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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
--------------------
April 8, 1999 (March 26, 1999)
Date of Report (Date of earliest event reported)
TYLER CORPORATION
-----------------
(Exact name of registrant as specified in its charter)
Delaware 1-10485 75-2303920
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation or
organization)
2800 W. Mockingbird Lane
Dallas, Texas 75235
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(Address of principal executive offices)
(214) 902-5086
--------------
(Registrant's telephone number,
including area code)
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Item 2. Acquisition or Disposition of Assets.
Effective March 26, 1999, Tyler Corporation ("Tyler") sold all of the
outstanding common stock of its subsidiary, Forest City Auto Parts Company
("Forest City"), to HalArt L.L.C. ("HalArt") for approximately $24.5 million.
HalArt is a privately held company controlled by Arthur M. Hawkins, former
Chairman, Chief Executive Officer and President of Exide Corporation. Harold
Parkison, President of Forest City prior to its sale, is also a shareholder of
HalArt. Proceeds consisted of $12.0 million in cash, $3.8 million in a
short-term secured promissory note, $3.2 million in senior secured subordinated
notes and $5.5 million in preferred stock. The short-term secured promissory
note bears interest at 8 1/2%, becomes due in July 1999, is secured by a first
lien on certain real estate and is subject to mandatory prepayment in certain
conditions. In July 1999, the unpaid balance, if any, of the short-term secured
promissory note will be converted to a senior subordinated note due in March
2002. The senior secured subordinated notes will carry interest rates ranging
between 6% to 8%, become due in March 2002, and will be secured by a second
lien on Forest City inventory and real estate. The preferred stock will be
mandatorily redeemable March 2006. Both the subordinated notes and the
preferred stock will be subject to partial or whole redemption upon the
occurrences of specified events.
The estimated loss on the disposal of Forest City is $8.9 million (net
of taxes of $0.7 million), consisting of an estimated loss on disposal of the
business of $8.5 million and a provision of $0.4 million, after taxes, for
anticipated operating losses from the measurement date to the date of disposal.
The amounts the Company will ultimately realize could differ materially from
the amounts assumed in arriving at the loss on disposal of the discontinued
operations. In determining the loss on the disposal of the business, the
subordinated notes were valued using present value techniques. Also, because
redemption of the preferred stock is highly dependent upon future successful
operations of the buyer and due to the extended repayment terms, the Company is
unable to estimate the degree of recoverability. Accordingly, the Company will
record the value of the preferred stock as cash is received.
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Item 7. Financial Statements and Exhibits.
(b) Pro forma financial information
The sale of the outstanding common stock of Forest City ("the
Transaction") was completed on March 26, 1999, prior to the issuance of the
Company's Form 10-K for the year ended December 31, 1998. The Company
retroactively restated its consolidated financial statements in the filing to
reflect Forest City as a discontinued operation. Therefore, the results of the
Transaction are reflected in the historical consolidated financial statements
included in the Company's Form 10-K for the year ended December 31, 1998, which
is hereby incorporated by reference, and pro forma information is not required.
(c) Exhibits
10.1 Stock Purchase Agreement between HalArt, L.L.C. and Tyler Corporation.
10.2 Subordination and Intercreditor Agreement between Congress Financial
Corporation (Central), Tyler Corporation and Forest City Auto Parts
Company.
10.3 Senior Subordinated Secured Promissory Note due July 26, 1999, in the
amount of $3,825,000.
10.4 Senior Subordinated Secured Promissory Note due March 26, 2002, in the
amount of $1,155,000.
10.5 Senior Subordinated Secured Promissory Note due March 26, 2002, in the
amount of $2,000,000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TYLER CORPORATION
By: /s/ Theodore L. Bathurst
-------------------------------------
Theodore L. Bathurst
Vice President and Chief Financial Officer
(principal financial officer)
Date: April 8, 1999
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C>
10.1 Stock Purchase Agreement between HalArt, L.L.C. and Tyler
Corporation.
10.2 Subordination and Intercreditor Agreement between Congress
Financial Corporation (Central), Tyler Corporation and Forest City
Auto Parts Company.
10.3 Senior Subordinated Secured Promissory Note due July 26, 1999, in
the amount of $3,825,000.
10.4 Senior Subordinated Secured Promissory Note due March 26, 2002, in
the amount of $1,155,000.
10.5 Senior Subordinated Secured Promissory Note due March 26, 2002, in
the amount of $2,000,000.
</TABLE>
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EXHIBIT 10.1
PURCHASE AGREEMENT
BETWEEN
TYLER CORPORATION
AND
HALART, L.L.C.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE 1 THE TRANSACTION
<S> <C> <C>
1.1 The Sale........................................................................................1
1.2 Closing.........................................................................................1
1.3 Recapitalization of FCAP........................................................................1
1.4 Post-Closing Adjustments........................................................................2
1.5 Directors and Officers..........................................................................2
1.6 Further Action..................................................................................2
ARTICLE 2 REPRESENTATIONS OF SELLER
2.1 Organization and Good Standing of FCAP..........................................................2
2.2 Foreign Qualification...........................................................................3
2.3 Power and Authority to Conduct Business.........................................................3
2.4 Authority to Consummate Purchase................................................................3
2.5 Binding Effect..................................................................................3
2.6 Compliance with Other Instruments...............................................................3
2.7 Capitalization of FCAP; Title...................................................................3
2.8 FCAP's Financial Statements.....................................................................4
2.9 Absence of Changes..............................................................................4
2.10 Patents, Trademarks, and Copyrights.............................................................4
2.11 Litigation and Claims...........................................................................4
2.12 Judgments, Decrees, and Orders in Restraint of Business.........................................4
2.13 No Violation of Any Instrument..................................................................4
ARTICLE 3 REPRESENTATIONS OF PURCHASER
3.1 Organization and Good Standing..................................................................5
3.2 Authority to Consummate Agreement...............................................................5
3.3 Binding Effect..................................................................................5
3.4 Compliance with Other Instruments...............................................................5
3.5 Capitalization of Purchaser.....................................................................5
ARTICLE 4 COVENANTS OF SELLER
4.1 Access; Confidentiality.........................................................................6
4.2 Monthly Financial Statements....................................................................7
4.3 Conduct of Business Prior to Closing Date.......................................................7
4.4 Senior Financing................................................................................7
4.5 Release of Liability............................................................................7
ARTICLE 5 COVENANTS OF PURCHASER
5.1 Purchaser Financial Condition...................................................................7
</TABLE>
i
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<TABLE>
<CAPTION>
ARTICLE 6 JOINT CONDITIONS PRECEDENT TO CLOSING OBLIGATIONS
<S> <C> <C>
6.1 Legal Action....................................................................................8
6.2 Hart-Scott-Rodino Compliance....................................................................8
ARTICLE 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
7.1 Compliance......................................................................................8
7.2 Representations.................................................................................8
7.3 Certificates....................................................................................8
7.4 Senior Financing................................................................................8
ARTICLE 8 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
8.1 Compliance......................................................................................9
8.2 Representations.................................................................................9
8.3 Certificates....................................................................................9
8.4 Senior Financing................................................................................9
ARTICLE 9 INDEMNIFICATION AND REMEDIES
9.1 Indemnification by Seller. ....................................................................9
9.2 Indemnification by Purchaser...................................................................10
9.3 Claims Limitations.............................................................................10
9.4 Maximum Liability..............................................................................10
9.5 Management.....................................................................................11
ARTICLE 10 TERMINATION
10.1 Termination....................................................................................11
ARTICLE 11 MISCELLANEOUS
11.1 Disclosure Schedules...........................................................................11
11.2 Entire Agreement...............................................................................11
11.3 Survival.......................................................................................12
11.4 Counterparts...................................................................................12
11.5 Notices........................................................................................12
11.6 Successors and Assigns.........................................................................13
11.7 Governing Law..................................................................................13
11.8 Waiver and Other Action........................................................................13
11.9 Knowledge......................................................................................13
11.10 Cooperation Pending Closing....................................................................13
11.11 Expenses.......................................................................................14
</TABLE>
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EXHIBITS
Exhibit A Amendment to Certificate of Incorporation (Sec. 1.3(a))
Exhibit B Senior Subordinated Secured Promissory Note (Sec. 1.3(b)(ii))
Exhibit C Senior Subordinated Secured Promissory Note (Sec. 1.3(b)(iii))
Exhibit D-1 December 27, 1998 Balance Sheet (As Adjusted)
Exhibit D-2 Adjustments to December 27, 1998 Balance Sheet
Exhibit E Leases Indemnified
SCHEDULES
Schedule 1.5 Resigning Officers and Directors
Schedule 2.2 Foreign Qualification
Schedule 2.6 Compliance with Other Instruments
Schedule 2.9 Absence of Changes
Schedule 2.12 Patents, Trademarks and Copyrights
Schedule 2.13 Contracts
Schedule 2.14 Litigation and Controversies
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT, dated as of March ___, 1999, is entered into
between Tyler Corporation, a Delaware corporation ("Seller"), and HalArt,
L.L.C., a Michigan limited liability company ("Purchaser").
WITNESSETH:
WHEREAS, the Board of Directors of Seller and the managers of
Purchaser have approved the sale by Seller and purchase by Purchaser of 100% of
the outstanding common stock of Forest City Auto Parts Company, a Delaware
corporation ("FCAP"), pursuant to the terms of this agreement (the
"Agreement"); and
WHEREAS, the parties hereto desire to set forth certain
representations and covenants made by each to the other as an inducement to
consummation of the purchase and sale (the "Sale");
NOW, THEREFORE, in consideration of the premises and of the mutual
representations and covenants herein, the parties agree as follows:
ARTICLE 1
THE TRANSACTION
1.1 THE SALE. Subject to and in accordance with the terms and
conditions of this Agreement at the Closing (as defined in Section 1.2) Seller
shall sell and Purchaser shall purchase 100% of the outstanding shares of
common stock of FCAP (the "Shares") for $2,000,000 in cash (the "Purchase
Price") on the terms herein set forth.
1.2 CLOSING. The closing of the sale (the "Closing") shall take place
at the offices of Gardere & Wynne, L.L.P. in Dallas, Texas (or at such other
place as the parties agree), commencing at 9:00 a.m. local time, as promptly as
possible after the conditions precedent to Closing have been satisfied (the
"Closing Date").
1.3 RECAPITALIZATION OF FCAP. Immediately preceding the Sale, subject
to the conditions precedent to Seller's obligation to close having been
satisfied or waived, and except as provided in Section 1.4, the Seller shall
cause FCAP to be recapitalized as follows:
(a) FCAP shall amend its certificate of incorporation
("Certificate") to provide for issuance of 5,500 shares of $1,000.00 par value
per share preferred stock (the "Preferred Stock") substantially on the terms of
Exhibit A attached hereto and 4,500 shares of Common Stock;
(b) FCAP will pay, issue or deliver to Seller:
(i) $14,000,000 in cash, subject to adjustment as
provided in (b)(iv);
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(ii) the $2,000,000 senior subordinated secured
promissory note of FCAP, substantially in the form of Exhibit B attached
hereto;
(iii) the $1,000,000 senior subordinated secured
promissory note of FCAP, substantially in the form of Exhibit C attached
hereto; and
(iv) a certificate for 5,500 shares of the Preferred
Stock.
(c) Seller shall cancel all Pre-Closing FCAP debt to Seller.
FCAP shall have no debt to Seller after Closing, except that debt provided for
in this Agreement.
1.4 POST-CLOSING ADJUSTMENTS. As promptly as possible after Closing,
Seller will deliver a balance sheet of FCAP as of the Closing Date (the
"Closing Date Balance Sheet"), certified by Seller's chief financial officer as
prepared on a basis consistent with FCAP's December 1998 Balance Sheet (the
"Dec. '98 Balance Sheet") (attached hereto as Exhibit D-1) and which shall be
adjusted by Seller in the same manner as the adjustments made by Seller to
prepare the "Dec. '98 Balance Sheet (attached hereto as Exhibit D-2). The
Closing Date Balance Sheet shall show the cash and cash equivalents of FCAP and
the net worth of FCAP as of the Closing Date (the "Closing Date Net Worth").
(a) Promptly upon delivery of the Closing Date Balance Sheet,
FCAP shall distribute to Tyler an amount equal to the cash and cash equivalents
on hand of FCAP as of the Closing Date in excess of $500,000, and, if the cash
and cash equivalents on hand is less than $500,000 as of the Closing Date,
Tyler shall contribute cash to FCAP in an amount equal to $500,000 less the
amount of cash and cash equivalents on hand as of the Closing Date.
(b) The number of shares of Preferred Stock shall be
decreased at the rate of $1,000 per share to the extent the Closing Date Net
Worth is less than $24.5 million and shall be increased to the extent the
Closing Date Net Worth is more than $26.5 million.
1.5 DIRECTORS AND OFFICERS. The persons specified as directors and
officers of FCAP on Schedule 1.4 hereto shall resign at the Closing.
1.6 FURTHER ACTION. The parties shall take all such reasonable and
lawful action prior to Closing as may be necessary or appropriate to effectuate
the Sale as promptly as possible, and after the Closing, if any further action
is necessary or desirable, to carry out the terms and purposes of this
Agreement.
ARTICLE 2
REPRESENTATIONS OF SELLER
Seller represents to Purchaser as follows:
2.1 ORGANIZATION AND GOOD STANDING OF FCAP. FCAP is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Delaware.
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2.2 FOREIGN QUALIFICATION. FCAP is duly qualified or licensed to do
business as a foreign corporation and in good standing in those jurisdictions
set forth in Schedule 2.2 of the FCAP Disclosure Schedule delivered herewith
(the "FCAP Disclosure Schedule"). FCAP is duly qualified or licensed to do
business as a foreign corporation in every jurisdiction where the failure so to
qualify could have a material adverse effect on the businesses, operations,
assets, or financial condition of FCAP. For purposes of this section, no
material adverse effect shall be deemed to have occurred as a result of
non-payment of state or local franchise taxes not exceeding $2,500 in the
aggregate.
2.3 POWER AND AUTHORITY TO CONDUCT BUSINESS. FCAP has the corporate
power and authority, and possesses all licenses and permits required by
governmental authorities, to own, lease, and operate its properties and assets
and to carry on its business as currently being conducted, except where the
failure to possess such license or permit would not have a material adverse
effect on the businesses, operations, assets, or financial condition of FCAP.
2.4 AUTHORITY TO CONSUMMATE PURCHASE. Seller has the corporate power
and authority to execute, deliver, and perform its obligations under this
Agreement and the other agreements or documents executed or required to be
executed by it in connection with this Agreement, and to consummate the
transactions described in this Agreement, and the execution, delivery, and
performance by Seller of this Agreement and the other documents executed or
required to be executed by it in connection with this Agreement will have been
duly authorized by all necessary corporate action prior to Closing.
2.5 BINDING EFFECT. This Agreement and the other agreements and
documents executed or required to be executed by FCAP and Seller in connection
with this Agreement have been or will have been duly executed and delivered by
each of them, and are or will be, when executed and delivered, the legal,
valid, and binding obligations, enforceable in accordance with their terms,
except that (i) enforceability may be limited by bankruptcy, insolvency, or
other similar laws affecting creditors' rights and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
2.6 COMPLIANCE WITH OTHER INSTRUMENTS. Except as disclosed in Section
2.6 of the FCAP Disclosure Schedule, neither the execution and delivery by FCAP
or Seller of this Agreement, or the other agreements or documents executed or
required to be executed by either of them in connection herewith, nor the
consummation of the transactions contemplated hereby and thereby, will (i)
conflict with the Certificate or FCAP's by-laws; (ii) require any consent or
notice under, or constitute a default (or an event that, with notice or lapse
of time or both, would constitute a default) under, or permit the termination
or acceleration of maturity of, or result in the imposition of any claim or
encumbrance upon any property of either of them, pursuant to any evidence of
indebtedness, loan, lease, or other agreement or any order by which either of
them is bound, or to which any of their assets is subject, where any such
failure to obtain any approval or notice, or violation or default would result
in a material adverse effect on the businesses, operations, assets, or
financial condition of FCAP.
2.7 CAPITALIZATION OF FCAP; TITLE. The authorized capital stock of
FCAP is 1,000 shares of FCAP's Common Stock, $1.00 par value of which 1,000
shares are issued and outstanding and no shares are subject to stock options.
All of the issued and outstanding shares of FCAP
3
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Common Stock have been duly authorized and are validly issued, fully paid, and
nonassessable. There are and at the Closing will be no shares of the capital
stock of FCAP held in its treasury. Except as provided herein, there is no
outstanding right obligating FCAP to dispose of, or to acquire, shares of, or
securities convertible into or exchangeable for, capital stock of FCAP.
Capitalization of FCAP will be revised pursuant to this Agreement.
2.8 FCAP'S FINANCIAL STATEMENTS. Attached as Exhibit D is a true,
correct, and complete copy of the unaudited balance sheet of FCAP as of
December 27, 1998 (the "FCAP Balance Sheet Date").
2.9 ABSENCE OF CHANGES. Since the FCAP Balance Sheet Date, FCAP has
not (except as may be contemplated by this Agreement or as may result from the
transactions contemplated by this Agreement or as disclosed in Section 2.9 of
the FCAP Disclosure Schedule):
(a) changed any material agreement, other than changes in the
ordinary course of business;
(b) declared, paid, or set aside for payment any distribution
with respect to its capital stock;
(c) acquired or disposed of any of its capital stock or
securities or any rights to acquire such capital stock or securities, or agreed
to changes in the terms and conditions of any such rights;
2.10 PATENTS, TRADEMARKS, AND COPYRIGHTS. Set forth in Section 2.10 of
the FCAP Disclosure Schedule is a true and correct description of all material
trademarks, trade names, service marks, patents, copyrights, and applications
therefor and other similar and intangible intellectual property and all
license, royalty, assignment, and other material agreements relating to
technology, know-how, or processes owned or used in connection with the
business of FCAP.
2.11 LITIGATION AND CLAIMS. Except as described in Section 2.11 of the
FCAP Disclosure Schedule, FCAP is not a party to any pending or threatened suit
or litigation or any pending change in any regulations, statutes, or
ordinances, which would, severally or in the aggregate, have a material adverse
effect on the businesses, results of operations, assets, or the condition of
FCAP.
2.12 JUDGMENTS, DECREES, AND ORDERS IN RESTRAINT OF BUSINESS. FCAP is
not subject to any judgment, order, or decree enjoining it in respect of any
business practice or the acquisition of any property or the conduct of its
business.
2.13 NO VIOLATION OF ANY INSTRUMENT. FCAP is not in violation of or
default under any document nor, to the knowledge of FCAP, has any event
occurred that, with or without the giving of notice, lapse of time, or the
occurrence of any other event, would constitute a violation of or default
under, or permit the termination or the acceleration of maturity of, or result
in the imposition of any document and encumbrance upon any property or asset of
FCAP.
4
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ARTICLE 3
REPRESENTATIONS OF PURCHASER
Purchaser represents to Seller as follows:
3.1 ORGANIZATION AND GOOD STANDING. Purchaser is a limited liability
company, duly formed, validly existing, and in good standing under the laws of
the State of Michigan.
3.2 AUTHORITY TO CONSUMMATE AGREEMENT. Purchaser has the corporate
power and authority to execute, deliver, and perform its obligations under this
Agreement and the other agreements or documents executed or required to be
executed by it in connection with this Agreement to consummate the transactions
described in this Agreement. The execution, delivery, and performance by
Purchaser of this Agreement and the other documents executed or required to be
executed by it in connection with this Agreement will have been duly authorized
by all necessary corporate action prior to Closing.
3.3 BINDING EFFECT. This Agreement and the other documents executed or
required to be executed by Purchaser in connection with this Agreement have
been or will have been duly executed and delivered by Purchaser and are or will
be, when executed and delivered, the legal, valid, and binding obligations of
Purchaser executing the same, enforceable in accordance with their terms except
that (i) enforceability may be limited by bankruptcy, insolvency, or other
similar laws affecting creditors' rights, and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability.
3.4 COMPLIANCE WITH OTHER INSTRUMENTS. Neither the execution and
delivery by Purchaser of this Agreement or the other agreements or documents
executed or required to be executed by Purchaser in connection herewith, nor
the consummation by Purchaser of the transactions contemplated hereby and
thereby will (i) conflict with the certificate of formation or operating
agreement of Purchaser; or (ii) require any consent in or notice under, or
constitute a default (or an event that, with notice or lapse of time or both,
would constitute a default) under, or permit the termination or the
acceleration of maturity of, or result in the imposition of any lien or
encumbrance upon any property or asset of Purchaser pursuant to any evidence of
indebtedness, loan, lease, or other agreement or any order by which Purchaser
is bound, or to which any of their assets is subject, except for those
violations and breaches that would not have a material adverse effect on the
businesses, operations, assets, or financial condition of Purchaser.
3.5 CAPITALIZATION OF PURCHASER. The authorized equity of Purchaser
consists of 1,000 membership interests, all of which are issued and
outstanding, and owned of record and beneficially as follows:
5
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<TABLE>
<CAPTION>
Membership
Owner Interest
----- ----------
<S> <C>
Art Hawkins 450
Harold Parkison 200
Timothy Findley 100
Alan Gauthier 100
William Hawkins 100
Michael Hawkins 50
------
1,000
</TABLE>
Messrs. William and Michael Hawkins, ages 26 and 23, respectively, are not a
part of Art Hawkins' household All of the issued and outstanding membership
interests have been duly authorized and are validly issued, fully paid and
nonassessable. There is no outstanding right obligating Purchaser or any of its
members to issue, sell, or otherwise dispose of, or to purchase or otherwise
acquire shares of, or securities convertible into or exchangeable for,
membership interests of Purchaser.
3.6 ASSETS AND SALES. The assets and annual sales of Purchaser are
each less than $10,000,000.
3.7 HART-SCOTT-RODINO FILING. Purchaser is the Ultimate Parent Entity
as defined under the Hart-Scott-Rodino Act Antitrust Improvements Act of 1976
(the "HSR Act") and rules and regulations. Purchaser is not required to make
any filing under the HSR Act, as amended, prior to the consummation of the
transactions contemplated by this Agreement. For purposes of this Agreement,
the term "Ultimate Parent Entity" shall have the meaning given to such term in
the regulations promulgated under the HSR Act.
ARTICLE 4
COVENANTS OF SELLER
4.1 ACCESS; CONFIDENTIALITY.
(a) During the period pending the Closing Date, Seller
shall afford to Purchaser and its duly authorized representatives full access
to and the right to review and make copies of FCAP's assets, books, contracts,
commitments, and records, view its physical properties, and communicate with
its key employees on a reasonably satisfactory basis, and will furnish and
cause its representatives to furnish promptly to FCAP such additional financial
and operating data and other documents and information relating to its
businesses and properties as Purchaser or its duly authorized representatives
may from time to time reasonably request, provided Purchaser shall clear with
C.A. Rundell, Jr. of Seller or his designee any proposed visits to any of the
premises of FCAP or contacts with any of its employees. Seller may also require
accompaniment of a Seller representative with any representative of Purchaser.
(b) The rights and obligations of the parties pursuant to
paragraph 14 of the Letter of Intent ("Letter of Intent") dated December 7,
1998, by Seller and Art Hawkins will survive the execution and delivery of this
Agreement, and all information obtained by the Purchaser or any of its
representatives pursuant hereto shall be deemed confidential information, and
shall be subject
6
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to the provisions of the Letter of Intent, except to the extent that Purchaser
is advised by its counsel that disclosure of any such information, including
the existence of the Letter of Intent, is required by law.
4.2 MONTHLY FINANCIAL STATEMENTS. During the period pending the
Closing Date, Seller shall furnish to Purchaser the unaudited balance sheet and
related statements of operations, stockholders' equity, and cash flows and any
supporting schedules of FCAP for the accounting periods ending on or about the
last day of each month, promptly after they are available, but not later than
60 days after the close of such accounting period.
4.3 CONDUCT OF BUSINESS PRIOR TO CLOSING DATE. During the period from
the date hereof to the Closing Date (or other indicated date), except as
otherwise provided herein or in the FCAP Disclosure Schedule, Seller shall
cause FCAP to:
(a) conduct its operations in the ordinary and usual
course of business consistent with past practices, maintain marketing
organizations intact, and preserve the goodwill of its employees,
representatives, suppliers, and customers;
(b) not declare or make any distribution with respect to
its stock, or lend any funds to a shareholder or its affiliates; and
(c) take no action that, and shall not fail to take any
action the failure to take which, would cause or permit its representations to
be untrue in any material respect on the Closing Date.
4.4 SENIOR FINANCING. Seller and Purchaser will use their respective
best reasonable efforts to obtain not less than $10,200,000 of senior financing
for FCAP secured by inventory, and $3,800,000 of senior financing secured by
real estate, as the lender may require and as are agreed and acceptable to
Seller and Purchaser (the "Senior Financing"). Seller will have no obligation
with respect to the Senior Financing. The parties intend for the Senior
Financing to be funded at Closing and with the $2,000,000 Purchase Price to
provide the cash payable to Seller at Closing.
4.5 RELEASE OF LIABILITY. Prior to Closing, Seller shall obtain a
release of FCAP from any liability on Seller funded indebtedness.
ARTICLE 5
COVENANTS OF PURCHASER
5.1 PURCHASER FINANCIAL CONDITION. At the Closing, Purchaser will have
at least $2,000,000 in cash, and a net worth of at least $2,000,000.
7
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ARTICLE 6
JOINT CONDITIONS PRECEDENT TO CLOSING OBLIGATIONS
6.1 LEGAL ACTION. Except as may be waived by Seller or Purchaser, no
party shall have any obligation to consummate the transactions contemplated by
this Agreement if (i) any governmental agency or authority shall have
instituted, or threatened in writing to institute, any action or proceeding
seeking to delay or prohibit consummation of the transactions contemplated by
this Agreement, or (ii) any order, judgment, or decree by any court or
governmental agency or authority shall be in effect that prohibits the same or,
in the reasonable judgment of Purchaser, otherwise would materially interfere
with the operation of the assets and business of FCAP after the Closing Date.
6.2 HART-SCOTT-RODINO COMPLIANCE. The parties shall have made all
filings required under the Hart-Scott-Rodino Act (the "HSR Act") and the
waiting period required under the HSR Act shall have expired or terminated
prior to the Closing Date.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
Except as may be waived by Seller, the obligations of Seller to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction on or before the Closing Date of each of the following
conditions:
7.1 COMPLIANCE. Purchaser shall have satisfied or complied with and
performed in all material respects all terms, covenants, and conditions of this
Agreement to be complied with or performed by Purchaser on or before the
Closing Date.
7.2 REPRESENTATIONS. All of the representations made by Purchaser in
this Agreement (prior to supplementation or amendment thereto) and in all
certificates and other agreements delivered by Purchaser to Seller pursuant
hereto or in connection with the transactions contemplated hereby, shall have
been true and correct in all material respects as of the date of delivery, and
shall be true and correct in all material respects at the Closing Date with the
same force and effect as if such representations had been made at and as of the
Closing Date, except for changes permitted or contemplated by this Agreement.
