<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
SCHEDULE TO
(RULE 14D-100)
TENDER OFFER STATEMENT UNDER SECTION 14(D)(1) OR SECTION 13(E)(1) OF
THE SECURITIES EXCHANGE ACT OF 1934
PLAYCORE, INC.
-------------------------
(Name of Subject Company)
JASDREW ACQUISITION CORP.
PLAYCORE HOLDINGS, INC.
PLAYCORE HOLDINGS, L.L.C.
PLAYCORE, INC.
-------------------------
(Name of Offerors Filing Schedule)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
-------------------------
(Title of Class of Securities)
72811G 10 2
-------------------------
(CUSIP Number of Class of Securities)
FREDERIC CONTINO, PRESIDENT AND CHIEF EXECUTIVE OFFICER
PLAYCORE, INC.
RIVERFRONT CENTRE, SUITE 204
15 WEST MILWAUKEE STREET
JANESVILLE, WISCONSIN 53545
(608) 741-7183
-------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications on Behalf of Filing Persons)
WITH A COPY TO:
BENJAMIN F. GARMER, III RUSSELL W. PARKS, JR.
FOLEY & LARDNER AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
777 EAST WISCONSIN AVENUE 1333 NEW HAMPSHIRE AVENUE, N.W., SUITE 400
MILWAUKEE, WISCONSIN 53202-5367 WASHINGTON, DC 20036
(414) 271-2400 (202) 887-4000
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
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Transaction
Valuation* Amount of Filing Fee*
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<S> <C>
$29,022,421 $5,805
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</TABLE>
* Estimated for purposes of calculating amount of filing fee only. This amount
assumes the purchase of all outstanding shares of common stock (the "Shares") of
PlayCore, Inc. (the "Company") at the tender offer price of $10.10 per Share,
except for Shares that are covered by agreements (collectively, the "Purchase
Agreements") entered into by Jasdrew Acquisition Corp., PlayCore Holdings, Inc.
or the Company pursuant to which the holders of Shares (or securities
convertible into Shares) have agreed not to tender such Shares (or securities
convertible into Shares). As of April 13, 2000, there were (1) 2,614,399 Shares
issued and outstanding that were not covered by Purchase Agreements, (2)
unexercised options not covered by Purchase Agreements to acquire 121,268 Shares
with an exercise price of less than $10.10 per Share under one of the Company's
stock option plans and (3) outstanding convertible debentures not covered by
Purchase Agreements which were convertible into 137,840 Shares at a conversion
price of less than $10.10 per Share. Based on the foregoing, the transaction
value is equal to the product of (1) the sum of 2,614,399 Shares not covered by
Purchase Agreements, 121,268 Shares subject to options to purchase Shares with
an exercise price of less than $10.10 per Share not covered by Purchase
Agreements, and 137,840 Shares issuable upon conversion of convertible
debentures with a conversion price of less than $10.10 per Share not covered by
Purchase Agreements, and (2) $10.10 per Share. The amount of the filing fee,
calculated in accordance with Section 14(g) and Rule 0-11 of the Securities
Exchange Act of 1934, as amended, equals 1/50th of one percent of the value of
the transaction.
[ ] Check the box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number or the Form or Schedule and the date of its filing.
Amount Previous Paid: Filing Party:
----------------- -------------------
Form or Registration No.: Date Filed:
------------- --------------------
[ ] Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which
the statement relates:
[X] third-party tender offer subject to Rule 14d-1.
[X] issuer tender offer subject to Rule 13e-4.
[X] going-private transaction subject to Rule 13e-3.
[ ] amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the
results of the tender offer: [ ]
<PAGE> 2
This Tender Offer Statement on Schedule TO relates to the joint tender
offer by PlayCore, Inc., a Delaware corporation ("Company"), PlayCore Holdings,
L.L.C., a Delaware limited liability company ("Holdings"), PlayCore Holdings,
Inc., a Delaware corporation ("Parent"), and Jasdrew Acquisition Corp., a
Delaware corporation ("Acquisition Company"), to purchase all of the outstanding
shares of the Company's common stock, par value $0.01 per share, at a price of
$10.10, net to the seller in cash, without interest. This joint tender offer is
being made upon the terms and subject to the conditions set forth in the Offer
to Purchase, dated April 20, 2000 (the "Offer to Purchase") and in the related
Letter of Transmittal (the "Letter of Transmittal"); which, as each may be
amended and supplemented from time to time, together constitute the "Offer".
Holdings, Parent, Acquisition Company and the Company are collectively referred
to herein as the "Offerors".
This Tender Offer Statement on Schedule TO is intended to satisfy the
reporting requirements of Section 13(e) of the Securities Exchange Act of 1934,
as amended. The information in the Offer to Purchase and the related Letter of
Transmittal, copies of which are attached to this Schedule TO as Exhibits
(a)(1)(i) and (a)(1)(ii), respectively, is incorporated herein by reference in
response to all of the Items of this Schedule TO as more particularly described
below.
ITEM 1. SUMMARY TERM SHEET.
The information set forth in the Summary Term Sheet in the Offer to
Purchase is incorporated herein by reference.
ITEM 2. SUBJECT COMPANY INFORMATION.
(a) The name of the subject company/issuer is PlayCore, Inc., a
Delaware corporation. The Company's executive offices are located at Riverfront
Centre, Suite 204, 15 West Milwaukee Street, Janesville, Wisconsin. The
telephone number of the Company at such offices is (608) 741-7183.
(b) The class of securities to which this statement relates is the
common stock, par value $.01 per share, of the Company, of which 7,960,304
shares were issued and outstanding as of April 13, 2000.
(c) The information set forth in the section of the Offer to Purchase
captioned "The Tender Offer--Section 5 (Price Range of Shares)" is incorporated
herein by reference.
ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON.
(a)-(c) This Tender Offer Statement is filed by the Offerors. The
information set forth in the sections of the Offer to Purchase captioned "The
Tender Offer--Section 7 (Certain Information Concerning the Company)" and "The
Tender Offer--Section 8 (Certain Information Concerning Holdings, Parent and
Acquisition Company)" and on Schedules I and II to the Offer to Purchase is
incorporated herein by reference.
-2-
<PAGE> 3
ITEM 4. TERMS OF THE TRANSACTION.
(a)-(b) The information set forth in the Offer to Purchase is
incorporated herein by reference.
ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.
(a) The information set forth on Schedules I and II to the Offer to
Purchase is incorporated herein by reference.
(b) The information set forth in the sections of the Offer to Purchase
captioned "Introduction," "Special Factors--Section 1 (Background of the
Transaction; Contacts with the Company)" and "Special Factors--Section 7 (The
Merger Agreement and Related Documents)" is incorporated herein by reference.
(e) The information set forth in the sections of the Offer to Purchase
captioned "Special Factors--Section 7 (The Merger Agreement and Related
Documents)" and "Special Factors--Section 8 (Interests of Certain Persons in the
Transaction)" is incorporated herein by reference.
ITEM 6. PURPOSE OF THE TRANSACTION AND PLANS OR PROPOSALS.
(a) The information set forth in the sections of the Offer to Purchase
captioned "Introduction" and "Special Factors--Section 4 (Purpose and Structure
of the Transaction)" is incorporated herein by reference.
(b) The information set forth in the sections of the Offer to Purchase
captioned "Introduction", "Special Factors--Section 7 (The Merger Agreement and
Related Documents)" and "The Tender Offer--Section 1 (Terms of the Offer)" is
incorporated herein by reference.
(c) The information set forth in the sections of the Offer to Purchase
captioned "Introduction", "Special Factors--Section 4 (Purpose and Structure of
the Transaction)", "Special Factors--Section 5 (Plans for the Company after the
Transaction)", "Special Factors--Section 7 (The Merger Agreement and Related
Documents)", "Special Factors--Section 8 (Interests of Certain Persons in the
Transaction)", "Special Factors--Section 9 (Financing of the Transaction)", "The
Tender Offer--Section 9 (Source and Amount of Funds)" and "The Tender
Offer--Section 10 (Effect of the Offer on the Market for the Common Stock;
Exchange Act Registration)" is incorporated herein by reference.
ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) and (d) The information set forth in the sections of the Offer
to Purchase captioned "Introduction", "Special Factors--Section 9 (Financing of
the Transaction)," "The Tender Offer--Section 9 (Source and Amount of Funds),"
and "The Tender Offer--Section 11 (Conditions to the Offer)" is incorporated
herein by reference.
-3-
<PAGE> 4
ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) The information set forth in Schedules I and II of the Offer to
Purchase is incorporated herein by reference.
(b) The information set forth in the sections of the Offer to Purchase
captioned "Tender Offer--Section 7 (Certain Information Concerning the
Company)", "Tender Offer--Section 8 (Certain Information Concerning Holdings,
Parent and Acquisition Company)" and Schedules I and II to the Offer to Purchase
is incorporated herein by reference.
ITEM 9. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED.
The information set forth in the sections of the Offer to Purchase
captioned "Introduction," "Special Factors--Section 11 (Fees and Expenses)," and
"The Tender Offer--Section 13 (Fees and Expenses)" is incorporated herein by
reference.
ITEM 10. FINANCIAL STATEMENTS.
(a) (1) The audited consolidated financial statements of the Company as
of and for the fiscal years ended December 31, 1999 and December 31, 1998 are
incorporated into this Schedule TO by reference to the Consolidated Financial
Statements of the Company included as Item 1 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999 filed with the Securities
and Exchange Commission (the "Commission") on March 28, 2000.*
(a) (2) The unaudited consolidated financial statements of the Company
for the three and nine month fiscal periods ended September 30, 1999 are
incorporated into this Schedule TO by reference to Part I of the Company's
Quarterly Report on Form 10-Q for the quarterly fiscal period ended September
30, 1999 filed with the Commission on November 12, 1999.*
(a) (3)-(4) The information set forth in the section of the Offer to
Purchase captioned "The Tender Offer--Section 7 (Certain Information Concerning
the Company)" is incorporated herein by reference.
(b) Pro-forma financial statements of the Company are not material to
the Offer. Each of Holdings, Parent and Acquisition Company is a newly-formed
entity with no material assets or liabilities. See the information set forth in
the section of the Offer to Purchase captioned "The Tender Offer--Section 8
(Certain Information Concerning Holdings, Parent and Acquisition Company)."
- - --------
* Information is available to the public at the website maintained by the
Commission at http://www.sec.gov.
-4-
<PAGE> 5
ITEM 11. ADDITIONAL INFORMATION.
(a) (1) None.
(a) (2)-(3) The information set forth in the sections of the Offer to
Purchase captioned "Introduction," and "The Tender Offer--Section 12 (Certain
Legal Matters; Regulatory Approvals)" is incorporated herein by reference.
(a) (4) The information set forth in the section of the Offer to
Purchase captioned "The Tender Offer--Section 10 (Effect of the Offer on the
Market for the Common Stock; Exchange Act Registration)" is incorporated herein
by reference.
(a) (5) None.
(b) The information set forth in the Offer to Purchase is incorporated
herein by reference.
ITEM 12. EXHIBITS
The exhibits listed in the accompanying Exhibit Index are filed as part of this
Schedule TO.
ITEM 13. ADDITIONAL INFORMATION REQUIRED BY SCHEDULE 13E-3.
The information in the Offer to Purchase is incorporated herein by reference in
answer to the information required by Schedule 13E-3 that is not included or
covered by the other items of this Schedule TO.
-5-
<PAGE> 6
SIGNATURE
After due inquiry and to the best of their knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Dated: April 20, 2000 PlayCore, Inc.
By: /s/ Richard E. Ruegger
--------------------------------------
Richard E. Ruegger
Chief Financial Officer
Jasdrew Acquisition Corp.
By: /s/ Michael S. Shein
--------------------------------------
Michael S. Shein
Vice President
PlayCore Holdings, Inc.
By: /s/ Michael S. Shein
--------------------------------------
Michael S. Shein
Vice President
PlayCore Holdings, L.L.C.
By: /s/ Michael S. Shein
--------------------------------------
Michael S. Shein
Manager
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<S> <C>
(a)(1)(i) Offer to Purchase.
(a)(1)(ii) Letter of Transmittal.
(a)(2)* Letter to Stockholders from Terence S. Malone, Chairman of
PlayCore, Inc., dated April 20, 2000.
(a)(3) See exhibit (a)(1)(i)
(a)(4) Not applicable.
(a)(5)(i) Notice of Guaranteed Delivery.
(a)(5)(ii) Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(a)(5)(iii) Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(5)(iv) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(a)(5)(v) Joint Press Release dated April 14, 2000. [Incorporated by
reference to the Company's Schedule TO-C filed on April 14,
2000]
(a)(5)(vi) Debenture conversion materials.
(a)(5)(vii) Summary Advertisement dated April 20, 2000.
(b)(i) Credit Agreement by and among PlayCore Wisconsin, Inc., as
Borrower, the other Credit Parties signatory thereto, as
Credit Parties, the Lenders signatory thereto from time to
time, as Lenders, General Electric Capital Corporation, as
Administrative Agent and Lender, and Credit Agricole Indosuez,
as Documentation Agent and Lender, dated as of April 13, 2000.
(b)(ii) Purchase Agreement, dated as of April 13, 2000, by and among
the Company, PlayCore Wisconsin, Inc., Holdings, and the
Subsidiaries listed on the signature pages thereof and GS
Mezzanine Partners II, L.P. and GS Mezzanine Partners II
Offshore, L.P., relating to $30,000,000 Aggregate Principal
Amount of 18% Senior Subordinated Notes Due 2008.
</TABLE>
<PAGE> 8
<TABLE>
<S> <C>
(b)(iii) Loan Agreement, dated April 13, 2000, by and among Acquisition
Company, the Company and PlayCore Wisconsin, Inc.
(c)(1)* Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation, dated April 13, 2000.
(c)(2) Presentation by Donaldson, Lufkin & Jenrette Securities
Corporation, made to the Company's Board of Directors on April
10, 2000.
(d)(i) Agreement and Plan of Merger, dated as of April 13, 2000, by
and among the Company, Acquisition Company and Parent and
certain exhibits thereto. [Incorporated by reference to
Exhibit (2.1) to the Company's Current Report on Form 8-K
dated April 13, 2000 and filed on April 14, 2000]
(d)(ii) Stock Purchase Agreement, dated as of April 13, 2000, by and
among the Company, Acquisition Company, Parent and GreenGrass
Holdings. [Incorporated by reference to Exhibit (4.1) to the
Company's Current Report on Form 8-K dated April 13, 2000 and
filed on April 14, 2000]
(d)(iii) Stock Option Agreement, dated as of April 13, 2000, by and
among Parent, Acquisition Company and the Company.
[Incorporated by reference to Exhibit (4.2) to the Company's
Current Report on Form 8-K dated April 13, 2000 and filed on
April 14, 2000]
(d)(iv) Purchase, Waiver and Consent Agreement, dated as of April 13,
2000, by and among Massachusetts Mutual Life Insurance
Company, MassMutual Corporate Investors, MassMutual
Participation Investors, MassMutual Corporate Value Partners
Limited, Gerlach & Co., the Company, PlayCore Wisconsin, Inc.
and Acquisition Company.
(d)(v) Form of Option Exercise/Cancellation Agreement, dated as of
April 13, 2000, by and among Acquisition Company, the Company
and each of Terence Malone, George Herrera, Gary Massel and
Ronald Wray, including the securities ownership schedules
thereto.
</TABLE>
<PAGE> 9
<TABLE>
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(d)(vi) Form of Option Exercise/Cancellation Agreement, dated as of
April 13, 2000, by and among Acquisition Company, the Company
and each of Frederic Contino, John Caldwell, Curtis Cole,
Richard Ruegger, David Hammelman, Lori Wetzel, Thomas
Norquist, Richard Kuhn, Wesley Sutton, Robert Farnsworth and
Thomas van der Meulen, including the securities ownership
schedules thereto.
(d)(vii) Employment Agreement, dated as of April 13, 2000, by and
between Acquisition Company and Frederic Contino.
(d)(viii) Severance, Change of Control and Noncompetition Agreement,
dated as of April 13, 2000, by and between Acquisition Company
and Thomas van der Meulen.
(d)(ix) Severance, Change of Control and Noncompetiton Agreement,
dated as of April 13, 2000, by and between Acquisition Company
and David H. Hammelman.
(d)(x) Severance, Change of Control and Noncompetition Agreement,
dated as of April 13, 2000, by and between Acquisition Company
and John E. Caldwell.
(d)(xi) Severance, Change of control and Noncompetition Agreement,
dated as of April 13, 2000, by and between Acquisition Company
and Robert Farnsworth.
(d)(xii) Severance, Change of Control and Noncompetition Agreement,
dated as of April 13, 2000, by and between Acquisition Company
and Richard E. Ruegger.
(d)(xiii) Letter Agreement, dated August 17, 1999, by and between the
Company and GreenGrass Holdings.
(d)(xiv) Letter Agreement, dated April 13, 2000, by and between
Chartwell and Acquisition Company.
(f)* Section 262 of the Delaware General Corporation Law regarding
Appraisal Rights.
(g) Not applicable.
(h) Not applicable.
</TABLE>
- - --------------------
* Included in copies of the Offer to Purchase (Exhibit (a)(1)(i)).
<PAGE> 1
[PLAYCORE LOGO]
April 20, 2000
Dear Stockholders:
On behalf of the Board of Directors of PlayCore, Inc. (the "Company"), I am
pleased to inform you that on April 13, 2000 the Company entered into a
definitive Agreement and Plan of Merger (the "Merger Agreement") with PlayCore
Holdings, Inc. ("Parent") and Jasdrew Acquisition Corp., a wholly owned
subsidiary of Parent ("Acquisition Company"), pursuant to which the Company and
Acquisition Company have today commenced a tender offer to purchase all of the
outstanding shares (the "Shares") of the Company's common stock at $10.10 per
Share in cash without interest (the "Offer").
Consummation of the Offer is subject to, among other things, (1) at least
1,367,947 Shares, which number of Shares constitutes a majority of the Shares
outstanding and Shares issuable upon conversion of Company debentures (excluding
any Shares owned by any officer, director or affiliate of the Company, shares
which are issuable upon exercise of options and warrants, and Shares issuable
upon the conversion of convertible debentures held by affiliates of the Company)
being validly tendered and not withdrawn prior to the expiration of the Offer
and (2) receipt of funds from executed financing agreements and Parent's capital
contribution to Acquisition Company sufficient to, among other things, purchase
the Shares tendered in the Offer, pay for any non-tendered Shares in the Merger
and pay for securities to be acquired pursuant to the related agreements
executed in connection with the Merger Agreement. Concurrently with the
execution of the Merger Agreement, the Company, Parent and Acquisition Company
entered into a definitive Stock Purchase Agreement with GreenGrass Holdings, the
Company's majority stockholder, pursuant to which GreenGrass has agreed to sell
to Acquisition Company all of its Shares and other Company securities
immediately following the closing of the Offer.
Following the successful completion of the Offer, upon approval by a
stockholder vote, if required, Acquisition Company will be merged with and into
the Company (the "Merger"), and all Shares not purchased pursuant to the Offer
or in related transactions will be converted into the right to receive $10.10
per Share in cash without interest (except any Shares as to which the holder has
properly exercised appraisal rights).
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND
HAS DETERMINED THAT THE OFFER AND THE MERGER ARE ADVISABLE, FAIR TO AND IN THE
BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY. YOUR BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT THERETO.
In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the enclosed Offer to Purchase, which
has been filed with the Securities and Exchange Commission, including, among
other things, the opinion, dated April 13, 2000, of Donaldson, Lufkin & Jenrette
Securities Corporation, the Company's financial advisor, that, as of such date
and subject to the assumptions, limitations and qualifications set forth in the
opinion, the $10.10 per Share cash consideration to be received by the holders
of Shares in the Offer and the Merger is fair to such holders from a financial
point of view.
In addition to the attached Offer to Purchase, also enclosed are various
materials relating to the Offer, including a Letter of Transmittal to be used
for tendering your Shares in the Offer. These documents state the terms and
conditions of the Offer and the Merger and provide instructions on how to tender
your Shares. I urge you to read these documents carefully in making your
decision on whether to tender your Shares pursuant to the Offer.
Very truly yours,
/s/ Terence S. Malone
Terence S. Malone
Chairman of the Board
<PAGE> 2
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
PLAYCORE, INC.
AT
$10.10 NET PER SHARE
BY
JASDREW ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
PLAYCORE HOLDINGS, INC.
A WHOLLY-OWNED SUBSIDIARY OF
PLAYCORE HOLDINGS, L.L.C.
AND BY
PLAYCORE, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
MAY 18, 2000, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED
AS OF APRIL 13, 2000 (THE "MERGER AGREEMENT"), BY AND AMONG PLAYCORE, INC. (THE
"COMPANY"), JASDREW ACQUISITION CORP. ("ACQUISITION COMPANY"), AND PLAYCORE
HOLDINGS, INC. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE
OFFER AND THE MERGER, AND HAS DETERMINED THAT THE OFFER AND THE MERGER ARE
ADVISABLE, FAIR TO, AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE
COMPANY. THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT THERETO.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST
1,367,947 SHARES, WHICH NUMBER OF SHARES CONSTITUTES A MAJORITY OF THE SHARES
OUTSTANDING AND SHARES ISSUABLE UPON CONVERSION OF THE COMPANY'S 10% CONVERTIBLE
DEBENTURES (EXCLUDING ANY SHARES OWNED BY ANY OFFICER, DIRECTOR OR AFFILIATE OF
THE COMPANY, SHARES ISSUABLE UPON EXERCISE OF COMPANY OPTIONS (AS DEFINED
HEREIN) AND WARRANTS (AS DEFINED HEREIN), AND SHARES ISSUABLE UPON THE
CONVERSION OF THE COMPANY'S 10% CONVERTIBLE DEBENTURES HELD BY AFFILIATES OF THE
COMPANY) AND (2) THE COMPANY AND/OR ACQUISITION COMPANY HAVING RECEIVED OR
HAVING AVAILABLE THE PROCEEDS FROM THE FINANCING CONTEMPLATED BY THE FINANCING
AGREEMENTS (AS DEFINED HEREIN) AND THE PROCEEDS FROM THE CAPITAL CONTRIBUTION
(AS DEFINED HEREIN), INCLUDING, BUT NOT LIMITED TO, PROCEEDS SUFFICIENT TO (A)
FINANCE THE PURCHASE OF THE SHARES THAT THE COMPANY AND ACQUISITION COMPANY ARE
AGREEING TO PURCHASE PURSUANT TO THE OFFER, (B) PAY THE MERGER CONSIDERATION (AS
DEFINED HEREIN) PURSUANT TO THE MERGER (AS DEFINED HEREIN), (C) PURCHASE CERTAIN
SECURITIES OF THE COMPANY PURSUANT TO THE PLAYCORE PURCHASE AGREEMENTS (AS
DEFINED HEREIN), (D) REDEEM THE COMPANY'S THEN OUTSTANDING 10% CONVERTIBLE
DEBENTURES AND REPAY THE OTHER OUTSTANDING INDEBTEDNESS OF THE COMPANY AND ITS
SUBSIDIARIES AND (E) PAY THE FEES AND EXPENSES REQUIRED TO BE PAID BY THE
COMPANY IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS DESCRIBED IN
THIS OFFER TO PURCHASE AND IN THE RELATED LETTER OF TRANSMITTAL.
<PAGE> 3
IMPORTANT
If you wish to tender all or any part of the shares of common stock
registered in your name, you should carefully follow the instructions described
in "THE TENDER OFFER -- Procedures for Tendering Shares," including completing a
Letter of Transmittal in accordance with the instructions in the Letter of
Transmittal and delivering it, along with your share certificates and any other
required items, to First Chicago Trust Company of New York, the Depositary. If
your shares are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee and you desire to tender your shares, then you
should contact the nominee and request that the nominee tender the shares for
you.
Any stockholder who desires to tender shares and whose certificates for
such shares are not immediately available or cannot be delivered to the
Depositary or who cannot comply with the procedure for book-entry transfer or
whose other required documents cannot be delivered to the Depositary by the
expiration of the offer, must tender the shares pursuant to the guaranteed
delivery procedure set forth in "THE TENDER OFFER -- Procedures for Tendering
Shares."
To properly tender shares, you must validly complete the Letter of
Transmittal. You may request additional copies of this Offer to Purchase, the
Letter of Transmittal or the Notice of Guaranteed Delivery from D.F. King & Co.,
Inc., which is acting as the Information Agent, at its address and telephone
numbers set forth on the back cover of this Offer to Purchase.
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF
AS TO WHETHER YOU SHOULD TENDER OR REFRAIN FROM TENDERING YOUR SHARES IN THIS
OFFER. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFER OTHER
THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF
TRANSMITTAL. IF ANYONE MAKES ANY RECOMMENDATION OR GIVES ANY INFORMATION OR
REPRESENTATION, YOU MUST NOT RELY UPON THAT RECOMMENDATION, INFORMATION OR
AUTHORIZATION AS HAVING BEEN AUTHORIZED BY THE OFFERORS.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of this transaction or passed upon the
fairness or merits of this transaction or upon the accuracy or adequacy of the
disclosure contained in this document. Any representation to the contrary is
unlawful and a criminal offense.
The Information Agent for the Offering:
D.F. KING & CO., INC.
April 20, 2000
ii
<PAGE> 4
SUMMARY TERM SHEET
This summary term sheet highlights certain information from this offer to
purchase. To understand the offer fully and for a more complete description of
the terms of the offer, we urge you to carefully read this entire offer to
purchase and the related letter of transmittal. We have included page references
parenthetically to direct you to a more complete description of the topics in
this summary.
QUESTIONS AND ANSWERS ABOUT THE OFFER AND THE MERGER
Q: Who is offering to buy my securities? (Page 1)
A: PlayCore Holdings, L.L.C., PlayCore Holdings, Inc., Jasdrew Acquisition
Corp. (which we refer to in this section as Acquisition Company) and
PlayCore, Inc. (which we refer to in this section as PlayCore) are making a
joint offer to purchase your securities. However, you will only tender your
shares to a single depositary which will receive payment from either
Acquisition Company or PlayCore. PlayCore Holdings, L.L.C., PlayCore
Holdings, Inc. and Acquisition Company are all newly formed entities
created by Chartwell Investments II LLC to effect the offer.
In the event that the shares tendered in the offer, plus shares acquired by
Acquisition Company from (1) PlayCore, (2) certain security holders of
PlayCore and (3) certain current and former members of management of
PlayCore, constitute greater than 90% of the outstanding shares,
Acquisition Company will purchase all tendered shares. If this requirement
is not met, but all of the conditions to the Offer have been waived or met,
PlayCore will purchase all shares tendered in excess of 425,439 shares.
Q: What are the classes and amounts of securities sought in the offer? (Page
1)
A: We are offering to purchase all of the outstanding shares of PlayCore
common stock, or any lesser number of shares that stockholders properly
tender in the offer.
Q: How much are the bidders offering to pay me and what is the form of
payment? (Page 1)
A: We are offering to pay you $10.10 per share in cash, without interest.
Q: Do the bidders have the financial resources to pay me for my shares? (Page
37)
A: We expect we will have sufficient funds to purchase the tendered shares. We
have entered into financing agreements with senior secured financing,
subordinated debt financing and equity financing sources. In these
financing agreements, the financing sources have committed, subject to
certain conditions, to provide the financing necessary to purchase all
shares that are tendered in the offer. The offer, however, is conditioned
upon our obtaining these funds, and there is the possibility that we will
not obtain these funds due to the various conditions in the financing
agreements not being met.
Q: Is the financial condition of the bidders relevant to my decision on
whether to tender in the offer? (Page 53)
A: No. We do not believe that the financial condition of any bidder is
important to your decision since we are paying you cash for your shares and
we are offering to purchase all outstanding shares of PlayCore's common
stock.
Q: When does the offer expire? (Page 44)
A: The offer expires on May 18, 2000, at 5:00 p.m., New York City time, unless
we extend it. If you cannot deliver everything that is required in order to
make a valid tender by that time, you may be able to use a guaranteed
delivery procedure. This procedure is described later in this offer to
purchase.
Q: Can the offer be extended and under what circumstances? (Page 44)
Yes. We may extend the offer at any time, subject to the terms of the
merger agreement. However, we cannot assure you that the offer will be
extended or, if extended, for how long. If we extend the
iii
<PAGE> 5
offer, we will make a public announcement of the new expiration date not
later than 9:00 A.M., New York City time, on the day after the day on which
the offer was scheduled to expire.
Q: How do I tender my shares? (Page 46)
A: If you hold your shares "of record," you can tender your shares by sending
the enclosed letter of transmittal to First Chicago Trust Company of New
York, at the address listed on the enclosed letter of transmittal. The
letter of transmittal must be received by First Chicago Trust Company of
New York no later than the time and date on which the offer expires.
If your broker holds your shares in "street name" for you, you must direct
your broker to tender your shares.
If your share certificates are not immediately available for delivery to
First Chicago Trust Company of New York, you must comply with the
guaranteed delivery procedure described in the offer prior to the date the
offer expires.
If you have any questions, you should contact the information agent or your
broker for assistance.
Q: What is the purpose of the offer? (Page 14)
A: Our offer to purchase your securities is one part of a multi-step
transaction that will result in PlayCore Holdings, Inc. owning all
outstanding shares of PlayCore. As a result of this transaction, PlayCore
will no longer be a publicly-traded company.
Q: What are the most significant conditions to the offer? (Page 56)
A: Our obligation to pay for any tendered shares depends upon a number of
conditions, including:
- There being validly tendered and not withdrawn prior to the
expiration of the offer at least 1,367,947 shares (not counting
shares owned by any officer, director or affiliate of PlayCore,
including GreenGrass Holdings, the majority stockholder of PlayCore,
shares issuable upon the exercise of certain PlayCore options and
warrants and shares issuable upon the conversion of PlayCore's
convertible debentures held by GreenGrass Holdings).
- Obtaining sufficient equity and debt financing: (1) to purchase the
shares tendered in the offer, (2) to pay for any non-tendered shares
in the merger, (3) to pay for any securities of the Company to be
acquired pursuant to the various agreements executed in connection
with the merger agreement, (4) to refinance PlayCore's existing
indebtedness and (5) to pay for the various fees and expenses
incurred in connection with the merger and the offer.
- There being no legal action pending, threatened or taken that might
adversely affect the offer or the merger.
- There being no breach of any representation or warranty in the
merger agreement by PlayCore which would have a material adverse
effect on PlayCore.
Q: Until what time can I withdraw previously tendered shares? (Page 48)
A: You may withdraw your tendered shares at any time before 5:00 p.m., New
York City time, on May 18, 2000 or, if the offer is extended, the last day
of the period for which it is extended. And, if we have not agreed by June
15, 2000 (or such later date as may apply if the offer is extended) to
accept your shares for payment, you can withdraw them at any time until we
accept shares for payment.
Q: How do I withdraw previously tendered shares? (Page 48)
A: You can withdraw shares that you have already tendered by sending a written
notice of withdrawal to First Chicago Trust Company of New York while you
still have the right to withdraw the shares.
Q: What does my board of directors think of the offer? (Page 9)
A: Your board of directors has unanimously approved the merger agreement, the
offer and the merger and has determined that the offer and the merger are
advisable, fair to, and in the best interests of the stockholders of
PlayCore. Your board of directors unanimously recommends that stockholders
accept the offer and tender their shares.
iv
<PAGE> 6
Q: Did my board of directors receive any opinions, appraisals, or reports
regarding the fairness of the offer? (Page 11)
A: Yes. Your Board of Directors received a written opinion, dated April 13,
2000, from Donaldson, Lufkin & Jenrette Securities Corporation to the
effect that, as of that date and based on and subject to the assumptions,
limitations and qualifications set forth in the opinion, the $10.10 per
share cash consideration to be received by holders of PlayCore's common
stock in the offer and the subsequent merger was fair to such holders from
a financial point of view. A complete copy of the DLJ opinion is attached
as Exhibit A to this offer to purchase.
Q: Will the Company continue as a public company? (Page 15)
A: No. Because we are purchasing PlayCore's common stock in a tender offer and
intend to engage in a merger which will result in the securities of
PlayCore being held by less than 300 persons of record, this offer is
considered the first step in a going-private transaction.
Q: Will the tender offer be followed by a merger if all common shares are not
tendered in the offer? (Page 14)
Yes. If the number of shares tendered in the offer, plus the number of
shares acquired by Acquisition Company pursuant to various agreements
entered into in connection with the merger agreement, constitute greater
than 90% of the outstanding shares, the merger will occur immediately
following the acquisition of such shares. If this requirement is not met,
but all of the conditions to the offer have been waived or met, PlayCore
will call a stockholders meeting to approve the merger. Since, at that
time, Acquisition Company will own more than 50% of the outstanding shares
of PlayCore stock, stockholder approval of the merger will be assured.
If we complete the merger, stockholders who did not tender their shares
into the offer will receive $10.10 in cash (or any higher price per share
that is paid in the offer) in the merger in exchange for each share of
PlayCore common stock which they own.
Q: If I decide not to tender, how will the offer affect my shares? (Page 14)
A: Stockholders not tendering in the offer will receive in the merger, if it
takes place, the same amount of cash per share which they would have
received had they tendered their shares in the offer.
Q: What is the market value of my shares as of a recent date? (Page 49)
A: On April 13, 2000, the last full trading day before we announced the offer
and merger, the reported closing sale price for one share of PlayCore's
common stock on the American Stock Exchange was $6 3/4. On April 19, 2000,
the last trading day before we commenced the offer, the reported closing
sale price for one share of PlayCore's common stock on the American Stock
Exchange was $9 3/4. We advise you to obtain a recent quotation for the
common stock in deciding whether to tender your shares.
Q: If I object to the price being offered, will I have appraisal rights? (Page
16)
A: Not in the offer, but you will have appraisal rights in the subsequent
merger. You may elect not to tender your shares in the offer, not vote in
favor of the merger, perfect your available appraisal rights under Delaware
law and have the "fair value" of your shares paid to you.
Q: Who can I talk to if I have questions about the tender offer?
A: If you have more questions about the tender offer, you should contact:
D.F. KING & CO., INC.
Banks and Brokers Call Collect:
(212) 269-5550
All Others Please Call Toll-Free:
(800) 431-9645
v
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE OFFER AND THE MERGER........ iii
INTRODUCTION................................................ 1
SPECIAL FACTORS............................................. 5
1. Background of the Transaction; Contacts with the
Company................................................. 5
2. Recommendation of the Board of Directors of the Company;
Fairness of the Offer and the Merger.................... 9
3. Opinion of the Company's Financial Advisor.............. 11
4. Purpose and Structure of the Transaction................ 14
5. Plans for the Company after the Transaction............. 15
6. Rights of Stockholders in the Offer and the Merger...... 16
7. The Merger Agreement and Related Documents.............. 18
8. Interests of Certain Persons in the Transaction......... 35
9. Financing of the Transaction............................ 37
10. Certain United States Federal Income Tax Consequences... 41
11. Fees and Expenses....................................... 42
THE TENDER OFFER............................................ 44
1. Terms of the Offer...................................... 44
2. Acceptance for Payment and Payment for Shares........... 45
3. Procedures for Tendering Shares......................... 46
4. Withdrawal Rights....................................... 48
5. Price Range of Shares................................... 49
6. Dividends and Distributions............................. 49
7. Certain Information Concerning the Company.............. 50
8. Certain Information Concerning Holdings, Parent and
Acquisition Company..................................... 53
9. Source and Amount of Funds.............................. 54
10. Effect of the Offer on the Market for the Common Stock;
Exchange Act Registration............................... 55
11. Conditions to the Offer................................. 56
12. Certain Legal Matters; Regulatory Approvals............. 57
13. Fees and Expenses....................................... 59
14. Miscellaneous........................................... 59
</TABLE>
<TABLE>
<S> <C>
Schedule I -- Information Concerning the Directors, Executive Officers
and Certain Stockholders of PlayCore, Inc.
Schedule II -- Information Concerning the Directors and Executive
Officers of PlayCore Holdings, L.L.C. PlayCore Holdings,
Inc. and Jasdrew Acquisition Corp.
Schedule III -- Information Statement Pursuant to Section 14(f) of the
Securities Exchange Act of 1934 and Rule 14f-1
Promulgated Thereunder
Exhibit A -- Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation
Exhibit B -- Section 262 of the Delaware General Corporation Law
</TABLE>
vi
<PAGE> 8
To the Holders of Common Stock of
PlayCore, Inc.
INTRODUCTION
PlayCore Holdings, L.L.C., a Delaware limited liability company
("Holdings"), PlayCore Holdings, Inc., a Delaware corporation and wholly-owned
subsidiary of Holdings ("Parent"), Jasdrew Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Acquisition Company"), and
PlayCore, Inc., a Delaware corporation (the "Company"), hereby offer to purchase
any and all of the issued and outstanding Shares of common stock, par value
$0.01 per share, of the Company (the "Shares" or "Common Stock"), at a price of
$10.10 per Share, net to the seller in cash (such amount or any greater amount
per Share paid in the Offer being referred to as the "Offer Price"), without
interest thereon on the terms and subject to the conditions set forth in this
Offer to Purchase and in the related Letter of Transmittal (which, as each may
be amended and supplemented from time to time, together constitute the "Offer").
See "THE TENDER OFFER -- Conditions to the Offer." For the purposes of this
Offer, Holdings, Parent, Acquisition Company and the Company are collectively
referred to as the "Offerors" and Acquisition Company and the Company are
collectively referred to as the "Purchasers." Holdings, Parent and Acquisition
Company are all newly formed entities which were created by Chartwell
Investments II LLC ("Chartwell") to effect the transactions referred to herein.
Chartwell is an advisor to, and manager of, private equity funds which invest in
growth financings and buy outs of middle market companies.
The Offer is a joint tender by Acquisition Company, Parent, Holdings and
the Company to purchase at the Offer Price all Shares tendered pursuant to the
Offer, with Acquisition Company to pay for and purchase no fewer than 425,439
Shares. In the event that the Shares tendered in the Offer, plus the Shares
acquired by Acquisition Company pursuant to the PlayCore Purchase Agreements (as
defined below) (including Shares issued upon the exercise or conversion of
derivative securities purchased thereunder), would constitute greater than 90%
of the outstanding Shares (the "Short Form Requirement") and permit the Merger
(as defined below) to be effected pursuant to Section 253 of the Delaware
General Corporation Law (the "DGCL"), Acquisition Company will purchase all
tendered Shares. If the number of tendered Shares, plus the Shares to be
acquired by Acquisition Company pursuant to the PlayCore Purchase Agreements
(including Shares issued upon the exercise or conversion of derivative
securities purchased thereunder) would not result in the Short Form Requirement
being met, but all of the conditions to the Offer have been waived or met, the
Company will purchase all Shares tendered in excess of 425,439 Shares.
Stockholders whose Shares are registered in their own name and who tender
directly to First Chicago Trust Company of New York, as Depositary (the
"Depositary"), will not be obligated to pay brokerage fees or commissions or,
except as set forth in Instruction 6 of the Letter of Transmittal, stock
transfer taxes on the purchase of Shares by the Purchasers pursuant to the
Offer. The Company will pay all charges and expenses incurred in connection with
the Offer by the Depositary, and D. F. King & Co., Inc., as Information Agent
(the "Information Agent"). See "SPECIAL FACTORS -- Fees And Expenses" and "THE
TENDER OFFER -- Fees and Expenses."
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of April 13, 2000 (the "Merger Agreement"), by and among the Company, Parent
and Acquisition Company. The Merger Agreement provides that, among other things,
as promptly as practicable after consummation of the Offer and the satisfaction
of the other conditions contained in the Merger Agreement, Acquisition Company
will be merged (the "Merger") with and into the Company, with the Company
continuing as the surviving corporation (the "Surviving Corporation"). At the
effective time of the Merger (the "Effective Time"), each Share issued and
outstanding immediately prior to the Effective Time (other than Shares held by
Acquisition Company, in the treasury of the Company and by holders who perfect
their appraisal rights in accordance with the DGCL), will, by virtue of the
Merger and without any action on the part of the holder thereof, be canceled and
be converted into the right to receive an amount per share (the "Merger
Consideration") equal to the Offer Price, without interest.
<PAGE> 9
As of April 13, 2000, there were 7,960,304 Shares issued and outstanding,
3,634,385 Shares held in the treasury of the Company, 1,514,590 Shares reserved
for issuance upon conversion of the Company's 10% Subordinated Convertible
Debentures due February 15, 2004 (the "Debentures"), 50,000 Shares reserved for
issuance upon exercise of a warrant to purchase Shares held by GreenGrass
Holdings, a Delaware general partnership and the majority stockholder of the
Company ("GreenGrass"), dated March 13, 1997 (the "GreenGrass Warrant"), 635,379
Shares reserved for issuance upon exercise of warrants to purchase Shares held
by Massachusetts Mutual Life Insurance Company ("MassMutual") and certain other
parties related to MassMutual (the "MM Warrant Holders") and 1,287,893 Shares
issuable upon the exercise of outstanding options granted under the Company's
stock option plans ("Company Options").
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST
1,367,947 SHARES, WHICH NUMBER OF SHARES CONSTITUTES A MAJORITY OF THE SHARES
OUTSTANDING AND SHARES ISSUABLE UPON CONVERSION OF THE DEBENTURES (EXCLUDING ANY
SHARES OWNED BY ANY OFFICER, DIRECTOR OR AFFILIATE OF THE COMPANY, SHARES
ISSUABLE UPON EXERCISE OF COMPANY OPTIONS AND WARRANTS, AND SHARES ISSUABLE UPON
THE CONVERSION OF DEBENTURES HELD BY GREENGRASS) (THE "MINIMUM CONDITION") AND
(2) THE COMPANY AND/ OR ACQUISITION COMPANY HAVING RECEIVED OR HAVING AVAILABLE
THE PROCEEDS FROM THE FINANCING CONTEMPLATED BY THE FINANCING AGREEMENTS AND THE
PROCEEDS FROM THE CAPITAL CONTRIBUTION, INCLUDING, BUT NOT LIMITED TO, PROCEEDS
SUFFICIENT TO (A) FINANCE THE PURCHASE OF THE SHARES THAT THE COMPANY AND
ACQUISITION COMPANY ARE AGREEING TO PURCHASE PURSUANT TO THE OFFER, (B) PAY THE
MERGER CONSIDERATION PURSUANT TO THE MERGER, (C) PURCHASE SECURITIES OF THE
COMPANY PURSUANT TO THE PLAYCORE PURCHASE AGREEMENTS, (D) REDEEM THE COMPANY'S
THEN OUTSTANDING DEBENTURES AND REPAY OTHER OUTSTANDING INDEBTEDNESS OF THE
COMPANY AND ITS SUBSIDIARIES AND (E) PAY THE FEES AND EXPENSES REQUIRED TO BE
PAID BY THE COMPANY IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THE
MERGER AGREEMENT (THE "RECEIPT OF FUNDS CONDITION"). THE OFFER IS ALSO
CONDITIONED UPON THE SATISFACTION OF CERTAIN OTHER CONDITIONS DESCRIBED IN "THE
TENDER OFFER -- CONDITIONS OF THE OFFER." THE SHORT FORM REQUIREMENT IS NOT A
CONDITION TO THE OFFER.
The consummation of the Merger is subject to the satisfaction of certain
conditions, including the approval of the Merger Agreement by the requisite vote
of the Company's stockholders if the Short Form Requirement is not met.
Concurrently with the execution of the Merger Agreement, and as an
inducement to Acquisition Company and Parent to enter into the Merger Agreement,
(i) the Company has entered into a Stock Purchase Agreement (the "Stock
Agreement") with Parent, GreenGrass and Acquisition Company pursuant to which
GreenGrass has agreed, among other matters, immediately after the closing of the
Offer (the "Offer Closing"), to sell to Acquisition Company all of its
securities of the Company as follows: (a) in the case of Shares, for
consideration equal to the Offer Price for each Share and (b) in the case of the
GreenGrass Warrant and Debentures held by GreenGrass, for consideration on an as
exercised or converted basis equal to the Offer Price per Share, less any
conversion or exercise price thereof; (ii) the MM Warrant Holders have entered
into a Purchase, Waiver and Consent Agreement with the Company, PlayCore
Wisconsin, Inc., a Wisconsin corporation and a wholly-owned subsidiary of the
Company ("PlayCore Wisconsin"), and Acquisition Company (the "MM Agreement"),
pursuant to which, among other matters, the MM Warrant Holders have agreed to
sell all of their warrants to purchase Shares (the "MM Warrants" which together
with the GreenGrass Warrant are collectively referred to herein as the
"Warrants") immediately after the Offer Closing to Acquisition Company (if the
Short Form Requirement is met) or the Company (if the Short Form Requirement is
not met) for consideration equal to the Offer Price per Share less the exercise
price thereof; and (iii) certain holders (the "Option Holders") of Company
Options have entered into Option Exercise/
2
<PAGE> 10
Cancellation Agreements with the Company and Acquisition Company (the "Option
Exercise Agreements"), pursuant to which, among other matters, the Option
Holders have agreed (x) (1) if the Short Form Requirement is met, to exercise
all of their Company Options immediately after the Offer Closing and to sell to
Acquisition Company all of the Shares issued upon such exercise (collectively,
the "Option Exercise Shares") for consideration equal to the Offer Price per
Share, or (2) if the Short Form Requirement is not met, not to exercise their
Company Options and to exchange their Company Options in the Merger as provided
in the Merger Agreement and (y) to tender in the Offer all Shares then owned by
them (excluding any Option Exercise Shares) and (iv) the Company has granted to
Acquisition Company an option (the "Acquisition Company Option") pursuant to a
Stock Option Agreement (the "Stock Option Agreement") to acquire from the
Company in certain circumstances a sufficient number of Shares (the "Acquisition
Company Option Shares") that, when taken together with all other outstanding
Shares to be acquired by Acquisition Company pursuant to the Offer and the
agreements outlined in clauses (i) through (iii) of this paragraph (such
agreements, collectively with the Stock Option Agreement, the "PlayCore Purchase
Agreements"), allow the Short Form Requirement to be met.
The Offer, the consummation of the transactions contemplated by the
PlayCore Purchase Agreements and the Merger are sometimes collectively referred
to herein as the "Transaction."
In the event that the number of Shares tendered pursuant to the Offer, plus
the Shares purchased by Acquisition Company pursuant to the PlayCore Purchase
Agreements (including Shares issued upon the exercise or conversion of
derivative securities purchased thereunder), would be sufficient to satisfy the
Short Form Requirement, Acquisition Company will purchase all Shares tendered
pursuant to the Offer and consummate the Merger immediately thereafter. If a
lesser number of Shares are tendered pursuant to the Offer, then, assuming all
conditions to the Offer have been waived or met, (i) Acquisition Company will
purchase 425,439 of the Shares tendered and the Company will purchase the
balance, if any, of the Shares tendered pursuant to the Offer and (ii) the
Company will call a stockholder meeting after the closing of the Offer to
approve the Merger.
The terms and conditions of the Merger Agreement and the PlayCore Purchase
Agreements are more fully described in "SPECIAL FACTORS -- The Merger Agreement
and Related Documents."
Subject to the perfection of appraisal rights under the DGCL, Shares not
tendered in the Offer (other than Shares held by Acquisition Company and in the
treasury of the Company) will be cancelled in the Merger and converted into the
right to receive the Merger Consideration, without interest.
Stockholders who hold their Shares at the time of the Merger and who fully
comply with the statutory appraisal procedures set forth in the DGCL, the
relevant provisions of which are attached as Exhibit B of this Offer to
Purchase, will be entitled to perfect their appraisal rights under the DGCL and
have the fair value of their Shares (which may be more than, equal to, or less
than the Merger Consideration) judicially determined and paid to them in cash
pursuant to the procedures prescribed by the DGCL. NO APPRAISAL OR DISSENTERS
RIGHTS ARE AVAILABLE TO STOCKHOLDERS IN CONNECTION WITH THE OFFER. See "SPECIAL
FACTORS -- Rights of Stockholders in the Offer and the Merger."
The Company's Board of Directors (the "Board"), by unanimous vote of all
directors, (i) approved the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, (ii) determined that the Offer and
the Merger are advisable, fair to, and in the best interests of the stockholders
of the Company and (iii) recommends to the Company's stockholders that such
stockholders accept the Offer and tender their Shares pursuant thereto.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), financial
advisor to the Board, has delivered to the Board its written opinion, dated
April 13, 2000, to the effect that, as of that date and based on and subject to
the assumptions, limitations and qualifications set forth in such opinion, the
$10.10 per Share cash consideration to be received in the Offer and the Merger
by holders of Shares was fair to such holders from a financial point of view. A
copy of the DLJ Opinion (defined below), which sets forth the assumptions made,
matters considered and limits of the review by DLJ in connection with such
opinion, is attached hereto as Exhibit A. Holders of Shares are urged to read
the opinion carefully in its entirety.
3
<PAGE> 11
Pursuant to the Credit Agreement, dated as of April 13, 2000, among
PlayCore Wisconsin, as borrower, and the Company, Acquisition Company and
Heartland Industries, Inc. (DE), a Delaware corporation and wholly-owned
subsidiary of PlayCore Wisconsin ("Heartland"), as guarantors, and the lenders
signatory thereto from time to time (the "Lenders"), General Electric Capital
Corporation, as Administrative Agent and a Lender ("GE"), and Credit Agricole
Indosuez, as Documentation Agent and a Lender (the "Credit Agreement" or "Senior
Credit Facility"), the Lenders, subject to certain conditions, have agreed to
provide to PlayCore Wisconsin a $115 million senior secured credit facility. The
Senior Credit Facility will be comprised of (i) $85 million of term loans to be
divided into two primary tranches in amounts to be determined, and (ii) $30
million of revolving credit facilities. Pursuant to the Purchase Agreement among
PlayCore Wisconsin, as issuer, the Company, Parent and Heartland, as guarantors,
and GS Mezzanine Partners II, L.P. and GS Mezzanine Partners Offshore II, L.P.
(together "GS"), dated as of April 13, 2000 (the "Subordinated Note Agreement"),
GS has agreed, subject to certain conditions, to purchase $30 million of senior
subordinated notes of PlayCore Wisconsin (the "Sub Notes" or "Notes"). The
Senior Credit Facility and Subordinated Note Agreement are collectively referred
to herein as the "Financing Agreements." A portion of the proceeds from the
Financing Agreements will be loaned by PlayCore Wisconsin to Acquisition Company
(if the Short Form Requirement is met) or the Company (if the Short Form
Requirement is not met) pursuant to the terms of a Loan Agreement among Company,
Acquisition Company and PlayCore Wisconsin dated as of April 13, 2000 (the
"PlayCore/Acquisition Company Loan Agreement"). The remainder of the funds
necessary for Acquisition Company to consummate the transactions contemplated by
the Merger Agreement and the PlayCore Purchase Agreements will be in the form of
a capital contribution from Parent to Acquisition Company of $72.5 million (the
"Capital Contribution"). The Offerors believe that the proceeds, if obtained,
from the Credit Agreement, Subordinated Note Agreement and the Capital
Contribution will be sufficient to satisfy the Receipt of Funds Condition. See
"SPECIAL FACTORS -- Financing of the Transactions" and "THE TENDER
OFFER -- Conditions to the Offer."
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
4
<PAGE> 12
SPECIAL FACTORS
1. BACKGROUND OF THE TRANSACTION; CONTACTS WITH THE COMPANY.
In 1998, the Board and GreenGrass expressed concern that the trading price
on The American Stock Exchange (the "AMEX") of the Common Stock did not
adequately reflect the financial performance or prospects of the Company. The
range of high and low sales prices for the Common Stock in 1998 was a high of
$5 1/4 and a low of $3 3/8, and for the first two quarters of 1999 was a high of
$6 1/2 and a low of $4 1/4. In 1998, the Company retained a financial public
relations firm to assist the Company in its relations with the financial media,
institutional investors and buy-side analysts. Additionally, in 1998 and early
1999, the Company reviewed various acquisition candidates, held discussions with
some of those candidates, both domestic and foreign, but was unable to effect a
transaction, other than Heartland. As to certain of the acquisition candidates,
it was apparent that a capital infusion into the Company would be required. In
the early spring of 1999, it became increasingly clear to the Board and
GreenGrass that the foregoing efforts, in light of the overall state of the
small cap markets generally, were not likely to generate an appropriate market
valuation for the Company.
Based on these concerns, from March through May 1999, GreenGrass
interviewed four international investment banking firms to obtain their views on
value enhancing strategies for the Company. After these interviews, GreenGrass
recommended to the Board that it consider a proposal by DLJ to act as a
financial advisor to the Company for the purposes of considering alternatives to
enhance stockholder value, including a possible sale of the Company.
A meeting with DLJ was held on July 7, 1999, that included Board member and
Chief Executive Officer Frederic L. Contino, Chairman of the Board Terence S.
Malone and Company legal counsel Benjamin F. Garmer, III of Foley & Lardner,
along with Chairman of the Executive Committee of the Board David S. Evans and
Board member Ronald D. Wray. At this meeting, DLJ reviewed various strategic
alternatives to enhance stockholder value. After a discussion and consideration
of the alternatives, Mr. Garmer recommended that the alternatives and the
question of whether to engage an investment banking firm be presented to the
full Board.
On August 17, 1999, the Board met by telephone conference to consider
alternatives to enhance stockholder value. John ("Jack") Maier from DLJ reviewed
with the Board materials previously distributed to the Board on August 11, 1999.
Mr. Maier first reviewed the favorable current mergers and acquisitions
environment, the various valuation methods used to produce the range of expected
enterprise values to be achieved in the sale of the Company, and the timing of
the sale process. Next, Mr. Maier reviewed the risks compared to benefits of
certain possible acquisitions the Company was evaluating, concluding that the
relative risks offset the possible improvement to stockholder value. Mr. Maier
also noted that the Company's current capital structure would make it difficult
to consummate potential acquisitions.
Following a discussion of Mr. Maier's presentation and the various
alternatives, the Board authorized the engagement of DLJ and GreenGrass as
financial advisors to assist management and the Board in exploring ways to
maximize stockholder value, including specifically selling the Company.
On September 20, 1999, the Company publicly announced the engagement of DLJ
and began the process of identifying candidates that might be interested in
acquiring or making a strategic investment in the Company. Over the next month,
DLJ contacted one hundred nineteen (119) potential buyers, including Chartwell,
comprised of ninety (90) financial buyers and twenty-nine (29) strategic buyers.
Of the parties contacted, fifty-one (51) financial buyers, including Chartwell,
and five (5) strategic buyers executed confidentiality agreements. Each of these
parties received a Confidential Information Memorandum developed by management,
GreenGrass and DLJ describing the Company, its businesses, products, markets,
assets, employees, financial performance and forecasts. Based on the
Confidential Information Memorandum, twelve (12) parties, including Chartwell,
submitted preliminary indications of interest in early November 1999.
On November 15, 1999, the Board met by telephone conference to review a
report by DLJ distributed to the Board prior to the meeting summarizing the
process and reviewing the indications of interest received from
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<PAGE> 13
the potential buyers. After a discussion, and although no decision was reached
by the Board at the meeting to sell the Company, the Board authorized the
financial advisors and management to continue the process.
Beginning in late November and concluding in early December, eight (8)
interested parties attended management presentations and were provided access to
a data room, which included the Company's material agreements and other
financial and due diligence information. Based on the management presentations
and access to the data room, these parties were asked to submit proposals on
December 3, 1999.
On December 6, 1999, the Board met by telephone conference to review the
eight (8) proposals received on December 3, 1999, copies of which had been
previously provided to the Board. James Frawley from DLJ reviewed the proposals.
Mr. Frawley reported that the values associated with the proposals were at the
lower end of the value range due to concern expressed by the interested parties
regarding a possible recession, conservative financial structures included in
the proposals of the potential buyers, impact of the Hechinger Company
bankruptcy in 1999, limited prospects for growth in the core consumer products
business, and the fact that the Company's Heartland subsidiary had been operated
by the Company for only a limited period of time. Mr. Frawley reviewed the
background of each of the interested parties submitting proposals, noting
particularly the financial ability and historical record of the party in
consummating a transaction. Based on this review and the submitted proposals,
the financial advisors recommended that four (4) of the interested parties,
including Chartwell, be selected to continue in the process, which would include
facility tours, additional due diligence and providing comments to the draft
Merger Agreement previously distributed by Foley & Lardner. After a discussion,
and although no decision was reached by the Board at the meeting to sell the
Company, the Board authorized the financial advisors to continue the process
with the four selected parties.
Between December 6, 1999 and January 14, 2000, Chartwell and one other
party (the "Other Party") conducted additional due diligence, visited the
Company's key manufacturing facilities and reviewed the Merger Agreement. The
two other parties declined to move forward in the process. As requested by the
Company, Chartwell provided a proposed letter of intent on January 14, 2000.
Pursuant to this letter of intent, Chartwell proposed a transaction consisting
of a tender offer at $10.00 per share subject to satisfactory completion of its
due diligence and a number of other conditions. In order to structure the
transaction as a recapitalization for accounting purposes, Chartwell proposed
that approximately $4.2 million of GreenGrass equity be rolled-over into common
stock of the surviving corporation. Chartwell's proposal included committed
financing from GE as senior lender and GS for the subordinated note financing,
and a memorandum from its legal counsel, Akin, Gump, Strauss, Hauer & Feld, LLP
("Akin Gump"), regarding comments to the Merger Agreement. In order to proceed,
the Chartwell proposal also required that the Company deal exclusively with
Chartwell for ninety (90) days.
On January 17, 2000, the Other Party provided its proposed letter of intent
to the Company. Although unclear from the language of the letter of intent, the
Other Party's per share acquisition price was less than $10.00 based on required
adjustments on the closing date based on the level of working capital, total
indebtedness and costs, bonuses and expenses incurred in connection with the
sale of the Company. The Other Party structured the transaction as a cash
merger, with no provision for a tender offer. Senior financing was provided GE.
Subordinated note financing was also proposed. The Other Party required that the
Company deal exclusively with it for six (6) weeks.
On January 17 and 18, 2000, DLJ had numerous discussions with Chartwell and
the Other Party regarding their respective proposals. On January 20, 2000, the
Company's financial advisors reviewed with the Executive Committee of the Board
the proposed letters of intent and provided an update on the progress made with
these parties. DLJ indicated that the Other Party was unwilling to commence a
tender offer or commit to a fixed per share price without additional due
diligence. DLJ further indicated that the Other Party had completed
substantially less accounting, business and legal due diligence than had been
completed by Chartwell. Finally, DLJ expressed the view that the Other Party's
subordinated note financing letter was not a customary commitment letter.
Chartwell, in discussions with DLJ, had agreed to increase its per share
offer to $10.10. Chartwell had also completed substantial due diligence and had
obtained committed financing from GE and GS. However,
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<PAGE> 14
Chartwell conditioned its offer and its willingness to move forward on the
parties agreeing to a recapitalization structure whereby GreenGrass was required
to roll-over up to $4.2 million worth of equity. After Mr. Evans canvassed the
other Board members for their concurrence, the financial advisors were
instructed to continue negotiating with Chartwell and explore ways to increase
Chartwell's offer and remove the differential consideration occasioned by the
roll-over interest required by the recapitalization structure.
Accordingly, the Company began negotiating an agreement with Chartwell on
January 30, 2000, whereby the Company would agree to deal exclusively with
Chartwell and not solicit additional acquisition proposals for a specified
period of time (the "no-shop" agreement). On February 3 and 4, 2000, the Board
was updated by Messrs. Evans and Garmer regarding the negotiations on the "no
shop" agreement and certain other issues unresolved with Chartwell. On February
4, 2000, negotiations with Chartwell regarding the "no-shop" agreement and a
possible transaction were terminated because the parties could not agree on (1)
the length of the "no-shop" time period, (2) the conditions upon which the
"no-shop" period could be extended, (3) the ability of the Company to provide
non-public information to unsolicited third parties, and (4) the conditions upon
which Chartwell would be reimbursed its transaction expenses.
After termination of negotiations with Chartwell, DLJ sent a Confidential
Information Memorandum to two parties initially contacted by DLJ for possible
investment in, or purchase of, the Company. Both parties declined to move
forward with a transaction.
On February 16, 2000, Mr. Frawley of DLJ reinitiated discussions with
Chartwell and communicated the Board's position regarding the timing of the
transaction and the firmness of the $10.10 per share offer price. On February
18, 2000, after several discussions between DLJ, Foley & Lardner, Chartwell and
Akin Gump, the parties agreed to a "no-shop" agreement providing that: (1) the
Company would deal exclusively with Chartwell and not solicit third party
proposals until March 31, 2000, with no right to extend, (2) DLJ could
communicate with parties making unsolicited proposals, and (3) if the Company
terminated the "no shop" agreement, it would pay Chartwell's transaction
expenses (exclusive of commitment fees) not to exceed $2,500,000. On February
18, 2000, the Executive Committee of the Board met by telephone conference and
approved the "no-shop" agreement.
During the week of February 21, 2000, after a discussion between legal
counsel and Chartwell's accounting firm, the proposed structure of the
transaction was modified to require a joint-tender offer by the Company and a
newly-formed Chartwell entity in order to obtain recapitalization accounting
treatment for the transaction and GreenGrass' roll-over equity requirement was
reduced to $1.6 million.
On February 28, 2000, Akin Gump provided Foley & Lardner a draft Merger
Agreement, providing for (1) the roll-over equity by GreenGrass, (2) the ability
of Chartwell to force a merger if the tender offer was not consummated, (3)
broad conditions to closing, including a 90% tender of shares as a condition to
closing, (4) the right of Chartwell to unilaterally extend the tender offer, (5)
significant restrictions on the Company's ability to address acquisition
proposals after signing of the Merger Agreement; and (6) several events
requiring the payment of a termination fee and expenses upon termination. Akin
Gump also provided an initial draft of the Stock Agreement and a Stockholders'
and Registration Rights Agreement to GreenGrass and its legal counsel, Latham &
Watkins.
On March 16, 2000, after receipt by Akin Gump of a re-draft to the Merger
Agreement from Foley & Lardner, representatives of the parties and their
counsels met in New York City at the offices of DLJ to negotiate the open issues
on the agreements. At this meeting, Chartwell agreed to (1) eliminate the
differential consideration caused by the recapitalization structure and provide
all stockholders $10.10 per Share in cash, (2) the Minimum Condition, and (3)
the ability of the Company to provide non-public information to an unsolicited
third-party and negotiate for a period of time with such party without violating
the "no-shop" covenant in the Merger Agreement. The Company also agreed to grant
Chartwell an option to purchase Shares to satisfy the Short Form Requirement, if
needed, upon the consummation of the Offer pursuant to an option agreement. Also
at this meeting, subject to Board approval, a termination fee of $2,300,000 and
expense reimbursement not to exceed $2,500,000 payable to Chartwell by the
Company was agreed to by Chartwell and the Company for limited circumstances.
The Offer Price was confirmed at $10.10 per Share, and Chartwell indicated its
unwillingness to increase its offer. On March 20, 2000, Akin
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<PAGE> 15
Gump provided revised drafts of the Merger Agreement and Stock Agreement and
Foley & Lardner provided an initial draft of the Stock Option Agreement.
On March 22, 2000, the Board met by telephone conference to receive an
update regarding the negotiations. Mr. Frawley from DLJ reviewed the history of
the negotiations and the revised structure. Mr. Evans and Mr. Stern from Foley &
Lardner reviewed the open issues on the Merger Agreement. After a discussion,
and although no decision was made to sell the Company, the Board authorized
continued negotiations with Chartwell.
From March 22 to March 31, 2000, the Company and Chartwell and their
respective legal counsel negotiated the Merger Agreement and Stock Option
Agreement, and GreenGrass and Chartwell and their respective legal counsel
negotiated the terms of the Stock Agreement.
On March 26, 2000, Foley & Lardner distributed to the members of the Board
a written summary of the transaction and the transaction agreements, as well as
current drafts of the Merger Agreement, Stock Agreement, Stock Option Agreement
and Offer materials.
On March 29, 2000, the Board met by telephone conference. Legal counsel for
the Company reviewed the status of negotiations on the terms of the Merger
Agreement and other transaction agreements and the various resolved and
unresolved issues.
On March 31, 2000, the Board met at the offices of DLJ in New York City.
Legal counsel for the Company reviewed the status of the negotiations on the
terms of the Merger Agreement and other transaction agreements and the various
resolved and unresolved issues, including the status of the Financing
Agreements, and the amount of the termination fee and the maximum dollar amount
of expenses of Chartwell that would be payable by Company in the event that the
transactions contemplated by the Merger Agreement were not consummated for
specific reasons. DLJ reviewed in detail with the Board its preliminary analysis
of the proposed transaction. DLJ orally expressed its view that the price of
$10.10 per Share of cash being offered in the Offer and to be received in the
Merger was fair, from a financial point of view, to the Company's stockholders.
The Board instructed its legal counsel and financial advisors to continue
negotiations with respect to the terms of the Merger Agreement.
From March 31 to April 10, 2000, the Company and Chartwell and their legal
counsel negotiated the terms of the Merger Agreement and Stock Option Agreement
and Chartwell and GreenGrass and their respective legal counsel negotiated the
terms of the Stock Agreement.
On April 7, 2000, Foley & Lardner distributed to members of the Board
updated summaries of the transaction and the transaction agreements, current
drafts of the Merger Agreement and the other transaction agreements and proposed
resolutions regarding the transaction.
On April 10, 2000, the Board met at the offices of DLJ in New York City.
Mr. Evans and Company legal counsel reported that they had satisfactorily
concluded negotiation of the unresolved issues related to the Merger Agreement,
except one issue relating to the consequences of the Company exceeding its
estimated expenses in the proposed transaction. DLJ stated that it was prepared
to issue to the Board its written opinion to the effect that, as of the date of
the opinion and based on and subject to the assumptions, limitations and
qualifications set forth therein, the $10.10 per Share cash consideration to be
received by holders of Shares in the Offer and the Merger is fair to such
holders from a financial point of view. The Company's legal counsel provided a
detailed summary of the proposed terms of the Transaction, the Merger Agreement,
the Stock Agreement, the Financing Agreements and the Stock Option Agreement and
reviewed the proposed Board resolutions. After discussion and analysis, the
Board unanimously determined that the Offer and the Merger and the terms and
provisions of the Merger Agreement, the Stock Agreement and Stock Option
Agreement were advisable, fair to and in the best interests of the Company's
stockholders, and unanimously recommended that stockholders of the Company
accept the Offer and tender their shares pursuant to the Offer, subject only to
receipt by the Company of an amendment to its current credit facility.
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<PAGE> 16
On April 13, 2000, legal counsel to Chartwell and the Company resolved the
remaining open issue and the Company executed an amendment to its current credit
facility. That same day, the parties executed the Merger Agreement and the
ancillary agreements contemplated thereby, including the Financing Agreements.
On April 14, 2000, the Company issued a press release announcing the
execution of the Merger Agreement.
2. RECOMMENDATION OF THE BOARD OF DIRECTORS OF THE COMPANY; FAIRNESS OF THE
OFFER AND THE MERGER.
In evaluating the Offer and the Merger, the Board relied upon its knowledge
of the business, financial condition and prospects of the Company as well as the
advice of financial advisors and legal counsel. In reaching its decision to
recommend and approve the Offer and the Merger and authorize the Merger
Agreement and the transactions contemplated thereby, the Board considered a
number of factors, including the following:
(i) The historical market prices and recent trading activity of the
Shares, including the fact that the $10.10 per Share cash consideration to
be paid in the Offer and the Merger represents a substantial premium over
the recent trading price of the Shares.
(ii) The fact that the purchase of Shares by the Company and/or
Acquisition Company is fully financed by executed Financing Agreements with
GE and GS and the Capital Contribution.
(iii) The fact that the Merger Agreement and the transactions
contemplated thereby were the product of arms-length negotiations between
Acquisition Company, Parent and the Board (and their respective advisors).
(iv) The fact that the Minimum Condition requires a majority of the
Shares (including Shares issuable upon conversion of all Debentures other
than those held by GreenGrass) not owned by GreenGrass or Company
management to be tendered in the Offer.
(v) The structure of the transaction which is designed, among other
things, to result in the receipt by stockholders at the earliest
practicable time of the consideration to be paid in the Offer and the fact
that the per Share consideration to be paid to all parties in the Offer and
the Merger is the same.
(vi) The fact that the Company's ability to grow through strategic
acquisitions is limited by its current capital structure.
(vii) The fact that GreenGrass would be receiving the Offer Price with
respect to all of its Shares and therefore its interests are aligned with
the interests of the public stockholders of the Company.
(viii) The written opinion of DLJ dated April 13, 2000 to the effect
that, as of that date and based on and subject to the assumptions,
limitations and qualifications set forth in the opinion, the $10.10 per
Share cash consideration to be received in the Offer and the Merger by the
holders of Shares was fair to such holders from a financial point of view.
The full text of the DLJ Opinion is attached as Exhibit A to this Offer to
Purchase. The summary of the DLJ Opinion set forth in this Offer to
Purchase is qualified in its entirety by reference to the full text of the
DLJ Opinion. The Company's stockholders are urged to read the DLJ Opinion
carefully and in its entirety for the procedures followed, assumptions
made, other matters considered and limits of the review by DLJ in
connection with such opinion. The DLJ Opinion was prepared for the Board
and was directed only to the fairness to the holders of Shares from a
financial point of view, as of the date thereof, of the consideration to be
received by such holders in the Offer and the Merger. The DLJ Opinion does
not constitute a recommendation to any of the Company's stockholders as to
whether such stockholder should tender his Shares or how such stockholder
should vote on the Merger.
(ix) The conclusion that the Offer Price and Merger Consideration
represent the highest price that an acquisition party would be willing to
pay in acquiring the Shares. This determination was the result of the
thorough auction process conducted by the Board and the Board's arms-length
negotiations with acquisition parties in an attempt to obtain the highest
possible price.
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(x) The terms of the Merger Agreement, including (a) the provision
providing that the Board may, in the exercise of its fiduciary duties,
furnish or provide access to information concerning the Company to, and
engage in discussions and negotiate with, third parties who make a bona
fide unsolicited request or inquiry that the Board believes may lead to an
acquisition proposal that would pay more than the Offer Price and (b) the
ability of the Board, in the exercise of its fiduciary duties, to terminate
the Merger Agreement in order to permit the Company to enter into an
alternative transaction with a third party.
(xi) The relatively few regulatory approvals or consents required to
consummate the Offer and the Merger, and the favorable prospects for
receiving such approvals and consents.
(xii) The availability of rights of appraisal under Delaware law with
respect to the Merger.
(xiii) The financial projections prepared by the Company's management.
See "THE TENDER OFFER -- Certain Information Concerning the
Company -- Certain Projections."
(xiv) The Company's business, financial condition, results of
operations and prospects and the nature of the industries in which the
Company operates.
(xv) The relatively thin trading market and the lack of liquidity of
the Common Stock.
(xvi) The possibility that if a merger transaction with Acquisition
Company is not consummated, and the Company remained a publicly-owned
corporation, the price that might be received by the holders of the Shares
in the open market or in a future transaction might be less than $10.10 per
Share.
(xvii) The fact that, under the terms of DLJ's engagement letter, a
portion of DLJ's fee was structured as an incentive fee, providing DLJ an
additional incentive to negotiate, on behalf of the Company, the highest
possible price. See "SPECIAL FACTORS -- Opinion of the Company's Financial
Advisor."
(xviii) The fact that all of the directors approved the Offer and the
Merger.
In addition to the factors listed above, the Board considered the fact that
the consummation of the Offer and the Merger would eliminate the possibility of
the Company's stockholders (other than Acquisition Company and Company
management) from participating in any future growth in the value of the Company,
and believed that this loss of opportunity was appropriately reflected in the
price of $10.10 per Share to be paid in the Offer and Merger.
The Board also considered the potential risks of the Offer and the Merger,
including (1) the fact that the fees and expenses required to be paid by the
Company by the terms of the Merger Agreement upon certain terminations of the
Merger Agreement would make it more costly for another potential bidder to
propose an acquisition of the Company on a basis that would be superior to that
contemplated by the Merger Agreement, and (2) the possibility that the
conditions set forth in the Financing Agreements to the obligations of the
financing sources to provide the funding necessary to consummate the Offer and
the Merger may not be fulfilled or waived.
In light of the number and variety of factors that the Board considered in
connection with its evaluation of the Offer and the Merger, the Board did not
find it practicable to quantify or otherwise assign relative weights to the
foregoing factors, and, accordingly, the Board did not do so. In addition,
individual members of the Board may have given different weights to different
factors. The Board viewed their positions and recommendations as being based on
the totality of the information presented to and considered by it.
THE BOARD (1) HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, (2) HAS
DETERMINED THAT THE OFFER AND THE MERGER ARE ADVISABLE, FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY'S STOCKHOLDERS AND (3) RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT THERETO.
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<PAGE> 18
3. OPINION OF THE COMPANY'S FINANCIAL ADVISOR.
The Company asked DLJ, in its role as financial advisor to the Company, to
render an opinion to the Board as to the fairness, from a financial point of
view, to the holders of Shares of the consideration to be received by such
holders pursuant to the Offer and the Merger.
On April 10, 2000, DLJ delivered to the Board its oral opinion,
subsequently confirmed in writing on April 13, 2000 (the "DLJ Opinion"), to the
effect that, as of such date, based on and subject to the assumptions,
limitations and qualifications set forth in the DLJ Opinion, the consideration
to be received by the holders of Shares pursuant to the Offer and the Merger was
fair to such holders from a financial point of view.
THE FULL TEXT OF THE DLJ OPINION IS ATTACHED AS EXHIBIT A TO THIS OFFER TO
PURCHASE. THE SUMMARY OF THE DLJ OPINION SET FORTH IN THIS OFFER TO PURCHASE IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE DLJ OPINION. THE
COMPANY'S STOCKHOLDERS ARE URGED TO READ THE DLJ OPINION CAREFULLY AND IN ITS
ENTIRETY FOR THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, OTHER MATTERS CONSIDERED
AND LIMITS OF THE REVIEW BY DLJ IN CONNECTION WITH SUCH OPINION.
The DLJ Opinion was prepared for the Board and was directed only to the
fairness to the holders of the Common Stock from a financial point of view, as
of the date thereof, of the consideration to be received by such holders. The
DLJ Opinion did not address the relative merits of the Offer or the Merger or
any other business strategies considered by the Board nor did it express any
opinion as to the Board's decision to proceed with the Offer and the Merger. The
DLJ Opinion does not constitute a recommendation to any of the Company's
stockholders as to whether such stockholder should tender his shares or how such
stockholder should vote on the Merger.
The Company selected DLJ as its financial advisor because DLJ is an
internationally recognized investment banking firm that has substantial
experience providing strategic advisory services. In addition, DLJ, as part of
its investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes. DLJ
was not retained as an advisor or agent to the stockholders of the Company or
any person other than the Company.
In arriving at its opinion, DLJ:
- reviewed the Merger Agreement and the annex thereto containing the
conditions to the Offer;
- reviewed financial and other information that was publicly available or
furnished to it by the Company, including information provided during
discussions with the Company's management. Included in the information
provided during discussions with the Company's management were certain
financial projections of the Company for the period beginning January 1,
2000 and ending December 31, 2002 prepared by the management of the
Company, which are the same projections as those included in the
Confidential Offering Memorandum supplied to potential buyers in the
auction process (the "Management Projections");
- compared certain financial and securities data of the Company with
various other companies whose securities are traded in public markets;
- reviewed the historical stock prices and trading volumes of the Company
common stock;
- reviewed prices paid in certain other business combinations; and
- conducted other financial studies, analyses and investigations as it
deemed appropriate for purposes of rendering its opinion.
In rendering its opinion, DLJ relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
DLJ from public sources, that was provided to DLJ by the Company or their
representatives, or that was otherwise reviewed by DLJ, and DLJ assumed that the
Company was not aware of any information prepared by it or its advisors that
might be material to DLJ's
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opinion that was not made available to DLJ. With respect to the financial
projections supplied to DLJ, DLJ relied on representations that they were
reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of the Company as to the future
operating and financial performance of the Company. DLJ did not assume any
responsibility for making any independent evaluation of any assets or
liabilities or for making any independent verification of any of the information
reviewed by DLJ. The consideration to be received by the holders of Common Stock
was determined in arm's length negotiations between the Company and Chartwell,
in which DLJ advised the Company.
The DLJ Opinion is necessarily based on economic, market, financial and
other conditions as they existed on, and on the information made available to
DLJ as of, the date of the DLJ Opinion. Although subsequent developments may
affect its opinion, DLJ does not have any obligation to update, revise or
reaffirm its opinion.
Summary of Financial Analyses Performed by DLJ. The following is a summary
of the financial analyses presented by DLJ to the Board in connection with the
preparation of the DLJ Opinion. The order of analyses, and results thereof,
described do not represent relative importance or weight given to these
analyses, or results thereof, by DLJ. No company or transaction used in the
analyses described below is directly comparable to the Company or the Offer or
the Merger. In addition, mathematical analysis such as determining the average
is not in itself a meaningful method of using selected company or transaction
data. The analyses performed by DLJ are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by these analyses.
Comparable Publicly Traded Company Analysis. DLJ analyzed the market values
and trading multiples of seven publicly traded recreation and leisure products
companies that DLJ believed were reasonably comparable to the Company. These
comparable companies consisted of:
- Brunswick Corporation;
- K2 Inc.;
- Cannondale Corporation;
- First Years Inc.;
- Escalade Incorporated;
- Koala Corporation; and
- Safety First, Inc.
DLJ examined the enterprise and equity values of each of the comparable
companies as of April 13, 2000 as derived from such companies' public filings
and published research analysts' reports prepared by investment banking firms
including DLJ. DLJ defined enterprise value as the value of fully-diluted common
equity plus long-term debt and the liquidation value of outstanding preferred
stock, if any, minus cash, the proceeds, if any, from the exercise of
outstanding options and warrants and the value of certain other non-core assets,
including minority interests in other entities. In examining these comparable
companies, DLJ analyzed, among other things, the enterprise value of the
companies as a multiple of each company's respective LTM sales, LTM EBITDA, and
LTM EBIT. EBITDA is defined as earnings before interest expense, income taxes,
depreciation and amortization; EBIT is defined as earnings before interest
expense and income taxes. LTM means the last twelve-month period for which
financial data for the company at issue has been reported. DLJ's analysis of the
comparable companies yielded the following:
- enterprise value as a multiple of LTM sales ranged from 0.4x to 3.0x for
the comparable companies with an average of 0.6x, excluding highs and
lows;
- enterprise value as a multiple of LTM EBITDA ranged from 3.8x to 10.9x
for the comparable companies with an average of 5.8x, excluding highs and
lows; and
- enterprise value as a multiple of LTM EBIT ranged from 4.3x to 20.5x for
the comparable companies with an average of 7.1x, excluding highs and
lows.
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DLJ noted that the enterprise value contemplated in the transactions
resulted in the following multiples for the Company: 1.0x LTM sales, 6.8x LTM
EBITDA and 8.7x LTM EBIT.
Comparable Transaction Analysis. DLJ reviewed five selected transactions or
proposed transactions involving companies that DLJ believed to be reasonably
comparable to the Company. These transactions were divided between selected
transactions, which DLJ refers to as "selected transactions," and transactions
involving Company or Company affiliates, which DLJ refers to as "PlayCore
Transactions." Collectively, the selected transactions and PlayCore Transactions
are referred to as "Comparable Transactions."
Selected transactions:
- True Temper Sports, Inc./Cornerstone Equity Investors; and
- ERO Inc./Hedstrom Corporation.
PlayCore transactions:
- GameTime, Inc./Swing N Slide Corp.;
- Heartland Industries, Inc. (DE)/PlayCore, Inc.; and
- Swing N Slide Corp./GreenGrass Holdings.
In examining these transactions, DLJ compared, among other things, the
enterprise value of the acquired company implied by each of these transactions
as a multiple of LTM revenue, LTM EBITDA, and LTM EBIT as obtained by DLJ from
various public and industry sources, including the Company. DLJ's analysis of
the Comparable Transactions yielded the following:
- enterprise value as a multiple of LTM revenue ranged from 0.2x to 2.3x
with an average of 1.1x.
- enterprise value as a multiple of LTM EBITDA ranged from 3.5x to 9.1x
with an average of 6.2x
- enterprise value as a multiple of LTM EBIT ranged from 4.2x to 14.8x with
an average of 8.8x.
DLJ's analysis of enterprise value as a multiple of LTM revenue of the
PlayCore Transactions yielded an average multiple of 0.6x. Based on LTM EBITDA,
the PlayCore Transactions yielded an average multiple of 4.8x. and based on LTM
EBIT of the analysis yielded an average multiple of 7.9x.
DLJ noted that the enterprise value contemplated in the transaction
resulted in the following multiples for the Company: 1.0x LTM Revenues, 6.8x LTM
EBITDA and 8.7x LTM EBIT.
Leveraged Buyout Analysis. DLJ also performed a leveraged buyout analysis
of the Company. DLJ performed an analysis of the financial sponsors' return on
fully diluted equity, assuming incentive options of 10% of fully diluted equity.
DLJ used the Management Projections for the years 2000 through 2002 and assumed
a 5% revenue growth rate thereafter, which is consistent with the Company's
historical growth rate for the period 1996 through 1999 (treating all
acquisitions as if they occurred on January 1, 1996), with stable margins. DLJ
noted that the Management Projections did not account for the potential impact
of a recession on the business of the Company, the lack of historical growth
rate when compared to management forecasts and the variability of actual Company
performance versus its plan in 1999. Assuming terminal values at the end of the
fifth year equal to a range of 5.5x to 6.5x EBITDA, this methodology indicated
that a leveraged buyout transaction could earn the financial sponsors a return
of 21.6% to 27.0% on their investment. DLJ also performed an analysis of the
Company's coverage ratios using 1999 financial information on a pro forma basis.
This analysis resulted in ratios of EBITDA to cash interest expense equal to
1.87x and long-term debt less cash to EBITDA equal to 4.55x.
Discounted Cash Flow Analysis. DLJ performed a discounted cash flow
analysis of the projected cash flows of the Company for the years 2000 through
2002, using the Management Projections for the years 2000 through 2002 and
assuming a 5% revenue growth rate thereafter, which is consistent with the
Company's historical growth rate for the period 1996 through 1999 (treating all
acquisitions as if they occurred on
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<PAGE> 21
January 1, 1996), with stable margins. DLJ noted that the Management Projections
did not account for the potential impact of a recession on the business of the
Company, the lack of historical growth rate when compared to management
forecasts and the variability of actual Company performance versus its plan in
1999. The discounted cash flows for the Company were estimated using discount
rates ranging from 13% to 17%, based on estimates of and judgments related to
the weighted average costs of capital of the Company, and terminal multiples of
EBITDA for the Company ranging from 5.5x to 6.5x. Based on this analysis, DLJ
estimated an enterprise value and an equity value per Share ranging from $174.2
million to $233.5 million, and $8.96 to $14.20, respectively.
The above summary describes, in summary form, the material elements of the
presentation made by DLJ to the Board on April 10, 2000. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of these methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Each of the analyses conducted by DLJ was
carried out in order to provide a different perspective on the Offer and the
Merger and to add to the total mix of information available. DLJ did not form a
conclusion as to whether any individual analysis, considered in isolation,
supported or failed to support an opinion as to fairness from a financial point
of view. Rather, in reaching its conclusions DLJ considered the results of the
analyses in light of each other and ultimately reached its opinion based on the
results of all analyses undertaken in connection with its opinion taken together
as a whole. Accordingly, notwithstanding the separate factors summarized above,
DLJ has indicated to the Company that it believes that its analyses must be
considered as a whole and that selecting portions of its analyses and the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the evaluation process underlying its opinion. The
analyses performed by DLJ are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by these analyses. A copy of the presentation made by DLJ to the Board on April
10, 2000 is attached as Exhibit c(2) to the Schedule TO.
Engagement Letter. Under the terms of an engagement agreement dated August
19, 1999, the Company agreed to pay DLJ a fee of approximately $1.8 million, a
substantial portion of which is contingent upon consummation of the Offer and a
portion of which was structured as an incentive fee. In addition, the Company
agreed to reimburse DLJ, upon request by DLJ from time to time, for all
out-of-pocket expenses, including the reasonable fees and expenses of counsel,
incurred by DLJ in connection with its engagement, and to indemnify DLJ and
related persons against certain liabilities and expenses arising out of the
tender offer and the subsequent merger, if any, or the transactions in
connection with the tender offer and the subsequent merger, if any, including
liabilities under United States federal securities laws. DLJ and the Company's
management negotiated the terms of the fee arrangement.
Other Relationships. In the ordinary course of business, DLJ and its
affiliates may own or actively trade the securities of the Company for their own
accounts and for the accounts of their customers and, accordingly, may at any
time hold a long or short position in the Company securities. Certain entities
affiliated with DLJ own limited partnership interests in one of the funds
providing a portion of the $72.5 million of equity financing to Holdings, the
result of which is that such entities will beneficially own, indirectly, in the
aggregate, less than 1% of the common equity of Holdings. DLJ also has been
engaged by an affiliate of Chartwell to provide investment banking services,
including exploring strategic alternatives such as the possible sale or
recapitalization of such affiliate.
4. PURPOSE AND STRUCTURE OF THE TRANSACTION.
The purpose of the Transaction is to enable Parent to acquire the entire
equity interest in the Company in a transaction in which the holders of Shares
(other than Acquisition Company) are entitled to have their equity interest in
the Company purchased or extinguished in exchange for cash in the amount of
$10.10 per Share. The Offer, which is the first step in the Transaction, is
structured as a joint tender offer by Holdings, Parent, Acquisition Company and
the Company to purchase, at the Offer Price, all Shares validly tendered and not
withdrawn pursuant to the Offer. Pursuant to the Merger Agreement, Acquisition
Company has agreed to pay for and purchase all Shares tendered pursuant to the
Offer, provided that the Short Form Requirement is met. If the Short Form
Requirement is not met, but all conditions to the Offer have been
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<PAGE> 22
waived or met, then Acquisition Company will purchase 425,439 Shares and the
Company will purchase the balance of the Shares tendered pursuant to the Offer.
The second step in the Transaction is for Acquisition Company or the Company to
purchase Shares and other securities of the Company exercisable or convertible
into Shares pursuant to the PlayCore Purchase Agreements. All Shares and other
securities of the Company purchased pursuant to the PlayCore Purchase Agreements
will be at a per Share price equal to the Offer Price (determined on an as
exercised or converted basis with respect to such Company securities, less any
conversion or exercise price thereof). The third step in the Transaction, the
Merger, will be consummated as soon as practicable following the consummation of
the Offer and the transactions contemplated by the PlayCore Purchase Agreements
and is structured to merge Acquisition Company with and into the Company so that
the Company is the Surviving Corporation. Pursuant to the Merger, each then
outstanding Share (other than Shares held by Acquisition Company, held in the
treasury of the Company or held by stockholders who perfect any applicable
appraisal rights under the DGCL) will be converted into the right to receive the
Merger Consideration, which is equal to the Offer Price. Pursuant to the Merger,
the Shares purchased by the Company pursuant to the Offer will be cancelled with
no consideration paid therefor, and each Share held by Parent or Acquisition
Company will be converted into Shares of the Surviving Corporation. Upon
consummation of the Merger, the Surviving Corporation will be a wholly-owned
subsidiary of Parent.
As described above, the Board has approved the Merger and the Merger
Agreement and the transactions contemplated thereby in accordance with the DGCL.
Under the DGCL, the approval of the Board and, if the Short Form Requirement is
not met, the affirmative vote of the holders of a majority of the outstanding
Shares, is required to approve and adopt the Merger Agreement and the
transactions contemplated thereby, including the Merger. If the Short Form
Requirement is met, Acquisition Company will be able to effect the Merger
pursuant to a Short-Form Merger under Section 253 of the DGCL without any action
by any stockholder of the Company. In such event, Acquisition Company intends to
effect a Short-Form Merger as promptly as practicable following the purchase of
Shares in the Offer.
In the event that the Short Form Requirement is not met, the Company has
agreed to convene a meeting of its stockholders as soon as practicable following
the consummation of the Offer for the purpose of adopting the Merger Agreement
and has agreed to include in any proxy or information statement required for
such meeting a recommendation of the Board that the Company's stockholders vote
in favor of the adoption of the Merger Agreement. IF (1) THE MINIMUM CONDITION
IS SATISFIED, (2) THE SHARES ARE PURCHASED IN THE OFFER BY ACQUISITION COMPANY
AND, IF NECESSARY, THE COMPANY AND (3) ACQUISITION COMPANY ACQUIRES GREENGRASS'
SECURITIES PURSUANT TO THE STOCK AGREEMENT, A FAVORABLE VOTE TO APPROVE THE
MERGER WILL BE ASSURED SINCE ACQUISITION COMPANY WILL OWN MORE THAN A MAJORITY
OF THE SHARES ENTITLED TO VOTE THEREON.
5. PLANS FOR THE COMPANY AFTER THE TRANSACTION.
Pursuant to the terms of the Merger Agreement, the Company, Acquisition
Company and Parent intend to effect the Merger in accordance with the Merger
Agreement as soon as practicable following completion of the Offer. Following
the Effective Time, the Board will be reconstituted to consist of Todd R.
Berman, Michael S. Shein, Jeffrey R. Larsen, Frederic L. Contino and Michael J.
Rolland and the officers of the Surviving Corporation will be the officers of
the Company immediately prior to the Effective Time. See "SPECIAL FACTORS -- The
Merger Agreement and Related Documents."
It is currently expected that the business and operations of the Surviving
Corporation will be continued substantially as they are currently being
conducted by the Company. Except as otherwise indicated in this Offer or as
contemplated by the Merger Agreement, none of the Offerors has any present plans
or proposals involving the Company that relate to or would result in an
extraordinary corporate transaction such as a merger, reorganization or
liquidation, or a sale or transfer of a material amount of the Company's assets,
or any material change in the Company's present dividend policy, indebtedness or
capitalization, or any other material change in the Company's corporate
structure or business. However, after the Merger, the Surviving Corporation's
management and board of directors will review proposals or may propose the
acquisition or disposition of assets or other changes in the Surviving
Corporation's business, corporate structure, capitaliza-
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<PAGE> 23
tion, businesses, management, operations or dividend policy that they consider
to be in the best interests of the Surviving Corporation and its stockholders.
