideration of the sum of [ ] now paid by the
Assignee to the Assignor (the receipt of which sum the Assignor hereby
acknowledges) the Assignor HEREBY ASSIGNS with full title guarantee to the
Assignee absolutely free from all liens, charges, security interests and/or
encumbrances whatsoever the all its right title and interest in and to the
Patents to the intent that the grant of any patents or registered designs
thereon shall be in the name of and vest in the Assignee together with all
rights and powers arising or accrued therefrom including the right to sue
for damages and other remedies in respect of any infringement of such
rights or other acts within the scope of the claims of any published
specification of any of the Patents or accompanying any application
therefore or accompanying any of the applications included in the Patents
prior to the date hereof.
2. The Assignor hereby agrees and undertakes to render to the Assignee (at its
request) all such assistance with any proceedings which may be brought by
or against the Assignee against or by any third party in relation to the
Patents and the Assignee shall indemnify the Assignor in respect of all
costs and expenses (including reasonable legal costs) actually incurred by
it in providing the Assignee with such assistance.
150
<PAGE>
3. The Assignor hereby covenants that at the cost and request of the Assignee
at any time and from time to time it will execute such deeds or documents
and do such acts or things and provide such assistance as may in each case
be necessary or desirable to give effect to this Assignment including, in
particular, executing confirmatory assignments in such form as the Assignee
may reasonably require for the purpose of recording/registering the
assignment hereby effected at any registry.
4. This Assignment shall be governed by and construed in accordance with
English Law and the parties hereto submit to the exclusive jurisdiction of
the English courts.
IN WITNESS WHEREOF this Assignment has been executed the day and year first
- ------------------
above written
SCHEDULE
--------
[Provide following details as appropriate]
Patents
-------
- --------------------------------------------------------------------------------
Country No. Description Filing Date
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signed by duly )
authorised for and on behalf of )
[ ] )
in the presence of: )
Signed by duly )
authorised for and on behalf of )
THE DERBY CYCLE CORPORATION )
in the presence of: )
151
<PAGE>
EXHIBIT 4:
PART 1: Form of Assignment of the Contracts
THIS DEED is made on day of [ ] 1998
- ---------
BETWEEN:
- -------
(1) [ ] a company whose office is at [
] (the "Assignor"); and
(2) [ ] a company whose office is at [
] (the "Assignee")
WHEREAS pursuant to an agreement dated [ ] (the "Sale and
- -------
Purchase Agreement") made between the [ ] (1) and the [ ]
(2) the Assignor has agreed to sell, or to procure the sale of, with full
title guarantee and the Assignee has agreed to purchase the [ ] and
its related assets and employees from the Assignor (as defined therein)
including the benefit and the burden of the Contracts (as defined therein) and
together with the Third Party Rights (as defined therein).
THIS DEED WITNESSES AND IT IS AGREED as follows:
- ------------------------------------
1. Definitions and Interpretation
- ---------------------------------
In this Deed, unless the context otherwise requires, words and expressions
defined, or for whose definition provision is made, in the Sale and Purchase
Agreement shall have the same meanings in this Deed and any provisions in the
Sale and Purchase Agreement concerning matters of construction or interpretation
shall also apply in this Deed.
2. Assignment of Contracts
- --------------------------
In consideration of the payment from the Assignee to the Assignor of the sum of
(Pounds)[ ] (receipt of which the Assignor acknowledges) and upon and subject
to the terms and conditions of the Sale and Purchase Agreement, the Assignor
with full title guarantee hereby assigns to the Assignee with effect from the
midnight on the date hereof (the "Transfer Date") the full benefit of all of the
Assignor's right, title and interest under these Contracts (as defined in the
Sale and Purchase Agreement) subject to the burden of the Assignor's liabilities
and obligations arising under the Contracts in respect of or by reference to any
period commencing after but not before the Transfer Date.
152
<PAGE>
3. Assignment of Third Party Rights
- -----------------------------------
In consideration of the payment from the Assignee to the Assignor of the sum of
(Pounds)[ ] (receipt of which the Assignor acknowledges) and upon and subject
to the terms and conditions of the Sale and Purchase Agreement, the Assignor
with full title guarantee hereby assigns to the Assignee with effect from the
Transfer Date the full benefit of all of the Assignor's right title and interest
in the Third Party Rights.
4. Further Assurance
- --------------------
At any time after the date hereof the Assignor shall, at the reasonable request
and cost of the Assignee, execute or procure the execution of such documents and
do or procure the doing of such acts and things as the Assignee may reasonably
require for the purpose of giving the Assignee the full benefit of all the
provisions of this Deed.
5. Law and Jurisdiction
- -----------------------
This Deed shall be governed by and construed in accordance with English law and
the parties irrevocably submit to the exclusive jurisdiction of the English
courts for all purposes relating to this Deed.
IN WITNESS of which this Deed has been executed and delivered by the parties the
day and year first before written
EXECUTED as a Deed by )
[ ] )
acting by )
Director
Director/Secretary
EXECUTED as a Deed by )
[ ] )
acting by )
Director
Director/Secretary
153
<PAGE>
PART 2: Form of Novation of the Contracts
THIS NOVATION AGREEMENT is dated . 1998 and made
- -----------------------
BETWEEN:
- --------
(1) [ ] the "Continuing Party"), [ ]
---------------- ------------------
and having its place of business at [ ];
(2) [ ] (the "Outgoing Party"), [ ]
--------------- ----------------
and having its place of business at [ ]; and
(3) [ ] (the "Incoming Party"), [ ]
------------- ----------------
and having its place of business at [ ].
