SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
_______________________
Date of Report
(Date of earliest
event reported): March 13, 1997
Swing-N-Slide Corp.
(Exact name of registrant as specified in its charter)
Delaware 0-20450 36-3808989
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
1212 Barberry Drive, Janesville, Wisconsin 53545
(Address of principal executive offices including zip code)
(608) 755-4777
(Registrant's telephone number)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On March 13, 1997, Newco, Inc. ("Newco"), a Wisconsin corporation
and wholly-owned subsidiary of Swing-N-Slide Corp., a Delaware corporation
("Holding Company"), acquired all of the issued and outstanding shares of
capital stock ("GameTime Stock") of Game Time, Inc., an Alabama
corporation ("GameTime"). Newco's acquisition of the GameTime Stock, as
well as the consummation of the transactions related thereto, are
sometimes collectively referred to herein as the "Acquisition." The
aggregate purchase price paid by Newco for the purchase of the GameTime
Stock was $27,000,000. The Holding Company valued the total transaction
at approximately $40,400,000, which amount includes GameTime's long-term
debt.
The Acquisition was consummated in accordance with the terms of an
Amended and Restated Stock Purchase Agreement, dated as of March 13, 1997
(the "Stock Purchase Agreement"), by and among Newco, GameTime, and Ross
D. Siragusa, Jr., John R. Siragusa and Richard D. Siragusa (collectively
referred to herein as the "GameTime Stockholders").
In connection with the Acquisition, Newco acquired the GameTime
Stock from the GameTime Stockholders for (i) $25,000,000 in cash at the
closing of the Acquisition; and (ii) Newco's unsecured 10.00% Subordinated
Notes Due March 13, 2005, delivered at the closing of the Acquisition,
payable to the GameTime Stockholders in the aggregate principal amount of
$2,000,000. The purchase price paid by Newco in the Acquisition was
determined on the basis of arm's length negotiations among the parties.
Immediately following the Acquisition on March 13, 1997, GameTime
was merged with and into Newco, pursuant to the terms of Articles of
Merger Merging GameTime, Inc. With and Into Newco, Inc. dated as of March
13, 1997 (the "Articles of Merger").
To provide financing for the Acquisition, to refinance certain
indebtedness of the Holding Company and certain indebtedness of Newco, and
to provide funds for working capital purposes, the Holding Company and
Newco entered into certain agreements, as follows:
(a) The Holding Company and Newco entered into a Credit Agreement,
dated as of March 13, 1997 (the "Fleet Credit Agreement"), among Holding
Company, Newco, the Lenders party thereto and Fleet National Bank, as
lender and agent, under the terms of which Agreement the Lenders extended
to Newco a $20,000,000 senior secured revolving credit facility maturing
March 13, 2003 (of which $12,700,000 was drawn at the closing of the
Acquisition), evidenced by Revolving Notes dated March 13, 1997 (the
"Revolving Notes"), a $45,000,000 senior secured "Term Loan A Facility"
maturing March 13, 2003, evidenced by Term Loan A Notes dated March 13,
1997 (the "Term Loan A Notes") and a $4,500,000 senior secured "Term Loan
B Facility" maturing June 30, 2003, evidenced by a Term Loan B Note dated
March 13, 1997 (the "Term Loan B Note");
(b) The Holding Company and Newco entered into separate Securities
Purchase Agreements dated as of March 13, 1997 (collectively, the
"MassMutual Securities Purchase Agreements"), with each of Massachusetts
Mutual Life Insurance Company, MassMutual Corporate Investors, MassMutual
Participation Investors and MassMutual Corporate Value Partners Limited
(collectively, the "MassMutual Investors"), under the terms of which
Agreements the Holding Company sold its warrants (the "MassMutual
Warrants") evidencing rights to purchase an aggregate of 592,177 shares of
Holding Company Class A Common Stock (subject to adjustment), for an
aggregate purchase price of $2,722,889, and Newco sold its 12% Senior
Subordinated Notes due March 13, 2005, in the aggregate principal amount
of $12,500,000 (the "MassMutual Notes"), for an aggregate purchase price
of $9,777,111;
(c) The Holding Company entered into an Investment Agreement dated
as of March 13, 1997 (the "GreenGrass Investment Agreement"), between the
Holding Company and its majority stockholder, GreenGrass Holdings, a
Delaware general partnership ("GreenGrass"), under the terms of which
Agreement the Holding Company: (i) issued to GreenGrass 1,087,405 shares
of its Common Stock for an aggregate purchase price of $5,000,000, or a
per share purchase price of $4.5981 (the "Estimated Share Price"); (ii)
sold its Junior Subordinated Bridge Note (the "Bridge Note") to
GreenGrass, in the principal amount of $2,500,000, due not later than
December 31, 1997 and subject to prepayment in connection with the "Rights
Offering" discussed below, bearing interest at a rate of 13.5% per annum,
to be paid by the issuance of shares of the Holding Company's Common
Stock, for the purchase price of $2,500,000, and the grant to GreenGrass
of a Warrant for the Purchase of Common Stock (the "GreenGrass Warrant"),
allowing GreenGrass the right to purchase 50,000 shares of the Holding
Company's Common Stock at a purchase price (the "Final Calculated Price")
to be determined based upon the weighted average bid price per share of
the Holding Company's Common Stock for the 150 days following the filing
of this Current Report on Form 8-K, but in no event less than $4.00 per
share nor greater than $4.5981 per share; (iii) agreed that, in the event
that the Final Calculated Price is less than the Estimated Share Price,
the Holding Company shall issue to GreenGrass a number of additional
shares of Common Stock equal to the difference between the quotient of
5,000,000 divided by the Final Calculated Price, and 1,087,405; and (iv)
agreed to make a "Rights Offering" under the terms of which: the Holding
Company will use its best efforts to file, within 90 days after the
closing of the Acquisition, a registration statement with the Securities
and Exchange Commission covering the number of shares of Common Stock
determined by dividing 2,500,000 by the Final Calculated Price (the
"Rights Shares"); the Holding Company will offer, to each stockholder of
the Holding Company other than GreenGrass, the right, on the basis of the
number of shares held as of a record date set by the Board of Directors of
the Holding Company, to purchase his or her pro rata share of the Rights
Shares for cash at a price equal to the Final Calculated Price; GreenGrass
is obligated to purchase any Rights Shares not purchased by the other
stockholders of the Holding Company under the Rights Offering at a price
per share equal to the Final Calculated Price; and the Holding Company
will use the proceeds of the sale of the Rights Shares to prepay in full
the principal outstanding under the Bridge Note; and
(d) The Holding Company entered into an Amended and Restated
Registration Rights Agreement dated as of March 13, 1997 (the
"Registration Rights Agreement"), between the Holding Company and
GreenGrass, under the terms of which, the Holding Company agreed to grant
certain demand and piggyback registration rights with respect to the
shares of Common Stock acquired by GreenGrass under the terms of the
GreenGrass Investment Agreement, the GreenGrass Warrant and the Bridge
Note.
The Rights Offering described above will be made only through a
prospectus complying with federal and applicable state securities laws,
and the timing of such Rights Offering will depend upon regulatory
clearance and other factors.
The Stock Purchase Agreement, the Articles of Merger, the Fleet
Credit Agreement, the Revolving Notes, the Term Loan A Notes, the Term
Loan B Note, the MassMutual Securities Purchase Agreements, the MassMutual
Notes, the MassMutual Warrants, the GreenGrass Investment Agreement, the
Bridge Note, the GreenGrass Warrant, and the Registration Rights Agreement
are filed as exhibits to this Current Report on Form 8-K and are
incorporated herein by reference. The brief summaries of the material
provisions of such agreements set forth above are qualified in their
entirety by reference to each respective agreement filed as an exhibit
hereto.
GameTime is principally involved in the design, manufacture, sale
and distribution of commercial (institutional) outdoor park and playground
equipment, site amenities and related products. The Holding Company has
no present plans to make significant changes to GameTime's business.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired - Game Time, Inc.
Independent Auditors' Report
Financial Statements:
Balance Sheets, December 31, 1996 and 1995
Statement of Operations,
Years Ended December 31, 1996 and 1995
Statement of Changes in Stockholders' Equity,
Years Ended December 31, 1996 and 1995
Statement of Cash Flows,
Years Ended December 31, 1996 and 1995
Notes to Financial Statements
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Gametime, Inc.
We have audited the accompanying balance sheets of GAMETIME, INC. (an S
corporation) as of December 31, 1996 and 1995, and the related statements
of operations, changes in stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Gametime, Inc. as of
December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the
financial statements taken as a whole. The additional financial data, as
listed in the Table of Contents, is presented for purposes of additional
analysis and is not a required part of the financial statements. Such
information has been subjected to the auditing procedures applied in the
audits of the financial statements and, in our opinion, is fairly stated
in all material respects in relation to the financial statements taken as
a whole.
Chicago, Illinois
March 7, 1997
<PAGE>
Exhibit A
GAMETIME, INC.
(An S Corporation)
Balance Sheets
December 31, 1996 and 1995
Assets (Primarily Pledged--Note 4) 1996 1995
Current Assets:
Cash and cash equivalents (Note 1) $ 47,160 $ 68,091
Restricted cash related to industrial
development bond issue (Note 3) 251,167 252,073
Accounts receivable, trade (net of
allowance for doubtful accounts
of $104,000 and $119,328) 5,488,265 6,219,403
Inventories (Notes 1 and 2) 3,105,623 3,102,293
Other receivables 80,727 261,764
Prepaid expenses 134,556 189,793
Deferred catalog costs--current
(Note 1) 1,158,099 1,654,093
---------- ----------
10,265,597 11,747,510
Property, Plant and Equipment (less
accumulated depreciation and
amortization):
Owned assets (Notes 1, 2 and 3) 7,917,724 5,797,796
Assets under capitalized leases
(Notes 1, 2 and 3) 2,950,797 3,290,125
---------- ----------
10,868,521 9,087,921
---------- ----------
Other Assets:
Restricted cash related to industrial
development bond issue (Note 3) 484,015 484,905
Marketable equity securities (Note 7) 0 440,131
Deferred catalog costs--noncurrent
(Note 1) 204,799 446,333
Other 243,256 231,949
---------- ----------
932,070 1,603,318
---------- ----------
$22,066,188 $22,438,749
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable, trade $ 2,080,167 $ 2,318,096
Current portion of long-term liabilities
(Note 7) 324,308 252,545
Loans under revolving credit agreement
(Note 4) 6,226,960 0
Accrued expenses and other liabilities
(Note 2) 4,477,316 3,387,103
---------- ----------
13,108,751 5,957,744
---------- ----------
Long-term Liabilities:
Loans under revolving credit agreement
(Note 4) 0 8,305,513
Other long-term liabilities (net of
current portion--Note 3) 4,488,579 4,321,751
---------- ----------
4,488,579 12,627,264
---------- ----------
Stockholders' Equity (Exhibit C) 4,468,858 3,853,741
---------- ----------
$22,066,188 $22,438,749
========== ==========
The accompanying notes are an integral part of this statement.
<PAGE>
Exhibit B
GAMETIME, INC.
(An S Corporation)
Statement of Operations
Years Ended December 31, 1996 and 1995
1996 1995
Net Revenue (Note 1) $41,842,729 $36,363,941
Cost of Goods Sold 27,022,837 24,089,146
---------- ----------
Gross Profit 14,819,892 12,274,795
---------- ----------
Operating Expenses:
Selling and marketing 5,141,970 4,528,556
Warehousing and shipping 1,693,223 1,415,174
Engineering 815,681 442,682
General and administrative 3,570,719 3,272,861
---------- ----------
11,221,593 9,659,273
---------- ----------
Income from Operations 3,598,299 2,615,522
---------- ----------
Other Expense (Income):
Interest expense, net 1,309,899 1,455,303
Realized gain on distribution of
securities (Note 7) ( 288,219) 0
Other (income), net ( 74,848) ( 35,586)
---------- ----------
946,832 1,419,717
---------- ----------
Net Income (to Exhibit C) $ 2,651,467 $ 1,195,805
========== ==========
The accompanying notes are an integral part of this statement.
<PAGE>
Exhibit C
<TABLE>
GAMETIME, INC.
(An S Corporation)
Statement of Changes in Stockholders' Equity
Years Ended December 31, 1996 and 1995
<CAPTION>
Common Stock
(1,000 Shares of
$1.00 Par Value
Authorized Additional Unrealized
100 Shares Issued Paid-in Retained Gain on
and Outstanding) Capital Earnings Securities Total
<S> <C> <C> <C> <C> <C>
Balances January 1, 1995 $ 100 $1,635,266 $ 762,445 $ 117,577 $2,515,388
Unrealized Gain on Securities for
1995 (Note 9) 142,548 142,548
Net Income for 1995 1,195,805 1,195,805
---------- --------- --------- --------- ---------
Balances, December 31, 1995 100 1,635,266 1,958,250 260,125 3,853,741
Unrealized Gain on Securities
for 1996 (Note 7) 28,094 28,094
Realized Gain on Securities
for 1996 (Note 7) ( 288,219) ( 288,219)
Distributions to Stockholders:
Cash (Note A) ( 1,308,000) ( 1,308,000)
Securities (Note 7) ( 468,225) ( 468,225)
Net Income for 1996 2,651,467 2,651,467
---------- --------- --------- --------- ---------
Balances, December 31, 1996 $ 100 $1,635,266 $2,833,492 $ 0 $4,468,858
========== ========= ========= =========
Note A--An additional $399,000 was distributed to stockholders in 1997.
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Exhibit D
GAMETIME, INC.
(An S Corporation)
Statement of Cash Flows
Years Ended December 31, 1996 and 1995
1996 1995
Cash Flows from Operating Activities:
Net income $2,651,467 $1,195,805
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 1,271,841 1,134,163
Provision for losses on accounts
receivable 23,258 69,000
Loss on sale of assets 2,194 0
Realized gain on distribution of
securities to stockholders ( 288,219) 0
Increase (Decrease) in cash from
changes in:
Accounts receivable 707,880 ( 20,144)
Inventories ( 3,330) ( 433,842)
Prepaid expenses 55,237 56,224
Deferred catalog costs 737,528 765,219
Other assets 169,730 86,589
Accounts payable ( 237,929) 389,408
Accrued expenses and other
liabilities 1,090,213 496,725
--------- ---------
Net cash provided by operating
activities 6,179,870 3,739,147
--------- ---------
Cash Flows from Investing Activities:
Capital expenditures for owned assets ( 2,533,348) ( 1,453,858)
Proceeds from sale of property, plant
and equipment 13,713 0
Decrease in due from stockholders 0 167,934
Decrease in restricted cash related
to future repayments of industrial
development bonds 1,796 110,630
--------- ---------
Net cash used in investing activities ( 2,517,839) ( 1,175,294)
--------- ---------
Cash Flows from Financing Activities:
Distributions to stockholders ( 1,308,000) 0
Net repayments under revolving credit
agreement ( 2,078,553) ( 2,381,340)
Principal payments on notes payable ( 296,409) ( 268,505)
--------- ---------
Net cash used in financial activities ( 3,682,962) ( 2,649,845)
--------- ---------
Net Decrease in Cash and Cash
Equivalents ( 20,931) ( 85,992)
Cash and Cash Equivalents, Beginning of
Year 68,091 154,083
--------- ---------
Cash and Cash Equivalents, End of Year $ 47,160 $ 68,091
========= =========
Supplementary Disclosures of Cash
Flow Information:
Cash paid during the year for interest $1,847,983 $1,565,233
========= =========
Supplementary Disclosures of Noncash
Investing and Financing Activities:
Increase in market value of marketable
equity securities $ 28,094 $ 142,548
========= =========
Distribution of marketable securities
to stockholders ($ 468,225) $ 0
========= =========
Equipment acquired under capital lease $ 535,000 $ 0
========= =========
The accompanying notes are an integral part of this statement.
<PAGE>
GAMETIME, INC.
(An S Corporation)
Notes to the Financial Statements
December 31, 1996 and 1995
Note 1--Nature of Activities and Significant Accounting Policies:
Gametime, Inc. (the "Company") is engaged in the manufacture and
distribution of park, playground and related equipment to end users such
as cities, park districts, and schools. Operations are conducted from
premises in Fort Payne, Alabama with sales being made throughout the
United States and in several foreign countries.
The Company's stockholders have entered into an agreement to sell all of
the Company's stock to Swing-N-Slide Corp., a publicly owned
corporation. Such sale is expected to be closed in March 1997.
A summary of significant accounting policies is as follows:
Inventories--Inventories are stated at the lower of cost,
determined on the first-in, first-out (FIFO) basis, or market.
Revenue--Revenue consists of (a) sales of company products, which
are recorded net of the related commissions paid to outside
manufacturers' representatives and (b) transportation charges to
customers.
Depreciation and Amortization--Provisions for depreciation and
amortization are computed for financial reporting purposes over the
estimated useful lives of the respective assets under the straight-
line method. For income tax reporting purposes, certain assets are
depreciated under accelerated methods. Fully depreciated assets
are generally not written off until disposition or retirement.
Income Taxes--The Company is not liable for federal income taxes
pursuant to its election of S corporation status under the Internal
Revenue Code, whereby income of the corporation is allocated to and
included in the individual returns of the stockholders.
Accordingly, no provision for federal income taxes is reflected in
the financial statements. However, the Company is currently
subject to immaterial amounts of state taxes. The S corporation
status will terminate upon the completion of the sale of the
Company's stock (see above).
Capitalized Leases--Leases capitalized are recorded at the present
value of future rental payments. For both financial and income tax
reporting purposes, amortization of assets under capitalized leases
is computed under the straight-line method.
Use of Estimates--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from the
estimates.
Cash and Cash Equivalents--For purposes of the statement of cash
flows, the Company considers all highly liquid debt instruments
acquired with a maturity of three months or less to be cash
equivalents.
Marketable Equity Securities--See Note 7.
Deferred Catalog and Advertising Costs--Catalog costs considered as
direct response advertising are amortized generally over one to two
years from completion of the respective catalogs, which is the
expected period of probable benefits. Other advertising costs are
charged to expense as incurred.
Reclassifications--Certain amounts reflected in the accompanying
financial statements for the year ended December 31, 1995 have been
reclassified from that previously presented in order to conform to
current year classifications, without affecting reported net income
or stockholders' equity for 1995.
Note 2--Selected Financial Data:
Owned property, plant and equipment at December 31, 1996 and 1995,
stated at cost, consisted of the following:
1996 1995
Land $ 104,868 $ 104,868
Land improvements 417,599 209,549
Buildings 2,158,960 2,158,960
Machinery and equipment 3,878,922 3,560,384
Office furniture and fixtures 1,005,920 755,411
Transportation equipment 272,474 309,591
Patterns and dies 6,853,722 4,992,959
Assets to be placed in service
(see below) 1,363,613 966,899
---------- ----------
16,056,078 13,058,621
Less accumulated depreciation and
amortization 8,138,354 7,260,825
---------- ----------
Net book value $ 7,917,724 $ 5,797,796
========== ==========
Assets to be placed in service at December 31, 1996 consist of a new
rotational molding building containing a new rotational molding machine
(acquired under a capital lease). The facility became operational in
February 1997.
See Notes 3 and 4 for related debt.
Assets under capitalized leases at December 31, 1996 and 1995 consisted
of the following:
1996 1995
Land improvements $ 298,910 $ 298,910
Buildings 1,964,006 1,964,006
Machinery and equipment 3,163,544 3,163,544
Furniture and fixtures 42,220 42,220
---------- ----------
5,468,680 5,468,680
Less accumulated amortization 2,517,883 2,178,555
---------- ----------
Net book value $ 2,950,797 $ 3,290,125
========== ==========
See Note 3 for related debt.
Inventories at December 31, 1996 and 1995 consisted of the following:
1996 1995
Raw materials $3,026,742 $2,924,033
Work in process 16,515 12,818
Finished goods 62,366 165,442
--------- ---------
$3,105,623 $3,102,293
========= =========
Accrued expenses and other liabilities at December 31, 1996 and 1995,
consisted of the following:
1996 1995
Commissions $1,848,793 $1,595,539
Group and product liability insurance 403,728 247,966
Sales and other taxes 147,592 173,363
Wages, bonuses and vacation pay 1,206,999 702,273
Interest 253,544 249,657
Other 616,660 418,305
--------- ---------
$4,477,316 $3,387,103
========= =========
Selected expenses for the years ended December 31, 1996 and 1995 were as
follows:
1996 1995
Bad Debt Expense $ 23,258 $ 69,000
========= =========
Advertising Expense $ 682,867 $ 581,899
========= =========
Note 3--Long-term Liabilities:
Long-term liabilities at December 31, 1996 and 1995, other than the
loans under the revolving credit agreement (Note 4), consisted of the
following:
1996 1995
Liabilities under capitalized leases
financed by Industrial Revenue Bonds
(see below) $4,119,000 $4,269,000
Liability under capitalized lease, payable
in quarterly installments of $32,685,
including interest at 8% per year; final
payment due June 1, 2001; secured by
certain machinery and equipment 483,939 0
Liability under capitalized lease, payable
in monthly installments of $5,130
including interest at 9.5% per year;
final payment due June 7, 1999; secured
by certain machinery and equipment 194,345 228,667
Liability under capitalized lease, final
payment made February 23, 1996 0 27,200
Note payable; final payment made
September 1, 1996 0 14,414
Note payable in quarterly installments of
$5,410 including interest at 8% per
year; final payment due October 1, 1997;
secured by certain machinery and
equipment 15,603 35,015
--------- ---------
Total long-term liabilities 4,812,887 4,574,296
Less current portion (inclusive of
capitalized leases) 324,308 252,545
--------- ---------
Noncurrent portion $4,488,579 $4,321,751
========= =========
On August 1, 1989, the Company entered into a lease agreement with the
Industrial Development Board of the City of Fort Payne, Alabama financed
by the issuance of new Industrial Development Bonds in the amount of
$4,742,000, the proceeds of which were used primarily for plant
expansion. The bonds bear interest at 10.25% per annum.
At December 31, 1996 and 1995, total restricted cash related to the bond
issue consisted of approximately:
1996 1995
Bond sinking fund $ 484,000 $ 484,000
========= =========
Deposits to trust fund for payment of
interest on debt $ 251,000 $ 252,000
========= =========
Maturities of long-term liabilities are as follows:
Capitalized Leases
Industrial
Revenue
Year Bond Other Other Total
1997 $ 587,198 $ 192,303 $ 15,603 $ 795,104
1998 587,286 192,303 779,589
1999 587,630 231,492 819,122
2000 587,028 130,738 717,766
2001 587,376 56,701 644,077
Thereafter 4,645,346 4,645,346
--------- --------- -------- ---------
Total minimum
payments 7,581,864 803,537 15,603 8,401,004
Less imputed
interest 3,462,864 125,253 3,588,117
--------- --------- --------- ---------
Total
obligations $4,119,000 $ 678,284 $ 15,603 $4,812,887
========= ========= ========= =========
Note 4--Loans under Revolving Credit Agreement:
At December 31, 1996 and 1995, the Company was obligated to a bank
for $6,226,960 and $8,305,513, respectively, on secured loans made
under revolving credit agreements. The most recent agreement,
effective May 1, 1996, expires May 1, 1997 and provides for
maximum borrowings of the lesser of $12,000,000 or a borrowing
base amount which is based on accounts receivable and inventory
amounts. Interest is payable quarterly at the LIBOR rate plus 225
basis points (7.8% at December 31, 1996) on borrowings up to
$6,000,000 and monthly at prime (8.25% at December 31, 1996) for
any additional outstanding balance.
Pursuant to the agreement, the Company has granted the bank a
security interest in all accounts receivable, inventories and
certain equipment. The agreement also contains various
restrictive covenants as well as pledges of certain marketable
securities of the stockholders as additional collateral. The
Company was in compliance with all such covenants at December 31,
1996. The loan is expected to be repaid in full concurrent with
the sale of the Company's stock (Note 1) and is classified as a
current liability at December 31, 1996.
Note 5--Employee Benefit Plan:
The Company provides retirement benefits to its qualified
employees through a "401(k) plan," which permits employee
contributions up to the maximum allowable by federal regulation,
with the Company making matching contributions at the rate of 40%
of the amount contributed by the participants up to 8% of the
participants' gross wages. During 1996 and 1995, respectively,
the Company's contributions were $110,000 and $97,000 and employee
contributions totaled $293,000 and $259,000.
Note 6--Contingencies:
The Company is subject to various product liability claims and
litigation which arise in the ordinary course of its business. In
the opinion of management, the amount of ultimate liability with
respect to these actions is adequately insured against and any
uninsured losses will not materially affect the financial position
of the Company.
Note 7--Marketable Equity Securities:
The Company had adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 115, Investments in Debt and
Certain Equity Securities to account for its investment in
marketable equity securities. The adoption of SFAS No. 115
required that marketable equity securities held for sale be valued
at market. The Company's investment in such marketable equity
securities consisted of the stock of a single company.
Note 7--Marketable Equity Securities, Continued:
On September 16, 1996, the securities (with an original cost of
$180,006) were distributed to the stockholders. A realized gain
of $288,219 was recorded upon distribution and is separately
reflected on the Statement of Operations. At December 31, 1995,
there was an unrealized gain of $260,125, shown as a separate
component of Stockholders' Equity.
<PAGE>
Independent Auditors' Report
Financial Statements:
Balance Sheets, December 31, 1995 and 1994
Statement of Operations,
Years Ended December 31, 1995 and 1994
Statement of Changes in Stockholders' Equity,
Years Ended December 31, 1995 and 1994
Statement of Cash Flows,
Years Ended December 31, 1995 and 1994
Notes to Financial Statements
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Gametime, Inc.
We have audited the accompanying balance sheets of GAMETIME, INC. (an S
corporation) as of December 31, 1995 and 1994, and the related statements
of operations, changes in stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Gametime, Inc. as of
December 31, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
As explained in Note 9 to the financial statements, the Company in 1994
adopted the provisions of Statement of Financial Accounting Standards No.
115, Investments in Debt and Certain Equity Securities.
Our audits were made for the purpose of forming an opinion on the
financial statements taken as a whole. The additional financial data, as
listed in the Table of Contents, is presented for purposes of additional
analysis and is not a required part of the financial statements. Such
information has been subjected to the auditing procedures applied in the
audits of the financial statements and, in our opinion, is fairly stated
in all material respects in relation to the financial statements taken as
a whole.
Chicago, Illinois
March 8, 1996
<PAGE>
Exhibit A
GAMETIME, INC.
(An S Corporation)
Balance Sheets
December 31, 1995 and 1994
Assets (Primarily Pledged--Note 6) 1995 1994
Current Assets:
Cash and cash equivalents (Note 1) $ 68,091 $ 154,083
Accounts receivable, trade (net of
allowance for doubtful accounts
of $119,328 and $71,900) 6,219,403 6,268,259
Inventories (Note 1) 3,102,293 2,668,451
Other receivables 261,764 290,445
Due from stockholders 0 167,934
Prepaid expenses 189,793 246,017
Deferred catalog costs--current
(Note 1) 1,654,093 2,290,645
---------- ----------
11,495,437 12,085,834
---------- ----------
Property, Plant and Equipment
(less accumulated depreciation and
amortization):
Owned assets (Notes 1, 2 and 4) 5,797,796 5,134,143
Assets under capitalized leases
(Notes 1, 3 and 4) 3,290,125 3,634,083
---------- ----------
9,087,921 8,768,226
---------- ----------
Other Assets:
Restricted cash related to
industrial development bond
issue (Note 4) 736,978 847,608
Marketable equity securities (Note 9) 440,131 297,583
Deferred catalog costs--non-current
(Note 1) 446,333 575,000
Other 231,949 289,857
---------- ----------
1,855,391 2,010,048
---------- ----------
$22,438,749 $22,864,108
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable, trade $ 2,318,096 $ 1,928,688
Current portion of long-term
liabilities (Note 4) 252,545 268,505
Accrued expenses and other liabilities
(Note 5) 3,387,103 2,890,378
---------- ----------
5,957,744 5,087,571
---------- ----------
Long-term Liabilities:
Loans under revolving credit agreement
(Note 6) 8,305,513 10,686,853
Other long-term liabilities (net of
current portion--Note 4) 4,321,751 4,574,296
---------- ----------
12,627,264 15,261,149
---------- ----------
Stockholders' Equity (Exhibit C) 3,853,741 2,515,388
---------- ----------
$22,438,749 $22,864,108
========== ==========
The accompanying notes are an integral part of this statement.
<PAGE>
Exhibit B
GAMETIME, INC.
(An S Corporation)
Statement of Operations
Years Ended December 31, 1995 and 1994
1995 1994
Net Revenue (Note 1) $36,363,941 $32,619,798
Cost of Goods Sold 24,089,146 21,722,347
---------- ----------
Gross Profit 12,274,795 10,897,451
---------- ----------
Operating Expenses:
Selling and marketing 4,528,556 4,334,121
Warehousing and shipping 1,415,174 1,126,928
Engineering 442,682 442,890
General and administrative 3,272,861 2,891,799
---------- ----------
9,659,273 8,795,738
---------- ----------
Income from Operations 2,615,522 2,101,713
---------- ----------
Other Expense:
Interest expense, net 1,455,303 1,422,303
Other expense, net ( 35,586) ( 49,025)
Settlement of claim (Note 8) 0 150,000
---------- ----------
1,419,717 1,523,278
---------- ----------
Net Income (to Exhibit C) $ 1,195,805 $ 578,435
========== ==========
The accompanying notes are an integral part of this statement.
<PAGE>
Exhibit C
<TABLE>
GAMETIME, INC.
(An S Corporation)
Statement of Changes in Stockholders' Equity
Years Ended December 31, 1995 and 1994
<CAPTION>
Common Stock
(1,000 Shares of
$1.00 Par Value
Authorized Additional Unrealized
100 Shares Issued Paid-in Retained Gain on
and outstanding) Capital Earnings Securities Total
<S> <C> <C> <C> <C> <C>
Balances, December 31,
1993 $ 100 $ 1,635,266 $ 184,010 $ 1,819,376
Cumulative Effect of Adopting
SFAS 115 January 1, 1994
(Note 9) $ 128,890 128,890
--------- ---------- ---------- ----------- ----------
Balances January 1, 1994,
restated 100 1,635,266 184,010 128,890 1,948,266
Reduction in Unrealized Gain
on Securities for 1994
(Note 9) ( 11,313) ( 11,313)
Net Income for 1994 578,435 578,435
--------- --------- ---------- ---------- ---------
Balances, December 31,
1994 100 1,635,266 762,445 117,577 2,515,388
Unrealized Gain on Securities
for 1995 (Note 9) 142,548 142,548
Net Income for 1995 1,195,805 1,195,805
--------- --------- --------- ---------- ---------
Balances, December 31, 1995 $ 100 $ 1,635,266 $ 1,958,250 $ 260,125 $ 3,853,741
========= ========= ========= ========== =========
(To
Exhibit A)
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Exhibit D
GAMETIME, INC.
(An S Corporation)
Statement of Cash Flows
Years Ended December 31, 1995 and 1994
1995
1994
Cash Flows from Operating
Activities:
Net income $1,195,805 $ 578,435
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 1,134,163 1,112,828
Provision for losses on accounts
receivable 69,000 15,000
Gain on sale of assets 0 ( 5,610)
Increase (Decrease) in cash from
changes in:
Accounts receivable ( 20,144) ( 332,363)
Inventories ( 433,842) 712,189
Prepaid expenses 56,224 ( 43,585)
Deferred catalog costs 765,219 766,988
Other assets 86,589 ( 37,207)
Accounts payable 389,408 ( 1,439,024)
Accrued expenses and other
liabilities 496,725 537,224
--------- ---------
Net cash provided by operating
activities 3,739,147 1,864,875
--------- ---------
Cash Flows from Investing
Activities:
Capital expenditures for owned
assets ( 1,453,858) ( 1,267,720)
Proceeds from sale of property,
plant and equipment 0 67,463
Decrease (Increase) in due from
stockholders 167,934 ( 6,695)
Decrease (Increase) in restricted
cash related to future repayments
of industrial development bonds 110,630 ( 72,289)
--------- ---------
Net cash used in investing
activities ( 1,175,294) ( 1,279,241)
--------- ---------
Cash Flows from Financing
Activities:
Net repayments under revolving
credit agreement ( 2,381,340) ( 279,815)
Principal payments on notes
payable ( 268,505) ( 260,896)
--------- ---------
Net cash used in financial
activities ( 2,649,845) ( 540,711)
--------- ---------
Net (Decrease) Increase in Cash
and Cash Equivalents ( 85,992) 44,923
Cash and Cash Equivalents, Beginning
of Year 154,083 109,160
--------- ---------
Cash and Cash Equivalents, End of Year $ 68,091 $ 154,083
========= =========
Supplementary Disclosures of Cash
Flow Information:
Cash paid during the year for
interest $1,565,233 $1,376,148
========= =========
Supplementary Disclosures of Noncash
Investing and Financing
Activities:
Increase in market value of
marketable equity securities $ 142,548 $ 117,577
========= =========
<PAGE>
GAMETIME, INC.
(An S Corporation)
Notes to the Financial Statements
December 31, 1995 and 1994
Note 1--Nature of Activities and Significant Accounting Policies:
Gametime, Inc. (the "Company") is engaged in the manufacture and
distribution of park, playground and related equipment to end users
such as cities, park districts, and schools. Operations are conducted
from premises in Fort Payne, Alabama with sales being made throughout
the United States and in several foreign countries.
A summary of significant accounting policies is as follows:
Inventories--Inventories are stated at the lower of cost,
determined on the first-in, first-out (FIFO) basis, or market.
Revenue--Revenue consists of (a) sales of company products, which
are recorded net of the related commissions paid to outside
manufacturers' representatives and (b) transportation charges to
customers.
Depreciation and Amortization--Provisions for depreciation and
amortization are computed for financial reporting purposes over
the estimated useful lives of the respective assets under the
straight-line method. For income tax reporting purposes, certain
assets are depreciated under accelerated methods. Fully
depreciated assets are generally not written off until
disposition or retirement.
Income Taxes--The Company is not liable for federal income taxes
pursuant to its election of S corporation status under the
Internal Revenue Code, whereby income of the corporation is
allocated to and included in the individual returns of the
stockholders. Accordingly, no provision for federal income taxes
is reflected in the financial statements. However, the Company
is currently subject to immaterial amounts of state taxes.
Capitalized Leases--Leases capitalized are recorded at the
present value of future rental payments (Note 3). For both
financial and income tax reporting purposes, amortization of
assets under capitalized leases is computed under the straight-
line method.
Use of Estimates--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from the estimates.
Cash and Cash Equivalents--For purposes of the statement of cash
flows, the Company considers all highly liquid debt instruments
acquired with a maturity of three months or less to be cash
equivalents.
Marketable Equity Securities--See Note 9.
Deferred Catalog Costs--Catalog costs considered as direct
response advertising are amortized generally over two years from
completion of the respective catalogs, which is the expected
period of probable benefits.
Reclassifications--Certain amounts reflected in the accompanying
financial statements for the year ended December 31, 1994 have
been reclassified from that previously presented in order to
conform to current year classifications, without affecting
reported net income or shareholders' equity for 1994.
Note 2--Property, Plant and Equipment:
Owned property, plant and equipment at December 31, 1995 and 1994,
stated at cost, consisted of the following:
1995 1994
Land $ 104,868 $ 104,868
Land improvements 209,549 209,549
Buildings 2,158,960 2,113,155
Machinery and equipment 3,560,384 3,049,657
Office furniture and fixtures 755,411 899,282
Transportation equipment 309,591 309,591
Patterns and dies 4,992,959 4,506,842
Assets to be placed in service 966,899 962,895
---------- ----------
13,058,621 12,155,839
Less accumulated depreciation and
amortization 7,260,825 7,021,696
---------- ----------
Net book value $ 5,797,796 $ 5,134,143
========== ==========
See Notes 4 and 6 for related debt.
Note 3--Assets under Capitalized Leases:
Assets under capitalized leases at December 31, 1995 and 1994 consisted
of the following:
1995 1994
Land improvements $ 298,910 $ 298,910
Buildings 1,964,006 1,964,006
Machinery and equipment 3,163,544 3,163,544
Furniture and fixtures 42,220 42,220
---------- ----------
5,468,680 5,468,680
Less accumulated amortization 2,178,555 1,834,597
---------- ----------
Net book value $ 3,290,125 $ 3,634,083
========== ==========
See Note 4 for related debt.
Note 4--Long-term Liabilities:
Long-term liabilities at December 31, 1995 and 1994, other than the
loans under the revolving credit agreement (Note 6), consisted of the
following:
1995 1994
Liabilities under capitalized leases
financed by Industrial Revenue Bonds
(see below) $4,269,000 $4,405,000
Liability under capitalized lease, payable
in monthly installments of $5,130
including interest at 9.5% per year;
final payment due June 7, 1999; secured
by certain machinery and equipment 228,667 266,419
Liability under capitalized lease, payable
in monthly installments of $13,630 plus
interest at prime rate; final payment
due February 23, 1996; secured by
certain machinery and equipment 27,200 81,720
Note payable in monthly installments of
$1,860 including interest at 8.5% per
year; final payment due September 1,
1996; secured by certain machinery and
equipment 14,414 34,566
Note payable in quarterly installments of
$5,410 including interest at 8% per
year; final payment due October 1, 1997;
secured by certain machinery and
equipment 35,015 52,949
Note payable in monthly installments of
$281, including interest at 12.90% per
year; final payment due September 13,
1995; secured by equipment 0 2,147
--------- ---------
Total long-term liabilities 4,574,296 4,842,801
Less current portion (inclusive of
capitalized leases) 252,545 268,505
--------- ---------
Noncurrent portion $4,321,751 $4,574,296
========= =========
On August 1, 1989, the Company entered into a lease agreement with the
Industrial Development Board of the City of Fort Payne, Alabama
financed by the issuance of new Industrial Development Bonds in the
amount of $4,742,000, the proceeds of which were used primarily for
plant expansion.
At December 31, 1995 and 1994, total restricted cash related to the
bond issue consisted of approximately:
1995 1994
Bond sinking fund $ 484,000 $ 482,000
Deposits to trust fund for payment
of interest on debt 252,000 365,000
--------- ---------
$ 736,000 $ 847,000
========= =========
Maturities of long-term liabilities are as follows:
Capitalized Leases
Industrial
Revenue
Year Bond Other Other Total
1996 $ 587,572 $ 89,377 $ 33,827 $ 710,776
1997 587,198 61,565 15,602 664,365
1998 587,286 61,565 648,851
1999 587,630 90,520 678,150
2000 587,028 587,028
Thereafter 5,232,722 5,232,722
--------- --------- --------- ---------
Total minimum
payments 8,169,436 303,027 49,429 8,521,892
Less imputed
interest 3,900,436 47,160 3,947,596
--------- --------- --------- ---------
Total
obligations $4,269,000 $ 255,867 $ 49,429 $4,574,296
========= ========= ========= =========
Management believes that the fair value of its long-term indebtedness is
not materially different from its carrying value. Management has
estimated the fair value by discounting expected cash flows using
interest rates that management believes are approximately equal to the
interest rates currently available for similar debt issues.
Note 5--Accrued Expenses and Other Liabilities:
Accrued expenses and other liabilities at December 31, 1995 and
1994, consisted of the following:
1995 1994
Commissions $1,595,539 $1,526,025
Group and product liability insurance 247,966 179,882
Sales and other taxes 173,363 138,508
Wages, bonuses and vacation pay 702,273 405,258
Interest 249,657 272,666
Settlement of claim (Note 8) 75,000 150,000
Other 343,305 218,039
--------- ---------
$3,387,103 $2,890,378
Note 6--Loans under Revolving Credit Agreement:
At December 31, 1995 and 1994, the Company was obligated to a bank for
$8,305,513 and $10,686,853, respectively, on secured loans made under a
revolving credit agreement. Effective June 1, 1995, a new revolving
agreement was executed, expiring on May 1, 1996 providing for maximum
borrowings of $12,000,000 with interest payable monthly at prime. In
March, 1996, the lender agreed to renew the agreement to become due in
May, 1997. Thus, the indebtedness has been classified as a long-term
liability at December 31, 1995.
Pursuant to both agreements, the Company has granted the bank a security
interest in all marketable equity securities, accounts receivable,
inventories and certain equipment. Both agreements also contain various
restrictive covenants as well as pledges of certain marketable
securities of the stockholders as additional collateral. The Company
was in compliance with all such covenants at December 31, 1995.
Because the revolving loan interest rate adjusts with changes in the
market rate of interest, management believes the fair value of the
revolving loan is equal to its carrying value.
Note 7--Employee Benefit Plan:
The Company provides retirement benefits to its qualified employees
through a "401(k) plan," which permits employee contributions up to the
maximum allowable by federal regulation, with the Company making
matching contributions at the rate of 40% of the amount contributed by
the participants up to 8% of the participants' gross wages. During 1995
and 1994, respectively, the Company's contributions were $97,000 and
$87,000 and employee contributions totaled $259,000 and $232,000.
Note 8--Contingencies:
The Company is subject to various product liability claims and
litigation which arise in the ordinary course of its business. In the
opinion of management, the amount of ultimate liability with respect to
these actions is adequately insured against and any uninsured losses
will not materially affect the financial position of the Company.
During 1994, a settlement of $150,000 was concluded concerning a claim
made by the U.S. Government regarding a prior year contract. Such
amount was payable $75,000 in 1995 and $75,000 in 1996.
Note 9--Marketable Equity Securities:
As of January 1, 1994, the Company adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 115, Investments in Debt
and Certain Equity Securities to account for its investment in
marketable equity securities. The adoption of SFAS No. 115 requires
that marketable equity securities held for sale be valued at market as
follows:
December 31,
1995 1994
Cost of securities $ 180,006 $ 180,006
Market value 440,131 297,583
--------- ---------
Unrealized gain $ 260,125 $ 117,577
========= =========
The unrealized gain of $128,890 as of December 31, 1993 was reflected as
a cumulative effect adjustment by increasing stockholders' equity at
January 1, 1994.
(b) Pro Forma Financial Information.
The required pro forma financial information will be filed by
amendment within the prescribed time period.
(c) Exhibits. The exhibits listed in the accompanying Exhibit
Index are filed as part of this Current Report on Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SWING-N-SLIDE CORP.
Date: March 21, 1997 /s/ Richard E. Ruegger
Richard E. Ruegger,
Vice President-Finance
and Chief Financial Officer
(Duly authorized officer and
Principal Financial and Accounting
Officer)
<PAGE>
SWING-N-SLIDE CORP.
EXHIBIT INDEX TO FORM 8-K
Report Dated March 13, 1997
Exhibit
(2.1) Amended and Restated Stock Purchase Agreement, dated as of
March 13, 1997, by and among Newco, Inc., Game Time, Inc. and
Ross D. Siragusa, Jr., John R. Siragusa and Richard D.
Siragusa.*
(2.2) Articles of Merger Merging Game Time, Inc. With and Into
Newco, Inc., dated as of March 13, 1997.
(4.1) Credit Agreement, dated as of March 13, 1997, among Swing-N-
Slide Corp., Newco, Inc., the Lenders party thereto and Fleet
National Bank, as lender and agent.*
(4.2) Newco, Inc. Revolving Note R-1 dated as of March 13, 1997.
(4.3) Newco, Inc. Revolving Note R-2 dated as of March 13, 1997.
(4.4) Newco, Inc. Revolving Note R-3 dated as of March 13, 1997.
(4.5) Newco, Inc. Revolving Note R-4 dated as of March 13, 1997.
(4.6) Newco, Inc. Term Loan A Note TA-1 dated as of March 13, 1997.
(4.7) Newco, Inc. Term Loan A Note TA-2 dated as of March 13, 1997.
(4.8) Newco, Inc. Term Loan A Note TA-3 dated as of March 13, 1997.
(4.9) Newco, Inc. Term Loan A Note TA-4 dated as of March 13, 1997.
(4.10) Newco, Inc. Term Loan B Note TB-1 dated as of March 13, 1997.
(4.11) Securities Purchase Agreement, dated as of March 13, 1997,
among Swing-N-Slide Corp., Newco, Inc. and Massachusetts
Mutual Life Insurance Company.*
(4.12) Securities Purchase Agreement, dated as of March 13, 1997,
among Swing-N-Slide Corp., Newco, Inc. and MassMutual
Corporate Investors.**
(4.13) Securities Purchase Agreement, dated as of March 13, 1997,
among Swing-N-Slide Corp., Newco, Inc. and MassMutual
Participation Investors.**
(4.14) Securities Purchase Agreement, dated as of March 13, 1997,
among Swing-N-Slide Corp., Newco, Inc. and MassMutual
Corporate Value Partners Limited.**
(4.15) Newco, Inc. 12% Senior Subordinated Note due March 13, 2005
No. R-1 dated March 13, 1997, in the principal amount of
$3,928,500.
(4.16) Newco, Inc. 12% Senior Subordinated Note due March 13, 2005
No. R-2 dated March 13, 1997, in the principal amount of
$1,931,000.
(4.17) Newco, Inc. 12% Senior Subordinated Note due March 13, 2005
No. R-3 dated March 13, 1997, in the principal amount of
$3,125,000.
(4.18) Newco, Inc. 12% Senior Subordinated Note due March 13, 2005
No. R-4 dated March 13, 1997, in the principal amount of
$1,562,500.
(4.19) Newco, Inc. 12% Senior Subordinated Note due March 13, 2005
No. R-5 dated March 13, 1997, in the principal amount of
$1,953,000.
(4.20) Warrant To Purchase 186,111 Shares of Common Stock of Swing-
N-Slide Corp. No. RW-1 dated March 13, 1997.
(4.21) Warrant To Purchase 91,472 Shares of Common Stock of Swing-N-
Slide Corp.
No. RW-2 dated March 13, 1997.
(4.22) Warrant To Purchase 148,044 Shares of Common Stock of Swing-
N-Slide Corp. No. RW-3 dated March 13, 1997.
(4.23) Warrant To Purchase 74,022 Shares of Common Stock of Swing-N-
Slide Corp. No. RW-4 dated March 13, 1997.
(4.24) Warrant To Purchase 92,528 Shares of Common Stock of Swing-N-
Slide Corp. No. RW-5 dated March 13, 1997.
(4.25) Investment Agreement, dated as of March 13, 1997, between
Swing-N-Slide Corp. and GreenGrass Holdings.
(4.26) Swing-N-Slide Corp. Bridge Note, dated as of March 13, 1997,
in the principal amount of $2,500,000.
(4.27) Warrant No. 1 for the Purchase of Common Stock of Swing-N-
Slide Corp., dated as of March 13, 1997.
(4.28) Amended and Restated Registration Rights Agreement, dated as
of March 13, 1997, between Swing-N-Slide Corp. and GreenGrass
Holdings.
_________________________________
* The schedules/exhibits to this document are not being filed
herewith. The Registrant agrees to furnish supplementally a copy
of any such schedule/exhibit to the Securities and Exchange
Commission upon request.
** This document is substantively identical to the Securities Purchase
Agreement, dated as of March 13, 1997, among Swing-N-Slide Corp.,
Newco, Inc. and Massachusetts Mutual Life Insurance Company,
included as Exhibit 4.11 above, and is therefore not being filed
herewith. The Registrant agrees to furnish supplementally a copy
of such document to the Securities and Exchange Commission upon
request.
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
by and among
NEWCO, INC.,
GAME TIME, INC.,
ROSS D. SIRAGUSA, JR.
JOHN R. SIRAGUSA
AND
RICHARD D. SIRAGUSA
Dated as of March 13, 1997
<PAGE>
TABLE OF CONTENTS
1. PURCHASE AND SALE OF SHARES . . . . . . . . . . . . . . . . . . 2
2. PURCHASE PRICE AND PAYMENT TERMS . . . . . . . . . . . . . . . . 2
2.1. Purchase Price . . . . . . . . . . . . . . . . . . . . . . 2
2.2. Payment of Purchase Price . . . . . . . . . . . . . . . . . 2
2.2.(a) Cash to Shareholders . . . . . . . . . . . . . . 3
2.2.(b) Notes . . . . . . . . . . . . . . . . . . . . . . 3
3. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS . . . 3
3.1. Corporate . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1.(a) Organization . . . . . . . . . . . . . . . . . . 3
3.1.(b) Corporate Power . . . . . . . . . . . . . . . . . 3
3.1.(c) Qualification . . . . . . . . . . . . . . . . . . 3
3.1.(d) Subsidiaries . . . . . . . . . . . . . . . . . . 4
3.1.(e) Corporate Documents. etc . . . . . . . . . . . . 4
3.1.(f) Capitalization of the Company . . . . . . . . . . 4
3.2. Shareholders . . . . . . . . . . . . . . . . . . . . . . . 4
3.2.(a) Power . . . . . . . . . . . . . . . . . . . . . . 4
3.2.(b) Validity . . . . . . . . . . . . . . . . . . . . 4
3.2.(c) Title . . . . . . . . . . . . . . . . . . . . . . 5
3.3. Authority . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4. No Violation . . . . . . . . . . . . . . . . . . . . . . . 5
3.5. Financial Statements . . . . . . . . . . . . . . . . . . . 5
3.6. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6.(a) Provision For Taxes . . . . . . . . . . . . . . . 6
3.6.(b) Tax Returns Filed . . . . . . . . . . . . . . . . 7
3.6.(c) Tax Audits . . . . . . . . . . . . . . . . . . . 7
3.6.(d) Consolidated Group . . . . . . . . . . . . . . . 7
3.6.(e) S Corporation Election . . . . . . . . . . . . . 7
3.6.(f) Other . . . . . . . . . . . . . . . . . . . . . . 7
3.7. Accounts Receivable . . . . . . . . . . . . . . . . . . . . 8
3.8. Inventory . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.9. Absence of Certain Changes . . . . . . . . . . . . . . . . 8
3.9.(a) Adverse Change . . . . . . . . . . . . . . . . . 8
3.9.(b) Damage . . . . . . . . . . . . . . . . . . . . . 8
3.9.(c) Increase in Compensation . . . . . . . . . . . . 8
3.9.(d) Labor Matters . . . . . . . . . . . . . . . . . . 8
3.9.(e) Commitments . . . . . . . . . . . . . . . . . . . 9
3.9.(f) Dividends . . . . . . . . . . . . . . . . . . . . 9
3.9.(g) Disposition of Property . . . . . . . . . . . . . 9
3.9.(h) Indebtedness . . . . . . . . . . . . . . . . . . 9
3.9.(i) Liens . . . . . . . . . . . . . . . . . . . . . . 9
3.9.(j) Amendment of Contracts . . . . . . . . . . . . . 9
3.9.(k) Loans and Advances . . . . . . . . . . . . . . . 9
3.9.(l) Credit . . . . . . . . . . . . . . . . . . . . . 9
3.9.(m) Unusual Events . . . . . . . . . . . . . . . . . 10
3.10. No Litigation . . . . . . . . . . . . . . . . . . . . 10
3.11. Absence of Undisclosed Liabilities . . . . . . . . . . 10
3.12. Compliance With Laws . . . . . . . . . . . . . . . . . 10
3.12.(a) Compliance . . . . . . . . . . . . . . . . . . . 10
3.12.(b) Licenses and Permits . . . . . . . . . . . . . . 11
3.12.(c) Environmental Matters . . . . . . . . . . . . . . 12
3.13. Title to and Condition of Properties . . . . . . . . . 12
3.13.(a) Marketable Title . . . . . . . . . . . . . . . . 12
3.13.(b) Condition . . . . . . . . . . . . . . . . . . . . 13
3.13.(c) Real Property . . . . . . . . . . . . . . . . . . 13
3.13.(d) No Condemnation or Expropriation . . . . . . . . 14
3.14. Insurance . . . . . . . . . . . . . . . . . . . . . . 14
3.15. Contracts and Commitments . . . . . . . . . . . . . . 15
3.15.(a) Real Property Leases . . . . . . . . . . . . . . 15
3.15.(b) Personal Property Leases . . . . . . . . . . . . 15
3.15.(c) Purchase Commitments . . . . . . . . . . . . . . 15
3.15.(d) Sales Commitments . . . . . . . . . . . . . . . . 16
3.15.(e) Contracts With Affiliates and Certain Others . . 16
3.15.(f) Powers of Attorney . . . . . . . . . . . . . . . 16
3.15.(g) Collective Bargaining Agreements . . . . . . . . 16
3.15.(h) Loan Agreements . . . . . . . . . . . . . . . . . 16
3.15.(i) Guarantees . . . . . . . . . . . . . . . . . . . 16
3.15.(j) Contracts Subject to Renegotiation . . . . . . . 16
3.15.(k) Burdensome or Restrictive Agreements . . . . . . 16
3.15.(l) Other Material Contracts . . . . . . . . . . . . 17
3.15.(m) No Default . . . . . . . . . . . . . . . . . . . 17
3.16. Labor Matters . . . . . . . . . . . . . . . . . . . . 17
3.17. Employee Benefit Plans . . . . . . . . . . . . . . . . 18
3.17.(a) Disclosure and Delivery of Documents . . . . . . 18
3.17.(b) Title IV of ERISA . . . . . . . . . . . . . . . . 19
3.17.(c) Multiemployer Plans . . . . . . . . . . . . . . . 19
3.17.(d) Severance and Post-Retirement Benefits . . . . . 19
3.17.(e) Payments and Compliance . . . . . . . . . . . . . 19
3.17.(f) COBRA . . . . . . . . . . . . . . . . . . . . . . 20
3.17.(g) Triggering of Obligations and Other Binding
Commitments . . . . . . . . . . . . . . . . . . . . . 20
3.18. Employment Compensation . . . . . . . . . . . . . . . 20
3.19. Trade Rights . . . . . . . . . . . . . . . . . . . . . 20
3.20. Major Customers and Suppliers . . . . . . . . . . . . 21
3.20.(a) Major Customers . . . . . . . . . . . . . . . . . 21
3.20.(b) Major Suppliers . . . . . . . . . . . . . . . . . 21
3.20.(c) Dealers and Distributors . . . . . . . . . . . . 22
3.21. Product Warranty and Product Liability . . . . . . . . 22
3.22. Bank Accounts . . . . . . . . . . . . . . . . . . . . 23
3.23. Affiliates' Relationships to Company . . . . . . . . . 23
3.23.(a) Contracts With Affiliates . . . . . . . . . . . . 23
3.23.(b) No Adverse Interests . . . . . . . . . . . . . . 23
3.23.(c) Obligations . . . . . . . . . . . . . . . . . . . 23
3.24. Assets Necessary to Business . . . . . . . . . . . . . 23
3.25. Disclosure . . . . . . . . . . . . . . . . . . . . . . 23
4. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . 24
4.1. Corporate . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.1.(a) Organization . . . . . . . . . . . . . . . . . . 24
4.1.(b) Corporate Power . . . . . . . . . . . . . . . . . 24
4.2. Authority . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.3. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 25
4.4. Investment Intent . . . . . . . . . . . . . . . . . . . . . 25
4.5. Buyer Reports; Financial Statements . . . . . . . . . . . . 25
4.6. Litigation . . . . . . . . . . . . . . . . . . . . . . . . 25
4.7. Financial Resources . . . . . . . . . . . . . . . . . . . . 25
5. OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1. Environmental Survey . . . . . . . . . . . . . . . . . . . 26
5.1.(a) Retention of Engineers . . . . . . . . . . . . . 26
5.1.(b) Limitations on Access . . . . . . . . . . . . . . 26
5.1.(c) Environmental Quantification . . . . . . . . . . 26
5.2. Noncompetition; Confidentiality . . . . . . . . . . . . . . 27
5.2.(a) Covenant Not to Compete . . . . . . . . . . . . . 27
5.2.(b) Covenant of Confidentiality . . . . . . . . . . . 28
5.2.(c) Equitable Relief for Violations . . . . . . . . . 29
5.3. General Releases . . . . . . . . . . . . . . . . . . . . . 29
5.4. Title Insurance . . . . . . . . . . . . . . . . . . . . . . 29
5.5. Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.6. Shareholders' Representative . . . . . . . . . . . . . . . 30
5.6.(a) Appointment . . . . . . . . . . . . . . . . . . . 30
5.6.(b) Authority . . . . . . . . . . . . . . . . . . . . 30
5.6.(c) Tenure and Replacement of the Shareholders'
Representative . . . . . . . . . . . . . . . . . . . . 30
5.7. Transaction Expenses . . . . . . . . . . . . . . . . . . . 31
5.8. Certain Tax Matters . . . . . . . . . . . . . . . . . . . . 31
5.8.(a) Allocation of Purchase Price . . . . . . . . . . 31
5.8.(b) 338 (h)(10) Election . . . . . . . . . . . . . . 31
5.9. Post-Closing Employment Matters . . . . . . . . . . . . . . 32
5.9.(a) 1996 Bonuses . . . . . . . . . . . . . . . . . . 32
5.9.(b) Retention Bonuses . . . . . . . . . . . . . . . . 32
6. FURTHER COVENANTS OF THE COMPANY AND THE SHAREHOLDERS . . . . . 32
6.1. Access to Information and Records . . . . . . . . . . . . . 32
6.2. Conduct of Business Pending the Closing . . . . . . . . . . 33
6.2.(a) No Changes . . . . . . . . . . . . . . . . . . . 33
6.2.(b) No Transfer of Shares . . . . . . . . . . . . . . 33
6.2.(c) Maintain Organization . . . . . . . . . . . . . . 33
6.2.(d) No Breach . . . . . . . . . . . . . . . . . . . . 33
6.2.(e) No Material Contracts . . . . . . . . . . . . . . 34
6.2.(f) No Corporate Changes . . . . . . . . . . . . . . 34
6.2.(g) Maintenance of Insurance . . . . . . . . . . . . 34
6.2.(h) Maintenance of Property . . . . . . . . . . . . . 34
6.2.(i) Interim Financials . . . . . . . . . . . . . . . 34
6.2.(j) No Negotiations . . . . . . . . . . . . . . . . . 34
6.2.(k) No Dividends; No Increase in Compensation . . . 34
6.2.(l) No Change in Accounting Policies . . . . . . . . 35
6.2.(m) No Extraordinary Capital Expenditures . . . . . . 35
6.3. Consents . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.4. Other Action . . . . . . . . . . . . . . . . . . . . . . . 35
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS . . . . . . . . . . 35
7.1. Representations and Warranties True on the Closing Date . . 35
7.2. Compliance With Agreement . . . . . . . . . . . . . . . . . 36
7.3. Absence of Suit . . . . . . . . . . . . . . . . . . . . . . 36
7.4. Environmental Survey . . . . . . . . . . . . . . . . . . . 36
7.5. Title Insurance . . . . . . . . . . . . . . . . . . . . . . 36
7.6. Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.7. Lender's Consent . . . . . . . . . . . . . . . . . . . . . 36
7.8. Due Diligence . . . . . . . . . . . . . . . . . . . . . . . 36
7.9. Financing . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.10. Non-Competition and Confidentiality Agreements . . . . 36
8. CONDITIONS PRECEDENT TO THE SHAREHOLDERS' OBLIGATIONS . . . . . 37
8.1. Representations and Warranties True on the Closing . . . . 37
8.2. Compliance with Agreement . . . . . . . . . . . . . . . . . 37
8.3. Absence of Suit . . . . . . . . . . . . . . . . . . . . . . 37
8.4. Repayment of Certain Indebtedness . . . . . . . . . . . . . 37
9. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . 37
9.1. By Shareholders . . . . . . . . . . . . . . . . . . . . . . 37
9.2. By Buyer . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.3. Indemnification for Third-Party Claims . . . . . . . . . . 38
9.3.(a) Notice and Defense . . . . . . . . . . . . . . . 38
9.3.(b) Failure to Defend . . . . . . . . . . . . . . . . 39
9.3.(c) Indemnified Party's Rights . . . . . . . . . . . 39
9.4. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.5. Effect of Payment . . . . . . . . . . . . . . . . . . . . . 40
9.6. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.7. Limitations on Company and Shareholder Indemnification . . 40
9.7.(a) Time Limitation . . . . . . . . . . . . . . . . . 40
9.7.(b) Amount Limitation . . . . . . . . . . . . . . . . 41
9.8. Limitations on Buyer Indemnification . . . . . . . . . . . 41
10. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.1. Documents to be Delivered by the Company and
Shareholders . . . . . . . . . . . . . . . . . . . . . . . 41
10.1.(a) Stock Certificates . . . . . . . . . . . . . . . 41
10.1.(b) Intentionally left blank. . . . . . . . . . . . . 41
10.1.(c) Opinion of Counsel . . . . . . . . . . . . . . . 42
10.1.(d) Certified Resolutions . . . . . . . . . . . . . . 42
10.1.(e) Articles; By-laws . . . . . . . . . . . . . . . . 42
10.1.(f) General Releases . . . . . . . . . . . . . . . . 42
10.1.(g) Termination and Waiver . . . . . . . . . . . . . 42
10.1.(h) Resignation . . . . . . . . . . . . . . . . . . . 42
10.1.(i) Consulting Agreement . . . . . . . . . . . . . . 42
10.1.(j) Other Documents . . . . . . . . . . . . . . . . . 42
10.2. Documents to be Delivered by Buyer . . . . . . . . . . 42
10.2.(a) Purchase Price . . . . . . . . . . . . . . . . . 42
10.2.(b) Note . . . . . . . . . . . . . . . . . . . . . . 42
10.2.(c) Intentionally left blank. . . . . . . . . . . . . 42
10.2.(d) Opinion of Counsel . . . . . . . . . . . . . . . 43
10.2.(e) Certified Resolutions . . . . . . . . . . . . . . 43
10.2.(f) Incumbency Certificate . . . . . . . . . . . . . 43
10.2.(g) Other Documents . . . . . . . . . . . . . . . . . 43
11. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.1. Termination Without Liability . . . . . . . . . . . . 43
11.2. Termination With Liability . . . . . . . . . . . . . . 44
12. POST-CLOSING OBLIGATIONS . . . . . . . . . . . . . . . . . . . . 44
12.1. Transition . . . . . . . . . . . . . . . . . . . . . . 44
12.2. Further Assurances . . . . . . . . . . . . . . . . . . 44
13. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 44
13.1. Disclosures and Announcements . . . . . . . . . . . . 44
13.2. Assignment; Parties in Interest . . . . . . . . . . . 44
13.2.(a) Assignment . . . . . . . . . . . . . . . . . . . 44
13.2.(b) Parties in Interest . . . . . . . . . . . . . . . 45
13.3. Law Governing Agreement . . . . . . . . . . . . . . . 45
13.4. Amendment and Modification . . . . . . . . . . . . . . 45
13.5. Notice . . . . . . . . . . . . . . . . . . . . . . . . 45
13.6. Expenses . . . . . . . . . . . . . . . . . . . . . . . 47
13.6.(a) Brokerage . . . . . . . . . . . . . . . . . . . . 47
13.6.(b) Expenses . . . . . . . . . . . . . . . . . . . . 47
13.6.(c) Costs of Litigation . . . . . . . . . . . . . . . 47
13.7. Consent to Jurisdiction . . . . . . . . . . . . . . . 47
13.8. Entire Agreement . . . . . . . . . . . . . . . . . . . 47
13.9. Counterparts . . . . . . . . . . . . . . . . . . . . . 48
13.10. Headings . . . . . . . . . . . . . . . . . . . . . . . 48
13.11. Glossary of Terms . . . . . . . . . . . . . . . . . . 48
Schedules (To Be Provided)
Schedule 3.1(c) - Real Property
Schedule 3.1(d) - Subsidiaries
Schedule 3.1(e) - Directors and Officers
Schedule 3.1(f) - Capitalization
Schedule 3.4 - Violation, Conflict, Default
Schedule 3.5 - Financial Statements
Schedule 3.6(b) - Tax Returns
Schedule 3.6(c) - Tax Audits
Schedule 3.6(d) - Consolidated Tax Returns
Schedule 3.6(e) - Tax, Other
Schedule 3.7 - Accounts Receivable
Schedule 3.8 - Inventory Off Premises
Schedule 3.9 - Certain Changes
Schedule 3.10 - Litigation Matters
Schedule 3.11 - Undisclosed Liabilities
Schedule 3.12(a) - Non-Compliance With Laws
Schedule 3.12(b) - Licenses and Permits
Schedule 3.12(c) - Environmental Matters
Schedule 3.13(a) - Liens
Schedule 3.13(c) - Real Property
Schedule 3.14 - Insurance
Schedule 3.15(b) - Personal Property Leases
Schedule 3.15(d) - Sales Commitments
Schedule 3.15(e) - Contracts With Affiliates and Certain Others
Schedule 3.15(f) - Powers of Attorney
Schedule 3.15(g) - Collective Bargaining Agreements
Schedule 3.15(h) - Loan Agreements, etc.
Schedule 3.15(i) - Guarantees
Schedule 3.15(j) - Contracts Subject to Renegotiation
Schedule 3.15(k) - Restrictive Agreements
Schedule 3.15(l) - Material Contracts
Schedule 3.15(m) - Third Party Defaults
Schedule 3.16 - Labor Matters
Schedule 3.17(a) - Employee Plans/Agreements
Schedule 3.18 - Employment Compensation
Schedule 3.19 - Trade Rights
Schedule 3.20(a) - Major Customers
Schedule 3.20(b) - Major Suppliers
Schedule 3.20(c) - Dealers and Distributors
Schedule 3.21 - Product Warranty, Warranty Expense and Liability
Claims
Schedule 3.22 - Bank Accounts
Schedule 3.23(a) - Contracts With Affiliates
Schedule 3.23(b) - Adverse Interests
Schedule 3.23(c) - Obligations of and to Affiliates
Schedule 5.4 - Real Property Surveys and Title Insurance
EXHIBITS
EXHIBIT A - Form of Subordinated Note
EXHIBIT B - Form of Opinion of the Company and Shareholders'
Counsel
EXHIBIT C - Form of Consulting Agreement
EXHIBIT D - Form of Opinion of Buyer's Counsel
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
This AMENDED AND RESTATED STOCK PURCHASE AGREEMENT ("Agreement"),
dated March 13, 1997, is entered into by and among Newco, Inc., a
Wisconsin corporation ("Buyer"), Game Time, Inc., an Alabama corporation
(the "Company"), and Ross D. Siragusa, Jr., John R. Siragusa and Richard
D. Siragusa (each individually "Shareholder" and together the
"Shareholders").
RECITALS
A. The Company is engaged in the design, manufacture, sale and
distribution of outdoor playground equipment, site amenities and related
products. Shareholders own all of the issued and outstanding shares of
capital stock of the Company (the "Shares").
B. Buyer desires to purchase from Shareholders, and Shareholders
desire to sell to Buyer, the Shares.
C. Swing-N-Slide Corp., a Delaware corporation ("SNSC"), the
Company and the Shareholders are parties to that certain Stock Purchase
Agreement dated January 21, 1997 (the "Prior Agreement"). SNSC has
assigned its rights and obligations under the Prior Agreement to Buyer.
Buyer, the Company and the Shareholders desire to amend and restate the
Prior Agreement as herein provided.
THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions
hereinafter set forth, and intending to be legally bound hereby, the
parties agree as follows:
1. PURCHASE AND SALE OF SHARES
Subject to the terms and conditions of this Agreement, on the Closing
Date (as defined herein) Shareholders shall sell, transfer, convey,
assign, and deliver to Buyer (or upon Buyer's request, to an assignee
affiliate of Buyer), and Buyer shall purchase the Shares.
2. PURCHASE PRICE AND PAYMENT TERMS
2.1. Purchase Price. The aggregate purchase price (the "Purchase
Price") payable for the Shares shall be Twenty-Seven Million Dollars
($27,000,000). All payments of the Purchase Price are to be made in
accordance with Section 2.2 hereof.
2.2. Payment of Purchase Price. The Purchase Price shall be paid
as follows:
2.2.(a) Cash to Shareholders. At the Closing (as defined
herein), Buyer shall deliver to Shareholders the sum of Twenty-Five
Million Dollars ($25,000,000) by wire transfer of immediately available
funds to such account or accounts and in such proportions as the
Shareholders' Representative (as defined herein) shall designate in
writing not less than forty-eight (48) hours prior to Closing.
2.2.(b) Notes. At the Closing, Buyer shall deliver to
Shareholders in such proportions as the Shareholders' Representative shall
designate in writing not less than 48 hours prior to closing, Buyer's
unsecured note or notes payable to Shareholders in the principal amount of
Two Million Dollars ($2,000,000) (collectively the "Notes") in the form
attached hereto as Exhibit A.
3. REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS
The Company and each Shareholder, jointly and severally, make the
following representations and warranties to Buyer, each of which is true
and correct on the date hereof and shall be unaffected by any
investigation heretofore or hereafter made by Buyer, or any knowledge of
Buyer other than as specifically disclosed in the schedules attached
hereto (the "Schedules"):
3.1. Corporate.
3.1.(a) Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Alabama.
3.1.(b) Corporate Power. The Company has all requisite
corporate power and authority to own, operate and lease its properties, to
carry on its business as and where such is now being conducted, to enter
into this Agreement and to carry out the transactions contemplated hereby.
3.1.(c) Qualification. The Company is duly licensed or
qualified to do business as a foreign corporation, and is in good
standing, in each jurisdiction wherein the character of the properties
owned or leased by it, or the nature of its business, makes such licensing
or qualification necessary, except where the Company's failure to be so
qualified or in good standing would not have a Material Adverse Effect (as
defined herein). For purposes of this Agreement, "Material Adverse
Effect" shall mean a material adverse effect on the assets, business,
properties, condition (financial or otherwise) or results of operations of
the Company, considered as a whole. The states in which the Company is
licensed or qualified to do business are listed in Schedule 3.1.(c).
3.1.(d) Subsidiaries. The Company does not own, directly or
indirectly, any capital stock or other equity securities of any
corporation or have any direct or indirect equity or other ownership
interest in any entity or business.
3.1.(e) Corporate Documents. etc. The copies of the
Certificate of Incorporation and By-Laws of the Company, including any
amendments thereto, which have been delivered by Shareholders to Buyer are
true, correct and complete copies of such instruments as presently in
effect. The corporate minute book and stock records of the Company which
have been furnished to Buyer for inspection are true, correct and complete
and accurately reflect all material corporate action taken by the Board of
Directors or the shareholders of the Company in their capacity as
directors or shareholders. The directors and officers of the Company are
listed in Schedule 3.1(e).
3.1.(f) Capitalization of the Company. The authorized
capital stock of the Company consists entirely of one thousand (1,000)
shares of common stock, par value $1.00 per share. No shares of such
capital stock are issued or outstanding except for 100 shares of common
stock of the Company which are owned of record and beneficially by the
Shareholders in the respective numbers set forth in Schedule 3.1.(f). All
such shares of capital stock of the Company are validly issued, fully paid
and nonassessable. Except as set forth in Schedule 3.1.(f), there are no
(i) securities convertible into or exchangeable for any of the Company's
capital stock or other securities, (ii) options, warrants or other rights
to purchase or subscribe to capital stock or other securities of the
Company or securities which are convertible into or exchangeable for
capital stock or other securities of the Company, or (iii) contracts,
commitments, agreements, understandings or arrangements of any kind
relating to the issuance, sale or transfer of any capital stock or other
equity securities of the Company, any such convertible or exchangeable
securities or any such options, warrants or other rights.
3.2. Shareholders.
3.2.(a) Power. Each Shareholder is a legally competent
adult with full power, right and authority to enter into, execute and
deliver this Agreement and the other agreements, instruments and documents
contemplated hereby (such other documents sometimes referred to herein
collectively as "Ancillary Instruments"), and to carry out the
transactions contemplated hereby.
3.2.(b) Validity. This Agreement has been duly and validly
executed and delivered by each Shareholder and is, and when executed and
delivered each Ancillary Instrument will be, the legal, valid and binding
obligation of such Shareholder, enforceable in accordance with its terms,
except as such may be limited by bankruptcy, insolvency, reorganization or
other laws affecting creditors' rights generally, and by general equitable
principles.
3.2.(c) Title. Each Shareholder has, and at Closing Buyer
will receive, good and marketable title to those Shares to be sold by such
Shareholder hereunder, free and clear of any liens, security interests,
pledges, assessments, levies, restrictions (including any restrictions on
transfers imposed by applicable federal or state securities law), options,
voting trusts or agreements, proxies, encumbrances, marital or community
property interests or other claims or charges of any nature whatever.
3.3. Authority. The execution and delivery of this Agreement by
the Company have been duly authorized by the Board of Directors of the
Company and the Shareholders. No other or further corporate act or
proceeding on the part of the Company is necessary to authorize this
Agreement. This Agreement constitutes a valid and binding agreement of
the Company, enforceable in accordance with its terms, except as such may
be limited by bankruptcy, insolvency, reorganization or other laws
affecting creditors' rights generally, and by general equitable
principles.
3.4. No Violation. Except as set forth on Schedule 3.4, neither
the execution and delivery of this Agreement or the other documents and
instruments to be executed and delivered by the Company and the
Shareholders pursuant hereto, nor the consummation by Shareholders of the
transactions contemplated hereby and thereby (a) will violate any
applicable federal, state, local or foreign laws, ordinances, orders,
rules or regulations, (b) will require any authorization, consent,
approval, exemption or other action by or notice to any governmental
entity (including, without limitation, under any "plant-closing" or
similar law), or (c) subject to obtaining the consents referred to in
Schedule 3.4, will violate or conflict with, or constitute a default (or
an event which, with notice or lapse of time, or both, would constitute a
default) under, or will result in the termination of, or accelerate the
performance required by, or result in the creation of any lien upon any of
the assets of the Company under, any term or provision of the Certificate
of Incorporation or By-laws of the Company or of any contract, commitment,
agreement or restriction of any kind or character to which the Company or
any Shareholder is a party or by which the Company or any Shareholder or
any of their respective assets or properties may be bound or affected.
3.5. Financial Statements. Included as Schedule 3.5 are true and
complete copies of the financial statements of the Company consisting of
(a) balance sheets of the Company as of December 31, 1991, 1992, 1993,
1994 and 1995, and the related statements of income and cash flows for the
years then ended (including the notes contained therein or annexed
thereto), which financial statements have been reported on, and are
accompanied by, the signed, unqualified opinions of Altschuler, Melvoin &
Glasser, independent auditors for the Company for such years, and (b) an
unaudited balance sheet of the Company as of December 31, 1996 (the
"Recent Balance Sheet"), and the related unaudited statements of income
and cash flows for the twelve months then ended and for the corresponding
period of the prior year (including the notes and schedules contained
therein or annexed thereto). All of such financial statements (including
all notes and schedules contained therein or annexed thereto) are true,
complete and accurate, have been prepared in accordance with GAAP (except,
in the case of unaudited statements, for the absence of footnote
disclosure and subject to year-end adjustments on a basis and in amount
consistent with adjustments made in prior years), have been prepared in
accordance with the books and records of the Company, and fairly present
in all material respects the assets, liabilities and financial position,
the results of operations and cash flows of the Company as of the dates
and for the years and periods indicated. Reserves reflected on such
financial statements have been determined in all material respects in
accordance with GAAP and are consistent with the Company's past practice
as to kind and amount. The Recent Balance Sheet reflects those year-end
adjustments which are recurring adjustments and estimates the likely
amount of such adjustments for the fiscal year ending December 31, 1996.
For purposes of this Agreement, the term "GAAP" means generally accepted
U.S. accounting principles as in effect during any relevant period of
time, applied in a consistent manner.
3.6. Tax Matters.
3.6.(a) Provision For Taxes. The provision made for taxes
on the Recent Balance Sheet is sufficient for the payment of all federal,
state, foreign, county, local and other income, ad valorem, excise,
profits, franchise, occupation, property, payroll, sales, use, gross
receipts and other taxes (and any interest and penalties) and assessments
of the Company as of December 31, 1996, whether or not disputed at the
date of the Recent Balance Sheet, and for all years and periods prior
thereto, but without inclusion of any tax liability attributable to an
election subsequent to the date hereof under Section 338 of the Code.
Since the date of the Recent Balance Sheet, the Company has not incurred
any taxes other than taxes incurred in the Ordinary Course of Business.
For purposes of this Agreement, the "Ordinary Course of Business" shall
mean conduct, transactions or occurrences consistent in
both nature and amount with historical experience and past practice of the
Company.
3.6.(b) Tax Returns Filed. The Company previously has
delivered to Buyer true, accurate and complete copies of all federal,
state, foreign, county, local and other tax returns filed by or on behalf
of the Company within the past five (5) years. Except as set forth on
Schedule 3.6.(b), all federal, state, foreign, county, local and other tax
returns required to be filed by or on behalf of the Company have been
timely filed and when filed were true and correct in all material
respects, and the taxes shown as due thereon were paid or adequately
accrued. The Company has duly withheld and paid all taxes which it is
required to withhold and pay relating to salaries and other compensation
paid to the employees of the Company.
3.6.(c) Tax Audits. The federal and state income tax
returns of the Company have been audited by the Internal Revenue Service
and appropriate state taxing authorities for the periods and to the extent
set forth in Schedule 3.6.(c), and the Company has not received from the
Internal Revenue Service or from the tax authorities of any state, county,
local or other jurisdiction any notice of underpayment of taxes or other
deficiency which has not been paid nor any objection to any return or
report filed by the Company. Except as set forth in Schedule 3.6.(c),
there are outstanding no agreements or waivers extending the statutory
period of limitations applicable to any tax return or report.
3.6.(d) Consolidated Group. Schedule 3.6.(d) lists every
year from January 1, 1986 and thereafter that the Company was a member of
an affiliated group of corporations that filed a consolidated tax return
on which the statute of limitations does not bar a federal tax assessment,
and each corporation that has been part of such group. Except as set
forth on Schedule 3.6.(d), no affiliated group of corporations of which
the Company has been a member has discontinued filing consolidated returns
during the past ten years.
3.6.(e) S Corporation Election. The Company has made a
valid election under Section 1361 of the Code to be an S Corporation for
federal income tax purposes and the Company and the Shareholders have
taken all actions necessary to maintain the Company's S Corporation
status.
3.6.(f) Other. Except as set forth in Schedule 3.6.(f),
since January 1, 1987 the Company has not (i) filed any consent or
agreement under Section 341(f) of the Internal Revenue Code of 1986, as
amended (the "Code"), (ii) applied for any tax ruling, (iii) entered into
a closing agreement with any taxing authority, (iv) filed an election
under Section 338(g) or Section 338(h)(10) of the Code (nor has a deemed
election under Section 338(e) of the Code occurred), (v) made any
payments, or been a party to an agreement (including this Agreement) that
under any circumstances could obligate it to make payments that will not
be deductible because of Section 280G of the Code, or (vi) been a party to
any tax allocation or tax sharing agreement. The Company is not a "United
States real property holding Company" within the meaning of Section
897(c)(2) of the Code.
3.7. Accounts Receivable. All accounts receivable of the Company
reflected on the Recent Balance Sheet, or arising in the Ordinary Course
of Business since the date thereof, represent arm's length sales actually
made in the Ordinary Course of Business and are valid. The reserve for
doubtful accounts shown on the Recent Balance Sheet has been determined in
accordance with GAAP. Schedule 3.7 contains an aged schedule of accounts
receivable included in the Recent Balance Sheet.
3.8. Inventory. Except for the inventory listed or described on
Schedule 3.8, as of February 28, 1997 all inventory of the Company
consists of a quality and quantity usable and saleable in the Ordinary
Course of Business, and is valued in accordance with GAAP at the lower of
cost (on a FIFO basis) or market. All inventory purchased since February
28, 1997 consists of a quality and quantity usable and saleable in the
Ordinary Course of Business. Except as set forth in Schedule 3.8, all
inventory of the Company is located on premises owned or leased by the
Company as reflected in this Agreement. All work in process contained in
inventory constitutes items in process of production pursuant to the
Ordinary Course of Business.
3.9. Absence of Certain Changes. Except as and to the extent set
forth in Schedule 3.9 or otherwise set forth in the Schedules to this
Agreement, since the date of the Recent Balance Sheet there has not been:
3.9.(a) Adverse Change. Any change in the financial
condition, assets, liabilities, business, operations or, to the Best
Knowledge of the Shareholders, the prospects of the Company which would
have a Material Adverse Effect;
3.9.(b) Damage. Any loss, damage or destruction in excess
of Twenty-Five Thousand Dollars ($25,000) in the aggregate, whether
covered by insurance or not, affecting the Company's business or
properties;
3.9.(c) Increase in Compensation. Any increase in the
compensation, salaries or wages payable or to become payable to any
employee or agent of the Company (including, without limitation, any
increase or change pursuant to any bonus, pension, profit sharing,
retirement or other plan or commitment), or any bonus or other employee
benefit granted, made or accrued;
3.9.(d) Labor Matters. Any union organizing petition or
campaign, labor dispute or disturbance, other than routine individual
grievances which are not material to the business, financial condition or
results of operations of the Company;
3.9.(e) Commitments. Any commitment or transaction by the
Company involving payments in excess of Ten Thousand Dollars ($10,000) in
the aggregate (including, without limitation, any borrowing or capital
expenditure) other than in the Ordinary Course of Business;
3.9.(f) Dividends. Any declaration, setting aside, or
payment of any dividend or any other distribution in respect of the
Company's capital stock (except for payment of dividends for the
Shareholders' tax obligations pursuant to Subchapter S of the Code on the
Company's income); any redemption, purchase or other acquisition by the
Company of any capital stock of the Company, or any security relating
thereto; or any other payment to any Shareholder in such person's capacity
as a shareholder;
3.9.(g) Disposition of Property. Any sale, lease or other
transfer or disposition of any properties or assets of the Company, except
for the sale of inventory items in the Ordinary Course of Business;
3.9.(h) Indebtedness. Any indebtedness for borrowed money
incurred, assumed or guaranteed by the Company;
3.9.(i) Liens. Any Lien (as defined herein) granted on any
of the properties or assets of the Company;
3.9.(j) Amendment of Contracts. Any entering into,
amendment or termination by the Company of any contract involving amounts
in excess of Ten Thousand Dollars ($10,000) in the aggregate, or any
waiver of material rights thereunder, other than in the Ordinary Course of
Business;
3.9.(k) Loans and Advances. Any loan or advance (other than
advances to employees in the Ordinary Course of Business for travel and
entertainment) to any person including, but not limited to, any officer,
director or employee of the Company, or any Affiliate (for the purposes of
this Agreement, the term "Affiliate" shall mean and include all
Shareholders, directors, and officers of the Company; the spouse of any
such person; any person who would be the heir or descendant of any such
person if he or she were not living; and any entity in which any of the
foregoing has a direct or indirect interest, except through ownership of
less than five percent (5%) of the outstanding shares of any entity whose
securities are listed on a National Securities Exchange traded in the
national over the counter market;
3.9.(l) Credit. Any grant of credit to any customer or
distributor on terms or in amounts more favorable than those which have
been extended to such customer or distributor in the past, any other
change in the terms of any credit heretofore extended, or any other change
of the Company's policies or practices with respect to the granting of
credit; or
3.9.(m) Unusual Events. Any other event or condition not in
the Ordinary Course of Business.
3.10. No Litigation. Except as set forth in Schedule 3.10, there is
no action, suit, arbitration, proceeding, investigation or inquiry pending
or, to the Best Knowledge of the Shareholders (as defined herein),
threatened against the Company or its directors (in such capacity), its
business or assets nor, to the Best Knowledge of the Shareholders, is
there any basis for any such proceedings, investigations or inquiries.
Schedule 3.10 also identifies all such actions, suits, proceedings,
investigations and inquiries to which the Company or any of its directors
(in such capacity) have been parties within the past five (5) years.
Except as set forth in Schedule 3.10, neither the Company nor its business
or assets is subject to any judgment, order, writ or injunction of any
court, arbitrator or federal, state, foreign, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality. For purposes of this Agreement, the term "Best Knowledge
of the Shareholders" shall mean the knowledge of any of the Shareholders
after due inquiry of appropriate operating personnel of the Company.
3.11. Absence of Undisclosed Liabilities. Except as and to the
extent specifically disclosed in the Recent Balance Sheet, in Schedule
3.11 or in any of the other Schedules to this Agreement, to the Best
Knowledge of the Shareholders, the Company does not have any material
liabilities other than commercial liabilities and obligations incurred
since the date of the Recent Balance Sheet in the Ordinary Course of
Business, none of which has or is reasonably likely to have a Material
Adverse Effect.
3.12. Compliance With Laws.
3.12.(a) Compliance. Except as set forth in Schedule
3.12.(a), to the Best Knowledge of the Shareholders the Company (including
all of its operations, practices, properties and assets) is in compliance
with all applicable federal, state, local and foreign laws, ordinances,
orders, rules and regulations (collectively, "Laws"), including, without
limitation, those applicable to discrimination in employment, occupational
safety and health, trade practices, competition and pricing, product
warranties, zoning, building and sanitation, employment, retirement and
labor relations, product advertising the Environmental Laws (as
hereinafter defined) and the Foreign Corrupt Practices Act, except where
the failure to so comply would not have a Material Adverse Effect. Except
as set forth in Schedule 3.12.(a), the Company has not received notice of
any violation or alleged violation of any Laws since January 1, 1986. All
reports and returns required to be filed by the Company with any
governmental authority have been filed, except where the failure to so
file would not, individually or in the aggregate, have a Material Adverse
Effect, and were accurate and complete when filed. Without limiting the
generality of the foregoing:
(i) To the Best Knowledge of the Shareholders, the
operation of the business of the Company as it is now
conducted does not, nor does any condition existing at any of
the facilities of the Company, in any manner constitute a
nuisance or other tortious interference with the rights of any
person or persons in such a manner as to give rise to or
constitute the grounds for a suit, action, claim or demand by
any such person or persons seeking compensation or damages or
seeking to restrain, enjoin or otherwise prohibit any aspect
of the conduct of such business or the manner in which it is
now conducted;
(ii) The Company has made all required payments to
its unemployment compensation reserve accounts with the
appropriate governmental departments of the states where it is
required to maintain such accounts, and each of such accounts
has a positive balance.
(iii) The Company has delivered to Buyer copies of
all reports of the Company for the past five (5) years made by
the Company under the federal Occupational Safety and Health
Act of 1970, as amended, and under all other applicable health
and safety laws and regulations. The deficiencies, if any,
noted on such reports have been corrected.
3.12.(b) Licenses and Permits. The Company has all licenses,
permits, approvals, authorizations and consents of all governmental and
regulatory authorities and all certification organizations required for
the conduct of the business as presently conducted and operation of its
facilities as presently operated. All material licenses, permits,
approvals, authorizations and consents of the Company (other than those
which relate to occupancy of its premises or the collection, withholding
or payment of taxes) are described in Schedule 3.12.(b), are in full force
and effect and will not be affected or made subject to loss, limitation or
any obligation to reapply as a result of the transactions contemplated
hereby. Except as set forth in Schedule 3.12.(b), the Company (including
its operations, properties and assets) is and has been in compliance with
all such permits and licenses, approvals, authorizations and consents,
except where the failure to so comply would not have a Material Adverse
Effect.
3.12.(c) Environmental Matters. The applicable Laws or
regulations adopted thereunder relating to pollution or protection of the
environment, including Laws relating to emissions, discharges, generation,
storage, releases or threatened releases of pollutants, contaminants,
chemicals or industrial, toxic, hazardous or petroleum or petroleum-based
substances or wastes ("Waste") into the environment (including, without
limitation, ambient air, surface water, ground water, land surface or
subsurface strata), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
such substances including, without limitation, the Clean Water Act, the
Clean Air Act, the Resource Conservation and Recovery Act, the Toxic
Substances Control Act and the Comprehensive Environmental Response
Compensation Liability Act ("CERCLA"), as amended up to the date hereof,
and their state and local counterparts are herein collectively referred to
as the "Environmental Laws". Without limiting the generality of the
foregoing provisions of this Section 3.12, to the Best Knowledge of the
Shareholders the Company is in compliance in all material respects with
all Environmental Laws and any requirements contained in any plan, order,
decree, judgment, injunction, notice or demand letter issued to or entered
against the Company. Except as set forth in Schedule 3.12.(c), there is
no civil, criminal or administrative action, suit, hearing, demand, claim,
notice of violation, investigation, proceeding, notice or demand letter
pending or to the Best Knowledge of the Shareholders, threatened against
the Company relating in any way to the Environmental Laws or any order,
decree or judgment entered against the Company. Except as set forth in
Schedule 3.12.(c), to the Best Knowledge of the Shareholders, there are no
past or present conditions or activities which could give rise to a
violation of any Environmental Laws or which may give rise to any
liability, including, without limitation, liability under CERCLA or
similar state or local Laws based on the use, treatment, storage,
disposal, transport or handling, or the release into the environment, of
any Waste.
3.13. Title to and Condition of Properties.
3.13.(a) Marketable Title. The Company has good and
marketable title to all of its assets, business and properties, including,
without limitation, all such properties (tangible and intangible)
reflected in the Recent Balance Sheet, except for inventory or other
assets disposed of in the Ordinary Course of Business since the date of
the Recent Balance Sheet, free and clear of all mortgages, liens
(statutory or otherwise), security interests, claims, pledges, licenses,
equities, options, conditional sales contracts, assessments, levies,
covenants, reservations, restrictions, exceptions, limitations, charges or
encumbrances of any nature whatsoever (collectively, "Liens") except those
described in Schedule 3.13.(a) and, in the case of real property,
encumbrances, easements and rights of way revealed in the title insurance
commitment provided pursuant to Section 5.4 and on the survey(s) obtained
pursuant to Section 5.5, Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings (and which have been
sufficiently accrued or reserved against in the Recent Balance Sheet),
municipal and zoning ordinances and easements for public utilities, none
of which interfere in any material respect with the use of the property as
currently utilized. None of the Company's assets or properties are
subject to any restrictions with respect to the transferability thereof
(except for laws of general applicability), and the Company's title
thereto will not be affected in any way by the transactions contemplated
hereby.
3.13.(b) Condition. To the Best Knowledge of the
Shareholders, all property and assets owned or utilized by the Company are
in good operating condition and repair (subject to normal wear and tear
and consistent with their respective ages), free from any defects (except
such minor defects as do not materially interfere with the use thereof in
the conduct of the normal operations of the Company), have been maintained
consistent with the standards generally followed in the industry and are
sufficient to carry on the business of the Company as conducted during the
preceding twelve (12) months. All buildings, plants and other structures
owned or otherwise utilized by the Company are in good condition and
repair (subject to normal wear and tear and consistent with their
respective ages) and have no structural defects or defects affecting the
plumbing, electrical, sewerage, or heating, ventilating or air
conditioning systems (except such minor defects as do not materially
interfere with the use thereof in the conduct of the normal operations of
the Company).
3.13.(c) Real Property. Schedule 3.13.(c) sets forth all
real property owned, used or occupied by the Company (the "Real
Property"), including a description of all land, and all encumbrances,
easements or rights of way of record (or, if not of record, of which the
Company has notice or knowledge) granted on or appurtenant to or otherwise
affecting such Real Property, the zoning classification thereof, and all
plants, buildings or other structures located thereon. With respect to
each parcel of Real Property which is leased, Schedule 3.13.(c) identifies
such lease and provides a true and complete copy of such lease. To the
Best Knowledge of the Shareholders, to the extent required by applicable
law, there are now in full force and effect duly issued certificates of
occupancy permitting the Real Property and improvements located thereon to
be legally used and occupied as the same are now constituted. All of the
Real Property has permanent rights of access to dedicated public highways.
To the Best Knowledge of the Shareholders, no fact or condition exists
which would prohibit or adversely affect the ordinary rights of access to
and from the Real Property from and to the existing highways and roads and
there is no pending or, to the Best Knowledge of the Shareholders,
threatened restriction or denial, governmental or otherwise, upon such
ingress and egress. To the Best Knowledge of the Shareholders, no portion
of any of the Real Property has been used as a landfill or for storage of
hazardous or toxic materials. Except as set forth on Schedule 3.13.(c),
there is not (i) any claim of adverse possession or prescriptive rights
involving any of the Real Property, (ii) any structure located on any Real
Property which encroaches on or over the boundaries of neighboring or
adjacent properties or (iii) any structure of any other party which
encroaches on or over the boundaries of any of such Real Property. To the
Best Knowledge of the Shareholders, none of the Real Property is located
in a flood plain, flood hazard area, wetland or lakeshore erosion area
within the meaning of any Law, regulation or ordinance. No public
improvements have been commenced and, to the Best Knowledge of the
Shareholders, none are planned which in either case may result in special
assessments against or otherwise materially adversely affect any Real
Property. Except as set forth on Schedule 3.13.(c), to the Best Knowledge
of the Shareholders there is no (i) planned or proposed increase in
assessed valuations of any Real Property, (ii) governmental agency or
court order requiring repair, alteration, or correction of any existing
condition affecting any Real Property or the systems or improvements
thereat, (iii) condition or defect which could give rise to an order of
the sort referred to in "(ii)" above, (iv) underground storage tanks, or
any structural, mechanical, or other defects of material significance
affecting any Real Property or the systems or improvements thereat
(including, but not limited to, inadequacy for normal use of mechanical
systems or disposal or water systems at or serving the Real Property), or
(v) work that has been done or labor or materials that has or have been
furnished to any Real Property during the period of six (6) months
immediately preceding the date of this Agreement for which liens could be
filed against any of the Real Property.
3.13.(d) No Condemnation or Expropriation. Neither the whole
nor any portion of the property or any other assets of the Company is
subject to any governmental decree or order to be sold or is being
condemned, expropriated or otherwise taken by any public authority with or
without payment of compensation therefor, nor to the Best Knowledge of the
Shareholders has any such condemnation, expropriation or taking been
proposed.
3.14. Insurance. Set forth in Schedule 3.14 is a complete and
accurate list of all policies of fire, liability, product liability,
workers compensation, health and other forms of insurance presently in
effect with respect to the business and properties of the Company, true
and correct copies of which have heretofore been delivered to Buyer.
Schedule 3.14 includes a list of any pending claims in excess of Ten
Thousand Dollars ($10,000) individually or Fifty Thousand Dollars
($50,000) in the aggregate per policy. All such policies are valid,
outstanding and enforceable policies; and no such policy (nor any previous
policy) provides for or is subject to any currently enforceable
retroactive rate or premium adjustment, loss sharing arrangement or other
actual or contingent liability arising wholly or partially out of events
arising prior to the date hereof, except as set forth in Schedule 3.14.
Schedule 3.14 indicates each policy as to which (a) the coverage limit has
been reached or (b) the total incurred losses to date equal seventy-five
percent (75%) or more of the coverage limit. No notice of cancellation or
termination has been received with respect to any such policy, and to the
Best Knowledge of the Shareholders the Company has not engaged in any act
or omission which could result in cancellation of any such policy prior to
its scheduled expiration date. To the Best Knowledge of the Shareholders,
the Company has duly and timely made all claims it has been entitled to
make under each policy of insurance. Since January 1, 1992, all products
liability and general liability policies maintained by or for the benefit
of the Company have been "occurrence" policies and not "claims made"
policies. There is no claim by the Company pending under any such
policies as to which coverage has been denied or disputed by the
underwriters of such policies nor, to the Best Knowledge of the
Shareholders, is there any basis for denial of any pending claim under any
such policy. The Company has not received any written notice from or on
behalf of any insurance carrier issuing any such policy that insurance
rates therefor will hereafter be substantially increased (except to the
extent that insurance rates may be increased for all similarly situated
risks) or that there will hereafter be a cancellation or an increase in a
deductible (or an increase in premiums in order to maintain an existing
deductible) or nonrenewal of any such policy.
3.15. Contracts and Commitments.
3.15.(a) Real Property Leases. Except as set forth in
Schedule 3.13.(c), the Company has no leases of real property.
3.15.(b) Personal Property Leases. Except as set forth in
Schedule 3.15.(b), the Company has no leases of personal property
involving consideration or other expenditures in excess of Five Thousand
Dollars ($5,000) in the case of any single contract.
3.15.(c) Purchase Commitments. The Company has no purchase
commitments for inventory items or supplies that, together with amounts on
hand, constitute in excess of twelve (12) months normal usage, except for
contracts which do not exceed Five Thousand Dollars ($5,000) for any
individual item or Twenty-Five Thousand Dollars ($25,000) in the
aggregate.
3.15.(d) Sales Commitments. Except as set forth in Schedule
3.15.(d), the Company has no sales contracts or commitments to customers
or distributors which aggregate in excess of One Hundred Thousand Dollars
($100,000) to any one customer or distributor (or group of affiliated
customers or distributors) outstanding as of February 28, 1997. The
Company has no sales contracts or commitments except those made in the
Ordinary Course of Business, at arm's length, and no such contracts or
commitments are for a sales price which would result in a loss to the
Company.
3.15.(e) Contracts With Affiliates and Certain Others.
Except as set forth in Schedule 3.15.(e), the Company has no agreement,
understanding, contract or commitment (written or oral) with any Affiliate
or any other officer, employee, agent, consultant, distributor, dealer or
franchisee that is not cancellable by the Company on notice of not longer
than thirty (30) days without liability, penalty or premium of any kind.
3.15.(f) Powers of Attorney. Except as set forth in Schedule
3.15.(f), the Company has not given a power of attorney, which is
currently in effect, to any person, firm or corporation for any purpose.
3.15.(g) Collective Bargaining Agreements. The Company is
not a party to any collective bargaining agreements with any unions,
guilds, shop committees or other collective bargaining groups.
3.15.(h) Loan Agreements. Except as set forth in Schedule
3.15.(h), the Company is not obligated under any loan agreement,
promissory note, letter of credit, or other evidence of indebtedness as a
signatory, guarantor or otherwise.
3.15.(i) Guarantees. Except as set forth in Schedule
3.15.(i), the Company has not guaranteed the payment or performance of any
person, firm or corporation, agreed to indemnify any person or act as a
surety, or otherwise agreed to be contingently or secondarily liable for
the obligations of any person.
3.15.(j) Contracts Subject to Renegotiation. Except as set
forth in Schedule 3.15.(j), the Company is not a party to any contract
with any governmental body which is subject to renegotiation.
3.15.(k) Burdensome or Restrictive Agreements. The Company
is not a party to nor is it bound by any agreement, deed, lease or other
instrument which is so burdensome as to materially affect or impair the
operation of the Company. Without limiting the generality of the
foregoing, except as disclosed on Schedule 3.15.(k), the Company is not a
party to nor is it bound by any agreement requiring the Company to assign
any interest in any trade secret or proprietary information, or
prohibiting or restricting the Company from competing in any business or
geographical area or soliciting customers or otherwise restricting it from
carrying on its business anywhere in the world.
3.15.(l) Other Material Contracts. Except for purchase or
sale commitments of the type described in Sections 3.15.(c) or 3.15.(d),
the Company has no lease, license, contract or commitment of any nature
involving consideration or other expenditure by the Company in excess of
Twenty-Five Thousand Dollars ($25,000) for a single contract or which is
otherwise individually material to the operations of the Company, except
as explicitly described in Schedule 3.15.(l).
3.15.(m) No Default. To the Best Knowledge of the
Shareholders, the Company is not in default under any lease, contract or
commitment, nor has any event or omission occurred which through the
passage of time or the giving of notice, or both, would constitute a
default thereunder or cause the acceleration of any of the Company's
obligations or result in the creation of any lien on any of the assets
owned, used or occupied by the Company, where such default would have a
Material Adverse Effect. Schedule 3.15(m) sets forth a schedule of aged
accounts receivable as of February 28, 1997. Except as set forth on
Schedule 3.15(m), to the Best Knowledge of the Shareholders no third party
is in default under any lease, contract or commitment to which the Company
is a party, nor has any event or omission occurred which, through the
passage of time or the giving of notice, or both, would constitute a
default thereunder or give rise to an automatic termination, or the right
of discretionary termination thereof.
3.16. Labor Matters. Except as set forth in Schedule 3.16, within
the last five (5) years the Company has not experienced any labor
disputes, union organization attempts or any work stoppage due to labor
disagreements in connection with its business. Except to the extent set
forth in Schedule 3.16, (a) to the Best Knowledge of the Shareholders the
Company is in compliance with all applicable laws respecting employment
and employment practices (including, without limitation, law applicable to
sexual harassment), terms and conditions of employment and wages and
hours, and is not engaged in any unfair labor practice, (b) there is no
unfair labor practice charge or complaint against the Company pending or,
to the Best Knowledge of the Shareholders, threatened, (c) there is no
labor strike, dispute, request for representation, slowdown or stoppage
actually pending or, to the Best Knowledge of the Shareholders, threatened
against or affecting the Company nor any secondary boycott with respect to
products of the Company, (d) no grievance which might have a Material
Adverse Effect, nor any arbitration proceeding arising out of or under
collective bargaining agreements, is pending, (e) there are no
administrative charges or court complaints against the Company concerning
alleged employment discrimination or other employment related matters
pending or threatened before the U.S. Equal Employment Opportunity
Commission or any state or federal or foreign court or agency, and (f)
there are no investigations, complaints, citations or other proceedings
pending or, to the Best Knowledge of the Shareholders, threatened against
the Company by the U.S. Occupational, Safety and Health Administration or
any state agency concerning any health or safety matters.
3.17. Employee Benefit Plans.
3.17.(a) Disclosure and Delivery of Documents. Schedule
3.17.(a) sets forth all pension, thrift, savings, profit sharing,
retirement, incentive bonus or other bonus, medical, dental, life,
accident insurance, benefit, employee welfare, disability, group
insurance, stock purchase, stock option, stock appreciation, stock bonus,
executive or deferred compensation, hospitalization and other similar
fringe or employee benefit plans, programs and arrangements, and any
employment or consulting contracts, "golden parachutes," collective
bargaining agreements, severance agreements or plans, vacation and sick
leave plans, programs, arrangements and policies, including, without
limitation, all "employee benefit plans" (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), all employee manuals, and all written or binding oral
statements of policies, practices or understandings relating to
employment, which are provided to, for the benefit of, or relate to, any
persons employed by the Company. The items described in the foregoing
sentence are hereinafter sometimes referred to collectively as "Employee
Plans/Agreements," and each individually as an "Employee Plan/Agreement."
True and correct copies of all the Employee Plans/Agreements, including
all amendments thereto, have heretofore been provided to Buyer, along
with, to the extent applicable to the particular Employee Plan/Agreement,
the following information: a copy of the annual report (form 5500 series)
filed for the last three years, a copy of the summary plan description,
summary annual report, summary of material modifications, and all material
manuals or communications filed or distributed with respect to the
Employee Plan/Agreement during the last three years, a copy of any
insurance contract or trust agreement through which the Employee
Plan/Agreement is funded, the most recent IRS determination letter issued
with respect to the Employee Plan/Agreement, and notice of any material
adverse change occurring with respect to any Employee Plan/Agreement since
the date of the most recently completed annual report.
3.17.(b) Title IV of ERISA. The Company does not maintain or
contribute to, and has never maintained or contributed to, an Employee
Plan/Agreement that is subject to Title IV of ERISA.
3.17.(c) Multiemployer Plans. The Company does not
contribute and has never contributed (or been obligated to contribute) to
a multiemployer plan as defined in Section 4001(a)(13) of ERISA.
3.17.(d) Severance and Post-Retirement Benefits. Neither the
Company nor any Employee Plan/Agreement maintained or contributed to by
the Company provides or has any obligation to provide (or contribute
toward the cost of) postretirement welfare benefits with respect to
current or former employees of the Company or any other entity, including,
without limitation, post-retirement medical, dental, life insurance,
severance or any other similar benefit, whether provided on an insured or
self-insured basis.
3.17.(e) Payments and Compliance. With respect to each
Employee Plan/Agreement, (i) all payments due from the Company with
respect to any such plan (or from the Company with respect to any such
plan) have been made, and all amounts properly accrued to date as
liabilities of the Company which have not been paid have been properly
recorded on the books of the Company; (ii) the Company has complied with,
and each such Employee Plan/Agreement conforms in form and operation to,
all applicable laws and regulations, including but not limited to ERISA
and the Code in all material respects, and all reports and information
relating to such Employee Plans/Agreements required to be filed with any
governmental entity have been timely filed; (iii) all reports and
information required to be disclosed or provided to participants or their
beneficiaries have been timely disclosed or provided; (iv) there have been
no prohibited transactions within the meaning of Sections 406 and 407 of
ERISA or Section 4975 of the Code with respect to any Employee
Plan/Agreement; (v) no event or omission has occurred in connection with
any Employee Plan/Agreement that would subject Company or any Employee
Plan/Agreement to a material fine, penalty, tax or liability, whether
pursuant to any agreement, instrument, indemnification obligation, or
statute, regulation or rule of law; (vi) each such Employee Plan/Agreement
which is intended to qualify under Section 401 of the Code has received a
favorable determination letter from the Internal Revenue Service with
respect to such qualification, its related trust has been determined to be
exempt from taxation under Section 501(a) of the Code, and nothing has
occurred since the date of such letter that has or is likely to adversely
affect such qualification or exemption; and (vii) there are no actions,
suits or claims pending (other than routine claims for benefits) or
threatened with respect to any Employee Plan/Agreement or against the
assets of such Employee Plan/Agreement.
3.17.(f) COBRA. The Company has complied in all material
respects with the continuation coverage requirements of Section 601
through 608 of ERISA, and the requirements of any similar state law
regarding continued insurance coverage, and the Company has incurred no
liability with respect to its failure to offer or provide continued
coverage in accordance with the foregoing requirements, nor is there any
suit or action pending or threatened with respect to such requirements.
3.17.(g) Triggering of Obligations and Other Binding
Commitments. Other than payments to be made under Section 5.9 or
otherwise under the agreements contemplated by Section 7.10, the
consummation of the transactions contemplated by this Agreement will not
entitle any current or former employee of the Company to severance pay,
unemployment compensation or any other payment, or accelerate the time of
payment or vesting, or increase the amount of compensation due to any such
employee or former employee. Further, the Company has not announced any
type of plan or binding commitment to create any additional Employee
Plan/Agreement or to amend or modify any existing Employee Plan/Agreement.
3.18. Employment Compensation. Schedule 3.18 contains a true and
correct list of (a) all employees to whom the Company is paying
compensation, including bonuses and incentives, at an annual rate,
effective January 1, 1997, in excess of Seventy Five Thousand Dollars
($75,000) for services rendered or otherwise and (b) all salaried
employees; and in the case of salaried employees such list identifies the
current annual rate of compensation for each employee, effective January
1, 1997, and in the case of hourly or commission employees identifies
certain reasonable ranges of rates and the number of employees falling
within each such range.
3.19. Trade Rights. Schedule 3.19 lists all Trade Rights (as
defined below) in which the Company now has any interest, specifying
whether such Trade Rights are owned, controlled, used or held (under
license or otherwise) by the Company, and also indicating which of such
Trade Rights are registered. All Trade Rights shown as registered in
Schedule 3.19 have been properly registered, all pending registrations and
applications have been properly made and filed and all annuity,
maintenance, renewal and other fees relating to registrations or
applications are current. In order to conduct the business of the
Company, as such is currently being conducted or proposed to be conducted,
the Company does not require any Trade Rights that it does not already
have. To the Best Knowledge of the Shareholders, the Company is not
infringing and has not infringed any Trade Rights of another in the
operation of the business of the Company, nor is any other person
infringing the Trade Rights of the Company. Except as set forth in
Schedule 3.19, the Company has not granted any license or made any
assignment of any Trade Right listed on Schedule 3.19, nor does the
Company pay any royalties or other consideration for the right to use any
Trade Rights of others. There are no inquiries, investigations or claims
or litigation challenging or, to the Best Knowledge of the Shareholders,
threatening to challenge the Company's right, title and interest with
respect to its continued use and right to preclude others from using any
Trade Rights of the Company. To the Best Knowledge of the Shareholders,
all Trade Rights of the Company are valid, enforceable and in good
standing, and there are no equitable defenses to enforcement based on any
act or omission of the Company. The consummation of the transactions
contemplated hereby will not alter or impair any Trade Rights owned or
used by the Company. As used herein, the term "Trade Rights" shall mean
and include: (a) all United States, state and foreign trademark rights,
business identifiers, trade dress, service marks, trade names and brand
names, including all claims for infringement, and all registrations
thereof and applications therefor and all goodwill associated with the
foregoing accruing from the dates of first use thereof; (b) all United
States and foreign copyrights, copyright registrations and copyright
applications, including all claims for infringement, and all other rights
associated with the foregoing and the underlying works of authorship; (c)
all United States and foreign patents and patent applications, including
all claims for infringement and all international proprietary rights
associated therewith; (d) all contracts or agreements granting any right,
title, license or privilege under the intellectual property rights of any
third party; and (e) all inventions, mask works and mask work
registrations, know-how, discoveries, improvements, designs, trade
secrets, shop and royalty rights, employee covenants and agreements
respecting intellectual property and non-competition and all other types
of intellectual property.
3.20. Major Customers and Suppliers.
3.20.(a) Major Customers. Schedule 3.20.(a) contains a list
of all of the Company's invoices over $20,000 for each of the two (2) most
recent fiscal years showing the total dollar amount of all invoices for
each customer or distributor of the Company during each such year. To the
Best Knowledge of the Shareholders, none of the customers so listed has
notified the Company in writing that it will not continue to be a customer
of the Company or will materially reduce the scope of its purchases from
the Company.
3.20.(b) Major Suppliers. Schedule 3.20.(b) contains a list
of the ten (10) largest suppliers to the Company for each of the two (2)
most recent fiscal years (determined on the basis of the total dollar
amount of purchases) showing the total dollar amount of purchases from
each such supplier (a "Major Supplier") during each such year. Except as
set forth in Schedule 3.20.(b), none of the Major Suppliers has notified
the Company that it will not continue to be a supplier to the Company
after the Closing or that it will not continue to supply the business with
substantially the same quantity and quality of goods at competitive
prices. To the Best Knowledge of the Shareholders, neither the Company
nor any Shareholder has received notice of any pending material change in
price or availability of materials, except for price adjustments imposed
in the Ordinary Course of Business on other customers purchasing similar
quantities of such materials. Schedule 3.20.(b) sets forth a list of all
Major Suppliers who have notified the Company of any pending price
increase in excess of ten percent (10%).
3.20.(c) Dealers and Distributors. Schedule 3.20.(c)
contains a list by product line of all sales representatives, dealers,
distributors and franchisees of the Company, together with representative
copies of all existing and pending sales representative, dealer,
distributor and franchise contracts. None of the representatives,
dealers, distributors or franchisees so listed has notified the Company
that it will terminate its relationship with the Company. Company
previously has provided to Buyer true and complete copies of all written
agreements between the Company and its current representatives, dealers,
distributors and franchisees.
3.21. Product Warranty and Product Liability. Schedule 3.21
contains a true, correct and complete copy of the Company's standard
warranty or warranties for sales of Products (as defined below) and,
except as stated therein, there are no other warranties, commitments or
obligations issued by the Company since January 1, 1990 with respect to
the return, repair or replacement of Products. Schedule 3.21 sets forth
the estimated aggregate annual cost to the Company of performing warranty
obligations for customers for each of the five (5) preceding fiscal years
and the current fiscal year to the date of the Recent Balance Sheet.
Schedule 3.21 contains a description of all product liability claims and
similar claims, actions litigation and other proceedings relating to
Products manufactured or sold, or services rendered, which are presently
pending or, to the Best Knowledge of the Shareholders, threatened, or
which have been asserted or commenced against the Company within the last
five (5) years, in which a party thereto either requests injunctive relief
or alleges damages in excess of Ten Thousand Dollars ($10,000) (whether or
not covered by insurance). Except as disclosed on Schedule 3.21, since
January 1, 1990, none of the Products has been the subject of any
replacement, field fix, retrofit, modification or recall campaign. The
Products have been designed, manufactured and labelled so as to meet and
comply with all mandatory governmental standards and specifications in
effect at the time of their manufacture and sale and have received all
governmental approvals necessary to allow their sale and use. Except as
disclosed on Schedule 3.21, all products currently manufactured,
distributed or sold by the Company under any brand name or mark (the
"Current Products") comply with all applicable standards of ASTM and the
Consumer Products Safety Commission currently in effect. As used in this
Section 3.21, the term "Products" means any and all Current Products and
all products at any time previously manufactured, distributed or sold by
the Company, or by any predecessor of the Company under any brand name or
mark under which products are or have been manufactured, distributed or
sold by the Company.
3.22. Bank Accounts. Schedule 3.22 sets forth the names and
locations of all banks, trust companies, savings and loan associations and
other financial institutions at which the Company maintains a safe deposit
box, lock box or checking, savings, custodial or other account of any
nature, the type and number of each such account and the signatories
therefore, a description of any compensating balance arrangements, and the
names of all persons authorized to draw thereon, make withdrawals
therefrom or have access thereto.
3.23. Affiliates' Relationships to Company.
3.23.(a) Contracts With Affiliates. All leases, contracts,
agreements or other arrangements between the Company and any Affiliate are
described on Schedule 3.23.(a).
3.23.(b) No Adverse Interests. Except as set forth in
Schedule 3.23.(b), no Affiliate has any direct or indirect interest in (i)
any entity which does business with the Company or is competitive with the
Company's business, or (ii) any property, asset or right which is used by
the Company in the conduct of its business.
3.23.(c) Obligations. All obligations of any Affiliate to
the Company, and all obligations of the Company to any Affiliate, are
listed on Schedule 3.23.(c).
3.24. Assets Necessary to Business. The Company presently has and
at the Closing will have good, valid and marketable title to all property
and assets, tangible and intangible, and all leases, licenses and other
agreements, necessary to permit the Company to carry on its business as
presently conducted.
3.25. Disclosure. No representation or warranty by the Company
and/or the Shareholders in this Agreement, nor any certificate, schedule,
document or exhibit hereto furnished or to be furnished by or on behalf of
the Company or the Shareholders pursuant to this Agreement contains or
shall contain any untrue statement of material fact or omits or shall omit
a material fact necessary to make the statements contained therein not
misleading. All statements and information contained in any certificate,
instrument, disclosure schedule or document delivered by or on behalf of
the Company and/or the Shareholders pursuant to this Agreement shall be
deemed representations and warranties by the Company and the Shareholders.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to the
Company and the Shareholders, each of which is true and correct on the
date hereof and shall be unaffected by any investigation heretofore or
hereafter made by the Company or any of the Shareholders or any knowledge
of the Company or any of the Shareholders other than as specifically
disclosed in the schedules hereto delivered to the Company and the
Shareholders at the time of execution of the Agreement:
4.1. Corporate.
4.1.(a) Organization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Wisconsin.
4.1.(b) Corporate Power. Buyer has all requisite corporate
power and authority to own, operate and lease its properties, to carry on
its business as and where such is now being conducted, to enter into this
Agreement and the other documents and instruments to be executed and
delivered by Buyer and to carry out the transactions contemplated hereby
and thereby.
4.2. Authority. The execution and delivery of this Agreement and
the Notes and the other documents and instruments to be executed and
delivered by Buyer pursuant hereto and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by
the Board of Directors of Buyer. No other corporate act or proceeding on
the part of Buyer or its shareholder is necessary to authorize this
Agreement and the Notes or the other documents and instruments to be
executed and delivered by Buyer pursuant hereto or the consummation of the
transactions contemplated hereby and thereby. No consent is required from
any third party in order for Buyer to consummate the transactions
contemplated by this Agreement. This Agreement constitutes, and when
executed and delivered, the Notes and the other documents and instruments
to be executed and delivered by Buyer pursuant hereto will constitute,
valid and binding agreements of Buyer, enforceable in accordance with
their respective terms, except as such may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights
generally, and by general equitable principles.
4.3. Disclosure. No representation or warranty by Buyer in this
Agreement, nor any certificate, schedule, document or exhibit hereto
furnished or to be furnished by or on behalf of Buyer pursuant to this
Agreement contains or shall contain any untrue statement of material fact
or omits or shall omit a material fact necessary to make the statements
contained therein not misleading.
4.4. Investment Intent. Buyer is purchasing the Shares for its own
account, for investment only and not with a view to resale, distribute or
other disposition thereof in violation of any federal, state or securities
laws. Buyer has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of an
investment in the Shares.
4.5. Buyer Reports; Financial Statements. Buyer has delivered to
the Shareholders' Representative copies of all forms, reports and
documents (including exhibits and any amendments thereto) filed by SNSC
with the Securities and Exchange Commission (the "SEC") since July 1, 1995
(collectively, including without limitation any financial statements or
schedules included therein, the "SNSC Reports"). As of their respective
dates, the SNSC Reports did not contain any untrue statement of material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of circumstances
in which they were made, not misleading. Each of the balance sheets
included in or incorporated by reference into the SNSC Reports (including
the related notes and Schedules) fairly presents in all material respects
the financial position of SNSC and its subsidiaries as of its date, and
each of the consolidated statements of income and cash flows included in
or incorporated by reference into the SNSC Reports (including any related
notes and schedules) fairly presents in all material respects the results
of operations, retained earnings and cash flows, as the case may be, of
SNSC and its subsidiaries for the periods set forth therein, in each case
in accordance with generally accepted accounting principles consistently
applied during the periods involved.
4.6. Litigation. There are no actions, suits, claims,
proceedings or investigations pending or, to the best knowledge of Buyer,
threatened against or affecting Buyer which seeks to prevent or enjoin the
consummation of the transactions contemplated by this Agreement.
4.7. Financial Resources. At the Closing, Buyer will have
sufficient resources or credit arrangements or facilities to enable it to
consummate the transactions contemplated by this Agreement and make
payment of cash in accordance with the terms of Section 2.2 of this
Agreement and deliver the Notes. Notwithstanding anything to the contrary
contained herein, the Company's and the Shareholders' sole and exclusive
remedy for any breach by Buyer of this Section 4.7 shall be to terminate
this Agreement in accordance with Section 11.1.(e).
5. OTHER MATTERS
5.1. Environmental Survey. Buyer and the Shareholders covenant and
agree as follows:
5.1.(a) Retention of Engineers. Subject to the limitations
set forth in Section 5.1.(b) below, Buyer shall retain an independent,
competent and qualified firm of nationally-recognized environmental
engineers or consultants (the "Engineers") to prepare and promptly submit
to Buyer a written report of site assessment and environmental survey (the
"Phase 1 Environmental Survey") relative to the assets, operations and
real property owned or used in the operations of the Company. The fees
and expenses of the Engineers, together with all other expenses incurred
in connection with the Phase 1 Environmental Survey, shall be paid by
Buyer.
5.1.(b) Limitations on Access. Notwithstanding any other
provision of this Agreement, the right of Buyer and/or its representatives
and the Engineers to enter on any parcel of real property or inspect any
portion of the business operations of the Company shall be subject to the
following restrictions:
(i) Activities conducted under this Section shall not
unreasonably interfere with the normal operation of the
Company's business;
(ii) Buyer shall give the Shareholders' Representative a
sufficient opportunity to review the scope of any proposed
activities prior to the entry on any parcel of real property;
(iii) All activities undertaken in connection with
the Phase 1 Environmental Survey shall comply with all
applicable law in all material respects; and
(iv) Buyer shall be responsible for and shall indemnify
the Company and the Shareholders against any material property
damage or personal injury incurred by the Company or any other
person resulting from any negligent or willful activities of
Buyer or its employees, agents, representatives, consultants
and Engineers.
5.1.(c) Environmental Quantification. Promptly upon its
completion, Buyer will provide to the Shareholders' Representative a copy
of the Phase 1 Environmental Survey. As part of the Phase 1 Environmental
Survey, the Engineers shall include a quantification (the "Environmental
Quantification") of the reasonably anticipated cost to correct or remedy
any violation of any Environmental Laws disclosed in the Phase 1
Environmental Survey (including the reasonably anticipated cost of any
fine or penalty reasonably likely to be assessed and paid in connection
with such violation or violations). The Environmental Quantification
shall also include any cost, liability, and expense (including but not
limited to costs to investigate, remediate, remove and dispose) associated
with the presence or release of any Waste disclosed by the Phase 1
Environmental Survey (including the reasonably anticipated cost of any
fine or penalty reasonably likely to be assessed and paid in connection
with such violation or violations. In the event the Environmental
Quantification exceeds Five Hundred Thousand Dollars ($500,000) in the
aggregate, Buyer may promptly notify the Shareholders' Representative in
writing of its intention to terminate this Agreement pursuant to the
provisions of Section 11.1.(c).
5.2. Noncompetition; Confidentiality. As an inducement to Buyer to
execute this Agreement and complete the transactions contemplated hereby,
and in order to preserve the goodwill associated with the business of the
Company being acquired pursuant to this Agreement, and in addition to and
not in limitation of any covenants contained in any agreement executed and
delivered pursuant hereto, each Shareholder hereby covenants and agrees as
follows:
5.2.(a) Covenant Not to Compete. For a period of five (5)
years after the Closing Date, each Shareholder, severally and not jointly,
will not directly or indirectly engage in any Competitive Activities (as
hereinafter defined). The term "Competitive Activities" as used herein
shall mean:
(i) directly or indirectly engaging in, continuing
in or carrying on the business of designing, manufacturing,
selling, distributing and dealing in and with recreational
equipment, including, playground equipment, park benches,
bleachers and shelters as conducted by the Company or Buyer on
the Closing Date, including owning or controlling any
financial interest in any corporation, partnership, firm or
other form of business organization which competes with or is
engaged in or carries on any aspect of such business or any
business substantially similar thereto;
(ii) directly or indirectly consulting with,
advising or assisting in any way, whether or not for
consideration, any corporation, partnership, firm or other
business organization which is now or becomes a competitor of
the Company or Buyer, including, but not limited to,
advertising or otherwise endorsing the products of any such
competitor; soliciting customers or otherwise serving as an
intermediary for any such competitor; loaning money or
rendering any other form of financial assistance to or
engaging in any form of business transaction on other than an
arm's length basis with any such competitor; or
(iii) offering employment to or employing an employee
of the Company or Buyer as of the date of this Agreement,
without the prior written consent of Buyer;
provided, however, that the term "Competitive Activities" shall not
include [A] the ownership of securities of corporations which are listed
on a national securities exchange or traded in the national
over-the-counter market in an amount which shall not exceed three percent
(3%) of the outstanding shares of any such corporation or [B] investment,
loans or advances or other financial assistance made by John R. Siragusa
to the business presently conducted by his son. The parties agree that
the geographic scope of this covenant not to compete shall extend to all
areas of the United States and all foreign countries where the Company or
Buyer currently does business, which countries are listed on Schedule
5.2.(a). The parties agree that Buyer may sell, assign or otherwise
transfer this covenant not to compete, in whole or in part, to any person,
corporation, firm or entity that purchases all or part of the business of
the Company. In the event a court of competent jurisdiction determines
that the provisions of this covenant not to compete are excessively broad
as to duration, geographical scope or activity, it is expressly agreed
that this covenant not to compete shall be construed so that the remaining
provisions shall not be affected, but shall remain in full force and
effect, and any such overly broad provisions shall be deemed, without
further action on the part of any person, to be modified, amended and/or
limited, but only to the extent necessary to render the same valid and
enforceable in such jurisdiction.
5.2.(b) Covenant of Confidentiality. No Shareholder shall
at any time subsequent to the Closing, except as explicitly requested by
Buyer, (i) use for any purpose, (ii) disclose to any person, or (iii) keep
or make copies of catalogues, brochures, documents, tapes, discs or
programs containing any confidential information concerning the Company.
For purposes hereof, "confidential information" shall mean and include,
without limitation, all Trade Rights in which the Company has an interest,
all customer lists and customer information, and all other information
concerning the Company's processes, apparatus, equipment, packaging,
products, marketing and distribution methods, except any of the foregoing
which shall have become public knowledge other than by breach of this
Agreement by any of the Shareholders.
5.2.(c) Equitable Relief for Violations. Each Shareholder
agrees that the provisions and restrictions contained in this Section 5.2
are necessary to protect the legitimate continuing interests of Buyer in
acquiring the Shares, and that any violation or breach of these provisions
will result in irreparable injury to Buyer for which a remedy at law would
be inadequate and that, in addition to any relief at law which may be
available to Buyer for such violation or breach and regardless of any
other provision contained in this Agreement, Buyer shall be entitled to
injunctive and other equitable relief as a court may grant after
considering the intent of this Section 5.2.
5.3. General Releases. At the Closing, each Shareholder shall
deliver general releases to Buyer, in form and substance satisfactory to
Buyer, releasing the Company, and the directors, officers, agents and
employees of the Company from all claims arising out of or relating to
events arising prior to or on the Closing Date, except (a) as may be
described in written contracts disclosed in the Schedules hereto and
expressly described and excepted from such releases, and (b) in the case
of persons who are employees of the Company, compensation for current
periods expressly described and excepted from such releases. Such
releases also shall contain waivers of any right of indemnification,
contribution or other recourse against the Company with respect to
representations, warranties or covenants made herein by the Company.
5.4. Title Insurance. Not less than fifteen (15) days prior to the
Closing, the Company shall provide to Buyer title insurance commitments,
issued by a title insurance company or companies reasonably satisfactory
to Buyer, agreeing to issue to Buyer standard form owner's policies of
title insurance with respect to all Real Property listed on Schedule 5.4,
together with a copy of each document to which reference is made in such
commitments. Such policies shall be standard ALTA 1990 Form B owner's
policies in the full amount of that portion of the Purchase Price
allocated respectively to each subject parcel of Real Property, insuring
good and marketable title thereto (expressly including all easements and
other appurtenances). All policies shall insure title in full accordance
with the representations and warranties set forth herein and shall be
subject only to such conditions and exceptions as shall be reasonably
acceptable to Buyer, and shall contain such endorsements as Buyer shall
reasonably request (including, but not limited to, an endorsement over
rights of creditors, if requested by Buyer or Buyer's lender).
5.5. Surveys. Not less than fifteen (15) days prior to the
Closing, the Company shall provide to Buyer surveys of all Real Property
listed on Schedule 5.4. Each such survey shall be prepared in accordance
with ALTA/ASCM standards, dated no more than ninety (90) days prior to the
Closing and detail the legal description, the perimeter boundaries, all
improvements located thereon, all easements and encroachments affecting
the relevant parcel of Real Property and such other matters as may be
reasonably requested by Buyer or the title insurance companies. Each
survey shall contain a surveyor certificate reasonably acceptable to Buyer
and the title insurance companies and prepared by a registered land
surveyor satisfactory to Buyer.
5.6. Shareholders' Representative
5.6.(a) Appointment. In order to administer efficiently the
rights and obligations of the Shareholders under this Agreement, the
Shareholders hereby designate and appoint Ross D. Siragusa, Jr. as the
Shareholders' Representative, to serve as the Shareholders' agent and
attorney-in-fact for the limited purposes set forth in Section 5.6.(b) of
this Agreement.
5.6.(b) Authority. Each of the Shareholders hereby appoints
the Shareholders' Representative as his agent, proxy and attorney-in-fact,
with full power of substitution, for all purposes set forth in this
Agreement, including, without limitation, the full power and authority on
such Shareholder's behalf (i) to consummate the transactions contemplated
by this Agreement, (ii) to cause the Company to pay the Transaction
Expenses (as defined herein), (iii) to disburse any funds received
hereunder to the Shareholders, (iv) to execute and deliver any
certificates representing the Shares and execution of such further
instruments of assignment as Buyer shall reasonably request, (v) to
execute and deliver on behalf of such Shareholder any amendment or waiver
under this Agreement, (vi) to retain legal counsel and other professional
services in connection with the performance by the Shareholders'
Representative of this Agreement, and (vii) to do each and every act and
exercise any and all rights which such Shareholder or the Shareholders are
permitted or required to do or exercise under this Agreement and the other
agreements, documents and certificates executed in connection herewith.
Each of the Shareholders agrees that such agency and proxy are coupled
with an interest, are therefore irrevocable without the consent of the
Shareholders' Representative and shall survive the death, bankruptcy or
other incapacity of any Shareholder; provided that such agency and proxy
shall terminate if this Agreement is terminated pursuant to its terms.
5.6.(c) Tenure and Replacement of the Shareholders'
Representative. Ross D. Siragusa, Jr. shall serve as the Shareholders'
Representative until he resigns or is otherwise unable or unwilling to
serve. In the event that a Shareholders' Representative resigns from such
position or is otherwise unable or unwilling to serve, the remaining
Shareholders shall select a successor representative to fill such vacancy,
shall provide prompt written notice to Buyer of such change and such
substituted representative shall then be deemed to be the Shareholders'
Representative for all purposes of this Agreement.
5.7. Transaction Expenses. The Company will pay all reasonable
expenses to a maximum aggregate amount of Three Hundred Thousand Dollars
($300,000) ("Transaction Expenses"), including attorneys' fees, incurred
in connection with its performance of the transactions contemplated by
this Agreement.
5.8. Certain Tax Matters.
5.8.(a) Allocation of Purchase Price.
(i) The parties agree that for federal, and to the
extent applicable, state and local income tax purposes, an
amount equal to the adjusted grossed up basis (as such term is
defined in the Treasury Regulations under Internal Revenue
Code Section 338) shall be allocated to the assets of the
Company (including goodwill) in accordance with the following:
The allocation will reflect a $300,000 mark-up over book value
of inventory, which will result in some lesser amount of
ordinary income on the federal income tax return of the
Company. An amount equal to book value minus one half the
difference between book value and tax basis will be assigned
to patterns, dies, machinery and equipment. All other assets
(other than goodwill) will be valued at book value which is
equal to tax basis. These values so assigned are agreed by
both parties to be the approximate fair market value of the
assets in question. Any excess of the total purchase price
over the value so assigned will be allocated to goodwill.
(ii) The parties shall prepare and file their respective
federal, state and local income tax returns and shall prepare
and file IRS form 8023-A in a manner consistent with such
allocation and shall not take a position on any tax return or
in any proceeding before any taxing authority that is in any
manner inconsistent with such allocation.
5.8.(b) 338 (h)(10) Election. At Buyer's request, and at
its option, the Company and the Shareholders will cooperate with Buyer in
filing an election under Section 338(h)(10) of the Code (the "338
Election"). Buyer will reimburse the Shareholders on an after-tax basis
(a) for the reasonable out-of-pocket expenses incurred by the Shareholders
in connection with the 338 Election (including, without limitation,
reasonable attorneys' and accountants' fees), which amounts shall be paid
by Buyer to the Shareholders from time to time as the same may be incurred
by the Shareholders, (b) for any increase in federal, state or other taxes
incurred by any of the Shareholders by reason of making the 338 Election
over the amount of such taxes otherwise payable by such Shareholders in
connection with the transactions contemplated hereby as if the 338
Election had not been made (such excess being referred to as the
"Anticipated Incremental 338 Tax Liability"), which amounts shall be paid
by Buyer to the Shareholders on or before the filing by the Buyer and the
Shareholders of IRS form 8023-A on which the 338 Election is made, and (c)
in the event of a challenge by the taxing authority to the 338 Election,
including but not limited to a challenge to the allocation made by the
parties consistent with Section 5.8(a)(i) hereof, for any additional
federal, state or other taxes payable by the Shareholders by reason of
such challenge over the Anticipated Incremental 338 Tax Liability, which
amounts shall be paid by Buyer to the Shareholders at the time of payment
of such additional taxes by the Shareholders to the respective taxing
authorities. Amounts reimbursable by Buyer to the Shareholders under
clauses (b) and (c) of the preceding sentence shall in no event exceed
$660,000 in the aggregate.
5.9. Post-Closing Employment Matters. From and after the Closing
Date, Buyer agrees with the Shareholders that:
5.9.(a) 1996 Bonuses. On or about March 15, 1997, Buyer
agrees to cause the Company to pay to those management and plant employees
who, on a basis consistent with the Company's past practice, are eligible
to participate therein, a bonus based on the Company's performance for
1996 in the amounts set forth on Schedule 3.9, which amounts Shareholders
represent have been calculated on the basis such bonus has been paid by
the Company during the past three (3) years.
5.9.(b) Retention Bonuses. Buyer agrees to pay a $30,000
retention bonus on September 30, 1997 to each of Rick Kuhn, Tom Norquist
and Bill Page provided that such person remains employed by Buyer through
September 30, 1997.
6. FURTHER COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders covenant and agree as follows:
6.1. Access to Information and Records. Promptly following
execution of this Agreement and until the Closing Date, the Company shall
give Buyer, its counsel, accountants and other representatives: (a)
reasonable access during normal business hours to all of the properties,
books, records, contracts and documents of the Company for the purpose of
such inspection and investigation as Buyer deems appropriate (and the
Company shall furnish or cause to be furnished to Buyer and its
representatives all information with respect to the business and affairs
of the Company within the possession of the Company as Buyer may request);
(b) with the prior consent of the Company (which consent will not be
unreasonably withheld), access to employees for the purposes of such
meetings and communications as Buyer reasonably desires; (c) access and
opportunity, at Buyer's expense, to observe the physical year-end
inventory conducted by the Company; and (d) with the prior consent (which
consent will not be unreasonably withheld) and, except as may be otherwise
requested by Buyer's financing sources for independent verification
purposes, participation of the Shareholders' Representative (or his
designee), access to vendors, customers, sales representatives,
manufacturers of its machinery and equipment, and others having business
dealings with the Company.
6.2. Conduct of Business Pending the Closing. From the date hereof
until the Closing, except as otherwise approved in writing by Buyer:
6.2.(a) No Changes. The Company will carry on its business
diligently and, in all material respects, in the same manner as heretofore
and will not make or institute any material changes in its methods of
purchase, sale, management, accounting or operation.
6.2.(b) No Transfer of Shares. No Shareholder shall pledge,
assign or otherwise transfer any portion of his interest in the Shares.
6.2.(c) Maintain Organization. The Company will take such
reasonable action as may be necessary to maintain, preserve, renew and
keep in effect the existence, rights and franchises of the Company and
will use its reasonable efforts to preserve the business organization of
the Company intact, to keep available to Buyer the present officers and
employees, and to preserve for Buyer its present relationships with
suppliers and customers and others having business relationships with the
Company.
6.2.(d) No Breach. The Company and the Shareholders will
not do or omit any act, or permit any omission to act, which may cause a
breach of any material contract, commitment or obligation, or any breach
of any representation, warranty, covenant or agreement made by the Company
and/or the Shareholders herein, or which would have required disclosure
hereunder had it occurred after the date of the Recent Balance Sheet and
prior to the date of this Agreement.
6.2.(e) No Material Contracts. No contract or commitment
will be entered into, and no purchase of raw materials or supplies and no
sale of goods or services (real, personal, or mixed, tangible or
intangible) will be made, by or on behalf of the Company, except
contracts, commitments, purchases or sales which are in the Ordinary
Course of Business. Notwithstanding the foregoing, the Company and the
Shareholders agree that the Company will not enter into any new sales
representative, dealer or distributor contracts, or amend any existing
contracts, without the prior consent of Buyer, regardless of the fact that
any such individual contract or amendment might otherwise be in the
Ordinary Course of Business.
6.2.(f) No Corporate Changes. The Company shall not amend
its Certificate of Incorporation or By-laws or make any changes in
authorized or issued capital stock, including, without limitation, any
issuance of additional shares or granting of any rights, options or
warrants to acquire any capital stock of the Company.
6.2.(g) Maintenance of Insurance. The Company shall
maintain all of the insurance in effect as of the date hereof.
6.2.(h) Maintenance of Property. The Company shall use,
operate, maintain and repair all property of the Company in a normal
business manner.
6.2.(i) Interim Financials. The Company will promptly
provide Buyer with interim monthly financial statements, daily debt
reports and other management reports as and when they are available.
6.2.(j) No Negotiations. Neither the Company nor any
Shareholder will directly or indirectly (through a representative or
otherwise) solicit or furnish any information to any prospective buyer,
commence, or conduct presently ongoing, negotiations with any other party
or enter into any agreement with any other party concerning the sale of
the Company, the Company's assets or business or any part thereof or any
equity securities of the Company (an "acquisition proposal"), and the
Company and the Shareholders shall immediately advise Buyer of the receipt
of any acquisition proposal.
6.2.(k) No Dividends; No Increase in Compensation. The
Company will not: (i) declare, set aside or pay any dividend or any other
distribution (except for payment of dividends for the Shareholders' tax
obligations on the Company's income but not including any income taxes
payable by the Shareholders as a result of the transactions contemplated
by this Agreement); any redemption, purchase or other acquisition by the
Company of any capital stock of the Company, or any security relating
thereto; or any other payment to any Shareholder (other than compensation
on a basis consistent with past practice of the Company as disclosed on
Schedule 3.9); or (ii) increase any compensation, salaries or wages
payable or to become payable to any employee or agent of the Company
(including, without limitation, any increase or change pursuant to any
bonus, pension, profit sharing, retirement or other plan or commitment),
or any bonus or other employee benefit granted made or accrued, except
compensation increases which have been committed to previously by the
Company or made in the Ordinary Course of Business, which increases are
described on Schedule 3.9.
6.2.(l) No Change in Accounting Policies. The Company shall
not make any change (whether or not material) in the Company's accounting
procedures, methods, policies or practices or the manner in which the
Company maintains its records.
6.2.(m) No Extraordinary Capital Expenditures. The Company
will not make any capital expenditures other than as reflected on capital
expense projections to be delivered to Buyer on a monthly basis, except as
may be required by any act or occurrence beyond the reasonable control of
Company or Shareholders, including, without limitation, fire, explosion,
power failure, act of God, war, revolution, civil commotion or act of a
public enemy.
6.3. Consents. The Company and the Shareholders will use their
best commercially reasonable efforts prior to Closing to obtain all
consents necessary for the consummation of the transactions contemplated
hereby.
6.4. Other Action. The Company and the Shareholders, on the one
hand, and the Buyer, on the other, will use their best commercially
reasonable efforts to cause the fulfillment at the earliest practicable
date of all of the conditions to the other parties' obligations to
consummate the transactions contemplated in this Agreement. Without
limiting the foregoing, the Shareholders agree to take all actions
necessary to cause the Company to perform its obligations under this
Agreement.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to be performed on the Closing
Date shall be subject to the satisfaction prior to or at the Closing of
each of the following conditions:
7.1. Representations and Warranties True on the Closing Date. Each
of the representations and warranties made by Buyer in this Agreement
shall be true and correct in all material respects when made and shall be
true and correct in all material respects at and as of the Closing Date as
though such representations and warranties were made or given on and as of
the Closing Date, except for any changes permitted by the terms hereof.
7.2. Compliance With Agreement. The Company and each Shareholder
shall have in all material respects performed and complied with all
agreements and obligations under this Agreement which are to be performed
or complied with by the Company and each Shareholder prior to or on the
Closing Date.
7.3. Absence of Suit. No action, suit or proceeding before any
court or any governmental authority shall have been commenced or
threatened, and no investigation by any governmental or regulating
authority shall have been commenced, against Buyer, the Company or any of
the affiliates, officers or directors of any of them, seeking to restrain,
prevent or challenge the transactions contemplated hereby, or questioning
the validity or legality of any such transactions, or seeking damages in
connection with, or imposing any condition on, any such transactions.
7.4. Environmental Survey. The Environmental Quantification shall
be less than Five Hundred Thousand Dollars ($500,000) and the results of
the Phase 1 Environmental Survey shall be otherwise acceptable to Buyer in
all respects.
7.5. Title Insurance. Buyer shall have received good and valid
title insurance policies or, in final form, irrevocable title insurance
binders, dated as of the Closing Date, conforming to the specifications
set forth in Section 5.4 hereof.
7.6. Surveys. Buyer shall have received the surveys required
pursuant to Section 5.5 hereof.
7.7. Lender's Consent. Buyer shall have received the consent of
The First National Bank of Chicago ("FNBC") to the transactions
contemplated hereby, or in the alternative, shall contemporaneously with
the Closing prepay or otherwise discharge Buyer's entire loan facility
with FNBC.
7.8. Due Diligence. Buyer shall be satisfied with the results of
its due diligence investigation.
7.9. Financing. Buyer shall have obtained financing necessary to
consummate the purchase of the Shares from sources and on terms acceptable
to it, in its sole discretion.
7.10. Non-Competition and Confidentiality Agreements. Buyer shall
have received executed Non-Competition and Confidentiality Agreements, in
forms reasonably acceptable to Buyer, from key management personnel.