Upon consummation of the Merger, the Company will be owned solely by
Parent, and Parent will be entitled to all benefits resulting from its sole
ownership of the Company, including all income generated by the Company's
operations and any future increase in the Company's value. Similarly, Parent
will also bear the risk of losses generated by the Company's operations and any
future decrease in the value of the Company after the Merger. Subsequent to the
Merger, no other stockholder will have the opportunity to participate in the
earnings and growth of the Company, and no other stockholder will have a right
to vote on corporate matters. Similarly, such stockholders will not face the
risk of losses generated by the Company's operations or any decrease in the
value of the Company after the consummation of the Transaction.
The Shares are currently traded on AMEX. Following the consummation of the
Transaction, the Shares will no longer be quoted on AMEX. In addition, the
registration of the Shares under the Exchange Act of 1934, as amended (the
"Exchange Act") will be terminated. Accordingly, following the consummation of
the Transaction, there will be no public market for the Shares. Moreover, the
Company will no longer be required to file periodic reports with the Securities
and Exchange Commission (the "Commission") under the Exchange Act, and will no
longer be required to comply with the proxy rules of Regulation 14A under
Section 14 promulgated under the Exchange Act. In addition, the Company's
officers, directors and 10% stockholders will be relieved of the reporting
requirements and restrictions on "short-swing" trading contained in Section 16
of the Exchange Act with respect to the Shares. See "THE TENDER OFFER -- Effect
of the Offer on the Market for the Common Stock; Exchange Act Registration."
It is expected that, if the Transaction is not consummated, then the
Company's current management, under the general direction of the Board, will
continue to manage the Company as an ongoing business.
6. RIGHTS OF STOCKHOLDERS IN THE OFFER AND THE MERGER.
No dissenters' or appraisal rights are available to stockholders in
connection with the Offer. If the Merger is consummated, however, record
stockholders of the Company who have not validly tendered their Shares or voted
in favor of the Merger will have certain rights under the DGCL to an appraisal
of, and to receive payment in cash of the fair value of, their Shares (the
"Appraisal Shares"). Stockholders who perfect appraisal rights by complying with
the procedures set forth in Section 262 of the DGCL ("Section 262"), a copy of
which is attached as Exhibit B to this Offer to Purchase, will have the fair
value of their Appraisal Shares (exclusive of any element of value arising from
the accomplishment or expectation of the Merger) determined by the Delaware
Court of Chancery and will be entitled to receive from the Surviving Corporation
a cash payment equal to such fair value. Any such judicial determination of the
fair value of Shares could be based upon any valuation method or combination of
methods the court deems appropriate. The value so determined could be more or
less than the Offer Price and Merger Consideration. In addition, stockholders
who invoke appraisal rights may be entitled to receive payment of a fair rate of
interest from the Effective Time on the amount determined to be the fair value
of the Appraisal Shares. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS
REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL.
Under Section 262, if the Merger is submitted to a vote of the Company's
stockholders at a meeting thereof, then the Company must, not less than 20 days
prior to the meeting held for the purpose of obtaining stockholder approval of
the Merger, notify each of the Company's stockholders entitled to appraisal
rights that such rights are available. If the Merger is accomplished by a
Short-Form Merger, the Company, either before the Effective Time or within ten
days thereafter, must notify each of the stockholders entitled to appraisal
rights of the Effective Time and that appraisal rights are available. In either
case, the notice must include a copy of Section 262.
If the Merger is not a Short-Form Merger, a holder of Appraisal Shares
wishing to exercise appraisal rights will be required to deliver to the Company
before the taking of the vote on the Merger or within 20 days after the date of
mailing the notice described in the preceding paragraph, a written demand for
appraisal of such holder's Appraisal Shares. A holder of Appraisal Shares
wishing to exercise such holder's appraisal rights
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<PAGE> 24
must be the record holder of such Appraisal Shares on the date the written
demand for appraisal is made and must continue to hold of record such Appraisal
Shares through the Effective Time. Accordingly, a holder of Appraisal Shares who
is the record holder of Appraisal Shares on the date the written demand for
appraisal is made, but who thereafter transfers such Appraisal Shares prior to
the Effective Time, will lose any right to appraisal in respect of such
Appraisal Shares.
If the Merger is a Short-Form Merger, a holder of Appraisal Shares wishing
to exercise appraisal rights will be required to deliver to the Company, within
20 days after the date of mailing the notice by the Company described above, a
written demand for appraisal of such holder's Appraisal Shares.
A demand for appraisal must be executed by or on behalf of the stockholder
of record and must reasonably inform the Company of the identity of the
stockholder of record and that such stockholder intends thereby to demand an
appraisal of such Appraisal Shares.
A person having a beneficial interest in Appraisal Shares that are held of
record in the name of another person, such as a broker, fiduciary, depository or
other nominee, will have to act to cause the record holder to execute the demand
for appraisal and to follow the requisite steps properly and in a timely manner
to perfect appraisal rights. If Appraisal Shares are owned of record by more
than one person, as in joint tenancy or tenancy in common, the demand will have
to be executed by or for all joint owners. An authorized agent, including an
agent for two or more joint owners, may execute a demand for appraisal for a
stockholder of record, provided that the agent identifies the record owner and
expressly discloses, when the demand is made, that the agent is acting as agent
for the record owner. If a stockholder owns Appraisal Shares through a broker
who in turn holds the Appraisal Shares through a central securities depository
nominee such as CEDE & Co., a demand for appraisal of such Appraisal Shares will
have to be made by or on behalf of the depository nominee and must identify the
depository nominee as Appraisal Shares' record holder.
A record holder, such as a broker, fiduciary, depository or other nominee,
who holds Appraisal Shares as a nominee for others, will be able to exercise
appraisal rights with respect to the Appraisal Shares held for all or less than
all of the beneficial owners of those Appraisal Shares as to which such person
is the record owner. In such case, the written demand must set forth the number
of Shares covered by the demand. Where the number of Shares is not expressly
stated, the demand will be presumed to cover all Appraisal Shares standing in
the name of such record owner.
Within 120 days after the Effective Time, but not thereafter, the Company
or any stockholder who has complied with the statutory requirements summarized
above and who is otherwise entitled to appraisal rights may file a petition in
the Delaware Court of Chancery demanding a determination of the fair value of
such holders' Appraisal Shares. There is no present intention on the part of
Acquisition Company or, to the Offerors' knowledge, GreenGrass, to file an
appraisal petition on behalf of the Company, and stockholders who seek to
exercise appraisal rights should not assume that the Company will file such a
petition or that the Company will initiate any negotiations with respect to the
fair value of Appraisal Shares. Accordingly, it will be the obligation of the
stockholders seeking appraisal rights to initiate all necessary action to
perfect any appraisal rights within the time prescribed in Section 262. Within
120 days after the Effective Time, any stockholder who has theretofore complied
with the provisions of Section 262 will be entitled, upon written request, to
receive from the Company a statement setting forth the aggregate number of
Shares not voting in favor of the Merger (if applicable) and with respect to
which demands for appraisal were received as well as the number of holders of
such Shares. Such statement must be mailed within ten days after the written
request therefor has been received by the Company.
If a petition for appraisal is timely filed, after a hearing on such
petition the Delaware Court of Chancery will determine the stockholders entitled
to appraisal rights and will appraise the fair value of their Appraisal Shares,
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value from the Effective Time.
The costs of the proceeding may be determined by the Delaware Court of
Chancery and taxed upon the parties as the Delaware Court of Chancery deems
equitable under the circumstances. However, costs do not
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<PAGE> 25
include attorneys' fees or expert witness fees. Upon application of a
stockholder, the Delaware Court of Chancery may also order all or a portion of
the expenses incurred by any stockholder, including reasonable attorneys' fees
and the fees and expenses of experts, to be charged pro rata against the value
of all of the Appraisal Shares entitled to appraisal.
At any time within 60 days after the Effective Time, any stockholder will
have the right to withdraw its demand for appraisal and to accept the Merger
Consideration. After this period, the stockholder may withdraw such holder's
demand for appraisal only with the consent of Acquisition Company. If any
stockholder who properly demands appraisal of such holder's Appraisal Shares
under Section 262 fails to perfect, or effectively withdraws or loses, such
holder's right to appraisal as provided in the DGCL, the Appraisal Shares of
such stockholder will be converted into the right to receive the Merger
Consideration. A stockholder will fail to perfect, or effectively lose or
withdraw, such stockholder's right to appraisal if, among other things, no
petition for appraisal is filed within 120 days after the Effective Time or if
the stockholder delivers to the Company a written withdrawal of such
stockholder's demand for appraisal.
Several decisions by Delaware courts have held that in certain
circumstances a controlling stockholder of a corporation involved in a merger
has a fiduciary duty to other stockholders that requires that the merger be fair
to other stockholders. In determining whether a merger is fair to minority
stockholders, Delaware courts have considered, among other things, the type and
amount of the consideration to be received by the stockholders and whether there
was fair dealing among the parties. The Delaware Supreme Court stated in two
cases, Weinberger v. UOP, Inc. and Rabkin v. Philip A. Hunt Chemical Corp., that
the remedy ordinarily available to minority stockholders in a cash-out merger is
the right to appraisal described above. However, a damages remedy or injunctive
relief may be available if a merger is found to be the product of procedural
unfairness, including fraud, misrepresentation or other misconduct.
THE FOREGOING SUMMARY OF THE RIGHTS OF STOCKHOLDERS WISHING TO PERFECT
THEIR APPRAISAL RIGHTS UNDER THE DGCL DOES NOT PURPORT TO BE A COMPLETE
STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING TO EXERCISE
ANY SUCH RIGHTS. THE PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS REQUIRE
STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE DGCL. A COPY OF SECTION 262
OF THE DGCL IS ATTACHED HERETO AS EXHIBIT B AND THE FOREGOING SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO EXHIBIT B.
7. THE MERGER AGREEMENT AND RELATED DOCUMENTS.
THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF THE MERGER AGREEMENT
AND RELATED DOCUMENTS. THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE MERGER AGREEMENT AND SUCH RELATED DOCUMENTS, ALL OF WHICH ARE INCORPORATED
HEREIN BY REFERENCE AND HAVE BEEN INCLUDED AS EXHIBITS TO THE SCHEDULE TO. THE
MERGER AGREEMENT AND SUCH RELATED DOCUMENTS MAY BE INSPECTED AT, AND COPIES MAY
BE OBTAINED FROM, THE SAME PLACES AND IN THE MANNER SET FORTH IN "THE TENDER
OFFER -- CERTAIN INFORMATION CONCERNING THE COMPANY."
The Merger Agreement.
The Offer. The Merger Agreement requires the Offerors to commence the Offer
on or prior to the fifth business day following public announcement of the
Offer. The obligation of the Offerors to commence the Offer and to accept for
payment, and to pay for, any Shares of Common Stock tendered pursuant to the
Offer, is subject to the satisfaction of certain conditions that are set forth
below the caption "THE TENDER OFFER -- Conditions of the Offer" (such
conditions, the "Offer Conditions"). Parent may waive certain of the Offer
Conditions without the prior consent of the Company or Acquisition Company. The
Company and Acquisition Company have agreed that, without the prior written
consent of Parent, no changes may be made that (i) increase or decrease the
Offer Price, (ii) decrease the number of Shares subject to the Offer,
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<PAGE> 26
(iii) amend or waive the Offer Conditions, (iv) impose any additional conditions
or amend any other term of the Offer or (v) extend the expiration date of the
Offer. Under the terms of the Merger Agreement, the Company and Acquisition
Company shall, upon request of Parent, extend the Offer if, at the then
scheduled expiration date of the Offer, any of the Offer Conditions have not
been satisfied or waived until the earlier of (i) the later of (A) May 19, 2000
and (B) such later date which is ten business days after the Company terminates
certain third party discussions or (ii) such time as all such conditions shall
have been satisfied or waived; provided that the Company and Acquisition Company
believe, in their reasonable judgment, that such Offer Conditions can be
satisfied or waived prior to May 19, 2000; and provided further that the Company
is permitted, but not required, to extend the Offer if Parent or Acquisition
Company has materially breached the Merger Agreement. In addition, each of the
Company and Acquisition Company has the right by mutual agreement to extend the
Offer until May 19, 2000 (or such earlier date as the Minimum Condition is
satisfied) if all Offer Conditions other than the Minimum Condition and receipt
of the proceeds from the Financings and the Capital Contribution have been
satisfied or waived as of the original expiration date of the Offer. If at the
scheduled expiration date of the Offer, or at the end of any extension thereof,
all of the Offer Conditions have been satisfied, the Purchasers are required to
immediately accept and promptly pay for all Shares tendered (assuming the
Minimum Condition is met). See "THE TENDER OFFER -- Terms of the Offer."
The Merger Agreement also provides that, subject to the terms and
conditions provided therein, the Company and Acquisition Company will each use
their reasonable best efforts to take, or cause to be taken, all actions and to
do, or cause to be done, and to assist and cooperate with the other parties to
the Merger Agreement in doing, all necessary, proper or advisable things under
applicable laws and regulations to consummate the Offer.
Board Representation. The Merger Agreement provides that, promptly upon the
purchase of Shares pursuant to the Offer and from time to time thereafter until
the Effective Time, Parent shall be entitled to designate such number of
directors equal to the greater of (a) a majority of the Board plus one and (b)
the product of (i) the number of directors on the Board and (ii) the percentage
that the number of Shares owned by Acquisition Company bears to the number of
Shares outstanding less the number of Independent Directors (as defined below).
The Company has agreed, upon request by Parent, to promptly increase the size of
the Board and/or use its reasonable efforts to secure the resignations, or the
removal, of such number of directors as is necessary to enable Acquisition
Company's designees to be elected to the Board and to cause Acquisition
Company's designees to be so elected. The Company's obligations to appoint
designees to the Board are subject to Section 14(f) of the Exchange Act and the
rules promulgated thereunder (Schedule III hereto contains the information
required under Rule 14f-1 promulgated under the Exchange Act). In addition, the
Merger Agreement requires the Company to have at all times prior to the
Effective Time two members on the Board who were members of the Board on the
date of the Merger Agreement and who are not employees of the Company
("Independent Directors"). Following the election or appointment of the
designees of Parent to the Board, but prior to the Effective Time, any permitted
termination of the Merger Agreement by the Company, any amendment of the Merger
Agreement or the Company's certificate of incorporation or by-laws requiring
action by the Board, any extension of time for the performance of any of the
obligations or other acts of Parent, and any waiver of compliance with any of
the agreements or conditions contained in the Merger Agreement must by
authorized by a majority of the Independent Directors as well as a majority of
all Board members.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions set forth in the Merger Agreement and the applicable provisions of
the DGCL, Acquisition Company will be merged with and into the Company at the
Effective Time and the separate existence of Acquisition Company will cease. All
of the properties, rights, privileges, powers and franchises of the Company and
Acquisition Company will vest in the Company, and all debts, liabilities and
duties of the Company and Acquisition Company will become the debts, liabilities
and duties of the Company. Subject to the provisions of the Merger Agreement and
applicable provisions of the DGCL, the closing of the Merger will occur promptly
following the satisfaction or, to the extent permitted under the Merger
Agreement, waiver of the conditions to the Merger set forth in the Merger
Agreement.
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<PAGE> 27
Effect on Capital Stock. At the Effective Time: (a) each Share that is
owned by the Company as treasury stock shall be automatically cancelled and
retired and no consideration shall be delivered in exchange therefor; (b) each
Share, other than Shares held by Parent, Acquisition Company or by stockholders
who perfect any applicable appraisal rights under the DGCL, shall be converted
into the right to receive, in cash, the Offer Price without interest; and (c)
each Share held by Parent or Acquisition Company shall be converted into the
right to receive 725,000 fully paid and nonassessable Shares of Surviving
Corporation.
Payment of Offer Price and Merger Consideration. The Merger Agreement
requires that prior to the commencement of the Offer, the Company and
Acquisition Company shall appoint a United States bank or trust company to act
as payment agent (the "Payment Agent") for the payment of the Offer Price and
the Merger Consideration. Prior to the payment time thereof, the Company and
Acquisition Company are required to deposit with the Payment Agent in a separate
fund established for the benefit of the holders of Shares, for payment upon
surrender of the certificates for exchange in accordance with (i) the Offer to
Purchase, in the case of the Offer and (ii) the Merger Agreement, in the case of
the Merger, through the Payment Agent (in the case of the Offer, the "Offer
Fund" and in the case of the Merger, the "Merger Fund" and collectively with the
Offer Fund, the "Payment Fund"), immediately available funds in amounts
necessary to make the payments to holders of Shares. The Payment Agent shall pay
the Offer Price out of the Offer Fund and the Merger Consideration out of the
Merger Fund.
As soon as reasonably practicable after the Effective Time, the Surviving
Corporation or the Payment Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Shares of Common Stock entitled to receive the Merger
Consideration (the "Certificates"): (i) a form of letter of transmittal which
shall: (x) specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates to
the Payment Agent; (y) contain a representation in a form reasonably
satisfactory to Parent as to the good and marketable title of the Shares held by
such holder free and clear of liens of any kind; and (z) contain such other
customary provisions as the Company and Acquisition Company may reasonably
specify; and (ii) instructions for use in surrendering such Certificates and
receiving the aggregate Merger Consideration, in respect thereof. Upon the
surrender of each Certificate and subject to applicable withholding, the Payment
Agent shall (subject to applicable abandoned property, escheat and similar laws)
pay the holder of such Certificate the Merger Consideration multiplied by the
number of Shares formerly represented by such Certificate, and such Certificate
shall forthwith be cancelled. Until so surrendered, each such Certificate (other
than Certificates representing Dissenting Shares) shall represent solely the
right to receive the aggregate Merger Consideration relating thereto. No
interest or dividends shall be paid or accrued on the Merger Consideration. If
the Merger Consideration is to be delivered to any person other than the person
in whose name the Certificate formerly representing such Shares is registered,
it is a condition to receiving the Merger Consideration that the Certificate so
surrendered be properly endorsed or otherwise be in proper form for transfer and
that the person surrendering such Certificates pay to the Payment Agent any
transfer or other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered, or establish to the satisfaction of the Payment Agent or the
Company, as applicable, that such tax has been paid or is not applicable. The
Payment Agent is entitled to deduct and withhold from the consideration
otherwise payable pursuant to the Merger Agreement to any stockholder of the
Company such amounts as the Company reasonably and in good faith determines are
required to be deducted and withheld with respect to the making of such payment
under the Code, or any provision of state, local or foreign tax law.
Treatment of Stock Options. The Merger Agreement provides that all options
to acquire Shares outstanding under any stock option plan or agreement
(individually, an "Option" and collectively, the "Options") which have not been
exercised pursuant to an Option Exercise Agreement (as discussed below) and are
outstanding immediately prior to the Effective Time, whether or not then vested
or exercisable, shall be canceled at the Effective Time and in exchange
therefor, each holder of a cancelled Option will receive an amount in cash equal
to product of (i) the excess, if any, of the Merger Consideration over the per
Share exercise price thereof and (ii) the number of Shares subject thereto, in
full settlement of the Company's (and the Surviving Corporation's) obligations
under each Option. To the extent that the per Share exercise price of
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any Option equals or exceeds the Merger Consideration, at the Effective Time,
such Option will be cancelled and the holder of such Option will not receive or
be entitled to receive any consideration from Acquisition Company or the
Surviving Corporation. All amounts payable in respect of Options shall be
subject to all applicable withholding of taxes.
Treatment of Warrants. The Merger Agreement provides that any Warrants
outstanding at the Effective Time that are owned of record by a person or entity
other than the Company, Parent or Acquisition Company shall be cancelled in the
Merger, and each holder of any Warrants shall receive an amount in cash, if any,
equal to the product of (i) the excess, if any, of the Merger Consideration over
the per Share exercise price thereof and (ii) the number of Shares subject
thereto.
Treatment of Debentures. The Merger Agreement provides that, except for
holders who hold Debentures subject to the Stock Agreement (as discussed below),
within two business days after the closing of the Offer, the Company shall send
a notice of redemption to all holders, if any, of outstanding Debentures.
Stockholder Meeting. The Merger Agreement provides that, in accordance with
applicable law and provided that the Short Form Requirement has not been met,
the Company, acting through the Board of Directors and after the Offer Closing,
shall (i) call a special meeting of its stockholders (the "Stockholder Meeting")
for the purpose of considering and voting on the Merger and Merger Agreement,
(ii) hold the Stockholder Meeting as soon as practicable after the purchase of
Shares pursuant to the Offer, (iii) file with the SEC a proxy statement or
information statement relating to the Merger Agreement and the Merger, and (iii)
unless taking such action would be inconsistent with the fiduciary duties of the
Board, recommend to the Company's stockholders the approval of the Merger
Agreement. The Company will use its reasonable best efforts to solicit from the
stockholders of the Company proxies in favor of the approval and adoption of the
Merger Agreement and the transactions contemplated thereby, unless otherwise
required by applicable fiduciary duties. Parent has agreed to vote or cause to
be voted all the Shares then owned by it, Acquisition Company or any other of
its subsidiaries in favor of the Merger at the Stockholder Meeting.
Notwithstanding the foregoing, if the Short Form Requirement is met, Acquisition
Company, the Company and Parent have agreed to take all actions necessary to
effect the Merger as a short-form merger pursuant to Section 253 of the DGCL,
without a meeting of the Company's stockholders.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties by the Company with respect to (i) the due
organization, existence and the qualification, good standing, corporate power
and authority of the Company and its subsidiaries; (ii) delivery and accuracy of
certain corporate documents and records; (iii) the capitalization of the Company
and its subsidiaries; (iv) the due authorization, execution, and delivery of the
Merger Agreement and the authorization of the consummation of the transactions
contemplated thereby, and the validity and enforceability of the Merger
Agreement; (v) certain agreements entered into by the Company relating to its
indebtedness and the employment of certain Company employees; (vi) subject to
certain exceptions and limitations, the absence of consents and approvals
necessary for consummation by the Company of the Offer and Merger and the
absence of any violations, breaches or defaults which would result from
compliance by the Company with any provision of the Merger Agreement; (vii)
subject to certain exceptions and limitations, the compliance by the Company and
its subsidiaries with all applicable foreign, federal, state or local laws,
statutes, ordinances, rules, regulations, orders, judgments, rulings and decrees
of any foreign, federal, state or local judicial, legislative, executive,
administrative or regulatory body or authority, or any court, arbitration, board
or tribunal; (viii) compliance by the Company with the Securities Act of 1933,
as amended (the "Securities Act") and the Exchange Act and the reports and
financial information required to be filed thereunder since January 1, 1997;
(ix) certain recent financial information of the Company and its subsidiaries;
(x) subject to certain exceptions and limitations, the absence of certain
liabilities of the Company and its subsidiaries; (xi) subject to certain
exceptions and limitations, the absence of pending or (to the knowledge of the
Company) threatened claims, actions, suits or proceedings; (xii) certain tax
matters; (xiii) certain employee benefit and ERISA matters; (xiv) certain
environmental matters; (xv) the absence of certain changes or effects since
December 31, 1999 which could result in a material adverse effect; (xvi) the
patents, trademarks and other intellectual property of the Company and its
subsidiaries; (xvii) the real property owned and leased by the Company and its
subsidiaries; (xviii) state takeover statutes; (xix) broker's
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fees; (xx) the DLJ Opinion; (xxi) the Company's inventory; (xxii) the
stockholder vote required for the Merger; (xxiii) title to and condition of
tangible assets of the Company and its subsidiaries; (xxiv) certain material
contracts of the Company and its subsidiaries, including non-compete agreements;
(xxv) year 2000 compliance issues; (xxvi) compliance with applicable laws;
(xxvii) the Company's accounts receivable; (xxviii) customers, suppliers, sales
representatives, dealers and distributors of the Company and its subsidiaries;
(xxvix) certain labor and employment matters; (xxx) certain fees and expenses in
connection with the transactions contemplated by the Merger Agreement; (xxxi)
subject to certain limitations, the possession by the Company and its
subsidiaries of necessary franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders;
(xxxii) certain insurance policy matters; (xxxiii) product warranty and
liability; and (xxxiv) transactions with affiliates.
Parent and Acquisition Company have also made certain representations and
warranties in the Merger Agreement, including with respect to (i) the due
incorporation, existence, good standing and corporate power and authority of
Acquisition Company and Parent; (ii) the due authorization, execution and
delivery of the Merger Agreement, the Stock Option Agreement and the Stock
Agreement and the authorization of the consummation of the transactions
contemplated thereby, and the validity and enforceability of the Merger
Agreement, the Stock Option Agreement and the Stock Agreement; (iii) the absence
of consents and approvals necessary for consummation of the transactions
contemplated by the Merger Agreement by Parent and Acquisition Company and the
absence of any violations, breaches or defaults which would result from
compliance by Parent and Acquisition Company with any provision of the Merger
Agreement; (iv) broker's and broker fees; (v) the sufficiency of funds available
to Parent and Acquisition Company for the consummation of the Offer and the
Merger; (vi) absence of any material misstatements or omissions made by Parent
and Acquisition Company in this Offer to Purchase, the Schedule TO and the
exhibits thereto; and (viii) no knowledge of Company breaches; and (ix) the
sophistication of Parent and Acquisition Company.
Conduct Until the Merger. The Company has agreed that from the date of the
Merger Agreement until the earlier of the date the Shares are purchased in the
Offer or the termination of the Merger Agreement, unless Parent has consented in
writing thereto, the Company will, and will cause each of its subsidiaries to:
(i) conduct its operations according to its ordinary course of business
consistent with past practice, and (ii) use its commercially reasonable efforts
to preserve in all material respects its business organization and its existing
relationships with its customers, suppliers, employees and business associates.
The Company has also agreed that from the date of the Merger Agreement
until the earlier of the date the Shares are purchased in the Offer or the
termination of the Merger Agreement, unless Parent has consented in writing
thereto, the Company will not, and will not permit any of its subsidiaries to:
(a) amend its certificate of incorporation or by-laws;
(b) acquire, sell, lease or dispose of any assets in excess of
$500,000, other than in the ordinary and usual course of business and
consistent with past practice;
(c) incur or modify any funded indebtedness, other than in the
ordinary and usual course of business and consistent with past practice;
(d) issue, reissue or sell or authorize the issuance, reissuance or
sale of (i) any shares of capital stock (other than issuances of Shares in
respect of any exercise of the Warrants or Company Options or the
conversion of the Debentures outstanding on the date of the Merger
Agreement), (ii) any shares convertible into capital stock of any class, or
(iii) any rights, calls, commitments, warrants or options to acquire any
shares of capital stock, or shares convertible into capital stock;
(e) declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock or
other ownership interests (other than such payments between the Company and
its subsidiaries);
(f) split, combine, subdivide, reclassify or, directly or indirectly,
redeem, purchase or otherwise acquire, recapitalize or reclassify, or
propose to redeem or purchase or otherwise acquire, any shares of its
capital stock or liquidate in whole or in part;
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<PAGE> 30
(g) except as required by law or actions taken in the ordinary course
and consistent with past practice (i) enter into, amend or extend any
employment, collective bargaining, severance or termination agreement, (ii)
grant any increase in severance or termination pay to, any officers,
directors or employees, (iii) increase the compensation of any of its
directors or officers, or increase the compensation of any other employees
outside the ordinary course of business consistent with past practice, (iv)
adopt, amend, modify, or terminate any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of any of
its directors, officers, and employees (or take any such action with
respect to any other employee benefit plan agreement or arrangement), or
(v) make any other change in employment terms for any of its directors,
officers, and employees;
(h) (i) except as may be required or contemplated by the Merger
Agreement, assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other person or entity (other than the Company's
subsidiaries), except in the ordinary and usual course of business and
consistent with past practices, (ii) make any loans, advances or capital
contributions to, or investments in, any other person or entity (other than
to its subsidiaries), other than in the ordinary and usual course of
business or (iii) make capital expenditures in excess of an aggregate of
$750,000;
(i) change any accounting methods, principles or practices materially
affecting their assets, liabilities or business, except insofar as may be
required by a change in generally accepted accounting principles;
(j) make any material tax election or settle or compromise any
material income tax liability;
(k) settle or compromise any claim (including any arbitration) or
litigation involving payments by the Company in excess of $125,000
individually, or $350,000 in the aggregate, which is not subject to
insurance reimbursement;
(l) enter into any contract (or series of related contracts) either
involving more than $250,000 or outside the ordinary course of business
consistent with past practice;
(m) postpone the payment of accounts payable and other liabilities
outside the ordinary course of business consistent with past practice;
(n) enter into any transaction with any affiliate (other than the
Management Agreements); or
(o) authorize or agree in writing or otherwise to take any of the
foregoing actions.
Access to Information. Under the Merger Agreement, from the date of the
Merger Agreement until the earlier of the termination of the Agreement or the
Effective Time, the Company has agreed, and has agreed to cause its subsidiaries
and their respective directors, employees, agents and advisors to, (i) provide
Parent and Acquisition Company and their authorized representatives access, upon
reasonable notice and during normal business hours, to the offices and other
facilities and to the books, records, financial statements and other documents
and materials relating to the financial condition, assets and liabilities of the
Company and its subsidiaries and permit Parent and Acquisition Company to make
such inspections thereof as they may reasonably request, (ii) furnish Parent and
Acquisition Company, to the extent available, with such information with respect
to the business of the Company and its subsidiaries as Parent and Acquisition
Company may from time to time reasonably request and (iii) confer and consult
with Parent and Acquisition Company on operational, financial and general status
of ongoing business operations of the Company as Parent and Acquisition Company
may reasonably request; provided, however, that all requests for such access,
inspection, information or consultations shall be made through David S. Evans,
Chairman of the Executive Committee of the Board (or such other persons as he
shall designate). Parent and Acquisition Company have agreed to hold all
information furnished by or on behalf of the Company or any of its subsidiaries
in confidence.
Filings; Further Assurances. Each of the parties to the Merger Agreement
has agreed to use its reasonable best efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things
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necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Merger
Agreement, including, without limitation, the Offer, the Merger and the
financings contemplated by the Financing Agreements. The parties have also
agreed that each shall (i) take or cause to be taken all such necessary action,
including, without limitation, the execution and delivery of such further
instruments and documents as may be reasonably requested by the other party for
such purposes or otherwise to consummate and make effective the transactions
contemplated in the Merger Agreement; and (ii) promptly inform the other party
of any event or circumstance relating to either the Company or Acquisition
Company or Parent or any of their respective subsidiaries which should be set
forth in an amendment to this Offer to Purchase and promptly take all steps
necessary to cause this Offer to Purchase as so corrected to be filed with the
SEC and to be disseminated to the shareholders of the Company, in each case as
to the extent required by applicable law. If at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
the Merger Agreement, including the execution of additional instruments, the
proper officers and directors of each party to the Merger Agreement, as the case
may be, shall take all such necessary action.
Consents. The Merger Agreement requires each of Parent, Acquisition Company
and the Company to use its commercially reasonable best efforts to obtain as
promptly as practicable all consents from any person or entity required in
connection with the consummation of the Offer and the Merger. Parent,
Acquisition Company and the Company are also required to take all actions
necessary to file as soon as practicable all notifications, filings, and other
documents required to obtain all consents or waivers, including, without
limitation, under the HSR Act, and to respond as promptly as practicable to any
inquiries received from the Federal Trade Commission, the Antitrust Division of
the Department of Justice and any other governmental entity for additional
information or documentation in connection with the Offer or the Merger.
Publicity. The Merger Agreement requires that the initial press releases
with respect to the execution of the Merger Agreement shall be acceptable to
Parent and the Company and that so long as this Agreement is in effect, neither
the Company, Parent nor any of their respective affiliates shall issue or cause
the publication of any press release with respect to the Offer or the Merger
without the prior consultation of the other parties, except as may be required
by law.
Employee Matters. The Merger Agreement requires that the Surviving
Corporation shall honor, in accordance with their terms, and shall make required
payments when due under, all employee benefit plans or agreements maintained or
contributed to by the Company or any of its subsidiaries (including, but not
limited to, employment, incentive and severance agreements and arrangements),
that are applicable with respect to any employee, director or stockholder of the
Company or any of its subsidiaries (whether current, former or retired) or their
beneficiaries. After the date of the Merger Agreement, employees of the Company
will not have the opportunity to purchase additional Shares from the Company
except pursuant to the exercise of an Option.
No Solicitation. Under the Merger Agreement, the Company may not, and may
not authorize or permit any of its subsidiaries or any of its or its
subsidiaries' officers, directors, employees or agents to, directly or
indirectly, solicit, participate in or initiate discussions or negotiations
with, or provide any non-public information to any person or entity (other than
Parent, Acquisition Company or any of their affiliates or representatives) (a
"Third Person") concerning any proposal or inquiry relating to any merger,
consolidation, tender offer, exchange offer, sale of all or substantially all of
the Company's assets, sale of Shares of capital stock or similar business
combination transaction involving the Company or any principal operating or
business unit of the Company or its subsidiaries (an "Acquisition Proposal"). In
the event that, after the date of the Merger Agreement and prior to the purchase
of the Shares pursuant to the Offer, the Board receives an unsolicited written
Acquisition Proposal and the Board determines, in good faith and after
consultation with its financial advisors and legal counsel, that the Acquisition
Proposal may lead to a Superior Proposal (as defined below), the Board is
permitted to do any or all of the following: (a) withdraw, modify or change the
Board's approval or recommendation of the Merger Agreement, the Offer or the
Merger, (b) approve or recommend to the Company's stockholders an Acquisition
Proposal, (c) engage in discussions and negotiations with respect to an
Acquisition Proposal and (d) terminate this Agreement. The Board may not,
however, take any
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action described in clauses (a)-(d) above until after the Board has given Parent
written notice stating the Board's proposed conduct and setting forth certain
information with respect to such Acquisition Proposal.
The Board is also permitted, after notice to Parent, to furnish information
to a Third Person which has made a bona fide Acquisition Proposal that the Board
reasonably determines may lead to a Superior Proposal and that was not solicited
in violation of the Merger Agreement, provided that, with respect to any person
or entity that is not currently party to a confidentiality agreement with the
Company, such person or entity has executed an agreement with confidentiality,
standstill and other provisions substantially similar to those then in effect
between the Company and Acquisition Company. For purposes of the Merger
Agreement, "Superior Proposal" means any proposal made by a Third Person to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, all of the equity securities of the Company entitled to vote
generally in the election of directors or all or substantially all the assets of
the Company, if and only if, the Board reasonably determines (after consultation
with its financial advisor and counsel) (i) that the proposed transaction would
be more favorable from a financial point of view to its stockholders than the
Offer and the Merger and the transactions contemplated by the Merger Agreement,
taking into account at the time of determination any changes to the terms of the
Merger Agreement which as of that time had been proposed by Acquisition Company,
and (ii) that the person or entity making such Acquisition Proposal is capable
of consummating such Acquisition Proposal (based upon, among other things, the
availability of financing and the degree of certainty of obtaining financing,
the expectation of obtaining required regulatory approvals and the identity and
background of such person).
Nothing contained in the Merger Agreement prohibits the Company or its
Board from taking and disclosing to the Company's stockholders a position with
respect to a tender or exchange offer by a third party pursuant to Rules 14d-9
and 14e-2(a) promulgated under the Exchange Act or from making such disclosure
to the Company's stockholders or otherwise which, in the judgment of the Board
after consultation with its legal counsel, is necessary under applicable law or
the rules of any stock exchange or if failure so to disclose would be
inconsistent with its fiduciary duties to the Company's stockholders under
applicable law.
The Merger Agreement requires the Company to promptly, but in any event
within three business days, advise Parent in writing of any Acquisition Proposal
or any inquiry regarding the making of an Acquisition Proposal, including any
request for information, the material terms and conditions of such request,
Acquisition Proposal or inquiry and the identity of the person or entity making
such request, Acquisition Proposal or inquiry. The Merger Agreement requires the
Company to keep Acquisition Company reasonably informed of the status and
details, including any amendments or proposed amendments, of any such request,
Acquisition Proposal or inquiry.
The Merger Agreement provides that if, within 10 business days after giving
notice to Parent of discussions or negotiations relating to an Acquisition
Proposal, the Company has not terminated such discussions or negotiations,
Parent may terminate the Merger Agreement if it has provided the Company with at
least 48 hours prior written notice to terminate such negotiations or
discussions (a "Failure to Terminate Negotiations").
Indemnification and Insurance. Under the Merger Agreement, Parent and
Acquisition Company agree that for a period of six years from the Effective
Time, the Surviving Corporation will maintain all rights to indemnification now
existing in favor of the current or former directors, officers, employees and
fiduciaries of the Company as provided in the Company's certificate of
incorporation and by-laws or otherwise in effect under any agreement on the date
of the Merger Agreement. In addition, under the Merger Agreement, Parent and
Acquisition Company agree that the certificate of incorporation and by-laws of
the Surviving Corporation shall contain the provisions with respect to
indemnification set forth in the Company's certificate of incorporation and
by-laws on the date of the Merger Agreement and that such provisions shall not
be amended, repealed or otherwise modified for a period of six years after the
Acceptance Date in any manner that would adversely affect the rights thereunder
of individuals who at any time prior to the Effective Time were directors or
officers of the Company in respect of actions or omission occurring at or prior
to the Effective Time (including, without limitation, the transactions
contemplated by the Merger Agreement), unless such modification is required by
law.
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The Merger Agreement requires the Surviving Corporation to at all times
exercise the powers granted to it by its certificate of incorporation, its
by-laws, and by applicable law to indemnify and hold harmless to the fullest
extent permitted by applicable law present or former directors, officers,
employees and fiduciaries and agents of the Company against any threatened or
actual claim, action, suit, proceeding or investigation made against them
arising from their service in such capacities (or service in such capacities for
another enterprise at the request of the Company) prior to and including the
Effective Time, including, without limitation, with respect to matters relating
to the Merger Agreement.
The Merger Agreement also requires the Surviving Corporation to maintain in
effect for not less than six years from the Effective Time the current policies
of the directors', officers' and controlling stockholders' liability insurance
maintained by the Company (including all riders thereto) with respect to matters
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by the Merger Agreement); provided, that, the
Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions which are no less advantageous; and
provided, that, such substitution does not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time; and
provided, further, that the Surviving Corporation is not required to pay an
annual premium in excess of 300% of the last annual premium paid by the Company
prior to the date of the Merger Agreement and if the Surviving Corporation is
unable to obtain such insurance for such premium, it will obtain as much
comparable insurance as possible for an annual premium equal to such maximum
amount.
Matters Relating to the Financing Agreements. Under the Merger Agreement,
the Company has agreed that Parent is primarily responsible for any matter with
respect to the financing to be provided under the Financing Agreements;
provided, however, that (i) the Company shall have received prior notice of, and
shall be kept reasonably informed of the ongoing status of, any such matters,
(ii) the Company shall take all such actions as are reasonably requested by
Parent in connection with any such negotiations that are consistent with the
Merger Agreement, and (iii) Parent shall conduct any such matters reasonably and
in good faith. The Merger Agreement requires Parent to use its commercially
reasonable efforts to close the Financing on terms consistent with the Financing
Agreements. The Merger Agreement requires the Company and Parent to use
commercially reasonable efforts to satisfy on or before the expiration of the
Offer all requirements of the Financing Agreements which are conditions to
obtaining the cash proceeds thereunder.
Upon receipt by either the Company or Parent, or any of their respective
affiliates, of any written or oral communication to the effect that any lender
is contemplating not providing the Financing or is terminating or canceling or
modifying in any material respect the Financing Agreements, or that the
Financing is unlikely to be obtained, the Merger Agreement requires that the
Company or Parent, as the case may be, to immediately communicate such event to
the other party and provide such other party with a true and complete copy of
any such written communication.
Company Expenses. The Merger Agreement provides that the Company shall not,
without the prior written consent of Parent (i) amend, terminate or otherwise
modify or waive any provision of the Option Exercise/Cancellation Agreements,
the MM Agreement, the Fleet Consent, the Financing Agreements or the expense
agreements entered into with certain service providers in connection with the
Offer and Merger (the "Expense Agreements") or enter into any new agreements
which are the subject thereof, or (ii) incur or pay any expenses in connection
with the Offer and Merger (the "Company Expenses") the result of which would be
the Company Expenses exceed the aggregate limit of those expenses represented by
the Company (the "Company Expense Cap"), provided the Company may incur $500,000
worth of expenses above the Company Expense Cap relating solely to circumstances
arising after April 13, 2000 beyond the reasonable control of the Company. To
the extent subparagraph (ii) above is breached by the Company, Parent may
terminate the Merger Agreement, but shall not be entitled to reimbursement of
Parent Expenses as defined below.
Survival of Representations, Warranties and Agreements. The Merger
Agreement provides that the representations, warranties and agreements in the
Merger Agreement shall survive the Offer Closing and the Merger, provided, that,
no stockholder or affiliate of the Company, nor any stockholder, partner,
officer,
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<PAGE> 34
director, employee, agent or representative of any of the foregoing, shall have
any liability for any breach or inaccuracy of any of the representations and
warranties of the Company.
Conditions to the Merger. The respective obligations of each party under
the Merger Agreement to effect the Merger are subject to the satisfaction at or
prior to the Effective Time of the following conditions: (i) the closing of the
Offer shall have occurred; (ii) the approval by the Company's stockholders of
the Merger and Merger Agreement shall have been obtained, if necessary; (iii)
all necessary waiting periods applicable to the Merger under the HSR Act shall
have expired or been earlier terminated; and (iv) no temporary restraining
order, preliminary or permanent injunction or other order issued by any
governmental entity or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that prior to
invoking this condition, the party so invoking this condition has complied with
its obligations described in "Consents" above and has used its reasonable best
efforts to lift or remove such order, injunction, restraint or prohibition.
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after the
stockholders of the Company approve the Merger at the Stockholders' Meeting:
(a) By mutual written consent of the Company, Parent and Acquisition
Company.
(b) By either the Company, on the one hand, or Parent, on the other
hand if any governmental entity issues an order or takes any other action,
in each case permanently restraining, enjoining or otherwise prohibiting
the transactions contemplated by the Merger Agreement and such order
becomes final and nonappealable.
(c) By the Company acting through the Board prior to the consummation
of the Offer if it receives an Acquisition Proposal that may lead to a
Superior Proposal and has complied with all applicable terms of the Merger
Agreement, including the payment of the Termination Fee (as defined below)
and confirmation of its agreement to pay expenses of Parent and its
Affiliates.
(d) By the Company (acting through the Board):
(i) in the event that the Offer expires or is terminated in
accordance with its terms without any Shares being purchased thereunder;
provided, that, the failure of the Company to fulfill any obligation
under the Merger Agreement has not been the cause of, or resulted in,
the failure to purchase Shares pursuant to the Offer; or
(ii) if there is a breach or failure to perform on the part of
Acquisition Company or Parent of any of their representations,
warranties, covenants or agreements contained in the Merger Agreement
and such breach or failure to perform has a material adverse effect on
the ability of Acquisition Company or Parent to consummate the Offer or
the Merger, and, with respect to any such breach or failure to perform
that is reasonably capable of being remedied within the time periods set
forth below, the breach or failure to perform is not remedied prior to
the earlier of (x) 10 days after the Company has furnished Parent with
written notice of such breach or failure to perform or (y) two business
days prior to the date on which the Offer expires.
(e) By Acquisition Company or Parent:
(i) if the Board (x) shall withdraw, modify or change its
recommendation so that it is not in favor of the Merger Agreement, the
Offer or the Merger or shall have resolved to do any of the foregoing,
(y) shall approve or have recommended to the Company's stockholders an
Acquisition Proposal, or (z) takes any public position or makes any
disclosure to the Company's stockholders which has the effect of doing
either of the foregoing;
(ii) (x) if the Company shall have materially breached any of its
obligations under the Merger Agreement relating to an Acquisition
Proposal or (y) upon a Failure to Terminate Negotiations;
(iii) in the event that the Offer expires or is terminated in
accordance with its terms without any Shares being purchased thereunder;
provided, that, the failure of Parent to fulfill any obligation
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<PAGE> 35
under this Agreement has not been the cause of, or resulted in, the
failure to purchase Shares pursuant to the Offer; or
(iv) if prior to the consummation of the Offer, the representations
and warranties of the Company set forth in the Merger Agreement shall
not be true and accurate in all material respects, in each instance as
of the date of consummation of the Offer as though made on or as of such
date and the effect thereof is a Company Material Adverse Effect (as
defined below), or the Company shall have breached or failed to perform
or comply in any material respect with any obligation, agreement or
covenant required by the Merger Agreement to be performed or complied
with by it, and, with respect to any such breach or failure to perform
that is reasonably capable of being remedied within the time periods set
forth below, the breach or failure to perform is not remedied prior to
the earlier of (x) 10 days after Acquisition Company has furnished the
Company with written notice of such breach or failure to perform or (y)
two business days prior to the date on which the Offer expires.
For purposes of the Merger Agreement, the term "Company Material Adverse
Effect" means any event, change, occurrence, effect, fact or circumstance
(except for events, changes, occurrences, effects, facts or circumstances
resulting (i) from general economic or financial market conditions, (ii) actions
taken by any party in accordance with the Merger Agreement or (iii) public
announcements relating to the transactions contemplated by the Merger Agreement,
or conditions previously disclosed to Parent in the Merger Agreement) having, or
which could reasonably be expected to have, a material adverse effect on (a) the
ability of the Company to perform its material obligations under the Merger
Agreement or to consummate the transactions contemplated thereby or (b) the
business, results of operations, condition (financial or otherwise), assets,
liabilities (actual or contingent), properties, or cash flows or assets of the
Company and its subsidiaries, taken as a whole.
Fees, Expenses and Other Payments; Effect of Termination. Except as
otherwise described in the following paragraphs, the Merger Agreement requires
all costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants and other out-of-pocket expenses,
incurred or to be incurred by the parties to the Merger Agreement in connection
with the Offer, the Merger and the Merger Agreement, to be borne solely and
entirely by the party which has incurred such costs and expenses. The Merger
Agreement requires all costs and expenses related to the filing, printing and
mailing of this Offer to Purchase, the Schedule TO and the proxy statement or
information statement required to be filed with the SEC to consummate the Merger
to be borne by the Company.
The Merger Agreement requires the Company to pay to Parent $2,300,000 (the
"Termination Fee") plus expenses of Parent and its affiliates in connection with
the Transaction not to exceed $2,500,000 ("Parent Expenses") in the event that
the Merger Agreement is terminated (i) by the Company due to accepting an
Acquisition Proposal or (ii) by Acquisition Company due to the Company: (a)
withdrawing its recommendation of the Offer (except, in certain circumstances,
as a result of the failure to obtain the Financing), (b) recommending an
Acquisition Proposal to its stockholders or (c) materially breaching its no
solicitation covenant.
In addition, the Merger Agreement requires the Company to pay the
Termination Fee and Parent Expenses to Acquisition Company, in the event that
(1) the Company enters into a definitive agreement with a Third Person within
one year of termination of the Merger Agreement and an Acquisition Proposal had
been publicly disclosed prior to termination and (2) the Merger Agreement is
terminated either (a) by the Company pursuant to the Offer expiring or
terminating in accordance with its terms without any Shares being purchased
thereunder solely as a result of the Minimum Condition failing to be satisfied
by the Expiration Date (other than as a result of a material or willful breach
by Parent or Acquisition Company of their obligations under the Merger
Agreement), or (b) by Acquisition Company pursuant to the Offer expiring or
terminating in accordance with its terms without any Shares being purchased
thereunder solely as a result of the Minimum Condition failing to be satisfied
by the Expiration Date of the Offer (other than as a result of a breach by the
Company of its no solicitation obligations). In the event that the Merger
Agreement is terminated as a result of the Minimum Condition failing to be
satisfied by the Expiration Date, and an
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Acquisition Proposal had been publicly disclosed prior to the termination, the
Company is required to pay $1.0 million of Parent Expenses to Parent upon such
termination of the Merger Agreement, and the balance of such Parent Expenses
(not to exceed an additional $1.5 million) if and when the Termination Fee
becomes due.
The Merger Agreement also requires the Company to pay the Termination Fee
to Acquisition Company if the Merger Agreement is terminated by Acquisition
Company upon a Failure to Terminate Negotiations and, within one year after such
a termination, the Company enters into a definitive agreement with respect to,
or consummates a merger, consolidation or other business combination with any
Third Person (or any other person or entity acting in concert with such Third
Person) with whom the Company was holding discussions or negotiations at the
time of termination of the Merger Agreement.
The Merger Agreement requires Company to pay Parent, at its request at any
time after Effective Time, in cash all expenses incurred by or on behalf of
Parent relating to the Offer and the Merger, including a transaction fee payable
to Chartwell.
In addition, the Merger Agreement requires the Company, in the event that
the Merger Agreement is terminated (a) by the Company or Parent because the
Company or Parent has been advised by the Financing sources that they will not
provide the Financing contemplated by the Financing Agreements or by Parent, in
each case, on account of a material breach of the Merger Agreement by Company
(in the case of breaches of representations and warranties only if such breaches
would individually or in the aggregate have a Company Material Adverse Effect)
or (b) by Parent upon a Failure to Terminate Negotiations, to pay to Parent all
actual and reasonably documented expenses incurred by or on behalf of
Acquisition Company, its members or Parent in connection with or in anticipation
of the Offer, the Merger, the Merger Agreement, the Stock Agreement and the
consummation of the transactions contemplated by the Merger Agreement and in the
Stock Agreement (including all fees and expenses of outside counsel, experts,
Financing sources, investment bankers, accountants and consultants incurred by
Acquisition Company in connection with or related to the due diligence,
authorization, preparation, negotiation, execution and performance of the
transactions contemplated hereby and by the Stock Agreement) not to exceed
$2,500,000; provided, however, that the payment of such expenses shall be
limited to $1.0 million in the event that such termination is due solely to a
Company Material Adverse Effect arising out of events occurring after the date
of the Merger Agreement other than as a result of an intentional act or omission
by the Company, its subsidiaries, officers, directors or affiliates as to which
the consequences thereof would be reasonably foreseeable to be a Company
Material Adverse Effect. Under no circumstances will the Parent Expenses
reimbursed to Parent by Company pursuant to the Merger Agreement exceed $2.5
million.
The Stock Agreement.
Agreement Not to Tender; Sale of Securities. Concurrently with the
execution of the Merger Agreement, Parent and Acquisition Company entered into a
Stock Agreement with the Company and GreenGrass. Pursuant to the Stock
Agreement, GreenGrass has agreed (i) not to tender its Shares in the Offer and
(ii) to sell to Acquisition Company all outstanding securities of the Company
owned by it (the "Purchased Securities") at a purchase price equal to the amount
that GreenGrass would have received had it exercised or converted all of its
derivative Purchased Securities into Shares and tendered all of its Shares in
the Offer (or any higher price paid per Share in the Merger other than in
connection with exercise of appraisal rights or settlement of litigation).
Irrevocable Proxy for Purchased Shares. Pursuant to the Stock Agreement,
GreenGrass also granted to Acquisition Company an irrevocable proxy to vote,
until the earlier of the Effective Time or the termination of the Merger
Agreement, at any meeting of the stockholders, all Purchased Securities: (a) in
favor of the Merger and the execution and delivery of the Merger Agreement and
the Stock Agreement and the transactions contemplated thereby, (b) against any
action, any failure to act or any agreement that would result in a breach of any
covenant, representation or warranty or any other obligation or agreement of the
Company under the Merger Agreement or the Stock Agreement and (c) against each
of the following actions (other than the Merger and the transactions
contemplated by the Merger Agreement): (i) any extraordinary
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corporate transaction such as a merger or a consolidation or other business
combination involving the Company or any of its subsidiaries; (ii) declaration
of any dividend or issuance of any equity securities (other than upon exercise
or conversion of the Debentures, Warrants and Company Options); (iii) any sale,
lease or transfer of material assets of the Company; (iv) any reorganization,
dissolution or liquidation of the Company; (v) any change in the majority of the
persons constituting the Board; (vi) any change in the present capitalization of
the Company or amendment of the Company's certificate of incorporation or
by-laws; (vii) any other material change in the Company's corporate structure or
business; or (viii) any other action which could reasonably be expected to
impede, interfere with, delay, postpone or materially adversely affect the
Merger and transactions contemplated by the Merger Agreement and the Stock
Agreement.
Covenants. GreenGrass has agreed that, except as contemplated by the Stock
Agreement, it shall not (i) offer for sale, sell or otherwise transfer, tender,
pledge, encumber, assign or otherwise dispose of or agree to dispose of any of
its Purchased Securities, (ii) grant any proxies or powers of attorney, deposit
into a voting trust or enter into a voting agreement with respect to any
Purchased Securities, (iii) take any action that would make any representation
or warranty of GreenGrass untrue or incorrect or prevent it from performing its
obligations under the Stock Agreement, or (iv) acquire any Shares (other than
upon conversion or exercise of the Purchased Securities).
Representations and Warranties. GreenGrass also makes representations and
warranties to Parent and Acquisition Company in the Stock Agreement relating to:
(i) ownership of and title to its Purchased Securities; (ii) voting and
disposition power; (iii) legal capacity, power and authority; (iv) valid
execution and delivery and enforceability of the Stock Agreement; (v) subject to
certain exemptions and qualifications, the absence of any conflicts and the
making or obtaining applicable filings, permits authorizations and consents;
(vi) liens and encumbrances on its Purchased Securities; (vii) no solicitation
of and response to third party acquisition proposals involving the Company;
(viii) restrictions on transfer of the Purchased Securities and granting of
liens or security interests with respect to the Purchased Securities; (ix)
waiver of rights of appraisal or rights to dissent from the Merger with respect
to its Shares; and (x) broker's and finder's fees.
Permission to Disclose. GreenGrass has also agreed that it will permit
Parent and Acquisition Company to publish and disclose, in any documents filed
with any governmental or regulatory agency in connection with the Merger, its
ownership of Shares and other securities of the Company, and the nature of its
commitments, arrangements and understandings under the Stock Agreement.
Termination. The covenants, agreements and proxy contained in the Stock
Agreement will terminate upon the earlier of (i) the Effective Time and (ii) the
termination of the Merger Agreement.
The Stock Option Agreement.
Grant of Stock Option. Pursuant to the Stock Option Agreement and subject
to the terms and conditions thereof, the Company granted to Acquisition Company
the Acquisition Company Option to purchase the Acquisition Company Option Shares
at the Offer Price.
Exercise of Stock Option. The Stock Option Agreement provides that, subject
to the conditions set forth in the Stock Option Agreement and any additional
requirements of law, the Acquisition Company Option may be exercised by
Acquisition Company, in whole but not in part, at any one time after the
occurrence of a Top-Up Exercise Event (as defined below) and prior to the
Termination Date (as defined below) and that Acquisition Company will exercise
the Acquisition Company Option if the results thereof would permit the Short
Form Requirement to be met. For the purpose of the Stock Option Agreement, a
"Top-Up Exercise Event" occurs upon the Purchasers' acceptance for payment
pursuant to the Offer of Shares satisfying the Minimum Condition, and the
"Termination Date" occurs upon the first to occur of the following: (i) the
Effective Time, (ii) the date which is five business days after the occurrence
of a Top-Up Exercise Event (or such later date on which the closing of the
purchase of the Acquisition Company Option Shares may be consummated pursuant to
the Stock Option Agreement); and (iii) the termination of the Merger Agreement.
Conditions to Closing. The Stock Option Agreement provides that the
obligation of the Company to deliver Acquisition Company Option Shares upon the
exercise of the Acquisition Company Option is subject
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to the following conditions: (i) all waiting periods, if any, under the HSR Act
applicable to the issuance of the Acquisition Company Option Shares have expired
or have been terminated, (ii) there being no injunction or other final
non-appealable judgment by a court of competent jurisdiction preventing or
prohibiting the exercise of the Acquisition Company Option or the delivery of
the Acquisition Company Option Shares; and (v) such exercise not violating the
AMEX rules then applicable to the Company.
Representations and Warranties. The Stock Option Agreement contains various
representations and warranties of the parties thereto, including representations
by the Company as to the Company's corporate organization, authority relative to
the Stock Option Agreement and authority to issue the Acquisition Company Option
Shares, the absence of any conflicts and the making or obtaining of all
applicable filings and consents.
Covenants of the Company. Pursuant to the Stock Option Agreement, the
Company has agreed (i) that it will not by any voluntary act avoid or seek to
avoid the observance or performance of any covenants, stipulations or conditions
of the Stock Option Agreement and (ii) promptly to take all actions as may from
time to time be required to permit Acquisition Company to exercise the Top-Up
Option and the Company to issue Shares pursuant thereto.
Management Agreements.
In connection with entering into the Merger Agreement, Acquisition Company
entered into an employment agreement with Frederic Contino, the Company's chief
executive officer, and into severance agreements with nine other executives of
the Company. These agreements replace the prior agreements between the Company
(or PlayCore Wisconsin) and those executives.
Contino Employment Agreement. Acquisition Company entered into a five-year
employment agreement with Mr. Contino that provides for his continued employment
as PlayCore Wisconsin's President and Chief Executive Offer. The agreement also
provides that both Mr. Contino and one other individual designated by him will
be elected to the board of directors of PlayCore Wisconsin. The term of the
agreement commences at the Effective Time and will automatically be extended
from year to year thereafter, unless terminated by either party upon 6 months
prior notice of the end of the initial term or any renewal term. Mr. Contino's
initial base salary is set at $450,000 per year, and may be increased by up to
10% annually by the compensation committee of the board of directors, based upon
Mr. Contino's performance in the previous year. Mr. Contino also is eligible for
an incentive bonus of up to 200% of his annual base salary, based on PlayCore
Wisconsin's achievement of certain EBITDA targets set by the board. Mr. Contino
will also be entitled to certain other benefits, including the use of an
automobile, life insurance, a country club membership, and reimbursement of
certain professional services. He will be entitled to participate in the
employee pension benefit plans which PlayCore Wisconsin maintains for its
employees generally and PlayCore Wisconsin will make annual contributions to a
supplemental executive retirement plan. If any payment or reimbursement (other
than salary and bonus) is subject to any income tax, those amounts will be
"grossed-up" to cover the applicable taxes.
Under the terms of the agreement, Mr. Contino will receive, at the closing
of the Merger, nonqualified options to purchase 29,000 shares of common stock of
Parent at an exercise price of $10.10 per share. Immediately following the
effectiveness of the Merger, Mr. Contino also will receive a cash bonus in the
amount of $500,000 and a grant of 4,848 shares of phantom stock of Parent. Mr.
Contino has agreed to purchase an equity interest in Holdings in an amount not
less than $500,000 in connection with the closing of the Offer.
In the event Mr. Contino's employment agreement is terminated by PlayCore
Wisconsin without "cause" (as defined therein) or by Mr. Contino for "good
reason" (as defined therein), Mr. Contino is entitled to receive (a) salary
continuation for two years at his annual base salary then in effect, (b)
continuation for two years of any benefits available to Mr. Contino under the
terms of the applicable benefit plans and programs in which Mr. Contino
participates on the termination date, and (c) a monthly bonus amount for two
years equal to 1/12th the average incentive bonus paid to Mr. Contino for the
two years preceding his termination. In the event the agreement is terminated
upon Mr. Contino's disability, Mr. Contino is entitled to salary continuation
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and continuation of any benefits available to him under the terms of the
applicable benefit plans and programs in which Mr. Contino participates on the
termination date for one year. The severance amounts payable to Mr. Contino in
the event he is terminated will be reduced dollar for dollar by the greater of
(a) the value of the grant of phantom shares to Mr. Contino on the date the
agreement becomes effective or (b) the value of such phantom shares on the
termination date.
Mr. Contino will be deemed to terminate his employment agreement with "good
reason" in the event there is: (a) any material adverse changes in his job
title, status or responsibility including diminution of duties, (b) any
reduction in his base salary and aggregate benefits, (c) a material breach of
the agreement by PlayCore Wisconsin, (d) a relocation of Mr. Contino's primary
place of employment following a "change of control" (as defined therein) to a
location more than 35 miles away, or (e) the removal of Mr. Contino as a member
of the Board of Directors, except if such removal is for "cause" or upon
voluntary termination of employment by Mr. Contino, or due to death or
disability. In addition, in the event a change of control occurs, Mr. Contino
will be deemed to have been terminated without cause if the agreement is not
extended through December 31, 2007.
The agreement contains standard non-competition, confidentiality and
non-solicitation clauses that apply during the period of his employment and for
a period of two years thereafter. The agreement provides that any intellectual
property developed by Mr. Contino during the term of his employment will be the
sole and exclusive property of PlayCore Wisconsin. It also provides that
PlayCore Wisconsin will indemnify Mr. Contino against damages and expenses in
connection with any action or proceeding to which he is made or threatened to be
made a party by reason of the fact that he is an employee or director of the
company (with certain specified exceptions). The new employment agreement
supersedes and replaces the existing employment agreement between Mr. Contino
and PlayCore, Inc., but will be null and void if the Merger is not consummated.
Severance Agreements. In connection with entering into the Merger
Agreement, Acquisition Company also entered into new severance agreements with
Messrs. Ruegger, Farnsworth, Hammelman, Caldwell, van der Meulen, Norquist,
Kuhn, Sutton, and Cole. Under the terms of these agreements, six of the
executives are to receive cash payments ranging from $30,000 to $150,000
immediately following the effectiveness of the merger, and all of the executives
will receive a grant of phantom common stock of Parent.
Generally, the severance agreements provide that if the executive is
terminated within 18 months after a "change of control" (as defined therein) by
PlayCore Wisconsin other than for "just cause" (as defined therein), due to the
executive's permanent disability, or by the executive for "good reason" (as
defined therein), the executive is entitled to the following: (a) continuation
of his salary for 12 months (in the case of four of the executives) or 18 months
(in the case of the other five executives); (b) continuation of coverage under
the health and welfare plans maintained by PlayCore Wisconsin at the discounted
employee cost for 12 months or 18 months, as the case may be; and (c) in the
case of the four executives who are entitled to the shorter severance period,
payment of an amount equal to one-half (or 100% in the case of one executive) of
the performance bonus, if any, received by such executive for the prior fiscal
year. Notwithstanding the above, the agreements provide that if the executive's
employment with PlayCore Wisconsin is terminated within 18 months after a change
of control by PlayCore Wisconsin other than with "just cause" or by the
executive for "good reason", the executive will be entitled to receive the
greater of (a) the severance benefits provided for in these new severance
agreements and (b) the severance benefits provided for in the executive's prior
severance agreement with the Company or PlayCore Wisconsin less the "transaction
benefit," which is defined as the greater of the value of the executive's grant
of phantom common stock on the date of the agreement and the value of such grant
on the termination date. The executive will be deemed to resign with "good
reason" in the event of (a) his removal from or the failure to reappoint him to
any positions held by him on or after the change of control, and (b) a good
faith determination by the executive that there has been a significant adverse
change in his working conditions or status.
The agreements also provide that if the executive's employment with
PlayCore Wisconsin is terminated by PlayCore Wisconsin other than for "just
cause", because of the executive's permanent disability, or, in the case of five
of the executives, by the executive for "good reason", and such termination
occurs at any time
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other than during the 18 month period following a change of control, the
executive is entitled to the same benefits but for a shorter period -- 6 months
in the case of four of the executives and 12 months for the other five
executives. However, if such termination occurs prior to a "change of control",
the amount of the severance payment will be reduced by the "transaction
benefit".
Each of the agreements also provides a standard non-competition clause,
pursuant to which each of the executives agrees not to compete with PlayCore
Wisconsin during the period of his employment and for a period of 1 or 2 years
thereafter, and a standard confidentiality clause that applies during the period
of the executive's employment and for five years thereafter.
These new severance agreements supersede and replace the existing severance
agreements between each of these executives and the Company or PlayCore
Wisconsin but will be null and void if the Merger is not consummated.
Other Arrangements. In addition to Mr. Contino, certain other members of
management will receive at the closing of the Merger, non-qualified options to
purchase an aggregate of 43,500 shares of common stock of Holdings at an
exercise price of $10.10 per share and 5,341 shares of phantom stock of Parent.
Option Exercise/Cancellation Agreements.
In connection with the Merger Agreement and in addition to the employment
and severance agreements discussed above, the Company and Acquisition Company
also entered into Option Exercise Agreements with Terence Malone, George
Herrera, Gary Massel and Ronald Wray, directors of the Company who hold Company
Options, and Frederic Contino, John Caldwell, Curtis Cole, Richard Ruegger,
David Hammelman, Lori Wetzel, Thomas Norquist, Richard Kuhn, Wesley Sutton,
Robert Farnsworth and Thomas van der Meulen, officers or key employees of the
Company or its subsidiaries who own Company Options.
Exercise of Options and Sale of Option Shares. Pursuant to the Option
Exercise Agreements, each Option Holder has agreed that upon consummation of the
Offer, if requested by Acquisition Company, such Option Holder will exercise all
options (the "Holder Options") granted to the Option Holder by the Company
pursuant to the Company's 1992 Stock Program and 1996 Incentive Stock Plan
(collectively, the "Plans") that have a per Share exercise price (the "Exercise
Price") less than the Offer Price ("In-the-Money Options") and sell to
Acquisition Company the shares issued upon exercise of the In-the-Money Options
(the "Option Exercise Shares"). The aggregate exercise price the Option Holder
will pay for the Option Exercise Shares will be paid in the form of (i) a cash
payment in an amount equal to the product of (a) the number of Option Exercise
Shares and (b) the par value of the such Option Exercise Shares (the "Cash
Exercise Price") and (ii) a promissory note in a principal amount equal to (x)
the number of Option Exercise Shares multiplied by the Exercise Price minus the
Cash Exercise Price. Acquisition Company will pay for the Option Exercise Shares
with a promissory note in a principal amount equal to the product of the Offer
Price multiplied by the number of Option Exercise Shares purchased.
Cancellation of Options. Pursuant to the Option Exercise Agreements, the
Company will, upon consummation of the Merger, cancel all of the Option Holder's
Options that are not In-the-Money Options ("Out-of-the-Money Options") and all
remaining In-the-Money-Options, if any. In exchange for agreeing to the
cancellation of such Holder Options, the Option Holder will receive a cash
payment equal to the product, for each Holder Option, of (a) the Offer Price
less the Exercise Price per Share for each Holder Option cancelled and (b) the
number of Shares subject to such Holder Option.
Agreement to Tender Shares. Each Option Holder has agreed to validly tender
(and not withdraw) any Shares (other than the Option Exercise Shares) owned by
such Option Holder in accordance with the terms and pursuant to the Offer
(provided that the Offer is commenced and not amended in a manner adverse to the
Option Holder) not later than the Expiration Date.
Waiver and Release. By executing the Option Exercise Agreements, each
Option Holder has acknowledged the effects of and consented to the exercise
and/or cancellation of the Holder Options, and upon exercise and/or cancellation
of the Options waives all rights and benefits associated with the Holder
Options. Each Option Holder has also unconditionally released and discharged the
Company, Acquisition Company,
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Parent and their respective directors, officers, employees agents and assigns
from all liabilities arising out of or related to the Plans or the Holder
Options.
Representations, Warranties and Covenants. The Option Exercise Agreements
contain various representations, warranties and covenants of the parties
thereto, including representations by each Option Holder as to the Option
Holder's ownership of the Holder Options and the Shares, authority relative to
the Option Exercise Agreements, the absence of any conflicts and the absence of
any encumbrances on the Option Holder's securities. Each Option Holder has also
agreed not to transfer any of the Option Holder's securities, not to grant any
proxies or enter into any voting agreements with respect to the Option Holder's
securities, not to take any action inconsistent with the representations or
warranties in the Option Exercise Agreements and not to acquire any of the
Company's securities. In addition, each Option Holder has waived any appraisal
rights with respect to the Merger.
Purchase, Waiver and Consent Agreement.
In connection with the Merger Agreement, the Company, PlayCore Wisconsin
and Acquisition Company executed the MM Agreement with the MM Warrant Holders.
Waiver of Notices. Pursuant to the MM Agreement, each MM Warrant Holder,
the Company and PlayCore Wisconsin have waived any and all notices required
under those Securities Purchase Agreements dated March 13, 1997 by and among the
Company, PlayCore Wisconsin and the MM Warrant Holders (the "Securities Purchase
Agreements"), the MM Warrants and all notes (the "MM Notes") and guarantees (the
"MM Guarantees") associated with the Securities Purchase Agreements (the "MM
Notes Documents").
Sale of the MM Warrants. Pursuant to the MM Agreement, the MM Warrant
Holders have agreed that, upon request of Acquisition Company and satisfaction
of the conditions set forth in the MM Agreement, the MM Warrant Holders shall
sell to Acquisition Company or the Company the MM Warrants for an aggregate
purchase price equal to $6,416,693. In connection with the sale of the MM
Warrants, the MM Warrant Holders have agreed to waive any rights they may have
under any anti-dilution provisions set forth in the MM Warrants relating to the
transactions contemplated by the Merger Agreement.
Redemption of Notes. Pursuant to the MM Agreement, the MM Warrant Holders
and PlayCore Wisconsin have agreed that, upon satisfaction of the conditions set
forth in the MM Agreement, PlayCore Wisconsin shall redeem the MM Notes held by
the MM Warrant Holders for an amount equal to (i) the principal amount of such
notes plus all accrued but unpaid interest thereon and (ii) a pre-payment fee of
$500,000 (as determined in accordance with the terms of the Securities Purchase
Agreements).
Consents; Waiver of Rights. The MM Warrant Holders have consented to the
Offer and the Merger and the execution and delivery by the Company and PlayCore
Wisconsin of the Merger Agreement, the Credit Agreement and the Subordinated
Note Agreement and have waived any and all rights and remedies the MM Warrant
Holders may have relating to any breach of any of the MM Notes Documents caused
by the Offer, the Merger, the execution or delivery of the Merger Agreement or
the consummation of the transactions contemplated thereby.
Conditions. The purchase of the MM Warrants and the redemption of the MM
Notes are conditioned upon (i) the first to occur of (a) the consummation of the
Offer and the purchase by Acquisition Company and/or Parent of the Shares
tendered thereunder and (b) the consummation of the Merger and (ii) the absence
of an injunction or other final, non-appealable judgment preventing or
prohibiting the sale of the MM Warrants or the redemption of the MM Notes.
Representations and Warranties. The MM Agreement contains various
representations and warranties of the parties thereto, including representations
by each MM Warrant Holder as to the MM Warrant Holder's ownership of the MM
Warrants, authority relative to the MM Agreement and the absence of any
conflicts. Each MM Warrant Holder has also agreed that upon consummation of the
sale of the MM Warrants, such MM Warrant Holder shall acknowledge and agree that
no obligations or liabilities shall be outstanding under or with respect to the
MM Warrants or the MM Notes. The Company and PlayCore Wisconsin agreed that all
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provisions under the Securities Purchase Agreements indemnifying the MM Warrant
Holders shall remain in full force and effect and survive the sale of the MM
Warrants and the redemption of the MM Notes.
Waiver, Consent and Agreement.
In connection with the Merger Agreement, the Company and PlayCore Wisconsin
executed a Waiver, Consent and Agreement with Fleet National Bank (the "Fleet
Consent"), as a lender and as agent for itself and the other lenders
(collectively, the "Existing Lenders") who are parties to that certain Restated
Credit Agreement, dated as of February 16, 1999, as amended from time to time
(the "Fleet Credit Agreement").
Waiver. Pursuant to the Fleet Consent, Fleet and the Existing Lenders
consent to the execution and delivery of the Merger Agreement, the Credit
Agreement, the Subordinated Note Agreement and the ancillary documents and
agreements relating thereto. Fleet and the Existing Lenders have also agreed
that upon the payment of the credit obligations ("Fleet Credit Obligations")
outstanding between the Company, PlayCore Wisconsin and Heartland, on the one
hand, and Fleet and the Existing Lenders on the other hand, any and all defaults
under the Fleet Credit Agreement caused by the Offer or the Merger will be
waived.
Payment. Pursuant to the Fleet Consent, PlayCore Wisconsin has agreed that
contemporaneously with the consummation of the Offer and the closing and funding
of the initial loans provided by GE, PlayCore Wisconsin shall pay in full all
outstanding Fleet Credit Obligations and cash collateralize all outstanding
letters of credit or arrange for the support for such letters of credit by means
of guaranties or backup letters of credit reasonably acceptable to Fleet.
8. INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION.
In considering the recommendations of the Board, the stockholders should be
aware that GreenGrass and certain directors and officers of the Company have
interests in the Transaction different from those of stockholders generally
which may present such persons with certain potential conflicts of interest.
These interests are described below.
GreenGrass Holdings. GreenGrass owns a majority of the Shares of Company
and has the ability to elect all members of the Board. Currently, three of the
Company's seven directors are officers or directors of GreenGrass or one of its
affiliates. The general partners of GreenGrass consist of GreenGrass Capital,
L.L.C., a Delaware limited liability company ("GGC"), GreenGrass Capital II,
L.L.C., a Delaware limited liability company ("GGCII"), and GreenGrass
Management, L.L.C., a Delaware limited liability company ("GGM"). The members of
GGC include Glencoe Fund Partners and Equity-Linked Investors-II, a New York
limited partnership ("ELI-II") and certain trusts established by the State of
Michigan Retirement System (the "Michigan Trusts"). The members of GGCII include
Glencoe Growth Closely-Held Business Fund, L.P. ("Glencoe Growth"), ELI-II, the
Michigan Trusts, and MassMutual and certain of its affiliates. The investment
advisor of ELI-II is Desai Capital Management Incorporated ("DCMI").
David S. Evans, a director of the Company, is the President and Chief
Executive Officer of Glencoe Investment Corporation and Glencoe Capital, L.L.C.,
both of which are affiliates of Glencoe Fund Partners and Glencoe Growth. Ronald
D. Wray, a director of the Company, is a Principal and Chief Financial Officer
of Glencoe Capital, L.L.C. Timothy R. Kelleher, a director of the Company, is a
Senior Vice President of DCMI. Richard E. Ruegger, the Company's Chief Financial
Officer, and David H. Hammelman, the Company's Vice President of Human
Resources, are members of GGM and Mr. Ruegger is the sole manager of GGM.
As of April 13, 2000, GreenGrass beneficially owned an aggregate of
5,345,905 Shares and had the right to acquire an additional 1,426,750 Shares
through exercising the GreenGrass Warrant and converting the Debentures held by
GreenGrass on that date. GreenGrass will be entitled to receive approximately
$68.2 million for its securities of the Company upon consummation of the
Transaction. Immediately upon consummation of the Offer, all Shares held by
GreenGrass, the GreenGrass Warrant and Debentures held by GreenGrass will be
purchased by Acquisition Company for the same consideration received by the
public stockholders for their Shares (with the purchase price for the GreenGrass
Warrant and such Debentures
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determined on an as if exercised or converted basis, less the exercise or
conversion price to be paid thereunder).
In addition, the Company and GreenGrass entered into a Letter Agreement,
dated August 17, 1999 (the "GreenGrass Fee Agreement"), pursuant to which the
Company is obligated to pay GreenGrass $748,800 as an investment advisory fee in
cash upon consummation of the Transaction and reimburse GreenGrass for its
expenses and fees (including attorneys fees) incurred with respect to the
Transaction (the "GreenGrass Fee"). The Company is also obligated to indemnify
GreenGrass under the GreenGrass Fee Agreement from certain liabilities in
connection with the services it is providing under the GreenGrass Fee Agreement.
Glencoe Capital, L.L.C. is also party to an agreement with GreenGrass
pursuant to which GreenGrass has agreed to pay certain fees and reimburse
certain expenses of Glencoe Capital, L.L.C. in consideration of Glencoe Capital,
L.L.C. providing assistance to GreenGrass in providing financial advisory
services to the Company under the GreenGrass Fee Agreement. The agreement also
provides for indemnification of Glencoe Capital, L.L.C. by GreenGrass upon terms
substantially similar to those provided in the GreenGrass Fee Agreement.
The consideration GreenGrass will receive in the Transaction plus the
GreenGrass Fee is referred to herein as the "GreenGrass Consideration".
Directors and Executive Officers of the Company. As of April 13, 2000, the
directors and executive officers of the Company, as a group, actually owned an
aggregate of 16,528 Shares (representing less than 1% of the then outstanding
Shares). Their beneficial ownership is more fully described on Schedule I
hereto. All such directors and executive officers will receive in the
Transaction the same per Share consideration for their Shares as the public
stockholders will receive for their Shares in the Offer and the Merger. In the
aggregate, the directors and executive officers of the Company will be entitled
to receive approximately $167,000 for their Shares actually owned upon
consummation of the Transaction.
As of April 13, 2000, the directors and executive officers of the Company,
as a group, had Company Options to acquire an aggregate of 957,827 Shares. All
directors and executive officers of the Company will receive in the Transaction
the same consideration for such Company Options as if they exercised such
Company Options and tendered them in the Offer. In the aggregate, the directors
and executive officers of the Company will be entitled to receive approximately
$4.17 million for their Company Options, upon consummation of the Transaction.
In addition, Messrs. Ruegger and Hammelman own approximately 66.7% and
8.7%, respectively, of the membership interests of GGM. This will entitle them
to approximately .67% and .09%, respectively, of the GreenGrass Consideration
distributed to the partners of GreenGrass.
Frederic L. Contino, the Chief Executive Officer of the Company, and
certain other members of management will receive at the closing of the Merger
non-qualified options to purchase an aggregate of 43,500 shares of common stock
of Holdings at an exercise price of $10.10 per share and 5,341 shares of phantom
stock of Holdings. In addition, the aggregate amount of cash bonuses to be
received by executive officers of the Company upon consummation of the
Transaction under the management agreements described in "SPECIAL FACTORS -- The
Merger Agreement and Related Documents" is $1 million.
Indemnification. The Merger Agreement provides that the Surviving
Corporation will, for a period of six years following the Effective Time,
maintain all rights to indemnification in favor of the Company's current or
former officers, directors, employees and fiduciaries, and GreenGrass, to the
same extent provided in the Company's certificate of incorporation, by-laws or
indemnification agreements as in effect as of the date of the Merger Agreement
(including the GreenGrass Fee Agreement). The Surviving Corporation is also
required, from and after the Effective Time, to indemnify, defend and hold
harmless the present and former officers and directors of the Company in
connection with any claims relating to such person serving as a director,
officer, employee or agent of the Company or any of its subsidiaries or at the
request of the Company or any of its subsidiaries of any other entity to the
full extent permitted under applicable law or the Company's certificate of
incorporation and by-laws. In addition, the Merger Agreement requires that the
Surviving Corporation's certificate of incorporation and by-laws contain the
provisions with respect to indemnification set forth in the
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Company's certificate of incorporation and by-laws on the date of the Merger
Agreement and that such provisions shall not be amended, repealed or otherwise
modified for a period of six years after the date on which the Shares are
purchased by the Company pursuant to the Offer in any manner that would
adversely affect the rights thereunder of persons who at anytime prior to the
Effective Time were directors or officers of the Company with respect to actions
or omissions occurring at or prior to the Effective Time, unless such
modification is required by applicable law. The Merger Agreement also provides
that the Surviving Corporation will, for a period of six years after the
Effective Time, maintain in effect, without any lapses in coverage, policies of
directors' and officers' liability insurance for the benefit of those persons
who are covered by the Company's directors' and officers' liability insurance
policies at the Effective Time (including GreenGrass and its members), providing
coverage with respect to matters occurring prior to the Effective Time that is
at least equal to the coverage provided under the Company's current directors'
and officers' liability insurance policies, to the extent that such liability
insurance can be maintained at an annual cost to the Surviving Corporation of
not greater than 300% of the premium for the current Company directors' and
officers' liability insurance, provided that if such insurance cannot be so
maintained at such cost, the Surviving Corporation will maintain as much of such
insurance as can be so maintained at a cost equal to 300% of the current annual
premiums of the Company for such insurance. See "SPECIAL FACTORS -- The Merger
Agreement and Related Documents."
Board's Awareness of Potential Conflicts of Interest. The Board was aware
of the actual and potential conflicts of interest described above and considered
them along with the other matters described under "SPECIAL
FACTORS -- Recommendation of the Board of Directors of the Company; Fairness of
the Offer and the Merger."
9. FINANCING OF THE TRANSACTION.
The Offerors estimate that the total amount of funds required to purchase
all Shares validly tendered pursuant to the Offer, to consummate the Merger, to
acquire all securities of the Company pursuant to the PlayCore Purchase
Agreements, to refinance approximately $87 million of existing indebtedness
(assuming the conversion of all Debentures into Common Stock) of the Company and
its subsidiaries, and to pay all related costs and expenses will be
approximately $207.5 million. The Purchasers expect to obtain these funds from
borrowings by PlayCore Wisconsin under the Senior Credit Facility, the issuance
by PlayCore Wisconsin of the Sub Notes and the capitalization of Acquisition
Company through the Capital Contribution of $72.5 million by Parent. Parent will
obtain the funds for the Capital Contribution from Holdings.
Senior Credit Facility.
The Senior Credit Facility is comprised of (i) a six-year $30 million
revolving credit facility (the "Revolving Credit Facility"), (ii) a $25 million
six-year amortizing term loan facility (the "A Term Loan") and (iii) a $60
million seven-year amortizing term loan facility (the "B Term Loan" and,
together with the A Term Loan, the "Term Loans").
The Term Loans may only be incurred upon the consummation of the Offer and
may only be used to directly or indirectly refinance existing debt and finance
the Offer and the costs, fees and expenses associated therewith. The Term Loans
are to be repaid on a quarterly basis, and to the extent repaid, Term Loans may
not be reborrowed.
Borrowings under the Revolving Credit Facility after the Offer Closing may
be used to fund the Merger, for ordinary working capital and other general
corporate needs of PlayCore Wisconsin and its subsidiaries. The Revolving Credit
Facility will have a six-year term. The Revolving Credit Facility will be made
available to PlayCore Wisconsin in the form of revolving credit loans (the
"Revolving Loans") with sublimits available thereunder for letters of credit and
swingline loans.
Interest Rate and Fees. Until PlayCore Wisconsin delivers to the
administrative agent its financial statements for the fiscal quarter ending
after the closing of the Senior Credit Facility (the "Senior Credit Facility
Closing Date"), the Revolving Credit Facility and the A Term Loan will bear
interest at a rate per annum equal to, at PlayCore Wisconsin's election, (i) the
applicable LIBOR rate, plus a margin equal to
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3.50%, or (ii) the higher of (a) the prime rate as reported by The Wall Street
Journal or (b) the overnight federal funds rate plus 0.50% (such higher rate,
the "Base Rate"), plus a margin equal to 1.75%. The B Term Loan will bear
interest at a rate per annum equal to, a floating rate equal to, at PlayCore
Wisconsin's election, (i) the applicable LIBOR rate, plus a margin equal to
4.00%, or (ii) the Base Rate plus a margin equal to 2.25%.
Upon PlayCore Wisconsin's delivery to the administrative agent of its
financial statements for the fiscal quarter ending after the Senior Credit
Facility Closing Date, the applicable margins for each of the Revolving Credit
Facility, the A Term Loan and the B Term Loan will be adjusted (upwards only),
based on PlayCore Wisconsin's consolidated financial performance for the
trailing four quarters most recently ended.
From and after delivery of PlayCore Wisconsin's financial statements for
the fiscal quarter ending after the first six months following the Senior Credit
Facility Closing Date, the Revolving Credit Facility and the A Term Loan will
bear interest at a rate per annum equal to, at PlayCore Wisconsin's election,
(i) the applicable LIBOR rate, plus a margin ranging from 2.75% to 3.75%, based
on PlayCore Wisconsin's consolidated financial performance for the trailing four
quarters most recently ended, or (ii) the Base Rate, plus a margin ranging from
1.00% to 2.00%, based on PlayCore Wisconsin's consolidated financial performance
for the trailing four quarters most recently ended. The B Term Loan will bear
interest at a rate per annum equal to, at PlayCore Wisconsin's election, (i) the
applicable LIBOR rate, plus a margin ranging from 3.75% to 4.25%, based on
PlayCore Wisconsin's consolidated financial performance for the trailing four
quarters most recently ended, or (ii) the Base Rate, plus a margin ranging from
2.00% to 2.50%, based on PlayCore Wisconsin's consolidated financial performance
for the trailing four quarters most recently ended.
If there is a continuing event of default under the Senior Credit Facility,
the applicable interest rates and letter of credit fees shall be increased by
two percent per annum above the rates of interest or the rate of the letter of
credit fees otherwise applicable, and all outstanding obligations shall bear
interest at this default rate, as applicable.
PlayCore Wisconsin will pay certain fees in connection with the Senior
Credit Facility, including, without limitation, (i) arrangement fees, (ii)
agency fees, (iii) letter of credit fees and (iv) commitment fees. The
commitment fees will accrue on the unutilized total commitments under the Senior
Credit Facility at a per annum rate of 0.50%.
Scheduled Amortization. The A Term Loans will amortize quarterly over six
years with payments commencing on October 1, 2000, with total annual
amortization to be $2,500,000 initially, and increasing pursuant to a schedule
up to $5,250,000 in the last two years of the A Term Loan. The B Term Loan will
amortize quarterly over seven years with payments commencing on October 1, 2000,
with total annual amortization to be $600,000 over the first five years and
$28,500,000 total amortization in the last two years of the B Term Loan.
Mandatory Prepayments. Subject to certain standard exceptions, mandatory
prepayments of the Term Loans (and after the Term Loans have been repaid in
full, mandatory reductions to the commitments under the Revolving Credit
Facility) will be required to be made (i) with 75% of all excess cash flow,
which percentage will be reduced to 50% whenever the debt to EBITDA leverage
ratio of PlayCore Wisconsin is less than 3.5:1.0, (ii) with 100% of certain
permitted new debt or equity issuances (net of commissions, expenses and other
costs), (iii) with 100% of permitted asset sales (net of commissions, expenses
and other costs) (other than the sale of inventory in the ordinary course and
certain other exceptions), and (iv) subject to exceptions for repairs and
replacements, all net insurance proceeds or other awards payable in connection
with the loss, destruction or condemnation of any assets of the Company,
PlayCore Wisconsin or any of its subsidiaries.
Conditions Precedent to Closing of Senior Credit Facility. The availability
of the Senior Credit Facility is subject to the satisfaction of conditions
precedent typical for this type of facility, including, but not limited to, the
following: (i) the administrative agent shall have received an executed pay-off
letter confirming that all of the obligations to prior lenders (other than the
Company's Debentures held by non-affiliates and certain other indebtedness) will
be repaid in full from the proceeds of the Term Loans and the initial Revolving
Loan and
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all liens in favor of prior lenders will be terminated immediately upon such
payment (with certain agreed exceptions for existing indebtedness), (ii) all
necessary material governmental and third party waivers, consents and approvals
in connection with the Senior Credit Facility and the Offer shall have been
obtained and remain in effect, (iii) there shall not have occurred any material
adverse change in the consolidated financial condition of the Company and its
subsidiaries from the historical financial information provided to the Lenders,
(iv) each of the loans under the Senior Credit Facility shall have been rated by
a nationally recognized rating agency, (v) the Offer and each of the other
transactions contemplated thereby (other than the Merger) shall have been
consummated or will be contemporaneously consummated on the closing date, (vi)
Acquisition Company shall have received at least $70 million of equity on terms
acceptable to the administrative agent and PlayCore Wisconsin shall have issued
the Notes, and (vii) since January 14, 2000, there shall have been no material
change in loan syndication, financial or capital market conditions that, in the
judgment of the administrative agent, would impair the syndication of the loans.
Guaranty. All obligations of PlayCore Wisconsin under the Senior Credit
Facility are unconditionally guaranteed by each of the Company, PlayCore
Wisconsin's wholly owned subsidiary Heartland, and each of PlayCore Wisconsin's
future subsidiaries (collectively, the "Guarantors").
Security. The obligations of PlayCore Wisconsin and the Guarantors under
the Senior Credit Facility will be secured by a first priority perfected
security interest (subject to certain permitted liens agreed upon) in (i) 100%
of the capital stock of PlayCore Wisconsin and each Guarantor (other than the
Company) and (ii) all other available assets of PlayCore Wisconsin and each
Guarantor, other than exceptions customary for transactions of this type.
Representations and Warranties. The Senior Credit facility contains
representations and warranties customary for such types of facilities. These
representations and warranties address subjects including, but not limited to,
the following: (i) taxes, (ii) environmental matters, (iii) financial condition,
(iv) solvency, (v) litigation, and (vi) status of properties and business.
Financial Covenants. The Senior Credit Facility contains financial
covenants customary for transactions of this type including, but not limited to,
the following: (i) limits on capital expenditures, (ii) minimum EBITDA, and
(iii) a maximum funded debt to EBITDA ratio.
Other Covenants. The Senior Credit Facility contains covenants typical for
such types of facilities. Such covenants include, but are not limited to, the
following: (i) restrictions on indebtedness and liens, (ii) restrictions on
mergers, acquisitions and dispositions of assets, (iii) restrictions on
investments, (iv) restrictions on dividends and other restricted payments, (v)
restrictions on transactions with affiliates and (vi) a negative pledge.
Events of Default. The Senior Credit Facility contains events of default
typical for these types of facilities. Such events of default include, but are
not limited to, the following: (i) non-payment of amounts under the Senior
Credit Facility, (ii) any material misrepresentation in any of the agreements
related to the Senior Credit Facility, (iii) covenant defaults, (iv)
cross-defaults to other indebtedness, (v) judgment defaults, (vi) insolvency or
bankruptcy proceedings, and (vii) a change of control of the Company, in each
case, subject to specified grace periods, exceptions and/or thresholds.
Subordinated Note Agreement.