BACKGROUND:
- -----------
(A) This Agreement is supplemental to the Original Agreement.
(B) The parties hereto have agreed that with effect from . . 1998 the
Outgoing Party shall cease to be a party to the Original Agreement and
that the Incoming Party shall become a party thereto in place of the
Outgoing Party and accordingly the Outgoing Party shall be released and
discharged from the Original Agreement upon the terms [and to the extent]
set out in this Agreement.
THE PARTIES AGREE THAT:
- -----------------------
1. Interpretation
- -----------------
In this Agreement and the recitals hereof:
"Original Agreement" means the . dated . . 1998 made between the
------------------
Continuing Party and the Outgoing Party.
["Effective Date" means . . 1998.]
----------------
154
<PAGE>
2. Novation
- -----------
2.1 Substitution of parties
(A) The Incoming Party hereby undertakes to the Continuing Party to
perform the Original Agreement and be bound by the terms thereof in
every way as if the Incoming Party was [,with effect from the
Effective Date,] a party to the Original Agreement in place of the
Outgoing Party.
(B) The Continuing Party hereby releases and discharges the Outgoing
Party from all obligations and liabilities of the Outgoing Party
under the Original Agreement [becoming due to be performed or
satisfied on or after the Effective Date] and all claims and demands
whatsoever in respect thereof and accepts the performance thereof by
the Incoming Party in place of performance by the Outgoing Party and
hereby undertakes to the Incoming Party [,with effect from the
Effective Date,] to perform the Original Agreement and be bound by
the terms thereof in every way as if the Incoming Party was a party
to the Original Agreement in place of the Outgoing Party.
[2.2 Surviving obligations
Each of the Continuing Party and the Outgoing Party shall continue to be
liable to the other in respect of their respective obligations and
liabilities under the Original Agreement becoming due to be performed or
satisfied prior to the Effective Date and all claims and demands in
respect thereof in all respects as if this Agreement had not been made and
the Incoming Party shall have no liability or obligation in respect
thereof.]
3. Warranties
- -------------
[3.1 Performance by the Outgoing Party
The Continuing Party hereby warrants to the Incoming Party that [, as at
the Effective Date,] the Outgoing Party is not in breach of and has duly
performed and observed all its obligations and liabilities to the
Continuing Party contained in the Original Agreement and that the
Continuing Party has no claims or demands of any nature whatsoever in
relation thereto and the Continuing Party hereby releases any such claims
and demands that it may have.]
[3.2 Performance by the Continuing Party
[The Continuing Party hereby warrants to the Incoming Party that [, as at
the Effective Date,] the Continuing Party is not in breach of and has duly
observed and performed all its obligations and liabilities to the Outgoing
Party contained in the
155
<PAGE>
Original Agreement.]
4. Confirmation of terms
- ------------------------
[For the avoidance of any doubt the Continuing Party hereby confirms to the
Incoming Party that the entire current terms of the Original Agreement [subject
only to the amendments referred to in clause ] are those appearing in the
document[s] [a copy/copies] of which [is/are] annexed hereto and signed on
behalf of the Continuing Party and the Incoming Party for identification and
there has been no amendment thereof (whether written or oral and whether or not
legally binding) and no subsisting waiver of any of such terms has been given by
the Continuing Party or the Outgoing Party].
5. Limitation Periods
- ---------------------
Nothing in this Agreement shall have the effect of extending any limitation
period set out in, or applicable to, the Original Agreement and nothing in this
Agreement shall operate to enable any claims to be brought against the Incoming
Party whether in tort, contract or otherwise which, but for this Agreement,
would be statute barred if made against the Outgoing Party.
6. Governing Law
- ----------------
This Agreement shall be governed by and construed in accordance with the law of
England and the parties hereto hereby submit to the jurisdiction of the English
Courts.
IN WITNESS whereof this Novation Agreement has been executed as a deed by the
parties hereto the day and year first before written
EXECUTED AS A DEED by
acting by:
Director
Director/Secretary
EXECUTED AS A DEED by
acting by:
Director
Director/Secretary
156
<PAGE>
EXECUTED AS A DEED by
acting by:
Director
Director/Secretary
157
<PAGE>
PART 3: Form of Assignment of U.S. Property
ASSIGNMENT AND ASSUMPTION OF LEASE
THIS ASSIGNMENT AND ASSUMPTION OF LEASE made as of this ________ day
of ______________, 1998 between Western States Import Co., Inc., a Delaware
corporation d/b/a Diamondback having an address at 4030 Via Pescador, Camarillo,
CA 93012-5008 ("Assignor"), and The Derby Cycle Corporation, a Delaware
--------
corporation having an address at 22710 Seventy-Second Avenue South, Kent,
Washington 98032 ("Assignee");
--------
RECITALS
--------
Pursuant to that certain Agreement dated as of ____________ _____, 1998
between Assignor, as seller, and Assignee, as buyer, and various other entities
(the "Agreement"), Assignor is selling to Assignee all of its assets, including
---------
without limitation the lease which is more particularly described on Schedule 1
----------
attached hereto (the "Lease"). All capitalized terms not defined herein shall
have the respective meaning ascribed thereto in the Agreement.