7.3 CERTIFICATES. Seller shall have received a certificate or
certificates, executed on behalf of Purchaser by its President, to the effect
that the conditions contained in Sections 7.1 and 7.2 hereof, have been
satisfied.
7.4 SENIOR FINANCING. A signed agreement for the Senior Financing
shall have been obtained by FCAP.
7.5 HART-SCOTT-RODINO OPINION. At the Closing, Purchaser shall cause
to be delivered to Seller the opinion of John M. Rickel, Esq., in form and
substance reasonably acceptable to Seller, that neither Purchaser nor its
Ultimate Parent Entity is required to make any filing under the HSR Act prior
to the consummation of the transactions contemplated by this agreement.
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<PAGE> 13
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS
OF PURCHASER
Except as may be waived by Purchaser, the obligations of Purchaser to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction, on or before the Closing Date, of each of the following
conditions:
8.1 COMPLIANCE. Seller shall have satisfied or complied with and
performed in all material respects all terms, covenants, and conditions of this
Agreement to be complied with or performed by Seller on or before the Closing
Date.
8.2 REPRESENTATIONS. All of the representations made by Seller in this
Agreement, the FCAP Disclosure Schedule (prior to any supplementation or
amendment pursuant), and in all certificates and other documents delivered by
Seller pursuant hereto or in connection with the transactions contemplated
hereby, shall have been true and correct in all material respects as of the
date of delivery, and shall be true and correct in all material respects at the
Closing Date with the same force and effect as if such representations had been
made at and as of the Closing Date, except for changes permitted or
contemplated by this Agreement.
8.3 CERTIFICATES. Purchaser shall have received a certificate or
certificates, executed on behalf of Seller, to the effect that the conditions
in Sections 8.1, 8.2 and 8.4 hereof, have been satisfied.
8.4 SENIOR FINANCING. A signed agreement for the Senior Financing
shall have been obtained by FCAP.
ARTICLE 9
INDEMNIFICATION AND REMEDIES
9.1 INDEMNIFICATION BY SELLER. Seller agrees to indemnify and hold
harmless Purchaser from and against:
(a) any and all claims, losses, obligations, damages,
demands, and liabilities for any undisclosed operating liability of FCAP ("FCAP
Losses"), based on, relating to, or arising out of, or any allegation by any
third party of, any event occurring prior to February 1, 1997;
(b) any and all claims and liabilities for income and
franchise taxes of FCAP, including any penalties and interest with respect
thereto for periods ending on or prior to the Closing Date ("Taxes");
(c) (i) sales taxes of FCAP, including interest and
penalties, if any, assessed by the States of Illinois, Indiana, New York, Ohio,
Pennsylvania, or Wisconsin, for the periods September 1994 through December
1998;
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<PAGE> 14
(ii) the costs, if any, payable to landlords to
cancel the leases listed in Exhibit E; and
(iii) the costs, damages, and expenses net of
insurance proceeds in resolving the lawsuits of Brown v. Forest City Auto Parts
and Wilmot v. Forest City Auto Parts; and
(d) (i) any finder or broker claiming a fee by, through,
or under Seller or FCAP with respect to the Sale, (ii) the fees of Hoak
Breedlove Wesneski & Co. and any other broker retained by Seller for placing
the Senior Financing, (iii) the $40,000 deposit against expenses paid to
Congress Financial Corporation prior to the date hereof in connection with the
Senior Financing, (iv) the initial points on the Senior Financing not to exceed
$90,000, and (v) legal and other fees of the bank not to exceed $60,000.
9.2 INDEMNIFICATION BY PURCHASER. Purchaser agrees to indemnify and
hold harmless Seller from and against:
(a) any and all claims, losses, expenses, obligations,
demands and liabilities, based on, related to, or arising out of, or any
allegation by any third party of, the operations of FCAP on or after the
Closing Date; and
(b) any finder or broker claiming a fee by, through, or
under Purchaser with respect to the Sale.
9.3 CLAIMS LIMITATIONS. Notwithstanding anything otherwise contained
in this Agreement, no party hereto shall assert any claim against any other
party hereto, unless the aggregate of all claims exceeds the sum of $25,000;
provided, that claims made by either party for breach of any binding provision
of the Letter of Intent shall not be subject to the foregoing limitations. The
remedies set forth in this Article are the exclusive remedies of the parties
under this Agreement with respect to their respective representations and
covenants to be completed prior to Closing, provided the parties shall have all
the rights and remedies set forth in the Securities. All claims hereunder must
be brought within the periods set forth in Section 11.3.
9.4 MAXIMUM LIABILITY. The maximum aggregate liability of Seller or
Purchaser for all claims made pursuant to this Agreement is $500,000 in
addition to recovery on insurance policies, except that:
(a) in addition to its obligation under this Section,
Seller shall be obligated to Purchaser for Seller's indemnifications under
Section 9.1(b), (c), and (d), and under Section 9.1(a) for FCAP Losses
attributable solely to actions of Seller; and,
(b) in addition to its obligation under this section,
Purchaser shall be obligated to Seller for its indemnifications under Section
9.2.
9.5 MANAGEMENT. The indemnifying party shall have the sole right at
its cost to manage the defense or handling of any claim or matter for which it
is, or is alleged to be, indemnifying the other party.
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ARTICLE 10
TERMINATION
10.1 TERMINATION. This Agreement and the transactions contemplated
hereby may be terminated at any time on or before the Closing Date:
(a) by mutual consent of the parties;
(b) by either Purchaser or Seller until a signed
definitive agreement for the Senior Financing has been obtained;
(c) by Purchaser or Seller if the transactions
contemplated by this Agreement have not been consummated by April 1, 1999,
unless such failure of consummation is due to the failure of the party seeking
termination to perform or observe the covenants, agreements, and conditions
hereof to be performed or observed by it at or before the Closing Date; and
(d) by Purchaser or Seller if the conditions precedent to
its obligations to close this Agreement have not been satisfied or waived by it
at or before April 1, 1999.
Any party desiring and entitled to terminate this Agreement shall do
so by giving prompt notice to the other parties hereto.
ARTICLE 11
MISCELLANEOUS
11.1 DISCLOSURE SCHEDULES. The FCAP Disclosure Schedule is
incorporated herein by reference.
11.2 ENTIRE AGREEMENT. This Agreement and the Exhibits and the FCAP
Disclosure Schedule hereto, the Letter of Intent, and the other agreements,
certificates, instruments, and documents contemplated hereby (the "Documents"),
contain the complete agreement among the parties with respect to the
transactions contemplated hereby and supersede all prior agreements and
understandings among the parties with respect to such transactions. Section and
other headings, the table of contents and indexes to the FCAP Disclosure
Schedules are for reference purposes only and shall not affect the
interpretation or construction of this Agreement. The parties have not made any
representation except as expressly set forth in the Documents. The obligations
of any party under any agreement executed pursuant to this Agreement shall not
be affected by this Section.
11.3 SURVIVAL. Except as set forth in this section, all
representations of the parties contained in this Agreement, or in any schedule
delivered pursuant to this Agreement, shall survive the Closing and shall
continue in full force and effect for one year after the Closing Date.
11.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute only one original.
Facsimile transmission of any signed original document
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and/or retransmission of any signed facsimile transmission will be deemed the
same as delivery of an original. At the request of any party, the parties will
confirm facsimile transmission by signing a duplicate original document.
11.5 NOTICES. All notices, demands, requests, or other communications
that may be or are required to be given, served, or sent by any party to any
other party pursuant to this Agreement shall be in writing and shall be mailed
by first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery, telegram, or telecopy, addressed as
follows:
(i) If to Seller to:
Tyler Corporation
2800 West Mockingbird Lane
Dallas, Texas 75235
Attn: Ted Bathurst
Telecopy No. (214) 902-5058
with a copy (which shall not constitute notice) to:
H. Lynn Moore, Jr., Esq
2800 West Mockingbird Lane
Dallas, Texas 75235
Telecopy No.: (214) 902-5058
(ii) If to Purchaser to:
Forest City Auto Parts Company
c/o Art Hawkins
6180 Cochran Road, 2nd Floor
Solon, Ohio 44139
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<PAGE> 17
with copies (which shall not constitute notice) to:
Art Hawkins
HalArt L.L.C.
1520 Surria Court
Bloomfield Hills, MI 48304
Telecopy No.: (248) 593-4997
John M. Rickel, Esq.
Rickel & Baun, P.C.
63 Kercheval Avenue
Grosse Pointe Farms, Michigan 48236-3627
Telecopy No.: (313) 886-0405
Each party may designate by notice in writing a new address to which
any notice, demand, request, or communication may thereafter be so given,
served, or sent. Each notice, demand, request, or communication that is mailed,
delivered, or transmitted in the manner described above shall be deemed
sufficiently given, served, sent and received for all purposes at such time as
it is delivered to the addressee (with the return receipt, the delivery
receipt, the affidavit of messenger, or (with respect to a telecopy) the
confirmation being deemed conclusive evidence of such delivery) or at such time
as delivery is refused by the addressee upon presentation.
11.6 SUCCESSORS AND ASSIGNS. This Agreement and the rights, interests,
and obligations hereunder shall be binding upon and shall inure to the benefit
of the parties hereto, but may not be assigned without the consent of the other
parties hereto.
11.7 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas.
11.8 WAIVER AND OTHER ACTION. This Agreement may be amended, modified,
or supplemented only by a written instrument executed by the parties against
which enforcement of the amendment, modification, or supplement is sought.
11.9 KNOWLEDGE. At any time there is a reference in a representation
or covenant of a party to this Agreement that is qualified by the knowledge of
such party, the terms "knowledge" or "knows" or "known", or "belief" or
"believes" shall mean (i) as to Purchaser, the knowledge or belief of Art
Hawkins, and (ii) as to Seller, the knowledge or belief of its Chairman of the
Board, Chief Executive Officer or Chief Financial Officer.
11.10 COOPERATION PENDING CLOSING. Each of the parties shall use its
commercially reasonable efforts, (i) to deliver promptly the necessary
applications, notices, and filings to obtain at the earliest practicable date
the consents necessary to consummate the transactions contemplated by this
Agreement, (ii) to cooperate with and keep the other informed as to all matters
in connection with the operation of FCAP, (iii) to take such actions as the
other party may reasonably request to consummate the transactions contemplated
by this Agreement, and (iv) to obtain the Senior Financing and to satisfy all
other conditions precedent to the obligations to close this Agreement.
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<PAGE> 18
11.11 EXPENSES. If an HSR Act filing is made, each of the parties
shall pay 50% of the HSR Act filing fee of $45,000. Otherwise, each party to
this Agreement shall bear its own expenses.
[THE NEXT FOLLOWING PAGES IS THE SIGNATURE PAGE.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TYLER CORPORATION
By:
Name:
Title:
HALART L.L.C.
By:
Art Hawkins, President
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<PAGE> 20
EXHIBIT A
AMENDMENT TO CERTIFICATE OF INCORPORATION
4. The total number of shares of capital stock that the Corporation shall
have the authority to issue is Ten Thousand (10,000) shares. Four
Thousand Five Hundred (4,500) of the authorized shares shall be Common
Stock with a par value of $1.00 per share and Five Thousand Five
Hundred (5,500) of the authorized shares shall be Preferred Stock with
a par value of $1,000.00 per share.
A. Voting Rights.
(1) Each share of Common Stock shall be entitled to one (1)
vote on all matters submitted to a vote of the stockholders. Except as
otherwise expressly provided in this Certificate of Incorporation or
required by law, the shares of Preferred Stock shall not be entitled to
a vote on actions submitted to a vote of the stockholders of the
Corporation.
(2) In addition to any provisions in this Certificate of
Incorporation and any requirement of law, the Preferred Stock shall
vote as a single class, and each share of Preferred Stock shall be
entitled to one (1) vote, with respect to any proposal to (a) alter or
change the dividend, liquidating, redemption, voting, or any other
rights, preferences, or privileges of the shares of Preferred Stock,
materially and adversely, (b) increase the authorized number of shares
of Preferred Stock, (c) create any class or series of stock on a parity
with or having preferences to the Preferred Stock, or (d) recapitalize
or reclassify any class or series of the Corporation's outstanding
capital stock. Unless the vote or consent of a larger percentage is
required by law or this Certificate of Incorporation, the affirmative
vote of the holders of a majority of the outstanding shares of
Preferred Stock shall be sufficient to take any action as to which a
class vote of the holders of Preferred Stock is required by this
Certificate of Incorporation or by law.
B. Common Stock.
(1) Shares of Common Stock may be issued by the Corporation
from time to time for such consideration as may be lawfully fixed by
the Board of Directors.
(2) Subject to the prior rights and preferences of the
Preferred Stock set forth in this Article 4 and to the extent permitted
by the laws of the State of Delaware, the holders of Common Stock shall
be entitled to receive such cash dividends as may be declared and made
payable by the Board of Directors.
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C. Preferred Stock.
(1) Dividends.
(a) No dividends of cash or property shall be
declared or paid on the Preferred Stock.
(b) While any shares of Preferred Stock are
outstanding, the Corporation shall not declare or pay any dividends on
the Common Stock in excess of fifty percent (50%) of the net income
after taxes of the Corporation for the year in which the dividend is
declared.
(2) Preference on Liquidation, Dissolution, or Winding
Up.
(a) Definition. A consolidation or merger of the
Corporation, a sale or transfer of substantially all of its assets as
an entirety, or any purchase or redemption of capital stock of the
Corporation of any class, shall not be regarded as "a liquidation,
dissolution, or winding up of the affairs of the Corporation" within
the meaning of this Section C.
(b) Preferred Stock. During any proceedings for the
voluntary or involuntary liquidation, dissolution, or winding up of the
affairs of the Corporation, after payment or provision for payment of
the debts and other liabilities of the Corporation, the holders of the
Preferred Stock shall be entitled to receive, in cash, with respect to
each outstanding share of Preferred Stock an amount equal to $1,000.00
(the "Liquidation Amount") before any distribution of the assets of the
Corporation shall be made to the holders of the outstanding Common
Stock. If upon such liquidation, dissolution, or winding up, the cash
available for distribution to the holders of capital stock of the
Corporation shall be insufficient to permit the payment to the holders
of the Preferred Stock of the Liquidation Amount in cash per share, the
other assets of the Corporation shall be distributed to the holders of
the Preferred Stock ratably until the fair market value of the other
assets so distributed, when added to the cash distributed to the
holders of the Preferred Stock, shall equal the full amount to which
the holders of the Preferred Stock would otherwise be entitled. If the
assets of the Corporation are sufficient to permit the payment of such
amounts to the holders of the Preferred Stock, the remainder of the
assets of the Corporation, if any, after the distributions as aforesaid
shall be distributed and divided ratably among the holders of the
Common Stock then outstanding according to their respective shares.
(3) Redemption.
(a) Mandatory Redemption. At any time (i) the
Corporation or any entity that owns any of the Common Stock (a
"Controlling Entity") shall sell or register its equity or equity
related securities pursuant to a registration statement declared
effective by the Securities and Exchange Commission, (ii) the
Corporation or a Controlling Entity otherwise becomes a reporting
company pursuant to the Securities Exchange Act of 1934, as amended,
with respect to equity or equity related securities, (iii) the
Corporation sells or otherwise transfers more than 30% of the book
value of its assets, (iv) there is a Change
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of Control (as defined herein), or (v) upon the seventh anniversary of
the initial issuance of the shares of Preferred Stock, then the
Corporation shall, contemporaneously therewith (the "Redemption
Date"), redeem (the "Mandatory Redemption") from the holders thereof
each outstanding share of Preferred Stock at a redemption price per
share equal to the Liquidation Amount (the "Redemption Price"). Upon
the failure of the Corporation to cure a default on any of its
obligations to make Mandatory Redemptions within six months after the
occurrence of the default, the holders of Preferred Shares shall
thereafter have the continuing right to elect a majority of the board
of directors of the Corporation.
(b) Partial Redemption. The Corporation shall, on the
date that is the first business day following 10 days after any of the
following events (the "Redemption Date"), redeem (the "Partial
Redemption") from the holders thereof, outstanding shares of Preferred
Stock at the Redemption Price, as follows:
(i) upon the sale other than in the ordinary course
of business of the Corporation's inventory, the Corporation shall
redeem shares of Preferred Stock to the extent the sales proceeds of
the inventory exceed the 50% amount lent against the inventory;
Ex: The Corporation sells a batch of inventory other
than in the ordinary course of business with a cost
of $10,000 and a borrowing base of $5,000 for $8,000.
The bank will receive $5,000 and the Corporation will
pay $3,000 in partial redemption of shares of
Preferred Stock. If the sale price was $12,000, the
bank would receive $5,000 and the Corporation will
pay $7,000 in redemption of shares of Preferred
Stock.
This subsection shall not apply to (i) transfers of inventory from one
store of Maker to another store of Maker or to a warehouse, where Maker
retains title, or (ii) transfers to manufacturers for credit.
(ii) upon the sale of any real estate, the
Corporation shall redeem shares of Preferred Stock to the extent the
sales proceeds of the real estate exceed the 75% amount lent against
the real estate;
Ex: The Corporation sells real estate originally
valued at $100,000 for $90,000. The Corporation will
pay $75,000 to the bank, and the Corporation will pay
$15,000 in redemption of shares of Preferred Stock.
If the sale price was $130,000, the Corporation would
pay $38,000 in redemption of shares of Preferred
Stock.
(iii) upon the sale of any fixtures or other capital
assets, the Corporation shall redeem shares of Preferred Stock to the
extent of the entire proceeds of sale.
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<PAGE> 23
(c) Optional Redemption. The Corporation shall have
the right at any time to redeem (an "Optional Redemption") from the
holders thereof each outstanding share of Preferred Stock at the
Redemption Price. If the Corporation at any particular time proposes to
redeem fewer than all of the then outstanding shares of Preferred
Stock, the shares of Preferred Stock to be redeemed shall be selected
in such manner that the number of shares of Preferred Stock (to the
nearest full share) to be redeemed from each holder of Preferred Stock
will bear the same proportional relationship to all shares of Preferred
Stock held by such holder as the aggregate number of shares to be
redeemed bears to all the shares of Preferred Stock then outstanding
The Corporation shall set forth a Redemption Date for any Optional
Redemption in the notice provided pursuant to this Section (3).
(d) Subordination. (i) Any Optional Redemption or the
Mandatory Redemption of shares of Preferred Stock is expressly
subordinate to, first, the prior claims of the Senior Debt, including,
without limitation, any requirement to reduce the outstanding amount of
the Senior Debt, and the prior payment of principal and accrued and
unpaid interest on any promissory note that is subordinated to the
Senior Debt that may be issued by the Corporation and payable to Tyler
Corporation ("Subordinated Notes"), and (ii) any Partial Redemption is
expressly subordinate to, first, the prior claims of the Senior Debt
and, second, the prior payment of principal and accrued and unpaid
interest on the Subordinated Notes (with respect to either clause (i)
or (ii), the "Senior Redemption Rights"). If due to such subordination,
the Corporation is unable to redeem the full number of outstanding
shares of Preferred Stock, then the Corporation shall on the Redemption
Date redeem only such number of outstanding shares of Preferred Stock
to the maximum extent permitted by the applicable Senior Redemption
Rights. Any shares of Preferred Stock remaining outstanding after such
Redemption Date shall thereafter be subject to redemption pursuant to
this Section (3).
"Senior Debt" means any and all indebtedness,
whether for principal, interest, fees, or other amounts, at any time and from
time to time owing or to become owing by Corporation under any agreement,
instrument or document, secured by inventory and real estate.
(e) Legal Restrictions. The Corporation shall in no
event apply to the redemption of any shares of Preferred Stock any
funds not legally available therefor under the General Corporation Law
of the State of Delaware, as amended, or any successor statute (the
"DGCL"). If due to such restrictions, the Corporation is unable to
redeem the full number of outstanding shares of Preferred Stock, then
the Corporation (i) shall on the Redemption Date redeem such number of
outstanding shares of Preferred Stock to the maximum extent permitted
by the DGCL and (b) shall thereafter redeem the balance of the
outstanding shares of Preferred Stock not so redeemed on the Redemption
Date at such intervals, which shall be no less often than quarterly, to
the maximum extent funds are available under the DGCL. Any shares of
Preferred Stock remaining outstanding after such Redemption Date shall
thereafter be subject to redemption pursuant to this Section (3).
(f) Notice; Record Date. Not less than twenty (20)
nor more than sixty (60) days prior to the Redemption Date, notice of
such redemption shall be given, either personally or
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by mail, to each holder of Preferred Stock. If mailed, such notice
shall be deemed to be delivered when deposited in the United States
mail addressed to the shareholder at his address as it appears on the
stock transfer book of the Corporation, with postage thereon prepaid.
Any notice mailed in the manner herein provided shall be conclusively
presumed to have been duly given whether or not the addressee receives
the notice. In no event shall the failure to mail notice, or any
defect therein or in the mailing thereof, to any one or more holders
of the Preferred Stock affect the validity of notice duly given to any
other holder thereof. The record date for any redemption shall be the
date ten (10) days prior to the Redemption Date.
(g) Payment. Upon any redemption pursuant this
Section (3), the Corporation shall pay each holder of the Preferred
Stock the Redemption Price in cash, by wire transfer, or by delivery of
a cashier's check with respect to each share of Preferred Stock held as
of the Redemption Date.
(h) Effect of Redemption. On and after the Redemption
Date, all rights of the holders of shares of Preferred Stock so called
for redemption as shareholders of the Corporation, except the right to
receive the Redemption Price without interest, shall cease and
terminate. The shares so called for redemption shall no longer be
deemed outstanding. On or before the Redemption Date, the respective
holders of record of the Preferred Stock to be redeemed shall deliver
to the Corporation the certificates for the shares to be redeemed. Such
certificates, if required, shall be properly stamped for transfer and
duly endorsed in blank or accompanied by proper instruments of
assignment and transfer thereof duly executed in blank. If any holder
of Preferred Stock shall fail to tender its shares of Preferred Stock
as provided above, the Corporation shall have the right to cancel said
shares upon its books and pay to such shareholder the Redemption Price
for such shares. Any such canceled shares shall for all purposes be
considered to have been redeemed as provided herein.
(i) Change of Control. A "Change of Control" shall be
deemed to have occurred if (i) the Corporation or a Controlling Entity
is merged or consolidated with another entity and as a result of such
merger or consolidation of the outstanding voting securities of the
surviving or resulting entity less than 50% are owned in the aggregate
by the former shareholders of the Corporation or the Controlling
Entity, or less than 30% are owned by Art Hawkins, (ii) any person
other than Art Hawkins or group within the meaning of the Securities
Exchange Act of 1934, as amended, acquires (together with voting
securities previously held by such person or group) more than 50% of
any class of outstanding voting securities of the Corporation or a
Controlling Entity (whether directly, indirectly, beneficially, or of
record) pursuant to any transaction or combination of transactions,
(iii) there is a change of control of the Corporation or a Controlling
Entity of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended, whether or not the
Corporation or the Controlling Entity is then subject to such reporting
requirements, or (iv) the individuals who, at the beginning of any
period of twelve (12) consecutive months, constituted the Board of
Directors of the Corporation or a Controlling Entity cease, for any
reason, to constitute at least a majority thereof, unless the
nomination for election or election by the Corporation's or the
Controlling Entity's shareholders of each new director of the
Corporation or the Controlling Entity was
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approved by a vote of at least two-thirds of the directors then still
in office who either were directors of the respective boards at the
beginning of such period or whose election or nomination for election
was previously so approved.
D. Purchase or Redemption of Capital Stock. The Corporation shall not
redeem or otherwise purchase any shares of any other class of its
capital stock while any shares of Preferred Stock remain outstanding
unless the holders of at least 50% of the outstanding shares of
Preferred Stock shall have given their prior written consent thereto.
E. Financial Statements. So long as any shares of Preferred Stock are
outstanding, the Corporation shall deliver to the holders of Preferred
Stock promptly after prepared, but in any event within sixty (60) days
after the end of each quarter, quarterly financial statements that
shall include a balance sheet, an earnings statement, a cash flow
statement, and a description of any sales of inventory, real estate or
other capital assets of the Corporation during the quarter.
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EXHIBIT B
SENIOR SUBORDINATED SECURED PROMISSORY NOTE
Due __________, 2002
$2,000,000 Dallas, Texas ____________, 1999
FOR VALUE RECEIVED, the undersigned, FOREST CITY AUTO PARTS COMPANY, a
Delaware corporation ("Maker"), hereby promises to pay to the order of TYLER
CORPORATION, a Delaware corporation ("Noteholder"), the principal amount of TWO
MILLION AND NO/100 DOLLARS ($2,000,000), together with interest on the unpaid
principal balance of this Note from time to time outstanding from the date
hereof at the rate of six percent (6%) per annum, provided, however, that all
past due principal of, and to the extent permitted by and not usurious under
applicable law, interest on, this Note, shall bear interest from date due until
paid (i) if paid on or before ninety (90) days after due date, at the rate of
six percent (6%) per annum, (ii) if paid more than ninety (90) days after due
date, but on or before one hundred eighty (180) days after due date, at the rate
of twelve percent (12%) per annum, and (iii) if paid more than one hundred and
eighty (180) days after the due date, at the rate of eighteen percent (18%) per
annum. Interest accrued on the unpaid principal balance of this Note from time
to time outstanding shall be calculated on the basis of the actual days elapsed
(including the first day but excluding the last) in a year consisting of 365 or
366 days, as appropriate.
Section 1. Definitions. When used in this Note, the following terms
have the respective meanings specified herein or in the section referred to:
"Change of Control" means (i) the merger or consolidation of Maker, or
any entity that owns of record and/or beneficially more than twenty-five percent
(25%) of the issued and outstanding common stock of Maker (a "Controlling
Entity") with another entity and as a result of such merger or consolidation of
the outstanding voting securities of the surviving or resulting entity less than
fifty percent (50%) are owned in the aggregate by the former shareholders of
Maker or the Controlling Entity, or less than 30% are owned by Art Hawkins, (ii)
the acquisition by any person other than Art Hawkins or group within the meaning
of the Securities Exchange Act of 1934, as amended, of more than fifty percent
(50%) of any class of outstanding voting securities of Maker or a Controlling
Entity, whether directly, individually, beneficially or of record, pursuant to
any transaction or combination of transactions, (iii) a change of control of
Maker or a Controlling Entity of a nature that would require a report in
response to Item 6(e) of Schedule 14A of Regulations 14A promulgated under the
Securities Exchange Act of 1934, as amended, whether or not Maker or a
Controlling Entity is then subject to such reporting requirements, or (iv)
cessation, for any reason, of the individuals who, at the beginning of any
period of twelve (12) consecutive months, constituted the Board of Directors of
Maker or any Controlling Entity to constitute at least a majority thereof,
unless the nomination for election or election by Maker's or the Controlling
Entity's shareholders was approved by a vote of at least two-thirds of the
respective boards then still in office who either were directors at the
beginning of such period or whose election or nomination for election was
previously so approved.