8. CONDITIONS PRECEDENT TO THE SHAREHOLDERS' OBLIGATIONS
Each and every obligation of the Shareholders to be performed on the
Closing Date shall be subject to the satisfaction prior to or at the
Closing of the following conditions:
8.1. Representations and Warranties True on the Closing. Each of
the representations and warranties made by Buyer in this Agreement shall
be true and correct in all material respects when made and shall be true
and correct in all material respects at and as of the Closing Date as
though such representations and warranties were made or given on and as of
the Closing Date, except for any changes permitted by the terms hereof or
inaccuracies which, in the aggregate, do not constitute a Buyer Material
Adverse Effect.
8.2. Compliance with Agreement. Buyer shall have in all material
respects performed and complied with all of Buyer's agreements and
obligations under this Agreement which are to be performed or complied
with by Buyer prior to or on the Closing Date.
8.3. Absence of Suit. No action, suit or proceeding before any
court or any governmental authority shall have been commenced or
threatened, and no investigation by any governmental or regulating
authority shall have been commenced, against Buyer, the Company or the
Shareholders or any of the affiliates, officers or directors of any of
them, seeking to restrain, prevent or challenge the transactions
contemplated hereby, or questioning the validity or legality of any such
transactions, or seeking damages in connection with, or imposing any
condition on, any such transactions.
8.4. Repayment of Certain Indebtedness. At Closing, Buyer shall
have made payment in full of all indebtedness owing to LaSalle Northwest
National Bank and shall have secured the release and delivered to the
Shareholders all shares of Rockwell International Corp. common stock (or
any proceeds thereof) owned by the Shareholders and held by such bank as
collateral to secure repayment of such indebtedness by the Company.
9. INDEMNIFICATION
9.1. By Shareholders. Subject to the terms and conditions of this
Article 9, if the Closing occurs, each Shareholder jointly and severally
hereby agrees to indemnify, defend and hold harmless Buyer, its directors,
officers, employees and controlled persons (hereinafter "Buyer's
Affiliates") and the Company from and against all Claims asserted against,
resulting to, imposed upon, or incurred by Buyer, Buyer's Affiliates or
the Company, directly or indirectly, by reason of, arising out of or
resulting from (a) the inaccuracy or breach of any representation or
warranty of any Shareholder contained in this Agreement or any certificate
or schedule delivered by the Shareholders to the Buyer in connection with
this Agreement or (b) the breach of any covenant of any Shareholder or the
Company contained in this Agreement. As used in this Article 9, the term
"Claim" shall include: (i) all debts, liabilities and obligations; (ii)
all losses, damages (including, without limitation, consequential
damages), judgments, awards, settlements, costs and expenses (including,
without limitation, interest (including prejudgment interest in any
litigated matter), penalties, court costs and attorneys fees and
expenses); and (iii) all demands, claims, suits, actions, costs of
investigation, causes of action, proceedings and assessments, in each case
actually incurred by the claimant.
Notwithstanding the foregoing paragraph, the obligations of the
Shareholders to indemnify, defend and hold harmless Buyer, Buyer's
Affiliates and the Company if the Closing occurs shall be several and not
joint obligations with respect to Claims arising out of or related to any
inaccuracy or breach of such Shareholder's representations and warranties
set forth in Section 3.2 hereof or with respect to any breach of such
Shareholder's agreements set forth in Section 5.2 hereof and any amounts
recoverable by Buyer in connection with either such breach shall be solely
recoverable from such Shareholder.
9.2. By Buyer. Subject to the terms and conditions of this Article
9, if the Closing occurs, Buyer hereby agrees to indemnify, defend and
hold harmless each Shareholder from and against all Claims asserted
against, resulting to, imposed upon or incurred by any such person,
directly or indirectly, by reason of or resulting from (a) the inaccuracy
or breach of any representation or warranty of Buyer contained in this
Agreement or any certificate or schedule delivered by Buyer to the
Shareholders in connection with this Agreement or (b) the breach of any
covenant of Buyer contained in this Agreement.
9.3. Indemnification for Third-Party Claims. The obligations and
liabilities of any party to indemnify any other party under this Article 9
with respect to Claims asserted by third parties shall be subject to the
following terms and conditions:
9.3.(a) Notice and Defense. The party or parties to be
indemnified (whether one or more, the "Indemnified Party") will give the
party from whom indemnification is sought (the "Indemnifying Party")
prompt written notice of any such Claim, and the Indemnifying Party will
undertake the defense thereof by representatives chosen by it. In all
matters concerning the Shareholders, the Shareholders' Representative
shall give and receive notice and otherwise act in all respects on their
behalf. Failure to give such notice shall not affect the Indemnifying
Party's duty or obligations under this Article 9, except to the extent the
Indemnifying Party is prejudiced thereby. So long as the Indemnifying
Party is defending any such Claim actively and in good faith, the
Indemnified Party shall not settle such Claim. The Indemnified Party
shall make available to the Indemnifying Party or its representatives all
records and other materials required by them and in the possession or
under the control of the Indemnified Party, for the use of the
Indemnifying Party and its representatives in defending any such Claim,
and shall in other respects give reasonable cooperation in such defense.
9.3.(b) Failure to Defend. If the Indemnifying Party,
within a reasonable time after notice of any such Claim, fails to defend
such Claim actively and in good faith, the Indemnified Party will (upon
further notice) have the right to undertake the defense, compromise or
settlement of such Claim or consent to the entry of a judgment with
respect to such Claim, on behalf of and for the account and risk of the
Indemnifying Party, and the Indemnifying Party shall thereafter have no
right to challenge the Indemnified Party's defense, compromise, settlement
or consent to judgment therein.
9.3.(c) Indemnified Party's Rights. Anything in this
Section 9.3 to the contrary notwithstanding, (i) if a Claim involves other
than solely monetary damages and may materially and adversely affect the
Indemnified Party, the Indemnifying Party shall not have the right to
compromise or settle such Claim without the prior written consent of the
Indemnified Party (which consent will not be unreasonably withheld), and
(ii) the Indemnifying Party shall not, without the written consent of the
Indemnified Party, which consent will not be unreasonably withheld, settle
or compromise any Claim or consent to the entry of any judgment which does
not include as an unconditional term thereof the giving by the claimant or
the plaintiff to the Indemnified Party of a release from all liability in
respect of such Claim.
9.4. Payment. The Indemnifying Party shall promptly pay the
Indemnified Party any amount due under this Article 9, which payment shall
first be accomplished by the Indemnified Party setting off any amount owed
to the Indemnifying Party by the Indemnified Party. Upon judgment,
determination, settlement or compromise of any third party Claim, the
Indemnifying Party shall pay promptly on behalf of the Indemnified Party,
and/or to the Indemnified Party in reimbursement of any amount theretofore
required to be paid by it, the amount so determined by judgment,
determination, settlement or compromise and all other Claims of the
Indemnified Party with respect thereto, unless in the case of a judgment
an appeal is made from the judgment. If the Indemnifying Party desires to
appeal from an adverse judgment, then the Indemnifying Party shall post
and pay the cost of the security or bond to stay execution of the judgment
pending appeal.
9.5. Effect of Payment. Upon the payment in full by the
Indemnifying Party of such amounts, the Indemnifying Party shall succeed
to the rights of such Indemnified Party, to the extent not waived in
settlement against the third party who made such third party claim.
9.6. No Waiver. The closing of the transactions contemplated by
this Agreement shall not constitute a waiver by any party of its rights to
indemnification hereunder, regardless of whether the party seeking
indemnification has knowledge of the breach, violation or failure of
condition constituting the basis of the Claim at or before the Closing,
and regardless of whether such breach, violation or failure is deemed to
be "material".
9.7. Limitations on Company and Shareholder Indemnification.
9.7.(a) Time Limitation. No claim or action shall be
brought under this Article 9 for breach of a representation or warranty
after March 31, 1999. Notwithstanding the foregoing, however, or any
other provisions of this Agreement:
(i) There shall be no time limitation on claims or
actions brought for breach of any representation or warranty
made in or pursuant to Section 3.1.(f) or Section 3.2, and the
Company and the Shareholders hereby waive all applicable
statutory limitation periods with respect thereto;
(ii) Any claim or action brought for breach of any
representation or warranty made in or pursuant to Section 3.6
may be brought at any time until the underlying tax obligation
is barred by the applicable period of limitation under federal
and state laws relating thereto without regard to any
extensions of any such period of limitation agreed to by Buyer
without the prior written consent of Shareholders'
Representative;
(iii) Any claim made by a party hereunder by filing a
suit or action in a court of competent jurisdiction or a court
reasonably believed to be of competent jurisdiction for breach
of a representation or warranty prior to the termination of
the survival period for such claim shall be preserved despite
the subsequent termination of such survival period;
(iv) If any act, omission, disclosure or failure to
disclose shall form the basis for a claim for breach of more
than one representation or warranty, and such claims have
different periods of survival hereunder, the termination of
the survival period of one claim shall not affect a party's
right to make a claim based on the breach of representation or
warranty still surviving; and
(v) All covenants and agreements in this Agreement
relating to periods after the Closing Date shall survive the
Closing indefinitely unless sooner terminated in accordance
with their terms.
9.7.(b) Amount Limitation. Except with respect to Claims
for breach of the representations or warranties contained in Section
3.1.(f) or Section 3.2 (for which an Indemnified Party shall be
indemnified in full), an Indemnified Party shall not be entitled to
indemnification under this Article 9 for breach of a representation or
warranty unless and to the extent the aggregate of the Indemnifying
Party's indemnification obligations to the Indemnified Party pursuant to
this Article 9 (but for this Section 9.7.(b)) exceeds Two Hundred Seventy
Thousand Dollars ($270,000). Further, the maximum amount of
indemnification payments to which a party shall be entitled, when added to
the aggregate amount of all other indemnification payments made by such
party, shall not exceed the Purchase Price.
9.8. Limitations on Buyer Indemnification. Notwithstanding
anything to the contrary contained anywhere else in this Agreement, the
Company's and the Shareholders' sole and exclusive remedy for any breach
by Buyer of Section 4.7 shall be to terminate this Agreement in accordance
with Section 11.2.(b).
10. CLOSING
The closing of this transaction (the "Closing") shall take place at
the offices of Foley & Lardner, 330 N. Wabash, Suite 3300, Chicago,
Illinois 60611, at 10:00 A.M. on February 15, 1997 or at such other time
and place as the parties hereto shall agree upon. Such date is referred
to in this Agreement as the "Closing Date".
10.1. Documents to be Delivered by the Company and Shareholders. At
the Closing, the Company and the Shareholders shall deliver to Buyer the
following documents, in each case duly executed and in form and substance
satisfactory to Buyer.
10.1.(a) Stock Certificates. Stock certificates representing
the Shares, duly endorsed for transfer to Buyer or with duly executed
stock powers attached.
10.1.(b) Intentionally left blank.
10.1.(c) Opinion of Counsel. A written opinion of Ross &
Hardies, counsel to the Company and the Shareholders dated as of the
Closing Date, addressed to Buyer and Buyer's senior lender, substantially
in the form of Exhibit B hereto.
10.1.(d) Certified Resolutions. A certified copy of the
resolutions of the Board of Directors and the Shareholders of the Company
authorizing this Agreement.
10.1.(e) Articles; By-laws. A copy of the By-laws of the
Company certified by the secretary of the Company, and a copy of the
Certificate of Incorporation of the Company certified by the Secretary of
State of the state of incorporation of the Company.
10.1.(f) General Releases. The General Releases referred to
in Section 5.3, duly executed by the persons referred to in such Section.
10.1.(g) Termination and Waiver. Evidence of the termination
of the September 1, 1990 Shareholders Agreement among the Company and
Shareholders, and a waiver by the Shareholders of any rights of first
refusal thereunder.
10.1.(h) Resignation. The written resignation effective as
of the Closing Date of each director of the Company and the resignation of
each Shareholder from any office held by such Shareholder, and the
resignation of any other officers requested by Buyer.
10.1.(i) Consulting Agreement. A consulting agreement
executed and delivered by Ross D. Siragusa, Jr., in the form of Exhibit C
hereto.
10.1.(j) Other Documents. All other documents, instruments
or writings required to be delivered to Buyer at or prior to the Closing
pursuant to this Agreement.
10.2. Documents to be Delivered by Buyer. At the Closing, Buyer
shall deliver to the Shareholders the following documents, in each case
duly executed or otherwise in proper form:
10.2.(a) Purchase Price. A wire transfer or transfers to the
Shareholders aggregating Twenty Five Million Dollars ($25,000,000).
10.2.(b) Note. Buyer's Note or Notes to the Shareholders in
the aggregate principal amount of Two Million Dollars ($2,000,000).
10.2.(c) Intentionally left blank.
10.2.(d) Opinion of Counsel. A written opinion of Foley &
Lardner, counsel to Buyer, dated as of the Closing Date, addressed to the
Company, in substantially the form of Exhibit D hereto.
10.2.(e) Certified Resolutions. A certified copy of the
resolutions of the Board of Directors of Buyer authorizing and approving
this Agreement and the Notes and the consummation of the transactions
contemplated by this Agreement.
10.2.(f) Incumbency Certificate. Incumbency certificates
relating to each person executing any document executed and delivered to
the Company by Buyer pursuant to the terms hereof.
10.2.(g) Other Documents. All other documents, instruments
or writings required to be delivered to the Company at or prior to the
Closing pursuant to this Agreement.
11. TERMINATION
11.1. Termination Without Liability. Except for a breach or
violation by any of the Shareholders or the Company of the covenants
contained in Section 6.2.(j), this Agreement may be terminated without
further liability of any party at any time prior to the Closing:
(a) by mutual written agreement of Buyer and Shareholders'
Representative; or
(b) by either Buyer or the Shareholders' Representative if
the Closing shall not have occurred on or before March 15, 1997; or
(c) by Buyer, if the Environmental Quantification is in
excess of Five Hundred Thousand Dollars ($500,000); or
(d) by Buyer, if (i) there has been a material violation or
breach by the Company of any of the covenants or agreements contained
in this Agreement (other than a breach of Section 6.2.(j) which has
not been waived in writing by Buyer), or (ii) there has been a
failure of satisfaction of a condition to the obligations of Buyer
which Buyer has not waived in writing, or (iii) the certificate
delivered pursuant to Section 10.1.(b) is not acceptable to Buyer in
its sole discretion; or
(e) by Company or Shareholders' Representative, if (i) there
has been a material violation or breach by Buyer of any of the
covenants or agreements contained in this Agreement which has not
been waived in writing by the Shareholders' Representative, or (ii)
there has been a failure of satisfaction of a condition to the
obligations of the Company and/or the Shareholders which the Company
and/or the Shareholders' Representative has not waived in writing.
11.2. Termination With Liability. If there has been a violation or
breach by the Company or the Shareholders of the covenants contained in
Section 6.2.(j) Buyer may, by written notice to the Company at any time
prior to the Closing that such violation or breach is continuing,
terminate this Agreement. Termination of this Agreement by Buyer pursuant
to this Section 11.2 shall not in any way terminate, limit or restrict the
rights and remedies of Buyer against the Company or the Shareholders by
reason of such breach or violation.
12. POST-CLOSING OBLIGATIONS
12.1. Transition. Each Shareholder hereby covenants and agrees to
assist in and facilitate an orderly transition of the Company ownership
and management after Closing.
12.2. Further Assurances. From time to time, prior to and after
Closing, at Buyer's request and without further consideration, the Company
and the Shareholders will execute and deliver to Buyer such documents and
take such other action as Buyer may reasonably request in order to
consummate more effectively the transactions contemplated hereby and to
vest in Buyer good, valid and marketable title to the Shares.
13. MISCELLANEOUS
13.1. Disclosures and Announcements. Both the timing and the
content of all disclosure to third parties and public announcements
concerning the transactions provided for in this Agreement by either the
Company, the Shareholders or Buyer shall be subject to the approval of the
others in all essential respects, except that the Company's approval shall
not be required as to any statements and other information which Buyer is
required to submit to the SEC or required to make pursuant to any rule or
regulation of the SEC or the American Stock Exchange or otherwise required
by law, provided that the Shareholders shall have been given two (2) days
prior written notice (and a copy of the text) of any such statement.
13.2. Assignment; Parties in Interest.
13.2.(a) Assignment. Except as expressly provided herein,
the rights and obligations of a party hereunder may not be assigned,
transferred or encumbered without the prior written consent of the other
parties. Notwithstanding the foregoing, (i) Buyer may, without consent of
any other party, cause one or more subsidiaries of Buyer to carry out all
or part of the transactions contemplated hereby provided that Buyer shall
remain liable for all of its obligations, and those of any such
subsidiary, to the Company and the Shareholders hereunder and (ii) at or
subsequent to the Closing, Buyer may assign its interest in this Agreement
to Buyer's senior lender as additional collateral security for Buyer's
obligations to such senior lender and the Company and the Shareholders
agree to execute such acknowledgements of such assignment as may
reasonably be required by such lender.
13.2.(b) Parties in Interest. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by the
respective successors and permitted assigns of the parties hereto.
Nothing contained herein shall be deemed to confer upon any other person
any right or remedy under or by reason of this Agreement.
13.3. Law Governing Agreement. This Agreement may not be modified
or terminated orally, and shall be construed and interpreted according to
the internal laws of the State of Illinois, excluding any choice of law
rules that may direct the application of the laws of another jurisdiction.
13.4. Amendment and Modification. Buyer and the Shareholders'
Representative may amend, modify and supplement this Agreement in such
manner as may be agreed upon by them in writing.
13.5. Notice. All notices, requests, demands and other
communications hereunder shall be given in writing and shall be: (a)
personally delivered; (b) sent by confirmed facsimile transmission or
other electronic means of transmitting written documents; or (c) sent to
the parties at their respective addresses indicated herein by registered
or certified U.S. mail, return receipt requested and postage prepaid, or
by private overnight mail courier service. The respective addresses to be
used for all such notices, demands or requests are as follows:
(a) If to Buyer, to:
Swing-N-Slide Corp.
1212 Barberry Drive
Janesville, Wisconsin 53545
Attention: Richard G. Mueller
Facsimile: (612) 735-6454
(with a copy, which copy shall not constitute notice,
to):
GreenGrass Holdings, G.P.
311 South Wacker Drive
Suite 4990
Chicago, Illinois 60606-6640
Attention: David S. Evans
Facsimile: (312) 554-7501
and
Foley & Lardner
330 N. Wabash, Suite 3300
Chicago, Illinois 60611
Attention: Stephen M. Slavin
Facsimile: (312) 755-1925
or to such other person or address as Buyer shall furnish to the Company
in writing.
If to the Company or any of the Shareholders, to Shareholders'
Representative:
Ross D. Siragusa, Jr.
Straight Creek Farm
4235 County Road 78
Fort Payne, Alabama 35167
Facsimile: (205) 845-0574
(with a copy, which copy shall not constitute
notice, to):
Ross & Hardies
150 North Michigan Avenue
Suite 2500
Chicago, Illinois 60601-7567
Attention: Robert W. Kleinman
Facsimile: (312) 750-8600
or to such other person or address as the Shareholders' Representative
shall furnish to Buyer in writing.
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted pursuant to this
paragraph, such communication shall be deemed delivered the next business
day after transmission (and sender shall bear the burden of proof of
delivery); if sent by overnight courier pursuant to this paragraph, such
communication shall be deemed delivered upon receipt; and if sent by U.S.
mail pursuant to this paragraph, such communication shall be deemed
delivered as of the date of delivery indicated on the receipt issued by
the relevant postal service, or, if the addressee fails or refuses to
accept delivery, as of the date of such failure or refusal. Any party to
this Agreement may change its address for the purposes of this Agreement
by giving notice thereof in accordance with this Section.
13.6. Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated:
13.6.(a) Brokerage. Except as to Charles Paul, who shall be
compensated by Buyer, the Company, the Shareholders and Buyer each
represent and warrant to each other that there is no broker involved or in
any way connected with the transfer provided for herein. Buyer agrees to
hold the Company and the Shareholders harmless from and against all claims
for brokerage commissions or finder's fees incurred through any act of
Buyer in connection with the execution of this Agreement or the
transactions provided for herein. The Company and the Shareholders,
jointly and severally, agree to hold Buyer harmless from and against all
claims for brokerage commissions or finder's fees incurred through any act
of either the Company or any Shareholder in connection with the execution
of this Agreement or the transactions provided for herein.
13.6.(b) Expenses. Each of the parties shall bear his or its
own expenses and the expenses of its counsel in connection with the
transactions contemplated hereby, except that the Company shall pay its
expenses and the expenses of the Shareholders in connection with the
negotiation and execution of, and the closing of the transactions
contemplated by, this Agreement.
13.6.(c) Costs of Litigation. The parties agree that the
prevailing party in any action brought with respect to or to enforce any
right or remedy under this Agreement shall be entitled to recover from the
other party or parties all reasonable costs and expenses of any nature
whatsoever incurred by the prevailing party in connection with such
action, including, without limitation, attorneys' fees and prejudgment
interest.
13.7. CONSENT TO JURISDICTION. THE COMPANY, THE SHAREHOLDERS AND
BUYER EACH HEREBY CONSENT TO THE JURISDICTION OF ANY STATE COURT WITHIN
COOK COUNTY, ILLINOIS OR ANY FEDERAL COURT LOCATED WITHIN THE NORTHERN
DISTRICT OF THE STATE OF ILLINOIS FOR ANY PROCEEDING INSTITUTED HEREUNDER
OR UNDER ANY OF THE OTHER DOCUMENTS EXECUTED IN CONNECTION HEREWITH. EACH
PARTY HERETO WAIVES ANY OBJECTION THAT IT MAY HAVE BASED UPON LACK OF
JURISDICTION OR FORUM NOW CONVENIENS TO THE CONDUCT OF ANY SUCH
PROCEEDING.
13.8. Entire Agreement. This Agreement amends and restates the
Prior Agreement in its entirety and embodies the entire agreement between
the parties hereto with respect to the transactions contemplated herein,
and there have been and are no agreements, representations or warranties
between the parties other than those set forth or provided for herein.
13.9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The parties agree
that a facsimile signature of any person shall be deemed to be an
original, binding signature.
13.10. Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
13.11. Glossary of Terms. The following sets forth the location of
definitions of capitalized terms defined in the body of this Agreement:
"Affiliate" - Section 3.9.(k)
"Ancillary Instruments" - Section 3.2.(a)
"Best Knowledge of the Shareholders" - Section 3.10
"Buyer's Affiliates" - Section 9.1
"CERCLA" - Section 3.12.(c)
"Claim" - Section 9.1
"Closing" - Preamble to Article 10
"Closing Date" - Preamble to Article 10
"Code" - Section 3.6
"Company Employees" - Section 3.17.(a)
"Employee Plans/Agreements" - Section 3.17.(a)
"Environmental Laws" - Section 3.12.(c)
"Environmental Quantification" - Section 5.1.(c)
"ERISA" - Section 3.17.(a)
"Indemnified Party" - Section 9.3.(a)
"Indemnifying Party" - Section 9.3.(a)
"Laws" - Section 3.12.(a)
"Lien" - Section 3.13.(a)
"Major Supplier" - Section 3.20(b)
"Note" - Section 2.2.(b)
"PBGC" - Section 3.17.(b)(ii)
"Prior Agreement" - Recital C
"Products" - Section 3.21
"Purchase Price" - Section 2.1
"Real Property" - Section 3.13.(c)
"Recent Balance Sheet" - Section 3.5
"SNSC" - Recital C
"Schedules" - Preamble to Article 3
"Shares" - Recital A
"Subsidiary" - Section 3.1.(d)
"Trade Rights" - Section 3.19
"Transaction Expenses" - Section 5.7
"Waste" - Section 3.12.(c)
Where any group or category of items or matters is defined collectively in
the plural number, any item or matter within such definition may be
referred to using such defined term in the singular number.
* * * * *
(The next page is the signature page.)
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date and year first above written.
BUYER:
NEWCO, INC.
By:
Title:
COMPANY:
GAME TIME, INC.
By:
Title:
ROSS D. SIRAGUSA, JR.,
SHAREHOLDER AND SHAREHOLDERS'
REPRESENTATIVE
JOHN R. SIRAGUSA, SHAREHOLDER
RICHARD D. SIRAGUSA, SHAREHOLDER
ARTICLES OF MERGER
MERGING
GAME TIME, INC.
(an Alabama corporation)
WITH AND INTO
NEWCO, INC.
(a Wisconsin corporation)
______________________________________________
In accordance with and pursuant to Title 10, Chapter 2B of the
Code of Alabama (the "Alabama Business Corporation Act") and Chapter 180
of the Wisconsin Statutes (the "Wisconsin Business Corporation Law"),
Newco, Inc., a Wisconsin corporation ("Newco"), does hereby execute these
Articles of Merger as of the 13th day of March, 1997, for the purpose of
effectuating the merger of Game Time, Inc., an Alabama corporation
("GTI"), with and into Newco.
ARTICLE I
The Board of Directors of each of GTI and Newco, in accordance
with their respective Articles of Incorporation and By-Laws and in
accordance with Section 10-2B-11.04 of the Alabama Business Corporation
Act and Section 180.1104 of the Wisconsin Business Corporation Law,
approved and adopted the Plan of Merger dated March 13, 1997 (the "Plan of
Merger"), a true and correct copy of which is attached hereto as Exhibit A
and incorporated herein by reference. The Plan of Merger sets forth the
terms and conditions pursuant to which GTI shall be merged with and into
Newco (the "Merger"), with Newco as the surviving corporation following
the Merger.
ARTICLE II
On the date hereof, all of the outstanding shares of capital
stock of GTI are held by Newco. Accordingly, shareholder approval of the
Merger was not required by the Alabama Business Corporation Act or the
Wisconsin Business Corporation Law.
ARTICLE III
The Articles of Incorporation of GTI are filed in Montgomery
County, Alabama.
ARTICLE IV
These Articles of Merger shall be effective, and the Merger
shall take effect, upon the receipt of these Articles of Merger with the
office of the Wisconsin Department of Financial Institutions, and filing
will be effective in Alabama when filed with the Secretary of State.
IN WITNESS WHEREOF, Newco has caused these Articles of Merger to
be executed by its duly authorized officer as of the date first set forth
above.
NEWCO, INC.
By:_________________________________
Richard E. Ruegger
Vice President of Finance
This document was drafted by, and after filing should be
returned to, Attorney Thomas W. Henshue, Foley & Lardner, 150 East Gilman
Street, P.O. Box 1497, Madison, Wisconsin 53701-1497.
<PAGE>
Exhibit A
PLAN OF MERGER
THIS PLAN OF MERGER (the "Plan of Merger") is made and entered
into as of the 13th day of March, 1997, by and between Newco, Inc., a
Wisconsin corporation ("Newco"), and Game Time, Inc., an Alabama
corporation ("GTI").
W I T N E S S E T H:
WHEREAS, on the date hereof, Newco holds all of the outstanding
shares of capital stock of GTI; and
WHEREAS, the Board of Directors of each of Newco and GTI deem
the merger of GTI with and into Newco, in accordance with the terms and
subject to the conditions set forth herein, desirable and to the advantage
of both Newco and GTI; and
WHEREAS, the Board of Directors of each of Newco and GTI have
approved this Plan of Merger and have authorized the execution hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. The Merger. On the Effective Date (as hereinafter defined)
and pursuant to the applicable provisions of and with the effect provided
in Title 10, Chapter 2B of the Code of Alabama (the "Alabama Business
Corporation Act") and Chapter 180 of the Wisconsin Statutes (the
"Wisconsin Business Corporation Law"), GTI shall be merged with and into
Newco (the "Merger"), with the corporate existence of Newco continuing
under the Wisconsin Business Corporation Law. The separate corporate
existence and corporate organization of GTI shall cease upon the Effective
Date. In connection with the Merger, all property, rights, privileges,
franchises, immunities, and powers of each of GTI and Newco shall be taken
and deemed to be transferred to and vested in Newco without further act or
deed; and all debts, liabilities, and duties of such corporations shall be
assumed by Newco and may be enforced against Newco to the same extent as
if the debts, liabilities, and duties had been incurred or contracted by
Newco.
2. Cancellation of GTI Stock. Each share of GTI's common
stock issued and outstanding immediately prior to the Effective Date and
all rights in respect thereof shall, upon the Effective Date, by virtue of
the Merger and without further action on the part of the holder thereof,
be canceled.
3. Articles of Incorporation. On the Effective Date, the
Articles of Incorporation of Newco shall remain in effect as the Articles
of Incorporation of Newco, as the surviving corporation following the
Merger, from and after the Effective Date until thereafter amended in
accordance with the Wisconsin Business Corporation Law and the provisions
of such Articles of Incorporation.
4. By-Laws. The By-Laws of Newco as in effect immediately
prior to the Effective Date, shall be and remain the By-Laws of Newco, as
the surviving corporation following the Merger, from and after the
Effective Date until thereafter amended in accordance with the Wisconsin
Business Corporation Law and the provisions of Newco's Articles of
Incorporation and By-Laws.
5. Board of Directors and Officers. The Board of Directors
and officers of Newco on the Effective Date shall remain the Board of
Directors and officers of Newco, as the surviving corporation following
the Merger, from and after the Effective Date until their prior death,
resignation, or removal or until their respective successors are duly
elected or appointed, as the case may be, and qualified.
6. Effective Date. The Merger shall be effective upon the
date of receipt of Articles of Merger with the office of the Wisconsin
Department of Financial Institutions. Such date is sometimes referred to
herein as the "Effective Date."
IN WITNESS WHEREOF, the parties have caused this Plan of Merger
to be
executed by their duly authorized officers as of the date first set forth
above.
GAME TIME, INC. NEWCO, INC.
By:_______________________ By:_______________________
Richard E. Ruegger Richard E. Ruegger
Vice President Vice President of Finance
EXECUTION COPY
SWING-N-SLIDE CORP.
NEWCO, INC.
CREDIT AGREEMENT
Dated as of March 13, 1997
FLEET NATIONAL BANK, Agent
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions; Certain Rules of Construction . . . . . . . . . . . . 1
2. The Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.1. Revolving Credit . . . . . . . . . . . . . . . . . . . . . 30
2.1.1. Revolving Loan . . . . . . . . . . . . . . . . . . . 30
2.1.2. Maximum Amount of Revolving Credit . . . . . . . . . 30
2.1.3. Borrowing Requests . . . . . . . . . . . . . . . . . 30
2.1.4. Revolving Notes . . . . . . . . . . . . . . . . . . 30
2.2. Term Loan A . . . . . . . . . . . . . . . . . . . . . . . 31
2.2.1. Term Loan A . . . . . . . . . . . . . . . . . . . . 31
2.2.2. Term Loan A Notes . . . . . . . . . . . . . . . . . 31
2.3. Term Loan B . . . . . . . . . . . . . . . . . . . . . . . 31
2.3.1. Term Loan B . . . . . . . . . . . . . . . . . . . . 31
2.3.2. Term Loan B Notes . . . . . . . . . . . . . . . . . 31
2.4. Letters of Credit . . . . . . . . . . . . . . . . . . . 32
2.4.1. Issuance of Letters of Credit . . . . . . . . . . . 32
2.4.2. Requests for Letters of Credit . . . . . . . . . . . 32
2.4.3. Form and Expiration of Letters of Credit . . . . . . 32
2.4.4. Lenders' Participation in Letters of Credit . . . . 32
2.4.5. Presentation . . . . . . . . . . . . . . . . . . . . 33
2.4.6. Payment of Drafts . . . . . . . . . . . . . . . . . 33
2.4.7. Uniform Customs and Practice . . . . . . . . . . . . 33
2.4.8. Subrogation . . . . . . . . . . . . . . . . . . . . 35
2.4.9. Modification, Consent, etc. . . . . . . . . . . . . 35
2.5. Application of Proceeds . . . . . . . . . . . . . . . . 35
2.5.1. Revolving Loan . . . . . . . . . . . . . . . . . . . 35
2.5.2. Term Loans . . . . . . . . . . . . . . . . . . . . . 35
2.5.3. Letters of Credit . . . . . . . . . . . . . . . . . 35
2.5.4. Specifically Prohibited Applications . . . . . . . . 35
2.6. Nature of Obligations of Lenders to Make Extensions
of Credit . . . . . . . . . . . . . . . . . . . . . . . 36
3. Interest; LIBOR Pricing Options; Fees . . . . . . . . . . . . . . 36
3.1. Interest . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.2. LIBOR Pricing Options . . . . . . . . . . . . . . . . . . 36
3.2.1. Election of LIBOR Pricing Options . . . . . . . . . 36
3.2.2. Notice to Lenders and Borrower . . . . . . . . . . . 37
3.2.3. Selection of LIBOR Interest Periods . . . . . . . . 37
3.2.4. Additional Interest . . . . . . . . . . . . . . . . 38
3.2.5. Violation of Legal Requirements . . . . . . . . . . 38
3.2.6. Funding Procedure . . . . . . . . . . . . . . . . . 39
3.3. Commitment Fees . . . . . . . . . . . . . . . . . . . . . 39
3.4. Letter of Credit Fees . . . . . . . . . . . . . . . . . . 39
3.5. Changes in Circumstances; Yield Protection . . . . . . . . 39
3.5.1. Reserve Requirements, etc . . . . . . . . . . . . . 40
3.5.2. Taxes . . . . . . . . . . . . . . . . . . . . . . . 40
3.5.3. Capital Adequacy . . . . . . . . . . . . . . . . . . 40
3.5.4. Regulatory Changes . . . . . . . . . . . . . . . . . 41
3.5.5. Compensation Claims . . . . . . . . . . . . . . . . 41
3.5.6. Mitigation . . . . . . . . . . . . . . . . . . . . . 41
3.6. Computations of Interest and Fees . . . . . . . . . . . . 42
4. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.1. Payment at Maturity . . . . . . . . . . . . . . . . . . . 42
4.2. Scheduled Required Prepayments . . . . . . . . . . . . . . 42
4.2.1. Term Loan A . . . . . . . . . . . . . . . . . . . . 42
4.2.2. Term Loan B . . . . . . . . . . . . . . . . . 43
4.3. Contingent Required Prepayments . . . . . . . . . . . . . 44
4.3.1. Excess Credit Exposure . . . . . . . . . . . . . . . 44
4.3.2. Excess Cash Flow . . . . . . . . . . . . . . . . . . 44
4.3.3. Net Asset Sale Proceeds . . . . . . . . . . . . . . 44
4.3.4. Net Debt Proceeds . . . . . . . . . . . . . . . . . 44
4.3.5. Net Equity Proceeds . . . . . . . . . . . . . . . . 44
4.4. Voluntary Prepayments . . . . . . . . . . . . . . . . . . 45
4.5. Letters of Credit . . . . . . . . . . . . . . . . . . . . 45
4.6. Reborrowing; Application of Payments, etc. . . . . . . . . 45
4.6.1. Reborrowing . . . . . . . . . . . . . . . . . . . . 46
4.6.2. Order of Application . . . . . . . . . . . . . . . . 46
4.6.3. Payment with Accrued Interest, etc . . . . . . . . . 46
4.6.4. Payments for Lenders . . . . . . . . . . . . . . . . 46
5. Conditions to Extending Credit . . . . . . . . . . . . . . . . . . 47
5.1. Conditions on Initial Closing Date . . . . . . . . . . . . 47
5.1.1. Notes . . . . . . . . . . . . . . . . . . . . . . . . 47
5.1.2. Payment of Fees . . . . . . . . . . . . . . . . . . 47
5.1.3. Legal Opinions . . . . . . . . . . . . . . . . . . . 47
5.1.4. Guarantee and Security Agreement . . . . . . . . . . 47
5.1.5. Guarantee and Pledge Agreement . . . . . . . . . . . 47
5.1.6. Real Estate Collateral . . . . . . . . . . . . . . . 48
5.1.7. Perfection of Security . . . . . . . . . . . . . . . 48
5.1.8. Acquisition . . . . . . . . . . . . . . . . . . . . 48
5.1.9. Capitalization, etc. . . . . . . . . . . . . . . . . 49
5.1.10. Termination of Prior Credit Agreements . . . . . . 50
5.1.13. Proper Proceedings . . . . . . . . . . . . . . . . 50
5.1.14. General . . . . . . . . . . . . . . . . . . . . . . 51
5.2. Conditions to Each Extension of Credit . . . . . . . . . . 51
5.2.1. Officer's Certificate . . . . . . . . . . . . . . . 51
5.2.2. Legality, etc . . . . . . . . . . . . . . . . . . . 51
6. General Covenants . . . . . . . . . . . . . . . . . . . . . . . . 51
6.1. Taxes and Other Charges; Accounts Payable . . . . . . . . 51
6.1.1. Taxes and Other Charges . . . . . . . . . . . . . . 51
6.1.2. Accounts Payable . . . . . . . . . . . . . . . . . . 52
6.2. Conduct of Business, etc. . . . . . . . . . . . . . . . . 52
6.2.1. Types of Business . . . . . . . . . . . . . . . . . 52
6.2.2. Maintenance of Properties. . . . . . . . . . . . . . 52
6.2.3. Statutory Compliance . . . . . . . . . . . . . . . . 53
6.2.4. Compliance with Material Agreements . . . . . . . . 53
6.3. Insurance . . . . . . . . . . . . . . . . . . . . . . . . 53
6.3.1. Business Interruption Insurance . . . . . . . . . . 53
6.3.2. Property Insurance . . . . . . . . . . . . . . . . . 53
6.3.3. Liability Insurance . . . . . . . . . . . . . . . . 53
6.3.4. Flood Insurance . . . . . . . . . . . . . . . . . . 54
6.4. Financial Statements and Reports . . . . . . . . . . . . . 54
6.4.1. Annual Reports . . . . . . . . . . . . . . . . . . . 54
6.4.2. Quarterly Reports . . . . . . . . . . . . . . . . . 56
6.4.3. Monthly Reports . . . . . . . . . . . . . . . . . . 57
6.4.4. Borrowing Base Reports . . . . . . . . . . . . . . . 57
6.4.5. Other Reports . . . . . . . . . . . . . . . . . . . 57
6.4.6. Notice of Litigation, Defaults, etc . . . . . . . . 58
6.4.7. ERISA Reports . . . . . . . . . . . . . . . . . . . 58
6.4.8. Other Information; Audit . . . . . . . . . . . . . . 58
6.5. Certain Financial Tests . . . . . . . . . . . . . . . . . 59
6.5.1. Consolidated Net Worth . . . . . . . . . . . . . . . 59
6.5.2. Consolidated EBITDA . . . . . . . . . . . . . . . . 59
6.5.3. Consolidated Total Debt to Consolidated EBITDA . . . 60
6.5.4. Consolidated Adjusted EBITDA Plus Rent to
Consolidated Fixed Charges Plus Rent . . . . . . . 61
6.5.5. Capital Expenditures . . . . . . . . . . . . . . . . 61
6.6. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . 62
6.7. Guarantees; Letters of Credit . . . . . . . . . . . . . . 63
6.8. Liens 63
6.9. Investments and Acquisitions . . . . . . . . . . . . . . . 65
6.10. Distributions . . . . . . . . . . . . . . . . . . . . . . 66
6.11. Asset Dispositions and Mergers . . . . . . . . . . . . . . 67
6.12. Issuance of Stock by Subsidiaries; Subsidiary Distributions
68
6.12.1. Issuance of Stock by Subsidiaries . . . . . . . . . 68
6.12.2. No Restrictions on Subsidiary Distributions . . . . 68
6.13. Voluntary Prepayments of Other Indebtedness . . . . . . . 68
6.14. Derivative Contracts . . . . . . . . . . . . . . . . . . . 68
6.15. Negative Pledge Clauses . . . . . . . . . . . . . . . . . 68
6.16. ERISA, etc. . . . . . . . . . . . . . . . . . . . . . . . 69
6.17. Transactions with Affiliates . . . . . . . . . . . . . . . 69
6.18. Interest Rate Protection . . . . . . . . . . . . . . . . . 69
6.19. Environmental Laws . . . . . . . . . . . . . . . . . . . . 70
6.19.1. Compliance with Law and Permits . . . . . . . . . . 70
6.19.2. Notice of Claims, etc. . . . . . . . . . . . . . . 70
7. Representations and Warranties . . . . . . . . . . . . . . . . . . 70
7.1. Organization and Business . . . . . . . . . . . . . . . . 70
7.1.1. The Holding Company . . . . . . . . . . . . . . . . 70
7.1.2. Subsidiaries . . . . . . . . . . . . . . . . . . . . 71
7.1.3. Qualification . . . . . . . . . . . . . . . . . . . 71
7.1.4. Capitalization . . . . . . . . . . . . . . . . . . . 71
7.2. Financial Statements and Other Information; Material
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
7.2.1. Financial Statements and Other Information . . . . . 72
7.2.2. Material Agreements . . . . . . . . . . . . . . . . 73
7.3. Agreements Relating to Financing Debt, Investments, etc . 73
7.4. Changes in Condition . . . . . . . . . . . . . . . . . . . 74
7.5. Title to Assets . . . . . . . . . . . . . . . . . . . . . 74
7.6. Operations in Conformity With Law, etc . . . . . . . . . . 74
7.7. Litigation . . . . . . . . . . . . . . . . . . . . . . . . 74
7.8. Authorization and Enforceability . . . . . . . . . . . . . 74
7.9. No Legal Obstacle to Agreements . . . . . . . . . . . . . 75
7.10. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . 76
7.11. Licenses, etc. . . . . . . . . . . . . . . . . . . . . . . 76
7.12. Tax Returns . . . . . . . . . . . . . . . . . . . . . . . 76
7.13. Certain Business Representations . . . . . . . . . . . . . 76
7.13.1. Labor Relations . . . . . . . . . . . . . . . . . . 76
7.13.2. Antitrust . . . . . . . . . . . . . . . . . . . . . 77
7.13.3. Consumer Protection . . . . . . . . . . . . . . . . 77
7.13.4. Extraordinary Obligations . . . . . . . . . . . . . 77
7.13.5. Future Expenditures . . . . . . . . . . . . . . . . 77
7.14. Environmental Regulations . . . . . . . . . . . . . . . . 77
7.14.1. Environmental Compliance . . . . . . . . . . . . . 77
7.14.2. Environmental Litigation . . . . . . . . . . . . . 78
7.14.3. Hazardous Material . . . . . . . . . . . . . . . . 78
7.14.4. Environmental Condition of Properties . . . . . . . 78
7.15. Pension Plans . . . . . . . . . . . . . . . . . . . . . . 79
7.16. Acquisition Agreement, etc . . . . . . . . . . . . . . . . 79
7.17. Government Regulation; Margin Stock . . . . . . . . . . . 79
7.17.1. Government Regulation . . . . . . . . . . . . . . . 79
7.17.2. Margin Stock . . . . . . . . . . . . . . . . . . . 79
7.18. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 79
8. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
8.1. Events of Default . . . . . . . . . . . . . . . . . . . . 80
8.1.1. Payment . . . . . . . . . . . . . . . . . . . . . . 80
8.1.2. Specified Covenants . . . . . . . . . . . . . . . . 80
8.1.3. Other Covenants . . . . . . . . . . . . . . . . . . 80
8.1.4. Representations and Warranties . . . . . . . . . . . 80
8.1.5. Cross Default, etc. . . . . . . . . . . . . . . . . 80
8.1.6. Ownership; Liquidation; etc. . . . . . . . . . . . . 81
8.1.7. Enforceability, etc. . . . . . . . . . . . . . . . . 81
8.1.8. Judgments . . . . . . . . . . . . . . . . . . . . . 82
8.1.9. ERISA . . . . . . . . . . . . . . . . . . . . . . . 82
8.1.10. Bankruptcy, etc. . . . . . . . . . . . . . . . . . 82
8.2. Certain Actions Following an Event of Default . . . . . . 83
8.2.1. Terminate Obligation to Extend Credit . . . . . . . 83
8.2.2. Specific Performance; Exercise of Rights . . . . . . 83
8.2.3. Acceleration . . . . . . . . . . . . . . . . . . . . 83
8.2.4. Enforcement of Payment; Credit Security; Setoff . . 84
8.2.5. Cumulative Remedies . . . . . . . . . . . . . . . . 84
8.3. Annulment of Defaults . . . . . . . . . . . . . . . . . . 84
8.4. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 84
9. Expenses; Indemnity . . . . . . . . . . . . . . . . . . . . . . . 85
9.1. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 85
9.2. General Indemnity . . . . . . . . . . . . . . . . . . . . 85
9.3. Indemnity With Respect to Letters of Credit . . . . . . . 86
10. Operations; Agent . . . . . . . . . . . . . . . . . . . . . . . . 86
10.1. Interests in Credits . . . . . . . . . . . . . . . . . . . 86
10.2. Agent's Authority to Act, etc . . . . . . . . . . . . . . 86
10.3. Borrower to Pay Agent, etc . . . . . . . . . . . . . . . . 87
10.4. Lender Operations for Advances, Letters of Credit, etc . . 87
10.4.1. Advances . . . . . . . . . . . . . . . . . . . . . 87
10.4.2. Letters of Credit . . . . . . . . . . . . . . . . . 87
10.4.3. Agent to Allocate Payments, etc. . . . . . . . . . 88
10.4.4. Delinquent Lenders; Nonperforming Lenders . . . . . 88
10.5. Sharing of Payments, etc. . . . . . . . . . . . . . . . . 89
10.6. Amendments, Consents, Waivers, etc . . . . . . . . . . . . 89
10.7. Agent's Resignation . . . . . . . . . . . . . . . . . . . 91
10.8. Concerning the Agent . . . . . . . . . . . . . . . . . . . 91
10.8.1. Action in Good Faith, etc . . . . . . . . . . . . . 91
10.8.2. No Implied Duties, etc. . . . . . . . . . . . . . . 91
10.8.3. Validity, etc. . . . . . . . . . . . . . . . . . . 92
10.8.4. Compliance . . . . . . . . . . . . . . . . . . . . 92
10.8.5. Employment of Agents and Counsel . . . . . . . . . 92
10.8.6. Reliance on Documents and Counsel . . . . . . . . . 92
10.8.7. Agent's Reimbursement . . . . . . . . . . . . . . . 93
10.9. Rights as a Lender . . . . . . . . . . . . . . . . . . . . 93
10.10. Independent Credit Decision . . . . . . . . . . . . . . . 93
10.11. Indemnification . . . . . . . . . . . . . . . . . . . . . 94
11. Successors and Assigns; Lender Assignments and Participations . . 94
11.1. Assignments by Lenders . . . . . . . . . . . . . . . . . . 94
11.1.1. Assignees and Assignment Procedures . . . . . . . . 94
11.1.2. Terms of Assignment and Acceptance . . . . . . . . 95
11.1.3. Register . . . . . . . . . . . . . . . . . . . . . 96
11.1.4. Acceptance of Assignment and Assumption . . . . . . 96
11.1.5. Federal Reserve Bank . . . . . . . . . . . . . . . 97
11.1.6. Further Assurances . . . . . . . . . . . . . . . . 97
11.2. Credit Participants . . . . . . . . . . . . . . . . . . . 97
11.3. Replacement of Lender . . . . . . . . . . . . . . . . . . 98
12. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . 99
13. Foreign Lenders . . . . . . . . . . . . . . . . . . . . . . . . 100
14. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
15. Course of Dealing; Amendments and Waivers . . . . . . . . . . . 101
16. No Strict Construction . . . . . . . . . . . . . . . . . . . . . 101
17. Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
18. Venue; Service of Process . . . . . . . . . . . . . . . . . . . 102
19. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . 102
20. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
EXHIBITS
1 - Financial Figures for Periods Prior to Initial Closing Date
2.1.4 - Revolving Note
2.2.2 - Term Loan A Note
2.3.2 - Term Loan B Note
5.1.4 - Guarantee and Security Agreement
5.1.5 - Guarantee and Pledge Agreement
5.2.1 - Officer's Certificate
6.4. - Compliance Certificate
7.1 - Holding Company and its Subsidiaries
7.2.2 - Material Agreements
7.3 - Financing Debt, Certain Investments, etc.
7.14 - Hazardous Material Sites
10.1 - Commitments
11.1.1 - Assignment and Acceptance
SWING-N-SLIDE CORP.
NEWCO, INC.
CREDIT AGREEMENT
This Agreement, dated as of March 13, 1997 is among Newco, Inc., a
Wisconsin corporation, the Subsidiaries of Newco, Inc. from time to time
party hereto, Newco, Inc.'s corporate parent Swing-N-Slide Corp., a
Delaware corporation, the Lenders from time to time party hereto and Fleet
National Bank, both in its capacity as a Lender and in its capacity as
agent for itself and the other Lenders. The parties agree as follows:
Recitals: Pursuant to this Agreement, the Lenders are extending to
the Borrower a $20,000,000 revolving credit facility, including a
$1,000,000 sub-allotment for Letters of Credit, a $45,000,000 Term Loan A
Facility and a $4,500,000 Term Loan B Facility. All the credit facilities
mature on March 13, 2003, except the Term Loan B facility, which matures
on June 30, 2003. The credit facilities are guaranteed by the Holding
Company and the Borrower's Subsidiaries and are secured by liens on
substantially all the assets and stock of the Borrower and its
Subsidiaries. The proceeds of the term loan facility are being used by
the Borrower to acquire Game Time, Inc. on the Initial Closing Date for an
aggregate cash purchase price of approximately $25,000,000, to repay
indebtedness and for general corporate purposes as provided herein.
1. Definitions; Certain Rules of Construction. Certain capitalized
terms are used in this Agreement and in the other Credit Documents with
the specific meanings defined below in this Section 1. Except as
otherwise explicitly specified to the contrary or unless the context
clearly requires otherwise, (a) the capitalized term "Section" refers to
sections of this Agreement, (b) the capitalized term "Exhibit" refers to
exhibits to this Agreement, (c) references to a particular Section include
all subsections thereof, (d) the word "including" shall be construed as
"including without limitation", (e) accounting terms not otherwise defined
herein have the meaning provided under GAAP, (f) references to a
particular statute or regulation include all rules and regulations
thereunder and any successor statute, regulation or rules, in each case as
from time to time in effect, (g) references to a particular Person include
such Person's successors and assigns to the extent not prohibited by this
Agreement and the other Credit Documents and (h) references to "Dollars"
or "$" mean United States Funds. References to "the date hereof" mean the
date first set forth above.
1.1. "Accumulated Benefit Obligations" means the actuarial present
value of the accumulated benefit obligations under any Plan, calculated in
accordance with Statement No. 87 of the Financial Accounting Standards
Board.
1.2. "Acquisition" means the acquisition of all the outstanding
stock of Game Time, Inc. by the Borrower pursuant to the Acquisition
Agreement and the contemporaneous merger of Game Time, Inc. into Borrower.
1.3. "Acquisition Agreement" means the Amended and Restated Stock
Purchase Agreement dated March 13, 1997 among the Borrower, Game Time,
Inc. and the Sellers.
1.4. "Affected Lender" is defined in Section 11.3.
1.5. "Affiliate" means, with respect to the Holding Company (or any
other specified Person), any other Person directly or indirectly
controlling, controlled by or under direct or indirect common control with
the Holding Company (or such specified Person), and shall include (a) any
officer or director or general partner of the Holding Company (or such
specified Person), (b) any Person of which the Holding Company (or such
specified Person) or any Affiliate (as defined in clause (a) above) of the
Holding Company (or such specified Person) shall, directly or indirectly,
beneficially own either (i) at least 10% of the outstanding equity
securities having the general power to vote or (ii) at least 10% of all
equity interests or (c) any Person directly or indirectly controlling the
Holding Company through a management agreement, voting agreement or other
contract.
1.6. "Agent" means Fleet in its capacity as agent for the Lenders
hereunder, as well as its successors and assigns in such capacity pursuant
to Section 10.7.
1.7. "Agreement" means this Credit Agreement as from time to time
amended, modified and in effect.
1.8. "Annualized" means, with respect to Consolidated Interest
Expense (or any other specified item), (a) for periods ending prior to
January 1, 1998 the product of (i) Consolidated Interest Expense (or such
other item) since the Initial Closing Date multiplied by (ii) a fraction,
the numerator of which is 365 and the denominator of which is the number
of days elapsed since the Initial Closing Date; and (b) for periods ending
on or after January 1, 1998, 100% of Consolidated Interest Expense (or
such other item).
1.9. "Applicable Margin" means (a) prior to September 1, 1997, the
highest percentage rate set forth in the table below and (b) on each day
during any month commencing after August 31, 1997, the percentage in the
table below set opposite the ratio of (i) Consolidated Senior Debt as of
the end of the most recent period of four consecutive fiscal quarters for
which financial statements have been (or are required to have been)
furnished to the Lenders in accordance with Sections 6.4.1 and 6.4.2 prior
to the first day of such month to (ii) Consolidated EBITDA for such
period:
Ratio of Consolidated Senior Debt Applicable Base Applicable
to Consolidated EBITDA Rate Margin LIBOR Margin
Greater than or equal to 3.0 1.50% 2.750%
Greater than or equal to 2.75 and
less than 3.0 1.375% 2.625%
Greater than or equal to 2.5 and
less than 2.75 1.25% 2.500%
Greater than or equal to 2.25 and
less than 2.5 1.00% 2.250%
Less than 2.25 0.75% 2.000%
Changes in the Applicable Margin shall occur on the first day of each
month after quarterly financial statements have been (or are required to
have been) furnished to the Lenders in accordance with Sections 6.4.1 or
6.4.2 from time to time. In the event that the financial statements
required to be delivered pursuant to Section 6.4.1 or 6.4.2, as
applicable, are not delivered when due, then during the period from the
date upon which such financial statements were required to be delivered
until the date upon which they are actually delivered, the ratio of
Consolidated Senior Debt to Consolidated EBITDA shall be deemed for
purposes of this definition to be greater than 3.0.
1.10. "Applicable Maturity Date" means (a) with respect to the
Revolving Loan, the Final Revolving Maturity Date, (b) with respect to
Term Loan A, the Final Term Loan A Maturity Date and (c) with respect to
Term Loan B, the Final Term Loan B Maturity Date.
1.11. "Applicable Rate" means, at any date, the sum of:
(a) (i) with respect to each portion of the Revolving Loan
and Term Loan A subject to a LIBOR Pricing Option, the sum of
the Applicable Margin plus the LIBOR Rate with respect to such
LIBOR Pricing Option;
(ii) with respect to each other portion of the Revolving
Loan and Term Loan A, the sum of the Applicable Margin plus
the Base Rate;
(iii) with respect to Term Loan B subject to a LIBOR
Pricing Option, the sum of 3.25% plus the LIBOR Rate with
respect to such LIBOR Pricing Option;
(iv) with respect to each other portion of Term Loan B,
the sum of 2.00% plus the Base Rate;
plus (b) an additional 2% effective on the day the Agent
notifies the Borrower that the interest rates hereunder are
increasing as a result of the occurrence and continuance of an
Event of Default until the earlier of such time as (i) such
Event of Default is no longer continuing or (ii) such Event of
Default is deemed no longer to exist, in each case pursuant to
Section 8.3.
1.12. "Assignee" is defined in Section 11.1.1.
1.13. "Assignment and Acceptance" is defined in Section 11.1.1.
1.14. "Banking Day" means any day other than Saturday, Sunday or a
day on which banks in Boston, Massachusetts are authorized or required by
law or other governmental action to close and, if such term is used with
reference to a LIBOR Pricing Option, any day on which dealings are
effected in Eurodollars in question by first-class banks in the London
inter-bank Eurodollar markets in New York, New York.
1.15. "Bankruptcy Code" means Title 11 of the United States Code.
1.16. "Bankruptcy Default" means an Event of Default referred to in
Section 8.1.10.
1.17. "Base Rate" means, on any date, the greater of (a) the rate of
interest announced by Fleet at the Boston Office as its Prime Rate or (b)
the sum of 1/2% plus the Federal Funds Rate.
1.18. "Borrower" means Newco, Inc., a Wisconsin corporation.
1.19. "Borrowing Base" means, on any date, the sum of:
(a) 80% of Eligible Accounts Receivable arising from the
Swing-N-Slide Division,
plus (b) 85% of Eligible Accounts Receivable arising from the Game
Time Division,
plus (b) the following percentages of Eligible Inventory for the
categories indicated below:
(i) 50% of Eligible Inventory consisting of raw
materials,
(ii) 25% of Eligible Inventory consisting of work-in-
process,
(iii) 50% of Eligible Inventory consisting of finished
goods;
provided, however, that the Borrowing Base shall be reduced to $1.00
during any period when the Holding Company has failed to furnish the
computation of the Borrowing Base required by Section 6.4.4, commencing
five days after such computation was originally due.
1.20. "Boston Office" means the principal banking office of Fleet
in Boston, Massachusetts.
1.21. "By-laws" means all written by-laws, rules, regulations and
all other documents relating to the management, governance or internal
regulation of any Person other than an individual, or interpretive of the
Charter of such Person, all as from time to time in effect.
1.22. "Capital Expenditures" means, for any period, amounts added or
required to be added to the property, plant and equipment or other fixed
assets account on the Consolidated balance sheet of the Borrower (or other
specified Person) and its Subsidiaries, prepared in accordance with GAAP,
in respect of (a) the acquisition, construction, improvement or
replacement of land, buildings, machinery, equipment, leaseholds and any
other real or personal property, (b) to the extent not included in clause
(a) above, materials, contract labor and direct labor relating thereto
(excluding amounts properly expensed as repairs and maintenance in
accordance with GAAP) and (c) software development costs to the extent not
expensed; provided, however, that Capital Expenditures shall not include
amounts added or required to be added as a result of acquisitions of the
stock or substantially all of the assets of another company as a going
concern.
1.23. "Capitalized Lease" means any lease which is required to be
capitalized on the balance sheet of the lessee in accordance with GAAP,
including Statement Nos. 13 and 98 of the Financial Accounting Standards
Board.
1.24. "Capitalized Lease Obligations" means the amount of the
liability reflecting the aggregate discounted amount of future payments
under all Capitalized Leases calculated in accordance with GAAP, including
Statement Nos. 13 and 98 of the Financial Accounting Standards Board.
1.25. "Cash Equivalents" means:
(a) negotiable certificates of deposit, time deposits
(including sweep accounts), demand deposits and bankers' acceptances
having a maturity of nine months or less and issued by any United
States financial institution having capital and surplus and undivided
profits aggregating at least $100,000,000 and rated at least Prime-1
by Moody's or A-1 by S&P or issued by any Lender;
(b) corporate obligations having a maturity of nine months
or less and rated at least Prime-1 by Moody's or A-1 by S&P or issued
by any Lender;
(c) any direct obligation of the United States of America or
any agency or instrumentality thereof, or of any state or
municipality thereof, (i) which has a remaining maturity at the time
of purchase of not more than one year or which is subject to a
repurchase agreement with any Lender (or any other financial
institution referred to in clause (a) above) exercisable within one
year from the time of purchase and (ii) which, in the case of
obligations of any state or municipality, is rated at least AAA by
Moody's or AAA by S&P; and
(d) any mutual fund or other pooled investment vehicle rated
at least Aa by Moody's or AA by S&P which invests principally in
obligations described above.
1.26. "CERCLA" means the federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980.
1.27. "Charter" means the articles of organization, certificate of
incorporation, statute, constitution, joint venture agreement, partnership
agreement, trust indenture, limited liability company agreement or other
charter document of any Person other than an individual, each as from time
to time in effect.
1.28. "Closing Date" means the Initial Closing Date and each other
date on which any extension of credit is made pursuant to Sections 2.1,
2.2, 2.3 or 2.4.
1.29. "Code" means the federal Internal Revenue Code of 1986.
1.30. "Commitment" means, with respect to any Lender, such Lender's
obligations to extend the credits contemplated by Section 2. The original
Commitments are set forth in Exhibit 10.1 and the subsequent Commitments
shall be recorded from time to time in the Register.
1.31. "Computation Covenants" means Sections 6.5, 6.6.7, 6.6.13,
6.9.6, 6.9.7, 6.9.8, 6.9.9, 6.10.3, 6.10.4, 6.10.5, 6.11.1, 6.11.4 and
6.16.
1.32. "Consolidated" and "Consolidating", when used with reference
to any term, mean that term as applied to the accounts of the Borrower (or
other specified Person) and all of its Subsidiaries (or other specified
group of Persons), or such of its Subsidiaries as may be specified,
consolidated (or combined) or consolidating (or combining), as the case
may be, in accordance with GAAP and with appropriate deductions for
minority interests in Subsidiaries.
1.33. "Consolidated Adjusted EBITDA" means, for any period,
Consolidated EBITDA minus Capital Expenditures minus Annualized taxes
based upon or measured by net income (including Distributions to the
Holding Company in respect of taxes permitted by Section 6.10.6, but not
including deferred taxes) to the extent deducted from Consolidated Net
Income used to determine Consolidated EBITDA.
1.34. "Consolidated EBITDA" means, for any period, the total of:
(a) Consolidated Net Income;
(b) all amounts deducted in computing such Consolidated
Net Income in respect of:
(i) depreciation, amortization and other noncash
charges,
(ii) Consolidated Interest Expense,
(iii) taxes based upon or measured by net income
(including Distributions to the Holding Company in respect of
taxes permitted by Section 6.10.6), and
(iv) any extraordinary and nonrecurring losses,
(c) to the extent included in computing such Consolidated
Net Income any extraordinary and nonrecurring gains;
provided, however, that Consolidated EBITDA for periods prior to the
Initial Closing Date shall be the amounts indicated in Exhibit 1.
1.35. "Consolidated Excess Cash Flow" means, for any period, the
total of:
(a) Consolidated EBITDA,
minus (b) Capital Expenditures,
minus (c) taxes based upon or measured by net income that are
actually paid (or to be paid currently) in cash (including
Distributions to the Holding Company in respect of taxes permitted by
Section 6.10.6),
minus (d) Consolidated Fixed Charges (but in no event including
contingent prepayments required by Section 4.3),
minus (e) voluntary prepayments of the Term Notes and other term
Financing Debt of the Borrower and its Subsidiaries (including
Distributions paid to the Holding Company on account of the voluntary
prepayment of its term Financing Debt) permitted by this Agreement,
minus (f) Consolidated Working Capital Factor (if a positive
number),
plus (g) Consolidated Working Capital Factor (if a negative
number); provided, however, that in adding the Consolidated Working
Capital Factor to compute Consolidated Excess Cash Flow, the amount
of the negative Consolidated Working Capital Factor described in this
clause (g) shall be added as if it were a positive number.
In determining Consolidated Excess Cash Flow for the year ending December
31, 1997, the amounts in clauses (a) through (e) above shall be computed
from the Initial Closing Date through the end of such year and the amounts
in clauses (f) and (g) above shall be computed from January 1, 1997
through the end of such year.
1.36. "Consolidated Fixed Charges" means, for any period, the sum
of:
(a) Annualized Consolidated Interest Expense,
plus (b) the aggregate amount of all mandatory scheduled payments
and sinking fund payments with respect to principal paid by the
Borrower and its Subsidiaries in respect of Consolidated Total Debt,
including payments in the nature of principal under Capitalized
Leases and Distributions paid to the Holding Company on account of
mandatory scheduled payments and sinking fund payments with respect
to its Financing Debt, but in no event including contingent
prepayments required by Section 4.3,
plus (c) Annualized mandatory dividends paid or payable by the
Borrower or any of its Subsidiaries to third parties.
1.37. "Consolidated Interest Expense" means, for any period, the
aggregate amount of interest, including commitment fees, payments in the
nature of interest under Capitalized Leases and net payments under
Interest Rate Protection Agreements, accrued by the Borrower and its
Subsidiaries (whether such interest is reflected as an item of expense or
capitalized, but including Distributions paid to the Holding Company on
account of interest on its Financing Debt and excluding PIK Interest and
the amortization of deferred financing charges) in accordance with GAAP on
a Consolidated basis.
1.38. "Consolidated Net Income" means, for any period, the net
income (or loss) of the Borrower and its Subsidiaries, determined in
accordance with GAAP on a Consolidated basis minus the amount of
Distributions paid to the Holding Company pursuant to Sections 6.10.3,
6.10.4 and 6.10.6 and any other Distributions paid to the Holding Company
on account of taxes, interest on Indebtedness, management fees and
corporate overhead expense; provided, however, that Consolidated Net
Income shall not include:
(a) the income (or loss) of any Person accrued prior to the
date such Person becomes a Subsidiary or is merged into or
consolidated with the Borrower or any of its Subsidiaries;
(b) the income (or loss) of any Person (other than a
Subsidiary) in which the Borrower or any of its Subsidiaries has an
ownership interest; provided, however, that (i) Consolidated Net
Income shall include amounts in respect of the income of such Person
when actually received in cash by the Borrower or such Subsidiary in
the form of dividends or similar Distributions and (ii) Consolidated
Net Income shall be reduced by the aggregate amount of all
Investments, regardless of the form thereof, made by the Borrower or
any of its Subsidiaries in such Person for the purpose of funding any
deficit or loss of such Person;
(c) all amounts included in computing such net income (or
loss) in respect of (i) the write-up of any asset on or after
December 31, 1995, including the subsequent amortization or expensing
of the written-up portion of assets on account of the Acquisition or
(ii) the retirement of any Indebtedness or equity at less than face
value after December 31, 1995;
(d) extraordinary and nonrecurring gains;
(e) the income of any Subsidiary to the extent the payment
of such income in the form of a Distribution or repayment of
Indebtedness to the Borrower or a Wholly Owned Subsidiary is not
permitted, whether on account of any Charter or By-law restriction,
any agreement, instrument, deed or lease or any law, statute,
judgment, decree or governmental order, rule or regulation applicable
to such Subsidiary;
(f) any after-tax gains or losses attributable to returned
surplus assets of any Plan;
(g) the write off after the Initial Closing Date of
capitalized financing costs incurred prior to the Initial Closing
Date;
(h) any deferred or other credit representing the excess of
the equity in any Subsidiary of the Borrower at the date of
acquisition thereof over the cost of the Investment in such
Subsidiary;
(i) any restoration to income of any contingency reserve,
except to the extent that provision for such reserve was made out of
income accrued during the same period;
(j) any aggregate net gain (but not any aggregate net loss)
arising from the sale, conversion, exchange or other disposition of
capital assets, including (i) all non-current assets and, without
duplication, (ii) the following, whether or not current: (A) fixed
assets, whether tangible or intangible, (B) all inventory sold in
conjunction with the disposition of fixed assets and (C) all shares
of capital stock or other securities;
(k) any net gain from the collection of any proceeds of life
insurance policies;
(l) any gain arising from the acquisition of any shares of
capital stock or other securities, or the extinguishment, under GAAP,
of any Indebtedness, of the Borrower or any Subsidiary of the
Borrower;
(m) any net income or gain (but not any net loss) from (i)
any change in accounting principles in accordance with GAAP, (ii) any
prior period adjustments resulting from any change in accounting
principles in accordance with GAAP and (iii) any discontinued
operations or the disposition thereof;
(n) any portion of Consolidated Net Income that cannot be
freely converted into United States Funds; and
(o) any other non-cash gain included in Consolidated Net
Income.
1.39. "Consolidated Net Worth" means, at any date, the total of:
(a) stockholders' equity of the Borrower and its
Subsidiaries determined in accordance with GAAP on a Consolidated
basis, excluding the effect of any foreign currency translation
adjustments;
minus (b) the amount by which such stockholders' equity has been
increased after December 31, 1995 by the items described in clauses
(a) through (o) of the definition of Consolidated Net Income or by
goodwill.
1.40. "Consolidated Rental Obligations" shall mean, for any period,
all rents and other amounts (including as such amounts all payments which
such Person is obligated to make to the lessor on termination of any lease
and/or on surrender of the leased property other than payments for which
such Person is contingently liable on account of early termination or
breach of such lease) paid, payable or guaranteed during such period by
the Borrower and its Subsidiaries on a Consolidated basis, as lessee or
sublessee under any lease (other than a Capitalized Lease), excluding any
amount required to be paid by such Person (whether or not designated as
rents or additional rents) on account of maintenance, repairs, insurance,
taxes, utilities and similar charges, determined in accordance with GAAP.
Whenever the amount of Consolidated Rental Obligations are determined for
any period, to the extent that such Consolidated Rental Obligations are
not definitely determinable by the terms of the lease, the Consolidated
Rental Obligations not so definitely determinable shall be estimated in
good faith and in such reasonable manner as the board of directors of the
Holding Company may determine (as evidenced by a certified resolution of
such board of directors promptly delivered to the Agent).
1.41. "Consolidated Senior Debt" means, at any date, Consolidated
Total Debt minus the Seller Subordinated Debt minus the Senior
Subordinated Notes.
1.42. "Consolidated Total Debt" means, at any date, all Financing
Debt of the Borrower and its Subsidiaries on a Consolidated basis.
1.43. "Consolidated Working Capital Factor" means, for any period,
the amount (whether positive or negative) equal to:
Current Assets
(a) Accounts Receivable:
(i) the amount, if any, by which accounts receivable
at the end of such period were greater than accounts
receivable at the beginning of such period,
minus (ii) the amount, if any, by which accounts receivable
at the end of such period were less than accounts
receivable at the beginning of such period,
(b) Inventory:
plus (i) the amount, if any, by which inventory at the end
of such period was greater than inventory at the
beginning of such period,
minus (ii) the amount, if any, by which inventory at the end
of such period was less than inventory at the
beginning of such period,
(c) Prepaid Expenses:
plus (i) the amount, if any, by which prepaid expenses at
the end of such period were greater than prepaid
expenses at the beginning of such period,
minus (ii) the amount, if any, by which prepaid expenses at
the end of such period were less than prepaid expenses
at the beginning of such period,
Current Liabilities
(d) Accounts Payable:
plus (i) the amount, if any, by which accounts payable at
the end of such period were less than accounts payable
at the beginning of such period,
minus (ii) the amount, if any, by which accounts payable at
the end of such period were greater than accounts
payable at the beginning of such period,
(e) Accrued Expenses
plus (i) the amount, if any, by which accrued expenses at
the end of such period were less than accrued expenses
at the beginning of such period,
minus (ii) the amount, if any, by which accrued expenses at
the end of such period were greater than accrued
expenses at the beginning of such period,
all with respect to the Borrower and its Subsidiaries as determined in
accordance with GAAP on a Consolidated basis.
1.44. "Convertible Subordinated Debentures" means the Holding
Company's 10% Convertible Subordinated Debentures due 2004 issued (a) in
1995 to GreenGrass Holdings in an original aggregate principal amount of
$4,300,000 and (b) in 1997 to other stockholders of the Holding Company in
an original aggregate principal amount not exceeding $3,300,000 in form
identical (except for the conversion price) to the Convertible
Subordinated Debentures described in the foregoing clause (a).
1.45. "Credit Documents" means:
(a) this Agreement, the Notes, each Letter of Credit, each
draft presented or accepted under a Letter of Credit, the Guarantee
and Security Agreement, the Guarantee and Pledge Agreement, the fee
agreement contemplated by Section 5.1.2 and each Interest Rate
Protection Agreement provided by a Lender (or an Affiliate of a
Lender) to the Holding Company or any of its Subsidiaries, each as
from time to time in effect; and
(b) any other present or future agreement or instrument from
time to time entered into among the Holding Company, any of its
Subsidiaries or any other Obligor, on one hand, and the Agent, any
Letter of Credit Issuer or all the Lenders, on the other hand,
relating to, amending or modifying this Agreement or any other Credit
Document referred to above or which is stated to be a Credit
Document, each as from time to time in effect.
1.46. "Credit Obligations" means all present and future liabilities,
obligations and Indebtedness of the Holding Company, the Borrower, any of
its Subsidiaries or any other Obligor owing to the Agent or any Lender (or
any Affiliate of a Lender) under or in connection with this Agreement or
any other Credit Document, including obligations in respect of principal,
interest, reimbursement obligations under Letters of Credit and Interest
Rate Protection Agreements provided by a Lender (or an Affiliate of a
Lender), commitment fees, Letter of Credit fees, amounts provided for in
Sections 3.2.4, 3.5 and 9 and other fees, charges, indemnities and
expenses from time to time owing hereunder or under any other Credit
Document (whether accruing before or after a Bankruptcy Default).
1.47. "Credit Participant" is defined in Section 11.2.
1.48. "Credit Security" means all assets now or from time to time
hereafter subjected to a security interest, mortgage or charge (or
intended or required so to be subjected pursuant to the Guarantee and
Security Agreement, the Guarantee and Pledge Agreement or any other Credit
Document) to secure the payment or performance of any of the Credit
Obligations on a pari passu basis, including the assets described in
section 3.1 of the Guarantee and the Security Agreement and in section 3.1
of the Guarantee and Pledge Agreement.
1.49. "Default" means any Event of Default and any event or
condition which with the passage of time or giving of notice, or both,
would become an Event of Default and the filing against the Holding
Company, any of its Subsidiaries or any other Obligor of a petition
commencing an involuntary case under the Bankruptcy Code.
1.50. "Delinquency Period" is defined in Section 10.4.4.
1.51. "Delinquent Lender" is defined in Section 10.4.4.
1.52. "Delinquent Payment" is defined in Section 10.4.4.
1.53. "Designated Financing Debt" means Financing Debt incurred by
the Holding Company or any of its Subsidiaries after the Initial Closing
Date other than Financing Debt permitted by Sections 6.6.1 (the Loan),
6.6.7 (purchase money Indebtedness and Capitalized Leases) and 6.6.9
(intercompany Indebtedness).
1.54. "Distribution" means, with respect to the Holding Company (or
other specified Person):
(a) the declaration or payment of any dividend or
distribution on or in respect of any shares of any class of capital
stock of or other equity interests in the Holding Company (or such
specified Person);
(b) the purchase, redemption or other retirement of any
shares of any class of capital stock of or other equity interest in
the Holding Company (or such specified Person) or of options,
warrants or other rights for the purchase of such shares, directly,
indirectly through a Subsidiary or otherwise;
(c) any other distribution on or in respect of any shares of
any class of capital stock of or equity or other beneficial interest
in the Holding Company (or such specified Person);
(d) any payment of principal or interest with respect to, or
any purchase, redemption or defeasance of, any Financing Debt of the
Holding Company (or such specified Person) which by its terms or the
terms of any agreement is subordinated to the payment of the Credit
Obligations; and
(e) any payment, loan or advance by the Holding Company (or
such specified Person) to, or any other Investment by the Holding
Company (or such specified Person) in, the holder of any shares of
any class of capital stock of or equity interest in the Holding
Company (or such specified Person), or any Affiliate of such holder
(including the payment of management and transaction fees and
expenses);
provided, however, that the term "Distribution" shall not include (i)
dividends payable in perpetual common stock of or other similar equity
interests in the Holding Company (or such specified Person) or (ii)
payments in the ordinary course of business in respect of (A) reasonable
compensation paid to employees, officers and directors, (B) advances and
reimbursements to employees for travel expenses, drawing accounts and
similar expenditures, or (C) rent paid to, or accounts payable for
services rendered or goods sold by, non-Affiliates that own capital stock
of or other equity interests in the Holding Company (or such specified
Person).
1.55. "Eligible Accounts Receivable" means, at any date, the
remainder of:
(a) the aggregate amount carried as accounts receivable
(reduced appropriately for doubtful accounts and customer returns) on
the most recent borrowing base report of the Borrower and its
Subsidiaries delivered in accordance with Section 6.4.4,
minus (b) the aggregate amount of any such accounts receivable that
are unpaid more than 60 days past the due date or 150 days past the
date of the original invoice,
minus (c) discounts, commissions and distribution fees payable by
the Borrower or any Subsidiary (other than to the Borrower or a
Wholly Owned Subsidiary) in respect of such accounts receivable,
minus (d) the amount of such accounts receivable due from
Affiliates,
minus (e) all payments under such accounts receivable to be made in
a currency other than United States Funds that is not freely
convertible into United States Funds or that may not be freely
withdrawn from the country of origin,
minus (f) all payments under such accounts receivable due from a
Person located outside the United States of America and Canada,
unless supported by receivables insurance reasonably satisfactory to
the Agent or by an irrevocable letter of credit issued by a United
States bank.
minus (g) accounts receivable subject to Liens other than Liens
securing the Credit Obligations,
minus (h) the aggregate amount of any such accounts receivable that
are unpaid more than 90 days past the date of the original invoice to
the extent such accounts receivable exceed 50% of Eligible Accounts
Receivable,
minus (i) all such accounts receivable due from any Person and its
Affiliates in the event at least 25% of such accounts receivable due
from such Person and its Affiliates are unpaid more than 60 days past
the due date or 150 days past the date of the original invoice,
minus (j) in the case only of such accounts receivable from the
Swing-N-Slide Division, accrued advertising and volume rebates in
respect of such accounts receivable.
1.56. "Eligible Inventory" means, at any date, the remainder of:
(a) the aggregate amount carried as inventory, at the lower
of cost or market value, on the most recent borrowing base report of
the Borrower and its Subsidiaries delivered in accordance with
Section 6.4.4,
minus (b) advance payments from customers reflected on the
Consolidated balance sheet of the Borrower and its Subsidiaries,
minus (c) inventory subject to Liens other than Liens securing the
Credit Obligations,
minus (d) inventory located outside the United States of America,
minus (e) inventory for consignment sale,
minus (f) obsolete and damaged inventory to the extent not
previously covered by reserves on the Consolidated balance sheet of
the Borrower and its Subsidiaries,
minus (g) packaging supplies included in such inventory,
minus (h) inventory that has been carried on the Consolidated
balance sheet of the Borrower and its Subsidiaries for more than one
year,
minus (i) inventory in transit between locations,
minus (j) inventory not covered by a perfected, first priority Lien
securing the Credit Obligations.
1.57. "Environmental Laws" means all applicable federal, state or
local statutes, laws, ordinances, codes, rules, regulations and guidelines
(including consent decrees and administrative orders) relating to public
health and safety and protection of the environment, including OSHA.
1.58. "Equity Transaction" means any issuance by the Holding Company
or any of its Subsidiaries after the Initial Closing Date of any shares of
its capital stock, other equity interests or options, warrants or other
purchase rights to acquire such capital stock or other equity interests
to, or receipt of a capital contribution from, any Person other than:
(a) any Obligors,
(b) the officers, employees and directors of the Holding
Company, the Borrower or any of the Borrower's Subsidiaries,
(c) GreenGrass Holdings and its Affiliates and investors in
funds managed by Glencoe, but only to the extent:
(i) funds invested pursuant to this clause (c) in the
Holding Company are used for the purpose of acquiring shares
held by minority stockholders of the Holding Company (but in
no event including GreenGrass Holdings and such Affiliates and
investors) and
(ii) funds invested pursuant to this clause (c) in the
Borrower and its Subsidiaries are not made directly or
indirectly to remedy a Default or in anticipation of a
Default,
(d) any other purchaser of capital stock of the Holding
Company, but only to the extent the funds invested pursuant to this
clause (d) are used to make an acquisition approved in writing by the
Required Lenders,
(e) minority stockholders of the Holding Company (but in no
event including GreenGrass Holdings and its Affiliates and such
investors), the proceeds of which are applied directly to the
repayment of the Subordinated Bridge Notes, and
(f) the holders of Subordinated Bridge Notes in payment of
principal of and accrued interest on such notes through the issuance
of common stock.
1.59. "ERISA" means the federal Employee Retirement Income Security
Act of 1974.
1.60. "ERISA Group Person" means the Holding Company, any Subsidiary
of the Holding Company and any Person which is a member of the controlled
group or under common control with the Holding Company or any Subsidiary
within the meaning of section 414 of the Code or section 4001(a)(14) of
ERISA.
1.61. "Eurodollars" means, with respect to any Lender, deposits of
United States Funds in a non-United States office or an international
banking facility of such Lender.
1.62. "Event of Default" is defined in Section 8.1.
1.63. "Exchange Act" means the federal Securities Exchange Act of
1934.
1.64. "Federal Funds Rate" means, for any day, the rate equal to the
weighted average (rounded upward to the nearest 1/8%) of (a) the rates on
overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, (a) as such weighted average is
published for such day (or, if such day is not a Banking Day, for the
immediately preceding Banking Day) by the Federal Reserve Bank of New York
or (b) if such rate is not so published for such Banking Day, quotations
received by the Agent from three federal funds brokers of recognized
standing selected by the Agent. Each determination by the Agent of the
Federal Funds Rate shall, in the absence of manifest error, be conclusive.
1.65. "Final Revolving Maturity Date" means March 13, 2003.
1.66. "Final Term Loan A Maturity Date" means March 13, 2003.
1.67. "Final Term Loan B Maturity Date" means June 30, 2003.
1.68. "Financial Officer" of the Holding Company (or other specified
Person) means its chief executive officer, chief financial officer, chief
operating officer, chairman, president, treasurer or any of its vice
presidents whose primary responsibility is for its financial affairs, all
of whose incumbency and signatures have been certified to the Agent by the
secretary or other appropriate attesting officer of the Holding Company
(or such specified Person).
1.69. "Financing Debt" means each of the items described in clauses
(a) through (f) of the definition of the term "Indebtedness" and, without
duplication, any Guarantees of such items.
1.70. "Fleet" means Fleet National Bank.
1.71. "Funding Liability" means (a) any Eurodollar deposit which was
used (or deemed by Section 3.2.6 to have been used) to fund any portion of
the Loan subject to a LIBOR Pricing Option, and (b) any portion of the
Loan subject to a LIBOR Pricing Option funded (or deemed by Section 3.2.6
to have been funded) with the proceeds of any such Eurodollar deposit.
1.72. "GAAP" means generally accepted accounting principles as from
time to time in effect, including the statements and interpretations of
the United States Financial Accounting Standards Board; provided, however,
that for purposes of compliance with Section 6 (other than Section 6.4)
and the related definitions, "GAAP" means such principles as in effect on
December 31, 1995 as applied by the Borrower and its Subsidiaries in the
preparation of the most recent annual statements referred to in
Section 7.2.1(a), and consistently followed, without giving effect to any
subsequent changes thereto.
1.73. "Game Time Division" means the operating division of the
Borrower that conducts primarily only the business conducted by Game Time,
Inc. prior to the Acquisition and other activities relating thereto.
1.74. "Glencoe" means Glencoe Investment Corporation, a Delaware
corporation.
1.75. "GreenGrass Holdings" means GreenGrass Holdings, a Delaware
general partnership, between GreenGrass Management LLC and GreenGrass
Capital LLC and Greengrass Capital II, LLC.
1.76. "Guarantee" means, with respect to the Holding Company (or
other specified Person):
(a) any guarantee by the Holding Company (or such specified
Person) of the payment or performance of, or any contingent
obligation by the Holding Company (or such specified Person) in
respect of, any Indebtedness or other obligation of any primary
obligor;
(b) any other arrangement whereby credit is extended to a
primary obligor on the basis of any promise or undertaking of the
Holding Company (or such specified Person), including any binding
"comfort letter" or "keep well agreement" written by the Holding
Company (or such specified Person), to a creditor or prospective
creditor of such primary obligor, to (i) pay the Indebtedness of such
primary obligor, (ii) purchase an obligation owed by such primary
obligor, (iii) pay for the purchase or lease of assets or services
regardless of the actual delivery thereof or (iv) maintain the
capital, working capital, solvency or general financial condition of
such primary obligor;
(c) any liability of the Holding Company (or such specified
Person), as a general partner of a partnership in respect of
Indebtedness or other obligations of such partnership;
(d) any liability of the Holding Company (or such specified
Person) as a joint venturer of a joint venture in respect of
Indebtedness or other obligations of such joint venture;
(e) any liability of the Holding Company (or such specified
Person) with respect to the tax liability of others as a member of a
group (other than a group consisting solely of the Holding Company
and its Subsidiaries) that is consolidated for tax purposes; and
(f) reimbursement obligations, whether contingent or
matured, of the Holding Company (or such specified Person) with
respect to letters of credit, bankers acceptances, surety bonds,
other financial guarantees and Interest Rate Protection Agreements,
in each case whether or not any of the foregoing are reflected on the
balance sheet of the Holding Company (or such specified Person) or in a
footnote thereto; provided, however, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business. The amount of any Guarantee and the amount of Indebtedness
resulting from such Guarantee shall be the maximum amount that the
guarantor may become obligated to pay in respect of the obligations
(whether or not such obligations are outstanding at the time of
computation).
1.77. "Guarantee and Security Agreement" is defined in Section
5.1.4.
1.78. "Guarantee and Pledge Agreement" is defined in Section 5.1.5.
1.79. "Guarantor" means the Holding Company and each Subsidiary
party to, or which subsequently becomes party to, the Guarantee and
Security Agreement as a Guarantor.
1.80. "Hazardous Material" means any pollutant, toxic or hazardous
material or waste, including any "hazardous substance" or "pollutant" or
"contaminant" as defined in section 101(14) of CERCLA or any other
Environmental Law or regulated as toxic or hazardous under RCRA or any
other Environmental Law.
1.81. "Holding Company" means Swing-N-Slide Corp., a Delaware
corporation.
1.82. "Indebtedness" means all obligations, contingent or otherwise,
which in accordance with GAAP are required to be classified upon the
balance sheet of the Holding Company (or other specified Person) as
liabilities, but in any event including (without duplication):
(a) borrowed money;
(b) indebtedness evidenced by notes, debentures or similar
instruments;
(c) Capitalized Lease Obligations;
(d) the deferred purchase price of assets or securities,
including related noncompetition, consulting and stock repurchase
obligations (other than ordinary trade accounts payable within six
months after the incurrence thereof in the ordinary course of
business);
(e) mandatory redemption or dividend rights on capital stock
(or other equity);
(f) reimbursement obligations, whether contingent or
matured, with respect to letters of credit, bankers acceptances,
surety bonds, other financial guarantees and Interest Rate Protection
Agreements (without duplication of other Indebtedness supported or
guaranteed thereby);
(g) unfunded pension liabilities;
(h) obligations that are immediately and directly due and
payable out of the proceeds of or production from property;
(i) liabilities secured by any Lien existing on property
owned or acquired by the Holding Company (or such specified Person),
whether or not the liability secured thereby shall have been assumed;
and
(j) all Guarantees in respect of Indebtedness of others.
1.83. "Indemnified Party" is defined in Section 9.2.
1.84. "Initial Closing Date" means March 13, 1997 or such other date
prior to March 31, 1997 agreed to by the Holding Company and the Agent as
the first Closing Date hereunder.
1.85. "Interest Rate Protection Agreement" means any interest rate
swap, interest rate cap, interest rate hedge or other contractual
arrangement that converts variable interest rates into fixed interest
rates, fixed interest rates into variable interest rates or other similar
arrangements.
1.86. "Investment" means, with respect to the Holding Company (or
other specified Person):
(a) any share of capital stock, partnership or other equity
interest, evidence of Indebtedness or other security issued by any
other Person;
(b) any loan, advance or extension of credit to, or
contribution to the capital of, any other Person;
(c) any Guarantee of the Indebtedness of any other Person;
(d) any acquisition of all, or any division or similar
operating unit of, the business of any other Person or the assets
comprising such business, division or unit; and
(e) any other similar investment.
The investments described in the foregoing clauses (a) through (e)
shall be included in the term "Investment" whether they are made or
acquired by purchase, exchange, issuance of stock or other securities,
merger, reorganization or any other method; provided, however, that the
term "Investment" shall not include (i) trade and customer accounts and
notes receivable for property leased, goods furnished or services rendered
in the ordinary course of business and payable on a current basis in
accordance with customary trade terms, (ii) deposits, advances or
prepayments to suppliers for property leased or licensed, goods furnished
and services rendered in the ordinary course of business, (iii) advances
to employees for relocation and travel expenses, drawing accounts and
similar expenditures, (iv) stock or other securities acquired in
connection with the satisfaction or enforcement of Indebtedness or claims
due to the Holding Company (or such specified Person) or as security for
any such Indebtedness or claim or (v) demand deposits in banks or similar
financial institutions.
In determining the amount of outstanding Investments:
(A) the amount of any Investment shall be the cost thereof
minus any returns of capital in cash on such Investment (determined
in accordance with GAAP without regard to amounts realized as income
on such Investment);
(B) the amount of any Investment in respect of a purchase
described in clause (d) above shall include the amount of any
Financing Debt assumed in connection with such purchase or secured by
any asset acquired in such purchase (whether or not any Financing
Debt is assumed) or for which any Person that becomes a Subsidiary is
liable on the date on which the securities of such Person are
acquired; and
(C) no Investment shall be increased as the result of an
increase in the undistributed retained earnings of the Person in
which the Investment was made or decreased as a result of an equity
interest in the losses of such Person.
1.87. "Legal Requirement" means any present or future requirement
imposed upon any of the Lenders or the Holding Company and its
Subsidiaries by any law, statute, rule, regulation, directive, order,
decree or guideline (or any interpretation thereof by courts or of
administrative bodies) of the United States of America, or any
jurisdiction in which any LIBOR Office is located or any state or
political subdivision of any of the foregoing, or by any board,
governmental or administrative agency, central bank or monetary authority
of the United States of America, any jurisdiction in which any LIBOR
Office is located, or any political subdivision of any of the foregoing.
1.88. "Lender" means each of the Persons listed as lenders on the
signature page hereto, including Fleet in its capacity as a Lender and
such other Persons who may from time to time own a Percentage Interest in
the Credit Obligations, but the term "Lender" shall not include any Credit
Participant.
1.89. "Lending Officer" means such individuals whom the Agent may
designate by notice to the Holding Company from time to time as an officer
who may receive telephone requests for borrowings under Section 2.1.3.
1.90. "Letter of Credit" is defined in Section 2.4.1.
1.91. "Letter of Credit Exposure" means, at any date, the sum of (a)
the aggregate face amount of all drafts that may then or thereafter be
presented by beneficiaries under all Letters of Credit then outstanding,
plus (b) the aggregate face amount of all drafts that the Letter of Credit
Issuer has previously accepted under Letters of Credit but has not paid.
1.92. "Letter of Credit Issuer" means, for any Letter of Credit,
Fleet or, in the event Fleet does not for any reason issue a requested
Letter of Credit, another Lender designated by the Agent to issue such
Letter of Credit.
1.93. "LIBOR Basic Rate" means, for any LIBOR Interest Period:
(a) the rate of interest at which deposits of United States
Funds are offered in the London interbank market for a period of time
equal to such LIBOR Interest Period that appears on the Telerate Page
3750 as of 11:00 a.m. London time two Banking Days prior to the
Banking Day on which such LIBOR Interest Period begins or
(b) if no such rate appears on the Telerate Page 3750, the
rate of interest determined by the Agent to be the average of up to
four interest rates per annum at which deposits of United States
Funds are offered in the London interbank market for a period of time
equal to such LIBOR Interest Period which appear on the Reuter's
Screen LIBO Page as of 11:00 a.m. London time two Banking Days prior
to the Banking Day on which such LIBOR Interest Period begins if at
least two such offered rates so appear on the Reuter's Screen LIBO
Page or
(c) if no such rate appears on the Telerate Page 3750 and
fewer than two offered rates appear on the Reuter's Screen LIBO Page,
the rate of interest at which deposits of United States Funds in an
amount comparable to the portion of the Loan as to which the related
LIBOR Pricing Option has been elected and which have a term
corresponding to such LIBOR Interest Period are offered to the Agent
by first class banks in the London inter-bank market for delivery in
immediately available funds at a LIBOR Office on the first day of
such LIBOR Interest Period as determined by the Agent at
approximately 11:00 a.m. (London time) two Banking Days prior to the
date upon which such LIBOR Interest Period is to commence (which
determination by the Agent shall, in the absence of manifest error,
be conclusive).
1.94. "LIBOR Interest Period" means any period, selected as provided
in Section 3.2.1, of one, two, three or six months, commencing on any
Banking Day and ending on the corresponding date in the subsequent
calendar month so indicated (or, if such subsequent calendar month has no
corresponding date, on the last day of such subsequent calendar month);
provided, however, that subject to Section 3.2.3, if any LIBOR Interest
Period so selected would otherwise begin or end on a date which is not a
Banking Day, such LIBOR Interest Period shall instead begin or end, as the
case may be, on the immediately preceding or succeeding Banking Day as
determined by the Agent in accordance with the then current banking
practice in the inter-bank LIBOR market with respect to LIBOR deposits at
the applicable LIBOR Office, which determination by the Agent shall, in
the absence of manifest error, be conclusive.
1.95. "LIBOR Office" means such non-United States office or
international banking facility of any Lender as the Lender may from time
to time select.
1.96. "LIBOR Pricing Options" means the options granted pursuant to
Section 3.2.1 to have the interest on any portion of the Loan computed on
the basis of a LIBOR Rate.
1.97. "LIBOR Rate" for any LIBOR Interest Period means the rate,
rounded upward to the nearest 1/100%, obtained by dividing (a) the LIBOR
Basic Rate for such LIBOR Interest Period by (b) an amount equal to 1
minus the LIBOR Reserve Rate; provided, however, that if at any time
during such LIBOR Interest Period the LIBOR Reserve Rate applicable to any
outstanding LIBOR Pricing Option changes, the LIBOR Rate for such LIBOR
Interest Period shall automatically be adjusted to reflect such change,
effective as of the date of such change to the extent required by the
Legal Requirement implementing such change.
1.98. "LIBOR Reserve Rate" means the stated maximum rate (expressed
as a decimal) of all reserves (including any basic, supplemental, marginal
or emergency reserve or any reserve asset), if any, as from time to time
in effect, required by any Legal Requirement to be maintained by any
Lender against (a) "Eurocurrency liabilities" as specified in Regulation D
of the Board of Governors of the Federal Reserve System applicable to
LIBOR Pricing Options, (b) any other category of liabilities that includes
LIBOR deposits by reference to which the interest rate on portions of the
Loan subject to LIBOR Pricing Options is determined, (c) the principal
amount of or interest on any portion of the Loan subject to a LIBOR
Pricing Option or (d) any other category of extensions of credit, or other
assets, that includes loans subject to a LIBOR Pricing Option by a
non-United States office of any of the Lenders to United States residents.
1.99. "Lien" means, with respect to the Holding Company (or any
other specified Person):
(a) any lien, encumbrance, mortgage, pledge, charge or
security interest of any kind upon any property or assets of the
Holding Company (or such specified Person), whether now owned or
hereafter acquired, or upon the income or profits therefrom;
(b) the acquisition of, or the agreement to acquire, any
property or asset upon conditional sale or subject to any other title
retention agreement, device or arrangement (including a Capitalized
Lease);
(c) the sale, assignment, pledge or transfer for security of
any accounts, general intangibles or chattel paper of the Holding
Company (or such specified Person), with or without recourse;
(d) the transfer of any tangible property or assets for the
purpose of subjecting such items to the payment of previously
outstanding Indebtedness in priority to payment of the general
creditors of the Holding Company (or such specified Person); and
(e) the existence for a period of more than 120 consecutive
days of any Indebtedness against the Holding Company (or such
specified Person) which if unpaid would by law or upon a Bankruptcy
Default be given any priority over general creditors.
1.100. "Loan" means, collectively, the Revolving Loan and the Term
Loans.
1.101. "Margin Stock" means "margin stock" within the meaning of
Regulations G, T, U or X of the Board of Governors of the Federal Reserve
System.
1.102. "Material Adverse Change" means, since any specified date or
from the circumstances existing immediately prior to the happening of any
specified event, a material adverse change in (a) the business, assets,
financial condition, income or prospects of the Holding Company and its
Subsidiaries (on a Consolidated basis), whether as a result of (i) general
economic conditions affecting the playground equipment industry, (ii)
difficulties in obtaining supplies and raw materials, (iii) fire, flood or
other natural calamities, (iv) environmental pollution, (v) regulatory
changes, judicial decisions, war or other governmental action or (vi) any
other event or development, whether or not related to those enumerated
above or (b) the ability of the Obligors to perform their obligations
under the Credit Documents or (c) the rights and remedies of the Agent and
the Lenders under the Credit Documents.
1.103. "Material Agreements" is defined in Section 7.2.2.
1.104. "Maximum Amount of Revolving Credit" is defined in Section
2.1.2.
1.105. "Moody's" means Moody's Investors Service, Inc.
1.106. "Multiemployer Plan" means any Plan that is a "multiemployer
plan" as defined in section 4001(a)(3) of ERISA.
1.107. "Net Asset Sale Proceeds" means the cash proceeds of the sale
or disposition of assets (including by way of merger) by the Borrower or
any of its Subsidiaries after the Initial Closing Date, net of (a) any
Indebtedness permitted by Section 6.6.7 (Capitalized Leases and purchase
money indebtedness) secured by assets being sold in such transaction
required to be paid from such proceeds, (b) income taxes that, as
estimated by the Borrower in good faith, will be required to be paid by
the Borrower or any of its Subsidiaries in cash as a result of, and within
15 months after, such sale or disposition, (c) reasonable reserves for
liabilities resulting from the sale of assets and (d) all reasonable
expenses of the Borrower or any of its Subsidiaries payable in connection
with the sale or disposition; provided, however, that "Net Asset Sale
Proceeds" shall not include cash proceeds:
(i) of asset sales permitted by Section 6.11.1,
(ii) of mergers permitted by Section 6.11.2, or
(iii) in an amount not exceeding $1,000,000 in any fiscal
year in the aggregate (or $3,000,000 in the aggregate since the
date hereof) that will be used to acquire replacement or other
assets within six months after such sale or disposition; provided,
however, that if any amount in this clause (iii) is not actually
used to acquire replacement or other assets within such six-month
period, such amount shall become Net Asset Sale Proceeds.
1.108. "Net Debt Proceeds" means cash proceeds of the incurrence of
Designated Financing Debt by the Holding Company or any of its
Subsidiaries (net of reasonable out-of-pocket transaction fees and
expenses).
1.109. "Net Equity Proceeds" means the cash proceeds received by the
Holding Company or any of its Subsidiaries in connection with any Equity
Transaction (net of reasonable out-of-pocket fees and expenses).
1.110. "Nonperforming Lender" is defined in Section 10.4.4.
1.111. "Notes" means, collectively, the Revolving Notes and the Term
Notes.
1.112. "Obligor" means the Borrower, the Holding Company, each other
Guarantor and each other Person guaranteeing or providing collateral for
the Credit Obligations.
1.113. "Offering Memorandum" is defined in Section 7.2.1.
1.114. "OSHA" means the federal Occupational Health and Safety Act.
1.115. "Overdue Reimbursement Rate" means, at any date, the highest
Applicable Rate then in effect.
1.116. "Payment Date" means (a) the last Banking Day of each month,
beginning on the first such date after the Initial Closing Date and (b)
the Final Maturity Date.
1.117. "PBGC" means the Pension Benefit Guaranty Corporation or any
successor entity.
1.118. "Percentage Interest" means, with respect to any Lender, the
Commitment of such Lender in the respective portions of the Loan and
Letter of Credit Exposure. For purposes of votes and consents of the
Lenders, Percentage Interests shall be computed as follows: (a) at all
times when no Event of Default under Section 8.1.1 and no Bankruptcy
Default exists, the ratio that the respective Commitments of any Lender
with respect to the Revolving Loan plus the respective outstanding Term
Loans of such Lender bears to the total Commitments of all Lenders with
respect to the Revolving Loan plus the total outstanding Term Loans of all
Lenders, as from time to time in effect and reflected in the Register, and
(b) at all other times, the ratio that the respective amounts of the Loan
and Letter of Credit Exposure owing to any Lender bear to the total
outstanding Loan and Letter of Credit Exposure owing to all Lenders.
1.119. "Performing Lender" is defined in Section 10.4.4.
1.120. "Person" means any present or future natural person or any
corporation, association, partnership, joint venture, limited liability,
joint stock or other company, business trust, trust, organization,
business or government or any governmental agency or political subdivision
thereof.
1.121. "PIK Interest" means any accrued interest payments on
Financing Debt that are postponed or made through the issuance of
"payment-in-kind" notes or other similar securities (including book-entry
accrual with respect to such postponed interest payments), all in
accordance with the terms of such Financing Debt; provided, however, that
in no event shall PIK Interest include payments made with cash or Cash
Equivalents.
1.122. "Plan" means any pension benefit plan subject to Title IV of
ERISA maintained, or to which contributions have been made or are required
to be made, by any ERISA Group Person within six years prior to the date
hereof.
1.123. "Prior Credit Agreements" means:
(a) the credit agreement between the Borrower and certain
lenders party thereto, including The First National Bank of Chicago,
as agent, dated as of January 19, 1995, as in effect on the Initial
Closing Date,
(b) the restated revolving credit agreement between Game Time,
Inc. and LaSalle National Bank dated as of May 1, 1990, as in effect
on the Initial Closing Date,
(c) Mortgage and Indenture of Trust dated as of August 1, 1989
by the Industrial Development Board of Fort Payne, Alabama to LaSalle
National Bank and William C. Vonder Heide and the related industrial
development bonds, and
(d) Lease dated on or about January 23, 1996 between Game Time,
Inc., as lessee, and Softech Financial, a division of Bankers Leasing
Association, Inc., as lessor.
1.124. "RCRA" means the federal Resource Conservation and Recovery
Act, 42 U.S.C. Section 690, et seq.
1.125. "Register" is defined in Section 11.1.3.
1.126. "Replacement Lender" is defined in Section 11.3.
1.127. "Required Lenders" means, with respect to any approval,
consent, modification, waiver or other action to be taken by the Agent or
the Lenders under the Credit Documents which require action by the
Required Lenders, such Lenders as own at least a majority of the
Percentage Interests; provided, however, that with respect to any matters
referred to in the proviso to Section 10.6, Required Lenders means such
Lenders as own at least the respective portions of the Percentage
Interests required by Section 10.6.
1.128. "Revolving Loan" is defined in Section 2.1.4.
1.129. "Revolving Notes" is defined in Section 2.1.4.
1.130. "S&P" means Standard & Poor's Ratings Group, a division of
The McGraw Hill Companies, Inc.
1.131. "Securities Act" means the federal Securities Act of 1933.
1.132. "Securities Purchase Agreements" means those certain
Securities Purchase Agreements dated March 13, 1997 among the Holding
Company, the Borrower and each of Massachusetts Mutual Life Insurance
Company, MassMutual Corporate Investors, MassMutual Participation
Investors and MassMutual Corporate Value Partners Limited, as previously
furnished to the Lenders and as amended, modified and supplemented from
time to time in accordance with Section 6.2.4.
1.133. "Seller Subordinated Debt" means the Borrower's $2,000,000
10% Subordinated Note due 2005 payable to the Sellers.
1.134. "Sellers" means Ross D. Siragusa, Jr., John R. Siragusa and
Richard D. Siragusa.
1.135. "Senior Subordinated Notes" means the Borrower's $12,500,000
12% Senior Subordinated Notes due 2005 issued pursuant to the Securities
Purchase Agreements.
1.136. "Subordinated Bridge Notes" means the Holding Company's
$2,500,000 13-1/2% Bridge Notes issued on the Initial Closing Date to
GreenGrass Holdings.
1.137. "Subsidiary" means any Person of which the Holding Company
(or other specified Person) shall at the time, directly or indirectly
through one or more of its Subsidiaries, (a) own at least 50% of the
outstanding capital stock (or other shares of beneficial interest)
entitled to vote generally, (b) hold at least 50% of the partnership,
joint venture or similar interests or (c) be a general partner or joint
venturer; provided, however, that "Subsidiary" shall not include any
Unrestricted Affiliate regardless of the ownership thereof by the Holding
Company.
1.138. "Swing-N-Slide Division" means the operating division of the
Borrower that conducts primarily only the business conducted by the
Borrower prior to the Acquisition and other activities relating thereto.
1.139. "Tax" means any present or future tax, levy, duty, impost,
deduction, withholding or other charges of whatever nature at any time
required by any Legal Requirement (a) to be paid by any Lender or (b) to
be withheld or deducted from any payment otherwise required hereby to be
made to any Lender, in each case on or with respect to its obligations
hereunder, the Loan, any payment in respect of the Credit Obligations or
any Funding Liability not included in the foregoing; provided, however,
that the term "Tax" shall not include taxes imposed upon or measured by
the net income of such Lender (other than withholding taxes) or franchise
taxes.
1.140. "Term Loan A" is defined in Section 2.2.1.
1.141. "Term Loan A Note" is defined in Section 2.2.2.
1.142. "Term Loan B" is defined in Section 2.3.1.
1.143. "Term Loan B Note" is defined in Section 2.3.2.
1.144. "Term Loans" means Term Loan A and Term Loan B, collectively.
1.145. "Term Notes" means the Term Loan A Notes and the Term Loan B
Notes, collectively.
1.146. "Uniform Customs and Practice" is defined in Section 2.4.7.
1.147. "United States Funds" means such coin or currency of the
United States of America as at the time shall be legal tender therein for
the payment of public and private debts.
1.148. "Unrestricted Affiliate" means a Person acquired by the
Holding Company in accordance with Section 6.9.7 and which is designated
in writing by the Holding Company to the Agent as an "Unrestricted
Affiliate".
1.149. "Wholly Owned Subsidiary" means any Subsidiary of which all
of the outstanding capital stock (or other shares of beneficial interest)
entitled to vote generally (other than directors' qualifying shares) is
owned by the Holding Company (or other specified Person) directly, or
indirectly through one or more Wholly Owned Subsidiaries.
2. The Credits.
2.1. Revolving Credit.
2.1.1. Revolving Loan. Subject to all the terms and conditions
of this Agreement and so long as no Default exists, from time to time
on and after the Initial Closing Date and prior to the Final
Revolving Maturity Date the Lenders will, severally in accordance
with their respective Commitments in the Revolving Loan, make loans
to the Borrower in such amounts as may be requested by the Borrower
in accordance with Section 2.1.3. The sum of the aggregate principal
amount of loans made under this Section 2.1.1 at any one time
outstanding plus the Letter of Credit Exposure shall in no event
exceed the lesser of (a) the Maximum Amount of Revolving Credit or
(b) the Borrowing Base. In no event will the principal amount of
loans at any one time outstanding made by any Lender pursuant to this
Section 2.1, together with such Lender's Percentage Interest in the
Letter of Credit Exposure, exceed such Lender's Commitment with
respect to the Revolving Loan.
2.1.2. Maximum Amount of Revolving Credit. The term "Maximum
Amount of Revolving Credit" means (a) (i) $20,000,000 minus (ii) Net
Asset Sale Proceeds described in Section 4.3.3 and Net Debt Proceeds
described in Section 4.3.4, in each case to the extent allocable to
the Revolving Loan in accordance with Section 4.6.2, or (b) the
amount (in an integral multiple of $500,000) to which the then
applicable amount set forth in clause (a)(i) above shall have been
irrevocably reduced from time to time by notice from the Borrower to
the Agent.
2.1.3. Borrowing Requests. The Borrower may from time to time
request a loan under Section 2.1.1 by providing to the Agent a notice
(which may be given by a telephone call received by a Lending Officer
if promptly confirmed in writing). Such notice must be not later
than noon (Boston time) on the first Banking Day (third Banking Day
if any portion of such loan will be subject to a LIBOR Pricing Option
on the requested Closing Date) prior to the requested Closing Date
for such loan. The notice must specify (a) the amount of the
requested loan (which shall be not less than $500,000 and an integral
multiple of $100,000) and (b) the requested Closing Date therefor
(which shall be a Banking Day). Upon receipt of such notice, the
Agent will promptly inform each other Lender (by telephone or
otherwise). Each such loan will be made at the Boston Office by
depositing the amount thereof to the general account of the Borrower
with the Agent. In connection with each such loan, the Borrower
shall furnish to the Agent a certificate in substantially the form of
Exhibit 5.2.1.
2.1.4. Revolving Notes. The aggregate principal amount of the
loans outstanding from time to time under this Section 2.1 is
referred to as the "Revolving Loan". The Agent shall keep a record
of the Revolving Loan as part of the Register. The Revolving Loan
shall be deemed owed to each Lender having a Commitment therein
severally in accordance with such Lender's Percentage Interest
therein, and all payments thereon shall be for the account of each
Lender in accordance with its Percentage Interest therein. The
Borrower's obligations to pay each Lender's Percentage Interest in
the Revolving Loan shall be evidenced by a separate note of the
Borrower in substantially the form of Exhibit 2.1.4 (the "Revolving
Notes"), payable to each Lender in accordance with such Lender's
Percentage Interest in the Revolving Loan.
2.2. Term Loan A.
2.2.1. Term Loan A. Subject to all the terms and conditions of
this Agreement and so long as no Default exists, on the Initial
Closing Date the Lenders will, in accordance with their respective
Percentage Interests in Term Loan A, severally lend to the Borrower
as a term loan $45,000,000. The aggregate principal amount of the
loans made pursuant to this Section 2.2.1 at any one time outstanding
is referred to as "Term Loan A". In connection with Term Loan A, the
Borrower shall furnish to the Agent a certificate in substantially
the form of Exhibit 5.2.1.
2.2.2. Term Loan A Notes. Term Loan A shall be made at the
Boston Office by crediting the amount of such loan to the general
account of the Borrower with the Agent against delivery to the Agent
of the separate term notes of the Borrower (the "Term Loan A Notes")
payable to the respective Lenders. The Term Loan A Note issued to
each Lender shall be in a principal amount equal to such Lender's
Percentage Interest in Term Loan A, and shall be in substantially the
form of Exhibit 2.2.2.
2.3. Term Loan B.
2.3.1. Term Loan B. Subject to all the terms and conditions of
this Agreement and so long as no Default exists, on the Initial
Closing Date the Lenders will, in accordance with their respective
Percentage Interests in Term Loan B, severally lend to the Borrower
as a term loan $4,500,000. The aggregate principal amount of the
loans made pursuant to this Section 2.3.1 at any one time outstanding
is referred to as "Term Loan B". In connection with Term Loan B, the
Borrower shall furnish to the Agent a certificate in substantially
the form of Exhibit 5.2.1.
2.3.2. Term Loan B Notes. Term Loan B shall be made at the
Boston Office by crediting the amount of such loan to the general
account of the Borrower with the Agent against delivery to the Agent
of the separate term notes of the Borrower (the "Term Loan B Notes")
payable to the respective Lenders. The Term Loan B Note issued to
each Lender shall be in a principal amount equal to such Lender's
Percentage Interest in Term Loan B, and shall be in substantially the
form of Exhibit 2.3.2.
2.4. Letters of Credit.
2.4.1. Issuance of Letters of Credit. Subject to all the terms
and conditions of this Agreement and so long as no Default exists,
from time to time on and after the Initial Closing Date and prior to
the Final Revolving Maturity Date, the Letter of Credit Issuer will
issue for the account of the Borrower one or more irrevocable
documentary or standby letters of credit (the "Letters of Credit").
Letter of Credit Exposure plus the Revolving Loan shall in no event
exceed the Maximum Amount of Revolving Credit. Letter of Credit
Exposure shall in no event exceed $1,000,000.
2.4.2. Requests for Letters of Credit. The Borrower may from
time to time request a Letter of Credit to be issued by providing to
the Letter of Credit Issuer (and the Agent if the Letter of Credit
Issuer is not the Agent) a notice which is actually received not less
than five Banking Days prior to the requested Closing Date for such
Letter of Credit specifying (a) the amount of the requested Letter of
Credit, (b) the beneficiary thereof, (c) the requested Closing Date
and (d) the principal terms of the text for such Letter of Credit.
Each Letter of Credit will be issued by forwarding it to the Borrower
or to such other Person as directed in writing by the Borrower. In
connection with the issuance of any Letter of Credit, the Borrower
shall furnish to the Letter of Credit Issuer (and the Agent if the
Letter of Credit Issuer is not the Agent) a certificate in
substantially the form of Exhibit 5.2.1 and any customary application
forms required by the Letter of Credit Issuer. In the event of any
inconsistency between such application forms and this Agreement, this
Agreement shall govern.
2.4.3. Form and Expiration of Letters of Credit. Each Letter of
Credit issued under this Section 2.4 and each draft accepted or paid
under such a Letter of Credit shall be issued, accepted or paid, as
the case may be, by the Letter of Credit Issuer at its principal
office. No Letter of Credit shall provide for the payment of drafts
drawn thereunder, and no draft shall be payable, at a date which is
later than the earlier of (a) the date 12 months after the date of
issuance or (b) the Final Revolving Maturity Date. Each Letter of
Credit and each draft accepted under a Letter of Credit shall be in
such form and minimum amount, and shall contain such terms, as the
Letter of Credit Issuer and the Borrower may agree upon at the time
such Letter of Credit is issued, including a requirement of not less
than three Banking Days after presentation of a draft before payment
must be made thereunder.
2.4.4. Lenders' Participation in Letters of Credit. Upon the
issuance of any Letter of Credit, a participation therein, in an
amount equal to each Lender's Percentage Interest in the Revolving
Loan, shall automatically be deemed granted by the Letter of Credit
Issuer to each such Lender on the date of such issuance and such
Lenders shall automatically be obligated, as set forth in Section
10.4, to reimburse the Letter of Credit Issuer to the extent of their
respective Percentage Interests in the Revolving Loan for all
obligations incurred by the Letter of Credit Issuer to third parties
in respect of such Letter of Credit not reimbursed by the Borrower.
The Letter of Credit Issuer will send to each Lender (and the Agent
if the Letter of Credit Issuer is not the Agent) a confirmation
regarding the participations in Letters of Credit outstanding during
such month.
2.4.5. Presentation. The Letter of Credit Issuer may accept or
pay any draft presented to it, regardless of when drawn and whether
or not negotiated, if such draft, the other required documents and
any transmittal advice are presented to the Letter of Credit Issuer
and dated on or before the expiration date of the Letter of Credit
under which such draft is drawn. Except insofar as a particular
Letter of Credit contains express, contrary instructions, the Letter
of Credit Issuer may honor as complying with the terms of any Letter
of Credit and with this Agreement any drafts or other documents
otherwise in order signed or issued by an administrator, executor,
conservator, trustee in bankruptcy, debtor in possession, assignee
for benefit of creditors, liquidator, receiver or other legal
representative of the party authorized under such Letter of Credit to
draw or issue such drafts or other documents.
2.4.6. Payment of Drafts. At such time as a Letter of Credit
Issuer makes any payment on a draft presented or accepted under a
Letter of Credit, the Borrower will on demand pay to the Agent in
immediately available funds the amount of such payment. Unless the
Borrower shall otherwise pay to the Agent the amount required by the
foregoing sentence, such amount shall be considered a loan under
Section 2.1.1 and part of the Revolving Loan as if the Borrower had
paid in full the amount required with respect to the Letter of Credit
by borrowing such amount under Section 2.1.1 to the extent such
amount does not cause the Revolving Loan to exceed the Maximum Amount
of Revolving Credit.
2.4.7. Uniform Customs and Practice. The Uniform Customs and
Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500, and any subsequent revisions
thereof approved by a Congress of the International Chamber of
Commerce and adhered to by the Letter of Credit Issuer (the "Uniform
Customs and Practice"), shall be binding on the Borrower and the
Letter of Credit Issuer except to the extent otherwise provided
herein, in any Letter of Credit or in any other Credit Document.
Anything in the Uniform Customs and Practice to the contrary
notwithstanding:
(a) Neither the Borrower nor any beneficiary of any Letter of
Credit shall be deemed an agent of any Letter of Credit Issuer.
(b) With respect to each Letter of Credit, neither the Letter of
Credit Issuer nor its correspondents shall be responsible for or
shall have any duty to ascertain (unless the Letter of Credit Issuer
or such correspondent is grossly negligent or willful in failing so
to ascertain):
(i) the genuineness of any signature;
(ii) the validity, form, sufficiency, accuracy, genuineness
or legal effect of any endorsements;
(iii) delay in giving, or failure to give, notice of
arrival, notice of refusal of documents or of discrepancies in
respect of which any Letter of Credit Issuer refuses the documents
or any other notice, demand or protest;
(iv) the performance by any beneficiary under any Letter of
Credit of such beneficiary's obligations to the Borrower;
(v) inaccuracy in any notice received by the Letter of
Credit Issuer;
(vi) the validity, form, sufficiency, accuracy, genuineness
or legal effect of any instrument, draft, certificate or other
document required by such Letter of Credit to be presented before
payment of a draft if such instrument, draft, certificate or other
document appears on its face to comply with the requirements of
the Letter of Credit, or the office held by or the authority of
any Person signing any of the same; or
(vii) failure of any instrument to bear any reference or
adequate reference to such Letter of Credit, or failure of any
Person to note the amount of any instrument on the reverse of such
Letter of Credit or to surrender such Letter of Credit or to
forward documents in the manner required by such Letter of Credit.
(c) The occurrence of any of the events referred to in the
Uniform Customs and Practice or in the preceding clauses of this
Section 2.4.7 shall not affect or prevent the vesting of any of the
Letter of Credit Issuer's rights or powers hereunder or the
Borrower's obligation to make reimbursement of amounts paid under any
Letter of Credit or any draft accepted thereunder.
(d) The Borrower will promptly examine (i) each Letter of Credit
(and any amendments thereof) sent to it by the Letter of Credit
Issuer and (ii) all instruments and documents delivered to it from
time to time by the Letter of Credit Issuer. The Borrower will
notify the Letter of Credit Issuer of any claim of noncompliance by
notice actually received within three Banking Days after receipt of
any of the foregoing documents, the Borrower being conclusively
deemed to have waived any such claim against such Letter of Credit
Issuer and its correspondents unless such notice is given. The
Letter of Credit Issuer shall have no obligation or responsibility to
send any such Letter of Credit or any such instrument or document to
the Borrower.
(e) In the event of any conflict between the provisions of this
Agreement and the Uniform Customs and Practice, the provisions of
this Agreement shall govern.
2.4.8. Subrogation. Upon any payment by a Letter of Credit
Issuer under any Letter of Credit and until the reimbursement of such
Letter of Credit Issuer by the Borrower with respect to such payment,
the Letter of Credit Issuer shall be entitled to be subrogated to,
and to acquire and retain, the rights which the Person to whom such
payment is made may have against the Borrower, all for the benefit of
the Lenders. The Borrower will take such action as the Letter of
Credit Issuer may reasonably request, including requiring the
beneficiary of any Letter of Credit to execute such documents as the
Letter of Credit Issuer may reasonably request, to assure and confirm
to the Letter of Credit Issuer such subrogation and such rights,
including the rights, if any, of the beneficiary to whom such payment
is made in accounts receivable, inventory and other properties and
assets of any Obligor.
2.4.9. Modification, Consent, etc. If the Borrower requests or
consents in writing to any modification or extension of any Letter of
Credit, or waives any failure of any draft, certificate or other
document to comply with the terms of such Letter of Credit, and if
the Letter of Credit Issuer consents thereto, the Letter of Credit
Issuer shall be entitled to rely on such request, consent or waiver.
This Agreement shall be binding upon the Borrower with respect to
such Letter of Credit as so modified or extended, and with respect to
any action taken or omitted by such Letter of Credit Issuer pursuant
to any such request, consent or waiver.
2.5. Application of Proceeds.
2.5.1. Revolving Loan. Subject to Section 2.5.4, the Borrower
will apply the proceeds of the Revolving Loan for working capital and
other lawful corporate purposes of the Holding Company and its
Subsidiaries.
2.5.2. Term Loans. The Borrower will apply the proceeds of the
Term Loans to fund the Acquisition, to fund Capital Expenditures, to
refinance existing term debt and to pay fees and expenses related to
the foregoing.
2.5.3. Letters of Credit. Letters of Credit shall be issued
only for such lawful corporate purposes as the Borrower has requested
in writing and to which the Letter of Credit Issuer agrees.
2.5.4. Specifically Prohibited Applications. The Borrower will
not, directly or indirectly, apply any part of the proceeds of any
extension of credit made pursuant to the Credit Documents to purchase
or to carry Margin Stock or to any transaction prohibited by Legal
Requirements applicable to the Lenders or by the Credit Documents.
2.6. Nature of Obligations of Lenders to Make Extensions of
Credit. The Lenders' obligations to extend credit under this Agreement
are several and are not joint or joint and several. If on any Closing
Date any Lender shall fail to perform its obligations under this
Agreement, the aggregate amount of Commitments to make the extensions of
credit under this Agreement shall be reduced by the amount of unborrowed
Commitment of the Lender so failing to perform and the Percentage
Interests shall be appropriately adjusted. Lenders that have not failed
to perform their obligations to make the extensions of credit contemplated
by Section 2 may, if any such Lender so desires, assume, in such
proportions as such Lenders may agree, the obligations of any Lender who
has so failed and the Percentage Interests shall be appropriately
adjusted. The provisions of this Section 2.6 shall not affect the rights
of the Borrower against any Lender failing to perform its obligations
hereunder.
3. Interest; LIBOR Pricing Options; Fees.
3.1. Interest. The Loan shall accrue and bear interest at a rate
per annum which shall at all times equal the Applicable Rate. Prior to
any stated or accelerated maturity of the Loan, the Borrower will, on each
Payment Date, pay the accrued and unpaid interest on the portion of the
Loan which was not subject to a LIBOR Pricing Option. On the last day of
each LIBOR Interest Period or on any earlier termination of any LIBOR
Pricing Option, the Borrower will pay the accrued and unpaid interest on
the portion of the Loan which was subject to the LIBOR Pricing Option
which expired or terminated on such date. In the case of any LIBOR
Interest Period longer than three months, the Borrower will also pay the
accrued and unpaid interest on the portion of the Loan subject to the
LIBOR Pricing Option having such LIBOR Interest Period at three-month
intervals, the first such payment to be made on the last Banking Day of
the three-month period which begins on the first day of such LIBOR
Interest Period. On the stated or any accelerated maturity of the Loan,
the Borrower will pay all accrued and unpaid interest on the Loan,
including any accrued and unpaid interest on any portion of the Loan which
is subject to a LIBOR Pricing Option. Upon the occurrence and during the
continuance of an Event of Default, the Lenders may require accrued
interest to be payable on demand or at regular intervals more frequent
than each Payment Date. All payments of interest hereunder shall be made
to the Agent for the account of each Lender in accordance with such
Lender's Percentage Interest.
3.2. LIBOR Pricing Options.
3.2.1. Election of LIBOR Pricing Options. Subject to all of the
terms and conditions hereof and so long as no Default exists, the
Borrower may from time to time, by irrevocable notice to the Agent
actually received not less than three Banking Days prior to the
commencement of the LIBOR Interest Period selected in such notice,
elect to have such portion of the Loan as the Borrower may specify in
such notice accrue and bear interest during the LIBOR Interest Period
so selected at the Applicable Rate computed on the basis of the LIBOR
Rate. In the event the Borrower at any time fails to elect a LIBOR
Pricing Option under this Section 3.2.1 for any portion of the Loan
(upon termination of a LIBOR Pricing Option or otherwise), then such
portion of the Loan will accrue and bear interest at the Applicable
Rate based on the Base Rate. No election of a LIBOR Pricing Option
shall become effective:
(a) if, prior to the commencement of any such LIBOR Interest
Period, the Agent determines that (i) the electing or granting of the
LIBOR Pricing Option in question would violate a Legal Requirement,
whether or not having the force of law so long as compliance
therewith is customary commercial practice, (ii) Eurodollar deposits
in an amount comparable to the principal amount of the Loan as to
which such LIBOR Pricing Option has been elected and which have a
term corresponding to the proposed LIBOR Interest Period are not
readily available in the London inter-bank Eurodollar market, or
(iii) by reason of circumstances affecting the London inter-bank
Eurodollar market, adequate and reasonable methods do not exist for
ascertaining the interest rate applicable to such deposits for the
proposed LIBOR Interest Period; or
(b) if the Required Lenders shall have advised the Agent by
telephone or otherwise at or prior to noon (Boston time) on the
second Banking Day prior to the commencement of such proposed LIBOR
Interest Period (and shall have subsequently confirmed in writing)
that, after reasonable efforts to determine the availability of
Eurodollar deposits, the Required Lenders reasonably anticipate that
Eurodollar deposits in an amount equal to the Percentage Interest of
the Required Lenders in the portion of the Loan as to which such
LIBOR Pricing Option has been elected and which have a term
corresponding to the LIBOR Interest Period in question will not be
offered in the Eurodollar market to the Required Lenders at a rate of
interest that does not exceed the anticipated LIBOR Basic Rate.
3.2.2. Notice to Lenders and Borrower. The Agent will promptly
inform each Lender (by telephone or otherwise) of each notice
received by it from the Borrower pursuant to Section 3.2.1 and of the
LIBOR Interest Period specified in such notice. Upon determination
by the Agent of the LIBOR Rate for such LIBOR Interest Period or in
the event such election shall not become effective, the Agent will
promptly notify the Borrower and each Lender (by telephone or
otherwise) of the LIBOR Rate so determined or why such election did
not become effective, as the case may be.
3.2.3. Selection of LIBOR Interest Periods. LIBOR Interest
Periods shall be selected so that:
(a) the minimum portion of the Loan subject to any LIBOR Pricing
Option shall be $1,000,000 and an integral multiple of $500,000;
(b) no more than 10 LIBOR Pricing Options shall be outstanding
at any one time;
(c) a portion of each of Term Loan A and Term Loan B equal to or
greater than the amount of the next mandatory prepayment required by
Section 4.2 shall not be subject to a LIBOR Pricing Option on the
date such mandatory prepayment is required to be made; and
(d) no LIBOR Interest Period shall expire later than the Final
Maturity Date.
3.2.4. Additional Interest. If any portion of the Loan subject
to a LIBOR Pricing Option is repaid, or any LIBOR Pricing Option is
terminated for any reason (including acceleration of maturity), on a
date which is prior to the last Banking Day of the LIBOR Interest
Period applicable to such LIBOR Pricing Option, the Borrower will pay
to the Agent for the account of each Lender in accordance with such
Lender's Percentage Interest, in addition to any amounts of interest
otherwise payable hereunder, an amount equal to the present value
(calculated in accordance with this Section 3.2.4) of interest for
the unexpired portion of such LIBOR Interest Period on the portion of
the Loan so repaid, or as to which a LIBOR Pricing Option was so
the rate applicable to such LIBOR Pricing Option minus (b) the rate
of interest obtainable by the Agent upon the purchase of debt
securities customarily issued by the Treasury of the United States of
America which have a maturity date approximating the last Banking Day
of such LIBOR Interest Period. The present value of such additional
interest shall be calculated by discounting the amount of such
interest for each day in the unexpired portion of such LIBOR Interest
Period from such day to the date of such repayment or termination at
a per annum interest rate equal to the interest rate determined
pursuant to clause (b) of the preceding sentence, and by adding all
such amounts for all such days during such period. The determination
by the Agent of such amount of interest shall, in the absence of
manifest error, be conclusive. For purposes of this Section 3.2.4,
if any portion of the Loan which was to have been subject to a LIBOR
Pricing Option is not outstanding on the first day of the LIBOR
Interest Period applicable to such LIBOR Pricing Option other than
for reasons described in Section 3.2.1, the Borrower shall be deemed
to have terminated such LIBOR Pricing Option.
3.2.5. Violation of Legal Requirements. If any Legal
Requirement shall prevent any Lender from funding or maintaining
through the purchase of deposits in the London interbank Eurodollar
market any portion of the Loan subject to a LIBOR Pricing Option or
otherwise from giving effect to such Lender's obligations as
contemplated by Section 3.2, (a) the Agent may by notice to the
Borrower terminate all of the affected LIBOR Pricing Options, (b) the
portion of the Loan subject to such terminated LIBOR Pricing Options
shall immediately bear interest thereafter at the Applicable Rate
computed on the basis of the Base Rate and (c) the Borrower shall
make any payment required by Section 3.2.4.
3.2.6. Funding Procedure. The Lenders may fund any portion of
the Loan subject to a LIBOR Pricing Option out of any funds available
to the Lenders. Regardless of the source of the funds actually used
by any of the Lenders to fund any portion of the Loan subject to a
LIBOR Pricing Option, however, all amounts payable hereunder,
including the interest rate applicable to any such portion of the
Loan and the amounts payable under Sections 3.2.4 and 3.5, shall be
computed as if each Lender had actually funded such Lender's
Percentage Interest in such portion of the Loan through the purchase
of deposits in such amount of the type by which the LIBOR Basic Rate
was determined with a maturity the same as the applicable LIBOR
Interest Period relating thereto and through the transfer of such
deposits from an office of the Lender having the same location as the
applicable LIBOR Office to one of such Lender's offices in the United
States of America.
3.3. Commitment Fees. In consideration of the Lenders'
commitments to make the extensions of credit provided for in Section 2.1,
while such commitments are outstanding, the Borrower will pay to the Agent
for the account of the Lenders in accordance with the Lenders' respective
Commitments in the Revolving Loan, on each Payment Date, an amount equal
to interest computed at the rate of 0.50% per annum on the amount by which
(a) the average daily Maximum Amount of Revolving Credit during the month
or portion thereof ending on such Payment Date exceeded (b) the sum of (i)
the average daily Revolving Loan during such month or portion thereof plus
(ii) the average daily Letter of Credit Exposure during such month or
portion thereof; provided, however, that the first such payment shall be
for the period beginning on the Initial Closing Date and ending on the
first Payment Date.
3.4. Letter of Credit Fees. The Borrower will pay to the Agent
for the account of each of the Lenders, in accordance with the Lenders'
respective Percentage Interests, on each Payment Date occurring in March,
June, September and December, a Letter of Credit fee equal to interest at
a rate per annum equal to the Applicable Margin indicated for the LIBOR
Rate on the average daily Letter of Credit Exposure during the three-month
period or portion thereof ending on such Payment Date. The Borrower will
pay to the Agent for the account of the Letter of Credit Issuer, on each
Payment Date occurring in March, June, September and December, a fronting
fee equal to interest at a rate per annum equal to 0.25% on the average
daily Letter of Credit Exposure during the three-month period or portion
thereof ending on such Payment Date. The Borrower will pay to the Letter
of Credit Issuer customary service charges and expenses for its services
in connection with the Letters of Credit at the times and in the amounts
from time to time in effect in accordance with its general rate structure,
including fees and expenses relating to issuance, amendment, negotiation,
cancellation and similar operations.
3.5. Changes in Circumstances; Yield Protection.
3.5.1. Reserve Requirements, etc. If any Legal Requirement
(whether or not having the force of law so long as compliance
therewith is customary commercial practice) shall (a) impose, modify,
increase or deem applicable any insurance assessment, reserve,
special deposit or similar requirement against any Funding Liability
or the Letters of Credit, (b) impose, modify, increase or deem
applicable any other requirement or condition with respect to any
Funding Liability or the Letters of Credit, or (c) change the basis
of taxation of Funding Liabilities or payments in respect of any
Letter of Credit (other than changes in the rate of taxes measured by
the overall net income of such Lender) and the effect of any of the
foregoing shall be to increase the cost to any Lender of issuing,
making, funding or maintaining its respective Percentage Interest in
any portion of the Loan subject to a LIBOR Pricing Option or any
Letter of Credit, to reduce the amounts received or receivable by
such Lender under this Agreement or to require such Lender to make
any payment or forego any amounts otherwise payable to such Lender
under this Agreement (other than any Tax or any reserves that are
included in computing the LIBOR Reserve Rate), then such Lender may
claim compensation from the Borrower under Section 3.5.5.
3.5.2. Taxes. All payments of the Credit Obligations shall be
made without set-off or counterclaim and free and clear of any
deductions, including deductions for Taxes, unless the Borrower is
required by law to make such deductions. If (a) any Lender shall be
subject to any Tax with respect to any payment of the Credit
Obligations or its obligations hereunder or (b) the Borrower shall be
required to withhold or deduct any Tax on any payment on the Credit
Obligations, then such Lender may claim compensation from the
Borrower under Section 3.5.5 to the extent such Lender is then in
compliance with any applicable requirements of Section 13. Whenever
Taxes must be withheld by the Borrower with respect to any payments
of the Credit Obligations, the Borrower shall promptly furnish to the
Agent for the account of the applicable Lender official receipts (to
the extent that the relevant governmental authority delivers such
receipts) evidencing payment of any such Taxes so withheld. If the
Borrower fails to pay any such Taxes when due or fails to remit to
the Agent for the account of the applicable Lender the required
receipts evidencing payment of any such Taxes so withheld or
deducted, the Borrower shall indemnify the affected Lender for any
incremental Taxes and interest or penalties that may become payable
by such Lender as a result of any such failure. In the event any
Lender receives a refund of any Taxes for which it has received
payment from the Borrower under this Section 3.5.2, such Lender shall
promptly pay the amount of such refund to the Borrower, together with
any interest thereon actually earned by such Lender.
3.5.3. Capital Adequacy. If any Lender shall determine that
compliance by such Lender with any Legal Requirement (whether or not
having the force of law so long as compliance therewith is customary
commercial practice) regarding capital adequacy of banks or bank
holding companies has or would have the effect of reducing the rate
of return on the capital of such Lender and its Affiliates as a
consequence of such Lender's commitment to make the extensions of
credit contemplated hereby, or such Lender's maintenance of the
extensions of credit contemplated hereby, to a level below that which
such Lender could have achieved but for such compliance (taking into
consideration the policies of such Lender and its Affiliates with
respect to capital adequacy immediately before such compliance and
assuming that the capital of such Lender and its Affiliates was fully
utilized prior to such compliance) by an amount deemed by such Lender
to be material, then such Lender may claim compensation from the
Borrower under Section 3.5.5.
3.5.4. Regulatory Changes. If any Lender shall determine that
(a) any change in any Legal Requirement (including any new Legal
Requirement) (whether or not having the force of law so long as
compliance therewith is customary commercial practice) after the date
hereof shall directly or indirectly (i) reduce the amount of any sum
received or receivable by such Lender with respect to the Loan or the
Letters of Credit or the return to be earned by such Lender on the
Loan or the Letters of Credit, (ii) impose a cost on such Lender or
any Affiliate of such Lender that is attributable to the making or
maintaining of, or such Lender's commitment to make, its portion of
the Loan or the Letters of Credit, or (iii) require such Lender or
any Affiliate of such Lender to make any payment on, or calculated by
reference to, the gross amount of any amount received by such Lender
under any Credit Document (other than Taxes or income or franchise
taxes), and (b) such reduction, increased cost or payment shall not
be fully compensated for by an adjustment in the Applicable Rate or
the Letter of Credit fees, then such Lender may claim compensation
from the Borrower under Section 3.5.5.
3.5.5. Compensation Claims. Within 15 days after the receipt by
the Borrower of a certificate from any Lender setting forth why it is
claiming compensation under this Section 3.5 and computations (in
reasonable detail) of the amount thereof, the Borrower shall pay to
such Lender such additional amounts as such Lender sets forth in such
certificate as sufficient fully to compensate it on account of the
foregoing provisions of this Section 3.5, together with interest on
such amount from the 15th day after receipt of such certificate until
payment in full thereof at the Overdue Reimbursement Rate. The
determination by such Lender of the amount to be paid to it and the
basis for computation thereof hereunder shall be conclusive so long
as (a) the Lender acts in good faith, (b) the Lender's determination
does not contain any manifest error and (c) the Lender used
reasonable averaging and attribution methods. The Borrower shall be
entitled to replace any such Lender in accordance with Section 11.3.
3.5.6. Mitigation. Each Lender shall take such commercially
reasonable steps as it may determine are not disadvantageous to it,
including changing lending offices to the extent feasible, in order
to reduce amounts otherwise payable by the Borrower to such Lender
pursuant to Sections 3.2.4 and 3.5 or to make LIBOR Pricing Options
available under Sections 3.2.1 and 3.2.5. In addition, the Borrower
shall not be responsible for costs (a) under Section 3.5 arising more
than 90 days prior to receipt by the Borrower of the certificate from
the affected Lender pursuant to such Section 3.5 or (b) under Section
3.2.4 arising from the termination of LIBOR Pricing Options more than
90 days prior to the demand by the Agent for payment under Section
3.2.4.
3.6. Computations of Interest and Fees. For purposes of this
Agreement, interest, commitment fees and Letter of Credit fees (and any
other amount expressed as interest or such fees) shall be computed on the
basis of a 360-day year for actual days elapsed. If any payment required
by this Agreement becomes due on any day that is not a Banking Day, such
payment shall, except as otherwise provided in the LIBOR Interest Period,
be made on the next succeeding Banking Day. If the due date for any
payment of principal is extended as a result of the immediately preceding
sentence, interest shall be payable for the time during which payment is
extended at the Applicable Rate.
4. Payment.
4.1. Payment at Maturity. On the Applicable Maturity Date or any
accelerated maturity of the Loan, the Borrower will pay to the Agent for
the account of the Lenders an amount equal to the portion of the Loan then
due, together with all accrued and unpaid interest and fees with respect
thereto and on the latest Applicable Maturity Date or any accelerated
maturity of the Loan, all other Credit Obligations then outstanding.
4.2. Scheduled Required Prepayments.
4.2.1. Term Loan A. On each Payment Date set forth below, the
Borrower will pay to the Agent for the account of the Lenders as a
prepayment of Term Loan A the lesser of (a) the amount set forth
below for such date, adjusted to the extent required by Section 4.6.2
or (b) the principal amount of Term Loan A then outstanding.
Payment Date Amount
June 30, 1997 $1,000,000
September 30, 1997 1,000,000
December 31, 1997 1,000,000
March 31, 1998 500,000
June 30, 1998 2,000,000
September 30, 1998 2,000,000
December 31, 1998 2,000,000
March 31, 1999 650,000
June 30, 1999 2,450,000
September 30, 1999 2,450,000
December 31, 1999 2,450,000
March 31, 2000 700,000
June 30, 2000 2,600,000
September 30, 2000 2,600,000
December 31, 2000 2,600,000
March 31, 2001 800,000
June 30, 2001 2,900,000
September 30, 2001 2,900,000
December 31, 2001 2,900,000
March 31, 2002 800,000
June 30, 2002 2,900,000
September 30, 2002 2,900,000
December 31, 2002 2,900,000
4.2.2. Term Loan B. On each Payment Date set forth below,
the Borrower will pay to the Agent, for the account of the Lenders as
a prepayment of Term Loan B, the lesser of (a) the amount set forth
below for such date, adjusted to the extent required by Section
4.6.2, and (b) the principal amount of Term Loan B then outstanding.
Payment Date Amount
June 30, 1997 $16,666
September 30, 1997 $16,667
December 31, 1997 $16,667
June 30, 1998 $16,666
September 30, 1998 $16,667
December 31, 1998 $16,667
June 30, 1999 $33,333
September 30, 1999 $33,333
December 31, 1999 $33,334
June 30, 2000 $33,333
September 30, 2000 $33,333
December 31, 2000 $33,334
June 30, 2001 $33,333
September 30, 2001 $33,333
December 31, 2001 $33,334
June 30, 2002 $33,333
September 30, 2002 $33,333
December 31, 2002 $33,334
June 30, 2003 $4,000,000
4.3. Contingent Required Prepayments.
4.3.1. Excess Credit Exposure. If at any time the Revolving
Loan exceeds the limits set forth in Section 2.1, the Borrower shall
within one Banking Day pay the amount of such excess to the Agent as
a prepayment of the Revolving Loan. If at any time the Letter of
Credit Exposure exceeds the limits set forth in Section 2.3, the
Borrower shall within one Banking Day pay the amount of such excess
to the Agent to be applied as provided in Section 4.5.
4.3.2. Excess Cash Flow. Within five Banking Days after the
date annual financial statements have been (or are required to have
been) furnished by the Holding Company to the Lenders in accordance
with Section 6.4.1, the Borrower shall pay to the Agent as a
prepayment of the Loans, to be applied as provided in Section 4.6.2
in an amount equal to (a) 75% of Consolidated Excess Cash Flow for
its most recently completed fiscal year if Consolidated Total Debt as
of the end of such year exceeds or is equal to 350% Consolidated
EBITDA for such year or (b) 50% of Consolidated Excess Cash Flow for
its most recently completed year if Consolidated Total Debt as of the
end of such year is less than 350% of Consolidated EBITDA for such
year.
4.3.3. Net Asset Sale Proceeds. Within five days prior to
the sale or other disposition of any assets by the Borrower or any of
its Subsidiaries that would result in Net Asset Sale Proceeds, the
Borrower shall provide written notice to the Lenders of the closing
date for such asset sale or disposition and the amount of the Net
Asset Sale Proceeds. Upon receipt by the Borrower or any of its
Subsidiaries of Net Asset Sale Proceeds, the Borrower shall within
three Banking Days pay to the Agent as a prepayment of the Loan, to
be applied as provided in Section 4.6.2 the lesser of (a) the amount
of such Net Asset Sale Proceeds or (b) the amount of the Loan.