Under the terms of the Subordinated Note Agreement, GS Mezzanine Partners
II, L.P. and GS Mezzanine Partners II Offshore, L.P., investment funds
affiliated with The Goldman Sachs Group, Inc., have agreed to purchase $30
million in original principal amount of PlayCore Wisconsin's 18% Senior
Subordinated Notes due 2008 (such notes and any notes issued in exchange or
replacement therefor, the "Sub Notes"). The proceeds from the Sub Notes may only
be used to finance the Offer and the Merger and to pay any fees and expenses
incurred in connection with these matters.
The Sub Notes will be subordinated in right of payment to the indebtedness
under the Senior Credit Facility and will be senior in right of payment to all
subordinated debt of PlayCore Wisconsin and its
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subsidiaries. The Sub Notes will be guaranteed by the Company and by Heartland
and all future subsidiaries of PlayCore Wisconsin that are guarantors of the
Senior Credit Facility.
Interest. Interest on the Sub Notes will accrue at a rate of 18% per annum.
For the first four years, interest will be payable in cash semi-annually in
arrears at the rate of 14%, and the remaining 4% will be added to the
outstanding principal amount of the Sub Notes semi-annually in arrears. After
the fourth year, all of the interest will be payable in cash semi-annually in
arrears.
Optional Prepayments. At PlayCore Wisconsin's option, the Sub Notes may be
prepaid in whole at any time after the third anniversary of the issuance, at
premiums (ranging from 107% after year three to 100% after year six) multiplied
by the principal amount, plus accrued interest to the date of prepayment
(provided that no premium is payable with respect to any interest that has been
added to the principal amount of the Sub Notes). In addition, PlayCore Wisconsin
may prepay up to 35% of the principal amount of the Sub Notes with the proceeds
of an initial public offering of common stock at a price of 114% multiplied by
the principal amount of the Sub Notes, plus accrued interest to the date of
prepayment (provided that no premium is payable with respect to any interest
that has been added to the principal amount of the Sub Notes).
Mandatory Prepayments/Change of Control. Upon a change of control, PlayCore
Wisconsin will be required to offer to purchase the Sub Notes in whole at a
price equal to 101% of the principal amount of the Sub Notes as of the purchase
date, plus accrued interest to the date of prepayment (provided that no premium
is payable with respect to any interest that has been added to the principal
amount of the Sub Notes).
Conditions Precedent to Purchase of the Sub Notes. GS's obligations to
purchase the Sub Notes in connection with the closing of the Offer are subject
to satisfaction of conditions precedent typical for this type of facility,
including the following: (i) all of the conditions precedent to the consummation
of the Offer being satisfied in all material respects, (ii) the Offer being
consummated concurrently with the sale of the Sub Notes, (iii) the outstanding
indebtedness of the Company and its subsidiaries (other than the Company's
Debentures held by non-affiliates and certain other specified indebtedness)
being refinanced concurrently with the sale of the Sub Notes, (iv) Acquisition
Company having purchased shares of the Company's common stock for the aggregate
purchase price of $72,500,000 and Parent having made an equity contribution to
Acquisition Company of not less than 30% of the Company's and Parent's total
capitalization, (v) Acquisition Company owning not less than 85% of the
Company's outstanding common stock after giving effect to the Offer and the
other transactions contemplated by the Merger Agreement (other than the Merger),
(vi) the Senior Credit Facility being in full force and effect, and (vii) there
not having occurred any material adverse change in the consolidated business or
condition of the Company and its subsidiaries since December 31, 1999 and (viii)
certain other conditions customary for financings of this type.
Representations and Warranties. The Subordinated Note Agreement contains
representations and warranties customary for financing of this type. These
representations and warranties address subjects including, but not limited to,
the following: (i) taxes, (ii) environmental matters, (iii) financial condition,
(iv) solvency, (v) litigation, and (vi) employee benefit plans.
Covenants. The Sub Notes will contain customary covenants for financings of
this type, that, among other things, will limit the ability of PlayCore
Wisconsin and its subsidiaries to incur debt, create liens, pay cash dividends
on or repurchase capital stock, enter into agreements prohibiting the creation
of liens or restricting the ability of a subsidiary to pay money or transfer
assets to PlayCore Wisconsin, enter into certain transactions with affiliates,
dispose of certain assets and engage in mergers and consolidations.
Events of Default. The Sub Notes will contain events of default typical for
these types of financings. Such events of default include the following: (i)
failure to make interest or principal payments, (ii) bankruptcy or insolvency,
(iii) cross-acceleration or cross-payment default at maturity of other debt in
an aggregate outstanding amount of $5,000,000, (v) judgments in excess of
$5,000,000 in the aggregate, (vi) violation of covenants, and (vii) material
inaccuracy of representations and warranties. In the event that a default in the
payment of the Sub Notes or an event of default occurs, the interest rate on the
Sub Notes shall increase by 200 basis points above the otherwise applicable rate
for any period that includes such a default or event of default that remains
uncured. If an event of default under the Subordinated Note Agreement occurs,
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the principal, interest and all other amounts payable under all the Notes may be
declared due and payable in the manner and with the effect provided in the
Subordinated Note Agreement.
Exchange Rights. GS will have the right to exchange all or part of the
outstanding Sub Notes for one or more series of new notes (the "Replacement
Notes") having identical terms, provided that the different series of
Replacement Notes may differ as to relative ranking, interest rate or yield, as
long as the aggregate interest cost to PlayCore Wisconsin is not increased.
Registration Rights. GS will have demand registration rights with respect
to the outstanding Sub Notes or Replacement Notes, exercisable on or after the
earlier to occur of (i) an initial public offering of common stock and (ii) the
fifth anniversary of the issuance of the Sub Notes.
Resale. At any time after the first anniversary of the issuance of the Sub
Notes, PlayCore Wisconsin will take all actions necessary to enable GS to sell
the Sub Notes and Replacement Notes without registration under Rule 144A of the
Securities Act and, if requested by GS will agree to make an exchange offer not
involving registration under the Securities Act that will permit purchasers in
such Rule 144A transactions to exchange their Sub Notes for identical and freely
transferable notes. In addition, the Sub Notes and Replacement Notes can be
sold, pledged or otherwise transferred by GS on any other private market basis
at any time in accordance with applicable securities laws.
Capital Contribution.
Seventy-two million five hundred thousand dollars of the funds necessary
for Acquisition Company to fund the Transaction will be in the form of the
Capital Contribution from Parent. Parent will receive the funds necessary for
the Capital Contribution from a capital contribution from Holdings. Holdings
will be capitalized with $72.5 million of equity provided by investment funds
sponsored by affiliates of Chartwell, members of management of the Company and
certain other institutions.
PlayCore/Acquisition Company Loan Agreement.
A portion of the proceeds from the Financing Agreements will be loaned by
PlayCore Wisconsin to Acquisition Company (if the Short Form Requirement is met)
or the Company (if the Short Form Requirement is not met) pursuant to the terms
of the PlayCore/Acquisition Company Loan Agreement. Interest shall accrue on the
principal amount of the PlayCore/Acquisition Company Loan Agreement at 10% per
annum. The entire unpaid principal balance and all interest thereon is due and
payable in the event the Merger Agreement is terminated. The entire principal
balance and all interest thereon will be deemed paid in full immediately
following consummation of the Merger.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE RECEIPT OF FUNDS
CONDITION. See "THE TENDER OFFER -- Conditions to the Offer." The Offerors
believe that the proceeds, if obtained by the Purchasers, from the Senior Credit
Facility, the Sub Notes and the Capital Contribution will be sufficient to
satisfy the Receipt of Funds Condition. The Offerors, however, do not have any
alternative financing arrangements or plans to obtain sufficient funds to
purchase the Shares tendered in the Offer and to consummate the Merger if the
Purchasers are unable to obtain funds from the Credit Agreement, the Sub Notes
and the Capital Contribution.
10. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
The following is a general summary of certain U.S. federal income tax
consequences of the Offer and the Merger relevant to beneficial holders whose
Shares are purchased pursuant to the Offer or whose Shares are converted into
the right to receive cash in the Merger. This discussion is for general
information only and does not purport to consider all aspects of U.S. federal
income taxation that may be relevant to holders of Shares. The summary is based
on the provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable current and proposed United States Treasury Regulations issued
thereunder, judicial authority and administrative rulings and practice, all of
which are subject to change, possibly with retroactive effect, at any time and,
therefore, the following statements and conclusions could be altered or
modified. The discussion
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does not address holders of Shares in whose hands Shares are not capital assets,
nor does it address holders who hold Shares as part of a hedging, "straddle,"
conversion or other integrated transaction, or who received Shares upon
conversion of securities or exercise of warrants or other rights to acquire
Shares or pursuant to the exercise of employee stock options or otherwise as
compensation, or to holders of Shares who are in special tax situations (such as
insurance companies, tax-exempt organizations, financial institutions, qualified
plans, individual retirement accounts, United States expatriates or non-U.S.
persons). Furthermore, the discussion does not address the tax treatment of
holders who perfect appraisal rights in the Merger, nor does it address any
aspect of foreign, state or local taxation or estate and gift taxation.
Because individual circumstances may differ, each holder of Shares should
consult such holder's own tax advisor to determine the applicability of the
rules discussed below to such stockholder and the particular tax effects of the
Offer and the Merger, including the application and effect of state, local and
other income tax laws.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for federal income tax purposes under the Code (and also
may be a taxable transaction under applicable state, local, foreign and other
income tax laws). In general, for federal income tax purposes, a holder of
Shares will recognize gain or loss in an amount equal to the difference between
its adjusted tax basis in the Shares sold pursuant to the Offer or converted
into the right to receive cash in the Merger and the amount of cash received
therefor. Gain or loss must be determined separately for each block of Shares
(i.e., Shares acquired at the same cost in a single transaction) sold pursuant
to the Offer or converted to cash in the Merger. Such gain or loss will be
capital gain or loss and will be long-term gain or loss if, on the date of sale
(or, if applicable, the Effective Time), the Shares were held for more than one
year.
Under the United States federal income tax backup withholding rules,
payments in connection with the Offer or the Merger may be subject to "backup
withholding" at a rate of 31%. To avoid backup withholding, each tendering
stockholder, unless an exemption applies, must provide the Depositary with such
stockholder's correct taxpayer identification number and certify that such
stockholder is not subject to such backup withholding by completing the
Substitute Form W-9 included in the Letter of Transmittal. Backup withholding is
not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service. Refunds are not available from the Company. Certain persons
generally are entitled to exemption from backup withholding, including
corporations, financial institutions and certain foreign individuals. Each
stockholder should consult with such holder's own tax advisor as to such
holder's qualification for exemption from backup withholding and the procedure
for obtaining such exemption.
All stockholders surrendering Shares pursuant to the Offer should complete
and sign the main signature form and the Substitute Form W-9 included as part of
the Letter of Transmittal to provide the information and certification necessary
to avoid backup withholding (unless an applicable exemption exists and is proved
in a manner satisfactory to Acquisition Company and the Depositary).
Noncorporate foreign stockholders should complete and sign the main signature
form and a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the Depositary, in order to avoid backup withholding. See
Instruction 12 to the Letter of Transmittal.
11. FEES AND EXPENSES.
Except as otherwise provided herein, all fees and expenses incurred in
connection with the Transaction, the Merger Agreement and the other transactions
contemplated thereby will be paid by the party incurring such fees and expenses,
except that the Company will pay for all fees and expenses relating to the
filing, printing and mailing of the documents in connection with the Offer, the
Schedule TO and the proxy statement, if any.
The Company has engaged DLJ as financial advisor in connection with the
Transaction, and will pay to DLJ approximately $1.8 million upon consummation of
the Transaction plus reasonable out-of-pocket expenses and fees (including
attorneys fees) incurred by DLJ for services rendered by it in connection with
the consummation of the Transaction. The Company has agreed to indemnify DLJ
against certain liabilities in
42
<PAGE> 50
connection with the Transaction, including certain liabilities under the federal
securities laws. The fees and expenses of DLJ are also described in "SPECIAL
FACTORS -- Opinion of the Company's Financial Advisor."
The Company has engaged GreenGrass as financial advisor in connection with
the Transaction pursuant to the GreenGrass Fee Agreement, and will pay to
GreenGrass, upon the consummation of the Transaction, a transaction fee of
$748,800, plus reasonable out-of-pocket expenses and fees (including attorneys
fees) incurred by GreenGrass for services rendered by it in connection with the
consummation of the Transaction and the Company has agreed thereunder to
indemnify GreenGrass in connection with the services it is providing under the
GreenGrass Fee Agreement.
Acquisition Company and Chartwell entered into a Letter Agreement, dated
April 13, 2000 (the "Chartwell Fee Agreement"), pursuant to which Acquisition
Company is, and immediately following the effectiveness of the Merger, PlayCore
Wisconsin will be, obligated to pay Chartwell an advisory fee equal to 1% of the
total capitalization of Acquisition Company and the Company (including the
funded debt under the Senior Credit Facility, the Sub Notes and the Capital
Contribution), plus reimbursement for fees and expenses (including attorneys
fees) incurred with respect to the Transaction, in cash upon consummation of the
Transaction.
The Purchasers have retained D.F. King & Co., Inc. to act as the
Information Agent in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone, facsimile, telegraph and personal
interview and may request brokers, dealers and other nominee stockholders to
forward Offer materials to beneficial owners. The Information Agent will receive
reasonable and customary compensation for services relating to the Offer and
will be reimbursed for certain reasonable out-of-pocket expenses. The Company
also has agreed to indemnify the Information Agent against certain liabilities
and expenses in connection with the Offer, including certain liabilities under
the federal securities laws.
First Chicago Trust Company of New York has been retained by the Purchasers
to act as the Depositary in connection with the Offer. The Depositary has not
been retained to make solicitations or recommendations in its role as
Depositary. The Depositary will receive reasonable and customary compensation
for services relating to the Offer and will be reimbursed for certain reasonable
out-of-pocket expenses. The Company has also agreed to indemnify the Depositary
against certain liabilities and expenses in connection with the Offer, including
certain liabilities under the federal securities laws.
The following table presents the estimated fees and expenses to be incurred
by the Offerors in connection with the Offer and the Merger:
<TABLE>
<S> <C>
Financing Fees.............................................. $ 3,200,000
Financial Advisors Fees and Expenses........................ 4,968,800
Legal Fees and Expenses..................................... 2,874,000
Accounting and Other Professional Fees and Expenses......... 730,000
Printing and Mailing........................................ 60,000
Filing Fees................................................. 5,805
Depositary Fees............................................. 30,000
Information Agent Fees...................................... 15,000
Miscellaneous............................................... 445,000
-----------
Total............................................. $12,328,605
===========
</TABLE>
Except as set forth above, the Offerors will not pay any fees or
commissions to any broker or dealer or any other person for soliciting tenders
of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust
companies will, upon request only, be reimbursed by the Offerors for customary
mailing and handling expenses incurred by them in forwarding material to their
customers. Assuming consummation of the Offer and the Merger, the Company is
responsible for all of the foregoing fees and expenses.
43
<PAGE> 51
THE TENDER OFFER
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions set forth in the Offer
(including, if the Offer is extended or amended, the terms and conditions of any
extension or amendment), either Acquisition Company or the Company will accept
for payment and pay for any and all Shares validly tendered prior to the
Expiration Date and not withdrawn in accordance with the procedures set forth in
"THE TENDER OFFER -- Withdrawal Rights" as soon as practicable after the
Expiration Date. The term "Expiration Date" means 5:00 p.m., New York City time,
on May 18, 2000 unless and until the Offerors, in their sole discretion (but
subject to the terms of the Merger Agreement), shall have extended the period of
time during which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Offer, as so extended by the
Offerors, shall expire.
The Offer is subject to certain conditions (the "Offer Conditions"),
including, among other things, the Minimum Condition and the Receipt of Funds
Condition. Such conditions are set forth in "THE TENDER OFFER -- Conditions to
the Offer." If the Offer Conditions are not satisfied or waived or any of the
events specified in "THE TENDER OFFER -- Conditions to the Offer" have occurred
or are determined by the Offerors to have occurred prior to the Expiration Date,
the Offerors may either, subject to the terms of the Merger Agreement, extend
the Offer or terminate the Offer. If the Offerors terminate the Offer, the
Purchasers shall not accept for payment any Shares and return all tendered
Shares to tendering stockholders.
The Company and Acquisition Company have agreed that, without the prior
written consent of Parent, no change may be made to the Offer by the Company or
the Acquisition Company that (i) reduces the number of Shares subject to the
Offer, (ii) increases or decreases the Offer Price, (iii) amends or modifies the
Offer Conditions in any manner, (iv) imposes any additional conditions or amend
any other term of the Offer or (v) extends the expiration date of the Offer
beyond the Expiration Date.
The Offerors, in their sole discretion, but subject to the terms of the
Merger Agreement, may extend, delay, terminate or amend the Offer, in any manner
at any time prior to the Expiration Date. Any such extension, delay, termination
or amendment will be followed, as promptly as practicable, by public
announcement thereof, with such announcement in the case of an extension to be
made no later than 9:00 a.m., New York City time, on the next business day after
the previously scheduled Expiration Date in accordance with the public
announcement requirements of Rule 14e-l of the Exchange Act. Subject to
applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange
Act, which require that material changes be promptly disseminated to
stockholders in a manner reasonably designed to inform them of such changes) and
without limiting the manner in which the Company may choose to make any public
announcement, the Company will have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a press
release to the Dow Jones News Service or as otherwise may be required by
applicable law.
If the Purchasers make a material change in the terms of the Offer or the
information concerning the Offer, or if they waive a material Offer Condition,
the Purchasers will extend the Offer to the extent required by Rules 14d-4(c),
14d-6(d) and 14e-1 under the Exchange Act. Pursuant to these rules, the minimum
period during which an offer must remain open following material changes in the
terms of the offer or information concerning the offer, other than a change in
price or a change in the percentage of securities sought, will depend upon the
facts and circumstances then existing, including the relative materiality of the
changed terms or information. With respect to a change in price or a change in
the percentage of securities sought, a minimum period of ten business days is
generally required to allow for adequate dissemination to stockholders and
investor response.
During any extensions of the Offer by the Offerors, all Shares previously
tendered and not withdrawn will remain subject to the Offer. Tendering
stockholders will continue to have the right to withdraw any tendered Shares
during such extension. See "THE TENDER OFFER -- Withdrawal Rights." Under no
circumstances will interest be paid on the purchase price for tendered Shares,
whether or not the Offer is extended.
44
<PAGE> 52
This Offer to Purchase, the Letter of Transmittal and other relevant
materials will be mailed to record holders of Shares whose names appear on the
Company's list of stockholders and will be furnished, for subsequent transmittal
to beneficial owners of Shares, to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the Company's list of stockholders or, where applicable, who are
listed as participants in the security position listing of The Depository Trust
Company.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of the Offer as so
extended or amended), the Purchasers will purchase, by accepting for payment,
and will pay for, all Shares validly tendered prior to the Expiration Date (and
not properly withdrawn in accordance with "THE TENDER OFFER -- Withdrawal
Rights") as promptly as practicable after the Expiration Date, with Acquisition
Company agreeing to accept for payment and pay for all Shares validly tendered,
provided that the Shares validly tendered (and not withdrawn) pursuant to the
Offer plus the Shares acquired by Acquisition Company pursuant to the PlayCore
Purchase Agreements (including Shares issuable upon the exercise or conversion
of derivative securities purchased thereunder) constitute at least 90% of the
outstanding Shares. If the foregoing requirement is not met, but all conditions
to the Offer are met, Acquisition Company has agreed to accept for payment and
pay for the first 425,439 Shares validly tendered and the Company has agreed to
accept for payment and pay for all Shares validly tendered in excess of such
425,439 Shares, in each case as promptly as practicable after the Expiration
Date. Subject to applicable rules of the Commission and the terms of the Merger
Agreement, the Purchasers expressly reserve the right, in their discretion, to
delay acceptance for payment of, or payment for, Shares in order to comply, in
whole or in part, with any applicable law. See "THE TENDER OFFER -- Terms of the
Offer," and "THE TENDER OFFER -- Certain Legal Matters; Regulatory Approvals."
The reservation by the Purchasers of the right to delay the acceptance or
purchase of, or payment for, the Shares is subject to the provisions of Rule
14e-1(c) under the Exchange Act, which requires the Purchasers to pay the
consideration offered or to return the Shares deposited by, or on behalf of,
stockholders, promptly after the termination or withdrawal of the Offer.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after such Shares are validly tendered and not properly withdrawn
prior to the Expiration Date. See "THE TENDER OFFER -- Procedures for Tendering
Shares" for a complete discussion of how Shares can be validly tendered.
For purposes of the Offer, the Purchasers will be deemed to have accepted
for payment (and thereby purchased) Shares validly tendered and not properly
withdrawn if, as and when the applicable Purchaser gives oral or written notice
to the Depositary of its acceptance for payment of such Shares. Upon the terms
and subject to the conditions of the Offer, payment for Shares accepted pursuant
to the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payments from the Purchasers and transmitting payments to such
tendering stockholders whose Shares have been accepted for payment.
UNDER NO CIRCUMSTANCES WILL INTEREST ON THE OFFER PRICE FOR SHARES BE PAID
BY THE PURCHASERS, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT OR EXTENSION
OF THE EXPIRATION DATE.
If any validly tendered Shares are not accepted for payment for any reason
pursuant to the terms and conditions of the Offer, or if the certificates for
tendered Shares are submitted evidencing more Shares than are tendered,
certificates evidencing Shares not purchased will be returned, without expense,
to the tendering stockholder, or such other person or entity as the tendering
stockholder shall specify in the Letter of Transmittal, as promptly as
practicable following the expiration, withdrawal or termination of the Offer. In
the case of Shares tendered by book-entry transfer into the Depositary's Account
at The Depositary Trust Company (the "Book-Entry Transfer Facility") pursuant to
the procedures set forth in "THE TENDER OFFER -- Procedures for Tendering
Shares," such Shares will be credited to such account at the Book-Entry Transfer
Facility as promptly as practicable following the expiration, withdrawal or
termination of the Offer.
45
<PAGE> 53
IF, PRIOR TO THE EXPIRATION DATE, THE OFFERORS INCREASE THE CONSIDERATION
TO BE PAID PER SHARE PURSUANT TO THE OFFER, THE PURCHASERS WILL PAY SUCH
INCREASED CONSIDERATION FOR ALL SUCH SHARES PURCHASED PURSUANT TO THE OFFER,
WHETHER OR NOT SUCH SHARES WERE TENDERED PRIOR TO SUCH INCREASE IN
CONSIDERATION.
Subject to the terms of the Merger Agreement, the Purchasers reserve the
right to assign to Acquisition Company, or to any other direct or indirect
wholly-owned subsidiary of Holdings, Parent or Acquisition Company, the right to
purchase all or any portion of the Shares tendered pursuant to the Offer, but
any such assignment will not relieve the Purchasers of their obligations under
the Offer and will in no way prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant to
the Offer.
3. PROCEDURES FOR TENDERING SHARES.
Valid Tender of Shares. In order for Shares to be validly tendered pursuant
to the Offer, a stockholder must, prior to the Expiration Date, either (i)
deliver to the Depositary at one of its addresses set forth on the back cover of
this Offer to Purchase (a) a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof) with any required signature
guarantees or an Agent's Message (as defined below) in connection with a
book-entry transaction, (b) the certificates representing Shares to be tendered
(the "Certificates") or timely confirmation of a book-entry transfer of Shares
into the Depositary's account at the Book-Entry Transfer Facility and (c) any
other documents required to be included with the Letter of Transmittal under the
terms and subject to the conditions thereof and of this Offer to Purchase, and,
if applicable, cause such stockholder's broker, dealer, commercial bank or trust
company to tender applicable Shares pursuant to the procedures for book-entry
transfer described below or (ii) comply with the guaranteed delivery procedures
described below.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Shares by (i) causing such securities to be
transferred in accordance with the Book-Entry Transfer Facility's procedures
into the Depositary's account and (ii) causing the Letter of Transmittal to be
delivered to the Depositary by means of an Agent's Message. Although delivery of
Shares may be effected through book-entry transfer, either the Letter of
Transmittal (or a manually signed facsimile thereof), properly completed and
duly executed, together with any required signature guarantees, or an Agent's
Message in lieu of the Letter of Transmittal, and any other required documents,
must, in any case, be transmitted to and received by the Depositary prior to the
Expiration Date at one of its addresses set forth on the back cover of this
Offer to Purchase, or the tendering stockholder must comply with the guaranteed
delivery procedures described below. DELIVERY OF THE LETTER OF TRANSMITTAL AND
ANY OTHER DOCUMENTS OR INSTRUCTIONS TO THE BOOK-ENTRY TRANSFER FACILITY IN
ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of the
conformation of a book-entry transfer of Shares into the Depositary's account at
the Book-Entry Transfer Facility, which states that the Book-Entry Transfer
Facility has received an express acknowledgment from a participant in the
Book-Entry Transfer Facility tendering the
46
<PAGE> 54
Shares that such participant has received and agrees to be bound by the terms of
the Letter of Transmittal and that the Purchasers may enforce such agreement
against such participant.
Signature Guarantee. All signatures on a Letter of Transmittal must be
guaranteed by a member in good standing of the Securities Transfer Agents
Medallion Program, or by any other firm which is a bank, broker, dealer, credit
union or savings association (each of the foregoing being referred to as an
"Eligible Institution" and collectively as "Eligible Institutions"), unless the
Shares tendered thereby are tendered (i) by the registered holder of Shares
(which term, for the purposes of this document, shall include any participant in
the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of Shares) who has not completed the box labeled "Special
Delivery Instructions" or the box labeled "Special Payment Instructions" on the
Letter of Transmittal or (ii) for the account of an Eligible Institution. See
Instruction 1 to the Letter of Transmittal.
If a Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a
Certificate not accepted for payment or not tendered is to be returned to, a
person other than the registered holder(s), then the Certificate must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on the Certificate,
with the signature(s) on such certificate or stock powers guaranteed as
described above. See Instruction 5 to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Certificates are not immediately available or
time will not permit all required documents to reach the Depositary on or prior
to the Expiration Date or the procedures for book-entry transfer cannot be
completed on a timely basis, such Shares may nevertheless be tendered if all the
following guaranteed delivery procedures are duly complied with:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Company, is received by
the Depositary as provided below prior to the Expiration Date; and
(iii) the certificates for (or a Book-Entry Confirmation with respect
to) all tendered Shares in proper form for transfer, together with a
properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof) with any required signature guarantee (or, in the
case of a book-entry transfer, an Agent's Message) and any other documents
required by such Letter of Transmittal, are received by the Depositary
within three Trading Days after the date of execution of the Notice of
Guaranteed Delivery. A "Trading Day" is any day on which the AMEX is open
for business.
Any Notice of Guaranteed Delivery may be delivered by hand, transmitted by
facsimile transmission or mailed to the Depositary and must include a guarantee
by an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery.
Tender Constitutes an Agreement. The valid tender of Shares pursuant to one
of the procedures described above will constitute a binding agreement between
the tendering stockholder and the Purchasers on the terms and subject to the
conditions of the Offer.
Determination of Validity. All questions as to the validity, form,
eligibility (including, but not limited to, time of receipt) and acceptance for
payment of any tendered Shares pursuant to any of the procedures described above
will be determined by the Purchasers, in their sole discretion, whose
determination will be final and binding on all parties. The Purchasers reserve
the absolute right to reject any or all tenders of any Shares determined by them
not to be in proper form or if the acceptance for payment of, or payment for,
such Shares may, in the opinion of the Company's counsel, be unlawful. The
Purchasers also reserve the absolute right, in their sole discretion, to waive
any of the Offer Conditions (subject to the terms of the Merger Agreement) or
any defect or irregularity in any tender with respect to Shares of any
particular stockholder, whether or not similar defects or irregularities are
waived in the case of other stockholders. No tender of Shares will be deemed to
have been validly made until all defects and irregularities have been cured or
waived.
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<PAGE> 55
None of the Offerors or any of their respective affiliates, the Depositary, the
Information Agent or any other person or entity will be under any duty to give
any notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification.
The Purchasers' interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding.
Appointment as Proxy. By executing a Letter of Transmittal (or delivering
an Agent's Message) as set forth above, a tendering stockholder irrevocably
appoints the Purchasers' designees as such stockholder's attorney-in-fact and
proxy, with full power of substitution, to vote in such manner as such
attorney-in-fact and proxy (or any substitute thereof) shall deem proper in its
sole discretion, and to otherwise act (including pursuant to written consent) to
the full extent of such stockholder's rights with respect to the Shares tendered
by such stockholder and accepted for payment by the Purchasers (and any and all
dividends, distributions, rights or other securities issued in respect of such
Shares on or after April 13, 2000). All such proxies shall be considered coupled
with an interest in the tendered Shares and shall be irrevocable. This
appointment will be effective if, when, and only to the extent that, the
Purchasers accept such Shares for payment pursuant to the Offer. Upon such
acceptance for payment, all prior proxies given by such stockholder with respect
to such Shares and other securities will, without further action, be revoked,
and no subsequent proxies may be given (and, if given, will not be deemed
effective). The designees of the Purchasers will, with respect to the Shares and
other securities for which the appointment is effective, be empowered to
exercise all voting and other rights of such stockholder as they in their sole
discretion may deem proper at any annual, special, adjourned or postponed
meeting of the Company's stockholders, by written consent in lieu of any such
meeting or otherwise. The Purchasers reserve the right to require that, in order
for Shares to be deemed validly tendered, immediately upon the Purchaser's
acceptance for payment of such Shares, such Purchaser must be able to exercise
all rights (including, without limitation, all voting rights) with respect to
such Shares and receive all dividends and distributions.
Backup Withholding. Under United States federal income tax law, the amount
of any payments made by the Depositary to stockholders (other than corporate and
certain other exempt stockholders) pursuant to the Offer may be subject to
backup withholding tax at a rate of 31%. To avoid such backup withholding tax
with respect to payments made pursuant to the Offer, a non-exempt, tendering
stockholder must provide the Depositary with such stockholder's correct taxpayer
identification number and certify under penalties of perjury that such
stockholder is not subject to backup withholding tax by completing the
Substitute Form W-9 included as part of the Letter of Transmittal. If backup
withholding applies with respect to a stockholder or if a stockholder fails to
deliver a completed Substitute Form W-9 to the Depositary or otherwise establish
an exemption, the Depositary is required to withhold 31% of any payments made to
such stockholder. See "SPECIAL FACTORS -- Certain United States Federal Income
Tax Consequences" and the information set forth under the heading "Important Tax
Information" contained in the Letter of Transmittal.
4. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by the Purchasers pursuant to the Offer,
may also be withdrawn at any time after June 15, 2000, or at such later time as
may apply if the Offer is extended.
If the Purchasers extend the Offer, are delayed in their acceptance for
payment of Shares or are unable to accept Shares for payment pursuant to the
Offer for any reason, then, without prejudice to the Purchasers' rights under
the Offer, the Depositary may, nevertheless, on behalf of the Purchasers, retain
tendered Shares, and such Shares may not be withdrawn except to the extent that
tendering stockholders are entitled to withdrawal rights as described below. Any
such delay will be an extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase. Any such notice
of withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the
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<PAGE> 56
number of Shares to be withdrawn, and the name of the registered holder of such
Shares, if different from that of the person who tendered such Shares. If
Certificates evidencing Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
Certificates, the serial numbers shown on such Certificates must be submitted to
the Depositary and the signature(s) on the notice of withdrawal must be
guaranteed by an Eligible Institution, unless such Shares have been tendered for
the account of an Eligible Institution. Shares tendered pursuant to the
procedure for book-entry transfer as set forth in "THE TENDER
OFFER -- Procedures for Tendering Shares" may be withdrawn only by means of the
withdrawal procedures made available by the Book-Entry Transfer Facility, must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Shares and must otherwise comply with the
Book-Entry Transfer Facility's procedures.
Withdrawals of tendered Shares may not be rescinded without the Purchasers'
consent and any Shares properly withdrawn will thereafter be deemed not validly
tendered for purposes of the Offer. All questions as to the form and validity
(including time of receipt) of notices of withdrawal will be determined by the
Purchasers in their sole discretion, which determination will be final and
binding. None of the Offerors or any of their affiliates, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
Any Shares properly withdrawn may be re-tendered at any time prior to the
Expiration Date by following any of the procedures described in "THE TENDER
OFFER -- Procedures for Tendering Shares."
5. PRICE RANGE OF SHARES.
The market for the Shares is AMEX. The ticker symbol for the Shares is
"PCO." The following table sets forth, for the periods indicated, the high and
low sales prices per share of Common Stock on AMEX:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1998:
First Quarter............................................. 4 3/8 3 3/8
Second Quarter............................................ 4 15/16 3 5/8
Third Quarter............................................. 4 1/2 3 11/16
Fourth Quarter............................................ 5 1/4 3 1/2
1999:
First Quarter............................................. 5 5/8 4 1/4
Second Quarter............................................ 6 1/2 4 3/4
Third Quarter............................................. 9 5 3/8
Fourth Quarter............................................ 10 3/4 6 3/8
2000:
First Quarter............................................. 9 3/4 6 3/8
Second Quarter (through April 19, 2000)................... 9 5/8 9 3/4
</TABLE>
On April 13, 2000, the last full trading day prior to the public
announcement of the Offer and the execution of the Merger Agreement, the
reported closing sales price of the Common Stock on AMEX was $6 3/4 per Share.
On April 19, 2000, the last trading day prior to the date of this Offer to
Purchase, the last reported sales price of the Common Stock on AMEX was $9 3/4
per Share. Stockholders are urged to obtain current market quotations for the
Common Stock.
6. DIVIDENDS AND DISTRIBUTIONS.
The Company has not paid any dividends with respect to the Shares at any
time during the past two years. Pursuant to the Merger Agreement, without
Acquisition Company's written consent, the Company will not, and will cause each
of its subsidiaries not to, (i) with certain exceptions, issue, sell or pledge
any Shares of its capital stock or other ownership interest in the Company or
any subsidiary, or any securities convertible into or exchangeable for any such
Shares or ownership interest, or any rights, warrants or options to acquire or
49
<PAGE> 57
with respect to any such Shares of capital stock, ownership interest, or
convertible or exchangeable securities (or derivative instruments in respect of
the foregoing); (ii) effect any stock split or otherwise change its
capitalization as it exists on the date hereof, or directly or indirectly
redeem, purchase or otherwise acquire any Shares of its capital stock or capital
stock of any subsidiary of the Company; or (iii) declare, set aside or pay any
dividend or make any other distribution or payment with respect to any Shares of
its capital stock or other ownership interests (other than any such payments to
the Company by any of its subsidiaries).
7. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company. The information concerning the Company contained in this Offer
to Purchase, including financial information, has been furnished by the Company
or has been taken from or is based upon publicly available documents and records
on file with the Commission and other public sources. None of Holdings, Parent,
Acquisition Company or the Information Agent or any of their affiliates assumes
any responsibility for the accuracy or completeness of the information
concerning the Company contained in such documents and records or for any
failure by the Company to disclose events which may have occurred or may affect
the significance or accuracy of any such information but which are unknown to
them.
The Company is a Delaware corporation. The address of the Company's
principal executive offices is Riverfront Centre, Suite 204, 15 West Milwaukee
Street, Janesville, Wisconsin. The telephone number of the Company at such
offices is (608) 741-7183. The Company is a leading designer, manufacturer and
marketer of commercial and consumer playground equipment and backyard products.
The Company's commercial playground systems are primarily sold under the
brand name GameTime. GameTime is one of the leading manufacturers and marketers
of modular and custom commercial outdoor playground equipment in the world.
GameTime markets its playground systems and components to municipalities,
schools, park districts and other playground equipment users through a network
of independent representatives.
The Company's consumer playground systems are primarily sold under the
brand name Swing-N-Slide. The Swing-N-Slide product line is marketed through
hardware and home center customers. The Swing-N-Slide do-it-yourself wooden
playground equipment is sold worldwide through more than 6,000 home center,
building supply and hardware stores.
On February 16, 1999, the Company acquired all of the capital stock of
Heartland, a maker of wooden storage buildings. Heartland has a national network
of company-owned sales branches and independent dealers to sell its products,
which include yard barns and custom-built garages.
Historical Financial Information. Certain financial information relating to
the Company is hereby incorporated by reference to (i) the audited financial
statements for the Company's 1999 and 1998 fiscal years set forth in Item I of
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1999 filed with the Commission on March 30, 2000 (the "1999 10-K"); and (ii) the
three month and nine month fiscal periods ended September 30, 1999 set forth in
Part I of the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999 filed with the Commission on November 12, 1999. These reports
may be inspected at, and copies may be obtained from, the same places and in the
manner set forth below.
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Set forth below is certain selected consolidated financial information
relating to the Company and its subsidiaries which has been derived from the
financial statements contained in the 1999 10-K. More comprehensive financial
information is included in these reports and other documents filed by the
Company with the Commission. The financial information that follows is qualified
in its entirety by reference to these reports and other documents, including the
financial statements and related notes contained therein.
PLAYCORE, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1999
----------------- -----------------
<S> <C> <C>
OPERATING DATA:
Net Sales................................................. $114,792 $191,936
Operating income.......................................... 15,574 21,159
Net earnings.............................................. 4,676 7,086
Basic net earnings per share.............................. 0.59 0.89
Diluted net earnings per share............................ 0.51 0.73
BALANCE SHEET DATA:
(At End of Period)
Total assets.............................................. $103,440 $140,311
Total liabilities......................................... 87,064 116,680
Stockholders' equity...................................... 16,376 23,631
Book value per share...................................... 2.07 2.98
Ratio of earnings to fixed changes........................ 1.90x 2.06x
</TABLE>
Financial Projections. The Company does not, as a matter of course, make
public forecasts or projections as to its future financial performance.
Nevertheless, the Company prepared the Management Projections for inclusion in
the Confidential Offering Memorandum provided to potential buyers in the auction
process. In addition, the Company assisted Chartwell in preparing financial
projections through 2009 for possible lenders so as to enable Chartwell to
obtain the financing (the "Financing Projections"). These projections were
provided to the Board and its financial and legal advisors and are set forth
below.
THE PROJECTIONS BELOW WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR
IN COMPLIANCE WITH PUBLISHED GUIDELINES OF THE SEC REGARDING PROJECTIONS OR THE
GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
REGARDING PROJECTIONS.
THE OFFERORS INTEND THAT THE PROJECTIONS ARE "FORWARD-LOOKING STATEMENTS"
INTENDED TO QUALIFY FOR THE SAFE HARBORS FROM LIABILITY ESTABLISHED BY THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THE PROJECTIONS, WHILE
PRESENTED WITH NUMERICAL SPECIFICITY, ARE BASED ON MYRIAD ESTIMATES AND
ASSUMPTIONS AND INVOLVE JUDGMENTS WITH RESPECT TO, AMONG OTHER THINGS, FUTURE
ECONOMIC AND COMPETITIVE CONDITIONS, INFLATION RATES, AND FUTURE BUSINESS
CONDITIONS. THESE ESTIMATES AND ASSUMPTIONS MAY NOT BE REALIZED AND ARE
INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC, AND COMPETITIVE
UNCERTAINTIES, MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY. THEREFORE,
THERE CAN BE NO ASSURANCE THAT THE PROJECTIONS BELOW WILL PROVE TO BE RELIABLE
ESTIMATES OF PROBABLE FUTURE PERFORMANCE. IT IS QUITE LIKELY THAT ACTUAL RESULTS
WILL VARY MATERIALLY FROM THESE ESTIMATES. IN LIGHT OF THE UNCERTAINTIES
INHERENT IN PROJECTIONS OF ANY KIND, THE INCLUSION OF PROJECTIONS IN THIS OFFER
SHOULD NOT BE REGARDED AS A REPRESENTATION BY ANY PARTY THAT THE ESTIMATED
RESULTS WILL BE REALIZED. THERE CAN BE NO ASSURANCES IN THIS
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<PAGE> 59
REGARD. THE PROJECTIONS WERE NOT PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES AND WERE NOT AUDITED OR REVIEWED BY ANY INDEPENDENT
ACCOUNTING FIRM, NOR DID ANY INDEPENDENT ACCOUNTING FIRM PERFORM ANY OTHER
SERVICES WITH RESPECT TO THESE PROJECTIONS. NONE OF THE OFFERORS OR ANY OTHER
PERSON ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY OF SUCH PROJECTIONS.
MANAGEMENT PROJECTIONS
<TABLE>
<CAPTION>
PROJECTED FISCAL YEAR ENDED
DECEMBER 31,
---------------------------
2000 2001 2002
------- ------- -------
<S> <C> <C> <C>
Revenues.................................................... $223.6 $256.5 $290.2
Cost of Goods Sold.......................................... 125.1 142.2 160.5
------ ------ ------
GROSS PROFIT................................................ $ 98.5 $114.3 $129.7
Selling , General and Admin. Expenses....................... $ 63.9 $ 72.8 $ 81.7
Corporate Expense........................................... 4.2 4.4 4.6
Amortization................................................ 2.7 2.7 2.7
------ ------ ------
EBIT........................................................ $ 27.7 $ 34.4 $ 40.7
Depreciation & Amortization................................. $ 6.4 $ 6.7 $ 6.8
------ ------ ------
EBITDA...................................................... $ 34.1 $ 41.1 $ 47.5
Capital Expenditures........................................ $ 5.9 $ 6.3 $ 6.5
====== ====== ======
</TABLE>
FINANCING PROJECTIONS
<TABLE>
<CAPTION>
PROJECTED FISCAL YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................... $223.5 $243.8 $261.8 $279.1 $296.3 $314.1 $333.3 $354.1 $376.4 $400.6
Cost of Goods Sold......... 127.6 138.6 147.6 156.2 165.1 174.4 184.3 195.0 206.6 219.0
GROSS PROFIT............. 95.9 105.2 114.1 122.9 131.1 139.7 149.0 159.0 169.9 181.6
SG&A Expenses.............. 59.7 64.2 68.6 72.9 77.2 81.8 86.6 91.8 97.4 103.4
Corporate Expenses......... 3.7 3.7 3.9 4.1 4.4 4.7 4.9 5.1 5.4 5.7
EBITDA................... $ 32.6 $ 37.2 $ 41.6 $ 45.8 $ 49.5 $ 53.3 $ 57.5 $ 62.0 $ 67.0 $ 72.4
Total Depreciation......... 3.5 3.6 3.7 3.8 3.8 3.8 3.8 3.8 3.8 3.8
Amortization of Existing
Goodwill................. 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9 1.9
Amortization of New
Goodwill................. 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9 3.9
EBIT..................... 22.2 26.8 31.1 35.1 38.8 42.6 46.8 52.3 57.3 62.7
</TABLE>
Certain Other Information. Except as set forth in this Offer to Purchase,
neither Company, any of its affiliates nor, to the best knowledge of Company,
any of the persons listed on Schedule I, or any associate or majority owned
subsidiary of any of the foregoing, beneficially owns or has a right to acquire
any Shares, and neither Company, nor, to the best of knowledge of Company, any
of the persons or entities referred to above, or any of the respective executive
officers, directors or subsidiaries of any of the foregoing, has effected any
transaction in the Shares during the past 60 days.
Except as set forth in this Offer to Purchase, neither Company, any of its
affiliates nor, to the best knowledge of Company, any of the persons listed on
Schedule I, has any contracts, arrangements, understandings or relationships
with any other person or entity with respect to any securities of the Company,
including, but not limited to, any contract, arrangement understanding or
relationship concerning the transfer or the voting of any securities of the
Company, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss or the giving or withholding of proxies.
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<PAGE> 60
Except as set forth in this Offer to Purchase, neither Company, any of its
affiliates, nor, to the best knowledge of Company, any of the persons listed on
Schedule I, has had, since the second fiscal year preceding the date of this
Offer to Purchase, any business relationships or transactions with the Company
or any of its executive officers, directors or affiliates that would be required
to be reported under the rules of the Commission. Except as set forth in this
Offer to Purchase, since the second fiscal year preceding the date of this Offer
to Purchase there have been no contracts, negotiations or transactions between
Company, any of its affiliates or, to the best knowledge of Company, any of the
persons listed on Schedule I, and the Company or its affiliates concerning a
merger, consolidation or acquisition, tender offer or other acquisition of
securities, election of directors or a sale or other transfer of a material
amount of assets.
During the last five years, neither Company, any of its affiliates nor, to
the best knowledge of Company, any of the persons listed on Schedule Ihereto,
have been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
Certain information concerning the directors, executive officers and
certain stockholders of the Company is set forth in Schedule I hereto.
Available Information. The Company is subject to the informational filing
requirements of the Exchange Act and is required to file reports, proxy
statements and other information with the Commission relating to its business,
financial condition and other matters. Information as of particular dates
concerning the Company's directors and officers, their remuneration, options
granted to them, the principal holders of the Company's securities and any
material interests of such persons in transactions with the Company is required
to be disclosed in proxy statements distributed to the Company's stockholders
and filed with the Commission. These reports, proxy statements and other
information should be available for inspection at the public reference
facilities of the Commission at 450 Fifth Street, NW, Washington, D.C. 20549,
and at the regional offices of the Commission located at Seven World Trade
Center, Suite 1300, New York, NY 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661. Copies of this material may also be
obtained by mail, upon payment of the Commission's customary fees, from the
Commission's principal office at 450 Fifth Street, NW, Washington, D.C. 20549.
The Commission also maintains a Webster on the internet at http://www.sec.gov
that contains reports, proxy statements and other information relating to the
Company which have been filed via the Commission's EDGAR System.
8. CERTAIN INFORMATION CONCERNING HOLDINGS, PARENT AND ACQUISITION COMPANY.
Acquisition Company and Parent are Delaware corporations and Holdings is a
Delaware limited liability company. Each such entity was organized in connection
with the Offer and Merger and has not carried on any significant activities
other than in connection with the Offer and Merger. Until immediately prior to
the time Acquisition Company purchases Shares pursuant to the Offer, it is not
anticipated that any of Acquisition Company, Parent or Holdings will have any
significant assets or liabilities or engage in any significant activities other
those incident to its formation and capitalization and the transactions
contemplated by the Offer and the Merger.
The principal offices of Acquisition Company, Parent and Holdings are
located at 717 Fifth Avenue, New York, New York 10022. The telephone number of
Acquisition Company, Parent and Holdings at such location is (212) 521-5500.
Except as set forth in this Offer to Purchase, neither Acquisition Company,
Parent, Holdings nor, to the best knowledge of Acquisition Company, Parent and
Holdings, any of the persons listed on Schedule II, or any associate or majority
owned subsidiary of any of the foregoing, beneficially owns or has a right to
acquire any Shares, and neither Acquisition Company, Parent, Holdings nor, to
the best of knowledge of Acquisition Company, Parent and Holdings any of the
persons or entities referred to above, or any of the respective executive
officers, directors or subsidiaries of any of the foregoing, has effected any
transaction in the Shares during the past 60 days.
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<PAGE> 61
Except as set forth in this Offer to Purchase, neither Acquisition Company,
Parent nor Holdings has any contracts, arrangements, understandings or
relationships with any other person or entity with respect to any securities of
the Company, including, but not limited to, any contract, arrangement
understanding or relationship concerning the transfer or the voting of any
securities of the Company, joint ventures, loan or option arrangements, puts or
calls, guarantees of loans, guarantees against loss or the giving or withholding
of proxies.
Except as set forth in this Offer to Purchase, neither Acquisition Company,
Parent, Holdings, any of their affiliates, nor, to the best knowledge of
Acquisition Company, Parent and Holdings, any of the persons listed on Schedule
II, has had, since the second fiscal year preceding the date of this Offer to
Purchase, any business relationships or transactions with the Company or any of
its executive officers, directors or affiliates that would be required to be
reported under the rules of the Commission. Except as set forth in this Offer to
Purchase, since the second fiscal year preceding the date of this Offer to
Purchase there have been no contracts, negotiations or transactions between
Acquisition Company, Parent and Holdings, any of their affiliates or, to the
best knowledge of Acquisition Company, Parent and Holdings, any of the persons
listed on Schedule II, and the Company or its affiliates concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
election of directors or a sale or other transfer of a material amount of
assets.
During the last five years, neither Acquisition Company, Parent, Holdings
nor, to the best knowledge of Acquisition Company, Parent and Holdings, any of
the persons listed on Schedule II hereto, have been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or was a party
to a civil proceeding of a judicial or administrative body competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violation of such
laws.
Certain information concerning the directors and executive officers of
Holdings, Parent and Acquisition Company is set forth in Schedule II hereto.
Available Information. Each of Acquisition Company, Parent and Holdings is
a privately-held company and is generally not the subject of the information
filing requirements of the Exchange Act, and is generally not required to file
reports, proxy statements and other information with the Commission relating to
its businesses, financial condition and other matters. However, pursuant to Rule
14d-3 under the Exchange Act, Acquisition Company, Parent and Holdings filed
with the Commission a Schedule TO, together with exhibits, including this Offer
to Purchase and the Merger Agreement, which provides certain additional
information with respect to the Offer and regarding Acquisition Company, Parent
and Holdings. The Schedule TO and any amendments thereto, including exhibits,
should be available for inspection and copies should be obtainable at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of such information should also be obtainable (i) by mail,
upon payment of the Commission's customary charges, by writing to the
Commission's principal office at 450 Fifth Street, N.W., Washington, DC. 20549,
and at the regional offices of the Commission located at Seven World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and (ii) by accessing the
Commission's website on the Internet at http://www.sec.gov.
9. SOURCE AND AMOUNT OF FUNDS.
The Offer is conditioned upon the Purchasers receiving the proceeds under
the Financing Agreements and Capital Contribution necessary to purchase all of
the outstanding Shares pursuant to the Offer, to pay the Merger Consideration,
to refinance approximately $87 of existing indebtedness (assuming conversion of
all Debentures into Shares) of the Company and its subsidiaries, to purchase the
securities to be sold pursuant to the PlayCore Purchase Agreements and to pay
related fees and expenses. The total amount of funds necessary to accomplish the
foregoing is expected to be approximately $207.5 million. The Purchasers
anticipate that they will obtain such funds from borrowings by PlayCore
Wisconsin under the Senior Credit Facility, the proceeds from the issuance of
the Sub Notes by PlayCore Wisconsin and the Capital Contribution. The purchase
of the Purchased Securities by Acquisition Company from GreenGrass will be
funded solely by the Capital Contribution. The Company has executed the
Financing Agreements. See "SPECIAL FACTORS --
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<PAGE> 62
Financing of the Transaction" for a more complete discussion of how the
Purchasers intend to finance the Offer and the Merger.
The margin regulations promulgated by the Board of Governors of the Federal
Reserve System place restrictions on the amount of credit that may be extended
for the purposes of purchasing margin stock, including if such credit is secured
directly or indirectly by margin stock. The Purchasers believe that the
financing of the acquisition of the Shares pursuant to the Merger and the Offer
will be in full compliance with the margin regulations.
10. EFFECT OF THE OFFER ON THE MARKET FOR THE COMMON STOCK; EXCHANGE ACT
REGISTRATION.
Market for Shares. The purchase of Shares pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and could adversely
affect the liquidity and market value of the remaining Shares held by the
public.
Stock Quotation. The Shares are traded on AMEX. The Shares might no longer
be eligible for quotation on AMEX if, among other things, the number of Shares
publicly held were less than 200,000, there were fewer than 300 holders of round
lots, the aggregate market value of the publicly held Shares was less than
$1,000,000. Shares held directly or indirectly by directors, officers or
beneficial owners of more than 10% of the Shares are not considered as being
publicly held for this purpose. According to the Company, as of April 13, 2000,
there were 78 holders of record of Shares (not including beneficial holders of
Shares in street name), and as of April 13, 2000, there were 7,960,304 shares
outstanding.
If the Shares were to cease to be quoted on the AMEX, the market for the
Shares could be adversely affected. It is possible that the Shares would be
traded or quoted on other securities exchanges or in the over-the-counter
market, and that price quotations would be reported by such exchanges, or
through Nasdaq or other sources. The extent of the public market for the Shares
and the availability of such quotations would, however, depend upon the number
of stockholders and/or the aggregate market value of the Shares remaining at
such time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration of the Shares under
the Exchange Act and other factors.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Such registration under the Exchange Act may be terminated upon
application of the Company to the Commission if the Shares are neither listed on
a national securities exchange nor held by 300 or more holders of record.
Termination of registration under the Exchange Act would substantially reduce
the information required to be furnished by the Company to its stockholders and
to the Commission and would make certain provisions of the Exchange Act no
longer applicable to the Company, such as the short-swing profit recovery
provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a
proxy statement pursuant to Section 14(a) of the Exchange Act in connection with
stockholders' meetings, the related requirement of furnishing an annual report
to stockholders and the requirements of Rule 13e-3 under the Exchange Act with
respect to "going private" transactions. Furthermore, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 promulgated under the
Securities Act may be impaired or eliminated. The Company intends to apply for
termination of registration of the Common Stock under the Exchange Act as soon
after the consummation of the Offer as the requirements for such termination are
met.
If registration of the Shares is not terminated prior to the Merger, then
the Shares will be delisted from all stock exchanges and the registration of the
Shares under the Exchange Act will be terminated following the consummation of
the Merger.
Margin Regulations. The Shares are currently "margin securities," as such
term is defined under the regulations of the Federal Reserve Board, which has
the effect, among other things, of allowing brokers to extend credit on the
collateral of the Shares. Depending upon factors similar to those described
above regarding listing and market quotations, it is possible that, following
the Offer, the Shares would no longer constitute "margin securities" for the
purposes of the margin regulations of the Federal Reserve Board and
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<PAGE> 63
therefore could no longer be used as collateral for loans made by brokers. In
any event, the Shares will cease to be "margin securities" if registration of
the Shares under the Exchange Act is terminated.
11. CONDITIONS TO THE OFFER.
Notwithstanding any other provision of the Offer, and subject to the
provisions of the Merger Agreement, the Purchasers are not required to accept
for payment or, subject to any applicable rules and regulations of the SEC
(including those relating to the obligation of the Purchasers to pay for, or
return tendered Shares promptly after termination or withdrawal of the Offer),
pay for any Shares pursuant to the Offer, and the Purchasers may delay their
acceptance for payment of or, subject to the restriction referred to above, its
payment for, any tendered Shares, and, subject to the provisions of the Merger
Agreement, the Purchasers may amend or terminate the Offer and not accept for
payment any tendered Shares, if: (a) any applicable waiting period or approval
under the HSR Act and any applicable foreign antitrust law, regulation or rule
has not expired or been terminated or obtained, (b) the Minimum Condition has
not been satisfied, (c) the Purchasers have not received or have available the
proceeds of the financing contemplated by the Financing Agreements and the
Capital Contribution, including but not limited to funds sufficient to: (i)
purchase the Shares tendered pursuant to the Offer, (ii) pay the Merger
Consideration pursuant to the Merger, (iii) refinance approximately $87 million
of the Company's and its subsidiaries outstanding indebtedness (assuming the
conversion of the Debentures into Shares), (iv) to purchase the securities to be
sold pursuant to the PlayCore Purchase Agreements and (v) pay the fees and
expenses required to be paid by the Company in connection with the transactions
contemplated by the Merger Agreement, (d) either Purchaser is not reasonably
satisfied that the Merger Agreement, the PlayCore Purchase Agreements, the MM
Agreement, and the Fleet Consent are then in full force and effect, or (e) at
any time on or after the date of the Merger Agreement and prior to the
acceptance of Shares for payment pursuant to the Offer, any of the following
events shall occur:
(a) there shall be instituted or pending or threatened by any
governmental entity any suit, action or proceeding which (i) seeks to
impose material limitations on the ability of the Purchasers to, or renders
the Purchasers unable to, accept for payment, pay for or purchase some or
all of the Shares pursuant to the Offer or the Merger, (ii) seeks to
restrain or prohibit the making or consummation of the Offer or the Merger
or the performance of any of the transactions contemplated by the Merger
Agreement, (iii) seeks to obtain from any Purchaser any damages (including
damages against any Purchaser's directors or officers for which they may
seek indemnification from a Purchaser) that would reasonably be expected to
have a Company Material Adverse Effect, or (iv) challenges the acquisition
by the Purchasers of any Shares pursuant to the Offer;
(b) there shall have been any statute, rule, regulation, judgment,
order or injunction promulgated, entered, enforced, enacted or issued by
any governmental entity applicable to the Offer or the Merger other than
the application of the waiting period provision of the HSR Act to the Offer
or the Merger which is reasonably likely to result, directly or indirectly,
in any of the consequences referred to in clauses (i) through (iv) of
paragraph (a) above;
(c) the Merger Agreement shall have been terminated in accordance with
its terms;
(d) the representations and warranties of the Company set forth in the
Merger Agreement shall not be true and accurate in all respects, in each
instance as of the date of consummation of the Offer as though made on or
as of such date (except for those representations and warranties that
address matters only as of a particular date or only with respect to a
specific period of time which need only be true and accurate as of such
date or with respect to such period), and the effect thereof, either
individually or in the aggregate, is a Company Material Adverse Effect, or
the Company shall have breached or failed to perform or comply in any
material respect with any obligation, agreement or covenant required by the
Merger Agreement to be performed or complied with by it, and, with respect
to any such breach or failure to perform that is reasonably capable of
being remedied within the time periods set forth below, the breach or
failure to perform is not remedied prior to the earlier of (x) 10 days
after Parent or Acquisition
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<PAGE> 64
Company has furnished the Company with written notice of such breach or
failure to perform or (y) two business days prior to the date on which the
Offer expires;
(e) the Purchasers shall not have received by the Expiration Date such
certificates of officers of the Company and/or opinions of nationally
recognized valuation and/or appraisal firms (in form and substance
reasonably satisfactory to the Purchasers) as their respective Boards may
reasonably require, substantially to the effect that the value of the
Company's assets shall exceed its liabilities following the consummation of
the Offer and the Merger and that the Offer and the Merger shall not impair
the Company's capital within the meaning of Section 160 of the DGCL or
impair the ability of the Company to pay its obligations as they come due;
(f) there shall have occurred (i) any general suspension of trading in
securities on the New York Stock Exchange, which suspension or limitation
shall continue for at least three consecutive trading days, (ii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (iii) a
commencement of a war, armed hostilities or other international or national
calamity directly involving the United States that would reasonably be
expected to have a material adverse impact on the capital markets of the
United States, (iv) any limitation (whether or not mandatory) by any United
States governmental entity on the extension of credit generally by banks or
other lending institutions, (v) a change in general financial, bank or
capital market conditions which materially and adversely affects the
ability of financial institutions in the United States to extend credit or
syndicate loans, (vi) a decline of at least 30% in the Standard & Poor's
500 Index from the close of business on the date of the Merger Agreement,
or (vii) in the case of any of the foregoing existing at the time of the
execution of the Merger Agreement, a material acceleration or worsening
thereof; or
(g) the failure of Parent to make the Capital Contribution to
Acquisition Company.
which, in the judgment of either Purchaser, subject to the terms of the Merger
Agreement and regardless of the circumstances giving rise to any such condition,
makes it inadvisable to proceed with the Offer or with such acceptance for
payment, purchase of, or payment for Shares.
The foregoing conditions are for the sole benefit of the Purchasers, and,
subject to the provisions of the Merger Agreement, may be waived by them at any
time. The failure by the Purchasers at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any right, and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to time.
12. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
General. Except as otherwise disclosed herein, the Offerors are not aware
of (i) any license or regulatory permit that appears to be material to the
business of the Company and its subsidiaries, taken as a whole, that might be
adversely affected by the acquisition of Shares by the Purchasers pursuant to
the Offer or the Merger or otherwise or (ii) any approval or other action by any
governmental, administrative or regulatory agency or authority, domestic or
foreign, that would be required for the acquisition or ownership of Shares by
the Purchasers as contemplated herein. Should any such approval or other action
be required, the Purchasers currently contemplate that they would seek such
approval or action. The Purchasers' obligation under the Offer to accept for
payment and pay for Shares is subject to certain conditions. See "THE TENDER
OFFER -- Conditions to the Offer." Although, except as described in this Offer
to Purchase, the Purchasers do not currently intend to delay the acceptance for
payment of Shares tendered pursuant to the Offer pending the outcome of any such
matter, there can be no assurance that any such approval or action, if needed,
would be obtained or would be obtained without substantial conditions, that
adverse consequences might not result to the business of the Company or that
certain parts of the businesses of the Company might not have to be disposed of
in the event that such approvals were not obtained or any other actions were not
taken such approval or other action. If certain types of adverse action are
taken with respect to the matters discussed below, the Purchasers could decline
to accept for payment, or pay for, any Shares tendered. See "THE TENDER
OFFER -- Conditions to the Offer" for certain conditions to the Offer, including
conditions with respect to government actions.
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<PAGE> 65
State Takeover Laws. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of the DGCL prevents an "interested
stockholder" (generally a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock, or an affiliate or associate
thereof) from engaging in a "business combination" (defined to include mergers
and certain other transactions) with a Delaware corporation for a period of
three years following the date such person became an interested stockholder
unless, among other things, prior to the date the interested stockholder became
an interested stockholder, the board of directors of the corporation approved
either the business combination or the transaction in which the interested
stockholder became an interested stockholder. Section 203 of the DGCL, however,
does not, according to subsection (b) thereof, apply if the corporation's
certificate of incorporation contains a provision expressly electing not to be
governed by Section 203. The Company's certificate of incorporation contains
such an express provision. In addition, the Company has represented to Parent
and Acquisition Company in the Merger Agreement that the Board has taken all
necessary action so that the restrictions contained in Section 203 of the DGCL
applicable to a "business combination" will not apply to the execution, delivery
or performance of the Merger Agreement, the Offer, the Merger or the
transactions contemplated by the Merger Agreement.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In EDGAR v. MITE CORP., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987 in
CTS CORP. v. DYNAMICS CORP. OF AMERICA, the Supreme Court held that the State of
Indiana may, as a matter of corporate law and, in particular, with respect to
those aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquirer from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders. The state
law before the Supreme Court was by its terms applicable only to corporations
that had a substantial number of holders in the state and were incorporated
there.
The Company, directly or through subsidiaries, conducts business in a
number of states throughout the United States, some of which have enacted
takeover laws. The Purchasers do not believe that any state takeover statutes
apply to the Offer. Neither the Company nor the Acquisition Company has
currently complied with any state takeover statute or regulation. The Purchasers
reserve the right to challenge the applicability or validity of any state law
purportedly applicable to the Offer or the Merger and nothing in this Offer to
Purchase or any action taken in connection with the Offer or the Merger is
intended as a waiver of such right. In the event it is asserted that one or more
state takeover laws is applicable to the Offer or the Merger, and an appropriate
court does not determine that it is inapplicable or invalid as applied to the
Offer or the Merger, the Purchasers might be required to file certain
information with, or receive approvals from, the relevant state authorities. In
addition, if enjoined, the Purchasers might be unable to accept for payment any
Shares tendered pursuant to the Offer or be delayed in continuing or
consummating the Offer and the Merger. In such case, the Purchasers may not be
obligated to accept for payment any Shares tendered. See "THE TENDER
OFFER -- Conditions of the Offer."
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), and the rules that have been promulgated thereunder
by the Federal Trade Commission (the "FTC"), certain transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice and the FTC and certain waiting period
requirements have been satisfied. The Offerors have concluded that a filing
under the HSR Act and the rules promulgated thereunder by the FTC is not
required for the Transaction.
In the event that a filing is required to be made under the HSR Act and the
rules promulgated thereunder by the FTC, the Offerors would promptly file
Notification and Report Forms under the HSR Act. The waiting period under the
HSR Act, with respect to Shares acquired pursuant to the Offer, if applicable,
will expire at 11:59 p.m., New York City time, on the fifteenth day after the
date on which the forms are filed, unless early termination of the waiting
period is granted. The DOJ or the FTC may extend the fifteen day waiting period
by requesting additional information or documentary material from the
Purchasers. If such a request is made,
58
<PAGE> 66
such waiting period will expire at 11:59 p.m., New York City time, on the tenth
day after substantial compliance with such request. Only one extension of the
waiting period pursuant to a request for additional information is authorized by
the HSR Act. Thereafter, such waiting period may be extended only by court order
or with the consent of Acquisition Company. In practice, complying with a
request for additional information or material can take a significant amount of
time. In addition, if the DOJ or the FTC raises substantive issues in connection
with a proposed transaction, the parties frequently engage in negotiations with
the relevant governmental agency concerning possible means of addressing those
issues and may agree to delay consummation of the transaction while such
negotiations continue. If a filing under the HSR Act is required, the Purchasers
will not accept for payment Shares tendered pursuant to the Offer unless and
until the waiting period requirements imposed by the HSR Act with respect to the
Offer have been satisfied.
The FTC and the DOJ routinely review the legality under the HSR Act of
transactions such as the proposed acquisition of Shares by the Purchasers. Even
if a filing is not required under the HSR Act, at any time before or after the
purchase by the Purchasers of Shares, either of the DOJ or the FTC could take
such action under the federal antitrust laws as it deems necessary or desirable
in the public interest, including seeking to enjoin the purchase of Shares
pursuant to the Offer or seeking the divestiture of Shares purchased by the
Purchasers or the divestiture of substantial assets of the Company. Private
parties and state governments may also bring legal action under certain
circumstances.
Although the Offerors believe that the acquisition of Shares pursuant to
the Offer would not violate the HSR Act or other antitrust statutes, there can
be no assurance that a challenge to the Offer on antitrust grounds will not be
made or, if such a challenge is made, what the outcome will be. See "THE TENDER
OFFER -- Conditions to the Offer" for certain conditions to the Offer, including
conditions with respect to litigation and certain government actions.
13. FEES AND EXPENSES.
Except as otherwise provided herein, all fees and expenses incurred in
connection with the Offer will be paid by the party incurring such fees and
expenses, except that the Company will pay for all fees and expenses related to
the filing, printing and mailing of the documents in connection with the Offer
and the Schedule TO, and Company will pay for all fees and expenses of the
Offerors upon consummation of the Offer and the Merger. See "SPECIAL
FACTORS -- Fees and Expenses" for a more complete discussion and listing of the
fees and expenses incurred by the Offerors with respect to the Offer and the
Merger.
14. MISCELLANEOUS.
The Offerors are not aware of any jurisdiction where the making of the
Offer is prohibited by any administrative or judicial action pursuant to any
valid state statute. If the Offerors become aware of any valid state statute
prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto, the Offerors will make a good faith effort to comply with such state
statute or seek to have such statute declared inapplicable to the Offer. If,
after such good faith effort, the Offerors cannot comply with any such state
statute, the Offer will not be made to (and tenders will not be accepted from or
on behalf of) the stockholders in such state. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the Offerors
by one or more registered brokers or dealers which are licensed under the laws
of such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of the Offerors not contained in this Offer to Purchase
or in the Letter of Transmittal and, if given or made, such information or
representation must not be relied upon as having been authorized.
The Offerors filed with the Commission the Schedule TO, together with
exhibits, pursuant to Sections 13(e) and 14(d)(1) of the Exchange Act and Rules
13e-3 and 14d-3 promulgated thereunder, furnishing certain additional
information with respect to the Offer, and may file amendments thereto. The
Schedule TO and any amendments thereto, including exhibits, may be inspected at,
and copies may be obtained from, the same places and in the manner set forth in
"THE TENDER OFFER -- Certain Information Concerning the Company" (except that
they will not be available at the regional offices of the Commission).
59
<PAGE> 67
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS, EXECUTIVE OFFICERS
AND CERTAIN STOCKHOLDERS OF PLAYCORE, INC.
DIRECTORS AND EXECUTIVE OFFICERS
1. Certain Information.
The name, position with the Company, present principal occupation or
employment and five-year employment history of each of the directors and
executive officers of the Company, together with the names, principal businesses
and addresses of any corporations or other organizations in which such principal
occupations are conducted, are set forth below. Unless otherwise indicated, each
individual is a United States citizen and each individual's business address is
c/o PlayCore, Inc., Riverfront Centre #204, 15 West Milwaukee Street,
Janesville, Wisconsin. Unless otherwise indicated, to the knowledge of the
Company, no director or executive officer of the Company has been convicted in a
criminal proceeding during the last five years (excluding traffic violations or
similar misdemeanors) and no director or executive officer of the Company was a
party to any judicial or administrative proceeding during the last five years
(except for any matters that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining the person from future
violations of, or prohibiting activities subject to, federal or state securities
laws, or a finding of any violation of federal or state securities laws.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- - ---- --------------------------------------------------
<S> <C>
Terence S. Malone.................... Chairman. Mr. Malone has served as a director of the Company
since September 1992 and Chairman since September 1997. He
served as Acting Chief Executive Officer of the Company from
September 1997 to January 1998. Mr. Malone was Chairman and
Chief Executive Officer of Johnson Outdoors Inc. (f/k/a
Johnson Worldwide Associates, Inc.) from 1986 until January
1994, which is principally engaged in the business of
manufacturing and distributing outdoor recreational equip-
ment and has a business address of 1326 Willow Road,
Sturtevant, Wisconsin.
Frederic L. Contino.................. President, Chief Executive Officer and Director. Mr. Contino
has served as President and Chief Executive Officer and a
director of the Company since January 1998. He was President
of Anchor Hocking Plastics and Plastics, Inc., divisions of
Newell Companies from January 1993 to January 1998, which is
principally engaged in the business of manufacturing and
distributing consumer home products and has a business
address of 29 E Stephenson Street, Freeport Illinois.
David S. Evans....................... Director. Mr. Evans has served as a director of the Company
since February 1996. He has been President and Chief
Executive Officer of Glencoe Investment Corporation ("GIC")
since March 1993 and a Principal and Chief Executive Officer
or Glencoe Capital, L.L.C. since September 1997, both of
which are principally engaged in the business of merchant
banking and private equity investing and have a business
address of 190 South LaSalle Street, Suite 2830, Chicago,
Illinois.
George N. Herrera.................... Director. Mr. Herrera has served as a director of the
Company since February 1996. He was Director of
International Sales of Masco Corporation from 1982 to
January 2000, which is principally engaged in the business
of manufacturing products for the building and home improve-
ment industry and has a business address of 21001 Van Born
Road, Taylor, Michigan.
</TABLE>
I-1
<PAGE> 68
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- - ---- --------------------------------------------------
<S> <C>
Timothy R. Kelleher.................. Director. Mr. Kelleher has served as a director of the
Company since April 1996. He has been Senior Vice President
of Desai Capital Management Incorporated since May 1992,
which is principally engaged in the business of
institutionally funded private equity investing and has a
business address of 540 Madison Avenue, 36th Floor, New
York, New York.
Gary A. Massel....................... Director. Mr. Massel has served as a director of the Company
since September 1996. He has been Vice
President -- Logistics of Boise Cascade Office Products
since September 1997, which is principally engaged in the
business of selling and distributing a wide range of office
products and has a business address of 800 West Bryn Mawr
Avenue, Itasca, Illinois. Mr. Massel was an independent
consultant from August 1995 to September 1997.
Ronald D. Wray....................... Director. Mr. Wray has been a director of the Company since
February 1999. He has been Executive Vice President and
Chief Operating Officer of Glencoe Capital, L.L.C. since
January 1999, which is principally engaged in the business
of merchant banking and private equity investing and has a
business address of 190 South LaSalle Street, Suite 2830,
Chicago, Illinois. Mr. Wray was Executive Vice President of
the Pritzker Family Business Office from 1990 to January
1999, which is principally engaged in the business of
private equity investing and asset management and has a
business address of 200 West Madison, Suite 3800, Chicago,
Illinois.
David H. Hammelman................... Vice President -- Human Resources & Administration. Mr.
Hammelman joined the Company as Director of Human Resources
in 1993 and was promoted to his current position in 1995.
Richard E. Ruegger................... Vice President -- Finance, Chief Financial Officer and
Secretary. Mr. Ruegger joined the Company as Controller in
1989 and was promoted to his current position in 1991.
John E. Caldwell..................... President of PlayCore's Swing-N-Slide business unit. Mr.
Caldwell joined the Company in December 1996 in the same
capacity. He was President of the Retail Business Unit of
Curtis Industries from May 1992 to November 1996, which is
principally engaged in the business of distributing hardware
and automotive products and has a business address of 6140
Parkland Boulevard, Cleveland, Ohio.
Robert A. Farnsworth................. President of PlayCore's GameTime business unit. Mr.
Farnsworth joined the Company in May 1998 in the same
capacity. He was Executive Vice President, Marketing and
Product Management of the Pfaltzgraff Company from February
1993 to April 1998, which is principally engaged in the
business of manufacturing and marketing consumer tabletop
products and has a business address of 140 East Market,
York, Pennsylvania.
Thomas van der Meulen................ President of PlayCore's Heartland Industries business unit.
Mr. van der Meulen joined the Company in June 1999 in the
same capacity. He was President of TC MiraDRI, a business
unit of Royal Ten Cate, from January 1994 to March 1999,
which is principally engaged in the business of
manufacturing commercial and residential building products
and has a business address of 3500 Parkway Lane, Norcross,
Georgia.
</TABLE>
I-2
<PAGE> 69
2. Beneficial Ownership of Shares.
The following table sets forth certain information known to the Company
with respect to beneficial ownership of Shares as of March 31, 2000 by (i) each
director of the Company and (ii) each executive officer of the Company. Except
as otherwise noted, the persons named in this table have sole voting and
investment power with respect to all Shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
--------------------------
NAME OF BENEFICIAL OWNER NUMBER(1) PERCENT(1)
- - ------------------------ ----------- ------------
<S> <C> <C>
John E. Caldwell(2)......................................... 82,028 1.0%
Frederic L. Contino(3)...................................... 280,400 3.4%
David S. Evans(4)........................................... 6,772,655 72.1%
Robert A. Farnsworth(5)..................................... 20,000 *
David H. Hammelman(6)....................................... 75,395 *
George N. Herrera(7)........................................ 20,000 *
Timothy R. Kelleher(8)...................................... 6,772,655 72.1%
Terence S. Malone(9)........................................ 62,181 *
Gary A. Massel(10).......................................... 15,000 *
Richard E. Ruegger(11)...................................... 141,448 1.8%
Thomas van der Meulen....................................... -- *
Ronald D. Wray(12).......................................... 5,000 *
</TABLE>
- - ---------------
* Less than 1%
(1) Excludes Company Options which are currently not vested but will become
vested upon consummation of the Offer pursuant to a resolution of the
Board. The number of Shares certain directors and executive officers would
receive upon exercise of such Company Options and the percentage of
outstanding Shares each such director and executive officer would
beneficially own following such exercise (if greater than 1%) is as
follows: Mr. Caldwell 20,000 (1.3%); Mr. Contino, 50,000 (4.0%); Mr.
Farnsworth, 40,000; Mr. Hammelmen, 17,500 (1.2%); Mr. Ruegger, 38,750
(2.2%); Mr. van der Meulen, 50,000.
(2) Includes 80,000 Shares issuable upon the exercise of Company Options which
are currently exercisable.
(3) Includes 275,000 Shares issuable upon the exercise of Company Options that
are currently exercisable.
(4) As one of the three persons appointed to the Members Operating Board of
GGC, Mr. Evans has shared control of the voting and investment making
decisions of GreenGrass which owns 5,345,905 Shares, Debentures convertible
into 1,376,750 Shares, and the GreenGrass Warrant to purchase 50,000
Shares. Of such securities, Mr. Evans would be entitled to receive from
GreenGrass Holdings 7,078 Shares, Debentures convertible into 1,545 Shares
and a warrant to purchase 86 Shares under certain circumstances as a result
of his ownership of a limited partnership interest in Glencoe Fund Partners
and Glencoe, and his ownership of stock in GIC.
(5) Includes 10,000 Shares issuable upon the exercise of Company Options that
are currently exercisable.
(6) Consists of 75,395 Shares issuable upon the exercise of Company Options
which are currently exercisable. Excludes 4,290 Shares and Debentures
convertible into 1,705 Shares held by GreenGrass which securities, as a
member of GGM, Mr. Hammelman may be deemed to beneficially own because he
would receive such securities under certain circumstances (including upon
termination of his employment). Mr. Hammelman expressly disclaims
beneficial ownership of any other securities of Company held by GreenGrass
because he neither is a controlling member of GGM nor has investment
control of the portfolio securities of either GGM or GreenGrass.
(7) Consists of 20,000 Shares issuable upon exercise of Company Options which
are currently exercisable.
(8) As one of the three persons appointed to the Members Operating Board of
GGC, Mr. Kelleher has shared control of the voting and investment making
decisions of GreenGrass which owns 5,345,905 Shares, Debentures convertible
into 1,376,750 Shares, and the GreenGrass Warrant to purchase 50,000
Shares.
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<PAGE> 70
(9) Includes 61,934 Shares issuable upon the exercise of Company Options which
are currently exercisable.
(10) Consists of 15,000 Shares issuable upon the exercise of Company Options
which are currently exercisable.
(11) Consists of 141,448 Shares issuable upon the exercise of Company Options
which are currently exercisable. Excludes 49,035 Shares and Debentures
convertible into 19,485 Shares which Mr. Ruegger may be deemed to
beneficially own as sole manager and the controlling member of GCM, which
indirectly beneficially owns such securities as a general partner of
GreenGrass Holdings, including 32,673 Shares and Debentures convertible
into 12,985 Shares held by GreenGrass Holdings which securities, as a
member of GGM, Mr. Ruegger may be deemed to beneficially own because Mr.
Ruegger would receive such securities under certain circumstances
(including upon termination of his employment). Ruegger disclaims
beneficial ownership of these securities except to the extent of his
pecuniary interest therein.
(12) Consists of 5,000 Shares issuable upon exercise of Company Options which
are currently exercisable.
CERTAIN STOCKHOLDERS OF PLAYCORE, INC.
1. Certain Information.
GreenGrass is a Delaware general partnership organized on January 4, 1996
for the purposes of purchasing, holding and selling Company securities and has
not carried on any other significant activities. GreenGrass' only assets are the
Company securities currently owned by it; GreenGrass has no significant
liabilities.
Pursuant to its Amended and Restated Partnership Agreement dated March
1997, partners owning a majority of the partnership interests of GreenGrass have
the ability to direct the control of GreenGrass. GGC currently owns a majority
of the partnership interests in GreenGrass and therefore is deemed to control
GreenGrass. GGC is a Delaware limited liability company organized on December
27, 1995 to act as an investment vehicle for a number of institutional investors
for an investment in GreenGrass. GGC's only assets are its partnership interests
in GreenGrass; GGC has no significant liabilities.
Pursuant to GGC's Operating Agreement dated February 15, 1996, all actions
taken by GGC are determined by GGC's Member Operating Board. The Member
Operating Board is comprised of appointees chosen by each of Glencoe Investment
Corporation, ELI-II and the Michigan Trusts (each a "GGC Board Member"). The GGC
Board Members are David S. Evans, appointed by Glencoe Investment Corporation,
Timothy Kelleher, appointed by ELI-II, and Thomas Hufnagel, appointed by the
Michigan Trusts.
The principal offices of GreenGrass and GGC are located at 190 South
LaSalle Street, Suite 2830, Chicago, Illinois. The telephone number of
GreenGrass and GGC at such location is (312) 795-6300.
2. Information Regarding GGC Board Members.
Certain information regarding David S. Evans and Timothy Kelleher is set
forth in this Schedule I under the heading "Directors and Executive
Officers -- Certain Information".
Mr. Hufnagel has been a Senior Analyst at the Alternative Investments
Division of the Michigan Department of Treasury (the "Division") for over five
years, which is principally engaged in the business of private equity and direct
leveraged investments for the Michigan Trusts. The business address of the
Division is 2501 Collidge Road, Suite 400, East Lansing, Michigan 48823.
Mr. Hufnagel is a United States citizen. To the knowledge of the Company,
Mr. Hufnagel has not been convicted in a criminal proceeding during the last
five years (excluding traffic violations or similar misdemeanors) and Mr.
Hufnagel has not been a party to any judicial or administrative proceeding
during the last five years (except for any matters that were dismissed without
sanction or settlement) that resulted in a judgment, decree or final order
enjoining the person from future violations of or prohibiting activities subject
to, federal or state securities laws, or a finding of any violation of federal
securities laws.
I-4
<PAGE> 71
3. Beneficial Ownership of Shares.
GreenGrass, and GGC through its control of GreenGrass, each beneficially
own 6,772,655 Shares as of April 13, 2000, which constitutes 72.1% of the
outstanding Shares as of such date (including Debentures convertible into
1,376,750 Shares and the GreenGrass Warrant to purchase 50,000 Shares).
The number of Shares beneficially owned by David S. Evans and Thomas
Kelleher as GGC Board Members is described in this Schedule I under the heading
"Directors and Executive Officers -- Beneficial Ownership of Shares." Thomas
Hufnagel, as a GGC Board Member, also has shared control of the voting and
investment-making decisions of GreenGrass and is therefore deemed to
beneficially own 6,772,655 Shares as of April 13, 2000, which constitutes 72.1%
of the outstanding Shares as of such date (including Debentures convertible into
1,376,750 Shares and the GreenGrass Warrant to purchase 50,000 Shares).
I-5
<PAGE> 72
SCHEDULE II
INFORMATION CONCERNING THE DIRECTORS AND
EXECUTIVE OFFICERS OF PLAYCORE HOLDINGS, L.L.C.,
PLAYCORE HOLDINGS, INC. AND JASDREW ACQUISITION CORP.
DIRECTORS AND EXECUTIVE OFFICERS
The name, business address, position with each of Holdings, Parent and
Acquisition Company, present principal occupation or employment and five-year
employment history of each of the directors and executive officers of Holdings,
Parent and Acquisition Company, together with the names, principal businesses
and addresses of any corporations or other organizations in which such principal
occupations are conducted, are set forth below. Each individual is a United
States citizen and each individual's business address is 717 Fifth Avenue, 23rd
Floor, New York, New York 10022. To the knowledge of Holdings, Parent and
Acquisition Company, no director or executive officer of Holdings, Parent or
Acquisition Company has been convicted in a criminal proceeding during the last
five years (excluding traffic violations or similar misdemeanors) and no
director or executive officer of Holdings, Parent or Acquisition Company was a
party to any judicial or administrative proceeding during the last five years
(except for any matters that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining the person from future
violations of, or prohibiting activities subject to, federal or state securities
laws, or a finding of any violation of federal or state securities laws.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- - ---- --------------------------------------------------
<S> <C>
Todd R. Berman....................... Director and President of each of Parent and Acquisition
Company and Manager of Holdings. Mr. Berman is a co-founder
and President of Chartwell, an advisor to, and manager of,
private equity funds which invest in growth financings and
buyouts of middle market companies. He has served as a
director of MMH Holdings, Inc. and a director of its wholly
owned subsidiary, Morris Material Handling, Inc., a manufac-
turer, distributor and service provider of "through-the-air"
material handling equipment, since March 1998; as Chairman
of the Board of Griffith Consumers Company, one of the
nation's largest independent distributors of heating oil and
other petroleum products, from December 1994 until February
1999; as Chairman of Carl King, Inc., the leading operator
of gas stations and convenience stores in the Delmarva
peninsula (Delaware, Maryland, Virginia), from December 1994
until February 1999; and as a director of Petro Stopping
Centers, L.P., a leading operator of large, full-service
truck stops, from January 1997 until July 1999. Mr. Berman
has been with Chartwell, Chartwell Investments Inc. or its
predecessor since 1992. He received his A.B. from Brown
University and an M.B.A. from Columbia University Graduate
School of Business.
</TABLE>
II-1
<PAGE> 73
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- - ---- --------------------------------------------------
<S> <C>
Michael S. Shein..................... Director and Vice President, Secretary and Treasurer of each
of Parent and Acquisition Company and Manager of Holdings.
Mr. Shein is a Managing Director and co-founder of
Chartwell. He has served as a director and Vice President of
MMH Holdings, Inc. and a director of its wholly-owned
subsidiary, Morris Material Handling, Inc., a manufac-
turer, distributor and service provider of "through-the-air"
material handling equipment, since March 1998; a director of
Griffith Consumers Company, one of the nation's largest
independent distributors of heating oil and other petroleum
products, from December 1994 until February 1999; a director
of Carl King, Inc., the leading operator of gas stations and
convenience stores in the Delmarva peninsula (Delaware,
Maryland, Virginia), from December 1994 until February 1999;
and a director of Petro Stopping Centers, L.P., a leading
operator of large, full-service truck stops, from January
1997 until July 1999. Mr. Shein has been with Chartwell,
Chartwell Investments Inc. or its predecessor since 1992.
Mr. Shein received a B.S. summa cum laude from The Wharton
School at the University of Pennsylvania.
Jeffrey R. Larsen.................... Vice President and Assistant Secretary of each of Parent and
Acquisition Company. Mr. Larsen has been an associate with
Chartwell since September 1999. From July 1997 to July 1999,
Mr. Larsen was an analyst in the Leveraged Finance Group of
the Investment Banking Division of Goldman, Sachs & Co.,
which has a business address of 85 Broad Street, New York,
New York 10004. Mr. Larsen received an A.B. magna cum laude
in Economics from Princeton University.
</TABLE>
BENEFICIAL OWNERSHIP OF SHARES
Mr. Berman and Mr. Shein, as managers of Holdings, Holdings, Parent and
Acquisition Company each may be deemed the beneficial owners of the securities
of the Company which Acquisition Company has the right to purchase pursuant to
the terms of the PlayCore Purchase Agreements. Acquisition Company has the right
and obligation to acquire, subject to certain conditions, up to 90% of the
outstanding Shares after giving effect to the exercise and conversion of certain
derivative securities of the Company in accordance with the terms of the
PlayCore Purchase Agreements. The address of each of Mr. Berman, Mr. Shein,
Holdings, Parent and Acquisition Company is c/o Chartwell Investments II LLC,
717 Fifth Avenue, 23rd Floor, New York, New York 10022.
II-2
<PAGE> 74
SCHEDULE III
PLAYCORE, INC.
RIVERFRONT CENTRE
SUITE 204
15 WEST MILWAUKEE STREET
JANESVILLE, WI 53545
---------------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND RULE 14F-1 PROMULGATED THEREUNDER
This Information Statement (the "Information Statement") is being mailed on
or about April 20, 2000 as part of the Offer to Purchase, dated April 20, 2000
(the "Offer to Purchase"), to the holders of the common stock of PlayCore, Inc.
(the "Company"). Capitalized terms used and not otherwise defined herein shall
have the meaning set forth in the Offer to Purchase. You are receiving this
Information Statement in connection with the possible election of persons
designated by Acquisition Company to a majority of the seats on the Board of
Directors of the Company (the "Board"). The Merger Agreement requires the
Company to cause Acquisition Company's designees to be elected to the Board
under the circumstances described therein. This Information Statement is
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action.
Pursuant to the Merger Agreement, the Offerors commenced the Offer on April
20, 2000. The Offer is scheduled to expire at 5:00 p.m., New York City time, on
Thursday, May 18, 2000, unless the Offer is extended.
The information contained in this Information Statement (including
information incorporated by reference) concerning Parent, Acquisition Company
and the Acquisition Company Designees (as defined below) has been furnished to
the Company by either Parent or Acquisition Company, and the Company assumes no
responsibility for the accuracy or completeness of such information.
GENERAL INFORMATION REGARDING THE COMPANY
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of the close of business on April 13,
2000, there were 7,960,304 Shares (including restricted stock) issued and
outstanding, 1,710,000 Shares reserved for issuance pursuant to the Company's
stock option plans (of which 1,287,893 are subject to outstanding Company
Options), 1,514,590 Shares reserved for issuance upon conversion of the
Debentures and 685,379 Shares reserved for issuance upon exercise of the
Company's warrants. The Board currently consists of seven members. Each director
holds office until such director's successor is duly elected and qualified or
until such director's earlier resignation or removal.
RIGHT TO DESIGNATE DIRECTORS; THE ACQUISITION COMPANY DESIGNEES
Pursuant to the Merger Agreement, promptly upon the Offer Closing and from
time to time thereafter until the Effective Time, Acquisition Company will be
entitled to designate such number of directors (the "Acquisition Company
Designees") equal to the greater of (a) a majority of the Board plus one
director and (b) the product of (i) the number of directors on the Board and
(ii) the percentage that the number of Shares owned by Acquisition Company bears
to the number of Shares outstanding less the number of Independent
III-1
<PAGE> 75
Directors. In furtherance thereof, the Company has agreed, upon request by
Acquisition Company, either to increase the size of the Board or use reasonable
efforts to secure the resignations of, or failing that, to remove such number of
directors as is necessary to enable the Acquisition Company Designees to be
elected or appointed to the Board and use its best efforts to cause the
Acquisition Company Designees to be so elected or appointed.
The Company's obligation to appoint the Acquisition Company Designees is
subject to Rule 14(f) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Company is required to take all action necessary to effect
any such election and to include in this Information Statement the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. The foregoing notwithstanding, the Merger Agreement further provides
that at least two directors who are not employees of the Company or any of its
subsidiaries ("Independent Directors") shall continue to serve on the Board
until the effectiveness of the Merger. Following the election or appointment of
the Acquisition Company Designees to the Board, but prior to the Effective Time,
any permitted termination of the Merger Agreement by the Company, any amendment
of the Merger Agreement or the Company's certificate of incorporation or by-laws
requiring action by the Board, any extension of time for the performance of any
of the obligations or other acts of Parent and any waiver of compliance with any
of the agreements or conditions contained in the Merger Agreement must be
authorized by a majority of the Independent Directors as well as a majority of
all Board members.
Acquisition Company has informed the Company that it will choose the
Acquisition Company Designees from the persons listed below and that each of the
people below has consented to act as a director, if so designated. The names of
the potential Acquisition Company Designees, their ages as of March 18, 2000 and
certain other information about them are set forth below.
TODD R. BERMAN, age 42, is the founder and President of Chartwell
Investments II LLC ("Chartwell"), an advisor to, and manager of, private equity
funds which invest in growth financings and buy outs of middle market companies.