"Event of Default" has the meaning set forth in Section 5 hereof.
"Mortgages" means, collectively, the mortgages, deeds of trust, deeds
to secure debt and similar instruments of even date herewith, executed by Maker
to or for the benefit of Noteholder for the purpose of encumbering real property
of Maker, more particularly described therein, as security for the payment of
the indebtedness evidenced by this Note and the other obligations of Maker to
Noteholder described therein.
<PAGE> 27
"Note" means this Senior Subordinated Secured Promissory Note.
"payment in full," "paid in full" or any similar formulation, when used
with respect to the Senior Financing Debt, means payment (or due provision for
payment) in full in cash or cash equivalents of one hundred percent (100%) of
the principal, interest, fees, expenses, and other obligations due or to become
due under the documents governing or securing the Senior financing Debt in
accordance with the terms of such documents, or otherwise on terms and
conditions to which the holders thereof shall consent in writing.
"Security Agreement" means the Security Agreement of even date herewith
between Maker and Noteholder.
"Senior Financing" means the "Senior Financing" defined and described
in, and contemplated by, Section 4.4 of the Purchase Agreement dated as of March
___, 1999, between HalArt, L.L.C., and Tyler Corporation.
"Senior Financing Debt" means any and all indebtedness, whether for
principal, interest, fees, or other amounts, at any time and from time to time
owing or to become owing by Maker under any agreement, instrument or document
governing, evidencing and/or securing the Senior Financing.
Section 2. Payment. The principal of and accrued interest on this Note
shall be due and payable as follows:
(a) Interest, computed as aforesaid, shall be due and payable
quarterly as it accrues, commencing on _________________,
1999, and thereafter on the first day of each January, April,
July, and October of each calendar year during the term of
this Note, through and including _____________, 2002; and
(b) the entire unpaid principal balance of this Note, together
with all accrued but unpaid interest thereon, shall be finally
due and payable in full on ____________, 2002.
Both principal of and interest on this Note are payable in lawful money of the
United States of America to Noteholder at 2800 West Mockingbird Lane, Dallas,
Texas 75235 (or at such other place as Noteholder shall specify in written
notice to Maker), in immediately available funds. All payments made hereon shall
be applied first to sums (other than the principal of and accrued interest on
this Note) payable by Maker pursuant to this Note or the Security Agreement,
then to accrued but unpaid interest on this Note, and thereafter to the unpaid
principal balance of this Note. Interest shall continue to accrue on unpaid
principal until receipt by Noteholder of good funds in payment thereof.
Section 3. Security. In order to secure the payment and performance of
the indebtedness and obligations evidenced by, or arising under or in respect
of, this Note and that certain Senior Subordinated Secured Promissory Note of
even date herewith from Maker to Noteholder in the original principal amount of
$1,000,000 ("Note B"), Maker has agreed to, and has, as of the date hereof,
executed and delivered to Maker the Security Agreement and the Mortgages,
pursuant to which Maker has granted to Noteholder (a) second priority (subject
only to the liens and security interests securing the Senior Financing Debt)
liens and security
2
<PAGE> 28
interests in all of Maker's now owned and hereafter acquired inventory (as that
term is defined in the Texas Uniform Commercial Code) and real estate, and (b)
first priority liens and security interests in all of Maker's now owned and
hereafter acquired accounts, equipment and general intangibles (as those terms
are defined in the Texas Uniform Commercial Code). Reference is hereby made to
the Security Agreement and the Mortgages for the descriptions of the property
covered thereby, the nature and extent of the liens and security interests
created and granted thereby, and the rights and powers of the holder of this
Note in respect of such liens and security interests. The liens and security
interest created under the Security Agreement and the Mortgage in Maker's now
owned and hereafter acquired inventory (as that term is defined in the Texas
Uniform Commercial Code) and real estate shall be junior and subordinate only to
the liens and security interest securing payment and performance of the Senior
Financing Debt. The indebtedness and obligations evidenced by, or arising under
or in respect of, this Note shall rank pari passu, with respect to payment and
security, with the indebtedness and obligations evidenced by, or arising under
or in respect of, Note B.
Section 4. Waiver. Except as provided herein or in the Security
Agreement, Maker and each surety, endorser, guarantor and other party ever
liable for payment of any sums of money payable upon this Note, jointly and
severally waive presentment, demand, protest, notice of protest and non-payment
or other notice of default, notice of acceleration and intention to accelerate
or other notice of any kind, and agree that their liability under this Note
shall not be affected by any renewal or extension in the time of payment hereof,
or in any indulgences, or by any release or change in any security for the
payment of this Note, and hereby consent to any and all renewals, extensions,
indulgences, releases or changes, regardless of the number of such renewals,
extensions, indulgences, releases or changes. No waiver by Noteholder of any of
its rights or remedies hereunder, or under any other document evidencing or
securing this Note or otherwise, shall be considered a waiver of any other
subsequent right or remedy of Noteholder; no delay or omission in the exercise
of enforcement by Noteholder of any rights or remedies shall ever be construed
as a waiver of any right or remedy of Noteholder; and no exercise or enforcement
of any such rights or remedies shall ever by held to exhaust any right or remedy
of Noteholder.
Section 5. Events of Default and Remedies. An "Event of Default" shall
exist hereunder if any one or more of the following events shall occur: (a)
Maker shall fail to pay when due any principal of, or interest upon, this Note;
(b) Maker shall (1) apply for or consent to the appointment of a receiver,
trustee, intervenor, custodian or liquidator of itself or of all or a
substantial part of its assets, (2) be adjudicated a bankrupt or insolvent or
file a voluntary petition for bankruptcy or admit in writing that it is unable
to pay its debts as they become due, (3) make a general assignment for the
benefit of creditors, (4) file a petition or answer seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy or insolvency
laws, or (5) file an answer admitting the material allegations of, or consent
to, or default in answering, a petition filed against it in any bankruptcy,
reorganization or insolvency proceeding, or take corporate action for the
purpose of effecting any of the foregoing; (c) an order, judgment or decree
shall be entered by any court of competent jurisdiction or other competent
authority approving a petition seeking reorganization of maker or appointing a
receiver, trustee, intervenor or liquidator of Maker, or of all or substantially
all of its assets, and such order, judgment or decree shall continue unstayed
and in effect for a period of sixty (60) days; (d) the dissolution or
liquidation of Maker; (e) Maker shall breach any covenant under this Note, (f)
any "Event of Default," as defined in the Security Agreement or the Mortgage,
shall occur, (g) any failure to pay, when due, any obligations, whether as to
principal, interest or otherwise, including non-payment following acceleration
or maturity, shall occur with respect to the Senior Financing Debt and continue
past the expiration of any period of grace, if any, with respect thereto
provided in the document governing the same, (h) any default or event of
default, other than a default or event of default occasioned by a failure to pay
as described in the
3
<PAGE> 29
preceding clause (g), shall occur with respect to Senior Financing Debt and, by
reason thereof, the holder of the Senior Debt accelerates the maturity of all or
any part of the Senior Financing Debt and declares the same to be due and
payable prior to the stated maturity date thereof, (i) the payment of dividends
by Maker on or with respect to its common stock in any fiscal year in excess of
50% of Maker's net income after taxes, (j) Maker shall make a loan to any party
(other than advances to employees for reasonable travel expenses in the ordinary
course of business), and/or (k) a Change of Control shall occur. Upon the
occurrence of any Event of Default hereunder, the Noteholder may, at its option,
at any time thereafter, (i) declare the entire unpaid principal balance and
accrued interest upon this Note to be, and the same shall thereupon become,
immediately due and payable without the presentment or notice of any kind, which
Maker hereby waives pursuant to Section 4 hereof, and/or (ii) pursue and enforce
any of Noteholder's rights and remedies available pursuant to any applicable law
or agreement; provided, however, upon the occurrence of any Event of Default
specified in clause (b), (c) or (d) of this Section 5,with respect to Maker,
without any notice to Maker or any other act by Noteholder, the principal
balance and interest accrued on this Note shall automatically and without
necessity of any act by Noteholder become immediately due and payable without
presentment, demand, protest or notice of protest, notice of acceleration,
notice of intent to accelerate or other notice of any kind, all of which are
hereby waived by Maker. Noteholder agrees to advise Maker promptly if Noteholder
is aware of an Event of Default.
Section 6. Notice. Whenever this Note requires or permits any notice,
approval, request or demand from one party to another, the notice, approval,
request or demand must be in writing and shall be deemed to have been given when
personally served or when deposited in the United States mails, registered or
certified, return receipt requested, addressed to the party to be notified at
the following address (or at such other address as may have been designated by
written notice):
Noteholder: Tyler Corporation
2800 West Mockingbird Lane
Dallas, Texas 75235
Attention: Ted Bathurst
Telecopy No.: (214) 902-5058
with a copy to (which shall not constitute notice) to:
H. Lynn Moore, Jr., Esq.
2800 West Mockingbird Lane
Dallas, Texas 75235
Telecopy No.: (214) 902-5058
Maker: Forest City Auto Parts Company
c/o Art Hawkins
6180 Cochran Road, 2nd Floor
Solon, Ohio 44139
with copies (which shall not constitute notice) to:
Art Hawkins
HalArt, L.L.C.
1520 Surria Court
Bloomfield Hills, MI 48304
Telecopy No.: (248) 593-4997
4
<PAGE> 30
John M. Rickel, Esq.
Rickel & Baun, P.C.
63 Kercheval Avenue
Grosse Pointe Farms, Michigan 48236-3627
Telecopy No.: (313) 886-0405
Section 7. Prepayment.
(a) Voluntary Prepayment. Subject to the provisions of Section 10 of
this Note, Maker reserves the right, upon thirty (30) days' prior
written notice to Noteholder, to prepay the outstanding principal
balance of this Note, in whole or in part, at any time and from
time to time, without premium or penalty. Any such prepayment
shall be made together with payment of interest accrued on the
amount of principal being prepaid through the date of such
prepayment.
(b) Mandatory Prepayment. Subject to the provisions of Section 10 of
this Note, Maker shall prepay the outstanding principal balance
of this Note in whole upon (i) the sale of securities of Maker or
a Controlling Entity pursuant to a registration statement that
has been declared effective by the Securities and Exchange
Commission, (ii) Maker or a Controlling Entity otherwise becoming
a reporting company pursuant to the Securities Exchange Act of
1934, as amended, (iii) Maker selling or otherwise transferring
all or any material part of its assets, (iv) a Change of Control,
(v) Maker incurring any senior indebtedness for the purpose of a
material expansion of Maker's business and operations of more
than $2,500,000, plus senior financing for acquisitions of
operating businesses.
Section 8. Usury Laws. Regardless of any provisions contained in this
Note, Noteholder shall never be deemed to have contracted for or be entitled to
receive, collect or apply as interest on or under this Note any amount in excess
of the maximum amount of interest permitted by applicable law (the "Maximum
Amount"), and, in the event that Noteholder ever receives, collects or applies
as interest any such excess, the amount which would be excessive interest shall
be deemed to be a partial prepayment of principal and treated hereunder as such;
and, if the principal amount of this Note is paid in full, any remaining excess
shall forthwith be paid to Maker. In determining whether or not the interest
paid or payable under any specific contingency exceeds the Maximum Amount, Maker
and Noteholder shall, to the maximum extent permitted under applicable law, (i)
characterize any nonprincipal payment as an expense, fee or premium rather than
as interest; (ii) exclude voluntary prepayments and the effects thereof; and
(iii) amortize, prorate, allocate and spread, in equal parts, the total amount
of interest throughout the entire contemplated term of this Note so that the
interest rate is uniform throughout the entire term; provided, however, that, if
this Note is paid in full prior to the end of the full contemplated term hereof,
and if the interest received for the actual period of existence thereof exceeds
the relevant Maximum Amount, Noteholder shall refund to Maker the amount of such
excess or credit the amount of such excess against the principal amount of this
Note and, in such event, Noteholder shall not be subject to any penalties
provided by any Laws for contracting for, charging, taking, reserving or
receiving interest in excess of the relevant Maximum Amount.
5
<PAGE> 31
Section 9. GOVERNING LAW. THIS NOTE IS PAYABLE AND PERFORMABLE IN
DALLAS COUNTY, TEXAS, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE FEDERAL LAWS OF
THE UNITED STATES OF AMERICA. WITHOUT EXCLUDING ANY OTHER JURISDICTION, MAKER
AGREES THAT THE COURTS OF THE STATE OF TEXAS SITTING IN DALLAS, TEXAS, AND THE
FEDERAL COURTS SITTING IN DALLAS, TEXAS, WILL HAVE JURISDICTION OVER ANY
PROCEEDINGS IN CONNECTION HEREWITH.
Section 10. Subordination. Maker agrees, and Noteholder, for itself and
for each subsequent owner and holder of this Note, agrees that the obligation
represented by this Note is and shall be subordinated in right of payment to the
prior payment in full of the Senior Financing Debt, whether outstanding on the
date hereof or hereafter incurred. Upon any distribution of assets of Maker upon
or by reason of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to the Company or to substantially all of its
assets, or (b) any liquidation, dissolution or other winding up of the Company,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (c) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company, then and in any such event
specified in clause (a), (b) or (c) preceding (each such event, if any, herein
sometimes referred to as a "Proceeding"), (i) the holders of the Senior
Financing Debt will first be entitled to receive payment in full of the Senior
Financing Debt before Noteholder is entitled to receive any payment, whether of
principal, premium, if any, or interest, on account of this Note (other than
Junior Securities) and (ii) any payment or distribution of assets of Maker of
any kind or character from any source, whether in cash, property or securities
(other than Junior Securities) to which Noteholder would be entitled but for the
provisions of this Section 10 will be paid by the liquidating trustee or agent
or other person making such a payment or distribution directly to the holders of
the Senior Financing Debt or their representative to the extent necessary to
make payment in full of the Senior Financing Debt remaining unpaid, after giving
effect to any concurrent payment or distribution made directly to the holders of
such Senior Financing Debt. For purposes of this Section 10, "Junior Securities"
shall mean capital stock and/or securities of Maker provided for by a plan of
reorganization or readjustment, or of any other corporation provided for by such
plan of reorganization or readjustment authorized by an order or decree of a
court of competent jurisdiction in a reorganization Proceeding under any
applicable bankruptcy law which stock or securities are subordinated in right of
payment to all then outstanding Senior Financing Debt to substantially the same
extent as this Note is so subordinated as provided in this Section 10. After all
Senior Financing Debt is paid in full and until this Note is paid in full,
Noteholder shall be subrogated (equally and ratably with all other indebtedness
pari passu with this Note) to the rights of holders of Senior Financing Debt to
receive distributions applicable to Senior Financing Debt to the extent that
distributions otherwise payable to Noteholder have been applied to the payment
of Senior Debt. A distribution made under this Section 10 to holders of Senior
Financing Debt that otherwise would have been made to Noteholder is not, as
between Maker and Noteholder, a payment by Maker on this Note. Nothing in this
Note shall (1) impair, as between Maker and Noteholder, the obligations of Maker
to pay the principal of and interest on this Note in accordance with its terms;
(2) affect the relative rights of Noteholder and creditors of Maker other than
its rights in relation to holders of Senior Financing Debt; or (3) prevent
Noteholder from exercising its available remedies upon an Event of Default,
subject to the rights of holders and owners of Senior Financing Debt to receive
distributions and payments otherwise payable to Noteholder to the extent
provided in this Section 10.
Section 11. "Noteholder". As used herein, the term "Noteholder"
includes Tyler Corporation and any subsequent owner and holder at the time in
question of this Note.
6
<PAGE> 32
MAKER:
FOREST CITY AUTO PARTS COMPANY,
a Delaware corporation
By:
Name:
Title:
7
<PAGE> 33
EXHIBIT C
SENIOR SUBORDINATED SECURED PROMISSORY NOTE
Due __________, 2002
$1,000,000 Dallas, Texas ____________, 1999
FOR VALUE RECEIVED, the undersigned, FOREST CITY AUTO PARTS COMPANY, a
Delaware corporation ("Maker"), hereby promises to pay to the order of TYLER
CORPORATION, a Delaware corporation ("Noteholder"), the principal amount of ONE
MILLION AND NO/100 DOLLARS ($1,000,000), together with interest on the unpaid
principal balance of this Note from time to time outstanding from the date
hereof at the rate of eight percent (8%) per annum, provided, however, that all
past due principal of, and to the extent permitted by and not usurious under
applicable law, interest on, this Note, shall bear interest from date due until
paid (i) if paid on or before ninety (90) days after due date, at the rate of
eight percent (8%) per annum, (ii) if paid more than ninety (90) days after due
date, but on or before one hundred eighty (180) days after due date, at the rate
of twelve percent (12%) per annum, and (iii) if paid more than one hundred and
eighty (180) days after the due date, at the rate of eighteen percent (18%) per
annum. Interest accrued on the unpaid principal balance of this Note from time
to time outstanding shall be calculated on the basis of the actual days elapsed
(including the first day but excluding the last) in a year consisting of 365 or
366 days, as appropriate.
Section 1. Definitions. When used in this Note, the following terms
have the respective meanings specified herein or in the section referred to:
"Cash Flow" means for any period Maker's net income from operations
after income taxes, increased for amortization and depreciation of intangible
assets and property and equipment and deferred income tax expense, decreased for
principal payments under all existing loan agreements and capital expenditures,
and adjusted for changes in working capital items not affecting the use of cash
in the period.
"Change of Control" means (i) the merger or consolidation of Maker, or
any entity that owns of record and/or beneficially more than twenty-five percent
(25%) of the issued and outstanding common stock of Maker (a "Controlling
Entity") with another entity and as a result of such merger or consolidation of
the outstanding voting securities of the surviving or resulting entity less than
fifty percent (50%) are owned in the aggregate by the former shareholders of
Maker or the Controlling Entity, or less than 30% are owned by Art Hawkins, (ii)
the acquisition by any person other than Art Hawkins or group within the meaning
of the Securities Exchange Act of 1934, as amended, of more than fifty percent
(50%) of any class of outstanding voting securities of Maker or a Controlling
Entity, whether directly, individually, beneficially or of record, pursuant to
any transaction or combination of transactions, (iii) a change of control of
Maker or a Controlling Entity of a nature that would require a report in
response to Item 6(e) of Schedule 14A of Regulations 14A promulgated under the
Securities Exchange Act of 1934, as amended, whether or not Maker or a
Controlling Entity is then subject to such reporting requirements, or (iv)
cessation, for any reason, of the individuals who, at the beginning of any
period of twelve (12) consecutive months, constituted the Board of Directors of
Maker or any Controlling Entity to constitute at least a majority thereof,
unless the nomination for election or election by Maker's or the Controlling
Entity's shareholders was approved by a vote of at least two-thirds of the
respective boards then still in office who either were directors at the
beginning of such period or whose election or nomination for election was
previously so approved.
<PAGE> 34
"Event of Default" has the meaning set forth in Section 5 hereof.
"Mortgages" means, collectively, the mortgages, deeds of trust, deeds
to secure debt and similar instruments of even date herewith, executed by Maker
to or for the benefit of Noteholder for the purpose of encumbering real property
of Maker, more particularly described therein, as security for the payment of
the indebtedness evidenced by this Note and the other obligations of Maker to
Noteholder described therein.
"Note" means this Senior Subordinated Secured Promissory Note.
"payment in full," "paid in full" or any similar formulation, when used
with respect to the Senior Financing Debt, means payment (or due provision for
payment) in full in cash or cash equivalents of one hundred percent (100%) of
the principal, interest, fees, expenses, and other obligations due or to become
due under the documents governing or securing the Senior financing Debt in
accordance with the terms of such documents, or otherwise on terms and
conditions to which the holders thereof shall consent in writing.
"Security Agreement" means the Security Agreement of even date herewith
between Maker and Noteholder.
"Senior Financing" means the "Senior Financing" defined and described
in, and contemplated by, Section 4.4 of the Purchase Agreement dated as of March
___, 1999, between HalArt, L.L.C., and Tyler Corporation.
"Senior Financing Debt" means any and all indebtedness, whether for
principal, interest, fees, or other amounts, at any time and from time to time
owing or to become owing by Maker under any agreement, instrument or document
governing, evidencing and/or securing the Senior Financing.
Section 2. Payment. The principal of and accrued interest on this Note
shall be due and payable as follows:
(a) Interest, computed as aforesaid, shall be due and payable
quarterly as it accrues, commencing on [the date hereof] ,
1999, and thereafter on the first day of each January, April,
July, and October of each calendar year during the term of
this Note, through and including _____________, 2002;
(b) The principal balance of this Note shall be due and payable
monthly in equal monthly installments of $80,000 or the
remaining balance thereof, commencing on April 30, 2000, and
thereafter on the last day of each calendar month during the
term of this Note until paid in full, provided, however, that
no monthly payment of principal shall be due and payable, and
shall be deferred, if Cash Flow from the date hereof through
the end of the period immediately preceding month does not
exceed $2,000,000; and provided further that any deferred
payment shall be added to the next monthly payment due and
payable; and
(c) the entire unpaid principal balance of this Note, together
with all accrued but unpaid interest thereon, shall be finally
due and payable in full on ____________, 2002(1).
- -------------
(1) Three years from the date hereof.
2
<PAGE> 35
Both principal of and interest on this Note are payable in lawful money of the
United States of America to Noteholder at 2800 West Mockingbird Lane, Dallas,
Texas 75235 (or at such other place as Noteholder shall specify in written
notice to Maker), in immediately available funds. All payments made hereon shall
be applied first to sums (other than the principal of and accrued interest on
this Note) payable by Maker pursuant to this Note or the Security Agreement,
then to accrued but unpaid interest on this Note, and thereafter to the unpaid
principal balance of this Note. Interest shall continue to accrue on unpaid
principal until receipt by Noteholder of good funds in payment thereof.
Section 3. Security. In order to secure the payment and performance of
the indebtedness and obligations evidenced by, or arising under or in respect
of, this Note and that certain Senior Subordinated Secured Promissory Note of
even date herewith from Maker to Noteholder in the original principal amount of
$2,000,000 ("Note A"), Maker has agreed to, and has, as of the date hereof,
executed and delivered to Maker the Security Agreement and the Mortgages,
pursuant to which Maker has granted to Noteholder (a) second priority (subject
only to the liens and security interests securing the Senior Financing Debt)
liens and security interests in all of Maker's now owned and hereafter acquired
inventory (as that term is defined in the Texas Uniform Commercial Code) and
real estate, and (b) first priority liens and security interests in all of
Maker's now owned and hereafter acquired accounts, equipment and general
intangibles (as those terms are defined in the Texas Uniform Commercial Code).
Reference is hereby made to the Security Agreement and the Mortgages for the
descriptions of the property covered thereby, the nature and extent of the liens
and security interests created and granted thereby, and the rights and powers of
the holder of this Note in respect of such liens and security interests. The
liens and security interest created under the Security Agreement and the
Mortgage in Maker's now owned and hereafter acquired inventory (as that term is
defined in the Texas Uniform Commercial Code) and real estate shall be junior
and subordinate only to the liens and security interest securing payment and
performance of the Senior Financing Debt. The indebtedness and obligations
evidenced by, or arising under or in respect of, this Note shall rank pari
passu, with respect to payment and security, with the indebtedness and
obligations evidenced by, or arising under or in respect of, Note A.
Section 4. Waiver. Except as provided herein or in the Security
Agreement, Maker and each surety, endorser, guarantor and other party ever
liable for payment of any sums of money payable upon this Note, jointly and
severally waive presentment, demand, protest, notice of protest and non-payment
or other notice of default, notice of acceleration and intention to accelerate
or other notice of any kind, and agree that their liability under this Note
shall not be affected by any renewal or extension in the time of payment hereof,
or in any indulgences, or by any release or change in any security for the
payment of this Note, and hereby consent to any and all renewals, extensions,
indulgences, releases or changes, regardless of the number of such renewals,
extensions, indulgences, releases or changes. No waiver by Noteholder of any of
its rights or remedies hereunder, or under any other document evidencing or
securing this Note or otherwise, shall be considered a waiver of any other
subsequent right or remedy of Noteholder; no delay or omission in the exercise
of enforcement by Noteholder of any rights or remedies shall ever be construed
as a waiver of any right or remedy of Noteholder; and no exercise or enforcement
of any such rights or remedies shall ever by held to exhaust any right or remedy
of Noteholder.
Section 5. Events of Default and Remedies. An "Event of Default" shall
exist hereunder if any one or more of the following events shall occur: (a)
Maker shall fail to pay when due any principal of, or interest upon, this Note;
(b) Maker shall (1) apply for or consent to the appointment of a receiver,
trustee, intervenor, custodian or liquidator of itself or of all or a
substantial part of its assets, (2) be adjudicated a bankrupt or
3
<PAGE> 36
insolvent or file a voluntary petition for bankruptcy or admit in writing that
it is unable to pay its debts as they become due, (3) make a general assignment
for the benefit of creditors, (4) file a petition or answer seeking
reorganization or an arrangement with creditors or to take advantage of any
bankruptcy or insolvency laws, or (5) file an answer admitting the material
allegations of, or consent to, or default in answering, a petition filed against
it in any bankruptcy, reorganization or insolvency proceeding, or take corporate
action for the purpose of effecting any of the foregoing; (c) an order, judgment
or decree shall be entered by any court of competent jurisdiction or other
competent authority approving a petition seeking reorganization of maker or
appointing a receiver, trustee, intervenor or liquidator of Maker, or of all or
substantially all of its assets, and such order, judgment or decree shall
continue unstayed and in effect for a period of sixty (60) days; (d) the
dissolution or liquidation of Maker; (e) Maker shall breach any covenant under
this Note, (f) any "Event of Default," as defined in the Security Agreement or
the Mortgage, shall occur, (g) any failure to pay, when due, any obligations,
whether as to principal, interest or otherwise, including non-payment following
acceleration or maturity, shall occur with respect to the Senior Financing Debt
and continue past the expiration of any period of grace, if any, with respect
thereto provided in the document governing the same, (h) any default or event of
default, other than a default or event of default occasioned by a failure to pay
as described in the preceding clause (g), shall occur with respect to Senior
Financing Debt and, by reason thereof, the holder of the Senior Debt accelerates
the maturity of all or any part of the Senior Financing Debt and declares the
same to be due and payable prior to the stated maturity date thereof, (i) the
payment of dividends by Maker on or with respect to its common stock in any
fiscal year in excess of 50% of Maker's net income after taxes, (j) Maker shall
make a loan to any party (other than advances to employees for reasonable travel
expenses in the ordinary course of business), and/or (k) a Change of Control
shall occur. Upon the occurrence of any Event of Default hereunder, the
Noteholder may, at its option, at any time thereafter, (i) declare the entire
unpaid principal balance and accrued interest upon this Note to be, and the same
shall thereupon become, immediately due and payable without the presentment or
notice of any kind, which Maker hereby waives pursuant to Section 4 hereof,
and/or (ii) pursue and enforce any of Noteholder's rights and remedies available
pursuant to any applicable law or agreement; provided, however, upon the
occurrence of any Event of Default specified in clause (b), (c) or (d) of this
Section 5,with respect to Maker, without any notice to Maker or any other act by
Noteholder, the principal balance and interest accrued on this Note shall
automatically and without necessity of any act by Noteholder become immediately
due and payable without presentment, demand, protest or notice of protest,
notice of acceleration, notice of intent to accelerate or other notice of any
kind, all of which are hereby waived by Maker. Noteholder agrees to advise Maker
promptly if Noteholder is aware of an Event of Default.