4.3.4. Net Debt Proceeds. Within five days prior to the
incurrence of Designated Financing Debt by the Holding Company or any
of its Subsidiaries, the Borrower shall provide written notice to the
Lenders of the closing date for such Designated Financing Debt and
the amount of the Net Debt Proceeds. Within three Banking Days after
the incurrence of such Designated Financing Debt, the Borrower shall
pay to the Agent as a prepayment of the Loan, to be applied as
provided in Section 4.6.2 the lesser of (a) the amount of such Net
Debt Proceeds or (b) the amount of the Loan; provided; however, that
the Borrower shall be required to pay only 75% of Net Debt Proceeds
under this Section 4.3.4 as a result of the issuance of additional
Convertible Subordinated Debentures after the Initial Closing Date.
4.3.5. Net Equity Proceeds. Within five days prior to the
issuance of any equity securities by the Holding Company or any of
its Subsidiaries that would result in Net Equity Proceeds, the
Borrower shall provide written notice to the Lenders of the closing
date for such issuance and the amount of the Net Equity Proceeds.
Within three Banking Days after the receipt by the Holding Company or
any of its Subsidiaries of Net Equity Proceeds, the Borrower shall
pay to the Agent as a prepayment of the Loan to be applied as
provided in Section 4.6.2 the lesser of (a) 75% of the amount of such
Net Equity Proceeds or (b) the amount of the Loan.
4.4. Voluntary Prepayments. In addition to the prepayments
required by Sections 4.2 and 4.3, the Borrower may from time to time
prepay all or any portion of the Loan (in a minimum amount of $500,000 and
an integral multiple of $100,000, or such lesser amount as is then
outstanding), without premium or penalty of any type (except as provided
in Section 3.2.4 with respect to the early termination of LIBOR Pricing
Options). Voluntary Term Loan prepayments must be allocated between Term
Loan A and Term Loan B pro rata based on the relative outstanding
principal amounts thereof, and shall be applied pro rata to the remaining
amortization installments pursuant to Section 4.2.1 or 4.2.2, as the case
may be. The Borrower shall give the Agent at least one Banking Day prior
notice of its intention to prepay the Revolving Loan under this Section
4.4, specifying the date of payment, the total amount of the Revolving
Loan to be paid on such date and the amount of interest to be paid with
such prepayment.
The Borrower shall give the Lenders at least five days prior notice
of its intention to prepay the Term Loans under this Section 4.4,
specifying the date of payment, the total amount of Term Loan A and Term
Loan B to be paid on such date and the amount of interest to be paid with
such prepayment.
4.5. Letters of Credit. If on the Final Revolving Maturity Date or
any accelerated maturity of the Credit Obligations the Lenders shall be
obligated in respect of a Letter of Credit or a draft accepted under a
Letter of Credit, the Borrower will either:
(a) prepay such obligation by depositing with the Agent an
amount of cash, or
(b) deliver to the Agent a standby letter of credit
(designating the Agent as beneficiary and issued by a bank and on
terms reasonably acceptable to the Agent),
in each case in an amount equal to the portion of the then Letter of
Credit Exposure issued for the account of the Borrower. Any such cash so
deposited and the cash proceeds of any draw under any standby Letter of
Credit so furnished, including any interest thereon, shall be returned by
the Agent to the Borrower only when, and to the extent that, the amount of
such cash held by the Agent exceeds the Letter of Credit Exposure at such
time and no Default then exists; provided, however, that if an Event of
Default occurs and the Credit Obligations become or are declared
immediately due and payable, the Agent may apply such cash, including any
interest thereon, to the payment of any of the Credit Obligations as
provided in section 3.5.6 of the Guarantee and Security Agreement.
4.6. Reborrowing; Application of Payments, etc.
4.6.1. Reborrowing. The amounts of the Revolving Loan
prepaid pursuant to Section 4.4 may be reborrowed from time to time
prior to the Final Maturity Date in accordance with Section 2.1,
subject to the limits set forth therein. No portion of the Term
Loans prepaid hereunder may be reborrowed.
4.6.2. Order of Application. Any prepayment of the Loan
pursuant to Sections 4.3.2, 4.3.3, 4.3.4 or 4.3.5 shall be applied
first to Term Loan A and Term Loan B, with any balance to the
Revolving Loan and, only in the case of prepayments under Sections
4.3.3 (Net Asset Sale Proceeds) and 4.3.4 (Net Debt Proceeds), to the
permanent reduction of the Revolving Loan Commitments whether or not
any Revolving Loan is then outstanding. Prepayments of Term Loan A
and Term Loan B made pursuant to Sections 4.3.2, 4.3.3, 4.3.4, 4.3.5
or 4.4 shall be applied pro rata to the remaining amortization
installments pursuant to Section 4.2.1 or 4.2.2, as the case may be,
and shall be allocated between Term Loan A and Term Loan B pro rata
based on the relative outstanding principal amounts thereof, except
as provided below. Any Lender who does not wish to receive a
prepayment of Term Loan B under Sections 4.3 or 4.4 must notify the
Agent and the Borrower within two Banking Days after receipt of
notice of such proposed prepayment. If the Borrower accepts such
Lender's election not to receive such prepayment of Term Loan B, the
portion of the Net Asset Sale Proceeds that would have been applied
to the repayment of the portion of Term Loan B held by such Lender
shall instead be applied to the repayment of Term Loan A. If the
Borrower does not accept such Lender's election not to receive such
prepayment of Term Loan B, the Borrower shall promptly provide notice
thereof to such Lender and the Agent, and shall allocate such
prepayments between Term Loan A and Term Loan B pro rata based on the
relative outstanding principal amounts thereof. Any prepayment of
the Loan shall be applied first to the portion of the Loan not then
subject to LIBOR Pricing Options, then the balance of any such
prepayment shall be applied to the portion of the Loan then subject
to LIBOR Pricing Options, in the chronological order of the
respective maturities thereof (or as the Borrower may otherwise
specify in writing), together with any payments required by Section
3.2.4.
4.6.3. Payment with Accrued Interest, etc. Upon all
prepayments of the Term Loans, the Borrower shall pay to the Agent
the principal amount to be prepaid, together with unpaid interest in
respect thereof accrued to the date of prepayment. Notice of
prepayment having been given in accordance with Section 4.4, and
whether or not notice is given of prepayments pursuant to Sections
4.2 and 4.3, the amount specified to be prepaid shall become due and
payable on the date specified for prepayment.
4.6.4. Payments for Lenders. All payments of principal
hereunder shall be made to the Agent for the account of the Lenders
in accordance with the Lenders' respective Percentage Interests.
5. Conditions to Extending Credit.
5.1. Conditions on Initial Closing Date. The obligations of the
Lenders to make any extension of credit pursuant to Section 2 shall be
subject to the satisfaction, on or before the Initial Closing Date, of the
conditions set forth in this Section 5.1 as well as the further conditions
in Section 5.2. If the conditions set forth in this Section 5.1 are not
met on or prior to the Initial Closing Date, the Lenders shall have no
obligation to make any extensions of credit hereunder.
5.1.1. Notes. The Borrower shall have duly executed and
delivered to the Agent a Revolving Note, a Term Loan A Note for each
Lender having a Percentage Interest in such portion of the Loan and a
Term Loan B Note for each Lender having a Percentage Interest in such
portion of the Loan.
5.1.2. Payment of Fees. The Borrower shall have paid to the
Agent the fees contemplated by the separate agreement between the
Agent and the Holding Company dated on or prior to the date hereof.
5.1.3. Legal Opinions. On the Initial Closing Date, the
Lenders shall have received from the following counsel their
respective opinions with respect to the transactions contemplated by
the Credit Documents, which opinions shall be in form and substance
reasonably satisfactory to the Required Lenders:
(a) Foley & Lardner, special counsel for the Holding Company
and its Subsidiaries.
(b) Confirmation to the Lenders of the opinion of Ross &
Hardies, counsel to the Sellers, delivered under the Acquisition
Agreement.
(c) Ropes & Gray, special counsel for the Agent.
The Holding Company authorizes and directs its special counsel
to furnish the foregoing opinion.
5.1.4. Guarantee and Security Agreement. Each of the
Borrower and its Subsidiaries (if any) shall have duly authorized,
executed and delivered to the Agent a Guarantee and Security
Agreement in substantially the form of Exhibit 5.1.4 (the "Guarantee
and Security Agreement"), as well as the patent and trademark
security agreements contemplated therein.
5.1.5. Guarantee and Pledge Agreement. The Holding Company
shall have duly authorized, executed and delivered to the Agent a
Guarantee and Pledge Agreement in substantially the form of Exhibit
5.1.5 (the "Guarantee and Pledge Agreement").
5.1.6. Real Estate Collateral. The Obligors shall have duly
authorized, executed, acknowledged and delivered to the Agent a
mortgage on each material real property owned by the Borrower and its
Subsidiaries and a leasehold mortgage on each material real property
leased by the Borrower and its Subsidiaries, with a landlord's
consent and waiver and any other documents required to allow for the
recording or filing of a leasehold mortgage, in each case in form and
substance reasonably satisfactory to the Agent, together with, for
each such real property: (a) title insurance with such insurer, in
such amount, in such form and with such exceptions as are reasonably
satisfactory to the Agent, (b) an environmental site assessment
report in such form, with such conclusions and from such
environmental engineering firm as are reasonably satisfactory to the
Agent, (c) a survey on each real property owned by the Borrower and
its Subsidiaries that is reasonably satisfactory to the Agent and (d)
a legal opinion of local counsel with respect to the recording and
enforceability of such mortgages and leasehold mortgages in form and
substance reasonably satisfactory to the Agent.
5.1.7. Perfection of Security. Each Obligor shall have duly
authorized, executed, acknowledged, delivered, filed, registered and
recorded such security agreements, notices, financing statements and
other instruments as the Agent may have reasonably requested in order
to perfect the Liens purported or required pursuant to the Credit
Documents to be created in the Credit Security and shall have paid
all filing or recording fees or taxes required to be paid in
connection therewith, including any recording, mortgage, documentary,
transfer or intangible taxes.
5.1.8. Acquisition. Other than as consented to by the Agent
in writing, with the consent of the Required Lenders if such consent
is material:
(a) The provisions of the Acquisition Agreement shall not
have been amended, modified, waived or terminated.
(b) All of the representations and warranties of the Sellers
set forth in the Acquisition Agreement shall be complete and correct
in all material respects on and as of the Initial Closing Date with
the same force and effect as though made on and as of such date.
(c) All of the other conditions to the obligations of the
Holding Company and its Subsidiaries set forth in the Acquisition
Agreement shall have been satisfied.
(d) Any material consent, authorization, order or approval
of any Person required in connection with the transactions
contemplated by the Acquisition Agreement shall have been obtained
and shall be in full force and effect.
(e) All of the items required to be delivered under the
Acquisition Agreement shall have been so delivered.
(f) The merger of Game Time, Inc. into the Borrower shall
have been consummated in accordance with the Acquisition Agreement
and Wisconsin and Alabama corporate law.
(g) Contemporaneously with the making by the Lenders of the
first extension of credit hereunder, the Holding Company shall have
furnished to the Lenders a certificate of a Financial Officer to the
effect that the closing has occurred under the Acquisition Agreement
and to the effect that each of the conditions set forth in this
Section 5.1.8 has been satisfied.
5.1.9. Capitalization, etc.
(a) The Holding Company shall have received cash equity
payments of at least $5,000,000 and Subordinated Bridge Note
proceeds of at least $2,500,000 since December 31, 1996, and the
Holding Company shall have invested such amount in the Borrower.
(b) Fees and expenses for the Acquisition, the Credit
Obligations and other expenses associated with the Initial Closing
Date and any other transaction contemplated by this Agreement or the
Acquisition Agreement shall not exceed $5,000,000.
(c) On the Initial Closing Date, (i) the lesser of (A) the
Maximum Amount of Revolving Credit and (B) the Borrowing Base shall
exceed (ii) the Revolving Loan by at least $2,000,000.
(d) On the Initial Closing Date, the Senior Subordinated
Notes, the Seller Subordinated Debt and the Subordinated Bridge Notes
shall be funded on terms reasonably satisfactory to the Lenders.
(e) After giving effect to the Acquisition and the
incurrence of the Seller Subordinated Debt, the Senior Subordinated
Notes, the Subordinated Bridge Notes and the Credit Obligations, the
Holding Company and its Subsidiaries, taken as a whole:
(i) will be solvent;
(ii) will have assets having a fair saleable value in
excess of the amount required to pay their probable liability
on their existing debts as such debts become absolute and
mature;
(iii) will have access to adequate capital for the
conduct of their business; and
(iv) will have the ability to pay their debts from time
to time incurred as such debts mature.
(f) The Holding Company shall have furnished to the Lenders
a certificate of a Financial Officer to such effect, together with
detailed computations verifying the items in clauses (a) and (b)
above and calculations pursuant to Section 7.2.1(e) demonstrating
compliance with the Computation Covenants, in each case giving pro
forma effect to the Acquisition and the incurrence of the Credit
Obligations.
5.1.10. Termination of Prior Credit Agreements.
Contemporaneously with the initial advances hereunder, the Borrower
shall have paid in full (or entered into a proper in substance
defeasance of) all principal, interest and other accrued and
outstanding amounts under the Prior Credit Agreements, all
commitments to extend further credit under the Prior Credit
Agreements shall have been terminated, all Liens securing amounts
owing under the Prior Credit Agreements shall have been released and
the Prior Credit Agreements shall have become terminated and of no
further force or effect (except for indemnity provisions that by
their terms survive the termination of the Prior Credit Agreements).
5.1.11. Insurance. The Agent shall have reviewed the
insurance policies of the Holding Company and its Subsidiaries and
the results of such review shall be satisfactory to the Agent.
5.1.12. Environmental Review. A third party environmental
engineering firm reasonably acceptable to the Agent shall have
reviewed an updated environmental due diligence report with respect
to the Holding Company and its Subsidiaries and the results of such
review shall be satisfactory to the Agent.
5.1.13. Proper Proceedings. This Agreement, each other
Credit Document and the transactions contemplated hereby and thereby
shall have been authorized by all necessary corporate or other
proceedings. All necessary consents, approvals and authorizations of
any governmental or administrative agency or any other Person of any
of the transactions contemplated hereby or by any other Credit
Document shall have been obtained and shall be in full force and
effect.
5.1.14. General. All legal and corporate proceedings in
connection with the transactions contemplated by this Agreement shall
be reasonably satisfactory in form and substance to the Agent and the
Agent shall have received copies of all documents, including
certified copies of the Charter and By-Laws of the Holding Company
and the other Obligors, records of corporate proceedings,
certificates as to signatures and incumbency of officers and opinions
of counsel, which the Agent may have reasonably requested in
connection therewith, such documents where appropriate to be
certified by proper corporate or governmental authorities.
5.2. Conditions to Each Extension of Credit. The obligations of
the Lenders to make any extension of credit pursuant to Section 2 shall be
subject to the satisfaction, on or before the Closing Date for such
extension of credit, of the following conditions:
5.2.1. Officer's Certificate. The representations and
warranties contained in Section 7 shall be true and correct on and as
of such Closing Date with the same force and effect as though made on
and as of such date (except as to any representation or warranty
which refers to a specific earlier date); no Default shall exist on
such Closing Date prior to or immediately after giving effect to the
requested extension of credit; no Material Adverse Change shall have
occurred since December 31, 1995, and the Borrower shall have
furnished to the Agent in connection with the requested extension of
credit a certificate to these effects, in substantially the form of
Exhibit 5.2.1, signed by a Financial Officer.
5.2.2. Legality, etc. The making of the requested extension
of credit shall not (a) subject any Lender to any penalty or special
tax (other than a Tax for which the Borrower is required to reimburse
the Lenders under Section 3.5), (b) be prohibited by any Legal
Requirement or (c) violate any credit restraint program of the
executive branch of the government of the United States of America,
the Board of Governors of the Federal Reserve System or any other
governmental or administrative agency so long as any Lender
reasonably believes that compliance therewith is in the best
interests of such Lender.
6. General Covenants. Each of the Holding Company, the Borrower and the
other Guarantors covenants that, until all of the Credit Obligations shall
have been paid in full and until the Lenders' commitments to extend credit
under this Agreement and any other Credit Document shall have been
irrevocably terminated, the Holding Company and its Subsidiaries will
comply with the following provisions:
6.1. Taxes and Other Charges; Accounts Payable.
6.1.1. Taxes and Other Charges. Each of the Holding Company
and its Subsidiaries shall duly pay and discharge, or cause to be
paid and discharged, before the same becomes in arrears, all taxes,
assessments and other governmental charges imposed upon such Person
and its properties, sales or activities, or upon the income or
profits therefrom, as well as all claims for labor, materials or
supplies which if unpaid might by law become a Lien upon any of its
property; provided, however, that any such tax, assessment, charge or
claim need not be paid if the validity or amount thereof shall at the
time be contested in good faith by appropriate proceedings and if
such Person shall, in accordance with GAAP, have set aside on its
books adequate reserves with respect thereto; and provided, further,
that each of the Holding Company and its Subsidiaries shall pay or
bond, or cause to be paid or bonded, all such taxes, assessments,
charges or other governmental claims immediately upon the
commencement of proceedings to foreclose any Lien which may have
attached as security therefor (except to the extent such proceedings
have been dismissed or stayed).
6.1.2. Accounts Payable. Each of the Holding Company and
its Subsidiaries shall promptly pay when due, or in conformity with
customary trade terms, all accounts payable incident to the
operations of such Person not referred to in Section 6.1.1; provided,
however, that any such accounts payable need not be paid if the
validity or amount thereof shall at the time be contested in good
faith and if such Person shall, in accordance with GAAP, have set
aside on its books adequate reserves with respect thereto.
6.2. Conduct of Business, etc.
6.2.1. Types of Business. The Holding Company and its
Subsidiaries shall not substantially engage in any business other
than (a) children's consumer and commercial indoor and outdoor play
products, (b) new products that utilize the Borrower's metal
fabrication or plastic forming core competencies or (c) substantially
similar products to those identified in clauses (a) and (b) that may
be sold through home centers, mass merchants or commercial and
industrial trade classes, and other activities related thereto.
6.2.2. Maintenance of Properties. Each of the Holding
Company and its Subsidiaries:
(a) shall keep its properties in such repair, working order
and condition, and shall from time to time make such repairs,
replacements, additions and improvements thereto as are necessary for
the efficient operation of its businesses and shall comply at all
times in all material respects with all material franchises, licenses
and leases to which it is party so as to prevent any loss or
forfeiture thereof or thereunder, except where (i) compliance is at
the time being contested in good faith by appropriate proceedings and
(ii) failure to comply with the provisions being contested has not
resulted, and does not create a material risk of resulting, in the
aggregate in any Material Adverse Change; and
(b) shall do all things necessary to preserve, renew and
keep in full force and effect and in good standing its legal
existence and authority necessary to continue its business; provided,
however, that this Section 6.2.2(b) shall not prevent the merger,
consolidation or liquidation of Subsidiaries permitted by Section
6.11.
6.2.3. Statutory Compliance. Each of the Holding Company
and its Subsidiaries shall comply in all material respects with all
valid and applicable statutes, laws, ordinances, zoning and building
codes and other rules and regulations of the United States of
America, of the states and territories thereof and their counties,
municipalities and other subdivisions and of any foreign country or
other jurisdictions applicable to such Person, except where (a)
compliance therewith shall at the time be contested in good faith by
appropriate proceedings and (b) failure so to comply with the
provisions being contested has not resulted, and does not create a
material risk of resulting, in the aggregate in any Material Adverse
Change.
6.2.4. Compliance with Material Agreements. Each of the
Holding Company and its Subsidiaries shall comply in all material
respects with the Material Agreements (to the extent not in violation
of the other provisions of this Agreement or any other Credit
Document). Without the prior written consent of the Required
Lenders, no Material Agreement shall be amended, modified, waived or
terminated in any manner that would have in any material respect an
adverse effect on the interests of the Lenders.
6.3. Insurance.
6.3.1. Business Interruption Insurance. Each of the Holding
Company and its Subsidiaries shall maintain with financially sound
and reputable insurers insurance related to interruption of business,
either for loss of revenues or for extra expense, in the manner
customary for businesses of similar size engaged in similar
activities.
6.3.2. Property Insurance. Each of the Holding Company and
its Subsidiaries shall keep its assets which are of an insurable
character insured by financially sound and reputable insurers against
theft and fraud and against loss or damage by fire, explosion and
hazards insured against by extended coverage to the extent, in
amounts and with deductibles at least as favorable as those generally
maintained by businesses of similar size engaged in similar
activities.
6.3.3. Liability Insurance. Each of the Holding Company and
its Subsidiaries shall maintain with financially sound and reputable
insurers insurance against liability for hazards, risks and liability
to persons and property, including product liability insurance, to
the extent, in amounts and with deductibles at least as favorable as
those maintained as of the date hereof and as generally maintained by
businesses of similar size engaged in similar activities; provided,
however, that it may effect workers' compensation insurance or
similar coverage with respect to operations in any particular state
or other jurisdiction through an insurance fund operated by such
state or jurisdiction or by meeting the self-insurance requirements
of such state or jurisdiction.
6.3.4. Flood Insurance. Each of the Holding Company and its
Subsidiaries shall at all times keep each parcel of real property
owned or leased by it which is (a) included in the Credit Security,
(b) in an area determined by the Director of the Federal Emergency
Management Agency to be subject to special flood hazard and (c) in a
community participating in the National Flood Insurance Program,
insured against such special flood hazards in an amount equal to the
maximum limit of coverage available for the particular type of
property under the federal National Flood Insurance Act of 1968.
6.4. Financial Statements and Reports. Each of the Holding Company
and its Subsidiaries shall maintain a system of accounting in which
correct entries shall be made of all transactions in relation to their
business and affairs in accordance with generally accepted accounting
practice. The fiscal year of the Holding Company and its Subsidiaries
shall end on December 31 in each year and the fiscal quarters of the
Holding Company and its Subsidiaries shall end on March 31, June 30,
September 30 and December 31 in each year.
6.4.1. Annual Reports. The Holding Company shall furnish to
the Lenders as soon as available, and in any event within 90 days
after the end of each fiscal year, the Consolidated and Consolidating
balance sheets of the Holding Company and its Subsidiaries and of the
Borrower and its Subsidiaries as at the end of such fiscal year, the
Consolidated and Consolidating statements of income and Consolidated
statements of changes in shareholders' equity and of cash flows of
the Holding Company and its Subsidiaries and of the Borrower and its
Subsidiaries for such fiscal year (all in reasonable detail) and
together, in the case of Consolidated financial statements, with
comparative figures for the immediately preceding fiscal year, all
accompanied by:
(a) Reports of Ernst & Young LLP (or, if they cease to be
auditors of the Holding Company and its Subsidiaries, other
independent certified public accountants of recognized national
standing reasonably satisfactory to the Required Lenders), containing
no material qualification, to the effect that they have audited the
foregoing Consolidated financial statements in accordance with
generally accepted auditing standards and that such Consolidated
financial statements present fairly, in all material respects, the
financial position of the Holding Company and its Subsidiaries and of
the Borrower and its Subsidiaries covered thereby at the dates
thereof and the results of their operations for the periods covered
thereby in conformity with GAAP.
(b) The statement of such accountants that they have caused
this Agreement to be reviewed and that in the course of their audit
of the Holding Company and its Subsidiaries no facts have come to
their attention that cause them to believe that any Default exists
and in particular that they have no knowledge of any Default under
Sections 6.5 through 6.20 or, if such is not the case, specifying
such Default and the nature thereof. This statement is furnished by
such accountants with the understanding that the examination of such
accountants cannot be relied upon to give such accountants knowledge
of any such Default except as it relates to accounting or auditing
matters within the scope of their audit.
(c) A certificate of the Holding Company signed by a
Financial Officer to the effect that such officer has caused this
Agreement to be reviewed and has no knowledge of any Default, or if
such officer has such knowledge, specifying such Default and the
nature thereof, and what action the Holding Company has taken, is
taking or proposes to take with respect thereto.
(d) Computations by the Holding Company comparing the
financial statements referred to above with the most recent budget
for such fiscal year furnished to the Lenders in accordance with
Section 6.4.5.
(e) Computations by the Holding Company in substantially the
form of Exhibit 6.4 demonstrating, as of the end of such fiscal year,
compliance with the Computation Covenants, certified by a Financial
Officer.
(f) Calculations, as at the end of such fiscal year, of (i)
the Accumulated Benefit Obligations for each Plan covered by Title IV
of ERISA (other than Multiemployer Plans) and (ii) the fair market
value of the assets of such Plan allocable to such benefits.
(g) Supplements to Exhibits 7.1 and 7.3, exhibit 3.3 to the
Guarantee and Security Agreement and exhibit 3.2 to the Guarantee and
Pledge Agreement showing any changes in the information set forth in
such exhibits not previously furnished to the Lenders in writing, as
well as any changes in the Charter, Bylaws or incumbency of officers
of the Obligors from those previously certified to the Agent.
(h) In the event of a change in GAAP after December 31,
1995, computations by the Holding Company, certified by a Financial
Officer, reconciling the financial statements referred to above with
financial statements prepared in accordance with GAAP as applied to
the other covenants in Section 6 and related definitions.
(i) In reasonable detail, management's discussion and
analysis of the results of operations and the financial condition of
the Holding Company and its Subsidiaries and the Borrower and its
Subsidiaries as at the end of and for the year covered by such
financial statements.
6.4.2. Quarterly Reports. The Holding Company shall furnish
to the Lenders as soon as available and, in any event, within 45 days
after the end of each of the first three fiscal quarters of the
Holding Company, the internally prepared Consolidated and
Consolidating balance sheets of the Holding Company and its
Subsidiaries and the Borrower and its Subsidiaries as of the end of
such fiscal quarter, the Consolidated and Consolidating statements of
income and Consolidated statements of changes in shareholders' equity
and of cash flows of the Holding Company and its Subsidiaries and the
Borrower and its Subsidiaries for such fiscal quarter and for the
portion of the fiscal year then ended (all in reasonable detail) and
together, in the case of Consolidated statements, with comparative
figures for the same period in the preceding fiscal year, all
accompanied by:
(a) A certificate of the Holding Company signed by a
Financial Officer to the effect that such Consolidated financial
statements have been prepared in accordance with GAAP and present
fairly, in all material respects, the financial position of the
Holding Company and its Subsidiaries and the Borrower and its
Subsidiaries covered thereby at the dates thereof and the results of
their operations for the periods covered thereby, subject only to
normal year-end audit adjustments and the addition of footnotes.
(b) A certificate of the Holding Company signed by a
Financial Officer to the effect that such officer has caused this
Agreement to be reviewed and has no knowledge of any Default, or if
such officer has such knowledge, specifying such Default and the
nature thereof and what action the Holding Company has taken, is
taking or proposes to take with respect thereto.
(c) Computations by the Holding Company comparing the
financial statements referred to above with the most recent budget
for the period covered thereby furnished to the Lenders in accordance
with Section 6.4.5.
(d) Computations by the Holding Company in substantially the
form of Exhibit 6.4 demonstrating, as of the end of such quarter,
compliance with the Computation Covenants, certified by a Financial
Officer.
(e) Supplements to Exhibits 7.1 and 7.3, exhibit 3.3 to the
Guarantee and Security Agreement and exhibit 3.2 to the Guarantee and
Pledge Agreement showing any changes in the information set forth in
such exhibits not previously furnished to the Lenders in writing, as
well as any changes in the Charter, Bylaws or incumbency of officers
of the Obligors from those previously certified to the Agent.
(f) In the event of a change in GAAP after December 31,
1995, computations by the Holding Company, certified by a Financial
Officer, reconciling the financial statements referred to above with
financial statements prepared in accordance with GAAP as applied to
the other covenants in Section 6 and related definitions.
(g) In reasonable detail, management's discussion and
analysis of the results of operations and financial condition of the
Holding Company and its Subsidiaries and the Borrower and its
Subsidiaries as at the end of and for the fiscal period covered by
the financial statements referred to above.
6.4.3. Monthly Reports. The Borrower shall furnish to the
Lenders as soon as available and, in any event, within 25 days after
the end of each month, the internally prepared Consolidated balance
sheet of the Borrower and its Subsidiaries as at the end of such
month and the Consolidated statement of income of the Borrower and
its Subsidiaries for such month (all in reasonable detail), all
accompanied by a certificate of the Holding Company signed by a
Financial Officer to the effect that such financial statements were
prepared in accordance with GAAP and present fairly, in all material
respects, the financial position of the Persons covered thereby at
the dates thereof and the results of their operations for the periods
covered thereby, subject only to normal year-end audit adjustments
and the addition of footnotes.
6.4.4. Borrowing Base Reports. The Borrower shall furnish
to the Lenders, as soon as available and, in any event (a) within 20
days after the end of each month, or (b) within 10 days following any
request by the Agent if more frequently than monthly, but not more
frequently than once per week, a certificate of a Financial Officer
supplying computations of the Borrowing Base at the end of such month
(or week, as the case may be).
6.4.5. Other Reports. The Holding Company shall promptly
furnish to the Lenders:
(a) As soon as prepared and in any event before the
beginning of each fiscal year, an annual budget and operating
projections for such fiscal year of the Holding Company and its
Subsidiaries, prepared in a manner consistent with the manner in
which the financial projections described in Section 7.2.1 were
prepared.
(b) Any material updates of such budget and projections.
(c) Any management letters furnished to the Holding Company
or any of its Subsidiaries by the Holding Company's auditors.
(d) All budgets, projections, statements of operations and
other reports furnished generally to the shareholders of the Holding
Company.
(e) Such registration statements, proxy statements and
reports, including Forms S-1, S-2, S-3, S-4, 10-K, 10-Q and 8-K, as
may be filed by the Holding Company or any of its Subsidiaries with
the Securities and Exchange Commission.
(f) Any 90-day letter or 30-day letter from the federal
Internal Revenue Service (or the equivalent notice received from
state or other taxing authorities) asserting tax deficiencies against
the Holding Company or any of its Subsidiaries.
6.4.6. Notice of Litigation, Defaults, etc. The Holding
Company shall promptly furnish to the Lenders notice of any
litigation or any administrative or arbitration proceeding (a) which
creates a material risk of resulting, after giving effect to any
applicable insurance, in the payment by the Holding Company and its
Subsidiaries of more than $750,000 or (b) which results, or creates a
material risk of resulting, in a Material Adverse Change. Promptly
upon acquiring knowledge thereof, the Holding Company shall notify
the Lenders of the existence of any Default or Material Adverse
Change, specifying the nature thereof and what action the Holding
Company or any Subsidiary has taken, is taking or proposes to take
with respect thereto.
6.4.7. ERISA Reports. The Holding Company shall furnish to
the Lenders as soon as available the following items with respect to
any Plan:
(a) any request for a waiver of the funding standards or an
extension of the amortization period,
(b) any reportable event (as defined in section 4043 of
ERISA), unless the notice requirement with respect thereto has been
waived by regulation,
(c) any notice received by any ERISA Group Person that the
PBGC has instituted or intends to institute proceedings to terminate
any Plan, or that any Multiemployer Plan is insolvent or in
reorganization,
(d) notice of the possibility of the termination of any Plan
by its administrator pursuant to section 4041 of ERISA, and
(e) notice of the intention of any ERISA Group Person to
withdraw, in whole or in part, from any Multiemployer Plan.
6.4.8. Other Information; Audit. From time to time at
reasonable intervals upon request of any authorized officer of any
Lender, each of the Holding Company and its Subsidiaries shall
furnish to such Lender such other information regarding the business,
assets, financial condition, income or prospects of the Holding
Company and its Subsidiaries as such officer may reasonably request,
including copies of all tax returns, licenses, agreements, leases and
instruments to which any of the Holding Company or its Subsidiaries
is party. Each Lender's authorized officers and representatives
shall have the right during normal business hours upon reasonable
notice and at reasonable intervals to examine the books and records
of the Holding Company and its Subsidiaries, to make copies and notes
therefrom for the purpose of ascertaining compliance with or
obtaining enforcement of this Agreement or any other Credit Document.
The Agent, upon reasonable advance notice, may undertake to have the
Borrower and its Subsidiaries reviewed by the Agent's commercial
financial examiners and fixed asset appraisers.
6.5. Certain Financial Tests.
6.5.1. Consolidated Net Worth. Consolidated Net Worth shall
at all times exceed the sum of (a) $3,800,000 plus (b) the amount by
which Consolidated Net Worth has been increased after the Initial
Closing Date as a result of capital contributions, the issuance of
capital stock or partnership interests of the Holding Company or any
of its Subsidiaries, the issuance of warrants, options or other
rights to acquire such capital stock or partnership interests or the
exercise of warrants, options or other rights or the conversion of
securities into such capital stock plus (c) 75% of Consolidated Net
Income (if positive) for each fiscal quarter of the Holding Company
after March 31, 1997.
6.5.2. Consolidated EBITDA. For each period of four
consecutive fiscal quarters of the Holding Company, Consolidated
EBITDA shall equal or exceed the amount specified in the table below.
Period Ending Amount
March 31, 1997 through
March 31 , 1998 $16,000,000
June 30, 1998 through
September 30, 1998 $16,750,000
December 31, 1998 through
March 31, 1999 $17,500,000
June 30, 1999 through
September 30, 1999 $18,250,000
December 31, 1999 through
March 31, 2000 $19,000,000
June 30, 2000 through
September 30, 2000 $19,750,000
December 31, 2000 through
March 31, 2001 $20,500,000
June 30, 2001 through
September 30, 2001 $21,000,000
December 31, 2001 through
March 31, 2002 $21,500,000
June 30, 2002 through
September 30, 2002 $22,000,000
December 31, 2002 and thereafter
$22,500,000
6.5.3. Consolidated Total Debt to Consolidated EBITDA.
Consolidated Total Debt shall not on any date exceed the percentage
set forth in the table below of Consolidated EBITDA for the most
recently completed period of four consecutive fiscal quarters for
which financial reports have been (or are required to have been)
furnished to the Lenders in accordance with Section 6.4.1 or 6.4.2.
Period Ending Percentage
June 30, 1997 through
September 30, 1997 450%
December 31, 1997 through
March 31, 1998 425%
June 30, 1998 through
September 30, 1998 405%
December 31, 1998 through
March 31, 1999 365%
June 30, 1999 through
September 30, 1999 345%
December 31, 1999 through
March 31, 2000 310%
June 30, 2000 through
September 30, 2000 300%
December 31, 2000 through
March 31, 2001 275%
June 30, 2001 through
September 30, 2001 265%
December 31, 2001 and thereafter 250%
6.5.4. Consolidated Adjusted EBITDA Plus Rent to Consolidated
Fixed Charges Plus Rent. For each period of four consecutive fiscal
quarters of the Holding Company, (a) the sum of Consolidated Adjusted
EBITDA plus one third of Consolidated Rental Obligations shall equal
or exceed the percentage specified in the table below of (b) the sum
of Consolidated Fixed Charges plus one third of Consolidated Rental
Obligations:
Period Ending Percentage
September 30, 1997 through
March 31, 2001 110%
June 30, 2001 and thereafter 115%
6.5.5. Capital Expenditures. The aggregate amount of
Capital Expenditures in any fiscal year of the Holding Company ending
on or after December 31, 1996 shall not exceed the sum of (a) the
amount set forth in the table below plus (b) the amount by which
Capital Expenditures made in the immediately preceding fiscal year
were less than the amount specified in the table below for such
preceding fiscal year.
Fiscal Year Ending Amount
December 31, 1997 $2,750,000
December 31, 1998 $2,750,000
December 31, 1999 $2,750,000
Thereafter $3,000,000
6.6. Indebtedness. Neither the Holding Company nor any of its
Subsidiaries shall create, incur, assume or otherwise become or remain
liable with respect to any Indebtedness (or become contractually committed
to do so), except the following:
6.6.1. Indebtedness in respect of the Credit Obligations.
6.6.2. Guarantees permitted by Section 6.7.
6.6.3. Current liabilities, other than Financing Debt,
incurred in the ordinary course of business.
6.6.4. To the extent that payment thereof shall not at the
time be required by Section 6.1, Indebtedness in respect of taxes,
assessments, governmental charges and claims for labor, materials and
supplies.
6.6.5. Indebtedness secured by Liens of carriers,
warehouses, mechanics and landlords permitted by Sections 6.8.5 and
6.8.6.
6.6.6. Indebtedness in respect of judgments or awards (a)
which have been in force for less than the applicable appeal period
or (b) in respect of which the Holding Company or any Subsidiary
shall at the time in good faith be prosecuting an appeal or
proceedings for review and, in the case of each of clauses (a) and
(b), the Holding Company or such Subsidiary shall have taken
appropriate reserves therefor in accordance with GAAP and execution
of such judgment or award shall not be levied.
6.6.7. To the extent permitted by Section 6.8.7,
Indebtedness in respect of Capitalized Lease Obligations or secured
by purchase money security interests; provided, however, that the
aggregate principal amount of all Indebtedness permitted by this
Section 6.6.7 at any one time outstanding shall not exceed
$1,000,000.
6.6.8. Indebtedness in respect of deferred taxes arising in
the ordinary course of business.
6.6.9. Indebtedness in respect of intercompany loans and
advances among the Holding Company and its Subsidiaries which are not
prohibited by Section 6.9.
6.6.10. The Seller Subordinated Debt, the Convertible
Subordinated Debentures, the Subordinated Bridge Notes and the Senior
Subordinated Notes.
6.6.11. Unfunded pension liabilities and obligations with
respect to Plans so long as the Holding Company and all ERISA Group
Persons are in compliance with Section 6.16.
6.6.12. Other Indebtedness outstanding on the date hereof
and described in Exhibit 7.3 and (except with respect to the Prior
Credit Agreements, which shall be terminated on the Initial Closing
Date) all renewals and extensions thereof not in excess of the amount
thereof outstanding immediately prior to such renewal or extension.
6.6.13. Indebtedness (other than Financing Debt) in addition
to the foregoing; provided, however, that the aggregate amount of all
such Indebtedness at any one time outstanding shall not exceed
$2,000,000, minus the amount of Indebtedness then outstanding under
Section 6.6.7.
6.7. Guarantees; Letters of Credit. Neither the Holding Company
nor any of its Subsidiaries shall become or remain liable with respect to
any Guarantee, including reimbursement obligations, whether contingent or
matured, under letters of credit or other financial guarantees by third
parties (or become contractually committed do to so), except the
following:
6.7.1. Letters of Credit and Guarantees of the Credit
Obligations.
6.7.2. Guarantees by the Holding Company of Indebtedness and
other obligations incurred by its Subsidiaries and permitted by
Section 6.6.
6.7.3. The Borrower and its Subsidiaries may join a
consolidated group for federal income tax purposes that includes only
the Holding Company and its Subsidiaries so long as the liability of
the Borrower and its Subsidiaries is limited by a tax sharing
agreement among the members of such group to the extent provided in
Section 6.10.6.
6.7.4. Guarantees by the Guarantors of the Senior
Subordinated Notes.
6.8. Liens. Neither the Holding Company nor any of its
Subsidiaries shall create, incur or enter into, or suffer to be created or
incurred or to exist, any Lien (or become contractually committed to do
so), except the following:
6.8.1. Liens on the Credit Security that secure the Credit
Obligations.
6.8.2. Liens to secure taxes, assessments and other
governmental charges, to the extent that payment thereof shall not at
the time be required by Section 6.1.
6.8.3. Deposits or pledges made (a) in connection with, or
to secure payment of, workers' compensation, unemployment insurance,
old age pensions or other social security, (b) in connection with
casualty insurance maintained in accordance with Section 6.3, (c) to
secure the performance of bids, tenders, contracts (other than
contracts relating to Financing Debt) or leases, (d) to secure
statutory obligations or surety or appeal bonds, (e) to secure
indemnity, performance or other similar bonds in the ordinary course
of business or (f) in connection with contested amounts to the extent
that payment thereof shall not at that time be required by Section
6.1.
6.8.4. Liens in respect of judgments or awards, to the
extent that such judgments or awards are permitted by Section 6.6.6
but only to the extent that such Liens are junior to the Liens on the
Credit Security granted to secure the Credit Obligations.
6.8.5. Liens of carriers, warehouses, mechanics and similar
Liens, in each case (a) in existence less than 90 days from the date
of creation thereof or (b) being contested in good faith by the
Holding Company or any Subsidiary in appropriate proceedings (so long
as the Holding Company or such Subsidiary shall, in accordance with
GAAP, have set aside on its books adequate reserves with respect
thereto).
6.8.6. Encumbrances in the nature of (a) zoning
restrictions, (b) easements, (c) restrictions of record on the use of
real property, (d) landlords' and lessors' Liens on rented premises
and (e) restrictions on transfers or assignment of leases, which in
each case do not materially detract from the value of the encumbered
property or impair the use thereof in the business of the Holding
Company or any Subsidiary.
6.8.7. Liens constituting (a) purchase money security
interests (including mortgages, conditional sales, Capitalized Leases
and any other title retention or deferred purchase devices) in real
property, interests in leases or tangible personal property (other
than inventory) existing or created on the date on which such
property is acquired, and (b) the renewal, extension or refunding of
any security interest referred to in the foregoing clause (a) in an
amount not to exceed the amount thereof remaining unpaid immediately
prior to such renewal, extension or refunding; provided, however,
that (i) each such security interest shall attach solely to the
particular item of property so acquired, and the principal amount of
Indebtedness (including Indebtedness in respect of Capitalized Lease
Obligations) secured thereby shall not exceed the cost (including all
such Indebtedness secured thereby, whether or not assumed) of such
item of property; and (ii) the aggregate principal amount of all
Indebtedness secured by Liens permitted by this Section 6.8.7 shall
not exceed the amount permitted by Section 6.6.7.
6.8.8. Restrictions under federal and state securities laws
on the transfer of securities.
6.8.9. Liens as in effect on the date hereof described in
Exhibit 7.3 and securing Indebtedness permitted by Section 6.6.12.
6.9. Investments and Acquisitions. Neither the Holding Company nor
any of its Subsidiaries shall have outstanding, acquire or hold any
Investment (including any Investment consisting of the acquisition of any
business) (or become contractually committed to do so), except the
following:
6.9.1. Investments of the Holding Company and its
Subsidiaries in Wholly Owned Subsidiaries which are Guarantors or the
Borrower as of the date hereof or which have become Wholly Owned
Subsidiaries and Guarantors after the date hereof to the extent
permitted by the other provisions of this Section 6.9; provided,
however, that no such Investment shall involve the transfer by the
Holding Company or the Borrower of any material assets other than
cash.
6.9.2. Intercompany loans and advances from any Wholly Owned
Subsidiary to the Borrower but in each case only to the extent
reasonably necessary for Consolidated tax planning.
6.9.3. Investments in Cash Equivalents.
6.9.4. Guarantees permitted by Section 6.7.
6.9.5. The acquisition on the Initial Closing Date
contemplated by the Acquisition Agreement.
6.9.6. So long as immediately before and after giving effect
thereto no Default exists, Investments by the Borrower and its Wholly
Owned Subsidiaries consisting of the negotiated acquisition of other
Persons and businesses; provided; however, that the amount of all
such Investments shall not exceed (a) $1,500,000 at all times other
than the period described in clause (b) below and (b) $3,500,000
after the end of the first fiscal quarter when the ratio of
Consolidated Total Debt to Consolidated EBITDA for the preceding four
fiscal quarters is less than 325%.
6.9.7. The Holding Company may acquire Unrestricted
Affiliates so long as (a) immediately before and after giving effect
thereto no Default exists, (b) the board of directors of the Person
being acquired shall have approved such acquisition and (c) the
aggregate amount of all Investments made pursuant to this Section
6.9.7 since the date hereof shall not exceed 25% of the Net Equity
Proceeds received after the date hereof.
6.9.8. Loans and advances to employees of the Borrower and
its Subsidiaries to enable them to purchase capital stock of the
Holding Company in an amount not to exceed $250,000 at any one time
outstanding.
6.9.9. Loans and advances to employees of the Borrower and
its Subsidiaries for business expenses or personal needs in an amount
not to exceed $500,000 at any one time outstanding.
6.10. Distributions. Neither the Holding Company nor any of its
Subsidiaries shall make any Distribution (or become contractually
committed to do so), except the following:
6.10.1. So long as immediately before and after giving
effect thereto no Default exists, Subsidiaries of the Borrower may
make Distributions to the Borrower or any Wholly Owned Subsidiary of
the Borrower and the Borrower and its Subsidiaries may make
Investments permitted by Sections 6.9.1 and 6.9.2.
6.10.2. The Borrower may make scheduled, mandatory cash
payments of interest on the Senior Subordinated Notes and the Seller
Subordinated Debt, and may pay mandatory payments of principal on the
Senior Subordinated Notes as scheduled of $50,000 on September 13,
2002, $250,000 on March 13, 2003, $250,000 on September 13, 2003,
$5,700,000 on March 13, 2004 and $6,250,000 on March 13, 2005 and
upon a mandatory put of the Senior Subordinated Notes and "Put
Securities" (as defined therein) under the Securities Purchase
Agreements upon a "Change in Control" (as defined therein), all in
accordance with their terms, including subordination terms.
6.10.3. So long as immediately before and after giving
effect thereto no Default exists, the Borrower may make Distributions
to the Holding Company of PIK Interest or of cash in an amount equal
to the scheduled, mandatory cash payments of interest on the
Convertible Subordinated Debentures in accordance with their terms,
including subordination terms; provided, however, that (a) no cash
payments will be made in respect of the Convertible Subordinated
Debentures prior to February 15, 1999 and (b) the aggregate cash
payments made in respect of the Convertible Subordinated Debentures
shall not exceed the lesser of (i) $1,110,000 per annum or (ii) 10%
of the outstanding principal amount of the Convertible Subordinated
Debentures at the time such payment is made.
6.10.4. The Borrower may make Distributions to the Holding
Company in an aggregate amount not exceeding (a) so long as
immediately before and after giving effect thereto no Default exists,
$75,000 per calendar quarter to pay management and consulting fees to
Glencoe and Desai Capital Management Incorporated pursuant to the
Management Consulting Agreement dated as of February 16, 1996 among
the Borrower, the Holding Company and such Persons and (b) amounts
paid by such Persons to third parties in performing consulting
services under such Management Consulting Agreement.
6.10.5. So long as immediately before and after giving
effect thereto no Default exists, the Borrower may make Distributions
up to $200,000 per year to the Holding Company to repurchase Holding
Company stock and options to acquire such stock owned by employees
whose employment with the Borrower and its Subsidiaries has
terminated.
6.10.6. So long as immediately before and after giving
effect thereto no Default exists, the Borrower may make Distributions
to the Holding Company on account of the proportionate share of the
income taxes of the Holding Company and its Subsidiaries properly
allocable (to the reasonable satisfaction of the Agent) to the
Borrower and its Subsidiaries.
6.10.7. The Holding Company may issue common stock in
payment of principal of and accrued interest on the Subordinated
Bridge Notes and, so long as immediately before and after giving
effect thereto no Default exists, the Holding Company may repay
principal of the Subordinated Bridge Notes with the net cash proceeds
from the issuance of common stock.
Upon receipt of Distributions in cash by the Borrower to the Holding
Company permitted by Sections 6.10.3, 6.10.4, 6.10.5 and 6.10.6, the
Holding Company shall promptly make the payments contemplated by such
respective Sections.
6.11. Asset Dispositions and Mergers. Neither the Borrower nor any
of its Subsidiaries shall merge or enter into a consolidation or sell,
lease, sell and lease back, sublease or otherwise dispose of any of its
assets (or become contractually committed to do so), except the following:
6.11.1. The Borrower and any of its Subsidiaries may sell or
otherwise dispose of (a) inventory and Cash Equivalents in the
ordinary course of business, (b) tangible assets to be replaced in
the ordinary course of business within six months by other tangible
assets of equal or greater value and (c) tangible assets that are no
longer used or useful in the business of the Borrower or such
Subsidiary; provided, however, that the aggregate fair market value
(book value, if greater) of all assets disposed of in accordance with
the foregoing clauses (b) and (c) of Section 6.11.1 shall not exceed
an aggregate of $250,000 per year.
6.11.2. Any Wholly Owned Subsidiary of the Borrower may
merge or be liquidated into the Borrower or any other Wholly Owned
Subsidiary of the Borrower so long as after giving effect to any such
merger to which the Borrower is a party the Borrower shall be the
surviving or resulting Person.
6.11.3. Mergers constituting Investments permitted by
Sections 6.9.5 or 6.9.6.
6.11.4. So long as immediately before and after giving
effect thereto no Default exists and the Net Asset Sale Proceeds
thereof are applied to repay the Loan as required by Section 4.3.3,
the Borrower and its Subsidiaries may sell for fair value assets
during any fiscal year having a fair market value (book value, if
greater) not exceeding $2,000,000; provided, however, that the sum of
the fair market values (book values, if greater) for all assets sold
pursuant to this Section 6.11.4 since the date hereof shall not
exceed $5,000,000.
6.11.5. Licensing of products and intangible assets for fair
value in the ordinary course of business.
6.12. Issuance of Stock by Subsidiaries; Subsidiary Distributions.
6.12.1. Issuance of Stock by Subsidiaries. No Subsidiary
shall issue or sell any shares of its capital stock or other evidence
of beneficial ownership to any Person other than (a) the Holding
Company or any Wholly Owned Subsidiary of the Holding Company, which
shares shall have been pledged to the Agent as part of the Credit
Security to the extent required by the Guarantee and Security
Agreement and (b) directors of Subsidiaries as qualifying shares to
the extent required by Legal Requirements.
6.12.2. No Restrictions on Subsidiary Distributions. Except
for this Agreement, the Credit Documents and the Securities Purchase
Agreements and related documents, neither the Holding Company nor any
Subsidiary shall enter into or be bound by any agreement (including
covenants requiring the maintenance of specified amounts of net worth
or working capital) restricting the right of any Subsidiary to make
Distributions or extensions of credit to the Borrower (directly or
indirectly through another Subsidiary).
6.13. Voluntary Prepayments of Other Indebtedness. Neither the
Holding Company nor any of its Subsidiaries shall make any voluntary
prepayment of principal of or interest on any Financing Debt (other than
the Credit Obligations) or make any voluntary redemptions or repurchases
of Financing Debt (other than the Credit Obligations); provided, however,
that the Holding Company may make such payments or redemptions solely
through payments in the form of its common stock.
6.14. Derivative Contracts. Neither the Holding Company nor any of
its Subsidiaries shall enter into any Interest Rate Protection Agreement,
foreign currency exchange contract or other financial or commodity
derivative contracts except to provide hedge protection for an underlying
economic transaction in the ordinary course of business.
6.15. Negative Pledge Clauses. Neither the Holding Company nor any
of its Subsidiaries shall enter into any agreement, instrument, deed or
lease which prohibits or limits the ability of the Holding Company or any
of its Subsidiaries to create, incur, assume or suffer to exist any Lien
upon any of their respective properties, assets or revenues, whether now
owned or hereafter acquired, or which requires the grant of any collateral
for such obligation if collateral is granted for another obligation,
except the following:
6.15.1. This Agreement and the other Credit Documents.
6.15.2. Covenants contained in the Securities Purchase
Agreements with respect to the Senior Subordinated Notes.
6.15.3. Covenants in documents creating Liens permitted by
Section 6.8 prohibiting further Liens on the assets encumbered
thereby.
6.16. ERISA, etc. Each of the Holding Company and its Subsidiaries
shall comply, and shall cause all ERISA Group Persons to comply, in all
material respects, with the provisions of ERISA and the Code applicable to
each Plan. Each of the Holding Company and its Subsidiaries shall meet,
and shall cause all ERISA Group Persons to meet, all minimum funding
requirements applicable to them with respect to any Plan pursuant to
section 302 of ERISA or section 412 of the Code, without giving effect to
any waivers of such requirements or extensions of the related amortization
periods which may be granted, except where the failure to comply with such
requirements would not be reasonably likely to result in a Material
Adverse Change to the Holding Company and its Subsidiaries. At no time
shall the Accumulated Benefit Obligations under any Plan that is not a
Multiemployer Plan exceed the fair market value of the assets of such Plan
allocable to such benefits by more than $500,000. The Holding Company and
its Subsidiaries shall not withdraw, and shall cause all other ERISA Group
Persons not to withdraw, in whole or in part, from any Multiemployer Plan
so as to give rise to withdrawal liability exceeding $500,000 in the
aggregate. At no time shall the actuarial present value of unfunded
liabilities of the Holding Company and its Subsidiaries for post-
employment health care benefits other than COBRA continuation coverage
benefits, whether or not provided under a Plan, calculated in a manner
consistent with Statement No. 106 of the Financial Accounting Standards
Board, exceed $500,000.
6.17. Transactions with Affiliates. Neither the Holding Company nor
any of its Subsidiaries shall effect any transaction with any of their
respective Affiliates (except for the Borrower and its Subsidiaries) on a
basis less favorable to the Holding Company and its Subsidiaries than
would be the case if such transaction had been effected with a
non-Affiliate; provided, however, that the Holding Company may pay
management fees to Glencoe and Desai Capital Management Incorporated in an
aggregate amount not exceeding $300,000 during any fiscal year in
accordance with Section 6.10.4.
6.18. Interest Rate Protection. Within 90 days after the Initial
Closing Date, the Borrower shall obtain and thereafter keep in effect one
or more Interest Rate Protection Agreements conforming to International
Securities Dealers Association standards, each in form and substance
reasonably satisfactory to the Agent, covering a notional amount of at
least $20,000,000 in each case for an aggregate period of not less than
two years.
6.19. Environmental Laws.
6.19.1. Compliance with Law and Permits. Each of the
Holding Company and its Subsidiaries shall use and operate all of its
facilities and properties in material compliance with all
Environmental Laws, keep all necessary permits, approvals,
certificates, licenses and other authorizations relating to
environmental matters in effect and remain in material compliance
therewith, and handle all Hazardous Materials in material compliance
with all applicable Environmental Laws.
6.19.2. Notice of Claims, etc. Each of the Holding Company
and its Subsidiaries shall immediately notify the Agent, and provide
copies upon receipt, of all written claims, complaints, notices or
inquiries from governmental authorities relating to the condition of
its facilities and properties or compliance with Environmental Laws,
and shall promptly cure and have dismissed with prejudice to the
reasonable satisfaction of the Agent any actions and proceedings
relating to compliance with Environmental Laws.
6.20. Restricted Operations of Holding Company. The Holding Company
will conduct no operations other than acquiring and owning the capital
stock of the Borrower and Unrestricted Affiliates acquired in accordance
with Section 6.9.7 and activities incidental thereto. The Holding Company
will own no material assets other than the stock of the Borrower and such
Unrestricted Affiliates and cash in an amount equal to 25% of Net Equity
Proceeds as permitted by Section 6.9.7 or expected to be spent or
distributed within 90 days in the ordinary course of business.
7. Representations and Warranties. In order to induce the Lenders to
extend credit to the Borrower hereunder, each of the Holding Company, the
Borrower and the Guarantors jointly and severally represents and warrants
as follows:
7.1. Organization and Business.
7.1.1. The Holding Company. The Holding Company is a duly
organized and validly existing corporation, in good standing under
the laws of Delaware, with all power and authority, corporate or
otherwise, necessary to (a) enter into and perform this Agreement and
each other Credit Document to which it is party, (b) guarantee the
Credit Obligations, (c) grant the Agent for the benefit of the
Lenders the security interests in the Credit Security owned by it to
secure the Credit Obligations and (d) own its properties and carry on
the business now conducted or proposed to be conducted by it.
Certified copies of the Charter and By-laws of the Holding Company
have been previously delivered to the Agent and are correct and
complete. Exhibit 7.1, as from time to time hereafter supplemented
in accordance with Sections 6.4.1 and 6.4.2, sets forth, as of the
later of the date hereof or the end of the most recent fiscal quarter
for which financial statements are required to be furnished in
accordance with such Sections, (i) the jurisdiction of incorporation
of the Holding Company, (ii) the address of the Holding Company's
principal executive office and chief place of business, (iii) each
name, including any trade name, under which the Holding Company
conducts its business and (iv) the jurisdictions in which the Holding
Company keeps tangible personal property.
7.1.2. Subsidiaries. Each Subsidiary of the Holding Company
is duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized, with all power and
authority, corporate or otherwise, necessary to (a) enter into and
perform this Agreement and each other Credit Document to which it is
party, (b) guarantee (in the case of the Borrower, incur) the Credit
Obligations, (c) grant the Agent for the benefit of the Lenders the
security interest in the Credit Security owned by such Subsidiary to
secure the Credit Obligations and (d) own its properties and carry on
the business now conducted or proposed to be conducted by it.
Certified copies of the Charter and By-laws of each Subsidiary of the
Holding Company have been previously delivered to the Agent and are
correct and complete. Exhibit 7.1, as from time to time hereafter
supplemented in accordance with Sections 6.4.1 and 6.4.2, sets forth,
as of the later of the date hereof or the end of the most recent
fiscal quarter for which financial statements are required to be
furnished in accordance with such Sections, (i) the name and
jurisdiction of organization of each Subsidiary of the Holding
Company, (ii) the address of the chief executive office and principal
place of business of each such Subsidiary, (iii) each name under
which each such Subsidiary conducts its business, (iv) each
jurisdiction in which each such Subsidiary keeps tangible personal
property, and (v) the number of authorized and issued shares and
ownership of each such Subsidiary.
7.1.3. Qualification. Each of the Holding Company and its
Subsidiaries is duly and legally qualified to do business as a
foreign corporation or other entity and is in good standing in each
state or jurisdiction in which such qualification is required and is
duly authorized, qualified and licensed under all laws, regulations,
ordinances or orders of public authorities, or otherwise, to carry on
its business in the places and in the manner in which it is
conducted, except for failures to be so qualified, authorized or
licensed which would not in the aggregate result, or create a
material risk of resulting, in any Material Adverse Change.
7.1.4. Capitalization. No options, warrants, conversion
rights, preemptive rights or other statutory or contractual rights to
purchase shares of capital stock or other securities of any
Subsidiary now exist, nor has any Subsidiary authorized any such
right, nor is any Subsidiary obligated in any other manner to issue
shares of its capital stock or other securities.
7.2. Financial Statements and Other Information; Material
Agreements.
7.2.1. Financial Statements and Other Information. The
Holding Company has previously furnished to the Lenders copies of the
following:
(a) The audited Consolidated and unaudited Consolidating
balance sheets of the Holding Company and its Subsidiaries and of the
Borrower and its Subsidiaries as at December 31 in each of 1993, 1994
and 1995 and the audited Consolidated and unaudited Consolidating
statements of income and the audited Consolidated statements of
changes in shareholders' equity and of cash flows of the Holding
Company and its Subsidiaries and of the Borrower and its Subsidiaries
for the fiscal years then ended.
(b) The unaudited Consolidated and Consolidating balance
sheets of the Holding Company and its Subsidiaries and of the
Borrower and its Subsidiaries as at September 30, 1996 and the
unaudited Consolidated statements of income, of changes in
shareholders' equity and of cash flows of the Holding Company and its
Subsidiaries and of the Borrower and its Subsidiaries for the portion
of the fiscal year then ended.
(c) The Holding Company's report on 10-K for its fiscal year
ended December 31, 1995, as filed with the Securities and Exchange
Commission.
(d) The five-year financial and operational projections for
the Holding Company and its Subsidiaries dated December 1996.
(e) Calculations demonstrating pro forma compliance with the
Computation Covenants as of the end of the most recent month or
quarter, as applicable, preceding the date hereof.
(f) Offering Memorandum for the Financing of the Acquisition
of the Borrower presented by Donaldson, Lufkin & Jenrette, dated
December 1996 (the "Offering Memorandum").
The audited Consolidated financial statements (including the
notes thereto) referred to in clause (a) above were prepared in
accordance with GAAP and fairly present in all material respects the
financial position of the Holding Company and its Subsidiaries and of
the Borrower and its Subsidiaries on a Consolidated basis at the
respective dates thereof and the results of their operations for the
periods covered thereby. The unaudited Consolidating financial
statements referred to in clause (a) above and the unaudited
Consolidated and Consolidating financial statements referred to in
clause (b) above were prepared in accordance with GAAP and fairly
present in all material respects the financial position of the
Holding Company and its Subsidiaries and of the Borrower and its
Subsidiaries at the respective dates thereof and the results of their
operations for the periods covered thereby, subject to normal year-
end audit adjustment and the addition of footnotes in the case of
interim financial statements. Neither the Holding Company nor any of
its Subsidiaries has any known contingent liability material to the
Holding Company and its Subsidiaries on a Consolidated basis which is
not reflected in the balance sheets referred to in clauses (a) or (b)
above (or delivered pursuant to Sections 6.4.1 or 6.4.2) or in the
notes thereto.
The Form 10-K referred to in clause (c) above contained all
information required to be contained therein and otherwise complied
in all material respects with the Exchange Act and the rules and
regulations thereunder. Such Form 10-K did not contain any untrue
statement of material fact or omit to state a material fact necessary
in order to make the statements contained therein not misleading in
the light of the circumstances under which they were made.
In the Holding Company's judgment, the financial and
operational projections referred to in clause (d) above constitute a
reasonable basis as of the Initial Closing Date for the assessment of
the future performance of the Holding Company and its Subsidiaries
during the periods indicated therein, it being understood that any
projected financial information represents an estimate, based on
various assumptions, of future results of operations which may or may
not in fact occur.
As of December 1996, the Offering Memorandum did not contain
any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained therein not
misleading in light of the circumstances under which they were made;
provided, however that the descriptions in the Offering Memorandum of
other documents and agreements are intended to be summaries only and
do not provide comprehensive descriptions of the terms and conditions
contained in such documents and agreements.
7.2.2. Material Agreements. The Holding Company has
previously furnished to the Lenders correct and complete copies,
including all exhibits, schedules and amendments thereto, of the
agreements, each as in effect on the date hereof, listed in Exhibit
7.2.2 (the "Material Agreements").
7.3. Agreements Relating to Financing Debt, Investments, etc.
Exhibit 7.3, as from time to time hereafter supplemented in accordance
with Sections 6.4.1 and 6.4.2, sets forth (a) the amounts (as of the dates
indicated in Exhibit 7.3, as so supplemented) of all Financing Debt of the
Holding Company and its Subsidiaries and all agreements which relate to
such Financing Debt, (b) all Liens and Guarantees with respect to such
Financing Debt, (c) all agreements which directly or indirectly require
the Holding Company or any Subsidiary to make any Investment, (d) material
license agreements with respect to the products of the Holding Company and
its Subsidiaries, including the parties thereto and the expiration dates
thereof and (e) all trademarks, tradenames, service marks, service names
and patents registered with the federal Patent and Trademark Office (or
with respect to which applications for such registration have been filed).
The Holding Company has furnished the Lenders with correct and complete
copies of any agreements described in clauses (a) through (e) above
requested by the Required Lenders.
7.4. Changes in Condition. Since December 31, 1995 no Material
Adverse Change has occurred and between December 31, 1995 and the date
hereof, neither the Holding Company nor any Subsidiary of the Holding
Company has entered into any material transaction outside the ordinary
course of business except for the transactions contemplated by this
Agreement and the Material Agreements.
7.5. Title to Assets. The Holding Company and its Subsidiaries
have good and marketable title to all assets necessary for or used in the
operations of their business as now conducted by them and reflected in the
most recent balance sheet referred to in Section 7.2.1 (or the balance
sheet most recently furnished to the Lenders pursuant to Sections 6.4.1 or
6.4.2), and to all assets acquired subsequent to the date of such balance
sheet, subject to no Liens except for Liens permitted by Section 6.8 and
except for assets disposed of as permitted by Section 6.11.
7.6. Operations in Conformity With Law, etc. The operations of the
Holding Company and its Subsidiaries as now conducted or proposed to be
conducted are not in violation of, nor is the Holding Company or its
Subsidiaries in default under, any Legal Requirement presently in effect,
except for such violations and defaults as do not and will not, in the
aggregate, result, or create a material risk of resulting, in any Material
Adverse Change. The Holding Company has received no notice of any such
violation or default and has no knowledge of any basis on which the
operations of the Holding Company or its Subsidiaries, as now conducted
and as currently proposed to be conducted after the date hereof, would be
held so as to violate or to give rise to any such violation or default.
7.7. Litigation. No litigation, at law or in equity, or any
proceeding before any court, board or other governmental or administrative
agency or any arbitrator is pending or, to the knowledge of the Holding
Company, the Borrower or any other Guarantor, threatened which involves
any material risk of any final judgment, order or liability which, after
giving effect to any applicable insurance, has resulted, or creates a
material risk of resulting, in any Material Adverse Change or which seeks
to enjoin the consummation, or which questions the validity, of any of the
transactions contemplated by this Agreement or any other Credit Document.
No judgment, decree or order of any court, board or other governmental or
administrative agency or any arbitrator has been issued against or binds
the Holding Company or any of its Subsidiaries which has resulted, or
creates a material risk of resulting, in any Material Adverse Change.
7.8. Authorization and Enforceability. Each of the Holding Company
and each other Obligor has taken all corporate action required to execute,
deliver and perform this Agreement and each other Credit Document to which
it is party. No consent of stockholders of the Holding Company is
necessary in order to authorize the execution, delivery or performance of
this Agreement or any other Credit Document to which the Holding Company
is party. Each of this Agreement and each other Credit Document
constitutes the legal, valid and binding obligation of each Obligor party
thereto and is enforceable against such Obligor in accordance with its
terms.
7.9. No Legal Obstacle to Agreements. Neither the execution and
delivery of this Agreement or any other Credit Document, nor the making of
any borrowings hereunder, nor the guaranteeing of the Credit Obligations,
nor the securing of the Credit Obligations with the Credit Security, nor
the consummation of any transaction (other than the Acquisition) referred
to in or contemplated by this Agreement or any other Credit Document, nor
the fulfillment of the terms hereof or thereof (other than the
consummation of the Acquisition) or of any other agreement, instrument,
deed or lease contemplated by this Agreement or any other Credit Document
(other than the Acquisition Agreement), has constituted or resulted in or
will constitute or result in:
(a) any breach or termination of the provisions of any
agreement, instrument, deed or lease to which the Holding Company,
any of its Subsidiaries or any other Obligor is a party or by which
it is bound, or of the Charter or By-laws of the Holding Company, any
of its Subsidiaries or any other Obligor;
(b) the violation of any law, statute, judgment, decree or
governmental order, rule or regulation applicable to the Holding
Company, any of its Subsidiaries or any other Obligor;
(c) the creation under any agreement, instrument, deed or
lease of any Lien (other than Liens on the Credit Security which
secure the Credit Obligations) upon any of the assets of the Holding
Company, any of its Subsidiaries or any other Obligor; or
(d) any redemption, retirement or other repurchase
obligation of the Holding Company, any of its Subsidiaries or any
other Obligor under any Charter, By-law, agreement, instrument, deed
or lease.
No approval, authorization or other action by, or declaration to or filing
with, any governmental or administrative authority or any other Person is
required to be obtained or made by the Holding Company, any of its
Subsidiaries or any other Obligor in connection with the execution,
delivery and performance of this Agreement, the Notes or any other Credit
Document, the transactions contemplated hereby or thereby, the making of
any borrowing hereunder, the guaranteeing of the Credit Obligations or the
securing of the Credit Obligations with the Credit Security (other than
filings necessary to perfect the Agent's security interest in the Credit
Security).
7.10. Defaults. Neither the Holding Company nor any of its
Subsidiaries is in default under any provision of its Charter or By-laws
or of this Agreement or any other Credit Document. Neither the Holding
Company nor any of its Subsidiaries is in default under any provision of
any agreement, instrument, deed or lease to which it is party or by which
it or its property is bound so as to result, or create a material risk of
resulting, in any Material Adverse Change. Neither the Holding Company
nor any of its Subsidiaries has violated any law, judgment, decree or
governmental order, rule or regulation, in each case so as to result, or
create a material risk of resulting, in any Material Adverse Change.
7.11. Licenses, etc. The Holding Company and its Subsidiaries have
all patents, patent applications, patent licenses, patent rights,
trademarks, trademark rights, trade names, trade name rights, copyrights,
licenses, franchises, permits, authorizations and other rights as are
necessary for the conduct of the business of the Holding Company and its
Subsidiaries as now conducted by them. All of the foregoing are in full
force and effect in all material respects, and each of the Holding Company
and its Subsidiaries is in substantial compliance with the foregoing
without any known conflict with the valid rights of others which has
resulted, or creates a material risk of resulting, in any Material Adverse
Change. No event has occurred which permits, or after notice or lapse of
time or both would permit, the revocation or termination of any such
license, franchise or other right or which affects the rights of any of
the Holding Company and its Subsidiaries thereunder so as to result, or to
create a material risk of resulting, in any Material Adverse Change. No
litigation or other proceeding or dispute exists with respect to the
validity or, where applicable, the extension or renewal, of any of the
foregoing which has resulted, or creates a material risk of resulting, in
any Material Adverse Change.
7.12. Tax Returns. Each of the Holding Company and its Subsidiaries
has filed all material tax and information returns which are required to
be filed by it and has paid, or made adequate provision for the payment
of, all taxes which have or may become due pursuant to such returns or to
any assessment received by it, other than taxes and assessments being
contested by the Holding Company and its Subsidiaries in good faith by
appropriate proceedings and for which adequate reserves have been taken in
accordance with GAAP. Neither the Holding Company nor any of its
Subsidiaries knows of any material additional assessments or any basis
therefor. The Holding Company reasonably believes that the charges,
accruals and reserves on the books of the Holding Company and its
Subsidiaries in respect of taxes or other governmental charges are
adequate.
7.13. Certain Business Representations
7.13.1. Labor Relations. No dispute or controversy between
the Holding Company or any of its Subsidiaries and any of their
respective employees has resulted, or is reasonably likely to result,
in any Material Adverse Change, and neither the Holding Company nor
any of its Subsidiaries anticipates that its relationships with its
unions or employees will result, or are reasonably likely to result,
in any Material Adverse Change. The Holding Company and each of its
Subsidiaries is in compliance in all material respects with all
federal and state laws with respect to (a) non-discrimination in
employment with which the failure to comply, in the aggregate, has
resulted, or creates a material risk of resulting, in a Material
Adverse Change and (b) the payment of wages.
7.13.2. Antitrust. Each of the Holding Company and its
Subsidiaries is in compliance in all material respects with all
federal and state antitrust laws relating to its business and the
geographic concentration of its business.
7.13.3. Consumer Protection. Neither the Holding Company
nor any of its Subsidiaries is in violation of any rule, regulation,
order, or interpretation of any rule, regulation or order of the
Federal Trade Commission (including truth-in-lending), with which the
failure to comply, in the aggregate, has resulted, or creates a
material risk of resulting, in a Material Adverse Change.
7.13.4. Extraordinary Obligations. Neither the Holding
Company nor any of its Subsidiaries is party to or bound by any
agreement, instrument, deed or lease or is subject to any Charter,
By-law or other restriction, commitment or requirement which, in the
opinion of the management of such Person, is so burdensome as in the
foreseeable future to result, or create a material risk of resulting,
in a Material Adverse Change.
7.13.5. Future Expenditures. Neither the Holding Company
nor any of its Subsidiaries anticipate that the future expenditures,
if any, by the Holding Company and its Subsidiaries needed to meet
the provisions of any federal, state or foreign governmental
statutes, orders, rules or regulations will be so burdensome as to
result, or create a material risk of resulting, in any Material
Adverse Change.
7.14. Environmental Regulations.
7.14.1. Environmental Compliance. Each of the Holding
Company and its Subsidiaries is in compliance in all material
respects with the Clean Air Act, the Federal Water Pollution Control
Act, the Marine Protection Research and Sanctuaries Act, RCRA, CERCLA
and any other Environmental Law in effect in any jurisdiction in
which any properties of the Holding Company or any of its
Subsidiaries are located or where any of them conducts its business,
and with all applicable published rules and regulations (and
applicable standards and requirements) of the federal Environmental
Protection Agency and of any similar agencies in states or foreign
countries in which the Holding Company or its Subsidiaries conducts
its business other than those which in the aggregate have not
resulted, and do not create a material risk of resulting, in a
Material Adverse Change.
7.14.2. Environmental Litigation. No suit, claim, action or
proceeding of which the Holding Company or any of its Subsidiaries
has been given notice or otherwise has knowledge is now pending
before any court, governmental agency or board or other forum, or to
the Holding Company's or any of its Subsidiaries knowledge,
threatened by any Person (nor to the Holding Company's or any of its
Subsidiaries' knowledge, does any factual basis exist therefor) for,
and neither the Holding Company nor any of its Subsidiaries have
received written correspondence from any federal, state or local
governmental authority with respect to:
(a) noncompliance by the Holding Company or any of its
Subsidiaries with any Environmental Law;
(b) personal injury, wrongful death or other tortious
conduct relating to materials, commodities or products used,
generated, sold, transferred or manufactured by the Holding Company
or any of its Subsidiaries (including products made of, containing or
incorporating asbestos, lead or other hazardous materials,
commodities or toxic substances); or
(c) the release into the environment by the Holding Company
or any of its Subsidiaries of any Hazardous Material generated by the
Holding Company or any of its Subsidiaries whether or not occurring
at or on a site owned, leased or operated by the Holding Company or
any of its Subsidiaries.
7.14.3. Hazardous Material. Exhibit 7.14 contains a list as
of the date hereof of all waste disposal or dump sites at which
Hazardous Material generated by either the Holding Company or any of
its Subsidiaries has been disposed of directly by the Holding Company
or any of its Subsidiaries and all independent contractors to whom
the Holding Company and its Subsidiaries have delivered Hazardous
Material, or to the Holding Company's or any of its Subsidiaries'
knowledge, where Hazardous Material finally came to be located, and
indicates all such sites which are or have been included (including
as a potential or suspect site) in any published federal, state or
local "superfund" or other list of hazardous or toxic waste sites.
Any waste disposal or dump sites at which Hazardous Material
generated by either the Holding Company or any of its Subsidiaries
has been disposed of directly by the Holding Company or any of its
Subsidiaries and all independent contractors to whom the Holding
Company or any of its Subsidiaries have delivered Hazardous Material,
or to the Holding Company's or any of its Subsidiaries' knowledge,
where Hazardous Material finally came to be located, has not
resulted, and does not create a material risk of resulting, in a
Material Adverse Change.
7.14.4. Environmental Condition of Properties. None of the
properties owned or leased by the Holding Company or any of its
Subsidiaries has been used as a treatment, storage or disposal site,
other than as disclosed in Exhibit 7.14. No Hazardous Material is
present in any real property currently or formerly owned or operated
by the Holding Company or any of its Subsidiaries except that which
has not resulted, and does not create a material risk of resulting,
in a Material Adverse Change.
7.15. Pension Plans. Neither the Holding Company nor any of its
Subsidiaries has a Plan or a Multiemployer Plan.
7.16. Acquisition Agreement, etc. The Acquisition Agreement is a
valid and binding contract as to the Borrower and, to the best of the
Borrower's knowledge, as to the Sellers. The Borrower is not in default
in any material respect of its obligations under the Acquisition Agreement
and, to the best of the Borrower's knowledge, the Sellers are not in
default in any material respect of any of their obligations thereunder.
The representations and warranties of the Borrower set forth in the
Acquisition Agreement are true and correct in all material respect as of
the date hereof with the same force and effect as though made on and as of
the date hereof. To the best of the Borrower's knowledge all of the
representations and warranties of the Sellers set forth in the Acquisition
Agreement are true and correct in all material respects as of the date
hereof with the same force and effect as though made on and as of the date
hereof.
7.17. Government Regulation; Margin Stock.
7.17.1. Government Regulation. Neither the Borrower nor any
of its Subsidiaries, nor any Person controlling the Borrower or any
of its Subsidiaries or under common control with the Borrower or any
of its Subsidiaries, is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the
Investment Company Act, the Interstate Commerce Act or any statute or
regulation which regulates the incurring by the Borrower or any of
its Subsidiaries of Financing Debt as contemplated by this Agreement
and the other Credit Documents.
7.17.2. Margin Stock. Neither the Borrower nor any of its
Subsidiaries owns any Margin Stock.
7.18. Disclosure. Neither this Agreement nor any other Credit
Document to be furnished to the Lenders by or on behalf of the Holding
Company or any of its Subsidiaries in connection with the transactions
contemplated hereby or by such Credit Document contains any untrue
statement of material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made. No fact is
actually known to the Holding Company or any of its Subsidiaries which has
resulted, or in the future (so far as the Holding Company or any of its
Subsidiaries can reasonably foresee) will result, or creates a material
risk of resulting, in any Material Adverse Change, except to the extent
that present or future general economic conditions may result in a
Material Adverse Change.
8. Defaults.
8.1. Events of Default. The following events are referred to as
"Events of Default":
8.1.1. Payment. The Borrower shall fail to make any payment
in respect of: (a) interest or any fee on or in respect of any of
the Credit Obligations owed by it as the same shall become due and
payable, and such failure shall continue for a period of three
Banking Days, or (b) any Credit Obligation with respect to payments
made by any Letter of Credit Issuer under any Letter of Credit or any
draft drawn thereunder within three Banking Days after demand
therefor by such Letter of Credit Issuer or (c) principal of any of
the Credit Obligations owed by it as the same shall become due,
whether at maturity or by acceleration or otherwise.
8.1.2. Specified Covenants. The Holding Company or any of
its Subsidiaries shall fail to perform or observe any of the
provisions of Sections 6.5 through 6.7 and Sections 6.9 through 6.20.
8.1.3. Other Covenants. The Holding Company, any of its
Subsidiaries or any other Obligor shall fail to perform or observe
any other covenant, agreement or provision to be performed or
observed by it under this Agreement or any other Credit Document, and
such failure shall not be rectified or cured within 30 days (or, in
the case of Section 6.8, five days) after the earlier of (a) notice
thereof by the Agent to the Holding Company or (b) a Financial
Officer shall have actual knowledge thereof.
8.1.4. Representations and Warranties. Any representation
or warranty of the Holding Company, any of its Subsidiaries or any
other Obligor made to the Lenders or the Agent in, pursuant to or in
connection with this Agreement or any other Credit Document, or in
any financial statement, report, notice, mortgage, assignment, UCC
financing statement or certificate delivered to the Agent or any of
the Lenders by the Holding Company, any of its Subsidiaries or any
other Obligor in connection herewith or therewith, shall be
materially false on the date as of which it was made.
8.1.5. Cross Default, etc.
(a) The Holding Company or any of its Subsidiaries shall
fail to make any payment when due (after giving effect to any
applicable grace periods) in respect of any Financing Debt (other
than the Credit Obligations) outstanding in an aggregate amount of
principal (whether or not due) and accrued interest exceeding
$750,000;
(b) the Holding Company or any of its Subsidiaries shall
fail to perform or observe the terms of any agreement or instrument
relating to such Financing Debt, and such failure shall continue,
without having been duly cured, waived or consented to, beyond the
period of grace, if any, specified in such agreement or instrument,
and such failure shall permit the acceleration of such Financing
Debt;
(c) all or any part of such Financing Debt of the Holding
Company or any of its Subsidiaries shall be accelerated or shall
become due or payable prior to its stated maturity (except with
respect to voluntary prepayments thereof) for any reason whatsoever;
(d) any Lien on any property of the Holding Company or any
of its Subsidiaries securing any such Financing Debt shall be
enforced by foreclosure or similar action; or
(e) any holder of any such Financing Debt shall exercise any
right of rescission with respect to the issuance thereof or put or
prepayment or repurchase rights against any Obligor with respect to
such Financing Debt (other than any such rights that may be satisfied
with "payment in kind" notes or other similar securities).
8.1.6. Ownership; Liquidation; etc. Except as permitted by
Section 6.11:
(a) the Holding Company shall cease to own, directly or
indirectly, all the capital stock of the Borrower, except to the
extent permitted by Section 6.13.1; or
(b) GreenGrass Holdings shall cease to own, beneficially and
of record, at least a majority of the voting stock and equity capital
of the Holding Company; or
(c) any Person other than GreenGrass Holdings, together with
"affiliates" and "associates" of such Person within the meaning of
Rule 12b-2 of the Exchange Act, or any "group" including such Person
under sections 13(d) and 14(d) of the Exchange Act, shall acquire
after the date hereof beneficial ownership within the meaning of Rule
13d-3 of the Exchange Act of more than 33% of the voting stock of the
Holding Company; or
(d) Glencoe shall cease to be a member, or shall cease to
have a designated representative serve on the board, of GreenGrass
Holdings; or
(e) the Holding Company, the Borrower, any of the Borrower's
Subsidiaries or any other Obligor shall initiate any action to
dissolve, liquidate or otherwise terminate its existence.
8.1.7. Enforceability, etc. Any Credit Document shall cease
for any reason (other than the scheduled termination thereof in
accordance with its terms) to be enforceable in accordance with its
terms or in full force and effect; or any party to any Credit
Document shall so assert in a judicial or similar proceeding; or the
security interests created by this Agreement or any other Credit
Documents shall cease to be enforceable and of the same effect and
priority purported to be created hereby.
8.1.8. Judgments. A final judgment (a) which, with other
outstanding final judgments against the Holding Company and its
Subsidiaries, exceeds an aggregate of $750,000 in excess of
applicable insurance coverage shall be rendered against the Holding
Company or any of its Subsidiaries, or (b) which grants injunctive
relief that results, or creates a material risk of resulting, in a
Material Adverse Change and in either case if (i) within 60 days
after entry thereof, such judgment shall not have been discharged or
execution thereof stayed pending appeal or (ii) within 60 days after
the expiration of any such stay, such judgment shall not have been
discharged.
8.1.9. ERISA. Any "reportable event" (as defined in section
4043 of ERISA) shall have occurred that reasonably could be expected
to result in termination of a Plan or the appointment by the
appropriate United States District Court of a trustee to administer
any Plan or the imposition of a Lien in favor of a Plan; or any ERISA
Group Person shall fail to pay when due amounts aggregating in excess
of $500,000 which it shall have become liable to pay to the PBGC or
to a Plan under Title IV of ERISA; or notice of intent to terminate a
Plan shall be filed under Title IV of ERISA by any ERISA Group Person
or administrator; or the PBGC shall institute proceedings under Title
IV of ERISA to terminate or to cause a trustee to be appointed to
administer any Plan or a proceeding shall be instituted by a
fiduciary of any Plan against any ERISA Group Person to enforce
section 515 or 4219(c)(5) of ERISA and such proceeding shall not have
been dismissed within 60 days thereafter; or a condition shall exist
by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Plan must be terminated; provided, however,
that none of the foregoing shall constitute an Event of Default
unless it has resulted in, or reasonably would be expected to result
in, a Material Adverse Change to the Holding Company and its
Subsidiaries.
8.1.10. Bankruptcy, etc. The Holding Company, any of its
Subsidiaries or any other Obligor shall:
(a) commence a voluntary case under the Bankruptcy Code or
authorize, by appropriate proceedings of its board of directors or
other governing body, the commencement of such a voluntary case;
(b) (i) have filed against it a petition commencing an
involuntary case under the Bankruptcy Code that shall not have been
stayed, dismissed or vacated within 60 days after the date on which
such petition is filed, or (ii) file an answer or other pleading
within such 60-day period admitting or failing to deny the material
allegations of such a petition or seeking, consenting to or
acquiescing in the relief therein provided, or (iii) have entered
against it an order for relief in any involuntary case commenced
under the Bankruptcy Code;
(c) seek relief as a debtor under any applicable law, other
than the Bankruptcy Code, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or
alteration of the rights of creditors, or consent to or acquiesce in
such relief;
(d) have entered against it an order by a court of competent
jurisdiction (i) finding it to be bankrupt or insolvent, (ii)
ordering or approving its liquidation or reorganization as a debtor
or any modification or alteration of the rights of its creditors or
(iii) assuming custody of, or appointing a receiver or other
custodian for, all or a substantial portion of its property; or
(e) make an assignment for the benefit of, or enter into a
composition with, its creditors, or appoint, or consent to the
appointment of, or suffer to exist a receiver or other custodian for,
all or a substantial portion of its property.
8.2. Certain Actions Following an Event of Default. If any one or
more Events of Default shall occur, then in each and every such case:
8.2.1. Terminate Obligation to Extend Credit. Upon written
request of the Required Lenders the Agent shall terminate the
obligations of the Lenders to make any further extensions of credit
under the Credit Documents by furnishing notice of such termination
to the Borrower.
8.2.2. Specific Performance; Exercise of Rights. Upon
written request of the Required Lenders the Agent shall proceed to
protect and enforce the Lenders' rights by suit in equity, action at
law and/or other appropriate proceeding, either for specific
performance of any covenant or condition contained in this Agreement
or any other Credit Document (other than Interest Rate Protection
Agreements) or in any instrument or assignment delivered to the
Lenders pursuant to this Agreement or any other Credit Document
(other than Interest Rate Protection Agreements), or in aid of the
exercise of any power granted in this Agreement or any other Credit
Document (other than Interest Rate Protection Agreements) or any such
instrument or assignment.
8.2.3. Acceleration. Upon written request of the Required
Lenders the Agent shall by notice in writing to the Borrower
(a) declare all or any part of the unpaid balance of the Credit
Obligations (other than Interest Rate Protection Agreements) then
outstanding to be immediately due and payable, and (b) require the
Borrower immediately to deposit with the Agent in cash an amount
equal to the then Letter of Credit Exposure (which cash shall be held
and applied as provided in Section 4.5), and thereupon such unpaid
balance or part thereof and such amount equal to the Letter of Credit
Exposure shall become so due and payable without presentation,
protest or further demand or notice of any kind, all of which are
hereby expressly waived; provided, however, that if a Bankruptcy
Default shall have occurred, the unpaid balance of the Credit
Obligations (other than Interest Rate Protection Agreements) shall
automatically become immediately due and payable.
8.2.4. Enforcement of Payment; Credit Security; Setoff.
Upon written request of the Required Lenders the Agent shall proceed
to enforce payment of the Credit Obligations in such manner as the
Required Lenders shall direct, to cancel, or instruct other Letter of
Credit Issuers to cancel, any outstanding Letters of Credit which
permit the cancellation thereof and to realize upon any and all
rights in the Credit Security. The Lenders may offset and apply
toward the payment of the Credit Obligations (and/or toward the
curing of any Event of Default) any Indebtedness from the Lenders to
the respective Obligors, including any Indebtedness represented by
deposits in any account maintained with the Lenders, regardless of
the adequacy of any security for the Credit Obligations. The Lenders
shall have no duty to determine the adequacy of any such security in
connection with any such offset.
8.2.5. Cumulative Remedies. To the extent not prohibited by
applicable law which cannot be waived, all of the Lenders' rights
hereunder and under each other Credit Document shall be cumulative.
8.3. Annulment of Defaults. Once an Event of Default has occurred,
such Event of Default shall be deemed to exist and be continuing for all
purposes of the Credit Documents (other than Interest Rate Protection
Agreements) until the Required Lenders or the Agent (with the consent of
the Required Lenders) shall have waived such Event of Default in writing,
stated in writing that the same has been cured to such Lenders' reasonable
satisfaction or entered into an amendment to this Agreement which by its
express terms cures such Event of Default, at which time such Event of
Default shall no longer be deemed to exist or to have continued. No such
action by the Lenders or the Agent shall extend to or affect any
subsequent Event of Default or impair any rights of the Lenders upon the
occurrence thereof. The making of any extension of credit during the
existence of any Default or Event of Default shall not constitute a waiver
thereof.
8.4. Waivers. To the extent that such waiver is not prohibited by
the provisions of applicable law that cannot be waived, each of the
Holding Company and the other Obligors waives:
(a) all presentments, demands for performance, notices of
nonperformance (except to the extent required by this Agreement or
any other Credit Document), protests, notices of protest and notices
of dishonor;
(b) any requirement of diligence or promptness on the part
of the Agent or any Lender in the enforcement of its rights under
this Agreement, the Notes or any other Credit Document;
(c) any and all notices of every kind and description which
may be required to be given by any statute or rule of law; and
(d) any defense (other than indefeasible payment in full)
which it may now or hereafter have with respect to its liability
under this Agreement, the Notes or any other Credit Document or with
respect to the Credit Obligations.
9. Expenses; Indemnity.
9.1. Expenses. Whether or not the transactions contemplated hereby
shall be consummated, the Borrower will pay:
(a) all reasonable expenses of the Agent (including the out-
of-pocket expenses related to forming the group of Lenders and
reasonable fees and disbursements of the counsel to the Agent) in
connection with the preparation and duplication of this Agreement and
each other Credit Document, examinations by, and reports of, the
Agent's commercial financial examiners, fixed asset appraisers and
environmental consultants, the transactions contemplated hereby and
thereby and amendments, waivers, consents and other operations
hereunder and thereunder;
(b) all recording and filing fees and transfer and
documentary stamp and similar taxes at any time payable in respect of
this Agreement, any other Credit Document, any Credit Security or the
incurrence of the Credit Obligations; and
(c) all other reasonable expenses incurred by the Lenders or
the holder of any Credit Obligation in connection with the "work out"
or enforcement of any rights hereunder or under any other Credit
Document, including costs of collection and reasonable attorneys'
fees.
9.2. General Indemnity. The Borrower shall indemnify the Lenders
and the Agent and hold them harmless from any liability, loss or damage
resulting from the violation by the Borrower of Section 2.5. In addition,
the Borrower shall indemnify each Lender, the Agent, each of the Lenders'
or the Agent's directors, officers, employees, agents, attorneys,
accountants, consultants and each Person, if any, who controls any Lender
or the Agent (each Lender, the Agent and each of such directors, officers,
employees, agents, attorneys, accountants, consultants and control Persons
is referred to as an "Indemnified Party") and hold each of them harmless
from and against any and all claims, damages, liabilities and reasonable
expenses (including reasonable fees and disbursements of counsel with whom
any Indemnified Party may consult in connection therewith and all
reasonable expenses of litigation or preparation therefor) which any
Indemnified Party may incur or which may be asserted against any
Indemnified Party in connection with (a) the Indemnified Party's
compliance with or contest of any subpoena or other process issued against
it in any proceeding involving the Holding Company or any of its
Subsidiaries or their Affiliates, (b) any litigation or investigation
involving the Holding Company, any of its Subsidiaries or their
Affiliates, or any officer, director or employee thereof, (c) the
existence or exercise of any security rights with respect to the Credit
Security in accordance with the Credit Documents, or (d) this Agreement,
any other Credit Document or any transaction contemplated hereby or
thereby; provided, however, that the foregoing indemnity shall not apply
to litigation commenced by the Borrower against the Lenders or the Agent
which seeks enforcement of any of the rights of the Borrower hereunder or
under any other Credit Document and is determined adversely to the Lenders
or the Agent in a final nonappealable judgment or to the extent such
claims, damages, liabilities and expenses result from an Indemnified
Party's or the Agent's gross negligence or willful misconduct.
9.3. Indemnity With Respect to Letters of Credit. The Borrower
shall indemnify each Letter of Credit Issuer and its correspondents and
hold each of them harmless from and against any and all claims, losses,
liabilities, damages and reasonable expenses (including reasonable
attorneys' fees) arising from or in connection with any Letter of Credit,
including any such claim, loss, liability, damage or expense arising out
of any transfer, sale, delivery, surrender or endorsement of any invoice,
bill of lading, warehouse receipt or other document at any time held by
any Letter of Credit Issuer or held for their respective accounts by any
of their correspondents, in connection with any Letter of Credit, except
to the extent such claims, losses, liabilities, damages and expenses
result from gross negligence or willful misconduct on the part of the
Letter of Credit Issuer.
10. Operations; Agent.
10.1. Interests in Credits. The Percentage Interest of each Lender
in the portions of the Loan and Letters of Credit, and the related
Commitments, shall be computed based on the maximum principal amount for
each Lender as set forth in the Register, as from time to time in effect.
The current Percentage Interests are set forth in Exhibit 10.1, which may
be updated by the Agent from time to time to conform to the Register.
10.2. Agent's Authority to Act, etc. Each of the Lenders appoints
and authorizes Fleet to act for the Lenders as the Lenders' Agent in
connection with the transactions contemplated by this Agreement and the
other Credit Documents (other than Interest Rate Protection Agreements) on
the terms set forth herein. In acting hereunder, the Agent is acting,
pursuant to the direction of the Lenders, for the account of Fleet to the
extent of its Percentage Interest and for the account of each other Lender
to the extent of the Lenders' respective Percentage Interests, and all
action in connection with the enforcement of, or the exercise of any
remedies (other than the Lenders' rights of set-off as provided in Section
8.2.4 or in any Credit Document) in respect of the Credit Obligations and
Credit Documents (other than Interest Rate Protection Agreements) shall be
taken by the Agent.
10.3. Borrower to Pay Agent, etc. The Borrower and each Guarantor
shall be fully protected in making all payments in respect of the Credit
Obligations to the Agent other than payments under Interest Rate
Protection Agreements, in relying upon consents, modifications and
amendments executed by the Agent purportedly on the Lenders' behalf, and
in dealing with the Agent as herein provided. The Agent may charge the
accounts of the Borrower, on the dates when the amounts thereof become due
and payable, with the amounts of the principal of and interest on the
Loan, any amounts paid by the Letter of Credit Issuers to third parties
under Letters of Credit or drafts presented thereunder, commitment fees,
Letter of Credit fees and all other fees and amounts owing under any
Credit Document.
10.4. Lender Operations for Advances, Letters of Credit, etc.
10.4.1. Advances. On each Closing Date, each Lender shall
advance to the Agent in immediately available funds such Lender's
Percentage Interest in the portion of the Loan advanced on such
Closing Date prior to 12:00 noon (Boston time). If such funds are
not received at such time, but all applicable conditions set forth in
Section 5 have been satisfied, each Lender authorizes and requests
the Agent to advance for the Lender's account, pursuant to the terms
hereof, the Lender's respective Percentage Interest in such portion
of the Loan and agrees to reimburse the Agent in immediately
available funds for the amount thereof prior to 2:00 p.m. (Boston
time) on the day any portion of the Loan is advanced hereunder;
provided, however, that the Agent is not authorized to make any such
advance for the account of any Lender who has previously notified the
Agent in writing that such Lender will not be performing its
obligations to make further advances hereunder; and provided,
further, that the Agent shall be under no obligation to make any such
advance.
10.4.2. Letters of Credit. Each of the Lenders authorizes
and requests each Letter of Credit Issuer to issue the Letters of
Credit provided for in Section 2.3 and to grant each Lender a
participation in each of such Letters of Credit in an amount equal to
its Percentage Interest in the amount of each such Letter of Credit.
Promptly upon the request of the Letter of Credit Issuer, each Lender
shall reimburse the Letter of Credit Issuer in immediately available
funds for such Lender's Percentage Interest in the amount of all
obligations to third parties incurred by the Letter of Credit Issuer
in respect of each Letter of Credit and each draft accepted under a
Letter of Credit to the extent not reimbursed by the Borrower by 2:00
p.m. (Boston time) on the Banking Day when due. The Letter of Credit
Issuer will notify each Lender of the issuance of any Letter of
Credit, the amount and date of payment of any draft drawn or accepted
under a Letter of Credit and whether in connection with the payment
of any such draft the amount thereof was added to the Revolving Loan
or was reimbursed by the Borrower.
10.4.3. Agent to Allocate Payments, etc. All payments of
principal and interest in respect of the extensions of credit made
pursuant to this Agreement, reimbursement of amounts paid by any
Letter of Credit Issuer to third parties under Letters of Credit or
drafts presented thereunder, commitment fees, Letter of Credit fees
and other fees under this Agreement shall, as a matter of
convenience, be made by the Borrower and the Guarantors to the Agent
in immediately available funds by noon (Boston time) on any Banking
Day. The share of each Lender shall be credited to such Lender by
the Agent in immediately available funds by 2:00 p.m. (Boston time)
on such Banking Day in such manner that the principal amount of the
Credit Obligations to be paid shall be paid proportionately in
accordance with the Lenders' respective Percentage Interests in such
Credit Obligations, except as otherwise provided in this Agreement.
Under no circumstances shall any Lender be required to produce or
present its Notes as evidence of its interests in the Credit
Obligations in any action or proceeding relating to the Credit
Obligations.
10.4.4. Delinquent Lenders; Nonperforming Lenders. In the
event that any Lender fails to reimburse the Agent pursuant to
Section 10.4.1 for the Percentage Interest of such lender (a
"Delinquent Lender") in any credit advanced by the Agent pursuant
hereto, overdue amounts (the "Delinquent Payment") due from the
Delinquent Lender to the Agent shall bear interest, payable by the
Delinquent Lender on demand, at a per annum rate equal to (a) the
Federal Funds Rate for the first three days overdue and (b) the sum
of 2% plus the Federal Funds Rate for any longer period. Such
interest shall be payable to the Agent for its own account for the
period commencing on the date of the Delinquent Payment and ending on
the date the Delinquent Lender reimburses the Agent on account of the
Delinquent Payment (to the extent not paid by any Obligor as provided
below) and the accrued interest thereon (the "Delinquency Period"),
whether pursuant to the assignments referred to below or otherwise.
Upon notice by the Agent, the Borrower will pay to the Agent the
principal (but not the interest) portion of the Delinquent Payment.
During the Delinquency Period, in order to make reimbursements for
the Delinquent Payment and accrued interest thereon, the Delinquent
Lender shall be deemed to have assigned to the Agent all interest,
commitment fees and other payments made by the Borrower under Section
3 that would have thereafter otherwise been payable under the Credit
Documents to the Delinquent Lender. During any other period in which
any Lender is not performing its obligations to extend credit under
Section 2 (a "Nonperforming Lender"), the Nonperforming Lender shall
be deemed to have assigned to each Lender that is not a Nonperforming
Lender (a "Performing Lender") all principal and other payments made
by the Borrower under Section 4 that would have thereafter otherwise
been payable under the Credit Documents to the Nonperforming Lender.
The Agent shall credit a portion of such payments to each Performing
Lender in an amount equal to the Percentage Interest of such
Performing Lender in an amount equal to the Percentage Interest of
such Performing Lender divided by one minus the Percentage Interest
of the Nonperforming Lender until the respective portions of the Loan
owed to all the Lenders are the same as the Percentage Interests of
the Lenders immediately prior to the failure of the Nonperforming
Lender to perform its obligations under Section 2. The foregoing
provisions shall be in addition to any other remedies the Agent, the
Performing Lenders or the Borrower may have under law or equity
against the Delinquent Lender as a result of the Delinquent Payment
or against the Nonperforming Lender as a result of its failure to
perform its obligations under Section 2.
10.5. Sharing of Payments, etc. Each Lender agrees that (a) if by
exercising any right of set-off or counterclaim or otherwise, it shall
receive payment of (i) a proportion of the aggregate amount due with
respect to its Percentage Interest in the Loan and Letter of Credit
Exposure which is greater than (ii) the proportion received by any other
Lender in respect of the aggregate amount due with respect to such other
Lender's Percentage Interest in the Loan and Letter of Credit Exposure and
(b) if such inequality shall continue for more than 10 days, the Lender
receiving such proportionately greater payment shall purchase
participations in the Percentage Interests in the Loan and Letter of
Credit Exposure held by the other Lenders, and such other adjustments
shall be made from time to time (including rescission of such purchases of
participations in the event the unequal payment originally received is
recovered from such Lender through bankruptcy proceedings or otherwise),
as may be required so that all such payments of principal and interest
with respect to the Loan and Letter of Credit Exposure held by the Lenders
shall be shared by the Lenders pro rata in accordance with their
respective Percentage Interests; provided, however, that this Section 10.5
shall not impair the right of any Lender to exercise any right of set-off
or counterclaim it may have and to apply the amount subject to such
exercise to the payment of Indebtedness of any Obligor other than such
Obligor's Indebtedness with respect to the Loan and Letter of Credit
Exposure. Each Lender that grants a participation in the Credit
Obligations to a Credit Participant shall require as a condition to the
granting of such participation that such Credit Participant agree to share
payments received in respect of the Credit Obligations as provided in this
Section 10.5. The provisions of this Section 10.5 are for the sole and
exclusive benefit of the Lenders and no failure of any Lender to comply
with the terms hereof shall be available to any Obligor as a defense to
the payment of the Credit Obligations.
10.6. Amendments, Consents, Waivers, etc. Except as otherwise set
forth herein, the Agent may (and upon the written request of the Required
Lenders the Agent shall) take or refrain from taking any action under this
Agreement or any other Credit Document, including giving its written
consent to any modification of or amendment to and waiving in writing
compliance with any covenant or condition in this Agreement or any other
Credit Document (other than an Interest Rate Protection Agreement) or any
Default or Event of Default, all of which actions shall be binding upon
all of the Lenders; provided, however, that:
(a) Except as provided below, without the written consent of
the Lenders owning at least a majority of the Percentage Interests
(other than any Delinquent Lender during the existence of a
Delinquency Period or Nonperforming Lender so long as such Delinquent
Lender is treated the same as the other Lenders with respect to any
actions enumerated below), no written modification of, amendment to,
consent with respect to, waiver of compliance with or waiver of a
Default under, any of the Credit Documents (other than an Interest
Rate Protection Agreement) or action taken under Section 8.2 shall be
made.
(b) Without the written consent of such Lenders as own 100%
of the Percentage Interests (other than any Delinquent Lender during
the existence of a Delinquency Period or Nonperforming Lender so long
as such Lender is treated the same as the other Lenders with respect
to any actions enumerated below):
(i) No reduction shall be made in (A) the amount of
principal of the Loan or reimbursement obligations for
payments made under Letters of Credit, (B) the interest rate
on the Loan (other than amendments and waivers approved by the
Required Lenders pursuant to clause (a) that modify defined
terms used in calculating the Applicable Margin or that waive
an increase in the Applicable Rate as a result of an Event of
Default) or (C) the Letter of Credit fees or commitment fees
with respect to the credit facility provided herein.
(ii) No change shall be made in the stated, scheduled
time of payment of all or any portion of the Loan (other than
amendments and waivers approved by the Required Lenders
pursuant to clause (a) that modify defined terms used in
calculating the Applicable Margin or Consolidated Excess Cash
Flow) or interest thereon or reimbursement of payments made
under Letters of Credit or fees relating to any of the
foregoing payable to the Lenders and no waiver shall be made
of any Default under Section 8.1.1.
(iii) No increase shall be made in the amount, or
extension of the term, of the stated Commitments beyond that
provided for under Section 2.
(iv) No alteration shall be made of the Lenders'
rights of set-off contained in Section 8.2.4.
(v) No release of all or a substantial portion of the
Credit Security or of the Guarantors shall be made (in any
event, the Agent may release particular items of Credit
Security or particular Guarantors in dispositions permitted by
Section 6.11 and may release all Credit Security pursuant to
Section 17 upon payment in full of the Credit Obligations and
termination of the Commitments without the written consent of
the Lenders).
(vi) No amendment to or modification of this Section
10.6(b) shall be made.
(c) Without the written consent of (i) such Lenders owning
at least a majority of the Percentage Interests (other than
Delinquent Lenders during the existence of a Delinquency Period so
long as such Delinquent Lender is treated the same as the other
Lenders with respect to any actions enumeraged below) and (ii) such
Lenders holding a majority of the Percentage Interests in Term Loan B
(other than Delinquent Lenders during the existence of a Delinquency
Period so long as such Delinquent Lender is treated the same as the
other Lenders with respect to any actions enumerated below), voting
as a separate class, no change may be made in the allocation of
mandatory prepayments under Section 4.2 and 4.3 between Term Loan A
and Term Loan B.
10.7. Agent's Resignation. The Agent may resign at any time by
giving at least 60 days' prior written notice of its intention to do so to
each of the Lenders and the Holding Company and upon the appointment by
the Required Lenders of a successor Agent satisfactory to the Holding
Company. If no successor Agent shall have been so appointed and shall
have accepted such appointment within 45 days after the retiring Agent's
giving of such notice of resignation, then the retiring Agent may with the
consent of the Holding Company, which shall not be unreasonably withheld,
appoint a successor Agent which shall be a bank or a trust company
organized under the laws of the United States of America or any state
thereof and having a combined capital, surplus and undivided profit of at
least $100,000,000; provided, however, that any successor Agent appointed
under this sentence may be removed upon the written request of the
Required Lenders, which request shall also appoint a successor Agent
reasonably satisfactory to the Holding Company. Upon the appointment of a
new Agent hereunder, the term "Agent" shall for all purposes of this
Agreement thereafter mean such successor. After any retiring Agent's
resignation hereunder as Agent, or the removal hereunder of any successor
Agent, the provisions of this Agreement shall continue to inure to the
benefit of such Agent as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.
10.8. Concerning the Agent.
10.8.1. Action in Good Faith, etc. The Agent and its
officers, directors, employees and agents shall be under no liability
to any of the Lenders or to any future holder of any interest in the
Credit Obligations for any action or failure to act taken or suffered
in good faith, and any action or failure to act in accordance with an
opinion of its counsel shall conclusively be deemed to be in good
faith. The Agent shall in all cases be entitled to rely, and shall
be fully protected in relying, on instructions given to the Agent by
the Required Lenders.
10.8.2. No Implied Duties, etc. The Agent shall have and
may exercise such powers as are specifically delegated to the Agent
under this Agreement or any other Credit Document together with all
other powers incidental thereto. The Agent shall have no implied
duties to any Person or any obligation to take any action under this
Agreement or any other Credit Document except for action specifically
provided for in this Agreement or any other Credit Document to be
taken by the Agent. Before taking any action under this Agreement or
any other Credit Document, the Agent may request an appropriate
specific indemnity satisfactory to it from each Lender in addition to
the general indemnity provided for in Section 10.11. Until the Agent
has received such specific indemnity, the Agent shall not be
obligated to take (although it may in its sole discretion take) any
such action under this Agreement or any other Credit Document. Each
Lender confirms that the Agent does not have a fiduciary relationship
to it under the Credit Documents. Each of the Borrower and each
Guarantor confirms that neither the Agent nor any other Lender has a
fiduciary relationship to it under the Credit Documents.
10.8.3. Validity, etc. The Agent shall not be responsible
to any Lender or any future holder of any interest in the Credit
Obligations (a) for the legality, validity, enforceability or
effectiveness of this Agreement or any other Credit Document, (b) for
any recitals, reports, representations, warranties or statements
contained in or made in connection with this Agreement or any other
Credit Document, (c) for the existence or value of any assets
included in any security for the Credit Obligations, (d) for the
effectiveness of any Lien purported to be included in the Credit
Security, (e) for the specification or failure to specify any
particular assets to be included in the Credit Security, or (f)
unless the Agent shall have failed to comply with Section 10.8.1, for
the perfection of the security interests in the Credit Security.
10.8.4. Compliance. The Agent shall not be obligated to
ascertain or inquire as to the performance or observance of any of
the terms of this Agreement or any other Credit Document; and in
connection with any extension of credit under this Agreement or any
other Credit Document, the Agent shall be fully protected in relying
on a certificate of the Borrower as to the fulfillment by the
Borrower of any conditions to such extension of credit.
10.8.5. Employment of Agents and Counsel. The Agent may
execute any of its duties as Agent under this Agreement or any other
Credit Document by or through employees, agents and attorneys-in-fact
and shall not be responsible to any of the Lenders, the Holding
Company or any other Obligor for the default or misconduct of any
such agents or attorneys-in-fact selected by the Agent acting in good
faith. The Agent shall be entitled to advice of counsel concerning
all matters pertaining to the agency hereby created and its duties
hereunder or under any other Credit Document.
10.8.6. Reliance on Documents and Counsel. The Agent shall
be entitled to rely, and shall be fully protected in relying, upon
any affidavit, certificate, cablegram, consent, instrument, letter,
notice, order, document, statement, telecopy, telegram, telex or
teletype message or writing reasonably believed in good faith by the
Agent to be genuine and correct and to have been signed, sent or made
by the Person in question, including any telephonic or oral statement
made by such Person, and, with respect to legal matters, upon an
opinion or the advice of counsel selected by the Agent.
10.8.7. Agent's Reimbursement. Each of the Lenders
severally agrees to reimburse the Agent, pro rata in accordance with
such Lender's Percentage Interest, for any reasonable expenses not
reimbursed by the Borrower or the Guarantors (without limiting the
obligation of the Borrower or the Guarantors to make such
reimbursement): (a) for which the Agent is entitled to reimbursement
by the Borrower or the Guarantors under this Agreement or any other
Credit Document, and (b) after the occurrence of a Default, for any
other reasonable expenses incurred by the Agent on the Lenders'
behalf in connection with the enforcement of the Lenders' rights
under this Agreement or any other Credit Document; provided, however,
that the Agent shall not be reimbursed for any such expenses arising
as a result of its gross negligence or willful misconduct.
10.9. Rights as a Lender. With respect to any credit extended by it
hereunder, Fleet shall have the same rights, obligations and powers
hereunder as any other Lender and may exercise such rights and powers as
though it were not the Agent, and unless the context otherwise specifies,
Fleet shall be treated in its individual capacity as though it were not
the Agent hereunder. Without limiting the generality of the foregoing,
the Percentage Interest of Fleet shall be included in any computations of
Percentage Interests. Fleet and its Affiliates (as well as any other
Lender and its Affiliates) may accept deposits from, lend money to, act as
trustee for and generally engage in any kind of banking or trust business
with the Holding Company, any of its Subsidiaries or any Affiliate of any
of them and any Person who may do business with or own an equity interest
in the Holding Company, any of its Subsidiaries or any Affiliate of any of
them, all as if Fleet were not the Agent and without any duty to account
therefor to the other Lenders.
10.10.
Independent Credit Decision. Each of the Lenders acknowledges that it has
independently and without reliance upon the Agent, based on the financial
statements and other documents referred to in Section 7.2, on the other
representations and warranties contained herein and on such other
information with respect to the Holding Company and its Subsidiaries as
such Lender deemed appropriate, made such Lender's own credit analysis
and decision to enter into this Agreement and to make the extensions of
credit provided for hereunder. Each Lender represents to the Agent that
such Lender will continue to make its own independent credit and other
decisions in taking or not taking action under this Agreement or any other
Credit Document. Each Lender expressly acknowledges that neither the
Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates has made any representations or warranties
to such Lender, and no act by the Agent taken under this Agreement or any
other Credit Document, including any review of the affairs of the Holding
Company and its Subsidiaries, shall be deemed to constitute any
representation or warranty by the Agent. Except for notices, reports and
other documents expressly required to be furnished to each Lender by the
Agent under this Agreement or any other Credit Document, the Agent shall
not have any duty or responsibility to provide any Lender with any credit
or other information concerning the business, operations, property,
condition, financial or otherwise, or creditworthiness of the Holding
Company or any Subsidiary which may come into the possession of the Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates; provided, however, that the Agent shall endeavor to furnish to
the Lenders all written reports and financial data received by it from the
Holding Company and its Subsidiaries that has not been furnished directly
to the Lenders.
10.11. Indemnification. The holders of the Credit Obligations
severally shall indemnify the Agent and its officers, directors, employees,
agents, attorneys, accountants, consultants and controlling Persons (to the
extent not reimbursed by the Obligors and without limiting the obligation of
any of the Obligors to do so), pro rata in accordance with their respective
Percentage Interests, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time be
imposed on, incurred by or asserted against the Agent or such Persons
relating to or arising out of this Agreement, any other Credit Document,
the transactions contemplated hereby or thereby, or any action taken or
omitted by the Agent in connection with any of the foregoing; provided,
however, that the foregoing shall not extend to actions or omissions which
are taken by the Agent with gross negligence or willful misconduct.
11. Successors and Assigns; Lender Assignments and Participations. Any
reference in this Agreement or any other Credit Document to any of the
parties hereto shall be deemed to include the successors and assigns of
such party, and all covenants and agreements by or on behalf of the
Holding Company, the other Obligors, the Agent or the Lenders that are
contained in this Agreement or any other Credit Document shall bind and
inure to the benefit of their respective successors and assigns; provided,
however, that (a) the Holding Company and its Subsidiaries may not assign
their rights or obligations under this Agreement or any other Credit
Document except for mergers or liquidations permitted by Section 6.11, and
(b) the Lenders shall be not entitled to assign their respective
Percentage Interests in the credits extended hereunder or their
Commitments except as set forth below in this Section 11.
11.1. Assignments by Lenders.
11.1.1. Assignees and Assignment Procedures. Each Lender
may (a) without the consent of the Agent, the Holding Company or the
Borrower if the proposed assignee is already a Lender hereunder or a
Wholly Owned Subsidiary of the same corporate parent of which the
assigning Lender is a Subsidiary, or (b) otherwise with the consents
of the Agent and (so long as no Event of Default exists) the Holding
Company (which consents will not be unreasonably withheld), in
compliance with applicable laws in connection with such assignment,
assign to one or more commercial banks or other financial
institutions or mutual funds (each, an "Assignee") all or a portion
of its interests, rights and obligations under this Agreement and the
other Credit Documents, including all or a portion, which need not be
pro rata between the Loan and the Letter of Credit Exposure, of its
Commitment, the portion of the Term Loan A, Term Loan B, Revolving
Loan and Letter of Credit Exposure at the time owing to it and the
Notes held by it, but excluding its rights and obligations as a
Letter of Credit Issuer; provided, however, that:
(i) the aggregate amount of the Commitment of the
assigning Lender subject to each such assignment to any
Assignee other than another Lender (determined as of the date
the Assignment and Acceptance with respect to such assignment
is delivered to the Agent) shall be in a minimum amount of
$2,500,000 and in increments of $1,000,000; and
(ii) the parties to each such assignment shall execute
and deliver to the Agent an Assignment and Acceptance (the
"Assignment and Acceptance") substantially in the form of
Exhibit 11.1.1, together with the Note subject to such
assignment and, except in the event of a transfer pursuant to
Section 11.3, a processing and recordation fee of $3,000
payable to the Agent by the assigning Lender or the Assignee.
Upon acceptance and recording pursuant to Section 11.1.4, from and
after the effective date specified in each Assignment and Acceptance
(which effective date shall be at least five Banking Days after the
execution thereof unless waived by the Agent):
(A) the Assignee shall be a party hereto and, to the
extent provided in such Assignment and Acceptance,
have the rights and obligations of a Lender under
this Agreement and
(B) the assigning Lender shall, to the extent provided in
such assignment, be released from its obligations
under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the
remaining portion of an assigning Lender's rights and
obligations under this Agreement, such Lender shall
cease to be a party hereto but shall continue to be
entitled to the benefits of Sections 3.2.4, 3.5 and
9, as well as to any fees accrued for its account
hereunder and not yet paid).
11.1.2. Terms of Assignment and Acceptance. By executing
and delivering an Assignment and Acceptance, the assigning Lender and
Assignee shall be deemed to confirm to and agree with each other and
the other parties hereto as follows:
(a) other than the representation and warranty that it is
the legal and beneficial owner of the interest being assigned thereby
free and clear of any adverse claim, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement,
any other Credit Document or any other instrument or document
furnished pursuant hereto;
(b) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Holding Company and its Subsidiaries or the
performance or observance by the Holding Company or any of its
Subsidiaries of any of its obligations under this Agreement, any
other Credit Document or any other instrument or document furnished
pursuant hereto;
(c) such Assignee confirms that it has received a copy of
this Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 7.2 or Section 6.4 and such
other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Assignment
and Acceptance;
(d) such Assignee will independently and without reliance
upon the Agent, such assigning Lender or any other Lender, and based
on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not
taking action under this Agreement;
(e) such Assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under
this Agreement as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; and
(f) such Assignee agrees that it will perform in accordance
with the terms of this Agreement all the obligations which are
required to be performed by it as a Lender.
11.1.3. Register. The Agent shall maintain at the Boston
Office a register (the "Register") for the recordation of (a) the
names and addresses of the Lenders and the Assignees which assume
rights and obligations pursuant to an assignment under Section
11.1.1, (b) the Percentage Interest of each such Lender as set forth
in Exhibit 10.1 and (c) the amount of the Loan and Letter of Credit
Exposure owing to each Lender from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and
the Borrower, the Agent and the Lenders may treat each Person whose
name is registered therein for all purposes as a party to this
Agreement. The Register shall be available for inspection by the
Borrower or any Lender at any reasonable time and from time to time
upon reasonable prior notice.
11.1.4. Acceptance of Assignment and Assumption. Upon its
receipt of a completed Assignment and Acceptance executed by an
assigning Lender and an Assignee (and any necessary consent of the
Agent and the Holding Company) together with the Note subject to such
assignment, and the processing and recordation fee referred to in
Section 11.1.1, the Agent shall (a) accept such Assignment and
Acceptance, (b) record the information contained therein in the
Register and (c) give prompt notice thereof to the Borrower. Within
five Banking Days after receipt of notice, the Borrower, at its own
expense, shall execute and deliver to the Agent, in exchange for the
surrendered Note, a new Note to the order of such Assignee in a
principal amount equal to the applicable Commitment and Loan assumed
by it pursuant to such Assignment and Acceptance and, if the
assigning Lender has retained a Commitment and Loan, a new Note to
the order of such assigning Lender in a principal amount equal to the
applicable Commitment and Loan retained by it. Such new Note shall
be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note, and shall be dated the date of the
surrendered Note which it replaces.
11.1.5. Federal Reserve Bank. Notwithstanding the foregoing
provisions of this Section 11, any Lender may at any time pledge or
assign all or any portion of such Lender's rights under this
Agreement and the other Credit Documents to a Federal Reserve Bank;
provided, however, that no such pledge or assignment shall release
such Lender from such Lender's obligations hereunder or under any
other Credit Document.
11.1.6. Further Assurances. The Holding Company and its
Subsidiaries shall sign such documents and take such other actions
from time to time reasonably requested by an Assignee to enable it to
share in the benefits of the rights created by the Credit Documents.
11.2. Credit Participants. Each Lender may, without the consent of
the Holding Company or the Agent, in compliance with applicable laws in
connection with such participation, sell to one or more commercial banks
or other financial institutions or mutual funds (each a "Credit
Participant") participations in all or a portion of its interests, rights
and obligations under this Agreement and the other Credit Documents
(including all or a portion of its Commitment, the Loan and Letter of
Credit Exposure owing to it and the Note held by it); provided, however,
that:
(a) such Lender's obligations under this Agreement shall
remain unchanged;
(b) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations;
(c) the Credit Participant shall be entitled to the benefit
of the cost protection provisions contained in Sections 3.2.4, 3.5
and 9, but shall not be entitled to receive any greater payment
thereunder than the selling Lender would have been entitled to
receive with respect to the interest so sold if such interest had not
been sold; and
(d) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement, and
such Lender shall retain the sole right as one of the Lenders to vote
with respect to the enforcement of the obligations of the Obligors
relating to the Loan and Letter of Credit Exposure and the approval
of any amendment, modification or waiver of any provision of this
Agreement (other than amendments, modifications, consents or waivers
described in clause (b) of the proviso to Section 10.6).
Each Obligor agrees, to the fullest extent permitted by applicable law,
that any Credit Participant and any Lender purchasing a participation from
another Lender pursuant to Section 10.5 may exercise all rights of payment
(including the right of set-off), with respect to its participation as
fully as if such Credit Participant or such Lender were the direct
creditor of the Obligors and a Lender hereunder in the amount of such
participation.
11.3. Replacement of Lender. In the event that any Lender or, to
the extent applicable, any Credit Participant (the "Affected Lender"):
(a) fails to perform its obligations to fund any portion of
the Loan or to issue any Letter of Credit on any Closing Date when
required to do so by the terms of the Credit Documents, or fails to
provide its portion of any LIBOR Pricing Option pursuant to Section
3.2.1 or on account of a Legal Requirement as contemplated by Section
3.2.5;
(b) demands payment under the provisions of Section 3.5 in
an amount materially in excess of the amounts with respect thereto
demanded by the other Lenders;
(c) refuses to consent to a proposed extension of the
Applicable Maturity Date that is consented to by all of the other
Lenders; or
(d) refuses to consent to a proposed amendment,
modification, waiver or other action requiring consent of the holders
of 100% of the Percentage Interests under Section 10.6(b) that is
consented to by all of the other Lenders;
then, so long as no Event of Default exists, the Holding Company shall
have the right to seek a replacement lender which is reasonably
satisfactory to the Agent (the "Replacement Lender"). The Replacement
Lender shall purchase the interests of the Affected Lender in the Loan,
Letters of Credit and its Commitment and shall assume the obligations of
the Affected Lender hereunder and under the other Credit Documents upon
execution by the Replacement Lender of an Assignment and Acceptance and
the tender by it to the Affected Lender of a purchase price agreed between
it and the Affected Lender (or, if they are unable to agree, a purchase
price in the amount of the Affected Lender's Percentage Interest in the
Loan and Letter of Credit Exposure, or appropriate credit support for
contingent amounts included therein, and all other outstanding Credit
Obligations then owed to the Affected Lender). No assignment fee pursuant
to Section 11.1.1(ii) shall be required in connection with such
assignment. Such assignment by the Affected Lender shall be deemed an
early termination of any LIBOR Pricing Option to the extent of the
Affected Lender's portion thereof, and the Borrower will pay to the
Affected Lender any resulting amounts due under Section 3.2.4. Upon
consummation of such assignment, the Replacement Lender shall become party
to this Agreement as a signatory hereto and shall have all the rights and
obligations of the Affected Lender under this Agreement and the other
Credit Documents with a Percentage Interest equal to the Percentage
Interest of the Affected Lender, the Affected Lender shall be released
from its obligations hereunder and under the other Credit Documents, and
no further consent or action by any party shall be required. Upon the
consummation of such assignment, the Borrower, the Agent and the Affected
Lender shall make appropriate arrangements so that a new Revolving Note is
issued to the Replacement Lender if it has acquired a portion of the
Revolving Loan. The Borrower and the Guarantors shall sign such documents
and take such other actions reasonably requested by the Replacement Lender
to enable it to share in the benefits of the rights created by the Credit
Documents. Until the consummation of an assignment in accordance with the
foregoing provisions of this Section 11.3, the Borrower shall continue to
pay to the Affected Lender any Credit Obligations as they become due and
payable.
12. Confidentiality. Each Lender will make no disclosure of confidential
information furnished to it by the Holding Company or any of its
Subsidiaries unless such information shall have become public, except:
(a) in connection with operations under or the enforcement
of this Agreement or any other Credit Document to Persons who have a
reasonable need to be furnished such confidential information and who
agree to comply with the restrictions contained in this Section 12
with respect to such information;
(b) pursuant to any statutory or regulatory requirement or
any mandatory court order, subpoena or other legal process;
(c) to any parent or corporate Affiliate of such Lender or
to any Credit Participant, proposed Credit Participant or proposed
Assignee; provided, however, that any such Person shall agree to
comply with the restrictions set forth in this Section 12 with
respect to such information;
(d) to its independent counsel, auditors and other
professional advisors with an instruction to such Person to keep such
information confidential; and
(e) with the prior written consent of the Holding Company,
to any other Person.
13. Foreign Lenders. If any Lender is not incorporated or organized
under the laws of the United States of America or a state thereof, such
Lender shall deliver to the Borrower and the Agent the following:
(a) Two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224 or successor form, as the case may
be, certifying in each case that such Person is entitled to receive
payments under this Agreement, the Notes and reimbursement
obligations under Letters of Credit payable to it, without deduction
or withholding of any United States federal income taxes; and
(b) A duly completed Internal Revenue Service Form W-8 or
W-9 or successor form, as the case may be, to establish an exemption
from United States backup withholding tax.
Each such Lender that delivers to the Borrower and the Agent a Form
1001 or 4224 and Form W-8 or W-9 pursuant to this Section 13 further
undertakes to deliver to the Borrower and the Agent two further copies of
Form 1001 or 4224 and Form W-8 or W-9, or successor applicable form, or
other manner of certification, as the case may be, on or before the date
that any such form expires or becomes obsolete or after the occurrence of
any event requiring a change in the most recent form previously delivered
by it to the Borrower and the Agent. Such Forms 1001 or 4224 shall
certify that such Lender is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal
income taxes. The foregoing documents need not be delivered in the event
any change in treaty, law or regulation or official interpretation thereof
has occurred which renders all such forms inapplicable or which would
prevent such Lender from delivering any such form with respect to it, or
such Lender advises the Borrower that it is not capable of receiving
payments without any deduction or withholding of United States federal
income tax and, in the case of a Form W-8 or W-9, establishing an
exemption from United States backup withholding tax. Until such time as
the Borrower and the Agent have received such forms indicating that
payments hereunder are not subject to United States withholding tax or are
subject to such tax at a rate reduced by an applicable tax treaty, the
Borrower shall withhold taxes from such payments at the applicable
statutory rate without regard to Section 3.5.
14. Notices. Except as otherwise specified in this Agreement or any
other Credit Document, any notice required to be given pursuant to this
Agreement or any other Credit Document shall be given in writing. Any
notice, consent, approval, demand or other communication in connection
with this Agreement or any other Credit Document shall be deemed to be
given if given in writing (including telex, telecopy or similar
teletransmission) addressed as provided below (or to the addressee at such
other address as the addressee shall have specified by notice actually
received by the addressor), and if either (a) actually delivered in fully
legible form to such address (evidenced in the case of a telex by receipt
of the correct answerback) or (b) in the case of a letter, unless actual
receipt of the notice is required by any Credit Document five days shall
have elapsed after the same shall have been deposited in the United States
mails, with first-class postage prepaid and registered or certified.
If to the Holding Company or any of its Subsidiaries, to it at its
address set forth in Exhibit 7.1 (as supplemented pursuant to
Sections 6.4.1 and 6.4.2), to the attention of the chief financial
officer.
If to any Lender or the Agent, to it at its address set forth on the
signature pages of this Agreement or in the Register, with a copy to the
Agent.
15. Course of Dealing; Amendments and Waivers. No course of dealing
between any Lender or the Agent, on one hand, and the Borrower or any
other Obligor, on the other hand, shall operate as a waiver of any of the
Lenders' or the Agent's rights under this Agreement or any other Credit
Document or with respect to the Credit Obligations. Each of the Borrower
and the Guarantors acknowledges that if the Lenders or the Agent, without
being required to do so by this Agreement or any other Credit Document,
give any notice or information to, or obtain any consent from, the
Borrower or any other Obligor, the Lenders and the Agent shall not by
implication have amended, waived or modified any provision of this
Agreement or any other Credit Document, or created any duty to give any
such notice or information or to obtain any such consent on any future
occasion. No delay or omission on the part of any Lender or the Agent in
exercising any right under this Agreement or any other Credit Document or
with respect to the Credit Obligations shall operate as a waiver of such
right or any other right hereunder or thereunder. A waiver on any one
occasion shall not be construed as a bar to or waiver of any right or
remedy on any future occasion. No waiver, consent or amendment with
respect to this Agreement or any other Credit Document shall be binding
unless it is in writing and signed by the Agent or the Required Lenders.
16. No Strict Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement and the other Credit Documents
with counsel sophisticated in financing transactions. In the event an
ambiguity or question of intent or interpretation arises, this Agreement
and the other Credit Documents shall be construed as if drafted jointly by
the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of
this Agreement and the other Credit Documents.
17. Defeasance. When all Credit Obligations have been paid, performed
and reasonably determined by the Lenders to have been indefeasibly
discharged in full, and if at the time no Lender continues to be committed
to extend any credit to the Holding Company hereunder or under any other
Credit Document, this Agreement and the other Credit Documents shall
terminate and, at the Holding Company's written request, accompanied by
such certificates and other items as the Agent shall reasonably deem
necessary, the Credit Security shall revert to the Obligors and the right,
title and interest of the Lenders therein shall terminate. Thereupon, on
the Obligors' demand and at their cost and expense, the Agent shall
execute proper instruments, acknowledging satisfaction of and discharging
this Agreement and the other Credit Documents, and shall redeliver to the
Obligors any Credit Security then in its possession; provided, however,
that Sections 3.2.4, 3.5, 9, 10.8.7, 10.11, 12, 18 and 19 shall survive
the termination of this Agreement.
18. Venue; Service of Process. Each of the Borrower and the other
Obligors:
(a) Irrevocably submits to the nonexclusive jurisdiction of
the state courts of The Commonwealth of Massachusetts and to the
nonexclusive jurisdiction of the United States District Court for the
District of Massachusetts for the purpose of any suit, action or
other proceeding arising out of or based upon this Agreement or any
other Credit Document or the subject matter hereof or thereof.
(b) Waives to the extent not prohibited by applicable law
that cannot be waived, and agrees not to assert, by way of motion, as
a defense or otherwise, in any such proceeding brought in any of the
above-named courts, any claim that it is not subject personally to
the jurisdiction of such court, that its property is exempt or immune
from attachment or execution, that such proceeding is brought in an
inconvenient forum, that the venue of such proceeding is improper, or
that this Agreement or any other Credit Document, or the subject
matter hereof or thereof, may not be enforced in or by such court.
Each of the Borrower and the other Obligors consents to service of process
in any such proceeding in any manner at the time permitted by Chapter 223A
of the General Laws of The Commonwealth of Massachusetts and agrees that
service of process by registered or certified mail, return receipt
requested, at its address specified in or pursuant to Section 14 is
reasonably calculated to give actual notice.
19. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
THAT CANNOT BE WAIVED, EACH OF THE BORROWER, THE OTHER OBLIGORS, THE AGENT
AND THE LENDERS WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY
FORUM IN RESPECT OF ANY ISSUE, CLAIM OR PROCEEDING ARISING OUT OF THIS
AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR THE SUBJECT MATTER HEREOF OR
THEREOF OR ANY CREDIT OBLIGATION OR IN ANY WAY CONNECTED WITH THE DEALINGS
OF THE LENDERS, THE AGENT, THE BORROWER OR ANY OTHER OBLIGOR IN CONNECTION
WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING AND WHETHER IN CONTRACT, TORT OR OTHERWISE. Each of the Borrower
and the other Obligors acknowledges that it has been informed by the Agent
that the provisions of this Section 19 constitute a material inducement
upon which each of the Lenders has relied and will rely in entering into
this Agreement and any other Credit Document, and that it has reviewed the
provisions of this Section 19 with its counsel. Any Lender, the Agent,
the Borrower or any other Obligor may file an original counterpart or a
copy of this Section 19 with any court as written evidence of the consent
of the Borrower, the other Obligors, the Agent and the Lenders to the
waiver of their rights to trial by jury.
20. General. Time is (and shall be) of the essence in this Agreement and
the other Credit Documents. All covenants, agreements, representations
and warranties made in this Agreement or any other Credit Document or in
certificates delivered pursuant hereto or thereto shall be deemed to have
been relied on by each Lender, notwithstanding any investigation made by
any Lender on its behalf, and shall survive the execution and delivery to
the Lenders hereof and thereof. The invalidity or unenforceability of any
provision hereof shall not affect the validity or enforceability of any
other provision hereof. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement and the other Credit Documents constitute
the entire understanding of the parties with respect to the subject matter
hereof and thereof and supersede all prior and contemporaneous
understandings and agreements, whether written or oral. This Agreement
may be executed in any number of counterparts which together shall
constitute one instrument. This Agreement shall be governed by and
construed in accordance with the laws (other than the conflict of laws
rules) of The Commonwealth of Massachusetts.
Each of the undersigned has caused this Agreement to be executed and
delivered by its duly authorized officer as an agreement under seal as of
the date first above written.
SWING-N-SLIDE CORP.
By ______________________________________
Title:
NEWCO, INC.
By ______________________________________
Title:
FLEET NATIONAL BANK
By ______________________________________
Title:
FLEET NATIONAL BANK
Acquisition Finance Division
One Federal Street
Boston, Massachusetts 02110
Telecopy: (617) 346-4389
THE FIRST NATIONAL BANK OF BOSTON
By ______________________________________
Title:
THE FIRST NATIONAL BANK OF BOSTON
Diversified Finance
100 Federal Street
Boston, Massachusetts 02110
Telecopy: (617) 434-4929
LASALLE NATIONAL BANK
By ______________________________________
Title:
LASALLE NATIONAL BANK
135 South LaSalle Street
Chicago, Illinois 60603
Telecopy: (312) 904-5483
SUNTRUST BANK, ATLANTA
By ______________________________________
Title:
By ______________________________________
Title:
SUNTRUST BANK, ATLANTA
25 Park Place, 23rd Floor
Atlanta, Georgia 30303
Telecopy: (404) 588-8833
REVOLVING NOTE
R-1 March 13, 1997
FOR VALUE RECEIVED, the undersigned Newco, Inc., a Wisconsin
corporation (the "Borrower"), hereby promises to pay Fleet National Bank
(the "Lender") or order, on the Final Revolving Maturity Date, the
aggregate unpaid principal amount of the Revolving Loan advanced by the
Lender pursuant to the Credit Agreement referred to below. The Borrower
promises to pay interest from the date hereof, computed as provided in
such Credit Agreement, on the aggregate principal amount of such loans
from time to time unpaid at the per annum rate applicable to such unpaid
principal amount as provided in such Credit Agreement and to pay interest
on overdue principal and, to the extent not prohibited by applicable law,
on overdue installments of interest at the rate specified in such Credit
Agreement, all such interest being payable at the times specified in such
Credit Agreement, except that all accrued interest shall be paid at the
stated or accelerated maturity hereof or upon the prepayment in full
hereof.
Payments hereunder shall be made to Fleet National Bank, as agent for
the Lender, at One Federal Street, Boston, Massachusetts 02110.
All loans made by the Lender as part of the Revolving Loan pursuant
to the Credit Agreement referred to below and all repayments of the
principal thereof shall be recorded by the Lender and, prior to any
transfer hereof, appropriate notations to evidence the foregoing
information with respect to each such loan then outstanding shall be
endorsed by the Lender on the schedule attached hereto or on a
continuation of such schedule attached to and made a part hereof;
provided, however, that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of the
Borrower under this Note, such Credit Agreement or any other Credit
Document.
This Note evidences borrowings under, and is entitled to the benefits
of, and is subject to the provisions of, the Credit Agreement dated as of
March 13, 1997, as from time to time in effect (the "Credit Agreement"),
among the Borrower, certain of its Affiliates, the Lender and certain
other parties. The principal of this Note is prepayable in the amounts
and under the circumstances set forth in the Credit Agreement, and may be
prepaid in whole or from time to time in part, all as set forth in the
Credit Agreement. Terms defined in the Credit Agreement are used herein
with the meanings so defined.
In case an Event of Default shall occur, the entire principal of this
Note may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement.
This Note shall be governed by and construed in accordance with the
laws (other than the conflict of laws rules) of The Commonwealth of
Massachusetts.
The parties hereto, including the Borrower and all guarantors and
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note, except as specifically otherwise
provided in the Credit Agreement, and assent to extensions of time of
payment, forbearance or other indulgence without notice.
NEWCO, INC.
By_________________________________
Title:
<PAGE>
LOANS AND PAYMENTS OF PRINCIPAL
________________________________________________________________________
Amount Amount of Unpaid
of Principal Principal Notation
Date Loan Repaid Balance Made By
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
REVOLVING NOTE
R-2 March 13, 1997
FOR VALUE RECEIVED, the undersigned Newco, Inc., a Wisconsin
corporation (the "Borrower"), hereby promises to pay SunTrust Bank,
Atlanta (the "Lender") or order, on the Final Revolving Maturity Date, the
aggregate unpaid principal amount of the Revolving Loan advanced by the
Lender pursuant to the Credit Agreement referred to below. The Borrower
promises to pay interest from the date hereof, computed as provided in
such Credit Agreement, on the aggregate principal amount of such loans
from time to time unpaid at the per annum rate applicable to such unpaid
principal amount as provided in such Credit Agreement and to pay interest
on overdue principal and, to the extent not prohibited by applicable law,
on overdue installments of interest at the rate specified in such Credit
Agreement, all such interest being payable at the times specified in such
Credit Agreement, except that all accrued interest shall be paid at the
stated or accelerated maturity hereof or upon the prepayment in full
hereof.
Payments hereunder shall be made to Fleet National Bank, as agent for
the Lender, at One Federal Street, Boston, Massachusetts 02110.
All loans made by the Lender as part of the Revolving Loan pursuant
to the Credit Agreement referred to below and all repayments of the
principal thereof shall be recorded by the Lender and, prior to any
transfer hereof, appropriate notations to evidence the foregoing
information with respect to each such loan then outstanding shall be
endorsed by the Lender on the schedule attached hereto or on a
continuation of such schedule attached to and made a part hereof;
provided, however, that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of the
Borrower under this Note, such Credit Agreement or any other Credit
Document.
This Note evidences borrowings under, and is entitled to the benefits
of, and is subject to the provisions of, the Credit Agreement dated as of
March 13, 1997, as from time to time in effect (the "Credit Agreement"),
among the Borrower, certain of its Affiliates, the Lender and certain
other parties. The principal of this Note is prepayable in the amounts
and under the circumstances set forth in the Credit Agreement, and may be
prepaid in whole or from time to time in part, all as set forth in the
Credit Agreement. Terms defined in the Credit Agreement are used herein
with the meanings so defined.
In case an Event of Default shall occur, the entire principal of this
Note may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement.
This Note shall be governed by and construed in accordance with the
laws (other than the conflict of laws rules) of The Commonwealth of
Massachusetts.
The parties hereto, including the Borrower and all guarantors and
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note, except as specifically otherwise
provided in the Credit Agreement, and assent to extensions of time of
payment, forbearance or other indulgence without notice.
NEWCO, INC.
By_________________________________
Title:
LOANS AND PAYMENTS OF PRINCIPAL
__________________________________________________________________________
Amount Amount of Unpaid
of Principal Principal Notation
Date Loan Repaid Balance Made By
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
REVOLVING NOTE
R-3 March 13, 1997
FOR VALUE RECEIVED, the undersigned Newco, Inc., a Wisconsin
corporation (the "Borrower"), hereby promises to pay The First National
Bank of Boston (the "Lender") or order, on the Final Revolving Maturity
Date, the aggregate unpaid principal amount of the Revolving Loan
advanced by the Lender pursuant to the Credit Agreement referred to below.
The Borrower promises to pay interest from the date hereof, computed as
provided in such Credit Agreement, on the aggregate principal amount of
such loans from time to time unpaid at the per annum rate applicable to
such unpaid principal amount as provided in such Credit Agreement and to
pay interest on overdue principal and, to the extent not prohibited by
applicable law, on overdue installments of interest at the rate specified
in such Credit Agreement, all such interest being payable at the times
specified in such Credit Agreement, except that all accrued interest shall
be paid at the stated or accelerated maturity hereof or upon the
prepayment in full hereof.
Payments hereunder shall be made to Fleet National Bank, as agent for
the Lender, at One Federal Street, Boston, Massachusetts 02110.
All loans made by the Lender as part of the Revolving Loan pursuant
to the Credit Agreement referred to below and all repayments of the
principal thereof shall be recorded by the Lender and, prior to any
transfer hereof, appropriate notations to evidence the foregoing
information with respect to each such loan then outstanding shall be
endorsed by the Lender on the schedule attached hereto or on a
continuation of such schedule attached to and made a part hereof;
provided, however, that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of the
Borrower under this Note, such Credit Agreement or any other Credit
Document.
This Note evidences borrowings under, and is entitled to the benefits
of, and is subject to the provisions of, the Credit Agreement dated as of
March 13, 1997, as from time to time in effect (the "Credit Agreement"),
among the Borrower, certain of its Affiliates, the Lender and certain
other parties. The principal of this Note is prepayable in the amounts
and under the circumstances set forth in the Credit Agreement, and may be
prepaid in whole or from time to time in part, all as set forth in the
Credit Agreement. Terms defined in the Credit Agreement are used herein
with the meanings so defined.
In case an Event of Default shall occur, the entire principal of this
Note may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement.
This Note shall be governed by and construed in accordance with the
laws (other than the conflict of laws rules) of The Commonwealth of
Massachusetts.
The parties hereto, including the Borrower and all guarantors and
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note, except as specifically otherwise
provided in the Credit Agreement, and assent to extensions of time of
payment, forbearance or other indulgence without notice.
NEWCO, INC.
By_________________________________
Title:
<PAGE>
LOANS AND PAYMENTS OF PRINCIPAL
__________________________________________________________________________
Amount Amount of Unpaid
of Principal Principal Notation
Date Loan Repaid Balance Made By
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
REVOLVING NOTE
R-4 March 13, 1997
FOR VALUE RECEIVED, the undersigned Newco, Inc., a Wisconsin
corporation (the "Borrower"), hereby promises to pay LaSalle National Bank
(the "Lender") or order, on the Final Revolving Maturity Date, the
aggregate unpaid principal amount of the Revolving Loan advanced by the
Lender pursuant to the Credit Agreement referred to below. The Borrower
promises to pay interest from the date hereof, computed as provided in
such Credit Agreement, on the aggregate principal amount of such loans
from time to time unpaid at the per annum rate applicable to such unpaid
principal amount as provided in such Credit Agreement and to pay interest
on overdue principal and, to the extent not prohibited by applicable law,
on overdue installments of interest at the rate specified in such Credit
Agreement, all such interest being payable at the times specified in such
Credit Agreement, except that all accrued interest shall be paid at the
stated or accelerated maturity hereof or upon the prepayment in full
hereof.