He has served as a director of MMH Holdings, Inc. and a director of its
wholly-owned subsidiary, Morris Material Handling, Inc., a manufacturer,
distributor and service provider of "through-the-air" material handling
equipment, since March 1998; as Chairman of the board of Griffith Consumers
Company, one of the nation's largest independent distributors of heating oil and
other petroleum products, from December 1994 until February 1999; as Chairman of
Carl King, Inc., the leading operator of gas stations and convenience stores in
the Delmarva peninsula (Delaware, Maryland, Virginia), from December 1994 until
February 1999; and as a director of Petro Stopping Centers, L.P., a leading
operator of large, full-service truck stops, from January 1997 until July 1999.
Mr. Berman has been with Chartwell, Chartwell Investments Inc. or its
predecessor since 1992. He received his A.B. from Brown University and an M.B.A.
from Columbia University Graduate School of Business.
JEFFREY R. LARSEN, age 25, has been an associate with Chartwell since
September 1999. From July 1997 to July 1999, Mr. Larsen was an analyst in the
Leveraged Finance Group of the Investment Banking Division of Goldman, Sachs &
Co. Mr. Larsen received an A.B. magna cum laude in Economics from Princeton
University.
MICHAEL J. ROLLAND, age 56, has been a Senior Managing Director of
Chartwell Investment Advisors, a provider of investment and consulting services
that is unaffiliated with Chartwell, since April 1, 2000. Previously, Mr.
Rolland was a Managing Director of Merrill Lynch & Co. since April 1977.
MICHAEL S. SHEIN, age 36, is a Managing Director and co-founder of
Chartwell. He has served as a director and Vice President of MMH Holdings, Inc.
and a director of its wholly-owned subsidiary, Morris Material Handling, Inc., a
manufacturer, distributor and service provider of "through-the-air" material
handling equipment, since March 1998; a director of Griffith Consumers Company,
one of the nation's largest independent distributors of heating oil and other
petroleum products, from December 1994 until February 1999; a director of Carl
King (Delaware, Maryland, Virginia), from December 1994 until February 1999; and
a director of Petro Stopping Centers, L.P., a leading operator of large,
full-service truck stops, from January 1997 until July 1999. Mr. Shein has been
with Chartwell, Chartwell Investments Inc. or its predecessor since
III-2
<PAGE> 76
1992. Mr. Shein received a B.S. summa cum laude from The Wharton School at the
University of Pennsylvania.
Acquisition Company has advised the Company that to the best knowledge of
Acquisition Company, none of the potential Acquisition Company Designees
currently is a director of, or holds any position with the Company, and except
as disclosed in the Offer to Purchase (including Schedule II thereto), none of
the potential Acquisition Company Designees beneficially owns any securities (or
rights to acquire any securities) of the Company or has been involved in any
transactions with the Company or any of its directors, executive officers or
affiliates that are required to be disclosed pursuant to the rules of the
Securities and Exchange Commission (the "SEC"), except as may be disclosed in
the Offer to Purchase. None of the Acquisition Company Designees has any family
relationship with any director or executive officer of the Company.
Acquisition Company has advised the Company that none of the persons listed
above has during the last five years been convicted in a criminal proceeding
(excluding traffic violations and similar misdemeanors) or was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was, or is, subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws or is
involved in any other legal proceeding which is required to be disclosed under
Item 401(f) of Regulation S-K promulgated by the SEC.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
CURRENT MEMBERS OF THE BOARD OF DIRECTORS
The names of the Company's current directors, their ages as of March 31,
2000 and certain other information about them are set forth below. As indicated
above, some of the directors may resign effective immediately following the
consummation of the Offer.
TERENCE S. MALONE, age 70, has served as a director of the Company since
September 1992 and Chairman since September 1997. Mr. Malone served as Acting
Chief Executive Officer of the Company from September 1997 to January 1998. Mr.
Malone was Chairman and Chief Executive Officer of Johnson Outdoors Inc. (f/k/a
Johnson Worldwide Associates, Inc.) (international manufacturer and marketer of
outdoor recreational products) from 1986 until his retirement in January 1994.
FREDERIC L. CONTINO, age 49, has served as a director of the Company and as
President and Chief Executive Officer of the Company since January 1998. Mr.
Contino was President of Anchor Hocking Plastics and Plastics, Inc., divisions
of Newell Companies (diversified manufacturers of consumer home products), from
January 1993 to January 1998. Mr. Contino served as Vice
President -- Merchandising for Anchor Hocking's glass division from May 1988 to
January 1993.
DAVID S. EVANS, age 36, has served as a director of the Company since
February 1996. Mr. Evans has been President and Chief Executive Officer of
Glencoe Investment Corporation (private equity investing) since March 1993.
Prior to such date, Mr. Evans was a Merchant Banking/Mergers and Acquisitions
Specialist at Donaldson, Lufkin & Jenrette Securities Corporation (full service
investment banking) from 1988 to March 1993.
GEORGE N. HERRERA, age 66, has served as a director of the Company since
February 1996. Mr. Herrera was Director of International Sales of Masco
Corporation (diversified manufacturer of home products) from 1982 until his
retirement in January 2000.
TIMOTHY R. KELLEHER, age 37, has served as director of the Company since
April 1996. Mr. Kelleher has been Senior Vice President of Desai Capital
Management Incorporated (institutionally funded private equity investment firm)
since May 1992. From 1989 to May 1992, he was an associate at Entrecanales, Inc.
(private equity investing). Mr. Kelleher is also a director of several privately
held companies.
GARY A. MASSEL, age 60, has served as a director of the Company since
September 1996. Mr. Massel has been Vice President -- Logistics of Boise Cascade
Office Products since September 1997. From August 1995
III-3
<PAGE> 77
to September 1997, Mr. Massel was an independent consultant. Previously, Mr.
Massel was a Senior Vice President of Ply-Gem Industries (building products
manufacturer) from February 1994 to August 1995. From 1989 to February 1994, Mr.
Massel was Vice President -- Operations Specialty Packaging of Packaging Corp.
of America (packaging manufacturer).
RONALD D. WRAY, age 40, has served as a director of the Company since
February 1999. Mr. Wray has been a Principal and Chief Financial Officer of
Glencoe Capital, L.L.C. since January 1999. Prior to such date, Mr. Wray was
Executive Vice President of the Pritzker Family Business Office (investment
management) from 1990 to January 1999.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board currently has three standing committees: the Audit Committee, the
Compensation Committee and the Executive Committee. The Board does not currently
have a standing Nominating Committee. The members and functions of the standing
committees are described briefly below.
AUDIT COMMITTEE
The Audit Committee is currently comprised of Messrs. Herrera and Massel
(Chairman). The Audit Committee makes recommendations to the Board of Directors
regarding the independent auditors to be retained to audit the Company's
accounts and reviews the independence of such auditors, approves the scope of
the annual audit activities of the independent auditors, approves the audit fee
payable to the independent auditors and review such audit results. Ernst & Young
LLP presently serves as the independent auditors of the Company. The Audit
Committee met one time during 1999.
COMPENSATION COMMITTEE
The Compensation Committee is currently comprised of Messrs. Evans
(Chairman), Malone and Wray. The Compensation Committee reviews and makes
recommendations as to compensation, bonuses, stock plans and other benefits and
policies respecting such matters for the officers and employees of the Company.
The Compensation Committee met two times during 1999.
EXECUTIVE COMMITTEE
The Executive Committee is currently comprised of Messrs. Contino, Evans,
Kelleher and Malone. The Executive Committee has the authority to exercise all
of the powers of the Board during intervals between meetings of the Board. The
Executive Committee met four times during 1999.
DIRECTORS' ATTENDANCE
The Board of Directors of PlayCore held five meetings in 1999. Each
director attended not less than 75% of the total number of meetings of (1) the
Board of Directors and (2) all committees of the Board on which he served,
during the period that he served.
DIRECTOR COMPENSATION
Each non-employee director of the Company who is not an employee of
GreenGrass Capital, L.L.C., a Delaware limited liability company that is an
affiliate of a principle stockholder of the Company ("GGC"), or any of GGC's
affiliates ("Non-affiliated Directors"), receives an annual retainer of $15,000
paid in quarterly installments of $3,750 and options to purchase 5,000 shares of
Common Stock with a per share exercise price equal to the fair market value of a
share of Common Stock on the day after the annual meeting of stockholders. In
addition, any Non-affiliated Director who serves as the Chairman of the Board
receives an annual retainer of $5,000, as chairman of a standing committee of
the Board receives an annual retainer of $3,000 and as a committee member of a
standing committee of the Board receives an annual retainer of $1,000. All
directors are reimbursed for out-of-pocket costs related to the Company's
business. No additional compensation is paid to directors for serving on
PlayCore Wisconsin's Board of Directors.
III-4
<PAGE> 78
EXECUTIVE OFFICERS OF THE COMPANY
The following paragraphs set forth certain information, as of March 31,
2000, about the other current executive officers of the Company who are not
directors. Such officers serve at the pleasure of the Board.
<TABLE>
<CAPTION>
NAME AGE POSITION
- - ---- --- --------
<S> <C> <C>
John E. Caldwell..................... 56 President of the Swing-N-Slide Division of PlayCore
Wisconsin since December 1996. From 1990 to November
1996, Mr. Caldwell was the President of the Retail
Division of Curtis Industries Inc. (manufacturer of
nuts, bolts and keys).
Robert A. Farnsworth................. 49 President of the GameTime Division of PlayCore Wisconsin
since May 1998. From February 1993 to April 1998, Mr.
Farnsworth was the Executive Vice President Marketing
and Product Manager of Pfaltzgraff Company (ceramics
manufacturing).
Richard E. Ruegger................... 39 Vice President -- Finance, Secretary and Treasurer since
January 1992 and Chief Financial Officer since June
1992.
David H. Hammelman................... 44 Vice President Human Resources and Administration since
July 1995 and prior to such date was Director of Human
Resources and Administration since October 1993.
Director of Human Services of Brach Van Houten, Andes
Candies Division (candy manufacturing) from October 1992
through October 1993 and Employee Relations Manager of
Pepsico, Frito-Lay division (snack food manufacturing)
from 1984 through September 1992.
</TABLE>
III-5
<PAGE> 79
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information with respect to Company
compensation earned in the last three completed fiscal years by Mr. Contino,
Chief Executive Officer, Mr. Caldwell, President of the Swing-N-Slide Division
of PlayCore Wisconsin, Mr. Farnsworth, President of the GameTime Division of
PlayCore Wisconsin, Mr. Hammelman, Vice President -- Human Resources and
Administration and Mr. Ruegger, Vice President -- Finance and Chief Financial
Officer, the only executive officers whose salary and bonus exceeded $100,000
during the most recently completed fiscal year (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMP. OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- - --------------------------- ---- -------- -------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Frederic L. Contino.................... 1999 $329,257 $452,925 (1) -- $ 56,404(2)
Chief Executive Officer 1997 288,462 585,000 (1) 375,000 7,625
1997 -- -- (1) -- --
John E. Caldwell....................... 1999 $176,781 $123,930 (1) -- $ 41,457(3)
President of the Swing-N-Slide
Division 1998 170,000 35,000 (1) -- 16,595
of PlayCore Wisconsin 1997 159,423 -- (1) 100,000 63,728
Robert A. Farnsworth................... 1999 $179,808 $ 8,576 (1) -- $ 67,231(4)
President of the GameTime Division 1998 111,154 117,823 (1) 50,000 9,594
of PlayCore Wisconsin 1997 -- -- (1) -- --
David H. Hammelman..................... 1999 $110,000 $ 73,150 (1) -- $ 20,329(5)
Vice President -- Human Resources 1998 105,000 95,550 (1) -- 3,874
and Administration 1997 93,961 7,893 (1) 78,219 3,947
Richard E. Ruegger..................... 1999 $120,000 $ 79,800 (1) -- $ 22,002(6)
Vice President -- Finance and Chief 1998 115,000 104,650 (1) -- 4,371
Financial Officer 1997 104,077 8,706 (1) 164,046 4,695
</TABLE>
- - ---------------
(1) The Company also provides its Named Executive Officers certain additional
non-cash benefits that are not described in this Proxy Statement because
such compensation is below the SEC's required disclosure thresholds.
(2) The compensation reported is comprised of $6,400 of matching contributions
made by the Company pursuant to its 401(k) plan and $50,004 of contributions
made by the Company pursuant to a Supplemental Executive Retirement Plan.
(3) The compensation reported is comprised of $6,400 of matching contributions
made by the Company pursuant to its 401(k) plan and $35,057 of relocation
expenses paid by the Company in connection with Mr. Caldwell's December 1996
employment by the Company.
(4) The compensation reported is comprised of $1,423 of matching contributions
made by the Company pursuant to its 401(k) plan, $25,528 of contributions
made by the Company pursuant to a Supplemental Executive Retirement Plan and
$40,280 of relocation expenses paid by the Company in connection with Mr.
Farnsworth's May 1998 employment with the Company.
(5) The compensation reported is comprised of $4,250 of matching contributions
made by the Company pursuant to its 401(k) plan and $16,079 of contributions
made by the Company pursuant to a Supplemental Executive Retirement Plan.
III-6
<PAGE> 80
(6) The compensation reported is comprised of $4,462 of matching contributions
made by the Company pursuant to its 401(k) plan and $17,540 of contributions
made by the Company pursuant to a Supplemental Executive Retirement Plan.
AGGREGATE OPTIONS EXERCISED IN 1999 AND 1999 YEAR-END OPTION VALUE
Set forth below is certain information regarding the number and value of
unexercised stock options held by the Named Executive Officers at the end of
1999. No options were exercised by the Named Executive Officers in 1999.
<TABLE>
<CAPTION>
AGGREGATE FISCAL YEAR-END OPTION VALUES
------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT DECEMBER 31, 1999 DECEMBER 31, 1999(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Frederic L. Contino........................ 225,000 150,000 $928,125 $618,750
John E. Caldwell........................... 55,000 45,000 $ 76,825 $ 17,275
Robert A. Farnsworth....................... 10,000 40,000 $ 34,375 $137,500
David H. Hammelman......................... 57,895 35,000 $123,185 --
Richard E. Ruegger......................... 63,948 116,250 $159,939 --
</TABLE>
- - ---------------
(1) For valuation purposes the amounts shown are based upon the December 31,
1999, $8.125 closing price per share of the Common Stock on the American
Stock Exchange.
AGREEMENTS WITH EXECUTIVE OFFICERS
New Management Agreements. Acquisition Company entered into an Employment
Agreement with Mr. Contino and Severance, Change of Control and Noncompetition
Agreements with nine officers of the Company, including Messrs. Caldwell,
Hammelman, Farnsworth and Ruegger. Each of the these agreements is described in
the section captioned "Special Factors -- Section 7 (The Merger Agreement and
Related Documents)" of the Offer to Purchase accompanying this Information
Statement and is incorporated herein by reference.
Existing Employment and Severance Agreements. Set forth below is a
description of the employment and/or severance agreements currently existing
between the Company and its Named Executive Officers.
The Company entered into an Employment Agreement in January 1998 with Mr.
Contino that sets forth certain terms and conditions of his employment with the
Company. The Employment Agreement runs for three years and automatically extends
from year to year thereafter unless terminated prior to any such extension. The
Employment Agreement provides for an annual base salary of $300,000, subject to
increases each year at the discretion of the Board, and for an annual bonus
based generally upon increases in the Company's earnings before interest, taxes,
depreciation and amortization ("EBITDA"). The Employment Agreement also provides
for the grant of options shown on the "Option Grants in Last Fiscal Year" table.
In the event Mr. Contino is terminated without cause, in addition to certain
other benefits, (i) his annual base salary continues for a minimum of two years
if such termination occurs before July 1999, and a minimum of one year, subject
to extension to up to two years if certain financial goals have been achieved by
the Company, after July 1999, and (ii) he is entitled to certain bonus
replacement payments if certain levels of EBITDA have been achieved prior to
such termination. If such termination occurs in connection with a change of
control, in certain circumstances Mr. Contino may be entitled to certain
additional payments, the amount of which are generally based upon the bonus paid
to Mr. Contino in the previous year. The Employment Agreement also provides for
certain perquisites and benefits commensurate with Mr. Contino's employment as
President and Chief Executive Officer of the Company. The Employment Agreement
contains provisions requiring Mr. Contino to keep certain information with
respect to the Company confidential during his employment and for two years
thereafter and provisions providing that Mr. Contino will not compete with the
Company's business for 18 months following any termination of his employment.
III-7
<PAGE> 81
In December 1996, the Company entered into a Severance and Change of
Control Agreement with Mr. Caldwell. Under the terms of such Severance and
Change of Control Agreement, in the event that Mr. Caldwell is terminated
without cause within one year after a change of control of the Company, he shall
be entitled to receive an amount based upon a multiple of his last month's base
salary. Mr. Caldwell shall also be entitled to receive an amount based upon a
multiple of his last month's base salary if he remains employed during the
one-year period after such change of control and elects to terminate employment
within 30 days of the end of such one-year period.
In June 1998, the Company entered into a Severance and Change of Control
Agreement with Mr. Farnsworth. Under the terms of such Severance and Change of
Control Agreement, in the event that Mr. Farnsworth is terminated without cause
within one year after a change of control of the Company, he shall be entitled
to receive an amount based upon a multiple of his last month's base salary.
In February 1999, the Company entered into Severance and Change of Control
Agreements with Messrs. Hammelman and Ruegger. Under the terms of such Severance
and Change of Control Agreements, in the event that any such employee is
terminated without cause within one year after a change of control of the
Company, such employee shall be entitled to receive an amount based upon a
multiple of his last month's base salary. Each such employee shall also be
entitled to receive an amount based upon a multiple of his last month's base
salary if the employee remains employed during the one-year period after such
change of control and the employee elects to terminate employment within 30 days
of the end of such one-year period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Messrs. Evans, Malone
and Wray. No present or former executive officer of the Company serves as a
member of the Compensation Committee. Furthermore, there are no interlocking
relationships between any executive officer of the Company and any entity whose
directors or executive officers serve on the Compensation Committee.
Mr. Evans is a stockholder and director and the President and Chief
Executive Officer of Glencoe Investment Corporation ("GIC"), which is an
affiliate of an institutional investor in GGC and an institutional investor in
GreenGrass Capital II LLC, a Delaware limited liability company ("GGCII"). GGC
and GGCII are two of the three partners of GreenGrass Holdings, a Delaware
general partnership ("GreenGrass Holdings"), which beneficially owns
approximately 72% of the outstanding shares of Common Stock. Mr. Evans is also
one of the three persons appointed to the Members Operating Board of GGC, which
entity controls voting and investment making decisions of GreenGrass Holdings,
and one of the three persons appointed to the Members Operating Board of GGCII.
AGREEMENT WITH RESPECT TO CONSULTING SERVICES
Under the terms of the Management Consulting Agreement, dated February 16,
1996, the Company pays to GIC and Desai Capital Management Incorporated
("DCMI"), affiliates of two GGC institutional investors, consulting fees in the
aggregate amount of $300,000 per year, payable in quarterly installments of
$75,000, plus reimbursement of reasonable expenses incident to their consulting
services. The Management Consulting Agreement is automatically renewed for
successive one-year terms unless either party gives notice to the other of its
intention not to renew the agreement. The consulting fee is reviewed annually by
the Board.
AGREEMENT WITH RESPECT TO ACQUISITION ADVISORY SERVICES
Under the terms of an engagement letter dated September 6, 1996, GIC and
DCMI agreed to act as acquisition advisors to the Company with respect to two
potential acquisitions (the "Acquisitions"). In this regard, GIC and DCMI agreed
to provide advice to the Company with respect to valuation, due diligence,
negotiation, financing techniques and alternatives, and related matters
involving the Acquisitions. The initial term of the engagement is for one year
with automatic renewal for successive one-year periods unless either party
provides notice of its desire not to renew at least 30 days before the renewal
date. As compensation for such services, the Company agreed to pay to GIC and
DCMI a fee equal to 4.0% of the gross proceeds from
III-8
<PAGE> 82
any new equity raised, plus 1.125% of any senior loan financing related to the
Acquisitions (less fees paid to other parties) plus 1.0% of the transaction of
value for either of the Acquisitions consummated by the Company. The Company
also agreed to reimburse GIC and DCMI for certain expenses incurred by them in
performing such services.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In addition to the matters described under the heading "Compensation
Committee Interlocks and Insider Participation," the Company has been party to
certain other related party transactions which are described below.
AGREEMENT WITH RESPECT TO ELECTION OF DIRECTORS
Under the terms of a Transaction Agreement dated January 4, 1996, as
amended, pursuant to which GreenGrass Holdings acquired it's equity holdings in
the Company, GreenGrass Holdings is entitled to designate five members of the
Board (Mr. Contino is not counted as one of such five directors). To date,
GreenGrass Holdings has designated four current directors, Messrs. Evans,
Herrera, Kelleher and Wray.
REGISTRATION RIGHTS
Under certain agreements, Code Hennessy & Simons Limited Partnership,
formerly a significant investor in the Company, GreenGrass Holdings and certain
of their associates, and various officers and directors and, in some cases,
their spouses or trusts for their benefit or the benefit of their children, were
granted certain rights to have shares of Common Stock registered and/or included
in registrations initiated by the Company or its stockholders (the "registration
rights"). Expenses incurred in connection with the exercise of such registration
rights shall be, subject to limited exceptions, borne by the Company.
III-9
<PAGE> 83
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of March
31, 2000, except as otherwise noted, by (i) each stockholder known by the
Company to be the beneficial owner of more than 5% of the Common Stock, (ii)
each director of the Company, (iii) the Named Executive Officers, and (iv) all
executive officers and directors as a group. Except as otherwise noted, the
persons named in this table have sole voting and investment power with respect
to all shares of Common Stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
-------------------
NAME OF BENEFICIAL OWNER(1) NUMBER PERCENT
- - --------------------------- --------- -------
<S> <C> <C>
John E. Caldwell(2)......................................... 82,028 1.0%
Frederic L. Contino(3)...................................... 280,400 3.4%
David S. Evans(4)........................................... 6,772,655 72.1%
Robert A. Farnsworth(5)..................................... 20,000 *
GreenGrass Holdings and Related Parties(6).................. 6,772,655 72.1%
GGC (4,851,774 shares -- 51.6%)(7)(9)(10)
GGCII (1,852,361 shares -- 19.7%)(8)(9)(10)
GGM (68,520 shares -- 0.7%)(11)
David H. Hammelman(12)...................................... 75,395 *
George N. Herrera(13)....................................... 20,000 *
Timothy R. Kelleher(14)..................................... 6,772,655 72.1%
Terence S. Malone(15)....................................... 62,181 *
Massachusetts Mutual Life Ins. Co.(16)...................... 781,201 9.4%
Gary A. Massel(17).......................................... 15,000 *
Richard E. Ruegger(18)...................................... 141,448 1.8%
Thomas van der Meulen....................................... -- --
Ronald D. Wray(19).......................................... 5,000 *
All executive officers and directors as a group (12
persons)(20).............................................. 7,464,107 74.1%
</TABLE>
- - ---------------
* Less than 1%
(1) Except as otherwise indicated, the address of each stockholder is c/o
PlayCore, Inc., Riverfront Centre, 15 West Milwaukee Street, Suite 204,
Janesville, Wisconsin 53545.
(2) Includes 80,000 shares issuable upon the exercise of stock options which
are currently exercisable.
(3) Includes 275,000 shares issuable upon the exercise of stock options that
are currently exercisable.
(4) As one of the three persons appointed to the Members Operating Board of
GreenGrass Capital LLC, a Delaware limited liability company ("GGC"), Mr.
Evans has shared control of the voting and investment making decisions of
GreenGrass Holdings, which owns 5,345,905 shares of Common Stock,
Debentures convertible into 1,376,750 shares of Common Stock, and a warrant
to purchase 50,000 shares of Common Stock. Of such securities, Mr. Evans
would be entitled to receive from GreenGrass Holdings 7,078 shares of
Common Stock, Debentures convertible into 1,545 shares of Common Stock, and
a warrant to purchase 86 shares of Common Stock under certain circumstances
as a result of his ownership of a limited partnership interest in Glencoe
Fund Partners and Glencoe Growth, and his ownership of stock in GIC. The
address of Mr. Evans is c/o Glencoe Investment Corporation, 190 South
LaSalle St., Suite 2830, Chicago, Illinois 60603.
(5) Includes 10,000 shares issuable upon the exercise of stock options which
currently exercisable.
(6) The address of GreenGrass Holdings, a Delaware general partnership
("GreenGrass Holdings"), is c/o Glencoe Investment Corporation, 190 South
LaSalle St., Suite 2830, Chicago, Illinois 60603. Includes 5,345,905 shares
of Common Stock, Debentures convertible into 1,376,750 shares of Common
Stock, and a warrant to purchase 50,000 shares of Common Stock. The general
partners of GreenGrass Holdings consist of GGC, GreenGrass Capital II LLC,
a Delaware limited liability company
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("GGCII"), and Green Grass Management LLC, a Delaware limited liability
company ("GGM"). Of the 5,345,905 shares of Common Stock owned by
GreenGrass Holdings, 3,494,509 shares are beneficially owned by GGC,
1,802,361 shares are beneficially owned by GGCII, and 49,035 shares are
beneficially owned by GGM. Of the 1,376,750 shares which GreenGrass
Holdings would receive upon conversion of Debentures, 1,357,265 shares
would be beneficially owned by GGC and 19,485 shares would be beneficially
owned by GGM. The 50,000 shares which GreenGrass Holdings would receive
upon exercise of the warrant would be beneficially owned by GGCII.
(7) The members of GGC are the following institutional investors: Glencoe Fund,
Equity-Linked Investors -- II, a New York limited partnership ("ELI-II"),
the State Treasurer of the State of Michigan, as Custodian for the Michigan
Public School Employee's Retirement System, the State Employees' Retirement
System, the Michigan State Police Retirement System and the Michigan Judges
Retirement System, each a trust organized by the State of Michigan to
provide pension benefits to eligible retirees (collectively, the "Michigan
Trusts"), Crescent/MACH I Partners, L.P., a Delaware limited partnership
("Crescent"), Sahara Enterprises, Inc., a Delaware corporation ("Sahara")
and Baldwin & Lyons Insurance Company, an Indiana corporation ("Baldwin").
(8) The members of GGCII are the following institutional investors: Glencoe
Growth Closely-Held Business Fund, L.P. ("Glencoe Growth"), ELI-II,
Baldwin, the Michigan Trusts, and Massachusetts Mutual Life Insurance
Company and certain of its affiliates ("MassMutual").
(9) ELI-II is a member of both GGC and GGCII. The general partner of ELI-II is
Rohit M. Desai Associates-II ("RMDA-II"). RMDA-II is a New York general
partnership and Rohit M. Desai is the managing partner of RMDA-II. The
investment advisor of ELI-II is Desai Capital Management Incorporated
("DCMI"). ELI-II may be deemed to beneficially own 2,457,781 shares of
Common Stock held by Green Grass Holdings (which represents approximately
26.2% of the outstanding Common Stock and which includes 1,926,290 shares
of Common Stock held by GreenGrass Holdings, 514,824 shares of Common Stock
issuable upon conversion of Debentures held by GreenGrass Holdings, and
16,667 shares of Common Stock issuable upon the exercise of the warrant
held by GreenGrass Holdings which it may be entitled to receive under
certain circumstances as a member of GGC and GGCII). RMDA-II (as the
general partner of ELI-II), DCMI (as the investment advisor to ELI-II), and
Rohit M. Desai each may be deemed to be the beneficial owner of securities
beneficially owned by ELI-II. The address of ELI-II and its affiliates
identified above is 540 Madison Avenue, 36th Floor, New York, New York
10022.
(10) The Michigan Trusts are members of both GGC and GGCII. As a result, the
Michigan Trusts may be deemed to beneficially own 2,457,781 shares of
Common Stock held by GreenGrass Holdings (which represents approximately
26.2% of the outstanding shares of Common Stock and includes 1,926,290
shares of Common Stock held by GreenGrass Holdings, 514,824 shares of
Common Stock issuable upon conversion of Debentures held by GreenGrass
Holdings, and 16,667 shares of Common Stock issuable upon the exercise of
the warrant held by GreenGrass Holdings which they may be entitled to
receive under certain circumstances as members of GGC and GGCII). The
address of the Michigan Trusts is 430 West Allegan Street, Lansing,
Michigan 48901.
(11) The members of GGM are the following former and current officers of
PlayCore: Messrs. Ruegger, Cole, Hammelman, Beebe and Jonas.
(12) Consists of 75,395 shares of Common Stock issuable upon the exercise of
stock options which are currently exercisable. Excludes 4,290 shares of
Common Stock and Debentures convertible into 1,705 shares of Common Stock
held by GreenGrass Holdings which securities, as a member of GGM may be
deemed to beneficially own because Mr. Hammelman would receive such
securities under certain circumstances (including upon termination of his
employment). Mr. Hammelman expressly disclaims beneficial ownership of any
other securities of PlayCore held by GreenGrass Holdings because he neither
is a controlling member of GGM nor has investment control of the portfolio
securities of either GGM or GreenGrass Holdings.
(13) Consists of 20,000 shares of Common Stock issuable upon exercise of stock
options which are currently exercisable.
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<PAGE> 85
(14) As one of the three persons appointed to the Members Operating Board of
GGC, Mr. Kelleher has shared control of the voting and investment making
decisions of GreenGrass Holdings, which owns 5,345,905 shares of Common
Stock, Debentures convertible into 1,376,750 shares of Common Stock, and a
warrant to purchase 50,000 shares of Common Stock. The address of Mr.
Kelleher is c/o Desai Capital Management Incorporated, 540 Madison Avenue,
36th Floor, New York, New York 10022.
(15) Includes 61,934 shares issuable upon the exercise of stock options which
are currently exercisable.
(16) The address of Massmutual is 1295 State Street, Springfield, MA 01111-0001.
Includes 297,834 shares of Common Stock issuable upon the exercise of
warrants which are currently exercisable, and 41,271 shares issuable upon
the exercise of a warrant held by MassMutual Corporate Value Partners
Limited (of which an affiliate of MassMutual is a Partner), which warrant
is currently exercisable. Also includes 430,163 shares of Common Stock and
11,933 shares issuable upon the exercise of a warrant held by GreenGrass
Holdings which securities, as a member of GGCII, MassMutual may be deemed
to beneficially own because it would receive such securities under certain
circumstances. MassMutual disclaims beneficial ownership of any other
securities of PlayCore held by GreenGrass Holdings because it neither is a
controlling member of GGCII nor has investment control of the portfolio
securities of either GGCII or GreenGrass Holdings. Also excludes 296,274
shares issuable upon the exercise of warrants held by certain of its
affiliates, including MassMutual Corporate Investors, MassMutual
Participating Investors, and MassMutual Corporate Value Partners Limited,
because the investments of such affiliates are held for the benefit of
unrelated third parties.
(17) Consists of 15,000 shares issuable upon the exercise of stock options which
are currently exercisable.
(18) Consists of 141,448 shares of Common Stock issuable upon the exercise of
stock options which are currently exercisable. Excludes 49,035 shares of
Common Stock and Debentures convertible into 19,485 shares of Common Stock
which Mr. Ruegger may be deemed to beneficially own as sole manager and the
controlling member of GCM, which indirectly beneficially owns such
securities as a general partner of GreenGrass Holdings, including 32,673
shares of Common Stock and Debentures convertible into 12,985 shares of
Common Stock held by GreenGrass Holdings which securities, as a member of
GGM, Mr. Ruegger may be deemed to beneficially own because Mr. Ruegger
would receive such securities under certain circumstances (including upon
termination of his employment). Mr. Ruegger disclaims beneficial ownership
of these securities except to the extent of his pecuniary interest therein.
(19) Consists of 5,000 shares issuable upon the exercise of stock options which
are currently exercisable.
(20) This group is comprised of the following executive officers: Messrs.
Caldwell, Contino, Farnsworth, Hammelman, Ruegger and Van der Meulen; and
the following non-employee directors: Messrs. Evans, Herrera, Kelleher,
Malone, Massel and Wray. Includes Debentures convertible into 1,376,750
shares of Common Stock and a warrant to purchase 50,000 shares of Common
Stock, all of which are held by GreenGrass Holdings, and 785,127 shares
issuable to certain executive officers and directors upon the exercise of
stock options which are currently exercisable.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires PlayCore's
executive officers, directors, and more than 10 percent stockholders to file
with the Securities and Exchange Commission reports on prescribed forms of their
ownership and changes in ownership of Common Stock and furnish copies of such
forms to the Company. The Company believes that during and with respect to the
fiscal year ended December 31, 1999, all reports required by Section 16(a) to be
filed by the Company's officers, directors and more than 10 percent stockholders
were filed on a timely basis.
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<PAGE> 86
EXHIBIT A
[DONALDSON, LUFKIN & JENRETTE LETTERHEAD]
April 13, 2000
Board of Directors
PlayCore Inc.
15 West Milwaukee Street, Suite 204
Janesville, WI 53545
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the holders of common stock, par value $0.01 per share ("Company Common
Stock"), of PlayCore, Inc. (the "Company") of the consideration to be received
by such holders pursuant to the terms of the Agreement and Plan of Merger, dated
as of April 13, 2000 (the "Agreement"), by and among the Company, PlayCore
Holdings, Inc., a Delaware corporation ("Parent") and Jasdrew Acquisition Corp.,
a Delaware corporation and a wholly owned subsidiary Parent ("Acquisition
Company") pursuant to which Acquisition Company will be merged (the "Merger")
with and into the Company.
Pursuant to the Agreement, Acquisition Company and the Company will
commence a tender offer (the "Tender Offer") for all outstanding shares of
Company Common Stock at a price of $10.10 per share. The Tender Offer is to be
followed by the Merger in which the shares of all holders who did not tender
will be converted into the right to receive $10.10 per share in cash.
In arriving at our opinion, we have reviewed the Agreement and the annex
thereto, the Conditions to the Offer. We also have reviewed financial and other
information that was publicly available or furnished to us by the Company
including information provided during discussions with the Company's management.
Included in the information provided during discussions with management were
certain financial projections of the Company for the period beginning January 1,
2000 and ending December 31, 2002 prepared by the management of the Company. In
addition, we have compared certain financial and securities data of the Company
with various other companies whose securities are traded in public markets,
reviewed the historical stock prices and trading volumes of Company Common
Stock, reviewed prices paid in certain other business combinations and conducted
such other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company, or that was
otherwise reviewed by us and have assumed that the Company is not aware of any
information prepared by it or its advisors that might be material to our opinion
that has not been made available to us. With respect to the financial
projections supplied to us, we have relied on representations that they have
been reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of the Company as to the future
operating and financial performance of the Company. We have not assumed any
responsibility for making an independent evaluation any assets or liabilities or
for making any independent verification of any of the information reviewed by
us.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Our opinion does not address the relative
merits of the Tender Offer and Merger or any other business strategies being
considered by the Company's Board of Directors, nor does it address the Board's
decision to proceed with the Tender Offer and Merger. Our opinion does not
constitute a recommendation to any stockholder as to whether such stockholder
should tender into the Tender Offer or how such stockholder should vote on any
proposed Merger.
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Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the consideration to be received by the holders of the
Company Common Stock pursuant to the Tender Offer and/or Merger is fair to such
holders from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ JAMES F. FRAWLEY
----------------------------------
James F. Frawley
Senior Vice President
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<PAGE> 88
EXHIBIT B
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to
sec. 251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or
sec. 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
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(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
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other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for Shares and
any other required documents should be sent or delivered by each stockholder of
the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary, at one of the addresses set forth below:
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Overnight Delivery: By Hand Delivery:
First Chicago Trust First Chicago Trust Company First Chicago Trust
Company of New York of New York Company of New York
Corporate Actions, Suite 4660 Corporate Actions, Suite 4660 c/o Securities Transfer and
P.O. Box 2569 525 Washington Blvd, 3rd Floor Reporting Services, Inc.
Jersey City, NJ 07303-2569 Jersey City, NJ 07310 Attn: Corporate Actions
100 William Street, Galleria
New York, NY 10038
</TABLE>
Facsimile Transmission:
(201) 324-3402
or
(201) 324-3403
Confirm Receipt of Facsimile by Telephone:
(201) 222-4707
FOR ADDITIONAL INFORMATION, PLEASE CALL FIRST CHICAGO TRUST COMPANY OF NEW YORK
AT (800) 446-2617.
Questions or requests for assistance or additional copies of this Offer to
Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be
directed to the Information Agent at its location and telephone numbers set
forth below. Stockholders may also contact their broker, dealer, commercial bank
or trust company for assistance concerning the Offer.
The Information Agent for the Offer is:
D. F. KING & CO., INC.
77 Water Street
New York, NY 10005
Banks and Brokers Call Collect:
(212) 269-5550
All Others Please Call Toll-Free:
(800) 431-9645
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
PLAYCORE, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED APRIL 20, 2000
BY
JASDREW ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
PLAYCORE HOLDINGS, INC.
A WHOLLY-OWNED SUBSIDIARY OF
PLAYCORE HOLDINGS, L.L.C.
AND BY
PLAYCORE, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON MAY 18, 2000, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Overnight Delivery: By Hand Delivery:
First Chicago Trust First Chicago Trust Company First Chicago Trust
Company of New York of New York Company of New York
Corporate Actions, Suite 4660 Corporate Actions, Suite 4660 c/o Securities Transfer and
P.O. Box 2569 525 Washington Blvd, 3rd Floor Reporting Services, Inc.
Jersey City, NJ 07303-2569 Jersey City, NJ 07310 Attn: Corporate Actions
100 William Street, Galleria
New York, NY 10038
</TABLE>
FOR ADDITIONAL INFORMATION, PLEASE CALL FIRST CHICAGO TRUST COMPANY OF NEW YORK
AT (800) 446-2617.
<TABLE>
<S> <C> <C> <C>
- - ------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- - ------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S)
APPEAR(S) SHARE CERTIFICATE(S) AND SHARES TENDERED
ON SHARE CERTIFICATE(S) TENDERED) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- - ------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF SHARES
SHARE CERTIFICATE REPRESENTED BY SHARE NUMBER OF SHARES
NUMBER(S)* CERTIFICATE(S)** TENDERED
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
TOTAL SHARES:
- - ------------------------------------------------------------------------------------------------------------------
* NEED NOT BE COMPLETED BY STOCKHOLDERS DELIVERING SHARES BY BOOK-ENTRY TRANSFER.
** UNLESS OTHERWISE INDICATED, IT WILL BE ASSUMED THAT ALL SHARES EVIDENCED BY EACH SHARE CERTIFICATE DELIVERED
TO THE DEPOSITARY ARE BEING TENDERED HEREBY. SEE INSTRUCTION 4.
- - ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
[ ] I HAVE LOST MY CERTIFICATE(S) FOR ________________ SHARES OF COMMON STOCK
AND REQUIRE ASSISTANCE WITH RESPECT TO REPLACING SUCH CERTIFICATE(S). (SEE
INSTRUCTION 10.)
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF
TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED
BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders either if
certificates evidencing Shares (as defined below) are to be forwarded herewith
or if delivery of Shares is to be made by book-entry transfer to the
Depositary's account at the Depository Trust Company ("DTC" or the "Book-Entry
Transfer Facility") pursuant to the book-entry transfer procedure described in
"The Tender Offer -- Section 3 (Procedures for Tendering Shares)" of the Offer
to Purchase (as defined below). DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER
FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Stockholders whose certificates evidencing Shares (the "Share
Certificates") are not immediately available or who cannot deliver their Share
Certificates and all other documents required hereby to the Depositary prior to
the Expiration Date (as defined in "The Tender Offer -- Section 1 (Terms of the
Offer)" of the Offer to Purchase) or who cannot complete the procedure for
delivery by book-entry transfer on a timely basis and who wish to tender their
Shares must do so pursuant to the guaranteed delivery procedure described in
"The Tender Offer -- Section 3 (Procedures for Tendering Shares)" of the Offer
to Purchase. See Instruction 2.
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE
FOLLOWING:
Name of Tendering Institution:
Account Number: Transaction Code Number:
[ ] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING. PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED
DELIVERY.
Name(s) of Registered Holder(s):
Window Ticket Number (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution which Guaranteed Delivery:
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL CAREFULLY.
2
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to Jasdrew Acquisition Corp. ("Acquisition
Company"), a Delaware corporation and a wholly-owned subsidiary of PlayCore
Holdings, Inc. ("Parent"), a Delaware corporation and a wholly-owned subsidiary
of PlayCore Holdings, L.L.C., a Delaware limited liability company, and/or to
PlayCore, Inc., a Delaware corporation (the "Company") (the Company or
Acquisition Company, individually, is, and the Company together with Acquisition
Company are, sometimes referred to herein as the "Purchasers") the
above-described shares of common stock, $0.01 par value per share (the
"Shares"), of the Company, pursuant to the Purchasers' offer to purchase all
outstanding Shares, at $10.10 per Share (the "Offer Price"), net to the seller
in cash, without interest thereon, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated April 20, 2000 (the "Offer to
Purchase"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which, as amended from time to time, together constitute the
"Offer").
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to, or upon the
order of, the Purchasers all right, title and interest in and to all the Shares
that are being tendered hereby and all dividends, distributions (including,
without limitation, distributions of additional Shares) and rights declared,
paid or distributed in respect of such Shares on or after April 13, 2000
(collectively, "Distributions"), and irrevocably appoints the Depositary the
true and lawful agent and attorney-in-fact of the undersigned with respect to
such Shares and all Distributions, with full power of substitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest),
to (i) deliver Share Certificates evidencing such Shares and all Distributions,
or transfer ownership of such Shares and all Distributions on the account books
maintained by the Book-Entry Transfer Facility, together, in either case, with
all accompanying evidences of transfer and authenticity, to or upon the order of
the Purchasers, (ii) present such Shares and all Distributions for transfer on
the books of the Company and (iii) receive all benefits and otherwise exercise
all rights of beneficial ownership of such Shares and all Distributions, all in
accordance with the terms of the Offer.
By executing this Letter of Transmittal, the undersigned irrevocably
appoints designees of Purchasers as the attorneys and proxies of the
undersigned, each with full power of substitution, to the full extent of the
undersigned's rights with respect to the Shares tendered by the undersigned and
accepted for payment by the Purchasers (and any and all Distributions). All such
proxies shall be considered coupled with an interest in the tendered Shares.
This appointment will be effective if, when, and only to the extent that, the
Purchasers accept such Shares for payment pursuant to the Offer. Upon such
acceptance for payment, all prior proxies given by the undersigned with respect
to such Shares (and such other Shares and securities) will, without further
action, be revoked, and no subsequent proxies may be given nor any subsequent
written consent executed by the undersigned (and, if given or executed, will not
be deemed to be effective) with respect thereto. The designees of the Purchasers
will, with respect to the Shares and other securities for which the appointment
is effective, be empowered to exercise all voting and other rights of the
undersigned as they in their sole discretion may deem proper at any annual or
special meeting of the stockholders of the Company or any adjournment or
postponement thereof, by written consent in lieu of any such meeting or
otherwise, and the Purchasers reserve the right to require that, in order for
Shares or other securities to be deemed validly tendered, immediately upon the
Purchasers' acceptance for payment of such Shares, the Purchasers must be able
to exercise full voting rights with respect to such Shares.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions, and that when such Shares are accepted
for payment by the Purchasers, the Purchasers will acquire good, marketable and
unencumbered title thereto and to all Distributions, free and clear of all
liens, restrictions, charges and encumbrances, and that none of such Shares and
Distributions will be subject to any adverse claim. The undersigned, upon
request, shall execute and deliver all additional documents deemed by the
Depositary or the Purchasers to be necessary or desirable to complete the sale,
assignment and transfer of the Shares tendered hereby and all Distributions. In
addition, the undersigned shall remit and transfer promptly to the Depositary
for the account of the Purchasers all Distributions in respect of the Shares
tendered hereby, accompanied by appropriate
3
<PAGE> 4
documentation of transfer, and, pending such remittance and transfer or
appropriate assurance thereof, the Purchasers shall be entitled to all rights
and privileges as owner of each such Distribution and may withhold the entire
purchase price of the Shares tendered hereby or deduct from such purchase price,
the amount or value of such Distribution as determined by the Purchasers in
their sole discretion.
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as otherwise stated in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in "The Tender Offer -- Section 3 (Procedures for
Tendering Shares)" of the Offer to Purchase and in the instructions hereto will
constitute the undersigned's acceptance of the terms and conditions of the
Offer. The Purchasers' acceptance of such Shares for payment will constitute a
binding agreement between the undersigned and the Purchasers upon the terms and
subject to the conditions of the Offer, including, without limitation, the
undersigned's representation and warranty that the undersigned owns the Shares
being tendered. The undersigned acknowledges that no interest will be paid on
the Offer Price for tendered Shares regardless of an extension of the Offer or
any delay in making such payment.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased or
not tendered, in the name(s) of the registered holder(s) appearing above under
"Description of Shares Tendered." Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions," please mail the check for the
purchase price of all Shares purchased and all Share Certificates evidencing
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered." In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, please issue the check for the purchase price of all Shares purchased
and return all Share Certificates evidencing Shares not purchased or not
tendered in the name(s) of, and mail such check and Share Certificates to, the
person(s) so indicated. The undersigned recognizes that the Purchasers do not
have an obligation, pursuant to the Special Payment Instructions, to transfer
any Shares from the name of the registered holder(s) thereof if the Purchasers
do not purchase any of the Shares tendered hereby.
4
<PAGE> 5
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not tendered or not purchased
are to be issued in the name of someone other than the undersigned or if Shares
tendered hereby and delivered by book-entry transfer which are not purchased are
to be returned by credit to an account at the Book-Entry Transfer Facility other
than that designated above.
Issue: [ ] Check [ ] Share Certificate(s) to:
Name --------------------------------------------------------------------------
(Print)
Address -----------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
(ZIP Code)
- - --------------------------------------------------------------------------------
(Taxpayer Identification or Social Security Number)
(See Substitute Form W-9 included herein)
Credit unpurchased Shares delivered by book-entry transfer to the following
account:
- - ------------------------
(Account Number)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares purchased
or Share Certificates evidencing Shares not tendered or not purchased are to be
mailed to someone other than the undersigned, or to the undersigned at an
address other than that shown under "Description of Shares Tendered."
Mail: [ ] Check [ ] Share Certificate(s) to:
Name
--------------------------------------------------------------------------
(Print)
Address
-----------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
(ZIP Code)
5
<PAGE> 6
IMPORTANT
STOCKHOLDERS: SIGN HERE
(ALSO PLEASE COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREIN)
X
- - --------------------------------------------------------------------------------
X
- - --------------------------------------------------------------------------------
Signature(s) of Stockholder(s)
Dated:
- - ------------------------------------, 2000
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Share Certificates or on a security position listing or by person(s) authorized
to become registered holder(s) by certificates and documents transmitted
herewith. If signature is by trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, please provide the following information. See
Instruction 5 hereof.)
Name(s):
-----------------------------------------------------------------------
(Please Print)
Capacity (full title):
-------------------------------------------------------
Address:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(Zip Code)
Area Code and Telephone No.:
--------------------------------------------------------------------------
Tax Identification or Social Security No.:
------------------------------------
(See substitute Form W-9 included herein)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5 HEREOF)
SPACE BELOW FOR USE BY FINANCIAL INSTITUTIONS ONLY.
PLACE MEDALLION GUARANTEE IN THE SPACE BELOW.
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or by a financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of the
Securities Transfer Agents Medallion Program or by any other bank, broker,
dealer, credit union, savings association or other entity which is an "eligible
guarantor institution," as such term is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (each of the foregoing constituting
an "Eligible Institution"), unless (i) this Letter of Transmittal is signed by
the registered holder(s) of the Shares (which term, for purposes of this
document includes any participant in the Book-Entry Transfer Facility system
whose name appears on a security position listing as the owner of the Shares)
tendered hereby and such registered holder(s) has (have) not completed either
the box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" or (ii) such Shares are tendered for the account of an
Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter of
Transmittal is to be used if either Share Certificates are to be forwarded
herewith or Shares are to be delivered by book-entry transfer pursuant to the
procedure set forth in "The Tender Offer -- Section 3 (Procedures for Tendering
Shares)" of the Offer to Purchase. Share Certificates evidencing all physically
tendered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility of all Shares delivered
by book-entry transfer, together in each case with a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof), or an
Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry transfer, and any other documents required by this Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth herein prior to the Expiration Date (as defined in the Offer to Purchase).
If Share Certificates are forwarded to the Depositary in multiple deliveries, a
properly completed and duly executed Letter of Transmittal must accompany each
such delivery. Stockholders whose Share Certificates are not immediately
available, who cannot deliver their Share Certificates and all other required
documents to the Depositary prior to the Expiration Date or who cannot complete
the procedure for delivery by book-entry transfer on a timely basis may tender
their Shares pursuant to the guaranteed delivery procedure described in "The
Tender Offer -- Section 3 (Procedures for Tendering Shares)" of the Offer to
Purchase. Pursuant to such procedure: (i) such tender must be made by or through
an Eligible Institution; (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by the Purchasers,
must be received by the Depositary prior to the Expiration Date; and (iii) the
Share Certificates representing all tendered Shares in proper form for transfer
or the Book-Entry Confirmation with respect to all such Shares, together with a
properly completed and duly executed Letter of Transmittal for (or a manually
signed facsimile thereof), with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message, and any other required
documents, must be received by the Depositary within three American Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery, all as described in "The Tender Offer -- Section 3 (Procedures for
Tendering Shares)" of the Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER.
SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS
WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION).
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
8
<PAGE> 8
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a manually signed facsimile hereof), all tendering stockholders waive any
right to receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares evidenced by any Share Certificate
delivered to the Depositary herewith are to be tendered hereby, fill in the
number of Shares which are to be tendered in the box entitled "Number of Shares
Tendered." In such cases, new Share Certificate(s) evidencing the remainder of
the Shares that were evidenced by the Share Certificates delivered to the
Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" on the reverse hereof, as soon as practicable after the expiration
or termination of the Offer. All Shares evidenced by Share Certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Share.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing the Shares not tendered or not purchased are to be issued in the name
of, a person other than the registered holder(s), in which case, the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity for the registered holder, such person should so indicate when signing,
and proper evidence satisfactory to the Purchasers of such person's authority so
to act must be submitted.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, the Purchasers will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to them or their order pursuant to the Offer. If,
however, payment of the purchase price of any Shares purchased is to be made to,
or Share Certificate(s) evidencing Shares not tendered or not purchased are to
be issued in the name of, a person other than the registered holder(s), the
amount of any stock transfer taxes (whether imposed on the registered holder(s),
such other person or otherwise) payable on account of the transfer to such other
person will be deducted from the purchase price of such Shares purchased, unless
evidence satisfactory to the Purchasers of the payment of such taxes, or
exemption therefrom is submitted. Except as provided in this Instruction 6, it
9
<PAGE> 9
will not be necessary for transfer tax stamps to be affixed to the Share
Certificates evidencing the Shares tendered hereby.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or any such Share Certificate is to be sent to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal but at an address other than that shown in the box
entitled "Description of Shares Tendered" set forth herein, the appropriate
boxes set forth in this Letter of Transmittal must be completed. Stockholders
tendering Shares by book-entry transfer may request that Shares not purchased be
credited to such account at the Book-Entry Transfer Facility as such stockholder
may designate in the box entitled "Special Payment Instructions." If no such
instructions are given, any such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated herein as
the account from which such Shares were delivered.
8. WAIVER OF CONDITIONS. The conditions to the Offer may be waived by the
Purchasers and Parent in whole or in part at any time and from time to time in
their discretion.
9. IMPROPER SURRENDER. The Depositary reserves the right to reject any
surrenders of Share Certificate(s) that are defective or irregular in any
respect and may request from persons making such surrenders such additional
documents as the Depositary deems appropriate to cure any such surrender. No
surrender will be deemed to have been effected until all such defects or
irregularities, which have not been waived, have been cured.
10. LOST CERTIFICATES. In the event that any stockholder is unable to
deliver to the Depositary the Share Certificate(s) representing his, her or its
Shares due to the loss or destruction of such Share Certificate(s), such fact
should be indicated on the face of this Letter of Transmittal. The Depositary
will forward additional documentation which such stockholder must complete in
order to effectively surrender such lost or destroyed Share Certificate(s)
(including affidavits of loss and indemnity bonds in lieu thereof). There may be
a fee in respect of lost or destroyed Share Certificates, but surrenders
hereunder regarding such lost certificates will be processed only after such
documentation has been submitted to and approved by the Depositary.
11. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
and requests for assistance may be directed to the Information Agent at the
address or telephone numbers set forth below. Additional copies of the Offer to
Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be obtained from the Information Agent or from brokers, dealers, commercial
banks or trust companies.
12. SUBSTITUTE FORM W-9. Each tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify, under penalties of perjury, that such number is correct and that
such stockholder is not subject to backup withholding of federal income tax. If
a tendering stockholder has been notified by the Internal Revenue Service that
such stockholder is subject to back-up withholding, such stockholder must cross
out item (2) of the Certification box of the Substitute Form W-9, unless such
stockholder has since been notified by the Internal Revenue Service that such
stockholder is no longer subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the tendering stockholder to
31% federal income tax withholding on the payment of the purchase price of all
Shares purchased from such stockholder. If the tendering stockholder has not
been issued a TIN and has applied for one or intends to apply for one in the
near future, such stockholder should write "Applied For" in the space provided
for the TIN in Part I of the Substitute Form W-9, and sign and date the
Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is
not provided with a TIN within 60 days, the Depositary will withhold 31% on all
payments of the purchase price to such stockholder until a TIN is provided to
the Depositary.
10
<PAGE> 10
IMPORTANT: THIS LETTER OF TRANSMITTAL PROPERLY COMPLETED AND DULY EXECUTED
(TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES AND SHARE CERTIFICATES OR
CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A
PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE
OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under the federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payor)
with such stockholder's correct TIN on Substitute Form W-9 below. If such
stockholder is an individual, the TIN is such stockholder's social security
number. If the Depositary is not provided with the correct TIN, the stockholder
may be subject to a $50 penalty imposed by the Internal Revenue Service. In
addition, payments that are made to such stockholder with respect to Shares
purchased pursuant to the Offer may be subject to backup withholding of 31%.
Certain stockholders (including, among others, corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement, signed under penalties of
perjury, attesting to such individual's exempt status. Forms of such statements
can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions. A stockholder should consult his or her tax advisor as
to such stockholder's qualification for exemption from backup withholding and
the procedure for obtaining such exemption.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service. Refunds
are not available from the Depositary.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing the form below certifying (i) that the TIN provided on Substitute
Form W-9 is correct (or that such stockholder is awaiting a TIN), and (ii) that
(y) such stockholder has not been notified by the Internal Revenue Service that
such stockholder is subject to backup withholding as a result of a failure to
report all interest or dividends or (z) the Internal Revenue Service has
notified such stockholder that such stockholder is no longer subject to backup
withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering stockholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the stockholder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% of all payments of the purchase price to such
stockholder until a TIN is provided to the Depositary.
11
<PAGE> 11
ALL TENDERING STOCKHOLDERS MUST COMPLETE THE FOLLOWING:
PAYOR'S NAME:
<TABLE>
<S> <C> <C>
- - ----------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- Taxpayer ------------------------------
Identification Number -- For Social Security Number
FORM W-9 all accounts, enter your or
taxpayer identification number ------------------------------
DEPARTMENT OF THE TREASURY on the appropriate line to the Employer Identification Number
INTERNAL REVENUE SERVICE right. (For most individuals,
this is your social security (If awaiting TIN write
PAYER'S REQUEST FOR TAXPAYER number. If you do not have a "Applied For")
IDENTIFICATION NUMBER (TIN) number, see Obtaining a Number
in the enclosed Guidelines and
complete as instructed.)
Certify by signing and dating
below. Note: If the account is
in more than one name, see the
chart in the enclosed
Guidelines to determine which
number to give the payor.
- - ----------------------------------------------------------------------------------------------
PART II -- For Payees exempt from backup withholding, see the enclosed Guidelines and
complete as instructed therein.
- - ----------------------------------------------------------------------------------------------
PART III -- CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am
waiting for a number to be issued to me); and
(2) I am not subject to backup withholding either because I have not been notified by the
Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result
of a failure to report all interest or dividends, or the IRS has notified me that I am
no longer subject to backup withholding.
CERTIFICATE INSTRUCTIONS -- You must cross out item (2) above if you have been notified by
the IRS that you are currently subject to backup withholding because of under reporting
interest or dividends on your tax return. However, if after being notified by the IRS that
you were subject to backup withholding you received another notification from the IRS that
you are no longer subject to backup withholding, do not cross out such item (2). (Also see
instructions in the enclosed Guidelines.)
- - ----------------------------------------------------------------------------------------------
Signature
- - ---------------------------------------------------------------------------------------------- Date
- - ---------------------------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING (OR WILL
SOON APPLY FOR) A TAXPAYER IDENTIFICATION NUMBER.
- - --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that, notwithstanding the information I provided in Part I of the
Substitute Form W-9 (and the fact that I have completed this Certificate of
Awaiting Taxpayer Identification Number), if I do not provide a correct
taxpayer identification number to the Depositary within sixty (60) days, 31%
of all reportable payments made to me thereafter may be withheld.
<TABLE>
<S> <C>
- - ----------------------------------------------------- -----------------------------------------------------
Signature Date
</TABLE>
- - --------------------------------------------------------------------------------
12
<PAGE> 12
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005-4495
Banks and Brokers Call Collect: (212) 269-5550
All Others call Toll Free: (800) 431-9645
April 20, 2000
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
PlayCore, INC.
TO
JASDREW ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
PlayCore HOLDINGS, INC.
A WHOLLY-OWNED SUBSIDIARY OF
PlayCore HOLDINGS, L.L.C.
AND TO
PlayCore, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) if (i) certificates
(the "Share Certificates") evidencing shares of common stock, $0.01 par value
per share (the "Shares"), of PlayCore, Inc., a Delaware corporation, are not
immediately available, (ii) time will not permit all required documents to reach
First Chicago Trust Company of New York, as Depositary (the "Depositary"), prior
to the Expiration Date (as defined in the Offer to Purchase (as defined below))
or (iii) the procedure for book-entry transfer cannot be completed on a timely
basis. This Notice of Guaranteed Delivery may be delivered by hand, by overnight
delivery or mailed to the Depositary. See "THE TENDER OFFER -- Section 3
(Procedures for Tendering Shares)" of the Offer to Purchase.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Overnight Delivery: By Hand Delivery:
First Chicago Trust First Chicago Trust Company First Chicago Trust
Company of New York of New York Company of New York
Corporate Actions, Suite 4660 Corporate Actions, Suite 4660 c/o Securities Transfer and
P.O. Box 2569 525 Washington Blvd, 3rd Floor Reporting Services, Inc.
Jersey City, NJ 07303-2569 Jersey City, NJ 07310 Attn: Corporate Actions
100 William Street, Galleria
New York, NY 10038
</TABLE>
Facsimile Transmission:
(201) 324-3402
or
(201) 324-3403
Confirm Receipt of Facsimile by Telephone:
(201) 222-4707
<PAGE> 2
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
Ladies and Gentlemen:
The undersigned hereby tenders to Jasdrew Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of PlayCore Holdings, Inc., a Delaware
corporation and a wholly-owned subsidiary of PlayCore Holdings, L.L.C., a
Delaware limited liability company, and/or to PlayCore, Inc., a Delaware
corporation, upon terms and subject to the conditions set forth in the Offer to
Purchase, dated April 20, 2000 (the "Offer to Purchase"), and the related Letter
of Transmittal, receipt of each of which is hereby acknowledged, the number of
Shares specified below pursuant to the guaranteed delivery procedures described
in "THE TENDER OFFER -- Section 3 (Procedures for Tendering Shares)" of the
Offer to Purchase.
<TABLE>
<S> <C>
Number of shares: Name(s) of Record Holder(s):
- - --------------------------------------------------- ---------------------------------------------------
Certificate Nos. (if available): ---------------------------------------------------
- - --------------------------------------------------- Please Print
If Shares will be delivered by book-entry Transfer, Address:
provide the following information: ---------------------------------------------------
Account Number: ------------------------------- ---------------------------------------------------
Zip Code
Area code and Tel. No.: ------------------------
Signature(s): ------------------------------------
---------------------------------------------------
Dated: ------------------------------------ , 2000
</TABLE>
2
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
The undersigned, a bank, broker, dealer, credit union, savings association
or other entity which is a member in good standing of the Securities Transfer
Agents Medallion Program or by any other bank, broker, dealer, credit union,
savings association or other entity which is an "eligible guarantor
institution," as such term is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (each of the foregoing constituting an
"Eligible Institution"), guarantees the delivery to the Depositary of the Shares
tendered hereby, in proper form of transfer, or a Book-Entry Confirmation (as
defined in the Offer to Purchase), together with a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof) with any
required signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase) in the case of a book-entry delivery, and any other required documents
within three American Stock Exchange trading days of the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates representing Shares to the Depositary within the time period set
forth herein. Failure to do so could result in financial loss to such Eligible
Institution.
<TABLE>
<CAPTION>
<S> <C>
- - --------------------------------------------------- ---------------------------------------------------
Name of Firm Authorized Signature
- - --------------------------------------------------- ---------------------------------------------------
Address Title
Name: -------------------------------------------
- - ---------------------------------------------------
Zip Code Please Type or Print
Area Code and Tel. No.: ----------------------- Date: -------------------------------------, 2000
</TABLE>
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE OF GUARANTEED
DELIVERY. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR
LETTER OF TRANSMITTAL.
3
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
PlayCore, INC.
AT
$10.10 NET PER SHARE
BY
JASDREW ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
PlayCore HOLDINGS, INC.
A WHOLLY-OWNED SUBSIDIARY OF
PlayCore HOLDINGS, L.L.C.
AND BY
PlayCore, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00, P.M., NEW YORK
CITY TIME, ON THURSDAY, MAY 18, 2000, UNLESS THE OFFER IS EXTENDED.
April 20, 2000
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by PlayCore Holdings, L.L.C., a Delaware limited
liability company ("Holdings"), PlayCore Holdings, Inc., a Delaware corporation
and a wholly-owned subsidiary of Holdings ("Parent"), Jasdrew Acquisition Corp.,
a Delaware corporation and wholly-owned subsidiary of Parent ("Acquisition
Company"), and PlayCore, Inc., a Delaware corporation (the "Company"), to act as
Information Agent in connection with Holdings', Parent's, Acquisition Company's
and the Company's joint offer to purchase any and all of the issued and
outstanding shares of common stock, par value $0.01 per share (the "Shares"), of
the Company, at a price of $10.10 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated April 20, 2000 (the "Offer to Purchase"), and in the
related Letter of Transmittal (which, as each may be amended and supplemented
from time to time, together constitute the "Offer") enclosed herewith. Holdings,
Parent, Acquisition Company and the Company are collectively referred to herein
as the "Offerors" and Acquisition Company and the Company are collectively
referred to herein as the "Purchasers."
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED
AS OF APRIL 13, 2000 (THE "MERGER AGREEMENT"), BY AND AMONG THE COMPANY, PARENT
AND ACQUISITION COMPANY. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE OFFER AND THE MERGER, AND HAS DETERMINED THAT THE OFFER AND THE
MERGER ARE ADVISABLE, FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF
THE COMPANY. THE BOARD OF
<PAGE> 2
DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS ACCEPT THE
OFFER AND TENDER THEIR SHARES PURSUANT THERETO.
Also enclosed is the letter to stockholders of the Company from the
Chairman of the Board of the Company.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST
1,367,947 SHARES, WHICH NUMBER OF SHARES CONSTITUTES A MAJORITY OF THE SHARES
OUTSTANDING AND SHARES ISSUABLE UPON CONVERSION OF THE COMPANY'S 10% CONVERTIBLE
DEBENTURES (EXCLUDING ANY SHARES OWNED BY ANY OFFICER, DIRECTOR OR AFFILIATE OF
THE COMPANY, SHARES ISSUABLE UPON EXERCISE OF COMPANY OPTIONS AND WARRANTS, AND
SHARES ISSUABLE UPON THE CONVERSION OF THE COMPANY'S 10% CONVERTIBLE DEBENTURES
HELD BY AFFILIATES OF THE COMPANY) AND (2) THE COMPANY AND/OR ACQUISITION
COMPANY HAVING RECEIVED OR HAVING AVAILABLE THE PROCEEDS OF THE FINANCING
CONTEMPLATED BY THE FINANCING AGREEMENTS (AS DEFINED IN THE OFFER TO PURCHASE)
AND THE PROCEEDS FROM THE CAPITAL CONTRIBUTION (AS DEFINED IN THE OFFER TO
PURCHASE), INCLUDING BUT, NOT LIMITED TO, PROCEEDS SUFFICIENT TO (A) FINANCE THE
PURCHASE OF THE SHARES THAT THE PURCHASERS ARE AGREEING TO PURCHASE PURSUANT TO
THE OFFER, (B) PAY THE MERGER CONSIDERATION (AS DEFINED IN THE OFFER TO
PURCHASE) PURSUANT TO THE MERGER, (C) PURCHASE CERTAIN SECURITIES OF THE COMPANY
PURSUANT TO THE PLAYCORE PURCHASE AGREEMENTS (AS DEFINED IN THE OFFER TO
PURCHASE), (D) REDEEM THE COMPANY'S THEN OUTSTANDING 10% CONVERTIBLE DEBENTURES
AND REPAY THE OTHER OUTSTANDING INDEBTEDNESS OF THE COMPANY AND ITS SUBSIDIARIES
AND (E) PAY THE FEES AND EXPENSES REQUIRED TO BE PAID BY THE COMPANY IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT. THE OFFER
IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS DESCRIBED IN THE OFFER TO PURCHASE
AND IN THE RELATED LETTER OF TRANSMITTAL.
Pursuant to the Merger Agreement, following the consummation of the Offer
and the satisfaction or waiver of certain conditions, Acquisition Company will
be merged with and into the Company (the "Merger"), with the Company continuing
as the surviving corporation (the "Surviving Corporation"). Following
consummation of the Merger, the Surviving Corporation will be a wholly-owned
subsidiary of Parent. At the effective time of the Merger (the "Effective
Time"), each Share issued and outstanding immediately prior to the Effective
Time (other than Shares held by Acquisition Company, in the treasury of the
Company and by holders who perfect their appraisal rights in accordance with the
Delaware General Corporation Law), will, by virtue of the Merger and without any
action on the part of the holder thereof, be cancelled and converted into the
right to receive $10.10 in cash per share, without interest, as set forth in the
Merger Agreement and described in the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following documents:
1. The Offer to Purchase dated April 20, 2000.
2. The Letter of Transmittal to be used by holders of Shares in
accepting the Offer and tendering Shares. Facsimile copies of the Letter of
Transmittal (with manual signatures) may be used to tender Shares.
3. The Notice of Guaranteed Delivery to be used to accept the Offer if
the certificates evidencing such Shares (the "Share Certificates") are not
immediately available or time will not permit all required
2
<PAGE> 3
documents to reach the Depositary (as defined in the Offer to Purchase)
prior to the Expiration Date (as defined in the Offer to Purchase) or the
procedure for book-entry transfer cannot be completed by the Expiration
Date.
4. A printed form of letter which may be sent to your clients for
whose accounts you hold Shares registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions
with regard to the Offer.
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9 providing information
relating to backup federal income tax withheld.
6. A return envelope addressed to the Depositary.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchasers will accept for payment and will pay for all
Shares validly tendered prior to the Expiration Date and not properly withdrawn
promptly after the latest to occur of (i) the Expiration Date and (ii) the
satisfaction or waiver of the conditions to the Offer set forth in "THE TENDER
OFFER -- Section 11 (Conditions to the Offer)" of the Offer to Purchase. For
purposes of the Offer, the Purchasers will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not properly
withdrawn as, if and when the Purchasers give oral or written notice to the
Depositary of their acceptance for payment of such Shares pursuant to the Offer.
In all cases, payment for Shares tendered and accepted for payment pursuant to
the Offer will be made only after timely receipt by the Depositary of (i) Share
Certificates or a timely confirmation of a book-entry transfer of such Shares
into the Depositary's account at the Book-Entry Transfer Facility (as defined in
"THE TENDER OFFER -- Section 3 (Procedures for Tendering Shares)" of the Offer
to Purchase) pursuant to the procedures set forth in "THE TENDER
OFFER -- Section 3 (Procedures for Tendering Shares)" of the Offer to Purchase,
(ii) the Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed, with any required signature guarantees or,
in the case of a book-entry transfer, an Agent's Message (as defined in "THE
TENDER OFFER -- Section 3 (Procedures for Tendering Shares)" of the Offer to
Purchase), and (iii) all other documents required by the Letter of Transmittal.
Under no circumstances will interest on the purchase price for Shares be paid by
the Purchasers, regardless of any delay in making such payment.
The Purchasers will not pay any fees or commissions to any broker or dealer
or any other person (other than the Information Agent as set forth in "SPECIAL
FACTORS -- Section 11 (Fees and Expenses)" of the Offer to Purchase) in
connection with the solicitation of tenders of Shares pursuant to the Offer. The
Purchasers will, however, upon request, reimburse you for customary mailing and
handling expenses incurred by you in forwarding the enclosed materials to your
clients.
The Purchasers will pay any stock transfer taxes with respect to the
transfer and sale to it or its order pursuant to the Offer, except as otherwise
provided in Instruction 6 of the Letter of Transmittal, as well as any charges
and expenses of the Depositary and the Information Agent.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00, P.M.,
NEW YORK CITY TIME, ON THURSDAY, MAY 18, 2000 UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal, with any required signature guarantees and any
other required documents, should be sent to the Depositary, and Share
Certificates should be delivered or such Shares should be tendered by book-entry
transfer, all in accordance with the Instructions set forth in the Letter of
Transmittal and the Offer to Purchase.
If holders of Shares wish to tender Shares, but it is impracticable for
them to forward their Share Certificates or other required documents to the
Depositary prior to the Expiration Date or to comply with the procedures for
book-entry transfer on a timely basis, a tender may be effected by following the
guaranteed delivery procedures specified under "THE TENDER OFFER -- Section 3
(Procedures for Tendering Shares)" of the Offer to Purchase.
3
<PAGE> 4
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed materials may be obtained from the
undersigned at the address and telephone number set forth on the back cover of
the Offer to Purchase.
Very truly yours,
D.F. KING & CO., INC.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
OTHER PERSON AS AN AGENT OF THE OFFERORS, THE DEPOSITARY OR THE INFORMATION
AGENT, OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER
PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN
CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED AND THE STATEMENTS
CONTAINED THEREIN.
4
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
PlayCore, INC.
AT
$10.10 NET PER SHARE
BY
JASDREW ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
PlayCore HOLDINGS, INC.
A WHOLLY-OWNED SUBSIDIARY OF
PlayCore HOLDINGS, L.L.C.
AND BY
PlayCore, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON THURSDAY, MAY 18, 2000, UNLESS THE OFFER IS EXTENDED.
April 20, 2000
To Our Clients:
Enclosed for your consideration are an Offer to Purchase, dated April 20,
2000 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as
each may be amended from time to time, together constitute the "Offer") in
connection with the offer by PlayCore Holdings, L.L.C., a Delaware limited
liability company ("Holdings"), PlayCore Holdings, Inc., a Delaware corporation
and a wholly-owned subsidiary of Holdings ("Parent"), Jasdrew Acquisition Corp.,
a Delaware corporation and a wholly-owned subsidiary of Parent ("Acquisition
Company"), and PlayCore, Inc., a Delaware corporation (the "Company"), to
purchase any and all of the issued and outstanding shares of common stock, par
value $0.01 per share (the "Shares"), of the Company, at a price of $10.10 per
share, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer. Unless the context indicates
otherwise, "Stockholders" shall mean holders of Shares. Holdings, Parent,
Acquisition Company and the Company are collectively referred to herein as the
"Offerors" and Acquisition Company and the Company are collectively referred to
herein as the "Purchasers."
Also enclosed is the letter to stockholders of the Company from the
Chairman of the Board of the Company.
Stockholders whose certificates evidencing Shares (the "Share
Certificates") are not immediately available or who cannot deliver their Share
Certificates and all other documents required by the Letter of Transmittal to
the Depositary prior to the Expiration Date (as such terms are defined in the
Offer to Purchase) or who cannot complete the procedure for delivery by
book-entry transfer to the Depositary's
<PAGE> 2
account at the Book-Entry Transfer Facility (as defined in "THE TENDER
OFFER--Section 3 (Procedures for Tendering Shares)" of the Offer to Purchase) on
a timely basis and who wish to tender their Shares must do so pursuant to the
guaranteed delivery procedure described in "THE TENDER OFFER--Section 3
(Procedures for Tendering Shares)" of the Offer to Purchase. See Instruction 2
of the Letter of Transmittal. Delivery of documents to the Book-Entry Transfer
Facility in accordance with the Book-Entry Transfer Facility's procedures does
not constitute delivery to the Depositary.
THIS MATERIAL IS BEING SENT TO YOU AS THE BENEFICIAL OWNER OF SHARES HELD
BY US FOR YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. WE ARE (OR OUR NOMINEE
IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH
SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR
INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS BEING FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account upon the terms and
subject to the conditions set forth in the Offer to Purchase and the related
Letter of Transmittal.
Please note the following:
1. The tender price is $10.10 per Share (the "Offer Price"), net to
you in cash, without interest thereon, upon the terms and subject to the
conditions of the Offer.
2. The Offer and withdrawal rights will expire at 5:00, p.m., New York
City time, on Thursday, May 18, 2000, unless the Offer is extended.
3. The Offer is being made pursuant to an Agreement and Plan of
Merger, dated as of April 13, 2000 (the "Merger Agreement"), by and among
the Company, Parent and Acquisition Company, which provides, among other
things, for the commencement of the Offer by the Offerors and further
provides that after the purchase of the Shares pursuant to the Offer,
subject to the satisfaction or waiver of certain conditions contained in
the Merger Agreement, Acquisition Company will be merged with and into the
Company (the "Merger"), with the Company continuing as the surviving
corporation (the "Surviving Corporation"). Following consummation of the
Merger, the Surviving Corporation will be a wholly-owned subsidiary of
Parent. At the effective time of the Merger (the "Effective Time"), each
Share issued and outstanding immediately prior to the Effective Time (other
than Shares held by Acquisition Company, in the treasury of the Company and
by holders who perfect their appraisal rights in accordance with the
Delaware General Corporation Law), will, by virtue of the Merger and
without any action on the part of the holder thereof, be cancelled and
converted into the right to receive $10.10 in cash per share, without
interest.
4. The Board of Directors of the Company (the "Board") has unanimously
approved the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger, and has determined that the Offer and
the Merger are advisable, fair to and in the best interests of the
stockholders of the Company, and unanimously recommends that stockholders
accept the Offer and tender their Shares pursuant thereto.
5. The Offer is being made for all outstanding Shares.
6. The Offer is conditioned upon, among other things, (1) there being
validly tendered and not withdrawn prior to the expiration of the Offer at
least 1,367,947 shares, which number of Shares constitutes a majority of
the Shares outstanding and Shares issuable upon conversion of the Company's
10% Convertible Debentures (excluding any Shares owned by any officer,
director or affiliate of the Company, Shares issuable upon exercise of
Company options and warrants, and Shares issuable upon the conversion of
the Company's 10% Convertible Debentures held by affiliates of the Company)
and (2) the Company and/or Acquisition Company having received or having
available the proceeds of the financing contemplated by the Financing
Agreements (as defined in the Offer to Purchase) and the proceeds from
2
<PAGE> 3
the Capital Contribution (as defined in the Offer to Purchase), including,
but not limited to, proceeds sufficient to (a) finance the purchase of the
Shares that the Purchasers are agreeing to purchase pursuant to the Offer,
(b) pay the Merger Consideration (as defined in the Offer to Purchase)
pursuant to the Merger, (c) purchase certain securities of the Company
pursuant to the PlayCore Purchase Agreements (as defined in the Offer to
Purchase), (d) redeem the Company's then outstanding 10% Convertible
Debentures and repay the other outstanding indebtedness of the Company and
its subsidiaries and (e) pay the fees and expenses required to be paid by
the Company in connection with the transactions contemplated by the Merger
Agreement. The Offer is also subject to other terms and conditions
described in the Offer to Purchase and in the related Letter of
Transmittal.
7. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the
Offer.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal (and any amendments or supplements thereto), and is being made to
all holders of all Shares. The Offerors are not aware of any state where the
making of the Offer is prohibited by administrative or judicial action pursuant
to any valid state statute. If the Offerors become aware of any valid state
statute prohibiting the making of the Offer, the Offerors will make a good faith
effort to comply with such statute. If, after such good faith effort, the
Offerors cannot comply with such state statute, the Offer will not be made to,
nor will tenders be accepted from or on behalf of, the holders of Shares in any
such state. In any jurisdiction where the securities, "blue sky" or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of the Offerors by one or more registered brokers or
dealers that are licensed under the laws of such jurisdiction.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified on the instruction form contained in this
letter. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US
TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. If
holders of Shares wish to tender Shares, but it is impracticable for them to
forward their Share Certificates or other required documents to the Depositary
prior to the Expiration Date or to comply with the procedures for book-entry
transfer on a timely basis, a tender may be effected by following the guaranteed
delivery procedures specified under "THE TENDER OFFER--Section 3 (Procedures for
Tendering Shares)" of the Offer to Purchase.
3
<PAGE> 4
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
PLAYCORE, INC
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated April 20, 2000 (the "Offer to Purchase"), and the
related Letter of Transmittal (which, as each may be amended from time to time,
together constitute the "Offer"), in connection with the offer by PlayCore
Holdings, L.L.C., a Delaware limited liability company ("Holdings"), PlayCore
Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of Holdings
("Parent"), Jasdrew Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Acquisition Company"), and PlayCore, Inc., a Delaware
corporation (the "Company") to purchase any and all of the issued and
outstanding shares of common stock, par value $0.01 per share (the "Shares"), of
the Company, at a price of $10.10 per share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer.
This will instruct you to tender to Acquisition Company and/or the Company
the number of Shares indicated below (or, if no number is indicated below, all
Shares) held by you for the account of the undersigned, upon the terms and
subject to the conditions set forth in the Offer.
Number of Shares to be Tendered:
---------------- shares*
SIGN HERE
Account Number: Signature(s):
------------------------------ ----------------------
Dated: , 2000
--------------------
- - --------------------------------------------------------------------------------
Please type or print name(s)
- - --------------------------------------------------------------------------------
Please type or print address(es) here
- - --------------------------------------------------------------------------------
Area Code and Telephone Number
- - --------------------------------------------------------------------------------
Taxpayer Identification or Social Security Number(s)
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
4
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER NAME AND IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the name
and number to give the payer.
<TABLE>
<CAPTION>
- - ------------------------------------------------------
GIVE THE
NAME AND
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- - ------------------------------------------------------
<C> <S> <C>
1. Individual The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, the
first individual on
the account(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or
valid trust under state
law
5. Sole proprietorship The owner(3)
- - ------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - ------------------------------------------------------
GIVE THE
NAME AND
EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- - ------------------------------------------------------
<C> <S> <C>
6. A valid trust, estate or Legal entity(4)
pension trust
7. Corporate The corporation
8. Association, club, The organization
religious, charitable,
educational or other
tax-exempt organization
9. Partnership The partnership
10. A broker or registered The broker or
nominee nominee
11. Account with the Department The public entity
of Agriculture in the name
of a public entity (such as
a state or local government,
school district or prison)
that receives agricultural
program payments
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C>
- - ------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a social security number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number or
employer identification number.
(4) List first and circle the name of the legal trust, estate or pension trust.
(Do not furnish the identifying number of the personal representative or
trustee unless the legal entity itself is not designated in the account
title.)
NOTE: If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number, apply for one immediately.
To apply for a social security number, get Form SS-5 from your local Social
Security Administration office. Get Form SS-4 to apply for an employer
identification number. You can get Form SS-4 from the IRS by calling
1-800-TAX-FORM (1-800-829-3676).
PAYEES EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees specifically exempted from backup
withholding:
(1) An organization exempt from tax under section 501(a), or an IRA or a
custodian account under section 403(b)(7) if the account satisfies the
requirements of section 401(f)(2).
(2) The United States or any of its agencies or instrumentalities.
(3) A state, the District of Columbia, a possession of the United States, or
any of their subdivisions or instrumentalities.
(4) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(5) An international organization or any of its agencies or
instrumentalities.
Other payees that may be exempt from backup withholding include:
(6) A corporation.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States, the District of Columbia or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee.
(15) A trust exempt from tax under section 664 or described in section 4947.
For interest and dividends, all listed payees are exempt except the payee in
item (9). For broker transactions, payees listed in items (1) through (13) and a
person registered under the Investment Advisers Act of 1940 who regularly acts
as a broker are exempt.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT"
IN PART II OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. If
you are a nonresident alien or a foreign entity not subject to backup
withholding, give the payer a completed Form W-8, Certificate of Foreign Status.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend,
interest or other payments to give taxpayer identification numbers of payers who
must report the payments to the IRS. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your return. The IRS may also
provide this information to the Department of Justice for criminal and civil
litigation and to cities, states and the District of Columbia to carry out their
tax laws. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31 percent of
taxable interest, dividend and certain other payments to a payee who does not
furnish a taxpayer identification number to a payer. Certain penalties may also
apply.
PENALTIES
(1) FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to
furnish your correct taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
EXHIBIT (a)(5)(vi)
================================================================================
NOTICE OF TENDER OFFER AND MERGER
AND
NOTICE OF REDEMPTION
================================================================================
Dear Debenture Holder:
RE: 10% Convertible Subordinated Debenture Due 2004
This notice is given pursuant to the Indenture (the
"Indenture"), dated as of March 27, 1998, between PlayCore, Inc. (the
"Company")(formerly known as Swing-N-Slide Corp.) and Firstar Bank, N.A., as
trustee, and the terms of the Company's 10% Convertible Subordinated Debentures
due 2004 (the "Debentures"). THE REDEMPTION OF THE DEBENTURES IS CONDITIONED ON
THE CONSUMMATION OF THE TENDER OFFER (AS DEFINED BELOW).
NOTICE IS HEREBY GIVEN that the Company and Jasdrew
Acquisition Corp. ("Acquisition Company"), a wholly-owned subsidiary of PlayCore
Holdings, Inc. ("Parent"), a wholly-owned subsidiary of PlayCore Holdings,
L.L.C., have offered to purchase in a joint tender offer (the "Tender Offer")
and in related transactions all the outstanding shares of common stock, par
value $0.01 per share (the "Common Stock"), of the Company for $10.10 per share
(the "Purchase Price"). The "Expiration Date" of the Tender Offer is 5:00 p.m.,
New York City time, on May 18, 2000, as such time or date may be extended as
provided for in that certain Agreement and Plan of Merger, dated April 13, 2000,
by and among Acquisition Company, Parent and the Company. Assuming that the
Tender Offer is successfully completed, shares of Common Stock not tendered (or
not purchased in related transactions described in the Offer to Purchase, dated
April 20, 2000) are expected to be "cashed out" at the Purchase Price in a
second-step merger of Acquisition Company with and into the Company (the
"Merger").
Provided the Tender Offer is consummated, the Company,
pursuant to the Indenture and the terms of the Debentures, will redeem all of
the Debentures outstanding as of the 16th day following consummation of the
Tender Offer (or, if such date is a Saturday, Sunday or federal holiday, on the
next business day) (the "Redemption Date") at a redemption price (the
"Redemption Price") equal to 100% of the principal amount of the Debentures,
together with accrued interest to the Redemption Date. On the Redemption Date,
the Redemption Price will become due and payable upon each outstanding Debenture
and interest thereon will cease to accrue. Holders who do not convert their
Debentures prior to the Redemption Date should send their redeemed Debentures to
the trustee, Firstar Bank, N.A., at 1555 North RiverCenter Drive, Suite 301,
ATTN: Bond Redemption, Milwaukee, Wisconsin 53212.
Prior to the Redemption Date, holders of the Debentures are
entitled to participate in the Tender Offer, if, before the Expiration Date,
they (a) convert the Debentures
<PAGE> 2
they hold at the Debentures' conversion rate (the "Conversion Rate") of (i) one
share of Common Stock for each $4.80 principal amount of Debentures in the case
of Debentures issued to GreenGrass Holdings, James R. Rastetter, Brian K.
Zeilinger and Richard G. Mueller or (ii) one share of Common Stock for each
$4.70 principal amount of Debentures in the case of Debentures issued pursuant
to the Company's Registration Statement on Form S-3 filed March 31, 1998, and
(b) tender in the Tender Offer the shares of Common Stock they receive upon
conversion of the Debentures ("Converted Shares").
Since the Redemption Price is less than the aggregate Purchase
Price that a holder of Debentures can receive on the Converted Shares in the
Tender Offer or Merger, we expect that all of the Debentures will be converted.
Provided that the Tender Offer is consummated, holders who convert their
Debentures and validly tender their Converted Shares will receive a cash payment
in an amount per Converted Share equal to the Purchase Price.
To simplify the process of converting the Debentures, issuing
certificates for shares of Common Stock received upon conversion of the
Debentures and then requiring holders to tender those shares of Common Stock
pursuant to the Tender Offer, we will permit holders to convert their Debentures
and tender their Converted Shares pursuant to the terms of the enclosed Offer to
Purchase by following the instructions below. Holders who convert their
Debentures and tender the Converted Shares will not receive certificates for the
Converted Shares.
To convert your Debentures and tender the Converted Shares,
please read the enclosed Offer to Purchase and Letter of Transmittal and then:
1. Complete and execute the enclosed Election to Convert;
2. Complete and execute the enclosed Letter of Transmittal in
accordance with the instructions thereto;
3. Complete the enclosed Attachment to Letter of Transmittal;
and
4. Deliver an executed Election to Convert, an executed Letter
of Transmittal and a completed Attachment to Letter Transmittal (listing the
Converted Shares) to the Depositary, First Chicago Trust Company of New York, in
accordance with the instructions accompanying the Letter of Transmittal.
If you have any questions about how to convert your Debentures
and tender the Converted Shares, please call D.F. King & Co., Inc., the
Information Agent, at (800) 431-9645.
By converting Debentures and tendering the Converted Shares
pursuant to the Tender Offer, and assuming the Tender Offer is consummated, you
will forego the rights associated with owning the shares of Common Stock into
which the Debentures may be converted, including, without limitation, the rights
under Section 262 of the Delaware General Corporation Law to dissent from the
Merger and to receive an appraisal of, and payment in
<PAGE> 3
cash for, the fair value of your Common Stock. Please read the enclosed Offer to
Purchase "SPECIAL FACTORS--Section 6 (Rights of Stockholders in the Offer and
the Merger)" for a description of these rights.
The right to convert the Debentures will terminate on the
Redemption Date. If the Merger is consummated before the Redemption Date,
holders of Debentures who convert their Debentures prior to the consummation of
the Merger but do not validly tender their Converted Shares in the Tender Offer
will be cashed out at the Purchase Price in the Merger. Holders who convert
their Debentures after the consummation of the Merger but prior to the
Redemption Date will not receive Shares, but rather, will receive an amount in
cash equal to Purchase Price multiplied by the number of shares of Common Stock
into which their Debentures are convertible at the Conversion Rate. Holders who
do not covert their Debentures prior to the Redemption Date will receive the
Redemption Price.
Dated April 20, 2000.
Sincerely,
PLAYCORE, INC.
<PAGE> 4
================================================================================
ELECTION TO CONVERT
10% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2004
================================================================================
To PlayCore, Inc.:
The undersigned owner of 10% Convertible Subordinated
Debentures (the "Debentures") of PlayCore, Inc. (the "Company")(formerly known
as Swing-N-Slide Corp.) hereby irrevocably exercises the option to convert all
of his, her or its Debentures, or the portion below designated, into shares of
common stock, $0.01 par value ("Common Stock"), of the Company in accordance
with the terms of the Indenture, dated as of March 27, 1998, between the Company
and Firstar Bank, N.A., as trustee, and directs that the shares issuable and
deliverable upon conversion, together with any check in payment for fractional
shares, be issued in the name of and delivered to the undersigned, unless a
different name is indicated in the assignment below; provided, however, that if
the shares of Common Stock issuable and deliverable upon conversion of the
Debentures are validly tendered pursuant to the offer (the "Offer") to purchase
all outstanding shares of Common Stock at $10.10 per share by Jasdrew
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of
PlayCore Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of
PlayCore Holdings, L.L.C., a Delaware limited liability company, and by the
Company, then no certificates for such shares shall be issued and all
consideration payable in exchange for tendering such shares pursuant to the
Offer shall be paid and delivered to the undersigned, unless a different name
and/or address has been indicated in the Letter of Transmittal delivered
herewith and pursuant to the terms of the Offer.
Dated: _______________, 2000
Principal Amount of Debentures to be converted ($1.00 or an integral multiple
thereof):
-------------------------------------
$ Signature (for conversion only)
------------ Please Print or Type Name and
Address, Including Zip Code, and
Social Security or other
Identifying Number
-------------------------------------
-------------------------------------
-------------------------------------
<PAGE> 5
ATTACHMENT TO LETTER OF TRANSMITTAL
This Attachment to Letter of Transmittal is to be completed by holders
of 10% Subordinated Debentures due 2004 (the "Debentures") of PlayCore, Inc.
(the "Company") if such holder has elected to (i) convert the Debentures into
shares of common stock, $0.01 par value per share (the "Shares"), of the Company
and (ii) tender the Shares issuable upon conversion of the Debentures pursuant
to the offer to purchase (the "Offer") all outstanding Shares at $10.10 per
share by Jasdrew Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of PlayCore Holdings, Inc., a Delaware corporation and a wholly-owned
subsidiary of PlayCore Holdings, L.L.C., a Delaware limited liability company,
and/or by the Company.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- - ----------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S)
ON THE DEBENTURES AND ELECTION TO CONVERT SHARES TENDERED
--------------------------------------------------
TOTAL NUMBER
OF SHARES
PRINCIPAL REPRESENTED NUMBER OF
AMOUNT OF BY ELECTION TO SHARES
DEBENTURES* CONVERT** TENDERED
----------- -------------- ----------
<S> <C> <C> <C>
----------- -------------- ----------
----------- -------------- ----------
----------- -------------- ----------
Total Shares:
- - ----------------------------------------------------------------------------------------------------------------------
* Principal amount of 10% Subordinated Debentures due 2004 being converted
pursuant to Election to Convert.