Section 6. Notice. Whenever this Note requires or permits any notice,
approval, request or demand from one party to another, the notice, approval,
request or demand must be in writing and shall be deemed to have been given when
personally served or when deposited in the United States mails, registered or
certified, return receipt requested, addressed to the party to be notified at
the following address (or at such other address as may have been designated by
written notice):
Noteholder: Tyler Corporation
2800 West Mockingbird Lane
Dallas, Texas 75235
Attention: Ted Bathurst
Telecopy No.: (214) 902-5058
with a copy to (which shall not constitute notice) to:
4
<PAGE> 37
H. Lynn Moore, Jr., Esq.
2800 West Mockingbird Lane
Dallas, Texas 75235
Telecopy No.: (214) 902-5058
Maker: Forest City Auto Parts Company
c/o Art Hawkins
6180 Cochran Road, 2nd Floor
Solon, Ohio 44139
with copies (which shall not constitute notice) to:
Art Hawkins
HalArt, L.L.C.
1520 Surria Court
Bloomfield Hills, MI 48304
Telecopy No.: (248) 593-4997
John M. Rickel, Esq.
Rickel & Baun, P.C.
63 Kercheval Avenue
Grosse Pointe Farms, Michigan 48236-3627
Telecopy No.: (313) 886-0405
Section 7. Prepayment.
(a) Voluntary Prepayment. Subject to the provisions of Section 10
of this Note, Maker reserves the right, upon thirty (30) days'
prior written notice to Noteholder, to prepay the outstanding
principal balance of this Note, in whole or in part, at any
time and from time to time, without premium or penalty. Any
such prepayment shall be made together with payment of
interest accrued on the amount of principal being prepaid
through the date of such prepayment.
(b) Mandatory Prepayment. Subject to the provisions of Section 10
of this Note, Maker shall prepay the outstanding principal
balance of this Note in whole upon (i) the sale of securities
of Maker or a Controlling Entity pursuant to a registration
statement that has been declared effective by the Securities
and Exchange Commission, (ii) Maker or a Controlling Entity
otherwise becoming a reporting company pursuant to the
Securities Exchange Act of 1934, as amended, (iii) Maker
selling or otherwise transferring all or any material part of
its assets, (iv) a Change of Control, (v) Maker incurring any
senior indebtedness for the purpose of a material expansion of
Maker's business and operations of more than $2,500,000, plus
senior financing for acquisitions of operating businesses.
Section 8. Usury Laws. Regardless of any provisions contained in this
Note, Noteholder shall never be deemed to have contracted for or be entitled to
receive, collect or apply as interest on or under this Note any amount in excess
of the maximum amount of interest permitted by applicable law (the "Maximum
Amount"), and, in the event that Noteholder ever receives, collects or applies
as interest any such excess, the amount which would be excessive interest shall
be deemed to be a partial prepayment of principal and treated
5
<PAGE> 38
hereunder as such; and, if the principal amount of this Note is paid in full,
any remaining excess shall forthwith be paid to Maker. In determining whether or
not the interest paid or payable under any specific contingency exceeds the
Maximum Amount, Maker and Noteholder shall, to the maximum extent permitted
under applicable law, (i) characterize any nonprincipal payment as an expense,
fee or premium rather than as interest; (ii) exclude voluntary prepayments and
the effects thereof; and (iii) amortize, prorate, allocate and spread, in equal
parts, the total amount of interest throughout the entire contemplated term of
this Note so that the interest rate is uniform throughout the entire term;
provided, however, that, if this Note is paid in full prior to the end of the
full contemplated term hereof, and if the interest received for the actual
period of existence thereof exceeds the relevant Maximum Amount, Noteholder
shall refund to Maker the amount of such excess or credit the amount of such
excess against the principal amount of this Note and, in such event, Noteholder
shall not be subject to any penalties provided by any Laws for contracting for,
charging, taking, reserving or receiving interest in excess of the relevant
Maximum Amount.
Section 9. GOVERNING LAW. THIS NOTE IS PAYABLE AND PERFORMABLE IN
DALLAS COUNTY, TEXAS, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE FEDERAL LAWS OF
THE UNITED STATES OF AMERICA. WITHOUT EXCLUDING ANY OTHER JURISDICTION, MAKER
AGREES THAT THE COURTS OF THE STATE OF TEXAS SITTING IN DALLAS, TEXAS, AND THE
FEDERAL COURTS SITTING IN DALLAS, TEXAS, WILL HAVE JURISDICTION OVER ANY
PROCEEDINGS IN CONNECTION HEREWITH.
Section 10. Subordination. Maker agrees, and Noteholder, for itself and
for each subsequent owner and holder of this Note, agrees that the obligation
represented by this Note is and shall be subordinated in right of payment to the
prior payment in full of the Senior Financing Debt, whether outstanding on the
date hereof or hereafter incurred. Upon any distribution of assets of Maker upon
or by reason of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to the Company or to substantially all of its
assets, or (b) any liquidation, dissolution or other winding up of the Company,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (c) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company, then and in any such event
specified in clause (a), (b) or (c) preceding (each such event, if any, herein
sometimes referred to as a "Proceeding"), (i) the holders of the Senior
Financing Debt will first be entitled to receive payment in full of the Senior
Financing Debt before Noteholder is entitled to receive any payment, whether of
principal, premium, if any, or interest, on account of this Note (other than
Junior Securities) and (ii) any payment or distribution of assets of Maker of
any kind or character from any source, whether in cash, property or securities
(other than Junior Securities) to which Noteholder would be entitled but for the
provisions of this Section 10 will be paid by the liquidating trustee or agent
or other person making such a payment or distribution directly to the holders of
the Senior Financing Debt or their representative to the extent necessary to
make payment in full of the Senior Financing Debt remaining unpaid, after giving
effect to any concurrent payment or distribution made directly to the holders of
such Senior Financing Debt. For purposes of this Section 10, "Junior Securities"
shall mean capital stock and/or securities of Maker provided for by a plan of
reorganization or readjustment, or of any other corporation provided for by such
plan of reorganization or readjustment authorized by an order or decree of a
court of competent jurisdiction in a reorganization Proceeding under any
applicable bankruptcy law which stock or securities are subordinated in right of
payment to all then outstanding Senior Financing Debt to substantially the same
extent as this Note is so subordinated as provided in this Section 10. After all
Senior Financing Debt is paid in full and until this Note is paid in full,
Noteholder shall be subrogated (equally and ratably with all other indebtedness
pari passu with this Note) to the rights of holders of Senior Financing Debt to
receive
6
<PAGE> 39
distributions applicable to Senior Financing Debt to the extent that
distributions otherwise payable to Noteholder have been applied to the payment
of Senior Debt. A distribution made under this Section 10 to holders of Senior
Financing Debt that otherwise would have been made to Noteholder is not, as
between Maker and Noteholder, a payment by Maker on this Note. Nothing in this
Note shall (1) impair, as between Maker and Noteholder, the obligations of Maker
to pay the principal of and interest on this Note in accordance with its terms;
(2) affect the relative rights of Noteholder and creditors of Maker other than
its rights in relation to holders of Senior Financing Debt; or (3) prevent
Noteholder from exercising its available remedies upon an Event of Default,
subject to the rights of holders and owners of Senior Financing Debt to receive
distributions and payments otherwise payable to Noteholder to the extent
provided in this Section 10.
Section 11. "Noteholder". As used herein, the term "Noteholder"
includes Tyler Corporation and any subsequent owner and holder at the time in
question of this Note.
MAKER:
FOREST CITY AUTO PARTS COMPANY,
a Delaware corporation
By:
Name:
Title:
7
<PAGE> 40
Forest City Auto Parts Company
(a wholly owned subsidiary of Tyler Corporation)
Balance Sheet
December 27, 1998
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 789,479
Accounts receivable (less allowance for doubtful
accounts of $25,000) 202,484
Merchandise inventories (less obsolescence reserve
of $600,000) 24,288,872
Prepaid expenses and other 91,078
Other assets (Note H) 200,000
------------
Total current assets 25,571,913
Property and equipment, at cost less accumulated
depreciation and amortization 6,375,485
------------
TOTAL ASSETS $ 31,947,398
============
</TABLE>
EXHIBIT D-1
AUDITED BALANCE SHEET WILL BE SUBSTITUTED WITHIN TEN DAYS AFTER EXECUTION OF
PURCHASE AGREEMENT
2
<PAGE> 41
<TABLE>
<S> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable--trade $ 4,403,406
Accrued liabilities (Notes D and H) 2,984,824
Deferred income taxes--current (Note G) 132,831
------------
Total current liabilities 7,521,061
Deferred income taxes--non current (Note G) 344,995
Intercompany account payable to Tyler Corporation (Note B) 10,474,599
Intercompany debenture payable to Tyler Corporation (Note B) 20,000,000
Commitments and contingencies (Notes E, F, and I)
Stockholder's equity:
Common stock, $1.00 par value, 1,000 shares
authorized, 1,000 shares issued and outstanding 1,000
Additional paid-in capital 4,550,000
Accumulated deficit (10,944,257)
------------
Total stockholder's equity (6,393,257)
------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 31,947,398
============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 42
FOREST CITY AUTO PARTS, INC.
CONDENSED BALANCE SHEET
UNAUDITED
DECEMBER 27, 1998
<TABLE>
<CAPTION>
ADJUSTMENTS FOR PROFORMA OPENING
TYLER ASSUMED BALANCE SHEET
HISTORICAL ACTIVITY(DR)CR FOR HALART
------------- --------------- -----------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 789,479 $ 0 $ 789,479
Accounts Receivable, net 202,484 0 202,484
Gross Inventory 24,888,872 0 24,888,972
Less: Inventory Reserve (600,000) 0 (600,000)
----------- ---- ----------
Net Inventory 24,288,872 0 24,288,872
Prepaid Expenses and other 91,078 0 91,078
Other Assets 200,000 0 200,000
----------- ---- ----------
TOTAL CURRENT ASSETS 25,571,913 0 25,571,913
PROPERTY & EQUIPMENT, AT COST
Total Property & Equipment 13,247,284 0 13,247,284
Less Accumulated Depreciation and Amortization (6,871,799) 0 (6,871,799)
----------- ---- -----------
Net Property and Equipment 6,375,485 0 6,375,485
TOTAL ASSETS $31,947,398 $ 0 $31,947,398
=========== ==== ===========
LIABILITIES AND NET INVESTMENT
CURRENT LIABILITIES
Accounts Payable-Trade $ 4,403,406 $ 0 $ 4,403,406
Deferred Income Taxes-Current 132,831 233,790 (2b) 356,621
Accrued Liabilities: 0
Accrued State Income Tax (23,335) 23,335 (2a) 0
Closed Stores: 0
Accrued Store Closure Expense 71,100 (71,100) (2c) 0
Accrued Rent Commitment 343,494 (343,494) (2c) 0
Accrued Real Estate Tax 23,700 (23,700) (2c) 0
Accrued Sales Tax Assessments 391,000 (391,000) (2d) 0
Deferred Liability for Step Leases 319,114 (319,114) (2e) 0
Accrued Legal Costs 0 0 (2f) 0
Other 1,859,751 0 1,859,751
---------- ---------- ----------
Total Accrued Liabilities 2,984,824 (1,125,073) 1,859,751
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 7,521,061 (901,283) 6,619,778
Deferred Income Taxes-Noncurrent 344,995 344,995
NET INVESTMENT/NET WORTH:
Intercompany Payable-Tyler 10,474,599 0
Intercompany Debenture-Tyler 20,000,000 0
Common Stock 1,000 0
Contributed Capital 4,550,000 0
Accumulated Deficit (6,393,257) 0
----------- ------- -----------
Net Investment/Net Worth 24,081,342 901,283 (2d) 24,982,625
----------- ------- -----------
TOTAL LIABILITIES AND NET INVESTMENT $31,947,398 0 $31,947,398
=========== ======= ===========
</TABLE>
See accompanying notes to unaudited condensed balance sheet
<PAGE> 43
FOREST CITY AUTO PARTS, INC.
NOTES TO UNAUDITED CONDENSED BALANCE SHEET
DECEMBER 27, 1998
1. The Purchase Agreement between Tyler Corporation (Tyler and/or Seller) and
HalArt, L.L.C. (Purchaser) provides for the preparation and presentation as
an Exhibit of an unaudited balance sheet as of December 27, 1998 of Forest
City Auto Parts, Inc. (a wholly owned subsidiary of Tyler).
The accompanying unaudited information for Forest City Auto Parts, Inc.
(the "Company") includes all adjustments which are, in the opinion of the
Company's management, of a normal or recurring nature and necessary for a
fair summarized presentation of the condensed balance sheet at December 27,
1998. Such financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
2. Pursuant to Section 9.1 of the Purchase Agreement, Seller agrees to
indemnify and hold harmless the Purchaser from certain matters.
Accordingly, certain adjustments have been made to the accompanying
historical unaudited condensed balance sheet to derive a "Pro forma opening
balance sheet for HalArt, L.L.C." to reflect this assumption by Tyler. The
following adjustments have been made to transfer to Tyler the recorded
general ledger balances as of December 27, 1998 for items not assumed by
HalArt, L.L.C. subsequent to the sale for the following estimated activity:
2(a) State income tax general ledger account balance for operating results
less estimated income tax payments prior to December 27, 1998.
2(b) Deferred income taxes-current and non-current, for the tax effects of
cumulative temporary differences between amounts for income taxes and
financial reporting purposes for operating results prior to December
27, 1998 will be assumed by the Purchaser, except for the deferred tax
effects of the liabilities for item 2(c) which will be retained by the
Seller. Since the transaction is to be a stock transaction, the
Seller's income tax basis is carried over to the Purchaser.
2(c) Estimated costs to be incurred in the future for rental payments, real
estate taxes and other commitments in connection with closed stores.
2(d) Estimated costs to be incurred in the future in connection with sales
tax audits for activity prior to February 1, 1997.
2(e) Deferred liability for step leases which represents cumulative rental
expense recorded pursuant to generally accepted accounting principles
on a straight-line basis in excess of cumulative rental payments for
escalating rental agreement payment amounts. Such deferral will not
represent a Purchaser liability as of the date of closing.
2(f) Estimated net costs (after insurance) to be incurred in connection
with certain legal proceedings.
2(g) Net worth for purposes of the Purchaser represents assets to be
acquired less liabilities to be assumed
<PAGE> 44
LEASES INDEMNIFIED
STORE NO. STORE NAME
- --------- ----------
2 Parma Heights
9 Bedford
14 Kensington
17 Toledo Southwest
18 Tonawanda
19 Toledo North
23 Cleveland Southeast
47 Niagara Falls
51 Toledo East
EXHIBIT E
<PAGE> 45
FCAP DISCLOSURE SCHEDULE
All capitalized terms used but not otherwise defined in the attached FCAP
Disclosure Schedule have the meanings assigned to such terms in the Purchase
Agreement by and among Tyler Corporation and Halart, L.L.C. dated as of March
__, 1999. Each of the disclosures set forth in the FCAP Disclosure Schedules
are made as an exception to or as required by the Agreement and are made as of
the date of the Agreement. Disclosure of any matters in the FCAP Disclosure
Schedules should not be construed as indicating that such matter is necessarily
required to be disclosed in order for any representation or warranty in the
Agreement to be true and correct in all material respects. Disclosure of any
matter in the FCAP Disclosure Schedules relating to (a) any known or unknown
obligations or liabilities, (b) the compliance or failure to comply with any
contracts, commitments, laws, or regulations, and (c) any pending or threatened
proceedings, lawsuits, administrative actions, or and potential basis therefor,
will not be deemed to be an admission or denial of the matters relating thereto
that are so disclosed or an assessment of the likelihood or magnitude of the
outcome thereof. Although a section reference is indicated for each disclosure,
disclosure with respect to one section shall be disclosure under each other
schedule so long as the reviewing party would reasonably be on notice of the
item disclosed in reference to such other schedule.
<PAGE> 46
FCAP DISCLOSURE SCHEDULE 1.5
TO THE PURCHASE AGREEMENT
RESIGNING OFFICERS AND DIRECTORS
Resigning Directors
C.A. Rundell, Jr.
Brian Miller
Resigning Officers
Brian Miller, Vice President
Terri Alford, Assistant Secretary
<PAGE> 47
FCAP DISCLOSURE SCHEDULE 2.2
TO THE PURCHASE AGREEMENT
FOREIGN QUALIFICATIONS
FCAP is duly qualified or licensed to do business as a foreign corporation in
the following jurisdictions:
Ohio
Illinois
New York
Pennsylvania
Wisconsin
<PAGE> 48
FCAP DISCLOSURE SCHEDULE 2.6
TO THE PURCHASE AGREEMENT
CONSENTS
Lease, dated August 24, 1989, by and between Forest City Auto Parts Company (as
assigned from The Whitlock Corporation and Auto Works, Inc.), as tenant, and
Principal Mutual Life Insurance Company (as assigned from Frank & Joseph
Crivello), as landlord, for the premises located at 320-332 East Capitol Drive,
Milwaukee, Wisconsin.
Lease Agreement, dated September 5, 1989, by and between Forest City Auto Parts
Company (as assigned from The Whitlock Corporation), as tenant, and Principal
Mutual Life Insurance Company (as assigned from Frank Crivello), as landlord,
for the premises located at 4698 South Whitnall Avenue, St. Francis, Milwaukee
County, Wisconsin.
<PAGE> 49
FCAP DISCLOSURE SCHEDULE 2.9
TO THE PURCHASE AGREEMENT
CHANGES IN THE BUSINESS SINCE THE FCAP BALANCE SHEET DATE
The following is a list of actions that FCAP or Tyler may do or refrain from
doing from the date of the Agreement to the Closing Date, any of which may or
may not be in the ordinary course of business:
Tyler will establish any procedures it deems reasonable and necessary to
oversee the payment of all invoices, bills, statements, and other documents
presented to FCAP for payment.
Tyler will determine the opening of any new store locations during the
period of time from the date of the Agreement until the Closing Date.
Tyler will take all necessary steps to cause FCAP to be operated in such a
manner so as to maintain the FCAP Net Worth within the range as set forth in
Section 1.4 to the Agreement.
<PAGE> 50
FCAP DISCLOSURE SCHEDULE 2.10
TO THE PURCHASE AGREEMENT
INTELLECTUAL PROPERTY
Attached is a list of four FCAP marks that are registered with the United
States Patent and Trademark Office, one FCAP mark that is registered with the
Secretary of State of the State of Ohio, and one FCAP mark the application for
which is currently pending before the United States Patent and Trademark Office.
In addition to these registered trademarks, FCAP operates under the trade name
of Forest City Auto Parts.
<PAGE> 51
<TABLE>
<CAPTION>
88625
File/Docket No. Trademark Appln. No. Appln. Date. Reg. No. Reg. Date Renewal Due
- --------------- ----------------- ---------- ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
088625/0004 MAX 74/567,935 AUG 31 1994 2,059,664 MAY 06 1997 MAY 06 2007
088625/0008 MAXWAY & DESIGN 73/043,741 FEB 07 1975 1,067,633 JUN 14 1977 JUN 14 2007
088625/0010 MISCELLANEOUS DESIGN 73/012,911 FEB 07 1974 1,007,510 MAR 25 1975 MAR 25 2005
(Caricature)
088625/0011 STOP LOOKING & DESIGN 2674 JAN 12 1998 99731 JAN 12 1998 JAN 12 2008
088625/0013 MAX WEAR & DESIGN 75/087,454 APR 12 1996 2,114,738 NOV 18 1997 NOV 18 2007
088625/0014 MAXWAY PLUS 75/432,425 FEB 11 1998
</TABLE>
<TABLE>
<CAPTION>
Outstanding Matter Due Date City Status
- ------------------ -------- ---------------
<S> <C> <C>
US Registered
US Registered
US Registered
US Registered
XOH Registered
US Registered
Aviating Office Action JAN 11 1999 US Pending
Has Registration FEB 11 2000
Certificate been
Received?
Has Notice of Publication APR 11 1999
been Received?
</TABLE>
<PAGE> 52
FCAP DISCLOSURE SCHEDULE 2.11
TO THE PURCHASE AGREEMENT
LITIGATION
Pending Litigation
Timothy Wilmot, et al. v. Forest City Auto Parts, et al., Cuyahoga County
Court of Common Pleas, Case No. 348146.
Bonita A. Brown v. Forest City Auto Parts and Tyler Corporation, State of
New York Supreme Court, County of Erie, Index No. I-1997/8187.
Leon Borozynski, et al. v. Forest City Auto Parts, New York Supreme Court,
County of Niagara, Index No. 95504.
Threatened Litigation
Joyce Gaskins v. Forest City Auto Parts, Ohio Civil Rights Commission
Charge No. (CLE) 24050598 (30643) 072798; 220981397 -- allegation of racial
discrimination in connection with termination of employment. Complaint currently
under consideration by the Ohio Civil Rights Commission.
Irwin Grossinger v. Forest City Auto Parts -- potential dispute in which
former landlord has attempted to recover alleged damages to Cleveland, Ohio
premises.
William A. Seiverth and Florence M. Seiverth v. Forest City Auto Parts --
potential dispute regarding early termination of lease.
2525 Henrietta, Inc. v. Forest City Auto Parts -- potential dispute
regarding landlord's termination of lease.
<PAGE> 53
[TYLER CORPORATION LETTERHEAD]
March 22, 1999
VIA FEDERAL EXPRESS
Mr. Art Hawkins
Halart, L.L.C.
1520 Surria Court
Bloomfield Hills, Michigan 48304
Dear Art:
I am returning the executed copy of the Purchase Agreement subject to your
agreement to the following:
1. Section 1.3 of the Agreement is amended by adding after the word
"proceeding," the words "or simultaneously with." Vic Puri requested this.
2. Section 4.4 of the Agreement is amended by adding after the word
"inventory" in the second line, the words "and other assets." Vic Puri
requested this.
3. It is understood that some or all of the $3,800,000 real estate financing
money may have to be escrowed pending receipt of surveys.
4. Section 9.1(d)(v) is amended by noting that $67,500 has already been paid.
5. Section 3(b) of the preferred stock provisions, Exhibit A to the Agreement,
is amended with the example to read as follows:
(ii) upon the sale of any real estate, the Corporation shall redeem
shares of Preferred Stock to the extent 75% of the sales proceeds of the
real estate exceed the 50% amount lent against the real estate;
Ex: The Corporation sells real estate originally valued at $100,000 for
$90,000. The Corporation will pay $50,000 to the bank, the Corporation will
pay $17,500 in redemption of shares of Preferred Stock, and $22,500 will be
retained by the Corporation. If the sale price was $130,000, the Corporation
would pay $47,500 in redemption of shares of Preferred Stock, and $32,500
would be retained by the Corporation.
Vic Puri requested this.
<PAGE> 54
Mr. Art Hawkins
March 22, 1999
Page Two
6. Section 3 of each of the two senior subordinated notes, Exhibits B and C to
the Agreement, is amended by deleting (b), in recognition of the fact that
the subordinated notes will not have a first priority lien but only a second
lien to the Senior Financing Debt. Vic Puri requested this.
7. Sections 2(b) of the $1,000,000 note, last line of page 2 is revised to
read: "period immediately preceding the month of a scheduled principal
payment does not exceed $2,000,000; and provided further that any deferred
payment shall be added to the next monthly payment due and payable;" so long
as the cash flow in that month recovers the cumulative cash to above
$2,000,000.
8. Section 6.2 of the Agreement, which you scratched through, is reinstated.
9. The Harold Parkison waiver letter is enclosed for his signature.
10. The $2,000,000 commitment letter is enclosed for your signature.
If the foregoing reflects your understanding, please sign a copy of this letter
and return to me (i) a signed copy of this letter, (ii) the Parkison letter,
and (iii) the $2,000,000 letter, and the Agreement shall be deemed thereupon
delivered.
If you have any questions, please call.
Yours very truly,
TYLER CORPORATION
By: /s/ C.A. RUNDELL, JR.
--------------------------
C. A. Rundell, Jr.
AGREED TO:
HALART, L.L.C.
By: /s/ ART HAWKINS
--------------------
Art Hawkins
cc: Vic Puri
John M. Rickel, Jr.
Neil J. O'Brien
<PAGE> 1
EXHIBIT 10.2
SUBORDINATION AND INTERCREDITOR AGREEMENT
This Subordination and Intercreditor Agreement ("Agreement")
is made as of this 26th day of March, 1999, among CONGRESS FINANCIAL
CORPORATION (CENTRAL), an Illinois corporation ("Senior Lender"), TYLER
CORPORATION, a Delaware corporation ("Subordinated Lender"), and FOREST CITY
AUTO PARTS COMPANY, a Delaware corporation ("Borrower").
W I T N E S S E T H
WHEREAS, Senior Lender and Borrower have entered into a Loan
and Security Agreement dated on or about the date hereof (as from time to time
amended, modified, extended, renewed, or restated, the "Loan Agreement"),
together with the other Financing Agreements (as defined in the Loan
Agreement), whereby Senior Lender shall make available to Borrower the credit
facilities (collectively, the "Senior Loan") therein set forth, which
obligations under such Senior Loan are secured by certain security interests in
the Collateral (as defined below), as more fully set forth in the Financing
Agreements (each as from time to time amended, modified, extended, renewed or
restated, collectively with the Loan Agreement, the "Senior Loan Documents");
WHEREAS, Borrower has issued in favor of Subordinated Lender
a Senior Subordinated Secured Promissory Note in the original principal amount
of Two Million Dollars ($2,000,000) (as may be amended and restated, the
"Subordinated A Note"), which obligations under such Subordinated A Note (i)
shall be increased to the extent of any outstanding balance under the
Subordinated C Note (defined herein) on the maturity date of the Subordinated C
Note and (ii) are secured by a junior security interest in the Collateral,
except for Permitted First Liens (defined herein), as more fully set forth in
the security agreements, mortgages and other documents executed in connection
therewith (each as from time to time amended, modified, extended, renewed or
restated, collectively with the Subordinated A Note, the "Subordinated A Loan
Documents");
WHEREAS, Borrower has issued in favor of Subordinated Lender
a Senior Subordinated Secured Promissory Note in the principal amount of One
Million Dollars ($1,000,000) (the "Subordinated B Note"), which obligations
under such Subordinated B Note are secured by a junior security interest in the
Collateral, as more fully set forth in the security agreements, mortgages and
other documents executed in connection therewith (each as from time to time
amended, modified, extended, renewed or restated, collectively, the
"Subordinated B Loan Documents");
WHEREAS, Borrower has issued in favor of Subordinated Lender
a Senior Subordinated Secured Promissory Note in the principal amount of
Three Million Eight Hundred Twenty-Five Thousand Dollars ($3,825,000) (the
"Subordinated C Note"), which obligations under such Subordinated C Note shall
(i) to the extent not paid with proceeds from the Term Loan by the maturity
date of such Subordinated C Note, be added to the principal balance
<PAGE> 2
outstanding under the Subordinated A Note and (ii) be secured by a junior
security interest in the Collateral, as more fully set forth in the security
agreements, mortgages and other documents executed in connection therewith
(each as from time to time amended, modified, extended, renewed or restated,
collectively, the "Subordinated C Loan Documents");
WHEREAS, Borrower has issued in favor of Subordinated Lender
5,500 shares of $1,000.00 par value per share preferred stock (the "Preferred
Stock") and may become obligated to redeem such Preferred Stock under the terms
set forth in the Amendment to Certificate of Incorporation of Borrower in
effect as of the date hereof (together with all certificates, instruments and
agreements evidencing the Preferred Stock, the "Preferred Stock Documents");
WHEREAS, as set forth in Section 19, Subordinated Lender
shall benefit from the execution and delivery of the Loan Agreement and the
making of the Senior Loan; and
WHEREAS, as a condition of the financial accommodations under
the Senior Loan Documents, the parties hereto are required to enter into this
Agreement to establish the priority of the repayment of Borrower's debt, and to
address certain related matters; and
WHEREAS, Subordinated Lender and Borrower desire to enter
into this Agreement in order to induce Senior Lender to enter into the Loan
Agreement with Borrower and to make the Senior Loan.