Payments hereunder shall be made to Fleet National Bank, as agent for
the Lender, at One Federal Street, Boston, Massachusetts 02110.
All loans made by the Lender as part of the Revolving Loan pursuant
to the Credit Agreement referred to below and all repayments of the
principal thereof shall be recorded by the Lender and, prior to any
transfer hereof, appropriate notations to evidence the foregoing
information with respect to each such loan then outstanding shall be
endorsed by the Lender on the schedule attached hereto or on a
continuation of such schedule attached to and made a part hereof;
provided, however, that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of the
Borrower under this Note, such Credit Agreement or any other Credit
Document.
This Note evidences borrowings under, and is entitled to the benefits
of, and is subject to the provisions of, the Credit Agreement dated as of
March 13, 1997, as from time to time in effect (the "Credit Agreement"),
among the Borrower, certain of its Affiliates, the Lender and certain
other parties. The principal of this Note is prepayable in the amounts
and under the circumstances set forth in the Credit Agreement, and may be
prepaid in whole or from time to time in part, all as set forth in the
Credit Agreement. Terms defined in the Credit Agreement are used herein
with the meanings so defined.
In case an Event of Default shall occur, the entire principal of this
Note may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement.
This Note shall be governed by and construed in accordance with the
laws (other than the conflict of laws rules) of The Commonwealth of
Massachusetts.
The parties hereto, including the Borrower and all guarantors and
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note, except as specifically otherwise
provided in the Credit Agreement, and assent to extensions of time of
payment, forbearance or other indulgence without notice.
NEWCO, INC.
By_________________________________
Title:
<PAGE>
LOANS AND PAYMENTS OF PRINCIPAL
__________________________________________________________________________
Amount Amount of Unpaid
of Principal Principal Notation
Date Loan Repaid Balance Made By
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
TERM LOAN A NOTE
TA-1 March 13, 1997
FOR VALUE RECEIVED, the undersigned Newco, Inc., a Wisconsin corporation
(the "Borrower"), hereby promises to pay Fleet National Bank (the
"Lender") or order, on the Term Loan A Maturity Date, the aggregate unpaid
principal amount of the Term Loan A advanced by the Lender pursuant to the
Credit Agreement referred to below. The Borrower promises to pay interest
from the date hereof, computed as provided in such Credit Agreement, on
the aggregate principal amount of such loan from time to time unpaid at
the per annum rate applicable to such unpaid principal amount as provided
in such Credit Agreement and to pay interest on overdue principal and, to
the extent not prohibited by applicable law, on overdue installments of
interest at the rate specified in such Credit Agreement, all such interest
being payable at the times specified in such Credit Agreement, except that
all accrued interest shall be paid at the stated or accelerated maturity
hereof or upon the prepayment in full hereof.
Payments hereunder shall be made to Fleet National Bank, as agent for
the Lender, at One Federal Street, Boston, Massachusetts 02110.
This Note evidences borrowings under, and is entitled to the benefits
of, and is subject to the provisions of, the Credit Agreement dated as of
March 13, 1997, as from time to time in effect (the "Credit Agreement"),
among the Borrower, certain of its Affiliates, the Lender and certain
other parties. The principal of this Note is prepayable in the amounts
and under the circumstances set forth in the Credit Agreement, and may be
prepaid in whole or from time to time in part, all as set forth in the
Credit Agreement. Terms defined in the Credit Agreement are used herein
with the meanings so defined.
In case an Event of Default shall occur, the entire principal of this
Note may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement.
This Note shall be governed by and construed in accordance with the laws
(other than the conflict of laws rules) of The Commonwealth of
Massachusetts.
The parties hereto, including the Borrower and all guarantors and
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note, except as specifically otherwise
provided in the Credit Agreement, and assent to extensions of time of
payment, forbearance or other indulgence without notice.
NEWCO, INC.
By_________________________________
Title:
TERM LOAN A NOTE
TA-2 March 13, 1997
FOR VALUE RECEIVED, the undersigned Newco, Inc., a Wisconsin corporation
(the "Borrower"), hereby promises to pay SunTrust Bank, Atlanta (the
"Lender") or order, on the Term Loan A Maturity Date, the aggregate unpaid
principal amount of the Term Loan A advanced by the Lender pursuant to the
Credit Agreement referred to below. The Borrower promises to pay interest
from the date hereof, computed as provided in such Credit Agreement, on
the aggregate principal amount of such loan from time to time unpaid at
the per annum rate applicable to such unpaid principal amount as provided
in such Credit Agreement and to pay interest on overdue principal and, to
the extent not prohibited by applicable law, on overdue installments of
interest at the rate specified in such Credit Agreement, all such interest
being payable at the times specified in such Credit Agreement, except that
all accrued interest shall be paid at the stated or accelerated maturity
hereof or upon the prepayment in full hereof.
Payments hereunder shall be made to Fleet National Bank, as agent for
the Lender, at One Federal Street, Boston, Massachusetts 02110.
This Note evidences borrowings under, and is entitled to the benefits
of, and is subject to the provisions of, the Credit Agreement dated as of
March 13, 1997, as from time to time in effect (the "Credit Agreement"),
among the Borrower, certain of its Affiliates, the Lender and certain
other parties. The principal of this Note is prepayable in the amounts
and under the circumstances set forth in the Credit Agreement, and may be
prepaid in whole or from time to time in part, all as set forth in the
Credit Agreement. Terms defined in the Credit Agreement are used herein
with the meanings so defined.
In case an Event of Default shall occur, the entire principal of this
Note may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement.
This Note shall be governed by and construed in accordance with the laws
(other than the conflict of laws rules) of The Commonwealth of
Massachusetts.
The parties hereto, including the Borrower and all guarantors and
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note, except as specifically otherwise
provided in the Credit Agreement, and assent to extensions of time of
payment, forbearance or other indulgence without notice.
NEWCO, INC.
By_________________________________
Title:
TERM LOAN A NOTE
TA-3 March 13, 1997
FOR VALUE RECEIVED, the undersigned Newco, Inc., a Wisconsin corporation
(the "Borrower"), hereby promises to pay The First National Bank of Boston
(the "Lender") or order, on the Term Loan A Maturity Date, the aggregate
unpaid principal amount of the Term Loan A advanced by the Lender pursuant
to the Credit Agreement referred to below. The Borrower promises to pay
interest from the date hereof, computed as provided in such Credit
Agreement, on the aggregate principal amount of such loan from time to
time unpaid at the per annum rate applicable to such unpaid principal
amount as provided in such Credit Agreement and to pay interest on overdue
principal and, to the extent not prohibited by applicable law, on overdue
installments of interest at the rate specified in such Credit Agreement,
all such interest being payable at the times specified in such Credit
Agreement, except that all accrued interest shall be paid at the stated or
accelerated maturity hereof or upon the prepayment in full hereof.
Payments hereunder shall be made to Fleet National Bank, as agent for
the Lender, at One Federal Street, Boston, Massachusetts 02110.
This Note evidences borrowings under, and is entitled to the benefits
of, and is subject to the provisions of, the Credit Agreement dated as of
March 13, 1997, as from time to time in effect (the "Credit Agreement"),
among the Borrower, certain of its Affiliates, the Lender and certain
other parties. The principal of this Note is prepayable in the amounts
and under the circumstances set forth in the Credit Agreement, and may be
prepaid in whole or from time to time in part, all as set forth in the
Credit Agreement. Terms defined in the Credit Agreement are used herein
with the meanings so defined.
In case an Event of Default shall occur, the entire principal of this
Note may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement.
This Note shall be governed by and construed in accordance with the laws
(other than the conflict of laws rules) of The Commonwealth of
Massachusetts.
The parties hereto, including the Borrower and all guarantors and
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note, except as specifically otherwise
provided in the Credit Agreement, and assent to extensions of time of
payment, forbearance or other indulgence without notice.
NEWCO, INC.
By_________________________________
Title:
TERM LOAN A NOTE
TA-4 March 13, 1997
FOR VALUE RECEIVED, the undersigned Newco, Inc., a Wisconsin corporation
(the "Borrower"), hereby promises to pay LaSalle National Bank (the
"Lender") or order, on the Term Loan A Maturity Date, the aggregate unpaid
principal amount of the Term Loan A advanced by the Lender pursuant to the
Credit Agreement referred to below. The Borrower promises to pay interest
from the date hereof, computed as provided in such Credit Agreement, on
the aggregate principal amount of such loan from time to time unpaid at
the per annum rate applicable to such unpaid principal amount as provided
in such Credit Agreement and to pay interest on overdue principal and, to
the extent not prohibited by applicable law, on overdue installments of
interest at the rate specified in such Credit Agreement, all such interest
being payable at the times specified in such Credit Agreement, except that
all accrued interest shall be paid at the stated or accelerated maturity
hereof or upon the prepayment in full hereof.
Payments hereunder shall be made to Fleet National Bank, as agent for
the Lender, at One Federal Street, Boston, Massachusetts 02110.
This Note evidences borrowings under, and is entitled to the benefits
of, and is subject to the provisions of, the Credit Agreement dated as of
March 13, 1997, as from time to time in effect (the "Credit Agreement"),
among the Borrower, certain of its Affiliates, the Lender and certain
other parties. The principal of this Note is prepayable in the amounts
and under the circumstances set forth in the Credit Agreement, and may be
prepaid in whole or from time to time in part, all as set forth in the
Credit Agreement. Terms defined in the Credit Agreement are used herein
with the meanings so defined.
In case an Event of Default shall occur, the entire principal of this
Note may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement.
This Note shall be governed by and construed in accordance with the laws
(other than the conflict of laws rules) of The Commonwealth of
Massachusetts.
The parties hereto, including the Borrower and all guarantors and
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note, except as specifically otherwise
provided in the Credit Agreement, and assent to extensions of time of
payment, forbearance or other indulgence without notice.
NEWCO, INC.
By_________________________________
Title:
TERM LOAN B NOTE
TB-1 March 13, 1997
FOR VALUE RECEIVED, the undersigned Newco, Inc., a Wisconsin corporation
(the "Borrower"), hereby promises to pay Fleet National Bank (the
"Lender") or order, on the Term Loan B Maturity Date, the aggregate unpaid
principal amount of the Term Loan B advanced by the Lender pursuant to the
Credit Agreement referred to below. The Borrower promises to pay interest
from the date hereof, computed as provided in such Credit Agreement, on
the aggregate principal amount of such loan from time to time unpaid at
the per annum rate applicable to such unpaid principal amount as provided
in such Credit Agreement and to pay interest on overdue principal and, to
the extent not prohibited by applicable law, on overdue installments of
interest at the rate specified in such Credit Agreement, all such interest
being payable at the times specified in such Credit Agreement, except that
all accrued interest shall be paid at the stated or accelerated maturity
hereof or upon the prepayment in full hereof.
Payments hereunder shall be made to Fleet National Bank, as agent for
the Lender, at One Federal Street, Boston, Massachusetts 02110.
This Note evidences borrowings under, and is entitled to the benefits
of, and is subject to the provisions of, the Credit Agreement dated as of
March 13, 1997, as from time to time in effect (the "Credit Agreement"),
among the Borrower, certain of its Affiliates, the Lender and certain
other parties. The principal of this Note is prepayable in the amounts
and under the circumstances set forth in the Credit Agreement, and may be
prepaid in whole or from time to time in part, all as set forth in the
Credit Agreement. Terms defined in the Credit Agreement are used herein
with the meanings so defined.
In case an Event of Default shall occur, the entire principal of this
Note may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement.
This Note shall be governed by and construed in accordance with the laws
(other than the conflict of laws rules) of The Commonwealth of
Massachusetts.
The parties hereto, including the Borrower and all guarantors and
endorsers, hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note, except as specifically otherwise
provided in the Credit Agreement, and assent to extensions of time of
payment, forbearance or other indulgence without notice.
NEWCO, INC.
By_________________________________
Title:
CONFORMED COPY
SWING-N-SLIDE CORP.
NEWCO, INC.
$12,500,000 12% Senior Subordinated Notes due March 13, 2005
of Newco, Inc.
Warrants for 592,177 Shares of Common Stock (subject to adjustment)
of Swing-N-Slide Corp.
______________
SECURITIES PURCHASE AGREEMENT
______________
March 13, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Authorization of Securities; etc. 1
2. Sale and Purchase of Securities 2
3. Closing 2
4. Conditions to Closing 2
4.1. Representations and Warranties Correct 3
4.2. Performance; No Default 3
4.3. Related Transactions 3
4.4. Compliance Certificate 5
4.5. Sale of Securities to Other Purchasers 5
4.6. Opinions of Counsel for the Companies 5
4.7. Opinion of Your Special Counsel 5
4.8. Certain Additional Documents to be Delivered at or Prior to the
Closing 5
4.9. Legal Investment; Certificate 5
4.10. Sale and Purchase Not Forbidden by Law 5
4.11. Payment of Transactions Costs54.12.Proceedings and Documents 5
5. Representations and Warranties by the Companies 6
5.1. Organization, Standing, etc. 6
5.2. Names; Jurisdictions of Incorporation; Subsidiaries, etc. 6
5.3. Qualification 6
5.4. Business, etc. 6
5.5. Shares; Stockholders 7
5.6. Financial Statements 8
5.7. Changes; Solvency, etc. 9
5.8. Tax Returns and Payments 9
5.9. Funded Debt, Current Debt, Liens, Investments, Transactions with
Affiliates, Leases, Derivative Transactions and Insurance
Coverages 9
5.10. Title to Properties; Liens; Leases 10
5.11. Litigation, etc. 10
5.12. Valid and Binding Obligations; Compliance with Other Instruments,
Borrowing Restrictions, etc. 11
5.13. ERISA 12
5.14. Consents, etc.135.15.Proprietary Rights; Licenses 13
5.16. Offer of Securities; Investment Bankers 13
5.17. Government Regulation 14
5.18. Labor Relations; Suppliers, Distributors and Customers 14
5.19. Disclosure 14
6. Use of Proceeds 15
7. Financial Statements and Information 15
8. Inspection. 20
9. Prepayment of Notes 20
9.1. Required Prepayment Without Premium of Notes 20
9.2. Optional Prepayment With Premium of Notes 20
9.3. Required Prepayment With Premium upon Exercise of Call Option 21
9.4. Prepayment Without Premium of the Notes at the Option of the
Required Holders of the Notes Upon a Change of Control 21
9.5. Allocation of Partial Prepayments of Notes 22
9.6. Notice of Optional Prepayments of Notes 22
9.7. Maturity; Accrued Interest; Surrender, etc. of Notes 22
9.8. Purchase of Notes 22
9.9. Payment on Non-Business Days 22
9.10. Application of Notes in Satisfaction of Exercise Price of
Warrants 23
10. Subordination of Notes and Note Guarantees 23
11. Registration, etc. 23
11.1. Registration on Request 23
11.2. Incidental Registration 25
11.3. Permitted Registration; Holdback Agreement; Private
Placement 26
11.4. Registration Procedures 26
11.5. Indemnification 27
11.6. Restrictions on Other Agreements 28
12. Put and Call Rights; Required Exercise of Warrants 29
12.1. Certain Definitions 29
12.2. Put Rights of the Holders of the Put Securities Upon Change of
Control 29
12.3. Call Right of the Holding Company; Required Exercise of
Warrants 30
12.4. Closing; Payment of Put/Call Price; Adjustments to Put/Call
Price 31
12.5. Limitations on Obligations of the Holding Company 32
12.6. Successive Changes of Control, etc.3312.7.No Limitation on
the Holding Company 33
13. Board Visitation Rights 34
14. Covenants of the Companies 34
14.1. Books of Record and Account; Reserves 34
14.2. Payment of Taxes; Existence; Maintenance of Properties;
Compliance with Laws; Lines of Business; Proprietary Rights 34
14.3. Insurance 35
14.4. Limitation on Discount or Sale of Receivables 36
14.5. Limitation on Funded Debt and Current Debt3614.6.Limitation
on Restricted Investments and Restricted Payments 39
14.7. Financial Covenants; Limitations on Derivative Transactions 41
14.8. Tax Consolidation 42
14.9. Limitation on Liens 43
14.10. Limitation on Transactions with Affiliates 45
14.11. Limitation on Issuance of Preferred Shares and Redeemable Shares
By Subsidiaries 45
14.12. Limitation on Issuance and Disposition of Shares of
Subsidiaries 45
14.13. Limitation on Consolidation or Merger, etc. 46
14.14. Limitation on Sale-and-Leaseback Transactions 47
14.15. Limitation on Disposition of Property 47
14.16. Modification of Certain Documents, Agreements and
Instruments 48
14.17. Further Assurances; Note Guarantees 49
14.18. Certain Additional Covenants of the Holding Company 50
15. Definitions 52
15.1. Definitions of Capitalized Terms 52
15.2. Other Definitions 69
15.3. Accounting Terms and Principles; Laws 70
16. Remedies 71
16.1. Events of Default Defined; Acceleration of Maturity 71
16.2. Suits for Enforcement, etc. 75
16.3. No Election of Remedies 75
16.4. Remedies Not Waived 76
16.5. Application of Payments 76
17. Registration, Transfer and Exchange of Securities 76
18. Replacement of Securities 76
19. Amendment and Waiver 77
20. Method of Payment of Securities 78
21. Expenses; Indemnity 78
22. Taxes 78
23. Communications 79
24. Survival of Agreements, Representations and Warranties, etc. 79
25. Successors and Assigns; Rights of Other Holders 80
26. Purchase for Investment; ERISA 80
27. Governing Law; Jurisdiction; Waiver of Jury Trial 82
28. Rule 144A 82
29. Miscellaneous 82
Schedule I Schedule of Purchasers
Exhibit 1(a) Form of Warrant
Exhibit 1(b)(i) Form of Note
Exhibit 1(b)(ii) Form of Note Guarantee
Exhibit 3 Wire Instructions
Exhibit 4.3(b)(i) Indebtedness of Old Game Time and the Companies to
be Repaid on the Closing Date
Exhibit 4.3(b)(ii) Persons Acquiring Common Stock of the Holding
Company
Exhibit 4.3(b)(iii) Form of Bridge Note
Exhibit 4.6 Opinion of Foley & Lardner
Exhibit 4.7 Opinion of Choate, Hall & Stewart
Exhibit 4.8 Additional Documents to be Delivered at or Prior
to the Closing
Exhibit 5.2 Names; Jurisdictions of Incorporation;
Subsidiaries, etc.
Exhibit 5.4 Disclosure Documents
Exhibit 5.5(a) Shares; Stockholders
Exhibit 5.5(b) Other Securities; Commitments; Preemptive and
Registration Rights
Exhibit 5.6(a) Financial Statements
Exhibit 5.6(b) Projections
Exhibit 5.6(c) Pro Forma Unaudited Balance Sheet
Exhibit 5.7 Restricted Payments and Restricted Investments
Exhibit 5.8 Tax Returns and Payments
Exhibit 5.9 Funded Debt, Current Debt, Liens, Investments,
Transactions with Affiliates, Leases, Derivative
Transactions and Insurance Coverages
Exhibit 5.11 Pending Litigation, etc.
Exhibit 5.14 Consents
Exhibit 6 Use of Proceeds
Exhibit 7(c)(v) Information as to New Subsidiaries
Exhibit 15.1 Consolidated EBITDA for Periods Prior to the
Closing Date
SWING-N-SLIDE CORP.
NEWCO, INC.
1212 Barberry Drive
Janesville, Wisconsin 53545
March 13, 1997
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
1295 State Street
Springfield, Massachusetts 01111
Ladies and Gentlemen:
SWING-N-SLIDE CORP., a Delaware corporation (the "Holding Company"),
and NEWCO, INC., a Wisconsin corporation and a Wholly-Owned Subsidiary of
the Holding Company (the "Operating Company") (the Holding Company and the
Operating Company are collectively referred to herein as the "Companies"
and each as a "Company"), jointly and severally agree with you as follows.
Certain terms used herein are defined in section 15.
1. Authorization of Securities; etc.
(a) The Holding Company has authorized the issue and sale of
its warrants evidencing rights to purchase 592,177 shares of Holding
Company Class A Common Stock (subject to adjustment) (herein,
together with any warrants issued in exchange therefor or replacement
thereof, called the "Warrants"). The Warrants are to be
substantially in the form of Exhibit 1(a) attached hereto.
(b) The Operating Company has authorized the issue and sale of
its 12% Senior Subordinated Notes due March 13, 2005 (herein,
together with any notes issued in exchange therefor or replacement
thereof, called the "Notes") in the aggregate principal amount of
$12,500,000. The Notes are to be substantially in the form of
Exhibit 1(b)(i) attached hereto. Interest is payable on the Notes,
semi-annually in arrears on the 13th day of March and September of
each year, commencing September 13, 1997 and at maturity. The Notes
shall be guaranteed by the Holding Company and each of the other
Guarantors pursuant to one or more Note Guarantees substantially in
the form of Exhibit 1(b)(ii) attached hereto (each, a "Note
Guarantee", collectively, the "Note Guarantees"), as further provided
in section 14.17. In no event shall the amount paid or agreed to be
paid by the Operating Company as interest and premium on any Note
exceed the highest lawful rate permissible under any law applicable
thereto.
(c) The Securities are to be issued under this Agreement and
separate Securities Purchase Agreements (the "Other Securities
Purchase Agreements") identical herewith (except as to the name and
address of each of the other purchasers) being entered into
concurrently by the Companies with each of the other purchasers (the
"Other Purchasers") named in Schedule I attached hereto. The issue
of Securities to you and the issues of Securities to each of the
Other Purchasers are separate transactions, and you shall not be
liable or responsible for the acts or defaults of the Other
Purchasers.
2. Sale and Purchase of Securities. The Companies will issue and sell
to you and, subject to the terms and conditions hereof and in reliance
upon the representations and warranties of the Companies contained herein
and in the other Operative Documents, you will purchase from the
Companies, at the Closing specified in section 3, such Securities as are
specified on that portion of Schedule I attached hereto as is applicable
to you. The aggregate purchase price of the Securities shall be
$12,500,000, which shall be allocated (a) $9,777,111 to the Notes and
(b) $2,722,889 to the Warrants. The Companies, you and each of the Other
Purchasers agree that the values ascribed to the Securities (which values
shall be used by the Companies, you and each of the Other Purchasers, as
well as any subsequent holder of any of the Securities, for all purposes,
including the preparation of tax returns) shall be determined in
accordance with the foregoing.
3. Closing. The closing of the sale and purchase of the Securities
hereunder (the "Closing") shall take place at the office of Messrs.
Choate, Hall & Stewart, Exchange Place, 53 State Street, Boston,
Massachusetts 02109, on March 13, 1997 (or such other date (not later than
March 14, 1997) to which you may agree) (the "Closing Date"). The Closing
shall occur not later than 11:00 A.M. Boston time (your reinvestment
deadline) on the Closing Date. At the Closing, the Companies will deliver
to you the Securities to be purchased by you at the Closing against
payment of the purchase price thereof to (or for the benefit of) the
Companies in immediately available funds in accordance with the wire
instructions set forth on Exhibit 3 attached hereto. Delivery of the
Securities to be purchased by you at the Closing shall be made in the form
of one or more Notes and Warrants, in such denominations and registered in
such names as are specified on Schedule I attached hereto, and in each
case dated and, in the case of each Note, bearing interest from, the
Closing Date. If at the Closing the Companies shall fail to tender the
Securities to be delivered to you thereat as provided herein, or if at the
Closing any of the conditions specified in section 4 shall not have been
fulfilled to your satisfaction, you shall, at your election, be relieved
of all further obligations under this Agreement, without thereby waiving
any other rights you may have by reason of such failure or such
non-fulfillment.
4. Conditions to Closing. Your obligation to purchase and pay for the
Securities to be purchased by you hereunder at the Closing is subject to
the fulfillment to your satisfaction, prior to or at the Closing, of the
following conditions:
4.1. Representations and Warranties Correct. The
representations and warranties made by the Companies herein and in the
other Operative Documents shall have been correct in all material respects
when made and shall be correct in all material respects at and as of the
time of the Closing (after giving effect to the transactions consummated
at the Closing).
4.2. Performance; No Default. The Companies shall have
performed all agreements and complied with all conditions contained herein
and in the other Operative Documents required to be performed or complied
with by them prior to or at the Closing, and at the time of the Closing,
no Default or Event of Default shall exist and no condition shall exist
which has resulted in, or could reasonably be expected to result in, a
Material Adverse Change.
4.3. Related Transactions.
(a) The Acquisition shall have been consummated in accordance
with the Acquisition Documents. No material term or condition of the
Acquisition Documents shall have been amended, modified, supplemented
or waived. The purchase price of the outstanding Shares of Old Game
Time shall not exceed $27,000,000 and shall be paid at the time of
the Closing as follows: (i) $25,000,000 shall be paid in cash and
(ii) $2,000,000 shall be paid by delivery of the Seller Note. The
aggregate amount of transaction fees and expenses paid in connection
with the Acquisition shall not exceed $5,000,000. The terms of the
Acquisition Documents, including, without limitation, those pursuant
to which the Seller Note is subordinated to the Notes, shall be
satisfactory to you in all material respects.
(b) The debt and equity capitalization of the Holding Company
and each of its Subsidiaries shall be satisfactory to you in all
material respects. Without limiting the generality of the foregoing,
after giving effect to the Acquisition, (i) neither the Holding
Company nor any of its Subsidiaries shall have any outstanding Funded
Debt or Current Debt other than that evidenced by the Notes and the
Note Guarantees and that which is specified on Exhibit 5.9 attached
hereto, (ii) the Indebtedness of Old Game Time and of the Companies
specified on Exhibit 4.3(b)(i) attached hereto shall have been repaid
in full, all related Liens shall have been terminated and you shall
have received evidence of the foregoing satisfactory to you,
(iii) the Persons indicated on Exhibit 4.3(b)(ii) attached hereto
shall have (A) acquired 1,065,598 shares of Holding Company Class A
Common Stock and shall have paid in full not less than $5,000,000 in
cash in the aggregate for such shares and (B) lent the Holding
Company $2,500,000 in cash and the Holding Company shall have issued
its Bridge Note in substantially the form of Exhibit 4.3(b)(iii)
attached hereto (the "Bridge Note") and (iv) the Holding Company
shall have made a capital contribution to the Operating Company of
not less than $7,500,000.
(c) The Fleet Bank Documents shall have been executed and
delivered and shall be in full force and effect. The Operating
Company shall have established pursuant thereto (i) a $20,000,000
senior secured revolving credit facility, (ii) a $45,000,000 senior
secured term loan facility and (iii) a $4,500,000 senior secured term
loan facility. The aggregate amount of the Operating Company's
unused borrowing availability immediately following the Closing under
such revolving credit facility shall be at least $2,000,000 and you
shall have been furnished with a borrowing base certificate
satisfactory in form and substance to you evidencing the same. The
terms of the Fleet Bank Documents shall be satisfactory to you in all
material respects.
(d) The Holding Company shall have furnished to you a copy of
its 1992 Incentive Stock Plan and 1996 Incentive Stock Plan
(collectively, the "Option Plan") providing for the issuance to
officers, directors and employees of and advisors and consultants to
the Holding Company and/or its Subsidiaries of options exercisable
for shares of Holding Company Class A Common Stock. The terms of the
Option Plan and all related agreements, documents and instruments
shall be satisfactory to you in all material respects.
(e) The Organizational Documents of the Holding Company, the
Operating Company and each other Subsidiary of the Holding Company
shall be satisfactory to you in all material respects.
(f) The Companies shall have entered into the Consulting
Agreement with the Consultants, the terms of which shall be
satisfactory to you in all material respects, and you, the Other
Purchasers, the lenders under the Fleet Bank Agreement, the Companies
and the Consultants shall have executed and delivered a letter
agreement (the "Consulting Agreement Side Letter") restricting the
payment of amounts due under the Consulting Agreement.
(g) You shall be satisfied in all material respect as to the
compliance by the Holding Company, the Operating Company and each
other Subsidiary of the Holding Company with all applicable
Environmental Laws. Without limiting the generality of the
foregoing, you shall have received "Phase I" environmental site
assessment reports with respect to the facilities located at 1212 and
1317 Barberry Drive, Janesville, Wisconsin, and 150 Game Time Drive,
Fort Payne, Alabama, and such reports shall be satisfactory to you in
all material respects.
(h) Each of the Guarantors shall have duly authorized, executed
and delivered to you and the Other Purchasers one or more Note
Guarantees (subordinated on the same terms as the Notes), and the
Note Guarantees shall be in full force and effect.
4.4. Compliance Certificate. At the Closing, you shall have
received an Officers' Certificate from each of the Companies, dated the
Closing Date, certifying that the conditions specified in sections 4.1 and
4.2 have been fulfilled.
4.5. Sale of Securities to Other Purchasers. At the Closing,
the Companies shall issue and sell to the Other Purchasers the Securities
to be purchased at the Closing by the Other Purchasers pursuant to the
Other Securities Purchase Agreements and shall receive payment in full of
the purchase price thereof.
4.6. Opinions of Counsel for the Companies. At the Closing, you
shall have received an opinion, dated the Closing Date, from Messrs. Foley
& Lardner, counsel to the Companies, addressing the matters set forth on
Exhibit 4.6 attached hereto, and such other matters as you may reasonably
request.
4.7. Opinion of Your Special Counsel. At the Closing, you shall
have received an opinion, dated the Closing Date, from your special
counsel, Messrs. Choate, Hall & Stewart, substantially in the form of
Exhibit 4.7 attached hereto.
4.8. Certain Additional Documents to be Delivered at or Prior to
the Closing. You shall have received from the Companies the items
specified on Exhibit 4.8 attached hereto, each of which shall be
satisfactory to you in all material respects.
4.9. Legal Investment; Certificate. Your purchase of the
Securities to be issued pursuant hereto shall be permitted under the laws
and regulations of any jurisdiction to which you are subject (without
resort to any provision of any such law permitting limited investments by
you without restriction as to the character of the particular investment),
and you shall, if requested by you, have received an Officers' Certificate
from either or both of the Companies, dated the Closing Date, certifying
as to such matters as you may reasonably request to enable you to
determine whether your purchase is so permitted.
4.10. Sale and Purchase Not Forbidden by Law. The offer, issue,
sale and delivery by the Companies of the Securities to be issued pursuant
hereto and your purchase of such Securities at the Closing shall not be
prohibited by and shall not subject you to any tax, penalty, liability or
other onerous condition under or pursuant to any law, statute, rule or
regulation.
4.11. Payment of Transactions Costs. The Companies shall have
paid in immediately available funds all fees, expenses and disbursements
incurred by you at or prior to the time of the Closing in connection with
the transactions contemplated by the Operative Documents, including,
without limitation, the reasonable fees, expenses and disbursements of
your special counsel.
4.12. Proceedings and Documents. All proceedings in connection
with the transactions contemplated by the Operative Documents and all
agreements, documents and instruments incident to such transactions shall
be satisfactory in substance and form to you and your special counsel, and
you and your special counsel shall have received all such counterpart
originals or copies of such agreements, documents and instruments as you
or they may reasonably request.
5. Representations and Warranties by the Companies. The Companies
jointly and severally represent and warrant that (after giving effect to
the transactions consummated at the Closing, including, without
limitation, the Acquisition):
5.1. Organization, Standing, etc. The Holding Company and each
of its Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation
and has all requisite power and authority to own, lease and operate its
properties, to carry on its business as now conducted and now proposed to
be conducted as described in the Disclosure Documents referred to in
section 5.4, to execute, deliver and perform each of the Operative
Documents to which it is (or is to be) a party and to consummate the
transactions contemplated by the Operative Documents. No approval of the
stockholders of the Holding Company or any of its Subsidiaries or any
class thereof is required in connection therewith which has not previously
been obtained.
5.2. Names; Jurisdictions of Incorporation; Subsidiaries, etc.
Exhibit 5.2 attached hereto correctly specifies as to the Holding Company
and each of its Subsidiaries (a) its legal name, (b) the jurisdiction of
its incorporation and (c) each jurisdiction (other than its jurisdiction
of incorporation) in which it is qualified to do business. The Holding
Company does not have any Subsidiary that is not named on Exhibit 5.2
attached hereto. The Operating Company is and shall at all times be a
Wholly-Owned Subsidiary of the Holding Company.
5.3. Qualification. The Holding Company and each of its
Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the character of the properties
owned or leased or the nature of the activities conducted makes such
qualification or licensing necessary, except for those jurisdictions in
which the failure to be so qualified or licensed or to be in good standing
has not resulted in, and could not reasonably be expected to result in, a
Material Adverse Change.
5.4. Business, etc. The Holding Company and its Subsidiaries
are engaged in the business of designing, manufacturing, marketing and
selling, through home centers, mass merchants or commercial/industrial
trade classes, children's consumer and commercial indoor and outdoor play
products, new products that utilize the Operating Company's metal
fabrication or plastic forming core competencies, or substantially similar
products (the "Business"), as further described in the documents listed on
Exhibit 5.4 attached hereto (the "Disclosure Documents"), true, correct
and complete copies of which have been furnished to you.
5.5. Shares; Stockholders.
(a) Exhibit 5.5(a) attached hereto correctly and fully
specifies as to the Holding Company and each of its Subsidiaries
(after giving effect to the transactions consummated at the Closing)
(i) its authorized, issued and outstanding Shares and (ii) the name
of, and the number (and percentage) of Shares held by, each record
owner of such Shares (or, in the case of the Holding Company, each
record owner of 5% or more of the Shares of the Holding Company) and
indicates if such Person is a member of the Initial Investor Group.
All of the outstanding Shares of the Holding Company and each of its
Subsidiaries are, and all Warrant Shares issued upon exercise of the
Warrants in accordance with the terms thereof will be, duly
authorized, validly issued, fully paid and non-assessable and not
subject to any preemptive right, right of first refusal or similar
right on the part of any other Person, and all of such Shares have
been (or will have been) offered, issued and sold in accordance with
all applicable laws. Except as set forth on Exhibit 5.5(a) attached
hereto, the owners of the Shares indicated on Exhibit 5.5(a) attached
hereto own the Shares indicated on such exhibit free of any Lien,
proxy, voting agreement, voting trust, stockholders agreement or
similar agreement or restriction. Except as set forth on Exhibit
5.5(a) attached hereto, neither the Organizational Documents nor any
other agreement, document or instrument binding on or applicable to
the Holding Company or any of its Subsidiaries or any of its
stockholders contains any provision requiring a higher voting
requirement with respect to action taken (and/or to be taken) by its
board of directors or stockholders than that which would apply in the
absence of such provision. GreenGrass Holdings has the right (by
virtue of its ownership of the Shares of the Holding Company as shown
on Exhibit 5.5(a) attached hereto) to elect or designate for election
a majority of the members of the board of directors of the Holding
Company (and thereby to direct or cause the direction of the
management and policies of the Holding Company and each of its
Subsidiaries), and, except as set forth on Exhibit 5.5(a) attached
hereto, neither GreenGrass Holdings, nor any of its members, nor any
other Person having any direct or indirect interest in GreenGrass
Holdings is subject to any agreement or restriction that affects its
right to vote such Shares or to exercise any other incident of
ownership of such Shares.
(b) Except as provided in sections 11 and 12, except for the
Warrants and except as set forth on Exhibit 5.5(b) attached hereto
(after giving effect to the consummation of the transactions
consummated at the Closing), (i) there are no outstanding securities
convertible into or exercisable or exchangeable for any Shares of the
Holding Company or any of its Subsidiaries and no outstanding
agreements for the purchase from, or sale or issuance by, the Holding
Company or any of its Subsidiaries of any of its Shares or any
securities convertible into or exercisable or exchangeable for such
Shares; (ii) there are no agreements on the part of the Holding
Company or any of its Subsidiaries to issue, sell or distribute any
of its Shares, other securities or assets; (iii) neither the Holding
Company nor any of its Subsidiaries has any obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its Shares
or other securities or any interest therein or to pay any dividend or
make any distribution in respect thereof; and (iv) no Person is
entitled to any rights with respect to the registration of any Shares
or other securities of the Holding Company or any of its Subsidiaries
under the Securities Act (or the securities laws of any other
jurisdiction).
(c) The aggregate number of shares of Holding Company Class A
Common Stock issuable upon exercise in full of the Warrants
immediately after the Closing is 592,177, which, if then issued,
would constitute 6.0% of the Holding Company Common Stock (calculated
assuming the conversion, exercise and exchange of all outstanding
securities convertible into and exercisable or exchangeable for
shares of Holding Company Common Stock, including, without
limitation, the Warrants, the Holding Company's 10% Convertible
Subordinated Debentures due 2004, the Bridge Note and any options now
outstanding under the Option Plan, it being agreed that the Warrants
shall be subject to dilution on account of the issuance of not more
than 1,096,513 shares of Holding Company Class A Common Stock
pursuant to the Option Plan upon the exercise of options therefor
granted after the Closing Date). The Holding Company has reserved
592,177 shares of Holding Company Class A Common Stock solely for
issuance upon exercise of the Warrants.
5.6. Financial Statements. You have been furnished with:
(a) the financial statements referred to on Exhibit 5.6(a)
attached hereto, which financial statements are complete and correct
in all material respects, have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby
and present fairly in all material respects the financial position
and the results of operations and cash flows of the Person(s)
purported to be covered thereby as at the respective dates and for
the respective periods indicated in conformity with GAAP (subject, in
the case of any unaudited financial statements, to the absence of
footnote disclosure and normal year-end and audit adjustments);
(b) the projections referred to on Exhibit 5.6(b) attached
hereto, which projections were prepared in good faith, are based upon
assumptions that the Companies believe are reasonable and take into
account all material information regarding the information set forth
therein. Such projections represent a reasonable estimate of the
future financial performance of the Holding Company and its
Subsidiaries; and
(c) the pro forma unaudited consolidated balance sheet of the
Holding Company referred to on Exhibit 5.6(c) attached hereto, which
balance sheet fairly presents the consolidated financial position of
the Holding Company as of December 31, 1996, adjusted on a pro forma
basis to give effect to the consummation of the transactions
contemplated by the Operative Documents as if they had occurred as of
such date, and reflects all known liabilities of the Holding Company
and its Subsidiaries, contingent or other, as at the Closing Date,
required by GAAP to be reflected therein.
5.7. Changes; Solvency, etc. Since December 31, 1995:
(a) there has been no change in the assets, liabilities or financial
condition of the Holding Company or any of its Subsidiaries or of Old Game
Time from that set forth in the balance sheets as at such date referred to
on Exhibit 5.6(a) attached hereto, other than changes in the ordinary
course of business which have not been, either in any case or in the
aggregate, materially adverse; (b) no condition or event has occurred
which has resulted in, or could reasonably be expected to result in, a
Material Adverse Change; and (c) except as set forth on Exhibit 5.7
attached hereto, neither the Holding Company nor any of its Subsidiaries
nor Old Game Time has, directly or indirectly, declared, ordered, paid or
made any Restricted Payment or Restricted Investment. Each of the Holding
Company and its Subsidiaries is (and after giving effect to the
consummation of the transactions at Closing will be) Solvent.
5.8. Tax Returns and Payments. The Holding Company and its
Subsidiaries and Old Game Time have filed all tax returns required by law
to be filed and have paid (and have made adequate provisions for the
payment of) all taxes, assessments and other governmental charges levied
upon their respective properties, assets, income, receipts, franchises or
sales, other than those not yet delinquent and those, not substantial in
aggregate amount, being or about to be contested as provided in section
14.2(a). The income tax liability of the Holding Company and its
Subsidiaries and Old Game Time has been finally determined by all
applicable governmental authorities, including, without limitation, the
Internal Revenue Service, and satisfied, or the time of audit has expired,
for the fiscal years specified on Exhibit 5.8 attached hereto. Neither
the Holding Company nor any of its Subsidiaries nor Old Game Time has
executed any waiver or waivers that would have the effect of extending the
applicable statute of limitations in respect of income tax liabilities.
The charges, accruals and reserves in the financial statements of the
Holding Company and its Subsidiaries and Old Game Time in respect of taxes
for all fiscal periods are adequate, and the Companies know of no unpaid
assessments for additional taxes for any fiscal period or of any basis
therefor.
5.9. Funded Debt, Current Debt, Liens, Investments, Transactions
with Affiliates, Leases, Derivative Transactions and Insurance Coverages.
Exhibit 5.9 attached hereto correctly describes as to the Holding Company
and each of its Subsidiaries (after giving effect to the transactions
consummated at the Closing):
(a) all of its Funded Debt and/or Current Debt to be
outstanding immediately following the Closing (other than that
evidenced by the Notes and the Note Guarantees);
(b) all Liens to which any of its properties and assets will be
subject immediately following the Closing (other than those of the
character described in section 14.9(b)) which individually or in the
aggregate secure Indebtedness of $1,000,000 or more;
(c) all of its Investments (and all agreements and commitments
to make Investments) to be owned or held (or in effect) immediately
following the Closing (other than Investments of the character
described in clauses (c) through (h) of the definition of Permitted
Investment);
(d) all of its Affiliates (other than the Holding Company and
its Subsidiaries) and all transactions with such Affiliates which
were consummated during the 12-month period ended on the Closing Date
or which it is now obligated or now intends to consummate at any time
in the future;
(e) each lease, other than Capital Leases, under which it is
lessee or sublessee and is or shall be obligated to pay $250,000 or
more during any period of twelve consecutive months after the Closing
Date, and, with respect to each such lease, the name of the lessor,
the lessee or sublessee, a general description of the property
leased, the annual Rental Obligations payable thereunder and the term
thereof;
(f) each Derivative Transaction to which it is a party or in
which it is otherwise engaged and each Derivative Transaction in
which it now intends to engage at any time in the future (and a
summary of the nature of each such Derivative Transaction); and
(g) the limits, deductibles and coverages (in summary form) of
its insurance policies.
5.10. Title to Properties; Liens; Leases. The Holding Company
and its Subsidiaries have good and marketable title to all of their
respective properties and assets, including, without limitation, the
properties and assets reflected in the balance sheets dated December 31,
1995 of the Holding Company and of Old Game Time referred to on Exhibit
5.6(a) attached hereto, except properties and assets disposed of since
such date in the ordinary course of business, free of all Liens (other
than the Liens permitted under section 14.9). The only material
properties and assets of the Holding Company are the Shares of the
Operating Company. The Holding Company and its Subsidiaries enjoy
peaceful and undisturbed possession under all material leases under which
they operate, and all of such leases are valid, subsisting and in full
force and effect. None of such leases contains any unusual or burdensome
provision, which, in either case, has resulted in, or could reasonably be
expected to result in, a Material Adverse Change.
5.11. Litigation, etc. There is no action, proceeding or
investigation pending or threatened, including, without limitation, those
referred to on Exhibit 5.11 attached hereto, which questions the validity
of any of the Operative Documents or any action taken or to be taken
pursuant thereto or which has resulted in, or could reasonably be expected
to result in, a Material Adverse Change. There is no outstanding
judgment, decree or order, including, without limitation, those referred
to on Exhibit 5.11 attached hereto, which has resulted in, or could
reasonably be expected to result in, a Material Adverse Change. Exhibit
5.11 attached hereto sets forth a complete list of all pending and
threatened actions, proceedings and investigations and all outstanding
judgments, decrees and orders against or affecting the Holding Company
and/or any of its Subsidiaries.
5.12. Valid and Binding Obligations; Compliance with Other
Instruments, Borrowing Restrictions, etc.
(a) This Agreement has been duly authorized, executed and
delivered by each of the Companies and constitutes the valid and
legally binding obligation of each of the Companies enforceable
against each of the Companies in accordance with its terms. Each of
the other Operative Documents to which either Company and/or any of
their respective Subsidiaries is (or is to be) a party has been duly
authorized by such Person and, when executed and delivered, will
constitute the valid and legally binding obligation of such Person,
enforceable against it in accordance with its terms.
(b) Neither the Holding Company nor any of its Subsidiaries is
in violation of or in default under any term of its Organizational
Documents, or of any agreement, document, instrument, judgment,
decree, order, law, statute, rule or regulation applicable to it or
any of its properties and assets, in any way which has resulted in,
or could reasonably be expected to result in, a Material Adverse
Change. Without limiting the generality of the foregoing, the Holding
Company and each of its Subsidiaries is in compliance with (and
neither it nor any of its predecessors in interest has received any
notice to the contrary) and there is no reasonable possibility of any
liability of or any judgment, decree or order being entered against
or being made applicable to the Holding Company and/or any of its
Subsidiaries or any of their respective properties and assets under
or on account of any Environmental Laws, except where the same has
not resulted in, and could not reasonably be expected to result in, a
Material Adverse Change.
(c) The execution, delivery and performance of and the
consummation of the transactions contemplated by the Operative
Documents will not violate or constitute a default under, or permit
any Person to accelerate or to require the prepayment of any
Indebtedness of the Holding Company or any of its Subsidiaries or to
terminate any material lease or agreement of the Holding Company or
any of its Subsidiaries pursuant to, or result in the creation of any
Lien (other than the Liens created by the Fleet Bank Documents) upon
any of the properties or assets of the Holding Company or any of its
Subsidiaries pursuant to, any term of its Organizational Documents or
of any agreement, document, instrument, judgment, decree, order, law,
statute, rule or regulation applicable to any of them or any of their
respective properties and assets.
(d) Neither the Holding Company nor any of its Subsidiaries is
a party to or bound by or subject to any agreement, document,
instrument, judgment, decree, order, law, statute, rule or regulation
(other than the Operative Documents and the Fleet Bank Documents and
laws, statutes, rules or regulations affecting creditors or
businesses generally) (i) which restricts its right or ability to
incur Indebtedness, to issue securities or to consummate the
transactions contemplated by the Operative Documents; (ii) under the
terms of or pursuant to which its obligation to pay all amounts due
from it and/or to perform all obligations imposed on it and/or to
comply with the terms applicable to it under any of the Operative
Documents is in any way restricted; (iii) which restricts its right
or ability to make any distributions to its stockholders or in
respect of any of its Shares, to mortgage or dispose of its
properties, to consummate any merger, consolidation or acquisition,
to make Investments or capital expenditures, to enter into and
perform leases, to pay executive compensation and/or to conduct its
business as now conducted and now proposed to be conducted, or
(iv) which has resulted in, or could reasonably be expected to result
in, a Material Adverse Change.
5.13. ERISA.
(a) The Holding Company, the Operating Company and each ERISA
Affiliate have operated and administered each Plan in compliance with
all applicable laws except for such instances of noncompliance which
have not resulted in, and could not reasonably be expected to result
in, a Material Adverse Change. Neither the Holding Company, the
Operating Company nor any ERISA Affiliate has incurred any liability
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans (as defined
in section 3 of ERISA), and no event, transaction or condition has
occurred or exists that could reasonably be expected to result in the
incurrence of any such liability by the Holding Company, the
Operating Company or any ERISA Affiliate, or in the imposition of any
Lien on any of the rights, properties or assets of the Holding
Company, the Operating Company or any ERISA Affiliate, in either case
pursuant to Title I or IV of ERISA or to such penalty or excise tax
provisions or to section 401(a)(29) or 412 of the Code, other than
such liabilities or Liens as would not individually or in the
aggregate result in a Material Adverse Change.
(b) None of the Plans is an employee pension plan subject to
Title IV of ERISA maintained, or to which contributions have been
made or are required to be made, by the Holding Company, the
Operating Company or any ERISA Affiliate within five years prior to
the date hereof.
(c) Since January 1, 1992, the Holding Company, the Operating
Company and the ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of
Multiemployer Plans that individually or in the aggregate could
reasonably be expected to result in a Material Adverse Change. Since
such date, the Holding Company, the Operating Company and the ERISA
Affiliates have made all required contributions to Multiemployer
Plans. Since such date, neither the Holding Company, the Operating
Company nor any ERISA Affiliate has incurred any Withdrawal Liability
upon a complete or partial withdrawal from any Multiemployer Plan
that individually or in the aggregate could result in a Material
Adverse Change. None of the Plans is a Multiemployer Plan
(d) The Holding Company and its Subsidiaries have no expected
post retirement welfare benefit obligation (determined as of the last
day of the most recently ended fiscal year of the Holding Company in
accordance with Financial Accounting Standards Board Statement No.
106, without regard to liabilities attributable to continuation
coverage mandated by section 4980B of the Code).
(e) The consummation of the transactions contemplated by the
Operative Documents will not involve any transaction that is subject
to the prohibitions of section 406(a) of ERISA or in connection with
which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of
the Code. The representation in the first sentence of this section
5.13(e) is made by the Companies in reliance upon and subject to the
accuracy of your representation in section 26(b) as to the sources of
the funds used to pay the purchase price of the Securities to be
purchased by you.
5.14. Consents, etc. No consent, approval or authorization of,
or declaration or filing with, or other action by, any Person (including,
without limitation, any creditor of or lender to the Holding Company or
any of its Subsidiaries and any governmental authority) is required as a
condition precedent to the valid execution, delivery and performance of
and the consummation of the transactions contemplated by the Operative
Documents, other than those specified on Exhibit 5.14 attached hereto, all
of which have been obtained and are unconditional, in full force and
effect and not subject to appeal or review. Without limiting the
generality of the foregoing, no filing under the Clayton Act and/or the
Hart-Scott- Rodino Antitrust Improvements Act of 1976 and no notice or
payment is required under The Worker Adjustment and Retraining
Notification Act, 29 U.S.C. Section 2101 et seq., is required in
connection with the Acquisition and/or the consummation of the other
transactions contemplated by the Operative Documents.
5.15. Proprietary Rights; Licenses. The Holding Company and its
Subsidiaries have all Proprietary Rights and Licenses as are adequate for
the conduct of their respective businesses as now conducted and now
proposed to be conducted, without any known conflict with the rights of
others. Each such Proprietary Right and License is in full force and
effect, all material obligations with respect thereto have been fulfilled
and performed, and there is no infringement thereon by any other Person.
No default in the performance or observance by the Holding Company and/or
any of its Subsidiaries (or any of their respective predecessors in
interest) of its obligations thereunder has occurred which permits, or
after notice or lapse of time or both would permit, the revocation or
termination of any Proprietary Right or License or which has resulted in,
or could reasonably be expected to result in, a Material Adverse Change.
5.16. Offer of Securities; Investment Bankers. Neither the
Holding Company nor any of its Subsidiaries nor any Person acting on their
behalf (a) has directly or indirectly offered the Securities or any part
thereof or any similar securities for issue or sale to, or solicited any
offer to buy any of the same from, anyone other than you, the Other
Purchasers and not more than 35 other institutional investors, (b) has
taken or will take any action which would bring the issuance and sale of
the Securities within the provisions of Section 5 of the Securities Act or
the registration or qualification provisions of any applicable blue sky or
other securities laws, (c) has dealt with any broker, finder, commission
agent or other similar Person in connection with the sale of the
Securities and the other transactions contemplated by the Operative
Documents, other than Donaldson, Lufkin & Jenrette Securities Corporation,
Desai Capital Management, Inc., Glencoe Growth Closely-Held Business Fund,
L.P. and Paul-Adams, Webb & Co., Inc., or (d) is under any obligation to
pay any broker's fee, finder's fee or commission in connection with such
transactions, other than fees to the Persons specified in clause (c),
which fees are the obligation solely of the Holding Company.
5.17. Government Regulation. Neither the Holding Company nor any
of its Subsidiaries is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Investment Company
Act of 1940 or the Interstate Commerce Act, each as amended.
5.18. Labor Relations; Suppliers, Distributors and Customers. No
dispute involving employees of the Holding Company or any of its
Subsidiaries (including, without limitation, employees of Old Game Time
who will become employees of the Operating Company) or the relationship of
the Holding Company or any of its Subsidiaries with such employees has
resulted in, or could reasonably be expected to result in, any Material
Adverse Change. The relationships with the suppliers to and distributors
for and customers of the Holding Company and its Subsidiaries (including,
without limitation, the suppliers, distributors and customers of Old Game
Time who will become suppliers, distributors and customers of the
Operating Company) are satisfactory commercial working relationships and,
during the 12-month period ended on the Closing Date, no such supplier,
distributor or customer has cancelled or otherwise terminated its
relationship with or decreased its services, supplies or materials to or
its usage or purchase of the services or products of the Holding Company
or any of its Subsidiaries (or of Old Game Time) in a manner which has
resulted in, or could reasonably be expected to result in, a Material
Adverse Change. The Companies are not aware of any intention of any such
supplier, distributor or customer to take any such action.
5.19. Disclosure. Neither this Agreement nor any of the other
Operative Documents nor any other document, certificate or written
statement furnished to you by or on behalf of the Holding Company or any
of its Subsidiaries in connection with the transactions contemplated by
the Operative Documents (including, without limitation, the Disclosure
Documents), contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
herein and therein not misleading in the light of the circumstances under
which such statements were made, it being understood that, except as set
forth in section 5.6, no representation or warranty is made with respect
to any projections or other prospective financial information. There is
no fact known to the Companies (other than information concerning general
economic conditions known to the public generally) which has resulted in,
or could reasonably be expected to result in, a Material Adverse Change
which has not been set forth in this Agreement, the other Operative
Documents and the other documents, certificates and written statements
referred to above in this section 5.19.
6. Use of Proceeds.
(a) The proceeds of the sale of the Securities will be used by
the Companies on the Closing Date to partially refinance existing
Indebtedness of the Operating Company (including Indebtedness of Old
Game Time assumed by the Operating Company), to pay certain fees and
expenses incurred in connection with the issue and sale of the Notes,
to make certain capital expenditures and to partially fund the
purchase price paid in the Acquisition, all as further specified on
Exhibit 6 attached hereto.
(b) The Companies do not own, and will not, and will not
permit any of their respective Subsidiaries to, directly or
indirectly, use any part of the proceeds of the sale of the
Securities for the purpose of purchasing or carrying any "margin
stock" within the meaning of Regulation G (12 CFR Part 207) of the
Board of Governors of the Federal Reserve System (herein called a
"margin security") or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might constitute the
transactions contemplated by the Operative Documents a "purpose
credit" within the meaning of said Regulation G or cause this
Agreement or any of the other Operative Documents to violate
Regulation G or any other regulation of the Board of Governors of the
Federal Reserve System, or the Exchange Act or any other applicable
law, statute, regulation, rule, order or restriction.
7. Financial Statements and Information. The Companies will furnish to
you in duplicate, so long as you shall be obligated to purchase Securities
hereunder or shall hold any of the Securities, and to each other
institutional holder from time to time of any of the Securities:
(a) as soon as available and in any event within 45 days after
the end of each quarterly accounting period in each fiscal year of
the Holding Company and of the Operating Company:
(i) the consolidated and consolidating balance sheets of
the Holding Company and its Subsidiaries as at the end of such
period, the related consolidated and consolidating statements of
income, and the related consolidated statements of stockholders'
equity and cash flows for such period and for the portion of the
fiscal year of the Holding Company then ended; and
(ii) the consolidated and consolidating balance sheets of
the Operating Company and its Subsidiaries as at the end of such
period, the related consolidated and consolidating statements of
income, and the related consolidated statements of stockholders'
equity and cash flows for such period and for the portion of the
fiscal year of the Operating Company then ended;
in each case setting forth in comparative form the corresponding
figures for the same period and portion of the next preceding fiscal
year and the corresponding figures from the budgets for such period
and for the fiscal year which includes such period;
(b) as soon as available and in any event within 90 days after
the end of each fiscal year of the Holding Company and of the
Operating Company:
(i) the consolidated and consolidating balance sheets of
the Holding Company and its Subsidiaries as at the end of such
year, the related consolidated and consolidating statements of
income, and the related consolidated statements of stockholders'
equity and cash flows for such year; and
(ii) the consolidated and consolidating balance sheets of
the Operating Company and its Subsidiaries as at the end of such
year, the related consolidated and consolidating statements of
income, and the related consolidated statements of stockholders'
equity and cash flows for such year;
in each case setting forth in comparative form the corresponding
figures for the next preceding fiscal year and the corresponding
figures from the budgets for such fiscal year, all in reasonable
detail and accompanied by the standard unqualified report on such
consolidated financial statements of the Holding Company and its
Subsidiaries and of the Operating Company and its Subsidiaries of
Ernst & Young LLP (or other accountants of recognized national
standing selected by the Holding Company or the Operating Company, as
applicable, and reasonably satisfactory to the Required Holders of
each class of Securities), which report shall (i) state that the
audit of such accountants in connection with such consolidated
financial statements has been conducted in accordance with generally
accepted auditing standards and that such accountants believe that
such audit provides a reasonable basis for their opinion, (ii)
contain the other statements required from time to time by the
American Institute of Certified Public Accountants for an auditor's
standard unqualified opinion (and shall not contain any additional
explanatory paragraph concerning uncertainties or other matters),
(iii) include the opinion of such accountants that such consolidated
financial statements present fairly in all material respects the
consolidated financial position of the Holding Company and its
Subsidiaries or of the Operating Company and its Subsidiaries, as
applicable, as at the end of such fiscal year and the consolidated
results of operations and cash flows for such fiscal year, in
conformity with GAAP, (iv) state that each holder of the Securities
may rely upon such report and (v) be accompanied by a separate
certificate from such accountants which shall state (A) that such
accountants are familiar with the terms of the Operative Documents
and provide negative assurance relative to compliance with the
applicable covenants of the Operative Documents as they relate to
accounting matters and (B) if their examination has disclosed the
existence, during or at the end of the fiscal year covered by such
financial statements and/or the date of such certificate, of (x) any
"reportable condition" (as defined in Statement on Auditing Standards
No. 60 issued by the Auditing Standards Board of the American
Institute of Certified Public Accountants) in the internal control
structure of the Holding Company or any of its Subsidiaries, (y) any
Change of Control or (z) any Default or Event of Default and, if
their examination has disclosed such a condition or event, specifying
in reasonable detail the nature and period of existence thereof,
provided that in issuing such certificate such accountants shall not
be required to go beyond normal accounting procedures conducted in
connection with issuing their report referred to above;
(c) together with each delivery of quarterly and annual
financial statements pursuant to sections 7(a) and 7(b), an Officers'
Certificate of the Holding Company which shall:
(i) certify that such financial statements have been
prepared in accordance with GAAP (subject, in the case of any
unaudited financial statements, to normal year-end and audit
adjustments and the omission of footnotes) applied on a
consistent basis throughout the periods covered thereby and
present fairly in all material respects the consolidated
financial position and the consolidated results of operations
and cash flows of the Holding Company and its Subsidiaries or of
the Operating Company and its Subsidiaries, as applicable, as at
the end of and for the periods covered thereby in conformity
with GAAP;
(ii) state that, after due inquiry, the signers do not have
knowledge of the existence, during the fiscal period covered by
such financial statements or as at the date of such Officers'
Certificate, of (A) any "reportable condition" (as so defined)
in the internal control structure of the Holding Company or any
of its Subsidiaries, (B) any Change of Control or (C) any
Default or Event of Default, or, if such is not the case,
specifying in reasonable detail the nature and period of
existence thereof and what action has been taken, is being taken
and is proposed to be taken with respect thereto;
(iii) show in reasonable detail all computations
required to demonstrate compliance, during and at the end of the
fiscal period covered by such financial statements, with the
provisions of sections 14.5, 14.6, 14.7, 14.8, 14.9, 14.10,
14.13, 14.14, 14.15 and 14.18;
(iv) include in reasonable detail management's discussion
and analysis of the results of operations and the financial
condition of the Holding Company and its Subsidiaries and of the
Operating Company and its Subsidiaries as at the end of and for
the fiscal period covered by such financial statements,
including a discussion of any significant variation from the
budgets for such period delivered pursuant to section 7(h); and
(v) if there shall exist any Subsidiary of the Holding
Company and/or the Operating Company as of the date of such
Officers' Certificate which did not exist as of the date of the
last Officers' Certificate delivered pursuant to this section
7(c), specify with respect to each such Subsidiary the
information called for by Exhibit 7(c)(v), contain a brief
description of the nature of each such Subsidiary's business and
certify that such new Subsidiary (if it is a Significant
Subsidiary) is a party to a Note Guarantee;
(d) as promptly as practicable (but in any event not later than
five Business Days) after receipt thereof, copies of all reports or
written comments (including, without limitation, audit reports, so-
called management letters and any other reports or communications
with respect to the internal control structure of the Holding Company
or any of its Subsidiaries) submitted by independent accountants or
other management consultants;
(e) as promptly as practicable (but in any event not later than
five Business Days) after the same are available, copies of (i) all
material press releases issued by the Holding Company or any
Subsidiary of the Holding Company, and all notices, proxy statements,
financial statements, reports and documents as the Holding Company
shall send or make available generally to its stockholders or as any
Subsidiary of the Holding Company shall send or make available
generally to its stockholders other than the Holding Company and (ii)
all periodic and special reports, documents and registration
statements (other than on Form S-8) which the Holding Company or any
Subsidiary of the Holding Company furnishes or files, or any officer
or director or stockholder of the Holding Company or any of its
Subsidiaries furnishes or files with respect to the Holding Company
or any of its Subsidiaries, with the Commission (or any analogous
foreign governmental authority) or any securities exchange;
(f) as promptly as practicable (but in any event not later than
five Business Days) after the occurrence of any of the following
conditions or events, an Officers' Certificate from the applicable
Company specifying in reasonable detail the nature and period of
existence thereof, and what action has been taken, is being taken and
is proposed to be taken with respect thereto: (i) with respect to
any Plan, any reportable event, as defined in section 4043(b) of
ERISA and the regulations thereunder, for which notice thereof has
not been waived pursuant to such regulations as in effect on the date
hereof; (ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Holding
Company, the Operating Company or any ERISA Affiliate of a notice
from a Multiemployer Plan that such action has been taken by the PBGC
with respect to such Multiemployer Plan; or (iii) any event,
transaction or condition that could result in the incurrence of any
liability by the Holding Company, the Operating Company or any ERISA
Affiliate pursuant to Title I or IV of ERISA or the penalty or excise
tax provisions of the Code relating to employee benefit plans, or in
the imposition of any Lien on any of the rights, properties or assets
of the Holding Company, the Operating Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or such penalty or excise tax
provisions, if such liability or Lien, taken together with any other
such liabilities or Liens then existing, has resulted in, or could
reasonably be expected to result in, a Material Adverse Change;
(g) as promptly as practicable (but in any event not later than
three Business Days) after the occurrence of any Default or Event of
Default, or of any condition or event which has resulted in, or could
reasonably be expected to result in, a Material Adverse Change,
including, without limitation, the commencement of any litigation or
governmental investigation or the assertion of any material claim
against or default by the Holding Company, the Operating Company or
any of their respective Subsidiaries, an Officers' Certificate from
the applicable Company specifying in reasonable detail the nature and
period of existence thereof, what action has been taken, is being
taken and is proposed to be taken with respect thereto and the date,
if any, on which it is estimated the same will be remedied;
(h) as promptly as practicable (but in any event not later than
30 days) prior to the end of each fiscal year of the Holding Company
and of the Operating Company, an annual budget prepared on a
quarterly basis for the Holding Company and its Subsidiaries and for
the Operating Company and its Subsidiaries for the succeeding fiscal
year (displaying anticipated balance sheets and statements of income,
stockholders' equity and cash flows) and, promptly upon preparation
thereof, any other significant budgets which the Holding Company, the
Operating Company or any of their respective Subsidiaries prepares
and any revisions of such annual or other budgets;
(i) such other material information and notices relating to the
Holding Company, the Operating Company and/or any of their respective
Subsidiaries as shall be furnished to or received from (i) any other
party to any of the Acquisition Documents or (ii) any Person to which
the Holding Company, the Operating Company or any of their respective
Subsidiaries is indebted for borrowed money in an aggregate amount of
$1,000,000 or more (other than that relating solely to collateral for
such Indebtedness), including, without limitation, any notice
relating to any adjustment to the purchase price or any claim for
indemnification under any of the Acquisition Documents or any notice
of default or event of default under any of the Fleet Bank Documents,
such information and notices to be furnished to the holders of the
Securities at the same time as it is furnished to, or immediately
after it is received from, any such Person; and
(j) such other information as from time to time may reasonably
be requested.
8. Inspection. Each Company will permit any Person designated by any
institutional holder of any of the Securities on reasonable notice and at
such holder's expense (unless a Default or Event of Default shall have
occurred and be continuing, in which case, at the Companies' expense), to
visit and inspect any of the properties of such Company and its
Subsidiaries, to examine its and their books and records (and to make
copies thereof and take extracts therefrom) and to discuss its and their
affairs, finances and accounts with and to be advised as to the same by,
its and their officers, consultants, counsel and accountants, all at such
reasonable times and intervals as such holder may desire.
9. Prepayment of Notes.
9.1. Required Prepayment Without Premium of Notes. In addition
to paying the entire outstanding principal amount of and the interest due
on the Notes on the maturity date thereof, on each of the dates specified
below (until the Notes have been paid in full), the Operating Company will
prepay without premium the aggregate principal amount of the Notes
specified below for such date (or such lesser principal amount thereof as
shall then be outstanding), together with all accrued and unpaid interest
thereon:
Aggregate
Date Principal Amount
September 13, 2002 $ 50,000
March 13, 2003 250,000
September 13, 2003 250,000
March 13, 2004 5,700,000
provided that the Operating Company may, at its option, make any of the
prepayments specified above on any date during the 30-day period ending on
the date specified above for such prepayment, so long as the Operating
Company notifies each holder of any Notes to such effect in writing not
less than 10 days prior to the date on which such prepayment is to be made
(which date shall be specified in such notice). If any partial prepayment
of the Notes is made pursuant to section 9.2, then the amount of each
subsequent prepayment which is required to be made pursuant to this
section 9.1 shall be reduced in the same proportion as the aggregate
unpaid principal amount of the Notes is reduced as a result of such
partial prepayment pursuant to section 9.2.
9.2. Optional Prepayment With Premium of Notes. At any time and
from time to time after the Closing Date, the Operating Company may, at
its option, upon notice as set forth in section 9.6, prepay all or any
part (in an integral multiple of $500,000 and a minimum of $1,000,000 or
such lesser principal amount thereof as shall then be outstanding) of the
Notes, together with all accrued and unpaid interest thereon, upon the
concurrent payment of a premium (a percentage of the principal amount so
prepaid) applicable in accordance with the following table depending on
the period in which such prepayment occurs:
If the Prepayment Occurs Premium
From and after the Closing Date
to and including March 12, 1998 10%
From and after March 13, 1998
to and including March 12, 1999 8%
From and after March 13, 1999
to and including March 12, 2000 6%
From and after March 13, 2000
to and including March 12, 2001 4%
From and after March 13, 2001
to and including March 12, 2002 2%
From and after March 13, 2002
to and including March 12, 2003 1%
From and after March 13, 2003 0%
Any partial prepayment of Notes pursuant to this section 9.2 which is made
prior to the date on which the prepayment required under section 9.1 is
made shall be applied as provided in section 9.1.
9.3. Required Prepayment With Premium upon Exercise of Call
Option. If at any time the Holding Company shall have exercised its Call
Option (as hereinafter defined) with respect to the Warrants as provided
in section 12.3(a), the Operating Company shall, on or before the Call
Closing Date (as hereinafter defined), prepay in full all of the Notes at
the time outstanding, together with all accrued and unpaid interest
thereon and a premium equal to the premium that would be payable upon a
prepayment at such time pursuant to section 9.2.
9.4. Prepayment Without Premium of the Notes at the Option of
the Required Holders of the Notes Upon a Change of Control.
(a) If any Change of Control is to occur, then not less than 30
days nor more than 60 days prior to the occurrence of such Change of
Control, the Operating Company will notify each holder of any Notes
of such pending Change of Control and the date upon which it is
scheduled to occur. If the Required Holders of the Notes furnish a
written request for prepayment to the Operating Company (in
accordance with section 23) not more than 30 days after receipt by
such holders of such notice of such Change of Control from the
Operating Company, the Operating Company will prepay without premium
all of the Notes then outstanding, together with all accrued and
unpaid interest thereon. Each such prepayment shall occur on the
date upon which the Change of Control occurs, unless the Operating
Company and the Required Holders of the Notes agree to a different
date, and no prepayment requested pursuant to this section 9.4 shall
be due unless the Change of Control shall occur.
(b) Each notice from the Operating Company pursuant to this
section 9.4 shall make explicit reference to this section 9.4 and
shall state that the right of the Required Holders of the Notes to
require prepayment of the Notes must be exercised within 30 days of
the receipt of such notice.
9.5. Allocation of Partial Prepayments of Notes. In the case of
each partial prepayment of the Notes under sections 9.1 or 9.2, the
principal amount to be prepaid shall be allocated among all of the Notes
at the time outstanding (excluding any Notes at the time owned by the
Operating Company or any Affiliate of the Operating Company) in
proportion, as nearly as practicable, to the respective unpaid principal
amounts thereof, with adjustments, to the extent practicable, to
compensate for any prior prepayments not made exactly in such proportion.
9.6. Notice of Optional Prepayments of Notes. In the case of
each prepayment under sections 9.2, 9.3 or 9.4, the Operating Company
shall give written notice thereof to each holder of any Notes not less
than 30 (10, in the case of any prepayment under section 9.4) nor more
than 60 days prior to the date fixed for such prepayment. Each such
notice shall set forth: (a) the date fixed for prepayment; (b) the
aggregate principal amount of Notes to be prepaid on such date; (c) the
aggregate principal amount of Notes held by such holder to be prepaid on
such date; and (d) the amount of the accrued interest and premium, if any,
to be paid to such holder on such date.
9.7. Maturity; Accrued Interest; Surrender, etc. of Notes. In
the case of each prepayment of all or any part of any Note, the principal
amount to be prepaid shall mature and become due and payable on the date
fixed for such prepayment, together with interest on such principal amount
accrued to such date and the premium, if any, due thereon. Any Note
prepaid in full shall be marked "paid in full", surrendered to the
Operating Company at the Operating Company's principal place of business
promptly following prepayment and cancelled and shall not be reissued, and
no Note shall be issued in lieu of any prepaid principal amount of any
Note.
9.8. Purchase of Notes. The Operating Company will not, and
will not permit any Affiliate of the Operating Company to, directly or
indirectly, purchase or otherwise acquire, or offer to purchase or
otherwise acquire, any outstanding Notes except by way of payment or
prepayment in accordance with the provisions of the Notes and this
Agreement.
9.9. Payment on Non-Business Days. If any amount hereunder or
under the Notes shall become due on a day which is not a Business Day,
such payment shall be due on the next succeeding Business Day.
9.10. Application of Notes in Satisfaction of Exercise Price of
Warrants. In the event that any holder of any Note shall apply all or any
portion of the principal amount of such Note in satisfaction (in whole or
in part) of the payment of the Exercise Price (as defined in the
Warrants), any partial application of the principal amount of any such
Note shall be applied to the payment of installments of principal due
thereunder in the inverse order of maturity.
10. Subordination of Notes and Note Guarantees. Payments on the Notes
and the Note Guarantees, and the rights of the holders of the Notes and
the Note Guarantees, are subordinated to payments on, and the rights of
the holders of, Superior Indebtedness (as defined in the Notes), all as
further provided in the Notes and the Note Guarantees.
11. Registration, etc.
11.1. Registration on Request.
(a) In case the Holding Company shall receive from one or more
holders of any Registrable Shares a written request or requests that
the Holding Company effect any registration, qualification and/or
compliance of any Registrable Shares held by (or issuable to) such
holder or holders, and specifying the intended method of offering,
sale and distribution, the Holding Company will:
(i) promptly give written notice of the proposed
registration, qualification and/or compliance to each holder of
any Registrable Shares; and
(ii) as soon as practicable, effect such registration,
qualification and/or compliance (including, without limitation,
the execution of an undertaking for post-effective amendments,
appropriate qualification under applicable blue sky or other
state securities laws and appropriate compliance with exemptive
regulations issued under the Securities Act and any other
governmental requirements or regulations) as may be so requested
and as would permit or facilitate the sale and distribution of
such amount of Registrable Shares as is specified in a written
request or requests, made within 30 days after receipt of such
written notice from the Holding Company, by any holder or
holders of any Registrable Shares.
(b) The obligations of the Holding Company under this section
11.1 are subject to the following qualifications:
(i) except as provided in section 11.1(b)(v), the Holding
Company shall only be obligated to effect two registrations
pursuant to this section 11.1;
(ii) the Holding Company shall not be obligated to effect
any registration pursuant to this section 11.1 unless (A) the
Holding Company shall have been requested to do so by the holder
or holders of at least 50% of the Registrable Shares at the time
outstanding and/or issuable and (B) the aggregate gross proceeds
(before all fees, expenses and disbursements related thereto and
all underwriters' discounts and commissions) from the sale of
the Registrable Shares requested to be registered and sold in
such registration (determined reasonably by the Holding Company
and the holder or holders of 66-2/3% or more of the Registrable
Shares to be included in such registration) is at least
$2,500,000;
(iii) the Holding Company shall not be obligated to
cause any registration statement relating to a registration
requested pursuant to this section 11.1 to become effective
prior to March 13, 2000;
(iv) the Holding Company shall pay all Registration
Expenses related to any registration, qualification and
compliance requested pursuant to this section 11.1;
(v) if, in connection with any registration of Registrable
Shares pursuant to this section 11.1, the holders of Registrable
Shares requesting registration are unable for any reason to
include in such registration at least 85% of the Registrable
Shares for which registration has been requested (including on
account of any limitation on the number or kind of securities
that may be included in such registration which limitation is
imposed by the managing underwriter(s) for such registration
because, in its (or their) reasonable judgment, such limitation
is necessary to effect an orderly public distribution), then the
holders of the Registrable Shares shall be entitled to one
additional registration of Registrable Shares pursuant to this
section 11.1; and
(vi) if the Holding Company shall furnish to each holder of
Registrable Shares an Officers' Certificate certifying that the
Holding Company has determined, as evidenced by a written
resolution of the board of directors of the Holding Company,
that it is necessary to delay the filing of the registration
statement related to a registration requested pursuant to this
section 11.1 because such a filing at the time requested, or the
offering of securities pursuant thereto, would materially
interfere with any pending material transaction to which the
Holding Company or any of its Subsidiaries is a party, the
Holding Company shall have the right to delay such filing for a
period ending not more than 90 days following the first date
upon which it shall have received a written request or requests
for such registration from the holder or holders of at least 50%
of the Registrable Shares at the time outstanding and/or
issuable; provided that (A) the Holding Company may not exercise
this right to delay the filing of a registration statement on
more than one occasion and (B) without limiting the generality
of any other provision of this Agreement, the Holding Company
shall reimburse each holder of Registrable Shares for all
expenses (including, without limitation, fees, expenses and
disbursements of counsel) incurred in connection with any such
registration prior to receipt of any such Officers' Certificate.
11.2. Incidental Registration.
(a) If the Holding Company at any time or from time to time
shall determine to effect the registration, qualification and/or
compliance of any of its Shares (whether in connection with an
offering by the Holding Company or others) (otherwise than pursuant
to a registration on Form S-4 or S-8 under the Securities Act or any
other similar form which is inappropriate for an offering of the
Registrable Shares), then, in each such case, the Holding Company
will:
(i) promptly give written notice of the proposed
registration, qualification and/or compliance (which shall
include a list of the jurisdictions in which the Holding Company
intends to register or qualify such securities under the
applicable blue sky or other state securities laws) to each
holder of any Registrable Shares; and
(ii) include among the Shares which it then registers or
qualifies all Registrable Shares specified by any holder thereof
in a written request or requests, made within 30 days after
receipt of such written notice from the Holding Company.
(b) The obligations of the Holding Company under this section
11.2 are subject to the following qualifications:
(i) the Holding Company shall pay all Registration
Expenses related to any registration, qualification or
compliance requested pursuant to this section 11.2; and
(ii) if, in connection with any underwritten offering
pursuant to this section 11.2, the managing underwriter(s) shall
impose a limitation on the number or kind of securities which
may be included in any such registration because, in its (or
their) reasonable judgment, such limitation is necessary to
effect an orderly public distribution, then the Holding Company
shall be obligated to include in such registration statement
only such limited portion of the Registrable Shares (which may
be none) as is determined in good faith by such managing
underwriter(s), provided that, if any securities are being
offered for the account of any Person other than the Holding
Company and the holders of the Registrable Shares, the reduction
in the number of Registrable Shares included in such
registration shall not represent a greater percentage of the
amount of Registrable Shares originally requested to be
registered and sold in such registration than the lowest such
percentage reduction imposed upon any such other Person.
11.3. Permitted Registration; Holdback Agreement; Private
Placement.
(a) If and to the extent that any holder or holders of any
Registrable Shares shall have, at the time of delivery of the written
request referred to in section 11.2, no present intention of selling
or distributing such securities, the Holding Company shall be
obligated to effect the registration, qualification and compliance of
such securities of such holder or holders only if and to the extent,
in each case, that such registration, qualification and compliance
are at the time permitted by the applicable statutes or rules and
regulations thereunder or the practices of the governmental authority
concerned.
(b) If a registration to be effected pursuant to section 11.1
or 11.2 involves an underwritten offering, each holder of Registrable
Shares agrees, whether or not such holder's Registrable Shares are to
be included in such registration, that, upon the written request of
the managing underwriter(s) for such registration, such holder shall
enter into a written agreement to not effect any public sale or
distribution of any Warrants or any Registrable Shares (other than
pursuant to Rule 144 of the Commission under the Securities Act or as
part of such underwritten offering) without the consent of such
managing underwriter(s) during the period commencing seven days
before the effective date of the registration statement related to
such underwritten offering and ending 180 days after such effective
date (or any other period to which such managing underwriter(s) and
the holders of the Registrable Shares may agree), provided that each
other Person holding Shares of the Holding Company (or securities
convertible into or exercisable or exchangeable for such Shares) and
having registration rights with respect thereto shall have entered
into such agreement (or another agreement which is, in all material
respects, the same as such agreement).
(c) Notwithstanding the provisions of section 11.1, in lieu of
effecting any registration requested pursuant to sections 11.1, the
Holding Company may elect to effect a private placement of the
Registrable Shares requested to be so registered, provided that
(i) the aggregate proceeds of such private placement paid to the
holders of such Registrable Shares shall not be less than the Fair
Value thereof (less an underwriting discount of not more than 5%),
which calculation of Fair Value shall be acceptable to each holder of
Registrable Shares to be included in such private placement, (ii) the
Holding Company notifies each holder of Registrable Shares requesting
registration of the election by the Holding Company to effect such
private placement within 30 days of its having received a request for
such registration from such holder, (iii) such private placement is
consummated not later than 90 days after its having received such
request for such registration and (iv) such private placement is
effected in compliance with the Securities Act and other applicable
laws.
11.4. Registration Procedures. In the case of each registration,
qualification and/or compliance contemplated by this section 11, the
Holding Company will keep the holder or holders of Registrable Shares
advised in writing as to the initiation of proceedings for such
registration, qualification and compliance and as to the completion
thereof, and will advise each such holder, upon request, of the progress
of such proceedings. In addition, the Holding Company will follow
procedures customarily observed by issuers in registered public offerings,
and accord to the holder or holders of such Registrable Shares all rights
(including, without limitation, the right to perform appropriate "due
diligence") customarily accorded to selling stockholders in secondary
distributions and to managing underwriters if the transaction in question
is or were an underwritten public offering. At the expense of the Holding
Company or of the party or parties bearing the expenses of such
registration, qualification and compliance, the Holding Company will (a)
keep such registration, qualification and compliance current and effective
by such action as may be necessary or appropriate, including, without
limitation, the filing of post-effective amendments and supplements to any
registration statement or prospectus, for such period as is necessary to
permit the exercise of the Warrants and the sale and distribution of the
Registrable Shares pursuant thereto, (b) take all necessary action under
any applicable blue sky or other state securities law to permit such sale
and/or distribution, all as requested by the holder or holders of
Registrable Shares included therein, provided that the Holding Company
shall not be required to so register or qualify the Registrable Shares in
any jurisdiction if, solely as a result thereof, the Holding Company must
qualify generally to do business therein or consent to general service of
process therein, (c) comply with applicable requirements of all regulatory
entities, including, without limitation, the National Association of
Securities Dealers, Inc., (d) furnish each holder of Registrable Shares
included therein such number of registration statements, prospectuses,
supplements, amendments, offering circulars and other documents incidental
thereto as such holder from time to time may reasonably request, (e) list
all Registrable Shares on each securities exchange on which securities of
the same class are then listed and (f) furnish (or cause to be furnished)
to each holder of Registrable Shares, all undertakings, agreements,
certificates, opinions, financial statements and "comfort letters" of the
sort customarily provided to selling stockholders in secondary
distributions and to managing underwriters if the transaction in question
is or were an underwritten public offering. Each holder of Registrable
Shares will furnish to the Holding Company upon request by the Holding
Company such information regarding such holder and any distribution of
Registrable Shares proposed by such holder as may be required or
appropriate to consummate any registration, qualification and/or
compliance contemplated by this section 11.
11.5. Indemnification. Without limiting the generality of
section 21, the Holding Company will indemnify, defend and hold harmless
each holder of Registrable Shares included in any registration,
qualification and/or compliance contemplated by this section 11 and each
underwriter of such securities, and each Person, if any, who controls each
such holder and underwriter within the meaning of the Securities Act, and
their respective directors, officers, employees, agents, advisors and
Affiliates (each, an "Indemnified Person"), to the fullest extent
enforceable under applicable law against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, supplement,
amendment, offering circular or other document related to any
registration, qualification or compliance or any omission (or alleged
omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any
violation (or alleged violation) of the Securities Act or other securities
laws in connection with any such registration, qualification or
compliance, and will reimburse each such Indemnified Person for any legal
or any other expenses reasonably incurred in connection with investigating
and/or defending (and/or preparing for any investigation or defense of)
any such claim, loss, damage, liability, action or violation; provided
that the Holding Company will not be liable in any such case to any such
Indemnified Person if, but only to the extent that, any such claim, loss,
damage, liability, action, violation or expense is finally determined to
arise out of or result from any untrue statement in or omission from
written information furnished to the Holding Company by an instrument duly
executed by such Indemnified Person and stated to be specifically for use
therein. Each holder of Registrable Shares will, if securities held by
such holder are included in a registration effected pursuant to this
section 11, indemnify, defend and hold harmless the Holding Company, each
of its directors and officers who signs the related registration
statement, and each Person, if any, who controls the Holding Company
within the meaning of the Securities Act, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, supplement,
amendment, offering circular or other document or any omission (or alleged
omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will
reimburse the Holding Company and such directors, officers or Persons for
any legal or any other expenses reasonably incurred in connection with
investigating or defending (and/or preparing for any investigation or
defense of) any such claim, loss, damage, liability or action, in each
case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) was made in
(or omitted from) such registration statement, prospectus, supplement,
amendment, offering circular or other document in reliance upon and in
conformity with written information furnished to the Holding Company by an
instrument duly executed by such holder and stated to be specifically for
use therein; provided that the liability of any such holder under this
section 11.5 shall be limited to the net sales proceeds actually received
by such holder as a result of the sale by it of securities in such
registration.
11.6. Restrictions on Other Agreements. The Holding Company will
not grant any right relating to the registration of its securities if the
exercise thereof interferes with or is inconsistent with or will delay (or
could reasonably be expected to interfere with or be inconsistent with or
delay) the exercise and enjoyment of any of the rights granted under this
section 11, without the written consent of holders of 66-2/3% or more of
the Registrable Shares at the time outstanding and/or issuable, which
consent may be given or withheld in the sole discretion of such holders.
The Holding Company will not permit any of its Subsidiaries to effect, or
to grant any right relating to, the registration of its Shares or other
securities.
12. Put and Call Rights; Required Exercise of Warrants.
12.1. Certain Definitions. As used in this section 12, the
following terms have the following respective meanings:
"Call Closing Date", "Call Notice" and "Call Option" shall have the
respective meanings specified in section 12.3.
"Call Securities" shall mean the Warrants, each of which is a Call
Security.
"Put/Call Price" of any Put Security or Call Security at any date
shall mean the Fair Value of such Security on such date.
"Put/Call Price Adjustment Event" shall mean (a) any Change of
Control or (b) any purchase or sale by the Holding Company or GreenGrass
Holdings (or any of their respective Affiliates) of any Shares of the
Holding Company in any transaction (or series of related transactions) in
which the aggregate purchase price for such Shares is $1,000,000 or more,
which occurs, in the case of clause (a) or (b), following the repurchase
of any Put Securities or Call Securities pursuant to section 12.2 or
12.3(a).
"Put Securities" shall mean the Warrants and the Warrant Shares, each
of which is a "Put Security".
"Put Closing Date", "Put Notice" and "Put Option" shall have the
respective meanings specified in section 12.2.
"Required Exercise Date" and "Required Exercise Option" shall have
the respective meanings specified in section 12.3.
12.2. Put Rights of the Holders of the Put Securities Upon Change
of Control.
(a) The Required Holders of the Put Securities shall have the
option (the "Put Option") to require the Holding Company to purchase
all (but not less than all) of the Put Securities then outstanding at
a purchase price equal to the Put/Call Price for the Put Securities
concurrently with the occurrence of any Change of Control.
(b) To exercise the Put Option, the Required Holders of the Put
Securities must deliver to the Holding Company a notice (a "Put
Notice") specifying that the Put Securities are to be purchased by
the Holding Company and such notice must be given not more than 30
days after receipt by the holders of the Put Securities of the notice
of a Change of Control pursuant to section 12.2(c). Upon receipt of
such Put Notice, the Holding Company shall be obligated to purchase
the Put Securities on the date of the occurrence of such Change of
Control (the "Put Closing Date"), unless in any case the Holding
Company and the Required Holders of the Put Securities agree to a
different date or the Required Holders of the Put Securities revoke
the Put Notice.
(c) Promptly after receipt of a Put Notice, the Holding Company
will notify each holder of Put Securities of receipt of such Put
Notice. The Holding Company shall notify each holder of any Put
Securities of the occurrence of any event which will, or could
reasonably be expected to, result in a Change of Control at least 30
days (but not more than 60 days) prior to the occurrence of such
Change of Control.
(d) The obligation of the Holding Company to pay the Put/Call
Price pursuant to this section 12.2 is hereby subordinated to the
payment of the Superior Indebtedness (as defined in the Notes) upon
the terms of subordination set forth in the Notes as in effect on the
Closing Date (which terms are incorporated herein by this reference),
and, for such purposes, all references in such terms of subordination
(i) to "Operating Company" shall mean the Holding Company, (ii) to
"Subordinated Indebtedness" shall mean the payment of the Put/Call
Price due pursuant to this section 12.2, and (iii) to "holders of the
Subordinated Indebtedness" shall mean the holders of the Put
Securities.
12.3. Call Right of the Holding Company; Required Exercise of
Warrants.
(a) At any time on or after March 13, 1999, the Holding Company
shall have the option (the "Call Option") to purchase all (but not
less than all) of the Call Securities outstanding on the Call Closing
Date (as hereinafter defined) at a purchase price equal to the
Put/Call Price; provided that:
(i) the Holding Company may not exercise such Call Option
(A) if the Required Holders of the Put Securities have exercised
and not revoked their Put Option pursuant to section 12.2 or
(B) unless on or before the Call Closing Date (as defined below)
it shall have prepaid in full all of the Notes at the time
outstanding pursuant to section 9.3; and
(ii) if at any time prior to March 13, 1999 the Required
Holders of the Put Securities shall have exercised the Put
Option and, by virtue of the operation of section 12.5, the
Holding Company shall not have purchased such Put Securities on
the date specified in section 12.2(b), then the first date upon
which the Holding Company may exercise the Call Option shall not
be March 13, 1999 but rather the date which follows March 13,
1999 by the number of days which is equal to the number of days
during which the repurchase obligation of the Holding Company
under section 12.2 was delayed by operation of section 12.5.
The Holding Company shall exercise the Call Option by delivering to
each holder of any Call Securities a notice (a "Call Notice")
specifying that the Call Securities are to be purchased by the
Holding Company and certifying that no Put/Call Price Adjustment
Event is then proposed to be consummated, or, if such is not the
case, describing in reasonable detail all proposed Call Price
Adjustment Events. Following delivery of such Call Notice, the
Holding Company shall be obligated to purchase all of the Call
Securities as may be outstanding and unexercised on the date
specified in such notice (the "Call Closing Date"), which date shall
not be earlier than 30 days nor later than 45 days following the date
of receipt by each holder of Call Securities of such Call Notice.
The Holding Company may not exercise such option unless the Holding
Company can pay the Put/Call Price in full in immediately available
funds on the applicable Call Closing Date.
(b) At any time on or after March 13, 1999, the Holding Company
shall have the option (the "Required Exercise Option") to require
that all (but not less than all) of the Warrants then outstanding be
exercised; provided that if at any time prior to March 13, 1999 the
Required Holders of the Put Securities shall have exercised the Put
Option and, by virtue of the operation of section 12.5, the Holding
Company shall not have purchased such Put Securities on the date
specified in section 12.2(b), then the first date upon which the
Holding Company may exercise the Required Exercise Option shall not
be March 13, 1999 but rather the date which follows March 13, 1999 by
the number of days which is equal to the number of days during which
the repurchase obligation of the Holding Company under section 12.2
was delayed by operation of section 12.5. The Holding Company shall
exercise the Required Exercise Option by delivering to each holder of
any Warrants a notice (a "Required Exercise Notice") specifying that
all of the Warrants then held by such holder shall be deemed
exercised as of a date specified in such Required Exercise Notice
(the "Required Exercise Date"), which date shall not be earlier than
30 days nor later than 45 days following the date of receipt by each
holder of Warrants of such Required Exercise Notice. Each holder of
Warrants shall, not later than 25 days following receipt by it of
such Required Exercise Notice, notify the Holding Company of the
manner by which such holder shall pay the Exercise Price due upon
such exercise, provided that, if such holder shall fail to give such
notice to the Holding Company on or before the expiration of such 25-
day period, then such holder shall be deemed to have elected to pay
the Exercise Price by applying that portion of the Warrant Shares
issuable upon such exercise to such holder (at a value per share
equal to the then Fair Value thereof) equal to the aggregate Exercise
Price which is due upon such exercise.
12.4. Closing; Payment of Put/Call Price; Adjustments to Put/Call
Price.
(a) The closing for any payment of the Put/Call Price due to
any holder of Put Securities or Call Securities under this section 12
shall occur at the principal office of such holder, unless the
Holding Company and such holder agree to a different location. The
payment of the Put/Call Price which is due to any holder of any Put
Securities or Call Securities pursuant to this section 12 shall be
paid by the Holding Company, against delivery of the certificates
evidencing such Put Securities or Call Securities, in immediately
available funds.
(b) If at any time during the 180-day period following the
repurchase of any Put Securities or Call Securities pursuant to
section 12.2 or 12.3(a), any Put/Call Price Adjustment Event occurs
or an agreement in principle concerning the material terms of any
Put/Call Price Adjustment Event is reached, then the Holding Company
shall immediately notify each holder of Put Securities or Call
Securities, as the case may be, and, contemporaneously with the
consummation of such Put/Call Price Adjustment Event, the Holding
Company shall pay to each former holder of Put Securities or Call
Securities, as the case may be, from which such Securities were
repurchased pursuant to sections 12.2 or 12.3(a) an amount equal to
the excess, if any, of (i) the aggregate Fair Value of the Put
Securities or Call Securities, as the case may be, repurchased from
such former holder, determined as of the date upon which such
Put/Call Price Adjustment Event is consummated and on the basis of
the per share price (or imputed per share price) paid in connection
with the Put/Call Price Adjustment Event (and assuming that such
Securities had not previously been repurchased pursuant to section
12.2 or 12.3(a)) over (ii) the aggregate Put/Call Price paid to such
former holder pursuant to section 12.2 or 12.3(a). All computations
made pursuant to this section 12.4(b) of the amount, if any, to be
paid to any former holder of Put Securities or Call Securities, as
the case may be, pursuant to this section 12.4(b) shall be in writing
and shall be satisfactory to such former holder.
12.5. Limitations on Obligations of the Holding Company.
Notwithstanding anything to the contrary contained in this section 12, if
the Holding Company is unable to pay to the holders of the Put Securities
the full amount of the Put/Call Price which is due to such holders
pursuant to section 12.2(a) in respect of the Put Securities on the
applicable Put Closing Date in immediately available funds without
violating applicable law, then:
(a) the Holding Company shall (i) use its best efforts to
obtain financing for such payment and to obtain all necessary
consents and waivers to permit such payment and (ii) pay in
immediately available funds the largest portion of such payment (pro
rata to each of the holders of Put Securities in proportion to the
Put Securities held by each holder) on the Put Closing Date that the
Holding Company is able to pay without causing any such violation;
(b) the Holding Company shall, and shall cause each of its
Subsidiaries to, conduct its business in the ordinary course, and the
Holding Company shall not, directly or indirectly, make any
Restricted Payment, until the Put/Call Price shall have been paid in
full in immediately available funds;
(c) the Holding Company shall furnish to each holder of Put
Securities an Officers' Certificate specifying (i) the nature of the
event or condition on account of which the Holding Company is so
precluded from making such payment, (ii) the action that the Holding
Company is taking to remedy such failure (including the action which
the Holding Company is taking to obtain financing for the payment of
the Put/Call Price and/or to obtain all necessary consents and
waivers) and (iii) the date, which shall not be later than 12 months
following the originally scheduled Put Closing Date, on which the
Put/Call Price shall be paid in full in immediately available funds,
it being agreed that if, on any date subsequent to the originally
scheduled Put Closing Date, the Holding Company is able to pay the
unpaid balance of the Put/Call Price (or any portion thereof) without
causing any such violation, then the Holding Company immediately
shall notify each holder of any Put Securities and shall pay (pro
rata as aforesaid) such unpaid balance (or the largest portion
thereof that may be so paid) in immediately available funds;
(d) from and after the originally scheduled Put Closing Date,
until the Put/Call Price shall have been paid in full in immediately
available funds, the unpaid balance of the Put/Call Price shall bear
interest at 18% per annum (compounded semi-annually), which interest
shall, to the extent permitted by law, be due and payable to the
holders of the Put Securities (pro rata as aforesaid) monthly in
arrears on the last day of each month, commencing on the first such
date following the originally scheduled Put Closing Date, and on the
date on which any portion (or all) of the unpaid balance of the
Put/Call Price is paid; and
(e) unless earlier paid in full, the Put/Call Price shall be
paid in full in immediately available funds not later than 12 months
following the originally scheduled Put Closing Date.
The Required Holders of the Put Securities may revoke any Put Notice at
any time prior to payment in full of the amount due to such holder in
connection therewith, without prejudice to such holder's rights under this
section 12.
12.6. Successive Changes of Control, etc. The provisions of this
section 12 are applicable to successive Changes of Control. No failure on
the part of any holder of any Put Securities to exercise any right under
this section 12 arising on account of any Change of Control shall affect
or impair any right of such holder arising on account of any subsequent
Change of Control or any other right of such holder under any of the
Operative Documents. The covenants contained in this section 12 shall
survive the payment, prepayment and/or replacement of any Notes and any
merger, consolidation, recapitalization, sale of assets or other similar
transaction or event involving the Holding Company and/or any of its
Subsidiaries.
12.7. No Limitation on the Holding Company. The Holding Company
is not now and, without the consent of the Required Holders of the Put
Securities and Call Securities, the Holding Company shall not be or become
bound by any agreement or other contractual restriction other than the
Fleet Bank Documents which prohibits, limits or delays (or could
reasonably be expected to prohibit, limit or delay) the performance of its
obligations under this section 12.
13. Board Visitation Rights. The Required Holders of the Warrants and
Warrant Shares shall have the right, as a group, to appoint one
representative who shall: (a) receive notice of all meetings (both
regular and special and including any executive or "private" session) of
the board of directors (or other governing body) of the Holding Company
and of each of its Subsidiaries and each committee of any such board (such
notice to be delivered or mailed as specified in section 23 at the same
time as notice is given to the members of any such board and/or committee
but in no event later than seven days prior to the date of such meeting
(or 48 hours in the case of telephone meetings)); (b) be entitled to
attend (or, in the case of telephone meetings, monitor) all such meetings;
(c) receive all notices, information and reports which are furnished to
the members of any such board and/or committee at the same time and in the
same manner as the same is furnished to such members; (d) be entitled to
participate in all discussions conducted at such meetings and (e) receive
as soon as available (but in any event not later than 30 days after such
meeting) copies of the minutes of all such meetings. If any action is
proposed to be taken by any such board and/or committee by written consent
in lieu of a meeting, the Holding Company will, or will cause the
applicable Subsidiary to, give written notice thereof to such
representative, which notice shall describe in reasonable detail the
nature and substance of such proposed action and shall be delivered not
less than seven Business Days (or 48 hours in the case of telephone
meetings) prior to the date upon which such action is proposed to be
taken. The Holding Company will, or will cause the applicable Subsidiary
to, furnish such representative with a copy of each such written consent
not later than five days after it has been signed by its last signatory.
Such representative shall not constitute a member of any such board and/or
committee and shall not be entitled to vote on any matters presented at
meetings of any such board and/or committee or to consent to any matter as
to which the consent of any such board and/or committee shall have been
requested. The board of directors of the Holding Company shall meet not
less frequently than semi-annually. The Holding Company will pay the
reasonable out-of-pocket expenses of such representative incurred in
connection with attending such meetings and/or exercising any rights
hereunder.
14. Covenants of the Companies. From and after the date of this
Agreement, and thereafter so long as any of the Notes shall remain
outstanding, the Holding Company and the Operating Company will duly
perform and observe, for the benefit of the holders of the Notes, each and
all of the covenants and agreements applicable to it as hereinafter set
forth:
14.1. Books of Record and Account; Reserves. Each of the
Companies will, and will cause each of its Subsidiaries to (a) at all
times keep proper books of record and account in which full, true and
correct entries shall be made of its transactions in accordance with GAAP
and (b) set aside on its books from its earnings for each fiscal year all
such proper reserves as shall be required in accordance with GAAP in
connection with its business.
14.2. Payment of Taxes; Existence; Maintenance of Properties;
Compliance with Laws; Lines of Business; Proprietary Rights. Each of the
Companies will, and will cause each of its Subsidiaries to:
(a) pay and discharge promptly as they become due and payable
all taxes, assessments and other governmental charges or levies
imposed upon it or its income or upon any of its property, as well as
all claims of any kind (including claims for labor, materials and
supplies) which, if unpaid, might by law become a Lien upon its
property; provided that no such Person shall be required to pay any
such tax, assessment, charge, levy or claim if the amount,
applicability or validity thereof shall currently be contested in
good faith by appropriate proceedings promptly initiated and
diligently conducted and if it shall have set aside on its books such
reserves, if any, with respect thereto as are required by GAAP;
provided, further, that the Operating Company will, and will cause
each of its Subsidiaries to, pay or bond over any such tax,
assessment, charge, levy or claim prior to the commencement of any
proceeding to foreclose any Lien securing the same;
(b) do or cause to be done all things necessary to preserve and
keep in full force and effect its existence;
(c) maintain and keep its material properties in good repair,
working order and condition, so that the business carried on in
connection therewith may be properly and advantageously conducted at
all times;
(d) comply in all material respects with all applicable laws,
statutes, rules, regulations and orders of, and all applicable
restrictions imposed by, all governmental authorities in respect of
the conduct of its business and the ownership of its property
(including, without limitation, all Environmental Laws); provided
that no such Person shall be required by reason of this section
14.2(d) to comply therewith at any time while it shall be contesting
its obligation to do so in good faith by appropriate proceedings
promptly initiated and diligently conducted, and if it shall have set
aside on its books such reserves, if any, with respect thereto as are
required by GAAP;
(e) engage only in the Business (and other related businesses)
and conduct substantially all its business and keep substantially all
its property in the United States of America; and
(f) own or have a valid license for all material Proprietary
Rights and Licenses used by it in the conduct of the Business.
14.3. Insurance. The Operating Company will, and will cause each
of its Subsidiaries to, maintain with financially sound and reputable
insurers, insurance with respect to its properties and businesses against
casualties and contingencies of the kinds customarily insured against by
Persons of established reputation engaged in the same or a similar
business and similarly situated, in such amounts and by such methods as
shall be customary for such Persons and reasonably deemed adequate by the
Operating Company; provided that such insurance shall be in amounts not
less than those maintained by the Operating Company on the date hereof.
14.4. Limitation on Discount or Sale of Receivables. The
Operating Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, discount or sell any of their accounts
receivable, except that the Operating Company and any Subsidiary of the
Operating Company may offer discounts in the ordinary course of business
and settle doubtful accounts in the ordinary course of business.
14.5. Limitation on Funded Debt and Current Debt. The Operating
Company will not, and will not permit any of its Subsidiaries to, be
liable or create, assume, incur, guarantee, or in any manner become
liable, contingently or otherwise, in respect of any Funded Debt or
Current Debt other than:
(a) in the case of the Operating Company:
(i) Funded Debt evidenced by the Notes;
(ii) Funded Debt and/or Current Debt under the Fleet Bank
Agreement, provided that the aggregate outstanding principal
amount thereof, including, without limitation, all amounts due
(contingently or otherwise) in respect of reimbursement
obligations under letters of credit, interest rate protection
agreements or similar instruments (and all related reimbursement
agreements) does not exceed the greater of (A) $75,000,000,
minus the aggregate amount of all principal payments made
thereon from time to time (other than any principal payment made
under the revolving credit facility established thereunder which
may be reborrowed under such facility), and (B) four times
Consolidated EBITDA for the most recently completed four
consecutive fiscal quarters of the Operating Company;
(iii) Funded Debt and/or Current Debt outstanding on
the Closing Date and specified on Exhibit 5.9 attached hereto,
provided that the aggregate outstanding principal thereof does
not exceed at any time the amount outstanding on the Closing
Date minus the aggregate amount of all principal payments made
thereon from time to time;
(iv) Funded Debt and Current Debt in respect of Capital
Leases, provided that the aggregate liabilities of the Operating
Company with respect thereto do not exceed at any time
$1,000,000;
(v) Funded Debt and Current Debt under (A) any Permitted
Derivative Transaction, (B) performance bonds or trade letters
of credit (or reimbursement obligations in respect thereof)
issued in the ordinary course of business, (C) letters of credit
issued to secure workers' compensation insurance and/or (D) any
bank overdraft that is repaid within three Business Days;
(vi) additional Funded Debt and/or Current Debt not
otherwise permitted under this section 14.5(a), provided that:
(A) the aggregate outstanding principal amount of
Funded Debt and/or Current Debt permitted by this clause
(vi) does not exceed at any time $3,000,000; and
(B) both at the time of and immediately after giving
effect to the incurrence of any such Funded Debt and/or
Current Debt and the retirement of any Funded Debt and/or
Current Debt which is concurrently being retired, no
Default or Event of Default shall exist;
(vii) Funded Debt and/or Current Debt not otherwise
permitted under this section 14.5(a), provided that:
(A) both at the time of and immediately after giving
effect to the incurrence of such Funded Debt and/or Current
Debt and the retirement of any other Funded Debt and/or
Current Debt which is concurrently being retired, no
Default or Event of Default shall exist; and
(B) immediately after giving effect to the incurrence
of such Funded Debt and/or Current Debt and the retirement
of any other Funded Debt and/or Current Debt which is
concurrently being retired:
(1) the Pro Forma Consolidated Leverage Ratio
does not exceed 4.50 to 1.00; and
(2) the Pro Forma Consolidated Fixed Charges
Coverage Ratio shall not be less than 2.50 to 1.00; and
(viii) Funded Debt and/or Current Debt incurred to
extend, refinance, refund or renew (the "Refinancing Debt") any
other outstanding Funded Debt and/or Current Debt permitted
under this section 14.5(a) (the "Refinanced Debt"), provided
that:
(A) the aggregate outstanding principal amount of the
Refinancing Debt shall not at any time exceed (1) that of
the Refinanced Debt immediately prior to such refinancing
or (2) in the case of any extensions, refinancings,
refundings or renewals of the Funded Debt and Current Debt
under the Fleet Bank Agreement or any Refinancing Debt
thereof, the amount permitted under section 14.5(a)(ii);
(B) the scheduled final maturity date of the
Refinancing Debt is not earlier than that of the Refinanced
Debt;
(C) the Weighted Average Life to Maturity of the
Refinancing Debt is not less than that of the Refinanced
Debt;
(D) the Refinancing Debt has a ranking which is not
senior to that of the Refinanced Debt and, without limiting
the generality of the foregoing, in the event that the
Refinanced Debt is Junior Subordinated Debt, then the
subordination provisions applicable to the Refinancing Debt
must have been approved in writing by the Required Holders
of the Notes, which approval may not be unreasonably
withheld;
(E) the Refinancing Debt bears interest at market
rates prevailing at its date of issuance;
(F) the other terms and conditions of the Refinancing
Debt are not more restrictive in any material respect upon
the Operating Company and its Subsidiaries nor more adverse
in any material respect to the interests of any holder of
any of the Securities than those of the Refinanced Debt;
and
(G) other than in the case of any extension,
refinancing, refunding or renewal of the Funded Debt and
Current Debt under the Fleet Bank Agreement or any
Refinancing Debt therefor, both at the time of and
immediately after giving effect to the incurrence of the
Refinancing Debt and the retirement of the Refinanced Debt,
no Default or Event of Default shall exist; and
(b) in the case of any Subsidiary of the Operating Company:
(i) Funded Debt evidenced by the Note Guarantees; and
(ii) Guarantees of Funded Debt and Current Debt under the
Fleet Bank Agreement which is permitted under section
14.5(a)(ii) and Guarantees of any Refinancing Debt incurred to
extend, refinance, refund or renew any Funded Debt and/or
Current Debt under the Fleet Bank Agreement which is permitted
under section 14.5(a)(viii).
The Company shall not incur any Indebtedness that would cause the
Notes to be "expressly subordinated in right of payment to a substantial
amount of unsecured indebtedness," within the meaning of section 279 of
the Code and the regulations promulgated thereunder.
For purposes of this section 14.5, any Person becoming a Subsidiary
of the Operating Company after the date hereof shall be deemed, at the
time it becomes a Subsidiary, to have incurred all of its then outstanding
Funded Debt and Current Debt, and any Person extending, refinancing,
refunding or renewing any Funded Debt or Current Debt shall be deemed to
have incurred such Funded Debt or Current Debt, as the case may be, at the
time of such extension, refinancing, refunding or renewal.
14.6. Limitation on Restricted Investments and Restricted
Payments.
(a) The Operating Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, at any time, authorize,
declare or make, or incur any liability to make, any Restricted
Investment or any Restricted Payment, unless in each case both at the
time of and after giving effect to such action:
(i) the sum of (x) the aggregate value of all Restricted
Investments of the Operating Company and its Subsidiaries
(valued, in the manner provided in section 14.6(f), immediately
after such action) plus (y) the aggregate amount of all
Restricted Payments of the Operating Company and its
Subsidiaries, declared or made during the period commencing on
the Closing Date and ending on the date such action is taken,
would not exceed the sum of:
(A) 50% of Consolidated Net Income (minus 100% of
losses) for the period commencing on the first day of the
first fiscal quarter of the Operating Company which begins
after the Closing Date and ending on the last day of the
most recently completed fiscal quarter of the Operating
Company immediately prior to the date such action is taken
(the "Test Period"), plus
(B) 50% of the aggregate amount of Net Proceeds of
Capital Stock for the Test Period; and
(ii) no Default or Event of Default would exist.
(b) The Operating Company will not, and will not permit any of
its Subsidiaries to, authorize a Restricted Payment that is not
payable within 60 days of authorization.
(c) The Operating Company will not, and will not permit any of
its Subsidiaries to, enter into or be or become bound by any
agreement which encumbers or restricts, or create or otherwise cause
or suffer to exist or become effective any encumbrance or restriction
upon, the right or ability of any Subsidiary of the Operating Company
to:
(i) pay dividends or make any other distribution on its
Shares (or any participation in its profit) owned by the
Operating Company or any other Subsidiary of the Operating
Company;
(ii) pay any Indebtedness owed to the Operating Company or
any other Subsidiary of the Operating Company;
(iii) make loans or advances to or Investments in the
Operating Company or any other Subsidiary of the Operating
Company; or
(iv) transfer any of its properties or assets to the
Operating Company or any other Subsidiary of the Operating
Company.
(d) Notwithstanding the provisions of section 14.6(a), the
Operating Company and its Subsidiaries may:
(i) pay dividends in cash to the Holding Company solely
for the purpose of making payments in cash to purchase Shares of
the Holding Company (or options to acquire such Shares) from any
employee of the Operating Company or one of its Subsidiaries
upon the termination of such employee's employment, provided
that (A) the aggregate amount of such dividends paid during any
fiscal year of the Operating Company does not exceed $200,000,
(B) both at the time of and immediately after giving effect to
each such dividend, no Default or Event of Default shall exist
and (C) all such dividends shall be deemed to have been
Restricted Payments and shall be counted for purposes of all
subsequent computations pursuant to section 14.6(a);
(ii) make payments in cash on Junior Subordinated Debt out
of the proceeds of any Refinancing Debt incurred to refinance or
refund such Junior Subordinated Debt, provided that such
refinancing or refunding is permitted under section
14.5(a)(viii) and under any terms of subordination applicable
thereto;
(iii) pay dividends in cash to the Holding Company in
lieu of paying income taxes, provided such payments are made
pursuant to a tax sharing agreement or arrangement permitted
under section 14.8; and
(iv) pay dividends in cash to the Holding Company solely
for the purpose of making the cash interest payments required to
be made on the Holding Company's 10% Convertible Subordinated
Debentures due 2004, provided that (A) the aggregate amount of
such dividends during any fiscal year of the Operating Company
does not exceed the lesser of (1) $1,100,000 and (2) 10% of the
then aggregate outstanding principal amount of such 10%
Convertible Subordinated Debentures due 2004, (B) both at the
time of and immediately after giving effect to each such
dividend, no Default or Event of Default shall exist and (C) all
such dividends shall be deemed to have been Restricted Payments
and shall be counted for purposes of all subsequent computations
pursuant to section 14.6(a).
(e) Each Person which becomes a Subsidiary of the Operating
Company after the Closing Date will be deemed to have made, on the
date such Person becomes a Subsidiary of the Operating Company, all
Restricted Investments of such Person in existence on such date.
Investments in any Person that ceases to be a Subsidiary of the
Operating Company after the Closing Date (but in which the Operating
Company or another Subsidiary continues to maintain an Investment)
will be deemed to have been made on the date on which such Person
ceases to be a Subsidiary of the Operating Company.
(f) For purposes of this section 14.6 and for purposes of
clause (k) of the definition of Permitted Investment, as of any date
of determination, each Restricted Investment and each Investment made
pursuant to clause (k) of the definition of Permitted Investment
shall be valued at the greater of:
(i) the amount at which such Investment is shown on
the books of the Operating Company or any of its Subsidiaries
(or zero if such Investment is not shown on any such books); and
(ii) either
(A) in the case of any Guarantee of the obligation of
any Person, the amount which the Operating Company or any
of its Subsidiaries has paid (or is obligated to pay) on
account of such obligation less any recoupment by the
Operating Company or such Subsidiary of any such payments,
or
(B) in the case of any other Investment, the excess
of (x) the greater of (1) the amount originally entered on
the books of the Operating Company or any of its
Subsidiaries with respect thereto and (2) the cost thereof
to the Operating Company or its Subsidiary over (y) any
return of capital (after income taxes applicable thereto)
upon such Investment through the sale or other liquidation
thereof or part thereof or otherwise.
14.7. Financial Covenants; Limitations on Derivative
Transactions.
(a) Consolidated Net Worth. The Operating Company will not
permit Consolidated Net Worth on and as of the last day of any fiscal
quarter of the Operating Company which commences on or after April 1,
1997 to be less than the sum of (a) $3,500,000 plus (b) an aggregate
amount equal to the sum of (i) 40% of Consolidated Net Income for the
period commencing on April 1, 1997 and ending on such last day (but
without any adjustment for any losses during such period) and
(ii) 50% of the aggregate amount of Net Proceeds of Capital Stock for
such period.
(b) Fixed Charges Coverage Ratio. The Operating Company will
not permit the Consolidated Fixed Charges Coverage Ratio on and as of
the last day of any fiscal quarter of the Operating Company ended
during any period specified below to be less than the applicable
ratio specified below:
Period Ratio
From and after July 1, 1997
through and including December 31, 1997 2.00 to 1.00
From and after January 1, 1998 2.25 to 1.00;
provided that the Consolidated Fixed Charges Coverage Ratio for the
period of four fiscal quarters ended on September 30, 1997 and
December 31, 1997 will be calculated using the actual Fixed Charges
of the Operating Company and its Subsidiaries during the period
commencing on April 1, 1997 and ending on each such date multiplied
by (i) for the period ended on September 30, 1997, 2.0, and (ii) for
the period ended on December 31, 1997, 1.4. Not later than September
30, 1997, the Operating Company shall deliver to the holders of the
Notes an Officers' Certificate setting forth a calculation of
Consolidated EBITDA for the fiscal quarter ended on March 31, 1997
which amount shall be calculated in the same manner in which the
amounts specified on Exhibit 15.1 attached hereto were calculated.
(c) Derivative Transactions. The Operating Company will not,
and will not permit any of its Subsidiaries to, enter into any
Derivative Transaction other than a Permitted Derivative Transaction.
14.8. Tax Consolidation. The Operating Company will not consent
to or permit the filing of or be a party to any consolidated income tax
return on behalf of itself or any of its Subsidiaries with any Person
(other than a consolidated return of the Operating Company and its own
Subsidiaries) except pursuant to a tax sharing agreement or arrangement
(a) which takes appropriate account of any tax benefits
(whether arising from a net operating loss, capital loss, deduction,
credit or otherwise) accruing to the other members of the affiliated
group (as such term is defined in section 1504(a) of the Code) as a
result of the inclusion of the Operating Company and its Subsidiaries
in such group's consolidated return, and
(b) pursuant to which the Operating Company and its
Subsidiaries
(i) will not make or agree to make any payments in respect
of income taxes if and to the extent that (A) the cumulative sum
of such payments made by the Operating Company and its
Subsidiaries less the cumulative sum of such payments received
by the Operating Company and its Subsidiaries exceeds (B) the
cumulative sum of income taxes which the Operating Company and
its Subsidiaries would have paid if the Operating Company and
its Subsidiaries had always filed income tax returns on a
consolidated basis as a separate affiliated group of
corporations consisting of only the Operating Company and its
Subsidiaries, and
(ii) shall be entitled to receive payments in respect of
tax benefits contributed by the Operating Company and its
Subsidiaries if and to the extent that (A) the cumulative sum of
payments received by such group from the Operating Company and
its Subsidiaries in respect of income taxes less the cumulative
sum of payments made by such group to the Operating Company and
its Subsidiaries in respect of income taxes exceeds (B) the
additional tax liability incurred by such group as a result of
the inclusion of the Operating Company and its Subsidiaries in
such group's consolidated tax return.
14.9. Limitation on Liens. The Operating Company will not, and
will not permit any of its Subsidiaries to, create, incur, assume or
suffer to exist any Lien in respect of any property of any character of
the Operating Company or any of its Subsidiaries (whether owned on the
date hereof or hereafter acquired), including, without limitation, any
assignment of any right to receive any income or profits or any other
payment or amount, other than:
(a) Liens securing Indebtedness of any Subsidiary owing to the
Operating Company or to a Wholly-Owned Subsidiary;
(b) Liens (other than any Lien created by any Environmental Law
or by Section 4068 of ERISA), charges and encumbrances which (i) are
incurred in the ordinary course of business and which are incidental
to the conduct of the business of the Operating Company and its
Subsidiaries and the ownership of its and their property, (ii) are
not incurred in connection with the borrowing of money or the
obtaining of advances or credit, (iii) do not in the aggregate
materially detract from the value of the property of the Operating
Company or its Subsidiaries or materially impair the use thereof in
the operation of its or their business and (iv) do not (and could not
reasonably be expected to) materially adversely affect the rights of
the holders of the Notes, including, without limitation, but subject
to the foregoing provisions of this section 14.9(b) and to all other
applicable provisions of the Operative Documents:
(A) Liens for taxes, assessments or governmental
charges or levies on property if the same shall not at the
time be delinquent or thereafter can be paid without
penalty or interest, or (if foreclosure, distraint, sale or
other similar proceedings shall not have been commenced)
are being contested in good faith and by appropriate
proceedings diligently conducted and for which proper
reserve or other provision has been made in accordance with
GAAP;
(B) Liens imposed by law, such as carriers',
warehousemen's and mechanics' liens, bankers' setoff rights
and other similar Liens arising in the ordinary course of
business, for sums not yet due or being contested in good
faith by appropriate proceedings diligently conducted and
for which proper reserve or other provision has been made
in accordance with GAAP;
(C) Liens arising in the ordinary course of business
out of pledges or deposits under worker's compensation
laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar
legislation;
(D) Liens arising from or upon any judgment or award,
provided that (1) such judgment or award is being contested
in good faith by proper appeal proceedings and only so long
as execution thereon shall be stayed and (2) proper reserve
or other provision has been made in accordance with GAAP;
(E) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases,
statutory obligations, surety bonds, performance bonds and
other obligations of a like nature incurred in the ordinary
course of business; and
(F) easements, rights of way, restrictions and other
similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not material in
amount, and which do not in any case materially detract
from the value of the property subject thereto or interfere
with the ordinary conduct of business by the Operating
Company and its Subsidiaries;
(c) any Lien securing Funded Debt and Current Debt outstanding
on the Closing Date and specified on Exhibit 5.9 attached hereto,
provided that such Funded Debt and Current Debt is paid in accordance
with the terms thereof as in effect on the Closing Date (without
extension, refinancing, refunding, renewal or amendment, except to
the extent permitted under section 14.5(a)(viii));
(d) any Lien constituting a purchase money security interest,
or other Liens of a conditional vendor, securing Indebtedness
incurred to finance the acquisition and/or improvement of any real or
personal property, or any Lien securing any refinancing or refunding
thereof, provided that (i) no Lien permitted under this clause (d)
shall extend to or cover any property other than the property so
acquired, (ii) the aggregate amount of Indebtedness secured by all
Liens permitted under this clause (d) shall not exceed $2,000,000 at
any time and (iii) the aggregate amount of Indebtedness secured by
any individual Lien permitted under this clause (d) shall not exceed
at any time the lower of the fair market value of the related
property at the time of its acquisition or the cost of such property;
(e) Liens securing Funded Debt and Current Debt, including
amounts due (contingently or otherwise) in respect of reimbursement
obligations under letters of credit, interest rate protection
agreements or similar instruments and all related reimbursement
agreements, under the Fleet Bank Documents to the extent permitted
under section 14.5(a)(ii) or any Refinancing Debt incurred to
refinance or refund the same to the extent permitted under section
14.5(a)(viii); and
(f) Liens in addition to those permitted under the foregoing
provisions of this section 14.9, provided that the aggregate amount
of Indebtedness secured thereby does not exceed $1,000,000 at any
time.
14.10. Limitation on Transactions with Affiliates. The Companies
will not, and will not permit any of their respective Subsidiaries to,
engage in any transaction (including, without limitation, the purchase,
sale or exchange of any properties and assets or the rendering of any
services) with an Affiliate of either Company or of any of their
respective Subsidiaries, other than any transaction entered into in the
ordinary course of business on terms no less favorable to such Company or
such Subsidiary in any material respect than would be obtainable at the
time in comparable transactions with a Person not such an Affiliate,
provided that the Companies may pay management fees to the Consultants
pursuant to the Consulting Agreement in an aggregate amount not exceeding
$300,000 during any fiscal year if, both at the time of and after giving
effect to any such payment, (a) no Default or Event of Default shall exist
and (b) the Holding Company's repurchase obligation under section 12.2
shall not then be delayed by virtue of the operation of section 12.5.
14.11. Limitation on Issuance of Preferred Shares and Redeemable
Shares By Subsidiaries. The Operating Company will not permit any of its
Subsidiaries to have any outstanding Preferred Shares or Redeemable Shares
(other than Preferred Shares or Redeemable Shares owned by the Operating
Company).
14.12. Limitation on Issuance and Disposition of Shares of
Subsidiaries. The Operating Company will not permit any of its
Subsidiaries to (a) issue, sell or otherwise dispose of any Shares of such
Subsidiary (or any securities convertible into or exercisable or
exchangeable for such Shares), except to the Operating Company or to a
Wholly-Owned Subsidiary of the Operating Company or (b) sell, transfer or
otherwise dispose of any Shares of any other Subsidiary of the Operating
Company (or any securities convertible into or exercisable or exchangeable
for such Shares), except to the Operating Company or to a Wholly-Owned
Subsidiary of the Operating Company, provided that nothing in this section
14.12 shall prohibit the sale, transfer or other disposition of the Shares
of any Subsidiary of the Operating Company (or any securities convertible
into or exercisable or exchangeable for such Shares) owned by the
Operating Company and its other Subsidiaries if (w) both before and after
giving effect to such disposition, no Default or Event of Default shall
exist; (x) such disposition is permitted under section 14.15,
(y) simultaneously with such disposition, the entire Investment (whether
represented by Shares, Indebtedness, claims or otherwise) of the Operating
Company and its other Subsidiaries in the Subsidiary being disposed of is
sold, transferred or otherwise disposed of and (z) following such
disposition, the Subsidiary being disposed of shall have no continuing
Investment in the Operating Company or any other Subsidiary of the
Operating Company not being simultaneously disposed of.
14.13. Limitation on Consolidation or Merger, etc. The Operating
Company will not, and will not permit any of its Subsidiaries to,
consolidate with or merge into any other Person or sell, lease or
otherwise dispose of all or substantially all of its property in a single
transaction or series of transactions to any Person or Persons (except
that any Subsidiary of the Operating Company may (x) merge into, or sell,
lease or otherwise dispose of all or substantially all of its property in
a single transaction or series of transactions to, the Operating Company
(if the Operating Company is the surviving corporation of such
transaction) or a Wholly-Owned Subsidiary of the Operating Company (if the
surviving corporation to such transaction is a Wholly-Owned Subsidiary of
the Operating Company) or (y) sell, lease or otherwise dispose of its
property in compliance with section 14.15 (other than 14.15(d)), provided
that the Operating Company may consolidate with or merge into, or sell,
lease or otherwise dispose of all or substantially all of its property to,
any other Person so long as:
(a) the successor formed by such consolidation or the survivor
of such merger or the Person that acquires all or substantially all
of the property of the Operating Company, as the case may be (the
"Successor Corporation"), shall be a Solvent corporation organized
and existing under the laws of the United States of America, any
state thereof or the District of Columbia and having all or
substantially all its property in the United States of America;
(b) if the Operating Company is not the Successor Corporation,
the Successor Corporation shall have executed and delivered to each
holder of Notes its assumption of the due and punctual performance
and observance of each covenant and condition of this Agreement and
each of the other Operative Documents (pursuant to such agreements
and instruments as shall be reasonably satisfactory to the Required
Holders of Notes), and the Operating Company shall have caused to be
delivered to each holder of Notes an opinion of independent counsel
reasonably satisfactory to the Required Holders of the Notes, to the
effect that all agreements or instruments effecting such assumption
are legal, valid and binding obligations of such Successor
Corporation enforceable against it in accordance with their
respective terms (except as such enforcement may be limited by
insolvency, bankruptcy, reorganization or other laws of general
application relating to the enforcement of creditors' rights or by
general equity principles) and covering such other matters as the
Required Holders of the Notes may reasonably request;
(c) both before and immediately after giving effect to such
transaction, no Default or Event of Default would exist; and
(d) after giving effect to such transaction, (i) the Successor
Corporation shall have a Consolidated Net Worth equal to or greater
than the Consolidated Net Worth of the Operating Company immediately
prior to such transaction and (ii) the Successor Corporation shall be
permitted to incur at least $1.00 of additional Funded Debt or
Current Debt under section 14.5(a)(vii).
No sale, lease or other disposition by the Operating Company shall have
the effect of releasing the Operating Company (or any successor
corporation that shall theretofore have become such in the manner
prescribed in this section 14.13) or any of its Subsidiaries from its
liability under this Agreement or any of the other Operative Documents.
14.14. Limitation on Sale-and-Leaseback Transactions. The
Operating Company will not, and will not permit any of its Subsidiaries
to, consummate any Sale-and-Leaseback Transaction unless:
(a) both before and immediately after giving effect to such
Sale-and-Leaseback Transaction, no Default or Event of Default shall
exist;
(b) all property sold or otherwise transferred pursuant to such
Sale-and-Leaseback Transaction shall have been acquired or
constructed after the Closing Date;
(c) such Sale-and-Leaseback Transaction is consummated not more
than 180 days following the date upon which the property sold or
otherwise transferred in such Sale-and-Leaseback Transaction shall
have been acquired or constructed; and
(d) the Operating Company and/or any Subsidiary effecting such
Sale-and-Leaseback Transaction shall receive, upon the consummation
thereof, cash consideration equal to the fair market value of the
property sold or otherwise transferred pursuant thereto.
14.15. Limitation on Disposition of Property. The Operating
Company will not, and will not permit any of its Subsidiaries to, directly
or indirectly, sell, lease or otherwise dispose of any of their respective
properties and assets (including any right, title or interest in any
property or asset), whether owned on the date hereof or hereafter acquired
and whether real, personal or mixed, tangible or intangible, including,
without limitation, Shares, securities or Indebtedness of any Subsidiary
of the Operating Company, except:
(a) any sale of inventory made in the ordinary course of
business;
(b) any sale of idle or obsolete equipment that is no longer
used or useful in the business of the Operating Company and its
Subsidiaries;
(c) any Sale-and-Leaseback Transaction permitted under section
14.14;
(d) any transaction permitted under section 14.13; and/or
(e) any other sale by the Operating Company and its
Subsidiaries of their respective properties and assets, if, in the
case of this clause (e),
(i) such properties and assets are sold for cash
consideration equal to the fair market value of such properties
and assets;
(ii) the aggregate net book value of properties and assets
sold pursuant to this clause (e) during any fiscal year of the
Operating Company does not exceed $500,000; and
(iii) both before and immediately after giving effect
to such sale, no Default or Event of Default shall exist;
provided that, if the proceeds of a sale made pursuant to this clause
(e) (net of all costs and out-of-pocket expenses in connection
therewith) are applied within 180 days of the consummation of such
sale to (x) the purchase by the Operating Company (or the Subsidiary
effecting such sale) of other property and assets used and useful in
the ordinary course of business of the Operating Company or such
Subsidiary, (y) the prepayment (and permanent reduction) of the
Funded Debt under the Fleet Bank Agreement (or any Refinancing Debt
incurred to refinance or refund such Funded Debt) or (z) the
prepayment of the Notes pursuant to section 9.2, then, from and after
the date such net proceeds are so applied, such sale shall be
disregarded for purposes of any subsequent computation under this
clause (e).
14.16. Modification of Certain Documents, Agreements and
Instruments. The Holding Company will not, and will not permit any of its
Subsidiaries to:
(a) file any resolution of its board of directors (or other
governing body) with the Secretary of State of the jurisdiction of
its organization to establish or create a series of Preferred Shares
or a separate class of equity securities;
(b) have a fiscal year which ends on any date other than
December 31;
(c) amend, modify, supplement or waive any term, condition
or provision of its Organizational Documents or any of the
agreements, documents or instruments referred to in section 4.3
(other than the Fleet Bank Documents as to which the following
section 14.16(d) applies) or enter into any agreement, document or
instrument or transaction, if the effect thereof is, or could
reasonably be expected to be, adverse to the interests of any holder
of any of the Notes or to impose restrictions upon the Holding
Company or any of its Subsidiaries that are more restrictive in any
material respect than those set forth in its Organizational Documents
or such other agreements, documents and instruments as in effect on
the Closing Date; or
(d) amend, supplement, modify or waive any term of the Fleet
Bank Documents (or the documents related to any Refinancing Debt
therefor) unless after giving effect thereto the terms of the Fleet
Bank Documents (or the documents related to any Refinancing Debt
therefor) are not more restrictive in any material respect upon the
Holding Company and its Subsidiaries nor more adverse in any material
respect to the interests of any holder of any of the Securities.
14.17. Further Assurances; Note Guarantees.
(a) From time to time hereafter, the Operating Company will
execute and deliver, or will cause to be executed and delivered, such
additional agreements, documents and instruments and will take all
such other actions as any holder or holders of the Notes may
reasonably request for the purpose of implementing or effectuating
the provisions of the Operative Documents.
(b) Without limiting the generality of the foregoing, the
Operating Company shall cause each Significant Subsidiary to deliver
a Note Guarantee to each holder of any Notes not later than 10 days
following the first day upon which such Subsidiary shall constitute a
Significant Subsidiary, provided that, if the Operating Company at
any time or from time to time shall elect to organize or acquire any
Subsidiary, then and in each such case the Operating Company will
promptly (but in any event not later than 20 days prior to
consummating any such transaction) notify each holder of Securities
and, if, upon the consummation of such transaction such Subsidiary
shall constitute a Significant Subsidiary, the Operating Company will
cause such Subsidiary, not later than the date upon which such
transaction is consummated, to execute and deliver a Note Guarantee
to each holder of any Notes. At the time any Note Guarantees are
delivered to the holders of Notes pursuant to this section 14.17, the
Operating Company shall also cause to be delivered to such holders an
opinion of independent counsel reasonably satisfactory to the
Required Holders of the Notes to the effect that such Note Guarantees
have been duly authorized, executed and delivered by the applicable
Significant Subsidiary and that such Note Guarantees constitute the
legal, valid and binding obligations of such Significant Subsidiary
enforceable against it in accordance with its terms and covering such
other matters as the Required Holders of the Notes may reasonably
request.
14.18. Certain Additional Covenants of the Holding Company.
(a) The Holding Company will not, and will not permit any of
its Subsidiaries to, be liable or create, assume, incur, guarantee,
or in any manner become liable, contingently or otherwise, in respect
of any Funded Debt or Current Debt, unless both at the time of and
immediately after giving effect to the incurrence of such Funded Debt
and/or Current Debt and the retirement of any other Funded Debt
and/or Current Debt which is concurrently being retired:
(i) no Default or Event of Default shall exist; and
(ii) the ratio of (A) Total Debt of the Holding Company and
its Subsidiaries outstanding on such date (including all Funded
Debt and Current Debt the incurrence of which gives rise to the
need for such determination) to (B) EBITDA of the Holding
Company and its Subsidiaries for the period of four consecutive
fiscal quarters of the Holding Company ending on, or most
recently ended prior to, such date (calculated on a pro forma
basis to give effect as of the first day of such period to the
incurrence of all Funded Debt and Current Debt giving rise to
the need for such determination and the retirement of any Funded
Debt and/or Current Debt which is concurrently being retired),
all determined on a consolidated basis in accordance with GAAP,
does not exceed 5.00 to 1.00.
(b) The Holding Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, at any time, authorize,
declare or make, or incur any liability to make, any Restricted
Investment or any Restricted Payment, unless, in each case both at
the time of and immediately after giving effect to such action:
(i) the sum of (x) the aggregate value of all Restricted
Investments of the Holding Company and its Subsidiaries (valued,
in the manner provided in section 14.6(f), immediately after
such action (all references in section 14.6(f) to Operating
Company being deemed, for purposes of this section 14.18(b), to
refer to the Holding Company)) plus (y) the aggregate amount of
all Restricted Payments of the Holding Company and its
Subsidiaries, declared or made during the period commencing on
the Closing Date and ending on the date such action is taken,
would not exceed 75% of Net Income (minus 100% of losses) of the
Holding Company and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP for the period
commencing on the first day of the first fiscal quarter of the
Holding Company which begins after the Closing Date and ending
on the last day of the most recently completed fiscal quarter of
the Holding Company immediately prior to the date such action is
taken; and
(ii) no Default or Event of Default would exist.
(c) The Holding Company will not consolidate with or merge
into, or sell, lease or otherwise dispose of all or substantially all
of its property in a single transaction or a series of transactions
to, any other Person unless:
(i) the successor formed by such consolidation or the
survivor of such merger or the Person that acquires all or
substantially all of the property of the Holding Company, as the
case may be (the "Survivor") shall be a Solvent corporation
organized and existing under the laws of the United States of
America, any state thereof or the District of Columbia and
having all or substantially all its property in the United
States of America;
(ii) if the Holding Company is not the Survivor, the
Survivor shall have executed and delivered to each holder of
Securities its assumption of the due and punctual performance
and observance of each covenant and condition of this Agreement
and each of the other Operative Documents (pursuant to such
agreements and instruments as shall be reasonably satisfactory
to the Required Holders of each class of the Securities), and an
opinion of independent counsel reasonably satisfactory to the
Required Holders of each class of the Securities, to the effect
that all agreements or instruments effecting such assumption are
legal, valid and binding obligations of such Survivor
enforceable against it in accordance with their respective terms
(except as such enforcement may be limited by insolvency,
bankruptcy, reorganization or other laws of general application
relating to the enforcement of creditors' rights or by general
equity principles) and covering such other matters as the
Required Holders of each class of the Securities may reasonably
request;
(iii) both before and immediately after giving effect
to such transaction, no Default or Event of Default would exist;
and
(iv) immediately after giving effect to such transaction
(A) the Survivor shall have a Net Worth equal to or greater than
the Net Worth of the Holding Company immediately prior to such
transaction and (B) the Survivor shall be permitted to incur at
least $1.00 of additional Funded Debt or Current Debt under
section 14.18(a).
(d) All calculations of EBITDA, Net Income and Net Worth for
purposes of this section 14.18 shall be made in a manner consistent
with the calculations of Consolidated EBITDA, Consolidated Net Income
and Consolidated Net Worth (including the adjustments thereto set
forth in the proviso contained in the definitions of Consolidated
EBITDA, Consolidated Net Income and Consolidated Net Worth).
(e) The consummation of any transaction permitted under section
14.18(c) may, notwithstanding compliance with the provisions thereof,
constitute a Change of Control.
15. Definitions. Note: Bracketed items are cross-references to the
section or sections of this Agreement in which the specified definitions
are used; they appear for purpose of convenience only and do not affect
the meaning of such definitions.
15.1. Definitions of Capitalized Terms. The terms defined in
this section 15.1, whenever used in this Agreement, shall, unless the
context otherwise requires, have the following respective meanings:
"Acquisition" shall mean (a) the acquisition by the Operating Company
of all of the outstanding Shares of Old Game Time, and of all outstanding
securities, convertible into and exercisable or exchangeable for Shares of
Old Game Time and (b) the contemporaneous merger of Old Game Time with and
into the Operating Company, pursuant to the Acquisition Documents.
"Acquisition Agreement" shall mean the Amended and Restated Stock
Purchase Agreement dated as of March 13, 1997 by and among the Operating
Company, Old Game Time, Ross D. Siragusa, Jr., John R. Siragusa and
Richard D. Siragusa.
"Acquisition Documents" shall mean the Acquisition Agreement, the
Merger Agreement and the other agreements, documents and instruments
related thereto, including, without limitation, the Seller Note.
"Affiliate" of any Person shall mean any other Person which, directly
or indirectly, controls or is controlled by or is under common control
with such first-mentioned Person, or any individual, in the case of a
Person who is an individual, who has a relationship by blood, marriage or
adoption to such first-mentioned Person not more remote than first cousin,
and, without limiting the generality of the foregoing, shall include (a)
any Person beneficially owning or holding, directly or indirectly, 5% or
more of any class of Voting Stock or other Shares of such first-mentioned
Person, (b) any Person of which such first-mentioned Person owns or holds,
directly or indirectly, 5% or more of any class of Voting Stock or other
Shares and (c) any director or officer of such first-mentioned Person;
provided that, for purposes hereof, in no event shall you or any other
institutional holder of Securities be deemed to be an Affiliate of the
Holding Company, the Operating Company or any of their respective
Subsidiaries. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common
control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of Voting Stock or by contract or otherwise.
"Bridge Note" shall have the meaning specified in section 4.3.
"Business" shall have the meaning specified in section 5.4.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day which shall be in Boston, Massachusetts or Janesville, Wisconsin
a legal holiday or a day on which banking institutions therein are
authorized by law to close.
"Call Closing Date," "Call Notice" and "Call Option" shall have the
respective meanings specified in section 12.3.
"Call Securities" shall have the meaning specified in section 12.1.
"Capital Lease" shall mean any lease or similar arrangement which is
of such a nature that payment obligations of the lessee or obligor
thereunder are required to be capitalized and shown as liabilities upon a
balance sheet of such lessee or obligor prepared in accordance with GAAP
or for which the amount of the asset and liability thereunder as if so
capitalized should be disclosed in a note to such balance sheet.
"Change of Control" shall mean and shall be deemed to have occurred
if at any time for whatever reason:
(a) any Person (other than any member of the Initial Investor
Group), together with "affiliates" and "associates" of such Person,
within the meaning of Rule 12b-2 of the Commission under the Exchange
Act, shall acquire control or beneficial ownership (including
beneficial ownership resulting from the formation of a "group" within
the meaning of Rule 13d-5 of the Commission under the Exchange Act)
of more than 33% of the Shares of any class of Voting Stock of the
Holding Company; or
(b) the Holding Company ceases to own and control beneficially
and of record all of the outstanding Shares of the Operating Company
and all securities convertible into or exercisable or exchangeable
for such Shares; or
(c) all or substantially all the assets of the Operating
Company shall have been sold, leased or otherwise disposed of
(directly or indirectly, through one or more transactions whether or
not concurrent).
"Closing" and "Closing Date" shall have the respective meanings
specified in section 3.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency from time to time administering the Securities Act
and/or the Exchange Act.
"Companies" and "Company" shall have the respective meanings
specified in section 1.
"Consolidated EBITDA" [14.5], "Consolidated Fixed Charges",
"Consolidated Net Income" [14.7], "Consolidated Net Worth" [14.7, 14.13],
"Consolidated Rental Obligations", "Consolidated Total Assets" and
"Consolidated Total Debt" shall mean the EBITDA, Fixed Charges, Net
Income, Net Worth, Rental Obligations, Total Assets and Total Debt, as the
case may be, of the Operating Company and its Subsidiaries (whether or not
ordinarily consolidated in consolidated financial statements of the
Operating Company and Subsidiaries), all consolidated in accordance with
GAAP, and after giving appropriate effect to outside minority interests,
if any, in Subsidiaries, provided that:
(a) Consolidated EBITDA and Consolidated Net Income shall be
reduced by the amount of all dividends and other distributions paid
to the Holding Company except to the extent such dividends or
distributions are permitted to be paid hereunder;
(b) in determining Consolidated EBITDA and Consolidated Net
Income there shall be excluded:
(i) the income (or loss) of any Person accrued prior to
the date such Person becomes a Subsidiary of the Operating
Company or is merged into or consolidated with the Operating
Company or any of its Subsidiaries;
(ii) the income (or loss) of any Person (other than a
Subsidiary) in which the Operating Company or any of its
Subsidiaries has an ownership interest; provided, however, that
(A) Consolidated EBITDA and Consolidated Net Income shall
include amounts in respect of the income of such Person when
actually received in cash by the Operating Company or such
Subsidiary in the form of dividends or similar distributions and
(B) Consolidated EBITDA and Consolidated Net Income shall be
reduced by the aggregate amount of all Investments, regardless
of the form thereof, made by the Operating Company or any of its
Subsidiaries in such Person for the purpose of funding any
deficit or loss of such Person;
(iii) all amounts included in computing such net income
(or loss) in respect of (A) the write-up of any asset on or
after December 31, 1995, including the subsequent amortization
or expensing of the written-up portion of assets on account of
the Acquisition or (B) the retirement of any Indebtedness or
equity at less than face value after December 31, 1995;
(iv) extraordinary and nonrecurring gains;
(v) the income of any Subsidiary of the Operating Company
to the extent the payment of such income in the form of a
dividend or repayment of Indebtedness to the Borrower or a
Wholly-Owned Subsidiary of the Operating Company is not
permitted, whether on account of any restriction in any
Organizational Document of, or any agreement, instrument, deed
or lease or any law, statute, judgement, decree or governmental
order, rule or regulation applicable to, such Subsidiary;
(vi) any after-tax gains or losses attributable to returned
surplus assets of any Plan;
(vii) the write off after the Closing Date of
capitalized financing costs incurred prior to the Closing Date;
(viii) any deferred or other credit representing the
excess of the equity in any Subsidiary of the Operating Company
at the date of acquisition thereof over the cost of the
investment in such Subsidiary;
(ix) any restoration to income of any contingency reserve,
except to the extent that provision for such reserve was made
out of income accrued during the same period;
(x) any aggregate net gain (but not any aggregate net
loss) arising from the sale, conversion, exchange or other
disposition of capital assets, including, without limitation,
(A) all non-current assets and, without duplication, (B) the
following, whether or not current: (1) fixed assets, whether
tangible or intangible, (2) all inventory sold in conjunction
with the disposition of fixed assets and (3) all Shares or other
securities;
(xi) any net gain from the collection of any proceeds of
life insurance policies;
(xii) any gain arising from the acquisition of any
Shares or other securities or the extinguishment, under GAAP, of
any Indebtedness, of the Operating Company or any Subsidiary of
the Operating Company;
(xiii) any Net Income or gain (but not any net loss)
from (A) any change in accounting principles in accordance with
GAAP, (B) any prior period adjustments resulting from any change
in accounting principles in accordance with GAAP and (C) any
discontinued operations or the disposition thereof;
(xiv) any portion of Net Income that cannot be freely
converted into United States Dollars;
(xv) any other non-cash gain included in the Net Income of
any such Person;
(c) Consolidated Net Worth shall be reduced by the amount by
which stockholders' equity of the Operating Company and its
Subsidiaries has been increased after December 31, 1995 by the items
described in subclauses (i) through (xv) of the foregoing clause (b)
or by goodwill; and
(d) Consolidated EBITDA for periods prior to the Closing Date
shall be the amounts indicated on Exhibit 15.1 attached hereto.