** Shares received upon conversion of the Debentures at the Conversion Rate.
Unless otherwise indicated, it will be assumed that all Shares issuable upon
conversion of the Debentures evidenced by the Election to Convert are being
tendered hereby.
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Overnight Delivery: By Hand Delivery:
First Chicago Trust First Chicago Trust Company First Chicago Trust
Company of New York of New York Company of New York
Corporate Actions, Suite 4660 Corporate Actions, Suite 4660 c/o Securities Transfer and
P.O. Box 2569 525 Washington Blvd, 3rd Floor Reporting Services, Inc.
Jersey City, NJ 07303-2569 Jersey City, NJ 07310 Attn: Corporate Actions
100 William Street, Galleria
New York, NY 10038
</TABLE>
FOR ADDITIONAL INFORMATION, PLEASE CALL FIRST CHICAGO TRUST COMPANY OF
NEW YORK AT (800) 446-2617.
DELIVERY OF THIS ATTACHMENT TO LETTER OF TRANSMITTAL WITH THE
ACCOMPANYING LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST COMPLETE THIS ATTACHMENT TO
LETTER OF TRANSMITTAL, SIGN THE ACCOMPANYING LETTER OF TRANSMITTAL WHERE
INDICATED AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED HEREWITH.
THE ACCOMPANYING LETTER OF TRANSMITTAL AND INSTRUCTIONS THERETO SHOULD
BE READ CAREFULLY BEFORE THIS ATTACHMENT TO LETTER OF TRANSMITTAL IS COMPLETED.
<PAGE> 1
EXHIBIT (a)(5)(vii)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase, dated April 20, 2000, and the related Letter of
Transmittal (and any amendments or supplements thereto), and is being made to
all holders of Shares. The Offerors (as defined below) are not aware of any
state where the making of the Offer is prohibited by administrative or judicial
action pursuant to any valid state statute. If the Offerors become aware of any
valid state statute prohibiting the making of the Offer, the Offerors will make
a good faith effort to comply with such statute. If, after such good faith
effort, the Offerors cannot comply with such state statute, the Offer will not
be made to, nor will tenders be accepted from or on behalf of, the holders of
Shares in such state. In any jurisdiction where the securities, "blue sky" or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of the Offerors by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
PLAYCORE, INC.
AT
$10.10 NET PER SHARE
BY
JASDREW ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
PLAYCORE HOLDINGS, INC.
A WHOLLY-OWNED SUBSIDIARY OF
PLAYCORE HOLDINGS, L.L.C.
AND BY
PLAYCORE, INC.
PlayCore Holdings, L.L.C., a Delaware limited liability company
("Holdings"), PlayCore Holdings, Inc., a Delaware corporation and wholly-owned
subsidiary of Holdings ("Parent"), Jasdrew Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent ("Acquisition Company"), and
PlayCore, Inc., a Delaware corporation (the "Company"), hereby offer to purchase
any and all of the issued and outstanding shares of common stock, par value
$0.01 per share, of the Company (the "Shares" or "Common Stock"), at a price of
$10.10 per Share, net to the seller in cash (such amount, or any greater amount
paid in the Offer, being referred to herein as the "Offer Price"), without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated April 20, 2000, and in the related Letter of
Transmittal (which, as each may be amended and supplemented from time to time,
together constitute the "Offer"). Holdings, Parent, Acquisition Company and the
Company are collectively referred to herein as the "Offerors" and Acquisition
Company and the Company are collectively referred to herein as the "Purchasers."
- - -------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
MAY 18, 2000, UNLESS THE OFFER IS EXTENDED.
- - --------------------------------------------------------------------------------
<PAGE> 2
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED
BELOW) AT LEAST 1,367,947 SHARES, WHICH NUMBER OF SHARES CONSTITUTES A MAJORITY
OF THE SHARES OUTSTANDING AND SHARES ISSUABLE UPON CONVERSION OF THE COMPANY'S
10% CONVERTIBLE DEBENTURES (EXCLUDING ANY SHARES OWNED BY ANY OFFICER, DIRECTOR
OR AFFILIATE OF THE COMPANY, SHARES ISSUABLE UPON EXERCISE OF COMPANY OPTIONS
AND WARRANTS, AND SHARES ISSUABLE UPON THE CONVERSION OF THE COMPANY'S 10%
CONVERTIBLE DEBENTURES HELD BY AFFILIATES OF THE COMPANY) AND (2) THE COMPANY
AND/OR ACQUISITION COMPANY HAVING RECEIVED OR HAVING AVAILABLE THE PROCEEDS FROM
THE FINANCING CONTEMPLATED BY FINANCING AGREEMENTS ENTERED INTO BY THE
PURCHASERS WITH CERTAIN FINANCING SOURCES AND THE PROCEEDS FROM CERTAIN EQUITY
FINANCING TO BE PROVIDED BY PARENT TO ACQUISITION COMPANY, INCLUDING, BUT NOT
LIMITED TO, PROCEEDS SUFFICIENT TO (A) FINANCE THE PURCHASE OF THE SHARES THAT
THE PURCHASERS ARE AGREEING TO PURCHASE PURSUANT TO THE OFFER, (B) PAY THE
MERGER CONSIDERATION (AS DEFINED BELOW) PURSUANT TO THE MERGER (AS DEFINED
BELOW), (C) PURCHASE CERTAIN OTHER SECURITIES OF THE COMPANY PURSUANT TO THE
PLAYCORE PURCHASE AGREEMENTS (AS DEFINED BELOW), (D) REDEEM THE COMPANY'S THEN
OUTSTANDING 10% CONVERTIBLE DEBENTURES AND REPAY THE OTHER OUTSTANDING
INDEBTEDNESS OF THE COMPANY AND ITS SUBSIDIARIES AND (E) PAY THE FEES AND
EXPENSES REQUIRED TO BE PAID BY THE COMPANY IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED BY THE MERGER AGREEMENT. THE OFFER IS ALSO SUBJECT TO OTHER TERMS
AND CONDITIONS DESCRIBED IN THE OFFER TO PURCHASE AND IN THE RELATED LETTER OF
TRANSMITTAL.
The purpose of the Offer, the PlayCore Purchase Agreements and the
Merger is for Parent to acquire control of, and the entire equity interest in,
the Company. As promptly as practicable following consummation of the Offer and
the transactions contemplated by the PlayCore Purchase Agreements, and after
satisfaction of all conditions to the Merger set forth in the Merger Agreement,
Parent intends to acquire the remaining equity interest in the Company not
acquired by the Purchasers in the Offer or through the PlayCore Purchase
Agreements by consummating the Merger.
The Offer is being made pursuant to the Agreement and Plan of Merger,
dated as of April 13, 2000 (the "Merger Agreement"), by and among the Company,
Parent and Acquisition Company. The Merger Agreement provides that, among other
things, as promptly as reasonably practicable after consummation of the Offer
and the satisfaction of the other conditions contained in the Merger Agreement,
Acquisition Company will be merged (the "Merger") with and into the Company,
with the Company continuing as the surviving corporation. At the effective time
of the Merger (the "Effective Time"), each Share issued and outstanding
immediately prior to the Effective Time (other than Shares held by Parent or
Acquisition Company, in the treasury of the Company or by holders who perfect
their appraisal rights under Section 262 of the Delaware General Corporation
Law), will, by virtue of the Merger and without any action on the part of the
holder thereof, be canceled and converted into the right to receive an amount
per share (the "Merger Consideration") equal to the Offer Price, without
interest, upon surrender of the certificate(s) formerly representing such
Shares, less any required withholding taxes. The Merger Agreement is more fully
described in Special Factors - Section 7 of the Offer to Purchase.
<PAGE> 3
Contemporaneously with the execution of the Merger Agreement, the
Purchasers entered into a Stock Purchase Agreement with GreenGrass Holdings, the
Company's majority stockholder, Option/Exercise Cancellation Agreements with
certain of the Company's directors, officers or key employees and other
agreements with certain security holders of the Company (collectively, the
"PlayCore Purchase Agreements") pursuant to which Acquisition Company or the
Company has the right to purchase Shares, as well as certain other derivative
Company securities exercisable for or convertible into Shares, from such
persons. All purchases by Acquisition Company or the Company of Shares and other
derivative Company securities pursuant to the PlayCore Purchase Agreements will
occur, if at all, immediately after, and are subject to, the consummation of the
Offer and all such Shares and derivative Company securities will be purchased at
the Offer Price (as if such derivative Company securities were exercised or
converted at the applicable exercise or conversion price). If Acquisition
Company acquires all Shares and derivative Company securities it has a right to
acquire under the PlayCore Purchase Agreements, Acquisition Company, upon
exercise or conversion of such derivative Company securities, will own
approximately 75% of the Shares then outstanding. The PlayCore Purchase
Agreements are more fully described in Special Factors - Section 7 of the Offer
to Purchase.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER
AND THE MERGER, AND DETERMINED THAT THE OFFER AND THE MERGER ARE ADVISABLE, FAIR
TO AND IN THE BEST INTERESTS OF THE HOLDERS OF THE SHARES, AND UNANIMOUSLY
RECOMMENDS THAT THE HOLDERS OF THE SHARES ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT THERETO.
For purposes of the Offer, the Purchasers will be deemed to have
accepted for payment (and thereby purchased) Shares validly tendered and not
properly withdrawn as, if and when the Purchasers give oral or written notice to
First Chicago Trust Company of New York (the "Depositary") of their acceptance
for payment of such Shares pursuant to the Offer. Upon the terms and subject to
the conditions of the Offer, payment for Shares accepted for payment pursuant to
the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payments from the Purchasers and transmitting such payments to
tendering stockholders whose Shares have been accepted for payment. UNDER NO
CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID BY THE
PURCHASERS, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT. In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of (1) certificates evidencing such Shares or timely confirmation of a
book-entry transfer of such Shares into the Depositary's account at the
Book-Entry Transfer Facility (as defined in the Offer to Purchase) pursuant to
the procedures set forth in The Tender Offer - Section 3 of the Offer to
Purchase, (2) the Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required signature
guarantees or, in the case of a book-entry transfer, an Agent's Message (as
defined in the Offer to Purchase) and (3) all other documents required by the
Letter of Transmittal.
<PAGE> 4
Subject to the provisions of the Merger Agreement and the applicable
rules and regulations of the Securities and Exchange Commission (the "SEC"), the
Purchasers and Parent have the right in their discretion to waive any or all
conditions to the Offer and to make any other changes in the terms and
conditions of the Offer. Subject to the provisions of the Merger Agreement and
the applicable rules and regulations of the SEC, if, by the Expiration Date, any
or all of the conditions to the Offer have not been satisfied, the Purchasers
and Parent have the right (but not the obligation) to (1) terminate the Offer
and return all tendered Shares to tendering stockholders, (2) waive such
unsatisfied conditions and purchase all Shares validly tendered or (3) extend
the Offer, and, subject to the terms of the Offer (including the rights of
stockholders to withdraw their Shares), retain the Shares which have been
tendered until the termination of the Offer, as extended.
Subject to the provisions of the Merger Agreement and the applicable
rules and regulations of the SEC, the Purchasers and Parent have the right in
their discretion, at any time and from time to time, to (1) extend the period of
time during which the Offer is open and thereby delay acceptance for payment of,
and payment for, any Shares, by giving oral or written notice of such extension
to the Depositary and (2) amend the Offer in any respect permitted by the Merger
Agreement by giving oral or written notice of such amendment to the Depositary.
Any extension will be followed as promptly as practicable by public
announcement thereof to be made no later than 9:00 A.M., New York City time, on
the next business day after the previously scheduled Expiration Date. Without
limiting the manner in which the Offerors may choose to make any public
announcement, the Offerors will have no obligation to publish, advertise or
otherwise communicate any such announcement other than issuing a release to the
Dow Jones News Service or as otherwise may be required by law. During any such
extension, all Shares previously tendered and not properly withdrawn will remain
subject to the Offer, subject to the rights of a tendering stockholder to
withdraw such stockholder's Shares. "Expiration Date" means 5:00 p.m., New York
City time, on May 18, 2000, unless and until the Purchasers and Parent, in their
discretion (but subject to the terms and conditions of the Merger Agreement),
have extended the period during which the Offer is open, in which event the term
"Expiration Date" means the latest time and date at which the Offer, as
extended, will expire.
Tenders of Shares made pursuant to the Offer are irrevocable, except
that Shares tendered pursuant to the Offer may be withdrawn at any time on or
prior to the Expiration Date, and, unless theretofore accepted for payment by
the Purchasers pursuant to the Offer, may also be withdrawn at any time after
June 15, 2000. For a withdrawal to be effective, a written, telegraphic, telex
or facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of the Offer to
Purchase. Any notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder of the Shares to be withdrawn, if different
from that of the person who tendered such Shares. If certificates evidencing
Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the serial
<PAGE> 5
numbers shown on the particular certificates evidencing the Shares to be
withdrawn must be submitted to the Depositary and the signatures on the notice
of withdrawal must be guaranteed by an Eligible Institution (as defined in the
Offer to Purchase), unless such Shares have been tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfers as set forth in The Tender Offer - Section 3 of the Offer
to Purchase, any notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Shares and must otherwise comply with such Book-Entry Transfer Facility
procedures, in which case a notice of withdrawal will be effective if delivered
to the Depositary by any method of delivery described in the second sentence of
this paragraph. All questions as to the form and validity (including time of
receipt) of any notice of withdrawal will be determined by the Purchasers, in
their sole discretion, whose determination will be final and binding on all
parties. None of the Offerors, any of their affiliates or assigns, the
Depositary, D.F. King & Co., Inc., which is acting as the Information Agent for
the Offer, or any other person will be under any duty to give notification of
any defects or irregularities in any notice of withdrawal or incur any liability
for failure to give such notification. Withdrawals of Shares may not be
rescinded. Any Shares properly withdrawn will thereafter be deemed not to have
been validly tendered for purposes of the Offer. However, withdrawn Shares may
be retendered at any time prior to the Expiration Date by following one of the
procedures described in The Tender Offer - Section 3 of the Offer to Purchase.
The information required to be disclosed by Rules 13e-4(d)(1) and
14d-6(d)(1) of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended, is contained in the Offer to Purchase and is
incorporated herein by reference.
The Company has provided Acquisition Company with the Company's
stockholder list and security position listing for the purpose of disseminating
the Offer to holders of Shares. The Offer to Purchase, the related Letter of
Transmittal and, if required, other relevant materials will be mailed to record
holders of Shares whose names appear on the stockholder list and will be
furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the stockholder
list or, if applicable, who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners of
Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the
Information Agent at the address and telephone numbers set forth below. Requests
for copies of the Offer to Purchase and the related Letter of Transmittal and
all other tender offer materials may be directed to the Information Agent, and
copies will be furnished promptly at the Purchasers' expense. The Purchasers
will not pay any fees or commissions to any broker or dealer or any other person
(other than the Information Agent) for soliciting tenders of Shares pursuant to
the Offer.
<PAGE> 6
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005-4495
Banks and Brokers Call Collect: (212) 269-5550
ALL OTHERS CALL TOLL FREE: (800) 431-9645
April , 2000
<PAGE> 1
EXECUTION COPY
================================================================================
CREDIT AGREEMENT
Dated as of April 13, 2000
among
PLAYCORE WISCONSIN, INC.,
as Borrower,
THE OTHER CREDIT PARTIES SIGNATORY HERETO,
as Credit Parties,
THE LENDERS SIGNATORY HERETO
FROM TIME TO TIME,
as Lenders,
GENERAL ELECTRIC CAPITAL CORPORATION,
as Administrative Agent and Lender
and
CREDIT AGRICOLE INDOSUEZ,
as Documentation Agent and Lender
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. AMOUNT AND TERMS OF CREDIT..............................................................................2
1.1. Credit Facilities..............................................................................2
1.2. Letters of Credit..............................................................................7
1.3. Prepayments....................................................................................8
1.4. Use of Proceeds...............................................................................10
1.5. Interest and Applicable Margins...............................................................10
1.6. Eligible Accounts.............................................................................14
1.7. Eligible Inventory............................................................................16
1.8. Cash Management Systems.......................................................................17
1.9 Fees..........................................................................................18
1.10. Receipt of Payments...........................................................................18
1.11. Application and Allocation of Payments........................................................18
1.12. Loan Account and Accounting...................................................................19
1.13. Indemnity.....................................................................................19
1.14. Access........................................................................................21
1.15. Taxes.........................................................................................21
1.16. Capital Adequacy; Increased Costs; Illegality.................................................23
1.17. Single Loan...................................................................................24
2. CONDITIONS PRECEDENT...................................................................................24
2.1. Conditions to the Initial Loans...............................................................24
2.2. Further Conditions to Each Loan...............................................................26
3. REPRESENTATIONS AND WARRANTIES.........................................................................27
3.1. Corporate Existence; Compliance with Law......................................................27
3.2. Executive Offices; FEIN.......................................................................28
3.3. Corporate Power, Authorization, Enforceable Obligations.......................................28
3.4. Financial Statements and Projections..........................................................28
3.5. Material Adverse Effect.......................................................................30
3.6. Ownership of Property; Liens..................................................................30
3.7. Labor Matters.................................................................................31
3.8. Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.....................31
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
3.9. Government Regulation.........................................................................31
3.10. Margin Regulations............................................................................32
3.11. Taxes.........................................................................................32
3.12. ERISA.........................................................................................32
3.13. No Litigation.................................................................................33
3.14. Brokers.......................................................................................33
3.15. Intellectual Property.........................................................................34
3.16. Full Disclosure...............................................................................34
3.17. Environmental Matters.........................................................................34
3.18. Insurance.....................................................................................35
3.19. Deposit and Disbursement Accounts.............................................................35
3.20. [Intentionally omitted.]......................................................................35
3.21. Customer and Trade Relations..................................................................35
3.22. Agreements and Other Documents................................................................35
3.23. Solvency......................................................................................36
3.24. Year 2000 Problems............................................................................36
3.25. Acquisition Agreement.........................................................................36
3.26. Status of Acquisition Co. and Merger Co.......................................................37
3.27. Subordinated Debt.............................................................................37
4. FINANCIAL STATEMENTS AND INFORMATION...................................................................37
4.1. Reports and Notices...........................................................................37
4.2. Communication with Accountants................................................................37
5. AFFIRMATIVE COVENANTS..................................................................................38
5.1. Maintenance of Existence and Conduct of Business..............................................38
5.2. Payment of Obligations........................................................................38
5.3. Books and Records.............................................................................39
5.4. Insurance; Damage to or Destruction of Collateral.............................................39
5.5. Compliance with Laws..........................................................................40
5.6. Supplemental Disclosure.......................................................................41
5.7. Intellectual Property.........................................................................41
5.8. Environmental Matters.........................................................................41
5.9. Landlords' Agreements, Mortgagee Agreements and Bailee Letters................................42
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
5.10. Further Assurances............................................................................43
5.11. ERISA Event...................................................................................43
5.12. Interest Hedging Obligations..................................................................43
5.13. Lender Meeting................................................................................43
5.14. Subsidiary Collateral Documents...............................................................43
6. NEGATIVE COVENANTS.....................................................................................43
6.1. Mergers, Subsidiaries, Etc....................................................................43
6.2. Investments; Loans and Advances...............................................................44
6.3. Indebtedness..................................................................................45
6.4. Employee Loans and Affiliate Transactions.....................................................46
6.5. Capital Structure and Business................................................................47
6.6. Guaranteed Indebtedness.......................................................................47
6.7. Liens.........................................................................................47
6.8. Sale of Stock and Assets......................................................................48
6.9. ERISA.........................................................................................48
6.10. Financial Covenants...........................................................................48
6.11. Hazardous Materials...........................................................................48
6.12. Sale-Leasebacks...............................................................................49
6.13. Cancellation of Indebtedness..................................................................49
6.14. Restricted Payments...........................................................................49
6.15. Change of Corporate Name or Location; Change of Fiscal Year...................................50
6.16. No Impairment of Intercompany Transfers.......................................................50
6.17. No Speculative Transactions...................................................................51
6.18. Changes Relating to Subordinated Debt.........................................................51
6.19. Status of Holdings............................................................................51
6.20. Sale or Discount of Accounts..................................................................51
7. TERM...................................................................................................51
7.1. Termination...................................................................................51
7.2. Survival of Obligations Upon Termination of Financing Arrangements............................51
8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES.................................................................52
8.1. Events of Default.............................................................................52
8.2. Remedies......................................................................................54
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
8.3. Waivers by Credit Parties.....................................................................54
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENTS...................................................54
9.1. Assignment and Participations.................................................................54
9.2. Appointment of Agents.........................................................................56
9.3. Agent's Reliance, Etc.........................................................................57
9.4. GE Capital and Affiliates.....................................................................58
9.5. Lender Credit Decision........................................................................58
9.6. Indemnification...............................................................................58
9.7. Successor Agent...............................................................................59
9.8. Setoff and Sharing of Payments................................................................59
9.9. Advances; Payments; Non-Funding Lenders; Information; Actions in Concert......................60
10. SUCCESSORS AND ASSIGNS.................................................................................62
10.1. Successors and Assigns........................................................................62
11. MISCELLANEOUS..........................................................................................63
11.1. Complete Agreement; Modification of Agreement.................................................63
11.2. Amendments and Waivers........................................................................63
11.3. Fees and Expenses.............................................................................65
11.4. No Waiver.....................................................................................66
11.5. Remedies......................................................................................66
11.6. Severability..................................................................................66
11.7. Conflict of Terms.............................................................................67
11.8. Confidentiality...............................................................................67
11.9. GOVERNING LAW.................................................................................67
11.10. Notices.......................................................................................68
11.11. Section Titles................................................................................69
11.12. Counterparts..................................................................................69
11.13. WAIVER OF JURY TRIAL..........................................................................69
11.14. Press Releases................................................................................69
11.15. Reinstatement.................................................................................69
11.16. Advice of Counsel.............................................................................70
11.17. No Strict Construction........................................................................70
11.18. No Director and Officer Liability.............................................................70
</TABLE>
iv
<PAGE> 6
INDEX OF APPENDICES
<TABLE>
<S> <C>
Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit Advance
Exhibit 1.1(a)(ii) - Form of Revolving Note
Exhibit 1.1(b)(A) - Form of Term Note A
Exhibit 1.1(b)(B) - Form of Term Note B
Exhibit 1.1(c)(ii) - Form of Swing Line Note
Exhibit 1.5(e) - - Form of Notice of Conversion/Continuation
Exhibit 4.1(b) - - Form of Borrowing Base Certificate
Exhibit 9.1(a) - - Form of Assignment Agreement
Disclosure Schedule (1.1(A)) - Maximum Amount of Revolving Credit Advances
on Closing Date
Disclosure Schedule (1.1(B)) - Responsible Individual
Disclosure Schedule (1.4) - Sources and Uses; Funds Flow Memorandum
Disclosure Schedule (3.2) - Executive Offices; FEIN
Disclosure Schedule (3.4(A)) - Financial Statements
Disclosure Schedule (3.4(B)) - Pro Forma
Disclosure Schedule (3.4(C)) - Projections
Disclosure Schedule (3.6) - Real Estate and Leases
Disclosure Schedule (3.7) - Labor Matters
Disclosure Schedule (3.8) - Ventures, Subsidiaries and Affiliates; Outstanding Stock
Disclosure Schedule (3.10) Margin Stock
Disclosure Schedule (3.11) - Tax Matters
Disclosure Schedule (3.12) - ERISA Plans
Disclosure Schedule (3.13) - Litigation
Disclosure Schedule (3.15) - Intellectual Property
Disclosure Schedule (3.17) - Hazardous Materials
Disclosure Schedule (3.18) - Insurance
Disclosure Schedule (3.19) - Deposit and Disbursement Accounts
Disclosure Schedule (3.20) - Government Contracts
Disclosure Schedule (3.21) - Customer and Trade Relations
Disclosure Schedule (3.22) - Material Agreements
Disclosure Schedule (5.1) - Trade Names
Disclosure Schedule (6.2(j)) - Investment Contracts
Disclosure Schedule (6.3) - Indebtedness
Disclosure Schedule (6.4(a)) - Transactions with Affiliates
Disclosure Schedule (6.7) - Existing Liens
Disclosure Schedule (6.16(a)) - Impairment of Intercompany Transfers
Disclosure Schedule
(A-EBITDA) - Adjustments to EBITDA
Disclosure Schedule (A-
Funded Debt) - Funded Debt
Annex A (Recitals) - Definitions
Annex B (Section 1.2) - Letters of Credit
Annex C (Section 1.8) - Cash Management System
</TABLE>
v
<PAGE> 7
<TABLE>
<S> <C>
Annex D (Section 2.1(a)) - Schedule of Additional Closing Documents
Annex E (Section 4.1(a)) - Financial Statements and Projections - Reporting
Annex F (Section 4.1(b)) - Collateral Reports
Annex G (Section 6.10) - Financial Covenants
Annex H (Section 9.9(a)) - Lenders' Wire Transfer Information
Annex I (Section 11.10) - Notice Addresses
Annex J (from Annex A-
Commitments definition) - Commitments as of Closing Date
</TABLE>
vi
<PAGE> 8
CREDIT AGREEMENT, dated as of April 13, 2000, among PLAYCORE
WISCONSIN, INC., a Wisconsin corporation ("Borrower"), the other Credit Parties
signatory hereto, GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation
(in its individual capacity, "GE Capital"), for itself, as Lender, and as
Administrative Agent for Lenders, CREDIT AGRICOLE INDOSUEZ, a French banking
institution acting through its New York Branch (in its individual capacity,
"Indosuez"), for itself, as Lender, and as Documentation Agent for Lenders, and
the other Lenders signatory hereto from time to time.
RECITALS
WHEREAS, Borrower desires that Lenders extend revolving and term
credit facilities to Borrower of up to One Hundred Fifteen Million Dollars
($115,000,000) in the aggregate for the purpose of funding a portion of the
Acquisition and Refinancing and to provide (a) working capital financing for
Borrower and its Subsidiaries, and (b) funds for other general corporate
purposes of Borrower and its Subsidiaries, and for these purposes, Lenders are
willing to make certain loans and other extensions of credit to Borrower of up
to such amount upon the terms and conditions set forth herein; and
WHEREAS, Borrower desires to secure all of its obligations under the
Loan Documents by granting to Administrative Agent, for the benefit of itself,
Documentation Agent and Lenders, a security interest in and lien upon all of its
existing and after-acquired personal and owned real property; and
WHEREAS, PlayCore, Inc., a Delaware corporation ("Holdings"), is
willing to guaranty all of the obligations of Borrower to Lenders under the Loan
Documents and to pledge to Administrative Agent, for the benefit of itself,
Documentation Agent and Lenders, all of the capital stock of Borrower to secure
such guaranty; and
WHEREAS, Heartland Industries, Inc. (DE), a Delaware corporation
("Heartland"), is willing to guaranty all of the obligations of Borrower to
Lenders under the Loan Documents and is willing to grant to Administrative
Agent, for the benefit of itself, Documentation Agent and Lenders, a security
interest in and lien upon all of its existing and after-acquired personal and
owned real property to secure such guaranty; and
WHEREAS, capitalized terms used in this Agreement shall have the
meanings ascribed to them in Annex A. All Annexes, Disclosure Schedules,
Exhibits and other attachments (collectively, "Appendices") hereto, or expressly
identified to this Agreement, are incorporated herein by reference, and taken
together, shall constitute but a single agreement. These Recitals shall be
construed as part of the Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and for other good and valuable consideration,
the parties hereto agree as follows:
<PAGE> 9
1. AMOUNT AND TERMS OF CREDIT
1.1. Credit Facilities.
(a) Revolving Credit Facility.
(i) Subject to the terms and conditions hereof, each Revolving
Lender agrees to make available from time to time until the Commitment
Termination Date its Pro Rata Share of advances (each, a "Revolving Credit
Advance"). The Pro Rata Share of the Revolving Loan of any Revolving Lender
shall not at any time exceed its separate Revolving Loan Commitment. The
obligations of each Revolving Lender hereunder shall be several and not
joint. The aggregate amount of Revolving Credit Advances outstanding shall
not exceed at any time the lesser of (A) the Maximum Amount and (B) the
Borrowing Base, in each case less the sum of the Letter of Credit
Obligations and the Swing Line Loan outstanding at such time ("Borrowing
Availability"); provided, however, that the aggregate amount of the
Revolving Credit Advances outstanding on the Closing Date shall not exceed
the amount provided in Disclosure Schedule (1.1(A)). Until the Commitment
Termination Date, Borrower may from time to time borrow, repay and reborrow
under this Section 1.1(a). Each Revolving Credit Advance shall be made on
notice by Borrower to the representative of Administrative Agent identified
on Disclosure Schedule (1.1(B)) at the address specified thereon. Those
notices must be given no later than (1) 11:00 a.m. (New York time) on the
Business Day of the proposed Revolving Credit Advance, in the case of an
Index Rate Loan, or (2) 11:00 a.m. (New York time) on the date which is
three (3) Business Days prior to the proposed Revolving Credit Advance, in
the case of a LIBOR Loan. Each such notice (a "Notice of Revolving Credit
Advance") must be given in writing (by telecopy or overnight courier)
substantially in the form of Exhibit 1.1(a)(i), and shall include the
information required in such Exhibit and such other information as may be
reasonably required by Administrative Agent. If Borrower desires to have
the Revolving Credit Advances bear interest by reference to a LIBOR Rate,
it must comply with Section 1.5(e).
(ii) Borrower shall execute and deliver to each Revolving Lender
a note to evidence the Revolving Loan Commitment of that Revolving Lender.
Each note shall be in the principal amount of the Revolving Loan Commitment
of the applicable Revolving Lender, dated the Closing Date and
substantially in the form of Exhibit 1.1(a)(ii) (each a "Revolving Note"
and, collectively, the "Revolving Notes"). Each Revolving Note shall
represent the obligation of Borrower to pay the amount of each Revolving
Lender's Revolving Loan Commitment or, if less, the applicable Revolving
Lender's Pro Rata Share of the aggregate unpaid principal amount of all
Revolving Credit Advances to Borrower together with interest thereon as
prescribed in Section 1.5. The entire unpaid balance of the Revolving Loan
and all other non-contingent Obligations shall be immediately due and
payable in full in immediately available funds on the Commitment
Termination Date.
(iii) At the request of Borrower, Agents at their discretion may
(but shall have absolutely no obligation to), make Revolving Credit
Advances to Borrower on
2
<PAGE> 10
behalf of Revolving Lenders in amounts which cause the outstanding balance
of the aggregate Revolving Loan to exceed the Borrowing Base (less the
Swing Line Loan) (any such excess Revolving Credit Advances are herein
referred to collectively as "Overadvances"), and no such event or
occurrence shall cause or constitute a waiver by Administrative Agent or
Lenders of any Default or Event of Default that may result therefrom or of
Administrative Agent's, the Swing Line Lender's or Revolving Lenders' right
to refuse to make any further Overadvances, Swing Line Advances or
Revolving Credit Advances, or incur any Letter of Credit Obligations, as
the case may be, at any time that an Overadvance exists or would result
therefrom. In addition, Overadvances may be made even if the conditions to
lending set forth in Section 2 have not been met. All Overadvances may be
made even if the conditions to lending set forth in Section 2 have not been
met. All Overadvances shall constitute Index Rate Loans, shall bear
interest at the Default Rate and shall be payable on demand. Except as
otherwise provided in Section 1.11(b), the authority of Administrative
Agent to make Overadvances is limited to an aggregate amount not to exceed
$3,000,000 at any time, shall not cause the Revolving Loan to exceed the
Maximum Amount, and may be revoked prospectively by a written notice to
Administrative Agent signed by Revolving Lenders holding a majority of the
Revolving Loan Commitments.
(b) Term Loans.
(i) Subject to the terms and conditions hereof, (A) each Term A
Lender agrees to: make a term loan on the Closing Date to Borrower (the
"Term Loan A") in the original principal amount of its Term Loan A
Commitment, and (B) each Term B Lender agrees to make a term loan on the
Closing Date to Borrower (the "Term Loan B"; Term Loan A and Term Loan B,
each a "Term Loan" and collectively, the "Term Loans") in the original
principal amount of its Term Loan B Commitment. The obligations of each
Term Lender hereunder shall be several and not joint. The Term Loan A shall
be evidenced by promissory notes substantially in the form of Exhibit
1.1(b)(A) (each a "Term A Note" and collectively the "Term A Notes"), and
Borrower shall execute and deliver a Term A Note to each Term A Lender. The
Term Loan B shall be evidenced by promissory notes substantially in the
form of Exhibit 1.1(b)(B) (each a "Term B Note" and collectively, the "Term
B Notes"; the Term A Note and the Term B Note, each a "Term Note" and
collectively, the "Term Notes"), and Borrower shall execute and deliver a
Term B Note to each Term B Lender. Each Term Note shall represent the
obligation of Borrower to pay the amount of the applicable Term Lender's
respective Term Loan Commitment, together with interest thereon as
prescribed in Section 1.5.
(ii) (A) Borrower shall pay the principal amount of the Term Loan
A in twenty-four (24) consecutive quarterly installments on the first day
of January, April, July and October of each year (except for the final
installment), commencing October 1, 2000, as follows:
3
<PAGE> 11
<TABLE>
<CAPTION>
Payment Installment
Date Amount
------- -----------
<S> <C>
October 1, 2000 $ 625,000
January 1, 2001 $ 625,000
April 1, 2001 $ 625,000
July 1, 2001 $ 625,000
October 1, 2001 $ 750,000
January 1, 2002 $ 750,000
April 1, 2002 $ 750,000
July 1, 2002 $ 750,000
October 1, 2002 $1,000,000
January 1, 2003 $1,000,000
April 1, 2003 $1,000,000
July 1, 2003 $1,000,000
October 1, 2003 $1,250,000
January 1, 2004 $1,250,000
April 1, 2004 $1,250,000
July 1, 2004 $1,250,000
October 1, 2004 $1,312,500
January 1, 2005 $1,312,500
April 1, 2005 $1,312,500
July 1, 2005 $1,312,500
October 1, 2005 $1,312,500
January 1, 2006 $1,312,500
April 1, 2006 $1,312,500
July 1, 2006 $1,312,500
</TABLE>
4
<PAGE> 12
(B) Borrower shall pay the principal amount of the Term Loan B in
twenty-eight quarterly installments on the first day of January, April, July and
October of each year (except for the final installment), commencing October 1,
2000 as follows:
<TABLE>
<CAPTION>
Payment Installment
Date Amount
------- -----------
<S> <C>
October 1, 2000 $ 150,000
January 1, 2001 $ 150,000
April 1, 2001 $ 150,000
July 1, 2001 $ 150,000
October 1, 2001 $ 150,000
January 1, 2002 $ 150,000
April 1, 2002 $ 150,000
July 1, 2002 $ 150,000
October 1, 2002 $ 150,000
January 1, 2003 $ 150,000
April 1, 2003 $ 150,000
July 1, 2003 $ 150,000
October 1, 2003 $ 150,000
January 1, 2004 $ 150,000
April 1, 2004 $ 150,000
July 1, 2004 $ 150,000
October 1, 2004 $ 150,000
January 1, 2005 $ 150,000
April 1, 2005 $ 150,000
July 1, 2005 $ 150,000
October 1, 2005 $7,125,000
January 1, 2006 $7,125,000
April 1, 2006 $7,125,000
July 1, 2006 $7,125,000
October 1, 2006 $7,125,000
January 1, 2007 $7,125,000
April 1, 2007 $7,125,000
July 1, 2007 $7,125,000
</TABLE>
Notwithstanding the foregoing, the aggregate outstanding principal
balance of the Term Loans shall be due and payable in full in immediately
available funds on the Commitment Termination Date (other than its schedule date
as set forth in clause (a) of the definition thereof with respect to Term Loan
B), if not sooner paid in full.
(iii) Each payment of principal with respect to each of the Term
Loans shall be paid to Administrative Agent for the ratable benefit of each
applicable Term Lender, ratably in proportion to each such Term Lender's
respective Term Loan Commitment.
5
<PAGE> 13
(c) Swing Line Facility.
(i) Administrative Agent shall notify the Swing Line Lender upon
Administrative Agent's receipt of any Notice of Revolving Credit Advance.
Subject to the terms and conditions hereof, the Swing Line Lender may, in
its discretion, make available from time to time until the Commitment
Termination Date advances (each, a "Swing Line Advance") in accordance with
any such notice. The aggregate amount of Swing Line Advances outstanding
shall not exceed the lesser of (A) the Swing Line Commitment and (B) the
lesser of the Maximum Amount and (except for Overadvances) the Borrowing
Base, in each case, less the outstanding balance of the Revolving Loan at
such time ("Swing Line Availability"). Until the Commitment Termination
Date, Borrower may from time to time borrow, repay and reborrow under this
Section 1.1(c). Each Swing Line Advance shall be made pursuant to a Notice
of Revolving Credit advance delivered by Borrower to Administrative Agent
in accordance with Section 1.1(a). Those notices must be given no later
than 11:00 a.m. (New York time) on the Business Day of the proposed Swing
Line Advance. Notwithstanding any other provision of this Agreement or the
other Loan Documents, the Swing Line Loan shall constitute an Index Rate
Loan. Borrower shall repay the aggregate outstanding principal amount of
the Swing Line Loan on the Commitment Termination Date, or upon demand
therefor by Administrative Agent, in which event such Swing Line Loan shall
be deemed converted to a Revolving Credit Advance.
(ii) Borrower shall execute and deliver to the Swing Line Lender
a promissory note to evidence the Swing Line Commitment. Such note shall be
in the principal amount of the Swing Line Commitment of the Swing Line
Lender, dated the Closing Date and substantially in the form of Exhibit
1.1(c)(ii) (the "Swing Line Note"). The Swing Line Note shall represent the
obligation of Borrower to pay the amount of the Swing Line Commitment or,
if less, the aggregate unpaid principal amount of all Swing Line Advances
made to Borrower together with interest thereon as prescribed in Section
1.5. The entire unpaid balance of the Swing Line Loan and all other
non-contingent Obligations related hereto shall be immediately due and
payable in full in immediately available funds on the Commitment
Termination Date if not sooner paid in full.
(iii) Refunding of Swing Line Loans. The Swing Line Lender, at
any time and from time to time in its sole and absolute discretion on
behalf of Borrower (and Borrower hereby irrevocably authorizes the Swing
Line Lender to so act on its behalf) may request each Revolving Lender
(including the Swing Line Lender) to make a Revolving Credit Advance to
Borrower (which shall be an Index Rate Loan) in an amount equal to such
Revolving Lender's Pro Rata Share of the principal amount of the Swing Line
Loan (the "Refunded Swing Line Loan") outstanding on the date such notice
is given. Unless any of the events described in Sections 8.1(h) or 8.1(i)
shall have occurred (in which event the procedures of Section 1.1(c)(iv)
shall apply) and regardless of whether the conditions precedent set forth
in this Agreement to the making of a Revolving Credit Advance are then
satisfied, each Revolving Lender shall disburse directly to Administrative
Agent, its Pro Rata Share of a Revolving Credit Advance on
6
<PAGE> 14
behalf of the Swing Line Lender, prior to 3:00 p.m. (New York time), in
immediately available funds on the Business Day next succeeding the date
such notice is given. The proceeds of such Revolving Credit Advances shall
be immediately paid to the Swing Line Lender and applied to repay the
Refunded Swing Line Loan.
(iv) Participation in Swing Line Loans. If, prior to refunding a
Swing Line Loan with a Revolving Credit Advance pursuant to Section
1.1(c)(iii), one of the events described in Sections 8.1(h) or 8.1(i) shall
have occurred, then, subject to the provisions of Section 1.1(c)(v) below,
each Revolving Lender will, on the date such Revolving Credit Advance was
to have been made for the benefit of Borrower, purchase from the Swing Line
Lender an undivided participation interest in the Swing Line Loan in an
amount equal to its Pro Rata Share of such Swing Line Loan. Upon request,
each Revolving Lender will promptly transfer to the Swing Line Lender, in
immediately available funds, the amount of its participation. Settlement of
payments received in respect of Swing Line Loans hereunder shall be made at
least weekly.
(v) Revolving Lenders' Obligations Unconditional. Each Revolving
Lender's obligation to make Revolving Credit Advances in accordance with
Section 1.1(c)(iii) and to purchase participating interests in accordance
with Section 1.1(c)(iv) shall be absolute and unconditional and shall not
be affected by any circumstance, including (A) any setoff, counterclaim,
recoupment, defense or other right which such Revolving Lender may have
against the Swing Line Lender, Borrower or any other Person for any reason
whatsoever; (B) the occurrence or continuance of any Default or Event of
Default; (C) any inability of Borrower to satisfy the conditions precedent
to borrowing set forth in this Agreement on the date upon which such
participating interest is to be purchased or (D) any other circumstance,
happening or event whatsoever, whether or not similar to any of the
foregoing. If any Revolving Lender does not make available to
Administrative Agent or the Swing Line Lender, as applicable, the amount
required pursuant to Section 1.1(c)(iii) or 1.1(c)(iv), as the case may be,
the Swing Line Lender shall be entitled to recover such amount on demand
from such Revolving Lender, together with interest thereon for each day
from the date of non-payment until such amount is paid in full at the
Federal Funds Rate for the first two Business Days and at the Index Rate
thereafter.
(d) Reliance on Notices. Administrative Agent shall be entitled to
rely upon, and shall be fully protected in relying upon, any Notice of Revolving
Credit Advance, Notice of Conversion/Continuation or similar notice believed by
Administrative Agent to be genuine. Administrative Agent may assume that each
Person executing and delivering such a notice was duly authorized, unless the
responsible individual acting thereon for Administrative Agent has actual
knowledge to the contrary.
1.2. Letters of Credit. Subject to and in accordance with the terms
and conditions contained herein and in Annex B, Borrower shall have the right to
request, and Revolving Lenders agree to incur, or purchase participations in,
Letter of Credit Obligations in respect of Borrower.
7
<PAGE> 15
1.3. Prepayments.
(a) Voluntary Prepayments. Borrower may at any time on at least five
(5) days' prior written notice to Administrative Agent (i) voluntarily prepay
all or part of any of the Term Loans and/or (ii) voluntarily prepay all or part
of the Revolving Loan and permanently reduce (but not terminate the Revolving
Loan Commitment; provided that (A) any such prepayments or reductions shall be
in a minimum amount of $1,000,000 and integral multiples of $250,000 in excess
of such amount and (B) the Revolving Loan Commitment shall not be reduced to an
amount less than $15,000,000. Borrower may at any time on at least five (5)
days' prior written notice to Administrative Agent terminate the Revolving Loan
Commitment, provided that upon such termination all Loans and other Obligations
shall be immediately due and payable in full. Any such voluntary prepayment and
any such reduction or termination of the Revolving Loan Commitment must be
accompanied by the payment of the fee required by Section 1.9, if any, plus the
payment of any LIBOR funding breakage costs in accordance with Section 1.13(b).
Upon any such prepayment and reduction or termination of the Revolving Loan
Commitment, Borrower's right to request Revolving Credit Advances, or request
that Letter of Credit Obligations be incurred on its behalf, or request Swing
Line Advances, shall simultaneously be permanently reduced or terminated, as the
case may be; provided that a permanent reduction of the Revolving Loan
Commitment shall not require a corresponding pro rata reduction in the L/C
Sublimit (as defined in Annex B), provided that the L/C Sublimit shall not be
more than 50% of the Revolving Loan Commitment. Each notice of partial
prepayment shall designate the Loan or other Obligations to which such
prepayment is to be applied, provided that any partial prepayments of any of the
Term Loans made by Borrower shall be applied to prepay the scheduled
installments of the respective Term Loan in inverse order of maturity.
(b) Mandatory Prepayments.
(i) If at any time the outstanding balance of the Revolving Loan
exceeds the lesser of (A) the Maximum Amount and (B) the Borrowing Base,
less, in each case, the outstanding Swing Line Loan at such time, Borrower
shall immediately repay the aggregate outstanding Revolving Credit Advances
to the extent required to eliminate such excess and at Borrower's option,
applied first to such Revolving Credit Advances which are Index Rate Loans.
If any such excess remains after repayment in full of the aggregate
outstanding Revolving Credit Advances, Borrower shall provide cash
collateral for the Letter of Credit Obligations in the manner set forth in
Annex B to the extent required to eliminate such excess. Notwithstanding
the foregoing, any Overadvance made pursuant to Section 1.1(a)(iii) shall
be repaid only on demand.
(ii) Promptly, but in any event within five (5) Business Days,
following receipt by any Credit Party of cash proceeds of any asset
disposition (including condemnation proceeds, but excluding proceeds of
asset dispositions permitted by Section 6.8(a), (d), (e) or (f) or any sale
of Stock of any Subsidiary of any Credit Party), Borrower shall prepay the
Loans in an amount equal to all such proceeds, net of (A) commissions and
other reasonable and customary transaction costs, fees and expenses
properly attributable to such transaction and payable by Borrower in
connection therewith (in each case, paid to non-Affiliates), (B) all sales,
transfer and recording taxes,
8
<PAGE> 16
(C) amounts payable to holders of senior Liens (to the extent such Liens
constitute Permitted Encumbrances hereunder), if any, (D) an appropriate
reserve for income taxes in accordance with GAAP in connection therewith
and (E) appropriate amounts to be provided by a Credit Party as a reserve,
in accordance with GAAP, against any liabilities associated with the assets
sold or disposed of in such asset disposition, including, without
limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with the assets sold or disposed of in such asset
disposition; provided that to the extent any reserve, or part thereof,
under this Section 1.3(b)(ii) is reversed or is no longer applicable, such
amount shall be applied toward prepayment of the Loans as provided in this
Section. Any such prepayment shall be applied in accordance with clause (c)
below.
(iii) If Holdings, Borrower or any of Borrower's Subsidiaries
issues Stock or debt securities permitted hereunder, no later than the
Business Day following the date of receipt of the proceeds thereof,
Borrower shall prepay the Loans in an amount equal to all such cash
proceeds, net of all discounts and commissions or brokerage fees and other
reasonable costs paid to non-Affiliates in connection therewith and net of
any transfer, recording or similar taxes. The foregoing shall not apply to
(A) directors qualifying shares, (B) pro rata issuances to minority
shareholders, (C) sales of Holdings Stock for acquisitions of assets or
business or entities becoming Subsidiaries, (D) sales of Stock pursuant to
stock options or incentive plans of Holdings, (E) private sales of Holdings
Stock up to an aggregate of $7,000,000 during the term of this Agreement,
(F) intercompany equity and debt issuances between and among Credit Parties
and (G) all Indebtedness permitted under Section 6.3(a)(iv), (vi), (viii),
(ix), (x) and any refinancing thereof. Any such prepayment shall be applied
in accordance with clause (c) below.
(iv) Until the Termination Date, Borrower shall prepay the
Obligations on the earlier of the date which is ninety (90) days after (A)
the date on which Borrower's annual audited Financial Statements for the
immediately preceding Fiscal Year are delivered pursuant to Annex E or (B)
the date on which such annual audited Financial Statements were required to
be delivered pursuant to Annex E, in an amount equal to: (x) seventy-five
percent (75%) of Excess Cash Flow for the immediately preceding Fiscal Year
if the Leverage Ratio as of such date is greater than or equal to 3.5:1.0
and (y) fifty percent (50%) of Excess Cash Flow for the immediately
preceding Fiscal Year if the Leverage Ratio as of such date is less than
3.5:1.0. Any prepayments from Excess Cash Flow paid pursuant to this clause
(iv) shall be applied in accordance with clause (c) below. Each such
prepayment shall be accompanied by a certificate signed by Borrower's chief
financial officer certifying the manner in which Excess Cash Flow and the
resulting prepayment were calculated, which certificate shall be in form
and substance satisfactory to Administrative Agent.
(c) Application of Certain Mandatory Prepayments. Any prepayments made
by Borrower pursuant to clauses (b)(ii), (b)(iii), or (b)(iv) above shall be
applied as follows: first, to Fees and reimbursable expenses of each Agent then
due and payable pursuant to any of the Loan Documents; second, to interest then
due and payable on each of the Loans on a pro rata basis; third, to prepay the
scheduled installments of each of the Loans on a pro rata basis in inverse
9
<PAGE> 17
order of maturity, until each of the Term Loans shall have been prepaid in full;
fourth, to the principal balance of the Swing Line Loan until the same shall
have been repaid in full; fifth, to the outstanding principal balance of
Revolving Credit Advances which are Index Rate Loans first, then to those which
are LIBOR Rate Loans, until the same shall have been paid in full; and sixth, to
any Letter of Credit Obligations, to provide cash collateral therefor in the
manner set forth in Annex B, until all such Letter of Credit Obligations have
been fully cash collateralized in the manner set forth in Annex B. Each of the
Revolving Loan Commitment and the Swing Line Commitment shall be permanently
reduced by the amount of any such prepayments. Notwithstanding the foregoing, so
long as the Term Loan A is outstanding, each Term B Lender shall have the right
to refuse all or a portion of such prepayment allocable to its Term Loan B, and
such amount so refused shall be applied to prepay the Term Loan A.
(d) Application of Prepayments from Insurance Proceeds. Prepayments
from insurance proceeds in accordance with Section 5.4(c) shall be applied as
follows: insurance proceeds from casualties or losses to cash or Inventory shall
be applied first, to the Swing Line Loans and, second, to the Revolving Credit
Advances; insurance proceeds from casualties or losses to Equipment, Fixtures
and Real Estate shall be applied on a pro rata basis to scheduled installments
of the Term Loans in inverse order of maturity. The Revolving Loan Commitment
and the Swing Line Loan Commitment shall be permanently reduced by the amount of
any such prepayments. If the precise amount of insurance proceeds allocable to
Inventory as compared to Equipment, Fixtures and Real Estate are not otherwise
determined, the allocation and application of those proceeds shall be determined
by Administrative Agent, subject to the approval of Requisite Lenders.
(e) Nothing in this Section 1.3 shall be construed to constitute
Administrative Agent's or any Lender's consent to any transaction referred to in
clauses (b)(ii) and (b)(iii) above which is not permitted by other provisions of
this Agreement or the other Loan Documents.
1.4. Use of Proceeds. Borrower shall utilize the proceeds of the Term
Loans and the Revolving Loan made on the Closing Date solely for the Acquisition
and the Refinancing (and to pay any related transaction fees and expenses), and
the proceeds of the Revolving Loan made thereafter for the financing of
Borrower's and its Subsidiaries' ordinary working capital and general corporate
needs (but excluding in any event the making of any Restricted Payment not
specifically permitted by Section 6.14). Disclosure Schedule (1.4) contains a
description of Borrower's sources and uses of funds as of the Closing Date,
including Loans and Letter of Credit Obligations to be made or incurred on that
date, and a funds flow memorandum detailing how funds from each source are to be
transferred to particular uses. Proceeds from equity issuances and the
Subordinated Debt shall be used first to acquire the outstanding equity of
Holdings.
1.5. Interest and Applicable Margins.
(a) Borrower shall pay interest to Administrative Agent, for the
ratable benefit of Lenders in accordance with the various Loans being made by
each Lender, in arrears on each applicable Interest Payment Date, at the
following rates: (i) with respect to the Revolving Credit Advances, the Index
Rate plus the Applicable Revolver Index Margin per annum or, at the
10
<PAGE> 18
election of Borrower, the applicable LIBOR Rate plus the Applicable Revolver
LIBOR Margin per annum, based on the aggregate Revolving Credit Advances
outstanding from time to time; (ii) with respect to the Term Loan A, the Index
Rate plus the Applicable Term Loan A Index Margin per annum or, at the election
of Borrower, the applicable LIBOR Rate plus the Applicable Term Loan A LIBOR
Margin per annum; and (iii) with respect to Term Loan B, the Index Rate plus the
Applicable Term Loan B Index Margin per annum or, at the election of Borrower,
the applicable LIBOR Rate plus the Applicable Term Loan B LIBOR Margin per
annum; and (iv) with respect to the Swing Line Loan, the Index Rate plus the
Applicable Revolver Index Margin per annum.
The Applicable Revolver Index Margin, Applicable Revolver LIBOR
Margin, Applicable Term Loan A Index Margin, Applicable Term Loan A LIBOR
Margin, Applicable Term Loan B Index Margin, Applicable Term Loan B LIBOR Margin
and Applicable L/C Margin will be 1.75%, 3.50%, 1.75%, 3.50%, 2.25%, 4.00% and
3.50% per annum, respectively, as of the Closing Date. The Applicable Margins
for the Revolving Loan and the Term Loan A and the Applicable L/C Margin will be
adjusted (up only) prospectively on a quarterly basis as determined by
Borrower's consolidated financial performance for the immediately preceding four
Fiscal Quarters, commencing with the first day of the first calendar month that
occurs more than five (5) days after delivery of Borrower's quarterly Financial
Statements to Administrative Agent for the first Fiscal Quarter ending following
the Closing Date. From and after the first day of the first calendar month that
occurs more than five (5) days after delivery of Borrower's quarterly Financial
Statements to Administrative Agent for the Fiscal Quarter ending after the first
six months following the Closing Date, the Applicable Margins for the Revolving
Loan and the Term Loan A and the Applicable L/C Margin will be adjusted (up or
down) prospectively on a quarterly basis, based on Borrower's consolidated
financial performance for the immediately preceding four Fiscal Quarters.
Adjustments in Applicable Margins will be determined by reference to the
following grids:
<TABLE>
<CAPTION>
LEVEL OF
IF LEVERAGE RATIO IS: APPLICABLE MARGINS:
-------------------- ------------------
<S> <C>
> or = to 4.75 Level I
> or = to 4.25, but < 4.75 Level II
> or = to 3.75, but < 4.25 Level III
> or = to 3.25, but < 3.75 Level IV
< 3.25 Level V
</TABLE>
11
<PAGE> 19
<TABLE>
<CAPTION>
APPLICABLE MARGINS
-----------------------------------------------------------------------------
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
------- -------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
Applicable Revolver 2.00% 1.75% 1.50% 1.25% 1.00%
Index Margin
Applicable Revolver 3.75% 3.50% 3.25% 3.00% 2.75%
LIBOR Margin
Applicable Term Loan A 2.00% 1.75% 1.50% 1.25% 1.00%
Index Margin
Applicable Term Loan A 3.75% 3.50% 3.25% 3.00% 2.75%
LIBOR Margin
Applicable Term Loan B 2.50% 2.25% 2.00% 2.00% 2.00%
Index Margin
Applicable Term Loan B 4.25% 4.00% 3.75% 3.75% 3.75%
LIBOR Margin
Applicable L/C Margin 3.75% 3.50% 3.25% 3.00% 2.75%
</TABLE>
Concurrently with the delivery of those Financial Statements, Borrower
shall deliver to Administrative Agent and Lenders a certificate, signed by its
chief financial officer, setting forth in reasonable detail the basis for the
continuance of, or any change in, the Applicable Margins. Failure to timely
deliver such Financial Statements shall, in addition to any other remedy
provided for in this Agreement, result in an increase in the Applicable Margins
to the highest level set forth in the foregoing grid, until the fifth Business
Day following the delivery of those Financial Statements demonstrating that such
an increase is not required. If a Default or an Event of Default shall have
occurred or be continuing at the time any reduction in the Applicable Margins is
to be implemented, that reduction shall be deferred until the fifth Business Day
following the date on which such Default or Event of Default is waived or cured.
(b) If any payment on any Loan becomes due and payable on a day other
than a Business Day, the maturity thereof will be extended to the next
succeeding Business Day (except as set forth in the definition of LIBOR Period)
and, with respect to payments of principal, interest thereon shall be payable at
the then applicable rate during such extension.
(c) All computations of Fees calculated on a per annum basis and
interest shall be made by Administrative Agent on the basis of a three hundred
and sixty (360) day year, in each case for the actual number of days occurring
in the period for which such interest and Fees are payable. The Index Rate shall
be determined each day based upon the Index Rate as in effect each day. Each
determination by Administrative Agent of an interest rate and Fees hereunder
shall be conclusive, absent manifest error.
12
<PAGE> 20
(d) So long as any Default or Event of Default shall have occurred and
be continuing, the interest rates applicable to the Loans and the Letter of
Credit Fees shall be increased by two percent (2%) per annum above the rates of
interest or the rate of such Fees otherwise applicable hereunder ("Default
Rate"), and all outstanding Obligations shall bear interest at the Default Rate
applicable to such Obligations. Interest and Letter of Credit Fees at the
Default Rate shall accrue from the initial date of such Default or Event of
Default until that Default or Event of Default is cured or waived and shall be
payable upon demand.
(e) Except with respect to clause (iii) below, so long as no Default
or Event of Default shall have occurred and be continuing, and subject to the
additional conditions precedent set forth in Section 2.2, Borrower shall have
the option to (i) request that any Revolving Credit Advances be made as a LIBOR
Loan, (ii) convert at any time all or any part of outstanding Loans (other than
the Swing Line Loan) from Index Rate Loans to LIBOR Loans, (iii) convert any
LIBOR Loan to an Index Rate Loan, subject to payment of LIBOR breakage costs in
accordance with Section 1.13(b) if such conversion is made prior to the
expiration of the LIBOR Period applicable thereto, or (iv) continue all or any
portion of any Loan (other than the Swing Line Loan) as a LIBOR Loan upon the
expiration of the applicable LIBOR Period and the succeeding LIBOR Period of
that continued Loan shall commence on the last day of the LIBOR Period of the
Loan to be continued. Any Loan to be made or continued as, or converted into, an
Index Rate Loan must be in a minimum amount of $250,000 and integral multiples
of $100,000 in excess of such amount. Any Loan to be made or continued as, or
converted into, a LIBOR Loan must be in a minimum amount of $1,000,000 and
integral multiples of $250,000 in excess of such amount. Any such election must
be made by 11:00 a.m. (New York time) on the third (3rd) Business Day prior to
(1) the date of any proposed Advance which is to bear interest at the LIBOR
Rate, (2) the end of each LIBOR Period with respect to any LIBOR Loans to be
continued as such, or (3) the date on which Borrower wishes to convert any Index
Rate Loan to a LIBOR Loan for a LIBOR Period designated by Borrower in such
election. If no election is received with respect to a LIBOR Loan by 11:00 a.m.
(New York time) on the third (3rd) Business Day prior to the end of the LIBOR
Period with respect thereto (or if a Default or an Event of Default shall have
occurred and be continuing or the additional conditions precedent set forth in
Section 2.2 shall not have been satisfied), that LIBOR Loan shall be converted
to an Index Rate Loan at the end of its LIBOR Period. Borrower must make such
election by notice to Administrative Agent in writing, by telecopy or overnight
courier. In the case of any conversion or continuation, such election must be
made pursuant to a written notice (a "Notice of Conversion/Continuation") in the
form of Exhibit 1.5(e). No Loan may be made as or converted into a LIBOR Loan
until the earlier of (a) forty-five (45) days after the Closing Date unless
otherwise consented to by Administrative Agent or (b) the completion of the
syndication of the Loans hereunder, as determined by Administrative Agent, or an
Affiliate thereof, in its sole discretion.
(f) Notwithstanding anything to the contrary set forth in this Section
1.5, if a court of competent jurisdiction determines in a final order that the
rate of interest payable hereunder exceeds the highest rate of interest
permissible under applicable law (the "Maximum Lawful Rate"), then so long as
the Maximum Lawful Rate would be so exceeded, the rate of interest payable
hereunder shall be equal to the Maximum Lawful Rate; provided, however, that
13
<PAGE> 21
if at any time thereafter the rate of interest payable hereunder is less than
the Maximum Lawful Rate, Borrower shall continue to pay interest hereunder at
the Maximum Lawful Rate until such time as the total interest received by
Administrative Agent, on behalf of Lenders, is equal to the total interest which
would have been received had the interest rate payable hereunder been (but for
the operation of this paragraph) the interest rate payable since the Closing
Date as otherwise provided in this Agreement. Thereafter, interest hereunder
shall be paid at the rate(s) of interest and in the manner provided in Sections
1.5(a) through (e) above, unless and until the rate of interest again exceeds
the Maximum Lawful Rate, and at that time this paragraph shall again apply. In
no event shall the total interest received by any Lender pursuant to the terms
hereof exceed the amount which such Lender could lawfully have received had the
interest due hereunder been calculated for the full term hereof at the Maximum
Lawful Rate. If the Maximum Lawful Rate is calculated pursuant to this
paragraph, such interest shall be calculated at a daily rate equal to the
Maximum Lawful Rate divided by the number of days in the year in which such
calculation is made. If, notwithstanding the provisions of this Section 1.5(f),
a court of competent jurisdiction shall finally determine that a Lender has
received interest hereunder in excess of the Maximum Lawful Rate, Administrative
Agent shall, to the extent permitted by applicable law, promptly apply such
excess in the order specified in Section 1.11 and thereafter shall refund any
excess to Borrower or as a court of competent jurisdiction may otherwise order.
1.6. Eligible Accounts. Based on the most recent Borrowing Base
Certificate delivered by Borrower to Administrative Agent and on other
information available to it, Administrative Agent shall in its reasonable credit
judgment determine which Accounts of Borrower and Heartland shall not constitute
"Eligible Accounts" for purposes of this Agreement. In determining whether a
particular Account constitutes an Eligible Account, Administrative Agent shall
not include any such Account to which any of the exclusionary criteria set forth
below applies unless otherwise approved in writing by Administrative Agent.
Agents reserve the right, at any time and from time to time after the Closing
Date, to adjust any such criteria, to establish new criteria and to adjust
advance rates with respect to Eligible Accounts, in its reasonable credit
judgment, subject to the approval of Requisite Revolving Lenders in the case of
adjustments, new criteria or changes in advance rates which have the effect of
making more credit available in excess of $3,000,000 of additional credit.
Eligible Accounts shall not include any Account of Borrower or Heartland unless
otherwise approved in writing by Administrative Agent:
(a) which does not arise from the sale of goods or the performance of
services by Borrower or Heartland in the ordinary course of its business;
(b) (i) upon which Borrower's or Heartland's right to receive payment
is not absolute or is contingent upon the fulfillment of any condition
whatsoever or (ii) as to which Borrower or Heartland is not able to bring suit
or otherwise enforce its remedies against the Account Debtor through judicial
process, or (iii) if the Account represents a progress billing consisting of an
invoice for goods sold or used or services rendered pursuant to a contract under
which the Account Debtor's obligation to pay that invoice is subject to
Borrower's or Heartland's completion of further performance under such contract
or is subject to the equitable lien of a surety bond issuer;
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(c) in the event that any defense, counterclaim, setoff or dispute is
asserted as to such Account to the extent of the amount of such defense,
counterclaim, setoff or dispute (excluding accrued advertising and volume
rebates);
(d) that is not a true and correct statement of bona fide indebtedness
incurred in the amount of the Account for merchandise sold to or services
rendered and accepted by the applicable Account Debtor;
(e) with respect to which an invoice, reasonably acceptable to
Administrative Agent in form and substance, has not been sent to the applicable
Account Debtor;
(f) that (i) is not owned by Borrower or Heartland or (ii) is subject
to any right, claim, security interest or other interest of any other Person,
other than Liens in favor of Administrative Agent, on behalf of itself,
Documentation Agent and Lenders;
(g) that arises from a sale to any director, officer, other employee
or Affiliate of any Credit Party;
(h) that is the obligation of an Account Debtor located in a foreign
country other than Canada (excluding the provinces of Quebec, Newfoundland, Nova
Scotia and Prince Edward Island) unless payment thereof is assured by a letter
of credit assigned and delivered to Administrative Agent or receivables
insurance, satisfactory to Administrative Agent as to form, amount and issuer;
(i) to the extent Borrower or any Subsidiary thereof is liable for
goods sold or services rendered by the applicable Account Debtor to Borrower or
any Subsidiary thereof but only to the extent of the potential offset;
(j) that arises with respect to goods which are delivered on a
bill-and-hold, cash-on-delivery basis or placed on consignment, guaranteed sale
or other terms by reason of which the payment by the Account Debtor is or may be
conditional;
(k) that is in default; provided, that, without limiting the
generality of the foregoing, an Account shall be deemed in default upon the
occurrence of any of the following:
(i) it is not paid within the earlier of: sixty (60) days
following its due date or one hundred and fifty (150) days following its
original invoice date;
(ii) if any Account Debtor obligated upon such Account suspends
business, makes a general assignment for the benefit of creditors or fails
to pay its debts generally as they come due; or
(iii) if any petition is filed by or against any Account Debtor
obligated upon such Account under any bankruptcy law or any other federal,
state or foreign (including any provincial) receivership, insolvency relief
or other law or laws for the relief of debtors;
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(l) which is the obligation of an Account Debtor if fifty percent
(50%) or more of the dollar amount of all Accounts owing by that Account Debtor
are ineligible under the other criteria set forth in this Section 1.6;
(m) as to which Administrative Agent's Lien thereon, on behalf of
itself, Documentation Agent and Lenders, is not a first priority perfected Lien;
(n) as to which any of the representations or warranties pertaining to
Accounts set forth in this Agreement or the Security Agreement is untrue;
(o) to the extent such Account is evidenced by a judgment, Instrument
or Chattel Paper;
(p) to the extent such Account debtor exceeds any credit limit
established by Agent, in its reasonable discretion after ten (10) days prior
written notice to Borrower, as to Accounts created thereafter;
(q) to the extent that such Account, together with all other Accounts
owing to such Account Debtor and its Affiliates as of any date of determination
exceed twenty-five percent (25%) of all Eligible Accounts;
(r) which is payable in any currency other than Dollars; or
(s) which, as to prospective Account balances (but not the then
outstanding Account balances), is unacceptable to Administrative Agent in its
reasonable credit judgment.
1.7. Eligible Inventory. Based on the most recent Borrowing Base
Certificate delivered by Borrower to Administrative Agent and on other
information available to it, Administrative Agent shall in its reasonable credit
judgment determine which Inventory of Borrower, Heartland or other Guarantor
(other than Holdings) shall not constitute "Eligible Inventory" for purposes of
this Agreement. In determining whether any particular Inventory constitutes
Eligible Inventory, Administrative Agent shall not include any such Inventory to
which any of the exclusionary criteria set forth below applies unless otherwise
approved in writing by Administrative Agent. Agents reserve the right, at any
time and from time to time after the Closing Date, to adjust any such criteria,
to establish new criteria and to adjust advance rates with respect to Eligible
Inventory in its reasonable credit judgment, subject to the approval of
Requisite Revolving Lenders in the case of adjustments, new criteria or changes
in advance rates which have the effect of making more credit available in excess
of $3,000,000 of additional credit. Eligible Inventory shall not include any
Inventory of Borrower, Heartland or any other Guarantor (other than Holdings)
unless otherwise approved in writing by Administrative Agent that:
(a) is not owned by such Credit Party free and clear of all Liens and
rights of any other Person (including the rights of a purchaser that has made
progress payments and the rights of a surety that has issued a bond to assure
such Credit Party's performance with respect to that
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Inventory), except the Liens in favor of Administrative Agent, on behalf of
itself, Documentation Agent and Lenders;
(b) is (i) not located on premises owned or leased by such Credit
Party or (ii) is stored with a bailee, warehouseman or similar Person, unless
Administrative Agent has given its prior consent thereto and unless (x) a
satisfactory bailee letter or landlord waiver has been delivered to
Administrative Agent, or (y) Reserves satisfactory to Administrative Agent have
been established with respect thereto, or (iii) other than with respect to
Heartland, located at any site if the aggregate book value of Inventory at any
such location is less than $100,000;
(c) is placed on consignment or is in transit;
(d) is covered by a negotiable document of title, unless such document
has been delivered to Administrative Agent with all necessary endorsements, free
and clear of all Liens except those in favor of Administrative Agent and
Lenders;
(e) in Administrative Agent's reasonable determination, is excess,
obsolete, unsalable, shopworn, seconds, damaged or unfit for sale to the extent
not previously covered by reserves on such Credit Party's balance sheet;
(f) consists of display items (excluding Heartland display items and
other Inventory that are or will be for sale in the ordinary course of business)
or packing or shipping materials, manufacturing supplies, or replacement parts;
(g) consists of goods which have been returned by the buyer and are
not resaleable in the ordinary course of business;
(h) is not of a type held for sale in the ordinary course of such
Credit Party's business;
(i) as to which Administrative Agent's Lien, on behalf of itself,
Documentation Agent and Lenders, therein is not a first priority perfected Lien;
(j) as to which any of the representations or warranties pertaining to
Inventory set forth in this Agreement or the Security Agreement is untrue;
(k) consists of Hazardous Materials or goods that can be transported
or sold only with licenses that are not readily available;
(l) is not covered by casualty insurance acceptable to Administrative
Agent; or
(m) which, as to prospective (but not the then existing) Inventory, is
otherwise unacceptable to Administrative Agent in its reasonable credit
judgment.
1.8. Cash Management Systems. Promptly, but in any event within thirty
(30) days after the Closing Date, Borrower will establish and will maintain
until the Termination Date, the cash management systems described on Annex C
(the "Cash Management Systems").
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1.9. Fees. Borrower shall pay to GE Capital and Indosuez, each
individually, the Fees specified in that certain fee letter dated January 14,
2000 among Chartwell Investments II LLC, GE Capital and Indosuez (the "GE
Capital Fee Letter"), at the times specified for payment therein.
As additional compensation for the Revolving Lenders, Borrower
agrees to pay to Administrative Agent, for the ratable benefit of such Lenders,
in arrears, on the first Business Day of each month prior to the Commitment
Termination Date and on the Commitment Termination Date, a fee for Borrower's
non-use of available funds in an amount equal to 0.50% per annum (calculated on
the basis of a 360-day year for actual days elapsed) of the difference between
(x) the Maximum Amount (as it may be reduced from time to time) and (y) the
average for the period of the daily closing balances of the Revolving Loan and
the Swing Line Loan outstanding during the period for which such fee is due.
1.10. Receipt of Payments. Borrower shall make each payment under this
Agreement not later than 2:00 p.m. (New York time) on the day when due in
immediately available funds in Dollars to the Collection Account. For purposes
of computing interest and Fees and determining Borrowing Availability or Net
Borrowing Availability as of any date, all payments shall be deemed received on
the day of receipt of immediately available funds therefor in the Collection
Account prior to 2:00 p.m. New York time. Payments received after 2:00 p.m. New
York time on any Business Day shall be deemed solely for such purposes to have
been received on the following Business Day.
1.11. Application and Allocation of Payments.
(a) So long as no Default or Event of Default shall have occurred and
be continuing, (i) payments matching specific scheduled payments then due shall
be applied to those scheduled payments; (ii) voluntary prepayments shall be
applied as determined by Borrower, subject to the provisions of Section 1.3(a);
and (iii) mandatory prepayments shall be applied as set forth in Sections 1.3(c)
and 1.3(d). All payments and prepayments applied to a particular Loan shall be
applied ratably to the portion thereof held by each Lender as determined by its
Pro Rata Share. As to each other payment, and as to all payments made when a
Default or Event or Default shall have occurred and be continuing or following
the Commitment Termination Date, Borrower hereby irrevocably waives the right to
direct the application of any and all payments received from or on behalf of
Borrower, and Borrower hereby irrevocably agrees that Administrative Agent shall
have the continuing exclusive right to apply any and all such payments against
the Obligations as Administrative Agent may deem advisable notwithstanding any
previous entry by Administrative Agent in the Loan Account or any other books
and records. In the absence of a specific determination by Administrative Agent
with respect thereto, payments shall be applied to amounts then due and payable
in the following order: (1) to Fees and Administrative Agent's expenses
reimbursable hereunder; (2) to interest on the Swing Line Loan; (3) to principal
payments on the Swing Line Loan; (4) to interest on the other Loans, ratably in
proportion to the interest accrued as to each Loan; (5) to principal payments on
the other Loans and to provide cash collateral for Letter of Credit Obligations
in the manner described in Annex B, ratably to the aggregate, combined principal
balance of the other
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Loans and outstanding Letter of Credit Obligations; and (6) to all other
Obligations including expenses of Lenders to the extent reimbursable under
Section 11.3.
(b) Administrative Agent is authorized to, and at its sole election
may, charge to the Revolving Loan balance on behalf of Borrower and cause to be
paid all Fees, expenses, Charges, costs (including insurance premiums in
accordance with Section 5.4(a)) and interest and principal, other than principal
of the Revolving Loan, owing by Borrower under this Agreement or any of the
other Loan Documents if and to the extent Borrower fails to promptly pay any
such amounts as and when due, even if such charges would cause the aggregate
balance of the Revolving Loan and the Swing Line Loan to exceed Borrowing
Availability. At Administrative Agent's option and to the extent permitted by
law, any charges so made shall constitute part of the Revolving Loan hereunder.
1.12. Loan Account and Accounting. Administrative Agent shall maintain
a loan account (the "Loan Account") on its books to record: all Advances and
each of the Term Loans, all payments made by Borrower, and all other debits and
credits as provided in this Agreement with respect to the Loans or any other
Obligations. All entries in the Loan Account shall be made in accordance with
Administrative Agent's customary accounting practices as in effect from time to
time. The balance in the Loan Account, as recorded on Administrative Agent's
most recent printout or other written statement, shall, absent manifest error,
be presumptive evidence of the amounts due and owing to Agents and Lenders by
Borrower; provided that any failure to so record or any error in so recording
shall not limit or otherwise affect Borrower's duty to pay the Obligations.
Administrative Agent shall render to Borrower a monthly accounting of
transactions with respect to the Loans setting forth the balance of the Loan
Account. Unless Borrower notifies Administrative Agent in writing of any
objection to any such accounting (specifically describing the basis for such
objection), within forty-five (45) days after the date thereof, each and every
such accounting shall, absent manifest error, be deemed final, binding and
conclusive upon Borrower in all respects as to all matters reflected therein.
Only those items expressly objected to in such notice shall be deemed to be
disputed by Borrower. Notwithstanding any provision herein contained to the
contrary, any Lender may elect (which election may be revoked) to dispense with
the issuance of Notes to that Lender and may rely on the Loan Account as
evidence of the amount of Obligations from time to time owing to it.
1.13. Indemnity.
(a) Each Credit Party that is a signatory hereto shall jointly and
severally indemnify and hold harmless each of Agents, Lenders and their
respective Affiliates, and each such Person's respective officers, directors,
employees, attorneys, agents and representatives (each, an "Indemnified
Person"), from and against any and all suits, actions, proceedings, claims,
damages, losses, liabilities and expenses (including reasonable attorneys' fees
and disbursements and other costs of investigation or defense, including those
incurred upon any appeal) which may be instituted or asserted against or
incurred by any such Indemnified Person as the result of credit having been
extended, suspended or terminated under this Agreement and the other Loan
Documents and the administration of such credit, and in connection with or
arising out of the transactions contemplated hereunder and thereunder and any
actions or failures to act in
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connection therewith, including any and all Environmental Liabilities and legal
costs and expenses arising out of or incurred in connection with disputes
between or among any parties to any of the Loan Documents (other than those
solely among Lenders and/or Agents) (collectively, "Indemnified Liabilities");
provided, that no such Credit Party shall be liable for any indemnification to
an Indemnified Person to the extent that any such suit, action, proceeding,
claim, damage, loss, liability or expense results from that Indemnified Person's
gross negligence or willful misconduct; and provided, further, that
notwithstanding the foregoing, if the Closing Date does not occur, only
Acquisition Co. and, as set forth in Section 11.1, Chartwell, shall be liable
for any indemnification to an Indemnified Person pursuant to this Section 1.13.
NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY
LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON
OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR
INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A
RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN
DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR
THEREUNDER.
(b) To induce Lenders to provide the LIBOR Rate option on the terms
provided herein, if (i) any LIBOR Loans are repaid in whole or in part prior to
the last day of any applicable LIBOR Period (whether that repayment is made
pursuant to any provision of this Agreement or any other Loan Document or is the
result of acceleration, by operation of law or otherwise); (ii) Borrower shall
default in payment when due of the principal amount of or interest on any LIBOR
Loan; (iii) Borrower shall default in making any borrowing of, conversion into
or continuation of LIBOR Loans after Borrower has given notice requesting the
same in accordance herewith; or (iv) Borrower shall fail to make any prepayment
of a LIBOR Loan after Borrower has given a notice thereof in accordance
herewith, Borrower shall indemnify and hold harmless each Lender from and
against all losses, costs and expenses resulting from or arising from any of the
foregoing. Such indemnification shall include any loss (including loss of
margin) or expense arising from the reemployment of funds obtained by it or from
fees payable to terminate deposits from which such funds were obtained. In the
case of a LIBOR Loan, the loss to any Lender attributable to any such event
shall be deemed to include an amount determined by such Lender to be equal to
the excess, if any, of (i) the amount of interest that such Lender would pay for
a deposit equal to the principal amount of such Loan for the period from the
date of such payment, conversion, failure or assignment to the last day of the
then current LIBOR Period for such Loan (or, in the case of a failure to borrow,
convert or continue, the duration of the Interest Period that would have
resulted from such borrowing, conversion or continuation) if the interest rate
payable on such deposit were equal to the LIBOR Rate for such LIBOR Period, over
(ii) the amount of interest that such Lender would earn on such principal amount
for such period if such Lender were to invest such principal amount for such
period at the interest rate that would be bid by such Lender (or an affiliate of
such Lender) for Dollar deposits from other banks in the eurodollar market at
the commencement of such period. For the purpose of calculating amounts payable
to a Lender under this subsection, each Lender shall be deemed to have actually
funded its relevant LIBOR Loan through the purchase of a deposit bearing
interest at the LIBOR Rate in an amount equal to the amount of that LIBOR
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Loan and having a maturity comparable to the relevant LIBOR Period; provided,
however, that each Lender may fund each of its LIBOR Loans in any manner it sees
fit, and the foregoing assumption shall be utilized only for the calculation of
amounts payable under this subsection. This covenant shall survive the
termination of this Agreement and the payment of the Notes and all other amounts
payable hereunder. As promptly as practicable under the circumstances, each
Lender shall provide Borrower with its written calculation of all amounts
payable pursuant to this Section 1.13(b), and such calculation shall be binding
on the parties hereto unless Borrower shall object in writing within ten (10)
Business Days of receipt thereof, specifying the basis for such objection in
detail.
1.14. Access. Each Credit Party which is a party hereto shall, during
normal business hours, from time to time upon one (1) Business Day's prior
notice as frequently as Administrative Agent determines to be appropriate: (a)
provide Administrative Agent and any of its officers, employees and agents
access to its properties, facilities, advisors and employees (including
officers) of each Credit Party and to the Collateral, (b) permit Administrative
Agent, and any of its officers, employees and agents, to inspect, audit and make
extracts from any Credit Party's books and records, and (c) permit
Administrative Agent, and its officers, employees and agents, to inspect,
review, evaluate and make test verifications and counts of the Accounts,
Inventory and other Collateral of any Credit Party. If a Default or Event of
Default shall have occurred and be continuing or if access is necessary to
preserve or protect the Collateral as determined by the Administrative Agent,
each such Credit Party shall provide such access to Administrative Agent and to
each Lender at all times and without advance notice. Furthermore, so long as any
Event of Default shall have occurred and be continuing, Borrower shall provide
Administrative Agent and each Lender with access to its suppliers and customers.
Each Credit Party shall make available to Administrative Agent and its counsel,
as quickly as is possible under the circumstances, originals or copies of all
books and records which Administrative Agent may request. Each Credit Party
shall deliver any document or instrument necessary for Administrative Agent, as
it may from time to time request, to obtain records from any service bureau or
other Person which maintains records for such Credit Party, and shall maintain
duplicate records or supporting documentation on media, including computer tapes
and discs owned by such Credit Party. Administrative Agent will give Lenders at
least ten (10) days' prior written notice of regularly scheduled audits.
Representatives of other Lenders may accompany Administrative Agent's
representatives on regularly scheduled audits at no charge to Borrower.
1.15. Taxes.
(a) Any and all payments by Borrower hereunder or under the Notes
shall be made, in accordance with this Section 1.15, free and clear of and
without deduction for any and all present or future Taxes. If Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under the Notes, (i) the sum payable shall be increased as much as
shall be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 1.15)
Administrative Agent or Lenders, as applicable, receive an amount equal to the
sum they would have received had no such deductions been made, (ii) Borrower
shall make such deductions, and (iii) Borrower shall pay the full amount
deducted to the relevant taxing or other authority in accordance with applicable
law.
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Within thirty (30) days after the date of any payment of Taxes, Borrower shall
furnish to Administrative Agent the original or a certified copy of a receipt
evidencing payment thereof.
(b) Each Credit Party that is a signatory hereto shall indemnify and,
within ten (10) days of demand therefor, pay Administrative Agent and each
Lender for the full amount of Taxes (including any Taxes imposed by any
jurisdiction on amounts payable under this Section 1.15) paid by Administrative
Agent or such Lender, as appropriate, and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto, whether or not
such Taxes were correctly or legally asserted.
(c) Each Lender organized under the laws of a jurisdiction outside the
United States (a "Foreign Lender") as to which payments to be made under this
Agreement or under the Notes are exempt from United States withholding tax under
an applicable statute or tax treaty shall provide to Borrower and Administrative
Agent a properly completed and executed IRS Form 4224 or Form 1001 or other
applicable form, certificate or document prescribed by the IRS or the United
States certifying as to such Foreign Lender's entitlement to such exemption (a
"Certificate of Exemption"). Any foreign Person that seeks to become a Lender
under this Agreement shall provide a Certificate of Exemption to Borrower and
Administrative Agent prior to becoming a Lender hereunder. No foreign Person may
become a Lender hereunder if such Person is unable to deliver a Certificate of
Exemption.
(d) If any Lender shall become aware that it is entitled to receive a
refund or credit (such credit to include any increase in any foreign tax credit)
as a result of indemnified Taxes (including any penalties or interest with
respect thereto) as to which it has been indemnified by Borrower pursuant to
this Section 1.15, it shall promptly notify Borrower of the availability of such
refund or credit and shall, within 30 days after receipt of a request by the
Borrower, apply for such refund or credit at Borrower's expense, and in the case
of any application for such refund or credit by Borrower, shall, if legally able
to do so, deliver to Borrower such certificates, forms or other documentation as
may be reasonably necessary to assist Borrower in such application. If any
Lender receives a refund or credit (such credit to include any increase in any
foreign tax credit) in respect to any indemnified Taxes as to which it has been
indemnified by Borrower pursuant to this Section 1.15, it shall promptly notify
Borrower of such refund or credit and shall, within 30 days after receipt of
such refund or the benefit of such credit (such benefit to include any reduction
of the taxes for which any Lender would otherwise be liable due to any increase
in any foreign tax credit available to such Lender), repay the amount of such
refund or benefit of such credit (with respect to the credit, as determined by
the Lender in its sole judgment) to Borrower to the extent of amounts that have
been paid by Borrower under this Section 1.15 with respect to indemnified Taxes
giving rise to such refund or credit), plus any interest received with respect
thereto, net of all reasonable out-of-pocket expenses of such Lender and without
interest (other than interest actually received from the relevant taxing
authority or other Governmental Authority with respect to such refund or
credit); provided, however, that the Borrower, upon the request of such Lender,
agrees to return the amount of such refund or benefit of such credit (plus
interest) to such Lender in the event such Lender is required to repay the
amount of such refund or benefit of such credit to the relevant taxing authority
or other Governmental Authority.
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1.16. Capital Adequacy; Increased Costs; Illegality.
(a) If any Lender shall have determined that any law, treaty,
governmental (or quasi-governmental) rule, regulation, guideline or order
regarding capital adequacy, reserve requirements or similar requirements or
compliance by any Lender with any request or directive regarding capital
adequacy, reserve requirements or similar requirements (whether or not having
the force of law), in each case, adopted after the Closing Date, from any
central bank or other Governmental Authority increases or would have the effect
of increasing the amount of capital, reserves or other funds required to be
maintained by such Lender and thereby reducing the rate of return on such
Lender's capital as a consequence of its obligations hereunder, then Borrower
shall from time to time upon demand by such Lender (with a copy of such demand
to Administrative Agent) pay to Administrative Agent, for the account of such
Lender, additional amounts sufficient to compensate such Lender for such
reduction. A certificate as to the amount of that reduction and showing the
basis of the computation thereof submitted by such Lender to Borrower and to
Administrative Agent shall, absent manifest error, be final, conclusive and
binding for all purposes.
(b) If, due to either (i) the introduction of or any change in any law
or regulation (or any change in the interpretation thereof) or (ii) the
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), in each case
adopted after the Closing Date, there shall be any increase in the cost to any
Lender of agreeing to make or making, funding or maintaining any Loan, then
Borrower shall from time to time, upon demand by such Lender (with a copy of
such demand to Administrative Agent), pay to Administrative Agent for the
account of such Lender additional amounts sufficient to compensate such Lender
for such increased cost. A certificate as to the amount of such increased cost,
submitted to Borrower and to Administrative Agent by such Lender, shall be
conclusive and binding on Borrower for all purposes, absent manifest error. Each
Lender agrees that, as promptly as practicable after it becomes aware of any
circumstances referred to above which would result in any such increased cost,
the affected Lender shall, to the extent not inconsistent with such Lender's
internal policies of general application, use reasonable commercial efforts to
minimize costs and expenses incurred by it and payable to it by Borrower
pursuant to this Section 1.16(b).
(c) Notwithstanding anything to the contrary contained herein, if the
introduction of or any change in any law or regulation (or any change in the
interpretation thereof) shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender to agree
to make or to make or to continue to fund or maintain any LIBOR Loan, then,
unless that Lender is able to make or to continue to fund or to maintain such
LIBOR Loan at another branch or office of that Lender without, in that Lender's
opinion, adversely affecting it or its Loans or the income obtained therefrom,
on notice thereof and demand therefor by such Lender to Borrower through
Administrative Agent, (i) the obligation of such Lender to agree to make or to
make or to continue to fund or maintain LIBOR Loans shall terminate and (ii)
Borrower shall forthwith prepay in full all outstanding LIBOR Loans owing to
such Lender, together with interest accrued thereon, unless Borrower, within
five (5) Business Days after the delivery of such notice and demand, converts
all such Loans into a Loan bearing interest based on the Index Rate.
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(d) Replacement of Lender in Respect of Increased Costs. Within
fifteen (15) days after receipt by Borrower of written notice and demand from
any Lender (an "Affected Lender") for payment of additional amounts or increased
costs as provided in Section 1.15(a), 1.16(a) or 1.16(b), Borrower may, at its
option, notify Administrative Agent and such Affected Lender of its intention to
replace the Affected Lender. So long as no Default or Event of Default shall
have occurred and be continuing, Borrower, with the consent of Administrative
Agent, which shall not be unreasonably withheld, may obtain, at Borrower's
expense, a replacement Lender ("Replacement Lender") for the Affected Lender,
which Replacement Lender must be reasonably satisfactory to Administrative
Agent. If Borrower obtains a Replacement Lender within ninety (90) days
following notice of its intention to do so, the Affected Lender must sell and
assign its Loans and Commitments to such Replacement Lender for an amount equal
to the principal balance of all Loans held by the Affected Lender and all
accrued interest and Fees with respect thereto through the date of such sale,
provided that Borrower shall have reimbursed such Affected Lender for the
additional amounts or increased costs that it is entitled to receive under this
Agreement through the date of such sale and assignment.
Notwithstanding the foregoing, Borrower shall not have the right to obtain
a Replacement Lender if the Affected Lender rescinds its demand for increased
costs or additional amounts within fifteen (15) days following its receipt of
Borrower's notice of intention to replace such Affected Lender. Furthermore, if
Borrower gives a notice of intention to replace and does not so replace such
Affected Lender within ninety (90) days thereafter, Borrower's rights under this
Section 1.16(d) with respect to such Affected Lender shall terminate and
Borrower shall promptly pay all increased costs or additional amounts demanded
by such Affected Lender pursuant to Sections 1.15(a), 1.16(a) and 1.16(b).
(e) Failure or delay on the part of any Lender to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender's right to
demand such compensation; provided, that the Borrower shall not be required to
compensate a Lender (or such Lender's holding company) pursuant to this Section
for any increased costs or reductions incurred more than two hundred and seventy
(270) days prior to the date that such Lender notifies the Borrower of the
change in law or regulation (or change in interpretation thereof) giving rise to
such increased costs or reductions and of such Lender's intention to claim
compensation thereof; provided, further, that, if the change in law giving rise
to such increased costs or reductions is retroactive, then the 270-day period
referred to above shall be extended to include the period of retroactive effect
thereof.
1.17. Single Loan. All Loans to Borrower and all of the other
Obligations of Borrower arising under this Agreement and the other Loan
Documents shall constitute one general obligation of Borrower secured, until the
Termination Date, by all of the Collateral.
2. CONDITIONS PRECEDENT
2.1. Conditions to the Initial Loans.
No Lender shall be obligated to make any Loan or incur any Letter of
Credit Obligations on the Closing Date, or to take, fulfill, or perform any
other action hereunder, until
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the following conditions have been satisfied or provided for in a manner
satisfactory to Administrative Agent, or waived in writing by Administrative
Agent and Lenders:
(a) Credit Agreement; Loan Documents. This Agreement or counterparts
hereof shall have been duly executed by, and delivered to, Borrower, each Credit
Party, Agents and Lenders; and Administrative Agent shall have received such
documents, instruments, agreements and legal opinions as Administrative Agent
shall reasonably request in connection with the transactions contemplated by
this Agreement and the other Loan Documents, including all those listed in the
Closing Checklist attached hereto as Annex D, each in form and substance
satisfactory to Administrative Agent.