NOW, THEREFORE, for good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Definitions.
Except as otherwise provided herein, all capitalized terms
used in this Agreement shall have the meanings ascribed to such terms in the
Loan Agreement, provided that the following terms shall have the meanings set
forth below:
"Bankruptcy Code" shall mean Title 11 of the United States
Code (11 U.S.C. Section 101 et. seq.) or any replacement or supplemental federal
statute dealing with the bankruptcy of debtors.
"Collateral" means all assets, property and property rights
of any kind or nature, tangible or intangible, now or hereafter existing, in
which Borrower or any Obligor owns, asserts or maintains an interest.
"Finally Paid" or "Final Payment", when used in connection
with the Senior Indebtedness, shall mean the full and final payment in cash of
all of the Senior Indebtedness and the termination of Senior Lender's
obligation to make loans or other advances under the Loan Agreement.
"Hawkins Guaranty" shall mean that certain Limited Guaranty
executed by Arthur Hawkins in favor of Senior Lender with respect to Borrower's
obligations under the Term Loan.
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<PAGE> 3
"Incipient Default" shall mean any event which with the
passage of time or the service of notice or both would mature into an Event of
Default.
"Insolvency Proceeding" shall mean any proceeding commenced
by or against any Person under any provision of the Bankruptcy Code, or under
any other bankruptcy or insolvency law, including assignments for the benefit
of creditors, formal or informal moratoria, compositions, extensions generally
with its creditors, or proceedings seeking reorganization, arrangement or other
similar relief.
"Junior Securities" shall mean any debt or equity securities
distributed to the holders of the Subordinated Indebtedness, but only if they
are subordinated to at least the same extent as the Subordinated Debt Documents
to the Senior Indebtedness and any securities issued in exchange for Senior
Indebtedness, and any such subordination shall include provisions relating to
amortization and prepayment or, if applicable, redemption or repurchase to at
least the same effect as set forth herein such that, except to the extent
otherwise provided herein, all payments of principal on the Senior Indebtedness
or any securities issued in exchange for the Senior Indebtedness are to be made
in full prior to any payment of principal under or redemption or repurchase of
such securities distributed to the holders of the Subordinated Indebtedness.
"Liens" means any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security
interest under the UCC or comparable law of any jurisdiction).
"Obligor" shall mean any guarantor or obligor of any Senior
Indebtedness.
"Permitted First Lien" shall mean any Lien held by
Subordinated Lender on any of Borrower's Real Property as to which Senior
Lender has agreed in writing to release its Liens on such Real Property and
permit Subordinated Lender to have a first Lien on such Real Property.
"Required Conditions" shall mean the satisfaction of each of
the following conditions: (a) no Event of Default or Incipient Default exists
or would result from the making of an Allowed Payment (defined herein), (b)
with respect to any Allowed Payment under clause (c) of Section 5 of this
Agreement, Borrower will have Excess Availability of at least $2,000,000 after
giving effect to such Allowed Payment and (c) with respect to any Allowed
Payment under clause (d) of Section 5 of this Agreement, Senior Lender shall
have funded that portion of the Term Loan supporting such Allowed Payment.
"Senior Indebtedness" means all principal, interest and other
obligations at any time due and owing by Borrower or any Obligor to Senior
Lender arising out of or incurred in connection with the Senior Loan Documents
or other documents executed in connection with the
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<PAGE> 4
Senior Loan Documents (and any indebtedness which refinances such principal,
interest or other obligations) as modified, extended, renewed or restated,
whether direct or contingent and whether now existing or hereafter created. In
addition to the above, Senior Indebtedness shall also include, without
limitation, (i) all interest and costs of enforcement or preservation and
protection of Collateral which may at any time accrue with respect to the
Senior Indebtedness or which would accrue but for the operation of any
provision or doctrine with respect to the Bankruptcy Code and any obligations
of, advances made to or claims against Borrower pursuant to or with respect to
any financing or extension of credit provided to Borrower by Senior Lender
pursuant to Section 363 or 364 of the Bankruptcy Code and (ii) all interest
which accrues on the principal amount of the Senior Indebtedness subsequent to
the commencement of a proceeding under Chapter 11 of the Bankruptcy Code,
irrespective of whether or not such interest would be allowed as a claim in
such proceedings.
"Subordinated Equity Rights" shall mean all dividends,
distributions and redemption rights now or hereafter arising with respect to
any of the Preferred Stock Documents.
"Subordinated Indebtedness" means (i) the Subordinated Equity
Rights, (ii) all principal, premium, if any, interest, fees costs, enforcement
expenses (including legal fees and disbursements), reimbursement obligations,
indemnity obligations, dividends, distributions, redemptions and all other
obligations now or hereafter existing or arising under the Subordinated A Loan
Documents, Subordinated B Loan Documents and Subordinated C Loan Documents,
(iii) any principal, interest, fees or other monies which may now or hereafter
be owing by any guarantor of any Subordinated Indebtedness and (iv) all present
and future advances, debts, liabilities, indebtedness obligations, claims and
causes of action, otherwise owing to or arising in favor of Subordinated Lender
in respect of Borrower, whether evidenced by any note, or other instrument or
document, whether absolute or contingent, due or to become due, including,
without limitation, all interest, charges, expenses, fees, attorneys' fees and
any other sums chargeable to Borrower or any Obligor (and any indebtedness
which refinances such principal, interest or other obligations) as modified,
extended, renewed or restated, whether direct or contingent and whether now
existing or hereafter created. Subordinated Indebtedness shall include, without
limitation, interest which accrues on any Subordinated Indebtedness subsequent
to the commencement of a case under Chapter 11 of the Bankruptcy Code,
irrespective of whether or not such interest would be allowed as a claim in
such proceedings. Subordinated Indebtedness shall not include amounts owing to
Subordinated Lender, if any, pursuant to Section 1.4 of that certain Purchase
Agreement dated on or about the date hereof between Subordinated Lender and
HalArt, L.L.C.
"Subordinated Loan Documents" means the Subordinated A Loan
Documents, the Subordinated B Loan Documents, the Subordinated C Loan Documents
and the Preferred Stock Documents.
"UCC" shall mean Article 9 of the Uniform Commercial Code, as
in effect in the State of Illinois from time to time.
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<PAGE> 5
2. Subordination.
(A) The payment and performance of the Subordinated
Indebtedness is hereby subordinated to the Final Payment of the Senior
Indebtedness and except for Allowed Payments (defined herein), Subordinated
Lender will not ask, demand, sue for, take or receive from Borrower by setoff
or in any other manner, the whole or any part of the Subordinated Indebtedness
which may now or hereafter be owing by Borrower and will not take any
negotiable instruments evidencing such amounts for any of the foregoing, unless
and until there is a Final Payment of the Senior Indebtedness. Subordinated
Lender now possesses and hereafter may acquire Liens or security interests in
the Collateral and hereby agrees that except for Permitted First Liens, any
Liens, security interests, claims and rights of any kind it may now possess or
hereafter acquire against Borrower, any Obligor and/or the Collateral shall be
subordinate and subject to the Liens, security interests, claims and rights
against Borrower, any Obligor and/or the Collateral of Senior Lender arising
from or out of the Senior Indebtedness, regardless of the order or time as of
which any Liens attach to any of the Collateral, the order or time of UCC
filing or any other filings, notices or recordings, the order or time of
granting of any such Liens, or the physical possession of any of the Collateral
until this Agreement is terminated in accordance with Section 26 hereof. Unless
otherwise permitted by the terms of this Agreement, the Subordinated Lender
shall have no right to possession of any Collateral or to foreclose upon any
Collateral, whether by judicial action or otherwise, unless and until the
Senior Indebtedness has been Finally Paid. The Subordinated Lender also hereby
agrees that, regardless of whether any of the Senior Indebtedness is secured or
unsecured, Senior Lender shall be subrogated to the Subordinated Lender with
respect to the Subordinated Lender's claims against Borrower and the
Subordinated Lender's Liens, if any, in any of Borrower's Collateral and the
proceeds thereof until all of the Senior Indebtedness has been Finally Paid.
(B) Subordinated Lender shall, simultaneously with the
execution and delivery of this Agreement, cause the following legend to be
placed on the Subordinated A Note, the Subordinated B Note and the Subordinated
C Note:
This Senior Subordinated Secured Promissory Note
(this "Note") and the indebtedness evidenced hereby are
subordinated in the manner and to the extent set forth in the
Subordination and Intercreditor Agreement (the "Subordination
Agreement") dated as of March 26, 1999, by the payee of this
Note in favor of Congress Financial Corporation (Central)
(together with its successors and assigns, the "Senior
Lender") to all indebtedness (including interest) at any time
owed by the maker of this Note to Senior Lender, and each
holder of this Note, by its acceptance hereof, shall be bound
by the Subordination Agreement.
(C) Subordinated Lender shall simultaneously with the
execution and delivery of this Agreement, cause the following legend to be
placed on each stock certificate evidencing the Preferred Stock:
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<PAGE> 6
This Certificate and any entitlements afforded to it under
the Certificate of Incorporation, as amended, of Forest City
Auto Parts Company, is subordinated in the manner and to the
extent set forth in the Subordination and Intercreditor
Agreement (the "Subordination Agreement") dated as of March
26, 1999, by the holder of this Certificate in favor of
Congress Financial Corporation (Central) (the "Senior Lender")
to all indebtedness (including interest) at any time owed by
the issuer of this Certificate to Senior Lender, and each
holder of this Certificate, by its acceptance hereof, shall be
bound by the Subordination Agreement.
3. (A) Warranties and Representations of Subordinated Lender.
Subordinated Lender represents and warrants to Senior Lender:
(A) that this Agreement has been duly executed and delivered by Subordinated
Lender and constitutes a legal, valid and binding obligation of Subordinated
Lender, enforceable against Subordinated Lender in accordance with its terms,
except to the extent that the enforceability hereof may be limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
from time to time in effect affecting generally the enforcement of creditors'
rights and remedies and general principles of equity; (B) that Subordinated
Lender is a corporation duly formed, validly existing and in good standing
under the laws of Delaware; (C) that all necessary corporate actions have been
taken by Subordinated Lender to authorize the execution and delivery by
Subordinated Lender of this Agreement and the performance of its obligations
hereunder; (D) that the execution, delivery, and performance by Subordinated
Lender of this Agreement do not and will not conflict with or result in any
default under Subordinated Lender's certificate of incorporation, bylaws or
other governing instrument or any agreement or instrument of any kind to which
Subordinated Lender is a party or by which Subordinated Lender or its
properties are bound, except for those as to which consents have been obtained
and are in full force and effect, and except where such conflict or
contravention will not have a material adverse effect on the financial
condition, operations, prospects, profits, business or property of Subordinated
Lender; (E) Subordinated Lender is the holder and owner of all of the
Subordinated Indebtedness, together with all claims and rights in connection
therewith, arising therefrom or evidenced thereby; and (F) Subordinated Lender
has not relied and shall not rely on any representation or information of any
nature made by or received from Senior Lender relative to Borrower in deciding
to execute this Agreement or to permit it to continue in effect.
(B) Warranties and Representations of Senior Lender.
Senior Lender represents and warrants to Subordinated Lender:
(A) that this Agreement has been duly executed and delivered by Senior Lender
and constitutes a legal, valid and binding obligation of Senior Lender,
enforceable against Senior Lender in accordance with its terms, except to the
extent that the enforceability hereof may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect affecting generally the enforcement of creditors' rights and
remedies and general principles of
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<PAGE> 7
equity; (B) that Senior Lender is a corporation duly formed, validly existing
and in good standing under the laws of Illinois; (C) that all necessary
corporate actions have been taken by Senior Lender to authorize the execution
and delivery by Senior Lender of this Agreement and the performance of its
obligations hereunder; and (D) that the execution, delivery, and performance by
Senior Lender of this Agreement do not and will not conflict with or result in
any default under Senior Lender's articles of incorporation, bylaws or other
governing instrument or any agreement or instrument of any kind to which Senior
Lender is a party or by which Senior Lender or its properties are bound, except
for those as to which consents have been obtained and are in full force and
effect, and except where such conflict or contravention will not have a material
adverse effect on the financial condition, operations, prospects, profits,
business or property of Senior Lender.
4. Negative Covenants. Until all of the Senior Indebtedness has been
Finally Paid: (A) Borrower shall not, directly or indirectly, grant a security
interest in, or mortgage, pledge, assign or transfer any properties to secure
or satisfy all or any part of the Subordinated Indebtedness, except for a Lien
on the Collateral which, except for Permitted First Liens, is junior to the
Lien in favor of Senior Lender on such Collateral and is subject to the terms
of this Subordination Agreement; (B) Subordinated Lender shall not demand or
accept from Borrower or any other Person any such Collateral, except for a Lien
on the Collateral which, except for Permitted First Liens, is junior to the
Lien in favor of Senior Lender on such Collateral and is subject to the terms
of this Subordination Agreement; (C) Subordinated Lender shall not hereafter
give any subordination in respect of the Subordinated Indebtedness; (D)
Subordinated Lender shall not transfer or assign any of the Subordinated
Indebtedness to any Person, except upon the condition that such transferee or
assignee shall have agreed in writing to be bound by the terms of this
Agreement as a Subordinated Lender hereunder (whereupon Subordinated Lender
shall promptly deliver a copy of such writing to Senior Lender); (E) Borrower
shall not hereafter issue any instrument, security or other writing evidencing
any part of the Subordinated Indebtedness and Subordinated Lender shall not
receive any such writing, except upon the condition that such security shall
bear the legend referred to in Section 2 above and a true copy thereof shall be
furnished to Senior Lender; and (F) none of Borrower or Subordinated Lender
otherwise shall take any action contrary to Senior Lender's priority position
over Subordinated Lender that is created by this Agreement, except with respect
to the exercise by Subordinated Lender of the rights granted to it in this
Agreement as and when permitted under this Agreement.
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<PAGE> 8
5. Payments of the Subordinated Indebtedness. Until all of the
Senior Indebtedness has been Finally Paid, Borrower shall not make and
Subordinated Lender shall not accept any direct or indirect payment in cash,
property, securities or anything of value, by set-off or otherwise, with respect
to any Subordinated Indebtedness except to the extent permitted in this Section
5. Borrower may make, and Subordinated Lender may receive, the following
payments (each, an "Allowed Payment") only so long as (i) the applicable
Required Conditions are satisfied and (ii) such payment does not occur during
any Standstill Period, as described in Section 6 of this Agreement:
(a) payments of interest made on or after, and with respect
to, a scheduled interest payment date in accordance with the Subordinated A
Note, Subordinated B Note and Subordinated C Note;
(b) payments of principal made on or after, and with respect
to, a scheduled principal payment date in accordance with the Subordinated B
Note;
(c) "Partial Redemption" payments made within thirty (30)
days after the time period scheduled in accordance with (and as defined in) the
Preferred Stock Documents; and
(d) prepayments of principal under the Subordinated C Note;
provided, that any such prepayment is funded solely with proceeds from the Term
Loan.
6. Prohibition on Payments.
(A) The foregoing provisions of Section 5 to the contrary
notwithstanding, upon the failure of Borrower to satisfy any Required Condition
applicable to any Allowed Payment(s), and upon receipt by Subordinated Lender
of written notice thereof (a "Blockage Notice") from Senior Lender, no direct
or indirect payment in cash, property, securities or anything of value, by set
off or otherwise with respect to such Allowed Payment(s), shall be made or
agreed to be made by Borrower or accepted by Subordinated Lender subsequent to
the issuance of a Blockage Notice on account of any amounts due under the
Subordinated Loan Documents or in respect of any redemption, retirement or
acquisition of any of the Subordinated Indebtedness evidencing or due under the
Subordinated Loan Documents and Borrower shall not segregate or hold in trust
money for any such payment or distribution. Upon notice from Senior Lender
rescinding the Blockage Notice, Subordinated Lender shall be entitled to the
immediate payment in full of all suspended payments of the Subordinated
Indebtedness but only to the extent permitted by Section 5 (including
satisfaction of the applicable Required Conditions).
(B) The foregoing provisions of Section 6(A) to the contrary
notwithstanding, if the Blockage Notice relates solely to an Event of Default
or Incipient Default (other than an Event of Default or Incipient Default under
Section 10.1(a) of the Loan Agreement), no direct or indirect payment in cash,
property, securities or anything of value, by set off or otherwise, shall be
made or agreed to be made by Borrower or accepted by Subordinated Lender
subsequent to the issuance of a Blockage Notice on account of any amounts due
under the Subordinated Loan Documents or in respect of any redemption,
retirement or acquisition of any of the Subordinated
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<PAGE> 9
Indebtedness evidencing or due under the Subordinated Loan Documents and
Borrower shall not segregate or hold in trust money for any such payment or
distribution unless and until the earliest of the following to occur has
occurred: (i) Subordinated Lender has received a written notice from Senior
Lender that such Event of Default referred to in such Blockage Notice has been
cured or waived by Senior Lender (which notice Senior Lender agrees to promptly
forward), or (ii) the expiration of one hundred eighty (180) days following the
giving of the Blockage Notice (or, if the Blockage Notice given by Senior
Lender is the result of an Incipient Default, the date such Incipient Default
ceases to exist if such date is earlier than the expiration of one hundred
eighty (180) days) (the period from the date the Blockage Notice is given to
the earlier to occur of the applicable events described in clauses (i) and (ii)
of this sentence shall be referred to as the "Standstill Period"). Upon the
expiration of the Standstill Period, Subordinated Lender shall be entitled,
notwithstanding anything herein to the contrary, to the immediate payment in
full of all suspended payments of the Subordinated Indebtedness but only to the
extent permitted by Section 5 (including satisfaction of the applicable
Required Conditions) and, subject to Section 7(B), Subordinated Lender shall
further be entitled to seek enforcement, collection, or realization on such
suspended payments of the Subordinated Indebtedness if said suspended payments
are not immediately so paid by Borrower. Senior Lender may issue a Blockage
Notice not less than thirty (30) days after the expiration of any Standstill
Period; provided such Blockage Notice is not with respect to any Event of
Default or Incipient Default in existence on the date the immediately preceding
Blockage Notice was issued.
(C) Should any payment or distribution or security or
instrument or proceeds thereof be received by the Subordinated Lender during
any Standstill Period or at any time at which such payment or distribution is
prohibited by the terms of this Agreement upon or with respect to the
Subordinated Indebtedness or any other obligations of Borrower to the
Subordinated Lender prior to the Final Payment of all of the Senior
Indebtedness, Subordinated Lender shall receive and hold the same in trust, as
trustee, for the benefit of Senior Lender, and shall forthwith deliver the same
to Senior Lender, in precisely the form received (except for the endorsement or
assignment of the Subordinated Lender where necessary), for application on any
of the Senior Indebtedness, due or not due, and, until so delivered, the same
shall be held in trust by the Subordinated Lender as the property of the Senior
Lender. In the event of the failure of the Subordinated Lender to make any such
endorsement or assignment to Senior Lender, Senior Lender, or any of its
officers or employees, is hereby irrevocably authorized to make the same.
(D) In the event that any failure of Borrower to make or of
Subordinated Lender to receive any payment with respect to the Subordinated
Indebtedness as a result of the provisions of Sections 5 and 6 shall be deemed
a default under any Subordinated Loan Document, such event shall not give rise
to any right of Subordinated Lender to exercise any remedies otherwise
available to it in respect of the Subordinated Indebtedness unless otherwise
permitted by the terms of this Agreement, any provision of any Subordinated
Loan Document to the contrary notwithstanding.
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<PAGE> 10
7. Forbearance of Legal Remedies.
(A) The Subordinated Lender, prior to the Final Payment of the Senior
Indebtedness, shall have no right to enforce any claim with respect to the
Subordinated Indebtedness, or otherwise to take any action (other than to file
its claim in any proceeding under the Bankruptcy Code) against Borrower or any
Obligor or Borrower's or any Obligor's property without the prior written
consent of Senior Lender; provided, that, in the event that the Borrower shall
fail to make an Allowed Payment and such failure continues for a period of
thirty (30) days after written notice thereof is given to Senior Lender by the
Subordinated Lender (unless such failure is at a time when any applicable
Required Condition has not been satisfied), then the Subordinated Lender may
file and prosecute a lawsuit against the Borrower for payment thereof (but the
Subordinated Lender shall not enforce its Liens other than in connection with
an enforcement by Senior Lender and on a basis reasonably approved by Senior
Lender, in advance, as not being prejudicial to the interests of Senior Lender,
as senior lien holder).
(B) The foregoing provisions of Section 7(A) to the contrary
notwithstanding, Subordinated Lender may exercise any of its rights and
remedies on or after the tenth day after the scheduled maturity date of the
Subordinated A Note and Subordinated B Note (subject at all times to the
payment subordination and lien subordination provisions set forth in this
Agreement). Subordinated Lender agrees to provide Senior Lender with not less
than ten (10) days prior written notice of its intent to exercise any legal
remedies. In the event that Subordinated Lender has commenced to sell,
foreclose upon or liquidate any of the Collateral that is subject to a Lien
securing Senior Indebtedness, Subordinated Lender will permit Senior Lender to
control such sale, foreclosure or liquidation if Senior Lender gives
Subordinated Lender notice of its election to control such sale, foreclosure or
liquidation for so long as Senior Lender continues to diligently pursue such
sale, foreclosure, or liquidation in a commercially reasonable manner in
accordance with Section 9-504 of the UCC.
8. Subordinated Indebtedness Subordinated to Prior Payment of All
Senior Indebtedness on Dissolution, Liquidation or Reorganization of Borrower.
Upon any distribution of assets of Borrower in any dissolution, winding up,
liquidation or reorganization of Borrower (whether in bankruptcy, insolvency or
receivership proceedings or upon an assignment for the benefit of creditors or
otherwise) tending toward liquidation of the business and assets of Borrower:
(A) the holder of all Senior Indebtedness shall first be entitled to
receive payment in full (or to have such payment duly provided for in a manner
previously agreed upon or otherwise satisfactory to it) of the principal
thereof, and premium and interest due thereon, and other amounts payable
comprising such Senior Indebtedness, before Subordinated Lender is entitled to
receive any amounts due under the Subordinated Indebtedness, except that
Subordinated Lender may receive Junior Securities; and
(B) any payment or distribution of assets of Borrower of any kind or
character whether in cash, property or securities, to which Subordinated Lender
would be entitled except for these provisions, shall be paid by the liquidating
trustee or agent or other person making such
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<PAGE> 11
payment or distribution directly to the holder of the Senior Indebtedness, to
the extent necessary to make payment in full of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or distribution
or provision therefor to the holders of such Senior Indebtedness.
Borrower shall give prompt written notice to Senior Lender
and Subordinated Lender of any dissolution, winding up, liquidation or
reorganization of Borrower or any assignment for the benefit of any of the
creditors of Borrower tending toward liquidation of the business and assets of
Borrower.
9. Obligation of Borrower Unconditional. Nothing contained herein or
in the Senior Loan Documents is intended to or shall impair, as between
Borrower on one hand and Subordinated Lender on the other hand, the obligation
of Borrower, which is absolute and unconditional, to pay to the holder of the
Subordinated Indebtedness the amounts owing under the Subordinated Indebtedness
as and when the same shall become due and payable in accordance with their
terms, or to affect the relative rights of Subordinated Lender and creditors of
Borrower other than Senior Lender.
10. Subordination Rights Not Impaired by Acts or Omissions of Borrower
or Holder of Senior Indebtedness. No right of any present or future holder of
any Senior Indebtedness to enforce subordination as provided herein shall at
any time in anyway be prejudiced or impaired by any act or failure to act on
the part of Borrower, by any act or failure to act, in good faith, by any such
holder, by any act or failure to act by any other holder, or by any
noncompliance by Borrower with the terms hereof, regardless of any knowledge
thereof which any such holder may have or be otherwise charged with.
Subordinated Lender shall not be released, nor shall any of Subordinated
Lender's obligations hereunder be in anyway diminished, by any of the
following: (A) the exercise or the failure to exercise by Senior Lender of any
rights or remedies conferred on it or them under the Senior Loan Documents
hereunder or existing at law or otherwise, or against any of the Collateral;
(B) the commencement of an action at law or the recovery of a judgment at law
against Borrower or any Obligor for the performance of the Senior Indebtedness
and the enforcement thereof through levy or execution or otherwise; (C) the
taking or institution of any other action or proceeding against Borrower or any
Obligor; or (D) any delay in taking, pursuing, or exercising any of the
foregoing actions, rights, powers, or remedies (even though requested by
Subordinated Lender) by Senior Lender or anyone acting for Senior Lender.
Without limiting the generality of the foregoing, Senior Lender, from time to
time, without notice to Subordinated Lender, may take all or any of the
following actions without in any manner affecting or impairing the obligations
or liability of Subordinated Lender hereunder: (i) obtain a lien or a security
interest in any property to secure any of the Senior Indebtedness; (ii) obtain
the primary and secondary liability of any party or parties with respect to any
of the Senior Indebtedness; (iii) renew, extend, or otherwise change the time
for payment of the Senior Loan or any installment thereof for any period; (iv)
release or compromise any liability of any nature of any person or entity with
respect to the Senior Indebtedness; (v) exchange, enforce, waive, release, and
apply any of the Collateral and direct the order or manner of sale thereof as
Senior Lender may in its discretion determine; (vi) enforce its rights
hereunder, whether or not Senior Lender shall proceed against any other person
or entity, (vii) agree to any amendment,
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<PAGE> 12
modification, or alteration of the Senior Loan Documents and/or exercise its
rights to consent to any action or non-action of Borrower which may violate the
covenants and agreements contained in the Senior Loan Documents with or without
consideration, on such terms and conditions as may be acceptable to it; or
(viii) exercise any of its rights conferred by the Senior Loan Documents or by
law.