"Consolidated Fixed Charges Coverage Ratio" [14.7] shall mean, on any
date, the ratio of (a) the sum of (i) Consolidated EBITDA for the period
of four consecutive fiscal quarters of the Operating Company ending on
such date, plus (ii) one-third of Consolidated Rental Obligations in
respect of leases (other than Capital Leases) for such period to
(b) Consolidated Fixed Charges for such period.
"Consultants" shall mean Glencoe Investment Corporation and Desai
Capital Management Incorporated.
"Consulting Agreement" shall mean the Management Consulting Agreement
dated February 16, 1996 between the Holding Company, the Operating Company
and the Consultants.
"Consulting Agreement Side Letter" shall have the meaning specified
in section 4.3.
"Current Debt" of any Person shall mean, at any date, without
duplication of amounts, (a) all Indebtedness for borrowed money or in
respect of Capital Leases or the deferred purchase price of property
(including, without limitation, all Indebtedness of the kind referred to
in clauses (b), (c), (d) and (e) of the definition of Indebtedness),
whether or not interest bearing and whether secured or unsecured, of such
Person at such date which would, in accordance with GAAP, be classified as
short-term Indebtedness at such date, but specifically excluding the
current maturities of such Person's Funded Debt and (b) all Guarantees by
such Person at such date of Current Debt of others.
"Default" shall mean any condition or event which constitutes or,
after notice or lapse of time or both, would constitute an Event of
Default.
"Derivative Transactions" shall mean (a) any rate, basis, commodity,
currency, debt or equity swap, (b) any cap, collar or floor agreement,
(c) any rate, basis, commodity, currency, debt or equity exchange or
forward agreement, (d) any rate, basis, commodity, currency, debt or
equity option, (e) any other similar agreement, (f) any option to enter
into any of the foregoing, (g) any master agreement or other agreement
providing for any of the foregoing and (h) any combination of any of the
foregoing.
"Disclosure Documents" shall have the meaning specified in section
5.4.
"EBITDA" of any Person shall mean, for any period, the Net Income of
such Person for such period after restoring thereto amounts deducted for
(a) Interest Charges, (b) taxes in respect of income and profits,
(c) depreciation and amortization, and (d) all other non-cash charges,
determined in accordance with GAAP.
"Environmental Laws" shall mean any law, statute, rule, regulation or
other governmental standard or requirement relating or pertaining to (a)
the generation, manufacture, management, handling, use, sale,
transportation, treatment, storage, disposal, delivery, discharge, release
or emission of any waste, pollutant or toxic, hazardous or other
substance, or (b) any other act, omission or condition affecting or
involving the environment or air or water pollution or soil or groundwater
contamination.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations and rulings
thereunder.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) that, together with the Holding Company or the Operating
Company, would be treated as a single employer under section 4001(b) of
ERISA, or that is a member of a group of which the Holding Company or the
Operating Company is a member and that is a controlled group within the
meaning of section 4971(e)(2)(B) of the Code.
"Event of Default" shall have the meaning specified in section 16.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations
of the Commission promulgated thereunder, all as the same shall be in
effect from time to time.
"Fair Value" shall have the meaning specified in the Warrants.
"Fixed Charges" of any Person shall mean, for any period, the sum
(without duplication of amounts) of (a) all Interest Charges of such
Person for such period, and (b) one-third of all Rental Obligations of
such Person for such period in respect of leases other than Capital
Leases, in each case determined in accordance with GAAP.
"Fleet Bank Agreement" shall mean the Credit Agreement dated as of
March 13, 1997 among the Operating Company, Fleet National Bank, as Agent,
and Fleet National Bank and certain other lenders, as from time to time in
effect.
"Fleet Bank Documents" shall mean the Fleet Bank Agreement and the
other agreements, documents and instruments related thereto.
"Funded Debt" of any Person shall mean, at any date, without
duplication of amounts, (a) all Indebtedness for borrowed money or in
respect of Capital Leases or the deferred purchase price of property
(including, without limitation, all Indebtedness of the kind referred to
in clauses (b), (c), (d) and (e) of the definition of Indebtedness),
whether or not interest-bearing, of such Person which would, in accordance
with GAAP, be classified as long-term Indebtedness at such date, but in
any event including all such Indebtedness, whether secured or unsecured,
of such Person which matures (or which, pursuant to the terms of a
revolving credit agreement or otherwise, is directly or indirectly
renewable or extendible at the option of such Person for a period ending)
more than one year after the date of the creation thereof, notwithstanding
the fact that payments in respect thereof (whether installment, serial
maturity or sinking fund payments or otherwise) are required to be made by
such Person not more than one year after the date as of which the amount
of Funded Debt is being determined, other than any amount thereof which is
at the time included in Current Debt of such Person, and (b) all
Guarantees by such Person at such date of Funded Debt of others.
"GAAP" shall mean generally accepted accounting principles as in
effect in the United States from time to time, consistently applied.
"GreenGrass Capital" shall mean GreenGrass Capital, LLC, a Delaware
limited liability company.
"GreenGrass Holdings" shall mean GreenGrass Holdings, a Delaware
general partnership.
"Guarantee" of any Person shall mean, at any date, any obligation of
such Person at such date guaranteeing, directly or indirectly, any
Indebtedness, liability or other obligation of any other Person in any
manner, but in any event including all endorsements (other than for
collection or deposit in the ordinary course of business), all discounts
with recourse and all obligations incurred through an agreement,
contingent or otherwise, (a) to purchase the obligations of any other
Person or any security therefor or to advance or supply funds for the
payment or purchase of such obligations, or (b) to purchase, sell or lease
(as lessee or lessor) property, products, materials or supplies or to
purchase or sell transportation or services, primarily for the purpose of
enabling the obligor to make payment of such obligations or to assure the
owner of such obligations against loss, regardless of the delivery or
non-delivery of the property, products, materials or supplies or the
furnishing or nonfurnishing of the transportation or services, or (c) to
provide funds for the payment of, or obligating such Person to make, any
loan, advance, capital contribution or other investment in the obligor for
the purpose of assuring a minimum equity, asset base, working capital or
other balance sheet condition for any date or to provide funds for the
payment of any obligation, dividend or stock liquidation payment, or
otherwise to supply funds to or in any manner invest in the obligor. The
amount of any Guarantee shall be equal to the amount of all Indebtedness,
liabilities and other obligations directly or indirectly guaranteed
thereby.
"Guarantors" shall mean the Holding Company and each of the
Subsidiary Guarantors. At the time of the Closing, the only Guarantor is
the Holding Company.
"Holding Company" shall mean Swing-N-Slide Corp., a Delaware
corporation.
"Holding Company Class A Common Stock" shall mean the Common Stock,
$.01 par value, of the Holding Company as constituted on the Closing Date
and any Shares into which such Common Stock shall have been changed or any
Shares resulting from any reclassification of such Common Stock.
"Holding Company Class B Common Stock" shall mean the Class B Common
Stock, $.01 par value, of the Holding Company as constituted on the
Closing Date and any Shares into which such Class B Common Stock shall
have been changed or any Shares resulting from any reclassification of
such Class B Common Stock.
"Holding Company Common Stock" shall mean the Holding Company Class A
Common Stock and the Holding Company Class B Common Stock.
"Indebtedness" of any Person shall mean, at any date, all
indebtedness, liabilities and other obligations of such Person at such
date (other than items of shareholders' equity) which would, in accordance
with GAAP, be classified as liabilities of such Person, but in any event
including (without duplication):
(a) all Guarantees of such Person;
(b) all indebtedness, liabilities and other obligations secured
by any Lien in respect of property owned by such Person, whether or
not such Person has assumed or become liable for the payment of such
obligations;
(c) all indebtedness, liabilities and other obligations of such
Person arising under any conditional sale or other title retention
agreement, whether or not the rights and remedies of the seller or
lender under such agreement in the event of default are limited to
repossession or sale of such property;
(d) the amount of the obligation required to be recorded by the
lessee in respect of any Capital Lease under which such Person is
lessee; and
(e) all indebtedness, liabilities and other obligations arising
in connection with letters of credit, bankers acceptances or other
credit enhancement facilities.
"Indemnified Costs" and "Indemnitee" shall have the respective
meanings specified in section 21.
"Indemnified Person" shall have the meaning specified in section
11.5.
"Initial Investor Group" shall mean GreenGrass Holdings and its
members and Affiliates as of the Closing Date.
"Interest Charges" of any Person shall mean, for any period, the
aggregate amount of all interest paid, payable or guaranteed during such
period by such Person in respect of Funded Debt and Current Debt,
including, without limitation, Rental Obligations on Capital Leases, and
all commitment and other fees paid in respect of the Funded Debt and
Current Debt under the Fleet Bank Documents or any Refinancing Debt
incurred to refinance such Funded Debt and Current Debt, determined in
accordance with GAAP.
"Investment" of any Person shall mean any investment made by such
Person in any other Person by stock purchase, capital contribution, loan,
advance, acquisition of Indebtedness, Guarantee or otherwise.
"Junior Subordinated Debt" shall mean unsecured Indebtedness of the
Operating Company and/or any of its Subsidiaries which has been
subordinated to the Notes and the Note Guarantees upon terms of
subordination approved in writing by the Required Holders of the Notes.
"Licenses" shall mean certificates of public convenience and
necessity, franchises, licenses and other permits and authorizations from
governmental authorities.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, lien (statutory or otherwise), preference, priority,
security interest, chattel mortgage or other charge or encumbrance of any
kind, or any other type of preferential arrangement, including, without
limitation, the lien or retained security title of a conditional vendor
and any easement, right of way or other encumbrance on title to real
property and any lease having substantially the same effect as any of the
foregoing.
"Material Adverse Change" shall mean a material adverse change in or
effect upon any of (a) the condition (financial or otherwise), business,
performance, operations, properties, profits or prospects of the Holding
Company or the Operating Company or the Holding Company and its
Subsidiaries taken as one enterprise, (b) the legality, validity or
enforceability of this Agreement, the Securities or any of the other
Operative Documents, (c) the rights and remedies of any holder of
Securities with respect to the Securities or (d) the ability of the
Holding Company or any of its Subsidiaries to perform its obligations
under any of the Operative Documents and/or to comply with any of the
terms thereof applicable to it.
"Merger Agreement" shall mean the Plan of Merger dated as of March
13, 1997 by and between Newco, Inc. and Old Game Time.
"Multiemployer Plan" shall mean any Plan that is a "multiemployer
plan" as defined in section 4001(a)(3) of ERISA.
"Net Income" of any Person shall mean, for any period, the net income
(or net loss) of such Person for such period, determined in accordance
with GAAP.
"Net Proceeds of Capital Stock" shall mean, for any period, all cash
proceeds (net of all costs and out-of-pocket expenses in connection
therewith, including, without limitation, placement, underwriting and
brokerage fees and expenses) received by the Operating Company during such
period, from the sale of Shares (but not, for purposes of
section 14.6(a)(i)(B), the sale of Redeemable Shares) of the Operating
Company, including in such net proceeds:
(a) the net amount paid to the Operating Company upon issuance
and exercise during such period of any right to acquire any Shares
(other than, for purposes of section 14.6(a)(i)(B), Redeemable
Shares) of the Operating Company, or paid during such period to
convert a convertible debt security to Shares (other than Redeemable
Shares) of the Operating Company (but excluding any amount paid to
the Operating Company upon issuance of such convertible debt
security); and
(b) any amount paid to the Operating Company upon issuance of
any convertible debt security issued after the Closing Date and
thereafter converted to Shares (but not, for purposes of
section 14.6(a)(i)(B), a conversion to Redeemable Shares) of the
Operating Company during such period.
"Net Worth" of any Person shall mean, at any date, such Person's
stockholders' equity determined in accordance with GAAP (but excluding the
effect of any foreign currency translation adjustments).
"Note Guarantees" shall have the meaning specified in section 1.
"Notes" shall have the meaning specified in section 1.
"Officers' Certificate" shall mean a certificate signed on behalf of
the Holding Company or the Operating Company, as applicable, by the
President or one of the Vice Presidents of the Holding Company or the
Operating Company, as applicable, and by the Treasurer or one of the
Assistant Treasurers of the Holding Company or the Operating Company, as
applicable.
"Old Game Time" shall mean Game Time, Inc., an Alabama corporation.
"Operating Company" shall mean Newco, Inc., a Wisconsin corporation.
The Operating Company is the surviving corporation of the merger on the
Closing Date of Old Game Time with and into Newco, Inc.
"Operating Company Common Stock" shall mean the Common Stock, no par
value, of the Operating Company as constituted on the Closing Date and any
Shares into which such Common Stock shall have been changed or any Shares
resulting from any reclassification of such Common Stock.
"Operative Documents" shall mean this Agreement, the Other Securities
Purchase Agreements, the Securities, the Note Guarantees, the Consulting
Agreement Side Letter and each of the other agreements, documents and
instruments executed in connection herewith and therewith, each as it may
from time to time be amended, modified or supplemented.
"Option Plan" shall have the meaning specified in section 4.3.
"Organizational Documents" of any Person shall mean such Person's
charter and by-laws, partnership agreement, operating agreement, trust
agreement, as applicable, and/or any other similar agreement, document or
instrument.
"Other Securities Purchase Agreements" and "Other Purchasers" shall
have the respective meanings specified in section 1.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.
"Permitted Derivative Transaction" shall mean any Derivative
Transaction (a) arising under the Fleet Bank Documents or (b) which is
approved in writing by the Required Holders of the Notes.
"Permitted Investment" shall mean any of the following Investments:
(a) advances to employees for business expenses or personal
needs, provided that the aggregate outstanding amount of such
advances (i) to any individual employee shall not exceed $200,000 at
any time and (ii) to all employees shall not exceed $500,000 at any
time;
(b) loans to key employees of the Operating Company the
proceeds of which are used to purchase Holding Company Class A Common
Stock, provided that the aggregate outstanding amount of such loans
to all employees shall not exceed $250,000 at any time;
(c) readily marketable obligations (having a maturity not in
excess of 12 months from the date of acquisition thereof) of, or
fully and unconditionally guaranteed (as to both principal and
interest) by, the United States of America or an agency thereof;
(d) negotiable certificates of deposit (having a maturity not
in excess of 12 months from the date of acquisition thereof)
evidencing direct obligations of any federally insured commercial
bank or trust company organized and operating in the United States of
America having capital and surplus and undivided profits of at least
$100,000,000 and whose long term unsecured debt obligations have the
highest or second highest rating available from Moody's Investors
Service, Inc., Standard & Poor's Corporation or Fitch Investors
Service;
(e) commercial paper (having a maturity not in excess of 270
days from the date of acquisition thereof) evidencing the direct
obligation of any corporation organized and operating in the United
States of America and having the highest or second highest rating
available from Moody's Investors Service, Inc. or Standard & Poor's
Corporation;
(f) shares of so-called "money market funds" registered under
the Investment Company Act of 1940, as amended, organized and
operating in the United States of America, having total net assets of
$1,000,000,000 or more and investing primarily in securities of the
character described in the preceding clauses (c) through (e) of this
definition;
(g) accounts or notes receivable arising from transactions in
the ordinary course of business; contingent liabilities represented
by endorsements of negotiable instruments for collection or deposit
in the ordinary course of business; advances (other than advances to
employees), deposits, down payments and prepayments on account of
firm purchase orders, in each case made in the ordinary course of
business;
(h) Investments in the Operating Company or any Wholly-Owned
Subsidiary of the Operating Company (or in any Person which
simultaneously therewith becomes a Wholly-Owned Subsidiary of the
Operating Company) made by stock purchase, capital contribution, loan
or advance, provided that (i) both at the time of and immediately
after giving effect to any such Investment, no Default or Event of
Default shall exist and (ii) all such Investments are made only in
Solvent entities (A) which are organized under the laws of and
conduct substantially all of their respective businesses in the
United States of America or a state thereof or the District of
Columbia and (B) engaged in the Business (or in other related
businesses);
(i) Investments existing on the Closing Date and referred to in
Exhibit 5.9 attached hereto;
(j) Investments made in connection with a Permitted Derivative
Transaction;
(k) other Investments made after the Closing Date not otherwise
permitted under the preceding clauses of this definition, provided
that both at the time of and after giving effect to such Investment
(i) no Default or Event of Default shall exist and (ii) the aggregate
value (determined as provided in section 14.6) of all Investments
made pursuant to this clause (k) does not exceed $1,000,000.
"Person" shall mean an individual, a corporation, an association, a
joint-stock company, a business trust or other similar organization, a
partnership, a limited liability company, a joint venture, a trust, an
unincorporated organization or a government or any agency, instrumentality
or political subdivision thereof.
"Plan" shall mean an "employee benefit plan" (as defined in section
3(3) of ERISA) that is or, within the preceding five years, has been
established or maintained, or to which contributions are or, within the
preceding five years, have been made or required to be made, by the
Holding Company or the Operating Company or any ERISA Affiliate or with
respect to which the Holding Company or the Operating Company or any ERISA
Affiliate may have any liability.
"Preferred Shares", as applied to any Person, shall mean Shares of
such Person which shall be entitled to preference or priority over any
other Shares of such Person in respect of either the payment of dividends
or the distribution of assets upon liquidation.
"Pro Forma Consolidated EBITDA", "Pro Forma Consolidated Fixed
Charges" and "Pro Forma Consolidated Rental Obligations" shall mean, as of
the date of determination thereof, for any period, Consolidated EBITDA for
such period or the maximum aggregate amount of Consolidated Fixed Charges
or Consolidated Rental Obligations which would have been paid, payable or
guaranteed by the Operating Company and its Subsidiaries in respect of
such period, in each case determined on a pro forma basis to give effect
as of the first day of such period to the incurrence of all Funded Debt
and Current Debt giving rise to the need for such determination and the
retirement of any Funded Debt and/or Current Debt which is concurrently
being retired. For purposes hereof, Interest Charges and/or Rental
Obligations which are payable at a floating or variable rate shall be
determined on the basis of the rate in effect on the date as of which Pro
Forma Consolidated Fixed Charges and/or Pro Forma Consolidated Rental
Obligations is to be determined.
"Pro Forma Consolidated Fixed Charges Coverage Ratio" [14.5] shall
mean, as of the date of determination thereof, the ratio of (a) the sum of
(i) Pro Forma Consolidated EBITDA for the period of four consecutive
fiscal quarters of the Operating Company ending on, or most recently ended
prior to, such date, plus without duplication (ii) one-third of all Pro
Forma Consolidated Rental Obligations in respect of leases (other than
Capital Leases) for such period to (b) Pro Forma Consolidated Fixed
Charges for such period.
"Pro Forma Consolidated Leverage Ratio" [14.5] shall mean, as of the
date of determination thereof, the ratio of (a) Consolidated Total Debt
outstanding on such date (including all Funded Debt and Current Debt the
incurrence of which gives rise to the need for such determination) to
(b) Pro Forma Consolidated EBITDA for the period of four consecutive
fiscal quarters of the Operating Company ending on, or most recently ended
prior to, such date.
"Proprietary Rights" shall mean any patents, registered and common
law trademarks, service marks, trade names, brand names, copyrights,
licenses and other similar rights (including, without limitation,
know-how, trade secrets and other confidential information) and
applications for each of the foregoing, if any.
"Put/Call Price", "Put/Call Price Adjustment Event" and "Put
Securities" shall have the respective meanings specified in section 12.1.
"Put Closing Date", "Put Notice" and "Put Option" shall have the
respective meanings specified in section 12.2.
"Redeemable" shall mean, with respect to any Shares of any Person,
each Share of such Person that is (a) redeemable, payable or required to
be purchased or otherwise retired or extinguished, or convertible into
Funded Debt or Current Debt of such Person, (i) at a fixed or determinable
date, whether by operation of any sinking fund or otherwise, (ii) at the
option of any Person other than such Person or (iii) upon the occurrence
of a condition not solely within the control of such Person or
(b) convertible into other Redeemable Shares.
"Refinanced Debt" shall have the meaning specified in section 14.5.
"Refinancing Debt" shall have the meaning specified in section 14.5.
"Registrable Shares" shall mean the Warrant Shares, except that, as
to any particular Registrable Shares, such securities, once issued, will
cease to be Registrable Shares when (a) a registration statement covering
such securities has been declared effective and such securities have been
disposed of pursuant to an effective registration statement or (b) such
securities are sold to the public in accordance with Rule 144 (or any
similar provision then in force) under the Securities Act. A Person shall
be deemed to be a "holder of Registrable Shares" for purposes of section
11 if such Person is the holder of any Warrants and/or any Warrant Shares.
"Registration Expenses" shall mean all fees, expenses and
disbursements related to any registration, qualification or compliance
pursuant to section 11, including, without limitation, all registration,
filing, rating and listing fees, blue sky fees and expenses, printing
expenses, fees and disbursements of counsel (including, without
limitation, the fees, expenses and disbursements of counsel for the holder
or holders of the Registrable Shares), and expenses of any special audits
incident to or required by any registration, qualification or compliance,
except that Registration Expenses shall not include any underwriters'
discounts or commissions attributable to any Registrable Shares registered
and sold pursuant to any such registration.
"Rental Obligations" of any Person shall mean, for any period, all
rents and other amounts (including as such, all payments which such Person
is obligated to make to the lessor on termination of any lease and/or on
surrender of the leased property other than payments for which such Person
is contingently liable on account of early termination or breach of such
lease) paid, payable or guaranteed during such period by such Person, as
lessee or sublessee under any lease, excluding any amount required to be
paid by such Person (whether or not designated as rents or additional
rents) on account of maintenance, repairs, insurance, taxes, utilities and
similar charges, determined in accordance with GAAP. Whenever it is
necessary to determine the amount of Rental Obligations for any period, to
the extent that such Rental Obligations are not definitely determinable by
the terms of the lease, the Rental Obligations not so definitely
determinable shall be estimated in good faith and in such reasonable
manner as the board of directors of the Operating Company may determine
(as evidenced by a certified resolution of such board of directors
promptly delivered to the holder or holders of the Notes).
"Required Exercise Date" and "Required Exercise Option" shall have
the respective meanings specified in section 12.3.
"Required Holders" as applied to describe the requisite holder or
holders of any class of the Securities, shall mean, at any date, the
holder or holders of 51% or more in interest of such class of Securities
at the time outstanding (excluding all Securities at the time owned by the
Companies or any Affiliate of the Companies).
"Restricted Investment" shall mean any Investment other than a
Permitted Investment.
"Restricted Payment" as applied to any Person shall mean:
(a) any dividend or other distribution or payment, direct or
indirect, on account of any Shares of such Person now or hereafter
outstanding (including, without limitation, Preferred Shares) or any
securities convertible into or exercisable or exchangeable for such
Shares or any rights, options or warrants to acquire any such Shares,
except (i) any such dividend or distribution or payment payable to
the Operating Company and/or any Wholly-Owned Subsidiary of the
Operating Company and (ii) a pro rata distribution payable to all of
the holders of Operating Company Common Stock solely in shares of
Operating Company Common Stock and as a result of which there is no
change in the relative ownership interest of any stockholder in the
Operating Company or any of such stockholder's rights;
(b) any redemption, retirement, purchase or other acquisition,
direct or indirect, of any Shares of such Person now or hereafter
outstanding (including, without limitation, Preferred Shares) or any
securities convertible into or exercisable or exchangeable for such
Shares or any rights, options or warrants to acquire any such
Shares; and
(c) any payment, including, without limitation, any defeasance,
redemption, repurchase or other acquisition or retirement, direct or
indirect, on or in respect of (i) any Junior Subordinated Debt prior
to the scheduled maturity thereof other than scheduled payments of
interest and principal in respect of the Seller Note as in effect on
the date hereof or (ii) the Bridge Note, other than scheduled
payments of interest and principal in respect of the Bridge Note as
in effect on the date hereof which are made solely with shares of
Holding Company Class A Common Stock or with the proceeds of Holding
Company Class A Common Stock sold after the Closing Date;
provided that, notwithstanding the foregoing, the term "Restricted
Payment" shall not include any dividend or other distribution or payment
on, or any redemption, retirement, purchase or other acquisition of, any
of the Securities. For purposes of this Agreement, the amount of any
Restricted Payment made in property other than cash shall be the greater
of (x) the fair market value of such property (as reasonably determined in
good faith by the board of directors (or equivalent governing body) of the
Person making such Restricted Payment) and (y) the net book value thereof
on the books of such Person, in each case determined as of the date on
which such Restricted Payment is made.
"Sale-and-Leaseback Transaction" shall mean a transaction or series
of transactions pursuant to which the Operating Company or any Subsidiary
of the Operating Company shall sell or transfer to any Person any
property, whether now owned or hereafter acquired, and, as part of the
same transaction or series of transactions, the Operating Company or any
Subsidiary of the Operating Company shall rent or lease as lessee, or
similarly acquire the right to possession or use of, such property or one
or more properties which it intends to use for the same purpose or
purposes as such property.
"Securities" shall mean the Notes, the Warrants and, unless the
context clearly requires otherwise, the Warrant Shares, each of which is a
"Security".
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect from
time to time.
"Seller Note" shall mean the Operating Company's 10% Subordinated
Notes dated March 13, 1997 and due March 13, 2005, in the original
aggregate principal amount of $2,000,000, issued pursuant to the
Acquisition Agreement.
"Shares" of any Person shall include any and all shares of capital
stock, partnership interests, membership interests, or other shares,
interests, participations or other equivalents (however designated and of
any class) in the capital of, or other ownership interests in, such
Person.
"Significant Subsidiary" shall mean, on any date, any Subsidiary of
the Operating Company that (a) has (or together with its Subsidiaries has)
assets having a net book value or fair market value equal to 5% or more of
Consolidated Total Assets as at such date and/or (b) generated (or
together with its Subsidiaries generated) gross revenues during its most
recently completed fiscal quarter in an amount equal to 5% or more of the
consolidated gross revenues of the Operating Company and its Subsidiaries
for the most recently completed fiscal quarter of the Operating Company.
If a Subsidiary shall, under this definition, be or become a Significant
Subsidiary on any date, then it shall at all times thereafter constitute a
Significant Subsidiary (notwithstanding that at any later date its assets
and/or gross revenues shall be less than the amounts specified in this
definition).
"Solvent" as applied to any Person at any date shall mean that on and
as of such date (a) the fair value of the property of such Person is
greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person, (b) the present fair
salable value of the assets of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured, (c) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond
such Person's ability to pay as such debts and liabilities mature and
(d) such Person is not engaged in business or a transaction, and is not
about to engage in business or a transaction, for which such Person's
property would constitute an unreasonably small capital. The amount of
contingent liabilities on and as of any date shall be computed as the
amount that, in the light of all the facts and circumstances existing on
and as of such date, represents the amount that can reasonably be expected
to become an actual or matured liability. For purposes of this
definition, "Person" shall mean, where so required by the context in which
the term "Solvent" appears, such Person and its Subsidiaries taken as a
whole.
"Source" shall have the meaning specified in section 26.
"Subsidiary" of any Person at any date shall mean (a) any other
Person a majority (by number of votes) of the Voting Stock of which is
owned by such first-mentioned Person and/or by one or more other
Subsidiaries of such first-mentioned Person and (b) any other Person with
respect to which such first-mentioned Person and/or any one or more other
Subsidiaries of such first-mentioned Person (i) is entitled to more than
50% of such Person's profits or losses or more than 50% of such Person's
assets on liquidation or (ii) holds an equity interest in such Person of
more than 50%; provided that "Subsidiary" shall not include any
Unrestricted Subsidiary. As used herein, unless the context clearly
required otherwise, the term "Subsidiary" refers to a Subsidiary of the
Operating Company.
"Subsidiary Guarantor" shall mean each Significant Subsidiary,
whether existing at the time of the Closing or thereafter organized or
acquired.
"Successor Corporation" shall have the meaning specified in section
14.13.
"Survivor" shall have the meaning specified in section 14.18.
"Test Period" shall have the meaning specified in section 14.6.
"Total Assets" of any Person shall mean, at any date, the total
assets of such Person which would be shown as assets on a balance sheet as
of such date prepared in accordance with GAAP after eliminating all
amounts properly attributable to minority interests, if any, in the stock
or surplus of any Subsidiary of such Person.
"Total Debt" of any Person shall mean, at any date, all Funded Debt
and Current Debt of such Person at such date, determined in accordance
with GAAP.
"Unrestricted Subsidiary" shall mean any Subsidiary of the Operating
Company which is organized or acquired after the date hereof and in which
the only Investment made by the Operating Company and/or any of its other
Subsidiaries is cash permitted to be used for Restricted Investments under
section 14.6.
"Voting Stock", when used with reference to any Person, shall mean
Shares (however designated) of such Person having ordinary voting power
for the election of a majority of the members of the board of directors
(or other governing body) of such Person, other than Shares having such
power only by reason of the happening of a contingency.
"Warrant Shares" shall mean any Shares (or Other Securities (as
defined in the Warrants)) issued (or issuable, as applicable) upon
exercise of any Warrants, each of which is an "Warrant Share".
"Warrants" shall have the meaning specified in section 1.
"Weighted Average Life to Maturity" of any Indebtedness or obligation
shall mean, at any date, the number of years obtained by dividing the then
Remaining Dollar-years of such Indebtedness or obligation by the then
outstanding principal amount of such Indebtedness or obligation. For
purposes of this definition, the "Remaining Dollar-years" of any
Indebtedness or obligation shall mean, at any date, the total of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment,
including payment at final maturity, in respect thereof, by (b) the number
of years (calculated to the nearest one-twelfth) which will elapse between
such date and the making of such payment.
"Wholly-Owned Subsidiary" of any Person at any date shall mean any
Subsidiary all of the outstanding Shares of which, other than directors'
qualifying Shares, shall at the time be owned by such Person and/or by one
or more other Wholly-Owned Subsidiaries of such Person and the accounts of
which are consolidated with those of such Person in accordance with GAAP.
"Withdrawal Liability" shall have the meaning given such term under
Part 1 of Subtitle E of Title IV of ERISA.
15.2. Other Definitions. The terms defined in this section 15.2,
whenever used in this Agreement, shall, unless the context otherwise
requires, have the respective meanings hereinafter specified.
"this Agreement" (and similar references to any of the other
Operative Documents) shall mean, and the words "herein" (and "therein"),
"hereof" (and "thereof"), "hereunder" (and "thereunder") and words of
similar import shall refer to, such instruments as they may from time to
time be amended, modified or supplemented.
"beneficial ownership" of any Shares or other securities of any
Person shall be determined in the manner set forth in Rule 13d-3 of the
Commission under the Exchange Act.
a "class" of Securities shall refer to the Notes, the Warrants and/or
the Warrant Shares, as the case may be, each of which is a separate class.
"corporation" shall include an association, joint stock company,
business trust or other similar organization.
"premium" when used in conjunction with references to principal of
and interest on the Notes, shall mean any amount due upon any payment or
prepayment of any of the Notes, other than principal and interest and
shall include the premium specified in section 9.2.
"qualification" or "compliance" as used in section 11 refer to the
qualification or compliance of all Registrable Shares included in any
registration pursuant to section 11 under all applicable blue sky or other
state securities laws.
"register", "registered" and "registration" as used in section 11
refer to a registration effected by filing a registration statement in
compliance with the Securities Act to permit the sale and disposition of
the Registrable Shares and any amendment filed or required to be filed to
permit any such disposition.
15.3. Accounting Terms and Principles; Laws.
(a) All accounting terms used herein which are not expressly
defined in this Agreement shall have the respective meanings given to
them in accordance with GAAP, all computations made pursuant to this
Agreement shall be made in accordance with GAAP and all financial
statements shall be prepared in accordance with GAAP.
(b) All references herein to laws, statutes, rules and
regulations shall, unless the context clearly requires otherwise, be
deemed to refer to any law, statute, rule, regulation and any other
governmental restriction, standard and/or requirement promulgated,
issued and/or enforced by any domestic or foreign federal, state or
local government, governmental agency, authority, court,
instrumentality or regulatory body, including, without limitation,
those of the United States of America or any state thereof or the
District of Columbia.
16. Remedies.
16.1. Events of Default Defined; Acceleration of Maturity. If
any one or more of the following events ("Events of Default") shall occur
(whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body), that is to say:
(a) if default shall be made in the due and punctual payment of
all or any part of the principal of, or premium (if any) on, any Note
when and as the same shall become due and payable, whether at the
stated maturity thereof, by notice of or demand for prepayment, or
otherwise; or
(b) if default shall be made in the due and punctual payment of
any interest on any Note when and as such interest shall become due
and payable and such default shall have continued for a period of
five Business Days; or
(c) if default shall be made in the performance or observance
of any covenant, agreement or condition contained in (i) sections
7(g), 8, 9.7, 13, 14.2(b), 14.2(e), 14.5 to 14.8, inclusive, or 14.10
to 14.18, inclusive, or (ii) section 14.9 and, in the case of this
clause (ii), such default shall have continued for five days; or
(d) if default shall be made in the performance or observance
of any other of the covenants, agreements or conditions of or
applicable to the Operating Company or the Holding Company contained
in this Agreement or any of the other Operative Documents and such
default shall have continued for a period of 30 days; or
(e) if the Holding Company or any of its Subsidiaries shall
make a general assignment for the benefit of creditors, or shall not
pay its debts as they become due, or shall admit in writing its
inability to pay its debts as they become due, or shall file a
voluntary petition in bankruptcy, or shall be adjudicated bankrupt or
insolvent, or shall file any petition or answer seeking for itself
any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or
future statute, law or regulation, or shall file any answer admitting
or not contesting the material allegations of a petition filed
against it in any such proceeding, or shall seek or consent to or
acquiesce in the appointment of any trustee, custodian, receiver,
liquidator or fiscal agent for it or for all or any substantial part
of its properties, or shall (or its directors or stockholders shall)
take any action looking to its dissolution or liquidation; or
(f) if (i) within 60 days after the commencement of an action
against the Holding Company or any of its Subsidiaries seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute,
law or regulation, such action shall not have been dismissed, stayed
or vacated or (ii) within 60 days after the appointment without the
consent or acquiescence of the Holding Company or any of its
Subsidiaries of any trustee, custodian, receiver, liquidator or
fiscal agent for any such Person or for all or any substantial part
of their respective properties, such appointment shall not have been
vacated; or
(g) if, under the provisions of any law for the relief or aid
of debtors, any court or governmental agency of competent
jurisdiction shall assume custody or control of the Holding Company
or any of its Subsidiaries or of all or any substantial part of their
respective properties and such custody or control shall not be
terminated within 60 days from the date of assumption such custody or
control; or
(h) if the Holding Company or any of its Subsidiaries shall
fail (after giving effect to any applicable grace period originally
provided with respect thereto) to (i) make any payment due on any
Indebtedness (other than the Notes) or other obligation (including
any in respect of any lease or any Shares upon the exercise by any
Person of any put or call option or other similar right of redemption
or repurchase with regard to such Shares), if the aggregate
outstanding amount thereof (and of any other Indebtedness or other
obligation as to which the Holding Company or any of its Subsidiaries
is in default) exceeds $1,000,000 (or the equivalent thereof, as at
any date of determination, in any other currency) or (ii) perform,
observe or discharge any covenant, condition or obligation in any
agreement, document or instrument evidencing, securing or relating to
such Indebtedness or other obligation, if the effect of any such
failure of the character described in this clause (ii) is to cause,
or any other Person shall cause, any payment in an aggregate amount
of $1,000,000 (or the equivalent thereof, as at any date of
determination, in any other currency) or more to become due and
payable, or if any such Indebtedness or other obligation in aggregate
amount of $1,000,000 (or the equivalent thereof, as at any date of
determination, in any other currency) or more shall become due and
payable by its terms and shall not be paid or extended; or
(i) if a final judgment for the payment of money which,
together with all other outstanding final judgments for the payment
of money against the Holding Company or any of its Subsidiaries,
exceeds an aggregate of $1,000,000 (or the equivalent thereof, as at
any date of determination, in any other currency) shall be rendered
by a court of record against the Holding Company or any of its
Subsidiaries, and the Holding Company or any of its Subsidiaries
shall not discharge the same or provide for its discharge in
accordance with its terms, or procure a stay of execution thereof
within 60 days from the date of entry thereof and within such period
of 60 days, or such longer period during which execution of such
judgment shall have been stayed, move to vacate such judgment or
appeal therefrom and cause the execution thereof to be stayed pending
determination of such motion or during such appeal; or
(j) the Holding Company or any of its Subsidiaries shall:
(i) default in making any payment, delivery or exchange, or in the
performance of any of its other obligations, under one or more
agreements or instruments (individually or collectively) governing or
otherwise relating to one or more Derivative Transactions, which
default shall have resulted in early termination, liquidation or
other similar payments in an aggregate amount of $1,000,000 (or the
equivalent thereof, as at any date of determination, in any other
currency) or more becoming, or becoming capable at such time of being
declared or designated, due and payable by the Holding Company or any
of its Subsidiaries; or (ii) default in making any payment or
delivery due on the last payment, delivery or exchange date of, or on
the early termination or liquidation of, one or more Derivative
Transactions and such default relates to one or more payments or
deliveries of cash or property having an aggregate value of
$1,000,000 (or the equivalent thereof, as at any date of
determination, in any other currency) or more;
(k) if any representation or warranty made by or on behalf of
the Holding Company or any of its Subsidiaries in this Agreement or
in any of the other Operative Documents or in any agreement, document
or instrument delivered under or pursuant to any provision hereof or
thereof shall prove to have been materially false or incorrect on the
date as of which made; or
(l) if, at any time, this Agreement or any of the other
Operative Documents shall for any reason (other than the scheduled
termination thereof in accordance with its terms) expire, fail to be
in full force and effect or be disaffirmed, repudiated, cancelled,
terminated or declared to be unenforceable, null and void; or
(m) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is
sought or granted under section 412 of the Code, (ii) a notice of
intent to terminate any Plan shall have been or is reasonably
expected to be filed with the PBGC or the PBGC shall have instituted
proceedings under section 4042 of ERISA to terminate or appoint a
trustee to administer any Plan or the PBGC shall have notified the
Holding Company or any ERISA Affiliate that a Plan may become a
subject of any such proceedings, (iii) the aggregate "amount of
unfunded benefit liabilities" (within the meaning of section
4001(a)(18) of ERISA) under all Plans, determined in accordance with
Title IV of ERISA, shall exceed $250,000 (or the equivalent thereof,
as at any date of determination, in any other currency), (iv) the
Holding Company or any ERISA Affiliate shall have incurred or is
reasonably expected to incur any liability pursuant to Title I or IV
of ERISA or the penalty or excise tax provisions of the Code relating
to employee benefit plans, (v) the Holding Company or any ERISA
Affiliate withdraws from any Multiemployer Plan, or (vi) the Holding
Company or any Subsidiary of the Holding Company establishes or
amends any employee welfare benefit plan that provides post-
employment welfare benefits in a manner that would increase the
liability of the Holding Company and/or its Subsidiaries thereunder;
and any such event or events described in clauses (i) through (vi)
above, either individually or together with any other such event or
events, has resulted in, or could reasonably be expected to result
in, a Material Adverse Change; or
then, in the case of any Event of Default (other than one of the character
described in subdivisions (e), (f) or (g) of this section 16.1) and at the
option of the Required Holders of the Notes at the time outstanding
(excluding any Notes at the time owned by the Companies or any Affiliate
of the Companies), exercised by written notice to the Operating Company,
the principal of all Notes shall forthwith become due and payable,
together with interest accrued thereon, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly
waived, and the Operating Company shall forthwith upon any such
acceleration pay to the holder or holders of all the Notes then
outstanding (i) the entire principal of and interest accrued on the Notes,
and (ii) in addition, to the extent permitted by applicable law, an amount
equal to the premium that would be payable upon a prepayment of the Notes
pursuant to section 9.2 at such time, as liquidated damages and not as a
penalty; provided that, in the case of an Event of Default of the
character described in subdivisions (a) or (b) of this section 16.1 and
irrespective of whether all of the Notes have been declared due and
payable by the Required Holders of the Notes at the time outstanding, any
holder of Notes who or which has not consented to any waiver with respect
to such Event of Default may, at the option of such holder, by written
notice to the Operating Company, declare all Notes then held by such
holder to be, and such Notes shall thereupon become, forthwith due and
payable, together with interest accrued thereon, without presentment,
demand, protest or other notice of any kind, all of which are hereby
expressly waived, and the Operating Company shall forthwith upon any such
acceleration pay to such holder (i) the entire principal of and interest
accrued on such Notes, and (ii) in addition, to the extent permitted by
applicable law, an amount equal to the premium that would be payable upon
a prepayment of the Notes pursuant to section 9.2 at such time, as
liquidated damages and not as a penalty; provided, further, that, in the
case of an Event of Default of the character described in subdivisions
(e), (f) or (g) of this section 16.1, the principal of all Notes shall
forthwith become due and payable, together with interest accrued thereon
(including any interest accruing after the commencement of any action or
proceeding under the federal bankruptcy laws, as now or hereafter
constituted, or any other applicable domestic or foreign federal or state
bankruptcy, insolvency or other similar law, and any other interest that
would have accrued but for the commencement of such proceeding, whether or
not any such interest is allowed as an enforceable claim in such
proceeding), without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived, and the Operating Company
shall forthwith upon any such acceleration pay to the holder or holders of
all the Notes then outstanding (i) the entire principal of and interest
accrued on the Notes, and (ii) in addition, to the extent permitted by
applicable law, an amount equal to the premium that would be payable upon
a prepayment of the Notes pursuant to section 9.2 at such time, as
liquidated damages and not as a penalty.
Notwithstanding the foregoing provisions, at any time after the
occurrence of any Event of Default and of notice thereof, if any, by any
holder or holders of Notes and before any judgment, decree or order for
payment of the money due has been obtained by or on behalf of any holder
or holders of the Notes, the Required Holders of the Notes by written
notice to the Operating Company, may rescind and annul such Event of
Default and/or notice of such Event of Default and the consequences
thereof with respect to all of the Notes (including any Notes which were
accelerated pursuant to the first proviso in the preceding paragraph by
any holder or holders on account of an Event of Default of the character
described in subdivision (a) or (b) of this section 16.1) if:
(1) the Operating Company has paid a sum sufficient to pay
(A) all overdue installments of interest on all Notes at
the rate specified in the Notes;
(B) the principal of (and premium, if any, on) any Notes
which have become due otherwise than by such Event of Default or
notice thereof and interest thereon at the rate for overdue
amounts specified in such Notes; and
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate for overdue amounts
specified in such Notes; and
(2) all Defaults and Events of Default, other than the
non-payment of the principal of Notes which have become due solely by
such acceleration, have been cured or waived as provided in section
19.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
16.2. Suits for Enforcement, etc. In case any one or more of the
Events of Default specified in section 16.1 shall have occurred, and
irrespective of whether any Notes have become or have been declared
immediately due and payable under section 16.1, the holder of any Note may
proceed to protect and enforce its rights either by suit in equity or by
action at law, or both. Each Company stipulates that the remedies at law
of the holder or holders of the Securities in the event of any default or
threatened default by it in the performance of or compliance with any
covenant or agreement in this Agreement or any of the other Operative
Documents are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for
the specific performance thereof, whether by an injunction against a
violation thereof or otherwise.
16.3. No Election of Remedies. No remedy conferred in this
Agreement or in any of the other Operative Documents upon the holder of
any Security is intended to be exclusive of any other remedy, and each and
every such remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or thereunder or now or hereafter existing at
law or in equity or by statute or otherwise.
16.4. Remedies Not Waived. No course of dealing between either
Company and/or any of its Subsidiaries, on the one hand, and any holder of
any Security, on the other hand, and no delay by any such holder in
exercising any rights hereunder or under any of the other Operative
Documents shall operate as a waiver of any rights of any such holder.
16.5. Application of Payments. In case any one or more of the
Events of Default specified in section 16.1 shall have occurred, all
amounts to be applied to the prepayment or payment of any Notes, shall be
applied, after the payment of all related costs and expenses incurred by
the holders of the Notes (including, without limitation, compensation to
any and all trustees, liquidators, receivers or similar officials and
reasonable fees, expenses and disbursements of counsel) in such order of
priority as is determined by the Required Holders of the Notes.
17. Registration, Transfer and Exchange of Securities. Securities issued
hereunder shall be issued in registered form. Each Company shall keep at
its principal executive office (which is now located at the address set
forth at the beginning of this Agreement), registers in which it shall
provide for the registration and transfer of the Securities issued by it.
The name and address of each holder of the Securities shall be registered
in such registers. Each Company shall give to any institutional holder of
any Security promptly (but in any event within 10 days) following request
therefor, a complete and correct copy of the names and addresses of all
registered holders of the Securities issued by it and the amount and kind
of Securities held by each. Whenever any Security or Securities shall be
surrendered for transfer or exchange, the Company that issued such
Security, at its expense, will execute and deliver in exchange therefor a
new Security or Securities (in such denominations and registered in such
name or names as may be requested by the holder of the surrendered
Security or Securities), in the same aggregate unpaid principal amount (in
the case of the Notes) or exercisable for the same aggregate number of
Shares (in the case of any Warrants) or in the same aggregate number of
Shares (in the case of any Warrant Share), as applicable, as that of the
Security or Securities so surrendered. Each such new Note shall be dated
and bear interest from the date to which interest shall have been paid on
the surrendered Note or dated the date of the surrendered Note if no
interest shall have been paid thereon. The Companies may treat the Person
in whose name any Security is registered as the owner of such Security for
all purposes.
18. Replacement of Securities. Upon receipt of satisfactory evidence of
the loss, theft, destruction or mutilation of any Security and (in the
case of loss, theft or destruction) of satisfactory indemnity, and (in the
case of mutilation) upon surrender of such Security, the Company that
issued such Security, at its expense, will execute and deliver in lieu of
such Security a new Security of like tenor and, in the case of any new
Note, dated so as not to result in any loss of interest. Your unsecured
agreement to indemnify and/or affidavit and that of any other
institutional holder shall constitute satisfactory indemnity and/or
satisfactory evidence of loss, theft or destruction for the purpose of
this section 18.
19. Amendment and Waiver.
(a) Any term of this Agreement and, unless explicitly provided
otherwise therein, of any of the other Operative Documents may, with
the consent of the Companies, be amended, or compliance therewith may
be waived, in writing only, by the Required Holders of each class of
Securities entitled to the benefits of such term, provided that (i)
without the consent of the holders of all of the Notes at the time
outstanding, no such amendment or waiver shall (A) change the amount
of the principal of or any rate of interest on or the amount of any
premium payable with respect to any of the Notes or change the
payment terms of any of the Notes, or, except as provided in the
Notes (and the Note Guarantees), subordinate the obligation of the
Operating Company (or any Guarantor) to pay any amount due on the
Notes (or on the Note Guarantees) to any other obligation, or (B)
change the percentage of holders of Notes required to approve any
such amendment, effectuate any such waiver or accelerate payment of
the Notes; (ii) without the consent of the holders of all of the
Warrants and Warrant Shares at the time outstanding, no such
amendment or waiver shall (A) modify any of the provisions of section
11 or section 12, or (B) change the percentage of holders of the
Warrants and Warrant Shares required to approve any such amendment or
effect any such waiver; and (iii) no such amendment or waiver shall
extend to or affect any obligation not expressly amended or waived or
impair any right consequent thereon. Executed or true and correct
copies of any amendment, waiver or consent effected pursuant to this
section 19 shall be delivered by the Companies to each holder of
Securities forthwith (but in any event not later than five days)
following the effective date thereof.
(b) The Companies will not, directly or indirectly, request or
negotiate for, or offer or pay any remuneration or grant any security
as an inducement for, any proposed amendment or waiver of any of the
provisions of this Agreement or any of the other Operative Documents
unless each holder of the Securities (irrespective of the kind and
amount of Securities then owned by it) shall be informed thereof by
the Companies and, if such holder is entitled to the benefit of any
such provision proposed to be amended or waived, shall be afforded
the opportunity of considering the same, shall be supplied by the
Companies with sufficient information to enable it to make an
informed decision with respect thereto and shall be offered and paid
such remuneration and granted such security on the same terms.
(c) In determining whether the requisite holders of Securities
have given any authorization, consent or waiver under this section
19, any Securities owned by the Companies or any of their Affiliates
shall be disregarded and deemed not to be outstanding.
20. Method of Payment of Securities. Irrespective of any provision
hereof or of the other Operative Documents to the contrary, so long as you
or any other institutional holder shall hold any Security, all payments
due on such Security shall be made to you or such other institutional
holder by the method and at the address for such purpose specified in
Schedule I attached hereto or by such other method or at such other
address as you or such institutional holder may designate in writing
(given as provided in section 23), without requiring any presentation or
surrender of such Security, except that if any Security shall be paid,
prepaid and/or repurchased in full, such Security shall be surrendered to
the Company that issued such Security promptly following such payment,
prepayment or repurchase and cancelled.
21. Expenses; Indemnity. Whether or not the transactions contemplated by
any of the Operative Documents shall be consummated, the Companies,
jointly and severally, will pay or cause to be paid (or reimbursed, as the
case may be) and will defend, indemnify and hold you (and each other
holder of any of the Securities) and each of your (and such other
holder's) directors, officers, employees, agents, advisors and Affiliates
(each, an "Indemnitee") harmless in respect of all reasonable costs,
losses, expenses (including, without limitation, the reasonable fees,
costs, expenses and disbursements of counsel) and damages (collectively,
"Indemnified Costs") incurred by or asserted against any Indemnitee in
connection with the negotiation, execution, delivery, performance and/or
enforcement of this Agreement or any of the other Operative Documents
(including, without limitation, so- called work-outs and/or restructurings
and all amendments, waivers and consents hereunder and thereunder, whether
or not effected) and/or the consummation of the transactions contemplated
hereby and thereby or which may otherwise be related in any way to this
Agreement or any other Operative Documents or such transactions or such
Indemnitee's relationship to the Companies or any of their Affiliates or
any of their respective properties and assets, including, without
limitation, any and all Indemnified Costs related in any way to the
requirements of any Environmental Laws (as the same may be amended,
modified or supplemented from time to time) or to any environmental
investigation, assessment, site monitoring, containment, clean up,
remediation, removal, restoration, reporting and sampling, whether or not
consented to, or requested or approved by, any Indemnitee, and whether or
not such Indemnified Cost is attributable to an event or condition
originating from any properties or assets of the Holding Company or any of
its Subsidiaries or any other properties previously or hereafter owned,
leased, occupied or operated by the Holding Company or any of its
Subsidiaries. Notwithstanding the foregoing, the Companies shall not have
any obligation to an Indemnitee under this section 21 with respect to any
Indemnified Cost which is finally determined by a court of competent
jurisdiction to have arisen solely and directly as a result of the willful
misconduct or bad faith of such Indemnitee.
22. Taxes. The Companies, jointly and severally, will pay all taxes and
fees (including interest and penalties), including, without limitation,
all issuance and documentary stamp and similar taxes, which may be payable
in respect of the execution and delivery of this Agreement and each of the
other Operative Documents.
23. Communications. All communications provided for herein and,
unless explicitly provided otherwise therein, in any of the other
Operative Documents shall be in writing and sent (a) by telecopy if the
sender on the same day sends a confirming copy of such communication by a
recognized overnight delivery service (charges prepaid), (b) by a
recognized overnight delivery service (charges prepaid), or (c) by
messenger. Any such communication must be sent (i) if to the Companies
(or any Subsidiary of the Holding Company), to the Companies (or such
Subsidiary) at:
Swing-N-Slide Corp.
1212 Barberry Drive
Janesville, Wisconsin 53545
Attention: Richard G. Mueller
Chairman, President and CEO
Telecopy No.: (608) 755-4763
with a copy (which shall not constitute notice) to:
Foley & Lardner
150 East Gilman Street
Madison, Wisconsin 53703
Attention: Blaine R. Renfert, Esq.
Telecopy No.: (608) 258-4258
or at such other address (or telecopy number) as may be furnished in
writing by the Companies to each holder of any Security and (ii) if to
you, at your address for such purpose set forth in Schedule I attached
hereto, with a copy (which shall not constitute notice) to:
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: Frank B. Porter, Jr., Esq.
Telecopy No.: (617) 248-4000
and if to any other holder of any Security, at the address of such holder
as it appears on the applicable register maintained pursuant to section
17, or at such other address as may be furnished in writing by you or by
any other holder to the Companies. Communications under this section 23
shall be deemed given only when actually received.
24. Survival of Agreements, Representations and Warranties, etc. All
agreements, representations and warranties contained herein and in the
other Operative Documents shall be deemed to have been relied upon by you
and shall survive the execution and delivery of this Agreement and each of
the other Operative Documents, the issue, sale and delivery of the
Securities and payment therefor and any disposition of the Securities by
you, whether or not any investigation at any time is made by you or on
your behalf. All indemnification provisions, including, without
limitation, those contained in sections 11.5, 21 and 22, shall survive the
date upon which none of the Securities shall be outstanding and the
termination of this Agreement and each of the other Operative Documents.
25. Successors and Assigns; Rights of Other Holders. This Agreement and,
unless explicitly provided otherwise therein, each of the other Operative
Documents shall bind and inure to the benefit of and be enforceable by the
Companies and you, successors to the Companies and your successors and
assigns, and, in addition, shall inure to the benefit of and be
enforceable by each holder from time to time of any Securities who, upon
acceptance thereof, shall, without further action, be entitled to enforce
the applicable provisions and enjoy the applicable benefits hereof and
thereof. Neither Company may assign any of its rights or obligations
hereunder or under any of the other Operative Documents without the
written consent of the Required Holders of each class of Securities then
outstanding.
26. Purchase for Investment; ERISA.
(a) You represent and warrant (i) that you are an "accredited
investor" as defined in Rule 501 of Regulation D under the Securities
Act, (ii) that you have been furnished with all information that you
have requested for the purpose of evaluating your proposed
acquisition of the Securities to be issued to you pursuant hereto and
(iii) that you will acquire such Securities for your own account for
investment and not for distribution in any manner that would violate
applicable securities laws, but without prejudice to your rights to
dispose of such Securities or a portion thereof to a transferee or
transferees, in accordance with such laws if at some future time you
deem it advisable to do so. The acquisition of such Securities by
you at the Closing shall constitute your confirmation of the
foregoing representations and warranties. You understand that such
Securities are being sold to you in a transaction which is exempt
from the registration requirements of the Securities Act, and that,
in making the representations and warranties contained in section
5.16, the Companies are relying, to the extent applicable, upon your
representations and warranties contained herein.
(b) You represent that at least one of the following statements
is an accurate representation as to each source of funds (a "Source")
to be used by you to pay the purchase price of the Securities to be
purchased by you hereunder:
(i) the Source is an "insurance company general account"
as defined in Section V(e) of Prohibited Transaction Exemption
("PTE") 95-60 (issued July 12, 1995) and, except as you have
disclosed to the Companies in writing pursuant to this section
(i), the amount of reserves and liabilities for the general
account contract(s) held by or on behalf of any employee benefit
plan or group of plans maintained by the same employer or
employee organization do not exceed 10% of the total reserves
and liabilities of the general account (exclusive of separate
account liabilities) plus surplus as set forth in the NAIC
Annual Statement filed with the state of domicile of the
insurer; or
(ii) the Source is a separate account of an insurance
company maintained by you in which an employee benefit plan (or
its related trust) has an interest, which separate account is
maintained solely in connection with your fixed contractual
obligations under which the amounts payable, or credited, to
such plan and to any participant or beneficiary of such plan
(including any annuitant) are not affected in any manner by the
investment performance of the separate account; or
(iii) the Source is either (A) an insurance company
pooled separate account, within the meaning of PTE 90-1 (issued
January 29, 1990), or (B) a bank collective investment fund,
within the meaning of the PTE 91-38 (issued July 12, 1991) and,
except as you have disclosed to the Companies in writing
pursuant to this section (iii), no employee benefit plan or
group of plans maintained by the same employer or employee
organization beneficially owns more than 10% of all assets
allocated to such pooled separate account or collective
investment fund; or
(iv) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by
a "qualified professional asset manager" or "QPAM" (within the
meaning of Part V of the QPAM Exemption), no employee benefit
plan's assets that are included in such investment fund, when
combined with the assets of all other employee benefit plans
established or maintained by the same employer or by an
affiliate (within the meaning of Section V(c)(1) of the QPAM
Exemption) of such employer or by the same employee organization
and managed by such QPAM, exceed 20% of the total client assets
managed by such QPAM, the conditions of Part I(c) and (g) of the
QPAM Exemption are satisfied, neither the QPAM nor a person
controlling or controlled by the QPAM (applying the definition
of "control" in Section V(e) of the QPAM Exemption) owns a 5% or
more interest in either Company and (A) the identity of such
QPAM and (B) the names of all employee benefit plans whose
assets are included in such investment fund have been disclosed
to the Companies in writing pursuant to this section (iv); or
(v) the Source is a governmental plan; or
(vi) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the
Companies in writing pursuant to this section (vi); or
(vii) the Source does not include assets of any
employee benefit plan, other than a plan exempt from the
coverage of ERISA.
As used in this section 26(b), the terms "employee benefit plan",
"governmental plan", "party in interest" and "separate account" shall
have the respective meanings assigned to such terms in Section 3 of
ERISA, and the term "QPAM Exemption" means PTE 84-14 (issued March
13, 1984).
27. Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement
and, unless explicitly provided otherwise therein, each of the other
Operative Documents, including the validity hereof and thereof and the
rights and obligations of the parties hereunder and thereunder, and all
amendments and supplements hereof and thereof and all waivers and consents
hereunder and thereunder, shall be construed in accordance with and
governed by the domestic substantive laws of The Commonwealth of
Massachusetts without giving effect to any choice of law or conflicts of
law provision or rule that would cause the application of the domestic
substantive laws of any other jurisdiction. Each Company, to the extent
that it may lawfully do so, hereby consents to service of process, and to
be sued, in The Commonwealth of Massachusetts and consents to the
jurisdiction of the courts of The Commonwealth of Massachusetts and the
United States District Court for the District of Massachusetts, as well as
to the jurisdiction of all courts to which an appeal may be taken from
such courts, for the purpose of any suit, action or other proceeding
arising out of any of its obligations hereunder or thereunder or with
respect to the transactions contemplated hereby or thereby, and expressly
waives any and all objections it may have as to venue in any such courts.
Each Company further agrees that a summons and complaint commencing an
action or proceeding in any of such courts shall be properly served and
shall confer personal jurisdiction if served personally or by certified
mail to it at its address set forth in section 23 or as otherwise provided
under the laws of The Commonwealth of Massachusetts. Notwithstanding the
foregoing, each Company agrees that nothing contained in this section 27
shall preclude the institution of any such suit, action or other
proceeding in any jurisdiction other than The Commonwealth of
Massachusetts. EACH COMPANY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY
JURY IN ANY SUIT, ACTION OR OTHER PROCEEDING INSTITUTED BY OR AGAINST IT
IN RESPECT OF ITS OBLIGATIONS HEREUNDER OR THEREUNDER OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
28. Rule 144A. The Companies will take, or will cause to be taken, such
action as any holder of Securities may reasonably request from time to
time to facilitate any sale or disposition by any such holder of any
Securities without registration under the Securities Act and/or any
applicable securities laws within the limitation of the exemptions
provided by any rule or regulation thereunder, including, without
limitation, Rule 144A under the Securities Act.
29. Miscellaneous. The headings in this Agreement and in each of the
other Operative Documents are for purposes of reference only and shall not
limit or otherwise affect the meaning hereof or thereof. This Agreement
(together with the other Operative Documents) embodies the entire
agreement and understanding among you and the Companies and supersedes all
prior agreements and understandings relating to the subject matter hereof.
Each covenant contained herein and in each of the other Operative
Documents shall be construed (absent an express provision to the contrary)
as being independent of each other covenant contained herein and therein,
so that compliance with any one covenant shall not (absent such an express
contrary provision) be deemed to excuse compliance with any other
covenant. If any provision in this Agreement or in any of the other
Operative Documents refers to any action taken or to be taken by any
Person, or which such Person is prohibited from taking, such provision
shall be applicable, whether such action is taken directly or indirectly
by such Person, whether or not expressly specified in such provision. In
case any provision in this Agreement or any of the other Operative
Documents shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any
way be affected or impaired thereby. This Agreement and, unless
explicitly provided otherwise therein, each of the other Operative
Documents, may be executed in any number of counterparts and by the
parties hereto or thereto, as the case may be, on separate counterparts
but all such counterparts shall together constitute but one and the same
instrument.
[The remainder of this page is intentionally left blank.]
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterparts of this letter, whereupon this
letter shall become a binding agreement under seal among you and the
Companies. Please then return one of such counterparts to the Companies.
Very truly yours,
SWING-N-SLIDE CORP.
By: /s/ Richard E. Ruegger
Vice President - Finance
NEWCO, INC.
By: /s/ Richard E. Ruegger
Vice President - Finance
The foregoing Agreement is hereby
agreed to as of the date thereof.
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Michael P. Hermsen
Managing Director
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterparts of this letter, whereupon this
letter shall become a binding agreement under seal among you and the
Companies. Please then return one of such counterparts to the Companies.
Very truly yours,
SWING-N-SLIDE CORP.
By: /s/ Richard E. Ruegger
Vice President - Finance
NEWCO, INC.
By: /s/ Richard E. Ruegger
Vice President - Finance
MASSMUTUAL CORPORATE INVESTORS
By: /s/ Michael P. Hermsen
Investment Officer
The foregoing is executed on behalf of
MassMutual Corporate Investors, organized
under a Declaration of Trust, dated
September 13, 1985, as amended from time
to time. The obligations of such Trust are
not personally binding upon, nor shall resort
be had to the property of, any of the Trustees,
shareholders, officers, employees or agents of
such Trust, but the Trust's property only shall
be bound.
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterparts of this letter, whereupon this
letter shall become a binding agreement under seal among you and the
Companies. Please then return one of such counterparts to the Companies.
Very truly yours,
SWING-N-SLIDE CORP.
By: /s/ Richard E. Ruegger
Vice President - Finance
NEWCO, INC.
By: /s/ Richard E. Ruegger
Vice President - Finance
MASSMUTUAL PARTICIPATION INVESTORS
By: /s/ Michael P. Hermsen
Investment Officer
The foregoing is executed on behalf of MassMutual
Participation Investors, organized under a
Declaration of Trust, dated April 7, 1988, as
amended from time to time. The obligations of
such Trust are not personally binding upon, nor
shall resort be had to the property of, any of
the Trustees, shareholders, officers, employees
or agents of such Trust, but the Trust's property
only shall be bound.
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterparts of this letter, whereupon this
letter shall become a binding agreement under seal among you and the
Companies. Please then return one of such counterparts to the Companies.
Very truly yours,
SWING-N-SLIDE CORP.
By: /s/ Richard E. Ruegger
Vice President - Finance
NEWCO, INC.
By: /s/ Richard E. Ruegger
Vice President - Finance
MASSMUTUAL CORPORATE VALUE
PARTNERS LIMITED
By Massachusetts Mutual Life Insurance
Company, as Investment Manager
By: /s/ Michael P. Hermsen
Managing Director
CONFORMED COPY
NEWCO, INC.
12% Senior Subordinated Note
due March 13, 2005
No. R-1
$3,928,500 March 13, 1997
NEWCO, INC., a Wisconsin corporation (the "Operating Company"), for
value received, hereby promises to pay to MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY, or registered assigns, the principal amount of THREE
MILLION NINE HUNDRED TWENTY-EIGHT THOUSAND FIVE HUNDRED DOLLARS
($3,928,500) on March 13, 2005, with interest (computed on the basis of a
360-day year of twelve 30- day months) on the unpaid balance of such
principal amount at the rate of 12% per annum from the date hereof,
payable semi-annually on the 13th day of March and September of each year
after the date hereof, commencing on September 13, 1997, until the
principal hereof shall have become due and payable (whether at maturity or
at a date fixed for prepayment or by declaration or otherwise), and with
interest on any overdue principal (including any overdue prepayment of
principal) and (to the extent permitted by applicable law) premium, if
any, and (to the extent permitted by applicable law) on any overdue
installment of interest, at the Default Rate (as defined below) until
paid, payable semi-annually as aforesaid or, at the option of the holder
hereof, on demand and, upon acceleration of this Note, together with the
premium specified in the Securities Purchase Agreements hereinafter
referred to, as liquidated damages and not as a penalty; provided that in
no event shall the amount payable by the Operating Company as interest and
premium on this Note exceed the highest lawful rate permissible under any
law applicable hereto. Payments of principal, premium, if any, and
interest hereon shall be made in lawful money of the United States of
America by the method and at the address for such purpose specified in the
Securities Purchase Agreements hereinafter referred to, and such payments
shall be overdue for purposes hereof if not made on the scheduled date of
payment therefor, without giving effect to any applicable grace period and
notwithstanding that such payment may be prohibited under the terms of
subordination applicable hereto set forth below. As used herein, the
"Default Rate" applicable to any overdue amount shall mean the higher of
(a) 14% per annum and (b) the sum of (i) the per annum rate of interest
reported by The Wall Street Journal as the "prime" rate on the Business
Day immediately preceding the scheduled date of payment for such amount
plus (ii) 200 basis points.
This Note is one of the Operating Company's 12% Senior Subordinated
Notes due March 13, 2005, limited to $12,500,000 aggregate principal
amount, issued pursuant to those certain Securities Purchase Agreements
dated March 13, 1997 (such agreements, as amended, modified and
supplemented from time to time, the "Securities Purchase Agreements")
among Swing-N-Slide Corp., the Operating Company and the institutional
investors named therein and their respective successors and assigns. The
holder hereof is entitled to the benefits of the Securities Purchase
Agreements and the other Operative Documents referred to in the Securities
Purchase Agreements, including, without limitation, the Note Guarantees,
and may enforce the agreements contained herein and therein and exercise
the remedies provided for hereby and thereby or otherwise available in
respect hereof and thereof, all in accordance with the terms hereof and
thereof. This Note is subject to prepayment as specified in the
Securities Purchase Agreements. Capitalized terms used herein without
definition have the meanings ascribed to them in the Securities Purchase
Agreements.
1. Subordination of Senior Subordinated Notes. Payments on this Note,
and the rights of the holder hereof and of all guarantees with respect
hereto, are subordinate, to the extent specified in this section 1, to
Superior Indebtedness (as defined below).
1.1. Certain Definitions. As used in this section 1, the
following terms have the following respective meanings:
"Bankruptcy Code" shall mean 11 U.S.C. Section 101 et seq., as
from time to time hereafter amended, and any successor or similar statute.
"Blockage Period" shall have the meaning specified in section
1.4.
"Covenant Default" shall have the meaning specified in section
1.4.
"Liquidation Payment" shall have the meaning specified in section
1.3.
"Operative Documents" shall mean the Securities Purchase
Agreements, together with all agreements, documents and instruments
executed in connection therewith.
"Payment Default" shall have the meaning specified in section
1.4.
"Permissible Securities" shall mean (a) any debt securities the
payment of which is subordinated, at least to the extent provided in this
section 1 with respect to the Subordinated Indebtedness, to the payment of
all Superior Indebtedness at the time outstanding and all securities
issued in exchange therefor and (b) any Shares of the Operating Company.
"Senior Subordinated Notes" shall mean the Operating Company's
12% Senior Subordinated Notes due March 13, 2005 (together with any notes
issued in exchange therefor or replacement thereof).
"Subordinated Indebtedness" shall mean the principal amount of
the Indebtedness evidenced by the Senior Subordinated Notes, together with
any interest (including any interest accruing after the commencement of
any action or proceeding under any bankruptcy, insolvency or other similar
law, and any interest that would have accrued but for the commencement of
any such proceeding, whether or not any such interest is allowed as an
enforceable claim in such proceeding) and premium, if any, and any other
amount (including any fee, expense or indemnification payment) due thereon
or payable with respect thereto.
"Subordination Notice" shall have the meaning specified in
section 1.4.
"Superior Indebtedness" shall mean the principal amount of,
interest (including any interest accruing after the commencement of any
action or proceeding under any bankruptcy, insolvency or other similar
law, and any interest that would have accrued but for the commencement of
any such proceeding, whether or not any such interest is allowed as an
enforceable claim in such proceeding) and premium (if any) or other amount
(including any fee, expense or indemnification payment) due in respect of
the Funded Debt and/or Current Debt and letters of credit and interest
rate protection agreements under the Fleet Bank Agreement (or any
extensions, renewals, refinancings or refundings thereof or of any
Refinancing Debt thereof permitted under section 14.5(a)(viii) of the
Securities Purchase Agreements) and all guarantees with respect thereto,
provided that the aggregate outstanding principal amount thereof,
including, without limitation, all amounts due (contingently or otherwise)
in respect of reimbursement obligations under letters of credit, interest
rate protection agreements or similar instruments (and all related
reimbursement agreements), that shall constitute Superior Indebtedness,
shall not exceed the greater of (a) $75,000,000, minus the aggregate
amount of all principal payments made thereon from time to time (other
than any principal payment made under the revolving credit facility
established thereunder which may be reborrowed under such facility), or
(b) four times Consolidated EBITDA for the most recently completed four
consecutive fiscal quarters of the Operating Company; provided, further,
that in no event shall Superior Indebtedness include any amount due in
respect of (A) the Senior Subordinated Notes, (B) any Indebtedness which
is expressly made equal or subordinate in right of payment to the Senior
Subordinated Notes or (C) any Indebtedness for goods, materials or
services purchased in the ordinary course of business.
1.2. Subordinated Indebtedness Subordinated to Superior
Indebtedness; No Amendments.
(a) The Operating Company for itself and its successors and
assigns, covenants and agrees, and each holder of any Subordinated
Indebtedness, by its acceptance thereof, shall be deemed to have agreed,
notwithstanding anything to the contrary in the Operative Documents, that
the payment of the Subordinated Indebtedness shall be subordinated to the
extent and in the manner set forth in this section 1, to the prior payment
in full in cash or cash equivalents of all Superior Indebtedness, and that
each holder of Superior Indebtedness, whether now outstanding or hereafter
created, incurred, assumed or guaranteed, shall be deemed to have acquired
Superior Indebtedness in reliance upon the provisions contained in this
section 1. No present or future holder of Superior Indebtedness shall be
prejudiced in the right to enforce the subordination of the Subordinated
Indebtedness effected pursuant to this section 1 by any act or failure to
act on the part of the Operating Company.
(b) Neither this section 1 nor any of the terms of the
Subordinated Indebtedness relating to the timing or amount of any payment
(or prepayment) due thereon, shall be amended without the written consent
of the holder or holders of not less than 66-2/3% in aggregate principal
amount of the Superior Indebtedness at the time outstanding.
(c) Unless and until the Superior Indebtedness has been paid in
full in cash or cash equivalents, the Operating Company shall not grant to
the holders of the Subordinated Indebtedness any Lien in or on any of the
assets of the Operating Company to secure the Subordinated Indebtedness
without the written consent of the holder or holders of not less than 66-
2/3% in aggregate principal amount of the Superior Indebtedness at the
time outstanding.
1.3. Dissolution, Liquidation, Reorganization, etc. Upon
any payment or distribution of the assets of the Operating Company of any
kind or character, whether in cash, property or securities, to creditors
upon any dissolution, winding-up, total or partial liquidation,
reorganization, composition, arrangement, adjustment or readjustment of
the Operating Company or its securities, whether voluntary or involuntary,
or in bankruptcy, insolvency, reorganization, liquidation or receivership
proceedings, or upon a general assignment for the benefit of creditors, or
any other marshalling of the assets and liabilities of the Operating
Company, or otherwise (hereinafter a "Liquidation Payment"), then and in
any such event:
(a) the holders of the Superior Indebtedness shall be entitled
to receive payment in full in cash or cash equivalents (or to have such
payment duly provided for in cash or cash equivalents in a manner
reasonably satisfactory to the holders of Superior Indebtedness) of all
amounts due or to become due on or in respect of all Superior
Indebtedness, before any Liquidation Payment, whether in cash, property or
securities (other than Permissible Securities), is made on account of or
applied to the Subordinated Indebtedness;
(b) the Subordinated Indebtedness shall forthwith become due and
payable, and any Liquidation Payment, whether in cash, property or
securities (other than Permissible Securities), to which the holders of
the Subordinated Indebtedness would be entitled except for the provisions
of this section 1, shall be paid or delivered by any debtor, custodian,
liquidating trustee, agent or other Person making such Liquidation
Payment, directly to the holders of the Superior Indebtedness, or their
agent, representative or representatives, ratably according to the
aggregate amounts remaining unpaid on account of the Superior
Indebtedness, for application to the payment thereof, to the extent
necessary to pay all such Superior Indebtedness in full in cash or cash
equivalents after giving effect to any concurrent payment or distribution,
or provision therefor, to the holders of such Superior Indebtedness;
(c) each holder of the Subordinated Indebtedness at the time
outstanding hereby irrevocably authorizes and empowers each holder of the
Superior Indebtedness or such holder's agent or representative to collect
and receive such holder's ratable share of any Liquidation Payment and to
receipt therefor, and, if any holder of Subordinated Indebtedness fails to
file a claim therefor at least ten (10) calendar days prior to the date
established by rule of law or order of court for such filing, to file and
prove (but not to vote) such claim therefor; and
(d) the holders of the Subordinated Indebtedness shall execute
and deliver to the holders of the Superior Indebtedness or their agent,
representative or representatives all such further instruments confirming
the above authorization and all such powers of attorney, proofs of claim,
assignments of claim and other instruments, and shall take all such other
action, as may be reasonably requested by the holders of the Superior
Indebtedness or such representative or representatives, to enforce such
claims and to carry out the purposes of this section 1.
Upon any payment or distribution of assets referred to in this
section 1, the holders of the Subordinated Indebtedness shall be entitled
to rely upon any order or decree made by any court of competent
jurisdiction in which such bankruptcy, insolvency, reorganization,
liquidation, receivership or other proceeding is pending, or a certificate
of the custodian, liquidating trustee, agent or other Person making any
such payment or distribution to such holders, for the purpose of
ascertaining the Persons entitled to participate therein, the holders of
the Superior Indebtedness, the then outstanding principal amount of the
Superior Indebtedness and any and all amounts payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent
thereto or to this section 1.
1.4. No Payments With Respect to Subordinated Indebtedness
in Certain Circumstances.
(a) The Operating Company will not, directly or indirectly, make
or agree to make, and neither the holder nor any assignee or successor
holder of any Subordinated Indebtedness will accept or receive any payment
or distribution (in cash, property or securities (other than Permissible
Securities) by set-off or otherwise), direct or indirect, of or on account
of the Subordinated Indebtedness if, at the time of such payment or
distribution or immediately after giving effect thereto:
(i) a default in the payment when due (whether at maturity
or at a date fixed for prepayment or by declaration or
otherwise) of all or any portion of the principal of or premium,
if any, or interest on or other amount due in respect of any
Superior Indebtedness shall have occurred (a "Payment Default")
and such Payment Default shall not have been cured by the
Operating Company or waived by the requisite holder or holders
of the Superior Indebtedness with respect to which such Payment
Default shall have occurred; or
(ii) all of the following conditions specified in this
section 1.4(a)(ii) shall be satisfied:
(A) a default other than a Payment Default shall have
occurred with respect to any Superior Indebtedness which
permits the holder or holders thereof at that time to
immediately accelerate the maturity thereof (a "Covenant
Default");
(B) the Operating Company and the holder or holders
of Subordinated Indebtedness shall have received written
notice (each a "Subordination Notice") of such Covenant
Default from the requisite holder or holders of the
Superior Indebtedness, or their representative or
representatives (which notice shall state that it is a
"Subordination Notice" and shall make explicit reference to
the provisions of this section 1.4(a)(ii));
(C) such Covenant Default shall not have been cured
by the Operating Company or waived in writing by the
requisite holder or holders of the Superior Indebtedness
with respect to which such Covenant Default shall have
occurred; and
(D) less than 180 days shall have elapsed after the
date of receipt by the Operating Company and the holders of
the Subordinated Indebtedness of such Subordination Notice
(any period during which the restrictions imposed by this
section 1.4(a)(ii) are in effect being hereinafter referred
to as a "Blockage Period");
provided, however, that, for the purpose of this section
1.4(a)(ii), (x) only one Blockage Period may be commenced during
any period of 360 consecutive days, (y) not more than four
Blockage Periods may be commenced, and (z) no facts or
circumstances known to the holders of Superior Indebtedness
giving any Subordination Notice on the date any Subordination
Notice is given may be used or shall be effective as a basis for
any subsequent Subordination Notice.
(b) The restrictions imposed by section 1.4(a) shall cease to
apply and the Operating Company shall resume payments in respect of
the Subordinated Indebtedness (including any payments which shall not
have been made on account of the provisions of this section 1, but
excluding any payments which may have become due solely on account of
any acceleration of the maturity of the Subordinated Indebtedness or
any judgment with respect thereto) upon the earliest to occur of
(i) the cure of the Payment Default or Covenant Default by the
Operating Company, (ii) the written waiver thereof by the requisite
holder or holders of the Superior Indebtedness with respect to which
such Payment Default or Covenant Default shall have occurred,
(iii) the expiration of the applicable Blockage Period or (iv) the
termination of such Blockage Period by such requisite holder or
holders of such Superior Indebtedness.
(c) In the event of an acceleration of the maturity of the
principal of any Superior Indebtedness in accordance with the terms
thereof (which acceleration has not been rescinded or annulled), such
Superior Indebtedness shall first be paid in full in cash or cash
equivalents (or provision for such payment in cash or cash
equivalents shall be made in a manner reasonably satisfactory to the
holder or holders of such Superior Indebtedness) before any payment
or distribution (in cash, properties or securities (other than
Permissible Securities), by set-off or otherwise) is made on account
of or applied on the Subordinated Indebtedness.
(d) Nothing herein shall affect or impair the right of any
holder of any Senior Subordinated Notes to apply any amount payable
in respect thereof to the payment of any amount due upon the exercise
of any Warrants at any time.
1.5. Payments and Distributions Received. If any payment or
distribution of any kind or character, whether in cash, property or
securities (other than Permissible Securities), shall be received by any
holder of any of the Subordinated Indebtedness in contravention of this
section 1, such payment or distribution shall be held in trust for the
benefit of, and shall, upon demand by the requisite holder or holders of
the Superior Indebtedness, be paid over or delivered and transferred to,
the holders of the Superior Indebtedness, or their representative or
representatives, ratably according to the aggregate amount remaining
unpaid on account of such Superior Indebtedness, for application to the
payment thereof, to the extent necessary to pay all such Superior
Indebtedness in full in cash or cash equivalents, after giving effect to
any concurrent payment or distribution, or provision therefor, to the
holders of such Superior Indebtedness; provided that such demand by the
holders of Superior Indebtedness shall be made no later than 90 days
following receipt of the applicable payment or distribution by such holder
of Subordinated Indebtedness. In the event of the failure of any holder
of any of the Subordinated Indebtedness to endorse or assign any such
payment or distribution, any holder of the Superior Indebtedness or such
holder's representative is hereby irrevocably authorized to endorse or
assign the same.
1.6. Subrogation. Subject to the payment in full of all
Superior Indebtedness in cash or cash equivalents, in case cash, property
or securities otherwise payable or deliverable to the holders of the
Subordinated Indebtedness shall have been applied pursuant to this section
1 to the payment of Superior Indebtedness, then and in each such case, the
holders of the Subordinated Indebtedness shall be subrogated to the rights
of each holder of Superior Indebtedness to receive any further payment or
distribution in respect of or applicable to the Superior Indebtedness;
and, for the purposes of such subrogation, no payment or distribution to
the holders of Superior Indebtedness of any cash, property or securities
to which any holder of Subordinated Indebtedness would be entitled except
for the provisions of this section 1 shall, and no payment over pursuant
to the provisions of this section 1 to the holders of Superior
Indebtedness by the holders of the Subordinated Indebtedness shall as
between the Operating Company, its creditors other than the holders of
Superior Indebtedness and the holders of Subordinated Indebtedness, be
deemed to be a payment by the Operating Company to or on account of
Superior Indebtedness.
1.7. Notice. In the event that (a) any Superior Indebtedness or
Subordinated Indebtedness shall be transferred and/or shall become due and
payable before the expressed maturity thereof as the result of the
occurrence of a default or any event of default or (b) any term or
provision of any agreement, document or instrument related to the Superior
Indebtedness or Subordinated Indebtedness shall be amended, modified or
supplemented, or compliance therewith waived, the Operating Company will
give immediate written notice in writing of such event to each holder of
Subordinated Indebtedness and Superior Indebtedness (together with copies
of all related agreements, documents and instruments). Each notice of any
transfer of any Superior Indebtedness or Subordinated Indebtedness shall
include the name and address of the applicable transferee for purposes of
this section 1. The holder or holders of Superior Indebtedness shall be
obligated to give a Subordination Notice (as defined in section 1.4) to a
holder of Subordinated Indebtedness other than the initial holders thereof
only if the holder or holders of Superior Indebtedness shall have been
furnished written notice of such other holder's address for purposes of
this section 1.
1.8. Subordination Not Affected, etc. The terms of this section
1, the subordination effected hereby and the rights created hereby of the
holders of the Superior Indebtedness shall not be affected by (a) any
amendment or modification of or supplement to any Superior Indebtedness
(or any renewal, extension, refinancing or refunding thereof) or any
agreement, document or instrument relating thereto to the extent permitted
by section 14.16(d) of the Securities Purchase Agreements, (b) any
exercise or non-exercise of any right, power or remedy under or in respect
of any Superior Indebtedness (or any security or collateral therefor) or
pursuant to any agreement, document or instrument relating thereto or
(c) any waiver, consent, release, indulgence, delay or other action,
inaction or omission, in respect of any Superior Indebtedness (or any
security or collateral therefor) or pursuant to any agreement, document or
instrument relating thereto, whether or not any holder of any Subordinated
Indebtedness shall have had notice or knowledge of any of the foregoing.
1.9. Obligations Unimpaired. The provisions of this section 1
are solely for the purpose of defining the relative rights of the holders
of Superior Indebtedness on the one hand and the holders of Subordinated
Indebtedness on the other hand, and (a) subject to the rights, if any,
under this section 1 of the holders of Superior Indebtedness, nothing in
this section 1 shall (i) impair as between the Operating Company and the
holder of any Subordinated Indebtedness the obligation of the Operating
Company, which is unconditional and absolute, to pay to the holder thereof
all amounts due thereon in accordance with the terms thereof or (ii)
except as otherwise provided in section 1.11, prevent the holder of any
Subordinated Indebtedness from exercising all remedies available to such
holder, whether arising under the Operative Documents, applicable law or
otherwise, and (b) no Person is entitled to any third party beneficiary
rights or other similar rights on account of or under this section 1 other
than the holders of the Superior Indebtedness. The failure to make any
payment due in respect of the Subordinated Indebtedness or to comply with
any of the terms and conditions of any of the agreements, documents and
instruments related to the Subordinated Indebtedness by reason of any
provision of this section 1 shall not be construed as preventing the
occurrence of any Default or Event of Default with respect to the
Subordinated Indebtedness.
1.10. Holders of Subordinated Indebtedness Entitled to Assume
Payments Not Prohibited in Absence of Notice. No holder of Subordinated
Indebtedness shall at any time be charged with knowledge of the existence
of any facts which would prohibit the making of any payment to it, unless
and until such holder shall have received written notice thereof (given as
provided in the Securities Purchase Agreements) from the Operating Company
or from any holder of Superior Indebtedness or any agent or representative
thereof. Prior to the receipt of any such notice, each holder of
Subordinated Indebtedness shall be entitled to assume conclusively that no
such facts exist, without, however, limiting any right of any holder of
Superior Indebtedness under this section 1 to recover from any holder of
the Subordinated Indebtedness any payment made in contravention of this
section 1. Each payment on the Subordinated Indebtedness by the Operating
Company shall be deemed to constitute a representation of the Operating
Company that such payment is permitted to be paid by the Operating Company
under this section 1.
Each holder of Subordinated Indebtedness shall be entitled to rely on
the delivery to it of a written notice by a Person representing himself to
be a holder of Superior Indebtedness or to be the agent or representative
of any holder of Superior Indebtedness to establish that such notice has
been given by any such Person. In the event that such holder of
Subordinated Indebtedness determines in good faith that further evidence
is required with respect to the right of any such Person to participate in
any payment or distribution pursuant to this section 1, such holder of
Subordinated Indebtedness may request such Person to furnish evidence to
the reasonable satisfaction of such holder of Subordinated Indebtedness as
to any fact pertinent to the rights of such Person under this section 1,
and if such evidence is not furnished, such holder of Subordinated
Indebtedness may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
1.11. Limitation on Right of Action. Notwithstanding anything to
the contrary contained in the Operative Documents, the holders of the
Subordinated Indebtedness agree that, if any Superior Indebtedness is
outstanding, the holders of the Subordinated Indebtedness will not take
any enforcement action with respect to the Subordinated Indebtedness
(including the acceleration of the Subordinated Indebtedness), unless and
until the first to occur of:
(a) the holder or holders of any Superior Indebtedness shall
have accelerated the Superior Indebtedness or shall have taken any
other formal enforcement action with respect thereto;
(b) a proceeding under the Bankruptcy Code or any similar state
statute or law (including any law providing for the appointment of a
receiver or other similar official) shall have been commenced by or
against the Operating Company or any of its Subsidiaries by Persons
other than the holders of the Subordinated Indebtedness; or
(c) any Event of Default under the Operative Documents shall
have occurred and shall have continued for a period of 180 days.
1.12. Additional Prohibitions on Certain Principal Payments Due
on the Notes. The holders of the Superior Indebtedness may prohibit the
Operating Company from making any or all of the scheduled prepayments of
the principal of (but not interest on) the Senior Subordinated Notes which
are due pursuant to section 9.1 of the Securities Purchase Agreements on
September 13, 2002, March 13, 2003 and September 13, 2003 (the "Specified
Prepayments"), if at the time of such prepayment, or immediately after
giving effect thereto, any Payment Default or Covenant Default shall
exist. To impose such prohibition with respect to any Specified
Prepayment, the holders of the Superior Indebtedness (or their
representative or representatives) must give written notice to such effect
to the Operating Company and the holder or holders of Subordinated
Indebtedness not later than the scheduled date upon which such Specified
Prepayment is to be made under section 9.1 of the Securities Purchase
Agreements. Each Specified Prepayment which is blocked pursuant to this
section 1.12 shall be paid by the Operating Company not later than March
13, 2004 (unless such payment is then prohibited under the other terms of
this section 1). So long as any Specified Prepayment is blocked pursuant
to this section 1.12, the Senior Subordinated Notes shall bear interest at
14% per annum.
1.13. Limitation on Actions by Holders of Superior Indebtedness.
Notwithstanding anything to the contrary contained herein, so long as the
Seller Note is outstanding, the holders of the Superior Indebtedness shall
not be entitled to enforce the terms of this section 1 or to enforce the
subordination of the Subordinated Indebtedness unless the holders of the
Superior Indebtedness are concurrently enforcing the subordination of the
Seller Note.
2. General.
2.1. Registered Notes, etc. This Note is in registered form and is
transferable only by surrender hereof at the principal executive office of
the Operating Company as provided in the Securities Purchase Agreements.
The Operating Company may treat the Person in whose name this Note is
registered on the Note register maintained at such office pursuant to the
Securities Purchase Agreements as the owner hereof for all purposes, and
the Operating Company shall not be affected by any notice to the contrary.
2.2. Events of Default. In case an Event of Default shall occur and
be continuing, the unpaid balance of the principal of this Note may be
declared and become due and payable in the manner and with the effect
provided in the Securities Purchase Agreements.
2.3. Certain Waivers. The parties hereto, including the maker and
all guarantors and endorsers of this Note, hereby waive presentment,
demand, notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance or enforcement of this Note.
2.4. Governing Law. This Note shall be construed in accordance with
and governed by the domestic substantive laws of The Commonwealth of
Massachusetts without giving effect to any choice of law or conflicts of
law provision or rule that would cause the application of domestic
substantive laws of any other jurisdiction.
[The remainder of this page is left blank intentionally.]
IN WITNESS WHEREOF, the Operating Company has executed this Note as
an instrument under seal as of the date first above written.
NEWCO, INC.
By: /s/ Richard E. Ruegger
Vice President - Finance
<PAGE>
FORM OF ASSIGNMENT
[To be signed only upon transfer of Note]
For value received, the undersigned hereby sells, assigns and
transfers unto __________________________________________________ the
within Note, and appoints _______________________ Attorney to transfer
such Note on the books of NEWCO, INC. with full power of substitution in
the premises.
Date: _______________, ____.
........................................................................
(Signature must conform in all respects to name of holder as specified on
the face of the Note)
Signed in the presence of
....................................................
CONFORMED COPY
NEWCO, INC.
12% Senior Subordinated Note
due March 13, 2005
No. R-2
$1,931,000 March 13, 1997
NEWCO, INC., a Wisconsin corporation (the "Operating Company"), for
value received, hereby promises to pay to MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY, or registered assigns, the principal amount of ONE
MILLION NINE HUNDRED THIRTY-ONE THOUSAND DOLLARS ($1,931,000) on March 13,
2005, with interest (computed on the basis of a 360-day year of twelve 30-
day months) on the unpaid balance of such principal amount at the rate of
12% per annum from the date hereof, payable semi-annually on the 13th day
of March and September of each year after the date hereof, commencing on
September 13, 1997, until the principal hereof shall have become due and
payable (whether at maturity or at a date fixed for prepayment or by
declaration or otherwise), and with interest on any overdue principal
(including any overdue prepayment of principal) and (to the extent
permitted by applicable law) premium, if any, and (to the extent permitted
by applicable law) on any overdue installment of interest, at the Default
Rate (as defined below) until paid, payable semi- annually as aforesaid
or, at the option of the holder hereof, on demand and, upon acceleration
of this Note, together with the premium specified in the Securities
Purchase Agreements hereinafter referred to, as liquidated damages and not
as a penalty; provided that in no event shall the amount payable by the
Operating Company as interest and premium on this Note exceed the highest
lawful rate permissible under any law applicable hereto. Payments of
principal, premium, if any, and interest hereon shall be made in lawful
money of the United States of America by the method and at the address for
such purpose specified in the Securities Purchase Agreements hereinafter
referred to, and such payments shall be overdue for purposes hereof if not
made on the scheduled date of payment therefor, without giving effect to
any applicable grace period and notwithstanding that such payment may be
prohibited under the terms of subordination applicable hereto set forth
below. As used herein, the "Default Rate" applicable to any overdue
amount shall mean the higher of (a) 14% per annum and (b) the sum of (i)
the per annum rate of interest reported by The Wall Street Journal as the
"prime" rate on the Business Day immediately preceding the scheduled date
of payment for such amount plus (ii) 200 basis points.
This Note is one of the Operating Company's 12% Senior Subordinated
Notes due March 13, 2005, limited to $12,500,000 aggregate principal
amount, issued pursuant to those certain Securities Purchase Agreements
dated March 13, 1997 (such agreements, as amended, modified and
supplemented from time to time, the "Securities Purchase Agreements")
among Swing-N-Slide Corp., the Operating Company and the institutional
investors named therein and their respective successors and assigns. The
holder hereof is entitled to the benefits of the Securities Purchase
Agreements and the other Operative Documents referred to in the Securities
Purchase Agreements, including, without limitation, the Note Guarantees,
and may enforce the agreements contained herein and therein and exercise
the remedies provided for hereby and thereby or otherwise available in
respect hereof and thereof, all in accordance with the terms hereof and
thereof. This Note is subject to prepayment as specified in the
Securities Purchase Agreements. Capitalized terms used herein without
definition have the meanings ascribed to them in the Securities Purchase
Agreements.
1. Subordination of Senior Subordinated Notes. Payments on this Note,
and the rights of the holder hereof and of all guarantees with respect
hereto, are subordinate, to the extent specified in this section 1, to
Superior Indebtedness (as defined below).
1.1. Certain Definitions. As used in this section 1, the
following terms have the following respective meanings:
"Bankruptcy Code" shall mean 11 U.S.C. Section 101 et seq., as
from time to time hereafter amended, and any successor or similar statute.
"Blockage Period" shall have the meaning specified in section
1.4.
"Covenant Default" shall have the meaning specified in section
1.4.
"Liquidation Payment" shall have the meaning specified in section
1.3.
"Operative Documents" shall mean the Securities Purchase
Agreements, together with all agreements, documents and instruments
executed in connection therewith.
"Payment Default" shall have the meaning specified in section
1.4.
"Permissible Securities" shall mean (a) any debt securities the
payment of which is subordinated, at least to the extent provided in this
section 1 with respect to the Subordinated Indebtedness, to the payment of
all Superior Indebtedness at the time outstanding and all securities
issued in exchange therefor and (b) any Shares of the Operating Company.
"Senior Subordinated Notes" shall mean the Operating Company's
12% Senior Subordinated Notes due March 13, 2005 (together with any notes
issued in exchange therefor or replacement thereof).
"Subordinated Indebtedness" shall mean the principal amount of
the Indebtedness evidenced by the Senior Subordinated Notes, together with
any interest (including any interest accruing after the commencement of
any action or proceeding under any bankruptcy, insolvency or other similar
law, and any interest that would have accrued but for the commencement of
any such proceeding, whether or not any such interest is allowed as an
enforceable claim in such proceeding) and premium, if any, and any other
amount (including any fee, expense or indemnification payment) due thereon
or payable with respect thereto.
"Subordination Notice" shall have the meaning specified in
section 1.4.
"Superior Indebtedness" shall mean the principal amount of,
interest (including any interest accruing after the commencement of any
action or proceeding under any bankruptcy, insolvency or other similar
law, and any interest that would have accrued but for the commencement of
any such proceeding, whether or not any such interest is allowed as an
enforceable claim in such proceeding) and premium (if any) or other amount
(including any fee, expense or indemnification payment) due in respect of
the Funded Debt and/or Current Debt and letters of credit and interest
rate protection agreements under the Fleet Bank Agreement (or any
extensions, renewals, refinancings or refundings thereof or of any
Refinancing Debt thereof permitted under section 14.5(a)(viii) of the
Securities Purchase Agreements) and all guarantees with respect thereto,
provided that the aggregate outstanding principal amount thereof,
including, without limitation, all amounts due (contingently or otherwise)
in respect of reimbursement obligations under letters of credit, interest
rate protection agreements or similar instruments (and all related
reimbursement agreements), that shall constitute Superior Indebtedness,
shall not exceed the greater of (a) $75,000,000, minus the aggregate
amount of all principal payments made thereon from time to time (other
than any principal payment made under the revolving credit facility
established thereunder which may be reborrowed under such facility), or
(b) four times Consolidated EBITDA for the most recently completed four
consecutive fiscal quarters of the Operating Company; provided, further,
that in no event shall Superior Indebtedness include any amount due in
respect of (A) the Senior Subordinated Notes, (B) any Indebtedness which
is expressly made equal or subordinate in right of payment to the Senior
Subordinated Notes or (C) any Indebtedness for goods, materials or
services purchased in the ordinary course of business.
1.2. Subordinated Indebtedness Subordinated to Superior
Indebtedness; No Amendments.
(a) The Operating Company for itself and its successors and
assigns, covenants and agrees, and each holder of any Subordinated
Indebtedness, by its acceptance thereof, shall be deemed to have agreed,
notwithstanding anything to the contrary in the Operative Documents, that
the payment of the Subordinated Indebtedness shall be subordinated to the
extent and in the manner set forth in this section 1, to the prior payment
in full in cash or cash equivalents of all Superior Indebtedness, and that
each holder of Superior Indebtedness, whether now outstanding or hereafter
created, incurred, assumed or guaranteed, shall be deemed to have acquired
Superior Indebtedness in reliance upon the provisions contained in this
section 1. No present or future holder of Superior Indebtedness shall be
prejudiced in the right to enforce the subordination of the Subordinated
Indebtedness effected pursuant to this section 1 by any act or failure to
act on the part of the Operating Company.
(b) Neither this section 1 nor any of the terms of the
Subordinated Indebtedness relating to the timing or amount of any payment
(or prepayment) due thereon, shall be amended without the written consent
of the holder or holders of not less than 66-2/3% in aggregate principal
amount of the Superior Indebtedness at the time outstanding.
(c) Unless and until the Superior Indebtedness has been paid in
full in cash or cash equivalents, the Operating Company shall not grant to
the holders of the Subordinated Indebtedness any Lien in or on any of the
assets of the Operating Company to secure the Subordinated Indebtedness
without the written consent of the holder or holders of not less than 66-
2/3% in aggregate principal amount of the Superior Indebtedness at the
time outstanding.
1.3. Dissolution, Liquidation, Reorganization, etc. Upon
any payment or distribution of the assets of the Operating Company of any
kind or character, whether in cash, property or securities, to creditors
upon any dissolution, winding-up, total or partial liquidation,
reorganization, composition, arrangement, adjustment or readjustment of
the Operating Company or its securities, whether voluntary or involuntary,
or in bankruptcy, insolvency, reorganization, liquidation or receivership
proceedings, or upon a general assignment for the benefit of creditors, or
any other marshalling of the assets and liabilities of the Operating
Company, or otherwise (hereinafter a "Liquidation Payment"), then and in
any such event:
(a) the holders of the Superior Indebtedness shall be entitled
to receive payment in full in cash or cash equivalents (or to have such
payment duly provided for in cash or cash equivalents in a manner
reasonably satisfactory to the holders of Superior Indebtedness) of all
amounts due or to become due on or in respect of all Superior
Indebtedness, before any Liquidation Payment, whether in cash, property or
securities (other than Permissible Securities), is made on account of or
applied to the Subordinated Indebtedness;
(b) the Subordinated Indebtedness shall forthwith become due and
payable, and any Liquidation Payment, whether in cash, property or
securities (other than Permissible Securities), to which the holders of
the Subordinated Indebtedness would be entitled except for the provisions
of this section 1, shall be paid or delivered by any debtor, custodian,
liquidating trustee, agent or other Person making such Liquidation
Payment, directly to the holders of the Superior Indebtedness, or their
agent, representative or representatives, ratably according to the
aggregate amounts remaining unpaid on account of the Superior
Indebtedness, for application to the payment thereof, to the extent
necessary to pay all such Superior Indebtedness in full in cash or cash
equivalents after giving effect to any concurrent payment or distribution,
or provision therefor, to the holders of such Superior Indebtedness;
(c) each holder of the Subordinated Indebtedness at the time
outstanding hereby irrevocably authorizes and empowers each holder of the
Superior Indebtedness or such holder's agent or representative to collect
and receive such holder's ratable share of any Liquidation Payment and to
receipt therefor, and, if any holder of Subordinated Indebtedness fails to
file a claim therefor at least ten (10) calendar days prior to the date
established by rule of law or order of court for such filing, to file and
prove (but not to vote) such claim therefor; and
(d) the holders of the Subordinated Indebtedness shall execute
and deliver to the holders of the Superior Indebtedness or their agent,
representative or representatives all such further instruments confirming
the above authorization and all such powers of attorney, proofs of claim,
assignments of claim and other instruments, and shall take all such other
action, as may be reasonably requested by the holders of the Superior
Indebtedness or such representative or representatives, to enforce such
claims and to carry out the purposes of this section 1.
Upon any payment or distribution of assets referred to in this
section 1, the holders of the Subordinated Indebtedness shall be entitled
to rely upon any order or decree made by any court of competent
jurisdiction in which such bankruptcy, insolvency, reorganization,
liquidation, receivership or other proceeding is pending, or a certificate
of the custodian, liquidating trustee, agent or other Person making any
such payment or distribution to such holders, for the purpose of
ascertaining the Persons entitled to participate therein, the holders of
the Superior Indebtedness, the then outstanding principal amount of the
Superior Indebtedness and any and all amounts payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent
thereto or to this section 1.
1.4. No Payments With Respect to Subordinated Indebtedness
in Certain Circumstances.
(a) The Operating Company will not, directly or indirectly, make
or agree to make, and neither the holder nor any assignee or successor
holder of any Subordinated Indebtedness will accept or receive any payment
or distribution (in cash, property or securities (other than Permissible
Securities) by set-off or otherwise), direct or indirect, of or on account
of the Subordinated Indebtedness if, at the time of such payment or
distribution or immediately after giving effect thereto:
(i) a default in the payment when due (whether at maturity
or at a date fixed for prepayment or by declaration or
otherwise) of all or any portion of the principal of or premium,
if any, or interest on or other amount due in respect of any
Superior Indebtedness shall have occurred (a "Payment Default")
and such Payment Default shall not have been cured by the
Operating Company or waived by the requisite holder or holders
of the Superior Indebtedness with respect to which such Payment
Default shall have occurred; or
(ii) all of the following conditions specified in this
section 1.4(a)(ii) shall be satisfied:
(A) a default other than a Payment Default shall have
occurred with respect to any Superior Indebtedness which
permits the holder or holders thereof at that time to
immediately accelerate the maturity thereof (a "Covenant
Default");
(B) the Operating Company and the holder or holders
of Subordinated Indebtedness shall have received written
notice (each a "Subordination Notice") of such Covenant
Default from the requisite holder or holders of the
Superior Indebtedness, or their representative or
representatives (which notice shall state that it is a
"Subordination Notice" and shall make explicit reference to
the provisions of this section 1.4(a)(ii));
(C) such Covenant Default shall not have been cured
by the Operating Company or waived in writing by the
requisite holder or holders of the Superior Indebtedness
with respect to which such Covenant Default shall have
occurred; and
(D) less than 180 days shall have elapsed after the
date of receipt by the Operating Company and the holders of
the Subordinated Indebtedness of such Subordination Notice
(any period during which the restrictions imposed by this
section 1.4(a)(ii) are in effect being hereinafter referred
to as a "Blockage Period");
provided, however, that, for the purpose of this section
1.4(a)(ii), (x) only one Blockage Period may be commenced during
any period of 360 consecutive days, (y) not more than four
Blockage Periods may be commenced, and (z) no facts or
circumstances known to the holders of Superior Indebtedness
giving any Subordination Notice on the date any Subordination
Notice is given may be used or shall be effective as a basis for
any subsequent Subordination Notice.
(b) The restrictions imposed by section 1.4(a) shall cease to
apply and the Operating Company shall resume payments in respect of
the Subordinated Indebtedness (including any payments which shall not
have been made on account of the provisions of this section 1, but
excluding any payments which may have become due solely on account of
any acceleration of the maturity of the Subordinated Indebtedness or
any judgment with respect thereto) upon the earliest to occur of
(i) the cure of the Payment Default or Covenant Default by the
Operating Company, (ii) the written waiver thereof by the requisite
holder or holders of the Superior Indebtedness with respect to which
such Payment Default or Covenant Default shall have occurred,
(iii) the expiration of the applicable Blockage Period or (iv) the
termination of such Blockage Period by such requisite holder or
holders of such Superior Indebtedness.
(c) In the event of an acceleration of the maturity of the
principal of any Superior Indebtedness in accordance with the terms
thereof (which acceleration has not been rescinded or annulled), such
Superior Indebtedness shall first be paid in full in cash or cash
equivalents (or provision for such payment in cash or cash
equivalents shall be made in a manner reasonably satisfactory to the
holder or holders of such Superior Indebtedness) before any payment
or distribution (in cash, properties or securities (other than
Permissible Securities), by set-off or otherwise) is made on account
of or applied on the Subordinated Indebtedness.
(d) Nothing herein shall affect or impair the right of any
holder of any Senior Subordinated Notes to apply any amount payable
in respect thereof to the payment of any amount due upon the exercise
of any Warrants at any time.
1.5. Payments and Distributions Received. If any payment or
distribution of any kind or character, whether in cash, property or
securities (other than Permissible Securities), shall be received by any
holder of any of the Subordinated Indebtedness in contravention of this
section 1, such payment or distribution shall be held in trust for the
benefit of, and shall, upon demand by the requisite holder or holders of
the Superior Indebtedness, be paid over or delivered and transferred to,
the holders of the Superior Indebtedness, or their representative or
representatives, ratably according to the aggregate amount remaining
unpaid on account of such Superior Indebtedness, for application to the
payment thereof, to the extent necessary to pay all such Superior
Indebtedness in full in cash or cash equivalents, after giving effect to
any concurrent payment or distribution, or provision therefor, to the
holders of such Superior Indebtedness; provided that such demand by the
holders of Superior Indebtedness shall be made no later than 90 days
following receipt of the applicable payment or distribution by such holder
of Subordinated Indebtedness. In the event of the failure of any holder
of any of the Subordinated Indebtedness to endorse or assign any such
payment or distribution, any holder of the Superior Indebtedness or such
holder's representative is hereby irrevocably authorized to endorse or
assign the same.
1.6. Subrogation. Subject to the payment in full of all
Superior Indebtedness in cash or cash equivalents, in case cash, property
or securities otherwise payable or deliverable to the holders of the
Subordinated Indebtedness shall have been applied pursuant to this section
1 to the payment of Superior Indebtedness, then and in each such case, the
holders of the Subordinated Indebtedness shall be subrogated to the rights
of each holder of Superior Indebtedness to receive any further payment or
distribution in respect of or applicable to the Superior Indebtedness;
and, for the purposes of such subrogation, no payment or distribution to
the holders of Superior Indebtedness of any cash, property or securities
to which any holder of Subordinated Indebtedness would be entitled except
for the provisions of this section 1 shall, and no payment over pursuant
to the provisions of this section 1 to the holders of Superior
Indebtedness by the holders of the Subordinated Indebtedness shall as
between the Operating Company, its creditors other than the holders of
Superior Indebtedness and the holders of Subordinated Indebtedness, be
deemed to be a payment by the Operating Company to or on account of
Superior Indebtedness.
1.7. Notice. In the event that (a) any Superior Indebtedness or
Subordinated Indebtedness shall be transferred and/or shall become due and
payable before the expressed maturity thereof as the result of the
occurrence of a default or any event of default or (b) any term or
provision of any agreement, document or instrument related to the Superior
Indebtedness or Subordinated Indebtedness shall be amended, modified or
supplemented, or compliance therewith waived, the Operating Company will
give immediate written notice in writing of such event to each holder of
Subordinated Indebtedness and Superior Indebtedness (together with copies
of all related agreements, documents and instruments). Each notice of any
transfer of any Superior Indebtedness or Subordinated Indebtedness shall
include the name and address of the applicable transferee for purposes of
this section 1. The holder or holders of Superior Indebtedness shall be
obligated to give a Subordination Notice (as defined in section 1.4) to a
holder of Subordinated Indebtedness other than the initial holders thereof
only if the holder or holders of Superior Indebtedness shall have been
furnished written notice of such other holder's address for purposes of
this section 1.
1.8. Subordination Not Affected, etc. The terms of this section
1, the subordination effected hereby and the rights created hereby of the
holders of the Superior Indebtedness shall not be affected by (a) any
amendment or modification of or supplement to any Superior Indebtedness
(or any renewal, extension, refinancing or refunding thereof) or any
agreement, document or instrument relating thereto to the extent permitted
by section 14.16(d) of the Securities Purchase Agreements, (b) any
exercise or non-exercise of any right, power or remedy under or in respect
of any Superior Indebtedness (or any security or collateral therefor) or
pursuant to any agreement, document or instrument relating thereto or
(c) any waiver, consent, release, indulgence, delay or other action,
inaction or omission, in respect of any Superior Indebtedness (or any
security or collateral therefor) or pursuant to any agreement, document or
instrument relating thereto, whether or not any holder of any Subordinated
Indebtedness shall have had notice or knowledge of any of the foregoing.
1.9. Obligations Unimpaired. The provisions of this section 1
are solely for the purpose of defining the relative rights of the holders
of Superior Indebtedness on the one hand and the holders of Subordinated
Indebtedness on the other hand, and (a) subject to the rights, if any,
under this section 1 of the holders of Superior Indebtedness, nothing in
this section 1 shall (i) impair as between the Operating Company and the
holder of any Subordinated Indebtedness the obligation of the Operating
Company, which is unconditional and absolute, to pay to the holder thereof
all amounts due thereon in accordance with the terms thereof or (ii)
except as otherwise provided in section 1.11, prevent the holder of any
Subordinated Indebtedness from exercising all remedies available to such
holder, whether arising under the Operative Documents, applicable law or
otherwise, and (b) no Person is entitled to any third party beneficiary
rights or other similar rights on account of or under this section 1 other
than the holders of the Superior Indebtedness. The failure to make any
payment due in respect of the Subordinated Indebtedness or to comply with
any of the terms and conditions of any of the agreements, documents and
instruments related to the Subordinated Indebtedness by reason of any
provision of this section 1 shall not be construed as preventing the
occurrence of any Default or Event of Default with respect to the
Subordinated Indebtedness.
1.10. Holders of Subordinated Indebtedness Entitled to Assume
Payments Not Prohibited in Absence of Notice. No holder of Subordinated
Indebtedness shall at any time be charged with knowledge of the existence
of any facts which would prohibit the making of any payment to it, unless
and until such holder shall have received written notice thereof (given as
provided in the Securities Purchase Agreements) from the Operating Company
or from any holder of Superior Indebtedness or any agent or representative
thereof. Prior to the receipt of any such notice, each holder of
Subordinated Indebtedness shall be entitled to assume conclusively that no
such facts exist, without, however, limiting any right of any holder of
Superior Indebtedness under this section 1 to recover from any holder of
the Subordinated Indebtedness any payment made in contravention of this
section 1. Each payment on the Subordinated Indebtedness by the Operating
Company shall be deemed to constitute a representation of the Operating
Company that such payment is permitted to be paid by the Operating Company
under this section 1.
Each holder of Subordinated Indebtedness shall be entitled to rely on
the delivery to it of a written notice by a Person representing himself to
be a holder of Superior Indebtedness or to be the agent or representative
of any holder of Superior Indebtedness to establish that such notice has
been given by any such Person. In the event that such holder of
Subordinated Indebtedness determines in good faith that further evidence
is required with respect to the right of any such Person to participate in
any payment or distribution pursuant to this section 1, such holder of
Subordinated Indebtedness may request such Person to furnish evidence to
the reasonable satisfaction of such holder of Subordinated Indebtedness as
to any fact pertinent to the rights of such Person under this section 1,
and if such evidence is not furnished, such holder of Subordinated
Indebtedness may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
1.11. Limitation on Right of Action. Notwithstanding anything to
the contrary contained in the Operative Documents, the holders of the
Subordinated Indebtedness agree that, if any Superior Indebtedness is
outstanding, the holders of the Subordinated Indebtedness will not take
any enforcement action with respect to the Subordinated Indebtedness
(including the acceleration of the Subordinated Indebtedness), unless and
until the first to occur of:
(a) the holder or holders of any Superior Indebtedness shall
have accelerated the Superior Indebtedness or shall have taken any
other formal enforcement action with respect thereto;
(b) a proceeding under the Bankruptcy Code or any similar state
statute or law (including any law providing for the appointment of a
receiver or other similar official) shall have been commenced by or
against the Operating Company or any of its Subsidiaries by Persons
other than the holders of the Subordinated Indebtedness; or
(c) any Event of Default under the Operative Documents shall
have occurred and shall have continued for a period of 180 days.
1.12. Additional Prohibitions on Certain Principal Payments Due
on the Notes. The holders of the Superior Indebtedness may prohibit the
Operating Company from making any or all of the scheduled prepayments of
the principal of (but not interest on) the Senior Subordinated Notes which
are due pursuant to section 9.1 of the Securities Purchase Agreements on
September 13, 2002, March 13, 2003 and September 13, 2003 (the "Specified
Prepayments"), if at the time of such prepayment, or immediately after
giving effect thereto, any Payment Default or Covenant Default shall
exist. To impose such prohibition with respect to any Specified
Prepayment, the holders of the Superior Indebtedness (or their
representative or representatives) must give written notice to such effect
to the Operating Company and the holder or holders of Subordinated
Indebtedness not later than the scheduled date upon which such Specified
Prepayment is to be made under section 9.1 of the Securities Purchase
Agreements. Each Specified Prepayment which is blocked pursuant to this
section 1.12 shall be paid by the Operating Company not later than March
13, 2004 (unless such payment is then prohibited under the other terms of
this section 1). So long as any Specified Prepayment is blocked pursuant
to this section 1.12, the Senior Subordinated Notes shall bear interest at
14% per annum.
1.13. Limitation on Actions by Holders of Superior Indebtedness.
Notwithstanding anything to the contrary contained herein, so long as the
Seller Note is outstanding, the holders of the Superior Indebtedness shall
not be entitled to enforce the terms of this section 1 or to enforce the
subordination of the Subordinated Indebtedness unless the holders of the
Superior Indebtedness are concurrently enforcing the subordination of the
Seller Note.
2. General.
2.1. Registered Notes, etc. This Note is in registered form and is
transferable only by surrender hereof at the principal executive office of
the Operating Company as provided in the Securities Purchase Agreements.
The Operating Company may treat the Person in whose name this Note is
registered on the Note register maintained at such office pursuant to the
Securities Purchase Agreements as the owner hereof for all purposes, and
the Operating Company shall not be affected by any notice to the contrary.
2.2. Events of Default. In case an Event of Default shall occur and
be continuing, the unpaid balance of the principal of this Note may be
declared and become due and payable in the manner and with the effect
provided in the Securities Purchase Agreements.
2.3. Certain Waivers. The parties hereto, including the maker and
all guarantors and endorsers of this Note, hereby waive presentment,
demand, notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance or enforcement of this Note.
2.4. Governing Law. This Note shall be construed in accordance with
and governed by the domestic substantive laws of The Commonwealth of
Massachusetts without giving effect to any choice of law or conflicts of
law provision or rule that would cause the application of domestic
substantive laws of any other jurisdiction.
[The remainder of this page is left blank intentionally.]
IN WITNESS WHEREOF, the Operating Company has executed this Note as
an instrument under seal as of the date first above written.
NEWCO, INC.
By: /s/ Richard E. Ruegger
Vice President - Finance
<PAGE>
FORM OF ASSIGNMENT
[To be signed only upon transfer of Note]
For value received, the undersigned hereby sells, assigns and
transfers unto __________________________________________________ the
within Note, and appoints ________________________ Attorney to transfer
such Note on the books of NEWCO, INC. with full power of substitution in
the premises.
Date: ________________, ___.
.......................................................................
(Signature must conform in all respects to name of holder as specified on
the face of the Note)
Signed in the presence of
............................................
CONFORMED COPY
NEWCO, INC.
12% Senior Subordinated Note
due March 13, 2005
No. R-3
$3,125,000 March 13, 1997
NEWCO, INC., a Wisconsin corporation (the "Operating Company"), for
value received, hereby promises to pay to MASSMUTUAL CORPORATE INVESTORS,
or registered assigns, the principal amount of THREE MILLION ONE HUNDRED
TWENTY-FIVE THOUSAND DOLLARS ($3,125,000) on March 13, 2005, with interest
(computed on the basis of a 360-day year of twelve 30-day months) on the
unpaid balance of such principal amount at the rate of 12% per annum from
the date hereof, payable semi-annually on the 13th day of March and
September of each year after the date hereof, commencing on September 13,
1997, until the principal hereof shall have become due and payable
(whether at maturity or at a date fixed for prepayment or by declaration
or otherwise), and with interest on any overdue principal (including any
overdue prepayment of principal) and (to the extent permitted by
applicable law) premium, if any, and (to the extent permitted by
applicable law) on any overdue installment of interest, at the Default
Rate (as defined below) until paid, payable semi- annually as aforesaid
or, at the option of the holder hereof, on demand and, upon acceleration
of this Note, together with the premium specified in the Securities
Purchase Agreements hereinafter referred to, as liquidated damages and not
as a penalty; provided that in no event shall the amount payable by the
Operating Company as interest and premium on this Note exceed the highest
lawful rate permissible under any law applicable hereto. Payments of
principal, premium, if any, and interest hereon shall be made in lawful
money of the United States of America by the method and at the address for
such purpose specified in the Securities Purchase Agreements hereinafter
referred to, and such payments shall be overdue for purposes hereof if not
made on the scheduled date of payment therefor, without giving effect to
any applicable grace period and notwithstanding that such payment may be
prohibited under the terms of subordination applicable hereto set forth
below. As used herein, the "Default Rate" applicable to any overdue
amount shall mean the higher of (a) 14% per annum and (b) the sum of (i)
the per annum rate of interest reported by The Wall Street Journal as the
"prime" rate on the Business Day immediately preceding the scheduled date
of payment for such amount plus (ii) 200 basis points.
This Note is one of the Operating Company's 12% Senior Subordinated
Notes due March 13, 2005, limited to $12,500,000 aggregate principal
amount, issued pursuant to those certain Securities Purchase Agreements
dated March 13, 1997 (such agreements, as amended, modified and
supplemented from time to time, the "Securities Purchase Agreements")
among Swing-N-Slide Corp., the Operating Company and the institutional
investors named therein and their respective successors and assigns. The
holder hereof is entitled to the benefits of the Securities Purchase
Agreements and the other Operative Documents referred to in the Securities
Purchase Agreements, including, without limitation, the Note Guarantees,
and may enforce the agreements contained herein and therein and exercise
the remedies provided for hereby and thereby or otherwise available in
respect hereof and thereof, all in accordance with the terms hereof and
thereof. This Note is subject to prepayment as specified in the
Securities Purchase Agreements. Capitalized terms used herein without
definition have the meanings ascribed to them in the Securities Purchase
Agreements.
1. Subordination of Senior Subordinated Notes. Payments on this Note,
and the rights of the holder hereof and of all guarantees with respect
hereto, are subordinate, to the extent specified in this section 1, to
Superior Indebtedness (as defined below).
1.1. Certain Definitions. As used in this section 1, the
following terms have the following respective meanings:
"Bankruptcy Code" shall mean 11 U.S.C. Section 101 et seq., as
from time to time hereafter amended, and any successor or similar statute.
"Blockage Period" shall have the meaning specified in section
1.4.
"Covenant Default" shall have the meaning specified in section
1.4.
"Liquidation Payment" shall have the meaning specified in section
1.3.
"Operative Documents" shall mean the Securities Purchase
Agreements, together with all agreements, documents and instruments
executed in connection therewith.
"Payment Default" shall have the meaning specified in section
1.4.
"Permissible Securities" shall mean (a) any debt securities the
payment of which is subordinated, at least to the extent provided in this
section 1 with respect to the Subordinated Indebtedness, to the payment of
all Superior Indebtedness at the time outstanding and all securities
issued in exchange therefor and (b) any Shares of the Operating Company.
"Senior Subordinated Notes" shall mean the Operating Company's
12% Senior Subordinated Notes due March 13, 2005 (together with any notes
issued in exchange therefor or replacement thereof).
"Subordinated Indebtedness" shall mean the principal amount of
the Indebtedness evidenced by the Senior Subordinated Notes, together with
any interest (including any interest accruing after the commencement of
any action or proceeding under any bankruptcy, insolvency or other similar
law, and any interest that would have accrued but for the commencement of
any such proceeding, whether or not any such interest is allowed as an
enforceable claim in such proceeding) and premium, if any, and any other
amount (including any fee, expense or indemnification payment) due thereon
or payable with respect thereto.
"Subordination Notice" shall have the meaning specified in
section 1.4.
"Superior Indebtedness" shall mean the principal amount of,
interest (including any interest accruing after the commencement of any
action or proceeding under any bankruptcy, insolvency or other similar
law, and any interest that would have accrued but for the commencement of
any such proceeding, whether or not any such interest is allowed as an
enforceable claim in such proceeding) and premium (if any) or other amount
(including any fee, expense or indemnification payment) due in respect of
the Funded Debt and/or Current Debt and letters of credit and interest
rate protection agreements under the Fleet Bank Agreement (or any
extensions, renewals, refinancings or refundings thereof or of any
Refinancing Debt thereof permitted under section 14.5(a)(viii) of the
Securities Purchase Agreements) and all guarantees with respect thereto,
provided that the aggregate outstanding principal amount thereof,
including, without limitation, all amounts due (contingently or otherwise)
in respect of reimbursement obligations under letters of credit, interest
rate protection agreements or similar instruments (and all related
reimbursement agreements), that shall constitute Superior Indebtedness,
shall not exceed the greater of (a) $75,000,000, minus the aggregate
amount of all principal payments made thereon from time to time (other
than any principal payment made under the revolving credit facility
established thereunder which may be reborrowed under such facility), or
(b) four times Consolidated EBITDA for the most recently completed four
consecutive fiscal quarters of the Operating Company; provided, further,
that in no event shall Superior Indebtedness include any amount due in
respect of (A) the Senior Subordinated Notes, (B) any Indebtedness which
is expressly made equal or subordinate in right of payment to the Senior
Subordinated Notes or (C) any Indebtedness for goods, materials or
services purchased in the ordinary course of business.
1.2. Subordinated Indebtedness Subordinated to Superior
Indebtedness; No Amendments.
(a) The Operating Company for itself and its successors and
assigns, covenants and agrees, and each holder of any Subordinated
Indebtedness, by its acceptance thereof, shall be deemed to have agreed,
notwithstanding anything to the contrary in the Operative Documents, that
the payment of the Subordinated Indebtedness shall be subordinated to the
extent and in the manner set forth in this section 1, to the prior payment
in full in cash or cash equivalents of all Superior Indebtedness, and that
each holder of Superior Indebtedness, whether now outstanding or hereafter
created, incurred, assumed or guaranteed, shall be deemed to have acquired
Superior Indebtedness in reliance upon the provisions contained in this
section 1. No present or future holder of Superior Indebtedness shall be
prejudiced in the right to enforce the subordination of the Subordinated
Indebtedness effected pursuant to this section 1 by any act or failure to
act on the part of the Operating Company.
(b) Neither this section 1 nor any of the terms of the
Subordinated Indebtedness relating to the timing or amount of any payment
(or prepayment) due thereon, shall be amended without the written consent
of the holder or holders of not less than 66-2/3% in aggregate principal
amount of the Superior Indebtedness at the time outstanding.
(c) Unless and until the Superior Indebtedness has been paid in
full in cash or cash equivalents, the Operating Company shall not grant to
the holders of the Subordinated Indebtedness any Lien in or on any of the
assets of the Operating Company to secure the Subordinated Indebtedness
without the written consent of the holder or holders of not less than 66-
2/3% in aggregate principal amount of the Superior Indebtedness at the
time outstanding.
1.3. Dissolution, Liquidation, Reorganization, etc. Upon
any payment or distribution of the assets of the Operating Company of any
kind or character, whether in cash, property or securities, to creditors
upon any dissolution, winding-up, total or partial liquidation,
reorganization, composition, arrangement, adjustment or readjustment of
the Operating Company or its securities, whether voluntary or involuntary,
or in bankruptcy, insolvency, reorganization, liquidation or receivership
proceedings, or upon a general assignment for the benefit of creditors, or
any other marshalling of the assets and liabilities of the Operating
Company, or otherwise (hereinafter a "Liquidation Payment"), then and in
any such event:
(a) the holders of the Superior Indebtedness shall be entitled
to receive payment in full in cash or cash equivalents (or to have such
payment duly provided for in cash or cash equivalents in a manner
reasonably satisfactory to the holders of Superior Indebtedness) of all
amounts due or to become due on or in respect of all Superior
Indebtedness, before any Liquidation Payment, whether in cash, property or
securities (other than Permissible Securities), is made on account of or
applied to the Subordinated Indebtedness;
(b) the Subordinated Indebtedness shall forthwith become due and
payable, and any Liquidation Payment, whether in cash, property or
securities (other than Permissible Securities), to which the holders of
the Subordinated Indebtedness would be entitled except for the provisions
of this section 1, shall be paid or delivered by any debtor, custodian,
liquidating trustee, agent or other Person making such Liquidation
Payment, directly to the holders of the Superior Indebtedness, or their
agent, representative or representatives, ratably according to the
aggregate amounts remaining unpaid on account of the Superior
Indebtedness, for application to the payment thereof, to the extent
necessary to pay all such Superior Indebtedness in full in cash or cash
equivalents after giving effect to any concurrent payment or distribution,
or provision therefor, to the holders of such Superior Indebtedness;
(c) each holder of the Subordinated Indebtedness at the time
outstanding hereby irrevocably authorizes and empowers each holder of the
Superior Indebtedness or such holder's agent or representative to collect
and receive such holder's ratable share of any Liquidation Payment and to
receipt therefor, and, if any holder of Subordinated Indebtedness fails to
file a claim therefor at least ten (10) calendar days prior to the date
established by rule of law or order of court for such filing, to file and
prove (but not to vote) such claim therefor; and
(d) the holders of the Subordinated Indebtedness shall execute
and deliver to the holders of the Superior Indebtedness or their agent,
representative or representatives all such further instruments confirming
the above authorization and all such powers of attorney, proofs of claim,
assignments of claim and other instruments, and shall take all such other
action, as may be reasonably requested by the holders of the Superior
Indebtedness or such representative or representatives, to enforce such
claims and to carry out the purposes of this section 1.
Upon any payment or distribution of assets referred to in this
section 1, the holders of the Subordinated Indebtedness shall be entitled
to rely upon any order or decree made by any court of competent
jurisdiction in which such bankruptcy, insolvency, reorganization,
liquidation, receivership or other proceeding is pending, or a certificate
of the custodian, liquidating trustee, agent or other Person making any
such payment or distribution to such holders, for the purpose of
ascertaining the Persons entitled to participate therein, the holders of
the Superior Indebtedness, the then outstanding principal amount of the
Superior Indebtedness and any and all amounts payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent
thereto or to this section 1.
1.4. No Payments With Respect to Subordinated Indebtedness
in Certain Circumstances.
(a) The Operating Company will not, directly or indirectly, make
or agree to make, and neither the holder nor any assignee or successor
holder of any Subordinated Indebtedness will accept or receive any payment
or distribution (in cash, property or securities (other than Permissible
Securities) by set-off or otherwise), direct or indirect, of or on account
of the Subordinated Indebtedness if, at the time of such payment or
distribution or immediately after giving effect thereto:
(i) a default in the payment when due (whether at maturity
or at a date fixed for prepayment or by declaration or
otherwise) of all or any portion of the principal of or premium,
if any, or interest on or other amount due in respect of any
Superior Indebtedness shall have occurred (a "Payment Default")
and such Payment Default shall not have been cured by the
Operating Company or waived by the requisite holder or holders
of the Superior Indebtedness with respect to which such Payment
Default shall have occurred; or
(ii) all of the following conditions specified in this
section 1.4(a)(ii) shall be satisfied:
(A) a default other than a Payment Default shall have
occurred with respect to any Superior Indebtedness which
permits the holder or holders thereof at that time to
immediately accelerate the maturity thereof (a "Covenant
Default");
(B) the Operating Company and the holder or holders
of Subordinated Indebtedness shall have received written
notice (each a "Subordination Notice") of such Covenant
Default from the requisite holder or holders of the
Superior Indebtedness, or their representative or
representatives (which notice shall state that it is a
"Subordination Notice" and shall make explicit reference to
the provisions of this section 1.4(a)(ii));
(C) such Covenant Default shall not have been cured
by the Operating Company or waived in writing by the
requisite holder or holders of the Superior Indebtedness
with respect to which such Covenant Default shall have
occurred; and
(D) less than 180 days shall have elapsed after the
date of receipt by the Operating Company and the holders of
the Subordinated Indebtedness of such Subordination Notice
(any period during which the restrictions imposed by this
section 1.4(a)(ii) are in effect being hereinafter referred
to as a "Blockage Period");
provided, however, that, for the purpose of this section
1.4(a)(ii), (x) only one Blockage Period may be commenced during
any period of 360 consecutive days, (y) not more than four
Blockage Periods may be commenced, and (z) no facts or
circumstances known to the holders of Superior Indebtedness
giving any Subordination Notice on the date any Subordination
Notice is given may be used or shall be effective as a basis for
any subsequent Subordination Notice.
(b) The restrictions imposed by section 1.4(a) shall cease to
apply and the Operating Company shall resume payments in respect of
the Subordinated Indebtedness (including any payments which shall not
have been made on account of the provisions of this section 1, but
excluding any payments which may have become due solely on account of
any acceleration of the maturity of the Subordinated Indebtedness or
any judgment with respect thereto) upon the earliest to occur of
(i) the cure of the Payment Default or Covenant Default by the
Operating Company, (ii) the written waiver thereof by the requisite
holder or holders of the Superior Indebtedness with respect to which
such Payment Default or Covenant Default shall have occurred,
(iii) the expiration of the applicable Blockage Period or (iv) the
termination of such Blockage Period by such requisite holder or
holders of such Superior Indebtedness.
(c) In the event of an acceleration of the maturity of the
principal of any Superior Indebtedness in accordance with the terms
thereof (which acceleration has not been rescinded or annulled), such
Superior Indebtedness shall first be paid in full in cash or cash
equivalents (or provision for such payment in cash or cash
equivalents shall be made in a manner reasonably satisfactory to the
holder or holders of such Superior Indebtedness) before any payment
or distribution (in cash, properties or securities (other than
Permissible Securities), by set-off or otherwise) is made on account
of or applied on the Subordinated Indebtedness.
(d) Nothing herein shall affect or impair the right of any
holder of any Senior Subordinated Notes to apply any amount payable
in respect thereof to the payment of any amount due upon the exercise
of any Warrants at any time.
1.5. Payments and Distributions Received. If any payment or
distribution of any kind or character, whether in cash, property or
securities (other than Permissible Securities), shall be received by any
holder of any of the Subordinated Indebtedness in contravention of this
section 1, such payment or distribution shall be held in trust for the
benefit of, and shall, upon demand by the requisite holder or holders of
the Superior Indebtedness, be paid over or delivered and transferred to,
the holders of the Superior Indebtedness, or their representative or
representatives, ratably according to the aggregate amount remaining
unpaid on account of such Superior Indebtedness, for application to the
payment thereof, to the extent necessary to pay all such Superior
Indebtedness in full in cash or cash equivalents, after giving effect to
any concurrent payment or distribution, or provision therefor, to the
holders of such Superior Indebtedness; provided that such demand by the
holders of Superior Indebtedness shall be made no later than 90 days
following receipt of the applicable payment or distribution by such holder
of Subordinated Indebtedness. In the event of the failure of any holder
of any of the Subordinated Indebtedness to endorse or assign any such
payment or distribution, any holder of the Superior Indebtedness or such
holder's representative is hereby irrevocably authorized to endorse or
assign the same.
1.6. Subrogation. Subject to the payment in full of all
Superior Indebtedness in cash or cash equivalents, in case cash, property
or securities otherwise payable or deliverable to the holders of the
Subordinated Indebtedness shall have been applied pursuant to this section
1 to the payment of Superior Indebtedness, then and in each such case, the
holders of the Subordinated Indebtedness shall be subrogated to the rights
of each holder of Superior Indebtedness to receive any further payment or
distribution in respect of or applicable to the Superior Indebtedness;
and, for the purposes of such subrogation, no payment or distribution to
the holders of Superior Indebtedness of any cash, property or securities
to which any holder of Subordinated Indebtedness would be entitled except
for the provisions of this section 1 shall, and no payment over pursuant
to the provisions of this section 1 to the holders of Superior
Indebtedness by the holders of the Subordinated Indebtedness shall as
between the Operating Company, its creditors other than the holders of
Superior Indebtedness and the holders of Subordinated Indebtedness, be
deemed to be a payment by the Operating Company to or on account of
Superior Indebtedness.
1.7. Notice. In the event that (a) any Superior Indebtedness or
Subordinated Indebtedness shall be transferred and/or shall become due and
payable before the expressed maturity thereof as the result of the
occurrence of a default or any event of default or (b) any term or
provision of any agreement, document or instrument related to the Superior
Indebtedness or Subordinated Indebtedness shall be amended, modified or
supplemented, or compliance therewith waived, the Operating Company will
give immediate written notice in writing of such event to each holder of
Subordinated Indebtedness and Superior Indebtedness (together with copies
of all related agreements, documents and instruments). Each notice of any
transfer of any Superior Indebtedness or Subordinated Indebtedness shall
include the name and address of the applicable transferee for purposes of
this section 1. The holder or holders of Superior Indebtedness shall be
obligated to give a Subordination Notice (as defined in section 1.4) to a
holder of Subordinated Indebtedness other than the initial holders thereof
only if the holder or holders of Superior Indebtedness shall have been
furnished written notice of such other holder's address for purposes of
this section 1.
1.8. Subordination Not Affected, etc. The terms of this section
1, the subordination effected hereby and the rights created hereby of the
holders of the Superior Indebtedness shall not be affected by (a) any
amendment or modification of or supplement to any Superior Indebtedness
(or any renewal, extension, refinancing or refunding thereof) or any
agreement, document or instrument relating thereto to the extent permitted
by section 14.16(d) of the Securities Purchase Agreements, (b) any
exercise or non-exercise of any right, power or remedy under or in respect
of any Superior Indebtedness (or any security or collateral therefor) or
pursuant to any agreement, document or instrument relating thereto or
(c) any waiver, consent, release, indulgence, delay or other action,
inaction or omission, in respect of any Superior Indebtedness (or any
security or collateral therefor) or pursuant to any agreement, document or
instrument relating thereto, whether or not any holder of any Subordinated
Indebtedness shall have had notice or knowledge of any of the foregoing.
1.9. Obligations Unimpaired. The provisions of this section 1
are solely for the purpose of defining the relative rights of the holders
of Superior Indebtedness on the one hand and the holders of Subordinated
Indebtedness on the other hand, and (a) subject to the rights, if any,
under this section 1 of the holders of Superior Indebtedness, nothing in
this section 1 shall (i) impair as between the Operating Company and the
holder of any Subordinated Indebtedness the obligation of the Operating
Company, which is unconditional and absolute, to pay to the holder thereof
all amounts due thereon in accordance with the terms thereof or (ii)
except as otherwise provided in section 1.11, prevent the holder of any
Subordinated Indebtedness from exercising all remedies available to such
holder, whether arising under the Operative Documents, applicable law or
otherwise, and (b) no Person is entitled to any third party beneficiary
rights or other similar rights on account of or under this section 1 other
than the holders of the Superior Indebtedness. The failure to make any
payment due in respect of the Subordinated Indebtedness or to comply with
any of the terms and conditions of any of the agreements, documents and
instruments related to the Subordinated Indebtedness by reason of any
provision of this section 1 shall not be construed as preventing the
occurrence of any Default or Event of Default with respect to the
Subordinated Indebtedness.
1.10. Holders of Subordinated Indebtedness Entitled to Assume
Payments Not Prohibited in Absence of Notice. No holder of Subordinated
Indebtedness shall at any time be charged with knowledge of the existence
of any facts which would prohibit the making of any payment to it, unless
and until such holder shall have received written notice thereof (given as
provided in the Securities Purchase Agreements) from the Operating Company
or from any holder of Superior Indebtedness or any agent or representative
thereof. Prior to the receipt of any such notice, each holder of
Subordinated Indebtedness shall be entitled to assume conclusively that no
such facts exist, without, however, limiting any right of any holder of
Superior Indebtedness under this section 1 to recover from any holder of
the Subordinated Indebtedness any payment made in contravention of this
section 1. Each payment on the Subordinated Indebtedness by the Operating
Company shall be deemed to constitute a representation of the Operating
Company that such payment is permitted to be paid by the Operating Company
under this section 1.
Each holder of Subordinated Indebtedness shall be entitled to rely on
the delivery to it of a written notice by a Person representing himself to
be a holder of Superior Indebtedness or to be the agent or representative
of any holder of Superior Indebtedness to establish that such notice has
been given by any such Person. In the event that such holder of
Subordinated Indebtedness determines in good faith that further evidence
is required with respect to the right of any such Person to participate in
any payment or distribution pursuant to this section 1, such holder of
Subordinated Indebtedness may request such Person to furnish evidence to
the reasonable satisfaction of such holder of Subordinated Indebtedness as
to any fact pertinent to the rights of such Person under this section 1,
and if such evidence is not furnished, such holder of Subordinated
Indebtedness may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
1.11. Limitation on Right of Action. Notwithstanding anything to
the contrary contained in the Operative Documents, the holders of the
Subordinated Indebtedness agree that, if any Superior Indebtedness is
outstanding, the holders of the Subordinated Indebtedness will not take
any enforcement action with respect to the Subordinated Indebtedness
(including the acceleration of the Subordinated Indebtedness), unless and
until the first to occur of:
(a) the holder or holders of any Superior Indebtedness shall
have accelerated the Superior Indebtedness or shall have taken any
other formal enforcement action with respect thereto;
(b) a proceeding under the Bankruptcy Code or any similar state
statute or law (including any law providing for the appointment of a
receiver or other similar official) shall have been commenced by or
against the Operating Company or any of its Subsidiaries by Persons
other than the holders of the Subordinated Indebtedness; or
(c) any Event of Default under the Operative Documents shall
have occurred and shall have continued for a period of 180 days.
1.12. Additional Prohibitions on Certain Principal Payments Due
on the Notes. The holders of the Superior Indebtedness may prohibit the
Operating Company from making any or all of the scheduled prepayments of
the principal of (but not interest on) the Senior Subordinated Notes which
are due pursuant to section 9.1 of the Securities Purchase Agreements on
September 13, 2002, March 13, 2003 and September 13, 2003 (the "Specified
Prepayments"), if at the time of such prepayment, or immediately after
giving effect thereto, any Payment Default or Covenant Default shall
exist. To impose such prohibition with respect to any Specified
Prepayment, the holders of the Superior Indebtedness (or their
representative or representatives) must give written notice to such effect
to the Operating Company and the holder or holders of Subordinated
Indebtedness not later than the scheduled date upon which such Specified
Prepayment is to be made under section 9.1 of the Securities Purchase
Agreements. Each Specified Prepayment which is blocked pursuant to this
section 1.12 shall be paid by the Operating Company not later than March
13, 2004 (unless such payment is then prohibited under the other terms of
this section 1). So long as any Specified Prepayment is blocked pursuant
to this section 1.12, the Senior Subordinated Notes shall bear interest at
14% per annum.
1.13. Limitation on Actions by Holders of Superior Indebtedness.
Notwithstanding anything to the contrary contained herein, so long as the
Seller Note is outstanding, the holders of the Superior Indebtedness shall
not be entitled to enforce the terms of this section 1 or to enforce the
subordination of the Subordinated Indebtedness unless the holders of the
Superior Indebtedness are concurrently enforcing the subordination of the
Seller Note.
2. General.
2.1. Registered Notes, etc. This Note is in registered form and is
transferable only by surrender hereof at the principal executive office of
the Operating Company as provided in the Securities Purchase Agreements.
The Operating Company may treat the Person in whose name this Note is
registered on the Note register maintained at such office pursuant to the
Securities Purchase Agreements as the owner hereof for all purposes, and
the Operating Company shall not be affected by any notice to the contrary.