(b) Repayment of Prior Lender Obligations; Satisfaction of Outstanding
L/Cs. (i) Administrative Agent shall have received a fully executed original of
a pay-off letter satisfactory to Administrative Agent confirming that all of the
Prior Lender Obligations will be repaid in full from the proceeds of the Term
Loans and the initial Revolving Credit Advance and all Liens upon any of the
property of Borrower or any other Credit Party in favor of Prior Lender shall be
terminated by Prior Lender immediately upon such payment, except no more than
$600,000 in Prior Lender Obligations under the 10% Convertible Subordinated
Debentures due 2004 issued by Holdings, which shall be paid in full within 60
days after the Closing Date; and (ii) all letters of credit issued or guaranteed
by Prior Lender shall have been cash collateralized, supported by a guaranty of
Administrative Agent or supported by a Letter of Credit issued pursuant to Annex
B, as mutually agreed upon by Administrative Agent, Borrower and Prior Lender.
(c) Approvals. Administrative Agent shall have received (i)
satisfactory evidence that the Credit Parties have obtained all required
material waivers, consents and approvals of all Persons including all requisite
Governmental Authorities, to the execution, delivery and performance of this
Agreement and the other Loan Documents and the consummation of the Related
Transactions or (ii) an officer's certificate in form and substance satisfactory
to Administrative Agent affirming that no such waivers, consents or approvals
are required.
(d) Opening Availability. The Eligible Accounts and Eligible Inventory
of Borrower supporting the initial Revolving Credit Advance and the initial
Letter of Credit Obligations incurred and the amount of the Reserves to be
established on the Closing Date shall be sufficient in value, as determined by
Administrative Agent, to provide Borrower with Net Borrowing Availability, after
giving effect to the initial Revolving Credit Advance, the incurrence of any
initial Letter of Credit Obligations and the consummation of the Related
Transactions (on a pro forma basis, with trade payables being paid currently,
and expenses and liabilities being paid in the ordinary course of business and
without acceleration of sales and deterioration of working capital) of an amount
acceptable to Administrative Agent.
(e) Payment of Fees. Borrower shall have paid the Fees required to be
paid on the Closing Date in the respective amounts specified in Section 1.9
(including the Fees specified in the GE Capital Fee Letter), and shall have
contemporaneously reimbursed Agents for all fees, costs and expenses of closing
presented as of the Closing Date.
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(f) Capital Structure; Other Indebtedness. The capital structure of
each Credit Party and the terms and conditions of all Indebtedness of each
Credit Party shall be acceptable to Administrative Agent in its sole discretion,
it being understood that the form of the Subordinated Notes, dated the date
hereof, is acceptable to Administrative Agent.
(g) Consummation of Related Transactions. Administrative Agent shall
have received fully executed copies of the Acquisition Agreement and each of the
other Related Transactions Documents, each of which shall be in form and
substance satisfactory to Administrative Agent and its counsel, it being
understood that the forms of the Acquisition Agreement and any other Transaction
Documents, each dated the date hereof, are acceptable to Administrative Agent.
The Acquisition and the other Related Transactions (other than the Merger) shall
have been consummated or be contemporaneously consummated on the Closing Date in
accordance with the terms of the Acquisition Agreement and the other Related
Transactions Documents and without waiver of any conditions unless consented to
by the Administrative Agent. On terms acceptable to Administrative Agent, the
Permitted Holders shall have contributed at least $70,000,000 in equity to
Acquisition Co. and on the Closing Date, Acquisition Co. shall purchase from the
principal shareholders of Holdings for (or otherwise made a capital contribution
to Merger Co. in an amount of) at least $70,000,000, and Borrower shall have
issued the Subordinated Debt.
(h) Credit Ratings. Each of the Loans hereunder shall have been rated
by a nationally recognized rating agency acceptable to Administrative Agent.
(i) Market Conditions. Since January 14, 2000, there shall have been
no material change in loan syndication, financial or capital market conditions
in general that, in the judgment of Administrative Agent, or GECC Capital
Markets Group, Inc., would impair the syndication of the Loans hereunder.
(j) Closing Date. The Closing Date shall have occurred on or prior to
May 30, 2000.
(k) Leverage Ratios. As of March 31, 2000, but after giving pro forma
effect to the transactions contemplated by the Loan Documents, Borrower shall
have a Leverage Ratio for the 12-month period then ended of not more than
4.60:1.0 and a Senior Leverage Ratio for such period of not more than 3.60:1.0.
2.2. Further Conditions to Each Loan. Except as otherwise expressly
provided herein, no Lender shall be obligated to fund any Loan, convert or
continue any Loan as a LIBOR Loan or incur any Letter of Credit Obligation, if,
as of the date thereof:
(a) Any representation or warranty by any Credit Party contained
herein or in any of the other Loan Documents shall be untrue or incorrect in any
material respect (except for representations or warranties subject to a
materiality or Material Adverse Effect exception, which shall be true and
correct in all respects) as of such date, except to the extent that such
representation or warranty expressly relates to an earlier date and except for
changes therein expressly permitted or expressly contemplated by this Agreement;
or
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(b) Any event or circumstance having a Material Adverse Effect shall
have occurred since the date hereof; or
(c) (i) Any Event of Default shall have occurred and be continuing or
would result after giving effect to any Loan (or the incurrence of any Letter of
Credit Obligations), or (ii) a Default shall have occurred and be continuing or
would result after giving effect to any Loan, and Administrative Agent or
Requisite Revolving Lenders shall have determined not to make any Loan or incur
any Letter of Credit Obligation so long as that Default is continuing; or
(d) After giving effect to any Advance (or the incurrence of any
Letter of Credit Obligations), the outstanding principal amount of the Revolving
Loan would exceed the lesser of the Borrowing Base and the Maximum Amount, less,
in each case, the then outstanding principal amount of the Swing Line Loan; or
(e) After giving effect to any Swing Line Advance, the outstanding
principal amount of the Swing Line Loan would exceed Swing Line Availability.
The request and acceptance by Borrower of the proceeds of any Loan, the
incurrence of any Letter of Credit Obligations or the conversion or continuation
of any Loan into, or as, a LIBOR Loan, as the case may be, shall be deemed to
constitute, as of the date of such request or acceptance, (i) a representation
and warranty by Borrower that the conditions in this Section 2.2 have been
satisfied and (ii) a reaffirmation by Borrower of the granting and continuance
of Administrative Agent's Liens, on behalf of itself, Documentation Agent and
Lenders, pursuant to the Collateral Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Loans and to incur Letter of Credit
Obligations, the Credit Parties executing this Agreement, jointly and severally,
make the following representations and warranties to each Agent and each Lender
with respect to all Credit Parties, each and all of which shall survive the
execution and delivery of this Agreement.
3.1. Corporate Existence; Compliance with Law. Each Credit Party (a)
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation; (b) is duly qualified to conduct
business and is in good standing in each other jurisdiction where its ownership
or lease of property or the conduct of its business requires such qualification,
except where the failure to be so qualified would not result in a Material
Adverse Effect; (c) has the requisite corporate power and authority and the
legal right to own, pledge, mortgage or otherwise encumber and operate its
properties, to lease the property it operates under lease and to conduct its
business as now, heretofore and proposed to be conducted; (d) subject to
specific representations regarding Environmental Laws, has all licenses,
permits, consents or approvals from or by, and has made all filings with, and
has given all notices to, all Governmental Authorities having jurisdiction, to
the extent required for such ownership, operation and conduct, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect; (e) is in compliance with its
charter and by-laws; and (f) subject to specific representations set forth
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herein regarding ERISA, Environmental Laws, tax and other laws, is in compliance
with all applicable provisions of law, except where the failure to comply,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
3.2. Executive Offices; FEIN. As of the Closing Date, the current
location of each Credit Party's chief executive office and principal place of
business is set forth in Disclosure Schedule (3.2), and except as set forth on
such Disclosure Schedule (3.2), none of such locations have changed within the
twelve (12) months preceding the Closing Date. In addition, Disclosure Schedule
(3.2) lists the federal employer identification number of each Credit Party.
3.3. Corporate Power, Authorization, Enforceable Obligations. The
execution, delivery and performance by each Credit Party of the Loan Documents
to which it is a party and the creation of all Liens provided for therein: (a)
are within such Person's corporate power; (b) have been duly authorized by all
necessary or proper corporate and shareholder action; (c) do not contravene any
provision of such Person's charter or bylaws; (d) do not violate any law or
regulation, or any order or decree of any court or Governmental Authority; (e)
except consents which have been obtained and except for Prior Lender Obligations
to be paid on or prior to the Closing Date, do not conflict with or result in
the breach or termination of, constitute a default under or accelerate or permit
the acceleration of any performance required by, any indenture, mortgage, deed
of trust, lease, agreement or other instrument to which such Person is a party
or by which such Person or any of its property is bound; (f) do not result in
the creation or imposition of any Lien upon any of the property of such Person
other than those in favor of Administrative Agent, on behalf of itself,
Documentation Agent and Lenders, pursuant to the Loan Documents; and (g) do not
require the consent or approval of any Governmental Authority or any other
Person, except those referred to in Section 2.1(c), all of which will have been
duly obtained, made or complied with prior to the Closing Date, and except for
Prior Lender Obligations to be paid on or prior to the Closing Date. On or prior
to the Closing Date, each of the Loan Documents shall have been duly executed
and delivered by each Credit Party thereto and each such Loan Document shall
then constitute a legal, valid and binding obligation of such Credit Party
enforceable against it in accordance with its terms.
3.4. Financial Statements and Projections. Except for the Projections,
all Financial Statements concerning Holdings and its Subsidiaries which are
referenced below have been prepared in accordance with GAAP consistently applied
throughout the periods covered (except as disclosed therein and except, with
respect to unaudited Financial Statements, for the absence of footnotes and
normal year-end audit adjustments) and present fairly in all material respects
the financial position of the Persons covered thereby as at the dates thereof
and the results of their operations and cash flows for the periods then ended.
(a) The following Financial Statements attached hereto as Disclosure
Schedule (3.4(A)) have been delivered on the date hereof:
(i) The audited consolidated and unaudited consolidating balance
sheets at December 31, 1999 and the related statements of income and cash
flows of Holdings and its Subsidiaries for the Fiscal Year then ended,
certified (as to the consolidated statements) by Ernst & Young LLP.
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(ii) The unaudited balance sheets at March 31, 2000 and the
related statements of income and cash flows of Holdings and its
Subsidiaries for the Fiscal Quarters then ended.
(iii) The unaudited balance sheets at the last day of each month
from January 2000 through the Closing Date and the related statements of
income and cash flows of Holdings and its Subsidiaries for the Fiscal
Months then ended.
(b) Pro Forma. The Pro Forma delivered on the date hereof and attached
hereto as Disclosure Schedule (3.4(B)) was prepared by Borrower giving pro forma
effect to the Related Transactions, was based on the unaudited consolidated and
consolidating balance sheets of Holdings and its Subsidiaries dated March 31,
2000, and was prepared in accordance with GAAP, with only such adjustments
thereto as would be required in accordance with GAAP, provided that such Pro
Forma is updated immediately prior to the Closing Date and is acceptable to
Administrative Agent.
(c) Projections. The Projections delivered on the date hereof and
attached hereto as Disclosure Schedule (3.4(C)) have been prepared by Borrower
in light of the past operations of its businesses, but including future payments
of known material contingent liabilities, and reflect projections on a month by
month basis through 2001 and on a year by year basis thereafter. The Projections
are based upon estimates and assumptions stated therein, all of which Borrower
believes to be reasonable and fair in light of current conditions and current
facts known to Borrower and, as of the Closing Date, reflect Borrower's good
faith and reasonable estimates of the future financial performance of Borrower
and of the other information projected therein for the period set forth therein;
provided that, with respect to projected financial information, the Credit
Parties represent only that such information was prepared in good faith based
upon assumptions believed to be reasonable at the time. Any forward looking
statements contained therein are inherently subject to risk and uncertainties,
many of which cannot be predicted with accuracy, and some of which might not be
anticipated. Future events and actual results, financial and otherwise, could
differ materially from those set forth therein or contemplated by the forward
looking statements contained therein.
(d) EBITDA Adjustments. The schedule of adjustments to EBITDA of
Borrower delivered on the date hereof and attached hereto as Disclosure Schedule
(A-EBITDA) and the adjustments referred to therein have been prepared by
Borrower to adjust EBITDA to reflect normalized EBITDA of Borrower.
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3.5. Material Adverse Effect. Between December 31, 1999 and the
Closing Date, (a) no Credit Party has incurred any obligations, contingent or
non-contingent liabilities, liabilities for Charges, long-term leases or unusual
forward or long-term commitments and there has been no decrease in the assets of
the Credit Parties, which are not reflected in the Pro Forma and which, alone or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect, (b) no contract, lease or other agreement or instrument has been entered
into by any Credit Party or has become binding upon any Credit Party's assets
and no law or regulation applicable to any Credit Party has been adopted which
has had or could reasonably be expected to have a Material Adverse Effect, (c)
no Credit Party is in default and to the best of Borrower's knowledge no third
party is in default under any material contract, lease or other agreement or
instrument, which alone or in the aggregate, could reasonably be expected to
have a Material Adverse Effect, and (d) no event has occurred, which alone or in
the aggregate, could reasonably be expected to have a Material Adverse Effect.
Between December 31, 1999 and the Closing Date no event, including, without
limitation, the commencement of any Litigation, has occurred, which alone or
together with other events, could reasonably be expected to have a Material
Adverse Effect.
3.6. Ownership of Property; Liens. As of the Closing Date, the real
estate ("Real Estate") listed on Disclosure Schedule (3.6) constitutes all of
the real property owned, leased, subleased, or used by any Credit Party. Each
Credit Party owns good and marketable fee simple title to all of its owned real
estate, and valid and marketable leasehold interests in all of its leased Real
Estate, all as described on Disclosure Schedule (3.6), and copies of all such
leases or a summary of terms thereof satisfactory to Administrative Agent have
been delivered to Administrative Agent. Disclosure Schedule (3.6) further
describes any Real Estate with respect to which any Credit Party is a lessor or
sublessor as of the Closing Date. Each Credit Party also has good and marketable
title to, or valid leasehold interests in, all of its personal properties and
assets. As of the Closing Date, none of the properties and assets of any Credit
Party are subject to any Liens other than Permitted Encumbrances and Liens being
released on the Closing Date, and there are no facts, circumstances or
conditions known to any Credit Party that may result in any Liens (including
Liens arising under Environmental Laws) other than Permitted Encumbrances, Liens
equal and ratable to the Subordinated Debt (to the extent permitted by the
Subordinated Notes), and Liens being released on the Closing Date. Each Credit
Party has received all deeds, assignments, waivers, consents, bills of sale and
other documents, and has duly effected all recordings, filings and other actions
necessary to establish, protect and perfect such Credit Party's right, title and
interest in and to all such Real Estate and other properties and assets, except
where the failure to do so, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. Disclosure Schedule
(3.6) also describes any purchase options, rights of first refusal or other
similar contractual rights to acquire a fee simple interest in real property
pertaining to any Real Estate. Except as set forth in Disclosure Schedule (3.6),
as of the Closing Date, no portion of any Credit Party's Real Estate has
suffered any material damage by fire or other casualty loss which has not
heretofore been repaired and restored in all material respects to its original
condition or otherwise remedied. All permits required to have been issued or
appropriate to enable the Real Estate to be lawfully occupied and used for all
of the purposes for which they are currently occupied and used have been
lawfully issued and are in full force and effect, except where the failure to do
so, individually or in the
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aggregate, would not reasonably be expected to have a Material Adverse Effect.
The Liens granted to Administrative Agent, on behalf of itself, Documentation
Agent and Lenders, pursuant to the Collateral Documents will at all times be
fully perfected first priority Liens in and to the Collateral described therein,
subject, as to priority, only to Permitted Encumbrances with respect to the
Collateral other than Accounts.
3.7. Labor Matters. As of the Closing Date (a) no strikes or other
material labor disputes against any Credit Party are pending or, to any Credit
Party's knowledge, threatened; (b) hours worked by and payment made to employees
of each Credit Party comply with the Fair Labor Standards Act and each other
federal, state, local or foreign law applicable to such matter; (c) all payments
due from any Credit Party for employee health and welfare insurance have been
paid or accrued as a liability on the books of such Credit Party; (d) except as
set forth in Disclosure Schedule (3.7), no Credit Party is a party to or bound
by any collective bargaining agreement or any management agreement, consulting
agreement or employment agreement involving annual payment in excess of $100,000
(and true and complete copies of any agreements described on Disclosure Schedule
(3.7) have been delivered to Administrative Agent); (e) there is no organizing
activity involving any Credit Party pending or, to any Credit Party's knowledge,
threatened by any labor union or group of employees; (f) there are no
representation proceedings pending or, to any Credit Party's knowledge,
threatened with the National Labor Relations Board, and no labor organization or
group of employees of any Credit Party has made a pending demand for
recognition; and (g) except as set forth in Disclosure Schedule (3.7), there are
no complaints or charges against any Credit Party pending or, to the knowledge
of any Credit Party, threatened to be filed with any Governmental Authority or
arbitrator based on, arising out of, in connection with, or otherwise relating
to the employment or termination of employment by any Credit Party of any
individual.
3.8. Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness. Except as set forth in Disclosure Schedule (3.8), no Credit Party
is engaged in any joint venture or partnership with any other Person or is an
Affiliate of any other Person or, as of the Closing Date, has any Subsidiaries.
All of the issued and outstanding Stock of each Credit Party other than Holdings
prior to the Merger is owned of record by each of the stockholders and in the
amounts set forth on Disclosure Schedule (3.8). Except as set forth in
Disclosure Schedule (3.8), there are no outstanding rights to purchase, options,
warrants or similar rights or agreements pursuant to which any Credit Party may
be required to issue, sell, repurchase or redeem any of its Stock or other
equity securities or any Stock or other equity securities of its Subsidiaries.
All outstanding Indebtedness of each Credit Party as of the Closing Date is
described in Section 6.3 (including Disclosure Schedule (6.3)). Holdings does
not have any assets (except Stock of Borrower), cash or cash equivalents of more
than $250,000 (and other than cash on hand required to be used to pay expenses
due within ninety (90) days) nor any Indebtedness or Guaranteed Indebtedness
(except the Obligations and the Subordinated Debt) other than Indebtedness
permitted by Section 6.3.
3.9. Government Regulation. No Credit Party is an "investment company"
or an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940 as amended. No Credit Party is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power
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Act, or any other federal or state statute that restricts or limits its ability
to incur Indebtedness or to perform its obligations hereunder. The making of the
Loans by Lenders to Borrower, the incurrence of the Letter of Credit Obligations
on behalf of Borrower, the application of the proceeds thereof and repayment
thereof and the consummation of the Related Transactions will not violate any
provision of any such statute or any rule, regulation or order issued by the
Securities and Exchange Commission.
3.10. Margin Regulations. No Credit Party is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
security" as such terms are defined in Regulation U of the Federal Reserve Board
as now and from time to time hereafter in effect (such securities being referred
to herein as "Margin Stock"). Except as set forth on Disclosure Schedule 3.10,
no Credit Party owns any Margin Stock, and none of the proceeds of the Loans or
other extensions of credit under this Agreement will be used, directly or
indirectly, for the purpose of purchasing or carrying any Margin Stock, for the
purpose of reducing or retiring any Indebtedness which was originally incurred
to purchase or carry any Margin Stock or for any other purpose which might cause
any of the Loans or other extensions of credit under this Agreement to be
considered a "purpose credit" within the meaning of Regulation T, U or X of the
Federal Reserve Board. No Credit Party will take or permit to be taken any
action which might cause any Loan Document to violate any regulation of the
Federal Reserve Board.
3.11. Taxes. All tax returns, reports and statements, including
information returns, required by any Governmental Authority to be filed by any
Credit Party have been filed with the appropriate Governmental Authority and all
Charges have been paid prior to the date on which any fine, penalty, interest or
late charge may be added thereto for nonpayment thereof (or any such fine,
penalty, interest, late charge or loss has been paid), excluding Charges or
other amounts being contested in accordance with Section 5.2(b). Proper and
accurate amounts have been withheld by each Credit Party from its respective
employees for all periods in full and complete compliance with all applicable
federal, state, local and foreign law and such withholdings have been timely
paid to the respective Governmental Authorities. Disclosure Schedule (3.11)
lists those tax returns since 1996 that have been audited, and indicates those
tax returns that are currently the subject of audit and any assessments or
threatened assessments in connection with such audit, or otherwise currently
outstanding. Except as described on Disclosure Schedule (3.11) as of the Closing
Date, no Credit Party has executed or filed with the IRS or any other
Governmental Authority any agreement or other document extending, or having the
effect of extending, the period for assessment or collection of any Charges.
None of the Credit Parties and their respective predecessors are liable for any
Charges: (a) under any agreement (including any tax sharing agreements) or (b)
to each Credit Party's knowledge, as a transferee. As of the Closing Date, no
Credit Party has agreed or been requested to make any adjustment under IRC
Section 481(a), by reason of a change in accounting method or otherwise, which
would have a Material Adverse Effect. The pro forma Financial Statements
delivered pursuant to Section 3.4 reflect all estimated Taxes resulting from
transactions contemplated by the Related Transactions Documents.
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3.12. ERISA.
(a) Disclosure Schedule (3.12) lists and separately identifies all
Title IV Plans, Multiemployer Plans, ESOPs and Retiree Welfare Plans. Copies of
all such listed Plans, together with a copy of the latest form 5500 for each
such Plan, have been delivered to Administrative Agent. Except with respect to
Multiemployer Plans, each Qualified Plan has been determined by the IRS to
qualify under Section 401 of the IRC, and the trusts created thereunder have
been determined to be exempt from tax under the provisions of Section 501 of the
IRC, and nothing has occurred which would cause the loss of such qualification
or tax-exempt status. Each Plan is in compliance with the applicable provisions
of ERISA and the IRC, including the filing of reports required under the IRC or
ERISA. No Credit Party or ERISA Affiliate has failed to make any contribution or
pay any amount due as required by either Section 412 of the IRC or Section 302
of ERISA or the terms of any Plan, Multiemployer Plan or Title IV Plan. No
Credit Party or ERISA Affiliate has engaged in a prohibited transaction, as
defined in Section 4975 of the IRC, in connection with any Plan, which would
subject any Credit Party to a material tax on prohibited transactions imposed by
Section 4975 of the IRC.
(b) Except as set forth in Disclosure Schedule (3.12): (i) no Title IV
Plan has any Unfunded Pension Liability; (ii) no ERISA Event or event described
in Section 4062(e) of ERISA with respect to any Title IV Plan has occurred or is
reasonably expected to occur; (iii) there are no pending, or to the knowledge of
any Credit Party, threatened claims (other than claims for benefits in the
normal course), sanctions, actions or lawsuits, asserted or instituted against
any Plan or any Person as fiduciary or sponsor of any Plan; (iv) no Credit Party
or ERISA Affiliate has incurred or reasonably expects to incur any liability as
a result of a complete or partial withdrawal from a Multiemployer Plan; (v)
within the last five years no Title IV Plan with Unfunded Pension Liabilities
has been transferred outside of the "controlled group" (within the meaning of
Section 4001(a)(14) of ERISA) of any Credit Party or ERISA Affiliate; and (vi)
no liability under any Title IV Plan has been satisfied with the purchase of a
contract from an insurance company that is not rated AAA by the Standard &
Poor's Corporation or the equivalent by another nationally recognized rating
agency.
3.13. No Litigation. No action, claim, lawsuit, demand, investigation
or proceeding is now pending or, to the knowledge of any Credit Party,
threatened against any Credit Party, before any Governmental Authority or before
any arbitrator or panel of arbitrators (collectively, "Litigation"), (a) which
challenges any Credit Party's right or power to enter into or perform any of its
obligations under the Loan Documents to which it is a party, or the validity or
enforceability of any Loan Document or any action taken thereunder, or (b) which
has a reasonable risk of being determined adversely to any Credit Party and
which, if so determined, could have a Material Adverse Effect. Except as set
forth on Disclosure Schedule (3.13), as of the Closing Date there is no
Litigation pending or threatened which seeks damages in excess of $100,000 or
injunctive relief or alleges criminal misconduct of any Credit Party.
3.14. Brokers. No broker or finder (except Donaldson, Lufkin &
Jenrette Securities Corporation and Chartwell Investments II, L.L.C. in
connection with the Acquisition) acting on behalf of any Credit Party brought
about the obtaining, making or closing of the Loans or the Related Transactions,
and no Credit Party has any obligation to any other Person in respect of any
finder's or brokerage fees in connection therewith.
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3.15. Intellectual Property. As of the Closing Date, each Credit Party
owns or has rights to use all Intellectual Property necessary to continue to
conduct its business as now conducted by it, and each Patent, Trademark,
Copyright and License is listed, together with application or registration
numbers, as applicable, in Disclosure Schedule (3.15) hereto. All of the
foregoing are in full force and effect, and each of the Credit Parties is in
substantial compliance with the foregoing without any known conflict with the
valid rights of others which has resulted, or creates a risk of resulting, in
any Material Adverse Effect. 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 Credit Parties thereunder so as to result, or to create a risk of resulting,
in any Material Adverse Effect. 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 risk of
resulting, in any Material Adverse Effect.
3.16. Full Disclosure. No information contained in this Agreement, any
of the other Loan Documents, any Financial Statements or Collateral Reports or
other reports from time to time delivered hereunder or any written statement
furnished by or on behalf of any Credit Party to Agent or any Lender pursuant to
the terms of this Agreement contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein not misleading in light of the
circumstances under which they were made; provided that, with respect to
projected financial information, the Credit Parties represent only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time. Any forward looking statements contained therein are
inherently subject to risk and uncertainties, many of which cannot be predicted
with accuracy, and some of which might not be anticipated. Future events and
actual results, financial or otherwise, could differ materially from those set
forth therein or contemplated by the forward looking statements contained
therein.
3.17. Environmental Matters.
(a) Except as set forth in Disclosure Schedule (3.17), as of the
Closing Date: (i) the Real Estate is free of contamination from any Hazardous
Material except for such contamination that would not adversely impact the value
or marketability of such Real Estate and which would not result in Environmental
Liabilities which could reasonably be expected to have a Material Adverse
Effect; (ii) no Credit Party has caused or suffered to occur any Release of
Hazardous Materials on, at, in, under, above, to, from or about any of its Real
Estate; (iii) the Credit Parties are and have been in compliance with all
Environmental Laws, except for such noncompliance which would not result in
Environmental Liabilities which could reasonably be expected to have a Material
Adverse Effect; (iv) the Credit Parties have obtained, and are in compliance
with, all Environmental Permits required by Environmental Laws for the
operations of their respective businesses as presently conducted or as proposed
to be conducted, except where the failure to so obtain or comply with such
Environmental Permits would not result in Environmental Liabilities which could
reasonably be expected to have a Material Adverse Effect, and all such
Environmental Permits are valid, uncontested and in good standing; (v) no Credit
Party is involved in operations or knows of any facts, circumstances or
conditions, including any Releases of Hazardous Materials, that are likely to
result in any Environmental
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Liabilities of such Credit Party which could reasonably be expected to have a
Material Adverse Effect, and no Credit Party has permitted any current or former
tenant or occupant of the Real Estate to engage in any such operations; (vi)
there is no Litigation arising under or related to any Environmental Laws,
Environmental Permits or Hazardous Material which seeks damages, penalties,
fines, costs or expenses in excess of $25,000 or injunctive relief, or which
alleges criminal misconduct by any Credit Party; (vii) no notice has been
received by any Credit Party identifying it as a "potentially responsible party"
or requesting information under CERCLA or analogous state statutes, and to the
knowledge of the Credit Parties, there are no facts, circumstances or conditions
that may result in any Credit Party being identified as a "potentially
responsible party" under CERCLA or analogous state statutes; and (viii) the
Credit Parties have provided to Administrative Agent copies of all existing
environmental reports, reviews and audits and all written information pertaining
to actual or potential Environmental Liabilities, in each case relating to any
Credit Party.
(b) Each Credit Party hereby acknowledges and agrees that
Administrative Agent (i) is not now, and has not ever been, in control of any of
the Real Estate or any Credit Party's affairs, and (ii) does not have the
capacity through the provisions of the Loan Documents or otherwise to influence
any Credit Party's conduct with respect to the ownership, operation or
management of any of its Real Estate or compliance with Environmental Laws or
Environmental Permits.
3.18. Insurance. Disclosure Schedule (3.18) lists all insurance
policies of any nature maintained, as of the Closing Date, for current
occurrences by each Credit Party, as well as a summary of the terms of each such
policy.
3.19. Deposit and Disbursement Accounts. Disclosure Schedule (3.19)
lists all banks and other financial institutions at which any Credit Party
maintains deposits and/or other accounts as of the Closing Date, including any
Disbursement Accounts, and such Schedule correctly identifies the name, address
and telephone number of each depository, the name in which the account is held,
a description of the purpose of the account, and the complete account number.
3.20. [Intentionally omitted.]
3.21. Customer and Trade Relations. Except as set forth in Disclosure
Schedule (3.21), as of the Closing Date, there exists no actual or, to the
knowledge of any Credit Party, threatened termination or cancellation of, or any
material adverse modification or change in: the business relationship of any
Credit Party with any customer or group of customers whose purchases during the
preceding twelve (12) months caused them to be ranked among the ten largest
customers of such Credit Party; or the business relationship of any Credit Party
with any supplier material to its operations.
3.22. Agreements and Other Documents. (a) As of the Closing Date, each
Credit Party has provided to Administrative Agent or its counsel, on behalf of
Lenders, accurate and complete copies (or summaries) of all of the following
agreements or documents to which it is subject and each of which are listed on
Disclosure Schedule (3.22): supply agreements and
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purchase agreements not terminable by such Credit Party within sixty (60) days
following written notice issued by such Credit Party and involving transactions
in excess of $1,000,000 per annum; any lease of Equipment having a remaining
term of one year or longer and requiring aggregate rental and other payments in
excess of $500,000 per annum; any agreement (or group of related agreements)
under which such Credit Party has created, incurred, assumed, or guaranteed any
Indebtedness in excess of $100,000, including any Capital Lease Obligation, or
under which it has imposed a Lien on any of its assets, tangible or intangible;
and instruments and agreements evidencing the issuance of any equity securities,
warrants, rights or options to purchase equity securities of such Credit Party.
(b) Except as set forth in Disclosure Schedule (3.22), the Credit
Parties hold all material permits and licenses from all Governmental Authorities
that are necessary for the operation of their businesses. Except as set forth in
Disclosure Schedule (3.22), the Credit Parties are in substantial compliance
with the terms of such permits and licenses.
3.23. Solvency. Both before and after giving effect to (a) the Loans
and Letter of Credit Obligations to be made or extended on the Closing Date or
such other date as Loans and Letter of Credit Obligations requested hereunder
are made or extended, (b) the disbursement of the proceeds of such Loans
pursuant to the instructions of Borrower, (c) the Acquisition, the Refinancing
and the consummation of the other Related Transactions and (d) the payment and
accrual of all transaction costs in connection with the foregoing, each Credit
Party is Solvent.
3.24. Year 2000 Problems. Each Credit Party has eliminated all Year
2000 Problems, except where the failure to correct the same could not reasonably
be expected to have a Material Adverse Effect, individually or in the aggregate.
3.25. Acquisition Agreement. As of the Closing Date, Borrower has
delivered to Administrative Agent a complete and correct copy of the Acquisition
Agreement (including all schedules, exhibits, amendments, supplements,
modifications, assignments and all other documents delivered pursuant thereto or
in connection therewith). The total consideration paid in connection with the
Acquisition and Refinancing does not exceed an amount acceptable to
Administrative Agent and inclusive of the fees payable to Donaldson Lufkin &
Jenrette Securities Corporation referred to in Section 3.14 and aggregate fees
and closing costs in connection therewith (including rating agency fees and
those fees and expenses payable to Agents and Lenders) do not exceed an amount
acceptable to Administrative Agent and inclusive of the fees payable to
Chartwell Investments II, L.L.C. referred to in Section 3.14. No Credit Party
and no other Person party thereto is in default in the performance or compliance
with any provisions thereof. The Acquisition Agreement complies with, and the
Acquisition has been consummated in accordance with, all applicable laws. The
Acquisition Agreement is in full force and effect as of the Closing Date, has
not been terminated, rescinded or withdrawn. All requisite approvals by
Governmental Authorities having jurisdiction over any party thereto, any Credit
Party and other Persons referenced therein, with respect to the transactions
contemplated by the Acquisition Agreement, have been obtained, and no such
approvals impose any conditions to the consummation of the transactions
contemplated by the Acquisition Agreement or to the conduct by any Credit Party
of its business thereafter. Each of the representations and warranties
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in, and given by each party to the Acquisition Agreement is true and correct in
all material respects.
3.26. Status of Acquisition Co. and Merger Co. Prior to the date of
the consummation of the Merger, each of Acquisition Co. and Merger Co. will not
have engaged in any business or incurred any Indebtedness or any liabilities
(except in connection with its corporate formation and the Related Transactions
Documents).
3.27. Subordinated Debt. As of the Closing Date, Borrower has
delivered to Administrative Agent a complete and correct copy of the
Subordinated Notes (including all schedules, exhibits, amendments, supplements,
modifications, assignments and all other documents delivered pursuant thereto or
in connection therewith). Borrower has the corporate power and authority to
incur the Indebtedness evidenced by the Subordinated Notes. The subordination
provisions of the Subordinated Notes are enforceable against the holders of the
Subordinated Notes by Agents and Lenders. All Obligations, including the
Obligations to pay principal of and interest on the Loans and the Letter of
Credit Obligations, constitute senior Indebtedness entitled to the benefits of
the subordination provisions contained in the Subordinated Notes. The principal
of and interest on the Notes, all Letter of Credit Obligations and all other
Obligations will constitute "senior debt" as that or any similar term is or may
be used in any other instrument evidencing or applicable to any other
Subordinated Debt. Borrower acknowledges that each Agent and each Lender are
entering into this Agreement and are extending the Commitments in reliance upon
the subordination provisions of the Subordinated Notes and this Section 3.27.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1. Reports and Notices.
(a) Each Credit Party executing this Agreement hereby agrees that from
and after the Closing Date and until the Termination Date, it shall deliver to
Administrative Agent, Documentation Agent and/or Lenders, as required, the
Financial Statements, notices, Projections and other information at the times,
to the Persons and in the manner set forth in Annex E.
(b) Each Credit Party executing this Agreement hereby agrees that from
and after the Closing Date and until the Termination Date, it shall deliver to
Administrative Agent, Documentation Agent and/or Lenders, as required, the
various Collateral Reports (including Borrowing Base Certificates in the form of
Exhibit 4.1(b)) at the times, to the Persons and in the manner set forth in
Annex F.
4.2. Communication with Accountants. Each Credit Party executing this
Agreement authorizes Administrative Agent and, so long as a Default or Event of
Default shall have occurred and be continuing, each Lender, to communicate
directly with its independent certified public accountants including Ernst &
Young LLP, and authorizes and shall instruct those accountants and advisors to
disclose and make available to Administrative Agent and each Lender any and all
Financial Statements and other supporting financial documents, schedules
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and information relating to any Credit Party (including copies of any issued
management letters) with respect to the business, financial condition and other
affairs of any Credit Party.
5. AFFIRMATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally
agrees as to all Credit Parties that from and after the date hereof and until
the Termination Date:
5.1. Maintenance of Existence and Conduct of Business. Each Credit
Party shall: do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence (except as permitted by Section
6.1) and its rights and franchises material to the conduct of the business of
Borrower and its Subsidiaries taken as a whole, except to the extent that
failure to do so could not reasonably be expected to have a Material Adverse
Effect; continue to conduct its business substantially as now conducted or as
otherwise permitted hereunder; at all times maintain, preserve and protect all
of its assets and properties used or useful in the conduct of its business, and
keep the same in good repair, working order and condition in all material
respects (taking into consideration ordinary wear and tear) and from time to
time make, or cause to be made, all necessary or appropriate repairs,
replacements and improvements thereto consistent with industry practices; and
transact business only in such corporate and trade names as are set forth in
Disclosure Schedule (5.1), as the same may be supplemented from time to time by
30 days' advance written notice to Administrative Agent.
5.2. Payment of Obligations.
(a) Subject to Section 5.2(b), each Credit Party shall pay and
discharge or cause to be paid and discharged promptly all Charges payable by it,
including (A) Charges imposed upon it, its income and profits, or any of its
property (real, personal or mixed) and all Charges with respect to tax, social
security and unemployment withholding with respect to its employees, and (B)
lawful claims for labor, materials, supplies and services or otherwise, before
any thereof shall become past due.
(b) Each Credit Party may in good faith contest, by appropriate
proceedings, the validity or amount of any Charges or claims described in
Section 5.2(a); provided, that (i) adequate reserves with respect to such
contest are maintained on the books of such Credit Party, in accordance with
GAAP, (ii) no Lien (other than Permitted Encumbrances) shall be imposed to
secure payment of such Charges that is superior to any of the Liens securing
payment of the Obligations and such contest is maintained and prosecuted
continuously and with diligence and operates to suspend collection or
enforcement of such Charges, (iii) none of the Collateral becomes subject to
forfeiture or loss as a result of such contest, (iv) such Credit Party shall
promptly pay or discharge such contested Charges or claims and all additional
charges, interest, penalties and expenses, if any, and shall deliver to
Administrative Agent evidence acceptable to Administrative Agent of such
compliance, payment or discharge, if such contest is terminated or discontinued
adversely to such Credit Party or the conditions set forth in this Section
5.2(b) are no longer met, and (v) Administrative Agent has not advised Borrower
in writing that Administrative Agent reasonably believes that nonpayment or
nondischarge thereof could have or result in a Material Adverse Effect.
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5.3. Books and Records. Each Credit Party shall keep adequate books
and records with respect to its business activities in which proper entries,
reflecting all financial transactions, are made in accordance with GAAP and on a
basis consistent with the Financial Statements attached as Disclosure Schedule
(3.4(A)).
5.4. Insurance; Damage to or Destruction of Collateral.
(a) The Credit Parties shall, at their sole cost and expense, maintain
the policies of insurance described on Disclosure Schedule (3.18) as in effect
on the date hereof, or otherwise in form and amounts substantially similar to
such policies in effect on the date hereof and with insurers with an A.M. Best
rating of A- or better. The Credit Parties shall provide thirty (30) days
advance notice to Administrative Agent of any non-renewal, cancellation or
amendment of such policies of insurance. If any Credit Party at any time or
times hereafter shall fail to obtain or maintain any of the policies of
insurance required above or to pay all premiums relating thereto, Administrative
Agent may at any time or times thereafter obtain and maintain such policies of
insurance and pay such premiums and take any other action with respect thereto
which Administrative Agent deems advisable. Administrative Agent shall have no
obligation to obtain insurance for any Credit Party or pay any premiums
therefor. By doing so, Administrative Agent shall not be deemed to have waived
any Default or Event of Default arising from any Credit Party's failure to
maintain such insurance or pay any premiums therefor. All sums so disbursed,
including attorneys' fees, court costs and other charges related thereto, shall
be payable on demand by Borrower to Administrative Agent and shall be additional
Obligations hereunder secured by the Collateral.
(b) Administrative Agent reserves the right at any time upon any
change in any Credit Party's risk profile (including any change in the product
mix maintained by any Credit Party or any laws affecting the potential liability
of such Credit Party) to require additional forms and limits of insurance to, in
Administrative Agent's opinion, adequately protect both Agents' and Lenders'
interests in all or any portion of the Collateral and to ensure that each Credit
Party is protected by insurance in amounts and with coverage customary for its
industry. If requested by Administrative Agent, each Credit Party shall deliver
to Administrative Agent from time to time a report of a reputable insurance
broker, satisfactory to Administrative Agent, with respect to its insurance
policies.
(c) Each Credit Party shall deliver to Administrative Agent, in form
and substance satisfactory to Administrative Agent, endorsements to (i) all "All
Risk" and business interruption insurance naming Administrative Agent, on behalf
of itself and Lenders, as additional loss payee, and (ii) all general liability
and other liability policies naming Administrative Agent, on behalf of itself
and Lenders, as additional insured. Each Credit Party irrevocably makes,
constitutes and appoints Administrative Agent (and all officers, employees or
agents designated by Administrative Agent), so long as any Default or Event of
Default shall have occurred and be continuing or the anticipated insurance
proceeds exceed $500,000, as each Credit Party's true and lawful agent and
attorney-in-fact for the purpose of making, settling and adjusting claims under
such "All Risk" policies of insurance, endorsing the name of each Credit Party
on any check or other item of payment for the proceeds of such "All Risk"
policies of insurance and for making all determinations and decisions with
respect to such "All Risk"
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policies of insurance. Administrative Agent shall have no duty to exercise any
rights or powers granted to it pursuant to the foregoing power-of-attorney.
Borrower shall promptly notify Administrative Agent of any loss, damage, or
destruction to the Collateral in the amount of $500,000 or more, whether or not
covered by insurance. After deducting from such proceeds the expenses, if any,
incurred by Administrative Agent in the collection or handling thereof,
Administrative Agent may, at its option, apply such proceeds to the reduction of
the Obligations in accordance with Section 1.3(d), provided that in the case of
insurance proceeds pertaining to any Credit Party other than Borrower, such
insurance proceeds shall be applied to the Loans owing by Borrower, or permit or
require each Credit Party to use such money, or any part thereof, to replace,
repair, restore or rebuild the Collateral in a diligent and expeditious manner
with materials and workmanship of substantially the same quality as existed
before the loss, damage or destruction. Notwithstanding the foregoing, if the
casualty giving rise to such insurance proceeds would not reasonably be expected
to have a Material Adverse Effect and such insurance proceeds do not exceed
$5,000,000 in the aggregate, Administrative Agent shall permit the applicable
Credit Party to replace, restore, repair or rebuild the property; provided that
if such Credit Party has not completed or entered into binding agreements to
complete such replacement, restoration, repair or rebuilding within 360 days of
such casualty, Administrative Agent may apply such insurance proceeds to the
Obligations in accordance with Section 1.3(d); provided further that in the case
of insurance proceeds pertaining to any Credit Party other than Borrower, such
insurance proceeds shall be applied to the Loans owing by Borrower. All
insurance proceeds which are to be made available to Borrower to replace,
repair, restore or rebuild the Collateral shall be applied by Administrative
Agent to reduce the outstanding principal balance of the Revolving Loan (which
application shall not result in a permanent reduction of the Revolving Loan
Commitment) and upon such application, Administrative Agent shall establish a
Reserve against the Borrowing Base in an amount equal to the amount of such
proceeds so applied. All insurance proceeds made available to any Credit Party
that is not a Borrower to replace, repair, restore or rebuild Collateral shall
be deposited in a cash collateral account. Thereafter, such funds shall be made
available to such Credit Party to provide funds to replace, repair, restore or
rebuild the Collateral as follows: (i) Borrower shall request a Revolving Credit
Advance or release from the cash collateral account be made to such Credit Party
in the amount requested to be released; (ii) so long as the conditions set forth
in Section 2.2 have been met, Revolving Lenders shall make such Revolving Credit
Advance or Administrative Agent shall release funds from the cash collateral
account; and (iii) in the case of insurance proceeds applied against the
Revolving Loan, the Reserve established with respect to such insurance proceeds
shall be reduced by the amount of such Revolving Credit Advance. To the extent
not used to replace, repair, restore or rebuild the Collateral, such insurance
proceeds shall be applied in accordance with Section 1.3(d); provided that in
the case of insurance proceeds pertaining to any Credit Party other than
Borrower, such insurance proceeds shall be applied to the Loans owing by
Borrower.
5.5. Compliance with Laws. Each Credit Party shall comply with all
federal, state, local and foreign laws and regulations applicable to it,
including, without limitation, those relating to ERISA and labor matters and
Environmental Laws and Environmental Permits, except to the extent that the
failure to comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
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5.6. Supplemental Disclosure. From time to time as may be requested by
Administrative Agent (which request will not be made more frequently than once
each year absent the occurrence and continuance of a Default or an Event of
Default), the Credit Parties shall supplement each Disclosure Schedule hereto,
or any representation herein or in any other Loan Document, with respect to any
matter hereafter arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in such
Disclosure Schedule or as an exception to such representation or which is
necessary to correct any information in such Disclosure Schedule or
representation which has been rendered inaccurate thereby (and, in the case of
any supplements to any Disclosure Schedule, such Disclosure Schedule shall be
appropriately marked to show the changes made therein); provided that (a) no
such supplement to any such Disclosure Schedule or representation shall be or be
deemed a waiver of any Default or Event of Default resulting from the matters
disclosed therein, except as consented to by Administrative Agent and Requisite
Lenders in writing; and (b) no supplement shall be required as to
representations and warranties that relate solely to the Closing Date.
5.7. Intellectual Property. Each Credit Party will conduct its
business and affairs without infringement of or interference with any
Intellectual Property of any other Person in any material respect.
5.8. Environmental Matters. Each Credit Party shall and shall cause
each Person within its control to: (a) conduct its operations and keep and
maintain its Real Estate in compliance with all Environmental Laws and
Environmental Permits other than noncompliance which could not reasonably be
expected to have a Material Adverse Effect; (b) implement any and all
investigation, remediation, removal and response actions which are appropriate
or necessary to maintain the value and marketability of the Real Estate or to
otherwise comply with Environmental Laws and Environmental Permits pertaining to
the presence, generation, treatment, storage, use, disposal, transportation or
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of its Real Estate; (c) notify Administrative Agent promptly after such
Credit Party becomes aware of any violation of Environmental Laws or
Environmental Permits or any Release on, at, in, under, above, to, from or about
any Real Estate which is reasonably likely to result in Environmental
Liabilities having a Material Adverse Effect; and (d) promptly forward to
Administrative Agent a copy of any order, notice, request for information or any
communication or report received by such Credit Party in connection with any
such violation or Release or any other matter relating to any Environmental Laws
or Environmental Permits that could reasonably be expected to result in
Environmental Liabilities having a Material Adverse Effect in each case whether
or not the Environmental Protection Agency or any Governmental Authority has
taken or threatened any action in connection with any such violation, Release or
other matter. If Administrative Agent at any time has a reasonable basis to
believe that there may be a violation of any Environmental Laws or Environmental
Permits by any Credit Party or any Environmental Liability arising thereunder,
or a Release of Hazardous Materials on, at, in, under, above, to, from or about
any of its Real Estate, which, in each case, could reasonably be expected to
have a Material Adverse Effect, then each Credit Party shall, upon
Administrative Agent's written request (i) cause the performance of such
environmental audits including subsurface sampling of soil and groundwater, and
preparation of such environmental reports, at Borrower's expense, as
Administrative Agent may from time to time
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reasonably request, which shall be conducted by reputable environmental
consulting firms reasonably acceptable to Administrative Agent and shall be in
form and substance acceptable to Administrative Agent, and (ii) permit
Administrative Agent or its representatives to have access to all Real Estate
for the purpose of conducting such environmental audits and testing as
Administrative Agent deems appropriate, including subsurface sampling of soil
and groundwater. Borrower shall reimburse Administrative Agent for the costs of
such audits and tests and the same will constitute a part of the Obligations
secured hereunder.
5.9. Landlords' Agreements, Mortgagee Agreements and Bailee Letters.
Borrower shall use commercially best efforts (excluding the obligation to
litigate or to pay additional consideration) to obtain a landlord's agreement,
mortgagee agreement or bailee letter, (a "Lien Waiver"), as applicable, from,
landlord of each leased property or mortgagee of owned property or with respect
to any warehouse, processor or converter facility or other location where
Collateral is located, if under applicable law, the Lien to be subordinated or
waived by such landlord or mortgagee, as applicable, would otherwise have
priority over the Liens granted to the Lenders under this Credit Agreement (a
"Required Borrower Lien Waiver"). Heartland shall use commercially best efforts
(excluding the obligation to litigate or to pay additional consideration) to
obtain a Lien Waiver from the landlords of the ten (10) leased warehouse,
processor or converter facilities containing the highest dollar value of
Collateral held by Heartland as of the date of this Credit Agreement, if under
applicable law, the Lien to be subordinated or waived by such landlord would
otherwise have priority over the Liens granted to the Lenders under this Credit
Agreement (a "Required Heartland Lien Waiver"). Each Lien Waiver shall contain a
waiver or subordination of all Liens or claims that the landlord, mortgagee or
bailee may assert against the Inventory or Collateral at that location, and
shall otherwise be reasonably satisfactory in form and substance to
Administrative Agent. With respect to such locations or warehouse space leased
or owned as of the Closing Date and thereafter, if Administrative Agent has not
received a Required Borrower Lien Waiver or Required Heartland Lien Waiver as of
the Closing Date (or, if later, as of the date such location is acquired or
leased), an amount equal to 300% of the then current monthly rental for such
leased location (or 300% of the then current monthly mortgage payment, with
respect to owned locations) shall, in Administrative Agent's sole discretion, be
excluded from the Borrowing Base or be subject to such Reserves as may be
established by Administrative Agent in its reasonable credit judgment. After the
Closing Date, Heartland shall use commercially best efforts (excluding the
obligation to litigate or to pay additional consideration) to deliver Lien
Waivers with respect to any new leased facilities if the dollar value of the
Collateral located on such facility would exceed the dollar value of the
Collateral located on the tenth (10th) most valuable (by dollar value of
Collateral) leased site for which Heartland must deliver a Required Heartland
Lien Waiver, and where the failure to deliver such Lien Waiver would result in
the landlord of such leased site having a Lien superior to that granted the
Lenders under this Credit Agreement. After the Closing Date, no real property or
warehouse space shall be leased or acquired by Borrower and no Inventory shall
be shipped to a processor or converter under arrangements established by
Borrower after the Closing Date without the prior written consent of
Administrative Agent (which consent, in Administrative Agent's sole discretion,
may be conditioned upon the exclusion from the Borrowing Base of Eligible
Inventory at that location or the establishment of Reserves acceptable to
Administrative Agent) or, unless and until a satisfactory Lien Waiver shall
first have been obtained with respect
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to such location, provided, however, that no such Lien Waiver will be required
unless the failure to deliver such Lien Waiver would result in the landlord of
such leased site having a Lien superior to that granted the Lenders under this
Credit Agreement. Each Credit Party shall timely and fully pay and perform its
obligations under all leases and other agreements with respect to each leased
location or public warehouse where any Collateral is or may be located.
5.10. Further Assurances. Each Credit Party executing this Agreement
agrees that it shall and shall cause each other Credit Party to, at such Credit
Party's expense and upon request of Administrative Agent, duly execute and
deliver, or cause to be duly executed and delivered, to Administrative Agent
such further instruments and do and cause to be done such further acts as may be
necessary or proper in the reasonable opinion of Administrative Agent to carry
out more effectively the provisions and purposes of this Agreement or any other
Loan Document.
5.11. ERISA Event. Each Credit Party shall, or shall cause (to the
extent it has such ability) an ERISA Affiliate to, notify the Administrative
Agent promptly, but in no event later than 10 days, following the occurrence of
any ERISA Event of the details of such ERISA Event and the course of action
which such Credit Party or ERISA Affiliate intends to take to correct such ERISA
Event.
5.12. Interest Hedging Obligations. Within sixty (60) days after the
Closing Date, Borrower shall enter into or utilize existing agreements with one
or more Lenders (or any Affiliate of any Lender) for Interest Hedge Obligations
in respect of fifty percent (50%) of the principal amount of the Term Loans
outstanding on terms and conditions acceptable to Administrative Agent.
5.13. Lender Meeting. Borrower shall participate in a meeting of the
Lenders once during each Fiscal Year (commencing with the Fiscal Year ending
December 31, 2001) to be held at a location and a time selected by
Administrative Agent and reasonably acceptable to Borrower, provided, however,
that Administrative Agent may require a reasonable number of additional meetings
if any condition or event constituting a Default or Event of Default has
occurred and is continuing.
5.14. Subsidiary Collateral Documents. If a Credit Party creates or
acquires a Subsidiary permitted under this Agreement, the Borrower shall cause
each such Subsidiary to execute and deliver to Administrative Agent, documents
in form and substance satisfactory to the Administrative Agent pursuant to which
such Subsidiary becomes a party to the Collateral Documents and its Stock is
pledged pursuant to the Pledge Agreement.
6. NEGATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally
agrees as to all Credit Parties that, without the prior written consent of
Administrative Agent and the Requisite Lenders, from and after the date hereof
until the Termination Date:
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6.1. Mergers, Subsidiaries, Etc.
No Credit Party shall directly or indirectly, by operation of law or
otherwise, unless the same shall constitute a Designated Acquisition, (a) form
or acquire any Subsidiary, except as permitted by Section 6.2, or (b) merge with
(except for the Merger and the merger of any Subsidiary of Borrower with and
into Borrower or a Credit Party other than Holdings) or consolidate with,
acquire all or substantially all of the assets or capital stock of, or otherwise
combine with or acquire, any Person or any division of any Person.
6.2. Investments; Loans and Advances. Except as otherwise expressly
permitted by this Section 6, no Credit Party shall make or permit to exist any
investment in, or make, accrue or permit to exist loans or advances of money to,
any Person, through the direct or indirect lending of money, holding of
securities or otherwise, except:
(a) so long as Administrative Agent has not delivered an Activation
Notice and subject to Control Letters in favor of Administrative Agent for the
benefit of Documentation Agent and Lenders or otherwise subject to a perfected
security interest in favor of Administrative Agent for the benefit of itself,
Documentation Agent and Lenders, investments by Holdings, Borrower or any of its
Subsidiaries in cash and cash equivalents, consisting of:
(i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency thereof maturing
within one year from the date of acquisition thereof;
(ii) commercial paper maturing no more than one year from the
date of creation thereof and currently having the highest rating obtainable
from either Standard & Poor's Ratings Group or Moody's Investors Service,
Inc.;
(iii) certificates of deposit, bankers acceptances, time
deposits, Eurocurrency deposits and similar types of investments routinely
offered by commercial banks with final maturities of one year or less
issued by commercial banks organized in the United States, or foreign
branches thereof, having capital and surplus in excess of $300,000,000 or
any commercial bank of any other country that is a member of the
Organization for Economic Cooperation and Development ("OECD") and has
total assets in excess of $300,000,000;
(iv) foreign bank deposits and cash equivalents in jurisdictions
where Holdings or its Subsidiaries are then actively conducting business
provided that (A) all such deposits are required to be made in the ordinary
course of business, (B) such deposits do not exceed $500,000 in the
aggregate and (C) the funds so deposited do not remain in such bank for
more than 30 days; and
(v) repurchase obligations for obligations described in (i) with
any bank meeting the qualifications specified in clause (iii) above;
(b) receivables owing to them and advances (including deposits) to
customers and suppliers, in each case if created, acquired or made in the
ordinary course of business and payable or dischargeable in accordance with
customary trade terms;
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(c) investments (including debt obligations) received in connection
with the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business or upon foreclosure of any
Lien in favor of the Borrower or its Subsidiaries;
(d) to the extent permitted by Section 6.4, investments made by a
Credit Party in existing Subsidiaries (other than Swing-N-Slide FSC, Ltd.) or by
a Subsidiary in a Credit Party or in one or more Subsidiaries;
(e) the acceptance of a form of consideration other than that
specified in clause (a) above in connection with the sale or disposition of
assets to the extent permitted by Section 6.8;
(f) guarantees permitted by Section 6.6;
(g) investments permitted by Section 6.14;
(h) Interest Hedge Obligations and Commodity Hedge Obligations to the
extent permitted by Section 6.3.
(i) investments contemplated by the Related Transaction Documents;
(j) investments which the Borrower and its Subsidiaries are
contractually committed to make pursuant to contracts existing on the Closing
Date as set forth on Disclosure Schedule (6.2(j));
(k) investments in prepaid expenses, negotiable instruments held for
collection and workers' compensation, utility, lease and similar deposits in the
ordinary course of business;
(l) Designated Acquisitions;
(m) loans or advances to officers and employees of Borrower and its
Subsidiaries permitted by Section 6.4; and
(n) additional loans, advances and/or investments of a nature not
contemplated by the foregoing clauses (a) through (m); provided that (x) all
loans, advances and investments made pursuant to this clause (l) shall not
exceed $1,000,000 in any Fiscal Year and $3,000,000 in the aggregate at any time
outstanding during the term of this Agreement and (y) all such loans, advances
and investments are subject to a perfected security interest in favor of
Administrative Agent for the benefit of itself, Documentation Agent and Lenders.
6.3. Indebtedness.
(a) No Credit Party shall create, incur, assume or permit to exist any
Indebtedness, except (without duplication) (i) Indebtedness secured by purchase
money security interests and Capitalized Leases permitted in clause (c) of
Section 6.7, (ii) the Loans and the other Obligations, (iii) unfunded pension
fund and other employee benefit plan obligations and
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liabilities to the extent they are permitted to remain unfunded under applicable
law, (iv) existing Indebtedness described in Disclosure Schedule (6.3) and the
Subordinated Debt and refinancings thereof or amendments or modifications
thereof which do not have the effect of increasing the principal amount thereof
(except for prepayment penalties and costs and expenses of the refinancings) or
changing the amortization thereof (other than to extend the same) and which are
otherwise on terms and conditions no less favorable to any Credit Party,
Administrative Agent, Documentation Agent or any Lender, as determined by
Administrative Agent, than the terms of the Indebtedness being refinanced,
amended or modified, (v) Indebtedness consisting of intercompany loans and
advances made by Borrower to any other Credit Party that is a Guarantor or by
any such Guarantor to Borrower or another Guarantor; provided that (A) Borrower
shall have executed and delivered to each such Guarantor, and each such
Guarantor shall have executed and delivered to Borrower, on the Closing Date, a
demand note (collectively, the "Intercompany Notes") to evidence any such
intercompany Indebtedness owing at any time by Borrower to such Guarantor or by
such Guarantor to Borrower, which Intercompany Notes shall be in form and
substance satisfactory to Administrative Agent and shall be pledged and
delivered to Administrative Agent pursuant to the Pledge Agreement or Security
Agreement as additional collateral security for the Obligations; (B) Borrower
shall record all intercompany transactions on its books and records in a manner
satisfactory to Administrative Agent; (C) the obligations of Borrower under any
such Intercompany Notes shall be subordinated to the Obligations of Borrower
hereunder in a manner satisfactory to Administrative Agent; (D) at the time any
such intercompany loan or advance is made by Borrower and after giving effect
thereto, Borrower shall be Solvent; (E) no Default or Event of Default would
occur and be continuing after giving effect to any such proposed intercompany
loan; (F) the aggregate amount of such intercompany loans owing by Holdings to
Borrower shall not exceed $1,000,000 at any one time outstanding; and (G) the
aggregate balance of all such intercompany loans owing by a Subsidiary (other
than Heartland and Swing-N-Slide FSC, Ltd.) of Borrower to Borrower shall not
exceed $1,000,000 at any time and the aggregate balance of all such intercompany
loans owing by Heartland to Borrower shall not exceed $10,000,000 at any time,
(vi) Surety Obligations, (vii) Indebtedness of Borrower under Commodity Hedge
Obligations, (viii) Indebtedness of Borrower under Interest Hedge Obligations
incurred in connection with the Loans, (ix) Guarantees permitted by Section 6.6,
and (x) other unsecured Indebtedness not to exceed $3,000,000 at any one time
outstanding.
(b) No Credit Party shall, directly or indirectly, voluntarily
purchase, redeem, defease or prepay any principal of, premium, if any, interest
or other amount payable in respect of any Indebtedness, other than (i) the
Obligations, (ii) Indebtedness secured by a Permitted Encumbrance, and (iii)
other Indebtedness (excluding the Subordinated Debt) not in excess of $500,000.
6.4. Employee Loans and Affiliate Transactions.
(a) Except as otherwise expressly permitted in this Section 6 with
respect to Affiliates, no Credit Party shall enter into or be a party to any
transaction with any Affiliate thereof that is not a Credit Party except in the
ordinary course of and pursuant to the reasonable requirements of such Credit
Party's business and upon fair and reasonable terms that are no less favorable
to such Credit Party than would be obtained in a comparable arm's length
transaction
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with a Person not an Affiliate of such Credit Party. In addition, if any such
transaction or series of related transactions involves payments in excess of
$2,500,000 in the aggregate, the terms of these transactions must be disclosed
in advance to Administrative Agent and Lenders. All such transactions existing
as of the date hereof are described on Disclosure Schedule (6.4(a)).
(b) No Credit Party shall enter into any lending or borrowing
transaction with any employees of any Credit Party, except loans to their
respective employees in the ordinary course of business for travel expenses,
relocation programs and similar purposes, and other loans to employees and
officers up to a maximum of $750,000 in the aggregate at any one time
outstanding.
6.5. Capital Structure and Business. No Credit Party shall (a) make
any changes in any of its business objectives, purposes or operations which
could reasonably be expected to have or result in a Material Adverse Effect, (b)
make any change in its capital structure as described on Disclosure Schedule
(3.8), including the issuance of any shares of Stock, warrants or other
securities convertible into Stock or any revision of the terms of its
outstanding Stock, except that Holdings may issue additional shares of its Stock
if (i) the proceeds thereof are applied in prepayment of the Obligations to the
extent required by Section 1.3(b)(iii), and (ii) no Change of Control occurs
after giving effect thereto, or (c) amend its charter or bylaws in a manner
which would adversely affect Administrative Agent, Documentation Agent or
Lenders or such Credit Party's duty or ability to repay the Obligations; other
than in each instance (1) director's qualifying shares, (2) sales of Holdings
Stock to acquire assets, businesses or entities that become Subsidiaries to the
extent such acquisition is permitted hereunder, (3) pro rata issuances of Stock
to minority stockholders, and (4) issuance of Stock pursuant to Stock
incentives, purchase and similar plans and employee arrangements. No Credit
Party shall engage in any business other than the businesses currently engaged
in by it or businesses which are complementary or reasonable extensions thereto.
6.6. Guaranteed Indebtedness. No Credit Party shall create, incur,
assume or permit to exist any Guaranteed Indebtedness except (a) by endorsement
of instruments or items of payment for deposit to the general account of any
Credit Party, and (b) for Guaranteed Indebtedness incurred for the benefit of
any other Credit Party if the primary obligation is expressly permitted by this
Agreement, including the Subordinated Debt and Surety Obligations.
6.7. Liens. No Credit Party shall create, incur, assume or permit to
exist any Lien on or with respect to its Accounts or any of its other properties
or assets (whether now owned or hereafter acquired) except for (a) Permitted
Encumbrances; (b) Liens in existence on the date hereof and summarized on
Disclosure Schedule (6.7); and (c) Liens created after the date hereof by
conditional sale or other title retention agreements (including Capital Leases)
or in connection with purchase money Indebtedness with respect to Equipment and
Fixtures acquired by any Credit Party in the ordinary course of business,
involving the incurrence of an aggregate amount of purchase money Indebtedness
and Capital Lease Obligations of not more than $3,000,000 outstanding at any one
time for all such Liens (provided that such Liens attach only to the assets,
accessions, improvements and proceeds subject to such purchase money debt and
such Indebtedness is incurred within sixty (60) days following such purchase and
does not exceed 100% of the purchase price of the subject assets or the cost of
construction or improvements). In
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addition, no Credit Party shall become a party to any agreement, note, indenture
or instrument, or take any other action, which would prohibit the creation of a
Lien on any of its properties or other assets in favor of Administrative Agent,
on behalf of itself, Documentation Agent and Lenders, as additional collateral
for the Obligations, except for Liens listed in (a) through (c) above and
operating leases, Capital Leases or Licenses which prohibit Liens upon the
assets that are subject thereto.
6.8. Sale of Stock and Assets. No Credit Party shall sell, transfer,
convey, assign or otherwise dispose of any of its properties or other assets,
including the capital Stock of any of its Subsidiaries (whether in a public or a
private offering or otherwise) or any of their Accounts, other than (a) the sale
of Inventory in the ordinary course of business, (b) the sale, transfer,
conveyance or other disposition by a Credit Party of Equipment, Fixtures or Real
Estate that are obsolete or no longer used or useful in such Credit Party's
business having a value not exceeding $1,000,000 in the aggregate in any Fiscal
Year, provided the proceeds thereof are reinvested in the business of the Credit
Parties within 360 days thereafter, and if not so reinvested, shall be applied
as a mandatory prepayment pursuant to Section 1.3(b)(iii), (c) other Equipment
and Fixtures having a value not exceeding $3,000,000 in the aggregate in any
Fiscal Year, provided the proceeds thereof are reinvested in the business of the
Credit Parties within 360 days thereafter, and if not so reinvested, shall be
applied as a mandatory prepayment pursuant to Section 1.3(b)(ii), (d) cash and
cash equivalents, (e) transfers to any Credit Party other than Holdings or (f)
Restricted Payments permitted by Section 6.14. With respect to any disposition
of assets or other properties permitted above, Administrative Agent agrees on
reasonable prior written notice to release its Lien on such assets or other
properties in order to permit the applicable Credit Party to effect such
disposition and shall execute and deliver to Borrower, at Borrower's expense,
appropriate UCC-3 termination statements and other releases as reasonably
requested by Borrower.
6.9. ERISA. No Credit Party shall, or shall cause or permit any ERISA
Affiliate to, cause or permit to occur an event which could result in the
imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of
ERISA or cause or permit to occur an ERISA Event to the extent such ERISA Event
could reasonably be expected, individually or in the aggregate, to result in a
liability of such Credit Party exceeding $200,000.
6.10. Financial Covenants. The Credit Parties shall not breach or fail
to comply with any of the Financial Covenants (the "Financial Covenants") set
forth in Annex G.
6.11. Hazardous Materials. No Credit Party shall cause or permit a
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of the Real Estate where such Release would (a) violate in any respect, or
form the basis for any Environmental Liabilities under, any Environmental Laws
or Environmental Permits or (b) otherwise adversely impact the value or
marketability of any of the Real Estate or any of the Collateral, other than
such violations or Environmental Liabilities which could not reasonably be
expected to have a Material Adverse Effect.
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6.12. Sale-Leasebacks. No Credit Party shall engage in any
sale-leaseback, synthetic lease or similar transaction involving in excess of
$2,000,000 in respect of any of its assets.
6.13. Cancellation of Indebtedness. No Credit Party shall voluntarily
cancel any claim or debt owing to it, except for reasonable consideration
negotiated on an arm's-length basis and in the ordinary course of its business
consistent with past practices.
6.14. Restricted Payments. No Credit Party shall make any Restricted
Payment, except (a) intercompany loans and advances between Borrower and
Guarantors to the extent permitted by Section 6.3 above, (b) (i) dividends and
distributions by Subsidiaries of Borrower paid to Borrower, and (ii) dividends
and distributions by Subsidiaries of Holdings paid to Holdings or its parent
entity up to an aggregate amount of $350,000 per annum to be used for the
payment of ordinary and customary holding company operating expenses and to the
extent necessary, the costs and expenses of effectuating the Related
Transactions, (c) employee loans permitted under Section 6.4(b) above, (d)
payments of management fees ("Management Fee"), during Fiscal Year 2000, of no
greater than $500,000, and during each Fiscal Year beginning in 2001 the greater
of (x) $500,000 or (y) the lesser of (i) 2% of EBITDA of Borrower for such
Fiscal Year or (ii) $1,250,000, and reimbursement of reasonable expenses
pursuant to that certain Management Consulting Agreement in the form delivered
to Administrative Agent by and between Chartwell Investments II L.L.C. and
Borrower, as in effect on the date hereof and containing subordination
provisions acceptable to Administrative Agent and payment of the transaction
fees and expenses pursuant to the Advisory Agreement in the form delivered to
Administrative Agent by and between Chartwell Investments II, L.L.C. and
Borrower, (e) scheduled payments of interest with respect to the Subordinated
Debt, payments of principal with respect to the Subordinated Debt on or after
May 31, 2008, subject however to the subordination provisions therein, and the
payment of transaction fees and expenses pursuant to the Purchase Agreement and
the Exchange and Registration Rights Agreement referred to in the Subordinated
Notes, (f) the repurchase of Stock of Holdings or any indirect or direct parent
company thereof from management personnel who cease to be employees of the
Credit Parties or Acquisition Co. not to exceed $500,000 in any Fiscal Year or
$2,500,000 in the aggregate during the term of this Agreement, (g) the Related
Transactions, (h) payments pursuant to a tax sharing agreement approved by
Administrative Agent, (i) ordinary and customary holding company operating
expenses of Acquisition Co. in the ordinary course of business, and (j)
scheduled payments of interest and principal and required prepayments of
principal with respect to existing Indebtedness which is permitted to remain
outstanding pursuant to Section 6.3(a)(iv), subject however to the subordination
provisions therein, provided that (i) no Default or Event of Default shall have
occurred and be continuing or would result after giving effect to any Management
Fee payment pursuant to clause (d) above and upon the occurrence of such Default
or Event of Default in connection with any payment pursuant to clause (d) above,
the Management Fee obligation may continue to accrue (without interest) and may
be paid when such Default or Event of Default is cured; and (ii) the timing of
the payments referred to in clause (d) above shall be set at dates which permit
the delivery of Financial Statements necessary to determine current compliance
with the financial covenants set forth in Annex G prior to each payment.
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6.15. Change of Corporate Name or Location; Change of Fiscal Year. No
Credit Party shall (a) change its corporate name, or (b) change its chief
executive office, principal place of business, corporate offices or warehouses
or locations at which Collateral (other than movable goods) is held or stored,
or the location of its records concerning the Collateral, in any case without at
least thirty (30) days prior written notice to Administrative Agent and after
Administrative Agent's written acknowledgment that any reasonable action
requested by Administrative Agent in connection therewith, including to continue
the perfection of any Liens in favor of Administrative Agent, on behalf of
itself, Documentation Agent and Lenders, in any Collateral, has been completed
or taken, and provided that any such new location shall be in the continental
United States. Without limiting the foregoing, no Credit Party shall change its
name, identity or corporate structure in any manner which might make any
financing or continuation statement filed in connection herewith seriously
misleading within the meaning of Section 9-402(7) of the Code or any other then
applicable provision of the Code except upon prior written notice to
Administrative Agent and Lenders and after Administrative Agent's written
acknowledgment that any reasonable action requested by Administrative Agent in
connection therewith, including to continue the perfection of any Liens in favor
of Administrative Agent, on behalf of itself, Documentation Agent and Lenders,
in any Collateral, has been completed or taken. No Credit Party shall change its
Fiscal Year.
6.16. No Impairment of Intercompany Transfers. No Credit Party shall
directly or indirectly enter into or become bound by any agreement, instrument,
indenture or other obligation (other than this Agreement and the other Loan
Documents) which could directly or indirectly restrict, prohibit or require the
consent of any Person with respect to the payment of dividends or distributions
or the making or repayment of intercompany loans by a Subsidiary of Borrower to
Borrower, except:
(a) instruments and agreements as in effect on the Closing Date set
forth in Disclosure Schedule (6.16(a)) and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings of any such instruments and agreements or any existing Indebtedness
to which such instruments and agreements relate, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive, taken as a whole with
respect to such distribution, dividend and other payment restrictions and loan
or investment restrictions than those contained in such agreement, as in effect
on the Closing Date;
(b) customary non-assignment provisions in Licenses and leases entered
into in the ordinary course of business and consistent with past practices;
(c) purchase money obligations otherwise permitted hereunder for
property acquired in the ordinary course of business that impose restrictions on
the property so acquired;
(d) any agreement for the sale or other disposition of assets thereof
pending its sale or other disposition, provided that such sale or disposition is
consummated, or such restrictions are canceled or terminated or lapse within 30
days; and
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(e) the refinancing of Indebtedness permitted by Section 6.3(a)(iv),
provided that the restrictions contained in the agreements governing such
refinancing Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced.
6.17. No Speculative Transactions. No Credit Party shall engage in any
transaction involving commodity options, futures contracts or similar
transactions, except solely to hedge against fluctuations in the prices of
commodities owned or purchased by it and the values of foreign currencies
receivable or payable by it and interest swaps, caps or collars.
6.18. Changes Relating to Subordinated Debt. No Credit Party shall
change or amend the terms of the Subordinated Debt (or any indenture or
agreement in connection therewith) if the effect of such amendment is to: (a)
increase the interest rate on such Subordinated Debt; (b) change the dates upon
which payments of principal or interest are due on such Subordinated Debt other
than to extend such dates; (c) change any default or event of default other than
to delete or make less restrictive any default provision therein, or add any
covenant with respect to such Subordinated Debt; (d) change the redemption or
prepayment provisions of such Subordinated Debt other than to extend the dates
therefor or to reduce the premiums payable in connection therewith; (e) grant
any security or collateral to secure payment of such Subordinated Debt; (f)
change the subordination provisions thereof; (g) amend the financial covenants
of such Subordinated Debt to make them more restrictive; or (h) change or amend
any other term if such change or amendment would materially increase the
obligations of the obligor or confer additional material rights to the holder of
such Subordinated Debt in a manner adverse to any Credit Party, Administrative
Agent, Documentation Agent or any Lender.
6.19. Status of Holdings. After the consummation of the Merger,
Holdings shall be a company which shall not engage in any activities other than
those associated with being the sole shareholder of Borrower and, without
limiting the foregoing, shall not incur any liabilities other than in connection
with the Related Transactions and the Obligations thereunder.
6.20. Sale or Discount of Accounts. No Credit Party or its respective
Subsidiaries shall enter into a third party transaction to sell, with or without
recourse, or discount (other than in connection with trade discounts in the
ordinary course of business) or otherwise sell for less than the face value
thereof, any of its Accounts (other than written-off Accounts).
7. TERM
7.1. Termination. The financing arrangements contemplated hereby shall
be in effect until the Termination Date, and the Loans and all other Obligations
shall be automatically due and payable in full on such date, except that the
Revolving Loan and Term Loan A shall be automatically due and payable in full on
the Commitment Termination Date.
7.2. Survival of Obligations Upon Termination of Financing
Arrangements. Except as otherwise expressly provided for in the Loan Documents,
no termination or cancellation (regardless of cause or procedure) of any
financing arrangement under this Agreement shall in any way affect or impair the
obligations, duties and liabilities of the Credit
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Parties or the rights of Administrative Agent, Documentation Agent and Lenders
relating to any unpaid portion of the Loans or any other Obligations, due or not
due, liquidated, contingent or unliquidated or any transaction or event
occurring prior to such termination, or any transaction or event, the
performance of which is required after the Commitment Termination Date or
Termination Date, as applicable. Except as otherwise expressly provided herein
or in any other Loan Document, all undertakings, agreements, covenants,
warranties and representations of or binding upon the Credit Parties, and all
rights of Administrative Agent, Documentation Agent and each Lender, all as
contained in the Loan Documents, shall not terminate or expire, but rather shall
survive any such termination or cancellation and shall continue in full force
and effect until the Termination Date; provided however, that in all events the
provisions of Section 11, the payment obligations under Sections 1.15 and 1.16,
and the indemnities contained in the Loan Documents shall survive the
Termination Date.
8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES
8.1. Events of Default. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "Event
of Default" hereunder:
(a) Borrower (i) fails to make any payment of principal of, or for a
period of three (3) Business Days interest on, or Fees owing in respect of, the
Loans or any of the other Obligations when due and payable, or (ii) fails to pay
or reimburse Administrative Agent, Documentation Agent or Lenders for any
expense reimbursable hereunder or under any other Loan Document within ten (10)
days following Administrative Agent's demand for such reimbursement or payment
of expenses.
(b) Any Credit Party shall fail or neglect to perform, keep or observe
any of the provisions of Sections 1.4, 1.8, 5.4 for a period of ten (10) days or
6, or any of the provisions set forth in Annexes C or G, respectively.
(c) Borrower shall fail or neglect to perform, keep or observe any of
the provisions of Section 4 or any provisions set forth in Annexes E or F,
respectively, and the same shall remain unremedied for three (3) Business Days
or more.
(d) Any Credit Party shall fail or neglect to perform, keep or observe
any other provision of this Agreement or of any of the other Loan Documents
(other than any provision embodied in or covered by any other clause of this
Section 8.1) and the same shall remain unremedied for twenty (20) days or more.
(e) A default or breach shall occur under any other agreement,
document or instrument to which any Credit Party is a party which is not cured
within any applicable grace period, and such default or breach (i) involves the
failure to make any payment when due in respect of any Indebtedness (other than
the Obligations) of any Credit Party in excess of $2,000,000 in the aggregate,
or (ii) causes, or permits any holder of such Indebtedness or a trustee to
cause, Indebtedness or a portion thereof in excess of $2,000,000 in the
aggregate to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment, regardless of whether such default is waived, or
such right is exercised, by such holder or trustee.
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(f) Any information contained in any Borrowing Base Certificate is
untrue or incorrect in any material respect, or any representation or warranty
herein or in any Loan Document or in any written statement, report, financial
statement or certificate (other than a Borrowing Base Certificate) made or
delivered to Administrative Agent, Documentation Agent or any Lender by any
Credit Party is untrue or incorrect in any material respect as of the date when
made or deemed made.
(g) Assets of any Credit Party with a fair market value of $1,000,000
or more shall be attached, seized, levied upon or subjected to a writ or
distress warrant, or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors of any Credit Party and such
condition continues for thirty (30) days or more.
(h) A case or proceeding shall have been commenced against any Credit
Party seeking a decree or order in respect of any Credit Party (i) under Title
11 of the United States Code, as now constituted or hereafter amended or any
other applicable federal, state or foreign bankruptcy or other similar law, (ii)
appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator
(or similar official) for any Credit Party or of any substantial part of any
such Person's assets, or (iii) ordering the winding-up or liquidation of the
affairs of any Credit Party, and such case or proceeding shall remain
undismissed or unstayed for sixty (60) days or more or such court shall enter a
decree or order granting the relief sought in such case or proceeding.
(i) Any Credit Party (i) shall file a petition seeking relief under
Title 11 of the United States Code, as now constituted or hereafter amended, or
any other applicable federal, state or foreign bankruptcy or other similar law,
(ii) shall fail to contest in a timely and appropriate manner or shall consent
to the institution of proceedings thereunder or to the filing of any such
petition or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) of any
Credit Party or of any substantial part of any such Person's assets, (iii) shall
make an assignment for the benefit of creditors, or (iv) shall take any
corporate action in furtherance of any of the foregoing, or (v) shall admit in
writing its inability to, or shall be generally unable to, pay its debts as such
debts become due.
(j) A final judgment or judgments for the payment of money in excess
of $1,000,000 in the aggregate at any time outstanding shall be rendered against
any Credit Party and the same shall not, within thirty (30) days after the entry
thereof, have been discharged or execution thereof stayed or bonded pending
appeal, or shall not have been discharged prior to the expiration of any such
stay.
(k) Any material provision of any Loan Document shall for any reason
cease to be in force and effective (or any Credit Party shall challenge the
enforceability of any Loan Document or shall assert in writing, or engage in any
action or inaction based on any such assertion, that any provision of any of the
Loan Documents has ceased to be or otherwise is not valid, binding and
enforceable in accordance with its terms), or any security interest created
under any Loan Document shall cease to be a valid and perfected first priority
security interest or Lien (except as otherwise permitted herein or therein) in
any of the Collateral purported to be covered thereby.
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(l) Any Change of Control shall occur.
8.2. Remedies. (a) If any Event of Default shall have occurred and be
continuing, Administrative Agent may (and at the written request of the
Requisite Revolving Lenders shall), without notice, suspend the Revolving Loan
facility with respect to further Advances and/or the incurrence of further
Letter of Credit Obligations whereupon any further Advances and Letter of Credit
Obligations shall be made or extended in Administrative Agent's sole discretion
(or in the sole discretion of the Requisite Revolving Lenders, if such
suspension occurred at their direction) so long as such Default or Event of
Default is continuing. If any Default or Event of Default shall have occurred
and be continuing, Administrative Agent may (and at the written request of
Requisite Lenders shall), without notice except as otherwise expressly provided
herein, increase the rate of interest applicable to the Loans and the Letter of
Credit Fees to the Default Rate.
(b) If any Event of Default shall have occurred and be continuing,
Administrative Agent may (and at the written request of the Requisite Lenders
shall), without notice, (i) terminate the Revolving Loan facility with respect
to further Advances or the incurrence of further Letter of Credit Obligations;
(ii) declare all or any portion of the Obligations, including all or any portion
of any Loan to be forthwith due and payable, and require that the Letter of
Credit Obligations be cash collateralized as provided in Annex B, all without
presentment, demand, protest or further notice of any kind, all of which are
expressly waived by Borrower and each other Credit Party; and (iii) exercise any
rights and remedies provided to Administrative Agent under the Loan Documents
and/or at law or equity, including all remedies provided under the Code;
provided, however, that upon the occurrence of an Event of Default specified in
Sections 8.1(h) or (i), the Revolving Loan facility shall be immediately
terminated and all of the Obligations, including the Revolving Loan, shall
become immediately due and payable without declaration, notice or demand by any
Person.
8.3. Waivers by Credit Parties. Except as otherwise provided for in
this Agreement or by applicable law, each Credit Party waives: (a) presentment,
demand and protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held by Administrative Agent on which any Credit Party
may in any way be liable, and hereby ratifies and confirms whatever
Administrative Agent may do in this regard, (b) all rights to notice and a
hearing prior to Administrative Agent's taking possession or control of, or to
Administrative Agent's replevy, attachment or levy upon, the Collateral or any
bond or security which might be required by any court prior to allowing
Administrative Agent to exercise any of its remedies, and (c) the benefit of all
valuation, appraisal, marshaling and exemption laws.
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9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENTS
9.1. Assignment and Participations.
(a) The Credit Parties signatory hereto consent to any Lender's
assignment to any entity other than a competitor of any of the Credit Parties
of, and/or sale of participations in, at any time or times, the Loan Documents,
Loans, Letter of Credit Obligations and any Commitment or of any portion thereof
or interest therein, including any Lender's rights, title, interests, remedies,
powers or duties thereunder, whether evidenced by a writing or not. Any
assignment by a Lender shall (i) require the consent of Administrative Agent
(which shall not be unreasonably withheld or delayed) and the execution of an
assignment agreement (an "Assignment Agreement" substantially in the form
attached hereto as Exhibit 9.1(a) and otherwise in form and substance
satisfactory to, and acknowledged by, Administrative Agent; (ii) be conditioned
on such assignee Lender representing to the assigning Lender and Administrative
Agent that it is purchasing the applicable Loans to be assigned to it for its
own account, for investment purposes and not with a view to the distribution
thereof; (iii) if a partial assignment, be in an amount at least equal to
$5,000,000 and, after giving effect to any such partial assignment, the
assigning Lender shall have retained Commitments in an amount at least equal to
$5,000,000; and (iv) include a payment to Administrative Agent of an assignment
fee of $3,500. In the case of an assignment by a Lender under this Section 9.1,
the assignee shall have, to the extent of such assignment, the same rights,
benefits and obligations as it would if it were a Lender hereunder. The
assigning Lender shall be relieved of its obligations hereunder with respect to
its Commitments or assigned portion thereof from and after the date of such
assignment. Borrower hereby acknowledges and agrees that any assignment will
give rise to a direct obligation of Borrower to the assignee and that the
assignee shall be considered to be a "Lender". In all instances, each Lender's
liability to make Loans hereunder shall be several and not joint and shall be
limited to such Lender's Pro Rata Share of the applicable Commitment. In the
event Administrative Agent or any Lender assigns or otherwise transfers all or
any part of the Obligations, Administrative Agent or any such Lender shall so
notify Borrower and Borrower shall, upon the request of Administrative Agent or
such Lender, execute new Notes in exchange for the Notes, if any, being
assigned. Notwithstanding the foregoing provisions of this Section 9.1(a), any
Lender may at any time pledge the Obligations held by it and such Lender's
rights under this Agreement and the other Loan Documents to a Federal Reserve
Bank, and any lender that is an investment fund may assign the Obligations held
by it and such Lender's rights under this Agreement and the other Loan Documents
to another investment fund managed by the same investment advisor; provided,
however, that no such pledge to a Federal Reserve Bank shall release such Lender
from such Lender's obligations hereunder or under any other Loan Document.
(b) Any participation by a Lender of all or any part of its
Commitments shall be made with the understanding that all amounts payable by
Borrower hereunder shall be determined as if that Lender had not sold such
participation, and that the holder of any such participation shall not be
entitled to require such Lender to take or omit to take any action hereunder
except actions directly affecting (i) any reduction in the principal amount of,
or interest rate or Fees payable with respect to, any Loan in which such holder
participates, (ii) any extension of the scheduled amortization of the principal
amount of any Loan in which such holder participates or the final maturity date
thereof, and (iii) any release of all or substantially all of the Collateral
(other than in accordance with the terms of this Agreement, the Collateral
Documents or the other Loan Documents). Solely for purposes of Sections 1.13,
1.15 (assuming
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the Lender complies with the provisions applicable to a foreign Lender), 1.16
(but not higher than that which the Lender who granted the applicable
participation would have been entitled to receive) and 9.8, Borrower
acknowledges and agrees that a participation shall give rise to a direct
obligation of Borrower to the participant and the participant shall be
considered to be a "Lender". Except as set forth in the preceding sentence
neither Borrower nor any other Credit Party shall have any obligation or duty to
any participant. Neither Administrative Agent nor any Lender (other than the
Lender selling a participation) shall have any duty to any participant and may
continue to deal solely with the Lender selling a participation as if no such
sale had occurred.
(c) Except as expressly provided in this Section 9.1, no Lender shall,
as between Borrower and that Lender, or Administrative Agent and that Lender, be
relieved of any of its obligations hereunder as a result of any sale,
assignment, transfer or negotiation of, or granting of participation in, all or
any part of the Loans, the Notes or other Obligations owed to such Lender.
(d) Each Credit Party executing this Agreement shall assist any Lender
permitted to sell assignments or participations under this Section 9.1 as
reasonably required to enable the assigning or selling Lender to effect any such
assignment or participation, including the execution and delivery of any and all
agreements, notes and other documents and instruments as shall be requested.
Until the completion of the syndication of the Loans hereunder, as determined by
Administrative Agent, or GECC Capital Markets Group, Inc., in its sole
discretion, each Credit Party executing this Agreement shall (i) assist in the
preparation of informational materials for, and the participation of management
in meetings with, potential assignees or participants, and (ii) certify the
correctness, completeness and accuracy of all descriptions of the Credit Parties
and their affairs contained in any selling materials provided by it and all
other information provided by it and included in such materials, except that any
Projections delivered by Borrower shall only be certified by Borrower as having
been prepared by Borrower in compliance with the representations contained in
Section 3.4(c).
(e) A Lender may furnish any information concerning Credit Parties in
the possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants). Each Lender shall obtain
from assignees or participants confidentiality covenants substantially
equivalent to those contained in Section 11.8.
(f) So long as no Event of Default shall have occurred and be
continuing, no Lender shall assign or sell participations in any portion of its
Loans or Commitments to a potential Lender or participant, if, as of the date of
the proposed assignment or sale, the assignee Lender or participant would be
subject to capital adequacy or similar requirements under Section 1.16(a),
increased costs under Section 1.16(b), an inability to fund LIBOR Loans under
Section 1.16(c), or withholding taxes in accordance with Section 1.15(a).
9.2. Appointment of Agents. GE Capital is hereby appointed to act on
behalf of all Lenders as Administrative Agent under this Agreement and the other
Loan Documents. Indosuez is hereby appointed to act on behalf of all Lenders as
Documentation Agent under this Agreement and the other Loan Documents. The
provisions of this Section 9.2 are solely for the benefit of Agents and Lenders
and no Credit Party nor any other Person shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and
duties
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under this Agreement and the other Loan Documents, each Agent shall act solely
as an agent of Lenders and does not assume and shall not be deemed to have
assumed any obligation toward or relationship of agency or trust with or for any
Credit Party or any other Person. The Agents shall have no duties or
responsibilities except for those expressly set forth in this Agreement and the
other Loan Documents. The duties of the Agents shall be mechanical and
administrative in nature and the Agents shall not have, or be deemed to have, by
reason of this Agreement, any other Loan Document or otherwise a fiduciary
relationship in respect of any Lender. Neither Agent nor any of its respective
Affiliates nor any of their respective officers, directors, employees, agents or
representatives shall be liable to any Lender for any action taken or omitted to
be taken by it hereunder or under any other Loan Document, or in connection
herewith or therewith, except for damages caused by its or their own gross
negligence or willful misconduct.
If either Agent shall request instructions from Requisite Lenders,
Requisite Revolving Lenders or all affected Lenders with respect to any act or
action (including failure to act) in connection with this Agreement or any other
Loan Document, then such Agent shall be entitled to refrain from such act or
taking such action unless and until such Agent shall have received instructions
from Requisite Lenders, Requisite Revolving Lenders or all affected Lenders, as
the case may be, and such Agent shall not incur liability to any Person by
reason of so refraining. Each Agent shall be fully justified in failing or
refusing to take any action hereunder or under any other Loan Document (a) if
such action would, in the opinion of such Agent, be contrary to law or the terms
of this Agreement or any other Loan Document, (b) if such action would, in the
opinion of such Agent, expose such Agent to Environmental Liabilities or (c) if
such Agent shall not first be indemnified to its satisfaction against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Without limiting the foregoing, no Lender
shall have either right of action whatsoever against either Agent as a result of
such Agent acting or refraining from acting hereunder or under any other Loan
Document in accordance with the instructions of Requisite Lenders, Requisite
Revolving Lenders or all affected Lenders, as applicable.
9.3. Agent's Reliance, Etc. Neither Agent nor any of its respective
Affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement or the other Loan Documents, except for
damages caused by its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, each Agent: (a) may treat
the payee of any Note as the holder thereof until such Agent receives written
notice of the assignment or transfer thereof signed by such payee and in form
satisfactory to such Agent; (b) may consult with legal counsel, independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (c) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations made in or in connection with this
Agreement or the other Loan Documents; (d) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms, covenants
or conditions of this Agreement or the other Loan Documents on the part of any
Credit Party or to inspect the Collateral (including the books and records) of
any Credit Party; (e) shall not be responsible to any Lender for the due
execution,
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legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto; and (f) shall incur no liability under or
in respect of this Agreement or the other Loan Documents by acting upon any
notice, consent, certificate or other instrument or writing (which may be by
telecopy, telegram, cable or telex) believed by it to be genuine and signed or
sent by the proper party or parties.