NOW, THEREFORE, in consideration of FIVE DOLLARS ($5.00) to the Assignor in
hand well and truly paid by the Assignee at and before sealing and delivery
hereof, the receipt and sufficiency of which is hereby acknowledged, the parties
hereto hereby agree as follows:
ASSIGNMENT AND ASSUMPTION
-------------------------
Subject to the terms and conditions set forth in the Agreement, Assignor
hereby assigns, transfers, sets-over, delivers and conveys unto Assignee all of
the rights, title, interest, benefits and privileges of Assignor, as tenant,
under the Lease.
Assignee assumes all rights, duties, obligations and liabilities first
arising or first accruing on or after the date hereof to be performed by
Assignor, as tenant, under the Lease, for the duration of the respective term
thereof.
Assignor retains all rights, duties, obligations and liabilities first
arising or first accruing prior to the date hereof to be performed by
Assignor, as tenant, under the Lease.
This Assignment shall be binding upon, enforceable by and shall inure to
the benefit of the successors and assigns of the parties.
This Assignment may be signed in multiple counterparts which, when taken
together and signed by all parties and delivered to any other party hereto,
shall constitute a binding Assignment between the parties.
158
<PAGE>
IN WITNESS WHEREOF, Assignor and Assignee have duly executed this
instrument as of the date first set forth above.
WESTERN STATES IMPORT CO., INC., a Delaware
corporation
_______________________________________
Name:
Title:
THE DERBY CYCLE CORPORATION, a Delaware
corporation
_______________________________________
Name:
Title:
159
<PAGE>
SCHEDULE 1
----------
DESCRIPTION OF LEASE
--------------------
Standard Industrial Commercial Lease, dated February 18, 1998 by and between
Centex Industrial Development Company, L.P., as Landlord and Western States
Import Co., Inc., d/b/a Diamondback for premises located in Ventura California.
160
<PAGE>
SIGNED by SZE CHIN HUNG JEROME )
duly authorised for and )
on behalf of )
DIAMOND BACK INTERNATIONAL )
COMPANY LIMITED )
SIGNED by SZE CHIN HUNG JEROME )
duly authorised for and )
on behalf of )
WESTERN STATES IMPORT )
COMPANY, INC. )
SIGNED by SZE CHIN HUNG JEROME )
duly authorised for and )
on behalf of )
BEJKA TRADING A.B. )
SIGNED by FRED MALEK )
duly authorised for and )
on behalf of )
THE DERBY CYCLE CORPORATION )
SIGNED by ALAN FINDEN-CROFTS )
duly authorised for and )
on behalf of )
DERBY SWEDEN A.B. )
<PAGE>
EXHIBIT 10.19
EXECUTION
DERBY CYCLE CORPORATION
FORM OF AGREEMENT EVIDENCING A GRANT OF A STOCK OPTION
UNDER 1998 STOCK OPTION PLAN
Agreement made as of March ___, 1999, between Derby Cycle Corporation,
a Delaware corporation (the "Company"), and _____________ ("Grantee").
Capitalized terms used but not defined herein shall have the meanings assigned
to such terms in the Derby Cycle Corporation 1998 Stock Option Plan (the
"Plan").
1. Grant of Option. Pursuant to the Plan, the Company hereby grants
to Grantee a stock option intended to be a nonqualified stock option (the
"Option") to purchase (i) ___ shares of Class A Common Stock (which number of
shares may be adjusted as provided in the Plan) and (ii) ___ shares of Class C
Common Stock (which number of shares may be adjusted as provided in the Plan),
all at the exercise price per share of $1,000 (the "Exercise Price"). The
Option shall be deemed to have been granted as of August 6, 1998 (the "Grant
Date").
2. Grantee Bound by Plan. Attached hereto as Annex A is a copy of
the Plan which is incorporated herein by reference and made a part hereof.
Grantee hereby acknowledges receipt of a copy of the Plan and agrees to be bound
by all the terms and provisions thereof. The Plan should be carefully examined
before any decision is made to exercise the Option.
3. Exercise of Option. Subject to the earlier termination of the
Option as provided herein and in the Plan and subject to Section 7, the Option
may be exercised, in whole or in part, to the extent it has become vested, by
written notice to the Company at any time and from time to time after the Grant
Date. An Option shall not be exercisable in any event after the tenth
anniversary of the date of grant of the Option. An Option may not be exercised
for a fraction of an Option Share. Options are subject to cancellation as
provided in the Plan.
4. Vesting of Options. Subject to the provisions of Section 5, this
Option shall vest and become exercisable with respect to 25% of the Option
Shares subject to this Option on each of the first, second, third and fourth
anniversaries of the Grant Date, provided that (a) this Option shall vest and
become exercisable with respect to the portion of the Option Shares on the
relevant anniversary date hereof only if the Grantee remains continuously
employed by the Company or a Subsidiary from the Grant Date through such
anniversary of the Grant Date, (b) no vesting shall be recognized if the Grantee
voluntarily terminates the Grantee's employment with the Company or any
Subsidiary at any time prior to the second anniversary of the Grant Date, and
(c) all unvested Options shall vest effective upon a Sale of the Company, but
only if the Grantee is employed by the Company on the date such Sale of the
Company is consummated.