11. Bankruptcy Financing. Until the Senior Indebtedness has been
Finally Paid, in the event an Insolvency Proceeding shall occur and be
continuing, Subordinated Lender hereby (i) expressly consents to the granting
by Borrower to Senior Lender of senior liens and priorities in connection with
any post-petition financing of Borrower by Senior Lender and (ii) agrees that
adequate notice of such financing to Subordinated Lender shall have been
provided if Subordinated Lender received notice in accordance with Section 18
hereof two (2) Business Days prior to the entry of any order approving such
cash collateral usage or financing. Provided that Senior Lender does not object
to the granting of a junior replacement lien in favor of Subordinated Lender,
Subordinated Lender agrees not to assert any right it may have to "adequate
protection" of its interest in such security in any Insolvency Proceeding and
agrees that it will not seek to have the automatic stay lifted with respect to
such security, in each case without the prior written consent of Senior Lender.
Subordinated Lender waives any claim or defense Subordinated Lender may now or
hereafter have arising out of the election by the Senior Lender in any
Insolvency Proceeding instituted under Chapter 11 of the Bankruptcy Code of any
use of cash collateral, any borrowing or any grant of a security interest under
Sections 363 and/or 364 of the Bankruptcy Code by Borrower, as
debtor-in-possession. To the extent that Senior Lender receives payments on, or
proceeds of Collateral for, the Senior Indebtedness which are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law, or equitable cause, then as
between Senior Lender and Subordinated Lender hereunder, to the extent of such
payment or proceeds received, the Senior Indebtedness, or part thereof,
intended to be satisfied shall be revived and continue in full force and effect
as if such payments or proceeds had not been received by the Senior Lender.
12. Waivers. Borrower and Subordinated Lender each hereby waives, to
the extent permitted by law, any defense based on the adequacy of a remedy at
law which might be asserted as a bar to the remedy of specific performance of
this Agreement in any action brought therefor by Senior Lender. To the fullest
extent permitted by law and except as otherwise expressly provided in this
Agreement or the Senior Loan Documents, Borrower and Subordinated Lender each
hereby further waives presentment, demand, protest, notice of protest, notice
of default or dishonor, notice of payment or nonpayment and any other notices
and demands of any kind in connection with all negotiable instruments
evidencing all or any portion of the Senior Indebtedness or any Subordinated
Indebtedness to which Borrower and Subordinated Lender may be a party; notice
of and consent to any loans made, extensions granted or other action taken in
reliance thereon; and all other demands and notices of every kind in connection
with this Agreement, the Senior Indebtedness or the Subordinated Indebtedness.
Senior Lender shall use its best efforts to give notice to Subordinated Lender
of any notice provided to Borrower of the occurrence of an Event of Default
within five (5) Business Days following the provision of such
12
<PAGE> 13
notice to Borrower, provided, however, that the failure of Senior Lender to
give any such notice shall not invalidate or otherwise limit the effectiveness
of any act undertaken by Senior Lender or any of the terms of this Agreement or
provide any rights to Subordinated Lender. Subject to the provisions of Section
15 hereof, Subordinated Lender consents to any release, renewal, extension,
compromise or postponement of the time of payment of the Senior Indebtedness,
to any substitution, exchange or release of Collateral therefor and to the
addition or release of any Person primarily or secondarily liable thereon.
13. Indulgences Not Waivers. Neither the failure nor any delay on the
part of Senior Lender to exercise any right, remedy, power or privilege
hereunder shall operate as a waiver thereof or give rise to an estoppel, nor be
construed as an agreement to modify the terms of this Agreement, nor shall any
single or partial exercise of any right, remedy, power or privilege with
respect to any occurrence be construed as a waiver of such right, remedy, power
or privilege with respect to any other occurrence. No waiver by a party
hereunder shall be effective unless it is in writing and signed by the party
making such waiver, and then only to the extent specifically stated in such
writing.
14. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of Borrower referred to in this
Agreement, Subordinated Lender shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of a trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other person making such payment or distribution,
delivered to Subordinated Lender, for the purpose of ascertaining the persons
entitled to participate in such payment or distribution, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto.
15. Amendment of the Subordinated Loan Documents. Subordinated Lender
agrees that it will not, without the consent of Senior Lender, amend any
Subordinated Loan Document, so as to modify the financial terms thereof in a
manner adverse to Senior Lender (including, without limitation, increasing the
amount of principal, rate of interest, dividends, fees, or prepayment premiums,
if any, or expanding any other Subordinated Equity Rights), extend the maturity
thereof, add or change any covenants in a manner more restrictive to Borrower,
or make any other modification to any Subordinated Loan Document which may
adversely affect Senior Lender. Notwithstanding the foregoing, Subordinated
Lender shall be permitted to amend and restate the Subordinated A Note for the
sole purpose of increasing the principal amount thereof by an amount equal to
the amount outstanding under the Subordinated C Note on the maturity date of
such Subordinated C Note.
16. Inconsistent or Conflicting Provisions. In the event any provision
of any of the Senior Loan Documents or the Subordinated Loan Documents is
inconsistent with the provisions of this Agreement, the provisions of this
Agreement shall govern and prevail.
13
<PAGE> 14
17. Default. Subject to applicable notice and/or grace periods, if any
representation or warranty of Borrower or Subordinated Lender in any instrument
evidencing, securing or relating to the Senior Indebtedness proves to have been
materially false when made, or, in the event of a breach by Borrower or
Subordinated Lender in the performance of any of the material terms of this
Agreement or any instrument or agreement evidencing, securing or relating to
the Senior Indebtedness, all of the Senior Indebtedness shall, at the option of
Senior Lender, become immediately due and payable without presentment, demand,
protest, or notices of any kind, notwithstanding any time or credit otherwise
allowed. At any time Subordinated Lender fails to comply with any material term
of this Agreement that is applicable to Subordinated Lender, Senior Lender may
demand specific performance of this Agreement whether or not Borrower has
complied with this Agreement, and may exercise any other remedy available at
law or equity.
18. Notices. Any notice, consent or other communication provided for
in this Agreement shall be in writing and shall be delivered personally
(effective upon delivery), via facsimile (effective upon confirmation of
transmission), via overnight courier (effective the next Business Day after
dispatch if instructed to deliver on next Business Day) or via United States
mail (effective five (5) days after mailing, certified or registered mail,
return receipt requested, postage prepaid, first class) to each party at its
address(es) and/or facsimile number(s) set forth below its signature, or to
such other address as either party shall specify to the other in writing from
time to time.
If to Senior Lender: Congress Financial Corporation (Central)
150 South Wacker Drive, Suite 2200
Chicago, Illinois 60606
Attention: George Kalesnik
Facsimile: (312) 332-0424
If to Subordinated Lender: Tyler Corporation
2800 Mockingbird Lane
Dallas, Texas 75235
Attention: Theodore Bathurst
Facsimile: (214) 902-0211
If to Borrower: Forest City Auto Parts Company
6180 Cochran Road
Solon, Ohio 44139
Attention: Alan Gauthier
Facsimile:(440) 542-1625
14
<PAGE> 15
Any addressee may alter the address to which communications are to be
sent by giving notice of such change of address in conformity with the
provisions of this Section for the giving of notice.
19. Benefit. Subordinated Lender represents and warrants that the
making of the Senior Loan under the Senior Loan Documents will benefit
Subordinated Lender; and Subordinated Lender acknowledges that Senior Lender
would not make the Senior Loan but for the execution of this Agreement.
Therefore, Subordinated Lender has received good, sufficient and adequate
consideration for the making of this Agreement.
20. Entire Agreement. This Agreement constitutes and expresses the
entire understanding between the parties hereto with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, whether express or implied, oral or
written. Neither this Agreement nor any portion or provision hereof may be
changed, waived or amended orally or in any manner other than by an agreement
in writing signed by Senior Lender and Subordinated Lender; provided, however,
any such change, waiver or amendment shall be binding upon Borrower only upon
its written consent thereto.
21. Additional Documentation. Borrower and Subordinated Lender, as
applicable, shall execute and deliver to Senior Lender such further instruments
and shall take such further actions as Senior Lender may at any time or times
reasonably request in order to carry out the provisions and intent of this
Agreement.
22. Expenses. Borrower agrees to pay Senior Lender on demand all
expenses of every kind, including reasonable attorney's fees, that Senior
Lender may reasonably incur in enforcing any of its rights against Borrower
under this Agreement. As among Senior Lender and Subordinated Lender, the
non-prevailing party shall pay to the prevailing party all expenses incurred by
the prevailing party in enforcing its rights against the non-prevailing party
under this Agreement.
23. Successors and Assigns. This Agreement shall inure to the benefit
of Senior Lender and Subordinated Lender, their respective successors and
assigns, and shall be binding upon the parties hereto and their respective
successors and assigns, including, without limitation, any subsequent holders
of the Subordinated Indebtedness. So long as any transferee or assignee of any
of Senior Lender and/or Subordinated Lender shall agree to be bound as an
original party to this Agreement in the capacity of the party from which such
transferree or assignee receives its rights hereunder, any of Senior Lender
and/or Subordinated Lender, without notice of any kind, may sell, assign or
transfer the Senior Indebtedness and/or the Subordinated Indebtedness,
respectively, and in such event each and every respective immediate and
successive assignee or transferee thereof may be given the right by Senior
Lender and Subordinated Lender to enforce this Agreement in full against the
other parties hereto, by suit or otherwise, for its own benefit. Each of Senior
Lender and Subordinated Lender agrees, for the benefit of any such assignee or
transferee, that its respective obligations hereunder shall not be subject to
any reduction, abatement defense, set-off, counterclaim or recoupment for any
reason whatsoever.
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<PAGE> 16
24. Covenant Not to Challenge. This Agreement has been negotiated by
the parties with the expectation and in reliance upon the assumption that the
instruments and documents evidencing the Senior Indebtedness are valid and
enforceable. In determining whether to enter into this Agreement, Subordinated
Lender has assumed such validity and enforceability, and has agreed to the
provisions contained herein, without relying upon any reservation of a right to
challenge or call into question such validity or enforceability. Except as
otherwise permitted by the UCC, as between Senior Lender and Subordinated
Lender, Subordinated Lender hereby covenants and agrees, to the extent
permitted by law, that it shall not initiate in any proceeding a challenge to
the validity or enforceability of the documents and instruments evidencing the
Senior Indebtedness, nor shall Subordinated Lender instigate other parties to
raise any such challenges, nor shall Subordinated Lender participate in or
otherwise assert any such challenges which are raised by other parties.
25. Subrogation. Subject to the foregoing provisions hereof, provided
that the Senior Indebtedness has been Finally Paid, Subordinated Lender shall
be ratably subrogated, to the extent of such Senior Indebtedness so paid, to
the rights of the holder of such Senior Indebtedness to receive payments or
distributions or assets of Borrower that secure such Senior Indebtedness until
all amounts owing on the Subordinated Indebtedness shall be paid in full. For
the purpose of such subrogation, no payments or distributions to the holder of
the Senior Indebtedness by or on behalf of Borrower or by or on behalf of
Subordinated Lender by virtue of the provisions hereof which otherwise would
have been made to Subordinated Lender shall, as between Borrower, a creditor of
Borrower (other than Subordinated Lender and Senior Lender) and Subordinated
Lender, be deemed to be payment by Borrower to or on account of the Senior
Indebtedness, it being understood that the provisions of this Agreement are,
and are intended solely, for the purpose of defining the relative rights of
Subordinated Lender and Senior Lender. In the event that Subordinated Lender
turns over to Senior Lender any payment or contributions received by it in
accordance with this Agreement, Subordinated Lender shall, for purposes of
determining whether a default under the Subordinated Loan Documents has
occurred, be deemed never to have received such payment or distribution. In the
event that Borrower fails to make any payment on account of the Subordinated
Indebtedness by reason of any provision contained herein, such failure shall,
notwithstanding such provision contained herein, constitute a default with
respect to the Subordinated Loan Documents if and to the extent such failure
would otherwise constitute such a default in accordance with the terms of the
Subordinated Loan Documents.
26. Termination of Subordination, Turn Over of Collateral, Lien
Release by Junior Creditors.
(A) The subordination provided herein in respect of the
Senior Indebtedness shall continue and shall be irrevocable until the date all
of the Senior Indebtedness has been Finally Paid by Borrower or otherwise
discharged and released by Senior Lender. Upon or subsequent to the termination
of such subordination, Senior Lender shall, upon Subordinated Lender's request,
turn over to Subordinated Lender any of the Collateral then in Senior Lender's
possession, to the extent that Subordinated Lender holds any Lien on or
security interest in such Collateral. In determining whether Subordinated
Lender hold(s) any Lien on or security interest
16
<PAGE> 17
in any the Collateral in Senior Lender's possession, Senior Lender shall be
entitled to rely upon the certification of any officer of Subordinated Lender
confirming the existence of a Lien in favor of Subordinated Lender and Borrower
hereby releases Senior Lender from any liability or obligation arising as the
result of Senior Lender's reliance upon such certification and compliance with
the terms of this Section requiring delivery of such property to Subordinated
Lender.
(B) In the event Borrower desires to sell any of the
Collateral in an arm's length transaction and Senior Lender consents to such
sale or Senior Lender releases its Lien in connection with any sale or
disposition of the Collateral occurring in connection with any enforcement of
Senior Lender's rights, Subordinated Lender shall be deemed to have consented
to such sale and shall execute such releases with respect to the Collateral to
be sold as Senior Lender requests, so long as the net cash proceeds of such
sale are applied in accordance with the terms of the Loan Agreement, the
Preferred Stock Documents and this Agreement, as applicable. Subordinated
Lender hereby waives any rights Subordinated Lender has or may have in the
future to require Senior Lender to marshal its Collateral and agrees that
Senior Lender may proceed against its Collateral in any order that it deems
appropriate in the exercise of its absolute discretion. Subordinated Lender
hereby irrevocably appoints Senior Lender its true and lawful attorney, with
full power of substitution, in the name of Subordinated Lender or in the name
of Senior Lender, for the use and benefit of Senior Lender, without further or
additional notice to Subordinated Lender or any of its representatives,
successors or assigns, to execute such releases with respect to the Collateral
to be sold as Senior Lender requests.
27. Enforcement of Certain Rights. To enable Senior Lender to enforce
its rights and protect its interests under this Agreement, Subordinated Lender:
(A) agrees to take any and all actions necessary to preserve
any claim it may at any time have against Borrower with respect to the
Subordinated Indebtedness and to refrain from taking any action that might
prejudice any such claim, including, without limitation, the compromise
thereof, the release of any collateral therefor or the forgiveness or the
reduction of amounts owing with respect thereto;
(B) irrevocably authorizes and empowers Senior Lender and
irrevocably appoints Senior Lender its attorney in fact to take the following
actions, in Senior Lender's name or the name of the Subordinated Lender or
otherwise at any time after an Insolvency Proceeding:
(i) file and present claims and proofs of claims
with respect to the Subordinated Indebtedness that the Subordinated Lender has
not filed by the date that is forty-five days prior to the applicable filing
deadline;
(ii) vote the Subordinated Indebtedness;
(iii) demand, sue for, collect, receive and give
acquittance for any and all payments and other distributions with respect to
the Subordinated Indebtedness in whatever form paid or issued, to be applied to
payment or prepayment of the Senior Indebtedness if (a) Senior Lender has filed
the related claim or proof of claim pursuant to clause (i) above or (b)
17
<PAGE> 18
Senior Lender has requested that the Subordinated Lender take such action and,
at any time on or after the thirtieth (30th) day following such request, Senior
Lender determines that the Subordinated Lender has not taken and is not
diligently pursuing such action;
(iv) if any payment or distribution received by
Senior Lender pursuant to this Agreement is in property other than cash, sell
all or any part of such property in any commercially reasonable way as Senior
Lender, in its discretion, decides to sell; and
(v) take any and all other actions that Senior
Lender determines is advisable to minimize the likelihood that the Senior
Indebtedness will not be paid in full if (a) such action is related to any
claim or proof of claim with respect to the Senior Indebtedness that was filed
by Senior Lender pursuant to clause (i) above or (b) Senior Lender has
requested that the Subordinated Lender take such action pursuant to clause
(iii) above and, at any time on or after the thirtieth (30th) day following
such request, Senior Lender determines that the Subordinated Lender has not
taken and is not diligently pursuing such action;
(C) agrees to take any and all of the following actions, as
Senior Lender may request at any time after an Insolvency Event:
(i) collect and receive any and all payments and
distributions payable or deliverable with respect to the Subordinated
Indebtedness, all for the benefit of Senior Lender during such time as any of
the Senior Indebtedness remain unpaid;
(ii) file appropriate claims and proofs of claim
with respect to the Subordinated Indebtedness; and
(iii) execute and deliver to Senior Lender all
powers of attorney, assignments and other instruments or documents, including
notes and stock certificates (properly assigned or endorsed) that Senior Lender
may request to enforce any and all claims Senior Lender is permitted to file or
enforce under this Section 27 and to receive and collect any and all payments
and distributions with respect to the Subordinated Indebtedness.
18
<PAGE> 19
28. Reinstatement. The obligations of Subordinated Lender to Senior
Lender under this Agreement shall continue to be effective, or be reinstated,
as the case may be, if at any time any payment in respect of any Senior
Indebtedness is rescinded or must otherwise be restored or returned by Senior
Lender by reason of any bankruptcy, reorganization, arrangement, composition or
similar proceeding or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, Borrower or any
substantial part of its property, or otherwise, all as though such payment had
not been made.
29. Term Loan Security. On or about the maturity date of the
Subordinated C Note, Senior Lender will grant Permitted First Liens to
Subordinated Lender with respect to each parcel of Real Property that Senior
Lender does not lend against in connection with the Term Loan. In addition,
Senior Lender agrees to execute an amendment to the Hawkins Guaranty to reduce
the obligations of Arthur Hawkins thereunder to reflect, on a pro rata basis,
any reduction in the Term Loan funded by Senior Lender.
30. Governing Law. THE VALIDITY, CONSTRUCTION AND ENFORCEMENT OF THIS
AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS.
BORROWER AND SUBORDINATED LENDER HEREBY AGREE THAT ALL ACTIONS OR PROCEEDINGS
INITIATED BY BORROWER OR SUBORDINATED LENDER AND ARISING DIRECTLY OR INDIRECTLY
OUT OF THIS AGREEMENT SHALL BE LITIGATED IN COOK COUNTY, ILLINOIS CIRCUIT COURT
OR THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, OR,
IF SENIOR LENDER INITIATES SUCH ACTION, IN ADDITION TO THE FOREGOING COURTS,
ANY COURT IN WHICH SENIOR LENDER SHOULD INITIATE SUCH ACTION, TO THE EXTENT
SUCH COURT HAS JURISDICTION. EACH OF BORROWER AND SUBORDINATED LENDER HEREBY
EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
PROCEEDING COMMENCED BY SENIOR LENDER AND HEREBY WAIVES ANY CLAIM THAT SUCH
COURTS ARE AN INCONVENIENT FORUM OR AN IMPROPER FORUM BASED UPON LACK OF VENUE.
THE EXCLUSIVE CHOICE OF FORUM AS SET FORTH IN THIS SECTION SHALL NOT BE DEEMED
TO PRECLUDE THE ENFORCEMENT, BY SENIOR LENDER, OF ANY JUDGMENT OBTAINED IN ANY
OTHER FORUM OR THE TAKING, BY SENIOR LENDER, OF ANY ACTION TO ENFORCE THE SAME
IN ANY OTHER APPROPRIATE JURISDICTION, AND EACH OF BORROWER AND SUBORDINATED
LENDER HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK SUCH JUDGMENT OR ACTION.
31. Jury Trial. SENIOR LENDER, SUBORDINATED LENDER AND BORROWER WAIVE
TRIAL BY JURY IN ANY DISPUTE ARISING FROM, UNDER OR IN CONNECTION WITH THIS
AGREEMENT, EACH ACKNOWLEDGING AND AGREEING THAT ANY CONTROVERSY THAT MAY ARISE
HEREUNDER WOULD BE BASED ON DIFFICULT AND COMPLEX ISSUES AND, THEREFORE, WOULD
BE BETTER PRESENTED TO AND RESOLVED BY A COURT OF COMPETENT JURISDICTION BY A
JUDGE SITTING WITHOUT A JURY.
19
<PAGE> 20
32. Severability. The provisions of this Agreement are independent of
and separable from each other. If any provision hereof shall for any reason be
held invalid or unenforceable, it is the intent of the parties that such
invalidity or unenforceability shall not affect the validity or enforceability
of any other provisions hereof, and that this Agreement shall be construed as
if such invalid or unenforceable provision had never been contained herein.
33. Counterparts. This Agreement may be executed in any number of
separate counterparts, all of which when taken together, shall constitute one
and the same instrument, notwithstanding the fact that all parties did not sign
the same counterpart.
[SIGNATURE PAGE FOLLOWS]
20
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SENIOR LENDER:
CONGRESS FINANCIAL CORPORATION (CENTRAL)
By: /s/ RICHARD A. DICKARO
------------------------------------
Name: Richard A. Dickaro
----------------------------------
Title: SUP
---------------------------------
SUBORDINATED LENDER:
TYLER CORPORATION
By: /s/ C.A. RUNDELL, JR.
------------------------------------
Name: C.A. Rundell, Jr.
----------------------------------
Title: Director
--------------------------------
BORROWER:
FOREST CITY AUTO PARTS COMPANY
By: /s/ ALAN E. GAUTHIER
---------------------------------
Name: Alan E. Gauthier
--------------------------------
Title: CFO
-------------------------------
[SIGNATURE PAGE TO SUBORDINATION AGREEMENT]
S-1
<PAGE> 1
EXHIBIT 10.3
This Senior Subordinated Secured Promissory Note (this "Note") and the
indebtedness evidenced hereby are subordinated in the manner and to the extent
set forth in the Subordination and Intercreditor Agreement (the "Subordination
Agreement") dated as of March __, 1999, by the payee of this Note in favor of
Congress Financial Corporation (Central) (together with its successors and
assigns, the "Senior Lender") to all indebtedness (including interest) at any
time owed by the maker of this Note to Senior Lender, and each holder of this
Note, by its acceptance hereof, shall be bound by the Subordination Agreement.
SENIOR SUBORDINATED SECURED PROMISSORY NOTE
Due July 26, 1999
$3,825,000 Dallas, Texas March 26, 1999
FOR VALUE RECEIVED, the undersigned, FOREST CITY AUTO PARTS COMPANY, a
Delaware corporation ("Maker"), hereby promises to pay to the order of TYLER
CORPORATION, a Delaware corporation ("Noteholder"), the principal amount of
THREE MILLION EIGHT HUNDRED TWENTY-FIVE AND NO/100 DOLLARS ($3,825,000),
together with interest on the unpaid principal balance of this Note from time to
time outstanding from the date hereof at the rate of eight and one-half percent
(8 1/2%) per annum, provided, however, that all past due principal of, and to
the extent permitted by and not usurious under applicable law, interest on, this
Note, shall bear interest from date due until paid at the rate of eighteen
percent (18%) per annum. Interest accrued on the unpaid principal balance of
this Note from time to time outstanding shall be calculated on the basis of the
actual days elapsed (including the first day but excluding the last) in a year
consisting of 365 or 366 days, as appropriate.
Section 1. Definitions. When used in this Note, the following terms
have the respective meanings specified herein or in the section referred to:
"Change of Control" means (i) the merger or consolidation of Maker, or
any entity that owns of record and/or beneficially more than twenty-five percent
(25%) of the issued and outstanding common stock of Maker (a "Controlling
Entity") with another entity and as a result of such merger or consolidation of
the outstanding voting securities of the surviving or resulting entity less than
fifty percent (50%) are owned in the aggregate by the former shareholders of
Maker or the Controlling Entity, or less than 30% are owned by Art Hawkins, (ii)
the acquisition by any person other than Art Hawkins or group within the meaning
of the Securities Exchange Act of 1934, as amended, of more than fifty percent
(50%) of any class of outstanding voting securities of Maker or a Controlling
Entity, whether directly, individually, beneficially or of record, pursuant to
any transaction or combination of transactions, (iii) a change of control of
Maker or a Controlling Entity of a nature that would require a report in
response to Item 6(e) of Schedule 14A of Regulations 14A promulgated under the
Securities Exchange Act of 1934, as amended, whether or not Maker or a
Controlling Entity is then subject to such reporting requirements, or (iv)
cessation, for any reason, of the individuals who, at the beginning of any
period of twelve (12) consecutive months, constituted the Board of Directors of
Maker or any Controlling Entity to constitute at least a majority thereof,
unless the nomination for election or election by Maker's or the Controlling
Entity's shareholders was approved by a vote of at least two-thirds of the
respective boards then still in office who either were directors at the
beginning of such period or whose election or nomination for election was
previously so approved.
"Event of Default" has the meaning set forth in Section 5 hereof.
<PAGE> 2
"Mortgages" means, collectively, the mortgages, deeds of trust, deeds
to secure debt and similar instruments of even date herewith, executed by Maker
to or for the benefit of Noteholder for the purpose of encumbering real property
of Maker, more particularly described therein, as security for the payment of
the indebtedness evidenced by this Note and the other obligations of Maker to
Noteholder described therein.
"Note" means this Senior Subordinated Secured Promissory Note.
"payment in full," "paid in full" or any similar formulation, when used
with respect to the Senior Financing Debt, means payment (or due provision for
payment) in full in cash or cash equivalents of one hundred percent (100%) of
the principal, interest, fees, expenses, and other obligations due or to become
due under the documents governing or securing the Senior financing Debt in
accordance with the terms of such documents, or otherwise on terms and
conditions to which the holders thereof shall consent in writing.
"Security Agreement" means the Security Agreement of even date herewith
between Maker and Noteholder.
"Senior Financing" means the "Senior Financing" defined and described
in, and contemplated by, Section 4.4 of the Purchase Agreement dated as of March
22, 1999, between HalArt, L.L.C., and Tyler Corporation.
"Senior Financing Debt" means any and all indebtedness, whether for
principal, interest, fees, or other amounts, at any time and from time to time
owing or to become owing by Maker under any agreement, instrument or document
governing, evidencing and/or securing the Senior Financing.
Section 2. Payment. The principal of and accrued interest on this Note
shall be due and payable as follows:
(a) Interest, computed as aforesaid, shall be due and payable
monthly as it accrues, commencing on March 26, 1999, and
thereafter on the first day of each month until this Note,
with accrued interest, is paid in full; and
(b) the principal of this Note, together with all accrued but
unpaid interest thereon, shall be due and payable on July 26,
1999, but to the extent the Term Loan is not fully funded
because Sections 4.1(o) and 4.2 of the Loan Agreement cannot
be reasonably met by July 26, 1999, the balance of this Note
shall be rolled into Note A (defined below), and Note A shall
be reissued as therein provided.