9.4. GE Capital and Affiliates. With respect to its Commitments
hereunder, GE Capital shall have the same rights and powers under this Agreement
and the other Loan Documents as any other Lender and may exercise the same as
though it were not Administrative Agent; and the term "Lender" or "Lenders"
shall, unless otherwise expressly indicated, include GE Capital in its
individual capacity. GE Capital and its Affiliates may lend money to, invest in,
and generally engage in any kind of business with, any Credit Party, any of its
Affiliates and any Person who may do business with or own securities of any
Credit Party or any such Affiliate, all as if GE Capital were not Administrative
Agent and without any duty to account therefor to Lenders. GE Capital and its
Affiliates may accept fees and other consideration from any Credit Party for
services in connection with this Agreement or otherwise without having to
account for the same to Lenders. GE Capital has also agreed to purchase certain
equity interests in an Affiliate of Holdings. Each Lender acknowledges the
potential conflict of interest between GE Capital as a Lender holding
disproportionate interests in the Loans, GE Capital as an equity holder of an
Affiliate of Holdings, and GE Capital as Administrative Agent.
9.5. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon either Agent or any other Lender and
based on the Financial Statements referred to in Section 3.4(a) and such other
documents and information as it has deemed appropriate, made its own credit and
financial analysis of the Credit Parties and its own decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon either Agent 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. Each
Lender acknowledges the potential conflict of interest of each other Lender as a
result of Lenders holding disproportionate interests in the Loans, and expressly
consents to, and waives any claim based upon, such conflict of interest.
9.6. Indemnification. Lenders agree to indemnify each Agent (to the
extent not reimbursed by Credit Parties and without limiting the obligations of
Borrower hereunder), ratably according to their respective Pro Rata Shares, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against such
Agent in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted by such Agent in connection therewith;
provided, however, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct. Without limiting the foregoing, each Lender agrees to
reimburse each Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees) incurred by such Agent in
connection with the
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preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
and each other Loan Document, to the extent that such Agent is not reimbursed
for such expenses by Credit Parties.
9.7. Successor Agent. Administrative Agent may resign at any time by
giving not less than thirty (30) days' prior written notice thereof to Lenders
and Borrower. Upon any such resignation, the Requisite Lenders shall have the
right to appoint a successor Administrative Agent. If no such successor
Administrative Agent shall have been so appointed by the Requisite Lenders and
shall have accepted such appointment within 30 days after the resigning
Administrative Agent's giving notice of resignation, then the resigning
Administrative Agent may, on behalf of Lenders, appoint a successor
Administrative Agent, which shall be a Lender, if a Lender is willing to accept
such appointment, or otherwise shall be a commercial bank or financial
institution or a subsidiary of a commercial bank or financial institution if
such commercial bank or financial institution is organized under the laws of the
United States of America or of any State thereof and has a combined capital and
surplus of at least $300,000,000. If no successor Administrative Agent has been
appointed pursuant to the foregoing, by the 30th day after the date such notice
of resignation was given by the resigning Administrative Agent, such resignation
shall become effective and the Requisite Lenders shall thereafter perform all
the duties of Administrative Agent hereunder until such time, if any, as the
Requisite Lenders appoint a successor Administrative Agent as provided above.
Any successor Administrative Agent appointed by Requisite Lenders hereunder
shall be subject to the approval of Borrower, such approval not to be
unreasonably withheld or delayed; provided that such approval shall not be
required if a Default or an Event of Default shall have occurred and be
continuing. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall succeed to and become vested with all the rights, powers, privileges
and duties of the resigning Administrative Agent. Upon the earlier of the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent or the effective date of the resigning Administrative
Agent's resignation, the resigning Administrative Agent shall be discharged from
its duties and obligations under this Agreement and the other Loan Documents,
except that any indemnity rights or other rights in favor of such resigning
Administrative Agent shall continue. After any resigning Administrative Agent's
resignation hereunder, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.
9.8. Setoff and Sharing of Payments. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default,
each Lender and each holder of any Note is hereby authorized at any time or from
time to time, without notice to any Credit Party or to any other Person, any
such notice being hereby expressly waived, to set off and to appropriate and to
apply any and all balances held by it at any of its offices for the account of
Borrower or any Guarantor (regardless of whether such balances are then due to
Borrower or any Guarantor) and any other properties or assets any time held or
owing by that Lender or that holder to or for the credit or for the account of
Borrower or any Guarantor against and on
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account of any of the Obligations which are not paid when due. Any Lender or
holder of any Note exercising a right to set off or otherwise receiving any
payment on account of the Obligations in excess of its Pro Rata Share thereof
shall purchase for cash (and the other Lenders or holders shall sell) such
participations in each such other Lender's or holder's Pro Rata Share of the
Obligations as would be necessary to cause such Lender to share the amount so
set off or otherwise received with each other Lender or holder in accordance
with their respective Pro Rata Shares. Each Lender's obligation under this
Section 9.8 shall be in addition to and not limitation of its obligations to
purchase a participation in an amount equal to its Pro Rata Share of the Swing
Line Loans under Section 1.1. Borrower and each Guarantor agrees, to the fullest
extent permitted by law, that (a) any Lender or holder may exercise its right to
set off with respect to amounts in excess of its Pro Rata Share of the
Obligations and may sell participations in such amount so set off to other
Lenders and holders and (b) any Lender or holders so purchasing a participation
in the Loans made or other Obligations held by other Lenders or holders may
exercise all rights of set-off, bankers' lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender or holder were a
direct holder of the Loans and the other Obligations in the amount of such
participation. Notwithstanding the foregoing, if all or any portion of the
set-off amount or payment otherwise received is thereafter recovered from the
Lender that has exercised the right of set-off, the purchase of participations
by that Lender shall be rescinded and the purchase price restored without
interest.
9.9. Advances; Payments; Non-Funding Lenders; Information; Actions in
Concert.
(a) Advances; Payments. (i) Revolving Lenders shall refund or
participate in the Swing Line Loan in accordance with clauses (iii) and (iv) of
Section 1.1(c). If the Swing Line Lender declines to make a Swing Line Loan or
if Swing Line Availability is zero, Administrative Agent shall notify Revolving
Lenders, promptly after receipt of a Notice of Revolving Advance and in any
event prior to 1:00 p.m. (New York time) on the date such Notice of Revolving
Advance is received, by telecopy, telephone or other similar form of
transmission. Each Revolving Lender shall make the amount of such Lender's Pro
Rata Share of such Revolving Credit Advance available to Administrative Agent in
same day funds by wire transfer to Administrative Agent's account as set forth
in Annex H not later than 3:00 p.m. (New York time) on the requested funding
date, in the case of an Index Rate Loan and not later than 11:00 a.m. (New York
time) on the requested funding date in the case of a LIBOR Loan. After receipt
of such wire transfers (or, in Administrative Agent's sole discretion, before
receipt of such wire transfers), subject to the terms hereof, Administrative
Agent shall make the requested Revolving Credit Advance to Borrower. All
payments by each Revolving Lender shall be made without setoff, counterclaim or
deduction of any kind.
(ii) On the second (2nd) Business Day of each calendar week or
more frequently as aggregate cumulative payments in excess of $2,000,000
are received with respect to the Loans (other than the Swing Line Loan)
(each, a "Settlement Date"), Administrative Agent will advise each Lender
by telephone, or telecopy of the amount of such Lender's Pro Rata Share of
principal, interest and Fees paid for the benefit of Lenders with respect
to each applicable Loan. Provided that such Lender has funded all payments
and Advances required to be made by it and purchased all participations
required to be purchased by it under this Agreement and the other Loan
Documents as of
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such Settlement Date, Administrative Agent will pay to each Lender such
Lender's Pro Rata Share of principal, interest and Fees paid by Borrower
since the previous Settlement Date for the benefit of that Lender on the
Loans held by it. To the extent that any Lender (a "Non-Funding Lender")
has failed to fund all such payments and Advances or failed to fund the
purchase of all such participations, Administrative Agent shall be entitled
to set off the funding short-fall against that Non-Funding Lender's Pro
Rata Share of all payments received from Borrower. Such payments shall be
made by wire transfer to such Lender's account (as specified by such Lender
in Annex H or the applicable Assignment Agreement) not later than 2:00 p.m.
(New York time) on the next Business Day following each Settlement Date.
(b) Availability of Lender's Pro Rata Share. Administrative Agent may
assume that each Revolving Lender will make its Pro Rata Share of each Revolving
Credit Advance available to Administrative Agent on each funding date. If such
Pro Rata Share is not, in fact, paid to Administrative Agent by such Revolving
Lender when due, Administrative Agent will be entitled to recover such amount on
demand from such Revolving Lender without set-off, counterclaim or deduction of
any kind. If any Revolving Lender fails to pay the amount of its Pro Rata Share
forthwith upon Administrative Agent's demand, Administrative Agent shall
promptly notify Borrower and Borrower shall immediately repay such amount to
Administrative Agent. Nothing in this Section 9.9(b) or elsewhere in this
Agreement or the other Loan Documents shall be deemed to require Administrative
Agent to advance funds on behalf of any Revolving Lender or to relieve any
Revolving Lender from its obligation to fulfill its Commitments hereunder or to
prejudice any rights that Borrower may have against any Revolving Lender as a
result of any default by such Revolving Lender hereunder. To the extent that
Administrative Agent advances funds to Borrower on behalf of any Revolving
Lender and is not reimbursed therefor on the same Business Day as such Advance
is made, Administrative Agent shall be entitled to retain for its account all
interest accrued on such Advance until reimbursed by the applicable Revolving
Lender.
(c) Return of Payments.
(i) If Administrative Agent pays an amount to a Lender under this
Agreement in the belief or expectation that a related payment has been or
will be received by Administrative Agent from Borrower and such related
payment is not received by Administrative Agent, then Administrative Agent
will be entitled to recover such amount from such Lender on demand without
set-off, counterclaim or deduction of any kind.
(ii) If Administrative Agent determines at any time that any
amount received by Administrative Agent under this Agreement must be
returned to Borrower or paid to any other Person pursuant to any insolvency
law or otherwise, then, notwithstanding any other term or condition of this
Agreement or any other Loan Document, Administrative Agent will not be
required to distribute any portion thereof to any Lender. In addition, each
Lender will repay to Administrative Agent on demand any portion of such
amount that Administrative Agent has distributed to such Lender, together
with interest at such rate, if any, as
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Administrative Agent is required to pay to Borrower or such other
Person, without set-off, counterclaim or deduction of any kind.
(d) Non-Funding Lenders. The failure of any Non-Funding Lender to make
any Revolving Credit Advance or any payment required by it hereunder, or to
purchase any participation in any Swing Line Loan to be made or purchased by it
on the date specified therefor shall not relieve any other Revolving Lender
(each such other Revolving Lender, an "Other Lender") of its obligations to make
such Advance or purchase such participation on such date, but neither any Other
Lender nor any Agent shall be responsible for the failure of any Non-Funding
Lender to make an Advance or to purchase a participation required hereunder.
Notwithstanding anything set forth herein to the contrary, a Non-Funding Lender
shall not have any voting or consent rights under or with respect to any Loan
Document or constitute a "Lender" or a "Revolving Lender" (or be included in the
calculation of "Requisite Lenders" or "Requisite Revolving Lenders" hereunder)
for any voting or consent rights under or with respect to any Loan Document.
(e) Dissemination of Information. Administrative Agent will use
reasonable efforts to provide Lenders with any notice of Default or Event of
Default received by Administrative Agent from, or delivered by Administrative
Agent to, any Credit Party, with notice of any Event of Default of which
Administrative Agent has actually become aware and with notice of any action
taken by Agent following any Event of Default; provided, however, that
Administrative Agent shall not be liable to any Lender for any failure to do so,
except to the extent that such failure is attributable to Administrative Agent's
gross negligence or willful misconduct. Lenders acknowledge that Borrower is
required to provide Financial Statements and Collateral Reports to Lenders in
accordance with Annexes E and F hereto and agree that Administrative Agent shall
have no duty to provide the same to Lenders.
(f) Actions in Concert. Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action to protect or enforce its rights arising out of this
Agreement or the Notes (including exercising any rights of set-off) without
first obtaining the prior written consent of Administrative Agent and Requisite
Lenders, it being the intent of Lenders that any such action to protect or
enforce rights under this Agreement and the Notes shall be taken in concert and
at the direction or with the consent of Administrative Agent.
10. SUCCESSORS AND ASSIGNS
10.1. Successors and Assigns. This Agreement and the other Loan
Documents shall be binding on and shall inure to the benefit of each Credit
Party, Administrative Agent, Documentation Agent, Lenders and their respective
successors and assigns (including, in the case of any Credit Party, a
debtor-in-possession on behalf of such Credit Party), except as otherwise
provided herein or therein. No Credit Party may assign, transfer, hypothecate or
otherwise convey its rights, benefits, obligations or duties hereunder or under
any of the other Loan Documents without the prior express written consent of
Administrative Agent and Lenders. Any such purported assignment, transfer,
hypothecation or other conveyance by any Credit Party without the prior express
written consent of Administrative Agent and Lenders shall be void.
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The terms and provisions of this Agreement are for the purpose of defining the
relative rights and obligations of each Credit Party, Administrative Agent,
Documentation Agent and Lenders with respect to the transactions contemplated
hereby and no Person shall be a third party beneficiary of any of the terms and
provisions of this Agreement or any of the other Loan Documents.
11. MISCELLANEOUS
11.1. Complete Agreement; Modification of Agreement. The Loan
Documents constitute the complete agreement between the parties with respect to
the subject matter thereof and may not be modified, altered or amended except as
set forth in Section 11.2 below. Any letter of interest, commitment letter
and/or fee letter (other than the GE Capital Fee Letter) between any Credit
Party and either Agent or any Lender or any of their respective affiliates,
predating this Agreement and relating to a financing of substantially similar
form, purpose or effect shall be superseded by this Agreement; provided,
however, that the provisions of the Commitment Letter pertaining to the
agreement by Chartwell to pay Transaction Expenses (as defined therein) and
provide indemnities shall survive until the Closing Date.
11.2. Amendments and Waivers. (a) Except for actions expressly
permitted to be taken by either Agent, no amendment, modification, termination
or waiver of any provision of this Agreement or any of the Notes, or any consent
to any departure by any Credit Party therefrom, shall in any event be effective
unless the same shall be in writing and signed by Administrative Agent and
Borrower, and by Requisite Lenders, Requisite Revolving Lenders or all affected
Lenders, as applicable. Except as set forth in clauses (b) and (c) below, all
such amendments, modifications, terminations or waivers requiring the consent of
any Lenders shall require the written consent of Requisite Lenders.
(b) No amendment, modification, termination or waiver of or consent
with respect to any provision of this Agreement which increases the percentage
advance rates set forth in the definition of the Borrowing Base, or which makes
less restrictive the nondiscretionary criteria for exclusion from Eligible
Accounts and Eligible Inventory set forth in Sections 1.6 and 1.7, shall be
effective unless the same shall be in writing and signed by Administrative
Agent, Documentation Agent, Requisite Revolving Lenders and Borrower. No
amendment, modification, termination or waiver of or consent with respect to any
provision of this Agreement which waives compliance with the conditions
precedent set forth in Section 2.2 to the making of any Loan or the incurrence
of any Letter of Credit Obligations shall be effective unless the same shall be
in writing and signed by Administrative Agent, Documentation Agent, Requisite
Revolving Lenders and Borrower. Notwithstanding anything contained in this
Agreement to the contrary, no waiver or consent with respect to any Default (if
in connection therewith either Agent or Requisite Revolving Lenders, as the case
may be, have exercised its or their right to suspend the making or incurrence of
further Advances or Letter of Credit Obligations pursuant to Section 8.2(a)) or
any Event of Default shall be effective for purposes of the conditions precedent
to the making of Loans or the incurrence of Letter of Credit Obligations set
forth in Section 2.2 unless the same shall be in writing and signed by
Administrative Agent, Requisite Revolving Lenders and Borrower.
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(c) No amendment, modification, termination or waiver shall, unless in
writing and signed by Administrative Agent, Documentation Agent and each Lender
directly affected thereby, do any of the following: (i) increase the principal
amount of any Lender's Commitment (which action shall be deemed to directly
affect all Lenders); (ii) reduce the principal of, rate of interest on or Fees
payable with respect to any Loan or Letter of Credit Obligations of any affected
Lender; (iii) extend any scheduled payment date or final maturity date of the
principal amount of any Loan of any affected Lender; (iv) waive, forgive, defer,
extend or postpone any payment of interest or Fees as to any affected Lender;
(v) release any Guaranty or, except as otherwise permitted herein or in the
other Loan Documents, release, or permit any Credit Party to sell or otherwise
dispose of, any Collateral with a value exceeding $8,000,000 in the aggregate
(which action shall be deemed to directly affect all Lenders); (vi) change the
percentage of the Commitments or of the aggregate unpaid principal amount of the
Loans which shall be required for Lenders or any of them to take any action
hereunder; and (vii) amend or waive this Section 11.2 or the definitions of the
terms "Requisite Lenders" or "Requisite Revolving Lenders" insofar as such
definitions affect the substance of this Section 11.2. Furthermore, no
amendment, modification, termination or waiver affecting the rights or duties of
either Agent under this Agreement or any other Loan Document shall be effective
unless in writing and signed by the affected Agent and Administrative Agent, in
addition to Lenders required hereinabove to take such action. Each amendment,
modification, termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given. No amendment,
modification, termination or waiver shall be required for Administrative Agent
to take additional Collateral pursuant to any Loan Document. No amendment,
modification, termination or waiver of any provision of any Note shall be
effective without the written concurrence of the holder of that Note. No notice
to or demand on any Credit Party in any case shall entitle such Credit Party or
any other Credit Party to any other or further notice or demand in similar or
other circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this Section 11.2 shall be binding upon each holder
of the Notes at the time outstanding and each future holder of the Notes.
(d) If, in connection with any proposed amendment, modification,
waiver or termination (a "Proposed Change") requiring the consent of all
affected Lenders, the consent of Requisite Lenders is obtained, but the consent
of other Lenders whose consent is required is not obtained (any such Lender
whose consent is not obtained as described this clause (i) and in clauses (ii)
and (iii) below being referred to as a "Non-Consenting Lender"), then, so long
as Administrative Agent is not a Non-Consenting Lender, at Borrower's request
Administrative Agent, or a Person acceptable to Administrative Agent, shall have
the right with Administrative Agent's consent and in Administrative Agent's sole
discretion (but shall have no obligation) to purchase from such Non-Consenting
Lenders, and such Non-Consenting Lenders agree that they shall, upon
Administrative Agent's request, sell and assign to Administrative Agent or such
Person, all of the Commitments of such Non-Consenting Lender for an amount equal
to the principal balance of all Loans held by the Non-Consenting Lender and all
accrued interest and Fees with respect thereto through the date of sale, such
purchase and sale to be consummated pursuant to an executed Assignment
Agreement.
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(e) Upon payment in full in cash and performance of all of the
Obligations (other than indemnification Obligations under Section 1.13),
termination of the Commitments and a release of all claims against each Agent
and all Lenders, and so long as no suits, actions proceedings, or claims are
pending or threatened against any Indemnified Person asserting any damages,
losses or liabilities that are Indemnified Liabilities, Administrative Agent
shall deliver to Borrower termination statements, mortgage releases and other
documents necessary or appropriate to evidence the termination of the Liens
securing payment of the Obligations.
11.3. Fees and Expenses. Borrower shall reimburse each Agent for all
of its respective out-of-pocket expenses incurred in connection with the
preparation of the Loan Documents (including the reasonable fees and expenses of
all of its special loan counsel, advisors, consultants and auditors retained in
connection with the Loan Documents and the Related Transactions and advice in
connection therewith). Borrower shall reimburse Administrative Agent (and, with
respect to clauses (c) and (d) below, each Lender) for all of its respective
fees, costs and expenses, including the reasonable fees, costs and expenses of
counsel or other advisors (including environmental and management consultants
and appraisers) for advice, assistance, or other representation in connection
with:
(a) the forwarding to Borrower or any other Person on behalf of
Borrower by Administrative Agent of the proceeds of the Loans;
(b) any amendment, modification or waiver of, or consent with respect
to, any of the Loan Documents or Related Transactions Documents or advice in
connection with the administration of the Loans made pursuant hereto or its
rights hereunder or thereunder;
(c) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Administrative Agent, any Lender, Borrower or any other
Person) in any way relating to the Collateral, any of the Loan Documents or any
other agreement to be executed or delivered in connection therewith or herewith,
whether as party, witness, or otherwise, including any litigation, contest,
dispute, suit, case, proceeding or action, and any appeal or review thereof, in
connection with a case commenced by or against Borrower or any other Person that
may be obligated to Administrative Agent by virtue of the Loan Documents;
including any such litigation, contest, dispute, suit, proceeding or action
arising in connection with any work-out or restructuring of the Loans during the
pendency of one or more Events of Default; provided that in the case of
reimbursement of counsel for Lenders other than Administrative Agent, such
reimbursement shall be limited to one counsel for all such Lenders;
(d) any attempt to enforce any remedies of Administrative Agent or any
Lender against any or all of the Credit Parties or any other Person that may be
obligated to Administrative Agent or any Lender by virtue of any of the Loan
Documents; including any such attempt to enforce any such remedies in the course
of any work-out or restructuring of the Loans during the pendency of one or more
Events of Default; provided that in the case of reimbursement of counsel for
Lenders other than Administrative Agent, such reimbursement shall be limited to
one counsel for all such Lenders;
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(e) any work-out or restructuring of the Loans during the pendency of
one or more Events of Default;
(f) efforts to (i) monitor the Loans or any of the other Obligations,
(ii) evaluate, observe or assess any of the Credit Parties or their respective
affairs, and (iii) verify, protect, evaluate, assess, appraise, collect, sell,
liquidate or otherwise dispose of any of the Collateral;
including, as to each of clauses (a) through (f) above, all reasonable
attorneys' and other professional and service providers' fees arising from such
services, including those in connection with any appellate proceedings; and all
reasonable expenses, costs, charges and other reasonable fees incurred by such
counsel and others in any way or respect arising in connection with or relating
to any of the events or actions described in this Section 11.3 shall be payable,
on demand, by Borrower to Administrative Agent. Without limiting the generality
of the foregoing, such expenses, costs, charges and fees may include: fees,
costs and expenses of accountants, environmental advisors, appraisers,
investment bankers, management and other consultants and paralegals; court costs
and expenses; photocopying and duplication expenses; court reporter fees, costs
and expenses; long distance telephone charges; air express charges; telegram or
telecopy charges; secretarial overtime charges; and expenses for travel, lodging
and food paid or incurred in connection with the performance of such legal or
other advisory services. Notwithstanding the foregoing, if the Closing Date does
not occur, only Acquisition Co. and, as set forth in Section 11.1, Chartwell,
shall be responsible for the reimbursement of fees and expenses pursuant to this
Section 11.3.
11.4. No Waiver. Either Agent's or any Lender's failure, at any time
or times, to require strict performance by the Credit Parties of any provision
of this Agreement and any of the other Loan Documents shall not waive, affect or
diminish any right of such Agent or such Lender thereafter to demand strict
compliance and performance therewith. Any suspension or waiver of an Event of
Default shall not suspend, waive or affect any other Event of Default whether
the same is prior or subsequent thereto and whether the same or of a different
type. Subject to the provisions of Section 11.2, none of the undertakings,
agreements, warranties, covenants and representations of any Credit Party
contained in this Agreement or any of the other Loan Documents and no Default or
Event of Default by any Credit Party shall be deemed to have been suspended or
waived by either Agent or any Lender, unless such waiver or suspension is by an
instrument in writing signed by an officer of or other authorized employee of
such Agent and the applicable required Lenders and directed to Borrower
specifying such suspension or waiver.
11.5. Remedies. Each Agent's and each Lenders' rights and remedies
under this Agreement shall be cumulative and nonexclusive of any other rights
and remedies which either Agent or any Lender may have under any other
agreement, including the other Loan Documents, by operation of law or otherwise.
Recourse to the Collateral shall not be required.
11.6. Severability. Wherever possible, each provision of this
Agreement and the other Loan Documents shall be interpreted in such a manner as
to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or
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invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
11.7. Conflict of Terms. Except as otherwise provided in this
Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in any of the
other Loan Documents, the provision contained in this Agreement shall govern and
control.
11.8. Confidentiality. Each Agent and each Lender agree to use
commercially reasonable efforts (equivalent to the efforts such Agent or such
Lender applies to maintain the confidentiality of its own confidential
information) to maintain as confidential all confidential information provided
to them by the Credit Parties and designated as confidential for a period of two
(2) years following receipt thereof, except that each Agent and each Lender may
disclose such information (a) to Persons employed or engaged by such Agent or
such Lender in evaluating, approving, structuring or administering the Loans and
the Commitments; (b) to any bona fide assignee or participant or potential
assignee or participant that has agreed to comply with the covenant contained in
this Section 11.8 (and any such bona fide assignee or participant or potential
assignee or participant may disclose such information to Persons employed or
engaged by them as described in clause (a) above) so long as such Persons have
agreed to be bound by the provisions of this Section 11.8; (c) as required or
requested by any Governmental Authority or reasonably believed by such Agent or
such Lender to be compelled by any court decree, subpoena or legal or
administrative order or process; (d) as, on the advice of such Agent's or such
Lender's counsel, required by law; (e) in connection with the exercise of any
right or remedy under the Loan Documents or in connection with any litigation to
which such Agent or such Lender is a party; or (f) which ceases to be
confidential through no fault of such Agent or such Lender.
11.9. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND
ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH CREDIT PARTY HEREBY
CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY,
CITY OF NEW YORK, NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, ADMINISTRATIVE
AGENT, DOCUMENTATION AGENT AND LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED, THAT ADMINISTRATIVE
AGENT, DOCUMENTATION AGENT, LENDERS AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW
YORK
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COUNTY, CITY OF NEW YORK, NEW YORK AND, PROVIDED, FURTHER NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE ADMINISTRATIVE AGENT FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE
ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF ADMINISTRATIVE AGENT. EACH CREDIT
PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH CREDIT PARTY HEREBY WAIVES
ANY OBJECTION WHICH SUCH CREDIT PARTY MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. EACH CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET FORTH IN
ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
UPON THE EARLIER OF SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS
AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
11.10. Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other parties, or whenever any of the parties desires to give or
serve upon any other parties any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and three (3)
Business Days after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this Section
11.10), (c) one (1) Business Day after deposit with a reputable overnight
courier with all charges prepaid or (d) when delivered, if hand-delivered by
messenger, all of which shall be addressed to the party to be notified and sent
to the address or facsimile number indicated on Annex I or to such other address
(or facsimile number) as may be substituted by notice given as herein provided.
The giving of any notice required hereunder may be waived in writing by the
party entitled to receive such notice. Failure or delay in delivering copies of
any notice, demand, request, consent, approval, declaration or other
communication to any Person (other than Borrower or Administrative Agent)
designated on Annex I to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
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11.11. Section Titles. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
11.12. Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which shall collectively and separately
constitute one agreement.
11.13. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, AMONG AGENTS, LENDERS AND ANY CREDIT PARTY ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
11.14. Press Releases. Each Credit Party executing this Agreement
agrees that neither it nor its Affiliates will in the future issue any press
releases or other public disclosure using the name of GE Capital, Indosuez or
any of their respective affiliates or referring to this Agreement, the other
Loan Documents or the Related Transactions Documents without at least two (2)
Business Days' prior notice to GE Capital and Indosuez and without the prior
written consent of GE Capital and Indosuez unless (and only to the extent that)
such Credit Party or Affiliate is required to do so under law and then, in any
event, such Credit Party or Affiliate will consult with GE Capital and Indosuez
before issuing such press release or other public disclosure. Each Credit Party
consents to the publication by Administrative Agent or any Lender of a tombstone
or similar advertising material relating to the financing transactions
contemplated by this Agreement with the prior consent of Borrower, which shall
not be unreasonably withheld or delayed. Administrative Agent or such Lender
shall provide a draft of any such tombstone or similar advertising material to
each Credit Party for review and comment prior to the publication thereof.
Administrative Agent reserves the right to provide to industry trade
organizations information necessary and customary for inclusion in league table
measurements with Borrower's consent which shall not be unreasonably withheld or
delayed.
11.15. Reinstatement. This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
Borrower for liquidation or reorganization, should Borrower become insolvent or
make an assignment for the benefit of any creditor or creditors or should a
receiver or trustee be appointed for all or any significant part of Borrower's
assets, and shall continue to be effective or to be reinstated, as the case may
be, if at any time payment and performance of the Obligations, or any part
thereof, is, pursuant to
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applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee of the Obligations, whether as a "voidable preference,"
"fraudulent conveyance," or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Obligations shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
11.16. Advice of Counsel. Each of the parties represents to each other
party hereto that it has discussed this Agreement and, specifically, the
provisions of Sections 11.9 and 11.13, with its counsel.
11.17. No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto 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.
11.18. No Director and Officer Liability. No director or officer of
any Credit Party, as such, shall have any personal liability for payment and
performance of the Obligations.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
PLAYCORE WISCONSIN, INC.
/s/ Frederic L. Contino
---------------------------------------------
By: Frederic L. Continio
Title: President and Chief Executive Officer
GENERAL ELECTRIC CAPITAL
CORPORATION, as Administrative Agent and
Lender
/s/ Janet Silverman
---------------------------------------------
By: Janet Silverman
Title: Its duly authorized signatory
CREDIT AGRICOLE INDOSUEZ,
as Documentation Agent and Lender
/s/ Michael Arougheti
---------------------------------------------
By: Michael Arougheti
Title: Vice President
/s/ Patricia Frankel
---------------------------------------------
By: Patricia Frankel
Title: First Vice President
The following Persons are signatories to this Agreement in their
capacity as Credit Parties and not as Borrowers:
PLAYCORE, INC.
/s/ Frederic L. Contino
---------------------------------------------
By: Frederic L. Continio
Title: President and Chief Executive Officer
HEARTLAND INDUSTRIES, INC. (DE)
/s/ Frederic L. Contino
---------------------------------------------
By: Frederic L. Continio
Title: President and Chief Executive Officer
PLAYCORE HOLDINGS, INC.
/s/ Michael Shein
---------------------------------------------
By: Michael Shein
Title: Vice President
<PAGE> 79
ANNEX A (RECITALS)
TO
CREDIT AGREEMENT
DEFINITIONS
Capitalized terms used in the Loan Documents shall have (unless
otherwise provided elsewhere in the Loan Documents) the following respective
meanings and all Section references in the following definitions shall refer to
Sections of the Agreement:
"Account Debtor" shall mean any Person who may become obligated to any
Credit Party under, with respect to, or on account of, an Account.
"Accounts" shall mean all "accounts," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party and, in any event,
including (a) all accounts receivable, other receivables, book debts and other
forms of obligations (other than forms of obligations evidenced by Chattel
Paper, Documents or Instruments) now owned or hereafter received or acquired by
or belonging or owing to any Credit Party, whether arising out of goods sold or
services rendered by it or from any other transaction (including any such
obligations which may be characterized as an account or contract right under the
Code), (b) all of each Credit Party's rights in, to and under all purchase
orders or receipts now owned or hereafter acquired by it for goods or services,
(c) all of each Credit Party's rights to any goods represented by any of the
foregoing (including unpaid sellers' rights of rescission, replevin, reclamation
and stoppage in transit and rights to returned, reclaimed or repossessed goods),
(d) all monies due or to become due to any Credit Party, under all purchase
orders and contracts for the sale of goods or the performance of services or
both by such Credit Party or in connection with any other transaction (whether
or not yet earned by performance on the part of such Credit Party) now or
hereafter in existence, including the right to receive the proceeds of said
purchase orders and contracts, and (e) all collateral security and guarantees of
any kind, now or hereafter in existence, given by any Person with respect to any
of the foregoing.
"Acquisition" shall mean the acquisition of all or substantially all
of the common stock of Holdings pursuant to a tender offer by Holdings and/or
Merger Co. of the common stock of Holdings and the Merger.
"Acquisition Agreement" shall mean, collectively, (a) the Agreement
and Plan of Merger dated as of the date hereof by and among Holdings,
Acquisition Co. and Merger Co., (b) the Stock Purchase Agreement dated as of the
date hereof by and among Acquisition Co., Merger Co. and GreenGrass Holdings,
(c) the Purchase, Waiver and Consent Agreement dated as of the date hereof by
and among Merger Co., Holdings, Borrower, MassachusettsMutual Life Insurance
Company, MassMutual Corporate Investors, MassMutual Participation Investors,
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MassMutual Corporate Value Partners Limited and Gerlach & Co., (d) those certain
Option Exercise/Cancellation Agreements dated as of the date hereof by and among
Holdings, Merger Co., and certain members of management of Holdings and
Borrower, (e) all documents filed with the Securities and Exchange Commission in
connection with the tender offer by Holdings and/or Merger Co. for the common
stock of Holdings and (f) all other documents executed in connection therewith.
"Acquisition Co." shall mean PlayCore Holdings, Inc., a Delaware
corporation.
"Activation Event" and "Activation Notice" shall have the meanings set
forth in Annex C.
"Administrative Agent" shall mean GE Capital or its successor
appointed pursuant to Section 9.7.
"Advance" shall mean any Revolving Credit Advance or Swing Line
Advance, as the context may require.
"Affiliate" shall mean, with respect to any Person, (a) each Person
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, five percent (5%) or more of the Stock
having ordinary voting power in the election of directors of such Persons, (b)
each Person that controls, is controlled by or is under common control with such
Person, (c) each of such Person's officers, directors, joint venturers and
partners and (d) in the case of Borrower, the immediate family members, spouses
and lineal descendants of individuals who are Affiliates of Borrower. For the
purposes of this definition, "control" of a Person shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting securities, by
contract or otherwise; provided, however, that the term "Affiliate" shall
specifically exclude each Agent and each Lender.
"Agents" shall mean the Administrative Agent and the Documentation
Agent, collectively.
"Agreement" shall mean the Credit Agreement by and among Borrower, the
other Credit Parties named therein, GE Capital, as Administrative Agent and
Lender, Indosuez, as Documentation Agent and Lender and the other Lenders
signatory from time to time to the Agreement.
"Annual Plan" shall mean the annual plan of the Borrower as adopted or
approved by the board of directors thereof.
"Appendices" shall have the meaning assigned to it in the recitals to
the Agreement.
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"Applicable L/C Margin" shall mean the per annum fee, from time to
time in effect, payable with respect to outstanding Letter of Credit Obligations
as determined by reference to Section 1.5(a).
"Applicable Margins" means collectively the Applicable L/C Margin, the
Applicable Revolver Index Margin, the Applicable Revolver LIBOR Margin, the
Applicable Term Loan A Index Margin, the Applicable Term Loan A LIBOR Margin and
the Applicable Term Loan B LIBOR Margin.
"Applicable Revolver Index Margin" shall mean the per annum interest
rate margin from time to time in effect and payable in addition to the Index
Rate applicable to the Revolving Loan, as determined by reference to Section
1.5(a) of the Agreement.
"Applicable Revolver LIBOR Margin" shall mean the per annum interest
rate from time to time in effect and payable in addition to the LIBOR Rate
applicable to the Revolving Loan, as determined by reference to Section 1.5(a)
of the Agreement.
"Applicable Term Loan A Index Margin" shall mean the per annum
interest rate from time to time in effect and payable in addition to the Index
Rate applicable to the Term Loan A, as determined by reference to Section 1.5(a)
of the Agreement.
"Applicable Term Loan A LIBOR Margin" shall mean the per annum
interest rate from time to time in effect and payable in addition to the LIBOR
Rate applicable to the Term Loan A, as determined by reference to Section 1.5(a)
of the Agreement.
"Applicable Term Loan B Index Margin" shall mean the per annum
interest rate from time to time in effect and payable in addition to the Index
Rate applicable to the Term Loan B, as determined by reference to Section 1.5(a)
of the Agreement.
"Applicable Term Loan B LIBOR Margin" shall mean the per annum
interest rate from time to time in effect and payable in addition to the LIBOR
Rate applicable to the Term Loan B, as determined by reference to Section 1.5(a)
of the Agreement.
"Assignment Agreement" shall have the meaning assigned to it in
Section 9.1(a).
"Borrower" shall have the meaning assigned thereto in the recitals to
the Agreement.
"Borrower Accounts" shall have the meaning assigned to it in Annex C.
"Borrowing Availability" shall have the meaning assigned to it in
Section 1.1(a)(i).
"Borrowing Base" shall mean, as of any date of determination by
Administrative Agent, from time to time, an amount equal to the sum at such time
of:
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(a) eighty-five percent (85%) of the book value of Borrower's Eligible
Accounts, less any Reserves established by Administrative Agent at such
time; and
(b) sixty percent (60%) of the book value of Borrower's Eligible
Inventory valued on a first-in, first-out basis (at the lower of cost or
market), less any Reserves established by Administrative Agent at such
time;
plus in months November through March, $3,000,000.
"Borrowing Base Certificate" shall mean a certificate to be executed
and delivered from time to time by Borrower in the form attached to the
Agreement as Exhibit 4.1(b).
"Budget" shall mean the operating budget of the Borrower as adopted or
approved by the board of directors thereof.
"Business Day" shall mean any day that is not a Saturday, a Sunday or
a day on which banks are required or permitted to be closed in the State of New
York and in reference to LIBOR Loans shall mean any such day that is also a
LIBOR Business Day.
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures (by the expenditure of cash or the incurrence of Indebtedness) by
such Person during any measuring period for any fixed assets or improvements or
for replacements, substitutions or additions thereto, that have a useful life of
more than one year and that are required to be capitalized under GAAP.
"Capital Lease" shall mean, with respect to any Person, any lease of
any property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person.
"Capital Lease Obligation" shall mean, with respect to any Capital
Lease of any Person, the amount of the obligation of the lessee thereunder that,
in accordance with GAAP, would appear on a balance sheet of such lessee in
respect of such Capital Lease.
"Cash Management Systems" shall have the meaning assigned to it in
Section 1.8.
"Change of Control" shall mean any event, transaction or occurrence as
a result of which (a) Permitted Holders shall cease to beneficially own (as
defined in Rule 13d-3 or any successor rule or regulation promulgated under the
Securities Exchange Act of 1934, as amended) at least a majority of the
outstanding common equity of Holdings, (b) Holdings shall cease to own and
control all of the economic and voting rights associated with all of the
outstanding capital Stock of Borrower, (c) Borrower shall cease to own and
control all of the economic and voting rights associated with all of the
outstanding capital Stock of Heartland or any Subsidiary of Borrower created in
connection with a Designated Acquisition, or (d) a "Change of Control", as
defined in the Subordinated Notes, shall occur.
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"Charges" shall mean all federal, state, county, city, municipal,
local, foreign or other governmental taxes (including taxes owed to the PBGC at
the time due and payable), levies, assessments, charges, liens, claims or
encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c)
the employees, payroll, income or gross receipts of any Credit Party, (d) any
Credit Party's ownership or use of any properties or other assets, or (e) any
other aspect of any Credit Party's business.
"Chartwell" shall mean Chartwell Investments II, L.L.C. and its
Affiliates.
"Chattel Paper" shall mean any "chattel paper," as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located.
"Closing Date" shall mean the date on which each of the conditions
precedent in Sections 2.1 and 2.2 are satisfied or waived by Administrative
Agent in accordance with the terms of this Agreement and the funding of the Term
Loans occurs.
"Closing Checklist" shall mean the schedule, including all appendices,
exhibits or schedules thereto, listing certain documents and information to be
delivered in connection with the Agreement, the other Loan Documents and the
transactions contemplated thereunder, substantially in the form attached hereto
as Annex D.
"Code" shall mean the Uniform Commercial Code as the same may, from
time to time, be enacted and in effect in the State of New York; provided,
however, in the event that, by reason of mandatory provisions of law, any or all
of the attachment, perfection or priority of Administrative Agent's,
Documentation Agent's or any Lender's security interest in any Collateral is
governed by the Uniform Commercial Code as enacted and in effect in a
jurisdiction other than the State of New York, the term "Code" shall mean the
Uniform Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes of the provisions hereof relating to such attachment,
perfection or priority and for purposes of definitions related to such
provisions.
"Collateral" shall mean the property covered by the Security
Agreement, the Mortgages and the other Collateral Documents and any other
property, real or personal, tangible or intangible, now existing or hereafter
acquired, that may at any time be or become subject to a security interest or
Lien in favor of Administrative Agent, on behalf of itself, Documentation Agent
and Lenders, to secure the Obligations.
"Collateral Documents" shall mean the Security Agreement, the Pledge
Agreement, the Guaranty, the Mortgages, the Patent Security Agreement, the
Trademark Security Agreement, the Copyright Security Agreement and all similar
agreements entered into guaranteeing payment of, or granting a Lien upon
property as security for payment of, the Obligations.
"Collateral Reports" shall mean the reports with respect to the
Collateral referred to in Annex F.
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"Collection Account" shall mean that certain account of Administrative
Agent, account number 50-232-854 in the name of Administrative Agent at Bankers
Trust Company in New York, New York or such other account as Administrative
Agent shall specify.
"Commitment Letter" shall mean the commitment letter in respect of the
Loans dated January 14, 2000 among Chartwell and the Agents.
"Commitment Termination Date" shall mean the earliest of (a) July 1,
2006, (b) the date of termination of Lenders' obligations to make Advances
and/or incur Letter of Credit Obligations or permit existing Loans to remain
outstanding pursuant to Section 8.2(b), and (c) the date of prepayment in full
by Borrower of the Loans and the cancellation and return (or stand-by guarantee)
of all Letters of Credit or the cash collateralization of all Letter of Credit
Obligations pursuant to Annex B, and the permanent reduction of the Revolving
Loan Commitment and the Swing Line Commitment to zero dollars ($0).
"Commitments" shall mean (a) as to any Lender, the aggregate of such
Lender's Revolving Loan Commitment (including without duplication the Swing Line
Lender's Swing Line Commitment as a subset of its Revolving Loan Commitment) and
Term Loan Commitments as set forth on Annex J to the Agreement or in the most
recent Assignment Agreement executed by such Lender and (b) as to all Lenders,
the aggregate of all Lenders' Revolving Loan Commitments (including without
duplication the Swing Line Lender's Swing Line Commitment as a subset of its
Revolving Loan Commitment) and Term Loan Commitments, which aggregate commitment
shall be One Hundred Fifteen Million Dollars ($115,000,000) on the Closing Date,
as to each of clauses (a) and (b), as such Commitments may be reduced, amortized
or adjusted from time to time in accordance with the Agreement.
"Commodity Hedge Obligations" shall mean, with respect to any Person,
the obligations of such Person at such time under commodity price swap
agreements, commodity price cap agreements, commodity price collar agreements
and commodity price arrangements or hedge contracts or forward sale contracts,
in each case designed to protect such Person or its Subsidiaries against
fluctuations in commodity prices; provided that such Commodity Hedge Obligations
are entered into in the ordinary course of business and are not speculative in
nature.
"Compliance Certificate" shall have the meaning assigned to it in
Annex E.
"Concentration Account" shall have the meaning assigned to it in Annex
C.
"Contracts" shall mean all "contracts," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, in any event,
including all contracts, undertakings, or agreements (other than rights
evidenced by Chattel Paper, Documents or Instruments) in or under which any
Credit Party may now or hereafter have any right, title or interest, including
any agreement relating to the terms of payment or the terms of performance of
any Account.
"Control Letter" means a letter agreement between Administrative Agent
and (i) the issuer of uncertificated securities with respect to uncertificated
securities in the name of any
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Credit Party, (ii) a securities intermediary with respect to securities, whether
certificated or uncertificated, securities entitlements and other financial
assets held in a securities account in the name of any Credit Party, (iii) a
futures commission merchant or clearing house with respect to commodity accounts
and commodity contracts held by any Credit Party, whereby, among other things,
the issuer, securities intermediary or futures commission merchant disclaims any
security interest in the applicable financial assets, acknowledges the Lien of
Administrative Agent, on behalf of itself, Documentation Agent and Lenders, on
such financial assets, and agrees to follow the instructions or entitlement
orders of Administrative Agent without further consent by the affected Credit
Party.
"Copyright License" shall mean any and all rights now owned or
hereafter acquired by any Credit Party under any written agreement granting any
right to use any Copyright or Copyright registration.
"Copyright Security Agreements" shall mean the Copyright Security
Agreements made in favor of Administrative Agent, on behalf of itself,
Documentation Agent and Lenders, by each applicable Credit Party.
"Copyrights" shall mean all of the following now owned or hereafter
acquired by any Credit Party: (a) all copyrights and general intangibles of like
nature (whether registered or unregistered), now owned or existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, including all registrations, recordings
and applications in the United States Copyright Office or in any similar office
or agency of the United States, any state or territory thereof, or any other
country or any political subdivision thereof, and (b) all reissues, extensions
or renewals thereof.
"Credit Parties" shall mean Holdings, Borrower, Heartland, Acquisition
Co. and each of their respective Subsidiaries.
"Current Assets" shall mean, with respect to any Person, all current
assets of such Person as of any date of determination calculated in accordance
with GAAP, but excluding cash, cash equivalents and debts due from Affiliates.
"Current Liabilities" shall mean, with respect to any Person, all
liabilities which should, in accordance with GAAP, be classified as current
liabilities, and in any event shall include all Indebtedness payable on demand
or within one year from any date of determination without any option on the part
of the obligor to extend or renew beyond such year, all accruals for federal or
other taxes based on or measured by income and payable within such year, and the
current portion of long-term debt required to be paid within one year, but
excluding, in the case of Borrower, the aggregate outstanding current portions
of the Term Loans, Revolving Loan and the Swing Line Loan and other Funded Debt.
"Default" shall mean any event which, with the passage of time or
notice or both, would, unless cured or waived, become an Event of Default.
"Default Rate" shall have the meaning assigned to it in Section
1.5(d).
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"Designated Acquisition" shall mean the acquisition of all or
substantially all of the assets or Stock of an entity or business unit, for
total consideration of not more than $2,500,000 individually and not more than
$5,000,000 in the aggregate in any Fiscal Year; provided that (i) the acquired
entity or business unit is in the same or related business as Borrower or its
existing Subsidiaries; (ii) any new Subsidiary resulting from such acquisition
becomes a Credit Party, its Stock is pledged pursuant to the Pledge Agreement
and it becomes a party to the Collateral Documents; (iii) after giving pro forma
effect to such acquisition as if it had occurred 12 months prior to the end of
the most recent Fiscal Quarter, the Credit Parties shall be in compliance with
all Financial Covenants set forth in Annex G as set forth in a certificate from
the Chief Financial Officer of Borrower, and the Administrative Agent shall have
received a revised copy of the most recently delivered operating plan as
referenced in Annex E giving effect to such Designated Acquisition; (iv) no
Default or Event of Default shall have occurred and be continuing or would
result therefrom; (v) such acquisition has been approved by Administrative
Agent; and (vi) Administrative Agent shall have been afforded the opportunity to
complete its due diligence with respect to such acquisition and the results
thereof shall be satisfactory to Administrative Agent.
"Disbursement Accounts" shall have the meaning assigned to it on Annex
C.
"Disclosure Schedules" shall mean the Schedules prepared by Borrower
and denominated as Disclosure Schedules 1.4 through 6.7 in the Index to the
Agreement.
"Documentation Agent" shall mean Indosuez or its successor appointed
pursuant to Section 9.7.
"Documents" shall mean any "documents," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located.
"Dollars" or "$" shall mean lawful currency of the United States of
America.
"EBITDA" shall mean, with respect to any Person for any fiscal period,
an amount equal to (a) consolidated net income of such Person for such period,
minus (b) the sum of (i) income tax credits, (ii) gain from extraordinary items
for such period, (iii) any aggregate net gain (but not any aggregate net loss)
during such period arising from the sale, exchange or other disposition of
capital assets by such Person (including any fixed assets, whether tangible or
intangible, all inventory sold in conjunction with the disposition of fixed
assets and all securities), and (iv) any other non-cash gains, in each instance
in this clause (b), which have been added in determining consolidated net
income, in each case to the extent included in the calculation of consolidated
net income of such Person for such period in accordance with GAAP, but without
duplication, plus (c) the sum of (i) any provision for income taxes, (ii)
Interest Expense, (iii) loss from extraordinary items for such period, (iv) the
amount of non-cash charges (including depreciation and amortization) for such
period, (v) amortized debt discount for such period, (vi) the amount of any
deduction to consolidated net income as the result of any grant to any members
of the management of such Person of any Stock, (vii) the Management Fee, and
(viii) any charge related to any premium or penalty paid in connection with
redeeming or retiring any Indebtedness prior to its stated maturity to the
extent permitted hereunder and reducing
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consolidated net income, in each case to the extent included in the calculation
of consolidated net income of such Person for such period in accordance with
GAAP, but without duplication. For purposes of this definition, the following
items shall be excluded in determining consolidated net income of a Person: (1)
the income (or deficit) of any other Person (other than a Subsidiary) in which
such Person has an ownership interest, except to the extent any such income has
actually been received by such Person in the form of cash dividends or
distributions; (2) the undistributed earnings of any Subsidiary of such Person
to the extent that the declaration or payment of dividends or similar
distributions by such Subsidiary is not at the time permitted by the terms of
any contractual obligation or requirement of law applicable to such Subsidiary;
(3) any restoration to income of any contingency reserve, except to the extent
that provision for such reserve was made out of income accrued during such
period or a prior period; (4) any write-up of any asset; (5) any net gain from
the collection of the proceeds of life insurance policies; (6) any net gain
arising from the acquisition of any securities, or the extinguishment, under
GAAP, of any Indebtedness, of such Person, (7) in the case of a successor to
such Person by consolidation or merger or as a transferee of its assets, any
earnings of such successor prior to such consolidation, merger or transfer of
assets, (8) any deferred credit representing the excess of equity in any
Subsidiary of such Person at the date of acquisition of such Subsidiary over the
cost to such Person of the investment in such Subsidiary, and (9) any fees,
expenses, costs, or other charges incurred or paid arising out of the Related
Transactions, including under this Agreement and relating to the retirement or
repayment of Indebtedness on the Closing Date. Notwithstanding the foregoing,
for each of the 12 months prior to the Closing Date, EBITDA shall be as set
forth on Disclosure Schedule (A-EBITDA).
"Eligible Accounts" shall have the meaning assigned to it in Sections
1.6 of the Agreement.
"Eligible Inventory" shall have the meaning assigned to it in Sections
1.7 of the Agreement.
"Environmental Laws" shall mean all applicable federal, state, local
and foreign laws, statutes, ordinances, codes, rules, standards and regulations,
now or hereafter in effect, and in each case as amended or supplemented from
time to time, and any applicable judicial or administrative interpretation
thereof, including any applicable judicial or administrative order, consent
decree, order or judgment, imposing liability or standards of conduct for or
relating to the regulation and protection of human health, safety, the
environment and natural resources (including ambient air, surface water,
groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic
species and vegetation). Environmental Laws include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C.
Sections 9601 et seq.) ("CERCLA"); the Hazardous Materials Transportation
Authorization Act of 1994 (49 U.S.C. Sections 5101 et seq.); the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Sections 136 et seq.); the
Solid Waste Disposal Act (42 U.S.C. Sections 6901 et seq.); the Toxic Substances
Control Act (15 U.S.C. Sections 2601 et seq.); the Clean Air Act (42 U.S.C.
Sections 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C.
Sections 1251 et seq.); the Occupational Safety and Health Act (29 U.S.C.
Sections 651 et seq.); and the Safe Drinking Water Act (42 U.S.C. Sections
300(f) et seq.), each as from time to time amended, and any and all regulations
promulgated thereunder, and all analogous state, local and foreign counterparts
or equivalents and any transfer of ownership notification or approval statutes.
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"Environmental Liabilities" shall mean, with respect to any Person,
all liabilities, obligations, responsibilities, response, remedial and removal
costs, investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all fees, disbursements and expenses of counsel, experts and
consultants), fines, penalties, sanctions and interest incurred as a result of
or related to any claim, suit, action, investigation, proceeding or demand by
any Person, whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law, including any arising under
or related to any Environmental Laws, Environmental Permits, or in connection
with any Release or threatened Release or presence of a Hazardous Material
whether on, at, in, under, from or about or in the vicinity of any real or
personal property.
"Environmental Permits" shall mean all permits, licenses,
authorizations, certificates, approvals or registrations required by any
Governmental Authority under any Environmental Laws.
"Equipment" shall mean all "equipment," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located and,
in any event, including all such Credit Party's machinery and equipment,
including processing equipment, conveyors, machine tools, data processing and
computer equipment with software and peripheral equipment (other than software
constituting part of the Accounts), and all engineering, processing and
manufacturing equipment, office machinery, furniture, materials handling
equipment, tools, attachments, accessories, automotive equipment, trailers,
trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other
equipment of every kind and nature, trade fixtures and fixtures not forming a
part of real property, all whether now owned or hereafter acquired, and wherever
situated, together with all additions and accessions thereto, replacements
therefor, all parts therefor, all substitutes for any of the foregoing, fuel
therefor, and all manuals, drawings, instructions, warranties and rights with
respect thereto, and all products and proceeds thereof and condemnation awards
and insurance proceeds with respect thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
(or any successor legislation thereto), as amended from time to time, and any
regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to any Credit Party, any
trade or business (whether or not incorporated) which, together with such Credit
Party, are treated as a single employer within the meaning of Sections 414(b),
(c), (m) or (o) of the IRC.
"ERISA Event" shall mean, with respect to any Credit Party or any
ERISA Affiliate, (a) any event described in Section 4043(c) of ERISA with
respect to a Title IV Plan; (b) the withdrawal of any Credit Party or ERISA
Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (c) the complete or partial withdrawal of any Credit Party or any
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ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice of
intent to terminate a Title IV Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA; (e) the institution of proceedings to
terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by
any Credit Party or ERISA Affiliate to make when due required contributions to a
Multiemployer Plan or Title IV Plan unless such failure is cured within 30 days;
(g) any other event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan
or for the imposition of liability under Section 4069 or 4212(c) of ERISA; (h)
the termination of a Multiemployer Plan under Section 4041A of ERISA or the
reorganization or insolvency of a Multiemployer Plan under Section 4241 of
ERISA; (i) the loss of a Qualified Plan's qualification or tax exempt status; or
(j) the termination of a Plan described in Section 4064 of ERISA.
"ESOP" shall mean a Plan which is intended to satisfy the requirements
of Section 4975(e)(7) of the IRC.
"Event of Default" shall have the meaning assigned to it in Section
8.1.
"Excess Cash Flow" shall mean, without duplication, with respect to
any Fiscal Year of Borrower and its Subsidiaries, EBITDA, (a) plus decreases or
minus increases (as the case may be) in Working Capital, (b) minus Capital
Expenditures during such Fiscal Year (excluding the financed portion thereof and
excluding any Capital Expenditures in such Fiscal Year to the extent in excess
of the amount permitted to be made in such Fiscal Year pursuant to clause (a) of
Annex G), (c) minus Interest Expense, (d) minus scheduled principal payments
paid or payable in respect of Funded Debt, (e) plus or minus (as the case may
be), extraordinary gains or losses which are cash items not included in the
calculation of net income and not taken into account in calculating EBITDA, (f)
minus mandatory prepayments paid in cash pursuant to Section 1.3 other than
mandatory prepayments made pursuant to Sections 1.3(b)(i), 1.3(b)(iv) or 1.3(d),
(g) minus income taxes paid in cash during such period, (h) minus the Management
Fee, (i) minus voluntary prepayments of Term Loans pursuant to Section 1.3(a)
and (j) minus cash paid in connection with any Designated Acquisition during
such period. For purposes of this definition, "Working Capital" means Current
Assets less Current Liabilities.
"Federal Funds Rate" shall mean, for any day, a floating rate equal to
the weighted average of the rates on overnight federal funds transactions among
members of the Federal Reserve System, as determined by Administrative Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System, or any successor thereto.
"Fees" shall mean any and all fees payable to either Agent or either
Lender pursuant to the Agreement or any of the other Loan Documents.
"Financial Statements" shall mean the consolidated and consolidating
income statements, statements of cash flows and balance sheets of Holdings and
its Subsidiaries delivered in accordance with Section 3.4 of the Agreement and
Annex E to the Agreement.
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"Fiscal Month" shall mean any of the monthly accounting periods of
Borrower.
"Fiscal Quarter" shall mean any of the quarterly accounting periods of
Borrower, ending on March 31, June 30, September 30 and December 31 of each
year.
"Fiscal Year" shall mean any of the annual accounting periods of
Borrower ending on December 31 of each year.
"Fixed Charges" shall mean, with respect to any Person for any fiscal
period, (a) the aggregate of all Interest Expense paid or accrued without
duplication if previously paid or accrued in a prior fiscal period during such
period plus (b) scheduled payments of principal with respect to Indebtedness
during such period, excluding payments under Sections 1.3(b) or 1.3(d), plus (c)
the Management Fee paid or accrued in such period plus (d) Capital Expenditures
made during such period; provided, however, that notwithstanding the foregoing,
solely for the purpose of calculating the Fixed Charge Coverage Ratio for the
12-month periods ending on June 30, 2000, September 30, 2000, and March 31,
2001, respectively, "Fixed Charges" for (1) the period of twelve months ending
June 30, 2000, shall be the quotient obtained by dividing the actual amounts
described in clauses (a), (b) and (c) above for the Fiscal Quarter ending June
30, 2000 by .25, (ii) the period of twelve months ending on September 30, 2000,
shall be the quotient obtained by dividing the actual amounts described in
clauses (a), (b) and (c) above for the two Fiscal Quarters ending September 30,
2000 by .50, and (iii) for the period of twelve months ending on March 31, 2001,
shall be the quotient obtained by dividing the actual amounts described in
clauses (a), (b) and (c) above for the three Fiscal Quarters ending March 31,
2001 by .75.
"Fixed Charge Coverage Ratio" shall mean, with respect to any Person
for any fiscal period, the ratio of EBITDA less Taxes paid to Fixed Charges. In
computing Fixed Charges for any fiscal period, interest and principal payments
that are due within one week after the end of that fiscal period, without
duplication, shall be deemed to have been paid on the last day of that fiscal
period.
"Fixtures" shall mean any "fixtures" as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party.
"Funded Debt" shall mean, with respect to any Person, all Indebtedness
for borrowed money evidenced by notes, bonds, debentures, or similar evidences
of Indebtedness and which by its terms matures more than one year from, or is
directly or indirectly renewable or extendible at such Person's option under a
revolving credit or similar agreement obligating the lender or lenders to extend
credit over a period of more than one year from the date of creation thereof,
and specifically including pay-in-kind interest on the Subordinated Debt,
Capital Lease Obligations, current maturities of long-term debt, revolving
credit and short-term debt extendible beyond one year at the option of the
debtor, and also including, in the case of Borrower, the Loans and, without
duplication, Guaranteed Indebtedness consisting of guaranties of Funded Debt of
other Persons. Solely for purposes of calculating the Leverage Ratio and Senior
Leverage Ratio, the outstanding amount of the Revolving Loan for the purposes of
determining the amount of Funded Debt shall be the lesser of (a) the actual
outstanding amount of the
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Revolving Loan as of the measurement date or (b) the outstanding amount of the
Revolving Loan at the end of each Fiscal Month for the 12 most recently ended
Fiscal Months divided by 12, or, as applicable, for the Fiscal Months set forth
in Disclosure Schedule (A-Funded Debt), such amount as is set forth in such
Schedule.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, consistently applied, as such term is further defined
in Annex G to the Agreement.
"GE Capital Fee Letter" shall have the meaning assigned to it in
Section 1.9.
"General Intangibles" shall mean any "general intangibles," as such
term is defined in the Code, now owned or hereafter acquired by any Credit
Party, and, in any event, including all right, title and interest which such
Credit Party may now or hereafter have in or under any Contract, all customer
lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefor
and reissues, extensions or renewals thereof, rights in Intellectual Property,
interests in partnerships, joint ventures and other business associations,
licenses, permits, copyrights, trade secrets, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, data bases,
data, skill, expertise, experience, processes, models, drawings, materials and
records, goodwill (including the goodwill associated with any Trademark or
Trademark License), all rights and claims in or under insurance policies
(including insurance for fire, damage, loss and casualty, whether covering
personal property, real property, tangible rights or intangible rights, all
liability, life, key man and business interruption insurance, and all unearned
premiums), uncertificated securities, choses in action, deposit, checking and
other bank accounts, rights to receive tax refunds and other payments, rights of
indemnification, all books and records, correspondence, credit files, invoices
and other papers, including without limitation all tapes, cards, computer runs
and other papers and documents in the possession or under the control of such
Credit Party or any computer bureau or service company from time to time acting
for such Credit Party.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any obligation
of such Person guaranteeing any indebtedness, lease, dividend, or other
obligation ("primary obligations") of any other Person (the "primary obligor")
in any manner, including any obligation or arrangement of such Person (a) to
purchase or repurchase any such primary obligation, (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency or any balance sheet condition of the
primary obligor, (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation, or (d) to
indemnify the owner of such primary obligation against loss in respect thereof.
The amount of any Guaranteed Indebtedness at any time shall be deemed to be an
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amount equal to the lesser at such time of (x) the stated or determinable amount
of the primary obligation in respect of which such Guaranteed Indebtedness is
made and (y) the maximum amount for which such Person may be liable pursuant to
the terms of the instrument embodying such Guaranteed Indebtedness; or, if not
stated or determinable, the maximum reasonably anticipated liability (assuming
full performance) in respect thereof.
"Guarantors" shall mean Holdings, Heartland, any other Subsidiary of
Borrower, and each other Person, if any, which executes a guarantee or other
similar agreement in favor of Administrative Agent, on behalf of itself,
Documentation Agent and Lenders in connection with the transactions contemplated
by the Agreement and the other Loan Documents.
"Guaranty" shall mean the Guaranty of even date herewith executed by
Holdings and Heartland in favor of Administrative Agent, on behalf of itself,
Documentation Agent and Lenders.
"Hazardous Material" shall mean any substance, material or waste which
is regulated by or forms the basis of liability now or hereafter under, any
Environmental Laws, including any material or substance which is (a) defined as
a "solid waste," "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "pollutant,"
"contaminant," "hazardous constituent," "special waste," "toxic substance" or
other similar term or phrase under any Environmental Laws, (b) petroleum or any
fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB's), or
any radioactive substance.
"Heartland" shall have the meaning ascribed thereto in the recitals to
the Agreement.
"Holdings" shall (a) prior to the Merger, have the meaning ascribed
thereto in the recitals to the Agreement and (b) upon and after the Merger, mean
Acquisition Co.
"Indebtedness" of any Person shall mean without duplication (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property payment for which is deferred six (6) months or more, but
excluding obligations to trade creditors incurred in the ordinary course of
business that are not overdue by more than six (6) months unless being contested
in good faith, (b) all reimbursement and other obligations with respect to
letters of credit, bankers' acceptances and surety bonds, whether or not
matured, (c) all obligations evidenced by notes, bonds, debentures or similar
instruments, (d) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (e) all Capital Lease Obligations and the present value (discounted
at the Index Rate as in effect on the Closing Date) of future rental payments
under all synthetic leases, (f) all obligations of such Person under commodity
purchase or option agreements or other commodity price hedging arrangements, in
each case whether contingent or matured, (g) all obligations of such Person
under any foreign exchange contract, currency swap agreement, interest rate
swap, cap or collar agreement or other similar agreement or arrangement designed
to alter the risks of that Person
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arising from fluctuations in currency values or interest rates, in each case
whether contingent or matured, (h) all Indebtedness referred to above secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien upon or in property or other assets
(including accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness,
and (i) the Obligations.
"Indemnified Liabilities" shall have the meaning assigned to it in
Section 1.13.
"Index Rate" shall mean, for any day, a floating rate equal to the
higher of (i) the rate publicly quoted from time to time by The Wall Street
Journal as the "base rate on corporate loans posted by at least 75% of the
nation's 30 largest banks" (or, if The Wall Street Journal ceases quoting a base
rate of the type described, the highest per annum rate of interest published by
the Federal Reserve Board in Federal Reserve statistical release H.15 (519)
entitled "Selected Interest Rates" as the Bank prime loan rate or its
equivalent), and (ii) the Federal Funds Rate plus fifty (50) basis points per
annum. Each change in any interest rate provided for in the Agreement based upon
the Index Rate shall take effect at the time of such change in the Index Rate.
"Index Rate Loan" shall mean a Loan or portion thereof bearing
interest by reference to the Index Rate.
"Instruments" shall mean any "instrument," as such term is defined in
the Code, now owned or hereafter acquired by any Credit Party, wherever located,
and, in any event, including all certificated securities, all certificates of
deposit, and all notes and other, without limitation, evidences of indebtedness,
other than instruments that constitute, or are a part of a group of writings
that constitute, Chattel Paper.
"Intellectual Property" shall mean any and all Licenses, Patents,
Copyrights, Trademarks, trade secrets and customer lists.
"Intercompany Notes" shall have the meaning assigned to it in Section
6.3.
"Interest Coverage Ratio" shall mean, with respect to any Person for
any period, the ratio of EBITDA to Interest Expense.
"Interest Expense" shall mean, with respect to any Person for any
fiscal period and net of interest income, interest expense payable in cash
(excluding any original issue discount, interest paid in kind and amortized debt
discount) of such Person determined in accordance with GAAP for the relevant
period ended on such date, including, in any event, interest expense with
respect to any Funded Debt of such Person, interest expense for the relevant
period that has been capitalized on the balance sheet of such Person and
adjustments for Interest Hedge Obligations to the extent consistent with GAAP;
provided, however, that notwithstanding the foregoing, solely for the purpose of
calculating the Interest Coverage Ratio for the 12-month periods ending on June
30, 2000, September 30, 2000 and March 31, 2001, respectively. "Interest
Expense" for (i) the period of twelve months ending on March 31, 2000, shall be
the quotient obtained by dividing the actual Interest Expense (excluding
amortization of
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debt discount and deferred financing fees) for the Fiscal Quarters ending June
30, 2000 by .25, (ii) the period of twelve months ending on September 30, 2000,
shall be the quotient obtained by dividing the actual Interest Expense
(excluding amortization of debt discount and deferred financing fees) for the
two Fiscal Quarters ending September 30, 2000 by .50, and (iii) for the period
of twelve months ending on March 31, 2001, shall be the quotient obtained by
dividing the actual Interest Expense (excluding amortization of debt discount
and deferred financing fees) for the three Fiscal Quarters ending March 31, 2001
by .75.
"Interest Hedge Obligations" shall mean, with respect to any Person,
the obligations of such Person pursuant to any interest rate swap agreement,
interest rate cap, collar or floor agreement or other similar agreement or
arrangement designed to protect against or manage such Person's or any of its
Subsidiaries' exposure to fluctuations in interest rates; provided that such
Interest Hedge Obligations are not speculative in nature.
"Interest Payment Date" means (a) as to any Index Rate Loan, the first
Business Day of each month to occur while such Loan is outstanding, (b) as to
any LIBOR Loan, the last day of the applicable LIBOR Period; provided, that in
the case of any LIBOR Period greater than three months in duration, interest
shall be payable at three-month intervals and on the last day of such LIBOR
Period; and provided further that, in addition to the foregoing, each of (x) the
date upon which all of the Commitments have been terminated and the Loans have
been paid in full and (y) the Commitment Termination Date shall be deemed to be
an "Interest Payment Date" with respect to any interest which is then accrued
under the Agreement, except for the Term Loan B.
"Inventory" shall mean any "inventory," as such term is defined in the
Code, now or hereafter owned or acquired by any Credit Party, wherever located,
and in any event including inventory, merchandise, goods and other personal
property which are held by or on behalf of any Credit Party for sale or lease or
are furnished or are to be furnished under a contract of service, or which
constitute raw materials, work in process or materials used or consumed or to be
used or consumed in such Credit Party's business or in the processing,
production, packaging, promotion, delivery or shipping of the same, including
other supplies.
"Investment Property" shall have the meaning ascribed thereto in
Section 9-115 of the Code in those jurisdictions in which such definition has
been adopted and shall include (i) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of any Credit Party,
including the rights of such Credit Party to any securities account and the
financial assets held by a securities intermediary in such securities account
and any free credit balance or other money owing by any securities intermediary
with respect to that account; (iii) all securities accounts held by any Credit
Party; (iv) all commodity contracts held by any Credit Party; and (v) all
commodity accounts held by any Credit Party.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and
any successor thereto.
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"IRS" shall mean the Internal Revenue Service, or any successor
thereto.
"L/C Issuer" shall have the meaning assigned to such term in Annex B.
"Lenders" shall mean GE Capital, Indosuez, the other Lenders named on
the signature page of the Agreement, and, if any such Lender shall decide to
assign all or any portion of the Obligations, such term shall include such
assignee.
"Letter of Credit Fee" has the meaning ascribed thereto in Annex B.
"Letter of Credit Obligations" shall mean all outstanding obligations
incurred by Administrative Agent and Lenders at the request of Borrower, whether
direct or indirect, contingent or otherwise, due or not due, in connection with
the issuance of a reimbursement agreement or guaranty by Administrative Agent or
purchase of a participation as set forth in Annex B with respect to any Letter
of Credit. The amount of such Letter of Credit Obligations shall equal the
maximum amount which may be payable by Administrative Agent or Lenders thereupon
or pursuant thereto.
"Letters of Credit" shall mean commercial or standby letters of credit
issued for the account of Borrower by any L/C Issuer, and bankers' acceptances
issued by Borrower, for which Administrative Agent and Lenders have incurred
Letter of Credit Obligations.
"Leverage Ratio" shall mean, with respect to Borrower, on a
consolidated basis, the ratio of (a) Funded Debt as of any date of
determination, to (b) the sum of EBITDA for the twelve months ending on that
date of determination.
"LIBOR Business Day" shall mean a Business Day on which banks in the
city of London are generally open for interbank or foreign exchange
transactions.
"LIBOR Loan" shall mean a Loan or any portion thereof bearing interest
by reference to the LIBOR Rate.
"LIBOR Period" shall mean, with respect to any LIBOR Loan, each period
commencing on a LIBOR Business Day selected by Borrower pursuant to the
Agreement and ending one, two, three or six months thereafter, as selected by
Borrower's irrevocable notice to Administrative Agent as set forth in Section
1.5(e); provided that the foregoing provision relating to LIBOR Periods is
subject to the following:
(a) if any LIBOR Period would otherwise end on a day that is not a
LIBOR Business Day, such LIBOR Period shall be extended to the next
succeeding LIBOR Business Day unless the result of such extension would be
to carry such LIBOR Period into another calendar month in which event such
LIBOR Period shall end on the immediately preceding LIBOR Business Day;
(b) any LIBOR Period that would otherwise extend beyond the Commitment
Termination Date or Termination Date, as applicable, shall end two (2)
LIBOR Business Days prior to such date;
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(c) any LIBOR Period pertaining to a LIBOR Loan that begins on the
last LIBOR Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end of such
LIBOR Period) shall end on the last LIBOR Business Day of a calendar month;
(d) Borrower shall select LIBOR Periods so as not to require a payment
or prepayment of any LIBOR Loan during a LIBOR Period for such Loan; and
(e) Borrower shall select LIBOR Periods so that there shall be no more
than five (5) separate LIBOR Loans in existence at any one time.
"LIBOR Rate" shall mean for each LIBOR Period, a rate of interest
determined by Administrative Agent equal to:
(a) the offered rate for deposits in United States Dollars for the
applicable LIBOR Period which appears on Telerate Page 3750 as of 11:00 a.m.,
London time, on the second full LIBOR Business Day next preceding the first day
of each LIBOR Period (unless such date is not a Business Day, in which event the
next succeeding Business Day will be used); divided by
(b) a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day which is two (2) LIBOR Business Days prior to
the beginning of such LIBOR Period (including basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve system or other governmental authority having jurisdiction with
respect thereto, as now and from time to time in effect) for Eurocurrency
funding (currently referred to as "Eurocurrency liabilities" in Regulation D of
such Board which are required to be maintained by a member bank of the Federal
Reserve System.
If such interest rates shall cease to be available from Telerate News
Service, the LIBOR Rate shall be determined from such financial reporting
service or other information as shall be mutually acceptable to Administrative
Agent and Borrower.
"License" shall mean any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by any Credit Party.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Code or comparable law of any jurisdiction).
"Litigation" shall have the meaning assigned to it in Section 3.13.
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"Loan Account" shall have the meaning assigned to it in Section 1.12.
"Loan Documents" shall mean the Agreement, the Notes, the Collateral
Documents, the Commitment Letter and all other agreements, instruments,
documents and certificates identified in the Closing Checklist executed and
delivered to, or in favor of, Administrative Agent, Documentation Agent and/or
Lenders and including all other pledges, powers of attorney, consents,
assignments, contracts, notices, and all other written matter whether
heretofore, now or hereafter executed by or on behalf of any Credit Party, or
any employee of any Credit Party, and delivered to Administrative Agent or any
Lender in connection with the Agreement or the transactions contemplated hereby.
Any reference in the Agreement or any other Loan Document to a Loan Document
shall include all appendices, exhibits or schedules thereto, and all amendments,
restatements, supplements or other modifications thereto, and shall refer to
such Agreement as the same may be in effect at any and all times such reference
becomes operative.
"Loans" shall mean the Revolving Loan, the Swing Line Loan, the Term
Loan A and the Term Loan B.
"Management Fee" shall have the meaning assigned to it in Section
6.14.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the business, assets, operations, prospects or financial or other condition of
the Credit Parties considered as a whole, (b) Borrower's ability to pay any of
the Loans or any of the other Obligations in accordance with the terms of the
Agreement, (c) the Collateral or Administrative Agent's Liens, on behalf of
itself, Documentation Agent and Lenders, on the Collateral or the priority of
such Liens, or (d) either Agent's or any Lender's rights and remedies under the
Agreement and the other Loan Documents.
"Maximum Amount" shall mean, at any particular time, an amount equal
to the Revolving Loan Commitment of all Lenders.
"Merger" shall mean the merger of Merger Co. and Holdings with and
into Borrower.
"Merger Co." shall mean Jasdrew Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Acquisition Co.
"Mortgaged Properties" shall have the meaning assigned to it in Annex
D.
"Mortgages" shall mean each of the mortgages, deeds of trust,
collateral assignments of leases or other real estate security documents
delivered by any Credit Party to Administrative Agent with respect to the
Mortgaged Properties, all in form and substance reasonably satisfactory to
Administrative Agent.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which any Credit Party or ERISA Affiliate is
making, is
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obligated to make, has made or been obligated to make, contributions on behalf
of participants who are or were employed by any of them.
"Net Borrowing Availability" shall mean as of any date of
determination, the lesser of (i) the Maximum Amount and (ii) the Borrowing Base,
in each case less the sum of the Revolving Loan and Swing Line Loan then
outstanding.
"Non-Funding Lender" shall have the meaning assigned to it in Section
9.9(a)(ii).
"Notes" shall mean the Revolving Notes, the Swing Line Note, the Term
A Notes and the Term B Notes, collectively.
"Notice of Conversion/Continuation" shall have the meaning assigned to
it in Section 1.5(e).
"Notice of Revolving Credit Advance" shall have the meaning assigned
to it in Section 1.1(a).
"Obligations" shall mean all loans, advances, debts, liabilities and
obligations, for the performance of covenants, tasks or duties or for payment of
monetary amounts (whether or not such performance is then required or
contingent, or such amounts are liquidated or determinable) owing by any Credit
Party to either Agent or any Lender, and all covenants and duties regarding such
amounts, of any kind or nature, present or future, whether or not evidenced by
any note, agreement or other instrument, arising under the Agreement or any of
the other Loan Documents. This term includes all principal, interest (including
all interest which accrues after the commencement of any case or proceeding in
bankruptcy after the insolvency of, or for the reorganization of any Credit
Party, whether or not allowed in such proceeding), Fees, Charges, expenses,
attorneys' fees and any other sum chargeable to any Credit Party under the
Agreement or any of the other Loan Documents, and solely for purposes of the
Collateral Documents (other than the Guaranty), the Interest Hedge Obligations
owing to any Lender (or any Affiliate of any Lender).
"Overadvance" shall have the meaning assigned to it in Section
1.1(a)(iii). "Patent License" shall mean rights under any written agreement now
owned or hereafter acquired by any Credit Party granting any right with respect
to any invention on which a Patent is in existence.
"Patent Security Agreements" shall mean the Patent Security Agreements
made in favor of Administrative Agent, on behalf of itself, Documentation Agent
and Lenders, by each applicable Credit Party.
"Patents" shall mean all of the following in which any Credit Party
now holds or hereafter acquires any interest: (a) all letters patent of the
United States or any other country, all registrations and recordings thereof,
and all applications for letters patent of the United States or any other
country, including registrations, recordings and applications in the United
States Patent
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and Trademark Office or in any similar office or agency of the United States,
any State or Territory thereof, or any other country, and (b) all reissues,
continuations, continuations-in-part or extensions thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Permitted Encumbrances" shall mean the following encumbrances: (a)
Liens for taxes or assessments or other governmental Charges not yet due and
payable or are being contested in good faith in compliance with Section 5.2(b);
(b) pledges or deposits of money securing statutory obligations under workmen's
compensation, unemployment insurance, social security or public liability laws
or similar legislation (excluding Liens under ERISA); (c) pledges or deposits of
money securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which any Credit Party is a party as lessee made in the
ordinary course of business; (d) workers', mechanics' or similar liens arising
in the ordinary course of business, so long as such Liens attach only to
Equipment, Fixtures and/or Real Estate; (e) carriers', warehousemen's,
suppliers' or other similar possessory liens arising in the ordinary course of
business and securing liabilities in an outstanding aggregate amount not in
excess of $6,000,000 at any time, so long as such Liens attach only to Inventory
or Equipment; (f) deposits securing, or in lieu of, surety, appeal or customs
bonds in proceedings to which any Credit Party is a party; (g) any attachment or
judgment lien not constituting an Event of Default under Section 8.1(j); (h)
zoning restrictions, easements, licenses, or other restrictions on the use of
any Real Estate or other minor irregularities in title (including leasehold
title) thereto, so long as the same do not materially impair the use, value, or
marketability of such Real Estate; (i) presently existing or hereafter created
Liens in favor of Administrative Agent, on behalf of itself, Documentation Agent
and Lenders; (j) Liens expressly permitted under clauses (b) and (c) of Section
6.7 of the Agreement, (k) customary landlord Liens pursuant to leases entered
into in the ordinary course of business which apply to property or assets of the
lessee located at the premises and those landlord Liens imposed by law, and (l)
any and all Liens (including without limitation, mortgages, deeds of trust
and/or ground leases) affecting any Real Estate with respect to which any Credit
Party is a tenant or subtenant, to the extent such Lien(s) were not created or
granted by such Credit Party.
"Permitted Holders" shall mean Chartwell, together with any other
Person controlled by or under common control with Chartwell.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
limited liability company, institution, public benefit corporation, other entity
or government (whether federal, state, county, city, municipal, local, foreign,
or otherwise, including any instrumentality, division, agency, body or
department thereof).
"Plan" shall mean, at any time, an employee benefit plan, as defined
in Section 3(3) of ERISA, which any Credit Party maintains, contributes to or
has an obligation to contribute to on behalf of participants who are or were
employed by any Credit Party.
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"Pledge Agreements" shall mean the Pledge Agreement of even date
herewith executed by Holdings and Borrower in favor of Administrative Agent, on
behalf of itself, Documentation Agent and Lenders.
"Prior Lenders" shall mean (a) the lenders under that certain Amended
and Restated Credit Agreement, dated as of February 16, 1999, by and among
Holdings, Borrower and Fleet National Bank, as agent, as amended by Restated
Credit Agreement Amendment No. 1, dated March 3, 2000, (b) the holders of
Holdings' 10% Convertible Debentures due 2004, as set forth on Schedule 1 to
Section 4.3 of the Company Disclosure Schedule to the Agreement and Plan of
Merger dated as of the date hereof by and among Holdings, Acquisition Co. and
Merger Co., and (c) Massachusetts Mutual Life Insurance Company, MassMutual
Corporate Investors, MassMutual Participation Investors, MassMutual Corporate
Value Partners Limited and Gerlach & Co., as holders of Borrower's 12% Senior
Subordinated Notes due March 13, 2005.
"Prior Lender Obligations" shall mean (a) the obligations under that
certain Amended and Restated Credit Agreement, dated as of February 16, 1999, by
and among Holdings, Borrower and Fleet National Bank, as agent, as amended by
Restated Credit Agreement Amendment No. 1, dated March 3, 2000, (b) Holdings'
10% Convertible Debentures due 2004, and (c) Borrower's 12% Senior Subordinated
Notes due March 13, 2005.
"Proceeds" shall mean "proceeds," as such term is defined in the Code
and, in any event, shall include (a) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to any Credit Party from time to time
with respect to any of the Collateral, (b) any and all payments (in any form
whatsoever) made or due and payable to any Credit Party from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of governmental authority), (c) any claim of
any Credit Party against third parties (i) for past, present or future
infringement of any Patent or Patent License, or (ii) for past, present or
future infringement or dilution of any Copyright, Copyright License, Trademark
or Trademark License, or for injury to the goodwill associated with any
Trademark or Trademark License, (d) any recoveries by any Credit Party against
third parties with respect to any litigation or dispute concerning any of the
Collateral, and (e) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral, upon disposition or
otherwise.
"Pro Forma" means the unaudited consolidated and consolidating balance
sheet of Borrower and its Subsidiaries as of March 31, 2000 after giving pro
forma effect to the Related Transactions.
"Projections" means Borrower's forecasted consolidated and
consolidating: (a) balance sheets; (b) profit and loss statements; (c) cash flow
statements; and (d) capitalization statements, all prepared on a Subsidiary by
Subsidiary or division by division basis, if applicable, together with
appropriate supporting details and a statement of underlying assumptions.
"Pro Rata Share" shall mean with respect to all matters relating to
any Lender (a) with respect to the Revolving Loan (including the Swing Line Loan
as a subset of the Swing Line Lender's Revolving Loan), the percentage obtained
by dividing (i) the Revolving Loan
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Commitment (including the Swing Line Commitment as a subset of the Swing Line
Lender's Revolving Loan Commitment), by (ii) the aggregate Revolving Loan
Commitments, as any such percentages may be adjusted by assignments pursuant to
Section 9.1, (b) with respect to the Term Loan A, the percentage obtained by
dividing (i) the Term Loan A Commitment of that Lender by (ii) the aggregate
Term Loan A Commitments of all Lenders, as any such percentages may be adjusted
by assignments permitted pursuant to Section 9.1, (c) with respect to the Term
Loan B, the percentage obtained by dividing (i) the Term Loan B Commitment of
that Lender by (ii) the aggregate Term Loan B Commitments of all Lenders, as any
such percentages may be adjusted by assignments permitted pursuant to Section
9.1, (d) with respect to all Loans, the percentage obtained by dividing (i) the
aggregate Commitments of that Lender by (ii) the aggregate Commitments of all
Lenders, and (e) with respect to all Loans on and after the Commitment
Termination Date, the percentage obtained by dividing (i) the aggregate
outstanding principal balance of the Loans held by that Lender, by (ii) the
outstanding principal balance of the Loans held by all Lenders.
"Qualified Plan" shall mean a Plan which is intended to be
tax-qualified under Section 401(a) of the IRC.
"Real Estate" shall have the meaning assigned to it in Section 3.6.
"Refinancing" shall mean the repayment in full by Borrower of the
Prior Lender Obligations on the Closing Date and the redemption of outstanding
10% Convertible Debentures due 2004 issued by Holdings.
"Refunded Swing Line Loan" shall have the meaning assigned to it in
Section 1.1(c)(iii).
"Related Transactions" means each borrowing under the Revolving Loan
and the Term Loans on the Closing Date, the Acquisition, the Refinancing, all
documents relating to the issuance of the Subordinated Notes, the payment of all
fees, costs and expenses associated with all of the foregoing and the execution
and delivery of all of the Related Transactions Documents.
"Related Transactions Documents" shall mean the Loan Documents, the
Acquisition Agreement, the Subordinated Notes and all other documents executed
in connection therewith.
"Release" shall mean any release, threatened release, spill, emission,
leaking, pumping, pouring, emitting, emptying, escape, injection, deposit,
disposal, discharge, dispersal, dumping, leaching or migration of Hazardous
Material in the indoor or outdoor environment, including the movement of
Hazardous Material through or in the air, soil, surface water, ground water or
property.
"Requisite Lenders" shall mean Lenders having (a) fifty-one percent
(51%) or more of the Commitments of all Lenders, or (b) after the Closing Date,
fifty-one percent (51%) or more of the sum of (i) outstanding Revolving Loan
Commitments plus (ii) the aggregate
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outstanding amount of the Term Loans, or (c) if the Commitments have been
terminated, fifty-one percent (51%) or more of the aggregate outstanding amount
of the Loans.
"Requisite Revolving Lenders" shall mean Lenders having (a) fifty-one
percent (51%) or more of the Revolving Loan Commitments of all Lenders, or (b)
if the Commitments have been terminated, fifty-one percent (51%) or more of the
aggregate outstanding amount of the Revolving Loan.
"Reserves" shall mean, with respect to the Borrowing Base of Borrower
(a) reserves established by Administrative Agent from time to time against
Eligible Inventory pursuant to Section 5.9, (b) reserves established pursuant to
Section 5.4(c), and (c) such other reserves against Eligible Accounts, Eligible
Inventory or Borrowing Availability of Borrower which Administrative Agent may,
in its reasonable credit judgment, establish from time to time. Without limiting
the generality of the foregoing, Reserves established to ensure the payment of
accrued Interest Expenses or Indebtedness shall be deemed to be a reasonable
exercise of Administrative Agent's credit judgment.
"Restricted Payment" shall mean (a) the declaration or payment of any
dividend or the incurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of a Person's Stock,
(b) any payment on account of the purchase, redemption, defeasance, sinking fund
or other retirement of a Person's Stock or any other payment or distribution
made in respect thereof, either directly or indirectly, (c) any payment or
prepayment of principal of, premium, if any, or interest, fees or other charges
on or with respect to, and any redemption, purchase, retirement, defeasance,
sinking fund or similar payment and any claim for rescission with respect to,
any Subordinated Debt; (d) any payment made to redeem, purchase, repurchase or
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire Stock of such Person now or hereafter outstanding; (e)
any payment of a claim for the rescission of the purchase or sale of, or for
material damages arising from the purchase or sale of, any shares of such
Person's Stock or of a claim for reimbursement, indemnification or contribution
arising out of or related to any such claim for damages or rescission; (f) any
payment, loan, contribution, or other transfer of funds or other property to any
Stockholder of such Person other than payment of compensation in the ordinary
course to stockholders who are employees of such Person; and (g) any payment of
management fees (or other fees of a similar nature) by such Person to any
Stockholder of such Person or their Affiliates.
"Retiree Welfare Plan" shall mean, at any time, a Plan that is a
"welfare plan" as defined in Section 3(2) of ERISA, that provides for continuing
coverage or benefits for any participant or any beneficiary of a participant
after such participant's termination of employment, other than continuation
coverage provided pursuant to Section 4980B of the IRC and at the sole expense
of the participant or the beneficiary of the participant.
"Revolving Credit Advance" shall have the meaning assigned to it in
Section 1.1(a)(i).
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"Revolving Lenders" shall mean, as of any date of determination,
Lenders having a Revolving Loan Commitment.
"Revolving Loan" shall mean, at any time, the sum of (i) the aggregate
amount of Revolving Credit Advances outstanding to Borrower plus (ii) the
aggregate Letter of Credit Obligations incurred on behalf of Borrower. Unless
the context otherwise requires, references to the outstanding principal balance
of the Revolving Loan shall include the outstanding balance of Letter of Credit
Obligations.
"Revolving Loan Commitment" shall mean (a) as to any Revolving Lender,
the aggregate commitment of such Revolving Lender to make Revolving Credit
Advances (including without duplication Swing Line Advances as a subset of the
Swing Line Lender's Revolving Loan Commitment) and/or incur Letter of Credit
Obligations as set forth on Annex J to the Agreement or in the most recent
Assignment Agreement executed by such Revolving Lender and (b) as to all
Revolving Lenders, the aggregate commitment of all Revolving Lenders to make
Revolving Credit Advances (including without duplication Swing Line Advances as
a subset of the Swing Line Lender's Revolving Loan Commitment) and/or incur
Letter of Credit Obligations, which aggregate commitment shall be Thirty Million
Dollars ($30,000,000) on the Closing Date, as such amount may be adjusted, if at
all, from time to time in accordance with the Agreement.
"Revolving Note" shall have the meaning assigned to it in Section
1.1(a)(ii).
"Security Agreement" shall mean the Security Agreement of even date
herewith entered into among Administrative Agent, on behalf of itself,
Documentation Agent and Lenders, and each Credit Party that is a signatory
thereto.
"Senior Funded Debt" shall mean Funded Debt other than the
Subordinated Debt.
"Senior Leverage Ratio" shall mean, with respect to Borrower, on a
consolidated basis, the ratio of (a) Senior Funded Debt as of any date of
determination to (b) EBITDA for the twelve months ending on that date of
determination.
"Solvent" shall mean, with respect to any Person on a particular date,
that on such date (a) the fair value of the property of such Person is greater
than the total amount of liabilities, including 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 probably 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 taking
into account the timing and the amounts of cash to be received by such Person or
its Subsidiaries from any source and the timing of and amounts of cash to be
payable in respect of or in connection with the debt and liabilities of such
Person and its Subsidiaries; and (d) such Person is not engaged in a business or
transaction, and is not about to engage in a business or transaction, for which
such Person's property would constitute an unreasonably small capital taking
into account the particular capital requirements of such Person and its
projected capital requirement and availability. The amount of contingent
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liabilities (such as litigation, guarantees and pension plan liabilities) at any
time shall be computed as the amount which, in light of all the facts and
circumstances existing at the time, represents the amount which can be
reasonably be expected to become an actual or matured liability.