5. Sale of the Company.
(a) To the extent all or part of any Option becomes vested and
exercisable as a result of a consummation of a Sale of the Company (and for
purposes of participating in such
<PAGE>
Sale of the Company), vesting (to the extent permitted under Section 4 above)
will be deemed to occur immediately prior to the consummation of the Sale of the
Company.
(b) Notwithstanding any other provisions of this Agreement, if all or
any portion of the benefits provided under Section 5(a) hereof, either alone or
together with other payments or benefits which the Grantee receives or is then
entitled to receive from the Company and any of its Subsidiaries would
constitute a "parachute payment" within the meaning of Section 280G of the Code,
the Company shall take all commercially reasonable effort (other than reducing
such payments or benefits) to cause such payment or benefit not to be
characterized as or constitute a "parachute payment."
6. Repurchase of Stock.
(a) Repurchase; Repurchase Option. In the event that Grantee's
employment with the Company is terminated for any reason, the Option Shares held
by Grantee and Grantee's Permitted Transferees (collectively, the "Grantee
Group") will be repurchased by the Company pursuant to the terms and conditions
set forth in this Section 6 (the "Repurchase") at a price per share equal to the
Fair Market Value thereof determined as of the Termination Date; provided that,
in the case of a Termination for Cause by the Company or a voluntary termination
of employment by Grantee (other than due to Retirement), such Repurchase shall
be at the option of the Company (the "Repurchase Option").
(b) Repurchase Notice. The Company shall exercise the Repurchase by
delivery of written notice (the "Repurchase Notice") to each member of the
Grantee Group. The Repurchase Notice shall set forth the number of Option Shares
to be acquired from each member of the Grantee Group, the aggregate
consideration to be paid for such Option Shares, and the time and place for the
closing of the transaction.
(c) Repurchase Option Notice. The Company may exercise the Repurchase
Option by delivery of written notice (the "Repurchase Option Notice") to each
member of the Grantee Group. The Repurchase Option Notice shall set forth the
number of Option Shares to be acquired from each member of the Grantee Group,
the aggregate consideration to be paid for such Option Shares, and the time and
place for the closing of the transaction.
(d) Closing of Repurchases. The closing of the purchase of any Option
Shares pursuant to the Repurchase or the Repurchase Option will take place on
the date designated by the Company in the Repurchase Notice or the Repurchase
Option Notice, as the case may be, which date will not be more than 45 days nor
less than 10 days after the delivery of such Repurchase Notice or the Repurchase
Option Notice, as the case may be. The Company will pay for the Option Shares
to be purchased by delivering to each member of the Grantee Group, a check in an
amount equal to the aggregate purchase price for the Option Shares to be
repurchased from such member of the Grantee Group. Notwithstanding the
foregoing, in the event payment of the purchase price would cause a default
under any material financing agreement of the Company or any Subsidiary in
effect from time to time (the "Financing Agreements"), or is otherwise
prohibited under applicable law, the Company shall have the option of paying the
purchase price with a subordinated promissory note bearing interest at 6% per
annum, due on the eighth anniversary of the date of issuance, and payable upon
the earlier to occur of the maturity thereof or on the date of a Sale of the
Company. In the
-2-
<PAGE>
event the issuance of the subordinated promissory note is not permitted under
the Financing Agreements or applicable law, the Company may pay the purchase
price for the Option Shares by the issuance of preferred stock bearing a
dividend rate of 6% per annum with redemption dates and payment restructuring
similar to those set forth in the subordinated promissory notes. If issuance of
a subordinated promissory note or the preferred stock is not permitted by the
Financing Agreements or applicable law, the Company may defer the repurchase
until such time as a form of payment described in this Section 6 is permitted
under the Financing Agreements and/or applicable law. If the Company determines
that withholding tax is required with respect to the Repurchase or the exercise
of a Repurchase Option, the Company shall withhold an amount equal to such
withholding tax from the purchase price. At the closing, each member of the
Grantee Group will deliver the certificates representing the Option Shares to be
sold, duly endorsed in form for transfer to the Company or its designee, and the
Company will be entitled to receive customary representations and warranties
from each member of the Grantee Group regarding title to the Option Shares.
"Cause" shall mean (i) the commission of a felony or a crime involving
moral turpitude or the commission of any other act or omission involving
disloyalty, fraud or material dishonesty with respect to the Company or any of
its Subsidiaries or any of their customers or suppliers, (ii) conduct tending to
bring the Company or any of its Subsidiaries into substantial public disgrace or
disrepute, (iii) substantial and repeated failure to perform material duties as
reasonably directed by the Board or, (iv) gross negligence or willful misconduct
with respect to the Company or any of its Subsidiaries or (v) any other material
breach of this Agreement by the Grantee if such breach is not cured within 30
days of Grantee receiving written notice of such breach; provided that Cause
shall not be deemed to exist unless (A) the Company provides to the Grantee a
written notice specifying in detail the reasons for (and/or breaches leading to)
the existence of Cause within 30 days of becoming aware of the existence of such
Cause and (B) to the extent curable, the Grantee has had 30 days after receipt
of the Company's written notice to cure the existence of any such Cause.