Both principal of and interest on this Note are payable in lawful money of the
United States of America to Noteholder at 2800 West Mockingbird Lane, Dallas,
Texas 75235 (or at such other place as Noteholder shall specify in written
notice to Maker), in immediately available funds. All payments made hereon shall
be applied first to sums (other than the principal of and accrued interest on
this Note) payable by Maker pursuant to this Note or the Security Agreement,
then to accrued but unpaid interest on this Note, and thereafter to the unpaid
principal balance of this Note. Interest shall continue to accrue on unpaid
principal until receipt by Noteholder of good funds in payment thereof.
2
<PAGE> 3
Section 3. Security. In order to secure the payment and performance of
the indebtedness and obligations evidenced by, or arising under or in respect
of, this Note and those certain Senior Subordinated Secured Promissory Notes of
even date herewith from Maker to Noteholder in the original principal amounts of
$2,000,000 ("Note A") and $1,155,000 ("Note B"), Maker has agreed to, and has,
as of the date hereof, executed and delivered to Noteholder the Security
Agreement and the Mortgages, pursuant to which Maker has granted to Noteholder
second priority (subject only to the liens and security interests securing the
Senior Financing Debt) liens and security interests in all of Maker's now owned
and hereafter acquired inventory (as that term is defined in the Texas Uniform
Commercial Code), real estate and other assets. Reference is hereby made to the
Security Agreement and the Mortgages for the descriptions of the property
covered thereby, the nature and extent of the liens and security interests
created and granted thereby, and the rights and powers of the holder of this
Note in respect of such liens and security interests. The liens and security
interest created under the Security Agreement and the Mortgage in Maker's now
owned and hereafter acquired inventory (as that term is defined in the Texas
Uniform Commercial Code), real estate and other assets shall be junior and
subordinate only to the liens and security interest securing payment and
performance of the Senior Financing Debt. The indebtedness and obligations
evidenced by, or arising under or in respect of, this Note shall rank pari
passu, with respect to payment and security, with the indebtedness and
obligations evidenced by, or arising under or in respect of, Notes A and B.
Section 4. Waiver. Except as provided herein or in the Security
Agreement, Maker and each surety, endorser, guarantor and other party ever
liable for payment of any sums of money payable upon this Note, jointly and
severally waive presentment, demand, protest, notice of protest and non-payment
or other notice of default, notice of acceleration and intention to accelerate
or other notice of any kind, and agree that their liability under this Note
shall not be affected by any renewal or extension in the time of payment hereof,
or in any indulgences, or by any release or change in any security for the
payment of this Note, and hereby consent to any and all renewals, extensions,
indulgences, releases or changes, regardless of the number of such renewals,
extensions, indulgences, releases or changes. No waiver by Noteholder of any of
its rights or remedies hereunder, or under any other document evidencing or
securing this Note or otherwise, shall be considered a waiver of any other
subsequent right or remedy of Noteholder; no delay or omission in the exercise
of enforcement by Noteholder of any rights or remedies shall ever be construed
as a waiver of any right or remedy of Noteholder; and no exercise or enforcement
of any such rights or remedies shall ever by held to exhaust any right or remedy
of Noteholder.
Section 5. Events of Default and Remedies. An "Event of Default" shall
exist hereunder if any one or more of the following events shall occur: (a)
Maker shall fail to pay when due any principal of, or interest upon, this Note;
(b) Maker shall (1) apply for or consent to the appointment of a receiver,
trustee, intervenor, custodian or liquidator of itself or of all or a
substantial part of its assets, (2) be adjudicated a bankrupt or insolvent or
file a voluntary petition for bankruptcy or admit in writing that it is unable
to pay its debts as they become due, (3) make a general assignment for the
benefit of creditors, (4) file a petition or answer seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy or insolvency
laws, or (5) file an answer admitting the material allegations of, or consent
to, or default in answering, a petition filed against it in any bankruptcy,
reorganization or insolvency proceeding, or take corporate action for the
purpose of effecting any of the foregoing; (c) an order, judgment or decree
shall be entered by any court of competent jurisdiction or other competent
authority approving a petition seeking reorganization of maker or appointing a
receiver, trustee, intervenor or liquidator of Maker, or of all or
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<PAGE> 4
substantially all of its assets, and such order, judgment or decree shall
continue unstayed and in effect for a period of sixty (60) days; (d) the
dissolution or liquidation of Maker; (e) Maker shall breach any covenant under
this Note, (f) any "Event of Default," as defined in the Security Agreement or
the Mortgage, shall occur, (g) any failure to pay, when due, any obligations,
whether as to principal, interest or otherwise, including non-payment following
acceleration or maturity, shall occur with respect to the Senior Financing Debt
and continue past the expiration of any period of grace, if any, with respect
thereto provided in the document governing the same, (h) any default or event of
default, other than a default or event of default occasioned by a failure to pay
as described in the preceding clause (g), shall occur with respect to Senior
Financing Debt and, by reason thereof, the holder of the Senior Debt accelerates
the maturity of all or any part of the Senior Financing Debt and declares the
same to be due and payable prior to the stated maturity date thereof, (i) the
payment of dividends by Maker on or with respect to its common stock in any
fiscal year in excess of 50% of Maker's net income after taxes , (j) Maker shall
make a loan to any party (other than advances to employees for reasonable travel
expenses in the ordinary course of business), and/or (k) a Change of Control
shall occur. Upon the occurrence of any Event of Default hereunder, the
Noteholder may, at its option, at any time thereafter, (i) declare the entire
unpaid principal balance and accrued interest upon this Note to be, and the same
shall thereupon become, immediately due and payable without the presentment or
notice of any kind, which Maker hereby waives pursuant to Section 4 hereof,
and/or (ii) pursue and enforce any of Noteholder's rights and remedies available
pursuant to any applicable law or agreement; provided, however, upon the
occurrence of any Event of Default specified in clause (b), (c) or (d) of this
Section 5,with respect to Maker, without any notice to Maker or any other act by
Noteholder, the principal balance and interest accrued on this Note shall
automatically and without necessity of any act by Noteholder become immediately
due and payable without presentment, demand, protest or notice of protest,
notice of acceleration, notice of intent to accelerate or other notice of any
kind, all of which are hereby waived by Maker. Noteholder agrees to advise Maker
promptly if Noteholder is aware of an Event of Default.
Section 6. Notice. Whenever this Note requires or permits any notice,
approval, request or demand from one party to another, the notice, approval,
request or demand must be in writing and shall be deemed to have been given when
personally served or when deposited in the United States mails, registered or
certified, return receipt requested, addressed to the party to be notified at
the following address (or at such other address as may have been designated by
written notice):
Noteholder: Tyler Corporation
2800 West Mockingbird Lane
Dallas, Texas 75235
Attention: Ted Bathurst
Telecopy No.: (214) 902-5058
with a copy to (which shall not constitute notice) to:
H. Lynn Moore, Jr., Esq.
2800 West Mockingbird Lane
Dallas, Texas 75235
Telecopy No.: (214) 902-5058
4
<PAGE> 5
Maker: Forest City Auto Parts Company
c/o Art Hawkins
6180 Cochran Road, 2nd Floor
Solon, Ohio 44139
with copies (which shall not constitute notice) to:
Art Hawkins
HalArt, L.L.C.
1520 Surria Court
Bloomfield Hills, MI 48304
Telecopy No.: (248) 593-4997
John M. Rickel, Esq.
Rickel & Baun, P.C.
63 Kercheval Avenue
Grosse Pointe Farms, Michigan 48236-3627
Telecopy No.: (313) 886-0405
Section 7. Prepayment.
(a) Voluntary Prepayment. Subject to the provisions of Section 10
of this Note, Maker reserves the right, upon thirty (30) days'
prior written notice to Noteholder, to prepay the outstanding
principal balance of this Note, in whole or in part, at any
time and from time to time, without premium or penalty. Any
such prepayment shall be made together with payment of
interest accrued on the amount of principal being prepaid
through the date of such prepayment.
(b) Mandatory Prepayment. Concurrently with each funding of the
proceeds of the Term Loan included within the Senior
Financing, Maker shall prepay the outstanding principal
balance of this Note in an amount equal to the proceeds so
funded. In addition, subject to the provisions of Section 10
of this Note, Maker shall prepay the outstanding principal
balance of this Note in whole upon (i) the sale of securities
of Maker or a Controlling Entity pursuant to a registration
statement that has been declared effective by the Securities
and Exchange Commission, (ii) Maker or a Controlling Entity
otherwise becoming a reporting company pursuant to the
Securities Exchange Act of 1934, as amended, (iii) Maker
selling or otherwise transferring all or any material part of
its assets, (iv) a Change of Control, (v) Maker incurring any
senior indebtedness for the purpose of a material expansion of
Maker's business and operations of more than $2,500,000, plus
senior financing for acquisitions of operating businesses.
Section 8. Usury Laws. Regardless of any provisions contained in this
Note, Noteholder shall never be deemed to have contracted for or be entitled to
receive, collect or apply as interest on or under this Note any amount in excess
of the maximum amount of interest permitted by applicable law (the "Maximum
Amount"), and, in the event that Noteholder ever receives, collects or applies
as interest any such excess, the amount which would be excessive interest shall
be deemed to be a partial prepayment of
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<PAGE> 6
principal and treated hereunder as such; and, if the principal amount of this
Note is paid in full, any remaining excess shall forthwith be paid to Maker. In
determining whether or not the interest paid or payable under any specific
contingency exceeds the Maximum Amount, Maker and Noteholder shall, to the
maximum extent permitted under applicable law, (i) characterize any nonprincipal
payment as an expense, fee or premium rather than as interest; (ii) exclude
voluntary prepayments and the effects thereof; and (iii) amortize, prorate,
allocate and spread, in equal parts, the total amount of interest throughout the
entire contemplated term of this Note so that the interest rate is uniform
throughout the entire term; provided, however, that, if this Note is paid in
full prior to the end of the full contemplated term hereof, and if the interest
received for the actual period of existence thereof exceeds the relevant Maximum
Amount, Noteholder shall refund to Maker the amount of such excess or credit the
amount of such excess against the principal amount of this Note and, in such
event, Noteholder shall not be subject to any penalties provided by any Laws for
contracting for, charging, taking, reserving or receiving interest in excess of
the relevant Maximum Amount.
Section 9. GOVERNING LAW. THIS NOTE IS PAYABLE AND PERFORMABLE IN
DALLAS COUNTY, TEXAS, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE FEDERAL LAWS OF
THE UNITED STATES OF AMERICA. WITHOUT EXCLUDING ANY OTHER JURISDICTION, MAKER
AGREES THAT THE COURTS OF THE STATE OF TEXAS SITTING IN DALLAS, TEXAS, AND THE
FEDERAL COURTS SITTING IN DALLAS, TEXAS, WILL HAVE JURISDICTION OVER ANY
PROCEEDINGS IN CONNECTION HEREWITH.
Section 10. Subordination. Maker agrees, and Noteholder, for itself and
for each subsequent owner and holder of this Note, agrees that the obligation
represented by this Note is and shall be subordinated in right of payment to the
prior payment in full of the Senior Financing Debt, whether outstanding on the
date hereof or hereafter incurred. Upon any distribution of assets of Maker upon
or by reason of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to the Company or to substantially all of its
assets, or (b) any liquidation, dissolution or other winding up of the Company,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (c) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of the Company, then and in any such event
specified in clause (a), (b) or (c) preceding (each such event, if any, herein
sometimes referred to as a "Proceeding"), (i) the holders of the Senior
Financing Debt will first be entitled to receive payment in full of the Senior
Financing Debt before Noteholder is entitled to receive any payment, whether of
principal, premium, if any, or interest, on account of this Note (other than
Junior Securities) and (ii) any payment or distribution of assets of Maker of
any kind or character from any source, whether in cash, property or securities
(other than Junior Securities) to which Noteholder would be entitled but for the
provisions of this Section 10 will be paid by the liquidating trustee or agent
or other person making such a payment or distribution directly to the holders of
the Senior Financing Debt or their representative to the extent necessary to
make payment in full of the Senior Financing Debt remaining unpaid, after giving
effect to any concurrent payment or distribution made directly to the holders of
such Senior Financing Debt. For purposes of this Section 10, "Junior Securities"
shall mean capital stock and/or securities of Maker provided for by a plan of
reorganization or readjustment, or of any other corporation provided for by such
plan of reorganization or readjustment authorized by an order or decree of a
court of competent jurisdiction in a reorganization Proceeding under any
applicable bankruptcy law which stock
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<PAGE> 7
or securities are subordinated in right of payment to all then outstanding
Senior Financing Debt to substantially the same extent as this Note is so
subordinated as provided in this Section 10. After all Senior Financing Debt is
paid in full and until this Note is paid in full, Noteholder shall be subrogated
(equally and ratably with all other indebtedness pari passu with this Note) to
the rights of holders of Senior Financing Debt to receive distributions
applicable to Senior Financing Debt to the extent that distributions otherwise
payable to Noteholder have been applied to the payment of Senior Debt. A
distribution made under this Section 10 to holders of Senior Financing Debt that
otherwise would have been made to Noteholder is not, as between Maker and
Noteholder, a payment by Maker on this Note. Nothing in this Note shall (1)
impair, as between Maker and Noteholder, the obligations of Maker to pay the
principal of and interest on this Note in accordance with its terms; (2) affect
the relative rights of Noteholder and creditors of Maker other than its rights
in relation to holders of Senior Financing Debt; or (3) prevent Noteholder from
exercising its available remedies upon an Event of Default, subject to the
rights of holders and owners of Senior Financing Debt to receive distributions
and payments otherwise payable to Noteholder to the extent provided in this
Section 10.
Section 11. "Noteholder". As used herein, the term "Noteholder"
includes Tyler Corporation and any subsequent owner and holder at the time in
question of this Note.
MAKER:
FOREST CITY AUTO PARTS COMPANY,
a Delaware corporation
By: /s/ ALAN E. GAUTHIER
---------------------------
Name: Alan E. Gauthier
-------------------------
Title: CFO
------------------------
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<PAGE> 1
EXHIBIT 10.4
This Senior Subordinated Secured Promissory Note (this "Note") and the
indebtedness evidenced hereby are subordinated in the manner and to the extent
set forth in the Subordination and Intercreditor Agreement (the "Subordination
Agreement") dated as of March __, 1999, by the payee of this Note in favor of
Congress Financial Corporation (Central) (together with its successors and
assigns, the "Senior Lender") to all indebtedness (including interest) at any
time owed by the maker of this Note to Senior Lender, and each holder of this
Note, by its acceptance hereof, shall be bound by the Subordination Agreement.
SENIOR SUBORDINATED SECURED PROMISSORY NOTE
Due March 26, 2002
$1,155,000 Dallas, Texas March 26, 1999
FOR VALUE RECEIVED, the undersigned, FOREST CITY AUTO PARTS COMPANY, a
Delaware corporation ("Maker"), hereby promises to pay to the order of TYLER
CORPORATION, a Delaware corporation ("Noteholder"), the principal amount of ONE
MILLION ONE HUNDRED FIFTY-FIVE THOUSAND AND NO/100 DOLLARS ($1,155,000),
together with interest on the unpaid principal balance of this Note from time
to time outstanding from the date hereof at the rate of eight percent (8%) per
annum, provided, however, that all past due principal of, and to the extent
permitted by and not usurious under applicable law, interest on, this Note,
shall bear interest from date due until paid (i) if paid on or before ninety
(90) days after due date, at the rate of eight percent (8%) per annum, (ii) if
paid more than ninety (90) days after due date, but on or before one hundred
eighty (180) days after due date, at the rate of twelve percent (12%) per
annum, and (iii) if paid more than one hundred and eighty (180) days after the
due date, at the rate of eighteen percent (18%) per annum. Interest accrued on
the unpaid principal balance of this Note from time to time outstanding shall
be calculated on the basis of the actual days elapsed (including the first day
but excluding the last) in a year consisting of 365 or 366 days, as
appropriate.
Section 1. Definitions. When used in this Note, the following terms
have the respective meanings specified herein or in the section referred to:
"Cash Flow" means for any period Maker's net income from operations
after income taxes, increased for amortization and depreciation of intangible
assets and property and equipment and deferred income tax expense, decreased
for principal payments under all existing loan agreements and capital
expenditures, and adjusted for changes in working capital items not affecting
the use of cash in the period.
"Change of Control" means (i) the merger or consolidation of Maker, or
any entity that owns of record and/or beneficially more than twenty-five
percent (25%) of the issued and outstanding common stock of Maker (a
"Controlling Entity") with another entity and as a result of such merger or
consolidation of the outstanding voting securities of the surviving or
resulting entity less than fifty percent (50%) are owned in the aggregate by
the former shareholders of Maker or the Controlling Entity, or less than 30%
are owned by Art Hawkins, (ii) the acquisition by any person other than Art
Hawkins or group within the meaning of the Securities Exchange Act of 1934, as
amended, of more than fifty percent (50%) of any class of outstanding voting
securities of Maker or a Controlling Entity, whether directly, individually,
beneficially or of record, pursuant to any transaction or combination of
transactions, (iii) a change of control of Maker or a Controlling Entity of a
nature that would require a report in response to Item 6(e) of Schedule 14A of
Regulations 14A promulgated under the Securities Exchange Act of 1934, as
amended, whether or not Maker or a Controlling Entity is then subject to such
reporting requirements, or (iv) cessation, for any reason, of the individuals
who, at the beginning of any period of twelve (12) consecutive
<PAGE> 2
months, constituted the Board of Directors of Maker or any Controlling Entity
to constitute at least a majority thereof, unless the nomination for election
or election by Maker's or the Controlling Entity's shareholders was approved by
a vote of at least two-thirds of the respective boards then still in office who
either were directors at the beginning of such period or whose election or
nomination for election was previously so approved.
"Event of Default" has the meaning set forth in Section 5 hereof.
"Mortgages" means, collectively, the mortgages, deeds of trust, deeds
to secure debt and similar instruments of even date herewith, executed by Maker
to or for the benefit of Noteholder for the purpose of encumbering real
property of Maker, more particularly described therein, as security for the
payment of the indebtedness evidenced by this Note and the other obligations of
Maker to Noteholder described therein.
"Note" means this Senior Subordinated Secured Promissory Note.
"payment in full," "paid in full" or any similar formulation, when
used with respect to the Senior Financing Debt, means payment (or due provision
for payment) in full in cash or cash equivalents of one hundred percent (100%)
of the principal, interest, fees, expenses, and other obligations due or to
become due under the documents governing or securing the Senior financing Debt
in accordance with the terms of such documents, or otherwise on terms and
conditions to which the holders thereof shall consent in writing.
"Security Agreement" means the Security Agreement of even date
herewith between Maker and Noteholder.
"Senior Financing" means the "Senior Financing" defined and described
in, and contemplated by, Section 4.4 of the Purchase Agreement dated as of
March 22, 1999, between HalArt, L.L.C., and Tyler Corporation.
"Senior Financing Debt" means any and all indebtedness, whether for
principal, interest, fees, or other amounts, at any time and from time to time
owing or to become owing by Maker under any agreement, instrument or document
governing, evidencing and/or securing the Senior Financing.
Section 2. Payment. The principal of and accrued interest on this Note
shall be due and payable as follows:
(a) Interest, computed as aforesaid, shall be due and payable
quarterly as it accrues, commencing on March 26, 1999, and
thereafter on the first day of each January, April, July, and
October of each calendar year during the term of this Note,
through and including March 26, 2002;
(b) The principal balance of this Note shall be due and payable
monthly in equal monthly installments of $80,000 or the
remaining balance thereof, commencing on April 30, 2000, and
thereafter on the last day of each calendar month during the
term of this Note until paid in full, provided, however, that
no monthly payment of principal shall be due and
2
<PAGE> 3
payable, and shall be deferred, if Cash Flow from the date
hereof through the end of the period immediately preceding
the month of a scheduled principal payment does not exceed
$2,000,000; and provided further that any deferred payment
shall be added to the next monthly payment due and payable so
long as the Cash Flow in that month recovers the cumulative
cash to the above $2,000,000; and
(c) the entire unpaid principal balance of this Note, together
with all accrued but unpaid interest thereon, shall be
finally due and payable in full on March 26, 2002(1).
Both principal of and interest on this Note are payable in lawful money of the
United States of America to Noteholder at 2800 West Mockingbird Lane, Dallas,
Texas 75235 (or at such other place as Noteholder shall specify in written
notice to Maker), in immediately available funds. All payments made hereon
shall be applied first to sums (other than the principal of and accrued
interest on this Note) payable by Maker pursuant to this Note or the Security
Agreement, then to accrued but unpaid interest on this Note, and thereafter to
the unpaid principal balance of this Note. Interest shall continue to accrue on
unpaid principal until receipt by Noteholder of good funds in payment thereof.
Section 3. Security. In order to secure the payment and performance of
the indebtedness and obligations evidenced by, or arising under or in respect
of, this Note and those certain Senior Subordinated Secured Promissory Notes of
even date herewith from Maker to Noteholder in the original principal amount of
$2,000,000 ("Note A") and $3,825,000 ("Note C"), Maker has agreed to, and has,
as of the date hereof, executed and delivered to Noteholder the Security
Agreement and the Mortgages, pursuant to which Maker has granted to Noteholder
second priority (subject only to the liens and security interests securing the
Senior Financing Debt) liens and security interests in all of Maker's now owned
and hereafter acquired inventory (as that term is defined in the Texas Uniform
Commercial Code), real estate, and other assets. Reference is hereby made to
the Security Agreement and the Mortgages for the descriptions of the property
covered thereby, the nature and extent of the liens and security interests
created and granted thereby, and the rights and powers of the holder of this
Note in respect of such liens and security interests. The liens and security
interest created under the Security Agreement and the Mortgage in Maker's now
owned and hereafter acquired inventory (as that term is defined in the Texas
Uniform Commercial Code), real estate, other assets shall be junior and
subordinate only to the liens and security interest securing payment and
performance of the Senior Financing Debt. The indebtedness and obligations
evidenced by, or arising under or in respect of, this Note shall rank pari
passu, with respect to payment and security, with the indebtedness and
obligations evidenced by, or arising under or in respect of, Notes A and C.
Section 4. Waiver. Except as provided herein or in the Security
Agreement, Maker and each surety, endorser, guarantor and other party ever
liable for payment of any sums of money payable upon this Note, jointly and
severally waive presentment, demand, protest, notice of protest and non-payment
or other notice of default, notice of acceleration and intention to accelerate
or other notice of any kind, and agree that their liability under this Note
shall not be affected by any renewal or extension in the time of payment
hereof, or in any indulgences, or by any release or change in any security for
the payment of this Note, and hereby consent to any and all renewals,
extensions, indulgences, releases or changes, regardless of the number of such
renewals, extensions, indulgences, releases or changes. No waiver by Noteholder
- ---------
(1)Three years from the date hereof.
3
<PAGE> 4
of any of its rights or remedies hereunder, or under any other document
evidencing or securing this Note or otherwise, shall be considered a waiver of
any other subsequent right or remedy of Noteholder; no delay or omission in the
exercise of enforcement by Noteholder of any rights or remedies shall ever be
construed as a waiver of any right or remedy of Noteholder; and no exercise or
enforcement of any such rights or remedies shall ever by held to exhaust any
right or remedy of Noteholder.
Section 5. Events of Default and Remedies. An "Event of Default" shall
exist hereunder if any one or more of the following events shall occur: (a)
Maker shall fail to pay when due any principal of, or interest upon, this Note;
(b) Maker shall (1) apply for or consent to the appointment of a receiver,
trustee, intervenor, custodian or liquidator of itself or of all or a
substantial part of its assets, (2) be adjudicated a bankrupt or insolvent or
file a voluntary petition for bankruptcy or admit in writing that it is unable
to pay its debts as they become due, (3) make a general assignment for the
benefit of creditors, (4) file a petition or answer seeking reorganization or
an arrangement with creditors or to take advantage of any bankruptcy or
insolvency laws, or (5) file an answer admitting the material allegations of,
or consent to, or default in answering, a petition filed against it in any
bankruptcy, reorganization or insolvency proceeding, or take corporate action
for the purpose of effecting any of the foregoing; (c) an order, judgment or
decree shall be entered by any court of competent jurisdiction or other
competent authority approving a petition seeking reorganization of maker or
appointing a receiver, trustee, intervenor or liquidator of Maker, or of all or
substantially all of its assets, and such order, judgment or decree shall
continue unstayed and in effect for a period of sixty (60) days; (d) the
dissolution or liquidation of Maker; (e) Maker shall breach any covenant under
this Note, (f) any "Event of Default," as defined in the Security Agreement or
the Mortgage, shall occur, (g) any failure to pay, when due, any obligations,
whether as to principal, interest or otherwise, including non-payment following
acceleration or maturity, shall occur with respect to the Senior Financing Debt
and continue past the expiration of any period of grace, if any, with respect
thereto provided in the document governing the same, (h) any default or event
of default, other than a default or event of default occasioned by a failure to
pay as described in the preceding clause (g), shall occur with respect to
Senior Financing Debt and, by reason thereof, the holder of the Senior Debt
accelerates the maturity of all or any part of the Senior Financing Debt and
declares the same to be due and payable prior to the stated maturity date
thereof, (i) the payment of dividends by Maker on or with respect to its common
stock in any fiscal year in excess of 50% of Maker's net income after taxes ,
(j) Maker shall make a loan to any party (other than advances to employees for
reasonable travel expenses in the ordinary course of business), and/or (k) a
Change of Control shall occur. Upon the occurrence of any Event of Default
hereunder, the Noteholder may, at its option, at any time thereafter, (i)
declare the entire unpaid principal balance and accrued interest upon this Note
to be, and the same shall thereupon become, immediately due and payable without
the presentment or notice of any kind, which Maker hereby waives pursuant to
Section 4 hereof, and/or (ii) pursue and enforce any of Noteholder's rights and
remedies available pursuant to any applicable law or agreement; provided,
however, upon the occurrence of any Event of Default specified in clause (b),
(c) or (d) of this Section 5,with respect to Maker, without any notice to Maker
or any other act by Noteholder, the principal balance and interest accrued on
this Note shall automatically and without necessity of any act by Noteholder
become immediately due and payable without presentment, demand, protest or
notice of protest, notice of acceleration, notice of intent to accelerate or
other notice of any kind, all of which are hereby waived by Maker. Noteholder
agrees to advise Maker promptly if Noteholder is aware of an Event of Default.