2.2. Events of Default. In case an Event of Default shall occur and
be continuing, the unpaid balance of the principal of this Note may be
declared and become due and payable in the manner and with the effect
provided in the Securities Purchase Agreements.
2.3. Certain Waivers. The parties hereto, including the maker and
all guarantors and endorsers of this Note, hereby waive presentment,
demand, notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance or enforcement of this Note.
2.4. Governing Law. This Note shall be construed in accordance with
and governed by the domestic substantive laws of The Commonwealth of
Massachusetts without giving effect to any choice of law or conflicts of
law provision or rule that would cause the application of domestic
substantive laws of any other jurisdiction.
[The remainder of this page is left blank intentionally.]
IN WITNESS WHEREOF, the Operating Company has executed this Note as
an instrument under seal as of the date first above written.
NEWCO, INC.
By: /s/ Richard E. Ruegger
Vice President - Finance
<PAGE>
FORM OF ASSIGNMENT
[To be signed only upon transfer of Note]
For value received, the undersigned hereby sells, assigns and
transfers unto __________________________________________________ the
within Note, and appoints ________________________ Attorney to transfer
such Note on the books of NEWCO, INC. with full power of substitution in
the premises.
Date: _______________, ____.
...................................................................
(Signature must conform in all respects to name of holder as specified on
the face of the Note)
Signed in the presence of
........................................
CONFORMED COPY
NEWCO, INC.
12% Senior Subordinated Note
due March 13, 2005
No. R-3
$3,125,000 March 13, 1997
NEWCO, INC., a Wisconsin corporation (the "Operating Company"), for
value received, hereby promises to pay to MASSMUTUAL CORPORATE INVESTORS,
or registered assigns, the principal amount of THREE MILLION ONE HUNDRED
TWENTY-FIVE THOUSAND DOLLARS ($3,125,000) on March 13, 2005, with interest
(computed on the basis of a 360-day year of twelve 30-day months) on the
unpaid balance of such principal amount at the rate of 12% per annum from
the date hereof, payable semi-annually on the 13th day of March and
September of each year after the date hereof, commencing on September 13,
1997, until the principal hereof shall have become due and payable
(whether at maturity or at a date fixed for prepayment or by declaration
or otherwise), and with interest on any overdue principal (including any
overdue prepayment of principal) and (to the extent permitted by
applicable law) premium, if any, and (to the extent permitted by
applicable law) on any overdue installment of interest, at the Default
Rate (as defined below) until paid, payable semi- annually as aforesaid
or, at the option of the holder hereof, on demand and, upon acceleration
of this Note, together with the premium specified in the Securities
Purchase Agreements hereinafter referred to, as liquidated damages and not
as a penalty; provided that in no event shall the amount payable by the
Operating Company as interest and premium on this Note exceed the highest
lawful rate permissible under any law applicable hereto. Payments of
principal, premium, if any, and interest hereon shall be made in lawful
money of the United States of America by the method and at the address for
such purpose specified in the Securities Purchase Agreements hereinafter
referred to, and such payments shall be overdue for purposes hereof if not
made on the scheduled date of payment therefor, without giving effect to
any applicable grace period and notwithstanding that such payment may be
prohibited under the terms of subordination applicable hereto set forth
below. As used herein, the "Default Rate" applicable to any overdue
amount shall mean the higher of (a) 14% per annum and (b) the sum of (i)
the per annum rate of interest reported by The Wall Street Journal as the
"prime" rate on the Business Day immediately preceding the scheduled date
of payment for such amount plus (ii) 200 basis points.
This Note is one of the Operating Company's 12% Senior Subordinated
Notes due March 13, 2005, limited to $12,500,000 aggregate principal
amount, issued pursuant to those certain Securities Purchase Agreements
dated March 13, 1997 (such agreements, as amended, modified and
supplemented from time to time, the "Securities Purchase Agreements")
among Swing-N-Slide Corp., the Operating Company and the institutional
investors named therein and their respective successors and assigns. The
holder hereof is entitled to the benefits of the Securities Purchase
Agreements and the other Operative Documents referred to in the Securities
Purchase Agreements, including, without limitation, the Note Guarantees,
and may enforce the agreements contained herein and therein and exercise
the remedies provided for hereby and thereby or otherwise available in
respect hereof and thereof, all in accordance with the terms hereof and
thereof. This Note is subject to prepayment as specified in the
Securities Purchase Agreements. Capitalized terms used herein without
definition have the meanings ascribed to them in the Securities Purchase
Agreements.
1. Subordination of Senior Subordinated Notes. Payments on this Note,
and the rights of the holder hereof and of all guarantees with respect
hereto, are subordinate, to the extent specified in this section 1, to
Superior Indebtedness (as defined below).
1.1. Certain Definitions. As used in this section 1, the
following terms have the following respective meanings:
"Bankruptcy Code" shall mean 11 U.S.C. Section 101 et seq., as
from time to time hereafter amended, and any successor or similar statute.
"Blockage Period" shall have the meaning specified in section
1.4.
"Covenant Default" shall have the meaning specified in section
1.4.
"Liquidation Payment" shall have the meaning specified in section
1.3.
"Operative Documents" shall mean the Securities Purchase
Agreements, together with all agreements, documents and instruments
executed in connection therewith.
"Payment Default" shall have the meaning specified in section
1.4.
"Permissible Securities" shall mean (a) any debt securities the
payment of which is subordinated, at least to the extent provided in this
section 1 with respect to the Subordinated Indebtedness, to the payment of
all Superior Indebtedness at the time outstanding and all securities
issued in exchange therefor and (b) any Shares of the Operating Company.
"Senior Subordinated Notes" shall mean the Operating Company's
12% Senior Subordinated Notes due March 13, 2005 (together with any notes
issued in exchange therefor or replacement thereof).
"Subordinated Indebtedness" shall mean the principal amount of
the Indebtedness evidenced by the Senior Subordinated Notes, together with
any interest (including any interest accruing after the commencement of
any action or proceeding under any bankruptcy, insolvency or other similar
law, and any interest that would have accrued but for the commencement of
any such proceeding, whether or not any such interest is allowed as an
enforceable claim in such proceeding) and premium, if any, and any other
amount (including any fee, expense or indemnification payment) due thereon
or payable with respect thereto.
"Subordination Notice" shall have the meaning specified in
section 1.4.
"Superior Indebtedness" shall mean the principal amount of,
interest (including any interest accruing after the commencement of any
action or proceeding under any bankruptcy, insolvency or other similar
law, and any interest that would have accrued but for the commencement of
any such proceeding, whether or not any such interest is allowed as an
enforceable claim in such proceeding) and premium (if any) or other amount
(including any fee, expense or indemnification payment) due in respect of
the Funded Debt and/or Current Debt and letters of credit and interest
rate protection agreements under the Fleet Bank Agreement (or any
extensions, renewals, refinancings or refundings thereof or of any
Refinancing Debt thereof permitted under section 14.5(a)(viii) of the
Securities Purchase Agreements) and all guarantees with respect thereto,
provided that the aggregate outstanding principal amount thereof,
including, without limitation, all amounts due (contingently or otherwise)
in respect of reimbursement obligations under letters of credit, interest
rate protection agreements or similar instruments (and all related
reimbursement agreements), that shall constitute Superior Indebtedness,
shall not exceed the greater of (a) $75,000,000, minus the aggregate
amount of all principal payments made thereon from time to time (other
than any principal payment made under the revolving credit facility
established thereunder which may be reborrowed under such facility), or
(b) four times Consolidated EBITDA for the most recently completed four
consecutive fiscal quarters of the Operating Company; provided, further,
that in no event shall Superior Indebtedness include any amount due in
respect of (A) the Senior Subordinated Notes, (B) any Indebtedness which
is expressly made equal or subordinate in right of payment to the Senior
Subordinated Notes or (C) any Indebtedness for goods, materials or
services purchased in the ordinary course of business.
1.2. Subordinated Indebtedness Subordinated to Superior
Indebtedness; No Amendments.
(a) The Operating Company for itself and its successors and
assigns, covenants and agrees, and each holder of any Subordinated
Indebtedness, by its acceptance thereof, shall be deemed to have agreed,
notwithstanding anything to the contrary in the Operative Documents, that
the payment of the Subordinated Indebtedness shall be subordinated to the
extent and in the manner set forth in this section 1, to the prior payment
in full in cash or cash equivalents of all Superior Indebtedness, and that
each holder of Superior Indebtedness, whether now outstanding or hereafter
created, incurred, assumed or guaranteed, shall be deemed to have acquired
Superior Indebtedness in reliance upon the provisions contained in this
section 1. No present or future holder of Superior Indebtedness shall be
prejudiced in the right to enforce the subordination of the Subordinated
Indebtedness effected pursuant to this section 1 by any act or failure to
act on the part of the Operating Company.
(b) Neither this section 1 nor any of the terms of the
Subordinated Indebtedness relating to the timing or amount of any payment
(or prepayment) due thereon, shall be amended without the written consent
of the holder or holders of not less than 66-2/3% in aggregate principal
amount of the Superior Indebtedness at the time outstanding.
(c) Unless and until the Superior Indebtedness has been paid in
full in cash or cash equivalents, the Operating Company shall not grant to
the holders of the Subordinated Indebtedness any Lien in or on any of the
assets of the Operating Company to secure the Subordinated Indebtedness
without the written consent of the holder or holders of not less than 66-
2/3% in aggregate principal amount of the Superior Indebtedness at the
time outstanding.
1.3. Dissolution, Liquidation, Reorganization, etc. Upon
any payment or distribution of the assets of the Operating Company of any
kind or character, whether in cash, property or securities, to creditors
upon any dissolution, winding-up, total or partial liquidation,
reorganization, composition, arrangement, adjustment or readjustment of
the Operating Company or its securities, whether voluntary or involuntary,
or in bankruptcy, insolvency, reorganization, liquidation or receivership
proceedings, or upon a general assignment for the benefit of creditors, or
any other marshalling of the assets and liabilities of the Operating
Company, or otherwise (hereinafter a "Liquidation Payment"), then and in
any such event:
(a) the holders of the Superior Indebtedness shall be entitled
to receive payment in full in cash or cash equivalents (or to have such
payment duly provided for in cash or cash equivalents in a manner
reasonably satisfactory to the holders of Superior Indebtedness) of all
amounts due or to become due on or in respect of all Superior
Indebtedness, before any Liquidation Payment, whether in cash, property or
securities (other than Permissible Securities), is made on account of or
applied to the Subordinated Indebtedness;
(b) the Subordinated Indebtedness shall forthwith become due and
payable, and any Liquidation Payment, whether in cash, property or
securities (other than Permissible Securities), to which the holders of
the Subordinated Indebtedness would be entitled except for the provisions
of this section 1, shall be paid or delivered by any debtor, custodian,
liquidating trustee, agent or other Person making such Liquidation
Payment, directly to the holders of the Superior Indebtedness, or their
agent, representative or representatives, ratably according to the
aggregate amounts remaining unpaid on account of the Superior
Indebtedness, for application to the payment thereof, to the extent
necessary to pay all such Superior Indebtedness in full in cash or cash
equivalents after giving effect to any concurrent payment or distribution,
or provision therefor, to the holders of such Superior Indebtedness;
(c) each holder of the Subordinated Indebtedness at the time
outstanding hereby irrevocably authorizes and empowers each holder of the
Superior Indebtedness or such holder's agent or representative to collect
and receive such holder's ratable share of any Liquidation Payment and to
receipt therefor, and, if any holder of Subordinated Indebtedness fails to
file a claim therefor at least ten (10) calendar days prior to the date
established by rule of law or order of court for such filing, to file and
prove (but not to vote) such claim therefor; and
(d) the holders of the Subordinated Indebtedness shall execute
and deliver to the holders of the Superior Indebtedness or their agent,
representative or representatives all such further instruments confirming
the above authorization and all such powers of attorney, proofs of claim,
assignments of claim and other instruments, and shall take all such other
action, as may be reasonably requested by the holders of the Superior
Indebtedness or such representative or representatives, to enforce such
claims and to carry out the purposes of this section 1.
Upon any payment or distribution of assets referred to in this
section 1, the holders of the Subordinated Indebtedness shall be entitled
to rely upon any order or decree made by any court of competent
jurisdiction in which such bankruptcy, insolvency, reorganization,
liquidation, receivership or other proceeding is pending, or a certificate
of the custodian, liquidating trustee, agent or other Person making any
such payment or distribution to such holders, for the purpose of
ascertaining the Persons entitled to participate therein, the holders of
the Superior Indebtedness, the then outstanding principal amount of the
Superior Indebtedness and any and all amounts payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent
thereto or to this section 1.
1.4. No Payments With Respect to Subordinated Indebtedness
in Certain Circumstances.
(a) The Operating Company will not, directly or indirectly, make
or agree to make, and neither the holder nor any assignee or successor
holder of any Subordinated Indebtedness will accept or receive any payment
or distribution (in cash, property or securities (other than Permissible
Securities) by set-off or otherwise), direct or indirect, of or on account
of the Subordinated Indebtedness if, at the time of such payment or
distribution or immediately after giving effect thereto:
(i) a default in the payment when due (whether at maturity
or at a date fixed for prepayment or by declaration or
otherwise) of all or any portion of the principal of or premium,
if any, or interest on or other amount due in respect of any
Superior Indebtedness shall have occurred (a "Payment Default")
and such Payment Default shall not have been cured by the
Operating Company or waived by the requisite holder or holders
of the Superior Indebtedness with respect to which such Payment
Default shall have occurred; or
(ii) all of the following conditions specified in this
section 1.4(a)(ii) shall be satisfied:
(A) a default other than a Payment Default shall have
occurred with respect to any Superior Indebtedness which
permits the holder or holders thereof at that time to
immediately accelerate the maturity thereof (a "Covenant
Default");
(B) the Operating Company and the holder or holders
of Subordinated Indebtedness shall have received written
notice (each a "Subordination Notice") of such Covenant
Default from the requisite holder or holders of the
Superior Indebtedness, or their representative or
representatives (which notice shall state that it is a
"Subordination Notice" and shall make explicit reference to
the provisions of this section 1.4(a)(ii));
(C) such Covenant Default shall not have been cured
by the Operating Company or waived in writing by the
requisite holder or holders of the Superior Indebtedness
with respect to which such Covenant Default shall have
occurred; and
(D) less than 180 days shall have elapsed after the
date of receipt by the Operating Company and the holders of
the Subordinated Indebtedness of such Subordination Notice
(any period during which the restrictions imposed by this
section 1.4(a)(ii) are in effect being hereinafter referred
to as a "Blockage Period");
provided, however, that, for the purpose of this section
1.4(a)(ii), (x) only one Blockage Period may be commenced during
any period of 360 consecutive days, (y) not more than four
Blockage Periods may be commenced, and (z) no facts or
circumstances known to the holders of Superior Indebtedness
giving any Subordination Notice on the date any Subordination
Notice is given may be used or shall be effective as a basis for
any subsequent Subordination Notice.
(b) The restrictions imposed by section 1.4(a) shall cease to
apply and the Operating Company shall resume payments in respect of
the Subordinated Indebtedness (including any payments which shall not
have been made on account of the provisions of this section 1, but
excluding any payments which may have become due solely on account of
any acceleration of the maturity of the Subordinated Indebtedness or
any judgment with respect thereto) upon the earliest to occur of
(i) the cure of the Payment Default or Covenant Default by the
Operating Company, (ii) the written waiver thereof by the requisite
holder or holders of the Superior Indebtedness with respect to which
such Payment Default or Covenant Default shall have occurred,
(iii) the expiration of the applicable Blockage Period or (iv) the
termination of such Blockage Period by such requisite holder or
holders of such Superior Indebtedness.
(c) In the event of an acceleration of the maturity of the
principal of any Superior Indebtedness in accordance with the terms
thereof (which acceleration has not been rescinded or annulled), such
Superior Indebtedness shall first be paid in full in cash or cash
equivalents (or provision for such payment in cash or cash
equivalents shall be made in a manner reasonably satisfactory to the
holder or holders of such Superior Indebtedness) before any payment
or distribution (in cash, properties or securities (other than
Permissible Securities), by set-off or otherwise) is made on account
of or applied on the Subordinated Indebtedness.
(d) Nothing herein shall affect or impair the right of any
holder of any Senior Subordinated Notes to apply any amount payable
in respect thereof to the payment of any amount due upon the exercise
of any Warrants at any time.
1.5. Payments and Distributions Received. If any payment or
distribution of any kind or character, whether in cash, property or
securities (other than Permissible Securities), shall be received by any
holder of any of the Subordinated Indebtedness in contravention of this
section 1, such payment or distribution shall be held in trust for the
benefit of, and shall, upon demand by the requisite holder or holders of
the Superior Indebtedness, be paid over or delivered and transferred to,
the holders of the Superior Indebtedness, or their representative or
representatives, ratably according to the aggregate amount remaining
unpaid on account of such Superior Indebtedness, for application to the
payment thereof, to the extent necessary to pay all such Superior
Indebtedness in full in cash or cash equivalents, after giving effect to
any concurrent payment or distribution, or provision therefor, to the
holders of such Superior Indebtedness; provided that such demand by the
holders of Superior Indebtedness shall be made no later than 90 days
following receipt of the applicable payment or distribution by such holder
of Subordinated Indebtedness. In the event of the failure of any holder
of any of the Subordinated Indebtedness to endorse or assign any such
payment or distribution, any holder of the Superior Indebtedness or such
holder's representative is hereby irrevocably authorized to endorse or
assign the same.
1.6. Subrogation. Subject to the payment in full of all
Superior Indebtedness in cash or cash equivalents, in case cash, property
or securities otherwise payable or deliverable to the holders of the
Subordinated Indebtedness shall have been applied pursuant to this section
1 to the payment of Superior Indebtedness, then and in each such case, the
holders of the Subordinated Indebtedness shall be subrogated to the rights
of each holder of Superior Indebtedness to receive any further payment or
distribution in respect of or applicable to the Superior Indebtedness;
and, for the purposes of such subrogation, no payment or distribution to
the holders of Superior Indebtedness of any cash, property or securities
to which any holder of Subordinated Indebtedness would be entitled except
for the provisions of this section 1 shall, and no payment over pursuant
to the provisions of this section 1 to the holders of Superior
Indebtedness by the holders of the Subordinated Indebtedness shall as
between the Operating Company, its creditors other than the holders of
Superior Indebtedness and the holders of Subordinated Indebtedness, be
deemed to be a payment by the Operating Company to or on account of
Superior Indebtedness.
1.7. Notice. In the event that (a) any Superior Indebtedness or
Subordinated Indebtedness shall be transferred and/or shall become due and
payable before the expressed maturity thereof as the result of the
occurrence of a default or any event of default or (b) any term or
provision of any agreement, document or instrument related to the Superior
Indebtedness or Subordinated Indebtedness shall be amended, modified or
supplemented, or compliance therewith waived, the Operating Company will
give immediate written notice in writing of such event to each holder of
Subordinated Indebtedness and Superior Indebtedness (together with copies
of all related agreements, documents and instruments). Each notice of any
transfer of any Superior Indebtedness or Subordinated Indebtedness shall
include the name and address of the applicable transferee for purposes of
this section 1. The holder or holders of Superior Indebtedness shall be
obligated to give a Subordination Notice (as defined in section 1.4) to a
holder of Subordinated Indebtedness other than the initial holders thereof
only if the holder or holders of Superior Indebtedness shall have been
furnished written notice of such other holder's address for purposes of
this section 1.
1.8. Subordination Not Affected, etc. The terms of this section
1, the subordination effected hereby and the rights created hereby of the
holders of the Superior Indebtedness shall not be affected by (a) any
amendment or modification of or supplement to any Superior Indebtedness
(or any renewal, extension, refinancing or refunding thereof) or any
agreement, document or instrument relating thereto to the extent permitted
by section 14.16(d) of the Securities Purchase Agreements, (b) any
exercise or non-exercise of any right, power or remedy under or in respect
of any Superior Indebtedness (or any security or collateral therefor) or
pursuant to any agreement, document or instrument relating thereto or
(c) any waiver, consent, release, indulgence, delay or other action,
inaction or omission, in respect of any Superior Indebtedness (or any
security or collateral therefor) or pursuant to any agreement, document or
instrument relating thereto, whether or not any holder of any Subordinated
Indebtedness shall have had notice or knowledge of any of the foregoing.
1.9. Obligations Unimpaired. The provisions of this section 1
are solely for the purpose of defining the relative rights of the holders
of Superior Indebtedness on the one hand and the holders of Subordinated
Indebtedness on the other hand, and (a) subject to the rights, if any,
under this section 1 of the holders of Superior Indebtedness, nothing in
this section 1 shall (i) impair as between the Operating Company and the
holder of any Subordinated Indebtedness the obligation of the Operating
Company, which is unconditional and absolute, to pay to the holder thereof
all amounts due thereon in accordance with the terms thereof or (ii)
except as otherwise provided in section 1.11, prevent the holder of any
Subordinated Indebtedness from exercising all remedies available to such
holder, whether arising under the Operative Documents, applicable law or
otherwise, and (b) no Person is entitled to any third party beneficiary
rights or other similar rights on account of or under this section 1 other
than the holders of the Superior Indebtedness. The failure to make any
payment due in respect of the Subordinated Indebtedness or to comply with
any of the terms and conditions of any of the agreements, documents and
instruments related to the Subordinated Indebtedness by reason of any
provision of this section 1 shall not be construed as preventing the
occurrence of any Default or Event of Default with respect to the
Subordinated Indebtedness.
1.10. Holders of Subordinated Indebtedness Entitled to Assume
Payments Not Prohibited in Absence of Notice. No holder of Subordinated
Indebtedness shall at any time be charged with knowledge of the existence
of any facts which would prohibit the making of any payment to it, unless
and until such holder shall have received written notice thereof (given as
provided in the Securities Purchase Agreements) from the Operating Company
or from any holder of Superior Indebtedness or any agent or representative
thereof. Prior to the receipt of any such notice, each holder of
Subordinated Indebtedness shall be entitled to assume conclusively that no
such facts exist, without, however, limiting any right of any holder of
Superior Indebtedness under this section 1 to recover from any holder of
the Subordinated Indebtedness any payment made in contravention of this
section 1. Each payment on the Subordinated Indebtedness by the Operating
Company shall be deemed to constitute a representation of the Operating
Company that such payment is permitted to be paid by the Operating Company
under this section 1.
Each holder of Subordinated Indebtedness shall be entitled to rely on
the delivery to it of a written notice by a Person representing himself to
be a holder of Superior Indebtedness or to be the agent or representative
of any holder of Superior Indebtedness to establish that such notice has
been given by any such Person. In the event that such holder of
Subordinated Indebtedness determines in good faith that further evidence
is required with respect to the right of any such Person to participate in
any payment or distribution pursuant to this section 1, such holder of
Subordinated Indebtedness may request such Person to furnish evidence to
the reasonable satisfaction of such holder of Subordinated Indebtedness as
to any fact pertinent to the rights of such Person under this section 1,
and if such evidence is not furnished, such holder of Subordinated
Indebtedness may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
1.11. Limitation on Right of Action. Notwithstanding anything to
the contrary contained in the Operative Documents, the holders of the
Subordinated Indebtedness agree that, if any Superior Indebtedness is
outstanding, the holders of the Subordinated Indebtedness will not take
any enforcement action with respect to the Subordinated Indebtedness
(including the acceleration of the Subordinated Indebtedness), unless and
until the first to occur of:
(a) the holder or holders of any Superior Indebtedness shall
have accelerated the Superior Indebtedness or shall have taken any
other formal enforcement action with respect thereto;
(b) a proceeding under the Bankruptcy Code or any similar state
statute or law (including any law providing for the appointment of a
receiver or other similar official) shall have been commenced by or
against the Operating Company or any of its Subsidiaries by Persons
other than the holders of the Subordinated Indebtedness; or
(c) any Event of Default under the Operative Documents shall
have occurred and shall have continued for a period of 180 days.
1.12. Additional Prohibitions on Certain Principal Payments Due
on the Notes. The holders of the Superior Indebtedness may prohibit the
Operating Company from making any or all of the scheduled prepayments of
the principal of (but not interest on) the Senior Subordinated Notes which
are due pursuant to section 9.1 of the Securities Purchase Agreements on
September 13, 2002, March 13, 2003 and September 13, 2003 (the "Specified
Prepayments"), if at the time of such prepayment, or immediately after
giving effect thereto, any Payment Default or Covenant Default shall
exist. To impose such prohibition with respect to any Specified
Prepayment, the holders of the Superior Indebtedness (or their
representative or representatives) must give written notice to such effect
to the Operating Company and the holder or holders of Subordinated
Indebtedness not later than the scheduled date upon which such Specified
Prepayment is to be made under section 9.1 of the Securities Purchase
Agreements. Each Specified Prepayment which is blocked pursuant to this
section 1.12 shall be paid by the Operating Company not later than March
13, 2004 (unless such payment is then prohibited under the other terms of
this section 1). So long as any Specified Prepayment is blocked pursuant
to this section 1.12, the Senior Subordinated Notes shall bear interest at
14% per annum.
1.13. Limitation on Actions by Holders of Superior Indebtedness.
Notwithstanding anything to the contrary contained herein, so long as the
Seller Note is outstanding, the holders of the Superior Indebtedness shall
not be entitled to enforce the terms of this section 1 or to enforce the
subordination of the Subordinated Indebtedness unless the holders of the
Superior Indebtedness are concurrently enforcing the subordination of the
Seller Note.
2. General.
2.1. Registered Notes, etc. This Note is in registered form and is
transferable only by surrender hereof at the principal executive office of
the Operating Company as provided in the Securities Purchase Agreements.
The Operating Company may treat the Person in whose name this Note is
registered on the Note register maintained at such office pursuant to the
Securities Purchase Agreements as the owner hereof for all purposes, and
the Operating Company shall not be affected by any notice to the contrary.
2.2. Events of Default. In case an Event of Default shall occur and
be continuing, the unpaid balance of the principal of this Note may be
declared and become due and payable in the manner and with the effect
provided in the Securities Purchase Agreements.
2.3. Certain Waivers. The parties hereto, including the maker and
all guarantors and endorsers of this Note, hereby waive presentment,
demand, notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance or enforcement of this Note.
2.4. Governing Law. This Note shall be construed in accordance with
and governed by the domestic substantive laws of The Commonwealth of
Massachusetts without giving effect to any choice of law or conflicts of
law provision or rule that would cause the application of domestic
substantive laws of any other jurisdiction.
[The remainder of this page is left blank intentionally.]
IN WITNESS WHEREOF, the Operating Company has executed this Note as
an instrument under seal as of the date first above written.
NEWCO, INC.
By: /s/ Richard E. Ruegger
Vice President - Finance
<PAGE>
FORM OF ASSIGNMENT
[To be signed only upon transfer of Note]
For value received, the undersigned hereby sells, assigns and
transfers unto __________________________________________________ the
within Note, and appoints ________________________ Attorney to transfer
such Note on the books of NEWCO, INC. with full power of substitution in
the premises.
Date: _______________, ____.
..........................................................................
(Signature must conform in all respects to name of holder as specified on
the face of the Note)
Signed in the presence of
.....................................
CONFORMED COPY
NEWCO, INC.
12% Senior Subordinated Note
due March 13, 2005
No. R-5
$1,953,000 March 13, 1997
NEWCO, INC., a Wisconsin corporation (the "Operating Company"), for
value received, hereby promises to pay to GERLACH & CO., or registered
assigns, the principal amount of ONE MILLION NINE HUNDRED FIFTY-THREE
THOUSAND DOLLARS ($1,953,000) on March 13, 2005, with interest (computed
on the basis of a 360-day year of twelve 30-day months) on the unpaid
balance of such principal amount at the rate of 12% per annum from the
date hereof, payable semi-annually on the 13th day of March and September
of each year after the date hereof, commencing on September 13, 1997,
until the principal hereof shall have become due and payable (whether at
maturity or at a date fixed for prepayment or by declaration or
otherwise), and with interest on any overdue principal (including any
overdue prepayment of principal) and (to the extent permitted by
applicable law) premium, if any, and (to the extent permitted by
applicable law) on any overdue installment of interest, at the Default
Rate (as defined below) until paid, payable semi-annually as aforesaid or,
at the option of the holder hereof, on demand and, upon acceleration of
this Note, together with the premium specified in the Securities Purchase
Agreements hereinafter referred to, as liquidated damages and not as a
penalty; provided that in no event shall the amount payable by the
Operating Company as interest and premium on this Note exceed the highest
lawful rate permissible under any law applicable hereto. Payments of
principal, premium, if any, and interest hereon shall be made in lawful
money of the United States of America by the method and at the address for
such purpose specified in the Securities Purchase Agreements hereinafter
referred to, and such payments shall be overdue for purposes hereof if not
made on the scheduled date of payment therefor, without giving effect to
any applicable grace period and notwithstanding that such payment may be
prohibited under the terms of subordination applicable hereto set forth
below. As used herein, the "Default Rate" applicable to any overdue
amount shall mean the higher of (a) 14% per annum and (b) the sum of (i)
the per annum rate of interest reported by The Wall Street Journal as the
"prime" rate on the Business Day immediately preceding the scheduled date
of payment for such amount plus (ii) 200 basis points.
This Note is one of the Operating Company's 12% Senior Subordinated
Notes due March 13, 2005, limited to $12,500,000 aggregate principal
amount, issued pursuant to those certain Securities Purchase Agreements
dated March 13, 1997 (such agreements, as amended, modified and
supplemented from time to time, the "Securities Purchase Agreements")
among Swing-N-Slide Corp., the Operating Company and the institutional
investors named therein and their respective successors and assigns. The
holder hereof is entitled to the benefits of the Securities Purchase
Agreements and the other Operative Documents referred to in the Securities
Purchase Agreements, including, without limitation, the Note Guarantees,
and may enforce the agreements contained herein and therein and exercise
the remedies provided for hereby and thereby or otherwise available in
respect hereof and thereof, all in accordance with the terms hereof and
thereof. This Note is subject to prepayment as specified in the
Securities Purchase Agreements. Capitalized terms used herein without
definition have the meanings ascribed to them in the Securities Purchase
Agreements.
1. Subordination of Senior Subordinated Notes. Payments on this Note,
and the rights of the holder hereof and of all guarantees with respect
hereto, are subordinate, to the extent specified in this section 1, to
Superior Indebtedness (as defined below).
1.1. Certain Definitions. As used in this section 1, the
following terms have the following respective meanings:
"Bankruptcy Code" shall mean 11 U.S.C. Section 101 et seq., as
from time to time hereafter amended, and any successor or similar statute.
"Blockage Period" shall have the meaning specified in section
1.4.
"Covenant Default" shall have the meaning specified in section
1.4.
"Liquidation Payment" shall have the meaning specified in section
1.3.
"Operative Documents" shall mean the Securities Purchase
Agreements, together with all agreements, documents and instruments
executed in connection therewith.
"Payment Default" shall have the meaning specified in section
1.4.
"Permissible Securities" shall mean (a) any debt securities the
payment of which is subordinated, at least to the extent provided in this
section 1 with respect to the Subordinated Indebtedness, to the payment of
all Superior Indebtedness at the time outstanding and all securities
issued in exchange therefor and (b) any Shares of the Operating Company.
"Senior Subordinated Notes" shall mean the Operating Company's
12% Senior Subordinated Notes due March 13, 2005 (together with any notes
issued in exchange therefor or replacement thereof).
"Subordinated Indebtedness" shall mean the principal amount of
the Indebtedness evidenced by the Senior Subordinated Notes, together with
any interest (including any interest accruing after the commencement of
any action or proceeding under any bankruptcy, insolvency or other similar
law, and any interest that would have accrued but for the commencement of
any such proceeding, whether or not any such interest is allowed as an
enforceable claim in such proceeding) and premium, if any, and any other
amount (including any fee, expense or indemnification payment) due thereon
or payable with respect thereto.
"Subordination Notice" shall have the meaning specified in
section 1.4.
"Superior Indebtedness" shall mean the principal amount of,
interest (including any interest accruing after the commencement of any
action or proceeding under any bankruptcy, insolvency or other similar
law, and any interest that would have accrued but for the commencement of
any such proceeding, whether or not any such interest is allowed as an
enforceable claim in such proceeding) and premium (if any) or other amount
(including any fee, expense or indemnification payment) due in respect of
the Funded Debt and/or Current Debt and letters of credit and interest
rate protection agreements under the Fleet Bank Agreement (or any
extensions, renewals, refinancings or refundings thereof or of any
Refinancing Debt thereof permitted under section 14.5(a)(viii) of the
Securities Purchase Agreements) and all guarantees with respect thereto,
provided that the aggregate outstanding principal amount thereof,
including, without limitation, all amounts due (contingently or otherwise)
in respect of reimbursement obligations under letters of credit, interest
rate protection agreements or similar instruments (and all related
reimbursement agreements), that shall constitute Superior Indebtedness,
shall not exceed the greater of (a) $75,000,000, minus the aggregate
amount of all principal payments made thereon from time to time (other
than any principal payment made under the revolving credit facility
established thereunder which may be reborrowed under such facility), or
(b) four times Consolidated EBITDA for the most recently completed four
consecutive fiscal quarters of the Operating Company; provided, further,
that in no event shall Superior Indebtedness include any amount due in
respect of (A) the Senior Subordinated Notes, (B) any Indebtedness which
is expressly made equal or subordinate in right of payment to the Senior
Subordinated Notes or (C) any Indebtedness for goods, materials or
services purchased in the ordinary course of business.
1.2. Subordinated Indebtedness Subordinated to Superior
Indebtedness; No Amendments.
(a) The Operating Company for itself and its successors and
assigns, covenants and agrees, and each holder of any Subordinated
Indebtedness, by its acceptance thereof, shall be deemed to have agreed,
notwithstanding anything to the contrary in the Operative Documents, that
the payment of the Subordinated Indebtedness shall be subordinated to the
extent and in the manner set forth in this section 1, to the prior payment
in full in cash or cash equivalents of all Superior Indebtedness, and that
each holder of Superior Indebtedness, whether now outstanding or hereafter
created, incurred, assumed or guaranteed, shall be deemed to have acquired
Superior Indebtedness in reliance upon the provisions contained in this
section 1. No present or future holder of Superior Indebtedness shall be
prejudiced in the right to enforce the subordination of the Subordinated
Indebtedness effected pursuant to this section 1 by any act or failure to
act on the part of the Operating Company.
(b) Neither this section 1 nor any of the terms of the
Subordinated Indebtedness relating to the timing or amount of any payment
(or prepayment) due thereon, shall be amended without the written consent
of the holder or holders of not less than 66-2/3% in aggregate principal
amount of the Superior Indebtedness at the time outstanding.
(c) Unless and until the Superior Indebtedness has been paid in
full in cash or cash equivalents, the Operating Company shall not grant to
the holders of the Subordinated Indebtedness any Lien in or on any of the
assets of the Operating Company to secure the Subordinated Indebtedness
without the written consent of the holder or holders of not less than 66-
2/3% in aggregate principal amount of the Superior Indebtedness at the
time outstanding.
1.3. Dissolution, Liquidation, Reorganization, etc. Upon
any payment or distribution of the assets of the Operating Company of any
kind or character, whether in cash, property or securities, to creditors
upon any dissolution, winding-up, total or partial liquidation,
reorganization, composition, arrangement, adjustment or readjustment of
the Operating Company or its securities, whether voluntary or involuntary,
or in bankruptcy, insolvency, reorganization, liquidation or receivership
proceedings, or upon a general assignment for the benefit of creditors, or
any other marshalling of the assets and liabilities of the Operating
Company, or otherwise (hereinafter a "Liquidation Payment"), then and in
any such event:
(a) the holders of the Superior Indebtedness shall be entitled
to receive payment in full in cash or cash equivalents (or to have such
payment duly provided for in cash or cash equivalents in a manner
reasonably satisfactory to the holders of Superior Indebtedness) of all
amounts due or to become due on or in respect of all Superior
Indebtedness, before any Liquidation Payment, whether in cash, property or
securities (other than Permissible Securities), is made on account of or
applied to the Subordinated Indebtedness;
(b) the Subordinated Indebtedness shall forthwith become due and
payable, and any Liquidation Payment, whether in cash, property or
securities (other than Permissible Securities), to which the holders of
the Subordinated Indebtedness would be entitled except for the provisions
of this section 1, shall be paid or delivered by any debtor, custodian,
liquidating trustee, agent or other Person making such Liquidation
Payment, directly to the holders of the Superior Indebtedness, or their
agent, representative or representatives, ratably according to the
aggregate amounts remaining unpaid on account of the Superior
Indebtedness, for application to the payment thereof, to the extent
necessary to pay all such Superior Indebtedness in full in cash or cash
equivalents after giving effect to any concurrent payment or distribution,
or provision therefor, to the holders of such Superior Indebtedness;
(c) each holder of the Subordinated Indebtedness at the time
outstanding hereby irrevocably authorizes and empowers each holder of the
Superior Indebtedness or such holder's agent or representative to collect
and receive such holder's ratable share of any Liquidation Payment and to
receipt therefor, and, if any holder of Subordinated Indebtedness fails to
file a claim therefor at least ten (10) calendar days prior to the date
established by rule of law or order of court for such filing, to file and
prove (but not to vote) such claim therefor; and
(d) the holders of the Subordinated Indebtedness shall execute
and deliver to the holders of the Superior Indebtedness or their agent,
representative or representatives all such further instruments confirming
the above authorization and all such powers of attorney, proofs of claim,
assignments of claim and other instruments, and shall take all such other
action, as may be reasonably requested by the holders of the Superior
Indebtedness or such representative or representatives, to enforce such
claims and to carry out the purposes of this section 1.
Upon any payment or distribution of assets referred to in this
section 1, the holders of the Subordinated Indebtedness shall be entitled
to rely upon any order or decree made by any court of competent
jurisdiction in which such bankruptcy, insolvency, reorganization,
liquidation, receivership or other proceeding is pending, or a certificate
of the custodian, liquidating trustee, agent or other Person making any
such payment or distribution to such holders, for the purpose of
ascertaining the Persons entitled to participate therein, the holders of
the Superior Indebtedness, the then outstanding principal amount of the
Superior Indebtedness and any and all amounts payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent
thereto or to this section 1.
1.4. No Payments With Respect to Subordinated Indebtedness
in Certain Circumstances.
(a) The Operating Company will not, directly or indirectly, make
or agree to make, and neither the holder nor any assignee or successor
holder of any Subordinated Indebtedness will accept or receive any payment
or distribution (in cash, property or securities (other than Permissible
Securities) by set-off or otherwise), direct or indirect, of or on account
of the Subordinated Indebtedness if, at the time of such payment or
distribution or immediately after giving effect thereto:
(i) a default in the payment when due (whether at maturity
or at a date fixed for prepayment or by declaration or
otherwise) of all or any portion of the principal of or premium,
if any, or interest on or other amount due in respect of any
Superior Indebtedness shall have occurred (a "Payment Default")
and such Payment Default shall not have been cured by the
Operating Company or waived by the requisite holder or holders
of the Superior Indebtedness with respect to which such Payment
Default shall have occurred; or
(ii) all of the following conditions specified in this
section 1.4(a)(ii) shall be satisfied:
(A) a default other than a Payment Default shall have
occurred with respect to any Superior Indebtedness which
permits the holder or holders thereof at that time to
immediately accelerate the maturity thereof (a "Covenant
Default");
(B) the Operating Company and the holder or holders
of Subordinated Indebtedness shall have received written
notice (each a "Subordination Notice") of such Covenant
Default from the requisite holder or holders of the
Superior Indebtedness, or their representative or
representatives (which notice shall state that it is a
"Subordination Notice" and shall make explicit reference to
the provisions of this section 1.4(a)(ii));
(C) such Covenant Default shall not have been cured
by the Operating Company or waived in writing by the
requisite holder or holders of the Superior Indebtedness
with respect to which such Covenant Default shall have
occurred; and
(D) less than 180 days shall have elapsed after the
date of receipt by the Operating Company and the holders of
the Subordinated Indebtedness of such Subordination Notice
(any period during which the restrictions imposed by this
section 1.4(a)(ii) are in effect being hereinafter referred
to as a "Blockage Period");
provided, however, that, for the purpose of this section
1.4(a)(ii), (x) only one Blockage Period may be commenced during
any period of 360 consecutive days, (y) not more than four
Blockage Periods may be commenced, and (z) no facts or
circumstances known to the holders of Superior Indebtedness
giving any Subordination Notice on the date any Subordination
Notice is given may be used or shall be effective as a basis for
any subsequent Subordination Notice.
(b) The restrictions imposed by section 1.4(a) shall cease to
apply and the Operating Company shall resume payments in respect of
the Subordinated Indebtedness (including any payments which shall not
have been made on account of the provisions of this section 1, but
excluding any payments which may have become due solely on account of
any acceleration of the maturity of the Subordinated Indebtedness or
any judgment with respect thereto) upon the earliest to occur of
(i) the cure of the Payment Default or Covenant Default by the
Operating Company, (ii) the written waiver thereof by the requisite
holder or holders of the Superior Indebtedness with respect to which
such Payment Default or Covenant Default shall have occurred,
(iii) the expiration of the applicable Blockage Period or (iv) the
termination of such Blockage Period by such requisite holder or
holders of such Superior Indebtedness.
(c) In the event of an acceleration of the maturity of the
principal of any Superior Indebtedness in accordance with the terms
thereof (which acceleration has not been rescinded or annulled), such
Superior Indebtedness shall first be paid in full in cash or cash
equivalents (or provision for such payment in cash or cash
equivalents shall be made in a manner reasonably satisfactory to the
holder or holders of such Superior Indebtedness) before any payment
or distribution (in cash, properties or securities (other than
Permissible Securities), by set-off or otherwise) is made on account
of or applied on the Subordinated Indebtedness.
(d) Nothing herein shall affect or impair the right of any
holder of any Senior Subordinated Notes to apply any amount payable
in respect thereof to the payment of any amount due upon the exercise
of any Warrants at any time.
1.5. Payments and Distributions Received. If any payment or
distribution of any kind or character, whether in cash, property or
securities (other than Permissible Securities), shall be received by any
holder of any of the Subordinated Indebtedness in contravention of this
section 1, such payment or distribution shall be held in trust for the
benefit of, and shall, upon demand by the requisite holder or holders of
the Superior Indebtedness, be paid over or delivered and transferred to,
the holders of the Superior Indebtedness, or their representative or
representatives, ratably according to the aggregate amount remaining
unpaid on account of such Superior Indebtedness, for application to the
payment thereof, to the extent necessary to pay all such Superior
Indebtedness in full in cash or cash equivalents, after giving effect to
any concurrent payment or distribution, or provision therefor, to the
holders of such Superior Indebtedness; provided that such demand by the
holders of Superior Indebtedness shall be made no later than 90 days
following receipt of the applicable payment or distribution by such holder
of Subordinated Indebtedness. In the event of the failure of any holder
of any of the Subordinated Indebtedness to endorse or assign any such
payment or distribution, any holder of the Superior Indebtedness or such
holder's representative is hereby irrevocably authorized to endorse or
assign the same.
1.6. Subrogation. Subject to the payment in full of all
Superior Indebtedness in cash or cash equivalents, in case cash, property
or securities otherwise payable or deliverable to the holders of the
Subordinated Indebtedness shall have been applied pursuant to this section
1 to the payment of Superior Indebtedness, then and in each such case, the
holders of the Subordinated Indebtedness shall be subrogated to the rights
of each holder of Superior Indebtedness to receive any further payment or
distribution in respect of or applicable to the Superior Indebtedness;
and, for the purposes of such subrogation, no payment or distribution to
the holders of Superior Indebtedness of any cash, property or securities
to which any holder of Subordinated Indebtedness would be entitled except
for the provisions of this section 1 shall, and no payment over pursuant
to the provisions of this section 1 to the holders of Superior
Indebtedness by the holders of the Subordinated Indebtedness shall as
between the Operating Company, its creditors other than the holders of
Superior Indebtedness and the holders of Subordinated Indebtedness, be
deemed to be a payment by the Operating Company to or on account of
Superior Indebtedness.
1.7. Notice. In the event that (a) any Superior Indebtedness or
Subordinated Indebtedness shall be transferred and/or shall become due and
payable before the expressed maturity thereof as the result of the
occurrence of a default or any event of default or (b) any term or
provision of any agreement, document or instrument related to the Superior
Indebtedness or Subordinated Indebtedness shall be amended, modified or
supplemented, or compliance therewith waived, the Operating Company will
give immediate written notice in writing of such event to each holder of
Subordinated Indebtedness and Superior Indebtedness (together with copies
of all related agreements, documents and instruments). Each notice of any
transfer of any Superior Indebtedness or Subordinated Indebtedness shall
include the name and address of the applicable transferee for purposes of
this section 1. The holder or holders of Superior Indebtedness shall be
obligated to give a Subordination Notice (as defined in section 1.4) to a
holder of Subordinated Indebtedness other than the initial holders thereof
only if the holder or holders of Superior Indebtedness shall have been
furnished written notice of such other holder's address for purposes of
this section 1.
1.8. Subordination Not Affected, etc. The terms of this section
1, the subordination effected hereby and the rights created hereby of the
holders of the Superior Indebtedness shall not be affected by (a) any
amendment or modification of or supplement to any Superior Indebtedness
(or any renewal, extension, refinancing or refunding thereof) or any
agreement, document or instrument relating thereto to the extent permitted
by section 14.16(d) of the Securities Purchase Agreements, (b) any
exercise or non-exercise of any right, power or remedy under or in respect
of any Superior Indebtedness (or any security or collateral therefor) or
pursuant to any agreement, document or instrument relating thereto or
(c) any waiver, consent, release, indulgence, delay or other action,
inaction or omission, in respect of any Superior Indebtedness (or any
security or collateral therefor) or pursuant to any agreement, document or
instrument relating thereto, whether or not any holder of any Subordinated
Indebtedness shall have had notice or knowledge of any of the foregoing.
1.9. Obligations Unimpaired. The provisions of this section 1
are solely for the purpose of defining the relative rights of the holders
of Superior Indebtedness on the one hand and the holders of Subordinated
Indebtedness on the other hand, and (a) subject to the rights, if any,
under this section 1 of the holders of Superior Indebtedness, nothing in
this section 1 shall (i) impair as between the Operating Company and the
holder of any Subordinated Indebtedness the obligation of the Operating
Company, which is unconditional and absolute, to pay to the holder thereof
all amounts due thereon in accordance with the terms thereof or (ii)
except as otherwise provided in section 1.11, prevent the holder of any
Subordinated Indebtedness from exercising all remedies available to such
holder, whether arising under the Operative Documents, applicable law or
otherwise, and (b) no Person is entitled to any third party beneficiary
rights or other similar rights on account of or under this section 1 other
than the holders of the Superior Indebtedness. The failure to make any
payment due in respect of the Subordinated Indebtedness or to comply with
any of the terms and conditions of any of the agreements, documents and
instruments related to the Subordinated Indebtedness by reason of any
provision of this section 1 shall not be construed as preventing the
occurrence of any Default or Event of Default with respect to the
Subordinated Indebtedness.
1.10. Holders of Subordinated Indebtedness Entitled to Assume
Payments Not Prohibited in Absence of Notice. No holder of Subordinated
Indebtedness shall at any time be charged with knowledge of the existence
of any facts which would prohibit the making of any payment to it, unless
and until such holder shall have received written notice thereof (given as
provided in the Securities Purchase Agreements) from the Operating Company
or from any holder of Superior Indebtedness or any agent or representative
thereof. Prior to the receipt of any such notice, each holder of
Subordinated Indebtedness shall be entitled to assume conclusively that no
such facts exist, without, however, limiting any right of any holder of
Superior Indebtedness under this section 1 to recover from any holder of
the Subordinated Indebtedness any payment made in contravention of this
section 1. Each payment on the Subordinated Indebtedness by the Operating
Company shall be deemed to constitute a representation of the Operating
Company that such payment is permitted to be paid by the Operating Company
under this section 1.
Each holder of Subordinated Indebtedness shall be entitled to rely on
the delivery to it of a written notice by a Person representing himself to
be a holder of Superior Indebtedness or to be the agent or representative
of any holder of Superior Indebtedness to establish that such notice has
been given by any such Person. In the event that such holder of
Subordinated Indebtedness determines in good faith that further evidence
is required with respect to the right of any such Person to participate in
any payment or distribution pursuant to this section 1, such holder of
Subordinated Indebtedness may request such Person to furnish evidence to
the reasonable satisfaction of such holder of Subordinated Indebtedness as
to any fact pertinent to the rights of such Person under this section 1,
and if such evidence is not furnished, such holder of Subordinated
Indebtedness may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
1.11. Limitation on Right of Action. Notwithstanding anything to
the contrary contained in the Operative Documents, the holders of the
Subordinated Indebtedness agree that, if any Superior Indebtedness is
outstanding, the holders of the Subordinated Indebtedness will not take
any enforcement action with respect to the Subordinated Indebtedness
(including the acceleration of the Subordinated Indebtedness), unless and
until the first to occur of:
(a) the holder or holders of any Superior Indebtedness shall
have accelerated the Superior Indebtedness or shall have taken any
other formal enforcement action with respect thereto;
(b) a proceeding under the Bankruptcy Code or any similar state
statute or law (including any law providing for the appointment of a
receiver or other similar official) shall have been commenced by or
against the Operating Company or any of its Subsidiaries by Persons
other than the holders of the Subordinated Indebtedness; or
(c) any Event of Default under the Operative Documents shall
have occurred and shall have continued for a period of 180 days.
1.12. Additional Prohibitions on Certain Principal Payments Due
on the Notes. The holders of the Superior Indebtedness may prohibit the
Operating Company from making any or all of the scheduled prepayments of
the principal of (but not interest on) the Senior Subordinated Notes which
are due pursuant to section 9.1 of the Securities Purchase Agreements on
September 13, 2002, March 13, 2003 and September 13, 2003 (the "Specified
Prepayments"), if at the time of such prepayment, or immediately after
giving effect thereto, any Payment Default or Covenant Default shall
exist. To impose such prohibition with respect to any Specified
Prepayment, the holders of the Superior Indebtedness (or their
representative or representatives) must give written notice to such effect
to the Operating Company and the holder or holders of Subordinated
Indebtedness not later than the scheduled date upon which such Specified
Prepayment is to be made under section 9.1 of the Securities Purchase
Agreements. Each Specified Prepayment which is blocked pursuant to this
section 1.12 shall be paid by the Operating Company not later than March
13, 2004 (unless such payment is then prohibited under the other terms of
this section 1). So long as any Specified Prepayment is blocked pursuant
to this section 1.12, the Senior Subordinated Notes shall bear interest at
14% per annum.
1.13. Limitation on Actions by Holders of Superior Indebtedness.
Notwithstanding anything to the contrary contained herein, so long as the
Seller Note is outstanding, the holders of the Superior Indebtedness shall
not be entitled to enforce the terms of this section 1 or to enforce the
subordination of the Subordinated Indebtedness unless the holders of the
Superior Indebtedness are concurrently enforcing the subordination of the
Seller Note.
2. General.
2.1. Registered Notes, etc. This Note is in registered form and is
transferable only by surrender hereof at the principal executive office of
the Operating Company as provided in the Securities Purchase Agreements.
The Operating Company may treat the Person in whose name this Note is
registered on the Note register maintained at such office pursuant to the
Securities Purchase Agreements as the owner hereof for all purposes, and
the Operating Company shall not be affected by any notice to the contrary.
2.2. Events of Default. In case an Event of Default shall occur and
be continuing, the unpaid balance of the principal of this Note may be
declared and become due and payable in the manner and with the effect
provided in the Securities Purchase Agreements.
2.3. Certain Waivers. The parties hereto, including the maker and
all guarantors and endorsers of this Note, hereby waive presentment,
demand, notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance or enforcement of this Note.
2.4. Governing Law. This Note shall be construed in accordance with
and governed by the domestic substantive laws of The Commonwealth of
Massachusetts without giving effect to any choice of law or conflicts of
law provision or rule that would cause the application of domestic
substantive laws of any other jurisdiction.
[The remainder of this page is left blank intentionally.]
IN WITNESS WHEREOF, the Operating Company has executed this Note as
an instrument under seal as of the date first above written.
NEWCO, INC.
By: /s/ Richard E. Ruegger
Vice President - Finance
<PAGE>
FORM OF ASSIGNMENT
[To be signed only upon transfer of Note]
For value received, the undersigned hereby sells, assigns and
transfers unto __________________________________________________ the
within Note, and appoints ________________________ Attorney to transfer
such Note on the books of NEWCO, INC. with full power of substitution in
the premises.
Date: _______________, ____.
...................................................................
(Signature must conform in all respects to name of holder as specified on
the face of the Note)
Signed in the presence of
...............................................
CONFORMED COPY
WARRANT
To Purchase 186,111 Shares of Common Stock of
SWING-N-SLIDE CORP.
March 13, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions 2
1.1. Definitions of Terms 2
1.2. Other Definitions 4
2. Exercise of Warrant 5
2.1. Right to Exercise; Notice 5
2.2. Manner of Exercise; Issuance of Holding Company
Common Stock 5
2.3. Effectiveness of Exercise 6
2.4. Fractional Shares 6
2.5. Automatic Exercise on Last Day of Exercise Period 7
2.6. Continued Validity 7
3. Registration, Transfer, Exchange and Replacement of Securities;
Legends 7
3.1. Registration, Transfer, Exchange and Replacement
of Securities 7
3.2. Legends 8
4. Anti-Dilution Provisions 8
4.1. Adjustment of Number of Shares Purchasable 8
4.2. Adjustment of Exercise Price 8
4.3. Rights Offering 17
4.4. Certificates and Notices 17
4.5. Adjustments for Changes in Certain Data;
Additional Adjustments 18
5. Registration, Repurchase, Required Exercise, etc. 21
6. Reservation of Holding Company Common Stock 21
7. Various Covenants of the Holding Company 21
7.1. No Impairment or Amendment 21
7.2. Listing on Securities Exchanges, etc. 22
7.3. Anti-Dilution Provisions 22
7.4. Indemnification 22
7.5. Certain Expenses 22
7.6. Certain Dividends, etc. 22
8. Miscellaneous 23
8.1. Nonwaiver 23
8.2. Amendment 23
8.3. Communications 23
8.4. Like Tenor 23
8.5. Remedies 23
8.6. Successors and Assigns 23
8.7. Governing Law 24
8.8. Headings; Entire Agreement; Partial Invalidity, etc. 24
8.9. No Rights or Liabilities as a Stockholder 24
Exhibit 2.2(a) Form of Notice of Exercise
Exhibit 3.1 Form of Assignment
<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF REGISTRATION
THEREUNDER OR AN EXEMPTION THEREFROM.
WARRANT
To Purchase 186,111 Shares of Common Stock of
SWING-N-SLIDE CORP.
No. RW-1 March 13, 1997
THIS IS TO CERTIFY that, for value received, MASSACHUSETTS MUTUAL
LIFE INSURANCE COMPANY, or registered assigns, is entitled upon the due
exercise hereof at any time during the Exercise Period (as hereinafter
defined) to purchase in the aggregate 186,111 shares of Common Stock, $.01
par value, of SWING-N-SLIDE CORP., a Delaware corporation (the "Holding
Company"), at an Exercise Price of $.001 per share (such Exercise Price
and the number of shares of Common Stock purchasable hereunder being
subject to adjustment as provided herein), and to exercise the other
rights, powers and privileges hereinafter provided, all on the terms and
subject to the conditions hereinafter set forth.
This Warrant is one of the Holding Company's Warrants to Purchase
Shares of Common Stock (herein, together with any warrants issued in
exchange therefor or replacement thereof, all as amended or supplemented
from time to time, called the "Warrants") initially exercisable in the
aggregate for 592,177 (subject to adjustment) shares of Holding Company
Class A Common Stock and issued pursuant to those certain Securities
Purchase Agreements, dated the Closing Date, by and among the Holding
Company, Newco, Inc. and the institutional investors named therein (as
amended, modified and supplemented from time to time, the "Securities
Purchase Agreements"). Reference is hereby made to the Securities Purchase
Agreements for a description of, among other things, certain terms
relating to the Warrants and the Warrant Shares and certain rights of the
holders hereof and thereof, including, without limitation (a) the rights
of the holders to require the repurchase of the Warrants and the Warrant
Shares and to require the registration of the Warrant Shares, and (b) the
right of the Holding Company to repurchase the Warrants and to require the
exercise of the Warrants. Holders of Warrants and/or Warrant Shares are
entitled to the applicable benefits of the Securities Purchase Agreements
and the other Operative Documents and may enforce the applicable
agreements contained therein, all in accordance with the terms thereof,
notwithstanding any payment or prepayment or redemption or acquisition of
any of the other Securities issued pursuant to the Securities Purchase
Agreements.
1. Definitions.
1.1. Definitions of Terms. Terms used herein without definition
which are defined in the Securities Purchase Agreements have the meanings
ascribed to them therein, unless the context clearly requires otherwise,
including, without limitation, the following terms: "Bridge Note",
"Closing", "Commission", "corporation", "Notes", "Officers' Certificate",
"Operating Company", "Operative Documents", "Option Plan", "Organizational
Documents", "Person", "Preferred Shares", "Required Holders", "Securities
Act", "shares" and "Subsidiary". In addition, the terms defined in this
section 1, whenever used and capitalized in this Warrant, shall, unless
the context otherwise requires, have the following respective meanings:
"Additional Debentures" shall have the meaning specified in section
4.5(b).
"Assignment" shall mean the form of Assignment appearing at the end
of this Warrant.
"Closing Date" shall mean March 13, 1997.
"Convertible Securities" shall mean evidences of indebtedness, Shares
(including, without limitation, any Preferred Shares) or other securities
which are convertible into or exchangeable or exercisable for, with or
without payment of additional consideration, shares of Holding Company
Common Stock (of either class), either immediately or upon the arrival of
a specified date or the happening of a specified event.
"Current Market Price" of any security (including, without
limitation, any share of Holding Company Common Stock) as of any date
herein specified shall mean the average of the daily closing prices for
the 20 consecutive trading days immediately prior to, but not including
the day in question (or in the event that a security has been traded for
less than 20 days, each of the trading days prior to the day in question
on which such security has been traded). The closing price for each day
shall be (a) if such security is listed or admitted for trading on any
domestic national securities exchange, the closing sale price of such
security, regular way, or the average of the closing bid prices thereof if
no such sale occurred, in each case as officially reported on the
principal securities exchange on which such security is listed, or (b) if
not reported as described in clause (a), the closing sale price of such
security, or the average of the closing bid prices thereof if no such sale
occurred, in each case as reported by the NASDAQ Stock Market, or any
similar system of automated dissemination of quotations of securities
prices then in common use, if so quoted, as reported by any member firm of
the New York Stock Exchange selected by the Holding Company, or (c) if not
quoted as described in clause (b), the average of the closing bid and
asked prices for such security as reported by the National Quotation
Bureau Incorporated or any similar successor organization, as reported by
any member firm of the New York Stock Exchange selected by the Holding
Company.
"Debentures" shall have the meaning specified in section 4.5(b).
"Exercise Period" shall mean the period commencing on the Closing
Date and terminating on the later of (a) March 13, 2003 and (b) the date
upon which all of the Notes have been paid in full, subject to the right
of the Holding Company to repurchase the Warrants and to require the
exercise of the Warrants, all as set forth in the Securities Purchase
Agreements.
"Exercise Price" shall mean the price per share of Holding Company
Common Stock set forth in the preamble to this Warrant, as such price may
be adjusted pursuant to section 4.
"Fair Value" shall mean the fair value of the appropriate security
(including, without limitation, any share of Holding Company Common
Stock), property, assets, business or entity as determined by the board of
directors of the Holding Company, provided that if, within 15 days
following receipt of the writing setting forth any such determination of
Fair Value, the Required Holders of the Warrants shall notify the Holding
Company of their disagreement with such determination, then the Fair Value
shall be determined by an independent investment banking firm of
recognized national standing (selected by the Holding Company and
reasonably satisfactory to the Required Holders of the Warrants). Each
determination of Fair Value shall be made without applying a discount for
any lack of liquidity or absence of control but shall otherwise be made in
accordance with generally accepted financial practice and shall be set
forth in writing, and the Holding Company shall, immediately following
such determination, deliver a copy thereof to each holder or holders of
Warrants then outstanding. The determination of any such independent
investment banking firm so made shall be conclusive and binding on the
Holding Company and on such holder or holders. The Holding Company shall
pay all of the expenses incurred in connection with any such
determination, including, without limitation, the expenses of the
independent investment banking firm engaged to make such determination.
If the Holding Company shall not have selected such investment banking
firm within 20 days after the occurrence of the event giving rise to the
need therefor, then the Required Holders of the Warrants at the time
outstanding may select such investment banking firm. Notwithstanding the
foregoing, in the case of any security, if clauses (a), (b) or (c) of the
definition of Current Market Price are applicable to such security, then
the Fair Value of such security shall be the Current Market Price of such
security.
"Holding Company" shall mean Swing-N-Slide Corp., a Delaware
corporation.
"Holding Company Class A Common Stock" shall mean the Common Stock,
$.01 par value, of the Holding Company as constituted on the Closing Date
and any Shares into which such Common Stock shall have been changed or any
Shares resulting from any reclassification of such Common Stock.
"Holding Company Class B Common Stock" shall mean the Class B Common
Stock, $.01 par value, of the Holding Company as constituted on the
Closing Date and any Shares into which such Class B Common Stock shall
have been changed or any Shares resulting from any reclassification of
such Class B Common Stock.
"Holding Company Common Stock" shall mean the Holding Company Class A
Common Stock and the Holding Company Class B Common Stock.
"Investment Agreement" shall have the meaning specified in section
4.5(b).
"Notice of Exercise" shall mean the form of Notice of Exercise
appearing at the end of this Warrant.
"Other Securities" shall mean with reference to the exercise
privilege of the holders of the Warrants, any Shares (other than Holding
Company Class A Common Stock) and any other securities of the Holding
Company (including, without limitation, Preferred Shares) or of any other
Person which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise or partial exercise of
the Warrants, in lieu of or in addition to Holding Company Class A Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Holding Company Class A Common Stock (or
Other Securities) pursuant to the terms of the Warrants or otherwise.
"Securities Purchase Agreements" shall have the meaning specified in
the preamble to this Warrant.
"Special Issuance" shall have the meaning specified in section
4.5(b).
"Stock Purchase Rights" shall mean any warrants, options or other
rights to subscribe for, purchase or otherwise acquire any shares of
Holding Company Common Stock (of either class) or any Convertible
Securities, either immediately or upon the arrival of a specified date or
the happening of a specified event.
"Warrant Shares" shall mean the shares of Holding Company Class A
Common Stock (and/or Other Securities) issued or issuable, as the case may
be, from time to time upon exercise of the Warrants, including, without
limitation, any shares of Holding Company Class A Common Stock (and/or
Other Securities) issued or issuable with respect thereto by way of stock
dividend or distribution or in connection with a combination of shares,
recapitalization, merger, consolidation, other reorganization or
otherwise.
"Warrants" shall have the meaning specified in the preamble to this
Warrant.
1.2. Other Definitions. The terms defined in this section 1.2,
whenever used in this Warrant, shall, unless the context otherwise
requires, have the following respective meanings:
"this Warrant" (and similar references to any of the other Operative
Documents) shall mean, and the words "herein" (and "therein"), "hereof"
(and "thereof"), "hereunder" (and "thereunder") and words of similar
import shall, unless the context clearly requires otherwise, refer to,
such instruments as they may from time to time be amended, modified or
supplemented.
2. Exercise of Warrant.
2.1. Right to Exercise; Notice. On the terms and subject to the
conditions of this section 2, the holder hereof shall have the right, at
its option, to exercise this Warrant in whole or in part at any time or
from time to time during the Exercise Period, all as more fully specified
below, provided that a partial exercise of this Warrant for less than the
entire remaining amount of Warrant Shares issuable under this Warrant
shall be made only for a whole number of shares.
2.2. Manner of Exercise; Issuance of Holding Company Common
Stock. To exercise this Warrant, the holder hereof shall deliver to the
Holding Company (a) a Notice of Exercise (substantially in the form of
Exhibit 2.2(a) attached hereto) duly executed by the holder hereof (or its
attorney) specifying the number of Warrant Shares to be purchased, (b) an
amount equal to the aggregate Exercise Price for all Warrant Shares as to
which this Warrant is then being exercised and (c) this Warrant. At the
option of the holder hereof, payment of the Exercise Price shall be made
(w) by wire transfer of funds to an account in a bank located in the
United States designated by the Holding Company for such purpose, (x) by
check payable to the order of the Holding Company, (y) by application of
any Warrant Shares or any Notes, as provided below, or (z) by any
combination of such methods.
Upon the exercise of this Warrant in whole or in part, the holder
hereof may, at its option, submit to the Holding Company written
instructions from such holder to apply any specified portion of the
Warrant Shares issuable upon such exercise in payment of the Exercise
Price required upon such exercise, in which case the Holding Company will
accept such specified portion of the Warrant Shares (at a value per share
equal to the Current Market Price of such share, if applicable, or the
then Fair Value of such share less, in each case, the Exercise Price then
in effect), in lieu of a like amount of such cash payment.
Upon the exercise of this Warrant in whole or in part by the holder
of any Note, such holder may, at its option, surrender such Note to the
Holding Company together with written instructions from such holder to
apply all or any specified principal amount of such Note against the
payment of some or all of the Exercise Price required upon such exercise,
in which case the Holding Company will accept such specified principal
amount in lieu of a like amount of such cash payment. In lieu of or in
addition to the aforesaid application, such holder may, without
surrendering such Note, furnish the Holding Company with written
instructions to apply all or any specified amount of accrued interest on
such Note against the payment of some or all of the Exercise Price
required upon such exercise, in which case the Holding Company will accept
such specified accrued interest in lieu of a like amount of cash. Upon
any such partial application of the principal of any Note, the Holding
Company at its expense will cause the Operating Company to promptly issue
and deliver to or upon the order of the holder thereof a new Note or Notes
equal in aggregate principal amount to the unpaid principal amount of such
surrendered Note not so applied and dated so as to result in no loss of
interest. At the time of surrender of any Note pursuant to this section
2.2, the Holding Company will cause the Operating Company to pay to the
holder surrendering such Note all interest on the principal amount thereof
so applied accrued to and including the date of such surrender.
Upon receipt of the items referred to in section 2.3, the Holding
Company shall, as promptly as practicable, and in any event within five
days thereafter, cause to be issued and delivered to the holder hereof (or
its nominee) or the transferee designated in the Notice of Exercise, a
certificate or certificates representing the number of Warrant Shares
specified in the Notice of Exercise (but not exceeding the maximum number
of shares issuable upon exercise of this Warrant) minus the number of
Warrant Shares, if any, applied in payment of the Exercise Price. Such
certificates shall be registered in the name of the holder hereof (or its
nominee) or in the name of such transferee, as the case may be.
If this Warrant is exercised in part, the Holding Company shall, at
the time of delivery of such certificate or certificates, issue and
deliver to the holder hereof or the transferee so designated in the Notice
of Exercise, a new Warrant evidencing the right of the holder hereof or
such transferee to purchase at the Exercise Price then in effect the
aggregate number of Warrant Shares for which this Warrant shall not have
been exercised and this Warrant shall be cancelled.
2.3. Effectiveness of Exercise. Unless otherwise requested by
the holder hereof, this Warrant shall be deemed to have been exercised and
such certificate or certificates representing Warrant Shares shall be
deemed to have been issued, and the holder or transferee so designated in
the Notice of Exercise shall be deemed to have become the holder of record
of such Warrant Shares for all purposes, as of the close of business on
the date on which the Notice of Exercise, the Exercise Price and this
Warrant shall have been received by the Holding Company.
2.4. Fractional Shares. The Holding Company shall not issue
fractional Warrant Shares or scrip representing fractional Warrant Shares
upon any exercise of this Warrant. As to any fractional Warrant Shares
which the holder hereof would otherwise be entitled to purchase from the
Holding Company upon such exercise, the Holding Company shall pay such
holder a cash adjustment for such fraction in an amount equal to the same
fraction of the Fair Value of a share of Holding Company Common Stock as
of the date of the Notice of Exercise.
2.5. Automatic Exercise on Last Day of Exercise Period. If this
Warrant shall not have been exercised in full on or before the last day of
the Exercise Period, then this Warrant shall be automatically exercised,
without further action on the part of the holder hereof, in full on and as
of the last day of the Exercise Period, unless at any time on or before
such last day of the Exercise Period the holder of this Warrant shall
notify the Holding Company in writing that no such automatic exercise is
to occur. Payment of the Exercise Price due in connection with any such
automatic exercise pursuant to this section 2.5 shall be made by
application of that portion of the Warrant Shares issuable upon such
exercise (at a value per share equal to the then Fair Value thereof) equal
to the aggregate Exercise Price which is due upon such exercise, unless at
any time on or before such last day of the Exercise Period the holder of
this Warrant shall notify the Holding Company that such holder elects one
of the other payment options set forth in section 2.2. As promptly as
practicable following any such automatic exercise, and in any event within
five days after the last day of the Exercise Period, the Holding Company
shall cause to be issued and delivered to the holder hereof a certificate
registered in the name of the holder hereof (unless the holder shall
specifically instruct the Holding Company otherwise) representing the
Warrant Shares issued in connection with such automatic exercise of this
Warrant minus the number of Warrant Shares, if any, applied in payment of
the Exercise Price. Upon receipt of such certificate, the holder of this
Warrant shall promptly surrender this Warrant to the Holding Company for
cancellation.
2.6. Continued Validity. A holder of Warrant Shares issued upon
the exercise of this Warrant, in whole or in part, shall continue to be
entitled to all rights to which a holder of this Warrant is entitled
pursuant to the provisions of this Warrant except such rights as by their
terms apply solely to the holder of a Warrant, notwithstanding that this
Warrant is cancelled following such exercise. The Holding Company will,
at the time of any exercise of this Warrant, upon the request of the
holder of the Warrant Shares issued upon the exercise hereof, acknowledge
in writing, in form reasonably satisfactory to such holder, its continuing
obligation to afford to such holder all rights to which such holder shall
continue to be entitled after such exercise in accordance with the
provisions of this Warrant, including, without limitation, those set forth
in sections 7.1, 7.2, 7.4 and 7.5 of this Warrant; provided that if such
holder shall fail to make any such request, such failure shall not affect
the continuing obligation of the Holding Company to afford to such holder
all such rights.
3. Registration, Transfer, Exchange and Replacement of Securities;
Legends.
3.1. Registration, Transfer, Exchange and Replacement of
Securities. Reference is hereby made to sections 17 and 18 of the
Securities Purchase Agreements for certain provisions relating to the
registration, transfer, exchange and replacement of the Warrants and
Warrant Shares. To transfer this Warrant, the holder shall deliver to the
Holding Company a Notice of Assignment (substantially in the form of
Exhibit 3.1 attached hereto) duly executed by the holder hereof (or its
attorney) specifying that this Warrant (or any portion hereof) is to be
transferred to the Person(s) named therein.
3.2. Legends. Neither this Warrant nor any Warrant Shares may
be transferred or assigned unless registered under the Securities Act or
unless an exemption from such registration is available. Until the date
on which a registration statement covering the Warrants becomes effective
under the Securities Act, each Warrant shall bear a legend in
substantially the following form:
"THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN THE
ABSENCE OF REGISTRATION THEREUNDER OR AN EXEMPTION
THEREFROM."
Until the date on which a registration statement covering the Warrant
Shares becomes effective under the Securities Act, each certificate
evidencing Warrant Shares shall bear a legend in substantially the
following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF REGISTRATION
THEREUNDER OR AN EXEMPTION THEREFROM."
4. Anti-Dilution Provisions.
4.1. Adjustment of Number of Shares Purchasable. Upon any
adjustment of the Exercise Price as provided in section 4.2, the holder
hereof shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Holding Company
Class A Common Stock (calculated to the nearest 1/100th of a share)
obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of shares of Holding Company Class A Common
Stock purchasable hereunder immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from such
adjustment.
4.2. Adjustment of Exercise Price. In addition to any
adjustment required under the provisions of section 4.5 below, and except
as otherwise provided in section 4.2(n) below, the Exercise Price shall be
subject to adjustment from time to time as set forth in this section 4.2.
(a) Stock Dividends, Distributions, Subdivisions and
Combinations. If and whenever the Holding Company subsequent to the
date hereof:
(i) declares a dividend upon, or makes any distribution in
respect of, any of its capital stock, payable in shares of
Holding Company Common Stock (of either class), Convertible
Securities or Stock Purchase Rights, or
(ii) subdivides its outstanding shares of Holding Company
Common Stock (of either class) into a larger number of shares of
Holding Company Common Stock (of such class), or
(iii) combines its outstanding shares of Holding
Company Common Stock (of either class) into a smaller number of
shares of Holding Company Common Stock (of such class),
then the Exercise Price shall be adjusted to that price determined by
multiplying the Exercise Price in effect immediately prior to such
event by a fraction (A) the numerator of which shall be the total
number of outstanding shares of Holding Company Common Stock (of
both classes) immediately prior to such event, and (B) the
denominator of which shall be the total number of outstanding shares
of Holding Company Common Stock (of both classes) immediately after
such event, treating as outstanding all shares of Holding Company
Common Stock issuable upon conversions or exchanges of any such
Convertible Securities issued in such dividend or distribution and
exercises of any such Stock Purchase Rights issued in such dividend
or distribution.
(b) Issuance of Additional Shares of Holding Company Common
Stock. If and whenever the Holding Company subsequent to the date
hereof shall issue or sell any shares of Holding Company Common Stock
(of either class) (except as otherwise provided in the last paragraph
of this section 4.2(b)), including, without limitation, any sale of
any treasury shares, for a consideration per share less than the Fair
Value per share (determined, in each case, as of the date specified
in the next succeeding paragraph), the Exercise Price upon each such
issuance or sale shall be adjusted as of the date specified in the
next succeeding paragraph to the price determined by multiplying the
Exercise Price in effect as of the date specified in the next
succeeding paragraph by a fraction the numerator of which is (i) the
sum of (A) the number of shares of Holding Company Common Stock (of
both classes) outstanding immediately prior to such issue or sale
multiplied by the Fair Value per share of Holding Company Common
Stock immediately prior to such issue or sale plus (B) the aggregate
consideration, if any, received by the Holding Company upon such
issue or sale, divided by (ii) the total number of shares of Holding
Company Common Stock (of both classes) outstanding immediately after
such issue or sale, and the denominator of which is the Fair Value
per share of Holding Company Common Stock immediately prior to such
issue or sale.
For the purposes of this section 4.2(b), the date as of which
the Exercise Price shall be adjusted and the date as of which the
Fair Value shall be determined shall be the earlier of (A) the date
on which the Holding Company shall enter into a firm contract for the
issuance of such shares of Holding Company Common Stock and (B)
immediately prior to the date of actual issuance of such shares of
Holding Company Common Stock.
No adjustment of the Exercise Price shall be made under this
section 4.2(b) upon the issuance of any shares of Holding Company
Common Stock which are (i) distributed to holders of Holding Company
Common Stock pursuant to a stock dividend, distribution or
subdivision for which an adjustment shall previously have been made
under section 4.2(a) or (ii) issued pursuant to the exercise of any
Stock Purchase Rights or pursuant to the conversion or exchange of
any Convertible Securities to the extent that an adjustment shall
previously have been made upon the issuance of such Stock Purchase
Rights or Convertible Securities pursuant to sections 4.2(a), (c) or
(d).
(c) Issuance of Stock Purchase Rights. If and whenever the
Holding Company subsequent to the date hereof shall issue or sell any
Stock Purchase Rights (except as otherwise provided in the last
paragraph of this section 4.2(c)) and the consideration per share for
which shares of Holding Company Common Stock (of either class) may at
any time thereafter be issuable upon exercise thereof (or, in the
case of Stock Purchase Rights exercisable for the purchase of
Convertible Securities, upon the subsequent conversion or exchange of
such Convertible Securities) shall be less than the Fair Value per
share (determined, in each case, as of the date specified in the next
succeeding paragraph), the Exercise Price upon each such issuance or
sale shall be adjusted as provided in section 4.2(b) as of the date
specified in the next succeeding paragraph on the basis that the
maximum number of shares of Holding Company Common Stock ever
issuable upon exercise of such Stock Purchase Rights (or upon
conversion or exchange of such Convertible Securities following such
exercise) shall be deemed to have been issued as of the date of the
determination of the Fair Value specified in the next succeeding
paragraph.
For the purposes of this section 4.2(c), the date as of which
the Exercise Price shall be adjusted and the date as of which the
Fair Value shall be determined shall be the earlier of (A) the date
on which the Holding Company shall enter into a firm contract for the
issuance of such Stock Purchase Rights and (B) immediately prior to
the date of actual issuance of such Stock Purchase Rights.
No adjustment of the Exercise Price shall be made under this
section 4.2(c) upon the issuance of any Stock Purchase Rights to the
extent that an adjustment shall previously have been made upon the
issuance of such Stock Purchase Rights pursuant to section 4.2(a).
(d) Issuance of Convertible Securities. If and whenever the
Holding Company subsequent to the date hereof shall issue or sell any
Convertible Securities (except as otherwise provided in the last
paragraph of this section 4.2(d)) and the consideration per share for
which shares of Holding Company Common Stock (of either class) may at
any time thereafter be issuable pursuant to the terms of such
Convertible Securities shall be less than the Fair Value per share
(determined, in each case, as of the date specified in the next
succeeding paragraph), the Exercise Price upon each such issuance or
sale shall be adjusted as provided in section 4.2(b) as of the date
specified in the next succeeding paragraph on the basis that the
maximum number of shares of Holding Company Common Stock ever
necessary to effect the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued as of the
date of the determination of the Fair Value specified in the next
succeeding paragraph.
For the purposes of this section 4.2(d), the date as of which
the Exercise Price shall be adjusted and the date as of which the
Fair Value shall be determined shall be the earlier of (A) the date
on which the Holding Company shall enter into a firm contract for the
issuance of such Convertible Securities and (B) immediately prior to
the date of actual issuance of such Convertible Securities.
No adjustment of the Exercise Price shall be made under this
section 4.2(d) upon the issuance of any Convertible Securities which
are (i) distributed to holders of Holding Company Common Stock
pursuant to a stock dividend or distribution to the extent that an
adjustment shall previously have been made pursuant to section 4.2(a)
or (ii) issued pursuant to the exercise of any Stock Purchase Rights
to the extent that an adjustment shall previously have been made upon
the issuance of such Stock Purchase Rights pursuant to section 4.2(a)
or (c).
(e) Minimum Adjustment. If any adjustment of the Exercise
Price pursuant to this section 4.2 shall result in an adjustment of
less than $.0001, no such adjustment shall be made, but any such
lesser adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which, together
with any adjustments so carried forward, shall amount to $.0001;
provided that upon any adjustment of the Exercise Price resulting
from (i) the declaration of a dividend upon, or the making of any
distribution in respect of, any stock of the Holding Company payable
in Holding Company Common Stock, Stock Purchase Rights or Convertible
Securities or (ii) the reclassification by subdivision, combination
or otherwise, of the Holding Company Common Stock into a greater or
smaller number of shares, the foregoing figure of $.0001 (or such
figure as last adjusted) shall be proportionately adjusted, and
provided, further, that upon the exercise of this Warrant, the
Holding Company shall make all necessary adjustments (to the nearest
.0001 of a cent) not theretofore made to the Exercise Price up to and
including the date upon which this Warrant is exercised.
(f) Readjustment of Exercise Price. Upon each change in (i)
the consideration, if any, payable for any Stock Purchase Rights or
Convertible Securities referred to in section 4.2(a), (c) or (d),
(ii) the consideration, if any, payable upon exercise of such Stock
Purchase Rights or upon the conversion or exchange of such
Convertible Securities or (iii) the number of shares of Holding
Company Common Stock issuable upon the exercise of such Stock
Purchase Rights or the rate at which such Convertible Securities are
convertible into or exchangeable for shares of Holding Company Common
Stock, the Exercise Price in effect at the time of such event shall
forthwith be readjusted to the Exercise Price which would have been
in effect at such time had such Stock Purchase Rights or Convertible
Securities provided for such changed consideration, number of shares
of Holding Company Common Stock so issuable or conversion rate, as
the case may be, at the time initially granted, issued or sold. On
the expiration of any Stock Purchase Rights not exercised or of any
right to convert or exchange under any Convertible Securities not
exercised, the Exercise Price then in effect shall forthwith be
increased to the Exercise Price which would have been in effect at
the time of such expiration had such Stock Purchase Rights or
Convertible Securities never been issued. No readjustment of the
Exercise Price pursuant to this section 4.2(f) shall (i) increase the
Exercise Price by an amount in excess of the adjustment originally
made to the Exercise Price in respect of the issue, sale or grant of
the applicable Stock Purchase Rights or Convertible Securities or
(ii) require any adjustment to the amount paid or number of Warrant
Shares received by any Person upon any exercise of this Warrant prior
to the date upon which such readjustment to the Exercise Price shall
occur.
(g) Reorganization, Reclassification or Recapitalization of the
Holding Company. If and whenever subsequent to the date hereof the
Holding Company shall effect (i) any reorganization or
reclassification or recapitalization of the capital stock of the
Holding Company (other than in the cases referred to in section
4.2(a)), (ii) any consolidation or merger of the Holding Company with
or into another Person, (iii) the sale, transfer or other disposition
of the property, assets or business of the Holding Company as an
entirety or substantially as an entirety or (iv) any other
transaction (or any other event shall occur) as a result of which
holders of Holding Company Common Stock (of either class) become
entitled to receive any Shares or other securities and/or property of
the Holding Company, any of its Subsidiaries or any other Person
(including, without limitation, cash) with respect to or in exchange
for the Holding Company Common Stock, there shall thereafter be
deliverable upon the exercise of this Warrant or any portion thereof
(in lieu of or in addition to the Warrant Shares theretofore
deliverable, as appropriate) the highest number of Shares or other
securities and/or the greatest amount of property (including, without
limitation, cash) to which the holder of the number of Warrant Shares
which would otherwise have been deliverable upon the exercise of this
Warrant or any portion thereof at the time would have been entitled
upon such reorganization or reclassification or recapitalization of
capital stock, consolidation, merger, sale, transfer, disposition or
other transaction or upon the occurrence of such other event, and at
the same aggregate Exercise Price.
Prior to and as a condition of the consummation of any
transaction or event described in the preceding sentence, the Holding
Company shall make equitable, written adjustments in the application
of the provisions set forth herein and in the other Operative
Documents for the benefit of the holders of the Warrants, in a manner
reasonably satisfactory to the Required Holders of the Warrants so
that all such provisions shall thereafter be applicable, as nearly as
possible, in relation to any Shares or other securities or other
property thereafter deliverable upon exercise of the Warrants and so
that the holders of the Warrants will (prior to exercise) enjoy all
of the rights and benefits enjoyed by any such Person who shall have
acquired any such Shares, other securities, or other property
(including, without limitation, cash) in connection with any such
transaction or event, including, without limitation, any subsequent
tender offer or redemption of any such Shares or other securities.
Any such adjustment shall be made by and set forth in a supplemental
agreement of the Holding Company and/or the successor entity, as
applicable, for the benefit of the holders of the Warrants, and in
form and substance reasonably acceptable to the Required Holders of
the Warrants, which agreement shall bind the Holding Company and/or
the successor entity, as applicable, and all holders of Warrants then
outstanding and shall be accompanied by a favorable opinion of the
regular outside counsel to the Holding Company or the successor
entity, as applicable (or such other firm as is reasonably acceptable
to the Required Holders of the Warrants), as to the enforceability of
such agreement and as to such other matters as the Required Holders
of the Warrants may reasonably request.
(h) Other Dilutive Events. If any other transaction or event
shall occur (excluding any transaction or event explicitly referred
to in this section 4.2, but including, without limitation, any
issuance, repurchase, redemption, or other distribution in respect of
any Shares or other securities of the Holding Company or of any other
Person, including any Person referred to in section 4.2(g)) as to
which the other provisions of this section 4 are not strictly
applicable but the failure to make any adjustment to the Exercise
Price or to any of the other terms of this Warrant would not fairly
protect the purchase rights and other rights represented by this
Warrant in accordance with the essential intent and principles
hereof, then, and as a condition to the consummation of any such
transaction or event, and in each such case, the Holding Company
shall appoint a firm of independent certified public accountants of
recognized national standing (which may be the regular auditors of
the Holding Company), which shall give its opinion as to the
adjustment, if any, on a basis consistent with the essential intent
and principles established in this section 4, necessary to preserve,
without dilution, the rights represented by this Warrant. The
certificate of any such firm of accountants shall be conclusive
evidence of the correctness of any computation made under this
section 4. The Holding Company shall pay the fees and expenses of
such firm of accountants in connection with any such opinion. Upon
receipt of such opinion, the Holding Company will promptly deliver a
copy thereof to the holder of this Warrant and shall make the
adjustments described therein.
(i) Determination of Consideration. For the purposes of this
section 4, the consideration received or receivable by the Holding
Company for the issuance, sale or grant of shares of Holding Company
Common Stock (of either class), Stock Purchase Rights or Convertible
Securities, irrespective of the accounting treatment of such
consideration, shall be valued and determined as follows:
(i) Cash Payment. In the case of cash, the gross amount
paid by the purchasers without deduction of any accrued interest
or dividends, any reasonable expenses paid or incurred and any
reasonable underwriting commissions or concessions paid or
allowed by the Holding Company in connection with such issue or
sale.
(ii) Non-Cash Payment. In the case of consideration other
than cash, the Fair Value thereof (in any case as of the date
immediately preceding the issuance, sale or grant in question).
(iii) Certain Allocations. If shares of Holding Company
Common Stock, Stock Purchase Rights and/or Convertible
Securities are issued or sold together with other securities or
other assets of the Holding Company for a consideration which
covers more than one of the foregoing categories of securities
and assets, the consideration received or receivable (computed
as provided in clauses (i) and (ii) of this section 4.2(i))
shall be allocable to such shares of Holding Company Common
Stock, Stock Purchase Rights and/or Convertible Securities as
reasonably determined in good faith by the board of directors of
the Holding Company (provided such allocation is set forth in a
written resolution and a certified copy thereof is furnished to
the holder of this Warrant promptly (but in any event within 10
days) following its adoption).
(iv) Dividends in Securities. If the Holding Company
shall declare a dividend or make any other distribution upon any
stock of the Holding Company payable in shares of Holding
Company Common Stock, Convertible Securities or Stock Purchase
Rights, such shares of Holding Company Common Stock, Convertible
Securities or Stock Purchase Rights, as the case may be,
issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
(v) Stock Purchase Rights and Convertible Securities.
The consideration for which each share of Holding Company Common
Stock shall be deemed to be issued upon the issuance or sale of
any Stock Purchase Rights or Convertible Securities shall be
determined by dividing (A) the total consideration, if any,
received by the Holding Company as consideration for the Stock
Purchase Rights or the Convertible Securities, as the case may
be, plus the minimum aggregate amount of additional
consideration, if any, ever payable to the Holding Company upon
the exercise of such Stock Purchase Rights and/or upon the
conversion or exchange of such Convertible Securities, as the
case may be, but without deduction of any accrued interest or
dividends, any reasonable expenses paid or incurred and any
reasonable underwriting commissions or concessions paid or
allowed by the Holding Company in connection with such issue or
sale; by (B) the maximum number of shares of Holding Company
Common Stock ever issuable upon the exercise of such Stock
Purchase Rights or upon the conversion or exchange of such
Convertible Securities.
(vi) Merger, Consolidation or Sale of Assets. If any
shares of Holding Company Common Stock (of either class),
Convertible Securities or Stock Purchase Rights are issued in
connection with any merger or consolidation of which the Holding
Company is the surviving corporation, the amount of
consideration therefor shall be deemed to be the Fair Value of
such portion of the assets and business of the non-surviving
corporation as shall be attributable to such Holding Company
Common Stock, Convertible Securities or Stock Purchase Rights,
as the case may be. In the event of (A) any merger or
consolidation of which the Holding Company is not the surviving
corporation or (B) the sale, transfer or other disposition of
the property, assets or business of the Holding Company as an
entirety or substantially as an entirety for Shares or Other
Securities of any other Person, the Holding Company shall be
deemed to have issued the number of shares of Holding Company
Common Stock for Shares or Other Securities of the surviving
corporation or such other Person computed on the basis of the
actual exchange ratio on which the transaction was predicated
and for a consideration equal to the Fair Value on the date of
such transaction of such Shares or Other Securities of the
surviving corporation or such other Person, and if any such
calculation results in adjustment of the Exercise Price, the
determination of the number of Warrant Shares issuable upon
exercise of this Warrant immediately prior to such merger,
consolidation or sale, for the purposes of section 4.2(g), shall
be made after giving effect to such adjustment of the Exercise
Price.
(j) Record Date. If the Holding Company shall take a record of
the holders of the Holding Company Common Stock (of either class) for
the purpose of entitling them (i) to receive a dividend or other
distribution payable in Holding Company Common Stock (of either
class), Convertible Securities or Stock Purchase Rights or (ii) to
subscribe for or purchase Holding Company Common Stock (of either
class), Convertible Securities or Stock Purchase Rights, then all
references in this section 4 to the date of the issue or sale of the
shares of Holding Company Common Stock (of either class) deemed to
have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be, shall be
deemed to be references to such record date.
(k) Shares Outstanding. The number of shares of Holding
Company Common Stock deemed to be outstanding at any given time shall
not include shares of Holding Company Common Stock held by the
Holding Company or any Subsidiary of the Holding Company.
(l) Maximum Exercise Price. At no time shall the Exercise
Price exceed the amount set forth in the first paragraph of the
Preamble of this Warrant except as a result of an adjustment thereto
pursuant to section 4.2(a)(iii) or 4.2(g).
(m) Application. All subdivisions of this section 4.2 are
intended to operate independently of one another. If a transaction
or an event occurs that requires the application of more than one
subdivision, all applicable subdivisions shall be given independent
effect (but without duplication of adjustment).
(n) No Adjustments Under Certain Circumstances. Anything in
this section 4.2 to the contrary notwithstanding, but subject to the
provisions of section 4.5, no adjustment to the Exercise Price shall
be made in the case of:
(i) any issuance of shares of Holding Company Class A
Common Stock (or Other Securities) upon the exercise in whole or
part of any of the Warrants;
(ii) (A) the granting after the Closing Date by the
Holding Company to any officer, director or employee of or
advisor or consultant to the Holding Company or the Operating
Company of options to purchase shares of Holding Company Class A
Common Stock pursuant to the Option Plan and (B) the issuance of
shares of Holding Company Class A Common Stock upon the exercise
of such options, provided that the aggregate number of shares of
Holding Company Class A Common Stock issued and issuable upon
exercise of such options shall not exceed 1,096,513 (being equal
to 10% of the Holding Company Common Stock as of the Closing
Date (calculated on a fully-diluted basis)) (such number of
shares to be adjusted appropriately for any subdivision,
combination, or other similar event with respect to the Holding
Company Class A Common Stock);
(iii) the issuance of shares of Holding Company Class A
Common Stock pursuant to any dividend reinvestment plan,
provided that the price per share of Holding Company Class A
Common Stock paid by plan participants is not less than 85% of
the Fair Value per share at the time of issuance; or
(iv) the issuance of up to 1,642,332 shares of Holding
Company Class A Common Stock (such number of shares to be
adjusted appropriately for any subdivision, combination, or
other similar event with respect to the Holding Company Class A
Common Stock) upon the conversion, exercise or exchange of any
securities convertible into and exercisable or exchangeable for
shares of Holding Company Class A Common Stock which are
outstanding on the Closing Date and specified on Exhibit 5.5(b)
attached to the Securities Purchase Agreements, including,
without limitation, the Holding Company's 10% Convertible
Subordinated Debentures, the Bridge Note and options outstanding
on the Closing Date under the Option Plan.
4.3. Rights Offering. If the Holding Company shall effect an
offering of securities pro rata among its stockholders, the holder hereof
shall be entitled, at its option, to elect to participate in each and
every such offering as if this Warrant had been exercised and such holder
were, at the time of any such offering, then a holder of that number of
Warrant Shares to which such holder is then entitled on the exercise
hereof.
4.4. Certificates and Notices.
(a) Adjustments to Exercise Price. As promptly as practicable
(but in any event not later than 15 days) after the occurrence of any
event requiring any adjustment under this section 4 to the Exercise
Price (or to the number or kind of securities or other property
deliverable upon the exercise of this Warrant), the Holding Company
shall, at its expense, deliver to the holder of this Warrant either
(i) an Officers' Certificate or (ii) a certificate signed by a firm
of independent certified public accountants of recognized national
standing (which may be the regular auditors of the Holding Company),
setting forth in reasonable detail the events requiring the
adjustment and the method by which such adjustment was calculated and
specifying the adjusted Exercise Price and the number of shares of
Holding Company Class A Common Stock (or Other Securities)
purchasable upon exercise of this Warrant after giving effect to such
adjustment. The certificate of any such firm of accountants shall be
conclusive evidence of the correctness of any computation made under
this section 4.
(b) Extraordinary Corporate Events. If and whenever the
Holding Company subsequent to the date hereof shall propose to (i)
pay any dividend to the holders of shares of Holding Company Common
Stock (of either class) or to make any other distribution to the
holders of shares of Holding Company Common Stock (of either class)
(other than as a regularly scheduled cash dividend), (ii) offer to
the holders of shares of Holding Company Common Stock (of either
class) rights to subscribe for or purchase any additional shares of
any class of stock or any other rights or options, (iii) effect any
reclassification of the Holding Company Common Stock (of either
class) or other Shares of the Holding Company (other than a
reclassification involving merely the subdivision or combination of
outstanding shares of Holding Company Common Stock referred to in
section 4.2(a)), (iv) engage in any reorganization or
recapitalization or any consolidation or merger, (v) consummate any
sale, transfer or other disposition of its property, assets and
business as an entirety or substantially as an entirety, (vi) effect
any other transaction which might require an adjustment to the
Exercise Price (or to the number or kind of securities or other
property deliverable upon the exercise of this Warrant), including,
without limitation, any transaction of the kind described in section
4.2(g) or (vii) commence or effect the liquidation, dissolution or
winding up of the Holding Company, then, in each such case, the
Holding Company shall deliver to the holder of this Warrant an
Officers' Certificate giving notice of such proposed action,
specifying (A) the date on which the stock transfer books of the
Holding Company shall close, or a record shall be taken, for
determining the holders of Holding Company Common Stock entitled to
receive such dividend or other distribution or such rights or
options, or the date on which such reclassification, reorganization,
recapitalization, consolidation, merger, sale, transfer, other
disposition, transaction, liquidation, dissolution or winding up
shall take place or commence, as the case may be, and (B) the date as
of which it is expected that holders of Holding Company Common Stock
of record shall be entitled to receive securities or other property
deliverable upon such action, if any such date is to be fixed. Such
Officers' Certificate shall be delivered in the case of any action
covered by clause (i) or (ii) above, at least 15 Business Days prior
to the record date for determining holders of Holding Company Common
Stock for purposes of receiving such payment or offer, and, in any
other case, at least 15 Business Days prior to the date upon which
such action takes place and 15 Business Days prior to any record date
to determine holders of Holding Company Common Stock entitled to
receive such securities or other property.
(c) Effect of Failure. Failure to give any certificate or
notice, or any defect in any certificate or notice required under
this section 4.4 shall not affect the legality or validity of the
adjustment of the Exercise Price or the number of Warrant Shares
purchasable upon exercise of this Warrant.
4.5. Adjustments for Changes in Certain Data; Additional
Adjustments.
(a) The Holding Company hereby agrees that the initial
aggregate number of shares of Holding Company Class A Common Stock
issuable upon exercise in full of the Warrants issued on the Closing
Date to the initial holders thereof was 592,177 shares of Holding
Company Class A Common Stock, which was intended to constitute 6% of
the shares of Holding Company Common Stock (of both classes)
outstanding immediately following the Closing (calculated on a fully-
diluted basis assuming the conversion, exercise and exchange of all
securities convertible into or exercisable or exchangeable for
Holding Company Common Stock (of either class), including, without
limitation, the shares of Holding Company Class A Common Stock
issuable upon exercise of such Warrants. If for any reason the
shares of Holding Company Class A Common Stock purchasable upon the
exercise of the Warrants issued on the Closing Date did not
constitute 6% of the shares of Holding Company Common Stock (of both
classes) outstanding as of such time (and as so calculated), the
Holding Company shall forthwith reissue each Warrant then outstanding
with appropriate adjustments in the Exercise Price and in the number
of shares of Holding Company Class A Common Stock issuable upon
exercise thereof (together with an Officers' Certificate setting
forth in reasonable detail the computation of such adjustments), and
all such adjustments shall be reasonably satisfactory to the holders
thereof.
(b) It is the intent of the Holding Company and the
Warrantholders that the percentage of the shares of Holding Company
Common Stock on a fully- diluted basis represented by the number of
Warrant Shares initially issuable upon exercise of the Warrants
(which is intended to be 6%; 592,177 represents 6% of 9,869,618
(being the sum of 9,277,441 and 592,177)) not be reduced on or after
the Closing Date by any Special Issuance (as defined below). If any
Special Issuance shall occur, then the aggregate number of shares of
Holding Company Class A Common Stock purchasable upon exercise of the
Warrants shall be increased (effective as of the Closing Date)
(without any adjustment in the aggregate Exercise Price) to the
aggregate number of shares of Holding Company Class A Common Stock
for which the Warrants would have been exercisable, on the Closing
Date, if the shares of Holding Company Common Stock issued or subject
to issuance in such Special Issuance had been outstanding on the
Closing Date and had been included for purposes of determining the
aggregate number of shares for which the Warrants were initially
exercisable, in order for such aggregate number of shares to
constitute 6% of the shares of Common Stock outstanding on a fully-
diluted basis on the Closing Date (including the shares of Holding
Company Class A Common Stock issuable upon the exercise of the
Warrants). In the event any Convertible Security or Stock Purchase
Right issued in any Special Issuance terminates without having been
converted or exercised in full, the adjustment pursuant to this
section 4.5(b) to the number of shares issuable upon exercise of the
Warrants shall be readjusted to the number which would have in effect
had such Convertible Security or Stock Purchase Right only been
convertible or exercisable for the number of shares of Holding
Company Common Stock actually issued upon the conversion or exercise
thereof, if any. All adjustments to the aggregate number of shares
of Holding Company Class A Common Stock issuable upon exercise of the
Warrants pursuant to this section 4.5(b) (x) shall be set forth in
reasonable detail in an Officers' Certificate which shall be
delivered by the Holding Company at the time of any Special Issuance,
(y) shall be reasonably satisfactory to the Required Holders of the
Warrants and (z) shall be allocated among each of the Warrants then
outstanding in proportion to the aggregate number of such shares
issuable upon exercise of each Warrant then outstanding (before
giving effect to such adjustment).
By way of example, if the Holding Company issues a Stock
Purchase Right in any Special Issuance for 10,000 shares of Holding
Company Common Stock, the number of Warrant Shares issuable upon
exercise of the Warrants shall be adjusted, at the time such Stock
Purchase Right is issued, initially to 592,815 (being 6% of
9,880,256, the new fully-diluted number of shares). If there had
been a prior adjustment pursuant to any provision of this section 4,
then such number of shares (592,815) shall be further adjusted by
recalculating such prior adjustment as if the number of shares
initially issuable upon exercise of the Warrants had been 592,815,
not 592,177. By way of example, if there had been a two for one
stock split prior to the date such Stock Purchase Right was issued,
the aggregate number of shares of Holding Company Class A Common
Stock issuable upon exercise of the Warrants would become 1,184,992
(being 6% of 19,749,874, the new fully-diluted number of shares), not
592,815.
For purposes hereof, "Special Issuance" shall mean (a) any
issuance of shares of Holding Company Common Stock pursuant to the
Investment Agreement dated March 13, 1997 between GreenGrass Holdings
and the Holding Company (the "Investment Agreement") (including any
shares issued pursuant to section 1.6 thereof) if, after giving
effect thereto, the aggregate number of shares of Holding Company
Common Stock issued or issuable pursuant to the Investment Agreement
exceeds 1,087,406 shares, (b) any issuance of shares of Holding
Company Common Stock in respect of the warrant issued to GreenGrass
Holdings referred to in section 1.3 of the Investment Agreement if,
after giving effect thereto, the aggregate number of shares issued or
issuable in respect thereof exceeds 50,000 shares or any adjustment
to the number of shares of Holding Company Common Stock issuable upon
exercise of such warrant to a number in excess of 50,000, (c) any
issuance of the Rights Shares and/or Remaining Rights Shares (each as
defined in the Investment Agreement) or any issuance of shares of
Holding Company Common Stock, Stock Purchase Rights or Convertible
Securities in respect of principal or interest due on the Bridge Note
if, after giving effect thereto, the aggregate number of Rights
Shares and Remaining Rights Shares issued or issuable pursuant to the
Investment Agreement and shares of Holding Company Common Stock
issued or issuable in respect of the Bridge Note exceeds 543,703
shares, (d) any issuance of shares of Holding Company Common Stock,
Stock Purchase Rights or Convertible Securities in respect of the
Holding Company's 10% Convertible Subordinated Debentures due 2004
(the "Debentures") outstanding in an aggregate principal amount of
$5,322,804 on the Closing Date if, after giving effect thereto, the
aggregate number of shares issued or issuable in respect thereof
exceeds 1,108,918 shares, including any issuance in respect of
interest due on such outstanding Debentures, or any adjustment to the
aggregate number of shares issuable upon conversion of such
outstanding Debentures to a number in excess of 1,108,918, (e) any
issuance of additional Debentures after the Closing Date (the
"Additional Debentures") (including, without limitation, those
subject to the Registration Statement filed with the Commission on
May 16, 1996 relating to the offering of Debentures in the principal
amount of $3,333,333) and any issuance of shares of Holding Company
Common Stock, Stock Purchase Rights or Convertible Securities in
respect of the Additional Debentures, including any issuance in
respect of interest due on such Additional Debentures, and (f) any
issuance of shares of Holding Company Common Stock, Stock Purchase
Rights or Convertible Securities pursuant to any stock option plan
(including the Option Plan) (except as provided in section
4.2(n)(ii)) if, after giving effect thereto, the aggregate number of
shares issued or issuable in respect thereof exceeds 483,414 shares.
5. Registration, Repurchase, Required Exercise, etc. Reference is
hereby made to the Securities Purchase Agreements for certain provisions
relating to (a) registration rights of the holders of the Warrants and
Warrant Shares, (b) the repurchase of the Warrants and/or Warrant Shares
at the option of the holders thereof and/or the Holding Company and
(c) the required exercise of the Warrants at the option of the Holding
Company.
6. Reservation of Holding Company Common Stock. The Holding Company has
reserved and at all times after the date hereof will reserve and keep
available, solely for issuance, sale and delivery upon the exercise of
this Warrant, such number of shares of Holding Company Class A Common
Stock (and/or Other Securities) equal to the number of shares of Holding
Company Class A Common Stock (and/or Other Securities) purchasable from
time to time upon the exercise of this Warrant. All such shares of
Holding Company Class A Common Stock (and/or Other Securities) shall be
duly authorized and, when issued upon exercise of this Warrant in
accordance with the terms hereof, will be validly issued and fully paid
and nonassessable with no liability on the part of the holders thereof and
not subject to preemptive rights on the part of any other Person or to any
lien, charge or other security interest but in each case subject to the
applicable terms of the Securities Purchase Agreements.
7. Various Covenants of the Holding Company.
7.1. No Impairment or Amendment. The Holding Company shall not
by any action including, without limitation, amending its Organizational
Documents, any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of Shares or other
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate to
protect the rights of the holder hereof against impairment. Without
limiting the generality of the foregoing, the Holding Company (a) will not
permit the par value of any Warrant Shares issuable upon exercise of this
Warrant to be greater than the amount payable therefor upon such exercise,
(b) will take all such action as may be necessary or appropriate in order
that the Holding Company may validly issue fully paid and nonassessable
Warrant Shares, (c) will obtain and maintain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
as may be necessary to enable the Holding Company to perform its
obligations under this Warrant, (d) will not issue any capital stock or
enter into any agreement, the terms of which would have the effect,
directly or indirectly, of preventing the Holding Company from honoring
its obligations hereunder or under the other Operative Documents,
including, without limitation, sections 11 and/or 12 of the Securities
Purchase Agreements, and (e) will not amend or modify any term, condition
or provision of its Organizational Documents, or any related agreement,
document or instrument, if the effect thereof is, or could reasonably be
expected to be, adverse in any material respect to the interests of any
holder of the Warrants.
So long as any Warrants or Warrant Shares are outstanding, upon
request of any holder of any such security, the Holding Company will
acknowledge in writing, in form satisfactory to such holder, the continued
validity of the Holding Company's obligations hereunder.
7.2. Listing on Securities Exchanges, etc. At all times
following the exercise of this Warrant, the Holding Company will maintain
the listing of all Warrant Shares on each securities exchange or market or
trading system on which the Holding Company Common Stock (or any Other
Securities) is then or at any time thereafter listed or traded.
7.3. Anti-Dilution Provisions. If the Holding Company issues
any Stock Purchase Rights or Convertible Securities or other securities
containing provisions protecting the holder or holders thereof against
dilution in any manner more favorable to such holder or holders thereof
than those set forth in this Warrant, such provisions (or any more
favorable portion thereof) shall be deemed to be incorporated herein as if
fully set forth in this Warrant and, to the extent inconsistent with any
provision of this Warrant, shall be deemed to be substituted therefor.
7.4. Indemnification. Without limiting the generality of any
provision of the Securities Purchase Agreements or any of the other
Operative Documents, the Holding Company shall indemnify, save and hold
harmless the holder of this Warrant and the holder of any Warrant Shares
from and against any and all liability, loss, cost, damage, reasonable
attorneys' and accountants' fees and expenses, court costs and all other
out-of-pocket expenses reasonably incurred by such holder in connection
with interpreting, preserving, exercising and/or enforcing any of the
terms hereof.
7.5. Certain Expenses. The Holding Company shall pay all
expenses in connection with, and all taxes (other than income, franchise
and stock transfer taxes) and other governmental charges that may be
imposed in respect of, the issue, sale and delivery of this Warrant and
any Warrant Shares.
7.6. Certain Dividends, etc. If and whenever subsequent to the
Closing Date the Holding Company shall declare or pay any dividend or
other distribution on any shares of Holding Company Class A Common Stock
or shall effect any other transaction as a result of which holders of any
shares of Holding Company Class A Common Stock shall be entitled to
receive any dividend or other distribution (excluding dividends or other
distributions of the kinds referred to in section 4.2(a)) with respect to
or in exchange for any shares of Holding Company Class A Common Stock,
then the Holding Company shall pay (or cause to be paid) to each holder of
any Warrant the same dividend or other distribution such holder would have
received had such holder exercised such Warrant in full immediately prior
to the date upon which such dividend or other distribution is paid (or
immediately prior to any record date for such dividend or other
distribution, if applicable).
8. Miscellaneous.
8.1. Nonwaiver. No course of dealing or any delay or failure to
exercise any right, power or remedy hereunder on the part of the holder of
this Warrant or of any Warrant Shares shall operate as a waiver of or
otherwise prejudice such holder's rights, powers or remedies.
8.2. Amendment. Any term, covenant, agreement or condition of
the Warrants may, with the consent of the Holding Company, be amended, or
compliance therewith may be waived (either generally or in a particular
instance and either retroactively or prospectively), by one or more
substantially concurrent written instruments signed by the Required
Holders of the Warrants, provided that (a) no such amendment or waiver
shall change the number of Warrant Shares issuable upon the exercise of
any Warrant or the manner of exercise or the amount of any payment due
upon exercise or the duration of the Exercise Period without the prior
written consent of the holder of such Warrant and (b) no such amendment or
waiver shall extend to or affect any obligation not expressly amended or
waived or impair any right consequent thereon.
8.3. Communications. All communications provided for herein
shall be delivered, mailed or sent by facsimile transmission addressed in
the manner and shall be effective as of the time specified in the
Securities Purchase Agreements.
8.4. Like Tenor. All Warrants shall at all times be identical,
except as to the preamble to each Warrant.
8.5. Remedies. The Holding Company stipulates that the remedies
at law of the holder or holders of this Warrant and/or of any Warrant
Shares in the event of any default or threatened default by the Holding
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for
the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
No remedy conferred in this Warrant on the holder of any Warrant or
Warrant Shares is intended to be exclusive of any other remedy, and each
and every such remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or under any other agreement, document
or instrument or now or hereafter existing at law or in equity or by
statute or otherwise.
8.6. Successors and Assigns. This Warrant and the rights
evidenced hereby shall inure to the benefit of and be binding upon the
successors and assigns of the Holding Company, the holder or holders of
this Warrant and, as applicable, of any Warrant Shares, to the extent
provided herein, and shall be enforceable by such holder or holders.
8.7. Governing Law. This Warrant, including the validity hereof
and the rights and obligations of the Holding Company and of the holder
hereof and all amendments and supplements hereof and all waivers and
consents hereunder, shall be construed in accordance with and governed by
the domestic substantive laws of The Commonwealth of Massachusetts without
giving effect to any choice of law or conflicts of law provision or rule
that would cause the application of the domestic substantive laws of any
other jurisdiction.
8.8. Headings; Entire Agreement; Partial Invalidity, etc. The
table of contents to and headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
This Warrant, together with the other Operative Documents, embodies the
entire agreement and understanding between the holder hereof and the
Holding Company and supersedes all prior agreements and understandings
relating to the subject matter hereof. In case any provision in this
Warrant or any of the other Operative Documents shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
8.9. No Rights or Liabilities as a Stockholder. This Warrant
shall not entitle the holder hereof to any voting rights or other rights
as a stockholder of the Holding Company, provided that nothing in this
section 8.9 shall be construed to affect any rights the holder of this
Warrant may have under any other provision of this Warrant or any of the
other Operative Documents or under any applicable law. No provision of
this Warrant, in the absence of an affirmative action by the holder hereof
to purchase Holding Company Common Stock, and no mere enumeration herein
of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder as a stockholder of the Holding Company, whether
such liability is asserted by the Holding Company, by creditors of the
Holding Company or by any other Person.
[The remainder of this page is left blank intentionally.]
IN WITNESS WHEREOF, the Holding Company has caused this Warrant to be
executed as an instrument under seal by its duly authorized officer as of
the date first above written.
SWING-N-SLIDE CORP.
By: /s/ Richard E. Ruegger
Vice President - Finance
<PAGE>
Exhibit 2.2(a)
FORM OF NOTICE OF EXERCISE
(To be executed only upon partial or full exercise
of the within Warrant)
The undersigned registered holder of the within Warrant irrevocably
exercises the within Warrant for and purchases__________________________
shares of Common Stock of SWING-N-SLIDE CORP. and herewith makes payment
therefor in the amount of $_________________, all at the price, in the
manner and on the terms and conditions specified in the within Warrant,
and requests that a certificate (or___________certificates in
denominations of_________________shares) for such shares hereby purchased
be issued in the name of and delivered to (choose one) (a) the undersigned
or (b)________________________________________, whose address is
___________________________ and, if such shares shall not include all the
Warrant Shares issuable as provided in the within Warrant, that a new
Warrant of like tenor for the number of Warrant Shares not being purchased
hereunder be issued in the name of and delivered to (choose one) (a) the
undersigned or (b) _________________________, whose address is
______________________________.
Dated:_______________ , _____.
[ ]
By ________________________________
(Signature of Registered Holder)
NOTICE: The signature on this Notice of Exercise must correspond with
the name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
<PAGE>
Exhibit 3
FORM OF ASSIGNMENT
(To be executed only upon the assignment
of the within Warrant)
FOR VALUE RECEIVED, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto _______________________ ,
whose address is ______________________________________________________ ,
all of the rights of the undersigned under the within Warrant, with
respect to ________ shares of Common Stock of SWING-N-SLIDE CORP. and, if
such shares shall not include all the Warrant Shares issuable as provided
in the within Warrant, that a new Warrant of like tenor for the number of
Warrant Shares not being transferred hereunder be issued in the name of
and delivered to [choose one] (a) the undersigned or (b)_________________
whose address is ________________________________________________________,
and does hereby irrevocably constitute and appoint ______________________
_________________________ Attorney to register such transfer on the books of
SWING-N-SLIDE CORP. maintained for the purpose, with full power of
substitution in the premises.
Dated: _______________ , ____ .
[ ]
By ________________________________
(Signature of Registered Holder)
NOTICE: The signature on this Assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
CONFORMED COPY
WARRANT
To Purchase 91,472 Shares of Common Stock of
SWING-N-SLIDE CORP.
March 13, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions 2
1.1. Definitions of Terms 2
1.2. Other Definitions 4
2. Exercise of Warrant 5
2.1. Right to Exercise; Notice 5
2.2. Manner of Exercise; Issuance of Holding Company
Common Stock 5
2.3. Effectiveness of Exercise 6
2.4. Fractional Shares 6
2.5. Automatic Exercise on Last Day of Exercise Period 7
2.6. Continued Validity 7
3. Registration, Transfer, Exchange and Replacement of Securities;
Legends 7
3.1. Registration, Transfer, Exchange and Replacement
of Securities 7
3.2. Legends 8
4. Anti-Dilution Provisions 8
4.1. Adjustment of Number of Shares Purchasable 8
4.2. Adjustment of Exercise Price 8
4.3. Rights Offering 17
4.4. Certificates and Notices 17
4.5. Adjustments for Changes in Certain Data; Additional
Adjustments 18
5. Registration, Repurchase, Required Exercise, etc. 21
6. Reservation of Holding Company Common Stock 21
7. Various Covenants of the Holding Company 21
7.1. No Impairment or Amendment 21
7.2. Listing on Securities Exchanges, etc. 22
7.3. Anti-Dilution Provisions 22
7.4. Indemnification 22
7.5. Certain Expenses 22
7.6. Certain Dividends, etc. 22
8. Miscellaneous 23
8.1. Nonwaiver 23
8.2. Amendment 23
8.3. Communications 23
8.4. Like Tenor 23
8.5. Remedies 23
8.6. Successors and Assigns 23
8.7. Governing Law 24
8.8. Headings; Entire Agreement; Partial Invalidity, etc. 24
8.9. No Rights or Liabilities as a Stockholder 24
Exhibit 2.2(a) Form of Notice of Exercise
Exhibit 3.1 Form of Assignment
<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF REGISTRATION
THEREUNDER OR AN EXEMPTION THEREFROM.
WARRANT
To Purchase 91,472 Shares of Common Stock of
SWING-N-SLIDE CORP.
No. RW-2 March 13, 1997
THIS IS TO CERTIFY that, for value received, MASSACHUSETTS MUTUAL
LIFE INSURANCE COMPANY, or registered assigns, is entitled upon the due
exercise hereof at any time during the Exercise Period (as hereinafter
defined) to purchase in the aggregate 91,472 shares of Common Stock, $.01
par value, of SWING-N-SLIDE CORP., a Delaware corporation (the "Holding
Company"), at an Exercise Price of $.001 per share (such Exercise Price
and the number of shares of Common Stock purchasable hereunder being
subject to adjustment as provided herein), and to exercise the other
rights, powers and privileges hereinafter provided, all on the terms and
subject to the conditions hereinafter set forth.
This Warrant is one of the Holding Company's Warrants to Purchase
Shares of Common Stock (herein, together with any warrants issued in
exchange therefor or replacement thereof, all as amended or supplemented
from time to time, called the "Warrants") initially exercisable in the
aggregate for 592,177 (subject to adjustment) shares of Holding Company
Class A Common Stock and issued pursuant to those certain Securities
Purchase Agreements, dated the Closing Date, by and among the Holding
Company, Newco, Inc. and the institutional investors named therein (as
amended, modified and supplemented from time to time, the "Securities
Purchase Agreements"). Reference is hereby made to the Securities Purchase
Agreements for a description of, among other things, certain terms
relating to the Warrants and the Warrant Shares and certain rights of the
holders hereof and thereof, including, without limitation (a) the rights
of the holders to require the repurchase of the Warrants and the Warrant
Shares and to require the registration of the Warrant Shares, and (b) the
right of the Holding Company to repurchase the Warrants and to require the
exercise of the Warrants. Holders of Warrants and/or Warrant Shares are
entitled to the applicable benefits of the Securities Purchase Agreements
and the other Operative Documents and may enforce the applicable
agreements contained therein, all in accordance with the terms thereof,
notwithstanding any payment or prepayment or redemption or acquisition of
any of the other Securities issued pursuant to the Securities Purchase
Agreements.
1. Definitions.
1.1. Definitions of Terms. Terms used herein without definition
which are defined in the Securities Purchase Agreements have the meanings
ascribed to them therein, unless the context clearly requires otherwise,
including, without limitation, the following terms: "Bridge Note",
"Closing", "Commission", "corporation", "Notes", "Officers' Certificate",
"Operating Company", "Operative Documents", "Option Plan", "Organizational
Documents", "Person", "Preferred Shares", "Required Holders", "Securities
Act", "shares" and "Subsidiary". In addition, the terms defined in this
section 1, whenever used and capitalized in this Warrant, shall, unless
the context otherwise requires, have the following respective meanings:
"Additional Debentures" shall have the meaning specified in section
4.5(b).
"Assignment" shall mean the form of Assignment appearing at the end
of this Warrant.
"Closing Date" shall mean March 13, 1997.
"Convertible Securities" shall mean evidences of indebtedness, Shares
(including, without limitation, any Preferred Shares) or other securities
which are convertible into or exchangeable or exercisable for, with or
without payment of additional consideration, shares of Holding Company
Common Stock (of either class), either immediately or upon the arrival of
a specified date or the happening of a specified event.
"Current Market Price" of any security (including, without
limitation, any share of Holding Company Common Stock) as of any date
herein specified shall mean the average of the daily closing prices for
the 20 consecutive trading days immediately prior to, but not including
the day in question (or in the event that a security has been traded for
less than 20 days, each of the trading days prior to the day in question
on which such security has been traded). The closing price for each day
shall be (a) if such security is listed or admitted for trading on any
domestic national securities exchange, the closing sale price of such
security, regular way, or the average of the closing bid prices thereof if
no such sale occurred, in each case as officially reported on the
principal securities exchange on which such security is listed, or (b) if
not reported as described in clause (a), the closing sale price of such
security, or the average of the closing bid prices thereof if no such sale
occurred, in each case as reported by the NASDAQ Stock Market, or any
similar system of automated dissemination of quotations of securities
prices then in common use, if so quoted, as reported by any member firm of
the New York Stock Exchange selected by the Holding Company, or (c) if not
quoted as described in clause (b), the average of the closing bid and
asked prices for such security as reported by the National Quotation
Bureau Incorporated or any similar successor organization, as reported by
any member firm of the New York Stock Exchange selected by the Holding
Company.
"Debentures" shall have the meaning specified in section 4.5(b).
"Exercise Period" shall mean the period commencing on the Closing
Date and terminating on the later of (a) March 13, 2003 and (b) the date
upon which all of the Notes have been paid in full, subject to the right
of the Holding Company to repurchase the Warrants and to require the
exercise of the Warrants, all as set forth in the Securities Purchase
Agreements.
"Exercise Price" shall mean the price per share of Holding Company
Common Stock set forth in the preamble to this Warrant, as such price may
be adjusted pursuant to section 4.
"Fair Value" shall mean the fair value of the appropriate security
(including, without limitation, any share of Holding Company Common
Stock), property, assets, business or entity as determined by the board of
directors of the Holding Company, provided that if, within 15 days
following receipt of the writing setting forth any such determination of
Fair Value, the Required Holders of the Warrants shall notify the Holding
Company of their disagreement with such determination, then the Fair Value
shall be determined by an independent investment banking firm of
recognized national standing (selected by the Holding Company and
reasonably satisfactory to the Required Holders of the Warrants). Each
determination of Fair Value shall be made without applying a discount for
any lack of liquidity or absence of control but shall otherwise be made in
accordance with generally accepted financial practice and shall be set
forth in writing, and the Holding Company shall, immediately following
such determination, deliver a copy thereof to each holder or holders of
Warrants then outstanding. The determination of any such independent
investment banking firm so made shall be conclusive and binding on the
Holding Company and on such holder or holders. The Holding Company shall
pay all of the expenses incurred in connection with any such
determination, including, without limitation, the expenses of the
independent investment banking firm engaged to make such determination.
If the Holding Company shall not have selected such investment banking
firm within 20 days after the occurrence of the event giving rise to the
need therefor, then the Required Holders of the Warrants at the time
outstanding may select such investment banking firm. Notwithstanding the
foregoing, in the case of any security, if clauses (a), (b) or (c) of the
definition of Current Market Price are applicable to such security, then
the Fair Value of such security shall be the Current Market Price of such
security.
"Holding Company" shall mean Swing-N-Slide Corp., a Delaware
corporation.
"Holding Company Class A Common Stock" shall mean the Common Stock,
$.01 par value, of the Holding Company as constituted on the Closing Date
and any Shares into which such Common Stock shall have been changed or any
Shares resulting from any reclassification of such Common Stock.
"Holding Company Class B Common Stock" shall mean the Class B Common
Stock, $.01 par value, of the Holding Company as constituted on the
Closing Date and any Shares into which such Class B Common Stock shall
have been changed or any Shares resulting from any reclassification of
such Class B Common Stock.
"Holding Company Common Stock" shall mean the Holding Company Class A
Common Stock and the Holding Company Class B Common Stock.
"Investment Agreement" shall have the meaning specified in section
4.5(b).
"Notice of Exercise" shall mean the form of Notice of Exercise
appearing at the end of this Warrant.
"Other Securities" shall mean with reference to the exercise
privilege of the holders of the Warrants, any Shares (other than Holding
Company Class A Common Stock) and any other securities of the Holding
Company (including, without limitation, Preferred Shares) or of any other
Person which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise or partial exercise of
the Warrants, in lieu of or in addition to Holding Company Class A Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Holding Company Class A Common Stock (or
Other Securities) pursuant to the terms of the Warrants or otherwise.
"Securities Purchase Agreements" shall have the meaning specified in
the preamble to this Warrant.
"Special Issuance" shall have the meaning specified in section
4.5(b).
"Stock Purchase Rights" shall mean any warrants, options or other
rights to subscribe for, purchase or otherwise acquire any shares of
Holding Company Common Stock (of either class) or any Convertible
Securities, either immediately or upon the arrival of a specified date or
the happening of a specified event.
"Warrant Shares" shall mean the shares of Holding Company Class A
Common Stock (and/or Other Securities) issued or issuable, as the case may
be, from time to time upon exercise of the Warrants, including, without
limitation, any shares of Holding Company Class A Common Stock (and/or
Other Securities) issued or issuable with respect thereto by way of stock
dividend or distribution or in connection with a combination of shares,
recapitalization, merger, consolidation, other reorganization or
otherwise.
"Warrants" shall have the meaning specified in the preamble to this
Warrant.
1.2. Other Definitions. The terms defined in this section 1.2,
whenever used in this Warrant, shall, unless the context otherwise
requires, have the following respective meanings:
"this Warrant" (and similar references to any of the other Operative
Documents) shall mean, and the words "herein" (and "therein"), "hereof"
(and "thereof"), "hereunder" (and "thereunder") and words of similar
import shall, unless the context clearly requires otherwise, refer to,
such instruments as they may from time to time be amended, modified or
supplemented.
2. Exercise of Warrant.
2.1. Right to Exercise; Notice. On the terms and subject to the
conditions of this section 2, the holder hereof shall have the right, at
its option, to exercise this Warrant in whole or in part at any time or
from time to time during the Exercise Period, all as more fully specified
below, provided that a partial exercise of this Warrant for less than the
entire remaining amount of Warrant Shares issuable under this Warrant
shall be made only for a whole number of shares.
2.2. Manner of Exercise; Issuance of Holding Company Common
Stock. To exercise this Warrant, the holder hereof shall deliver to the
Holding Company (a) a Notice of Exercise (substantially in the form of
Exhibit 2.2(a) attached hereto) duly executed by the holder hereof (or its
attorney) specifying the number of Warrant Shares to be purchased, (b) an
amount equal to the aggregate Exercise Price for all Warrant Shares as to
which this Warrant is then being exercised and (c) this Warrant. At the
option of the holder hereof, payment of the Exercise Price shall be made
(w) by wire transfer of funds to an account in a bank located in the
United States designated by the Holding Company for such purpose, (x) by
check payable to the order of the Holding Company, (y) by application of
any Warrant Shares or any Notes, as provided below, or (z) by any
combination of such methods.
Upon the exercise of this Warrant in whole or in part, the holder
hereof may, at its option, submit to the Holding Company written
instructions from such holder to apply any specified portion of the
Warrant Shares issuable upon such exercise in payment of the Exercise
Price required upon such exercise, in which case the Holding Company will
accept such specified portion of the Warrant Shares (at a value per share
equal to the Current Market Price of such share, if applicable, or the
then Fair Value of such share less, in each case, the Exercise Price then
in effect), in lieu of a like amount of such cash payment.
Upon the exercise of this Warrant in whole or in part by the holder
of any Note, such holder may, at its option, surrender such Note to the
Holding Company together with written instructions from such holder to
apply all or any specified principal amount of such Note against the
payment of some or all of the Exercise Price required upon such exercise,
in which case the Holding Company will accept such specified principal
amount in lieu of a like amount of such cash payment. In lieu of or in
addition to the aforesaid application, such holder may, without
surrendering such Note, furnish the Holding Company with written
instructions to apply all or any specified amount of accrued interest on
such Note against the payment of some or all of the Exercise Price
required upon such exercise, in which case the Holding Company will accept
such specified accrued interest in lieu of a like amount of cash. Upon
any such partial application of the principal of any Note, the Holding
Company at its expense will cause the Operating Company to promptly issue
and deliver to or upon the order of the holder thereof a new Note or Notes
equal in aggregate principal amount to the unpaid principal amount of such
surrendered Note not so applied and dated so as to result in no loss of
interest. At the time of surrender of any Note pursuant to this section
2.2, the Holding Company will cause the Operating Company to pay to the
holder surrendering such Note all interest on the principal amount thereof
so applied accrued to and including the date of such surrender.
Upon receipt of the items referred to in section 2.3, the Holding
Company shall, as promptly as practicable, and in any event within five
days thereafter, cause to be issued and delivered to the holder hereof (or
its nominee) or the transferee designated in the Notice of Exercise, a
certificate or certificates representing the number of Warrant Shares
specified in the Notice of Exercise (but not exceeding the maximum number
of shares issuable upon exercise of this Warrant) minus the number of
Warrant Shares, if any, applied in payment of the Exercise Price. Such
certificates shall be registered in the name of the holder hereof (or its
nominee) or in the name of such transferee, as the case may be.
If this Warrant is exercised in part, the Holding Company shall, at
the time of delivery of such certificate or certificates, issue and
deliver to the holder hereof or the transferee so designated in the Notice
of Exercise, a new Warrant evidencing the right of the holder hereof or
such transferee to purchase at the Exercise Price then in effect the
aggregate number of Warrant Shares for which this Warrant shall not have
been exercised and this Warrant shall be cancelled.
2.3. Effectiveness of Exercise. Unless otherwise requested by
the holder hereof, this Warrant shall be deemed to have been exercised and
such certificate or certificates representing Warrant Shares shall be
deemed to have been issued, and the holder or transferee so designated in
the Notice of Exercise shall be deemed to have become the holder of record
of such Warrant Shares for all purposes, as of the close of business on
the date on which the Notice of Exercise, the Exercise Price and this
Warrant shall have been received by the Holding Company.
2.4. Fractional Shares. The Holding Company shall not issue
fractional Warrant Shares or scrip representing fractional Warrant Shares
upon any exercise of this Warrant. As to any fractional Warrant Shares
which the holder hereof would otherwise be entitled to purchase from the
Holding Company upon such exercise, the Holding Company shall pay such
holder a cash adjustment for such fraction in an amount equal to the same
fraction of the Fair Value of a share of Holding Company Common Stock as
of the date of the Notice of Exercise.
2.5. Automatic Exercise on Last Day of Exercise Period. If this
Warrant shall not have been exercised in full on or before the last day of
the Exercise Period, then this Warrant shall be automatically exercised,
without further action on the part of the holder hereof, in full on and as
of the last day of the Exercise Period, unless at any time on or before
such last day of the Exercise Period the holder of this Warrant shall
notify the Holding Company in writing that no such automatic exercise is
to occur. Payment of the Exercise Price due in connection with any such
automatic exercise pursuant to this section 2.5 shall be made by
application of that portion of the Warrant Shares issuable upon such
exercise (at a value per share equal to the then Fair Value thereof) equal
to the aggregate Exercise Price which is due upon such exercise, unless at
any time on or before such last day of the Exercise Period the holder of
this Warrant shall notify the Holding Company that such holder elects one
of the other payment options set forth in section 2.2. As promptly as
practicable following any such automatic exercise, and in any event within
five days after the last day of the Exercise Period, the Holding Company
shall cause to be issued and delivered to the holder hereof a certificate
registered in the name of the holder hereof (unless the holder shall
specifically instruct the Holding Company otherwise) representing the
Warrant Shares issued in connection with such automatic exercise of this
Warrant minus the number of Warrant Shares, if any, applied in payment of
the Exercise Price. Upon receipt of such certificate, the holder of this
Warrant shall promptly surrender this Warrant to the Holding Company for
cancellation.
2.6. Continued Validity. A holder of Warrant Shares issued upon
the exercise of this Warrant, in whole or in part, shall continue to be
entitled to all rights to which a holder of this Warrant is entitled
pursuant to the provisions of this Warrant except such rights as by their
terms apply solely to the holder of a Warrant, notwithstanding that this
Warrant is cancelled following such exercise. The Holding Company will,
at the time of any exercise of this Warrant, upon the request of the
holder of the Warrant Shares issued upon the exercise hereof, acknowledge
in writing, in form reasonably satisfactory to such holder, its continuing
obligation to afford to such holder all rights to which such holder shall
continue to be entitled after such exercise in accordance with the
provisions of this Warrant, including, without limitation, those set forth
in sections 7.1, 7.2, 7.4 and 7.5 of this Warrant; provided that if such
holder shall fail to make any such request, such failure shall not affect
the continuing obligation of the Holding Company to afford to such holder
all such rights.
3. Registration, Transfer, Exchange and Replacement of Securities;
Legends.
3.1. Registration, Transfer, Exchange and Replacement of
Securities. Reference is hereby made to sections 17 and 18 of the
Securities Purchase Agreements for certain provisions relating to the
registration, transfer, exchange and replacement of the Warrants and
Warrant Shares. To transfer this Warrant, the holder shall deliver to the
Holding Company a Notice of Assignment (substantially in the form of
Exhibit 3.1 attached hereto) duly executed by the holder hereof (or its
attorney) specifying that this Warrant (or any portion hereof) is to be
transferred to the Person(s) named therein.
3.2. Legends. Neither this Warrant nor any Warrant Shares may
be transferred or assigned unless registered under the Securities Act or
unless an exemption from such registration is available. Until the date
on which a registration statement covering the Warrants becomes effective
under the Securities Act, each Warrant shall bear a legend in
substantially the following form:
"THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN THE
ABSENCE OF REGISTRATION THEREUNDER OR AN EXEMPTION
THEREFROM."
Until the date on which a registration statement covering the Warrant
Shares becomes effective under the Securities Act, each certificate
evidencing Warrant Shares shall bear a legend in substantially the
following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF REGISTRATION
THEREUNDER OR AN EXEMPTION THEREFROM."
4. Anti-Dilution Provisions.
4.1. Adjustment of Number of Shares Purchasable. Upon any
adjustment of the Exercise Price as provided in section 4.2, the holder
hereof shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Holding Company
Class A Common Stock (calculated to the nearest 1/100th of a share)
obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of shares of Holding Company Class A Common
Stock purchasable hereunder immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from such
adjustment.
4.2. Adjustment of Exercise Price. In addition to any
adjustment required under the provisions of section 4.5 below, and except
as otherwise provided in section 4.2(n) below, the Exercise Price shall be
subject to adjustment from time to time as set forth in this section 4.2.
(a) Stock Dividends, Distributions, Subdivisions and
Combinations. If and whenever the Holding Company subsequent to the
date hereof:
(i) declares a dividend upon, or makes any distribution in
respect of, any of its capital stock, payable in shares of
Holding Company Common Stock (of either class), Convertible
Securities or Stock Purchase Rights, or
(ii) subdivides its outstanding shares of Holding Company
Common Stock (of either class) into a larger number of shares of
Holding Company Common Stock (of such class), or
(iii) combines its outstanding shares of Holding
Company Common Stock (of either class) into a smaller number of
shares of Holding Company Common Stock (of such class),
then the Exercise Price shall be adjusted to that price determined by
multiplying the Exercise Price in effect immediately prior to such
event by a fraction (A) the numerator of which shall be the total
number of outstanding shares of Holding Company Common Stock (of
both classes) immediately prior to such event, and (B) the
denominator of which shall be the total number of outstanding shares
of Holding Company Common Stock (of both classes) immediately after
such event, treating as outstanding all shares of Holding Company
Common Stock issuable upon conversions or exchanges of any such
Convertible Securities issued in such dividend or distribution and
exercises of any such Stock Purchase Rights issued in such dividend
or distribution.
(b) Issuance of Additional Shares of Holding Company Common
Stock. If and whenever the Holding Company subsequent to the date
hereof shall issue or sell any shares of Holding Company Common Stock
(of either class) (except as otherwise provided in the last paragraph
of this section 4.2(b)), including, without limitation, any sale of
any treasury shares, for a consideration per share less than the Fair
Value per share (determined, in each case, as of the date specified
in the next succeeding paragraph), the Exercise Price upon each such
issuance or sale shall be adjusted as of the date specified in the
next succeeding paragraph to the price determined by multiplying the
Exercise Price in effect as of the date specified in the next
succeeding paragraph by a fraction the numerator of which is (i) the
sum of (A) the number of shares of Holding Company Common Stock (of
both classes) outstanding immediately prior to such issue or sale
multiplied by the Fair Value per share of Holding Company Common
Stock immediately prior to such issue or sale plus (B) the aggregate
consideration, if any, received by the Holding Company upon such
issue or sale, divided by (ii) the total number of shares of Holding
Company Common Stock (of both classes) outstanding immediately after
such issue or sale, and the denominator of which is the Fair Value
per share of Holding Company Common Stock immediately prior to such
issue or sale.
For the purposes of this section 4.2(b), the date as of which
the Exercise Price shall be adjusted and the date as of which the
Fair Value shall be determined shall be the earlier of (A) the date
on which the Holding Company shall enter into a firm contract for the
issuance of such shares of Holding Company Common Stock and (B)
immediately prior to the date of actual issuance of such shares of
Holding Company Common Stock.
No adjustment of the Exercise Price shall be made under this
section 4.2(b) upon the issuance of any shares of Holding Company
Common Stock which are (i) distributed to holders of Holding Company
Common Stock pursuant to a stock dividend, distribution or
subdivision for which an adjustment shall previously have been made
under section 4.2(a) or (ii) issued pursuant to the exercise of any
Stock Purchase Rights or pursuant to the conversion or exchange of
any Convertible Securities to the extent that an adjustment shall
previously have been made upon the issuance of such Stock Purchase
Rights or Convertible Securities pursuant to sections 4.2(a), (c) or
(d).
(c) Issuance of Stock Purchase Rights. If and whenever the
Holding Company subsequent to the date hereof shall issue or sell any
Stock Purchase Rights (except as otherwise provided in the last
paragraph of this section 4.2(c)) and the consideration per share for
which shares of Holding Company Common Stock (of either class) may at
any time thereafter be issuable upon exercise thereof (or, in the
case of Stock Purchase Rights exercisable for the purchase of
Convertible Securities, upon the subsequent conversion or exchange of
such Convertible Securities) shall be less than the Fair Value per
share (determined, in each case, as of the date specified in the next
succeeding paragraph), the Exercise Price upon each such issuance or
sale shall be adjusted as provided in section 4.2(b) as of the date
specified in the next succeeding paragraph on the basis that the
maximum number of shares of Holding Company Common Stock ever
issuable upon exercise of such Stock Purchase Rights (or upon
conversion or exchange of such Convertible Securities following such
exercise) shall be deemed to have been issued as of the date of the
determination of the Fair Value specified in the next succeeding
paragraph.
For the purposes of this section 4.2(c), the date as of which
the Exercise Price shall be adjusted and the date as of which the
Fair Value shall be determined shall be the earlier of (A) the date
on which the Holding Company shall enter into a firm contract for the
issuance of such Stock Purchase Rights and (B) immediately prior to
the date of actual issuance of such Stock Purchase Rights.
No adjustment of the Exercise Price shall be made under this
section 4.2(c) upon the issuance of any Stock Purchase Rights to the
extent that an adjustment shall previously have been made upon the
issuance of such Stock Purchase Rights pursuant to section 4.2(a).
(d) Issuance of Convertible Securities. If and whenever the
Holding Company subsequent to the date hereof shall issue or sell any
Convertible Securities (except as otherwise provided in the last
paragraph of this section 4.2(d)) and the consideration per share for
which shares of Holding Company Common Stock (of either class) may at
any time thereafter be issuable pursuant to the terms of such
Convertible Securities shall be less than the Fair Value per share
(determined, in each case, as of the date specified in the next
succeeding paragraph), the Exercise Price upon each such issuance or
sale shall be adjusted as provided in section 4.2(b) as of the date
specified in the next succeeding paragraph on the basis that the
maximum number of shares of Holding Company Common Stock ever
necessary to effect the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued as of the
date of the determination of the Fair Value specified in the next
succeeding paragraph.
For the purposes of this section 4.2(d), the date as of which
the Exercise Price shall be adjusted and the date as of which the
Fair Value shall be determined shall be the earlier of (A) the date
on which the Holding Company shall enter into a firm contract for the
issuance of such Convertible Securities and (B) immediately prior to
the date of actual issuance of such Convertible Securities.
No adjustment of the Exercise Price shall be made under this
section 4.2(d) upon the issuance of any Convertible Securities which
are (i) distributed to holders of Holding Company Common Stock
pursuant to a stock dividend or distribution to the extent that an
adjustment shall previously have been made pursuant to section 4.2(a)
or (ii) issued pursuant to the exercise of any Stock Purchase Rights
to the extent that an adjustment shall previously have been made upon
the issuance of such Stock Purchase Rights pursuant to section 4.2(a)
or (c).
(e) Minimum Adjustment. If any adjustment of the Exercise
Price pursuant to this section 4.2 shall result in an adjustment of
less than $.0001, no such adjustment shall be made, but any such
lesser adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which, together
with any adjustments so carried forward, shall amount to $.0001;
provided that upon any adjustment of the Exercise Price resulting
from (i) the declaration of a dividend upon, or the making of any
distribution in respect of, any stock of the Holding Company payable
in Holding Company Common Stock, Stock Purchase Rights or Convertible
Securities or (ii) the reclassification by subdivision, combination
or otherwise, of the Holding Company Common Stock into a greater or
smaller number of shares, the foregoing figure of $.0001 (or such
figure as last adjusted) shall be proportionately adjusted, and
provided, further, that upon the exercise of this Warrant, the
Holding Company shall make all necessary adjustments (to the nearest
.0001 of a cent) not theretofore made to the Exercise Price up to and
including the date upon which this Warrant is exercised.
(f) Readjustment of Exercise Price. Upon each change in (i)
the consideration, if any, payable for any Stock Purchase Rights or
Convertible Securities referred to in section 4.2(a), (c) or (d),
(ii) the consideration, if any, payable upon exercise of such Stock
Purchase Rights or upon the conversion or exchange of such
Convertible Securities or (iii) the number of shares of Holding
Company Common Stock issuable upon the exercise of such Stock
Purchase Rights or the rate at which such Convertible Securities are
convertible into or exchangeable for shares of Holding Company Common
Stock, the Exercise Price in effect at the time of such event shall
forthwith be readjusted to the Exercise Price which would have been
in effect at such time had such Stock Purchase Rights or Convertible
Securities provided for such changed consideration, number of shares
of Holding Company Common Stock so issuable or conversion rate, as
the case may be, at the time initially granted, issued or sold. On
the expiration of any Stock Purchase Rights not exercised or of any
right to convert or exchange under any Convertible Securities not
exercised, the Exercise Price then in effect shall forthwith be
increased to the Exercise Price which would have been in effect at
the time of such expiration had such Stock Purchase Rights or
Convertible Securities never been issued. No readjustment of the
Exercise Price pursuant to this section 4.2(f) shall (i) increase the
Exercise Price by an amount in excess of the adjustment originally
made to the Exercise Price in respect of the issue, sale or grant of
the applicable Stock Purchase Rights or Convertible Securities or
(ii) require any adjustment to the amount paid or number of Warrant
Shares received by any Person upon any exercise of this Warrant prior
to the date upon which such readjustment to the Exercise Price shall
occur.