"Retirement" means the retirement after age 65 pursuant to the normal
retirement policy of the Company.
7. Conditions to Exercise. The Option may not be exercised by
Grantee unless the following conditions are met:
(a) The Option has become vested with respect to the Option
Shares to be acquired pursuant to such exercise;
(b) Legal counsel for the Company must be satisfied at the time
of exercise that the issuance of the Option Shares upon exercise will be in
compliance with the Securities Act and applicable United States federal,
state, local and foreign laws; and
(c) Grantee becomes (or remains) a party to the Shareholders'
Agreement.
8. Transferability. The Option may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of by Grantee except in
accordance with section 6.3 of the Plan; provided that, prior to any sale,
assignment, transfer, pledge or other such disposal allowed
-3-
<PAGE>
thereunder, the transferee must provide to the Company a written agreement
(reasonably satisfactory to the Company), whereby such transferee agrees to be
bound by the obligations applicable to the Grantee hereunder. The Option is
exercisable during Grantee's lifetime only by Grantee or any other person to
whom the Option is transferred in accordance with Section 6.3 of the Plan. If
Grantee or anyone claiming under or through Grantee attempts to violate this
Section 8, such attempted violation shall be null and void and without effect,
and the Company's obligation hereunder shall terminate. If at the time of
Grantee's death the Option has not been fully exercised, Grantee (or Grantee's
estate or any person who acquires the right to exercise the Option by bequest or
inheritance or by reason of Grantee's death) may, at any time within one year
after the date of Grantee's death (but in no event after the expiration of ten
years from the grant date), exercise the Option with respect to the number of
shares, determined under Section 4 above, as to which Grantee could have
exercised the Option at the time of Grantee's death, or with respect to such
greater number of shares as determined by the Committee in its sole discretion.
The applicable requirements of Section 7 above must be satisfied at the time of
such exercise. Any Option Shares received upon exercise of this Option are
subject to the repurchase rights, restrictions on transfer and right of first
refusal set forth in the Management Stock Purchase Agreement dated as of the
date hereof between Grantee and the Company (the "Management Stock Purchase
Agreement").
9. Administration. Any action taken or decision made by the Company
or the Committee or its delegates arising out of or in connection with the
construction, administration, interpretation or effect of the Plan or this
Agreement shall lie within its sole and absolute discretion, as the case may be,
and shall be final, conclusive and binding on Grantee and all persons claiming
under or through Grantee. By accepting this grant or any other benefit under
the Plan, Grantee and each person claiming under or through Grantee shall be
conclusively deemed to have indicated acceptance and ratification of, and
consent to, any such action taken under the Plan by the Company or the Committee
or its delegates.
10. No Rights as Shareholder. Unless and until a certificate or
certificates representing such Option Shares shall have been issued to Grantee
(or any person acting under Section 8 above), Grantee shall not be or have any
of the rights or privileges of a shareholder of the Company with respect to
Option Shares acquirable upon exercise of the Option; provided that the Company
shall issue such certificate or certificates within five business days of the
exercise of (and the payment for) the Option.
11. Investment Representation. Grantee hereby acknowledges that the
Option Shares which Grantee may acquire by exercising the Option shall be
acquired for investment without a view to distribution, within the meaning of
the Securities Act, and shall not be sold, transferred, assigned, pledged or
hypothecated in the absence of an effective registration statement for the
Option Shares under the Securities Act and applicable state securities laws or
an applicable exemption from the registration requirements of the Act and any
applicable state securities laws. Grantee also agrees that the Option Shares
which Grantee may acquire by exercising the Option will not be sold or otherwise
disposed of in any manner which would constitute a violation of any applicable
federal or state securities laws.
-4-
<PAGE>
12. Sale of the Company.
(a) Consent to Sale of Company. If the Board and the holders of
50% of the Company's Common Stock then outstanding approve a Sale of the Company
(the "Approved Sale"), Grantee will (i) consent to and raise no objections
against the Approved Sale or the process pursuant to which the Approved Sale is
arranged, (ii) waive any dissenter's rights and any similar rights with respect
thereto and (iii) if the Approved Sale is structured as a sale of stock, sell
all (to the extent vested) of Option Shares and rights to acquire Option Shares
held by Grantee on the terms and conditions approved by the Board and the
holders of a majority of the Company's Stock then outstanding. Grantee will take
all necessary and desirable actions in connection with the consummation of the
Approved Sale as requested by the Board.
(b) Purchaser Representative. If the Company or the holders of
the Company's securities enter into any negotiation or transaction for which
Rule 506 (or any similar rule then in effect) promulgated by the Securities
Exchange Commission pursuant to the Securities Act may be available with respect
to such negotiation or transaction (including a merger, consolidation or other
reorganization), Grantee 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 Grantee appoints the purchaser representative
designated by the Company, the Company will pay the fees of such purchaser
representative, but if Grantee declines to appoint the purchaser representative
designated by the Company, Grantee will appoint another purchaser representative
(reasonably acceptable to the Company), and Grantee will be responsible for the
fees of the purchaser representative so appointed.