Section 6. Notice. Whenever this Note requires or permits any notice,
approval, request or demand from one party to another, the notice, approval,
request or demand must be in writing and shall
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<PAGE> 5
be deemed to have been given when personally served or when deposited in the
United States mails, registered or certified, return receipt requested,
addressed to the party to be notified at the following address (or at such
other address as may have been designated by written notice):
Noteholder: Tyler Corporation
2800 West Mockingbird Lane
Dallas, Texas 75235
Attention: Ted Bathurst
Telecopy No.: (214) 902-5058
with a copy to (which shall not constitute notice) to:
H. Lynn Moore, Jr., Esq.
2800 West Mockingbird Lane
Dallas, Texas 75235
Telecopy No.: (214) 902-5058
Maker: Forest City Auto Parts Company
c/o Art Hawkins
6180 Cochran Road, 2nd Floor
Solon, Ohio 44139
with copies (which shall not constitute notice) to:
Art Hawkins
HalArt, L.L.C.
1520 Surria Court
Bloomfield Hills, MI 48304
Telecopy No.: (248) 593-4997
John M. Rickel, Esq.
Rickel & Baun, P.C.
63 Kercheval Avenue
Grosse Pointe Farms, Michigan 48236-3627
Telecopy No.: (313) 886-0405
Section 7. Prepayment.
(a) Voluntary Prepayment. Subject to the provisions of Section 10
of this Note, Maker reserves the right, upon thirty (30)
days' prior written notice to Noteholder, to prepay the
outstanding principal balance of this Note, in whole or in
part, at any time and from time to time, without premium or
penalty. Any such prepayment shall be made together with
payment of interest accrued on the amount of principal being
prepaid through the date of such prepayment.
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<PAGE> 6
(b) Mandatory Prepayment. Subject to the provisions of Section 10
of this Note, Maker shall prepay the outstanding principal
balance of this Note in whole upon (i) the sale of securities
of Maker or a Controlling Entity pursuant to a registration
statement that has been declared effective by the Securities
and Exchange Commission, (ii) Maker or a Controlling Entity
otherwise becoming a reporting company pursuant to the
Securities Exchange Act of 1934, as amended, (iii) Maker
selling or otherwise transferring all or any material part of
its assets, (iv) a Change of Control, (v) Maker incurring any
senior indebtedness for the purpose of a material expansion
of Maker's business and operations of more than $2,500,000,
plus senior financing for acquisitions of operating
businesses.
Section 8. Usury Laws. Regardless of any provisions contained in this
Note, Noteholder shall never be deemed to have contracted for or be entitled to
receive, collect or apply as interest on or under this Note any amount in
excess of the maximum amount of interest permitted by applicable law (the
"Maximum Amount"), and, in the event that Noteholder ever receives, collects or
applies as interest any such excess, the amount which would be excessive
interest shall be deemed to be a partial prepayment of principal and treated
hereunder as such; and, if the principal amount of this Note is paid in full,
any remaining excess shall forthwith be paid to Maker. In determining whether
or not the interest paid or payable under any specific contingency exceeds the
Maximum Amount, Maker and Noteholder shall, to the maximum extent permitted
under applicable law, (i) characterize any nonprincipal payment as an expense,
fee or premium rather than as interest; (ii) exclude voluntary prepayments and
the effects thereof; and (iii) amortize, prorate, allocate and spread, in equal
parts, the total amount of interest throughout the entire contemplated term of
this Note so that the interest rate is uniform throughout the entire term;
provided, however, that, if this Note is paid in full prior to the end of the
full contemplated term hereof, and if the interest received for the actual
period of existence thereof exceeds the relevant Maximum Amount, Noteholder
shall refund to Maker the amount of such excess or credit the amount of such
excess against the principal amount of this Note and, in such event, Noteholder
shall not be subject to any penalties provided by any Laws for contracting for,
charging, taking, reserving or receiving interest in excess of the relevant
Maximum Amount.
Section 9. GOVERNING LAW. THIS NOTE IS PAYABLE AND PERFORMABLE IN
DALLAS COUNTY, TEXAS, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE FEDERAL LAWS
OF THE UNITED STATES OF AMERICA. WITHOUT EXCLUDING ANY OTHER JURISDICTION,
MAKER AGREES THAT THE COURTS OF THE STATE OF TEXAS SITTING IN DALLAS, TEXAS,
AND THE FEDERAL COURTS SITTING IN DALLAS, TEXAS, WILL HAVE JURISDICTION OVER
ANY PROCEEDINGS IN CONNECTION HEREWITH.
Section 10. Subordination. Maker agrees, and Noteholder, for itself
and for each subsequent owner and holder of this Note, agrees that the
obligation represented by this Note is and shall be subordinated in right of
payment to the prior payment in full of the Senior Financing Debt, whether
outstanding on the date hereof or hereafter incurred. Upon any distribution of
assets of Maker upon or by reason of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to the Company or to
substantially all of its assets, or (b) any liquidation, dissolution or other
winding up of the Company, whether voluntary or involuntary and whether or not
involving insolvency or bankruptcy, or (c) any
6
<PAGE> 7
assignment for the benefit of creditors or any other marshalling of assets and
liabilities of the Company, then and in any such event specified in clause (a),
(b) or (c) preceding (each such event, if any, herein sometimes referred to as
a "Proceeding"), (i) the holders of the Senior Financing Debt will first be
entitled to receive payment in full of the Senior Financing Debt before
Noteholder is entitled to receive any payment, whether of principal, premium,
if any, or interest, on account of this Note (other than Junior Securities) and
(ii) any payment or distribution of assets of Maker of any kind or character
from any source, whether in cash, property or securities (other than Junior
Securities) to which Noteholder would be entitled but for the provisions of
this Section 10 will be paid by the liquidating trustee or agent or other
person making such a payment or distribution directly to the holders of the
Senior Financing Debt or their representative to the extent necessary to make
payment in full of the Senior Financing Debt remaining unpaid, after giving
effect to any concurrent payment or distribution made directly to the holders
of such Senior Financing Debt. For purposes of this Section 10, "Junior
Securities" shall mean capital stock and/or securities of Maker provided for by
a plan of reorganization or readjustment, or of any other corporation provided
for by such plan of reorganization or readjustment authorized by an order or
decree of a court of competent jurisdiction in a reorganization Proceeding
under any applicable bankruptcy law which stock or securities are subordinated
in right of payment to all then outstanding Senior Financing Debt to
substantially the same extent as this Note is so subordinated as provided in
this Section 10. After all Senior Financing Debt is paid in full and until this
Note is paid in full, Noteholder shall be subrogated (equally and ratably with
all other indebtedness pari passu with this Note) to the rights of holders of
Senior Financing Debt to receive distributions applicable to Senior Financing
Debt to the extent that distributions otherwise payable to Noteholder have been
applied to the payment of Senior Debt. A distribution made under this Section
10 to holders of Senior Financing Debt that otherwise would have been made to
Noteholder is not, as between Maker and Noteholder, a payment by Maker on this
Note. Nothing in this Note shall (1) impair, as between Maker and Noteholder,
the obligations of Maker to pay the principal of and interest on this Note in
accordance with its terms; (2) affect the relative rights of Noteholder and
creditors of Maker other than its rights in relation to holders of Senior
Financing Debt; or (3) prevent Noteholder from exercising its available
remedies upon an Event of Default, subject to the rights of holders and owners
of Senior Financing Debt to receive distributions and payments otherwise
payable to Noteholder to the extent provided in this Section 10.
Section 11. "Noteholder". As used herein, the term "Noteholder"
includes Tyler Corporation and any subsequent owner and holder at the time in
question of this Note.
MAKER:
FOREST CITY AUTO PARTS COMPANY,
a Delaware corporation
By: /s/ ALAN E. GAUTHIER
------------------------------------
Name: Alan E. Gauthier
----------------------------------
Title: CFO
---------------------------------
7
<PAGE> 1
EXHIBIT 10.5
This Senior Subordinated Secured Promissory Note (this "Note") and the
indebtedness evidenced hereby are subordinated in the manner and to the extent
set forth in the Subordination and Intercreditor Agreement (the "Subordination
Agreement") dated as of March , 1999, by the payee of this Note in favor of
Congress Financial Corporation (Central) (together with its successors and
assigns, the "Senior Lender") to all indebtedness (including interest) at any
time owed by the maker of this Note to Senior Lender, and each holder of this
Note, by its acceptance hereof, shall be bound by the Subordination Agreement.
SENIOR SUBORDINATED SECURED PROMISSORY NOTE
Due March 26, 2002
$2,000,000 Dallas, Texas March 26, 1999
FOR VALUE RECEIVED, the undersigned, FOREST CITY AUTO PARTS COMPANY, a
Delaware corporation ("Maker"), hereby promises to pay to the order of TYLER
CORPORATION, a Delaware corporation ("Noteholder"), the principal amount of TWO
MILLION AND NO/100 DOLLARS ($2,000,000), together with interest on the unpaid
principal balance of this Note from time to time outstanding from the date
hereof at the rate of six percent (6%) per annum, provided, however, that all
past due principal of, and to the extent permitted by and not usurious under
applicable law, interest on, this Note, shall bear interest from date due until
paid (i) if paid on or before ninety (90) days after due date, at the rate of
six percent (6%) per annum, (ii) if paid more than ninety (90) days after due
date, but on or before one hundred eighty (180) days after due date, at the
rate of twelve percent (12%) per annum, and (iii) if paid more than one hundred
and eighty (180) days after the due date, at the rate of eighteen percent (18%)
per annum. Interest accrued on the unpaid principal balance of this Note from
time to time outstanding shall be calculated on the basis of the actual days
elapsed (including the first day but excluding the last) in a year consisting
of 365 or 366 days, as appropriate.
Section 1. Definitions. When used in this Note, the following terms
have the respective meanings specified herein or in the section referred to:
"Change of Control" means (i) the merger or consolidation of Maker, or
any entity that owns of record and/or beneficially more than twenty-five
percent (25%) of the issued and outstanding common stock of Maker (a
"Controlling Entity") with another entity and as a result of such merger or
consolidation of the outstanding voting securities of the surviving or
resulting entity less than fifty percent (50%) are owned in the aggregate by
the former shareholders of Maker or the Controlling Entity, or less than 30%
are owned by Art Hawkins, (ii) the acquisition by any person other than Art
Hawkins or group within the meaning of the Securities Exchange Act of 1934, as
amended, of more than fifty percent (50%) of any class of outstanding voting
securities of Maker or a Controlling Entity, whether directly, individually,
beneficially or of record, pursuant to any transaction or combination of
transactions, (iii) a change of control of Maker or a Controlling Entity of a
nature that would require a report in response to Item 6(e) of Schedule 14A of
Regulations 14A promulgated under the Securities Exchange Act of 1934, as
amended, whether or not Maker or a Controlling Entity is then subject to such
reporting requirements, or (iv) cessation, for any reason, of the individuals
who, at the beginning of any period of twelve (12) consecutive months,
constituted the Board of Directors of Maker or any Controlling Entity to
constitute at least a majority thereof, unless the nomination for election or
election by Maker's or the Controlling Entity's shareholders was approved by a
vote of at least two-thirds of the respective boards then still in office who
either were directors at the beginning of such period or whose election or
nomination for election was previously so approved.
<PAGE> 2
"Event of Default" has the meaning set forth in Section 5 hereof.
"Mortgages" means, collectively, the mortgages, deeds of trust, deeds
to secure debt and similar instruments of even date herewith, executed by Maker
to or for the benefit of Noteholder for the purpose of encumbering real
property of Maker, more particularly described therein, as security for the
payment of the indebtedness evidenced by this Note and the other obligations of
Maker to Noteholder described therein.
"Note" means this Senior Subordinated Secured Promissory Note.
"payment in full," "paid in full" or any similar formulation, when
used with respect to the Senior Financing Debt, means payment (or due provision
for payment) in full in cash or cash equivalents of one hundred percent (100%)
of the principal, interest, fees, expenses, and other obligations due or to
become due under the documents governing or securing the Senior financing Debt
in accordance with the terms of such documents, or otherwise on terms and
conditions to which the holders thereof shall consent in writing.
"Security Agreement" means the Security Agreement of even date
herewith between Maker and Noteholder.
"Senior Financing" means the "Senior Financing" defined and described
in, and contemplated by, Section 4.4 of the Purchase Agreement dated as of
March 22, 1999, between HalArt, L.L.C., and Tyler Corporation.
"Senior Financing Debt" means any and all indebtedness, whether for
principal, interest, fees, or other amounts, at any time and from time to time
owing or to become owing by Maker under any agreement, instrument or document
governing, evidencing and/or securing the Senior Financing.
Section 2. Payment. The principal of and accrued interest on this Note
shall be due and payable as follows:
(a) Interest, computed as aforesaid, shall be due and payable
quarterly as it accrues, commencing on March 26, 1999,
and thereafter on the first day of each January, April,
July, and October of each calendar year during the term of
this Note, through and including March 26, 2002; and
(b) the entire unpaid principal balance of this Note, together
with all accrued but unpaid interest thereon, shall be
finally due and payable in full on March 26, 2002.
Both principal of and interest on this Note are payable in lawful money of the
United States of America to Noteholder at 2800 West Mockingbird Lane, Dallas,
Texas 75235 (or at such other place as Noteholder shall specify in written
notice to Maker), in immediately available funds. All payments made hereon
shall be applied first to sums (other than the principal of and accrued
interest on this Note) payable by Maker pursuant to this Note or the Security
Agreement, then to accrued but unpaid interest on this Note, and thereafter to
the unpaid principal balance of this Note. Interest shall continue to accrue on
unpaid principal until receipt by Noteholder of good funds in payment thereof.
2
<PAGE> 3
Section 3. Security. In order to secure the payment and performance of
the indebtedness and obligations evidenced by, or arising under or in respect
of, this Note and those certain Senior Subordinated Secured Promissory Notes of
even date herewith from Maker to Noteholder in the original principal amount of
$1,155,000 ("Note B") and $3,825,000 ("Note C"), Maker has agreed to, and has,
as of the date hereof, executed and delivered to Maker the Security Agreement
and the Mortgages, pursuant to which Maker has granted to Noteholder (a) second
priority (subject only to the liens and security interests securing the Senior
Financing Debt) liens and security interests in all of Maker's now owned and
hereafter acquired inventory (as that term is defined in the Texas Uniform
Commercial Code) real estate and other assets. Reference is hereby made to the
Security Agreement and the Mortgages for the descriptions of the property
covered thereby, the nature and extent of the liens and security interests
created and granted thereby, and the rights and powers of the holder of this
Note in respect of such liens and security interests. The liens and security
interest created under the Security Agreement and the Mortgage in Maker's now
owned and hereafter acquired inventory (as that term is defined in the Texas
Uniform Commercial Code) and real estate shall be junior and subordinate only to
the liens and security interest securing payment and performance of the Senior
Financing Debt. The indebtedness and obligations evidenced by, or arising under
or in respect of, this Note shall rank pari passu, with respect to payment and
security, with the indebtedness and obligations evidenced by, or arising under
or in respect of, Notes B and C.
If pursuant to its terms the balance of Note C is to be rolled into
this Note, then Maker shall promptly (i) amend and restate this note in the
increased principal amount, (ii) grant Noteholder a first lien in certain real
estate and a portion of the Hawkins Guaranty in accordance with the
Subordination and Intercreditor Agreement dated this date between Congress
Financial Corporation (Central), Maker and Noteholder, and (iii) add in the
payment paragraph of this restated note that the principal shall be prepaid on
upon further funding in whole or in part, to the extent thereof, of the Term
Loan.
Section 4. Waiver. Except as provided herein or in the Security
Agreement, Maker and each surety, endorser, guarantor and other party ever
liable for payment of any sums of money payable upon this Note, jointly and
severally waive presentment, demand, protest, notice of protest and non-payment
or other notice of default, notice of acceleration and intention to accelerate
or other notice of any kind, and agree that their liability under this Note
shall not be affected by any renewal or extension in the time of payment
hereof, or in any indulgences, or by any release or change in any security for
the payment of this Note, and hereby consent to any and all renewals,
extensions, indulgences, releases or changes, regardless of the number of such
renewals, extensions, indulgences, releases or changes. No waiver by Noteholder
of any of its rights or remedies hereunder, or under any other document
evidencing or securing this Note or otherwise, shall be considered a waiver of
any other subsequent right or remedy of Noteholder; no delay or omission in the
exercise of enforcement by Noteholder of any rights or remedies shall ever be
construed as a waiver of any right or remedy of Noteholder; and no exercise or
enforcement of any such rights or remedies shall ever by held to exhaust any
right or remedy of Noteholder.
Section 5. Events of Default and Remedies. An "Event of Default" shall
exist hereunder if any one or more of the following events shall occur: (a)
Maker shall fail to pay when due any principal of, or interest upon, this Note;
(b) Maker shall (1) apply for or consent to the appointment of a receiver,
trustee, intervenor, custodian or liquidator of itself or of all or a
substantial part of its assets, (2) be adjudicated a bankrupt or insolvent or
file a voluntary petition for bankruptcy or admit in writing that it is unable
to pay
3
<PAGE> 4
its debts as they become due, (3) make a general assignment for the benefit of
creditors, (4) file a petition or answer seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy or insolvency
laws, or (5) file an answer admitting the material allegations of, or consent
to, or default in answering, a petition filed against it in any bankruptcy,
reorganization or insolvency proceeding, or take corporate action for the
purpose of effecting any of the foregoing; (c) an order, judgment or decree
shall be entered by any court of competent jurisdiction or other competent
authority approving a petition seeking reorganization of maker or appointing a
receiver, trustee, intervenor or liquidator of Maker, or of all or
substantially all of its assets, and such order, judgment or decree shall
continue unstayed and in effect for a period of sixty (60) days; (d) the
dissolution or liquidation of Maker; (e) Maker shall breach any covenant under
this Note, (f) any "Event of Default," as defined in the Security Agreement or
the Mortgage, shall occur, (g) any failure to pay, when due, any obligations,
whether as to principal, interest or otherwise, including non-payment following
acceleration or maturity, shall occur with respect to the Senior Financing Debt
and continue past the expiration of any period of grace, if any, with respect
thereto provided in the document governing the same, (h) any default or event
of default, other than a default or event of default occasioned by a failure to
pay as described in the preceding clause (g), shall occur with respect to
Senior Financing Debt and, by reason thereof, the holder of the Senior Debt
accelerates the maturity of all or any part of the Senior Financing Debt and
declares the same to be due and payable prior to the stated maturity date
thereof, (i) the payment of dividends by Maker on or with respect to its common
stock in any fiscal year in excess of 50% of Maker's net income after taxes ,
(j) Maker shall make a loan to any party (other than advances to employees for
reasonable travel expenses in the ordinary course of business), and/or (k) a
Change of Control shall occur. Upon the occurrence of any Event of Default
hereunder, the Noteholder may, at its option, at any time thereafter, (i)
declare the entire unpaid principal balance and accrued interest upon this Note
to be, and the same shall thereupon become, immediately due and payable without
the presentment or notice of any kind, which Maker hereby waives pursuant to
Section 4 hereof, and/or (ii) pursue and enforce any of Noteholder's rights and
remedies available pursuant to any applicable law or agreement; provided,
however, upon the occurrence of any Event of Default specified in clause (b),
(c) or (d) of this Section 5,with respect to Maker, without any notice to Maker
or any other act by Noteholder, the principal balance and interest accrued on
this Note shall automatically and without necessity of any act by Noteholder
become immediately due and payable without presentment, demand, protest or
notice of protest, notice of acceleration, notice of intent to accelerate or
other notice of any kind, all of which are hereby waived by Maker. Noteholder
agrees to advise Maker promptly if Noteholder is aware of an Event of Default.
Section 6. Notice. Whenever this Note requires or permits any notice,
approval, request or demand from one party to another, the notice, approval,
request or demand must be in writing and shall be deemed to have been given
when personally served or when deposited in the United States mails, registered
or certified, return receipt requested, addressed to the party to be notified
at the following address (or at such other address as may have been designated
by written notice):
Noteholder: Tyler Corporation
2800 West Mockingbird Lane
Dallas, Texas 75235
Attention: Ted Bathurst
Telecopy No.: (214) 902-5058
4
<PAGE> 5
with a copy to (which shall not constitute notice) to:
H. Lynn Moore, Jr., Esq.
2800 West Mockingbird Lane
Dallas, Texas 75235
Telecopy No.: (214) 902-5058
Maker: Forest City Auto Parts Company
c/o Art Hawkins
6180 Cochran Road, 2nd Floor
Solon, Ohio 44139
with copies (which shall not constitute notice) to:
Art Hawkins
HalArt, L.L.C.
1520 Surria Court
Bloomfield Hills, MI 48304
Telecopy No.: (248) 593-4997
John M. Rickel, Esq.
Rickel & Baun, P.C.
63 Kercheval Avenue
Grosse Pointe Farms, Michigan 48236-3627
Telecopy No.: (313) 886-0405
Section 7. Prepayment.
(a) Voluntary Prepayment. Subject to the provisions of Section 10
of this Note, Maker reserves the right, upon thirty (30)
days' prior written notice to Noteholder, to prepay the
outstanding principal balance of this Note, in whole or in
part, at any time and from time to time, without premium or
penalty. Any such prepayment shall be made together with
payment of interest accrued on the amount of principal being
prepaid through the date of such prepayment.
(b) Mandatory Prepayment. Subject to the provisions of Section 10
of this Note, Maker shall prepay the outstanding principal
balance of this Note in whole upon (i) the sale of securities
of Maker or a Controlling Entity pursuant to a registration
statement that has been declared effective by the Securities
and Exchange Commission, (ii) Maker or a Controlling Entity
otherwise becoming a reporting company pursuant to the
Securities Exchange Act of 1934, as amended, (iii) Maker
selling or otherwise transferring all or any material part of
its assets, (iv) a Change of Control, (v) Maker incurring any
senior indebtedness for the purpose of a material expansion
of Maker's business and operations of more than $2,500,000,
plus senior financing for acquisitions of operating
businesses.
5
<PAGE> 6
Section 8. Usury Laws. Regardless of any provisions contained in this
Note, Noteholder shall never be deemed to have contracted for or be entitled to
receive, collect or apply as interest on or under this Note any amount in
excess of the maximum amount of interest permitted by applicable law (the
"Maximum Amount"), and, in the event that Noteholder ever receives, collects or
applies as interest any such excess, the amount which would be excessive
interest shall be deemed to be a partial prepayment of principal and treated
hereunder as such; and, if the principal amount of this Note is paid in full,
any remaining excess shall forthwith be paid to Maker. In determining whether
or not the interest paid or payable under any specific contingency exceeds the
Maximum Amount, Maker and Noteholder shall, to the maximum extent permitted
under applicable law, (i) characterize any nonprincipal payment as an expense,
fee or premium rather than as interest; (ii) exclude voluntary prepayments and
the effects thereof; and (iii) amortize, prorate, allocate and spread, in equal
parts, the total amount of interest throughout the entire contemplated term of
this Note so that the interest rate is uniform throughout the entire term;
provided, however, that, if this Note is paid in full prior to the end of the
full contemplated term hereof, and if the interest received for the actual
period of existence thereof exceeds the relevant Maximum Amount, Noteholder
shall refund to Maker the amount of such excess or credit the amount of such
excess against the principal amount of this Note and, in such event, Noteholder
shall not be subject to any penalties provided by any Laws for contracting for,
charging, taking, reserving or receiving interest in excess of the relevant
Maximum Amount.
Section 9. GOVERNING LAW. THIS NOTE IS PAYABLE AND PERFORMABLE IN
DALLAS COUNTY, TEXAS, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE FEDERAL
LAWS OF THE UNITED STATES OF AMERICA. WITHOUT EXCLUDING ANY OTHER JURISDICTION,
MAKER AGREES THAT THE COURTS OF THE STATE OF TEXAS SITTING IN DALLAS, TEXAS,
AND THE FEDERAL COURTS SITTING IN DALLAS, TEXAS, WILL HAVE JURISDICTION OVER
ANY PROCEEDINGS IN CONNECTION HEREWITH.
Section 10. Subordination. Maker agrees, and Noteholder, for itself
and for each subsequent owner and holder of this Note, agrees that the
obligation represented by this Note is and shall be subordinated in right of
payment to the prior payment in full of the Senior Financing Debt, whether
outstanding on the date hereof or hereafter incurred. Upon any distribution of
assets of Maker upon or by reason of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to the Company or to
substantially all of its assets, or (b) any liquidation, dissolution or other
winding up of the Company, whether voluntary or involuntary and whether or not
involving insolvency or bankruptcy, or (c) any assignment for the benefit of
creditors or any other marshalling of assets and liabilities of the Company,
then and in any such event specified in clause (a), (b) or (c) preceding (each
such event, if any, herein sometimes referred to as a "Proceeding"), (i) the
holders of the Senior Financing Debt will first be entitled to receive payment
in full of the Senior Financing Debt before Noteholder is entitled to receive
any payment, whether of principal, premium, if any, or interest, on account of
this Note (other than Junior Securities) and (ii) any payment or distribution
of assets of Maker of any kind or character from any source, whether in cash,
property or securities (other than Junior Securities) to which Noteholder would
be entitled but for the provisions of this Section 10 will be paid by the
liquidating trustee or agent or other person making such a payment or
distribution directly to the holders of the Senior Financing Debt or their
representative to the extent necessary to make payment in full of the Senior
Financing Debt remaining
6
<PAGE> 7
unpaid, after giving effect to any concurrent payment or distribution made
directly to the holders of such Senior Financing Debt. For purposes of this
Section 10, "Junior Securities" shall mean capital stock and/or securities of
Maker provided for by a plan of reorganization or readjustment, or of any other
corpora tion provided for by such plan of reorganization or readjustment
authorized by an order or decree of a court of competent jurisdiction in a
reorganization Proceeding under any applicable bankruptcy law which stock or
securities are subordinated in right of payment to all then outstanding Senior
Financing Debt to substantially the same extent as this Note is so subordinated
as provided in this Section 10. After all Senior Financing Debt is paid in full
and until this Note is paid in full, Noteholder shall be subrogated (equally
and ratably with all other indebtedness pari passu with this Note) to the
rights of holders of Senior Financing Debt to receive distributions applicable
to Senior Financing Debt to the extent that distributions otherwise payable to
Noteholder have been applied to the payment of Senior Debt. A distribution made
under this Section 10 to holders of Senior Financing Debt that otherwise would
have been made to Noteholder is not, as between Maker and Noteholder, a payment
by Maker on this Note. Nothing in this Note shall (1) impair, as between Maker
and Noteholder, the obligations of Maker to pay the principal of and interest
on this Note in accordance with its terms; (2) affect the relative rights of
Noteholder and creditors of Maker other than its rights in relation to holders
of Senior Financing Debt; or (3) prevent Noteholder from exercising its
available remedies upon an Event of Default, subject to the rights of holders
and owners of Senior Financing Debt to receive distributions and payments
otherwise payable to Noteholder to the extent provided in this Section 10.
Section 11. "Noteholder". As used herein, the term "Noteholder"
includes Tyler Corporation and any subsequent owner and holder at the time in
question of this Note.
MAKER:
FOREST CITY AUTO PARTS COMPANY,
a Delaware corporation
By: /s/ ALAN E. GAUTHIER
-----------------------------------
Name: Alan E. Gauthier
----------------------------------
Title: CFO
--------------------------------
7