(g) Reorganization, Reclassification or Recapitalization of the
Holding Company. If and whenever subsequent to the date hereof the
Holding Company shall effect (i) any reorganization or
reclassification or recapitalization of the capital stock of the
Holding Company (other than in the cases referred to in section
4.2(a)), (ii) any consolidation or merger of the Holding Company with
or into another Person, (iii) the sale, transfer or other disposition
of the property, assets or business of the Holding Company as an
entirety or substantially as an entirety or (iv) any other
transaction (or any other event shall occur) as a result of which
holders of Holding Company Common Stock (of either class) become
entitled to receive any Shares or other securities and/or property of
the Holding Company, any of its Subsidiaries or any other Person
(including, without limitation, cash) with respect to or in exchange
for the Holding Company Common Stock, there shall thereafter be
deliverable upon the exercise of this Warrant or any portion thereof
(in lieu of or in addition to the Warrant Shares theretofore
deliverable, as appropriate) the highest number of Shares or other
securities and/or the greatest amount of property (including, without
limitation, cash) to which the holder of the number of Warrant Shares
which would otherwise have been deliverable upon the exercise of this
Warrant or any portion thereof at the time would have been entitled
upon such reorganization or reclassification or recapitalization of
capital stock, consolidation, merger, sale, transfer, disposition or
other transaction or upon the occurrence of such other event, and at
the same aggregate Exercise Price.
Prior to and as a condition of the consummation of any
transaction or event described in the preceding sentence, the Holding
Company shall make equitable, written adjustments in the application
of the provisions set forth herein and in the other Operative
Documents for the benefit of the holders of the Warrants, in a manner
reasonably satisfactory to the Required Holders of the Warrants so
that all such provisions shall thereafter be applicable, as nearly as
possible, in relation to any Shares or other securities or other
property thereafter deliverable upon exercise of the Warrants and so
that the holders of the Warrants will (prior to exercise) enjoy all
of the rights and benefits enjoyed by any such Person who shall have
acquired any such Shares, other securities, or other property
(including, without limitation, cash) in connection with any such
transaction or event, including, without limitation, any subsequent
tender offer or redemption of any such Shares or other securities.
Any such adjustment shall be made by and set forth in a supplemental
agreement of the Holding Company and/or the successor entity, as
applicable, for the benefit of the holders of the Warrants, and in
form and substance reasonably acceptable to the Required Holders of
the Warrants, which agreement shall bind the Holding Company and/or
the successor entity, as applicable, and all holders of Warrants then
outstanding and shall be accompanied by a favorable opinion of the
regular outside counsel to the Holding Company or the successor
entity, as applicable (or such other firm as is reasonably acceptable
to the Required Holders of the Warrants), as to the enforceability of
such agreement and as to such other matters as the Required Holders
of the Warrants may reasonably request.
(h) Other Dilutive Events. If any other transaction or event
shall occur (excluding any transaction or event explicitly referred
to in this section 4.2, but including, without limitation, any
issuance, repurchase, redemption, or other distribution in respect of
any Shares or other securities of the Holding Company or of any other
Person, including any Person referred to in section 4.2(g)) as to
which the other provisions of this section 4 are not strictly
applicable but the failure to make any adjustment to the Exercise
Price or to any of the other terms of this Warrant would not fairly
protect the purchase rights and other rights represented by this
Warrant in accordance with the essential intent and principles
hereof, then, and as a condition to the consummation of any such
transaction or event, and in each such case, the Holding Company
shall appoint a firm of independent certified public accountants of
recognized national standing (which may be the regular auditors of
the Holding Company), which shall give its opinion as to the
adjustment, if any, on a basis consistent with the essential intent
and principles established in this section 4, necessary to preserve,
without dilution, the rights represented by this Warrant. The
certificate of any such firm of accountants shall be conclusive
evidence of the correctness of any computation made under this
section 4. The Holding Company shall pay the fees and expenses of
such firm of accountants in connection with any such opinion. Upon
receipt of such opinion, the Holding Company will promptly deliver a
copy thereof to the holder of this Warrant and shall make the
adjustments described therein.
(i) Determination of Consideration. For the purposes of this
section 4, the consideration received or receivable by the Holding
Company for the issuance, sale or grant of shares of Holding Company
Common Stock (of either class), Stock Purchase Rights or Convertible
Securities, irrespective of the accounting treatment of such
consideration, shall be valued and determined as follows:
(i) Cash Payment. In the case of cash, the gross amount
paid by the purchasers without deduction of any accrued interest
or dividends, any reasonable expenses paid or incurred and any
reasonable underwriting commissions or concessions paid or
allowed by the Holding Company in connection with such issue or
sale.
(ii) Non-Cash Payment. In the case of consideration other
than cash, the Fair Value thereof (in any case as of the date
immediately preceding the issuance, sale or grant in question).
(iii) Certain Allocations. If shares of Holding
Company Common Stock, Stock Purchase Rights and/or Convertible
Securities are issued or sold together with other securities or
other assets of the Holding Company for a consideration which
covers more than one of the foregoing categories of securities
and assets, the consideration received or receivable (computed
as provided in clauses (i) and (ii) of this section 4.2(i))
shall be allocable to such shares of Holding Company Common
Stock, Stock Purchase Rights and/or Convertible Securities as
reasonably determined in good faith by the board of directors of
the Holding Company (provided such allocation is set forth in a
written resolution and a certified copy thereof is furnished to
the holder of this Warrant promptly (but in any event within 10
days) following its adoption).
(iv) Dividends in Securities. If the Holding Company shall
declare a dividend or make any other distribution upon any stock
of the Holding Company payable in shares of Holding Company
Common Stock, Convertible Securities or Stock Purchase Rights,
such shares of Holding Company Common Stock, Convertible
Securities or Stock Purchase Rights, as the case may be,
issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
(v) Stock Purchase Rights and Convertible Securities. The
consideration for which each share of Holding Company Common
Stock shall be deemed to be issued upon the issuance or sale of
any Stock Purchase Rights or Convertible Securities shall be
determined by dividing (A) the total consideration, if any,
received by the Holding Company as consideration for the Stock
Purchase Rights or the Convertible Securities, as the case may
be, plus the minimum aggregate amount of additional
consideration, if any, ever payable to the Holding Company upon
the exercise of such Stock Purchase Rights and/or upon the
conversion or exchange of such Convertible Securities, as the
case may be, but without deduction of any accrued interest or
dividends, any reasonable expenses paid or incurred and any
reasonable underwriting commissions or concessions paid or
allowed by the Holding Company in connection with such issue or
sale; by (B) the maximum number of shares of Holding Company
Common Stock ever issuable upon the exercise of such Stock
Purchase Rights or upon the conversion or exchange of such
Convertible Securities.
(vi) Merger, Consolidation or Sale of Assets. If any
shares of Holding Company Common Stock (of either class),
Convertible Securities or Stock Purchase Rights are issued in
connection with any merger or consolidation of which the Holding
Company is the surviving corporation, the amount of
consideration therefor shall be deemed to be the Fair Value of
such portion of the assets and business of the non-surviving
corporation as shall be attributable to such Holding Company
Common Stock, Convertible Securities or Stock Purchase Rights,
as the case may be. In the event of (A) any merger or
consolidation of which the Holding Company is not the surviving
corporation or (B) the sale, transfer or other disposition of
the property, assets or business of the Holding Company as an
entirety or substantially as an entirety for Shares or Other
Securities of any other Person, the Holding Company shall be
deemed to have issued the number of shares of Holding Company
Common Stock for Shares or Other Securities of the surviving
corporation or such other Person computed on the basis of the
actual exchange ratio on which the transaction was predicated
and for a consideration equal to the Fair Value on the date of
such transaction of such Shares or Other Securities of the
surviving corporation or such other Person, and if any such
calculation results in adjustment of the Exercise Price, the
determination of the number of Warrant Shares issuable upon
exercise of this Warrant immediately prior to such merger,
consolidation or sale, for the purposes of section 4.2(g), shall
be made after giving effect to such adjustment of the Exercise
Price.
(j) Record Date. If the Holding Company shall take a record of
the holders of the Holding Company Common Stock (of either class) for
the purpose of entitling them (i) to receive a dividend or other
distribution payable in Holding Company Common Stock (of either
class), Convertible Securities or Stock Purchase Rights or (ii) to
subscribe for or purchase Holding Company Common Stock (of either
class), Convertible Securities or Stock Purchase Rights, then all
references in this section 4 to the date of the issue or sale of the
shares of Holding Company Common Stock (of either class) deemed to
have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be, shall be
deemed to be references to such record date.
(k) Shares Outstanding. The number of shares of Holding
Company Common Stock deemed to be outstanding at any given time shall
not include shares of Holding Company Common Stock held by the
Holding Company or any Subsidiary of the Holding Company.
(l) Maximum Exercise Price. At no time shall the Exercise
Price exceed the amount set forth in the first paragraph of the
Preamble of this Warrant except as a result of an adjustment thereto
pursuant to section 4.2(a)(iii) or 4.2(g).
(m) Application. All subdivisions of this section 4.2 are
intended to operate independently of one another. If a transaction
or an event occurs that requires the application of more than one
subdivision, all applicable subdivisions shall be given independent
effect (but without duplication of adjustment).
(n) No Adjustments Under Certain Circumstances. Anything in
this section 4.2 to the contrary notwithstanding, but subject to the
provisions of section 4.5, no adjustment to the Exercise Price shall
be made in the case of:
(i) any issuance of shares of Holding Company Class A
Common Stock (or Other Securities) upon the exercise in whole or
part of any of the Warrants;
(ii) (A) the granting after the Closing Date by the Holding
Company to any officer, director or employee of or advisor or
consultant to the Holding Company or the Operating Company of
options to purchase shares of Holding Company Class A Common
Stock pursuant to the Option Plan and (B) the issuance of shares
of Holding Company Class A Common Stock upon the exercise of
such options, provided that the aggregate number of shares of
Holding Company Class A Common Stock issued and issuable upon
exercise of such options shall not exceed 1,096,513 (being equal
to 10% of the Holding Company Common Stock as of the Closing
Date (calculated on a fully-diluted basis)) (such number of
shares to be adjusted appropriately for any subdivision,
combination, or other similar event with respect to the Holding
Company Class A Common Stock);
(iii) the issuance of shares of Holding Company Class A
Common Stock pursuant to any dividend reinvestment plan,
provided that the price per share of Holding Company Class A
Common Stock paid by plan participants is not less than 85% of
the Fair Value per share at the time of issuance; or
(iv) the issuance of up to 1,642,332 shares of Holding
Company Class A Common Stock (such number of shares to be
adjusted appropriately for any subdivision, combination, or
other similar event with respect to the Holding Company Class A
Common Stock) upon the conversion, exercise or exchange of any
securities convertible into and exercisable or exchangeable for
shares of Holding Company Class A Common Stock which are
outstanding on the Closing Date and specified on Exhibit 5.5(b)
attached to the Securities Purchase Agreements, including,
without limitation, the Holding Company's 10% Convertible
Subordinated Debentures, the Bridge Note and options outstanding
on the Closing Date under the Option Plan.
4.3. Rights Offering. If the Holding Company shall effect an
offering of securities pro rata among its stockholders, the holder hereof
shall be entitled, at its option, to elect to participate in each and
every such offering as if this Warrant had been exercised and such holder
were, at the time of any such offering, then a holder of that number of
Warrant Shares to which such holder is then entitled on the exercise
hereof.
4.4. Certificates and Notices.
(a) Adjustments to Exercise Price. As promptly as practicable
(but in any event not later than 15 days) after the occurrence of any
event requiring any adjustment under this section 4 to the Exercise
Price (or to the number or kind of securities or other property
deliverable upon the exercise of this Warrant), the Holding Company
shall, at its expense, deliver to the holder of this Warrant either
(i) an Officers' Certificate or (ii) a certificate signed by a firm
of independent certified public accountants of recognized national
standing (which may be the regular auditors of the Holding Company),
setting forth in reasonable detail the events requiring the
adjustment and the method by which such adjustment was calculated and
specifying the adjusted Exercise Price and the number of shares of
Holding Company Class A Common Stock (or Other Securities)
purchasable upon exercise of this Warrant after giving effect to such
adjustment. The certificate of any such firm of accountants shall be
conclusive evidence of the correctness of any computation made under
this section 4.
(b) Extraordinary Corporate Events. If and whenever the
Holding Company subsequent to the date hereof shall propose to (i)
pay any dividend to the holders of shares of Holding Company Common
Stock (of either class) or to make any other distribution to the
holders of shares of Holding Company Common Stock (of either class)
(other than as a regularly scheduled cash dividend), (ii) offer to
the holders of shares of Holding Company Common Stock (of either
class) rights to subscribe for or purchase any additional shares of
any class of stock or any other rights or options, (iii) effect any
reclassification of the Holding Company Common Stock (of either
class) or other Shares of the Holding Company (other than a
reclassification involving merely the subdivision or combination of
outstanding shares of Holding Company Common Stock referred to in
section 4.2(a)), (iv) engage in any reorganization or
recapitalization or any consolidation or merger, (v) consummate any
sale, transfer or other disposition of its property, assets and
business as an entirety or substantially as an entirety, (vi) effect
any other transaction which might require an adjustment to the
Exercise Price (or to the number or kind of securities or other
property deliverable upon the exercise of this Warrant), including,
without limitation, any transaction of the kind described in section
4.2(g) or (vii) commence or effect the liquidation, dissolution or
winding up of the Holding Company, then, in each such case, the
Holding Company shall deliver to the holder of this Warrant an
Officers' Certificate giving notice of such proposed action,
specifying (A) the date on which the stock transfer books of the
Holding Company shall close, or a record shall be taken, for
determining the holders of Holding Company Common Stock entitled to
receive such dividend or other distribution or such rights or
options, or the date on which such reclassification, reorganization,
recapitalization, consolidation, merger, sale, transfer, other
disposition, transaction, liquidation, dissolution or winding up
shall take place or commence, as the case may be, and (B) the date as
of which it is expected that holders of Holding Company Common Stock
of record shall be entitled to receive securities or other property
deliverable upon such action, if any such date is to be fixed. Such
Officers' Certificate shall be delivered in the case of any action
covered by clause (i) or (ii) above, at least 15 Business Days prior
to the record date for determining holders of Holding Company Common
Stock for purposes of receiving such payment or offer, and, in any
other case, at least 15 Business Days prior to the date upon which
such action takes place and 15 Business Days prior to any record date
to determine holders of Holding Company Common Stock entitled to
receive such securities or other property.
(c) Effect of Failure. Failure to give any certificate or
notice, or any defect in any certificate or notice required under
this section 4.4 shall not affect the legality or validity of the
adjustment of the Exercise Price or the number of Warrant Shares
purchasable upon exercise of this Warrant.
4.5. Adjustments for Changes in Certain Data; Additional
Adjustments.
(a) The Holding Company hereby agrees that the initial
aggregate number of shares of Holding Company Class A Common Stock
issuable upon exercise in full of the Warrants issued on the Closing
Date to the initial holders thereof was 592,177 shares of Holding
Company Class A Common Stock, which was intended to constitute 6% of
the shares of Holding Company Common Stock (of both classes)
outstanding immediately following the Closing (calculated on a fully-
diluted basis assuming the conversion, exercise and exchange of all
securities convertible into or exercisable or exchangeable for
Holding Company Common Stock (of either class), including, without
limitation, the shares of Holding Company Class A Common Stock
issuable upon exercise of such Warrants. If for any reason the
shares of Holding Company Class A Common Stock purchasable upon the
exercise of the Warrants issued on the Closing Date did not
constitute 6% of the shares of Holding Company Common Stock (of both
classes) outstanding as of such time (and as so calculated), the
Holding Company shall forthwith reissue each Warrant then outstanding
with appropriate adjustments in the Exercise Price and in the number
of shares of Holding Company Class A Common Stock issuable upon
exercise thereof (together with an Officers' Certificate setting
forth in reasonable detail the computation of such adjustments), and
all such adjustments shall be reasonably satisfactory to the holders
thereof.
(b) It is the intent of the Holding Company and the
Warrantholders that the percentage of the shares of Holding Company
Common Stock on a fully- diluted basis represented by the number of
Warrant Shares initially issuable upon exercise of the Warrants
(which is intended to be 6%; 592,177 represents 6% of 9,869,618
(being the sum of 9,277,441 and 592,177)) not be reduced on or after
the Closing Date by any Special Issuance (as defined below). If any
Special Issuance shall occur, then the aggregate number of shares of
Holding Company Class A Common Stock purchasable upon exercise of the
Warrants shall be increased (effective as of the Closing Date)
(without any adjustment in the aggregate Exercise Price) to the
aggregate number of shares of Holding Company Class A Common Stock
for which the Warrants would have been exercisable, on the Closing
Date, if the shares of Holding Company Common Stock issued or subject
to issuance in such Special Issuance had been outstanding on the
Closing Date and had been included for purposes of determining the
aggregate number of shares for which the Warrants were initially
exercisable, in order for such aggregate number of shares to
constitute 6% of the shares of Common Stock outstanding on a fully-
diluted basis on the Closing Date (including the shares of Holding
Company Class A Common Stock issuable upon the exercise of the
Warrants). In the event any Convertible Security or Stock Purchase
Right issued in any Special Issuance terminates without having been
converted or exercised in full, the adjustment pursuant to this
section 4.5(b) to the number of shares issuable upon exercise of the
Warrants shall be readjusted to the number which would have in effect
had such Convertible Security or Stock Purchase Right only been
convertible or exercisable for the number of shares of Holding
Company Common Stock actually issued upon the conversion or exercise
thereof, if any. All adjustments to the aggregate number of shares
of Holding Company Class A Common Stock issuable upon exercise of the
Warrants pursuant to this section 4.5(b) (x) shall be set forth in
reasonable detail in an Officers' Certificate which shall be
delivered by the Holding Company at the time of any Special Issuance,
(y) shall be reasonably satisfactory to the Required Holders of the
Warrants and (z) shall be allocated among each of the Warrants then
outstanding in proportion to the aggregate number of such shares
issuable upon exercise of each Warrant then outstanding (before
giving effect to such adjustment).
By way of example, if the Holding Company issues a Stock
Purchase Right in any Special Issuance for 10,000 shares of Holding
Company Common Stock, the number of Warrant Shares issuable upon
exercise of the Warrants shall be adjusted, at the time such Stock
Purchase Right is issued, initially to 592,815 (being 6% of
9,880,256, the new fully-diluted number of shares). If there had
been a prior adjustment pursuant to any provision of this section 4,
then such number of shares (592,815) shall be further adjusted by
recalculating such prior adjustment as if the number of shares
initially issuable upon exercise of the Warrants had been 592,815,
not 592,177. By way of example, if there had been a two for one
stock split prior to the date such Stock Purchase Right was issued,
the aggregate number of shares of Holding Company Class A Common
Stock issuable upon exercise of the Warrants would become 1,184,992
(being 6% of 19,749,874, the new fully-diluted number of shares), not
592,815.
For purposes hereof, "Special Issuance" shall mean (a) any
issuance of shares of Holding Company Common Stock pursuant to the
Investment Agreement dated March 13, 1997 between GreenGrass Holdings
and the Holding Company (the "Investment Agreement") (including any
shares issued pursuant to section 1.6 thereof) if, after giving
effect thereto, the aggregate number of shares of Holding Company
Common Stock issued or issuable pursuant to the Investment Agreement
exceeds 1,087,406 shares, (b) any issuance of shares of Holding
Company Common Stock in respect of the warrant issued to GreenGrass
Holdings referred to in section 1.3 of the Investment Agreement if,
after giving effect thereto, the aggregate number of shares issued or
issuable in respect thereof exceeds 50,000 shares or any adjustment
to the number of shares of Holding Company Common Stock issuable upon
exercise of such warrant to a number in excess of 50,000, (c) any
issuance of the Rights Shares and/or Remaining Rights Shares (each as
defined in the Investment Agreement) or any issuance of shares of
Holding Company Common Stock, Stock Purchase Rights or Convertible
Securities in respect of principal or interest due on the Bridge Note
if, after giving effect thereto, the aggregate number of Rights
Shares and Remaining Rights Shares issued or issuable pursuant to the
Investment Agreement and shares of Holding Company Common Stock
issued or issuable in respect of the Bridge Note exceeds 543,703
shares, (d) any issuance of shares of Holding Company Common Stock,
Stock Purchase Rights or Convertible Securities in respect of the
Holding Company's 10% Convertible Subordinated Debentures due 2004
(the "Debentures") outstanding in an aggregate principal amount of
$5,322,804 on the Closing Date if, after giving effect thereto, the
aggregate number of shares issued or issuable in respect thereof
exceeds 1,108,918 shares, including any issuance in respect of
interest due on such outstanding Debentures, or any adjustment to the
aggregate number of shares issuable upon conversion of such
outstanding Debentures to a number in excess of 1,108,918, (e) any
issuance of additional Debentures after the Closing Date (the
"Additional Debentures") (including, without limitation, those
subject to the Registration Statement filed with the Commission on
May 16, 1996 relating to the offering of Debentures in the principal
amount of $3,333,333) and any issuance of shares of Holding Company
Common Stock, Stock Purchase Rights or Convertible Securities in
respect of the Additional Debentures, including any issuance in
respect of interest due on such Additional Debentures, and (f) any
issuance of shares of Holding Company Common Stock, Stock Purchase
Rights or Convertible Securities pursuant to any stock option plan
(including the Option Plan) (except as provided in section
4.2(n)(ii)) if, after giving effect thereto, the aggregate number of
shares issued or issuable in respect thereof exceeds 483,414 shares.
5. Registration, Repurchase, Required Exercise, etc. Reference is
hereby made to the Securities Purchase Agreements for certain provisions
relating to (a) registration rights of the holders of the Warrants and
Warrant Shares, (b) the repurchase of the Warrants and/or Warrant Shares
at the option of the holders thereof and/or the Holding Company and
(c) the required exercise of the Warrants at the option of the Holding
Company.
6. Reservation of Holding Company Common Stock. The Holding Company has
reserved and at all times after the date hereof will reserve and keep
available, solely for issuance, sale and delivery upon the exercise of
this Warrant, such number of shares of Holding Company Class A Common
Stock (and/or Other Securities) equal to the number of shares of Holding
Company Class A Common Stock (and/or Other Securities) purchasable from
time to time upon the exercise of this Warrant. All such shares of
Holding Company Class A Common Stock (and/or Other Securities) shall be
duly authorized and, when issued upon exercise of this Warrant in
accordance with the terms hereof, will be validly issued and fully paid
and nonassessable with no liability on the part of the holders thereof and
not subject to preemptive rights on the part of any other Person or to any
lien, charge or other security interest but in each case subject to the
applicable terms of the Securities Purchase Agreements.
7. Various Covenants of the Holding Company.
7.1. No Impairment or Amendment. The Holding Company shall not
by any action including, without limitation, amending its Organizational
Documents, any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of Shares or other
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate to
protect the rights of the holder hereof against impairment. Without
limiting the generality of the foregoing, the Holding Company (a) will not
permit the par value of any Warrant Shares issuable upon exercise of this
Warrant to be greater than the amount payable therefor upon such exercise,
(b) will take all such action as may be necessary or appropriate in order
that the Holding Company may validly issue fully paid and nonassessable
Warrant Shares, (c) will obtain and maintain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
as may be necessary to enable the Holding Company to perform its
obligations under this Warrant, (d) will not issue any capital stock or
enter into any agreement, the terms of which would have the effect,
directly or indirectly, of preventing the Holding Company from honoring
its obligations hereunder or under the other Operative Documents,
including, without limitation, sections 11 and/or 12 of the Securities
Purchase Agreements, and (e) will not amend or modify any term, condition
or provision of its Organizational Documents, or any related agreement,
document or instrument, if the effect thereof is, or could reasonably be
expected to be, adverse in any material respect to the interests of any
holder of the Warrants.
So long as any Warrants or Warrant Shares are outstanding, upon
request of any holder of any such security, the Holding Company will
acknowledge in writing, in form satisfactory to such holder, the continued
validity of the Holding Company's obligations hereunder.
7.2. Listing on Securities Exchanges, etc. At all times
following the exercise of this Warrant, the Holding Company will maintain
the listing of all Warrant Shares on each securities exchange or market or
trading system on which the Holding Company Common Stock (or any Other
Securities) is then or at any time thereafter listed or traded.
7.3. Anti-Dilution Provisions. If the Holding Company issues
any Stock Purchase Rights or Convertible Securities or other securities
containing provisions protecting the holder or holders thereof against
dilution in any manner more favorable to such holder or holders thereof
than those set forth in this Warrant, such provisions (or any more
favorable portion thereof) shall be deemed to be incorporated herein as if
fully set forth in this Warrant and, to the extent inconsistent with any
provision of this Warrant, shall be deemed to be substituted therefor.
7.4. Indemnification. Without limiting the generality of any
provision of the Securities Purchase Agreements or any of the other
Operative Documents, the Holding Company shall indemnify, save and hold
harmless the holder of this Warrant and the holder of any Warrant Shares
from and against any and all liability, loss, cost, damage, reasonable
attorneys' and accountants' fees and expenses, court costs and all other
out-of-pocket expenses reasonably incurred by such holder in connection
with interpreting, preserving, exercising and/or enforcing any of the
terms hereof.
7.5. Certain Expenses. The Holding Company shall pay all
expenses in connection with, and all taxes (other than income, franchise
and stock transfer taxes) and other governmental charges that may be
imposed in respect of, the issue, sale and delivery of this Warrant and
any Warrant Shares.
7.6. Certain Dividends, etc. If and whenever subsequent to the
Closing Date the Holding Company shall declare or pay any dividend or
other distribution on any shares of Holding Company Class A Common Stock
or shall effect any other transaction as a result of which holders of any
shares of Holding Company Class A Common Stock shall be entitled to
receive any dividend or other distribution (excluding dividends or other
distributions of the kinds referred to in section 4.2(a)) with respect to
or in exchange for any shares of Holding Company Class A Common Stock,
then the Holding Company shall pay (or cause to be paid) to each holder of
any Warrant the same dividend or other distribution such holder would have
received had such holder exercised such Warrant in full immediately prior
to the date upon which such dividend or other distribution is paid (or
immediately prior to any record date for such dividend or other
distribution, if applicable).
8. Miscellaneous.
8.1. Nonwaiver. No course of dealing or any delay or failure to
exercise any right, power or remedy hereunder on the part of the holder of
this Warrant or of any Warrant Shares shall operate as a waiver of or
otherwise prejudice such holder's rights, powers or remedies.
8.2. Amendment. Any term, covenant, agreement or condition of
the Warrants may, with the consent of the Holding Company, be amended, or
compliance therewith may be waived (either generally or in a particular
instance and either retroactively or prospectively), by one or more
substantially concurrent written instruments signed by the Required
Holders of the Warrants, provided that (a) no such amendment or waiver
shall change the number of Warrant Shares issuable upon the exercise of
any Warrant or the manner of exercise or the amount of any payment due
upon exercise or the duration of the Exercise Period without the prior
written consent of the holder of such Warrant and (b) no such amendment or
waiver shall extend to or affect any obligation not expressly amended or
waived or impair any right consequent thereon.
8.3. Communications. All communications provided for herein
shall be delivered, mailed or sent by facsimile transmission addressed in
the manner and shall be effective as of the time specified in the
Securities Purchase Agreements.
8.4. Like Tenor. All Warrants shall at all times be identical,
except as to the preamble to each Warrant.
8.5. Remedies. The Holding Company stipulates that the remedies
at law of the holder or holders of this Warrant and/or of any Warrant
Shares in the event of any default or threatened default by the Holding
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for
the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
No remedy conferred in this Warrant on the holder of any Warrant or
Warrant Shares is intended to be exclusive of any other remedy, and each
and every such remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or under any other agreement, document
or instrument or now or hereafter existing at law or in equity or by
statute or otherwise.
8.6. Successors and Assigns. This Warrant and the rights
evidenced hereby shall inure to the benefit of and be binding upon the
successors and assigns of the Holding Company, the holder or holders of
this Warrant and, as applicable, of any Warrant Shares, to the extent
provided herein, and shall be enforceable by such holder or holders.
8.7. Governing Law. This Warrant, including the validity hereof
and the rights and obligations of the Holding Company and of the holder
hereof and all amendments and supplements hereof and all waivers and
consents hereunder, shall be construed in accordance with and governed by
the domestic substantive laws of The Commonwealth of Massachusetts without
giving effect to any choice of law or conflicts of law provision or rule
that would cause the application of the domestic substantive laws of any
other jurisdiction.
8.8. Headings; Entire Agreement; Partial Invalidity, etc. The
table of contents to and headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
This Warrant, together with the other Operative Documents, embodies the
entire agreement and understanding between the holder hereof and the
Holding Company and supersedes all prior agreements and understandings
relating to the subject matter hereof. In case any provision in this
Warrant or any of the other Operative Documents shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
8.9. No Rights or Liabilities as a Stockholder. This Warrant
shall not entitle the holder hereof to any voting rights or other rights
as a stockholder of the Holding Company, provided that nothing in this
section 8.9 shall be construed to affect any rights the holder of this
Warrant may have under any other provision of this Warrant or any of the
other Operative Documents or under any applicable law. No provision of
this Warrant, in the absence of an affirmative action by the holder hereof
to purchase Holding Company Common Stock, and no mere enumeration herein
of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder as a stockholder of the Holding Company, whether
such liability is asserted by the Holding Company, by creditors of the
Holding Company or by any other Person.
[The remainder of this page is left blank intentionally.]
IN WITNESS WHEREOF, the Holding Company has caused this Warrant to be
executed as an instrument under seal by its duly authorized officer as of
the date first above written.
SWING-N-SLIDE CORP.
By: /s/ Richard E. Ruegger
Vice President - Finance
<PAGE>
Exhibit 2.2(a)
FORM OF NOTICE OF EXERCISE
(To be executed only upon partial or full exercise
of the within Warrant)
The undersigned registered holder of the within Warrant irrevocably
exercises the within Warrant for and purchases__________________________
shares of Common Stock of SWING-N-SLIDE CORP. and herewith makes payment
therefor in the amount of $_________________, all at the price, in the
manner and on the terms and conditions specified in the within Warrant,
and requests that a certificate (or _________certificates in
denominations of_________________shares) for such shares hereby purchased
be issued in the name of and delivered to (choose one) (a) the undersigned
or (b)________________________________________, whose address is
________________________and, if such shares shall not include all the
Warrant Shares issuable as provided in the within Warrant, that a new
Warrant of like tenor for the number of Warrant Shares not being purchased
hereunder be issued in the name of and delivered to (choose one) (a) the
undersigned or (b)_____________________________________, whose address is
_______________________________________.
Dated:________________,_____ .
[ ]
By ______________________________
(Signature of Registered Holder)
NOTICE: The signature on this Notice of Exercise must correspond with
the name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
<PAGE>
Exhibit 3
FORM OF ASSIGNMENT
(To be executed only upon the assignment
of the within Warrant)
FOR VALUE RECEIVED, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto _______________________
whose address is _______________________________________________________,
all of the rights of the undersigned under the within Warrant, with
respect to______________ shares of Common Stock of SWING-N-SLIDE CORP. and,
if such shares shall not include all the Warrant Shares issuable as
provided in the within Warrant, that a new Warrant of like tenor for the
number of Warrant Shares not being transferred hereunder be issued in the
name of and delivered to [choose one] (a) the undersigned or (b)
_________________________ , whose address is_____________________________,
and does hereby irrevocably constitute and appoint_______________________
Attorney to register such transfer on the books of SWING-N-SLIDE CORP.
maintained for the purpose, with full power of substitution in the premises.
Dated: ________________ ,_____.
[ ]
By
(Signature of Registered Holder)
NOTICE: The signature on this Assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
CONFORMED COPY
WARRANT
To Purchase 148,044 Shares of Common Stock of
SWING-N-SLIDE CORP.
March 13, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions 2
1.1. Definitions of Terms 2
1.2. Other Definitions 4
2. Exercise of Warrant 5
2.1. Right to Exercise; Notice 5
2.2. Manner of Exercise; Issuance of Holding Company
Common Stock 5
2.3. Effectiveness of Exercise 6
2.4. Fractional Shares 6
2.5. Automatic Exercise on Last Day of Exercise Period 7
2.6. Continued Validity 7
3. Registration, Transfer, Exchange and Replacement of Securities;
Legends 7
3.1. Registration, Transfer, Exchange and Replacement of
Securities 7
3.2. Legends 8
4. Anti-Dilution Provisions 8
4.1. Adjustment of Number of Shares Purchasable 8
4.2. Adjustment of Exercise Price 8
4.3. Rights Offering 17
4.4. Certificates and Notices 17
4.5. Adjustments for Changes in Certain Data;
Additional Adjustments 18
5. Registration, Repurchase, Required Exercise, etc. 21
6. Reservation of Holding Company Common Stock 21
7. Various Covenants of the Holding Company 21
7.1. No Impairment or Amendment 21
7.2. Listing on Securities Exchanges, etc. 22
7.3. Anti-Dilution Provisions 22
7.4. Indemnification 22
7.5. Certain Expenses 22
7.6. Certain Dividends, etc. 22
8. Miscellaneous 23
8.1. Nonwaiver 23
8.2. Amendment 23
8.3. Communications 23
8.4. Like Tenor 23
8.5. Remedies 23
8.6. Successors and Assigns 23
8.7. Governing Law 24
8.8. Headings; Entire Agreement; Partial Invalidity, etc. 24
8.9. No Rights or Liabilities as a Stockholder 24
Exhibit 2.2(a) Form of Notice of Exercise
Exhibit 3.1 Form of Assignment
<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF REGISTRATION
THEREUNDER OR AN EXEMPTION THEREFROM.
WARRANT
To Purchase 148,044 Shares of Common Stock of
SWING-N-SLIDE CORP.
No. RW-3 March 13, 1997
THIS IS TO CERTIFY that, for value received, MASSMUTUAL CORPORATE
INVESTORS, or registered assigns, is entitled upon the due exercise hereof
at any time during the Exercise Period (as hereinafter defined) to
purchase in the aggregate 148,044 shares of Common Stock, $.01 par value,
of SWING-N-SLIDE CORP., a Delaware corporation (the "Holding Company"), at
an Exercise Price of $.001 per share (such Exercise Price and the number
of shares of Common Stock purchasable hereunder being subject to
adjustment as provided herein), and to exercise the other rights, powers
and privileges hereinafter provided, all on the terms and subject to the
conditions hereinafter set forth.
This Warrant is one of the Holding Company's Warrants to Purchase
Shares of Common Stock (herein, together with any warrants issued in
exchange therefor or replacement thereof, all as amended or supplemented
from time to time, called the "Warrants") initially exercisable in the
aggregate for 592,177 (subject to adjustment) shares of Holding Company
Class A Common Stock and issued pursuant to those certain Securities
Purchase Agreements, dated the Closing Date, by and among the Holding
Company, Newco, Inc. and the institutional investors named therein (as
amended, modified and supplemented from time to time, the "Securities
Purchase Agreements"). Reference is hereby made to the Securities Purchase
Agreements for a description of, among other things, certain terms
relating to the Warrants and the Warrant Shares and certain rights of the
holders hereof and thereof, including, without limitation (a) the rights
of the holders to require the repurchase of the Warrants and the Warrant
Shares and to require the registration of the Warrant Shares, and (b) the
right of the Holding Company to repurchase the Warrants and to require the
exercise of the Warrants. Holders of Warrants and/or Warrant Shares are
entitled to the applicable benefits of the Securities Purchase Agreements
and the other Operative Documents and may enforce the applicable
agreements contained therein, all in accordance with the terms thereof,
notwithstanding any payment or prepayment or redemption or acquisition of
any of the other Securities issued pursuant to the Securities Purchase
Agreements.
1. Definitions.
1.1. Definitions of Terms. Terms used herein without definition
which are defined in the Securities Purchase Agreements have the meanings
ascribed to them therein, unless the context clearly requires otherwise,
including, without limitation, the following terms: "Bridge Note",
"Closing", "Commission", "corporation", "Notes", "Officers' Certificate",
"Operating Company", "Operative Documents", "Option Plan", "Organizational
Documents", "Person", "Preferred Shares", "Required Holders", "Securities
Act", "shares" and "Subsidiary". In addition, the terms defined in this
section 1, whenever used and capitalized in this Warrant, shall, unless
the context otherwise requires, have the following respective meanings:
"Additional Debentures" shall have the meaning specified in section
4.5(b).
"Assignment" shall mean the form of Assignment appearing at the end
of this Warrant.
"Closing Date" shall mean March 13, 1997.
"Convertible Securities" shall mean evidences of indebtedness, Shares
(including, without limitation, any Preferred Shares) or other securities
which are convertible into or exchangeable or exercisable for, with or
without payment of additional consideration, shares of Holding Company
Common Stock (of either class), either immediately or upon the arrival of
a specified date or the happening of a specified event.
"Current Market Price" of any security (including, without
limitation, any share of Holding Company Common Stock) as of any date
herein specified shall mean the average of the daily closing prices for
the 20 consecutive trading days immediately prior to, but not including
the day in question (or in the event that a security has been traded for
less than 20 days, each of the trading days prior to the day in question
on which such security has been traded). The closing price for each day
shall be (a) if such security is listed or admitted for trading on any
domestic national securities exchange, the closing sale price of such
security, regular way, or the average of the closing bid prices thereof if
no such sale occurred, in each case as officially reported on the
principal securities exchange on which such security is listed, or (b) if
not reported as described in clause (a), the closing sale price of such
security, or the average of the closing bid prices thereof if no such sale
occurred, in each case as reported by the NASDAQ Stock Market, or any
similar system of automated dissemination of quotations of securities
prices then in common use, if so quoted, as reported by any member firm of
the New York Stock Exchange selected by the Holding Company, or (c) if not
quoted as described in clause (b), the average of the closing bid and
asked prices for such security as reported by the National Quotation
Bureau Incorporated or any similar successor organization, as reported by
any member firm of the New York Stock Exchange selected by the Holding
Company.
"Debentures" shall have the meaning specified in section 4.5(b).
"Exercise Period" shall mean the period commencing on the Closing
Date and terminating on the later of (a) March 13, 2003 and (b) the date
upon which all of the Notes have been paid in full, subject to the right
of the Holding Company to repurchase the Warrants and to require the
exercise of the Warrants, all as set forth in the Securities Purchase
Agreements.
"Exercise Price" shall mean the price per share of Holding Company
Common Stock set forth in the preamble to this Warrant, as such price may
be adjusted pursuant to section 4.
"Fair Value" shall mean the fair value of the appropriate security
(including, without limitation, any share of Holding Company Common
Stock), property, assets, business or entity as determined by the board of
directors of the Holding Company, provided that if, within 15 days
following receipt of the writing setting forth any such determination of
Fair Value, the Required Holders of the Warrants shall notify the Holding
Company of their disagreement with such determination, then the Fair Value
shall be determined by an independent investment banking firm of
recognized national standing (selected by the Holding Company and
reasonably satisfactory to the Required Holders of the Warrants). Each
determination of Fair Value shall be made without applying a discount for
any lack of liquidity or absence of control but shall otherwise be made in
accordance with generally accepted financial practice and shall be set
forth in writing, and the Holding Company shall, immediately following
such determination, deliver a copy thereof to each holder or holders of
Warrants then outstanding. The determination of any such independent
investment banking firm so made shall be conclusive and binding on the
Holding Company and on such holder or holders. The Holding Company shall
pay all of the expenses incurred in connection with any such
determination, including, without limitation, the expenses of the
independent investment banking firm engaged to make such determination.
If the Holding Company shall not have selected such investment banking
firm within 20 days after the occurrence of the event giving rise to the
need therefor, then the Required Holders of the Warrants at the time
outstanding may select such investment banking firm. Notwithstanding the
foregoing, in the case of any security, if clauses (a), (b) or (c) of the
definition of Current Market Price are applicable to such security, then
the Fair Value of such security shall be the Current Market Price of such
security.
"Holding Company" shall mean Swing-N-Slide Corp., a Delaware
corporation.
"Holding Company Class A Common Stock" shall mean the Common Stock,
$.01 par value, of the Holding Company as constituted on the Closing Date
and any Shares into which such Common Stock shall have been changed or any
Shares resulting from any reclassification of such Common Stock.
"Holding Company Class B Common Stock" shall mean the Class B Common
Stock, $.01 par value, of the Holding Company as constituted on the
Closing Date and any Shares into which such Class B Common Stock shall
have been changed or any Shares resulting from any reclassification of
such Class B Common Stock.
"Holding Company Common Stock" shall mean the Holding Company Class A
Common Stock and the Holding Company Class B Common Stock.
"Investment Agreement" shall have the meaning specified in section
4.5(b).
"Notice of Exercise" shall mean the form of Notice of Exercise
appearing at the end of this Warrant.
"Other Securities" shall mean with reference to the exercise
privilege of the holders of the Warrants, any Shares (other than Holding
Company Class A Common Stock) and any other securities of the Holding
Company (including, without limitation, Preferred Shares) or of any other
Person which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise or partial exercise of
the Warrants, in lieu of or in addition to Holding Company Class A Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Holding Company Class A Common Stock (or
Other Securities) pursuant to the terms of the Warrants or otherwise.
"Securities Purchase Agreements" shall have the meaning specified in
the preamble to this Warrant.
"Special Issuance" shall have the meaning specified in section
4.5(b).
"Stock Purchase Rights" shall mean any warrants, options or other
rights to subscribe for, purchase or otherwise acquire any shares of
Holding Company Common Stock (of either class) or any Convertible
Securities, either immediately or upon the arrival of a specified date or
the happening of a specified event.
"Warrant Shares" shall mean the shares of Holding Company Class A
Common Stock (and/or Other Securities) issued or issuable, as the case may
be, from time to time upon exercise of the Warrants, including, without
limitation, any shares of Holding Company Class A Common Stock (and/or
Other Securities) issued or issuable with respect thereto by way of stock
dividend or distribution or in connection with a combination of shares,
recapitalization, merger, consolidation, other reorganization or
otherwise.
"Warrants" shall have the meaning specified in the preamble to this
Warrant.
1.2. Other Definitions. The terms defined in this section 1.2,
whenever used in this Warrant, shall, unless the context otherwise
requires, have the following respective meanings:
"this Warrant" (and similar references to any of the other Operative
Documents) shall mean, and the words "herein" (and "therein"), "hereof"
(and "thereof"), "hereunder" (and "thereunder") and words of similar
import shall, unless the context clearly requires otherwise, refer to,
such instruments as they may from time to time be amended, modified or
supplemented.
2. Exercise of Warrant.
2.1. Right to Exercise; Notice. On the terms and subject to the
conditions of this section 2, the holder hereof shall have the right, at
its option, to exercise this Warrant in whole or in part at any time or
from time to time during the Exercise Period, all as more fully specified
below, provided that a partial exercise of this Warrant for less than the
entire remaining amount of Warrant Shares issuable under this Warrant
shall be made only for a whole number of shares.
2.2. Manner of Exercise; Issuance of Holding Company Common
Stock. To exercise this Warrant, the holder hereof shall deliver to the
Holding Company (a) a Notice of Exercise (substantially in the form of
Exhibit 2.2(a) attached hereto) duly executed by the holder hereof (or its
attorney) specifying the number of Warrant Shares to be purchased, (b) an
amount equal to the aggregate Exercise Price for all Warrant Shares as to
which this Warrant is then being exercised and (c) this Warrant. At the
option of the holder hereof, payment of the Exercise Price shall be made
(w) by wire transfer of funds to an account in a bank located in the
United States designated by the Holding Company for such purpose, (x) by
check payable to the order of the Holding Company, (y) by application of
any Warrant Shares or any Notes, as provided below, or (z) by any
combination of such methods.
Upon the exercise of this Warrant in whole or in part, the holder
hereof may, at its option, submit to the Holding Company written
instructions from such holder to apply any specified portion of the
Warrant Shares issuable upon such exercise in payment of the Exercise
Price required upon such exercise, in which case the Holding Company will
accept such specified portion of the Warrant Shares (at a value per share
equal to the Current Market Price of such share, if applicable, or the
then Fair Value of such share less, in each case, the Exercise Price then
in effect), in lieu of a like amount of such cash payment.
Upon the exercise of this Warrant in whole or in part by the holder
of any Note, such holder may, at its option, surrender such Note to the
Holding Company together with written instructions from such holder to
apply all or any specified principal amount of such Note against the
payment of some or all of the Exercise Price required upon such exercise,
in which case the Holding Company will accept such specified principal
amount in lieu of a like amount of such cash payment. In lieu of or in
addition to the aforesaid application, such holder may, without
surrendering such Note, furnish the Holding Company with written
instructions to apply all or any specified amount of accrued interest on
such Note against the payment of some or all of the Exercise Price
required upon such exercise, in which case the Holding Company will accept
such specified accrued interest in lieu of a like amount of cash. Upon
any such partial application of the principal of any Note, the Holding
Company at its expense will cause the Operating Company to promptly issue
and deliver to or upon the order of the holder thereof a new Note or Notes
equal in aggregate principal amount to the unpaid principal amount of such
surrendered Note not so applied and dated so as to result in no loss of
interest. At the time of surrender of any Note pursuant to this section
2.2, the Holding Company will cause the Operating Company to pay to the
holder surrendering such Note all interest on the principal amount thereof
so applied accrued to and including the date of such surrender.
Upon receipt of the items referred to in section 2.3, the Holding
Company shall, as promptly as practicable, and in any event within five
days thereafter, cause to be issued and delivered to the holder hereof (or
its nominee) or the transferee designated in the Notice of Exercise, a
certificate or certificates representing the number of Warrant Shares
specified in the Notice of Exercise (but not exceeding the maximum number
of shares issuable upon exercise of this Warrant) minus the number of
Warrant Shares, if any, applied in payment of the Exercise Price. Such
certificates shall be registered in the name of the holder hereof (or its
nominee) or in the name of such transferee, as the case may be.
If this Warrant is exercised in part, the Holding Company shall, at
the time of delivery of such certificate or certificates, issue and
deliver to the holder hereof or the transferee so designated in the Notice
of Exercise, a new Warrant evidencing the right of the holder hereof or
such transferee to purchase at the Exercise Price then in effect the
aggregate number of Warrant Shares for which this Warrant shall not have
been exercised and this Warrant shall be cancelled.
2.3. Effectiveness of Exercise. Unless otherwise requested by
the holder hereof, this Warrant shall be deemed to have been exercised and
such certificate or certificates representing Warrant Shares shall be
deemed to have been issued, and the holder or transferee so designated in
the Notice of Exercise shall be deemed to have become the holder of record
of such Warrant Shares for all purposes, as of the close of business on
the date on which the Notice of Exercise, the Exercise Price and this
Warrant shall have been received by the Holding Company.
2.4. Fractional Shares. The Holding Company shall not issue
fractional Warrant Shares or scrip representing fractional Warrant Shares
upon any exercise of this Warrant. As to any fractional Warrant Shares
which the holder hereof would otherwise be entitled to purchase from the
Holding Company upon such exercise, the Holding Company shall pay such
holder a cash adjustment for such fraction in an amount equal to the same
fraction of the Fair Value of a share of Holding Company Common Stock as
of the date of the Notice of Exercise.
2.5. Automatic Exercise on Last Day of Exercise Period. If this
Warrant shall not have been exercised in full on or before the last day of
the Exercise Period, then this Warrant shall be automatically exercised,
without further action on the part of the holder hereof, in full on and as
of the last day of the Exercise Period, unless at any time on or before
such last day of the Exercise Period the holder of this Warrant shall
notify the Holding Company in writing that no such automatic exercise is
to occur. Payment of the Exercise Price due in connection with any such
automatic exercise pursuant to this section 2.5 shall be made by
application of that portion of the Warrant Shares issuable upon such
exercise (at a value per share equal to the then Fair Value thereof) equal
to the aggregate Exercise Price which is due upon such exercise, unless at
any time on or before such last day of the Exercise Period the holder of
this Warrant shall notify the Holding Company that such holder elects one
of the other payment options set forth in section 2.2. As promptly as
practicable following any such automatic exercise, and in any event within
five days after the last day of the Exercise Period, the Holding Company
shall cause to be issued and delivered to the holder hereof a certificate
registered in the name of the holder hereof (unless the holder shall
specifically instruct the Holding Company otherwise) representing the
Warrant Shares issued in connection with such automatic exercise of this
Warrant minus the number of Warrant Shares, if any, applied in payment of
the Exercise Price. Upon receipt of such certificate, the holder of this
Warrant shall promptly surrender this Warrant to the Holding Company for
cancellation.
2.6. Continued Validity. A holder of Warrant Shares issued upon
the exercise of this Warrant, in whole or in part, shall continue to be
entitled to all rights to which a holder of this Warrant is entitled
pursuant to the provisions of this Warrant except such rights as by their
terms apply solely to the holder of a Warrant, notwithstanding that this
Warrant is cancelled following such exercise. The Holding Company will,
at the time of any exercise of this Warrant, upon the request of the
holder of the Warrant Shares issued upon the exercise hereof, acknowledge
in writing, in form reasonably satisfactory to such holder, its continuing
obligation to afford to such holder all rights to which such holder shall
continue to be entitled after such exercise in accordance with the
provisions of this Warrant, including, without limitation, those set forth
in sections 7.1, 7.2, 7.4 and 7.5 of this Warrant; provided that if such
holder shall fail to make any such request, such failure shall not affect
the continuing obligation of the Holding Company to afford to such holder
all such rights.
3. Registration, Transfer, Exchange and Replacement of Securities;
Legends.
3.1. Registration, Transfer, Exchange and Replacement of
Securities. Reference is hereby made to sections 17 and 18 of the
Securities Purchase Agreements for certain provisions relating to the
registration, transfer, exchange and replacement of the Warrants and
Warrant Shares. To transfer this Warrant, the holder shall deliver to the
Holding Company a Notice of Assignment (substantially in the form of
Exhibit 3.1 attached hereto) duly executed by the holder hereof (or its
attorney) specifying that this Warrant (or any portion hereof) is to be
transferred to the Person(s) named therein.
3.2. Legends. Neither this Warrant nor any Warrant Shares may
be transferred or assigned unless registered under the Securities Act or
unless an exemption from such registration is available. Until the date
on which a registration statement covering the Warrants becomes effective
under the Securities Act, each Warrant shall bear a legend in
substantially the following form:
"THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN THE
ABSENCE OF REGISTRATION THEREUNDER OR AN EXEMPTION
THEREFROM."
Until the date on which a registration statement covering the Warrant
Shares becomes effective under the Securities Act, each certificate
evidencing Warrant Shares shall bear a legend in substantially the
following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF REGISTRATION
THEREUNDER OR AN EXEMPTION THEREFROM."
4. Anti-Dilution Provisions.
4.1. Adjustment of Number of Shares Purchasable. Upon any
adjustment of the Exercise Price as provided in section 4.2, the holder
hereof shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Holding Company
Class A Common Stock (calculated to the nearest 1/100th of a share)
obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of shares of Holding Company Class A Common
Stock purchasable hereunder immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from such
adjustment.
4.2. Adjustment of Exercise Price. In addition to any
adjustment required under the provisions of section 4.5 below, and except
as otherwise provided in section 4.2(n) below, the Exercise Price shall be
subject to adjustment from time to time as set forth in this section 4.2.
(a) Stock Dividends, Distributions, Subdivisions and
Combinations. If and whenever the Holding Company subsequent to the
date hereof:
(i) declares a dividend upon, or makes any distribution in
respect of, any of its capital stock, payable in shares of
Holding Company Common Stock (of either class), Convertible
Securities or Stock Purchase Rights, or
(ii) subdivides its outstanding shares of Holding Company
Common Stock (of either class) into a larger number of shares of
Holding Company Common Stock (of such class), or
(iii) combines its outstanding shares of Holding
Company Common Stock (of either class) into a smaller number of
shares of Holding Company Common Stock (of such class),
then the Exercise Price shall be adjusted to that price determined by
multiplying the Exercise Price in effect immediately prior to such
event by a fraction (A) the numerator of which shall be the total
number of outstanding shares of Holding Company Common Stock (of
both classes) immediately prior to such event, and (B) the
denominator of which shall be the total number of outstanding shares
of Holding Company Common Stock (of both classes) immediately after
such event, treating as outstanding all shares of Holding Company
Common Stock issuable upon conversions or exchanges of any such
Convertible Securities issued in such dividend or distribution and
exercises of any such Stock Purchase Rights issued in such dividend
or distribution.
(b) Issuance of Additional Shares of Holding Company Common
Stock. If and whenever the Holding Company subsequent to the date
hereof shall issue or sell any shares of Holding Company Common Stock
(of either class) (except as otherwise provided in the last paragraph
of this section 4.2(b)), including, without limitation, any sale of
any treasury shares, for a consideration per share less than the Fair
Value per share (determined, in each case, as of the date specified
in the next succeeding paragraph), the Exercise Price upon each such
issuance or sale shall be adjusted as of the date specified in the
next succeeding paragraph to the price determined by multiplying the
Exercise Price in effect as of the date specified in the next
succeeding paragraph by a fraction the numerator of which is (i) the
sum of (A) the number of shares of Holding Company Common Stock (of
both classes) outstanding immediately prior to such issue or sale
multiplied by the Fair Value per share of Holding Company Common
Stock immediately prior to such issue or sale plus (B) the aggregate
consideration, if any, received by the Holding Company upon such
issue or sale, divided by (ii) the total number of shares of Holding
Company Common Stock (of both classes) outstanding immediately after
such issue or sale, and the denominator of which is the Fair Value
per share of Holding Company Common Stock immediately prior to such
issue or sale.
For the purposes of this section 4.2(b), the date as of which
the Exercise Price shall be adjusted and the date as of which the
Fair Value shall be determined shall be the earlier of (A) the date
on which the Holding Company shall enter into a firm contract for the
issuance of such shares of Holding Company Common Stock and (B)
immediately prior to the date of actual issuance of such shares of
Holding Company Common Stock.
No adjustment of the Exercise Price shall be made under this
section 4.2(b) upon the issuance of any shares of Holding Company
Common Stock which are (i) distributed to holders of Holding Company
Common Stock pursuant to a stock dividend, distribution or
subdivision for which an adjustment shall previously have been made
under section 4.2(a) or (ii) issued pursuant to the exercise of any
Stock Purchase Rights or pursuant to the conversion or exchange of
any Convertible Securities to the extent that an adjustment shall
previously have been made upon the issuance of such Stock Purchase
Rights or Convertible Securities pursuant to sections 4.2(a), (c) or
(d).
(c) Issuance of Stock Purchase Rights. If and whenever the
Holding Company subsequent to the date hereof shall issue or sell any
Stock Purchase Rights (except as otherwise provided in the last
paragraph of this section 4.2(c)) and the consideration per share for
which shares of Holding Company Common Stock (of either class) may at
any time thereafter be issuable upon exercise thereof (or, in the
case of Stock Purchase Rights exercisable for the purchase of
Convertible Securities, upon the subsequent conversion or exchange of
such Convertible Securities) shall be less than the Fair Value per
share (determined, in each case, as of the date specified in the next
succeeding paragraph), the Exercise Price upon each such issuance or
sale shall be adjusted as provided in section 4.2(b) as of the date
specified in the next succeeding paragraph on the basis that the
maximum number of shares of Holding Company Common Stock ever
issuable upon exercise of such Stock Purchase Rights (or upon
conversion or exchange of such Convertible Securities following such
exercise) shall be deemed to have been issued as of the date of the
determination of the Fair Value specified in the next succeeding
paragraph.
For the purposes of this section 4.2(c), the date as of which
the Exercise Price shall be adjusted and the date as of which the
Fair Value shall be determined shall be the earlier of (A) the date
on which the Holding Company shall enter into a firm contract for the
issuance of such Stock Purchase Rights and (B) immediately prior to
the date of actual issuance of such Stock Purchase Rights.
No adjustment of the Exercise Price shall be made under this
section 4.2(c) upon the issuance of any Stock Purchase Rights to the
extent that an adjustment shall previously have been made upon the
issuance of such Stock Purchase Rights pursuant to section 4.2(a).
(d) Issuance of Convertible Securities. If and whenever the
Holding Company subsequent to the date hereof shall issue or sell any
Convertible Securities (except as otherwise provided in the last
paragraph of this section 4.2(d)) and the consideration per share for
which shares of Holding Company Common Stock (of either class) may at
any time thereafter be issuable pursuant to the terms of such
Convertible Securities shall be less than the Fair Value per share
(determined, in each case, as of the date specified in the next
succeeding paragraph), the Exercise Price upon each such issuance or
sale shall be adjusted as provided in section 4.2(b) as of the date
specified in the next succeeding paragraph on the basis that the
maximum number of shares of Holding Company Common Stock ever
necessary to effect the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued as of the
date of the determination of the Fair Value specified in the next
succeeding paragraph.
For the purposes of this section 4.2(d), the date as of which
the Exercise Price shall be adjusted and the date as of which the
Fair Value shall be determined shall be the earlier of (A) the date
on which the Holding Company shall enter into a firm contract for the
issuance of such Convertible Securities and (B) immediately prior to
the date of actual issuance of such Convertible Securities.
No adjustment of the Exercise Price shall be made under this
section 4.2(d) upon the issuance of any Convertible Securities which
are (i) distributed to holders of Holding Company Common Stock
pursuant to a stock dividend or distribution to the extent that an
adjustment shall previously have been made pursuant to section 4.2(a)
or (ii) issued pursuant to the exercise of any Stock Purchase Rights
to the extent that an adjustment shall previously have been made upon
the issuance of such Stock Purchase Rights pursuant to section 4.2(a)
or (c).
(e) Minimum Adjustment. If any adjustment of the Exercise
Price pursuant to this section 4.2 shall result in an adjustment of
less than $.0001, no such adjustment shall be made, but any such
lesser adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which, together
with any adjustments so carried forward, shall amount to $.0001;
provided that upon any adjustment of the Exercise Price resulting
from (i) the declaration of a dividend upon, or the making of any
distribution in respect of, any stock of the Holding Company payable
in Holding Company Common Stock, Stock Purchase Rights or Convertible
Securities or (ii) the reclassification by subdivision, combination
or otherwise, of the Holding Company Common Stock into a greater or
smaller number of shares, the foregoing figure of $.0001 (or such
figure as last adjusted) shall be proportionately adjusted, and
provided, further, that upon the exercise of this Warrant, the
Holding Company shall make all necessary adjustments (to the nearest
.0001 of a cent) not theretofore made to the Exercise Price up to and
including the date upon which this Warrant is exercised.
(f) Readjustment of Exercise Price. Upon each change in (i)
the consideration, if any, payable for any Stock Purchase Rights or
Convertible Securities referred to in section 4.2(a), (c) or (d),
(ii) the consideration, if any, payable upon exercise of such Stock
Purchase Rights or upon the conversion or exchange of such
Convertible Securities or (iii) the number of shares of Holding
Company Common Stock issuable upon the exercise of such Stock
Purchase Rights or the rate at which such Convertible Securities are
convertible into or exchangeable for shares of Holding Company Common
Stock, the Exercise Price in effect at the time of such event shall
forthwith be readjusted to the Exercise Price which would have been
in effect at such time had such Stock Purchase Rights or Convertible
Securities provided for such changed consideration, number of shares
of Holding Company Common Stock so issuable or conversion rate, as
the case may be, at the time initially granted, issued or sold. On
the expiration of any Stock Purchase Rights not exercised or of any
right to convert or exchange under any Convertible Securities not
exercised, the Exercise Price then in effect shall forthwith be
increased to the Exercise Price which would have been in effect at
the time of such expiration had such Stock Purchase Rights or
Convertible Securities never been issued. No readjustment of the
Exercise Price pursuant to this section 4.2(f) shall (i) increase the
Exercise Price by an amount in excess of the adjustment originally
made to the Exercise Price in respect of the issue, sale or grant of
the applicable Stock Purchase Rights or Convertible Securities or
(ii) require any adjustment to the amount paid or number of Warrant
Shares received by any Person upon any exercise of this Warrant prior
to the date upon which such readjustment to the Exercise Price shall
occur.
(g) Reorganization, Reclassification or Recapitalization of the
Holding Company. If and whenever subsequent to the date hereof the
Holding Company shall effect (i) any reorganization or
reclassification or recapitalization of the capital stock of the
Holding Company (other than in the cases referred to in section
4.2(a)), (ii) any consolidation or merger of the Holding Company with
or into another Person, (iii) the sale, transfer or other disposition
of the property, assets or business of the Holding Company as an
entirety or substantially as an entirety or (iv) any other
transaction (or any other event shall occur) as a result of which
holders of Holding Company Common Stock (of either class) become
entitled to receive any Shares or other securities and/or property of
the Holding Company, any of its Subsidiaries or any other Person
(including, without limitation, cash) with respect to or in exchange
for the Holding Company Common Stock, there shall thereafter be
deliverable upon the exercise of this Warrant or any portion thereof
(in lieu of or in addition to the Warrant Shares theretofore
deliverable, as appropriate) the highest number of Shares or other
securities and/or the greatest amount of property (including, without
limitation, cash) to which the holder of the number of Warrant Shares
which would otherwise have been deliverable upon the exercise of this
Warrant or any portion thereof at the time would have been entitled
upon such reorganization or reclassification or recapitalization of
capital stock, consolidation, merger, sale, transfer, disposition or
other transaction or upon the occurrence of such other event, and at
the same aggregate Exercise Price.
Prior to and as a condition of the consummation of any
transaction or event described in the preceding sentence, the Holding
Company shall make equitable, written adjustments in the application
of the provisions set forth herein and in the other Operative
Documents for the benefit of the holders of the Warrants, in a manner
reasonably satisfactory to the Required Holders of the Warrants so
that all such provisions shall thereafter be applicable, as nearly as
possible, in relation to any Shares or other securities or other
property thereafter deliverable upon exercise of the Warrants and so
that the holders of the Warrants will (prior to exercise) enjoy all
of the rights and benefits enjoyed by any such Person who shall have
acquired any such Shares, other securities, or other property
(including, without limitation, cash) in connection with any such
transaction or event, including, without limitation, any subsequent
tender offer or redemption of any such Shares or other securities.
Any such adjustment shall be made by and set forth in a supplemental
agreement of the Holding Company and/or the successor entity, as
applicable, for the benefit of the holders of the Warrants, and in
form and substance reasonably acceptable to the Required Holders of
the Warrants, which agreement shall bind the Holding Company and/or
the successor entity, as applicable, and all holders of Warrants then
outstanding and shall be accompanied by a favorable opinion of the
regular outside counsel to the Holding Company or the successor
entity, as applicable (or such other firm as is reasonably acceptable
to the Required Holders of the Warrants), as to the enforceability of
such agreement and as to such other matters as the Required Holders
of the Warrants may reasonably request.
(h) Other Dilutive Events. If any other transaction or event
shall occur (excluding any transaction or event explicitly referred
to in this section 4.2, but including, without limitation, any
issuance, repurchase, redemption, or other distribution in respect of
any Shares or other securities of the Holding Company or of any other
Person, including any Person referred to in section 4.2(g)) as to
which the other provisions of this section 4 are not strictly
applicable but the failure to make any adjustment to the Exercise
Price or to any of the other terms of this Warrant would not fairly
protect the purchase rights and other rights represented by this
Warrant in accordance with the essential intent and principles
hereof, then, and as a condition to the consummation of any such
transaction or event, and in each such case, the Holding Company
shall appoint a firm of independent certified public accountants of
recognized national standing (which may be the regular auditors of
the Holding Company), which shall give its opinion as to the
adjustment, if any, on a basis consistent with the essential intent
and principles established in this section 4, necessary to preserve,
without dilution, the rights represented by this Warrant. The
certificate of any such firm of accountants shall be conclusive
evidence of the correctness of any computation made under this
section 4. The Holding Company shall pay the fees and expenses of
such firm of accountants in connection with any such opinion. Upon
receipt of such opinion, the Holding Company will promptly deliver a
copy thereof to the holder of this Warrant and shall make the
adjustments described therein.
(i) Determination of Consideration. For the purposes of this
section 4, the consideration received or receivable by the Holding
Company for the issuance, sale or grant of shares of Holding Company
Common Stock (of either class), Stock Purchase Rights or Convertible
Securities, irrespective of the accounting treatment of such
consideration, shall be valued and determined as follows:
(i) Cash Payment. In the case of cash, the gross amount
paid by the purchasers without deduction of any accrued interest
or dividends, any reasonable expenses paid or incurred and any
reasonable underwriting commissions or concessions paid or
allowed by the Holding Company in connection with such issue or
sale.
(ii) Non-Cash Payment. In the case of consideration other
than cash, the Fair Value thereof (in any case as of the date
immediately preceding the issuance, sale or grant in question).
(iii) Certain Allocations. If shares of Holding
Company Common Stock, Stock Purchase Rights and/or Convertible
Securities are issued or sold together with other securities or
other assets of the Holding Company for a consideration which
covers more than one of the foregoing categories of securities
and assets, the consideration received or receivable (computed
as provided in clauses (i) and (ii) of this section 4.2(i))
shall be allocable to such shares of Holding Company Common
Stock, Stock Purchase Rights and/or Convertible Securities as
reasonably determined in good faith by the board of directors of
the Holding Company (provided such allocation is set forth in a
written resolution and a certified copy thereof is furnished to
the holder of this Warrant promptly (but in any event within 10
days) following its adoption).
(iv) Dividends in Securities. If the Holding Company shall
declare a dividend or make any other distribution upon any stock
of the Holding Company payable in shares of Holding Company
Common Stock, Convertible Securities or Stock Purchase Rights,
such shares of Holding Company Common Stock, Convertible
Securities or Stock Purchase Rights, as the case may be,
issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
(v) Stock Purchase Rights and Convertible Securities. The
consideration for which each share of Holding Company Common
Stock shall be deemed to be issued upon the issuance or sale of
any Stock Purchase Rights or Convertible Securities shall be
determined by dividing (A) the total consideration, if any,
received by the Holding Company as consideration for the Stock
Purchase Rights or the Convertible Securities, as the case may
be, plus the minimum aggregate amount of additional
consideration, if any, ever payable to the Holding Company upon
the exercise of such Stock Purchase Rights and/or upon the
conversion or exchange of such Convertible Securities, as the
case may be, but without deduction of any accrued interest or
dividends, any reasonable expenses paid or incurred and any
reasonable underwriting commissions or concessions paid or
allowed by the Holding Company in connection with such issue or
sale; by (B) the maximum number of shares of Holding Company
Common Stock ever issuable upon the exercise of such Stock
Purchase Rights or upon the conversion or exchange of such
Convertible Securities.
(vi) Merger, Consolidation or Sale of Assets. If any
shares of Holding Company Common Stock (of either class),
Convertible Securities or Stock Purchase Rights are issued in
connection with any merger or consolidation of which the Holding
Company is the surviving corporation, the amount of
consideration therefor shall be deemed to be the Fair Value of
such portion of the assets and business of the non-surviving
corporation as shall be attributable to such Holding Company
Common Stock, Convertible Securities or Stock Purchase Rights,
as the case may be. In the event of (A) any merger or
consolidation of which the Holding Company is not the surviving
corporation or (B) the sale, transfer or other disposition of
the property, assets or business of the Holding Company as an
entirety or substantially as an entirety for Shares or Other
Securities of any other Person, the Holding Company shall be
deemed to have issued the number of shares of Holding Company
Common Stock for Shares or Other Securities of the surviving
corporation or such other Person computed on the basis of the
actual exchange ratio on which the transaction was predicated
and for a consideration equal to the Fair Value on the date of
such transaction of such Shares or Other Securities of the
surviving corporation or such other Person, and if any such
calculation results in adjustment of the Exercise Price, the
determination of the number of Warrant Shares issuable upon
exercise of this Warrant immediately prior to such merger,
consolidation or sale, for the purposes of section 4.2(g), shall
be made after giving effect to such adjustment of the Exercise
Price.
(j) Record Date. If the Holding Company shall take a record of
the holders of the Holding Company Common Stock (of either class) for
the purpose of entitling them (i) to receive a dividend or other
distribution payable in Holding Company Common Stock (of either
class), Convertible Securities or Stock Purchase Rights or (ii) to
subscribe for or purchase Holding Company Common Stock (of either
class), Convertible Securities or Stock Purchase Rights, then all
references in this section 4 to the date of the issue or sale of the
shares of Holding Company Common Stock (of either class) deemed to
have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be, shall be
deemed to be references to such record date.
(k) Shares Outstanding. The number of shares of Holding
Company Common Stock deemed to be outstanding at any given time shall
not include shares of Holding Company Common Stock held by the
Holding Company or any Subsidiary of the Holding Company.
(l) Maximum Exercise Price. At no time shall the Exercise
Price exceed the amount set forth in the first paragraph of the
Preamble of this Warrant except as a result of an adjustment thereto
pursuant to section 4.2(a)(iii) or 4.2(g).
(m) Application. All subdivisions of this section 4.2 are
intended to operate independently of one another. If a transaction
or an event occurs that requires the application of more than one
subdivision, all applicable subdivisions shall be given independent
effect (but without duplication of adjustment).
(n) No Adjustments Under Certain Circumstances. Anything in
this section 4.2 to the contrary notwithstanding, but subject to the
provisions of section 4.5, no adjustment to the Exercise Price shall
be made in the case of:
(i) any issuance of shares of Holding Company Class A
Common Stock (or Other Securities) upon the exercise in whole or
part of any of the Warrants;
(ii) (A) the granting after the Closing Date by the Holding
Company to any officer, director or employee of or advisor or
consultant to the Holding Company or the Operating Company of
options to purchase shares of Holding Company Class A Common
Stock pursuant to the Option Plan and (B) the issuance of shares
of Holding Company Class A Common Stock upon the exercise of
such options, provided that the aggregate number of shares of
Holding Company Class A Common Stock issued and issuable upon
exercise of such options shall not exceed 1,096,513 (being equal
to 10% of the Holding Company Common Stock as of the Closing
Date (calculated on a fully-diluted basis)) (such number of
shares to be adjusted appropriately for any subdivision,
combination, or other similar event with respect to the Holding
Company Class A Common Stock);
(iii) the issuance of shares of Holding Company Class A
Common Stock pursuant to any dividend reinvestment plan,
provided that the price per share of Holding Company Class A
Common Stock paid by plan participants is not less than 85% of
the Fair Value per share at the time of issuance; or
(iv) the issuance of up to 1,642,332 shares of Holding
Company Class A Common Stock (such number of shares to be
adjusted appropriately for any subdivision, combination, or
other similar event with respect to the Holding Company Class A
Common Stock) upon the conversion, exercise or exchange of any
securities convertible into and exercisable or exchangeable for
shares of Holding Company Class A Common Stock which are
outstanding on the Closing Date and specified on Exhibit 5.5(b)
attached to the Securities Purchase Agreements, including,
without limitation, the Holding Company's 10% Convertible
Subordinated Debentures, the Bridge Note and options outstanding
on the Closing Date under the Option Plan.
4.3. Rights Offering. If the Holding Company shall effect an
offering of securities pro rata among its stockholders, the holder hereof
shall be entitled, at its option, to elect to participate in each and
every such offering as if this Warrant had been exercised and such holder
were, at the time of any such offering, then a holder of that number of
Warrant Shares to which such holder is then entitled on the exercise
hereof.
4.4. Certificates and Notices.
(a) Adjustments to Exercise Price. As promptly as practicable
(but in any event not later than 15 days) after the occurrence of any
event requiring any adjustment under this section 4 to the Exercise
Price (or to the number or kind of securities or other property
deliverable upon the exercise of this Warrant), the Holding Company
shall, at its expense, deliver to the holder of this Warrant either
(i) an Officers' Certificate or (ii) a certificate signed by a firm
of independent certified public accountants of recognized national
standing (which may be the regular auditors of the Holding Company),
setting forth in reasonable detail the events requiring the
adjustment and the method by which such adjustment was calculated and
specifying the adjusted Exercise Price and the number of shares of
Holding Company Class A Common Stock (or Other Securities)
purchasable upon exercise of this Warrant after giving effect to such
adjustment. The certificate of any such firm of accountants shall be
conclusive evidence of the correctness of any computation made under
this section 4.
(b) Extraordinary Corporate Events. If and whenever the
Holding Company subsequent to the date hereof shall propose to (i)
pay any dividend to the holders of shares of Holding Company Common
Stock (of either class) or to make any other distribution to the
holders of shares of Holding Company Common Stock (of either class)
(other than as a regularly scheduled cash dividend), (ii) offer to
the holders of shares of Holding Company Common Stock (of either
class) rights to subscribe for or purchase any additional shares of
any class of stock or any other rights or options, (iii) effect any
reclassification of the Holding Company Common Stock (of either
class) or other Shares of the Holding Company (other than a
reclassification involving merely the subdivision or combination of
outstanding shares of Holding Company Common Stock referred to in
section 4.2(a)), (iv) engage in any reorganization or
recapitalization or any consolidation or merger, (v) consummate any
sale, transfer or other disposition of its property, assets and
business as an entirety or substantially as an entirety, (vi) effect
any other transaction which might require an adjustment to the
Exercise Price (or to the number or kind of securities or other
property deliverable upon the exercise of this Warrant), including,
without limitation, any transaction of the kind described in section
4.2(g) or (vii) commence or effect the liquidation, dissolution or
winding up of the Holding Company, then, in each such case, the
Holding Company shall deliver to the holder of this Warrant an
Officers' Certificate giving notice of such proposed action,
specifying (A) the date on which the stock transfer books of the
Holding Company shall close, or a record shall be taken, for
determining the holders of Holding Company Common Stock entitled to
receive such dividend or other distribution or such rights or
options, or the date on which such reclassification, reorganization,
recapitalization, consolidation, merger, sale, transfer, other
disposition, transaction, liquidation, dissolution or winding up
shall take place or commence, as the case may be, and (B) the date as
of which it is expected that holders of Holding Company Common Stock
of record shall be entitled to receive securities or other property
deliverable upon such action, if any such date is to be fixed. Such
Officers' Certificate shall be delivered in the case of any action
covered by clause (i) or (ii) above, at least 15 Business Days prior
to the record date for determining holders of Holding Company Common
Stock for purposes of receiving such payment or offer, and, in any
other case, at least 15 Business Days prior to the date upon which
such action takes place and 15 Business Days prior to any record date
to determine holders of Holding Company Common Stock entitled to
receive such securities or other property.
(c) Effect of Failure. Failure to give any certificate or
notice, or any defect in any certificate or notice required under
this section 4.4 shall not affect the legality or validity of the
adjustment of the Exercise Price or the number of Warrant Shares
purchasable upon exercise of this Warrant.
4.5. Adjustments for Changes in Certain Data; Additional
Adjustments.
(a) The Holding Company hereby agrees that the initial
aggregate number of shares of Holding Company Class A Common Stock
issuable upon exercise in full of the Warrants issued on the Closing
Date to the initial holders thereof was 592,177 shares of Holding
Company Class A Common Stock, which was intended to constitute 6% of
the shares of Holding Company Common Stock (of both classes)
outstanding immediately following the Closing (calculated on a fully-
diluted basis assuming the conversion, exercise and exchange of all
securities convertible into or exercisable or exchangeable for
Holding Company Common Stock (of either class), including, without
limitation, the shares of Holding Company Class A Common Stock
issuable upon exercise of such Warrants. If for any reason the
shares of Holding Company Class A Common Stock purchasable upon the
exercise of the Warrants issued on the Closing Date did not
constitute 6% of the shares of Holding Company Common Stock (of both
classes) outstanding as of such time (and as so calculated), the
Holding Company shall forthwith reissue each Warrant then outstanding
with appropriate adjustments in the Exercise Price and in the number
of shares of Holding Company Class A Common Stock issuable upon
exercise thereof (together with an Officers' Certificate setting
forth in reasonable detail the computation of such adjustments), and
all such adjustments shall be reasonably satisfactory to the holders
thereof.
(b) It is the intent of the Holding Company and the
Warrantholders that the percentage of the shares of Holding Company
Common Stock on a fully- diluted basis represented by the number of
Warrant Shares initially issuable upon exercise of the Warrants
(which is intended to be 6%; 592,177 represents 6% of 9,869,618
(being the sum of 9,277,441 and 592,177)) not be reduced on or after
the Closing Date by any Special Issuance (as defined below). If any
Special Issuance shall occur, then the aggregate number of shares of
Holding Company Class A Common Stock purchasable upon exercise of the
Warrants shall be increased (effective as of the Closing Date)
(without any adjustment in the aggregate Exercise Price) to the
aggregate number of shares of Holding Company Class A Common Stock
for which the Warrants would have been exercisable, on the Closing
Date, if the shares of Holding Company Common Stock issued or subject
to issuance in such Special Issuance had been outstanding on the
Closing Date and had been included for purposes of determining the
aggregate number of shares for which the Warrants were initially
exercisable, in order for such aggregate number of shares to
constitute 6% of the shares of Common Stock outstanding on a fully-
diluted basis on the Closing Date (including the shares of Holding
Company Class A Common Stock issuable upon the exercise of the
Warrants). In the event any Convertible Security or Stock Purchase
Right issued in any Special Issuance terminates without having been
converted or exercised in full, the adjustment pursuant to this
section 4.5(b) to the number of shares issuable upon exercise of the
Warrants shall be readjusted to the number which would have in effect
had such Convertible Security or Stock Purchase Right only been
convertible or exercisable for the number of shares of Holding
Company Common Stock actually issued upon the conversion or exercise
thereof, if any. All adjustments to the aggregate number of shares
of Holding Company Class A Common Stock issuable upon exercise of the
Warrants pursuant to this section 4.5(b) (x) shall be set forth in
reasonable detail in an Officers' Certificate which shall be
delivered by the Holding Company at the time of any Special Issuance,
(y) shall be reasonably satisfactory to the Required Holders of the
Warrants and (z) shall be allocated among each of the Warrants then
outstanding in proportion to the aggregate number of such shares
issuable upon exercise of each Warrant then outstanding (before
giving effect to such adjustment).
By way of example, if the Holding Company issues a Stock
Purchase Right in any Special Issuance for 10,000 shares of Holding
Company Common Stock, the number of Warrant Shares issuable upon
exercise of the Warrants shall be adjusted, at the time such Stock
Purchase Right is issued, initially to 592,815 (being 6% of
9,880,256, the new fully-diluted number of shares). If there had
been a prior adjustment pursuant to any provision of this section 4,
then such number of shares (592,815) shall be further adjusted by
recalculating such prior adjustment as if the number of shares
initially issuable upon exercise of the Warrants had been 592,815,
not 592,177. By way of example, if there had been a two for one
stock split prior to the date such Stock Purchase Right was issued,
the aggregate number of shares of Holding Company Class A Common
Stock issuable upon exercise of the Warrants would become 1,184,992
(being 6% of 19,749,874, the new fully-diluted number of shares), not
592,815.
For purposes hereof, "Special Issuance" shall mean (a) any
issuance of shares of Holding Company Common Stock pursuant to the
Investment Agreement dated March 13, 1997 between GreenGrass Holdings
and the Holding Company (the "Investment Agreement") (including any
shares issued pursuant to section 1.6 thereof) if, after giving
effect thereto, the aggregate number of shares of Holding Company
Common Stock issued or issuable pursuant to the Investment Agreement
exceeds 1,087,406 shares, (b) any issuance of shares of Holding
Company Common Stock in respect of the warrant issued to GreenGrass
Holdings referred to in section 1.3 of the Investment Agreement if,
after giving effect thereto, the aggregate number of shares issued or
issuable in respect thereof exceeds 50,000 shares or any adjustment
to the number of shares of Holding Company Common Stock issuable upon
exercise of such warrant to a number in excess of 50,000, (c) any
issuance of the Rights Shares and/or Remaining Rights Shares (each as
defined in the Investment Agreement) or any issuance of shares of
Holding Company Common Stock, Stock Purchase Rights or Convertible
Securities in respect of principal or interest due on the Bridge Note
if, after giving effect thereto, the aggregate number of Rights
Shares and Remaining Rights Shares issued or issuable pursuant to the
Investment Agreement and shares of Holding Company Common Stock
issued or issuable in respect of the Bridge Note exceeds 543,703
shares, (d) any issuance of shares of Holding Company Common Stock,
Stock Purchase Rights or Convertible Securities in respect of the
Holding Company's 10% Convertible Subordinated Debentures due 2004
(the "Debentures") outstanding in an aggregate principal amount of
$5,322,804 on the Closing Date if, after giving effect thereto, the
aggregate number of shares issued or issuable in respect thereof
exceeds 1,108,918 shares, including any issuance in respect of
interest due on such outstanding Debentures, or any adjustment to the
aggregate number of shares issuable upon conversion of such
outstanding Debentures to a number in excess of 1,108,918, (e) any
issuance of additional Debentures after the Closing Date (the
"Additional Debentures") (including, without limitation, those
subject to the Registration Statement filed with the Commission on
May 16, 1996 relating to the offering of Debentures in the principal
amount of $3,333,333) and any issuance of shares of Holding Company
Common Stock, Stock Purchase Rights or Convertible Securities in
respect of the Additional Debentures, including any issuance in
respect of interest due on such Additional Debentures, and (f) any
issuance of shares of Holding Company Common Stock, Stock Purchase
Rights or Convertible Securities pursuant to any stock option plan
(including the Option Plan) (except as provided in section
4.2(n)(ii)) if, after giving effect thereto, the aggregate number of
shares issued or issuable in respect thereof exceeds 483,414 shares.
5. Registration, Repurchase, Required Exercise, etc. Reference is
hereby made to the Securities Purchase Agreements for certain provisions
relating to (a) registration rights of the holders of the Warrants and
Warrant Shares, (b) the repurchase of the Warrants and/or Warrant Shares
at the option of the holders thereof and/or the Holding Company and
(c) the required exercise of the Warrants at the option of the Holding
Company.
6. Reservation of Holding Company Common Stock. The Holding Company has
reserved and at all times after the date hereof will reserve and keep
available, solely for issuance, sale and delivery upon the exercise of
this Warrant, such number of shares of Holding Company Class A Common
Stock (and/or Other Securities) equal to the number of shares of Holding
Company Class A Common Stock (and/or Other Securities) purchasable from
time to time upon the exercise of this Warrant. All such shares of
Holding Company Class A Common Stock (and/or Other Securities) shall be
duly authorized and, when issued upon exercise of this Warrant in
accordance with the terms hereof, will be validly issued and fully paid
and nonassessable with no liability on the part of the holders thereof and
not subject to preemptive rights on the part of any other Person or to any
lien, charge or other security interest but in each case subject to the
applicable terms of the Securities Purchase Agreements.
7. Various Covenants of the Holding Company.
7.1. No Impairment or Amendment. The Holding Company shall not
by any action including, without limitation, amending its Organizational
Documents, any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of Shares or other
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate to
protect the rights of the holder hereof against impairment. Without
limiting the generality of the foregoing, the Holding Company (a) will not
permit the par value of any Warrant Shares issuable upon exercise of this
Warrant to be greater than the amount payable therefor upon such exercise,
(b) will take all such action as may be necessary or appropriate in order
that the Holding Company may validly issue fully paid and nonassessable
Warrant Shares, (c) will obtain and maintain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
as may be necessary to enable the Holding Company to perform its
obligations under this Warrant, (d) will not issue any capital stock or
enter into any agreement, the terms of which would have the effect,
directly or indirectly, of preventing the Holding Company from honoring
its obligations hereunder or under the other Operative Documents,
including, without limitation, sections 11 and/or 12 of the Securities
Purchase Agreements, and (e) will not amend or modify any term, condition
or provision of its Organizational Documents, or any related agreement,
document or instrument, if the effect thereof is, or could reasonably be
expected to be, adverse in any material respect to the interests of any
holder of the Warrants.
So long as any Warrants or Warrant Shares are outstanding, upon
request of any holder of any such security, the Holding Company will
acknowledge in writing, in form satisfactory to such holder, the continued
validity of the Holding Company's obligations hereunder.
7.2. Listing on Securities Exchanges, etc. At all times
following the exercise of this Warrant, the Holding Company will maintain
the listing of all Warrant Shares on each securities exchange or market or
trading system on which the Holding Company Common Stock (or any Other
Securities) is then or at any time thereafter listed or traded.
7.3. Anti-Dilution Provisions. If the Holding Company issues
any Stock Purchase Rights or Convertible Securities or other securities
containing provisions protecting the holder or holders thereof against
dilution in any manner more favorable to such holder or holders thereof
than those set forth in this Warrant, such provisions (or any more
favorable portion thereof) shall be deemed to be incorporated herein as if
fully set forth in this Warrant and, to the extent inconsistent with any
provision of this Warrant, shall be deemed to be substituted therefor.
7.4. Indemnification. Without limiting the generality of any
provision of the Securities Purchase Agreements or any of the other
Operative Documents, the Holding Company shall indemnify, save and hold
harmless the holder of this Warrant and the holder of any Warrant Shares
from and against any and all liability, loss, cost, damage, reasonable
attorneys' and accountants' fees and expenses, court costs and all other
out-of-pocket expenses reasonably incurred by such holder in connection
with interpreting, preserving, exercising and/or enforcing any of the
terms hereof.
7.5. Certain Expenses. The Holding Company shall pay all
expenses in connection with, and all taxes (other than income, franchise
and stock transfer taxes) and other governmental charges that may be
imposed in respect of, the issue, sale and delivery of this Warrant and
any Warrant Shares.
7.6. Certain Dividends, etc. If and whenever subsequent to the
Closing Date the Holding Company shall declare or pay any dividend or
other distribution on any shares of Holding Company Class A Common Stock
or shall effect any other transaction as a result of which holders of any
shares of Holding Company Class A Common Stock shall be entitled to
receive any dividend or other distribution (excluding dividends or other
distributions of the kinds referred to in section 4.2(a)) with respect to
or in exchange for any shares of Holding Company Class A Common Stock,
then the Holding Company shall pay (or cause to be paid) to each holder of
any Warrant the same dividend or other distribution such holder would have
received had such holder exercised such Warrant in full immediately prior
to the date upon which such dividend or other distribution is paid (or
immediately prior to any record date for such dividend or other
distribution, if applicable).
8. Miscellaneous.
8.1. Nonwaiver. No course of dealing or any delay or failure to
exercise any right, power or remedy hereunder on the part of the holder of
this Warrant or of any Warrant Shares shall operate as a waiver of or
otherwise prejudice such holder's rights, powers or remedies.
8.2. Amendment. Any term, covenant, agreement or condition of
the Warrants may, with the consent of the Holding Company, be amended, or
compliance therewith may be waived (either generally or in a particular
instance and either retroactively or prospectively), by one or more
substantially concurrent written instruments signed by the Required
Holders of the Warrants, provided that (a) no such amendment or waiver
shall change the number of Warrant Shares issuable upon the exercise of
any Warrant or the manner of exercise or the amount of any payment due
upon exercise or the duration of the Exercise Period without the prior
written consent of the holder of such Warrant and (b) no such amendment or
waiver shall extend to or affect any obligation not expressly amended or
waived or impair any right consequent thereon.
8.3. Communications. All communications provided for herein
shall be delivered, mailed or sent by facsimile transmission addressed in
the manner and shall be effective as of the time specified in the
Securities Purchase Agreements.
8.4. Like Tenor. All Warrants shall at all times be identical,
except as to the preamble to each Warrant.
8.5. Remedies. The Holding Company stipulates that the remedies
at law of the holder or holders of this Warrant and/or of any Warrant
Shares in the event of any default or threatened default by the Holding
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for
the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
No remedy conferred in this Warrant on the holder of any Warrant or
Warrant Shares is intended to be exclusive of any other remedy, and each
and every such remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or under any other agreement, document
or instrument or now or hereafter existing at law or in equity or by
statute or otherwise.
8.6. Successors and Assigns. This Warrant and the rights
evidenced hereby shall inure to the benefit of and be binding upon the
successors and assigns of the Holding Company, the holder or holders of
this Warrant and, as applicable, of any Warrant Shares, to the extent
provided herein, and shall be enforceable by such holder or holders.
8.7. Governing Law. This Warrant, including the validity hereof
and the rights and obligations of the Holding Company and of the holder
hereof and all amendments and supplements hereof and all waivers and
consents hereunder, shall be construed in accordance with and governed by
the domestic substantive laws of The Commonwealth of Massachusetts without
giving effect to any choice of law or conflicts of law provision or rule
that would cause the application of the domestic substantive laws of any
other jurisdiction.
8.8. Headings; Entire Agreement; Partial Invalidity, etc. The
table of contents to and headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
This Warrant, together with the other Operative Documents, embodies the
entire agreement and understanding between the holder hereof and the
Holding Company and supersedes all prior agreements and understandings
relating to the subject matter hereof. In case any provision in this
Warrant or any of the other Operative Documents shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
8.9. No Rights or Liabilities as a Stockholder. This Warrant
shall not entitle the holder hereof to any voting rights or other rights
as a stockholder of the Holding Company, provided that nothing in this
section 8.9 shall be construed to affect any rights the holder of this
Warrant may have under any other provision of this Warrant or any of the
other Operative Documents or under any applicable law. No provision of
this Warrant, in the absence of an affirmative action by the holder hereof
to purchase Holding Company Common Stock, and no mere enumeration herein
of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder as a stockholder of the Holding Company, whether
such liability is asserted by the Holding Company, by creditors of the
Holding Company or by any other Person.
[The remainder of this page is left blank intentionally.]
IN WITNESS WHEREOF, the Holding Company has caused this Warrant to be
executed as an instrument under seal by its duly authorized officer as of
the date first above written.
SWING-N-SLIDE CORP.
By: /s/ Richard E. Ruegger
Vice President - Finance
<PAGE>
Exhibit 2.2(a)
FORM OF NOTICE OF EXERCISE
(To be executed only upon partial or full exercise
of the within Warrant)
The undersigned registered holder of the within Warrant irrevocably
exercises the within Warrant for and purchases ___________________________
shares of Common Stock of SWING-N-SLIDE CORP. and herewith makes payment
therefor in the amount of $_________________________, all at the price, in
the manner and on the terms and conditions specified in the within
Warrant, and requests that a certificate (or __________ certificates in
denominations of _____________________ shares) for such shares hereby
purchased be issued in the name of and delivered to (choose one) (a) the
undersigned or (b) _______________________ whose address is
____________________________________and, if such shares shall not include
all the Warrant Shares issuable as provided in the within Warrant, that a
new Warrant of like tenor for the number of Warrant Shares not being
purchased hereunder be issued in the name of and delivered to (choose one)
(a) the undersigned or (b) _____________________________________, whose
address is __________________________________________.
Dated: _______________ ___, _____.
[ ]
By ___________________________
(Signature of Registered Holder)
NOTICE: The signature on this Notice of Exercise must correspond with
the name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
<PAGE>
Exhibit 3
FORM OF ASSIGNMENT
(To be executed only upon the assignment
of the within Warrant)
FOR VALUE RECEIVED, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto ____________________,
whose address is ________________________________________, all of the
rights of the undersigned under the within Warrant, with respect to
________ shares of Common Stock of SWING-N-SLIDE CORP. and, if such shares
shall not include all the Warrant Shares issuable as provided in the
within Warrant, that a new Warrant of like tenor for the number of Warrant
Shares not being transferred hereunder be issued in the name of and
delivered to [choose one] (a) the undersigned or
(b) _______________________, whose address is ______________________, and
does hereby irrevocably constitute and appoint
_____________________________ Attorney to register such transfer on the
books of SWING-N-SLIDE CORP. maintained for the purpose, with full power
of substitution in the premises.
Dated: ______________________,_____.
[ ]
By ___________________________________
(Signature of Registered Holder)
NOTICE: The signature on this Assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
CONFORMED COPY
WARRANT
To Purchase 74,022 Shares of Common Stock of
SWING-N-SLIDE CORP.
March 13, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions 2
1.1. Definitions of Terms 2
1.2. Other Definitions 4
2. Exercise of Warrant 5
2.1. Right to Exercise; Notice 5
2.2. Manner of Exercise; Issuance of Holding Company
Common Stock 5
2.3. Effectiveness of Exercise 6
2.4. Fractional Shares 6
2.5. Automatic Exercise on Last Day of Exercise Period 7
2.6. Continued Validity 7
3. Registration, Transfer, Exchange and Replacement of
Securities; Legends 7
3.1. Registration, Transfer, Exchange and Replacement
of Securities 7
3.2. Legends 8
4. Anti-Dilution Provisions 8
4.1. Adjustment of Number of Shares Purchasable 8
4.2. Adjustment of Exercise Price 8
4.3. Rights Offering 17
4.4. Certificates and Notices 17
4.5. Adjustments for Changes in Certain Data;
Additional Adjustments 18
5. Registration, Repurchase, Required Exercise, etc. 21
6. Reservation of Holding Company Common Stock 21
7. Various Covenants of the Holding Company 21
7.1. No Impairment or Amendment 21
7.2. Listing on Securities Exchanges, etc. 22
7.3. Anti-Dilution Provisions 22
7.4. Indemnification 22
7.5. Certain Expenses 22
7.6. Certain Dividends, etc. 22
8. Miscellaneous 23
8.1. Nonwaiver 23
8.2. Amendment 23
8.3. Communications 23
8.4. Like Tenor 23
8.5. Remedies 23
8.6. Successors and Assigns 23
8.7. Governing Law 24
8.8. Headings; Entire Agreement; Partial Invalidity, etc. 24
8.9. No Rights or Liabilities as a Stockholder 24
Exhibit 2.2(a) Form of Notice of Exercise
Exhibit 3.1 Form of Assignment
<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF REGISTRATION
THEREUNDER OR AN EXEMPTION THEREFROM.
WARRANT
To Purchase 74,022 Shares of Common Stock of
SWING-N-SLIDE CORP.
No. RW-4 March 13, 1997
THIS IS TO CERTIFY that, for value received, MASSMUTUAL PARTICIPATION
INVESTORS, or registered assigns, is entitled upon the due exercise hereof
at any time during the Exercise Period (as hereinafter defined) to
purchase in the aggregate 74,022 shares of Common Stock, $.01 par value,
of SWING-N-SLIDE CORP., a Delaware corporation (the "Holding Company"), at
an Exercise Price of $.001 per share (such Exercise Price and the number
of shares of Common Stock purchasable hereunder being subject to
adjustment as provided herein), and to exercise the other rights, powers
and privileges hereinafter provided, all on the terms and subject to the
conditions hereinafter set forth.
This Warrant is one of the Holding Company's Warrants to Purchase
Shares of Common Stock (herein, together with any warrants issued in
exchange therefor or replacement thereof, all as amended or supplemented
from time to time, called the "Warrants") initially exercisable in the
aggregate for 592,177 (subject to adjustment) shares of Holding Company
Class A Common Stock and issued pursuant to those certain Securities
Purchase Agreements, dated the Closing Date, by and among the Holding
Company, Newco, Inc. and the institutional investors named therein (as
amended, modified and supplemented from time to time, the "Securities
Purchase Agreements"). Reference is hereby made to the Securities Purchase
Agreements for a description of, among other things, certain terms
relating to the Warrants and the Warrant Shares and certain rights of the
holders hereof and thereof, including, without limitation (a) the rights
of the holders to require the repurchase of the Warrants and the Warrant
Shares and to require the registration of the Warrant Shares, and (b) the
right of the Holding Company to repurchase the Warrants and to require the
exercise of the Warrants. Holders of Warrants and/or Warrant Shares are
entitled to the applicable benefits of the Securities Purchase Agreements
and the other Operative Documents and may enforce the applicable
agreements contained therein, all in accordance with the terms thereof,
notwithstanding any payment or prepayment or redemption or acquisition of
any of the other Securities issued pursuant to the Securities Purchase
Agreements.
1. Definitions.
1.1. Definitions of Terms. Terms used herein without definition
which are defined in the Securities Purchase Agreements have the meanings
ascribed to them therein, unless the context clearly requires otherwise,
including, without limitation, the following terms: "Bridge Note",
"Closing", "Commission", "corporation", "Notes", "Officers' Certificate",
"Operating Company", "Operative Documents", "Option Plan", "Organizational
Documents", "Person", "Preferred Shares", "Required Holders", "Securities
Act", "shares" and "Subsidiary". In addition, the terms defined in this
section 1, whenever used and capitalized in this Warrant, shall, unless
the context otherwise requires, have the following respective meanings:
"Additional Debentures" shall have the meaning specified in section
4.5(b).
"Assignment" shall mean the form of Assignment appearing at the end
of this Warrant.
"Closing Date" shall mean March 13, 1997.
"Convertible Securities" shall mean evidences of indebtedness, Shares
(including, without limitation, any Preferred Shares) or other securities
which are convertible into or exchangeable or exercisable for, with or
without payment of additional consideration, shares of Holding Company
Common Stock (of either class), either immediately or upon the arrival of
a specified date or the happening of a specified event.
"Current Market Price" of any security (including, without
limitation, any share of Holding Company Common Stock) as of any date
herein specified shall mean the average of the daily closing prices for
the 20 consecutive trading days immediately prior to, but not including
the day in question (or in the event that a security has been traded for
less than 20 days, each of the trading days prior to the day in question
on which such security has been traded). The closing price for each day
shall be (a) if such security is listed or admitted for trading on any
domestic national securities exchange, the closing sale price of such
security, regular way, or the average of the closing bid prices thereof if
no such sale occurred, in each case as officially reported on the
principal securities exchange on which such security is listed, or (b) if
not reported as described in clause (a), the closing sale price of such
security, or the average of the closing bid prices thereof if no such sale
occurred, in each case as reported by the NASDAQ Stock Market, or any
similar system of automated dissemination of quotations of securities
prices then in common use, if so quoted, as reported by any member firm of
the New York Stock Exchange selected by the Holding Company, or (c) if not
quoted as described in clause (b), the average of the closing bid and
asked prices for such security as reported by the National Quotation
Bureau Incorporated or any similar successor organization, as reported by
any member firm of the New York Stock Exchange selected by the Holding
Company.
"Debentures" shall have the meaning specified in section 4.5(b).
"Exercise Period" shall mean the period commencing on the Closing
Date and terminating on the later of (a) March 13, 2003 and (b) the date
upon which all of the Notes have been paid in full, subject to the right
of the Holding Company to repurchase the Warrants and to require the
exercise of the Warrants, all as set forth in the Securities Purchase
Agreements.
"Exercise Price" shall mean the price per share of Holding Company
Common Stock set forth in the preamble to this Warrant, as such price may
be adjusted pursuant to section 4.
"Fair Value" shall mean the fair value of the appropriate security
(including, without limitation, any share of Holding Company Common
Stock), property, assets, business or entity as determined by the board of
directors of the Holding Company, provided that if, within 15 days
following receipt of the writing setting forth any such determination of
Fair Value, the Required Holders of the Warrants shall notify the Holding
Company of their disagreement with such determination, then the Fair Value
shall be determined by an independent investment banking firm of
recognized national standing (selected by the Holding Company and
reasonably satisfactory to the Required Holders of the Warrants). Each
determination of Fair Value shall be made without applying a discount for
any lack of liquidity or absence of control but shall otherwise be made in
accordance with generally accepted financial practice and shall be set
forth in writing, and the Holding Company shall, immediately following
such determination, deliver a copy thereof to each holder or holders of
Warrants then outstanding. The determination of any such independent
investment banking firm so made shall be conclusive and binding on the
Holding Company and on such holder or holders. The Holding Company shall
pay all of the expenses incurred in connection with any such
determination, including, without limitation, the expenses of the
independent investment banking firm engaged to make such determination.
If the Holding Company shall not have selected such investment banking
firm within 20 days after the occurrence of the event giving rise to the
need therefor, then the Required Holders of the Warrants at the time
outstanding may select such investment banking firm. Notwithstanding the
foregoing, in the case of any security, if clauses (a), (b) or (c) of the
definition of Current Market Price are applicable to such security, then
the Fair Value of such security shall be the Current Market Price of such
security.
"Holding Company" shall mean Swing-N-Slide Corp., a Delaware
corporation.
"Holding Company Class A Common Stock" shall mean the Common Stock,
$.01 par value, of the Holding Company as constituted on the Closing Date
and any Shares into which such Common Stock shall have been changed or any
Shares resulting from any reclassification of such Common Stock.
"Holding Company Class B Common Stock" shall mean the Class B Common
Stock, $.01 par value, of the Holding Company as constituted on the
Closing Date and any Shares into which such Class B Common Stock shall
have been changed or any Shares resulting from any reclassification of
such Class B Common Stock.
"Holding Company Common Stock" shall mean the Holding Company Class A
Common Stock and the Holding Company Class B Common Stock.
"Investment Agreement" shall have the meaning specified in section
4.5(b).
"Notice of Exercise" shall mean the form of Notice of Exercise
appearing at the end of this Warrant.
"Other Securities" shall mean with reference to the exercise
privilege of the holders of the Warrants, any Shares (other than Holding
Company Class A Common Stock) and any other securities of the Holding
Company (including, without limitation, Preferred Shares) or of any other
Person which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise or partial exercise of
the Warrants, in lieu of or in addition to Holding Company Class A Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Holding Company Class A Common Stock (or
Other Securities) pursuant to the terms of the Warrants or otherwise.
"Securities Purchase Agreements" shall have the meaning specified in
the preamble to this Warrant.
"Special Issuance" shall have the meaning specified in section
4.5(b).
"Stock Purchase Rights" shall mean any warrants, options or other
rights to subscribe for, purchase or otherwise acquire any shares of
Holding Company Common Stock (of either class) or any Convertible
Securities, either immediately or upon the arrival of a specified date or
the happening of a specified event.
"Warrant Shares" shall mean the shares of Holding Company Class A
Common Stock (and/or Other Securities) issued or issuable, as the case may
be, from time to time upon exercise of the Warrants, including, without
limitation, any shares of Holding Company Class A Common Stock (and/or
Other Securities) issued or issuable with respect thereto by way of stock
dividend or distribution or in connection with a combination of shares,
recapitalization, merger, consolidation, other reorganization or
otherwise.
"Warrants" shall have the meaning specified in the preamble to this
Warrant.
1.2. Other Definitions. The terms defined in this section 1.2,
whenever used in this Warrant, shall, unless the context otherwise
requires, have the following respective meanings:
"this Warrant" (and similar references to any of the other Operative
Documents) shall mean, and the words "herein" (and "therein"), "hereof"
(and "thereof"), "hereunder" (and "thereunder") and words of similar
import shall, unless the context clearly requires otherwise, refer to,
such instruments as they may from time to time be amended, modified or
supplemented.
2. Exercise of Warrant.
2.1. Right to Exercise; Notice. On the terms and subject to the
conditions of this section 2, the holder hereof shall have the right, at
its option, to exercise this Warrant in whole or in part at any time or
from time to time during the Exercise Period, all as more fully specified
below, provided that a partial exercise of this Warrant for less than the
entire remaining amount of Warrant Shares issuable under this Warrant
shall be made only for a whole number of shares.
2.2. Manner of Exercise; Issuance of Holding Company Common
Stock. To exercise this Warrant, the holder hereof shall deliver to the
Holding Company (a) a Notice of Exercise (substantially in the form of
Exhibit 2.2(a) attached hereto) duly executed by the holder hereof (or its
attorney) specifying the number of Warrant Shares to be purchased, (b) an
amount equal to the aggregate Exercise Price for all Warrant Shares as to
which this Warrant is then being exercised and (c) this Warrant. At the
option of the holder hereof, payment of the Exercise Price shall be made
(w) by wire transfer of funds to an account in a bank located in the
United States designated by the Holding Company for such purpose, (x) by
check payable to the order of the Holding Company, (y) by application of
any Warrant Shares or any Notes, as provided below, or (z) by any
combination of such methods.
Upon the exercise of this Warrant in whole or in part, the holder
hereof may, at its option, submit to the Holding Company written
instructions from such holder to apply any specified portion of the
Warrant Shares issuable upon such exercise in payment of the Exercise
Price required upon such exercise, in which case the Holding Company will
accept such specified portion of the Warrant Shares (at a value per share
equal to the Current Market Price of such share, if applicable, or the
then Fair Value of such share less, in each case, the Exercise Price then
in effect), in lieu of a like amount of such cash payment.
Upon the exercise of this Warrant in whole or in part by the holder
of any Note, such holder may, at its option, surrender such Note to the
Holding Company together with written instructions from such holder to
apply all or any specified principal amount of such Note against the
payment of some or all of the Exercise Price required upon such exercise,
in which case the Holding Company will accept such specified principal
amount in lieu of a like amount of such cash payment. In lieu of or in
addition to the aforesaid application, such holder may, without
surrendering such Note, furnish the Holding Company with written
instructions to apply all or any specified amount of accrued interest on
such Note against the payment of some or all of the Exercise Price
required upon such exercise, in which case the Holding Company will accept
such specified accrued interest in lieu of a like amount of cash. Upon
any such partial application of the principal of any Note, the Holding
Company at its expense will cause the Operating Company to promptly issue
and deliver to or upon the order of the holder thereof a new Note or Notes
equal in aggregate principal amount to the unpaid principal amount of such
surrendered Note not so applied and dated so as to result in no loss of
interest. At the time of surrender of any Note pursuant to this section
2.2, the Holding Company will cause the Operating Company to pay to the
holder surrendering such Note all interest on the principal amount thereof
so applied accrued to and including the date of such surrender.
Upon receipt of the items referred to in section 2.3, the Holding
Company shall, as promptly as practicable, and in any event within five
days thereafter, cause to be issued and delivered to the holder hereof (or
its nominee) or the transferee designated in the Notice of Exercise, a
certificate or certificates representing the number of Warrant Shares
specified in the Notice of Exercise (but not exceeding the maximum number
of shares issuable upon exercise of this Warrant) minus the number of
Warrant Shares, if any, applied in payment of the Exercise Price. Such
certificates shall be registered in the name of the holder hereof (or its
nominee) or in the name of such transferee, as the case may be.
If this Warrant is exercised in part, the Holding Company shall, at
the time of delivery of such certificate or certificates, issue and
deliver to the holder hereof or the transferee so designated in the Notice
of Exercise, a new Warrant evidencing the right of the holder hereof or
such transferee to purchase at the Exercise Price then in effect the
aggregate number of Warrant Shares for which this Warrant shall not have
been exercised and this Warrant shall be cancelled.
2.3. Effectiveness of Exercise. Unless otherwise requested by
the holder hereof, this Warrant shall be deemed to have been exercised and
such certificate or certificates representing Warrant Shares shall be
deemed to have been issued, and the holder or transferee so designated in
the Notice of Exercise shall be deemed to have become the holder of record
of such Warrant Shares for all purposes, as of the close of business on
the date on which the Notice of Exercise, the Exercise Price and this
Warrant shall have been received by the Holding Company.
2.4. Fractional Shares. The Holding Company shall not issue
fractional Warrant Shares or scrip representing fractional Warrant Shares
upon any exercise of this Warrant. As to any fractional Warrant Shares
which the holder hereof would otherwise be entitled to purchase from the
Holding Company upon such exercise, the Holding Company shall pay such
holder a cash adjustment for such fraction in an amount equal to the same
fraction of the Fair Value of a share of Holding Company Common Stock as
of the date of the Notice of Exercise.
2.5. Automatic Exercise on Last Day of Exercise Period. If this
Warrant shall not have been exercised in full on or before the last day of
the Exercise Period, then this Warrant shall be automatically exercised,
without further action on the part of the holder hereof, in full on and as
of the last day of the Exercise Period, unless at any time on or before
such last day of the Exercise Period the holder of this Warrant shall
notify the Holding Company in writing that no such automatic exercise is
to occur. Payment of the Exercise Price due in connection with any such
automatic exercise pursuant to this section 2.5 shall be made by
application of that portion of the Warrant Shares issuable upon such
exercise (at a value per share equal to the then Fair Value thereof) equal
to the aggregate Exercise Price which is due upon such exercise, unless at
any time on or before such last day of the Exercise Period the holder of
this Warrant shall notify the Holding Company that such holder elects one
of the other payment options set forth in section 2.2. As promptly as
practicable following any such automatic exercise, and in any event within
five days after the last day of the Exercise Period, the Holding Company
shall cause to be issued and delivered to the holder hereof a certificate
registered in the name of the holder hereof (unless the holder shall
specifically instruct the Holding Company otherwise) representing the
Warrant Shares issued in connection with such automatic exercise of this
Warrant minus the number of Warrant Shares, if any, applied in payment of
the Exercise Price. Upon receipt of such certificate, the holder of this
Warrant shall promptly surrender this Warrant to the Holding Company for
cancellation.
2.6. Continued Validity. A holder of Warrant Shares issued upon
the exercise of this Warrant, in whole or in part, shall continue to be
entitled to all rights to which a holder of this Warrant is entitled
pursuant to the provisions of this Warrant except such rights as by their
terms apply solely to the holder of a Warrant, notwithstanding that this
Warrant is cancelled following such exercise. The Holding Company will,
at the time of any exercise of this Warrant, upon the request of the
holder of the Warrant Shares issued upon the exercise hereof, acknowledge
in writing, in form reasonably satisfactory to such holder, its continuing
obligation to afford to such holder all rights to which such holder shall
continue to be entitled after such exercise in accordance with the
provisions of this Warrant, including, without limitation, those set forth
in sections 7.1, 7.2, 7.4 and 7.5 of this Warrant; provided that if such
holder shall fail to make any such request, such failure shall not affect
the continuing obligation of the Holding Company to afford to such holder
all such rights.
3. Registration, Transfer, Exchange and Replacement of Securities;
Legends.
3.1. Registration, Transfer, Exchange and Replacement of
Securities. Reference is hereby made to sections 17 and 18 of the
Securities Purchase Agreements for certain provisions relating to the
registration, transfer, exchange and replacement of the Warrants and
Warrant Shares. To transfer this Warrant, the holder shall deliver to the
Holding Company a Notice of Assignment (substantially in the form of
Exhibit 3.1 attached hereto) duly executed by the holder hereof (or its
attorney) specifying that this Warrant (or any portion hereof) is to be
transferred to the Person(s) named therein.
3.2. Legends. Neither this Warrant nor any Warrant Shares may
be transferred or assigned unless registered under the Securities Act or
unless an exemption from such registration is available. Until the date
on which a registration statement covering the Warrants becomes effective
under the Securities Act, each Warrant shall bear a legend in
substantially the following form:
"THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN THE
ABSENCE OF REGISTRATION THEREUNDER OR AN EXEMPTION
THEREFROM."
Until the date on which a registration statement covering the Warrant
Shares becomes effective under the Securities Act, each certificate
evidencing Warrant Shares shall bear a legend in substantially the
following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF REGISTRATION
THEREUNDER OR AN EXEMPTION THEREFROM."
4. Anti-Dilution Provisions.
4.1. Adjustment of Number of Shares Purchasable. Upon any
adjustment of the Exercise Price as provided in section 4.2, the holder
hereof shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Holding Company
Class A Common Stock (calculated to the nearest 1/100th of a share)
obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of shares of Holding Company Class A Common
Stock purchasable hereunder immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from such
adjustment.
4.2. Adjustment of Exercise Price. In addition to any
adjustment required under the provisions of section 4.5 below, and except
as otherwise provided in section 4.2(n) below, the Exercise Price shall be
subject to adjustment from time to time as set forth in this section 4.2.
(a) Stock Dividends, Distributions, Subdivisions and
Combinations. If and whenever the Holding Company subsequent to the
date hereof:
(i) declares a dividend upon, or makes any distribution in
respect of, any of its capital stock, payable in shares of
Holding Company Common Stock (of either class), Convertible
Securities or Stock Purchase Rights, or
(ii) subdivides its outstanding shares of Holding Company
Common Stock (of either class) into a larger number of shares of
Holding Company Common Stock (of such class), or
(iii) combines its outstanding shares of Holding
Company Common Stock (of either class) into a smaller number of
shares of Holding Company Common Stock (of such class),
then the Exercise Price shall be adjusted to that price determined by
multiplying the Exercise Price in effect immediately prior to such
event by a fraction (A) the numerator of which shall be the total
number of outstanding shares of Holding Company Common Stock (of
both classes) immediately prior to such event, and (B) the
denominator of which shall be the total number of outstanding shares
of Holding Company Common Stock (of both classes) immediately after
such event, treating as outstanding all shares of Holding Company
Common Stock issuable upon conversions or exchanges of any such
Convertible Securities issued in such dividend or distribution and
exercises of any such Stock Purchase Rights issued in such dividend
or distribution.
(b) Issuance of Additional Shares of Holding Company Common
Stock. If and whenever the Holding Company subsequent to the date
hereof shall issue or sell any shares of Holding Company Common Stock
(of either class) (except as otherwise provided in the last paragraph
of this section 4.2(b)), including, without limitation, any sale of
any treasury shares, for a consideration per share less than the Fair
Value per share (determined, in each case, as of the date specified
in the next succeeding paragraph), the Exercise Price upon each such
issuance or sale shall be adjusted as of the date specified in the
next succeeding paragraph to the price determined by multiplying the
Exercise Price in effect as of the date specified in the next
succeeding paragraph by a fraction the numerator of which is (i) the
sum of (A) the number of shares of Holding Company Common Stock (of
both classes) outstanding immediately prior to such issue or sale
multiplied by the Fair Value per share of Holding Company Common
Stock immediately prior to such issue or sale plus (B) the aggregate
consideration, if any, received by the Holding Company upon such
issue or sale, divided by (ii) the total number of shares of Holding
Company Common Stock (of both classes) outstanding immediately after
such issue or sale, and the denominator of which is the Fair Value
per share of Holding Company Common Stock immediately prior to such
issue or sale.
For the purposes of this section 4.2(b), the date as of which
the Exercise Price shall be adjusted and the date as of which the
Fair Value shall be determined shall be the earlier of (A) the date
on which the Holding Company shall enter into a firm contract for the
issuance of such shares of Holding Company Common Stock and (B)
immediately prior to the date of actual issuance of such shares of
Holding Company Common Stock.
No adjustment of the Exercise Price shall be made under this
section 4.2(b) upon the issuance of any shares of Holding Company
Common Stock which are (i) distributed to holders of Holding Company
Common Stock pursuant to a stock dividend, distribution or
subdivision for which an adjustment shall previously have been made
under section 4.2(a) or (ii) issued pursuant to the exercise of any
Stock Purchase Rights or pursuant to the conversion or exchange of
any Convertible Securities to the extent that an adjustment shall
previously have been made upon the issuance of such Stock Purchase
Rights or Convertible Securities pursuant to sections 4.2(a), (c) or
(d).
(c) Issuance of Stock Purchase Rights. If and whenever the
Holding Company subsequent to the date hereof shall issue or sell any
Stock Purchase Rights (except as otherwise provided in the last
paragraph of this section 4.2(c)) and the consideration per share for
which shares of Holding Company Common Stock (of either class) may at
any time thereafter be issuable upon exercise thereof (or, in the
case of Stock Purchase Rights exercisable for the purchase of
Convertible Securities, upon the subsequent conversion or exchange of
such Convertible Securities) shall be less than the Fair Value per
share (determined, in each case, as of the date specified in the next
succeeding paragraph), the Exercise Price upon each such issuance or
sale shall be adjusted as provided in section 4.2(b) as of the date
specified in the next succeeding paragraph on the basis that the
maximum number of shares of Holding Company Common Stock ever
issuable upon exercise of such Stock Purchase Rights (or upon
conversion or exchange of such Convertible Securities following such
exercise) shall be deemed to have been issued as of the date of the
determination of the Fair Value specified in the next succeeding
paragraph.
For the purposes of this section 4.2(c), the date as of which
the Exercise Price shall be adjusted and the date as of which the
Fair Value shall be determined shall be the earlier of (A) the date
on which the Holding Company shall enter into a firm contract for the
issuance of such Stock Purchase Rights and (B) immediately prior to
the date of actual issuance of such Stock Purchase Rights.
No adjustment of the Exercise Price shall be made under this
section 4.2(c) upon the issuance of any Stock Purchase Rights to the
extent that an adjustment shall previously have been made upon the
issuance of such Stock Purchase Rights pursuant to section 4.2(a).
(d) Issuance of Convertible Securities. If and whenever the
Holding Company subsequent to the date hereof shall issue or sell any
Convertible Securities (except as otherwise provided in the last
paragraph of this section 4.2(d)) and the consideration per share for
which shares of Holding Company Common Stock (of either class) may at
any time thereafter be issuable pursuant to the terms of such
Convertible Securities shall be less than the Fair Value per share
(determined, in each case, as of the date specified in the next
succeeding paragraph), the Exercise Price upon each such issuance or
sale shall be adjusted as provided in section 4.2(b) as of the date
specified in the next succeeding paragraph on the basis that the
maximum number of shares of Holding Company Common Stock ever
necessary to effect the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued as of the
date of the determination of the Fair Value specified in the next
succeeding paragraph.
For the purposes of this section 4.2(d), the date as of which
the Exercise Price shall be adjusted and the date as of which the
Fair Value shall be determined shall be the earlier of (A) the date
on which the Holding Company shall enter into a firm contract for the
issuance of such Convertible Securities and (B) immediately prior to
the date of actual issuance of such Convertible Securities.
No adjustment of the Exercise Price shall be made under this
section 4.2(d) upon the issuance of any Convertible Securities which
are (i) distributed to holders of Holding Company Common Stock
pursuant to a stock dividend or distribution to the extent that an
adjustment shall previously have been made pursuant to section 4.2(a)
or (ii) issued pursuant to the exercise of any Stock Purchase Rights
to the extent that an adjustment shall previously have been made upon
the issuance of such Stock Purchase Rights pursuant to section 4.2(a)
or (c).
(e) Minimum Adjustment. If any adjustment of the Exercise
Price pursuant to this section 4.2 shall result in an adjustment of
less than $.0001, no such adjustment shall be made, but any such
lesser adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which, together
with any adjustments so carried forward, shall amount to $.0001;
provided that upon any adjustment of the Exercise Price resulting
from (i) the declaration of a dividend upon, or the making of any
distribution in respect of, any stock of the Holding Company payable
in Holding Company Common Stock, Stock Purchase Rights or Convertible
Securities or (ii) the reclassification by subdivision, combination
or otherwise, of the Holding Company Common Stock into a greater or
smaller number of shares, the foregoing figure of $.0001 (or such
figure as last adjusted) shall be proportionately adjusted, and
provided, further, that upon the exercise of this Warrant, the
Holding Company shall make all necessary adjustments (to the nearest
.0001 of a cent) not theretofore made to the Exercise Price up to and
including the date upon which this Warrant is exercised.
(f) Readjustment of Exercise Price. Upon each change in (i)
the consideration, if any, payable for any Stock Purchase Rights or
Convertible Securities referred to in section 4.2(a), (c) or (d),
(ii) the consideration, if any, payable upon exercise of such Stock
Purchase Rights or upon the conversion or exchange of such
Convertible Securities or (iii) the number of shares of Holding
Company Common Stock issuable upon the exercise of such Stock
Purchase Rights or the rate at which such Convertible Securities are
convertible into or exchangeable for shares of Holding Company Common
Stock, the Exercise Price in effect at the time of such event shall
forthwith be readjusted to the Exercise Price which would have been
in effect at such time had such Stock Purchase Rights or Convertible
Securities provided for such changed consideration, number of shares
of Holding Company Common Stock so issuable or conversion rate, as
the case may be, at the time initially granted, issued or sold. On
the expiration of any Stock Purchase Rights not exercised or of any
right to convert or exchange under any Convertible Securities not
exercised, the Exercise Price then in effect shall forthwith be
increased to the Exercise Price which would have been in effect at
the time of such expiration had such Stock Purchase Rights or
Convertible Securities never been issued. No readjustment of the
Exercise Price pursuant to this section 4.2(f) shall (i) increase the
Exercise Price by an amount in excess of the adjustment originally
made to the Exercise Price in respect of the issue, sale or grant of
the applicable Stock Purchase Rights or Convertible Securities or
(ii) require any adjustment to the amount paid or number of Warrant
Shares received by any Person upon any exercise of this Warrant prior
to the date upon which such readjustment to the Exercise Price shall
occur.
(g) Reorganization, Reclassification or Recapitalization of the
Holding Company. If and whenever subsequent to the date hereof the
Holding Company shall effect (i) any reorganization or
reclassification or recapitalization of the capital stock of the
Holding Company (other than in the cases referred to in section
4.2(a)), (ii) any consolidation or merger of the Holding Company with
or into another Person, (iii) the sale, transfer or other disposition
of the property, assets or business of the Holding Company as an
entirety or substantially as an entirety or (iv) any other
transaction (or any other event shall occur) as a result of which
holders of Holding Company Common Stock (of either class) become
entitled to receive any Shares or other securities and/or property of
the Holding Company, any of its Subsidiaries or any other Person
(including, without limitation, cash) with respect to or in exchange
for the Holding Company Common Stock, there shall thereafter be
deliverable upon the exercise of this Warrant or any portion thereof
(in lieu of or in addition to the Warrant Shares theretofore
deliverable, as appropriate) the highest number of Shares or other
securities and/or the greatest amount of property (including, without
limitation, cash) to which the holder of the number of Warrant Shares
which would otherwise have been deliverable upon the exercise of this
Warrant or any portion thereof at the time would have been entitled
upon such reorganization or reclassification or recapitalization of
capital stock, consolidation, merger, sale, transfer, disposition or
other transaction or upon the occurrence of such other event, and at
the same aggregate Exercise Price.
Prior to and as a condition of the consummation of any
transaction or event described in the preceding sentence, the Holding
Company shall make equitable, written adjustments in the application
of the provisions set forth herein and in the other Operative
Documents for the benefit of the holders of the Warrants, in a manner
reasonably satisfactory to the Required Holders of the Warrants so
that all such provisions shall thereafter be applicable, as nearly as
possible, in relation to any Shares or other securities or other
property thereafter deliverable upon exercise of the Warrants and so
that the holders of the Warrants will (prior to exercise) enjoy all
of the rights and benefits enjoyed by any such Person who shall have
acquired any such Shares, other securities, or other property
(including, without limitation, cash) in connection with any such
transaction or event, including, without limitation, any subsequent
tender offer or redemption of any such Shares or other securities.
Any such adjustment shall be made by and set forth in a supplemental
agreement of the Holding Company and/or the successor entity, as
applicable, for the benefit of the holders of the Warrants, and in
form and substance reasonably acceptable to the Required Holders of
the Warrants, which agreement shall bind the Holding Company and/or
the successor entity, as applicable, and all holders of Warrants then
outstanding and shall be accompanied by a favorable opinion of the
regular outside counsel to the Holding Company or the successor
entity, as applicable (or such other firm as is reasonably acceptable
to the Required Holders of the Warrants), as to the enforceability of
such agreement and as to such other matters as the Required Holders
of the Warrants may reasonably request.
(h) Other Dilutive Events. If any other transaction or event
shall occur (excluding any transaction or event explicitly referred
to in this section 4.2, but including, without limitation, any
issuance, repurchase, redemption, or other distribution in respect of
any Shares or other securities of the Holding Company or of any other
Person, including any Person referred to in section 4.2(g)) as to
which the other provisions of this section 4 are not strictly
applicable but the failure to make any adjustment to the Exercise
Price or to any of the other terms of this Warrant would not fairly
protect the purchase rights and other rights represented by this
Warrant in accordance with the essential intent and principles
hereof, then, and as a condition to the consummation of any such
transaction or event, and in each such case, the Holding Company
shall appoint a firm of independent certified public accountants of
recognized national standing (which may be the regular auditors of
the Holding Company), which shall give its opinion as to the
adjustment, if any, on a basis consistent with the essential intent
and principles established in this section 4, necessary to preserve,
without dilution, the rights represented by this Warrant. The
certificate of any such firm of accountants shall be conclusive
evidence of the correctness of any computation made under this
section 4. The Holding Company shall pay the fees and expenses of
such firm of accountants in connection with any such opinion. Upon
receipt of such opinion, the Holding Company will promptly deliver a
copy thereof to the holder of this Warrant and shall make the
adjustments described therein.
(i) Determination of Consideration. For the purposes of this
section 4, the consideration received or receivable by the Holding
Company for the issuance, sale or grant of shares of Holding Company
Common Stock (of either class), Stock Purchase Rights or Convertible
Securities, irrespective of the accounting treatment of such
consideration, shall be valued and determined as follows:
(i) Cash Payment. In the case of cash, the gross amount
paid by the purchasers without deduction of any accrued interest
or dividends, any reasonable expenses paid or incurred and any
reasonable underwriting commissions or concessions paid or
allowed by the Holding Company in connection with such issue or
sale.
(ii) Non-Cash Payment. In the case of consideration other
than cash, the Fair Value thereof (in any case as of the date
immediately preceding the issuance, sale or grant in question).
(iii) Certain Allocations. If shares of Holding
Company Common Stock, Stock Purchase Rights and/or Convertible
Securities are issued or sold together with other securities or
other assets of the Holding Company for a consideration which
covers more than one of the foregoing categories of securities
and assets, the consideration received or receivable (computed
as provided in clauses (i) and (ii) of this section 4.2(i))
shall be allocable to such shares of Holding Company Common
Stock, Stock Purchase Rights and/or Convertible Securities as
reasonably determined in good faith by the board of directors of
the Holding Company (provided such allocation is set forth in a
written resolution and a certified copy thereof is furnished to
the holder of this Warrant promptly (but in any event within 10
days) following its adoption).
(iv) Dividends in Securities. If the Holding Company shall
declare a dividend or make any other distribution upon any stock
of the Holding Company payable in shares of Holding Company
Common Stock, Convertible Securities or Stock Purchase Rights,
such shares of Holding Company Common Stock, Convertible
Securities or Stock Purchase Rights, as the case may be,
issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
(v) Stock Purchase Rights and Convertible Securities. The
consideration for which each share of Holding Company Common
Stock shall be deemed to be issued upon the issuance or sale of
any Stock Purchase Rights or Convertible Securities shall be
determined by dividing (A) the total consideration, if any,
received by the Holding Company as consideration for the Stock
Purchase Rights or the Convertible Securities, as the case may
be, plus the minimum aggregate amount of additional
consideration, if any, ever payable to the Holding Company upon
the exercise of such Stock Purchase Rights and/or upon the
conversion or exchange of such Convertible Securities, as the
case may be, but without deduction of any accrued interest or
dividends, any reasonable expenses paid or incurred and any
reasonable underwriting commissions or concessions paid or
allowed by the Holding Company in connection with such issue or
sale; by (B) the maximum number of shares of Holding Company
Common Stock ever issuable upon the exercise of such Stock
Purchase Rights or upon the conversion or exchange of such
Convertible Securities.
(vi) Merger, Consolidation or Sale of Assets. If any
shares of Holding Company Common Stock (of either class),
Convertible Securities or Stock Purchase Rights are issued in
connection with any merger or consolidation of which the Holding
Company is the surviving corporation, the amount of
consideration therefor shall be deemed to be the Fair Value of
such portion of the assets and business of the non-surviving
corporation as shall be attributable to such Holding Company
Common Stock, Convertible Securities or Stock Purchase Rights,
as the case may be. In the event of (A) any merger or
consolidation of which the Holding Company is not the surviving
corporation or (B) the sale, transfer or other disposition of
the property, assets or business of the Holding Company as an
entirety or substantially as an entirety for Shares or Other
Securities of any other Person, the Holding Company shall be
deemed to have issued the number of shares of Holding Company
Common Stock for Shares or Other Securities of the surviving
corporation or such other Person computed on the basis of the
actual exchange ratio on which the transaction was predicated
and for a consideration equal to the Fair Value on the date of
such transaction of such Shares or Other Securities of the
surviving corporation or such other Person, and if any such
calculation results in adjustment of the Exercise Price, the
determination of the number of Warrant Shares issuable upon
exercise of this Warrant immediately prior to such merger,
consolidation or sale, for the purposes of section 4.2(g), shall
be made after giving effect to such adjustment of the Exercise
Price.
(j) Record Date. If the Holding Company shall take a record of
the holders of the Holding Company Common Stock (of either class) for
the purpose of entitling them (i) to receive a dividend or other
distribution payable in Holding Company Common Stock (of either
class), Convertible Securities or Stock Purchase Rights or (ii) to
subscribe for or purchase Holding Company Common Stock (of either
class), Convertible Securities or Stock Purchase Rights, then all
references in this section 4 to the date of the issue or sale of the
shares of Holding Company Common Stock (of either class) deemed to
have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be, shall be
deemed to be references to such record date.
(k) Shares Outstanding. The number of shares of Holding
Company Common Stock deemed to be outstanding at any given time shall
not include shares of Holding Company Common Stock held by the
Holding Company or any Subsidiary of the Holding Company.
(l) Maximum Exercise Price. At no time shall the Exercise
Price exceed the amount set forth in the first paragraph of the
Preamble of this Warrant except as a result of an adjustment thereto
pursuant to section 4.2(a)(iii) or 4.2(g).
(m) Application. All subdivisions of this section 4.2 are
intended to operate independently of one another. If a transaction
or an event occurs that requires the application of more than one
subdivision, all applicable subdivisions shall be given independent
effect (but without duplication of adjustment).
(n) No Adjustments Under Certain Circumstances. Anything in
this section 4.2 to the contrary notwithstanding, but subject to the
provisions of section 4.5, no adjustment to the Exercise Price shall
be made in the case of:
(i) any issuance of shares of Holding Company Class A
Common Stock (or Other Securities) upon the exercise in whole or
part of any of the Warrants;
(ii) (A) the granting after the Closing Date by the Holding
Company to any officer, director or employee of or advisor or
consultant to the Holding Company or the Operating Company of
options to purchase shares of Holding Company Class A Common
Stock pursuant to the Option Plan and (B) the issuance of shares
of Holding Company Class A Common Stock upon the exercise of
such options, provided that the aggregate number of shares of
Holding Company Class A Common Stock issued and issuable upon
exercise of such options shall not exceed 1,096,513 (being equal
to 10% of the Holding Company Common Stock as of the Closing
Date (calculated on a fully-diluted basis)) (such number of
shares to be adjusted appropriately for any subdivision,
combination, or other similar event with respect to the Holding
Company Class A Common Stock);
(iii) the issuance of shares of Holding Company Class A
Common Stock pursuant to any dividend reinvestment plan,
provided that the price per share of Holding Company Class A
Common Stock paid by plan participants is not less than 85% of
the Fair Value per share at the time of issuance; or
(iv) the issuance of up to 1,642,332 shares of Holding
Company Class A Common Stock (such number of shares to be
adjusted appropriately for any subdivision, combination, or
other similar event with respect to the Holding Company Class A
Common Stock) upon the conversion, exercise or exchange of any
securities convertible into and exercisable or exchangeable for
shares of Holding Company Class A Common Stock which are
outstanding on the Closing Date and specified on Exhibit 5.5(b)
attached to the Securities Purchase Agreements, including,
without limitation, the Holding Company's 10% Convertible
Subordinated Debentures, the Bridge Note and options outstanding
on the Closing Date under the Option Plan.
4.3. Rights Offering. If the Holding Company shall effect an
offering of securities pro rata among its stockholders, the holder hereof
shall be entitled, at its option, to elect to participate in each and
every such offering as if this Warrant had been exercised and such holder
were, at the time of any such offering, then a holder of that number of
Warrant Shares to which such holder is then entitled on the exercise
hereof.
4.4. Certificates and Notices.
(a) Adjustments to Exercise Price. As promptly as practicable
(but in any event not later than 15 days) after the occurrence of any
event requiring any adjustment under this section 4 to the Exercise
Price (or to the number or kind of securities or other property
deliverable upon the exercise of this Warrant), the Holding Company
shall, at its expense, deliver to the holder of this Warrant either
(i) an Officers' Certificate or (ii) a certificate signed by a firm
of independent certified public accountants of recognized national
standing (which may be the regular auditors of the Holding Company),
setting forth in reasonable detail the events requiring the
adjustment and the method by which such adjustment was calculated and
specifying the adjusted Exercise Price and the number of shares of
Holding Company Class A Common Stock (or Other Securities)
purchasable upon exercise of this Warrant after giving effect to such
adjustment. The certificate of any such firm of accountants shall be
conclusive evidence of the correctness of any computation made under
this section 4.
(b) Extraordinary Corporate Events. If and whenever the
Holding Company subsequent to the date hereof shall propose to (i)
pay any dividend to the holders of shares of Holding Company Common
Stock (of either class) or to make any other distribution to the
holders of shares of Holding Company Common Stock (of either class)
(other than as a regularly scheduled cash dividend), (ii) offer to
the holders of shares of Holding Company Common Stock (of either
class) rights to subscribe for or purchase any additional shares of
any class of stock or any other rights or options, (iii) effect any
reclassification of the Holding Company Common Stock (of either
class) or other Shares of the Holding Company (other than a
reclassification involving merely the subdivision or combination of
outstanding shares of Holding Company Common Stock referred to in
section 4.2(a)), (iv) engage in any reorganization or
recapitalization or any consolidation or merger, (v) consummate any
sale, transfer or other disposition of its property, assets and
business as an entirety or substantially as an entirety, (vi) effect
any other transaction which might require an adjustment to the
Exercise Price (or to the number or kind of securities or other
property deliverable upon the exercise of this Warrant), including,
without limitation, any transaction of the kind described in section
4.2(g) or (vii) commence or effect the liquidation, dissolution or
winding up of the Holding Company, then, in each such case, the
Holding Company shall deliver to the holder of this Warrant an
Officers' Certificate giving notice of such proposed action,
specifying (A) the date on which the stock transfer books of the
Holding Company shall close, or a record shall be taken, for
determining the holders of Holding Company Common Stock entitled to
receive such dividend or other distribution or such rights or
options, or the date on which such reclassification, reorganization,
recapitalization, consolidation, merger, sale, transfer, other
disposition, transaction, liquidation, dissolution or winding up
shall take place or commence, as the case may be, and (B) the date as
of which it is expected that holders of Holding Company Common Stock
of record shall be entitled to receive securities or other property
deliverable upon such action, if any such date is to be fixed. Such
Officers' Certificate shall be delivered in the case of any action
covered by clause (i) or (ii) above, at least 15 Business Days prior
to the record date for determining holders of Holding Company Common
Stock for purposes of receiving such payment or offer, and, in any
other case, at least 15 Business Days prior to the date upon which
such action takes place and 15 Business Days prior to any record date
to determine holders of Holding Company Common Stock entitled to
receive such securities or other property.
(c) Effect of Failure. Failure to give any certificate or
notice, or any defect in any certificate or notice required under
this section 4.4 shall not affect the legality or validity of the
adjustment of the Exercise Price or the number of Warrant Shares
purchasable upon exercise of this Warrant.
4.5. Adjustments for Changes in Certain Data; Additional
Adjustments.
(a) The Holding Company hereby agrees that the initial
aggregate number of shares of Holding Company Class A Common Stock
issuable upon exercise in full of the Warrants issued on the Closing
Date to the initial holders thereof was 592,177 shares of Holding
Company Class A Common Stock, which was intended to constitute 6% of
the shares of Holding Company Common Stock (of both classes)
outstanding immediately following the Closing (calculated on a fully-
diluted basis assuming the conversion, exercise and exchange of all
securities convertible into or exercisable or exchangeable for
Holding Company Common Stock (of either class), including, without
limitation, the shares of Holding Company Class A Common Stock
issuable upon exercise of such Warrants. If for any reason the
shares of Holding Company Class A Common Stock purchasable upon the
exercise of the Warrants issued on the Closing Date did not
constitute 6% of the shares of Holding Company Common Stock (of both
classes) outstanding as of such time (and as so calculated), the
Holding Company shall forthwith reissue each Warrant then outstanding
with appropriate adjustments in the Exercise Price and in the number
of shares of Holding Company Class A Common Stock issuable upon
exercise thereof (together with an Officers' Certificate setting
forth in reasonable detail the computation of such adjustments), and
all such adjustments shall be reasonably satisfactory to the holders
thereof.
(b) It is the intent of the Holding Company and the
Warrantholders that the percentage of the shares of Holding Company
Common Stock on a fully- diluted basis represented by the number of
Warrant Shares initially issuable upon exercise of the Warrants
(which is intended to be 6%; 592,177 represents 6% of 9,869,618
(being the sum of 9,277,441 and 592,177)) not be reduced on or after
the Closing Date by any Special Issuance (as defined below). If any
Special Issuance shall occur, then the aggregate number of shares of
Holding Company Class A Common Stock purchasable upon exercise of the
Warrants shall be increased (effective as of the Closing Date)
(without any adjustment in the aggregate Exercise Price) to the
aggregate number of shares of Holding Company Class A Common Stock
for which the Warrants would have been exercisable, on the Closing
Date, if the shares of Holding Company Common Stock issued or subject
to issuance in such Special Issuance had been outstanding on the
Closing Date and had been included for purposes of determining the
aggregate number of shares for which the Warrants were initially
exercisable, in order for such aggregate number of shares to
constitute 6% of the shares of Common Stock outstanding on a fully-
diluted basis on the Closing Date (including the shares of Holding
Company Class A Common Stock issuable upon the exercise of the
Warrants). In the event any Convertible Security or Stock Purchase
Right issued in any Special Issuance terminates without having been
converted or exercised in full, the adjustment pursuant to this
section 4.5(b) to the number of shares issuable upon exercise of the
Warrants shall be readjusted to the number which would have in effect
had such Convertible Security or Stock Purchase Right only been
convertible or exercisable for the number of shares of Holding
Company Common Stock actually issued upon the conversion or exercise
thereof, if any. All adjustments to the aggregate number of shares
of Holding Company Class A Common Stock issuable upon exercise of the
Warrants pursuant to this section 4.5(b) (x) shall be set forth in
reasonable detail in an Officers' Certificate which shall be
delivered by the Holding Company at the time of any Special Issuance,
(y) shall be reasonably satisfactory to the Required Holders of the
Warrants and (z) shall be allocated among each of the Warrants then
outstanding in proportion to the aggregate number of such shares
issuable upon exercise of each Warrant then outstanding (before
giving effect to such adjustment).
By way of example, if the Holding Company issues a Stock
Purchase Right in any Special Issuance for 10,000 shares of Holding
Company Common Stock, the number of Warrant Shares issuable upon
exercise of the Warrants shall be adjusted, at the time such Stock
Purchase Right is issued, initially to 592,815 (being 6% of
9,880,256, the new fully-diluted number of shares). If there had
been a prior adjustment pursuant to any provision of this section 4,
then such number of shares (592,815) shall be further adjusted by
recalculating such prior adjustment as if the number of shares
initially issuable upon exercise of the Warrants had been 592,815,
not 592,177. By way of example, if there had been a two for one
stock split prior to the date such Stock Purchase Right was issued,
the aggregate number of shares of Holding Company Class A Common
Stock issuable upon exercise of the Warrants would become 1,184,992
(being 6% of 19,749,874, the new fully-diluted number of shares), not
592,815.