13. Notices. Any notice hereunder to the Company shall be addressed
to the Company, Attention: Board of Directors, and any notice hereunder to
Grantee shall be addressed to Grantee at Grantee's last address on the records
of the Company, subject to the right of either party to designate at any time
hereafter in writing some other address. Any notice shall be deemed to have
been duly given when delivered personally, one day following dispatch if sent by
reputable overnight courier, fees prepaid, or three days following mailing if
sent by registered mail, return receipt requested, postage prepaid and addressed
as set forth above.
14. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of any successors to the Company and all persons lawfully
claiming under Grantee.
15. GOVERNING LAW. THE VALIDITY, CONSTRUCTION, INTERPRETATION,
ADMINISTRATION AND EFFECT OF THE PLAN, AND OF ITS RULES AND REGULATIONS, AND
RIGHTS RELATING TO THE PLAN AND TO THIS AGREEMENT, SHALL BE GOVERNED, CONSTRUED
AND INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING ANY
EFFECT TO ANY CHOICE OF LAW RULES OF ANY STATE.
16. Arbitration. Section 4.8 of the Management Stock Purchase
Agreement is hereby incorporated herein by reference.
* * * * *
-5-
<PAGE>
IN WITNESS WHEREOF, the Company and Grantee have executed this
Agreement as of the date first above written.
THE DERBY CYCLE CORPORATION
By:
------------------------
Name:
Title:
---------------------------
-------------------
<PAGE>
Annex A
Amended and Restated
Derby Cycle Corporation
1998 Stock Option Plan
See attached.
<PAGE>
EXHIBIT 10.20
EXECUTION
THE DERBY CYCLE CORPORATION
AMENDED AND RESTATED
SHAREHOLDERS' AGREEMENT
THIS AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT is made this 3rd day
of February, 1999 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.
<PAGE>
"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 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.
"Class C Common Stock" shall mean the shares of common stock, Class C,
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.
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"Common Stock" shall mean the Class A Common Stock, the Class B Common
Stock, the Class C Common Stock and such other common equity of the Company
which the Company may issue from time to time.
"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.
"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, the Class C
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.
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"Employee Shareholders" shall mean each of the Employees named on
Schedule 1 attached hereto and such Employee's Permitted Transferees.
"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 exceed 25% of the Class A Common Stock
held by such Shareholder on the date of this Agreement, (b) Transfers of Class C
Common Stock by such Shareholder after the date of this Agreement that in the
aggregate do not exceed 25% of the Class C Common Stock held by such Shareholder
on the date of this Agreement, (c) 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, (d) a Public Sale, (e) a purchase, redemption or conversion of
Preferred Stock as provided in the Certificate of Incorporation, and (f)
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.
"GSIC" means Vencap Holdings (1992) Pte Ltd.
"GSIC Stockholders' Agreement" means that certain Stockholders'
Agreement dated as of February 3, 1999 by and among GSIC, Cycle LLC and Perseus
"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.
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"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.
"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, the Series
B Preferred Stock and any other preferred equity of the Company that the Company
may issue from time to time.
"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.
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"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 Subordinated Loan Agreement" means that certain Senior
Subordinated Loan Agreement dated as of February 3, 1999 between the Company and
GSIC.
"Senior Subordinated Notes" means the Senior Subordinated Notes in
aggregate original principal amount of $20,000,000 issued pursuant to the terms
of that certain Senior Subordinated Loan Agreement.
"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.
"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 the members of the Shareholder Group and
their Permitted Transferees, the Employee Shareholders, 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, Class C 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).
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"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.
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
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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:
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:
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(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 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.
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(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 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
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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 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)
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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 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
Shareholders 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;
(viii) 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).
(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:
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(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.
(e) Certain Amendments to the Certificate of Incorporation.
Notwithstanding anything to the contrary herein, the Shareholders
agree to vote all Shares held by them in favor of, and take all such other
actions as are necessary to cause the Company to make, any amendment to the
Company's Certificate of Incorporation that are necessary (i) to permit the
Company to honor its obligation to issue Series C Preferred Stock pursuant to
that certain Side Letter Agreement dated as of February 3, 1999 among the
Company, GSIC and Cycle LLC and (ii) to issue Class C Common Stock to Cycle LLC,
Perseus and DFS, as applicable, with
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an aggregate Liquidation Amount (plus accrued and accumulated but unpaid
dividends thereon) equal to the aggregate amount paid by Cycle LLC, Perseus and
DFS, as the case may be, to purchase Senior Subordinated Notes from the holders
thereof pursuant to Section 3 of the GSIC Stockholders' Agreement, upon
surrender by Cycle LLC, Perseus and DFS, as applicable, of such Senior
Subordinated Notes to the Company for cancellation.
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
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except to the extent provided in Section 6(b) hereof or a DFS Shareholder, Cycle
Shareholder or Perseus Shareholder, as the case may be.
(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.