For purposes hereof, "Special Issuance" shall mean (a) any
issuance of shares of Holding Company Common Stock pursuant to the
Investment Agreement dated March 13, 1997 between GreenGrass Holdings
and the Holding Company (the "Investment Agreement") (including any
shares issued pursuant to section 1.6 thereof) if, after giving
effect thereto, the aggregate number of shares of Holding Company
Common Stock issued or issuable pursuant to the Investment Agreement
exceeds 1,087,406 shares, (b) any issuance of shares of Holding
Company Common Stock in respect of the warrant issued to GreenGrass
Holdings referred to in section 1.3 of the Investment Agreement if,
after giving effect thereto, the aggregate number of shares issued or
issuable in respect thereof exceeds 50,000 shares or any adjustment
to the number of shares of Holding Company Common Stock issuable upon
exercise of such warrant to a number in excess of 50,000, (c) any
issuance of the Rights Shares and/or Remaining Rights Shares (each as
defined in the Investment Agreement) or any issuance of shares of
Holding Company Common Stock, Stock Purchase Rights or Convertible
Securities in respect of principal or interest due on the Bridge Note
if, after giving effect thereto, the aggregate number of Rights
Shares and Remaining Rights Shares issued or issuable pursuant to the
Investment Agreement and shares of Holding Company Common Stock
issued or issuable in respect of the Bridge Note exceeds 543,703
shares, (d) any issuance of shares of Holding Company Common Stock,
Stock Purchase Rights or Convertible Securities in respect of the
Holding Company's 10% Convertible Subordinated Debentures due 2004
(the "Debentures") outstanding in an aggregate principal amount of
$5,322,804 on the Closing Date if, after giving effect thereto, the
aggregate number of shares issued or issuable in respect thereof
exceeds 1,108,918 shares, including any issuance in respect of
interest due on such outstanding Debentures, or any adjustment to the
aggregate number of shares issuable upon conversion of such
outstanding Debentures to a number in excess of 1,108,918, (e) any
issuance of additional Debentures after the Closing Date (the
"Additional Debentures") (including, without limitation, those
subject to the Registration Statement filed with the Commission on
May 16, 1996 relating to the offering of Debentures in the principal
amount of $3,333,333) and any issuance of shares of Holding Company
Common Stock, Stock Purchase Rights or Convertible Securities in
respect of the Additional Debentures, including any issuance in
respect of interest due on such Additional Debentures, and (f) any
issuance of shares of Holding Company Common Stock, Stock Purchase
Rights or Convertible Securities pursuant to any stock option plan
(including the Option Plan) (except as provided in section
4.2(n)(ii)) if, after giving effect thereto, the aggregate number of
shares issued or issuable in respect thereof exceeds 483,414 shares.
5. Registration, Repurchase, Required Exercise, etc. Reference is
hereby made to the Securities Purchase Agreements for certain provisions
relating to (a) registration rights of the holders of the Warrants and
Warrant Shares, (b) the repurchase of the Warrants and/or Warrant Shares
at the option of the holders thereof and/or the Holding Company and
(c) the required exercise of the Warrants at the option of the Holding
Company.
6. Reservation of Holding Company Common Stock. The Holding Company has
reserved and at all times after the date hereof will reserve and keep
available, solely for issuance, sale and delivery upon the exercise of
this Warrant, such number of shares of Holding Company Class A Common
Stock (and/or Other Securities) equal to the number of shares of Holding
Company Class A Common Stock (and/or Other Securities) purchasable from
time to time upon the exercise of this Warrant. All such shares of
Holding Company Class A Common Stock (and/or Other Securities) shall be
duly authorized and, when issued upon exercise of this Warrant in
accordance with the terms hereof, will be validly issued and fully paid
and nonassessable with no liability on the part of the holders thereof and
not subject to preemptive rights on the part of any other Person or to any
lien, charge or other security interest but in each case subject to the
applicable terms of the Securities Purchase Agreements.
7. Various Covenants of the Holding Company.
7.1. No Impairment or Amendment. The Holding Company shall not
by any action including, without limitation, amending its Organizational
Documents, any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of Shares or other
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate to
protect the rights of the holder hereof against impairment. Without
limiting the generality of the foregoing, the Holding Company (a) will not
permit the par value of any Warrant Shares issuable upon exercise of this
Warrant to be greater than the amount payable therefor upon such exercise,
(b) will take all such action as may be necessary or appropriate in order
that the Holding Company may validly issue fully paid and nonassessable
Warrant Shares, (c) will obtain and maintain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
as may be necessary to enable the Holding Company to perform its
obligations under this Warrant, (d) will not issue any capital stock or
enter into any agreement, the terms of which would have the effect,
directly or indirectly, of preventing the Holding Company from honoring
its obligations hereunder or under the other Operative Documents,
including, without limitation, sections 11 and/or 12 of the Securities
Purchase Agreements, and (e) will not amend or modify any term, condition
or provision of its Organizational Documents, or any related agreement,
document or instrument, if the effect thereof is, or could reasonably be
expected to be, adverse in any material respect to the interests of any
holder of the Warrants.
So long as any Warrants or Warrant Shares are outstanding, upon
request of any holder of any such security, the Holding Company will
acknowledge in writing, in form satisfactory to such holder, the continued
validity of the Holding Company's obligations hereunder.
7.2. Listing on Securities Exchanges, etc. At all times
following the exercise of this Warrant, the Holding Company will maintain
the listing of all Warrant Shares on each securities exchange or market or
trading system on which the Holding Company Common Stock (or any Other
Securities) is then or at any time thereafter listed or traded.
7.3. Anti-Dilution Provisions. If the Holding Company issues
any Stock Purchase Rights or Convertible Securities or other securities
containing provisions protecting the holder or holders thereof against
dilution in any manner more favorable to such holder or holders thereof
than those set forth in this Warrant, such provisions (or any more
favorable portion thereof) shall be deemed to be incorporated herein as if
fully set forth in this Warrant and, to the extent inconsistent with any
provision of this Warrant, shall be deemed to be substituted therefor.
7.4. Indemnification. Without limiting the generality of any
provision of the Securities Purchase Agreements or any of the other
Operative Documents, the Holding Company shall indemnify, save and hold
harmless the holder of this Warrant and the holder of any Warrant Shares
from and against any and all liability, loss, cost, damage, reasonable
attorneys' and accountants' fees and expenses, court costs and all other
out-of-pocket expenses reasonably incurred by such holder in connection
with interpreting, preserving, exercising and/or enforcing any of the
terms hereof.
7.5. Certain Expenses. The Holding Company shall pay all
expenses in connection with, and all taxes (other than income, franchise
and stock transfer taxes) and other governmental charges that may be
imposed in respect of, the issue, sale and delivery of this Warrant and
any Warrant Shares.
7.6. Certain Dividends, etc. If and whenever subsequent to the
Closing Date the Holding Company shall declare or pay any dividend or
other distribution on any shares of Holding Company Class A Common Stock
or shall effect any other transaction as a result of which holders of any
shares of Holding Company Class A Common Stock shall be entitled to
receive any dividend or other distribution (excluding dividends or other
distributions of the kinds referred to in section 4.2(a)) with respect to
or in exchange for any shares of Holding Company Class A Common Stock,
then the Holding Company shall pay (or cause to be paid) to each holder of
any Warrant the same dividend or other distribution such holder would have
received had such holder exercised such Warrant in full immediately prior
to the date upon which such dividend or other distribution is paid (or
immediately prior to any record date for such dividend or other
distribution, if applicable).
8. Miscellaneous.
8.1. Nonwaiver. No course of dealing or any delay or failure to
exercise any right, power or remedy hereunder on the part of the holder of
this Warrant or of any Warrant Shares shall operate as a waiver of or
otherwise prejudice such holder's rights, powers or remedies.
8.2. Amendment. Any term, covenant, agreement or condition of
the Warrants may, with the consent of the Holding Company, be amended, or
compliance therewith may be waived (either generally or in a particular
instance and either retroactively or prospectively), by one or more
substantially concurrent written instruments signed by the Required
Holders of the Warrants, provided that (a) no such amendment or waiver
shall change the number of Warrant Shares issuable upon the exercise of
any Warrant or the manner of exercise or the amount of any payment due
upon exercise or the duration of the Exercise Period without the prior
written consent of the holder of such Warrant and (b) no such amendment or
waiver shall extend to or affect any obligation not expressly amended or
waived or impair any right consequent thereon.
8.3. Communications. All communications provided for herein
shall be delivered, mailed or sent by facsimile transmission addressed in
the manner and shall be effective as of the time specified in the
Securities Purchase Agreements.
8.4. Like Tenor. All Warrants shall at all times be identical,
except as to the preamble to each Warrant.
8.5. Remedies. The Holding Company stipulates that the remedies
at law of the holder or holders of this Warrant and/or of any Warrant
Shares in the event of any default or threatened default by the Holding
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for
the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
No remedy conferred in this Warrant on the holder of any Warrant or
Warrant Shares is intended to be exclusive of any other remedy, and each
and every such remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or under any other agreement, document
or instrument or now or hereafter existing at law or in equity or by
statute or otherwise.
8.6. Successors and Assigns. This Warrant and the rights
evidenced hereby shall inure to the benefit of and be binding upon the
successors and assigns of the Holding Company, the holder or holders of
this Warrant and, as applicable, of any Warrant Shares, to the extent
provided herein, and shall be enforceable by such holder or holders.
8.7. Governing Law. This Warrant, including the validity hereof
and the rights and obligations of the Holding Company and of the holder
hereof and all amendments and supplements hereof and all waivers and
consents hereunder, shall be construed in accordance with and governed by
the domestic substantive laws of The Commonwealth of Massachusetts without
giving effect to any choice of law or conflicts of law provision or rule
that would cause the application of the domestic substantive laws of any
other jurisdiction.
8.8. Headings; Entire Agreement; Partial Invalidity, etc. The
table of contents to and headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
This Warrant, together with the other Operative Documents, embodies the
entire agreement and understanding between the holder hereof and the
Holding Company and supersedes all prior agreements and understandings
relating to the subject matter hereof. In case any provision in this
Warrant or any of the other Operative Documents shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
8.9. No Rights or Liabilities as a Stockholder. This Warrant
shall not entitle the holder hereof to any voting rights or other rights
as a stockholder of the Holding Company, provided that nothing in this
section 8.9 shall be construed to affect any rights the holder of this
Warrant may have under any other provision of this Warrant or any of the
other Operative Documents or under any applicable law. No provision of
this Warrant, in the absence of an affirmative action by the holder hereof
to purchase Holding Company Common Stock, and no mere enumeration herein
of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder as a stockholder of the Holding Company, whether
such liability is asserted by the Holding Company, by creditors of the
Holding Company or by any other Person.
[The remainder of this page is left blank intentionally.]
IN WITNESS WHEREOF, the Holding Company has caused this Warrant to be
executed as an instrument under seal by its duly authorized officer as of
the date first above written.
SWING-N-SLIDE CORP.
By: /s/ Richard E. Ruegger
Vice President - Finance
<PAGE>
Exhibit 2.2(a)
FORM OF NOTICE OF EXERCISE
(To be executed only upon partial or full exercise
of the within Warrant)
The undersigned registered holder of the within Warrant irrevocably
exercises the within Warrant for and purchases ___________________________
shares of Common Stock of SWING-N-SLIDE CORP. and herewith makes payment
therefor in the amount of $ _______________ , all at the price, in the
manner and on the terms and conditions specified in the within Warrant,
and requests that a certificate (or _________ certificates in
denominations of _______________ shares) for such shares hereby purchased
be issued in the name of and delivered to (choose one) (a) the undersigned
or (b) _______________________________________, whose address is__________
_____________________ and, if such shares shall not include all the
Warrant Shares issuable as provided in the within Warrant, that a new
Warrant of like tenor for the number of Warrant Shares not being purchased
hereunder be issued in the name of and delivered to (choose one) (a) the
undersigned or (b) ____________________________________, whose address is
_______________________________________.
Dated: _____________, _____.
[ ]
By __________________________________
(Signature of Registered Holder)
NOTICE: The signature on this Notice of Exercise must correspond with
the name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
<PAGE>
Exhibit 3
FORM OF ASSIGNMENT
(To be executed only upon the assignment
of the within Warrant)
FOR VALUE RECEIVED, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto _________________________
_____________________ , whose address is
_________________________________________________, all of the rights of
the undersigned under the within Warrant, with respect to _______ shares
of Common Stock of SWING-N-SLIDE CORP. and, if such shares shall not
include all the Warrant Shares issuable as provided in the within Warrant,
that a new Warrant of like tenor for the number of Warrant Shares not
being transferred hereunder be issued in the name of and delivered to
[choose one] (a) the undersigned or (b)________________________ , whose
address is _______________________________________________ , and does
hereby irrevocably constitute and appoint _____________________________
Attorney to register such transfer on the books of SWING-N-SLIDE CORP.
maintained for the purpose, with full power of substitution in the
premises.
Dated: _____________, _____.
[ ]
By ________________________________
(Signature of Registered Holder)
NOTICE: The signature on this Assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
CONFORMED COPY
WARRANT
To Purchase 92,528 Shares of Common Stock of
SWING-N-SLIDE CORP.
March 13, 1997
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions 2
1.1. Definitions of Terms 2
1.2. Other Definitions 4
2. Exercise of Warrant 5
2.1. Right to Exercise; Notice 5
2.2. Manner of Exercise; Issuance of Holding Company
Common Stock 5
2.3. Effectiveness of Exercise 6
2.4. Fractional Shares 6
2.5. Automatic Exercise on Last Day of Exercise Period 7
2.6. Continued Validity 7
3. Registration, Transfer, Exchange and Replacement of Securities;
Legends 7
3.1. Registration, Transfer, Exchange and Replacement
of Securities 7
3.2. Legends 8
4. Anti-Dilution Provisions 8
4.1. Adjustment of Number of Shares Purchasable 8
4.2. Adjustment of Exercise Price 8
4.3. Rights Offering 17
4.4. Certificates and Notices 17
4.5. Adjustments for Changes in Certain Data;
Additional Adjustments 18
5. Registration, Repurchase, Required Exercise, etc. 21
6. Reservation of Holding Company Common Stock 21
7. Various Covenants of the Holding Company 21
7.1. No Impairment or Amendment 21
7.2. Listing on Securities Exchanges, etc. 22
7.3. Anti-Dilution Provisions 22
7.4. Indemnification 22
7.5. Certain Expenses 22
7.6. Certain Dividends, etc. 22
8. Miscellaneous 23
8.1. Nonwaiver 23
8.2. Amendment 23
8.3. Communications 23
8.4. Like Tenor 23
8.5. Remedies 23
8.6. Successors and Assigns 23
8.7. Governing Law 24
8.8. Headings; Entire Agreement; Partial Invalidity, etc. 24
8.9. No Rights or Liabilities as a Stockholder 24
Exhibit 2.2(a) Form of Notice of Exercise
Exhibit 3.1 Form of Assignment
<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF REGISTRATION
THEREUNDER OR AN EXEMPTION THEREFROM.
WARRANT
To Purchase 92,528 Shares of Common Stock of
SWING-N-SLIDE CORP.
No. RW-5 March 13, 1997
THIS IS TO CERTIFY that, for value received, GERLACH & CO., or
registered assigns, is entitled upon the due exercise hereof at any time
during the Exercise Period (as hereinafter defined) to purchase in the
aggregate 92,528 shares of Common Stock, $.01 par value, of SWING-N-SLIDE
CORP., a Delaware corporation (the "Holding Company"), at an Exercise
Price of $.001 per share (such Exercise Price and the number of shares of
Common Stock purchasable hereunder being subject to adjustment as provided
herein), and to exercise the other rights, powers and privileges
hereinafter provided, all on the terms and subject to the conditions
hereinafter set forth.
This Warrant is one of the Holding Company's Warrants to Purchase
Shares of Common Stock (herein, together with any warrants issued in
exchange therefor or replacement thereof, all as amended or supplemented
from time to time, called the "Warrants") initially exercisable in the
aggregate for 592,177 (subject to adjustment) shares of Holding Company
Class A Common Stock and issued pursuant to those certain Securities
Purchase Agreements, dated the Closing Date, by and among the Holding
Company, Newco, Inc. and the institutional investors named therein (as
amended, modified and supplemented from time to time, the "Securities
Purchase Agreements"). Reference is hereby made to the Securities Purchase
Agreements for a description of, among other things, certain terms
relating to the Warrants and the Warrant Shares and certain rights of the
holders hereof and thereof, including, without limitation (a) the rights
of the holders to require the repurchase of the Warrants and the Warrant
Shares and to require the registration of the Warrant Shares, and (b) the
right of the Holding Company to repurchase the Warrants and to require the
exercise of the Warrants. Holders of Warrants and/or Warrant Shares are
entitled to the applicable benefits of the Securities Purchase Agreements
and the other Operative Documents and may enforce the applicable
agreements contained therein, all in accordance with the terms thereof,
notwithstanding any payment or prepayment or redemption or acquisition of
any of the other Securities issued pursuant to the Securities Purchase
Agreements.
1. Definitions.
1.1. Definitions of Terms. Terms used herein without definition
which are defined in the Securities Purchase Agreements have the meanings
ascribed to them therein, unless the context clearly requires otherwise,
including, without limitation, the following terms: "Bridge Note",
"Closing", "Commission", "corporation", "Notes", "Officers' Certificate",
"Operating Company", "Operative Documents", "Option Plan", "Organizational
Documents", "Person", "Preferred Shares", "Required Holders", "Securities
Act", "shares" and "Subsidiary". In addition, the terms defined in this
section 1, whenever used and capitalized in this Warrant, shall, unless
the context otherwise requires, have the following respective meanings:
"Additional Debentures" shall have the meaning specified in section
4.5(b).
"Assignment" shall mean the form of Assignment appearing at the end
of this Warrant.
"Closing Date" shall mean March 13, 1997.
"Convertible Securities" shall mean evidences of indebtedness, Shares
(including, without limitation, any Preferred Shares) or other securities
which are convertible into or exchangeable or exercisable for, with or
without payment of additional consideration, shares of Holding Company
Common Stock (of either class), either immediately or upon the arrival of
a specified date or the happening of a specified event.
"Current Market Price" of any security (including, without
limitation, any share of Holding Company Common Stock) as of any date
herein specified shall mean the average of the daily closing prices for
the 20 consecutive trading days immediately prior to, but not including
the day in question (or in the event that a security has been traded for
less than 20 days, each of the trading days prior to the day in question
on which such security has been traded). The closing price for each day
shall be (a) if such security is listed or admitted for trading on any
domestic national securities exchange, the closing sale price of such
security, regular way, or the average of the closing bid prices thereof if
no such sale occurred, in each case as officially reported on the
principal securities exchange on which such security is listed, or (b) if
not reported as described in clause (a), the closing sale price of such
security, or the average of the closing bid prices thereof if no such sale
occurred, in each case as reported by the NASDAQ Stock Market, or any
similar system of automated dissemination of quotations of securities
prices then in common use, if so quoted, as reported by any member firm of
the New York Stock Exchange selected by the Holding Company, or (c) if not
quoted as described in clause (b), the average of the closing bid and
asked prices for such security as reported by the National Quotation
Bureau Incorporated or any similar successor organization, as reported by
any member firm of the New York Stock Exchange selected by the Holding
Company.
"Debentures" shall have the meaning specified in section 4.5(b).
"Exercise Period" shall mean the period commencing on the Closing
Date and terminating on the later of (a) March 13, 2003 and (b) the date
upon which all of the Notes have been paid in full, subject to the right
of the Holding Company to repurchase the Warrants and to require the
exercise of the Warrants, all as set forth in the Securities Purchase
Agreements.
"Exercise Price" shall mean the price per share of Holding Company
Common Stock set forth in the preamble to this Warrant, as such price may
be adjusted pursuant to section 4.
"Fair Value" shall mean the fair value of the appropriate security
(including, without limitation, any share of Holding Company Common
Stock), property, assets, business or entity as determined by the board of
directors of the Holding Company, provided that if, within 15 days
following receipt of the writing setting forth any such determination of
Fair Value, the Required Holders of the Warrants shall notify the Holding
Company of their disagreement with such determination, then the Fair Value
shall be determined by an independent investment banking firm of
recognized national standing (selected by the Holding Company and
reasonably satisfactory to the Required Holders of the Warrants). Each
determination of Fair Value shall be made without applying a discount for
any lack of liquidity or absence of control but shall otherwise be made in
accordance with generally accepted financial practice and shall be set
forth in writing, and the Holding Company shall, immediately following
such determination, deliver a copy thereof to each holder or holders of
Warrants then outstanding. The determination of any such independent
investment banking firm so made shall be conclusive and binding on the
Holding Company and on such holder or holders. The Holding Company shall
pay all of the expenses incurred in connection with any such
determination, including, without limitation, the expenses of the
independent investment banking firm engaged to make such determination.
If the Holding Company shall not have selected such investment banking
firm within 20 days after the occurrence of the event giving rise to the
need therefor, then the Required Holders of the Warrants at the time
outstanding may select such investment banking firm. Notwithstanding the
foregoing, in the case of any security, if clauses (a), (b) or (c) of the
definition of Current Market Price are applicable to such security, then
the Fair Value of such security shall be the Current Market Price of such
security.
"Holding Company" shall mean Swing-N-Slide Corp., a Delaware
corporation.
"Holding Company Class A Common Stock" shall mean the Common Stock,
$.01 par value, of the Holding Company as constituted on the Closing Date
and any Shares into which such Common Stock shall have been changed or any
Shares resulting from any reclassification of such Common Stock.
"Holding Company Class B Common Stock" shall mean the Class B Common
Stock, $.01 par value, of the Holding Company as constituted on the
Closing Date and any Shares into which such Class B Common Stock shall
have been changed or any Shares resulting from any reclassification of
such Class B Common Stock.
"Holding Company Common Stock" shall mean the Holding Company Class A
Common Stock and the Holding Company Class B Common Stock.
"Investment Agreement" shall have the meaning specified in section
4.5(b).
"Notice of Exercise" shall mean the form of Notice of Exercise
appearing at the end of this Warrant.
"Other Securities" shall mean with reference to the exercise
privilege of the holders of the Warrants, any Shares (other than Holding
Company Class A Common Stock) and any other securities of the Holding
Company (including, without limitation, Preferred Shares) or of any other
Person which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise or partial exercise of
the Warrants, in lieu of or in addition to Holding Company Class A Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Holding Company Class A Common Stock (or
Other Securities) pursuant to the terms of the Warrants or otherwise.
"Securities Purchase Agreements" shall have the meaning specified in
the preamble to this Warrant.
"Special Issuance" shall have the meaning specified in section
4.5(b).
"Stock Purchase Rights" shall mean any warrants, options or other
rights to subscribe for, purchase or otherwise acquire any shares of
Holding Company Common Stock (of either class) or any Convertible
Securities, either immediately or upon the arrival of a specified date or
the happening of a specified event.
"Warrant Shares" shall mean the shares of Holding Company Class A
Common Stock (and/or Other Securities) issued or issuable, as the case may
be, from time to time upon exercise of the Warrants, including, without
limitation, any shares of Holding Company Class A Common Stock (and/or
Other Securities) issued or issuable with respect thereto by way of stock
dividend or distribution or in connection with a combination of shares,
recapitalization, merger, consolidation, other reorganization or
otherwise.
"Warrants" shall have the meaning specified in the preamble to this
Warrant.
1.2. Other Definitions. The terms defined in this section 1.2,
whenever used in this Warrant, shall, unless the context otherwise
requires, have the following respective meanings:
"this Warrant" (and similar references to any of the other Operative
Documents) shall mean, and the words "herein" (and "therein"), "hereof"
(and "thereof"), "hereunder" (and "thereunder") and words of similar
import shall, unless the context clearly requires otherwise, refer to,
such instruments as they may from time to time be amended, modified or
supplemented.
2. Exercise of Warrant.
2.1. Right to Exercise; Notice. On the terms and subject to the
conditions of this section 2, the holder hereof shall have the right, at
its option, to exercise this Warrant in whole or in part at any time or
from time to time during the Exercise Period, all as more fully specified
below, provided that a partial exercise of this Warrant for less than the
entire remaining amount of Warrant Shares issuable under this Warrant
shall be made only for a whole number of shares.
2.2. Manner of Exercise; Issuance of Holding Company Common
Stock. To exercise this Warrant, the holder hereof shall deliver to the
Holding Company (a) a Notice of Exercise (substantially in the form of
Exhibit 2.2(a) attached hereto) duly executed by the holder hereof (or its
attorney) specifying the number of Warrant Shares to be purchased, (b) an
amount equal to the aggregate Exercise Price for all Warrant Shares as to
which this Warrant is then being exercised and (c) this Warrant. At the
option of the holder hereof, payment of the Exercise Price shall be made
(w) by wire transfer of funds to an account in a bank located in the
United States designated by the Holding Company for such purpose, (x) by
check payable to the order of the Holding Company, (y) by application of
any Warrant Shares or any Notes, as provided below, or (z) by any
combination of such methods.
Upon the exercise of this Warrant in whole or in part, the holder
hereof may, at its option, submit to the Holding Company written
instructions from such holder to apply any specified portion of the
Warrant Shares issuable upon such exercise in payment of the Exercise
Price required upon such exercise, in which case the Holding Company will
accept such specified portion of the Warrant Shares (at a value per share
equal to the Current Market Price of such share, if applicable, or the
then Fair Value of such share less, in each case, the Exercise Price then
in effect), in lieu of a like amount of such cash payment.
Upon the exercise of this Warrant in whole or in part by the holder
of any Note, such holder may, at its option, surrender such Note to the
Holding Company together with written instructions from such holder to
apply all or any specified principal amount of such Note against the
payment of some or all of the Exercise Price required upon such exercise,
in which case the Holding Company will accept such specified principal
amount in lieu of a like amount of such cash payment. In lieu of or in
addition to the aforesaid application, such holder may, without
surrendering such Note, furnish the Holding Company with written
instructions to apply all or any specified amount of accrued interest on
such Note against the payment of some or all of the Exercise Price
required upon such exercise, in which case the Holding Company will accept
such specified accrued interest in lieu of a like amount of cash. Upon
any such partial application of the principal of any Note, the Holding
Company at its expense will cause the Operating Company to promptly issue
and deliver to or upon the order of the holder thereof a new Note or Notes
equal in aggregate principal amount to the unpaid principal amount of such
surrendered Note not so applied and dated so as to result in no loss of
interest. At the time of surrender of any Note pursuant to this section
2.2, the Holding Company will cause the Operating Company to pay to the
holder surrendering such Note all interest on the principal amount thereof
so applied accrued to and including the date of such surrender.
Upon receipt of the items referred to in section 2.3, the Holding
Company shall, as promptly as practicable, and in any event within five
days thereafter, cause to be issued and delivered to the holder hereof (or
its nominee) or the transferee designated in the Notice of Exercise, a
certificate or certificates representing the number of Warrant Shares
specified in the Notice of Exercise (but not exceeding the maximum number
of shares issuable upon exercise of this Warrant) minus the number of
Warrant Shares, if any, applied in payment of the Exercise Price. Such
certificates shall be registered in the name of the holder hereof (or its
nominee) or in the name of such transferee, as the case may be.
If this Warrant is exercised in part, the Holding Company shall, at
the time of delivery of such certificate or certificates, issue and
deliver to the holder hereof or the transferee so designated in the Notice
of Exercise, a new Warrant evidencing the right of the holder hereof or
such transferee to purchase at the Exercise Price then in effect the
aggregate number of Warrant Shares for which this Warrant shall not have
been exercised and this Warrant shall be cancelled.
2.3. Effectiveness of Exercise. Unless otherwise requested by
the holder hereof, this Warrant shall be deemed to have been exercised and
such certificate or certificates representing Warrant Shares shall be
deemed to have been issued, and the holder or transferee so designated in
the Notice of Exercise shall be deemed to have become the holder of record
of such Warrant Shares for all purposes, as of the close of business on
the date on which the Notice of Exercise, the Exercise Price and this
Warrant shall have been received by the Holding Company.
2.4. Fractional Shares. The Holding Company shall not issue
fractional Warrant Shares or scrip representing fractional Warrant Shares
upon any exercise of this Warrant. As to any fractional Warrant Shares
which the holder hereof would otherwise be entitled to purchase from the
Holding Company upon such exercise, the Holding Company shall pay such
holder a cash adjustment for such fraction in an amount equal to the same
fraction of the Fair Value of a share of Holding Company Common Stock as
of the date of the Notice of Exercise.
2.5. Automatic Exercise on Last Day of Exercise Period. If this
Warrant shall not have been exercised in full on or before the last day of
the Exercise Period, then this Warrant shall be automatically exercised,
without further action on the part of the holder hereof, in full on and as
of the last day of the Exercise Period, unless at any time on or before
such last day of the Exercise Period the holder of this Warrant shall
notify the Holding Company in writing that no such automatic exercise is
to occur. Payment of the Exercise Price due in connection with any such
automatic exercise pursuant to this section 2.5 shall be made by
application of that portion of the Warrant Shares issuable upon such
exercise (at a value per share equal to the then Fair Value thereof) equal
to the aggregate Exercise Price which is due upon such exercise, unless at
any time on or before such last day of the Exercise Period the holder of
this Warrant shall notify the Holding Company that such holder elects one
of the other payment options set forth in section 2.2. As promptly as
practicable following any such automatic exercise, and in any event within
five days after the last day of the Exercise Period, the Holding Company
shall cause to be issued and delivered to the holder hereof a certificate
registered in the name of the holder hereof (unless the holder shall
specifically instruct the Holding Company otherwise) representing the
Warrant Shares issued in connection with such automatic exercise of this
Warrant minus the number of Warrant Shares, if any, applied in payment of
the Exercise Price. Upon receipt of such certificate, the holder of this
Warrant shall promptly surrender this Warrant to the Holding Company for
cancellation.
2.6. Continued Validity. A holder of Warrant Shares issued upon
the exercise of this Warrant, in whole or in part, shall continue to be
entitled to all rights to which a holder of this Warrant is entitled
pursuant to the provisions of this Warrant except such rights as by their
terms apply solely to the holder of a Warrant, notwithstanding that this
Warrant is cancelled following such exercise. The Holding Company will,
at the time of any exercise of this Warrant, upon the request of the
holder of the Warrant Shares issued upon the exercise hereof, acknowledge
in writing, in form reasonably satisfactory to such holder, its continuing
obligation to afford to such holder all rights to which such holder shall
continue to be entitled after such exercise in accordance with the
provisions of this Warrant, including, without limitation, those set forth
in sections 7.1, 7.2, 7.4 and 7.5 of this Warrant; provided that if such
holder shall fail to make any such request, such failure shall not affect
the continuing obligation of the Holding Company to afford to such holder
all such rights.
3. Registration, Transfer, Exchange and Replacement of Securities;
Legends.
3.1. Registration, Transfer, Exchange and Replacement of
Securities. Reference is hereby made to sections 17 and 18 of the
Securities Purchase Agreements for certain provisions relating to the
registration, transfer, exchange and replacement of the Warrants and
Warrant Shares. To transfer this Warrant, the holder shall deliver to the
Holding Company a Notice of Assignment (substantially in the form of
Exhibit 3.1 attached hereto) duly executed by the holder hereof (or its
attorney) specifying that this Warrant (or any portion hereof) is to be
transferred to the Person(s) named therein.
3.2. Legends. Neither this Warrant nor any Warrant Shares may
be transferred or assigned unless registered under the Securities Act or
unless an exemption from such registration is available. Until the date
on which a registration statement covering the Warrants becomes effective
under the Securities Act, each Warrant shall bear a legend in
substantially the following form:
"THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN THE
ABSENCE OF REGISTRATION THEREUNDER OR AN EXEMPTION
THEREFROM."
Until the date on which a registration statement covering the Warrant
Shares becomes effective under the Securities Act, each certificate
evidencing Warrant Shares shall bear a legend in substantially the
following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF REGISTRATION
THEREUNDER OR AN EXEMPTION THEREFROM."
4. Anti-Dilution Provisions.
4.1. Adjustment of Number of Shares Purchasable. Upon any
adjustment of the Exercise Price as provided in section 4.2, the holder
hereof shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Holding Company
Class A Common Stock (calculated to the nearest 1/100th of a share)
obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of shares of Holding Company Class A Common
Stock purchasable hereunder immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from such
adjustment.
4.2. Adjustment of Exercise Price. In addition to any
adjustment required under the provisions of section 4.5 below, and except
as otherwise provided in section 4.2(n) below, the Exercise Price shall be
subject to adjustment from time to time as set forth in this section 4.2.
(a) Stock Dividends, Distributions, Subdivisions and
Combinations. If and whenever the Holding Company subsequent to the
date hereof:
(i) declares a dividend upon, or makes any distribution in
respect of, any of its capital stock, payable in shares of
Holding Company Common Stock (of either class), Convertible
Securities or Stock Purchase Rights, or
(ii) subdivides its outstanding shares of Holding Company
Common Stock (of either class) into a larger number of shares of
Holding Company Common Stock (of such class), or
(iii) combines its outstanding shares of Holding
Company Common Stock (of either class) into a smaller number of
shares of Holding Company Common Stock (of such class),
then the Exercise Price shall be adjusted to that price determined by
multiplying the Exercise Price in effect immediately prior to such
event by a fraction (A) the numerator of which shall be the total
number of outstanding shares of Holding Company Common Stock (of
both classes) immediately prior to such event, and (B) the
denominator of which shall be the total number of outstanding shares
of Holding Company Common Stock (of both classes) immediately after
such event, treating as outstanding all shares of Holding Company
Common Stock issuable upon conversions or exchanges of any such
Convertible Securities issued in such dividend or distribution and
exercises of any such Stock Purchase Rights issued in such dividend
or distribution.
(b) Issuance of Additional Shares of Holding Company Common
Stock. If and whenever the Holding Company subsequent to the date
hereof shall issue or sell any shares of Holding Company Common Stock
(of either class) (except as otherwise provided in the last paragraph
of this section 4.2(b)), including, without limitation, any sale of
any treasury shares, for a consideration per share less than the Fair
Value per share (determined, in each case, as of the date specified
in the next succeeding paragraph), the Exercise Price upon each such
issuance or sale shall be adjusted as of the date specified in the
next succeeding paragraph to the price determined by multiplying the
Exercise Price in effect as of the date specified in the next
succeeding paragraph by a fraction the numerator of which is (i) the
sum of (A) the number of shares of Holding Company Common Stock (of
both classes) outstanding immediately prior to such issue or sale
multiplied by the Fair Value per share of Holding Company Common
Stock immediately prior to such issue or sale plus (B) the aggregate
consideration, if any, received by the Holding Company upon such
issue or sale, divided by (ii) the total number of shares of Holding
Company Common Stock (of both classes) outstanding immediately after
such issue or sale, and the denominator of which is the Fair Value
per share of Holding Company Common Stock immediately prior to such
issue or sale.
For the purposes of this section 4.2(b), the date as of which
the Exercise Price shall be adjusted and the date as of which the
Fair Value shall be determined shall be the earlier of (A) the date
on which the Holding Company shall enter into a firm contract for the
issuance of such shares of Holding Company Common Stock and (B)
immediately prior to the date of actual issuance of such shares of
Holding Company Common Stock.
No adjustment of the Exercise Price shall be made under this
section 4.2(b) upon the issuance of any shares of Holding Company
Common Stock which are (i) distributed to holders of Holding Company
Common Stock pursuant to a stock dividend, distribution or
subdivision for which an adjustment shall previously have been made
under section 4.2(a) or (ii) issued pursuant to the exercise of any
Stock Purchase Rights or pursuant to the conversion or exchange of
any Convertible Securities to the extent that an adjustment shall
previously have been made upon the issuance of such Stock Purchase
Rights or Convertible Securities pursuant to sections 4.2(a), (c) or
(d).
(c) Issuance of Stock Purchase Rights. If and whenever the
Holding Company subsequent to the date hereof shall issue or sell any
Stock Purchase Rights (except as otherwise provided in the last
paragraph of this section 4.2(c)) and the consideration per share for
which shares of Holding Company Common Stock (of either class) may at
any time thereafter be issuable upon exercise thereof (or, in the
case of Stock Purchase Rights exercisable for the purchase of
Convertible Securities, upon the subsequent conversion or exchange of
such Convertible Securities) shall be less than the Fair Value per
share (determined, in each case, as of the date specified in the next
succeeding paragraph), the Exercise Price upon each such issuance or
sale shall be adjusted as provided in section 4.2(b) as of the date
specified in the next succeeding paragraph on the basis that the
maximum number of shares of Holding Company Common Stock ever
issuable upon exercise of such Stock Purchase Rights (or upon
conversion or exchange of such Convertible Securities following such
exercise) shall be deemed to have been issued as of the date of the
determination of the Fair Value specified in the next succeeding
paragraph.
For the purposes of this section 4.2(c), the date as of which
the Exercise Price shall be adjusted and the date as of which the
Fair Value shall be determined shall be the earlier of (A) the date
on which the Holding Company shall enter into a firm contract for the
issuance of such Stock Purchase Rights and (B) immediately prior to
the date of actual issuance of such Stock Purchase Rights.
No adjustment of the Exercise Price shall be made under this
section 4.2(c) upon the issuance of any Stock Purchase Rights to the
extent that an adjustment shall previously have been made upon the
issuance of such Stock Purchase Rights pursuant to section 4.2(a).
(d) Issuance of Convertible Securities. If and whenever the
Holding Company subsequent to the date hereof shall issue or sell any
Convertible Securities (except as otherwise provided in the last
paragraph of this section 4.2(d)) and the consideration per share for
which shares of Holding Company Common Stock (of either class) may at
any time thereafter be issuable pursuant to the terms of such
Convertible Securities shall be less than the Fair Value per share
(determined, in each case, as of the date specified in the next
succeeding paragraph), the Exercise Price upon each such issuance or
sale shall be adjusted as provided in section 4.2(b) as of the date
specified in the next succeeding paragraph on the basis that the
maximum number of shares of Holding Company Common Stock ever
necessary to effect the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued as of the
date of the determination of the Fair Value specified in the next
succeeding paragraph.
For the purposes of this section 4.2(d), the date as of which
the Exercise Price shall be adjusted and the date as of which the
Fair Value shall be determined shall be the earlier of (A) the date
on which the Holding Company shall enter into a firm contract for the
issuance of such Convertible Securities and (B) immediately prior to
the date of actual issuance of such Convertible Securities.
No adjustment of the Exercise Price shall be made under this
section 4.2(d) upon the issuance of any Convertible Securities which
are (i) distributed to holders of Holding Company Common Stock
pursuant to a stock dividend or distribution to the extent that an
adjustment shall previously have been made pursuant to section 4.2(a)
or (ii) issued pursuant to the exercise of any Stock Purchase Rights
to the extent that an adjustment shall previously have been made upon
the issuance of such Stock Purchase Rights pursuant to section 4.2(a)
or (c).
(e) Minimum Adjustment. If any adjustment of the Exercise
Price pursuant to this section 4.2 shall result in an adjustment of
less than $.0001, no such adjustment shall be made, but any such
lesser adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which, together
with any adjustments so carried forward, shall amount to $.0001;
provided that upon any adjustment of the Exercise Price resulting
from (i) the declaration of a dividend upon, or the making of any
distribution in respect of, any stock of the Holding Company payable
in Holding Company Common Stock, Stock Purchase Rights or Convertible
Securities or (ii) the reclassification by subdivision, combination
or otherwise, of the Holding Company Common Stock into a greater or
smaller number of shares, the foregoing figure of $.0001 (or such
figure as last adjusted) shall be proportionately adjusted, and
provided, further, that upon the exercise of this Warrant, the
Holding Company shall make all necessary adjustments (to the nearest
.0001 of a cent) not theretofore made to the Exercise Price up to and
including the date upon which this Warrant is exercised.
(f) Readjustment of Exercise Price. Upon each change in (i)
the consideration, if any, payable for any Stock Purchase Rights or
Convertible Securities referred to in section 4.2(a), (c) or (d),
(ii) the consideration, if any, payable upon exercise of such Stock
Purchase Rights or upon the conversion or exchange of such
Convertible Securities or (iii) the number of shares of Holding
Company Common Stock issuable upon the exercise of such Stock
Purchase Rights or the rate at which such Convertible Securities are
convertible into or exchangeable for shares of Holding Company Common
Stock, the Exercise Price in effect at the time of such event shall
forthwith be readjusted to the Exercise Price which would have been
in effect at such time had such Stock Purchase Rights or Convertible
Securities provided for such changed consideration, number of shares
of Holding Company Common Stock so issuable or conversion rate, as
the case may be, at the time initially granted, issued or sold. On
the expiration of any Stock Purchase Rights not exercised or of any
right to convert or exchange under any Convertible Securities not
exercised, the Exercise Price then in effect shall forthwith be
increased to the Exercise Price which would have been in effect at
the time of such expiration had such Stock Purchase Rights or
Convertible Securities never been issued. No readjustment of the
Exercise Price pursuant to this section 4.2(f) shall (i) increase the
Exercise Price by an amount in excess of the adjustment originally
made to the Exercise Price in respect of the issue, sale or grant of
the applicable Stock Purchase Rights or Convertible Securities or
(ii) require any adjustment to the amount paid or number of Warrant
Shares received by any Person upon any exercise of this Warrant prior
to the date upon which such readjustment to the Exercise Price shall
occur.
(g) Reorganization, Reclassification or Recapitalization of the
Holding Company. If and whenever subsequent to the date hereof the
Holding Company shall effect (i) any reorganization or
reclassification or recapitalization of the capital stock of the
Holding Company (other than in the cases referred to in section
4.2(a)), (ii) any consolidation or merger of the Holding Company with
or into another Person, (iii) the sale, transfer or other disposition
of the property, assets or business of the Holding Company as an
entirety or substantially as an entirety or (iv) any other
transaction (or any other event shall occur) as a result of which
holders of Holding Company Common Stock (of either class) become
entitled to receive any Shares or other securities and/or property of
the Holding Company, any of its Subsidiaries or any other Person
(including, without limitation, cash) with respect to or in exchange
for the Holding Company Common Stock, there shall thereafter be
deliverable upon the exercise of this Warrant or any portion thereof
(in lieu of or in addition to the Warrant Shares theretofore
deliverable, as appropriate) the highest number of Shares or other
securities and/or the greatest amount of property (including, without
limitation, cash) to which the holder of the number of Warrant Shares
which would otherwise have been deliverable upon the exercise of this
Warrant or any portion thereof at the time would have been entitled
upon such reorganization or reclassification or recapitalization of
capital stock, consolidation, merger, sale, transfer, disposition or
other transaction or upon the occurrence of such other event, and at
the same aggregate Exercise Price.
Prior to and as a condition of the consummation of any
transaction or event described in the preceding sentence, the Holding
Company shall make equitable, written adjustments in the application
of the provisions set forth herein and in the other Operative
Documents for the benefit of the holders of the Warrants, in a manner
reasonably satisfactory to the Required Holders of the Warrants so
that all such provisions shall thereafter be applicable, as nearly as
possible, in relation to any Shares or other securities or other
property thereafter deliverable upon exercise of the Warrants and so
that the holders of the Warrants will (prior to exercise) enjoy all
of the rights and benefits enjoyed by any such Person who shall have
acquired any such Shares, other securities, or other property
(including, without limitation, cash) in connection with any such
transaction or event, including, without limitation, any subsequent
tender offer or redemption of any such Shares or other securities.
Any such adjustment shall be made by and set forth in a supplemental
agreement of the Holding Company and/or the successor entity, as
applicable, for the benefit of the holders of the Warrants, and in
form and substance reasonably acceptable to the Required Holders of
the Warrants, which agreement shall bind the Holding Company and/or
the successor entity, as applicable, and all holders of Warrants then
outstanding and shall be accompanied by a favorable opinion of the
regular outside counsel to the Holding Company or the successor
entity, as applicable (or such other firm as is reasonably acceptable
to the Required Holders of the Warrants), as to the enforceability of
such agreement and as to such other matters as the Required Holders
of the Warrants may reasonably request.
(h) Other Dilutive Events. If any other transaction or event
shall occur (excluding any transaction or event explicitly referred
to in this section 4.2, but including, without limitation, any
issuance, repurchase, redemption, or other distribution in respect of
any Shares or other securities of the Holding Company or of any other
Person, including any Person referred to in section 4.2(g)) as to
which the other provisions of this section 4 are not strictly
applicable but the failure to make any adjustment to the Exercise
Price or to any of the other terms of this Warrant would not fairly
protect the purchase rights and other rights represented by this
Warrant in accordance with the essential intent and principles
hereof, then, and as a condition to the consummation of any such
transaction or event, and in each such case, the Holding Company
shall appoint a firm of independent certified public accountants of
recognized national standing (which may be the regular auditors of
the Holding Company), which shall give its opinion as to the
adjustment, if any, on a basis consistent with the essential intent
and principles established in this section 4, necessary to preserve,
without dilution, the rights represented by this Warrant. The
certificate of any such firm of accountants shall be conclusive
evidence of the correctness of any computation made under this
section 4. The Holding Company shall pay the fees and expenses of
such firm of accountants in connection with any such opinion. Upon
receipt of such opinion, the Holding Company will promptly deliver a
copy thereof to the holder of this Warrant and shall make the
adjustments described therein.
(i) Determination of Consideration. For the purposes of this
section 4, the consideration received or receivable by the Holding
Company for the issuance, sale or grant of shares of Holding Company
Common Stock (of either class), Stock Purchase Rights or Convertible
Securities, irrespective of the accounting treatment of such
consideration, shall be valued and determined as follows:
(i) Cash Payment. In the case of cash, the gross amount
paid by the purchasers without deduction of any accrued interest
or dividends, any reasonable expenses paid or incurred and any
reasonable underwriting commissions or concessions paid or
allowed by the Holding Company in connection with such issue or
sale.
(ii) Non-Cash Payment. In the case of consideration other
than cash, the Fair Value thereof (in any case as of the date
immediately preceding the issuance, sale or grant in question).
(iii) Certain Allocations. If shares of Holding
Company Common Stock, Stock Purchase Rights and/or Convertible
Securities are issued or sold together with other securities or
other assets of the Holding Company for a consideration which
covers more than one of the foregoing categories of securities
and assets, the consideration received or receivable (computed
as provided in clauses (i) and (ii) of this section 4.2(i))
shall be allocable to such shares of Holding Company Common
Stock, Stock Purchase Rights and/or Convertible Securities as
reasonably determined in good faith by the board of directors of
the Holding Company (provided such allocation is set forth in a
written resolution and a certified copy thereof is furnished to
the holder of this Warrant promptly (but in any event within 10
days) following its adoption).
(iv) Dividends in Securities. If the Holding Company shall
declare a dividend or make any other distribution upon any stock
of the Holding Company payable in shares of Holding Company
Common Stock, Convertible Securities or Stock Purchase Rights,
such shares of Holding Company Common Stock, Convertible
Securities or Stock Purchase Rights, as the case may be,
issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
(v) Stock Purchase Rights and Convertible Securities. The
consideration for which each share of Holding Company Common
Stock shall be deemed to be issued upon the issuance or sale of
any Stock Purchase Rights or Convertible Securities shall be
determined by dividing (A) the total consideration, if any,
received by the Holding Company as consideration for the Stock
Purchase Rights or the Convertible Securities, as the case may
be, plus the minimum aggregate amount of additional
consideration, if any, ever payable to the Holding Company upon
the exercise of such Stock Purchase Rights and/or upon the
conversion or exchange of such Convertible Securities, as the
case may be, but without deduction of any accrued interest or
dividends, any reasonable expenses paid or incurred and any
reasonable underwriting commissions or concessions paid or
allowed by the Holding Company in connection with such issue or
sale; by (B) the maximum number of shares of Holding Company
Common Stock ever issuable upon the exercise of such Stock
Purchase Rights or upon the conversion or exchange of such
Convertible Securities.
(vi) Merger, Consolidation or Sale of Assets. If any
shares of Holding Company Common Stock (of either class),
Convertible Securities or Stock Purchase Rights are issued in
connection with any merger or consolidation of which the Holding
Company is the surviving corporation, the amount of
consideration therefor shall be deemed to be the Fair Value of
such portion of the assets and business of the non-surviving
corporation as shall be attributable to such Holding Company
Common Stock, Convertible Securities or Stock Purchase Rights,
as the case may be. In the event of (A) any merger or
consolidation of which the Holding Company is not the surviving
corporation or (B) the sale, transfer or other disposition of
the property, assets or business of the Holding Company as an
entirety or substantially as an entirety for Shares or Other
Securities of any other Person, the Holding Company shall be
deemed to have issued the number of shares of Holding Company
Common Stock for Shares or Other Securities of the surviving
corporation or such other Person computed on the basis of the
actual exchange ratio on which the transaction was predicated
and for a consideration equal to the Fair Value on the date of
such transaction of such Shares or Other Securities of the
surviving corporation or such other Person, and if any such
calculation results in adjustment of the Exercise Price, the
determination of the number of Warrant Shares issuable upon
exercise of this Warrant immediately prior to such merger,
consolidation or sale, for the purposes of section 4.2(g), shall
be made after giving effect to such adjustment of the Exercise
Price.
(j) Record Date. If the Holding Company shall take a record of
the holders of the Holding Company Common Stock (of either class) for
the purpose of entitling them (i) to receive a dividend or other
distribution payable in Holding Company Common Stock (of either
class), Convertible Securities or Stock Purchase Rights or (ii) to
subscribe for or purchase Holding Company Common Stock (of either
class), Convertible Securities or Stock Purchase Rights, then all
references in this section 4 to the date of the issue or sale of the
shares of Holding Company Common Stock (of either class) deemed to
have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be, shall be
deemed to be references to such record date.
(k) Shares Outstanding. The number of shares of Holding
Company Common Stock deemed to be outstanding at any given time shall
not include shares of Holding Company Common Stock held by the
Holding Company or any Subsidiary of the Holding Company.
(l) Maximum Exercise Price. At no time shall the Exercise
Price exceed the amount set forth in the first paragraph of the
Preamble of this Warrant except as a result of an adjustment thereto
pursuant to section 4.2(a)(iii) or 4.2(g).
(m) Application. All subdivisions of this section 4.2 are
intended to operate independently of one another. If a transaction
or an event occurs that requires the application of more than one
subdivision, all applicable subdivisions shall be given independent
effect (but without duplication of adjustment).
(n) No Adjustments Under Certain Circumstances. Anything in
this section 4.2 to the contrary notwithstanding, but subject to the
provisions of section 4.5, no adjustment to the Exercise Price shall
be made in the case of:
(i) any issuance of shares of Holding Company Class A
Common Stock (or Other Securities) upon the exercise in whole or
part of any of the Warrants;
(ii) (A) the granting after the Closing Date by the Holding
Company to any officer, director or employee of or advisor or
consultant to the Holding Company or the Operating Company of
options to purchase shares of Holding Company Class A Common
Stock pursuant to the Option Plan and (B) the issuance of shares
of Holding Company Class A Common Stock upon the exercise of
such options, provided that the aggregate number of shares of
Holding Company Class A Common Stock issued and issuable upon
exercise of such options shall not exceed 1,096,513 (being equal
to 10% of the Holding Company Common Stock as of the Closing
Date (calculated on a fully-diluted basis)) (such number of
shares to be adjusted appropriately for any subdivision,
combination, or other similar event with respect to the Holding
Company Class A Common Stock);
(iii) the issuance of shares of Holding Company Class A
Common Stock pursuant to any dividend reinvestment plan,
provided that the price per share of Holding Company Class A
Common Stock paid by plan participants is not less than 85% of
the Fair Value per share at the time of issuance; or
(iv) the issuance of up to 1,642,332 shares of Holding
Company Class A Common Stock (such number of shares to be
adjusted appropriately for any subdivision, combination, or
other similar event with respect to the Holding Company Class A
Common Stock) upon the conversion, exercise or exchange of any
securities convertible into and exercisable or exchangeable for
shares of Holding Company Class A Common Stock which are
outstanding on the Closing Date and specified on Exhibit 5.5(b)
attached to the Securities Purchase Agreements, including,
without limitation, the Holding Company's 10% Convertible
Subordinated Debentures, the Bridge Note and options outstanding
on the Closing Date under the Option Plan.
4.3. Rights Offering. If the Holding Company shall effect an
offering of securities pro rata among its stockholders, the holder hereof
shall be entitled, at its option, to elect to participate in each and
every such offering as if this Warrant had been exercised and such holder
were, at the time of any such offering, then a holder of that number of
Warrant Shares to which such holder is then entitled on the exercise
hereof.
4.4. Certificates and Notices.
(a) Adjustments to Exercise Price. As promptly as practicable
(but in any event not later than 15 days) after the occurrence of any
event requiring any adjustment under this section 4 to the Exercise
Price (or to the number or kind of securities or other property
deliverable upon the exercise of this Warrant), the Holding Company
shall, at its expense, deliver to the holder of this Warrant either
(i) an Officers' Certificate or (ii) a certificate signed by a firm
of independent certified public accountants of recognized national
standing (which may be the regular auditors of the Holding Company),
setting forth in reasonable detail the events requiring the
adjustment and the method by which such adjustment was calculated and
specifying the adjusted Exercise Price and the number of shares of
Holding Company Class A Common Stock (or Other Securities)
purchasable upon exercise of this Warrant after giving effect to such
adjustment. The certificate of any such firm of accountants shall be
conclusive evidence of the correctness of any computation made under
this section 4.
(b) Extraordinary Corporate Events. If and whenever the
Holding Company subsequent to the date hereof shall propose to (i)
pay any dividend to the holders of shares of Holding Company Common
Stock (of either class) or to make any other distribution to the
holders of shares of Holding Company Common Stock (of either class)
(other than as a regularly scheduled cash dividend), (ii) offer to
the holders of shares of Holding Company Common Stock (of either
class) rights to subscribe for or purchase any additional shares of
any class of stock or any other rights or options, (iii) effect any
reclassification of the Holding Company Common Stock (of either
class) or other Shares of the Holding Company (other than a
reclassification involving merely the subdivision or combination of
outstanding shares of Holding Company Common Stock referred to in
section 4.2(a)), (iv) engage in any reorganization or
recapitalization or any consolidation or merger, (v) consummate any
sale, transfer or other disposition of its property, assets and
business as an entirety or substantially as an entirety, (vi) effect
any other transaction which might require an adjustment to the
Exercise Price (or to the number or kind of securities or other
property deliverable upon the exercise of this Warrant), including,
without limitation, any transaction of the kind described in section
4.2(g) or (vii) commence or effect the liquidation, dissolution or
winding up of the Holding Company, then, in each such case, the
Holding Company shall deliver to the holder of this Warrant an
Officers' Certificate giving notice of such proposed action,
specifying (A) the date on which the stock transfer books of the
Holding Company shall close, or a record shall be taken, for
determining the holders of Holding Company Common Stock entitled to
receive such dividend or other distribution or such rights or
options, or the date on which such reclassification, reorganization,
recapitalization, consolidation, merger, sale, transfer, other
disposition, transaction, liquidation, dissolution or winding up
shall take place or commence, as the case may be, and (B) the date as
of which it is expected that holders of Holding Company Common Stock
of record shall be entitled to receive securities or other property
deliverable upon such action, if any such date is to be fixed. Such
Officers' Certificate shall be delivered in the case of any action
covered by clause (i) or (ii) above, at least 15 Business Days prior
to the record date for determining holders of Holding Company Common
Stock for purposes of receiving such payment or offer, and, in any
other case, at least 15 Business Days prior to the date upon which
such action takes place and 15 Business Days prior to any record date
to determine holders of Holding Company Common Stock entitled to
receive such securities or other property.
(c) Effect of Failure. Failure to give any certificate or
notice, or any defect in any certificate or notice required under
this section 4.4 shall not affect the legality or validity of the
adjustment of the Exercise Price or the number of Warrant Shares
purchasable upon exercise of this Warrant.
4.5. Adjustments for Changes in Certain Data; Additional
Adjustments.
(a) The Holding Company hereby agrees that the initial
aggregate number of shares of Holding Company Class A Common Stock
issuable upon exercise in full of the Warrants issued on the Closing
Date to the initial holders thereof was 592,177 shares of Holding
Company Class A Common Stock, which was intended to constitute 6% of
the shares of Holding Company Common Stock (of both classes)
outstanding immediately following the Closing (calculated on a fully-
diluted basis assuming the conversion, exercise and exchange of all
securities convertible into or exercisable or exchangeable for
Holding Company Common Stock (of either class), including, without
limitation, the shares of Holding Company Class A Common Stock
issuable upon exercise of such Warrants. If for any reason the
shares of Holding Company Class A Common Stock purchasable upon the
exercise of the Warrants issued on the Closing Date did not
constitute 6% of the shares of Holding Company Common Stock (of both
classes) outstanding as of such time (and as so calculated), the
Holding Company shall forthwith reissue each Warrant then outstanding
with appropriate adjustments in the Exercise Price and in the number
of shares of Holding Company Class A Common Stock issuable upon
exercise thereof (together with an Officers' Certificate setting
forth in reasonable detail the computation of such adjustments), and
all such adjustments shall be reasonably satisfactory to the holders
thereof.
(b) It is the intent of the Holding Company and the
Warrantholders that the percentage of the shares of Holding Company
Common Stock on a fully- diluted basis represented by the number of
Warrant Shares initially issuable upon exercise of the Warrants
(which is intended to be 6%; 592,177 represents 6% of 9,869,618
(being the sum of 9,277,441 and 592,177)) not be reduced on or after
the Closing Date by any Special Issuance (as defined below). If any
Special Issuance shall occur, then the aggregate number of shares of
Holding Company Class A Common Stock purchasable upon exercise of the
Warrants shall be increased (effective as of the Closing Date)
(without any adjustment in the aggregate Exercise Price) to the
aggregate number of shares of Holding Company Class A Common Stock
for which the Warrants would have been exercisable, on the Closing
Date, if the shares of Holding Company Common Stock issued or subject
to issuance in such Special Issuance had been outstanding on the
Closing Date and had been included for purposes of determining the
aggregate number of shares for which the Warrants were initially
exercisable, in order for such aggregate number of shares to
constitute 6% of the shares of Common Stock outstanding on a fully-
diluted basis on the Closing Date (including the shares of Holding
Company Class A Common Stock issuable upon the exercise of the
Warrants). In the event any Convertible Security or Stock Purchase
Right issued in any Special Issuance terminates without having been
converted or exercised in full, the adjustment pursuant to this
section 4.5(b) to the number of shares issuable upon exercise of the
Warrants shall be readjusted to the number which would have in effect
had such Convertible Security or Stock Purchase Right only been
convertible or exercisable for the number of shares of Holding
Company Common Stock actually issued upon the conversion or exercise
thereof, if any. All adjustments to the aggregate number of shares
of Holding Company Class A Common Stock issuable upon exercise of the
Warrants pursuant to this section 4.5(b) (x) shall be set forth in
reasonable detail in an Officers' Certificate which shall be
delivered by the Holding Company at the time of any Special Issuance,
(y) shall be reasonably satisfactory to the Required Holders of the
Warrants and (z) shall be allocated among each of the Warrants then
outstanding in proportion to the aggregate number of such shares
issuable upon exercise of each Warrant then outstanding (before
giving effect to such adjustment).
By way of example, if the Holding Company issues a Stock
Purchase Right in any Special Issuance for 10,000 shares of Holding
Company Common Stock, the number of Warrant Shares issuable upon
exercise of the Warrants shall be adjusted, at the time such Stock
Purchase Right is issued, initially to 592,815 (being 6% of
9,880,256, the new fully-diluted number of shares). If there had
been a prior adjustment pursuant to any provision of this section 4,
then such number of shares (592,815) shall be further adjusted by
recalculating such prior adjustment as if the number of shares
initially issuable upon exercise of the Warrants had been 592,815,
not 592,177. By way of example, if there had been a two for one
stock split prior to the date such Stock Purchase Right was issued,
the aggregate number of shares of Holding Company Class A Common
Stock issuable upon exercise of the Warrants would become 1,184,992
(being 6% of 19,749,874, the new fully-diluted number of shares), not
592,815.
For purposes hereof, "Special Issuance" shall mean (a) any
issuance of shares of Holding Company Common Stock pursuant to the
Investment Agreement dated March 13, 1997 between GreenGrass Holdings
and the Holding Company (the "Investment Agreement") (including any
shares issued pursuant to section 1.6 thereof) if, after giving
effect thereto, the aggregate number of shares of Holding Company
Common Stock issued or issuable pursuant to the Investment Agreement
exceeds 1,087,406 shares, (b) any issuance of shares of Holding
Company Common Stock in respect of the warrant issued to GreenGrass
Holdings referred to in section 1.3 of the Investment Agreement if,
after giving effect thereto, the aggregate number of shares issued or
issuable in respect thereof exceeds 50,000 shares or any adjustment
to the number of shares of Holding Company Common Stock issuable upon
exercise of such warrant to a number in excess of 50,000, (c) any
issuance of the Rights Shares and/or Remaining Rights Shares (each as
defined in the Investment Agreement) or any issuance of shares of
Holding Company Common Stock, Stock Purchase Rights or Convertible
Securities in respect of principal or interest due on the Bridge Note
if, after giving effect thereto, the aggregate number of Rights
Shares and Remaining Rights Shares issued or issuable pursuant to the
Investment Agreement and shares of Holding Company Common Stock
issued or issuable in respect of the Bridge Note exceeds 543,703
shares, (d) any issuance of shares of Holding Company Common Stock,
Stock Purchase Rights or Convertible Securities in respect of the
Holding Company's 10% Convertible Subordinated Debentures due 2004
(the "Debentures") outstanding in an aggregate principal amount of
$5,322,804 on the Closing Date if, after giving effect thereto, the
aggregate number of shares issued or issuable in respect thereof
exceeds 1,108,918 shares, including any issuance in respect of
interest due on such outstanding Debentures, or any adjustment to the
aggregate number of shares issuable upon conversion of such
outstanding Debentures to a number in excess of 1,108,918, (e) any
issuance of additional Debentures after the Closing Date (the
"Additional Debentures") (including, without limitation, those
subject to the Registration Statement filed with the Commission on
May 16, 1996 relating to the offering of Debentures in the principal
amount of $3,333,333) and any issuance of shares of Holding Company
Common Stock, Stock Purchase Rights or Convertible Securities in
respect of the Additional Debentures, including any issuance in
respect of interest due on such Additional Debentures, and (f) any
issuance of shares of Holding Company Common Stock, Stock Purchase
Rights or Convertible Securities pursuant to any stock option plan
(including the Option Plan) (except as provided in section
4.2(n)(ii)) if, after giving effect thereto, the aggregate number of
shares issued or issuable in respect thereof exceeds 483,414 shares.
5. Registration, Repurchase, Required Exercise, etc. Reference is
hereby made to the Securities Purchase Agreements for certain provisions
relating to (a) registration rights of the holders of the Warrants and
Warrant Shares, (b) the repurchase of the Warrants and/or Warrant Shares
at the option of the holders thereof and/or the Holding Company and
(c) the required exercise of the Warrants at the option of the Holding
Company.
6. Reservation of Holding Company Common Stock. The Holding Company has
reserved and at all times after the date hereof will reserve and keep
available, solely for issuance, sale and delivery upon the exercise of
this Warrant, such number of shares of Holding Company Class A Common
Stock (and/or Other Securities) equal to the number of shares of Holding
Company Class A Common Stock (and/or Other Securities) purchasable from
time to time upon the exercise of this Warrant. All such shares of
Holding Company Class A Common Stock (and/or Other Securities) shall be
duly authorized and, when issued upon exercise of this Warrant in
accordance with the terms hereof, will be validly issued and fully paid
and nonassessable with no liability on the part of the holders thereof and
not subject to preemptive rights on the part of any other Person or to any
lien, charge or other security interest but in each case subject to the
applicable terms of the Securities Purchase Agreements.
7. Various Covenants of the Holding Company.
7.1. No Impairment or Amendment. The Holding Company shall not
by any action including, without limitation, amending its Organizational
Documents, any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of Shares or other
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate to
protect the rights of the holder hereof against impairment. Without
limiting the generality of the foregoing, the Holding Company (a) will not
permit the par value of any Warrant Shares issuable upon exercise of this
Warrant to be greater than the amount payable therefor upon such exercise,
(b) will take all such action as may be necessary or appropriate in order
that the Holding Company may validly issue fully paid and nonassessable
Warrant Shares, (c) will obtain and maintain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
as may be necessary to enable the Holding Company to perform its
obligations under this Warrant, (d) will not issue any capital stock or
enter into any agreement, the terms of which would have the effect,
directly or indirectly, of preventing the Holding Company from honoring
its obligations hereunder or under the other Operative Documents,
including, without limitation, sections 11 and/or 12 of the Securities
Purchase Agreements, and (e) will not amend or modify any term, condition
or provision of its Organizational Documents, or any related agreement,
document or instrument, if the effect thereof is, or could reasonably be
expected to be, adverse in any material respect to the interests of any
holder of the Warrants.
So long as any Warrants or Warrant Shares are outstanding, upon
request of any holder of any such security, the Holding Company will
acknowledge in writing, in form satisfactory to such holder, the continued
validity of the Holding Company's obligations hereunder.
7.2. Listing on Securities Exchanges, etc. At all times
following the exercise of this Warrant, the Holding Company will maintain
the listing of all Warrant Shares on each securities exchange or market or
trading system on which the Holding Company Common Stock (or any Other
Securities) is then or at any time thereafter listed or traded.
7.3. Anti-Dilution Provisions. If the Holding Company issues
any Stock Purchase Rights or Convertible Securities or other securities
containing provisions protecting the holder or holders thereof against
dilution in any manner more favorable to such holder or holders thereof
than those set forth in this Warrant, such provisions (or any more
favorable portion thereof) shall be deemed to be incorporated herein as if
fully set forth in this Warrant and, to the extent inconsistent with any
provision of this Warrant, shall be deemed to be substituted therefor.
7.4. Indemnification. Without limiting the generality of any
provision of the Securities Purchase Agreements or any of the other
Operative Documents, the Holding Company shall indemnify, save and hold
harmless the holder of this Warrant and the holder of any Warrant Shares
from and against any and all liability, loss, cost, damage, reasonable
attorneys' and accountants' fees and expenses, court costs and all other
out-of-pocket expenses reasonably incurred by such holder in connection
with interpreting, preserving, exercising and/or enforcing any of the
terms hereof.
7.5. Certain Expenses. The Holding Company shall pay all
expenses in connection with, and all taxes (other than income, franchise
and stock transfer taxes) and other governmental charges that may be
imposed in respect of, the issue, sale and delivery of this Warrant and
any Warrant Shares.
7.6. Certain Dividends, etc. If and whenever subsequent to the
Closing Date the Holding Company shall declare or pay any dividend or
other distribution on any shares of Holding Company Class A Common Stock
or shall effect any other transaction as a result of which holders of any
shares of Holding Company Class A Common Stock shall be entitled to
receive any dividend or other distribution (excluding dividends or other
distributions of the kinds referred to in section 4.2(a)) with respect to
or in exchange for any shares of Holding Company Class A Common Stock,
then the Holding Company shall pay (or cause to be paid) to each holder of
any Warrant the same dividend or other distribution such holder would have
received had such holder exercised such Warrant in full immediately prior
to the date upon which such dividend or other distribution is paid (or
immediately prior to any record date for such dividend or other
distribution, if applicable).
8. Miscellaneous.
8.1. Nonwaiver. No course of dealing or any delay or failure to
exercise any right, power or remedy hereunder on the part of the holder of
this Warrant or of any Warrant Shares shall operate as a waiver of or
otherwise prejudice such holder's rights, powers or remedies.
8.2. Amendment. Any term, covenant, agreement or condition of
the Warrants may, with the consent of the Holding Company, be amended, or
compliance therewith may be waived (either generally or in a particular
instance and either retroactively or prospectively), by one or more
substantially concurrent written instruments signed by the Required
Holders of the Warrants, provided that (a) no such amendment or waiver
shall change the number of Warrant Shares issuable upon the exercise of
any Warrant or the manner of exercise or the amount of any payment due
upon exercise or the duration of the Exercise Period without the prior
written consent of the holder of such Warrant and (b) no such amendment or
waiver shall extend to or affect any obligation not expressly amended or
waived or impair any right consequent thereon.
8.3. Communications. All communications provided for herein
shall be delivered, mailed or sent by facsimile transmission addressed in
the manner and shall be effective as of the time specified in the
Securities Purchase Agreements.
8.4. Like Tenor. All Warrants shall at all times be identical,
except as to the preamble to each Warrant.
8.5. Remedies. The Holding Company stipulates that the remedies
at law of the holder or holders of this Warrant and/or of any Warrant
Shares in the event of any default or threatened default by the Holding
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for
the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
No remedy conferred in this Warrant on the holder of any Warrant or
Warrant Shares is intended to be exclusive of any other remedy, and each
and every such remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or under any other agreement, document
or instrument or now or hereafter existing at law or in equity or by
statute or otherwise.
8.6. Successors and Assigns. This Warrant and the rights
evidenced hereby shall inure to the benefit of and be binding upon the
successors and assigns of the Holding Company, the holder or holders of
this Warrant and, as applicable, of any Warrant Shares, to the extent
provided herein, and shall be enforceable by such holder or holders.
8.7. Governing Law. This Warrant, including the validity hereof
and the rights and obligations of the Holding Company and of the holder
hereof and all amendments and supplements hereof and all waivers and
consents hereunder, shall be construed in accordance with and governed by
the domestic substantive laws of The Commonwealth of Massachusetts without
giving effect to any choice of law or conflicts of law provision or rule
that would cause the application of the domestic substantive laws of any
other jurisdiction.
8.8. Headings; Entire Agreement; Partial Invalidity, etc. The
table of contents to and headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
This Warrant, together with the other Operative Documents, embodies the
entire agreement and understanding between the holder hereof and the
Holding Company and supersedes all prior agreements and understandings
relating to the subject matter hereof. In case any provision in this
Warrant or any of the other Operative Documents shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
8.9. No Rights or Liabilities as a Stockholder. This Warrant
shall not entitle the holder hereof to any voting rights or other rights
as a stockholder of the Holding Company, provided that nothing in this
section 8.9 shall be construed to affect any rights the holder of this
Warrant may have under any other provision of this Warrant or any of the
other Operative Documents or under any applicable law. No provision of
this Warrant, in the absence of an affirmative action by the holder hereof
to purchase Holding Company Common Stock, and no mere enumeration herein
of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder as a stockholder of the Holding Company, whether
such liability is asserted by the Holding Company, by creditors of the
Holding Company or by any other Person.
[The remainder of this page is left blank intentionally.]
IN WITNESS WHEREOF, the Holding Company has caused this Warrant to be
executed as an instrument under seal by its duly authorized officer as of
the date first above written.
SWING-N-SLIDE CORP.
By: /s/ Richard E. Ruegger
Vice President - Finance
<PAGE>
Exhibit 2.2(a)
FORM OF NOTICE OF EXERCISE
(To be executed only upon partial or full exercise
of the within Warrant)
The undersigned registered holder of the within Warrant irrevocably
exercises the within Warrant for and purchases __________________________
shares of Common Stock of SWING-N-SLIDE CORP. and herewith makes payment
therefor in the amount of $ ______________ , all at the price, in the
manner and on the terms and conditions specified in the within Warrant,
and requests that a certificate (or _______ certificates in
denominations of _______________ shares) for such shares hereby purchased
be issued in the name of and delivered to (choose one) (a) the undersigned
or (b) _____________________________________ , whose address is
________________________________ and, if such shares shall not include
all the Warrant Shares issuable as provided in the within Warrant, that a
new Warrant of like tenor for the number of Warrant Shares not being
purchased hereunder be issued in the name of and delivered to (choose one)
(a) the undersigned or (b) __________________________________ , whose
address is _______________________________________ .
Dated: ______________, _____.
[ ]
By
(Signature of Registered Holder)
NOTICE: The signature on this Notice of Exercise must correspond with
the name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
Exhibit 3
FORM OF ASSIGNMENT
(To be executed only upon the assignment
of the within Warrant)
FOR VALUE RECEIVED, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto ________________________
_____________________, whose address is ________________________________
_________________________________________________ , all of the rights of
the undersigned under the within Warrant, with respect to ________ shares
of Common Stock of SWING-N-SLIDE CORP. and, if such shares shall not
include all the Warrant Shares issuable as provided in the within Warrant,
that a new Warrant of like tenor for the number of Warrant Shares not
being transferred hereunder be issued in the name of and delivered to
[choose one] (a) the undersigned or (b) _________________________________
, whose address is _____________________________________________________
____________________ , and does hereby irrevocably constitute and appoint
_______________________________ Attorney to register such transfer on the
books of SWING-N-SLIDE CORP. maintained for the purpose, with full power
of substitution in the premises.
Dated: _________________, _____.
[ ]
By: ____________________________
(Signature of Registered Holder)
NOTICE: The signature on this Assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
INVESTMENT AGREEMENT
BETWEEN
GREENGRASS HOLDINGS
AND
SWING-N-SLIDE CORP.
March 13, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I. PURCHASE OF SECURITIES BY HOLDINGS . . . . . . . . . . . 1
1.1 Issuance of Shares . . . . . . . . . . . . . . . . . . . . 1
1.2 Issuance of Bridge Note . . . . . . . . . . . . . . . . . . 1
1.3 Issuance of Stock Purchase Warrants . . . . . . . . . . . . 2
1.4 Consideration for Shares . . . . . . . . . . . . . . . . . 2
1.5 Consideration for Bridge Note . . . . . . . . . . . . . . . 2
1.6 Additional Shares; Dilution Adjustment . . . . . . . . . . 2
1.7 Rights Offering . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Listing . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9 Loan Account . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II. THE CLOSING . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . 3
3.1 Conditions . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Satisfaction of Conditions . . . . . . . . . . . . . . . . 4
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF COMPANY . . . . . . . 4
4.1 Existence and Rights . . . . . . . . . . . . . . . . . . . 4
4.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . 5
4.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . 6
4.4 Subsidiaries, Other Investments . . . . . . . . . . . . . . 6
4.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 6
4.6 No Violation . . . . . . . . . . . . . . . . . . . . . . . 6
4.7 Compliance with Laws, Instruments, Etc . . . . . . . . . . 6
4.8 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.9 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF HOLDINGS . . . . . . . 7
5.1 Registration . . . . . . . . . . . . . . . . . . . . . . . 7
5.2 Investment Purposes . . . . . . . . . . . . . . . . . . . . 7
5.3 Accredited Investor . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VI. ADDITIONAL PROVISIONS . . . . . . . . . . . . . . . . . 7
6.1 Expenses; Indemnity . . . . . . . . . . . . . . . . . . . . 7
6.2 Successors and Assigns . . . . . . . . . . . . . . . . . . 8
6.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.4 No Waiver, Remedies Cumulative . . . . . . . . . . . . . . 8
6.5 Amendments and Waivers . . . . . . . . . . . . . . . . . . 9
6.6 Mutilated or Missing Certificates . . . . . . . . . . . . . 9
6.7 Integration . . . . . . . . . . . . . . . . . . . . . . . . 9
6.8 Separability . . . . . . . . . . . . . . . . . . . . . . . 9
6.9 Headings . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 9
6.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 9
Schedules
Schedule 4.3(a) Capitalization
Schedule 4.3(b) Securities Agreements
Schedule 4.5 Description of Litigation
Schedule 4.8 Brokers or Finders
<PAGE>
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT is made and entered into as of this
13th day of March, 1997, by and among GreenGrass Holdings, a Delaware
general partnership ("Holdings"), and Swing-N-Slide Corp., a Delaware
corporation ("Company").
RECITALS
WHEREAS, the Company, or its subsidiary Newco, Inc., a Wisconsin
corporation ("Newco") will as of the date hereof enter into a Stock
Purchase Agreement (the "Purchase Agreement") for the purchase of all
shares of the common stock of GameTime, Inc., a Alabama corporation
("GameTime") (such common stock is referred to herein as the "GameTime
Securities");
WHEREAS, in order to finance the purchase by the Company or
Newco of the GameTime Securities and/or to refinance Newco's indebtedness
pursuant to the terms and conditions of the Commitment Letter (as defined
herein), the Company has offered to Holdings to make an investment in the
Company on the terms and conditions contained herein; and
WHEREAS, subject to the covenants and conditions contained
herein, Holdings desires to make such investment.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the receipt and sufficiency of which are hereby acknowledged,
IT IS HEREBY AGREED AND STIPULATED AS FOLLOWS:
AGREEMENT
ARTICLE I. PURCHASE OF SECURITIES BY HOLDINGS
1.1 Issuance of Shares. Subject to the terms, covenants and
conditions hereof, at the Closing, the Company will issue and sell to
Holdings and Holdings will purchase from the Company the Purchased Shares.
The "Purchased Shares" means 1,087,405 shares of the Company's common
stock, par value $.01, ("Common Stock") purchased by Holdings on the
Closing Date, determined by dividing $5,000,000 by the Estimated Share
Price. The "Estimated Share Price" means $4.5981, being the average of
the daily closing bid price per share of Common Stock for each of the 20
consecutive Trading Days (weighted for volume on each such Trading Day)
commencing 24 Trading Days prior to the Closing Date. "Trading Day" means
a day on which the principal national securities exchange on which the
Common Stock is listed or admitted to trading is open for the transaction
of business.
1.2 Issuance of Bridge Note. Subject to the terms, covenants
and conditions hereof, at the Closing, the Company will sell to Holdings
and Holdings will purchase from the Company a Bridge Note in the principal
amount of $2,500,000 due on the earlier of December 31, 1997 or as such
time as the Company shall have received the proceeds of the Rights Shares
(as defined herein) and Holdings shall have purchased the Remaining Rights
Shares (as defined herein) (the "Bridge Note"). The Bridge Note will be
dated as of the Closing Date and will contain such terms and provisions as
are set forth in the form attached hereto as Appendix A, which such terms
and conditions are incorporated by reference herein.
1.3 Issuance of Stock Purchase Warrants. Subject to the terms,
covenants and conditions hereof, at the Closing, the Company will grant to
Holdings a Stock Purchase Warrant allowing Holdings to purchase 50,000
shares of Common Stock (the "Warrant") pursuant to the terms and
conditions set forth therein. The Warrant will be dated as of the Closing
Date and will contain such terms and conditions as set forth in the form
attached hereto as Appendix B, which such terms and conditions are
incorporated by reference herein. The Warrant will be issued to Holdings
as a fee for the loan provided to the Company and Holdings under the
Bridge Note.
1.4 Consideration for Shares. The aggregate purchase price to
be paid by Holdings at the Closing for the Purchased Shares and the
Additional Shares, if any, issued pursuant to Section 1.6 herein will be
$5,000,000. The purchase price will be paid by wire transfer of same day
funds to the Company's account upon receipt by Holdings of the Purchased
Shares.
1.5 Consideration for Bridge Note. The purchase price to be
paid by Holdings at the Closing for the Bridge Note will be $2,500,000.
The purchase price will be paid by wire transfer of same day funds to the
Company's account upon receipt by Holdings of the Bridge Note, duly
executed and in proper form.
1.6 Additional Shares; Dilution Adjustment. If the Final
Calculated Price is less than the Estimated Share Price, the Company will
issue to Holdings, immediately upon determination of the Final Calculated
Price, a number of additional shares of Common Stock ("Additional
Shares"). The number of Additional Shares issued to Holdings pursuant to
this Section 1.6 will be equal to the difference between (i) the quotient
of 5,000,000 divided by the Final Calculated Price and (ii) the number of
Purchased Shares purchased by Holdings pursuant to Section 1.1 herein.
The "Final Calculated Price" shall have the meaning set forth in the
Warrant. The "Announcement Date" means the day the Company publicly
announces the closing of Company's or Newco's acquisition of the GameTime
Securities by the filing of a Form 8-K with the Securities and Exchange
Commission.
1.7 Rights Offering. The Company shall use its best efforts to
file, not later than 90 days after the Closing Date, a registration
statement with the Securities and Exchange Commission covering an offering
of Rights Shares to stockholders of the Company other than Holdings (the
"Rights Offering"). Under the Rights Offering each stockholder other than
Holdings will be given the right, on the basis of the number of shares of
Common Stock held by such stockholder as of a record date set by the Board
of Directors of Company, to purchase his pro rata share of the Rights
Shares for cash at a price equal to the Final Calculated Price. "Rights
Shares" means the number of shares of Common Stock offered under the
Rights Offering determined by dividing 2,500,000 by the Final Calculated
Price. Upon effectiveness of such registration statement, the Company
will use its best efforts to cause the Company to consummate the Rights
Offering in accordance with its terms and the requirements of applicable
law. Upon the conclusion of the Rights Offering, Holdings agrees to
purchase any Rights Shares not purchased by the other shareholders of the
Company under the Rights Offering (the "Remaining Rights Shares") at a
price per share equal to the Final Calculated Price. The purchase price
for the Remaining Rights Shares will be paid through a reduction of any
principal outstanding under the Bridge Note on a dollar-for-dollar basis.
1.8 Listing. The Company covenants and agrees that it will, as
soon as practicable, list the Purchased Shares, Additional Shares, the
shares of Common Stock issuable under the Bridge Note and the shares of
Common Stock issuable upon exercise of the rights represented by the
Warrant on the American Stock Exchange, in accordance with and to the
extent permitted by the Securities Act of 1933, as amended, any applicable
state securities laws and the rules or regulations of the American Stock
Exchange.
1.9 Loan Account. The Company shall place all proceeds of the
Rights Offering into a segregated account and shall not comingle such
proceeds with any other assets of the Company (the "Loan Account").
Company shall use the proceeds of the Rights Offering solely to prepay any
principal outstanding under the Bridge Note.
ARTICLE II. THE CLOSING
Subject to the conditions hereof, the transactions described
herein will be closed (the "Closing") simultaneously with the purchase by
Company or Newco of the GameTime Securities (the "Closing Date") and the
refinancing of Newco's indebtedness pursuant to the terms and conditions
of the Commitment Letter.
ARTICLE III. CONDITIONS TO CLOSING
3.1 Conditions. All of the obligations of Holdings to purchase
the Purchased Shares and the Bridge Note described in this Investment
Agreement are subject to the performance by the Company of all the terms,
covenants and conditions on its part to be performed hereunder on or prior
to the Closing Date and to the satisfaction of the following additional
conditions precedent:
(a) Proceedings and Documents. All proceedings taken or
to be taken in connection with the transactions contemplated by
this Investment Agreement to be consummated at, or prior to, the
Closing and all other documents, schedules, exhibits, opinions
and certificates in connection therewith shall each be
satisfactory in form and substance to Holdings, and Holdings
shall have received copies of all such documents, including a
certified copy of resolutions approving the transaction, and all
other documents which Holdings has requested in connection with
said transactions and of all proceedings in connection
therewith, in form and substance satisfactory to Holdings.
(b) Issuance of Shares. The Company shall have issued the
Purchased Shares.
(c) Issuance of Bridge Note. The Company shall have
executed and delivered the Bridge Note.
(d) No Material Adverse Change. No event or circumstance
shall have occurred after September 30, 1996 which individually
or in the aggregate has had or would reasonably be expected to
have a material adverse effect on Company's or GameTime's
business, financial condition or prospects.
(e) Purchase of GameTime Securities. Company or Newco
shall have purchased the GameTime Securities from GameTime
pursuant to the Purchase Agreement and GameTime shall have
merged into Newco pursuant to the Plan of Merger dated March 13,
1997.
(f) Newco Refinancing. Newco shall have refinanced its
indebtedness as contemplated by the Commitment Letter between
Target and Fleet Bank dated January 31, 1997.
(g) Securities Purchase Agreements. Newco shall have
consummated the transactions contemplated by the Securities
Purchase Agreements by and among Company, Massachusetts Mutual
Life Insurance Company, MassMutual Corporate Investors,
MassMutual Participation Investors and MassMutual Corporate
Value Partners Limited (collectively, the "MassMutual Entities")
dated March 13, 1997.
(h) Holdings Investment Agreement. GreenGrass Capital
LLC, a Delaware limited liability company ("Capital"),
GreenGrass Capital II LLC, a Delaware limited liability company
("Capital II") and GreenGrass Management LLC, a Delaware limited
liability company ("Management") and Holdings shall have entered
into an Investment Agreement dated March 13, 1997 (the "Holdings
Investment Agreement").
(i) Admission of Capital II as a Partner of Holdings.
Capital II, Capital, and Management shall have entered into an
Amended and Restated Partnership Agreement of Holdings pursuant
to the Holdings Investment Agreement.
(j) Opinion. Holdings shall have received an opinion of
Foley & Lardner dated the Closing Date, upon which the members
of Capital II may rely, as to the formation and good standing of
the Company, its authorization, execution and enforceability of
all agreements, and such other customary matters as requested by
Holdings or the members of Capital II in form and substance
satisfactory to Holdings and each member of Capital II.
3.2 Satisfaction of Conditions. Closing of the transaction
contemplated hereby shall constitute satisfaction of all conditions
contained in this Article and such conditions shall terminate effective
with completion of Closing.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF COMPANY
In order to induce Holdings to enter into this Investment
Agreement and notwithstanding any investigation made by or on behalf of
Holdings, Company makes the following representations and warranties as of
the date hereof and as of the Closing Date, each of which is independently
material and relied upon by Holdings:
4.1 Existence and Rights. Company is a Delaware corporation
duly organized and validly existing under the laws of the State of
Delaware. Company has all power and adequate authority, rights, licenses
and franchises to own and operate its properties and assets and carry on
the business to be conducted by it. Company is duly qualified and in good
standing in each state or other jurisdiction where failure to so qualify
would have a material impact on the conduct of its business. Company has
the power and adequate authority to enter into and perform this Investment
Agreement. Company has the power and adequate authority to consummate the
transactions contemplated by the Purchase Agreement.
4.2 Authorization.
(a) The execution and delivery of this Investment
Agreement, the consummation of the transactions contemplated
herein and the performance of each of the terms, covenants and
agreements contained or referred to herein by Company (including
the issuance of the Purchased Shares, any Additional Shares, the
Bridge Note, the Warrant and any Remaining Rights Shares) is not
in contravention of, or in conflict with, any law, ordinance or
regulation known to the Company or any term or provision of its
Certificate of Incorporation or By-laws and the execution and
performance of this Investment Agreement is duly authorized and
does not require the consent or approval of any governmental
body or other regulatory authority except for any approvals and
consents necessary to the completion of the Rights Offering and
the listing of the Company's Common Stock. All action on the
part of Company, and all necessary or appropriate approvals and
consents for the due execution, delivery and performance of this
Investment Agreement, have been duly and validly obtained or
taken. No right of Company is impaired or infringed upon by the
execution and/or performance of this Investment Agreement. This
Investment Agreement and all other documents, instruments and
agreements of Company in connection therewith constitute, and on
the Closing, will constitute, the valid and binding obligations
of Company, as the case may be, enforceable against it in
accordance with their respective terms, except as enforcement
may be limited by bankruptcy, insolvency, moratorium and similar
laws of general application affecting creditors' rights, and
except as enforcement may be limited by general equitable
principles.
(b) The Purchased Shares, all shares issuable pursuant to
the Bridge Note and all shares issuable upon the exercise of the
Warrant, when issued, and the Additional Shares and the
Remaining Rights Shares, if issued, to Holdings as contemplated
hereby, will be duly and validly authorized and issued and will
be fully paid and nonassessable.
(c) The Purchase Agreement has been duly authorized,
executed and delivered by Company, and to the best knowledge of
Company, by GameTime, and constitutes the valid and binding
obligations of Company and GameTime enforceable against them in
accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, moratorium or similar laws of general
application effecting creditors' rights, and except as
enforcement may be limited by general equitable principles.
(d) The Bridge Note and Warrant have been duly authorized,
executed and delivered by Company and constitute the valid and
binding obligations of Company enforceable against it in
accordance with their terms, except as enforcement may be
limited by bankruptcy, insolvency, moratorium or similar laws of
general application effecting creditors' rights, and except as
enforcement may be limited by general equitable principles.
4.3 Capitalization.
(a) Following the purchase of the Purchased Shares by
Company and immediately after the Closing, the capitalization of
the Company will be as set forth in Schedule 4.3(a). All of the
issued and outstanding shares of capital stock of the Company
set forth on Schedule 4.3(a) have been duly authorized and are
validly issued, fully paid and nonassessable.
(b) The Company does not have, and on the Closing Date
will not have, any outstanding agreements of any kind relating
to the sale, transfer or assignment of any securities of Company
except as provided herein or as set forth in Schedule 4.3(b).
4.4 Subsidiaries, Other Investments. Company has no
subsidiaries other then Newco or other investment in any other entity,
except for the GameTime Securities purchased pursuant to the Purchase
Agreement.
4.5 Litigation. Except for those matters set forth in Schedule
4.5, there is no litigation or other proceeding (including any
administrative or government proceedings or investigations) pending or, to
the knowledge of Company, threatened against or affecting Company or the
assets of Company and Company is not in default with respect to any order,
writ, injunction, decree or demand of any court or other governmental or
regulatory authority. There is no currently pending temporary restraining
order or injunction against the consummation of the transactions
contemplated hereby or by the Purchase Agreement.
4.6 No Violation. Neither the execution nor the delivery of
this Agreement or the Purchase Agreement, nor the consummation of the
transactions contemplated hereby, nor the fulfillment of the terms hereof,
will conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, the Certificate of
Incorporation or By-laws of Company, any law or governmental regulation
applicable to Company or of any agreement, instrument, lien, charge or
encumbrance under which Company or any of its properties is bound or
obligated.
4.7 Compliance with Laws, Instruments, Etc. Company is not in
violation of any applicable law, statute or regulation of any federal,
state, municipal or other governmental or quasi-governmental agency,
board, bureau or body or in violation or default in any material respect
with respect to any order, license, regulation or demand of any
governmental agency, or in default in any material respect under any
instrument under which it is bound. Company has complied with and
performed each and every material obligation required to be complied with
and performed pursuant to each instrument and other agreement to which it
is a party or by which it or its assets are bound or obligated, and there
is no material default under any such instrument or other agreement now
existing, or which would come into existence with the passage of time, the
giving of notice, or both.
4.8 Brokers. Company has not incurred any liability for any
finders' fees, brokerage fees, advisory fees or similar fees or expenses
in connection with entering into the transactions contemplated by this
Investment Agreement except as set forth in Schedule 4.8.
4.9 Disclosure. Neither this Investment Agreement nor any of
the schedules, attachments, written statements, documents, certificates or
other items required hereby contain any untrue statement of a material
fact or omit a material fact necessary to make each such statement
contained herein or therein not misleading.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF HOLDINGS
As an inducement to Company to enter into this Investment
Agreement, Holdings hereby represents, warrants and covenants to and with
Company that:
5.1 Registration. Holdings understands that neither the
Purchased Shares, the Additional Shares, the Bridge Note, the Warrant, the
Common Stock to be issued upon exercise of the Warrant nor the Common
Stock to be issued under the Bridge Note (the "Non-Registered Securities")
will be registered under the Securities Act of 1933, as amended
("Securities Act"), that the offer and sale of such securities will be
exempt from such registration under Sections 3(b) and/or 4(2) of the
Securities Act and/or Regulation D thereunder and that such shares will
not be registered under any state securities laws ("Blue Sky Laws") in
reliance upon certain exemptions therefrom, based in part upon Holdings'
representations made herein.
5.2 Investment Purposes. Any purchase by Holdings of the Non-
Registered Shares will be for investment purposes only and for its own
account, and not with a view to resell or otherwise to distribute the Non-
Registered Shares and it will not sell or otherwise distribute the Non-
Registered Shares without registration under the Securities Act and
applicable Blue Sky Laws or pursuant to an applicable exemption therefrom.
5.3 Accredited Investor. The investments represented by this
Investment Agreement are financially suitable to Holdings in that, among
other things, the Investor is an "accredited investor" as defined under
the Securities Act and Holdings's financial condition is more than
adequate, and will continue for the foreseeable future to be more than
adequate, to bear the substantial economic risks of such investments.
Holdings has sufficient knowledge and experience in investment, tax and
business matters and is aware of the intended use of the proceeds of such
investments.
ARTICLE VI. ADDITIONAL PROVISIONS
6.1 Expenses; Indemnity.
(a) Company shall pay or reimburse Holdings for all
reasonable out-of-pocket costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses) paid or
incurred by Holdings in connection with the investment
contemplated hereby and, before and after judgment, in
enforcing, protecting or preserving its rights under this
Investment Agreement and all other documents required hereunder
or thereunder.
(b) Company agrees to indemnify Holdings against any and
all losses, claims, damages, liabilities and expenses,
(including, without limitation, reasonable attorneys' fees and
expenses) incurred by Holdings arising out of, in any way
connected with, or as a result of (i) any acquisition or
attempted acquisition of securities or other assets of another
person or entity by Company other than the GameTime Securities
pursuant to the Purchase Agreement, (ii) any claim, litigation,
investigation or proceedings related to the operations of
Company or to the purchase of securities of GameTime, whether or
not Holdings is a party thereto; provided, however, that such
indemnity shall not apply to any such losses, claims, damages,
liabilities or related expenses arising from (A) any unexcused
breach by Holdings of its obligations under this Investment
Agreement or (B) any commitment made by Holdings to a person
other than Company which would be breached by the performance of
Holdings's obligations under this Investment Agreement.
Notwithstanding the foregoing, a Holdings shall in all instances
be liable for its acts or omissions in breach of this Investment
Agreement or any acts or omissions which constitute fraud,
willful misconduct, or breach of fiduciary duty.
(c) The foregoing agreements and indemnities shall remain
operative and in full force and effect regardless of termination
of this Investment Agreement, the consummation of or failure to
consummate the transactions contemplated by this Investment
Agreement or any amendment, supplement, modification or waiver
hereof, the return of any funds invested hereunder, the
invalidity or unenforceability of any term or provision of this
Investment Agreement, or any other document required hereunder,
any investigation made by or on behalf of Holdings or the
content or accuracy of any representation or warranty made under
this Investment Agreement or any other document required
hereunder.
6.2 Successors and Assigns. This Investment Agreement shall be
binding upon and inure to the benefit of Holdings and the Company and
their respective successors and assigns, and any subsequent holder of any
Common Stock issued hereunder.
6.3 Notices. All notices, demands, and communications provided
for herein or made hereunder shall be delivered, or mailed first class
with postage prepaid, or telecopied, addressed in each case as follows,
until some other address shall have been designated in a written notice
given in like manner, and shall be deemed to have been given or made when
so delivered or one business day after being mailed or telecopied:
(a) if to the Company:
1212 Barberry Drive
Janesville, WI 53545
Attention: Richard G. Mueller
(b) if to Holdings:
c/o Glencoe Investment Corporation
311 South Wacker Drive, Suite 4990
Chicago, IL 60606
Attention: David S. Evans
A copy of any such notice, demand or communication shall be given to Foley
& Lardner, Suite 3800, 777 East Wisconsin Avenue, Milwaukee, Wisconsin
53202, Attention: Martin D. Mann.
6.4 No Waiver, Remedies Cumulative. No delay on the part of
Holdings in exercising any right, power or privilege under this Investment
Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege hereunder or thereunder
preclude other or further exercise thereof, or the exercise of any other
right, power or privilege. The rights and remedies provided in this
Investment Agreement are cumulative and are in addition to all rights or
remedies which Holdings and such other holders otherwise may have in law
or in equity or by statute or otherwise. Without limiting the generality
of the foregoing, nothing in this Investment Agreement shall be deemed to
preclude or be in lieu of any right or remedy which Holdings may have in
law or in equity or by statute or otherwise against the Company or any
other person based upon any fraud.
6.5 Amendments and Waivers. This Investment Agreement may not
be changed or amended orally, and no waiver hereunder may be oral, but any
change or amendment hereto or any waiver hereunder must be in writing and
signed by the party or parties against whom such change, amendment or
waiver is sought to be enforced.
6.6 Mutilated or Missing Certificates. In case any certificate
or other document issued to Holdings hereunder evidencing the Purchased
Shares, the Warrant, the Remaining Rights Shares, the Additional Shares,
the shares issued under the Bridge Note or the shares issued upon the
exercise of the Warrant shall be mutilated, lost, stolen, or destroyed,
the Company shall issue and deliver a new certificate or other document of
like tenor representing an equivalent right or interest in exchange and
substitution for such certificate, and the Company shall cancel such
mutilated, lost, stolen or destroyed certificate or other document, but
only upon receipt of evidence satisfactory to the Company of such loss,
theft or destruction; the affidavit of the holder of record, without bond
but with promise of indemnity, shall be satisfactory evidence of such
loss, theft or destruction. The applicant for such replacement instrument
or certificate shall also comply with such other reasonable regulations as
the Company may prescribe.
6.7 Integration. This Investment Agreement, the appendices and
exhibits annexed hereto and documents, schedules and certificates referred
to herein and all other documents delivered at the Closing contain the
entire agreement between the Company and Holdings with respect to the
transactions contemplated herein; and none of the parties shall be bound
by nor shall be deemed to have made any representations and/or warranties
except those made by such party herein and therein.
6.8 Separability. If any provision of this Investment
Agreement is held for any reason to be unenforceable by a court of
competent jurisdiction, the remainder of this Investment Agreement shall,
nevertheless, remain in full force and effect in such jurisdiction.
6.9 Headings. The headings in this Investment Agreement are
intended solely for convenience of reference and shall be given no effect
in the construction or interpretation of this Agreement.
6.10 Governing Law. This Investment Agreement is made in the
State of Delaware and shall be governed by and construed in accordance
with the internal laws of the State of Delaware (without regard to any
rules or principles of conflict of laws that might result in the
application of the laws of any other jurisdiction).
6.11 Counterparts. This Investment Agreement may be executed in
one or more counterparts. Each such counterpart shall be considered an
original and all of such counterparts shall constitute a single agreement
binding all the parties as if all had signed a single document.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
executed as of the day and year first above written.
GREENGRASS HOLDINGS
By: GreenGrass Capital LLC
By: /s/ David S. Evans
David S. Evans, Attorney-in-Fact
SWING-N-SLIDE CORP.
By: /s/ Richard G. Mueller
Richard G. Mueller, President
<PAGE>
Schedule 4.3(a)
Capitalization
Description of authorized and outstanding shares of capital
stock (after giving effect to this Agreement and the transactions
described in Article III hereof) of each Company:
1. Swing-N-Slide Corp.
(a) Description of shares (authorized, issued, outstanding, etc.) *
(i) Common Stock ($.01 par value); 25,000,000 shares
authorized; 10,691,406 shares issued of which
3,600,000 are treasury shares and 7,091,406 are
outstanding.
(ii) Class B Common Stock ($.01 par value); 1,750,000
shares authorized; no shares issued or outstanding.
(iii) Preferred Stock ($.01 par value); 5,000,000 shares
authorized, no shares issued or outstanding.
* The description of the shares of the Company provided in
1(a) above is based on the following assumptions:
1. Assuming a purchase price of $4.5981 per share,
1,087,406 shares of common stock of the Company will be issued
to GreenGrass Holdings and other public stockholders (if any
Rights Shares are purchased by such public stockholders) by the
Company pursuant to the Investment Agreement dated as of March
13, 1997 between GreenGrass Holdings and the Company (the
"Investment Agreement"). In the event that the purchase price
is less than $4.5981 per share, the number of shares of the
Company's common stock to be issued to GreenGrass Holdings and
the public stockholders, shall be increased proportionately (but
shall in no event be greater than 1,250,000 shares).
2. None of the Warrants to purchase 50,000 shares of
common stock of the Company to be issued to GreenGrass Holdings
in connection with the Investment Agreement will have been
exercised.
3. No shares of common stock of the Company have been
issued under the Rights Offering.
4. No shares of common stock of the Company have been
issued to Holdings by the Company pursuant to the Bridge Note.
5. None of the Warrants issued in connection with the
MassMutual Entities Securities Purchase Agreements will have
been exercised.
Number and Class
and Percentage of
(b) Name of Each 5% Shares Owned by Each
Holder of Shares Holder **
GreenGrass Holdings 4,674,870 shares of common
stock;
65.92%
** The number and percentage of shares owned by Holdings
provided in 1(b) above is based on the assumptions that
Holdings will purchase 1,087,406 shares of common stock of
the Company at a rate of $4.5981 per share under the
Investment Agreement. Please note that the number and
percentages of shares may change depending on the
conversion rates and the number of shares purchased by
public stockholders under the Rights Offering, or for other
similar reasons.
2. Newco, Inc.
a. Description of shares (authorized, issued, outstanding,
etc.)
Common Stock (no par value); 1,000 shares authorized, 100
shares issued and outstanding.
Number and Class
Name of Each and Percentage of
b. Holder of Shares Shares Owned by Each
Holder
The Company 100%
<PAGE>
Schedule 4.3(b)
Securities Agreements
1. All outstanding securities convertible into or exercisable or
exchangeable for any shares of the Company or Newco or outstanding
agreements for the purchase from, or sale or issuance by, the Company or
Newco of any of its shares or any securities convertible into or
exercisable or exchangeable for such shares.
a. Transaction Agreement dated January 4, 1996 between the
Company and GreenGrass Holdings, as amended by that certain
Amendment No. 1 to Transaction Agreement dated February 12,
1996 (the "Transaction Agreement").
b. $5,322,804 of 10% Convertible Subordinated Debentures
issued by the Company to Holdings pursuant to the
Transaction Agreement.
Assuming that all of the $5,322,804 of Convertible
Subordinated Debentures described in this paragraph (b) are
converted at the rate of $4.80 per share, the Company will
need to issue 1,108,918 shares of common stock in
connection with the conversion of such debentures.
c. Options of directors, officers and key employees of the
Company and/or Newco to purchase 322,434 shares of common
stock of the Company pursuant to the Company's 1992 and
1996 stock option plans. The number of shares provided in
this paragraph does not include any adjustments that may be
made to the number of such shares under the stock option
plans.
d. Agreement to permit certain officers and key employees of
the Company and/or Newco to take a portion of their annual
bonus in shares of common stock of the Company.
e. Agreement in connection with the settlement of the Sirota
lawsuit to have Holdings purchase $5,000,000 of Company
equity as provided for in this Investment Agreement.
f. Agreement to permit certain public stockholders of the
Company to purchase up to $3,333,333 of 10% Convertible
Subordinated Debentures issued by the Company pursuant to
partial settlement of the Barbieri lawsuit. Assuming that
all of the $3,333,333 of Convertible Subordinated
Debentures described in this paragraph (i) are converted at
the rate of $4.70 per share, the Company will need to issue
709,220 shares of common stock with respect to such
debentures.
2. All persons entitled to any rights with respect to the
registration of any shares or other securities of the Company or Newco
under the Securities Act (or the securities laws of any other
jurisdiction).
a. Amended and Restated Registration Rights Agreement dated
March 13, 1997 between Swing-N-Slide Corp. and GreenGrass
Holdings.
b. Registration Statement of Swing-N-Slide Corp. filed May 16,
1996 (but not yet effective) relating to the public
offering of 10% Convertible Subordinated Debentures in the
principal amount of $3,333,333 due October 15, 2004.
<PAGE>
Schedule 4.5
Description of Litigation
The Company has been named as a defendant in a class action
pending in the Court of Chancery of the State of Delaware, New Castle
County entitled Robert Barbieri v. Swing-N-Slide Corp., Thomas R. Baer,
Richard G. Mueller Andrew W. Code, James M. Dodson, Peter M. Gotsch,
Terence S. Malone, Henry B. Pearsall and Brian P. Simmons, Green Grass
Holdings and GreenGrass Management, LLC, Case No. 14239. The complaint
alleges that the Company's purchase of 3.6 million of outstanding shares
of common stock, which was completed in January 1995, was the result of a
deceptive and manipulative plan on the part of the individual defendants
to enrich themselves. The plaintiff also challenges on similar grounds
the purchase by Holdings of approximately 3.6 million shares of the
Company's common stock and other securities pursuant to a tender offer.
The relief sought includes the imposition of a constructive trust on all
proceeds of the repurchase received by the defendants as well as various
non-monetary forms of relief. The parties are currently conducting
discovery.
As a settlement proposal for the above referenced class
action, the Company has offered to pay the plaintiffs $300,000 for their
legal fees and the right to purchase $1,000,000 in convertible debentures
which are arguably valued at $1,000,000 in excess of their purchase price.
The Company anticipates that the $300,000 for legal fees will be covered
by its insurance. The plaintiffs have tentatively counter-offered with a
request for $400,000 in legal fees and a grant of transferable warrants
rather than debentures. Such a counter-offer is currently unacceptable to
the Company and the parties are continuing to negotiate.
There is a related case pending in Rock County, Wisconsin
Circuit Court entitled Sirota v. Swing-N-Slide Corp., Case No. 95-CV-726.
This is a derivative action filed on November 17, 1995, by Sirota on
behalf of himself and the Company against Thomas Baer, Richard G. Mueller,
Andrew W. Code, James D. Dodson, Peter M. Gotsch, Terence M. Malone, Henry
B. Pearsall, Brian P. Simmons, Newco, Inc. and CHS. The complaint raises
allegations similar to those in the Barbieri action, to wit, that the
defendants breached their fiduciary duties to the shareholders and the
Company as a result of the self-tender offer in November 1994, but alleges
that the breaches damaged the Company, as a whole, as opposed to
individual shareholders. It is believed at this time that the parties
have reached a mutually satisfactory resolution of this case and have
agreement on the principal terms of such resolution. A draft Stipulation
of Settlement containing the proposed settlement terms is available upon
request.
The Company and Newco were parties to a lawsuit brought in
the Federal District Court for the District of Kansas entitled Sperry
Marketing, Inc. v. Newco, Inc. and Swing-N-Slide Corp., Case No. 96-2155-
GTV. Sperry Marketing, Inc., a former Newco distributor, alleged that the
Company improperly reduced Sperry's commission rate and territory from
1992-1995 in violation of the distributorship contract between the
parties. On February 14, 1997, the Court granted the Company's and
Newco's Motion for Summary Judgment dismissing the action on the merits.
The plaintiff has moved for reconsideration of the Court's decision. In
the event the plaintiff is unsuccessful with the motion for
reconsideration, the plaintiff may appeal, but the Company believes that
the judgment of dismissal will be upheld on appeal.
In addition, the Company or Newco are subject to the
attached workers compensation claims and product liability claims attached
as Exhibit A.
In the ordinary course of its business, the Company or
Newco may also receive garnishment and similar notices with respect to its
or their employees.
Other than as described in this Exhibit 4.5, the Company
has no notice or knowledge of any pending or threatened claim, action,
proceeding, or investigation.
<PAGE>
Schedule 4.8
Brokers, Finders or Advisors
Donaldson, Lufkin & Jenrette Securities Corporation
Glencoe Investment Corporation
Desai Capital Management Incorporated
Paul Adams & Co.
NEITHER THIS BRIDGE NOTE NOR THE SHARES ISSUABLE IN RELATION TO
THIS BRIDGE NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAW. THIS BRIDGE NOTE
AND ANY INTEREST HEREIN MAY BE OFFERED, TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF ONLY IF REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE, AND ONLY IN
STRICT COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS AND REGULATIONS.
SWING-N-SLIDE CORP.
BRIDGE NOTE
$2,500,000 March 13, 1997
FOR VALUE RECEIVED, the undersigned ("Maker") hereby promises to
pay to the order of GreenGrass Holdings ("Payee"), without setoff or
counterclaim, the principal sum of Two Million Five Hundred Thousand
Dollars ($2,500,000), payable on December 31, 1997 or such earlier time as
Maker shall have received the proceeds of the Right Shares and Payee shall
have purchased the Remaining Rights Shares pursuant to Section 1.7 of that
certain Investment Agreement dated even date herewith between Maker and
Payee (the "Investment Agreement").
The unpaid principal balance hereof shall bear interest at a
fixed rate equal to Thirteen and One Half percent (13-1/2%) per annum.
Interest shall be payable at maturity and, upon a Default (as defined
herein), on the first day of each month thereafter. Interest shall be
paid by the issuance to Payee of a number of shares of common stock, par
value $.01 per share, of Maker equal to the quotient of the amount of
unpaid interest accrued as of each such interest payment date divided by
the Final Calculated Price (as defined in that certain Warrant, dated the
date hereof, for 50,000 shares of Common Stock granted to Payee pursuant
to the Investment Agreement), except that if Maker is not legally
permitted to issue its common stock, interest shall be payable in lawful
money of the United States of America. Interest shall be calculated for
the actual number of days elapsed, using a daily rate determined by
dividing the annual rate by 360. All principal, interest and other
amounts unpaid after Default shall bear interest, payable on demand,
computed at a rate equal to 4% per annum plus the rate otherwise payable
hereunder. All amounts of principal payable on this Note shall be payable
in lawful money of the United States of America and shall ONLY be payable
from the proceeds of the Rights Offering and/or the proceeds of the
purchase by Payee of the Remaining Rights Shares pursuant to the
Investment Agreement and Maker shall not make principal payments to Payee
from any other source.
Without affecting the liability of any maker, indorser, surety
or guarantor, the holder may, from time to time and without notice, renew
or extend the time for payment, accept partial payments.
Maker covenants and agrees that the shares of Maker common stock
issuable to Payee under this Note shall be, upon issuance, duly
authorized, validly issued, fully paid and non-assessable and free from
all taxes, liens and charges. Maker further covenants and agrees that
until this Note is paid in full, Maker will at all times have authorized,
and reserved for the purpose of issue hereunder, a sufficient number of
shares of its common stock to provide for the interest payments hereunder.
All shares of Maker common stock issued under this Note shall be entitled
to the benefits of the Amended and Restated Registration Rights Agreement
dated the date hereof between Maker and Payee.
Maker covenants and agrees that it will list the shares of its
common stock issuable hereunder on the American Stock Exchange in
accordance with and to the extent permitted by the Securities Act of 1933,
as amended, any applicable state securities laws and the rules and
regulations of the American Stock Exchange.
Maker agrees that the shares issued hereunder shall be deemed to
be issued to the Payee as the record owner of such shares as of the close
of business on the interest payment day on which such shares are issued.
Subject to Maker's Certificate of Incorporation, certificates for the
shares of common stock so issued hereunder shall be delivered to Payee
within a reasonable time, not exceeding ten (10) days after such shares
have been issued hereunder. The issuance hereunder of certificates for
shares of common stock of Maker shall be made without charge to the Payee
for any issuance tax in respect thereof.
If any payment is not made when due (a "Designated Default"),
the unpaid balance of this Note shall, at the option of the holder and
without notice or demand, mature and become immediately payable. The
unpaid balance shall automatically mature and become immediately payable
in the event Maker, any surety, indorser or guarantor becomes the subject
of bankruptcy or other insolvency proceeding (a "Bankruptcy Default" and,
together with a Designated Default, a "Default"). Payee's receipt of any
payment after the occurrence of a Default shall not constitute a waiver of
such Default or of any of Payee's rights and remedies.
The Maker and any indorsers, sureties or guarantors waive
presentment, demand, notice of dishonor and protest, and agree to pay all
costs of collection, before and after judgment, including reasonable
attorneys' fees and legal expenses.
This Note constitutes the Bridge Note issued under the
Investment Agreement to which reference is made above and is subject in
all respects to the terms and conditions set forth therein. All
capitalized terms not defined herein shall have the meaning assigned to
them in the Investment Agreement.
This Note is governed by the internal laws of the State of
Delaware, except to the extent superseded by federal law.
SWING-N-SLIDE CORP.
By: /s/ Richard G. Mueller, President
Richard G. Mueller, President
[CORPORATE SEAL]
Attest:
Title:
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAW. THIS WARRANT AND
ANY INTEREST HEREIN MAY BE OFFERED, TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF ONLY IF REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE, AND ONLY IN
STRICT COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS AND REGULATIONS.
WARRANT
FOR THE PURCHASE OF
COMMON STOCK
OF
SWING-N-SLIDE CORP.
Warrant Number 1
THIS CERTIFIES THAT, FOR VALUE RECEIVED, GreenGrass Holdings, a
Delaware general partnership (the "Holder"), is entitled to subscribe for
and purchase from Swing-N-Slide Corp., a Delaware corporation (the
"Company"), 50,000 shares of Common Stock, $.01 par value per share, of
the Company at a purchase price equal to the Final Calculated Price (as
defined herein) per share, subject to adjustment as provided in Section 5
of this Warrant.
<PAGE>
This Warrant is issued pursuant to and is subject in all
respects to the terms and conditions set forth in the Investment Agreement
between Holder and Company dated March 13, 1997.
1. Definitions. When used in this Warrant, the following
terms shall have the meanings specified:
(a) "Affiliate" means any Person directly or indirectly
controlling, controlled by or under direct or indirect common control with
another Person. A Person shall be deemed to control a corporation if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether
through the ownership of voting securities, by contract or otherwise.
(b) "Amex"" means the American Stock Exchange.
(c) "Announcement Date" means the day that the Company
publicly announces its acquisition of the shares of common stock of
GameTime, Inc., a Delaware corporation.
(d) "Business Day" means a day other than Saturday,
Sunday, or a legal holiday on which federally chartered banks are
generally closed for business.
(e) "Common Stock" means the Common Stock, $.01 par value
per share, of the Company.
(f) "Expiration Date" means the day 10 years after the
Initial Date.
(g) "Final Calculated Price" means a price (the "Price")
equal to the average of the daily closing bid price per share of Common
Stock for the Trading Days (weighted for volume on each such Trading Day)
included in the 150 consecutive calendar days beginning the first Trading
Day after the Announcement Date; provided, however, that the Price shall
not be less than $4.00 nor greater than $4.5918.
(h) "Initial Date" means the day 10 calendar days after
the determination of the Final Calculated Price.
(i) "Person" means and includes an individual,
partnership, corporation, trust, joint venture, incorporated organization
and a government or any department or agency thereof.
(j) "Trading Day" means a day on which the principal
national securities exchange on which the Common Stock is listed or
admitted to trading is open for the transaction of business.
2. Exercise: Issuance of Certificates; Payment for Shares.
This Warrant may be exercised by the Holder, in whole or in part, at any
time after the Initial Date, by the surrender of this Warrant (properly
endorsed if required) and payment by Holder of the Final Calculated Price
per share, subject to adjustment as provided in Section 4 hereof, of
Common Stock purchased by Holder with respect to such exercise. Upon such
payment and surrender, the Holder shall be entitled to receive a
certificate or certificates representing the shares of Common Stock
purchased through the exercise of this Warrant. At the option of the
Holder, the exercise price or any part of the exercise price may be paid
by the cancellation of indebtedness of the Company to the Holder, other
than the indebtedness represented by the Bridge Note (as defined in the
Investment Agreement), on a dollar-for-dollar basis. All cash payments
hereunder shall be made by wire transfer in immediately available funds.
The Company agrees that the shares so purchased shall be deemed to be
issued to the Holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been surrendered.
Subject to the Company's Certificate of Incorporation, certificates for
the shares of Common Stock so purchased shall be delivered to the Holder
within a reasonable time, not exceeding 10 days, after the rights
represented by this Warrant shall have been so exercised. If the rights
of the Holder of this Warrant are exercised in part, the number of shares
of Common Stock shall be reduced accordingly and the Company shall reissue
a Warrant or Warrants of like tenor representing in the aggregate the
right to purchase the number of shares of Stock as so reduced.
3. Affirmative Covenants. The Company covenants and agrees
that the shares of Common Stock issuable upon exercise of the rights
represented by this Warrant will, upon such exercise and issuance in
accordance herewith, be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to
the issue. The Company further covenants and agrees that until the
Expiration Date, the Company will at all times have authorized, and
reserved for the purpose of issue upon total or partial exercise of the
rights represented by this Warrant, a sufficient number of shares of its
Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. Listing. The Company covenants and agrees that it will
list the shares of Common Stock issuable upon exercise of the rights
represented by this Warrant on AMEX, in accordance with and to the extent
permitted by the Securities Act of 1933, as amended, any applicable state
securities laws and the rules or regulations of AMEX.
5. Adjustments. If the Company shall, while this Warrant
remains outstanding, change as a whole, by subdivision or consolidation in
any manner (including, but not limited to, a stock-split or reverse stock-
split) other than a stock dividend on the Common Stock, the number of
shares of Common Stock then outstanding into a different number of shares
of Common Stock, with or without par value, then thereafter the number of
shares of Common Stock which the Holder shall be entitled to purchase
hereunder shall be automatically (and without notice or further action)
increased or decreased, as the case may be, in direct proportion to the
increase or decrease in the number of shares of Common Stock by reason of
such change, and the per share exercise price of this Warrant (as set
forth on the front cover and Section 2 hereof) after such change shall in
case of an increase in the number of shares be proportionately decreased,
and in case of a decrease in the number of shares be proportionately
increased so that the aggregate exercise price of this Warrant shall be
unchanged by such change. Notwithstanding anything to the contrary
contained herein, no adjustment shall be made to the number of shares of
Common Stock issuable pursuant hereto on account of (a) the issue of the
Warrants (as defined in the Securities Purchase Agreements referred to
below), (b) the issue of any Warrant Shares (as so defined) upon the
exercise of any Warrant and/or (c) any adjustment to the number of Warrant
Shares issuable upon exercise of the Warrants by operation of the "anti-
dilution provisions" contained in the Warrants, unless the event requiring
such adjustment would also require adjustment to this Warrant as provided
for herein. Capitalized terms used in this paragraph have the meanings
ascribed to them in the Securities Purchase Agreements dated March 13,
1997 among the Company, Newco, Inc. and the institutional investors named
therein (as amended, modified and supplemented from time to time, the
"Securities Purchase Agreements"). The Holder hereby consents to the
terms of the Securities Purchase Agreements and each of the other
Operative Documents (as defined in the Securities Purchase Agreements).
6. Dividends on Common Stock. The Company covenants and
agrees that, prior to the Expiration Date, it shall not declare or effect
a dividend or other distribution upon the Common Stock payable otherwise
than in Common Stock, unless the Company shall deliver to the Holder
written notice of such dividend or distribution at least 10 days prior to
the record date for such distribution, or, if there is no record date, the
date as of which the holders of Common Stock of record entitled to such
distribution are to be determined.
7. Reorganization. Reclassification. Share Exchange or Merger.
(a) If at any time prior to the Expiration Date the
Company is a party to any agreement providing for (i) any capital
reorganization or reclassification of the capital stock of the Company or
(ii) any share exchange or merger of the Company with another corporation,
in such a way that holders of Common Stock shall be entitled to receive
cash, shares of stock or securities or assets with respect to or in
exchange for Common Stock, then, as a condition to such reorganization,
reclassification, share exchange or merger, the Holder shall be given the
opportunity to elect to receive such cash, shares of stock or securities
or assets as may be issued or payable with respect to or in exchange for
the number of shares of Common Stock then issuable upon the exercise of
the rights represented by this Warrant.
(b) If the Holder elects to receive such cash, shares of
stock or securities or assets pursuant to the provisions of Section 7(a)
hereof, upon the Holder's receipt of such cash, shares of stock or
securities or assets in accordance with the provisions of Section 6(a)
hereof, as the case may be, the Holder shall pay to the Company (i) the
per share exercise price of this Warrant (as set forth on the front cover
and Section 2 hereof and as adjusted, if any such adjustment has been
made, pursuant to Section 5 hereof) multiplied by (ii) the number of
shares of Common Stock then issuable upon the exercise of the rights
represented by this Warrant, and thereafter the parties shall have no
further rights or obligations hereunder.
(c) If the Holder does not elect to receive such cash,
shares of stock or securities or assets pursuant to the provisions this
Section 7, the rights and obligations of the Holder and the Company
(including any successor company) under this Warrant shall remain in full
force and effect pursuant to the terms and conditions of this Warrant. In
any such case, the Company shall not effect any such reclassification,
reorganization, share exchange or merger, unless prior to the consummation
thereof the successor corporation (if other than the Company) resulting
from such share exchange or merger shall assume by written instrument the
Company's obligations under this Warrant.
8. Notification of Holder. Upon each adjustment pursuant to
Section 5 hereof, the Company shall give written notice thereof to the
Holder within ten (10) days after the date of such adjustment, which
notice shall set forth the calculation of the number of shares of Common
Stock issuable upon exercise of the rights represented by this Warrant
before and after such adjustment and the facts upon which such
calculations are based. If at any time:
(a) the Company shall offer for subscription pro rata
to the holders of its Common Stock any additional shares of
stock of any class or other rights;
(b) the Board of Directors (or any committee thereof)
shall authorize or approve any capital reorganization, or
reclassification of the capital stock of the Company, or share
exchange or merger of the Company with, or sale, disposition or
other conveyance of all or substantially all of its assets to,
any Person;
(c) the Company (or any other party) shall institute
any proceeding seeking an order for relief under the Federal
bankruptcy laws or seeking to adjudicate the Company as bankrupt
or insolvent, or seeking dissolution, liquidation or winding up
of the Company or seeking reorganization under any law relating
to bankruptcy or insolvency;
then, within 10 days of the date of any such occurrence, the Company shall
give the Holder written notice describing in reasonable detail such
occurrence.
9. Certain Events. If any event occurs as to which the
provisions of this Warrant are not strictly applicable or, if strictly
applicable would not fairly protect the rights of the Holder in accordance
with the essential intent and principles of such provisions, then the
Board of Directors of the Company shall make an adjustment in the
application of such provisions, in accordance with such essential intent
and principles, so as to protect the Holder's rights as aforesaid.
10. Term of Warrant. This Warrant shall remain outstanding and
exercisable until the Expiration Date. To the extent not previously
exercised, the rights represented by this Warrant shall thereupon
terminate.
11. Issue Tax. The issuance of certificates for shares of
Common Stock upon the total or partial exercise of this Warrant shall be
made without charge to the Holder for any issuance tax in respect thereof.
12. Closing of Books. The Company will at no time close its
transfer books against the transfer of this Warrant or in any manner which
interferes with the timely exercise of the rights represented by this
Warrant.
13. Transfer of Warrant. Subject to any registration or
qualification requirements under the Securities Act and applicable state
securities laws, this Warrant and all rights hereunder are transferable,
in whole or in part, without charge to the Holder, by the Holder in person
or by duly authorized attorney, upon surrender of this Warrant to the
Company properly endorsed. If this Warrant is transferred in part in
accordance with the terms hereof, the Company shall reissue a Warrant or
Warrants of like tenor representing in the aggregate the right to purchase
the number of shares of Common Stock represented by this Warrant
immediately prior to such transfer.
14. No Voting Rights. This Warrant shall not entitle the
Holder to any voting rights as a shareholder of the Company.
15. Descriptive Headings. The descriptive headings of the
several sections of this Warrant are inserted for convenience only and do
not constitute a part of this Warrant.
16. Notices. Any notice or other communication pursuant to
this Warrant shall be in writing and shall be deemed sufficiently given
upon receipt, if personally delivered or telecopied (with receipt
acknowledged), or if mailed, upon deposit with the United States Postal
Service by first class, certified or registered mail, postage prepaid,
return receipt requested, addressed as follows:
(a) If to the Company, to Swing-N-Slide Corp., 1212
Barberry Drive, Janesville, WI 53545, Attention: President, or
such other address as the Company has designated in writing to
the Holder.
(b) If to the Holder, to GreenGrass Holdings, c/o
Glencoe Investment Corporation, 311 South Wacker Drive, Suite
4990, Chicago, Illinois 60606, Attention: David S. Evans.
17. Replacement of Warrant. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation
of this Warrant, and upon receipt of written indemnification of the
Company by the Holder in form and substance reasonably satisfactory to the
Company, the Company shall execute and deliver to the Holder a new Warrant
of like date, tenor and denomination.
18. Last Day for Performance Other Than a Business Day. In the
event that the last day for performance of an act or the exercise of a
right hereunder falls on a day other than a Business Day, then the last
day for such performance shall be the First Business Day immediately
following the otherwise last day for such performance or such exercise.
19. Governing Law. This Warrant shall be construed and
interpreted in accordance with the internal laws of the State of Delaware.
20. Successors and Assigns. The provisions of this Warrant
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors, assigns and transferees.
21. Further Assurances. The Company agrees that it will
execute and record such documents as the Holder shall reasonably request
to secure for the Holder any of the rights represented by this Warrant.
22. Amendment and Modifications. This Warrant may be amended,
modified or supplemented only by written agreement of the Company and the
Holder.
[Signature On Following Page]
<PAGE>
IN WITNESS WHEREOF, Swing-N-Slide Corp. has caused this Warrant
to be signed by its duly authorized officers and this Warrant to be dated
as of March 13, 1997.
SWING-N-SLIDE CORP.
By: /s/ Richard G. Mueller, President
Richard G. Mueller, President
Attest:
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT ("Agreement"), dated March 13, 1997, is between
Swing-N-Slide Corp., a Delaware corporation (the "Company"), and
GreenGrass Holdings, a Delaware general partnership ("Purchaser").
WHEREAS, pursuant to a Transaction Agreement, dated January 4,
1996, between the Company and Purchaser, as amended by Amendment No. 1
thereto (the "Transaction Agreement"), Purchaser purchased 3,510,000
shares of the Company's common stock, par value $.01 per share ("Initial
Common Stock") and invested, in accordance with the Transaction Agreement,
$5,000,000 through the purchase of the Company's authorized 10%
Convertible Debentures due 2004 (the "Debenture"); and
WHEREAS, pursuant to the Transaction Agreement, the Company and
Purchaser entered into a Registration Rights Agreement dated February 15,
1996;
WHEREAS, pursuant to an Investment Agreement, dated March 13,
1997, between the Company and Purchaser, Purchaser will purchase, in
accordance with the Investment Agreement, shares of the Company's common
stock, par value $.01 per share ("Additional Common Stock"), and a
$2,500,000 Bridge Note ("Bridge Note") and shall be granted, in accordance
with the Investment Agreement, a Warrant for 50,000 shares of Company's
common stock, par value $.01 per share ("Warrant"); and
WHEREAS, the Company and Purchaser wish to amend the
Registration Rights Agreement to include the securities of Company issued
pursuant to the Investment Agreement and to make certain other
modifications therein.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements contained herein and intending
to be legally bound hereby, the parties hereto agree as follows:
Section 1. Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
(a) The term "Commission" shall have the meaning assigned
thereto in Section 2(a) of this Agreement.
(b) The term "Demand Notice" shall have the meaning assigned
thereto in Section 2(a) of this Agreement.
(c) The term "Demand Registration" shall have the meaning
assigned thereto in Section 2(a) of this Agreement.
(d) The term "Demand Request Notice" shall have the meaning
assigned thereto in Section 2(a) of this Agreement.
(e) The term "Demanding Shareholders" shall have the meaning
assigned thereto in Section 2(a) of this Agreement.
(f) The term "LLC Investor Designee" means GreenGrass Capital
LLC, GreenGrass Capital II, LLC, GreenGrass Holdings any member of
GreenGrass Capital LLC as designated by GreenGrass Capital LLC and any
member of GreenGrass Capital II, LLC as designated by GreenGrass Capital
II, LLC.
(g) The term "LLC Investor Party" means each of GreenGrass
Capital LLC, GreenGrass Capital II, LLC and GreenGrass Management LLC, a
Delaware limited liability company.
(h) The term "LLC Permitted Transferee" means any transferee of
an LLC Investor Designee.
(i) The term "Maximum Number" shall have the meaning assigned
thereto in Section 5(a) of this Agreement.
(j) The term "Person" means any unincorporated organization,
association, corporation, individual, sole proprietorship, partnership,
joint venture, trust institution, entity, party or government (including
any instrumentality, division, agency, body or department thereof).
(k) The term "Piggyback Registration" shall have the meaning
assigned thereto in Section 3(a) of this Agreement.
(l) The term "Registrable Securities" shall have the meaning
assigned thereto in Section 2(b) of this Agreement.
(m) The term "Registration Statement" shall have the meaning
assigned thereto in Section 2(a) of this Agreement.
(n) The term "Securities Act" means the Securities Act of 1933,
as amended.
(o) The term "Shareholders" means each initial party to this
Agreement, other than the Company, and Persons to whom Shares are
hereafter Transferred and who are required to join in and agree to be
bound by this Agreement as a condition of such Transfer.
(p) The term "Shares" means, collectively, all shares of
Initial Common Stock, all shares issued pursuant to the Debenture, all
shares of Additional Common Stock, all shares of common stock of the
Company to be issued under the Bridge Note and all shares of common stock
of the Company issuable upon exercise of the Warrant.
(q) The term "Transfer" means any transfer, sale, assignment,
irrespective of whether any of the foregoing are effected voluntarily or
involuntarily, by operation of law or otherwise, or whether inter vivos or
upon death.
Section 2. Demand Registrations.
(a) Subject to the remaining provisions of this Agreement, from
and after the date hereof, each LLC Investor Designee may deliver a
written notice to the Company (a "Demand Notice") requesting that the
Company register all or part of the Registrable Securities (as defined in
Section 2(b) below) held by any or all of the LLC Investor Parties (the
"Demanding Shareholders") (any such registration being referred to as a
"Demand Registration"). Each Demand Notice shall state (i) the names of
the Demanding Shareholders, (ii) the aggregate number of Registrable
Shares held by each Demanding Shareholder and (iii) with respect to each
Demanding Shareholder, the number of Registrable Shares that such
Demanding Shareholder is requesting that the Company register pursuant to
such Demand Notice. Upon receipt of a Demand Notice given pursuant to
this Section 2(a), the Company shall, as soon as possible, (x) deliver
written notice to each of the other Shareholders (a "Demand Request
Notice") stating that the Company has received a Demand Notice and setting
forth the identity of the Demanding Shareholders, (y) use its best efforts
to file with the Securities and Exchange Commission (the "Commission") a
registration statement in an appropriate form covering all Registrable
Securities specified in such Demand Notice (such registration and any
registration statement referred to in Section 3 being referred to herein
as a "Registration Statement") and (z) use its best efforts to cause such
Registration Statement to become effective under the Securities Act.
Notwithstanding any other provisions of this Agreement, there shall not be
more than four (4) Demand Registrations pursuant to this Agreement, and
all of the LLC Investor Designees, collectively, shall be entitled to such
four (4) Demand Registrations.
(b) For purposes of this Agreement, the term "Registrable
Securities" shall mean any Shares (now owned or hereafter acquired) held
by any Shareholder or LLC Permitted Transferee.
(c) Any registration initiated by an LLC Investor Designee as a
Demand Registration pursuant to this Section 2 shall not, for purposes of
this Section 2, count as a Demand Registration (i) unless and until such
Registration Statement shall have been filed with the Commission, become
effective (unless such Registration Statement fails to become effective as
a result of the Demanding Shareholders not including Registrable
Securities therein) and remain effective for the shorter of (x) such
period as it shall take to sell all such Registrable Securities covered by
such Registration Statement and not withdrawn from registration or (y) 90
days following the date of effectiveness, as such period may be extended
pursuant to Section 3(b), or (ii) if the Demanding Shareholders have
elected to withdraw such Demand Registration pursuant to Section 5(b) as a
result of any allocations made pursuant to Section 5.
(d) The Company shall be entitled to postpone for a reasonable
period of time (not to exceed one hundred eighty (180) days) the filing or
effectiveness of any Registration Statement filed pursuant to a Demand
Registration, if (i) at the time it receives a Demand Notice with respect
to such Demand Registration, the Company is conducting or is about to
conduct an offering of Shares or any other securities of the Company or
any of its Subsidiaries (whether a primary or a secondary offering) and
the Company is advised by its investment banker (whether or not such
offering is being underwritten) that such offering would be materially
adversely affected by such Demand Registration, and the Company delivers
written evidence of such advice to the holders of the Registrable
Securities requesting such Demand Registration or (ii) the Board of
Directors of the Company shall determine in good faith that such Demand
Registration will materially adversely interfere with a pending or
contemplated material financing, merger, sale of assets, recapitalization
or other material transaction involving the Company, and the Company
delivers a certificate of an executive officer of the Company confirming
such determination to the holders of the Registrable Securities requesting
such Demand Registration. If any Demand Registration is postponed
pursuant to this Section 2(d), the holders of the Registrable Securities
requesting such Demand Registration will be entitled to withdraw such
request and, if such request is withdrawn, such Demand Registration will
not count as a Demand Registration.
Section 3. Piggyback Registrations.
(a) If, at any time, the Company determines to file with the
Commission a registration statement covering any equity securities to be
issued or sold by the Company (other than in connection with an employee
benefit plan or a litigation settlement) or any shareholders of the
Company, the Company shall (at least sixty (60) days prior to the filing
of such proposed Registration Statement) notify each Shareholder in
writing of the proposed Registration Statement, such notification to
describe in detail the proposed registration (including those
jurisdictions where registration is required under state securities laws).
If one or more of the Shareholders requests the Company in writing, within
thirty (30) days of the receipt of such notification from the Company, to
include in such Registration Statement any of such Shareholder's Shares,
then, subject to the remaining provisions hereof, the Company will use its
best efforts to include those Shares in the Registration Statement and to
have the Registration Statement declared effective (any such registration
being referred to as a "Piggyback Registration"). Each such request by a
Shareholder shall specify the number of Shares intended to be offered and
sold by such Shareholder, shall express such Shareholder's present intent
to offer such Shares for distribution, shall describe the nature or method
of the proposed offer and sale thereof and shall contain the undertaking
of such Shareholder to provide all such information and materials and take
all such action as may be requested in order to permit the Company to
comply with all applicable requirements of the Commission and to obtain
acceleration of the effective date of such Registration Statement. The
Company, at its sole option, may elect not to proceed with the
Registration Statement which is the subject of such notice.
(b) The Company shall use its best efforts to maintain the
effectiveness of a Registration Statement filed pursuant to Section 2 or
this Section 3 for a period of ninety (90) days from its effective date
and to cause the Registration Statement to remain current (including the
filing of necessary supplements or post-effective amendments) during the
period commencing on the initial effective date of such Registration
Statement and ending on the date on which such Registration Statement
shall have remained effective for ninety (90) days; provided, however,
that such ninety (90) day period shall be extended for a period of time
equal to the period the Shareholder shall refrain from selling any Shares
included in such Registration Statement at the request of an underwriter
of Shares (other than an underwriter chosen by such Shareholder) or
pursuant to the terms of Section 3(f) hereof.
(c) Whenever the Company is required pursuant to Sections 2 and
3(a) to register Shares under the Securities Act, the Company will furnish
to each participating Shareholder such number of copies of any prospectus
(including any preliminary or summary prospectus) and any amendment or
supplement to the prospectus and such other documents as such Shareholder
may reasonably request in order to effect the offering and sale of the
Shares to be offered and sold by such Shareholder, but only while the
Company is required under the provisions hereof to cause the Registration
Statement to remain current.
(d) The Company's obligations to effect registration of Shares
for Shareholders pursuant to Sections 2 or 3 shall include such
qualification under applicable blue sky or other state securities laws as
may be necessary to enable the Shareholders on whose behalf such
registration is to be effected to offer and sell the Shares which are the
subject matter of their requests; provided, however, that the Company
shall not be obligated to qualify as a foreign corporation to do business
under the laws of any jurisdiction in which it is not then qualified or to
qualify as a broker dealer or to file any general consent to service of
process.
(e) In the event that the offering of Registrable Securities is
to be made by or through an underwriter, the Company shall enter into a
customary underwriting agreement with a managing underwriter or
underwriters.
(f) The Company and the Shareholder whose shares are being
registered shall enter into a customary indemnification agreement in form
satisfactory to each.
(g) If the Company has delivered preliminary or final
prospectuses to the selling shareholders and after having done so the
prospectus is amended to comply with the requirements of the Securities
Act, the Company shall promptly notify the selling shareholders and, if
requested, the selling shareholders shall immediately cease making offers
of Registrable Securities and return all prospectuses to the Company. The
Company shall promptly provide the selling shareholders with revised
prospectuses and, following receipt of the revised prospectuses, the
selling shareholders shall be free to resume making offers of the
Registrable Securities.
Section 4. Manner of Offering.
(a) All offerings of Registrable Securities by Shareholders in
a Piggyback Registration shall be made pursuant to a prescribed plan of
distribution reasonably satisfactory to the Company; however, if any
Shares to be sold pursuant to such Piggyback Registration are to be sold
on a firm commitment basis through underwriters, the Company may require
all Shareholders selling Shares pursuant to such Piggyback Registration to
sell their shares on such basis through such underwriters.
(b) The Company shall not be required to offer securities on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act,
or otherwise.
Section 5. Allocations.
(a) In the event that the managing underwriter for any Demand
Registration or Piggyback Registration (or, the Company, in the case of
any offering not being underwritten) determines that it is able to proceed
with the proposed offering only with respect to a smaller number (the
"Maximum Number") of Shares than the total number of Shares proposed to be
offered by the LLC Investor Parties (in the case of Demand Registration)
or proposed to be offered by the Company and all others entitled to
registration rights in connection with such offering (in the case of a
Piggyback Registration), then (i) in the case of a Demand Registration,
the aggregate number of Shares that may be offered by the LLC Investor
Parties shall equal the Maximum Number, which shall be allocated among the
LLC Investor Parties pro rata in accordance with the number of Registrable
Shares owned by each LLC Investor Party which are proposed to be included
in such Demand Registration, and (ii) in the case of Piggyback
Registration, the aggregate number of Shares owned by the LLC Investor
Parties and the total number of Shares proposed to be offered by all other
holders offering Shares to be included in such Registration Statement
shall equal the Maximum Number less the number of Shares proposed to be
offered by the Company, such difference to be allocated pro rata in
accordance with the number of Shares proposed to be offered by each such
party.
(b) In the event that the number of Shares to be offered by the
Demanding Shareholders in any Demand Registration is to be reduced as a
result of the application of Section 2(a) hereof, a majority in interest
of the Demanding Shareholders may withdraw such Demand Registration.
Section 6. Lock-Ups. After receipt of any Demand Request
Notice pursuant to Section 2 hereof, no holder of Registrable Securities
shall sell or offer to sell any securities of the Company until the
earlier of the effective date of the Registration Statement in respect of
which such notice was given or ninety (90) days after the date such notice
was given. To the extent requested by the managing underwriter in respect
of an offering of securities of the Company (whether or not holders of
Registrable Securities are including any of such securities therein), each
holder of Registrable Securities shall agree to refrain from selling or
offering to sell, any securities of the Company for up to one hundred
twenty (120) days after the effective date of any registration statement
in connection with the public offering of its equity securities (other
than any registrations on Forms S-4 or S-8 or any form substituting
therefor).
Section 7. Expenses. All expenses incurred in connection with
any Demand Registration or Piggyback Registration, including, without
limitation, all Commission registration fees, blue sky filing fees and
expenses, printing expenses (excluding the printing of any agreements,
memoranda or other documents pertaining solely to the sale of Shares by
Shareholders) and fees and disbursements of experts used by the Company in
connection with such registration, shall, subject to requirements of any
applicable regulatory agency, be borne by the Company. Each participating
Shareholder shall bear the fees and disbursements of its own legal
counsel, underwriting or brokerage discounts and commissions, and transfer
taxes, on the sale of its Shares.
Section 8. Other Registration Rights. Nothing contained in
this Agreement shall limit the Company's right to (i) grant to any Person
the right to require the Company to register on demand any Shares or other
securities of the Company, (ii) grant any piggyback or other registration
rights to any Person with respect to Shares or any other securities of the
Company, including, without limitation, Piggyback Registration rights
relating to Demand Registrations, or (iii) include, for the Company's own
account, Shares or any other securities of the Company in any Demand
Registration, provided, however, that no such rights granted to any Person
may be superior to, or conflict with, the rights granted the LLC Investor
Designees or the other Shareholders herein. Notwithstanding anything to
the contrary contained in this Agreement, the Company may grant
registration rights to the holders of warrants issued pursuant to those
certain Securities Purchase Agreements, dated March 13, 1997, by and among
the Company, Newco, Inc. and the purchasers named therein, and no
registration rights granted pursuant to this Agreement shall be superior
to or in any way limit the registration rights granted to the holders of
such warrants.
Section 9. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof.
Any amendments to this Agreement must be made in writing and duly executed
by each of the parties entitled to adopt said amendment as provided herein
or by an authorized representative or agent of each such party.
(b) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto, their heirs,
representatives, successors and permitted assigns.
(c) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
(d) Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not
contain the signatures of more than one party, but all such counterparts
taken together will constitute one and the same Agreement.
(e) Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
(f) Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement and the exhibits and
schedules hereto will be governed by the internal law of Delaware (without
regard to any rules or principles of conflict of laws that might result in
the application of the laws of another jurisdiction).
(g) Notices. All notices, demands or other communications to
be given or delivered under or by reason of the provisions of this
Agreement will be in writing and will be deemed to have been given when
delivered personally or mailed by certified or registered mail, return
receipt requested and postage prepaid, to the recipient. Such notices,
demands and other communications will be sent to each holder of
Registrable Securities at the address set forth in the records of the
Company with respect to such holder and to the Company at its principal
executive office or, in each case, to such other address or to the
attention of such other person as the recipient party has specified by
prior written notice to the sending party.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
SWING-N-SLIDE CORP.
By: /s/ Richard G. Mueller
Name: Richard G. Mueller
Title: President/C.E.O.
GREENGRASS HOLDINGS
By: GreenGrass Capital LLC
By: /s/ David S. Evans
Name: David S. Evans,
Attorney-in-Fact