(c) Notwithstanding anything to the contrary herein, upon written request
from DFS received by the Company on or before August 3, 1999, the Company and
the Shareholders agree to take all actions (including approving amendments to
the Company's Certificate of Incorporation) as are necessary to permit DFS to
purchase 7,583 Class C Common Shares from the Company at a purchase price of US
$1,000 per Class C Common Share and to cause the Company to use the proceeds
received in respect of such Class C Common Shares to redeem 6,311 Class C Common
Shares from Cycle LLC and 1,272 Class C Common Shares from Perseus; provided,
that at the time of such purchase and redemption, Cycle LLC, Perseus and DFS
shall enter into an agreement providing that (i) Cycle LLC and Perseus shall be
entitled to the economic benefit (in proportion to their ownership of the Class
C Common Shares as of the date of this agreement) of the dividends accrued in
respect of such 7,538 Class C Common Shares prior to the date of such purchase
and redemption, (ii) such economic benefits shall be payable by DFS from the
proceeds that are realized by DFS with respect to such accrued dividends, and
(iii) DFS shall be obligated to purchase its pro rata share (based on its
ownership percentage of the total Class C Common Stock outstanding after the
purchase and redemption described in this Section 7(c)) of any Senior
Subordinated Notes that Cycle LLC and Perseus become obligated to purchase from
the holders thereof pursuant to Section 3 of the GSIC Stockholders' 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, Class C 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, Class
C 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.
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(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 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.
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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 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
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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 Class A 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 Class B 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; (C) the price for each share of Class C
Common 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;
(D) 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 (E) 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.
(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,
Class C 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
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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,
Class C 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; provided, however, that the
number of shares of Deemed Common Stock being offered for sale by the Selling
Shareholder shall be reduced as necessary to permit the participation in the
proposed sale of the holders of the Senior Subordinated Notes. None of the
provisions of Section 10 hereof shall apply to an Exempt Transfer.
(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,
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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 "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 Class C Common Stock to be
sold in such Approved Sale shall be sold at the same price, and on terms and
subject to conditions substantially identical to those applicable to the Deemed
Common Stock in such Approved Sale, (C) all of the
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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 (D) 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.
(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
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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 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
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(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 or
Part C 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 member of the Shareholder
Group a portion of such stock or securities determined based on the relative
voting power of the Shares held by such member of the Shareholder Group;
provided, however, that if the members of the Shareholder Group do not subscribe
for the total amount of stock or securities offered to the Shareholder Group,
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 member of the
Shareholder Group 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 the Shareholder Group 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.
(b) Exercise of Right
In order to exercise its purchase rights hereunder, each member of the
Shareholder Group 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 member of the
Shareholder Group'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 members of
the Shareholder Group 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 the Shareholder Group. Any
stock or securities offered or sold by the Company to any Person after such 190-
day period must be reoffered to the Shareholder Group 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
-24-
<PAGE>
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:
(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
-25-
<PAGE>
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 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.
-26-
<PAGE>
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.
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
-27-
<PAGE>
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 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
-28-
<PAGE>
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.
(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 Derby International 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.
* * * * *
-29-
<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:
-30-
<PAGE>
SHAREHOLDERS
<TABLE>
<CAPTION>
SHARES OF SHARES OF
SHARES OF SHARES OF SHARES OF PREFERRED PREFERRED
CLASS A CLASS B CLASS C STOCK, STOCK,
NAME COMMON STOCK COMMON STOCK COMMON STOCK SERIES A SERIES B
- ------------------------ ------------ ------------ ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Derby Finance S.a.r.l. 21,700 0 0 0 3,000
DC Cycle, L.L.C. 12,500 0 18,950 25,000 0
Perseus Cycle, L.L.C. 10,000 0 3,800 0 0
TOTAL SHARES OUTSTANDING 44,200 0 22,750 25,000 3,000
</TABLE>
EXHIBIT A
TO THE SHAREHOLDERS' AGREEMENT FOR
THE DERBY CYCLE CORPORATION
-31-
<PAGE>
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
-33-
<PAGE>
EMPLOYEE SHAREHOLDERS
[TO COME]
SCHEDULE 1
TO THE SHAREHOLDERS' AGREEMENT FOR
THE DERBY CYCLE CORPORATION
-34-
<PAGE>
EXHIBIT 10.21
EXECUTION
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of February 3, 1999 between The
Derby Cycle Corporation, a Delaware corporation (the "Company"), Perseus Cycle,
L.L.C., a Delaware limited liability company ("Perseus") and DC Cycle, L.L.C., a
Delaware limited liability company ("Thayer"). Perseus and Thayer are each
sometimes referred to herein as a "Purchaser" and collectively, as the
"Purchasers."
This Agreement provides for the purchase (the "Purchase") by the
Purchasers of 22,750 shares of the Company's Class C Common Stock, $.01 par
value (the "Common Stock"), all upon the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the mutual undertakings contained
herein, the parties agree as follows:
Section 1. Purchase of Shares. On the date of execution of this
------------------
Agreement, (i) the Purchasers shall purchase, and the Company shall sell to the
Purchasers, the number of shares of Common Stock set forth opposite each such
Purchaser's name on Schedule 1 hereto at $1,000 per share for a total aggregate
purchase price of TWENTY TWO MILLION SEVEN HUNDRED FIFTHY THOUSAND DOLLARS
($22,750,000.00), and (ii) the Purchaser shall execute the Amended and Restated
Stockholders Agreement in the form of Exhibit A hereto (the "Stockholders
---------
Agreement"). The purchase price for the Common Stock purchased by the
Purchasers pursuant to this Section 1 shall be payable by certified check or by
wire transfer of immediately available funds.
Section 2. Investment Representations. Each of the Purchasers
--------------------------
(severally and not jointly) represents and warrants (i) that the Common Stock to
be acquired by such Purchaser pursuant to this Agreement will be acquired for
such Purchaser's own account and not with a view to, or present intention of,
distribution thereof in violation of the Securities Act of 1933, as amended (the
"Securities Act"), and will not be disposed of in contravention of the
Securities Act, this Agreement or the Stockholders Agreement; (ii) that such
Purchaser is able to bear the economic risk of an investment in the Common Stock
for an indefinite period of time inasmuch as the Common Stock has not been
registered under the Securities Act and, therefore, cannot be sold unless
subsequently registered under the Securities Act or an exemption from such
registration is available; and (iii) that such Purchaser has had an opportunity
to ask questions and receive answers concerning the terms and conditions of the
offering of the Common Stock, has had full access to such other information
concerning the Company and its subsidiaries as such Purchaser has requested.
Section 3. Notices. All notices, demands or other communications to
-------
be given or delivered under or by reason of the provisions of this Agreement
will be in writing and will be deemed to have been given when delivered in
accordance with the provisions of Section 23 of the Stockholders Agreement.
<PAGE>
Section 4. Expenses. In the event of a dispute between the Company
--------
and the Purchaser shall develop over the terms or operation of this Agreement or
the Stockholders Agreement and the Purchaser obtains a final judgment against
the Company with respect to such dispute, the Company shall promptly reimburse
the Purchasers for their reasonable attorney's fees and out-of-pocket expenses
incurred in connection with such dispute.
Section 5. Severability. Whenever possible, each provision of this
------------
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
Section 6. Entire Agreement. This Agreement and those documents
----------------
expressly referred to herein embody the complete agreement and understanding
among the parties and supersede and preempt any prior understandings, agreements
or representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way. This Agreement shall be
binding upon the parties hereto and their respective successors, heirs,
representatives and assigns. This Agreement may not be assigned by either
Purchaser without the prior written consent of the Company.
Section 7. Amendments and Waivers. Any provision of this Agreement
-----------------------
may be amended or waived only with the prior written consent of the Company and
the Purchasers.
Section 8. Governing Law. 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.
[END OF PAGE]
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Securities Purchase
Agreement as of the date set forth above.
THE DERBY CYCLE CORPORATION
By: _________________________________
Title:_______________________________
PERSEUS CYCLE, L.L.C.
By: _________________________________
Title: _____________________________
DC CYCLE, L.L.C.
By: _________________________________
Title: ______________________________
<PAGE>
Schedule 1
STOCKHOLDERS
<TABLE>
<CAPTION>
SHARES
OF
CLASS C
COMMON
NAME STOCK
- ------------------------- -------
<S> <C>
DC Cycle, L.L.C. 18,950
Perseus Cycle, L.L.C. 3,800
-------
TOTAL SHARES OUTSTANDING 22,750
</TABLE>
<PAGE>
EXHIBIT A
Form of Stockholders Agreement
------------------------------
<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.
Centum 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.
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 Sweden AB.
Derby (HK) Trading Co. Ltd.
Derby Trading Co. Inc.
Engelbert 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.
J.B. Brooks & Co. Ltd.
J.H. Slotar & Co. (Pty) Ltd.
Koninklinjke Gazelle B.V.
Lyon Investments BV (formerly Lyon Cycle BV
Moulton Bicycles Ltd.
New Hudson Cycle Co. Ltd.
NV Dierense Maatschapij Tot Exploitatie van Woningen en Assurantien
NW Sportgerate GmbH
Norman Cycles Ltd.
Phillips Cycles Ltd.
<PAGE>
PI Manufacturing (Pty) Ltd.
Probike South Africa (Pty) Ltd.
Derby WS Vermogensverwaltungs GmbH.
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 Bike & Sport Switzerland AG
Univega Bikes & Sports Europe GmbH
Univega Worldwide GmbH
Winora-Staiger GmbH
The Wright Saddle Co. Ltd.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 17,453
<SECURITIES> 0
<RECEIVABLES> 74,875
<ALLOWANCES> 8,074
<INVENTORY> 105,264
<CURRENT-ASSETS> 199,104
<PP&E> 118,977
<DEPRECIATION> 69,463
<TOTAL-ASSETS> 325,290
<CURRENT-LIABILITIES> 125,941
<BONDS> 165,870
45,432
0
<COMMON> 1
<OTHER-SE> (70,121)
<TOTAL-LIABILITY-AND-EQUITY> 325,290
<SALES> 465,305
<TOTAL-REVENUES> 465,305
<CGS> 350,346
<TOTAL-COSTS> 350,346
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,467
<INTEREST-EXPENSE> 16,948
<INCOME-PRETAX> 904
<INCOME-TAX> 6,294
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 431
<CHANGES> 0
<NET-INCOME> (5,888)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