"Stock" shall mean all shares, options, warrants, general or limited
partnership interests or other equivalents (regardless of how designated) of or
in a corporation, partnership or equivalent entity whether voting or nonvoting,
including common stock, preferred stock or any other "equity security" (as such
term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended).
"Subordinated Debt" shall mean the Indebtedness of Borrower evidenced
by the Subordinated Notes and Guarantees thereof by the Subsidiaries.
"Subordinated Notes" shall mean those certain 18% Senior Subordinated
Notes due 2008 issued by Borrower in an aggregate original principal amount of
$30,000,000 and Guaranties thereof by Holdings and the Subsidiaries of Borrower,
together with the Purchase Agreement (as amended, supplemented or modified from
time to time to the extent permitted by Section 6.18, the "Purchase Agreement"),
dated as of April 13, 2000, among the Company, Holdings, Acquisition Co., the
Subsidiaries parties thereto and GS Mezzanine Partners II, L.P. and GS Mezzanine
Partners Offshore II, L.P., (collectively, the "Purchasers"), the Exchange and
Registration Rights Agreement (as amended, supplemented or modified from time to
time to the extent permitted by Section 6.18, the "Exchange and Registration
Rights Agreement"), dated as of April 12, 2000, among the Company, Holdings,
Acquisition Co., the Subsidiaries parties thereto and the Purchasers and all
certificates, instruments, financial and other statements and other documents
made and delivered in connection therewith. The term "Subordinated Notes" shall
also include all such notes issued in exchange or replacement for the original
Subordinated Notes (including the Replacement Notes (as defined in the Purchase
Agreement) and the Exchange Notes (as defined in the Exchange and Registration
Agreement) and all Exchange Guarantees (as defined in the Exchange and
Registration Rights Agreement) to the extent permitted by Section 6.3(a)(iv).
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than fifty percent (50%) of the
outstanding Stock having ordinary voting power to elect a majority of the board
of directors of such corporation (irrespective of whether, at the time, Stock of
any other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by such Person and/or one or more
Subsidiaries of such Person, or with respect to which any such Person has the
right to vote or designate the vote of fifty percent (50%) or more of such Stock
whether by proxy, agreement, operation of law or otherwise, and (b) any
partnership or limited liability company in which such Person and/or one or more
Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of more than fifty
percent (50%) or of which any such Person is a general partner or may exercise
the powers of a general partner.
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"Surety Obligations" means any bonds, including bid bonds, advance
bonds, or performance bonds, letters of credit, warranties, and similar
arrangements between the Credit Party or its Subsidiaries and one or more surety
providers, entered into in the ordinary course of business and for the benefit
of the Credit Party's or its Subsidiaries' suppliers, vendors, insurers, or
customers including, in each case, any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith.
"Swing Line Advance" has the meaning assigned to it in Section
1.1(c)(i).
"Swing Line Availability" has the meaning assigned to it in Section
1.1(c)(i).
"Swing Line Commitment" shall mean, as to the Swing Line Lender, the
commitment of the Swing Line Lender to make Swing Line Loans as set forth on
Annex J to the Agreement, which commitment constitutes a subfacility of the
Revolving Loan Commitment of the Swing Line Lender.
"Swing Line Lender" shall mean GE Capital.
"Swing Line Loan" shall mean at any time, the aggregate amount of
Swing Line Advances outstanding to Borrower.
"Swing Line Note" has the meaning assigned to it in Section
1.1(c)(ii).
"Taxes" shall mean taxes, levies, imposts, deductions, Charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on or measured by the net income or net profits of a Lender of either Agent or a
Lender by the jurisdictions under the laws of which Agents and Lenders are
organized or any political subdivision thereof or which its principal office is
located or in which its principal lending office is located.
"Term A Lenders" shall mean those Lenders having Term Loan A
Commitments.
"Term B Lenders" shall mean those Lenders having Term Loan B
Commitments.
"Term Lenders" shall mean those Lenders having Term Loan A Commitments
or Term Loan B Commitments.
"Term Loan A" shall have the meaning assigned to it in Section
1.1(b)(i).
"Term Loan B" shall have the meaning assigned to it in Section
1.1(b)(i).
"Term Loans" shall have the meaning assigned to it in Section
1.1(b)(i).
"Term Loan A Commitment" shall mean (a) as to any Term A Lender, the
commitment of such Term A Lender to make its Pro Rata Share of the Term Loan A
as set forth on Annex J to the Agreement or in the most recent Assignment
Agreement executed by such Term A Lender, and (b) as to all Term A Lenders, the
aggregate commitment of all Term A Lenders to make the Term Loan A, which
aggregate commitment shall be Twenty-Five Million
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Dollars ($25,000,000) on the Closing Date, as to each of clauses (a) and (b), as
such Term Loan A Commitments may be reduced, amortized or adjusted from time to
time in accordance with the Agreement.
"Term Loan B Commitment" shall mean (a) as to any Term B Lender, the
commitment of such Term Lender to make its Pro Rata Share of the Term Loan B as
set forth on Annex J to the Agreement or in the most recent Assignment Agreement
executed by such Term B Lender, and (b) as to all Term B Lenders, the aggregate
commitment of all Term B Lenders to make the Term Loan B, which aggregate
commitment shall be Sixty Million Dollars ($60,000,000) on the Closing Date, as
to each of clauses (a) and (b), as such Term Loan B Commitments may be reduced,
amortized or adjusted from time to time in accordance with the Agreement.
"Term Loan Commitment" shall mean, as to any Lender, the aggregate of
such Lender's Term Loan A Commitment and Term Loan B Commitment.
"Term Note" shall have the meaning assigned to it in Section
1.1(b)(i).
"Term A Note" shall have the meaning assigned to it in Section
1.1(b)(i).
"Term B Note" shall have the meaning assigned to it in Section
1.1(b)(i).
"Termination Date" shall mean the date on which the Loans have been
repaid in full and all other Obligations (other than Interest Hedge Obligations)
under the Agreement and the other Loan Documents have been completely discharged
and Letter of Credit Obligations have been cash collateralized, cancelled or
backed by stand-by letters of credit in accordance with Annex B, and Borrower
shall not have any further right to borrow any monies under the Agreement.
"Third Party Interactives" shall mean all Persons with whom any Credit
Party exchanges data electronically in the ordinary course of business,
including, without limitation, customers, suppliers, third-party vendors,
subcontractors, processors-converters, shippers and warehousemen.
"Title IV Plan" shall mean an employee pension benefit plan, as
defined in Section 3 (2) of ERISA (other than a Multiemployer Plan), which is
covered by Title IV of ERISA, and which any Credit Party or ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"Trademark Security Agreements" shall mean the Trademark Security
Agreements made in favor of Administrative Agent, on behalf of itself,
Documentation Agent and Lenders, by each applicable Credit Party.
"Trademark License" shall mean rights under any written agreement now
owned or hereafter acquired by any Credit Party granting any right to use any
Trademark.
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"Trademarks" shall mean all of the following now owned or hereafter
acquired by any Credit Party: (a) all trademarks, trade names, corporate names,
business names, trade styles, service marks, logos, other source or business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of like nature (whether registered or
unregistered), now owned or existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, including registrations, recordings and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any state or territory thereof, or any other country or any
political subdivision thereof; (b) all reissues, extensions or renewals thereof;
and (c) all goodwill associated with or symbolized by any of the foregoing.
"Unfunded Pension Liability" shall mean, at any time, the aggregate
amount, if any, of the sum of (a) the amount by which the present value of all
accrued benefits under each Title IV Plan exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits in accordance with Title
IV of ERISA, all determined as of the most recent valuation date for each such
Title IV Plan using the actuarial assumptions for funding purposes in effect
under such Title IV Plan, and (b) for a period of five (5) years following a
transaction which might reasonably be expected to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by any
Credit Party or any ERISA Affiliate as a result of such transaction.
"Year 2000 Date-Sensitive System/Component" shall mean, as to any
Person, any em software, network software, applications software, data base,
computer file, embedded microchip, firmware or hardware that accepts, creates,
manipulates, sorts, sequences, calculates, compares or outputs calendar-related
data accurately; such systems and components shall include, without limitation,
mainframe computers, file server/client systems, computer workstations, routers,
hubs, other network-related hardware, and other computer-related software,
firmware or hardware and information processing and delivery systems of any kind
and telecommunications systems and other communications processors, security
systems, alarms, elevators and HVAC systems.
"Year 2000 Problems" shall mean, with respect to each Credit Party,
limitations on the capacity or readiness of any such Credit Party's Year 2000
Date-Sensitive Systems/Components to accurately accept, create, manipulate,
sort, sequence, calculate, compare or output calendar date information with
respect to calendar year 1999 or any subsequent calendar year beginning on or
after January 1, 2000 (including leap year computations), including, without
limitation, exchanges of information among Year 2000 Date-Sensitive
Systems/Components of the Credit Parties and exchanges of information among the
Credit Parties and Year 2000 Date-Sensitive Systems/Components of Third Party
Interactives and functionality of peripheral interfaces, firmware and embedded
microchips.
All other undefined terms contained in any of the Loan Documents
shall, unless the context indicates otherwise, have the meanings provided for by
the Code as in effect in the State of New York to the extent the same are used
or defined therein. Unless otherwise specified, references in the Agreement or
any of the Appendices to a Section, subsection or clause refer to such Section,
subsection or clause as contained in the Agreement. The words
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"herein," "hereof" and "hereunder" and other words of similar import refer to
the Agreement as a whole, including all Annexes, Exhibits and Schedules, as the
same may from time to time be amended, restated, modified or supplemented, and
not to any particular section, subsection or clause contained in the Agreement
or any such Annex, Exhibit or Schedule.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, feminine and neuter genders. The words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to Persons include their respective successors and assigns (to the
extent and only to the extent permitted by the Loan Documents) or, in the case
of governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of the same and any successor statutes and regulations. Whenever
any provision in any Loan Document refers to the knowledge (or an analogous
phrase) of any Credit Party, such words are intended to signify that such Credit
Party has actual knowledge or awareness of a particular fact or circumstance or
that such Credit Party, if it had exercised reasonable diligence, would have
known or been aware of such fact or circumstance.
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ANNEX B (SECTION 1.2)
TO
CREDIT AGREEMENT
LETTERS OF CREDIT
(a) Issuance. Subject to the terms and conditions of the Agreement,
Administrative Agent and Revolving Lenders agree to incur, from time to time
prior to the Commitment Termination Date, upon the request of Borrower and for
Borrower's account, Letter of Credit Obligations by causing Letters of Credit to
be issued (by a bank or other legally authorized Person selected by or
acceptable to Administrative Agent in its reasonable discretion (each, an "L/C
Issuer")) for Borrower's account and guaranteed by Administrative Agent;
provided, however, that if the L/C Issuer is a Revolving Lender, then such
Letters of Credit shall not be guaranteed by Administrative Agent but rather
each Revolving Lender shall, subject to the terms and conditions hereinafter set
forth, purchase (or be deemed to have purchased) risk participations in all such
Letters of Credit issued with the written consent of Administrative Agent, as
more fully described in paragraph (b)(ii) below. The aggregate amount of all
such Letter of Credit Obligations shall not at any time exceed the least of (i)
Five Million Dollars ($5,000,000) (the "L/C Sublimit"), and (ii) the Maximum
Amount less the aggregate outstanding principal balance of the Revolving Credit
Advances and the Swing Line Loan, and (iii) the Borrowing Base less the
aggregate outstanding principal balance of the Revolving Credit Advances and the
Swing Line Loan. No such Letter of Credit shall have an expiry date which is
more than one year following the date of issuance thereof, and neither
Administrative Agent nor Revolving Lenders shall be under any obligation to
incur Letter of Credit Obligations in respect of, or purchase risk
participations in, any Letter of Credit having an expiry date which is later
than the Commitment Termination Date.
(b) Advances Automatic; Participations. (i) In the event that
Administrative Agent or any Revolving Lender shall make any payment on or
pursuant to any Letter of Credit Obligation, such payment shall then be deemed
automatically to constitute a Revolving Credit Advance under Section 1.1(a) of
the Agreement regardless of whether a Default or Event of Default shall have
occurred and be continuing and notwithstanding Borrower's failure to satisfy the
conditions precedent set forth in Section 2, and each Revolving Lender shall be
obligated to pay its Pro Rata Share thereof in accordance with the Agreement.
The failure of any Revolving Lender to make available to Administrative Agent
for Administrative Agent's own account its Pro Rata Share of any such Revolving
Credit Advance or payment by Administrative Agent under or in respect of a
Letter of Credit shall not relieve any other Revolving Lender of its obligation
hereunder to make available to Administrative Agent its Pro Rata Share thereof,
but no Revolving Lender shall be responsible for the failure of any other
Revolving Lender to make available such other Revolving Lender's Pro Rata Share
of any such payment.
If it shall be illegal or unlawful for Borrower to incur Revolving
Credit Advances as contemplated by paragraph (b)(i) above because of an Event of
Default described in Section 8.1(h) or (i) or otherwise or if it shall be
illegal or unlawful for any Revolving Lender to be deemed to have assumed a
ratable share of the reimbursement obligations owed to an L/C Issuer, or if the
L/C Issuer is a Revolving Lender, then (i) immediately and without further
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whatsoever, each Revolving Lender shall be deemed to have irrevocably and
unconditionally purchased from Administrative Agent (or such L/C Issuer, as the
case may be) an undivided interest and participation equal to such Revolving
Lender's Pro Rata Share (based on the Revolving Loan Commitments) of the Letter
of Credit Obligations in respect of all Letters of Credit then outstanding and
(ii) thereafter, immediately upon issuance of any Letter of Credit, each
Revolving Lender shall be deemed to have irrevocably and unconditionally
purchased from Administrative Agent (or such L/C Issuer, as the case may be) an
undivided interest and participation in such Revolving Lender's Pro Rata Share
(based on the Revolving Loan Commitments) of the Letter of Credit Obligations
with respect to such Letter of Credit on the date of such issuance. Each
Revolving Lender shall fund its participation in all payments or disbursements
made under the Letters of Credit in the same manner as provided in the Agreement
with respect to Revolving Credit Advances.
(c) Cash Collateral. If Borrower is required to provide cash
collateral for any Letter of Credit Obligations pursuant to the Agreement prior
to the Commitment Termination Date, Borrower will pay to Administrative Agent
for the benefit of Revolving Lenders cash or cash equivalents acceptable to
Administrative Agent ("Cash Equivalents") in an amount equal to 105% of the
maximum amount then available to be drawn under each applicable Letter of Credit
outstanding. Such funds or Cash Equivalents shall be held by Administrative
Agent in a cash collateral account (the "Cash Collateral Account") maintained at
a bank or financial institution acceptable to Administrative Agent. The Cash
Collateral Account shall be in the name of Borrower and shall be pledged to, and
subject to the control of, Administrative Agent, for the benefit of itself,
Documentation Agent and Lenders, in a manner satisfactory to Administrative
Agent. Borrower hereby pledges and grants to Administrative Agent, on behalf of
itself, Documentation Agent and Lenders, a security interest in all such funds
and Cash Equivalents held in the Cash Collateral Account from time to time and
all proceeds thereof, as security for the payment of all amounts due in respect
of the Letter of Credit Obligations and other Obligations, whether or not then
due. The Agreement, including this Annex B, shall constitute a security
agreement under applicable law.
If any Letter of Credit Obligations, whether or not then due and
payable, shall for any reason be outstanding on the Commitment Termination Date,
Borrower shall either (i) provide cash collateral therefor in the manner
described above, or (ii) cause all such Letters of Credit and guaranties thereof
to be canceled and returned, or (iii) deliver a stand-by letter (or letters) of
credit in guarantee of such Letter of Credit Obligations, which stand-by letter
(or letters) of credit shall be of like tenor and duration (plus thirty (30)
additional days) as, and in an amount equal to 105% of the aggregate maximum
amount then available to be drawn under, the Letters of Credit to which such
outstanding Letter of Credit Obligations relate and shall be issued by a Person,
and shall be subject to such terms and conditions, as are be satisfactory to
Administrative Agent in its sole discretion.
From time to time after funds are deposited in the Cash Collateral
Account by Borrower, whether before or after the Commitment Termination Date,
Administrative Agent may apply such funds or Cash Equivalents then held in the
Cash Collateral Account to the payment of any amounts, in such order as
Administrative Agent may elect, as shall be or shall become due and payable by
Borrower to Lenders with respect to such Letter of Credit
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Obligations of Borrower and, upon the satisfaction in full of all Letter of
Credit Obligations of Borrower, to any other Obligations then due and payable.
Neither Borrower nor any Person claiming on behalf of or through
Borrower shall have any right to withdraw any of the funds or Cash Equivalents
held in the Cash Collateral Account, except that upon the termination of all
Letter of Credit Obligations and the payment of all amounts payable by Borrower
to Lenders in respect thereof, any funds remaining in the Cash Collateral
Account shall be applied to other Obligations when due and owing and upon
payment in full of such Obligations, any remaining amount shall be paid to
Borrower or as otherwise required by law.
(d) Fees and Expenses. Borrower agrees to pay to Administrative Agent
for the benefit of Revolving Lenders, as compensation to such Lenders for Letter
of Credit Obligations incurred hereunder, (x) all costs and expenses incurred by
Administrative Agent or any Lender on account of such Letter of Credit
Obligations, and (y) for each month during which any Letter of Credit Obligation
shall remain outstanding, a fee (the "Letter of Credit Fee") at a rate equal to
the Applicable L/C Margin multiplied by the maximum amount available from time
to time to be drawn under the applicable Letter of Credit. Such fee shall be
paid to Administrative Agent for the benefit of the Revolving Lenders in
arrears, on the first day of each month. In addition, Borrower shall pay to any
L/C Issuer, on demand, such fees (including all per annum fees), charges and
expenses of such L/C Issuer in respect of the issuance, negotiation, acceptance,
amendment, transfer and payment of such Letter of Credit or otherwise payable
pursuant to the application and related documentation under which such Letter of
Credit is issued.
(e) Request for Incurrence of Letter of Credit Obligations. Borrower
shall give Administrative Agent at least two (2) Business Days prior written
notice requesting the incurrence of any Letter of Credit Obligation, specifying
the date such Letter of Credit Obligation is to be incurred, identifying the
beneficiary to which such Letter of Credit Obligation relates and describing the
nature of the transactions proposed to be supported thereby. The notice shall be
accompanied by the form of the Letter of Credit (which shall be acceptable to
the L/C Issuer) to be guarantied and, to the extent not previously delivered to
Administrative Agent, copies of all agreements between Borrower and the L/C
Issuer pertaining to the issuance of Letters of Credit. Notwithstanding anything
contained herein to the contrary, Letter of Credit applications by Borrower and
approvals by Administrative Agent and the L/C Issuer may be made and transmitted
pursuant to electronic codes and security measures mutually agreed upon and
established by and among Borrower, Administrative Agent and the L/C Issuer.
(f) Obligation Absolute. The obligation of Borrower to reimburse
Administrative Agent and Revolving Lenders for payments made with respect to any
Letter of Credit Obligation shall be absolute, unconditional and irrevocable,
without necessity of presentment, demand, protest or other formalities, and the
obligations of each Revolving Lender to make payments to Administrative Agent
with respect to Letters of Credit shall be unconditional and irrevocable. Such
obligations of Borrower and Revolving Lenders shall be paid strictly in
accordance with the terms hereof under all circumstances including the following
circumstances:
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(i) any lack of validity or enforceability of any Letter of
Credit or the Agreement or the other Loan Documents or any other agreement;
(ii) the existence of any claim, set-off, defense or other right
which Borrower or any of its Affiliates or any Lender may at any time have
against a beneficiary or any transferee of any Letter of Credit (or any
Persons or entities for whom any such transferee may be acting),
Administrative Agent, any Lender, or any other Person, whether in
connection with the Agreement, the Letter of Credit, the transactions
contemplated herein or therein or any unrelated transaction (including any
underlying transaction between Borrower or any of its Affiliates and the
beneficiary for which the Letter of Credit was procured);
(iii) any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(iv) payment by Administrative Agent (except as otherwise
expressly provided in paragraph (g)(ii)(C) below) or any L/C Issuer under
any Letter of Credit or guaranty thereof against presentation of a demand,
draft or certificate or other document which does not comply with the terms
of such Letter of Credit or such guaranty;
(v) any other circumstance or happening whatsoever, which is
similar to any of the foregoing; or
(vi) the fact that a Default or an Event of Default shall have
occurred and be continuing.
(g) Indemnification; Nature of Lenders' Duties. (i) In addition to
amounts payable as elsewhere provided in the Agreement, Borrower hereby agrees
to pay and to protect, indemnify, and save harmless Administrative Agent and
each Lender from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including attorneys' fees and allocated
costs of internal counsel) which Administrative Agent or any Lender may incur or
be subject to as a consequence, direct or indirect, of (A) the issuance of any
Letter of Credit or guaranty thereof, or (B) the failure of Administrative Agent
or any Lender seeking indemnification or of any L/C Issuer to honor a demand for
payment under any Letter of Credit or guaranty thereof as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto government or Governmental Authority, in each case other than to the
extent solely as a result of the gross negligence or willful misconduct of
Administrative Agent or such Lender (as finally determined by a court of
competent jurisdiction).
(ii) As between Administrative Agent and any Lender and Borrower,
Borrower assumes all risks of the acts and omissions of, or misuse of any Letter
of Credit by beneficiaries of any Letter of Credit. In furtherance and not in
limitation of the foregoing, to the fullest extent permitted by law neither
Administrative Agent nor any Lender shall be responsible: (A) for the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
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issued by any party in connection with the application for and issuance of any
Letter of Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged; (B) for the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason; (C) for failure of the beneficiary of any Letter of
Credit to comply fully with conditions required in order to demand payment under
such Letter of Credit; provided that, in the case of any payment by
Administrative Agent under any Letter of Credit or guaranty thereof,
Administrative Agent shall be liable to the extent such payment was made solely
as a result of its gross negligence or willful misconduct (as finally determined
by a court of competent jurisdiction) in determining that the demand for payment
under such Letter of Credit or guaranty thereof complies on its face with any
applicable requirements for a demand for payment under such Letter of Credit or
guaranty thereof; (D) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (E) for errors in interpretation of
technical terms; (F) for any loss or delay in the transmission or otherwise of
any document required in order to make a payment under any Letter of Credit or
guaranty thereof or of the proceeds thereof; (G) for the credit of the proceeds
of any drawing under any Letter of Credit or guaranty thereof; and (H) for any
consequences arising from causes beyond the control of Administrative Agent or
any Lender. None of the above shall affect, impair, or prevent the vesting of
any of Administrative Agent's or any Lender's rights or powers hereunder or
under the Agreement.
(iii) Nothing contained herein shall be deemed to limit or to expand
any waivers, covenants or indemnities made by Borrower in favor of any L/C
Issuer in any letter of credit application, reimbursement agreement or similar
document, instrument or agreement between Borrower and such L/C Issuer.
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ANNEX C (SECTION 1.8)
TO
CREDIT AGREEMENT
CASH MANAGEMENT SYSTEMS
Each Credit Party shall, and shall cause its Subsidiaries to,
establish and maintain the Cash Management Systems described below:
(a) On or before the Closing Date and until the Termination Date,
Borrower shall (i) establish lock boxes ("Lock Boxes") at one or more of the
banks set forth on Disclosure Schedule (3.19), and shall request in writing
within thirty (30) days after the Closing Date and otherwise take such
reasonable steps to ensure that all Account Debtors forward payment directly to
such Lock Boxes, and (ii) deposit and cause its Subsidiaries to deposit or cause
to be deposited promptly, and in any event no later than the first Business Day
after the date of receipt thereof, all cash, checks, drafts or other similar
items of payment relating to or constituting payments made in respect of any and
all Collateral (whether or not otherwise delivered to a Lock Box) into bank
accounts in Borrower's name or any such Subsidiary's name (collectively, the
"Borrower Accounts") at banks set forth on Disclosure Schedule (3.19) (each, a
"Relationship Bank"). On or before the Closing Date, Borrower shall have
established a concentration account in its name (the "Concentration Account") at
the bank which shall be designated as the Concentration Account bank for
Borrower on Disclosure Schedule (3.19) (the "Concentration Account Bank") which
bank shall be satisfactory to Administrative Agent.
(b) On or before the Closing Date (or such later date as
Administrative Agent shall consent to in writing), the Concentration Account
Bank, each bank where a Disbursement Account is located and all other
Relationship Banks, shall have entered into tri-party blocked account agreements
with Administrative Agent, for the benefit of itself, Documentation Agent and
Lenders, and Borrower and Subsidiaries thereof, as applicable, in form and
substance acceptable to Administrative Agent, which shall become operative on or
prior to the Closing Date. Each such blocked account agreement shall provide,
among other things, that (i) all items of payment deposited in such account and
proceeds thereof deposited in the Concentration Account are held by such bank as
agent or bailee-in-possession for Administrative Agent, on behalf of itself,
Documentation Agent and Lenders, (ii) the bank executing such agreement has no
rights of setoff or recoupment or any other claim against such account, as the
case may be, other than for payment of its service fees and other charges
directly related to the administration of such account and for returned checks
or other items of payment, and (iii) from and after the Closing Date (A) with
respect to banks at which a Borrower Account is located, such bank agrees, from
and after the receipt of a notice (an "Activation Notice") from Administrative
Agent (which Activation Notice may be given by Administrative Agent at any time
at which (1) a Default or Event of Default shall have occurred and be
continuing, (2) Administrative Agent reasonably believes based upon information
available to it that a Default or an Event of Default is likely to occur; (3) if
amounts are outstanding under the Revolving Credit Loan, Administrative Agent
reasonably believes that an event or circumstance has occurred which is likely
to have a Material Adverse Effect, or (4) Administrative Agent reasonably has
grounds to
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question the integrity of Borrower's Cash Management Systems or Borrower's
compliance with the provisions of this Annex C or any other provisions of the
Loan Documents to the extent related to such Cash Management Systems (any of the
foregoing being referred to herein as an "Activation Event")), to forward
immediately all amounts in each Borrower Account to the Concentration Account
Bank and to commence the process of daily sweeps from such Borrower Account into
the Concentration Account and (B) with respect to the Concentration Account
Bank, such bank agrees from and after the receipt of an Activation Notice from
Administrative Agent upon the occurrence of an Activation Event, to immediately
forward all amounts received in the Concentration Account to the Collection
Account through daily sweeps from such Concentration Account into the Collection
Account. From and after the date Administrative Agent has delivered an
Activation Notice to any bank with respect to any Borrower Account(s), Borrower
shall not, and shall not cause or permit any Subsidiary thereof to, accumulate
or maintain cash in disbursement or payroll accounts as of any date of
determination in excess of checks outstanding against such accounts as of that
date and amounts necessary to meet minimum balance requirements.
(c) So long as no Default or Event of Default has occurred and is
continuing, Borrower may amend Disclosure Schedule (3.19) to add or replace a
Relationship Bank, Lock Box or Borrower Account or to replace any Concentration
Account or any Disbursement Account; provided, however, that (i) Administrative
Agent shall have consented in writing in advance to the opening of such account
or Lock Box with the relevant bank and (ii) prior to the time of the opening of
such account or Lock Box, Borrower and/or the Subsidiaries thereof, as
applicable, and such bank shall have executed and delivered to Administrative
Agent a tri-party blocked account agreement, in form and substance satisfactory
to Administrative Agent. Borrower shall close any of its accounts (and establish
replacement accounts in accordance with the foregoing sentence) promptly and in
any event within thirty (30) days of notice from Administrative Agent that the
creditworthiness of any bank holding an account is no longer acceptable in
Administrative Agent's reasonable judgment, or as promptly as practicable and in
any event within sixty (60) days of notice from Administrative Agent that the
operating performance, funds transfer and/or availability procedures or
performance with respect to accounts or lockboxes of the bank holding such
accounts or Administrative Agent's liability under any tri-party blocked account
agreement with such bank is no longer acceptable in Administrative Agent's
reasonable judgment.
(d) The Lock Boxes, Borrower Accounts, Disbursement Accounts and the
Concentration Account shall be cash collateral accounts, with all cash, checks
and other similar items of payment in such accounts securing payment of the
Loans and all other Obligations, and in which Borrower and each Subsidiary
thereof shall have granted a Lien to Administrative Agent, on behalf of itself,
Documentation Agent and Lenders, pursuant to the Security Agreement.
(e) All amounts deposited in the Collection Account shall be deemed
received by Administrative Agent in accordance with Section 1.10 of the
Agreement and shall be applied (and allocated) by Administrative Agent in
accordance with Section 1.11 of the Agreement. In no event shall any amount be
so applied unless and until such amount shall have been credited in immediately
available funds to the Collection Account.
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(f) Borrower may maintain, in its name, an account (each a
"Disbursement Account" and collectively, the "Disbursement Accounts") at a bank
acceptable to Administrative Agent into which Administrative Agent shall, from
time to time, deposit proceeds of Revolving Credit Advances and Swing Line
Advances made to Borrower pursuant to Section 1.1 for use by Borrower solely in
accordance with the provisions of Section 1.4.
(g) Borrower shall and shall cause its Affiliates, officers,
employees, agents, directors or other Persons acting for or in concert with
Borrower (each a "Related Person") to (i) hold in trust for Administrative
Agent, for the benefit of itself and Lenders, all checks, cash and other items
of payment received by Borrower or any such Related Person, and (ii) within one
(1) Business Day after receipt by Borrower or any such Related Person of any
checks, cash or other items or payment, deposit the same into a Borrower
Account. Borrower and each Related Person thereof acknowledges and agrees that
all cash, checks or items of payment constituting proceeds of Collateral are the
property of Administrative Agent and Lenders. All proceeds of the sale or other
disposition of any Collateral, shall be deposited directly into Borrower
Accounts.
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ANNEX D (SECTION 2.1(a))
TO
CREDIT AGREEMENT
SCHEDULE OF ADDITIONAL CLOSING DOCUMENTS
In addition to, and not in limitation of, the conditions described in
Section 2.1 of the Agreement, pursuant to Section 2.1(a), the following items
must be received by Administrative Agent in form and substance satisfactory to
Administrative Agent on or prior to the Closing Date (each capitalized term used
but not otherwise defined herein shall have the meaning ascribed thereto in
Annex A to the Agreement):
A. Appendices. All Appendices to the Agreement, in form and substance
satisfactory to Administrative Agent.
B. Revolving Notes, Swing Line Note, Term A Notes and Term B Notes.
Duly executed originals of the Revolving Notes, Swing Line Note, Term A Notes
and Term B Notes for each applicable Lender, dated the Closing Date.
C. Security Agreement. Duly executed originals of the Security
Agreement, dated the Closing Date, and all instruments, documents and agreements
executed pursuant thereto.
D. Insurance. Satisfactory evidence that the insurance policies
required by Section 5.4 are in full force and effect, together with appropriate
evidence showing loss payable and/or additional insured clauses or endorsements,
as requested by Administrative Agent, in favor of Administrative Agent, on
behalf of itself, Documentation Agent and Lenders.
E. Security Interests and Code Filings. (a) Evidence satisfactory to
Administrative Agent that Administrative Agent (for the benefit of itself,
Documentation Agent and Lenders) has a valid and perfected first priority
security interest in the Collateral, including (i) such documents duly executed
by each Credit Party (including financing statements under the Code and other
applicable documents under the laws of any jurisdiction with respect to the
perfection of Liens) as Administrative Agent may request in order to perfect its
security interests in the Collateral and (ii) copies of Code search reports
listing all effective financing statements that name any Credit Party as debtor,
together with copies of such financing statements, none of which shall cover the
Collateral, except for those relating to the Prior Lender Obligations (all of
which shall be terminated on the Closing Date) and Permitted Encumbrances.
(b) Evidence satisfactory to Administrative Agent, including copies,
of all UCC-1 and other financing statements filed in favor of any Credit Party
with respect to each location, if any, at which Inventory may be consigned.
(c) Control Letters from (i) all issuers of uncertificated securities
and financial assets held by Borrower, (ii) all securities intermediaries with
respect to all securities accounts
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and securities entitlements of Borrower, and (iii) all futures commission agents
and clearing houses with respect to all commodities contracts and commodities
accounts held by Borrower.
F. Payoff Letter; Termination Statements. Copies of a duly executed
payoff letter, in form and substance satisfactory to Administrative Agent, by
and between all parties to the Prior Lender loan documents evidencing repayment
in full of all Prior Lender Obligations, together with (a) UCC-3 or other
appropriate termination statements, in form and substance satisfactory to
Administrative Agent, manually signed by the Prior Lender releasing all liens of
Prior Lender upon any of the personal property of each Credit Party, and (b)
termination of all blocked account agreements, bank agency agreements or other
similar agreements or arrangements or arrangements in favor of Prior Lender or
relating to the Prior Lender Obligations.
G. Intellectual Property Security Agreements. Duly executed originals
of Trademark Security Agreements, Copyright Security Agreements and Patent
Security Agreements, each dated the Closing Date and signed by each Credit Party
which owns Trademarks, Copyrights and/or Patents, as applicable, all in form and
substance satisfactory to Administrative Agent, together with all instruments,
documents and agreements executed pursuant thereto.
H. Guaranty. Duly executed originals of the Guaranty, dated the
Closing Date and signed by Holdings and Heartland, and all documents,
instruments and agreements executed pursuant thereto.
I. Initial Borrowing Base Certificate. Duly executed originals of an
initial Borrowing Base Certificate from Borrower, dated the Closing Date,
reflecting information concerning Eligible Accounts and Eligible Inventory of
Borrower as of a date not more than [seven (7)] days prior to the Closing Date.
J. Initial Notice of Revolving Credit Advance. Duly executed originals
of a Notice of Revolving Credit Advance, dated the Closing Date, with respect to
the initial Revolving Credit Advance to be requested by Borrower on the Closing
Date.
K. Letter of Direction. Duly executed originals of a letter of
direction from Borrower addressed to Administrative Agent, on behalf of itself
and Lenders, with respect to the disbursement on the Closing Date of the
proceeds of the Term Loans and the initial Revolving Credit Advance.
L. Cash Management System; Blocked Account Agreements. Evidence
satisfactory to Administrative Agent that, as of the Closing Date, Cash
Management Systems complying with Annex C to the Agreement have been established
and are currently being maintained in the manner set forth in such Annex C,
together with copies of duly executed tri-party blocked account and lock box
agreements, satisfactory to Administrative Agent, with the banks as required by
Annex C.
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M. Charter and Good Standing. For each Credit Party, such Person's (a)
charter and all amendments thereto, (b) good standing certificates (including
verification of tax status) in its state of incorporation and (c) good standing
certificates (including verification of tax status) and certificates of
qualification to conduct business in each jurisdiction where its ownership or
lease of property or the conduct of its business requires such qualification,
each dated a recent date prior to the Closing Date and certified by the
applicable Secretary of State or other authorized Governmental Authority.
N. Bylaws and Resolutions. For each Credit Party, (a) such Person's
bylaws, together with all amendments thereto and (b) resolutions of such
Person's Board of Directors, approving and authorizing the execution, delivery
and performance of the Loan Documents to which such Person is a party and the
transactions to be consummated in connection therewith, each certified as of the
Closing Date by such Person's corporate secretary or an assistant secretary as
being in full force and effect without any modification or amendment.
O. Incumbency Certificates. For each Credit Party, signature and
incumbency certificates of the officers of each such Person executing any of the
Loan Documents, certified as of the Closing Date by such Person's corporate
secretary or an assistant secretary as being true, accurate, correct and
complete.
P. Opinions of Counsel. Duly executed originals of opinions of Akin,
Gump, Strauss, Hauer & Feld LLP, counsel for the Credit Parties, together with
any local counsel opinions requested by Administrative Agent, each in form and
substance satisfactory to Administrative Agent and its counsel, dated the
Closing Date, and each accompanied by a letter addressed to such counsel from
the Credit Parties, authorizing and directing such counsel to address its
opinion to Administrative Agent, on behalf of itself, Documentation Agent and
Lenders, and to include in such opinion an express statement to the effect that
Agents and Lenders are authorized to rely on such opinion.
Q. Pledge Agreement. Duly executed originals of the Pledge Agreement
dated the Closing Date and signed by Holdings and Borrower, accompanied by (as
applicable) (a) share certificates representing all of the outstanding Stock
being pledged pursuant to the Pledge Agreement and stock powers for such share
certificates executed in blank and (b) the original Intercompany Notes and other
instruments evidencing Indebtedness being pledged pursuant to the Pledge
Agreement, duly endorsed in blank.
R. Accountants' Letters. A letter from the Credit Parties to their
independent auditors authorizing the independent certified public accountants of
the Credit Parties to communicate with Administrative Agent and Lenders in
accordance with Section 4.2, and a letter from such auditors acknowledging
Lenders' reliance on the auditor's certification of past and future Financial
Statements.
S. Solvency. Borrower shall deliver to Administrative Agent both (i) a
solvency opinion from Houlihan Lokey Howard & Zukin, Inc. addressed to
Administrative Agent, Lenders under this Agreement and the Purchasers under the
Subordinated Notes, and (ii) a certificate of the Chief Financial Officer of
Borrower, certifying that both before and after giving
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effect to (a) the Loans and Letter of Credit Obligations to be made or extended
on the Closing Date or such other date as Loans and Letter of Credit Obligations
requested hereunder are made or extended, (b) the disbursement of the proceeds
of such Loans pursuant to the instructions of Borrower, (c) the Acquisition, the
Refinancing and the consummation of the other Related Transactions and (d) the
payment and accrual of all transaction costs in connection with the foregoing,
each Credit Party is Solvent.
T. Officer's Certificate. Administrative Agent shall have received
duly executed originals of a certificate of the Chief Executive Officer and
Chief Financial Officer of each Credit Party, dated the Closing Date, stating
that, since December 31, 1999 (a) no event or condition has occurred or is
existing which could reasonably be expected to have a Material Adverse Effect;
(b) there has been no material adverse change in the industry in which such
Credit Party operates; (c) no Litigation has been commenced which, if
successful, would have a Material Adverse Effect or could challenge any of the
transactions contemplated by the Agreement and the other Loan Documents; (d)
there have been no Restricted Payments made by such Credit Party; and (e) there
has been no material increase in liabilities, liquidated or contingent, and no
material decrease in assets of such Credit Party or any of its Subsidiaries.
U. Waivers. Administrative Agent, on behalf of Lenders, shall have
received landlord waivers and consents, bailee letters and mortgagee agreements
in form and substance satisfactory to Administrative Agent, in each case as
required pursuant to Section 5.9.
V. Mortgages. Within 30 days after the Closing Date, Mortgages
covering all of the owned Real Estate (the "Mortgaged Properties") together
with: (a) title insurance policies, current as-built surveys, zoning letters and
certificates of occupancy, in each case reasonably satisfactory in form and
substance to Administrative Agent; and (b) an opinion of counsel in each state
in which any Mortgaged Property is located in form and substance and from
counsel reasonably satisfactory to Administrative Agent.
W. Subordination and Intercreditor Agreements. Administrative Agent
and Lenders shall have received any and all subordination and/or intercreditor
agreements, all in form and substance reasonably satisfactory to Administrative
Agent, in its sole discretion, as Administrative Agent shall have deemed
necessary or appropriate with respect to any Indebtedness of any Credit Party,
including, without limitation, under the Subordinated Notes, the provisions of
which as contained therein, are acceptable to Administrative Agent.
X. Environmental Reports. Administrative Agent shall have received
Phase I Environmental Site Assessment Reports, consistent with American Society
of Testing and Materials (ASTM) Standard E 1527-94, and applicable state
requirements, on all of the Real Estate, dated no more than 6 months prior to
the Closing Date, prepared by environmental engineers satisfactory to
Administrative Agent, all in form and substance satisfactory to Administrative
Agent, in its sole discretion; and Administrative Agent shall have further
received such environmental review and audit reports, including Phase II
reports, with respect to the Real Estate of any Credit Party as Administrative
Agent shall have requested, and Administrative Agent shall be satisfied, in its
sole discretion, with the contents of all such environmental reports.
Administrative Agent shall have received letters executed by the
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environmental firms preparing such environmental reports, in form and substance
satisfactory to Administrative Agent, authorizing Administrative Agent and
Lenders to rely on such reports.
Y. Audited Financials; Financial Condition. Administrative Agent shall
have received Holdings' final Financial Statements for its Fiscal Year ended
December 31, 1999, audited by Ernst & Young LLP. Borrower shall have provided
Administrative Agent with its current operating statements, a consolidated and
consolidating balance sheet and statement of cash flows, the Pro Forma,
Projections and a Borrowing Base Certificate with respect to Borrower certified
by its Chief Financial Officer, in each case in form and substance satisfactory
to Administrative Agent, and Administrative Agent shall be satisfied, in its
sole discretion, with all of the foregoing. Administrative Agent shall have
further received a certificate of the Chief Executive Officer and/or the Chief
Financial Officer of Borrower, based on such Pro Forma and Projections, to the
effect that (a) the Pro Forma fairly presents the financial condition of
Borrower as of the date thereof after giving effect to the transactions
contemplated by the Related Transactions Documents and shows that the
stockholders common equity of Borrower as of the Closing Date is not less than
$60,000,000 and the pro forma EBITDA of Borrower, after giving effect to the
adjustments provided in Disclosure Schedule (A-EBITDA), as of December 31, 1999
is at least $28,100,000; (b) the Projections are based upon estimates and
assumptions stated therein, all of which Borrower believes to be reasonable and
fair in light of current conditions and current facts known to Borrower and, as
of the Closing Date, reflect Borrower's good faith and reasonable estimates of
its future financial performance and of the other information projected therein
for the period set forth therein; it being recognized that any forward looking
statements contained therein are inherently subject to risk and uncertainties,
many of which cannot be predicted with accuracy; (c) as of March 31, 2000 and
after giving pro forma effect to the transactions contemplated by the Loan
Documents, the Borrower shall have a Leverage Ratio for the 12-month period then
ended of not more than 4.60:1.0 and a Senior Leverage Ratio for such period of
not more than 3.60:1.0; and (d) containing such other statements with respect to
the solvency of Borrower and matters related thereto as Administrative Agent
shall request.
Z. Other Documents. Such other certificates, documents and agreements
respecting any Credit Party as Administrative Agent may, in its sole discretion,
reasonably request.
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ANNEX E (SECTION 4.1(a))
TO
CREDIT AGREEMENT
FINANCIAL STATEMENTS AND PROJECTIONS -- REPORTING
Borrower shall deliver or cause to be delivered to Administrative
Agent or to Administrative Agent and Lenders, as indicated, the following:
(a) Monthly Financials. To Administrative Agent and Lenders, within
thirty (30) days after the end of each Fiscal Month, financial information
regarding Holdings, Borrower and their Subsidiaries, certified by the Chief
Financial Officer of Borrower, consisting of consolidated and consolidating (i)
unaudited balance sheets as of the close of such Fiscal Month and the related
statements of income and cash flow for that portion of the Fiscal Year ending as
of the close of such Fiscal Month; (ii) unaudited statements of income and cash
flows for such Fiscal Month, setting forth in comparative form the figures for
the corresponding period in the prior year and the figures contained in the
Annual Plan or Budget for such Fiscal Year, all prepared in accordance with GAAP
(subject to normal year-end adjustments and the absence of footnotes); and (iii)
a summary of the outstanding balance of all Intercompany Notes as of the last
day of that Fiscal Month. Such financial information shall be accompanied by the
certification of the Chief Financial Officer of Borrower that (i) such financial
information presents fairly in accordance with GAAP (subject to normal year-end
adjustments) the financial position and results of operations of Borrower and
its Subsidiaries, on a consolidated and consolidating basis, in each case as at
the end of such month and for the period then ended and (ii) any other
information presented in clause (iii) above is true, correct and complete in all
material respects and that there was no Default or Event of Default in existence
as of such time or, if a Default or Event of Default shall have occurred and be
continuing, describing the nature thereof and all efforts undertaken to cure
such Default or Event of Default;
(b) Quarterly Financials. To Administrative Agent and Lenders, within
forty-five (45) days after the end of each Fiscal Quarter, consolidated and
consolidating financial information regarding Holdings, Borrower and their
Subsidiaries, certified by the Chief Financial Officer of Borrower, including
(i) unaudited balance sheets as of the close of such Fiscal Quarter and the
related statements of income and cash flow for that portion of the Fiscal Year
ending as of the close of such Fiscal Quarter and (ii) unaudited statements of
income and cash flows for such Fiscal Quarter, in each case setting forth in
comparative form the figures for the corresponding period in the prior year and
the figures contained in the Annual Plan or Budget for such Fiscal Year, all
prepared in accordance with GAAP (subject to normal year-end adjustments and the
absence of footnotes). Such financial information shall be accompanied by (A) a
statement in reasonable detail (each, a "Compliance Certificate") showing the
calculations used in determining compliance with a Compliance Certificate in
respect of each of the financial covenants set forth on Annex G which is tested
on a quarterly basis and (B) the certification of the Chief Financial Officer of
Borrower that (i) such financial information presents fairly in accordance with
GAAP (subject to normal year-end adjustments) the financial position, results of
operations and statements of cash flows of Borrower and its Subsidiaries, on
both a
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consolidated and consolidating basis, as at the end of such Fiscal Quarter and
for the period then ended, (ii) any other information in clause (iii) of
paragraph (a) above presented is true, correct and complete in all material
respects and that there was no Default or Event of Default in existence as of
such time or, if a Default or Event of Default shall have occurred and be
continuing, describing the nature thereof and all efforts undertaken to cure
such Default or Event of Default. In addition, Borrower shall deliver to
Administrative Agent and Lenders, within forty-five (45) days after the end of
each Fiscal Quarter, a management discussion and analysis which includes a
comparison to Projections for that Fiscal Quarter and a comparison of
performance for that Fiscal Quarter to the corresponding period in the prior
year;
(c) Operating Plan. To Administrative Agent and Lenders, as soon as
available, but not later than thirty (30) days after the end of each Fiscal
Year, an annual operating plan for Borrower, approved by the Board of Directors
of Borrower, for the following year, which will include a statement of all of
the material assumptions on which such plan is based, will include monthly
balance sheets and a monthly budget for the following year and will integrate
sales, gross profits, operating expenses, operating profit, cash flow
projections and Borrowing Availability projections all prepared on the same
basis and in similar detail as that on which operating results are reported (and
in the case of cash flow projections, representing management's good faith
estimates of future financial performance based on historical performance), and
including plans for personnel, Capital Expenditures and facilities;
(d) Annual Audited Financials. To Administrative Agent and Lenders,
within ninety (90) days after the end of each Fiscal Year, audited Financial
Statements for Holdings, Borrower and their Subsidiaries on a consolidated and
(unaudited) consolidating basis, consisting of balance sheets and statements of
income and retained earnings and cash flows, setting forth in comparative form
in each case the figures for the previous Fiscal Year, which Financial
Statements shall be prepared in accordance with GAAP, certified without
qualification, by an independent certified public accounting firm of national
standing or otherwise acceptable to Administrative Agent. Such Financial
Statements shall be accompanied by (i) a statement prepared in reasonable detail
showing the calculations used in determining compliance with each of the
financial covenants set forth on Annex G, (ii) a report from such accounting
firm to the effect that, in connection with their audit examination, nothing has
come to their attention to cause them to believe that a Default or Event of
Default has occurred (or specifying those Defaults and Events of Default that
they became aware of) which report may be limited to the extent required by
accounting rules or guidelines, it being understood that such audit examination
extended only to accounting matters and that no special investigation was made
with respect to the existence of Defaults or Events of Default, (iii) a letter
addressed to Administrative Agent, on behalf of itself and Lenders, in form and
substance reasonably satisfactory to Administrative Agent and subject to
standard qualifications taken by nationally recognized accounting firms, signed
by such accounting firm acknowledging that Administrative Agent and Lenders are
entitled to rely upon such accounting firm's certification of such audited
Financial Statements, (iv) the annual letters to such accountants in connection
with their audit examination detailing contingent liabilities and material
litigation matters, and (v) the certification of the Chief Executive Officer or
Chief Financial Officer of Borrower that all such Financial Statements present
fairly in accordance with GAAP the financial position, results of
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<PAGE> 124
operations and statements of cash flows of Borrower and its Subsidiaries on a
consolidated and consolidating basis, as at the end of such year and for the
period then ended, and that there was no Default or Event of Default in
existence as of such time or, if a Default or Event of Default shall have
occurred and be continuing, describing the nature thereof and all efforts
undertaken to cure such Default or Event of Default;
(e) Management Letters. To Administrative Agent and Lenders, within
five (5) Business Days after receipt thereof by any Credit Party, copies of all
management letters, exception reports or similar letters or reports received by
such Credit Party from its independent certified public accountants;
(f) Default Notices. To Administrative Agent and Lenders, as soon as
practicable, and in any event within five (5) Business Days after an executive
officer of Borrower has actual knowledge of the existence of any Default, Event
of Default or other event which has had a Material Adverse Effect, telephonic or
telecopied notice specifying the nature of such Default or Event of Default or
other event, including the anticipated effect thereof, which notice, if given
telephonically, shall be promptly confirmed in writing on the next Business Day;
(g) SEC Filings and Press Releases. To Administrative Agent and
Lenders, promptly upon their becoming available, copies of: (i) all Financial
Statements, reports, notices and proxy statements made publicly available by any
Credit Party to its security holders; (ii) all regular and periodic reports and
all registration statements and prospectuses, if any, filed by any Credit Party
with any securities exchange or with the Securities and Exchange Commission or
any governmental or private regulatory authority; and (iii) all press releases
and other statements made available by any Credit Party to the public concerning
material changes or developments in the business of any such Person;
(h) Subordinated Debt and Equity Notices. To Administrative Agent, as
soon as practicable, copies of all material written notices given or received by
any Credit Party with respect to any Subordinated Debt or Stock of such Person,
and, within two (2) Business Days after any Credit Party obtains knowledge of
any matured or unmatured event of default with respect to any Subordinated Debt,
notice of such event of default;
(i) Supplemental Schedules. To Administrative Agent, supplemental
disclosures, if any, required by Section 5.6 of the Agreement;
(j) Litigation. To Administrative Agent in writing, promptly upon
learning thereof, notice of any Litigation commenced or threatened against any
Credit Party that (i) seeks damages in excess of $1,000,000 whether or not
covered by insurance, (ii) seeks injunctive relief, (iii) is asserted or
instituted against any Plan, its fiduciaries or its assets or against any Credit
Party or ERISA Affiliate in connection with any Plan, (iv) alleges criminal
misconduct by any Credit Party, (v) alleges the violation of any law regarding,
or seeks remedies in connection with, any Environmental Liabilities; or (vi)
involves any product recall;
(k) Insurance Notices. To Administrative Agent, disclosure of losses
or casualties required by Section 5.4 of the Agreement;
E-3
<PAGE> 125
(l) Lease Default Notices. To Administrative Agent, copies of (i) any
and all default notices received under or with respect to any leased location or
public warehouse where Collateral is located, and (ii) such other notices or
documents as Administrative Agent may request in its reasonable discretion;
(m) Lease Amendments. To Administrative Agent, copies of all material
amendments to real estate leases involving annual payments of more than
$300,000; and
(n) Other Documents. To Administrative Agent and Lenders, such other
financial and other information respecting any Credit Party's business or
financial condition as Agent or any Lender shall, from time to time, request.
E-4
<PAGE> 126
ANNEX F (SECTION 4.1(b))
TO
CREDIT AGREEMENT
COLLATERAL REPORTS
Borrower shall deliver or cause to be delivered the following:
(a) To Administrative Agent, upon its request, and in no event less
frequently than five (5) Business Days after the end of each Fiscal Month
(together with a copy of all or any part of such delivery requested by any
Lender in writing after the Closing Date), each of the following:
(i) a Borrowing Base Certificate with respect to Borrower, accompanied
by such supporting detail and documentation as shall be requested by
Administrative Agent in its reasonable discretion;
(ii) with respect to Borrower, a summary of Inventory by location and
type with a supporting perpetual Inventory report, in each case accompanied by
such supporting detail and documentation as shall be requested by Administrative
Agent in its reasonable discretion; and
(iii) with respect to Borrower, a monthly trial balance showing
Accounts outstanding aged from invoice due date as follows: 1 to 30 days, 31 to
60 days, 61 to 90 days and 91 days or more, accompanied by such supporting
detail and documentation as shall be requested by Administrative Agent in its
reasonable discretion;
(b) To Administrative Agent, on a weekly basis or at such more
frequent intervals as Agent may request from time to time (together with a copy
of all or any part of such delivery requested by any Lender in writing after the
Closing Date), collateral reports with respect to Borrower, including all
additions and reductions (cash and non-cash) with respect to Accounts of
Borrower, in each case accompanied by such supporting detail and documentation
as shall be requested by Administrative Agent in its reasonable discretion;
(c) To Administrative Agent, at the time of delivery of each of the
monthly Financial Statements delivered pursuant to Annex E, a reconciliation of
the Accounts trial balance and month-end Inventory reports of Borrower to
Borrower's general ledger and monthly Financial Statements delivered pursuant to
such Annex E, in each case accompanied by such supporting detail and
documentation as shall be requested by Administrative Agent in its reasonable
discretion;
(d) To Administrative Agent, at the time of delivery of each of the
quarterly Financial Statements delivered pursuant to Annex E, (i) a listing of
government contracts of Borrower subject to the Federal Assignment of Claims Act
of 1940; and (ii) a list of any applications for the registration of any Patent,
Trademark or Copyright with the United States
<PAGE> 127
Patent and Trademark Office, the United States Copyright Office or any similar
office or agency which any Credit Party thereof has filed in the prior Fiscal
Quarter;
(e) Borrower, at its own expense, shall deliver to Administrative
Agent the results of each physical verification, if any, which Borrower or any
of its Subsidiaries may in their discretion have made, or caused any other
Person to have made on their behalf, of all or any portion of their Inventory
(and, if a Default or an Event of Default shall have occurred and be continuing,
Borrower shall, upon the request of Administrative Agent, conduct, and deliver
the results of, such physical verifications as Administrative Agent may
require);
(f) Borrower, at its own expense, shall deliver to Administrative
Agent such appraisals of its assets as Administrative Agent may request at any
time after the occurrence and during the continuance of a Default or an Event of
Default, such appraisals to be conducted by an appraiser, and in form and
substance, satisfactory to Administrative Agent; and
(g) Such other reports, statements and reconciliations with respect to
the Borrowing Base or Collateral of any or all Credit Parties as Administrative
Agent shall from time to time request in its reasonable discretion.
F-2
<PAGE> 128
ANNEX G (SECTION 6.10)
TO
CREDIT AGREEMENT
FINANCIAL COVENANTS
Borrower shall not breach or fail to comply with any of the following
financial covenants, each of which shall be calculated in accordance with GAAP
consistently applied:
(a) Maximum Capital Expenditures. Borrower and its Subsidiaries on a
consolidated basis shall not make Capital Expenditures during the following
periods that exceed in the aggregate the amounts set forth opposite each of such
periods:
<TABLE>
<CAPTION>
Period Maximum Capital Expenditures per Period
- - ------ ---------------------------------------
<S> <C>
Fiscal Year ending December 31, 2000 $7,000,000
Fiscal Year ending December 31, 2001 $7,000,000
Fiscal Year ending December 31, 2002 $7,000,000
Fiscal Year ending December 31, 2003 $8,000,000
Fiscal Year ending December 31, 2004 $8,000,000
Each Fiscal Year thereafter $8,000,000
</TABLE>
(b) Minimum Fixed Charge Coverage Ratio. Borrower and its Subsidiaries
shall have on a consolidated basis at the end of each Fiscal Quarter set forth
below, a Fixed Charge Coverage Ratio for the 12-month period then ended of not
less than the following:
1.05:1:00 for the Fiscal Quarter ending June 30, 2000;
1.05:1.00 for the Fiscal Quarter ending September 30, 2000;
1.05:1.00 for the Fiscal Quarter ending December 31, 2000
1.05:1.00 for the Fiscal Quarter ending March 31, 2001;
1.05:1.00 for the Fiscal Quarter ending June 30, 2001
1.05:1.00 for the Fiscal Quarter ending September 30, 2001;
1.05:1.00 for the Fiscal Quarter ending December 31, 2001;
1.05:1.00 for the Fiscal Quarter ending March 31, 2002;
1.05:1.00 for the Fiscal Quarter ending June 30, 2002;
1.10:1.00 for the Fiscal Quarter ending September 30, 2002;
1.10:1.00 for the Fiscal Quarter ending December 31, 2002;
1.10:1.00 for the Fiscal Quarter ending March 31, 2003;
1.10:1.00 for the Fiscal Quarter ending June 30, 2003;
1.15:1.00 for the Fiscal Quarter ending September 30, 2003;
1.15:1.00 for the Fiscal Quarter ending December 31, 2003;
<PAGE> 129
1.15:1.00 for the Fiscal Quarter ending March 31, 2004;
1.15:1.00 for the Fiscal Quarter ending June 30, 2004;
1.15:1.00 for the Fiscal Quarter ending September 30, 2004;
1.15:1.00 for the Fiscal Quarter ending December 31, 2004; and
1.15 for each Fiscal Quarter ending thereafter.
(c) Minimum EBITDA. Borrower and its Subsidiaries on a consolidated
basis shall have, at the end of each Fiscal Quarter set forth below, EBITDA for
the 12-month period then ended of not less than the following:
$28,000,000 for the Fiscal Quarter ending June 30, 2000;
$28,000,000 for the Fiscal Quarter ending September 30, 2000;
$28,000,000 for the Fiscal Quarter ending December 31, 2000;
$28,000,000 for the Fiscal Quarter ending March 31, 2001;
$29,000,000 for the Fiscal Quarter ending June 30, 2001;
$30,500,000 for the Fiscal Quarter ending September 30, 2001;
$32,000,000 for the Fiscal Quarter ending December 31, 2001;
$32,500,000 for the Fiscal Quarter ending March 31, 2002;
$34,000,000 for the Fiscal Quarter ending June 30, 2002;
$34,500,000 for the Fiscal Quarter ending September 30, 2002;
$35,500,000 for the Fiscal Quarter ending December 31, 2002;
$36,000,000 for the Fiscal Quarter ending March 31, 2003;
$37,000,000 for the Fiscal Quarter ending June 30, 2003;
$38,500,000 for the Fiscal Quarter ending September 30, 2003;
$39,500,000 for the Fiscal Quarter ending December 31, 2003;
$40,000,000 for the Fiscal Quarter ending March 31, 2004;
$41,000,000 for the Fiscal Quarter ending June 30, 2004;
$42,000,000 for the Fiscal Quarter ending September 30, 2004;
$42,500,000 for the Fiscal Quarter ending December 31, 2004; and
$42,500,000 for each Fiscal Quarter ending thereafter.
(d) Maximum Leverage Ratio. Borrower and its Subsidiaries on a
consolidated basis shall have, at the end of each Fiscal Quarter set forth
below, a Leverage Ratio as of the last day of such Fiscal Quarter and for the
12-month period then ended of not more than the following:
5.00:1:00 for the Fiscal Quarter ending June 30, 2000;
5.00:1.00 for the Fiscal Quarter ending September 30, 2000;
4.75:1.00 for the Fiscal Quarter ending December 31, 2000;
4.75:1.00 for the Fiscal Quarter ending March 31, 2001;
4.75:1.00 for the Fiscal Quarter ending June 30, 2001;
4.75:1.00 for the Fiscal Quarter ending September 30, 2001;
4.00:1.00 for the Fiscal Quarter ending December 31, 2001;
4.00:1.00 for the Fiscal Quarter ending March 31, 2002;
4.00:1.00 for the Fiscal Quarter ending June 30, 2002;
3.75:1.00 for the Fiscal Quarter ending September 30, 2002;
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<PAGE> 130
3.50:1.00 for the Fiscal Quarter ending December 31, 2002;
3.50:1.00 for the Fiscal Quarter ending March 31, 2003;
3.50:1.00 for the Fiscal Quarter ending June 30, 2003;
3.50:1.00 for the Fiscal Quarter ending September 30, 2003;
3.25:1.00 for the Fiscal Quarter ending December 31, 2003;
3.25:1.00 for the Fiscal Quarter ending March 31, 2004;
3.00:1.00 for the Fiscal Quarter ending June 30, 2004;
3.00:1.00 for the Fiscal Quarter ending September 30, 2004;
3.00:1.00 for the Fiscal Quarter ending December 31, 2004; and
3.00:100 for each Fiscal Quarter thereafter.
(e) Maximum Senior Leverage Ratio. Borrower and its Subsidiaries on a
consolidated basis shall have, at the end of each Fiscal Quarter set forth
below, a Senior Leverage Ratio as of the last day of such Fiscal Quarter and for
the 12-month period then ended of not more than the following:
4:00:1:00 for the Fiscal Quarter ending June 30, 2000;
4.00:1.00 for the Fiscal Quarter ending September 30, 2000;
3.75:1.00 for the Fiscal Quarter ending December 31, 2000;
3.75:1.00 for the Fiscal Quarter ending March 31, 2001;
3.75:1.00 for the Fiscal Quarter ending June 30, 2001;
3.75:1.00 for the Fiscal Quarter ending September 30, 2001;
3.00:1.00 for the Fiscal Quarter ending December 31, 2001;
3.00:1.00 for the Fiscal Quarter ending March 31, 2002;
3.00:1.00 for the Fiscal Quarter ending June 30, 2002;
2.75:1.00 for the Fiscal Quarter ending September 30, 2002;
2.50:1.00 for the Fiscal Quarter ending December 31, 2002;
2.50:1.00 for the Fiscal Quarter ending March 31, 2003;
2.50:1.00 for the Fiscal Quarter ending June 30, 2003;
2.50:1.00 for the Fiscal Quarter ending September 30, 2003;
2.25:1.00 for the Fiscal Quarter ending December 31, 2003;
2.25:1.00 for the Fiscal Quarter ending March 31, 2004;
2.00:1.00 for the Fiscal Quarter ending June 30, 2004;
2.00:1.00 for the Fiscal Quarter ending September 30, 2004;
2.00:1.00 for the Fiscal Quarter ending December 31, 2004; and
2.00:1.00 for each Fiscal Quarter thereafter.
(f) Minimum Interest Coverage Ratio. Borrower and its Subsidiaries on
a consolidated basis shall have at the end of each Fiscal Quarter set forth
below, an Interest Coverage Ratio for the 12-month period then ended of not less
than the following:
2.00:1:00 for the Fiscal Quarter ending June 30, 2000;
2.00:1.00 for the Fiscal Quarter ending September 30, 2000;
2.00:1.00 for the Fiscal Quarter ending December 31, 2000;
2.00:1.00 for the Fiscal Quarter ending March 31, 2001;
2.00:1.00 for the Fiscal Quarter ending June 30, 2001;
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<PAGE> 131
2.00:1.00 for the Fiscal Quarter ending September 30, 2001;
2.25:1.00 for the Fiscal Quarter ending December 31, 2001;
2.25:1.00 for the Fiscal Quarter ending March 31, 2002;
2.25:1.00 for the Fiscal Quarter ending June 30, 2002;
2.25:1.00 for the Fiscal Quarter ending September 30, 2002;
2.50:1.00 for the Fiscal Quarter ending December 31, 2002;
2.50:1.00 for the Fiscal Quarter ending March 31, 2003;
2.50:1.00 for the Fiscal Quarter ending June 30, 2003;
2.50:1.00 for the Fiscal Quarter ending September 30, 2003;
3.00:1.00 for the Fiscal Quarter ending December 31, 2003;
3.00:1.00 for the Fiscal Quarter ending March 31, 2004;
3.00:1.00 for the Fiscal Quarter ending June 30, 2004;
3.00:1.00 for the Fiscal Quarter ending September 30, 2004;
3.00:1.00 for the Fiscal Quarter ending December 31, 2004; and
3.00:100 for each Fiscal Quarter thereafter.
Unless otherwise specifically provided herein, any accounting term
used in the Agreement shall have the meaning customarily given such term in
accordance with GAAP, and all financial computations hereunder shall be computed
in accordance with GAAP consistently applied. That certain items or computations
are explicitly modified by the phrase "in accordance with GAAP" shall in no way
be construed to limit the foregoing. If any "Accounting Changes" (as defined
below) occur and such changes result in a change in the calculation of the
financial covenants, standards or terms used in the Agreement or any other Loan
Document, then Borrower, Administrative Agent and Lenders agree to enter into
negotiations in order to amend such provisions of the Agreement so as to
equitably reflect such Accounting Changes with the desired result that the
criteria for evaluating Borrower's and its Subsidiaries' financial condition
shall be the same after such Accounting Changes as if such Accounting Changes
had not been made; provided, however, that the agreement of Requisite Lenders to
any required amendments of such provisions shall be sufficient to bind all
Lenders. "Accounting Changes" means (a) changes in accounting principles
required by the promulgation of any rule, regulation, pronouncement or opinion
by the Financial Accounting Standards Board of the American Institute of
Certified Public Accountants (or successor thereto or any agency with similar
functions), (b) changes in accounting principles concurred in by Borrower's
certified public accountants; (c) purchase accounting adjustments under A.P.B.
16 and/or 17 and EITF 88-16, and the application of the accounting principles
set forth in FASB 109, including the establishment of reserves pursuant thereto
and any subsequent reversal (in whole or in part) of such reserves; and (d) the
reversal of any reserves established as a result of purchase accounting
adjustments. All such adjustments resulting from expenditures made subsequent to
the Closing Date (including capitalization of costs and expenses or payment of
pre-Closing Date liabilities) shall be treated as expenses in the period the
expenditures are made and deducted as part of the calculation of EBITDA in such
period. If Administrative Agent, Borrower and Requisite Lenders agree upon the
required amendments, then after appropriate amendments have been executed and
the underlying Accounting Change with respect thereto has been implemented, any
reference to GAAP contained in the Agreement or in any other Loan Document
shall, only to the
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<PAGE> 132
extent of such Accounting Change, refer to GAAP, consistently applied after
giving effect to the implementation of such Accounting Change. If Administrative
Agent, Borrower and Requisite Lenders cannot agree upon the required amendments
within thirty (30) days following the date of implementation of any Accounting
Change, then all Financial Statements delivered and all calculations of
financial covenants and other standards and terms in accordance with the
Agreement and the other Loan Documents shall be prepared, delivered and made
without regard to the underlying Accounting Change.
For purposes of the calculations above, pro forma effect shall be
given to each Designated Acquisition as if it had occurred twelve (12) months
prior to the end of the most recently ended Fiscal Quarter.
G-5
<PAGE> 133
ANNEX H (SECTION 1.1(d))
TO
CREDIT AGREEMENT
LENDERS' WIRE TRANSFER INFORMATION
To GE Capital:
Payment to: Bankers Trust Company
1 Bankers Trust Plaza
New York, NY 10006
POC: Doris Adams
212-250-8383
ABA#: 021-001-033
Account Name: GECC - PlayCore
Account Number: 50-232-854
To IndoSuez:
Payment to: Citibank, N.A. - New York
ABA #: 021-000-089
Swift Code: CITIUS33
Account: 361 42 537
Name: Credit Agricole Indosuez Chicago Branch CAI-CAP
<PAGE> 134
ANNEX I (SECTION 11.10)
TO
CREDIT AGREEMENT
NOTICE ADDRESSES
(A) If to Administrative Agent or GE Capital, at
General Electric Capital Corporation
335 Madison Avenue
12th Floor
New York, New York 10017
Attention: Account Manager-PlayCore
Telecopier No.: (212) 983-8767
Telephone No.: (212) 370-8066
- and -
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: Corporate Counsel-Commercial Finance
Telecopier No.: (203) 316-7889
Telephone No.: (203) 316-7552
with copies to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Ted S. Waksman, Esq.
Telecopier No.: (212) 310-8007
Telephone No.: (212) 310-8000
(B) If to Documentation Agent or Indosuez, at
<PAGE> 135
Credit Agricole Indosuez
Indosuez Capital
666 Third Avenue
New York, New York 10017
Attention: Mike Arougheti, Vice President
Telecopier No.: (646) 658-2203
Telephone No.: (646) 658-2000
(C) If to Borrower, at
PlayCore Wisconsin, Inc.
Riverfront Centre
15 West Milwaukee Street
Suite 204
Janesville, Wisconsin 53545
Attention: President
Telecopier No.: (608) 741-7191
Telephone No.: (608) 741-7183
With copies to:
PlayCore Holdings, Inc.
c/o Chartwell Investments II, LLC
717 Fifth Avenue
New York, New York 10022
Attention: Michael S. Shein
Telecopier No.: (212) 521-5533
Telephone No.: (212) 521-5500
- and -
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Attention: Russell W. Parks, Jr., Esq.
Telecopier No.: (202) 887-4288
Telephone No. (202) 887-4000
I-2
<PAGE> 136
ANNEX J (FROM ANNEX A - COMMITMENTS DEFINITION)
TO
CREDIT AGREEMENT
Lender(s):
General Electric Capital Corporation
Revolving Loan Commitment (including a Swing Line
Commitment of $5,000,000): $30,000,000
Term Loan A Commitment: $25,000,000
Term Loan B Commitment: $35,000,000
Credit Agricole Indosuez
Term Loan B Commitment: $25,000,000
<PAGE> 1
Execution Copy
PURCHASE AGREEMENT
among
PLAYCORE, INC.,
PLAYCORE WISCONSIN, INC.,
PLAYCORE HOLDINGS, INC.,
and
THE SUBSIDIARIES LISTED ON THE SIGNATURE PAGES HEREOF
and
GS MEZZANINE PARTNERS II, L.P.
and
GS MEZZANINE PARTNERS II OFFSHORE, L.P.
Dated as of April 13, 2000
Relating to:
$30,000,000 Aggregate Principal Amount of
18% Senior Subordinated Notes Due 2008
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
RECITALS 1
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS......................................................................2
1.1 Definitions..........................................................................................2
1.2 Computation of Time Periods.........................................................................30
1.3 Accounting Terms....................................................................................30
SECTION 2. AUTHORIZATION AND ISSUANCE OF NOTES..................................................................30
2.1 Authorization of Issue..............................................................................30
2.2 Sale and Purchase of the Notes......................................................................30
2.3 Closing.............................................................................................30
SECTION 3. CONDITIONS TO CLOSING................................................................................31
3.1 Representations and Warranties......................................................................31
3.2 Performance; No Default under Other Agreements......................................................31
3.3 Compliance Certificates.............................................................................31
3.4 Opinions of Counsel; Solvency Opinion...............................................................32
3.5 Undertaking by Parent...............................................................................32
3.6 Refinancing of Existing Indebtedness; Credit Agreement; Equity Financing; Minimum Aggregate
Proceeds.......................................................................................32
3.7 Financial Information...............................................................................33
3.8 Material Adverse Effect.............................................................................33
3.9 Proceedings and Documents...........................................................................33
3.10 Management Employment Contracts....................................................................33
3.11 Transaction Documents..............................................................................33
3.12 Closing Payment; Payment of Expenses...............................................................33
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PLAYCORE WISCONSIN.................................................34
4.1 Due Incorporation; Power and Authority..............................................................34
4.2 Capitalization......................................................................................34
4.3 Subsidiaries........................................................................................34
4.4 Due Authorization, Execution and Delivery...........................................................35
4.5 Non-Contravention; Authorizations and Approvals.....................................................35
4.6 Financial Statements................................................................................36
4.7 Absence of Undisclosed Liabilities or Events........................................................37
4.8 No Actions or Proceedings...........................................................................37
4.9 Title to Properties.................................................................................38
4.10 Intellectual Property Rights.......................................................................38
4.11 Tax Returns and Payments...........................................................................38
4.12 Employee Benefit Plans.............................................................................39
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
4.13 Private Offering; No Integration or General Solicitation; Rule 144A Eligibility....................40
4.14 Environmental Matters..............................................................................41
4.15 Status Under Certain Statutes......................................................................42
4.16 Insurance..........................................................................................42
4.17 Use of Proceeds; Margin Regulations................................................................42
4.18 Existing Indebtedness; Future Liens................................................................42
4.19 Compliance with Laws; Permits......................................................................43
4.20 Solvency...........................................................................................43
4.21 Affiliate Transactions.............................................................................43
4.22 Material Contracts.................................................................................43
4.23 Indebtedness.......................................................................................43
4.24 Fees...............................................................................................43
4.25 Labor and Employment Matters.......................................................................43
4.26 Brokerage Fees.....................................................................................44
4.27 Activities of Holdings.............................................................................44
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.....................................................44
5.1 Purchase for Investment.............................................................................44
SECTION 6. COVENANTS TO PROVIDE INFORMATION.....................................................................45
6.1 Future Reports of Holdings to Purchasers............................................................45
6.2 Future Reports of PlayCore Wisconsin to Purchasers..................................................48
SECTION 7. OTHER AFFIRMATIVE COVENANTS..........................................................................50
7.1 Preservation of Corporate Existence and Franchises..................................................50
7.2 Maintenance of Properties...........................................................................50
7.3 Taxes...............................................................................................51
7.4 Books, Records and Access...........................................................................51
7.5 Compliance with Law.................................................................................52
7.6 Insurance...........................................................................................52
7.7 Offer to Repurchase Upon Change of Control..........................................................52
7.8 Non-Voting Observer.................................................................................54
7.9 Offer to Purchase by Application of Excess Proceeds.................................................55
7.10 Post-Closing Note Guarantees.......................................................................56
7.11 Further Assurances.................................................................................56
7.12 Redemption of Convertible Debentures...............................................................57
SECTION 8. NEGATIVE COVENANTS OF PLAYCORE WISCONSIN.............................................................57
8.1 Stay, Extension and Usury Laws......................................................................57
8.2 Restricted Payments.................................................................................57
8.3 Dividend and Other Payment Restrictions Affecting Subsidiaries......................................60
8.4 Incurrence of Additional Indebtedness...............................................................62
8.5 Asset Sales.........................................................................................62
8.6 Transactions with Affiliates........................................................................64
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
8.7 Limitation on Liens.................................................................................64
8.8 Prohibition on Incurrence of Senior Subordinated Debt...............................................65
8.9 Limitation on Issuances and Sales of Capital Stock of Subsidiaries..................................65
8.10 Sales and Leaseback Transactions...................................................................65
8.11 Conduct of Business................................................................................66
8.12 Merger, Consolidation, or Sales of Assets..........................................................66
SECTION 9 NEGATIVE COVENANTS OF HOLDINGS........................................................................68
9.1 Business, Indebtedness, Investments, Etc............................................................68
9.2 Merger, Consolidation or Sales of Assets of Holdings................................................69
9.3 Transactions with Affiliates........................................................................69
SECTION 10. PROVISIONS RELATING TO RESALES OF NOTES.............................................................71
10.1 Private Offerings..................................................................................71
10.2 Exchange and Registration Rights Agreement.........................................................72
10.3 Exchange Right.....................................................................................72
SECTION 11. THE NOTES...........................................................................................73
11.1 Form and Execution.................................................................................73
11.2 Terms of the Notes.................................................................................73
11.3 Denominations......................................................................................73
11.4 Form of Legend for the Notes.......................................................................73
11.5 Payments and Computations..........................................................................74
11.6 Registration, Registration of Transfer and Exchange................................................74
11.7 Transfer Restrictions..............................................................................75
11.8 Mutilated, Destroyed, Lost and Stolen Notes........................................................77
11.9 Persons Deemed Owners..............................................................................77
11.10 Cancellation......................................................................................78
11.11 Home Office Payment...............................................................................78
SECTION 12. EVENTS OF DEFAULT; REMEDIES.........................................................................78
12.1 Events of Default..................................................................................78
12.2 Remedies...........................................................................................81
12.3 Waiver of Past Defaults............................................................................82
12.4 No Personal Liability of Directors, Officers, Employees and Stockholders...........................82
SECTION 13. REDEMPTION..........................................................................................82
13.1 Right of Redemption................................................................................82
13.2 Partial Redemptions................................................................................82
13.3 Notice of Redemption...............................................................................83
13.4 Deposit of Redemption Price........................................................................83
13.5 Notes Payable on Redemption Date...................................................................83
13.6 Notes Redeemed in Part.............................................................................84
SECTION 14. SUBORDINATION OF NOTES..............................................................................84
14.1 Notes Subordinate to Senior Indebtedness..........................................................84
</TABLE>
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<TABLE>
<S> <C> <C>
14.2 Payment Over of Proceeds Upon Dissolution, Etc.....................................................84
14.3 No Payment When Senior Indebtedness in Default.....................................................85
14.4 Payment Permitted If No Default....................................................................87
14.5 Subrogation to Rights of Holders of Senior Indebtedness............................................87
14.6 Provisions Solely to Define Relative Rights........................................................87
14.7 No Waiver of Subordination Provisions..............................................................88
14.8 Reliance on Judicial Order or Certificate of Liquidating Agent.....................................88
14.9 Reliance by Holders of Senior Indebtedness on Subordination Provisions.............................88
14.10 Reinstatement.....................................................................................88
SECTION 15. NOTE GUARANTEES.....................................................................................89
15.1 Note Guarantees....................................................................................89
15.2 Execution and Delivery of Note Guarantees..........................................................90
15.3 Guarantors May Consolidate, Etc. On Certain Terms..................................................90
15.4 Releases of Note Guarantees........................................................................91
15.5 Subordination of Note Guarantees...................................................................91
15.6 Limitation on Guarantor Liability..................................................................91
15.7 Endorsement of Note Guarantees.....................................................................92
SECTION 16. EXPENSES, INDEMNIFICATION AND CONFIDENTIALITY.......................................................92
16.1 Expenses...........................................................................................92
16.2 Indemnification....................................................................................93
16.3 Notification.......................................................................................93
16.4 Confidentiality....................................................................................94
SECTION 17. MISCELLANEOUS.......................................................................................95
17.1 Notices............................................................................................95
17.2 Benefit of Agreement; Assignments and Participations...............................................96
17.3 No Waiver; Remedies Cumulative.....................................................................96
17.4 Amendments, Waivers and Consents...................................................................96
17.5 Counterparts.......................................................................................97
17.6 Reproduction.......................................................................................97
17.7 Headings...........................................................................................97
17.8 Survival of Covenants and Indemnities..............................................................97
17.9 Governing Law; Submission to Jurisdiction; Venue...................................................97
17.10 Severability......................................................................................98
17.11 Entirety..........................................................................................99
17.12 Survival of Representations and Warranties........................................................99
17.13 Construction......................................................................................99
17.14 Intent to Limit Interest to Maximum...............................................................99
17.15 Incorporation.....................................................................................99
17.16 Acknowledgement by Parent.........................................................................99
</TABLE>
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<TABLE>
<CAPTION>
EXHIBITS:
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<S> <C>
Exhibit A - Form of Note
Exhibit B - Form of Exchange and Registration Rights Agreement
Exhibit C - Form of Supplemental Agreement
Exhibit D - Form of Notation of Note Guarantee
Exhibit 3.3(a) - Form of Officers' Certificate
Exhibit 3.3(b) - Form of Secretary's Certificate
Exhibit 3.4(a) - Form of Opinion of Counsel to Company
Exhibit 3.4(b) - Form of Solvency Opinion
SCHEDULES:
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<S> <C>
Schedule A - Information relating to the Purchasers
Schedule 3.10 - Management Employment Contracts
Schedule 4.2 - Stock of Employees
Schedule 4.3 - Holdings and Subsidiaries
Schedule 4.5 - Consents
Schedule 4.8 - Proceedings and Documents
Schedule 4.9 - Title to Properties
Schedule 4.11 - Taxes
Schedule 4.12 - Plans
Schedule 4.14 - Environmental Matters
Schedule 4.18 - Existing Indebtedness
Schedule 4.19 - Permits
Schedule 4.21 - Affiliate Transactions
Schedule 4.22 - Material Contracts
Schedule 4.25 - Labor Matters
Schedule 4.26 - Broker's Fee
Schedule 4.27 - Activities of Holdings
</TABLE>
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PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of April 13, 2000, among PlayCore, Inc., a
Delaware corporation (prior to the effectiveness of the Merger, "Holdings"),
PlayCore Wisconsin, Inc., a Wisconsin corporation (together with its permitted
successors and assigns, "PlayCore Wisconsin"), PlayCore Holdings, Inc., a
Delaware corporation ("Parent", and upon the effectiveness of the Merger,
"Parent" or "Holdings") the Subsidiaries (as hereinafter defined) listed on the
signature pages hereof as Guarantors, GS Mezzanine Partners II, L.P., a limited
partnership organized under the laws of Delaware ("GS Mezzanine"), and GS
Mezzanine Partners II Offshore, L.P., an exempted limited partnership organized
under the laws of the Cayman Islands ("GS Mezzanine Offshore" and, collectively
with GS Mezzanine and their permitted successors and assigns, the "Purchasers").
RECITALS
WHEREAS, Holdings has entered into an Agreement and Plan of Merger, dated
as of April 13, 2000 (the "Merger Agreement"), by and among Holdings, Parent,
and Jasdrew Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Acquisition Company"), pursuant to which Acquisition
Company and Holdings will be merged with and into PlayCore Wisconsin with
PlayCore Wisconsin being the surviving corporation by way of a two step
transaction consisting of (a) a joint tender offer (the "Tender Offer") by
Acquisition Company and Holdings with respect to the Common Stock, par value
$0.01 per share of Holdings ("Common Stock"), which will be commenced pursuant
to an Offer to Purchase related thereto (the "Offer to Purchase"), and (b) a
subsequent mergers (collectively, the "Merger") of Acquisition Company with and
into Holdings and Holdings with and into PlayCore Wisconsin;
WHEREAS, the Merger Agreement contemplates that Parent will invest in
Acquisition Company $72,500,000 in cash which Acquisition Company will use to
purchase in connection with the Tender Offer Common Stock for an aggregate
purchase price of $72,500,000 (the "Equity Financing");
WHEREAS, pursuant to the Tender Offer, either Acquisition Company or
Holdings will acquire in the Tender Offer all shares of Common Stock not
purchased by Acquisition Company with the proceeds of the Equity Financing and,
in connection therewith, PlayCore Wisconsin will refinance all of the
outstanding Indebtedness of PlayCore Wisconsin and its Subsidiaries;
WHEREAS, the Tender Offer and the refinancing of the outstanding
Indebtedness of PlayCore Wisconsin and its Subsidiaries will be financed as
follows: (a) upon the terms and subject to the conditions set forth in this
Agreement, PlayCore Wisconsin will sell $30,000,000 aggregate principal amount
of its 18% Senior Subordinated Notes due 2008 in the form of Exhibit A hereto
(together with all notes issued in exchange or replacement therefor, the
"Notes"), and (b) PlayCore Wisconsin will enter into the Credit Agreement with
the lenders who
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are parties thereto under which an amount equal to approximately $95,000,000
minus fees and expenses will be disbursed to PlayCore Wisconsin at the Closing;
WHEREAS, the Notes are to be guaranteed on a senior subordinated basis by
the Guarantors pursuant to Section 15 of this Agreement;
WHEREAS, the Holders will from time to time be entitled to the benefits of
the Exchange and Registration Rights Agreement in the form of Exhibit B hereto
(as amended, supplemented or modified from time to time, the "Exchange and
Registration Rights Agreement"), among Holdings, Parent, PlayCore Wisconsin,
Playcore Wisconsin's Subsidiaries who are parties to this Agreement and the
Purchasers;
WHEREAS, after consummation of the Tender Offer and the Merger, all of the
outstanding equity of PlayCore Wisconsin will be owned by Parent;
WHEREAS, PlayCore Wisconsin has duly authorized the creation and issuance
of the Notes, Holdings, Parent and PlayCore Wisconsin have duly authorized the
execution and delivery of this Agreement and the Exchange and Registration
Rights Agreement, and PlayCore Wisconsin's Subsidiaries who are parties to this
Agreement have duly authorized the execution and delivery of this Agreement and
the Exchange and Registration Rights Agreement;
WHEREAS, all things necessary to make this Agreement, the Notes and the
Exchange and Registration Rights Agreement valid and binding obligations of
Holdings, Parent and PlayCore Wisconsin in accordance with their respective
terms have been done. All things necessary to make this Agreement and the
Exchange and Registration Rights Agreement the valid and binding obligation of
the Guarantors who are parties thereto in accordance with their respective terms
have been done.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1.
DEFINITIONS AND ACCOUNTING TERMS
1.1 Definitions. As used herein, the following terms shall have the
meanings specified herein unless the context otherwise requires:
"Accredited Investor" means any Person that is an "accredited investor"
within the meaning of Rule 501(a) (1), (2), (3) or (7) of Regulation D under the
Securities Act.
"Acquired Indebtedness" means with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with, into or becomes a subsidiary of such specified Person, or (ii)
assumed in connection with the acquisition of assets from such other Person and
in each case whether or not Incurred by such other Person
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in connection with, or in anticipation or contemplation of, such other Person
becoming a Subsidiary of such specified Person or such acquisition, merger or
consolidation.
"Acquisition Company" is defined in the first recital to this Agreement.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
Notwithstanding the foregoing, in no event will the Purchasers or any of their
Affiliates be deemed to be an Affiliate of Holdings or PlayCore Wisconsin.
"Affiliate Transaction" is defined in Section 8.6(a).
"Agreement" is defined in Section 17.4.
"Applicable Law" means all laws, statutes, treaties, rules, codes,
ordinances, regulations, certificates, orders and licenses of, and
interpretations by, any Governmental Authority and judgments, decrees,
injunctions, writs, permits, orders or like governmental action of any
Governmental Authority (including Environmental Laws and those pertaining to
health or safety) applicable to Holdings, PlayCore Wisconsin or any of its
Subsidiaries or any of their property, assets or operations.
"Asset Acquisition" means (i) an Investment by Holdings, PlayCore Wisconsin
or any Subsidiary of PlayCore Wisconsin in any other Person pursuant to which
such Person shall become a Subsidiary of PlayCore Wisconsin, or shall be merged
with or into PlayCore Wisconsin or any Subsidiary of PlayCore Wisconsin, or (ii)
the acquisition by Holdings, PlayCore Wisconsin or any Subsidiary of PlayCore
Wisconsin of the assets or a line of business or a division of any Person (other
than a Subsidiary of PlayCore Wisconsin) other than in the ordinary course of
business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment (other than in connection with a mortgage, pledge, lien
or security interest permitted by Section 8.7) or other transfer for value by
Holdings, PlayCore Wisconsin or any of PlayCore Wisconsin's Subsidiaries,
including any Sale and Leaseback Transaction, to any Person other than PlayCore
Wisconsin or a Wholly Owned Subsidiary of PlayCore Wisconsin of: (i) any Capital
Stock of PlayCore Wisconsin or any Subsidiary of PlayCore Wisconsin (other than
directors' qualifying shares to the extent required by applicable law); or (ii)
any other property or assets of PlayCore Wisconsin or any Subsidiary of PlayCore
Wisconsin other than in the ordinary course of business; provided, however, that
Asset Sales shall not include: (A) a transaction or series of related
transactions for which PlayCore Wisconsin or its Subsidiaries receive aggregate
consideration of less than $500,000; (B) the sale, lease, conveyance,
disposition or other transfer of all or substantially all of the assets of
PlayCore Wisconsin as
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permitted under Section 8.12; (C) any Restricted Payment permitted by Section
8.2, (D) any Permitted Investment; (E) sales of damaged, worn-out or obsolete
equipment or assets that, in PlayCore Wisconsin's reasonable judgment, are no
longer either used or useful in the business of PlayCore Wisconsin or its
Subsidiaries; (F) the sale, lease, conveyance, disposition or other transfer of
all or substantially all of the assets of PlayCore Wisconsin or Holdings that
constitutes a Change of Control; and (G) transfers of cash or Cash Equivalents
otherwise permitted by this Agreement.
"Asset Sale Offer" is defined in Section 7.9(a).
"Asset Sale Offer Trigger Date" is defined in Section 8.5(c).
"Attributable Indebtedness" in respect of a Sale and Leaseback Transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such Sale and Leaseback Transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Audit Date" means December 31, 1999.
"Bankruptcy Law" means Title 11 of the United States Code or any similar
federal or state bankruptcy, insolvency, reorganization or other law for the
relief of debtors.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Holders.
"Business Day" means any day other than a Legal Holiday.
"Capital Expenditures" means, for any period and with respect to any
Person, the aggregate of all expenditures by such Person and its Subsidiaries
for the acquisition or leasing of fixed or capital assets or additions to fixed
or capital assets (including replacements, capitalized repairs and improvements
during such period) which should be capitalized under GAAP on a consolidated
balance sheet of such Person and its Subsidiaries.
"Capitalized Interest" is defined in Exhibit A hereto.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at
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any date shall be the capitalized amount of such obligations at such date,
determined in accordance with GAAP.
"Capital Stock" means, (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person; and (ii) with
respect to any Person that is not a corporation, any and all partnership,
membership or other equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) time
deposits, certificates of deposit, Eurocurrency deposits or bankers' acceptances
maturing within one year from the date of acquisition thereof or similar types
of investments routinely offered by any bank organized under the laws of the
United States of America or any state thereof or the District of Columbia or any
U.S. branch of a foreign bank having at the date of acquisition thereof combined
capital and surplus of not less than $300,000,000 or any commercial bank of any
other country that is a member of Organization for Economic Cooperation and
Development ("OECD") and has total assets in excess of $300,000,000; (v)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications specified in clause (iv) above; (vi) investments in
money market funds which invest substantially all their assets in securities of
the types described in clauses (i) through (v) above; and (vii) foreign bank
deposits and cash equivalents in jurisdictions where Holdings or its
Subsidiaries are then actively conducting business; provided that (A) all such
deposits are required to be made in the ordinary course of business, (B) such
deposits do not exceed $1,000,000 in the aggregate and (C) the funds so
deposited do not remain in such bank for more than 30 days.
"Change of Control" means the occurrence of any of the following (other
than as the result of the Transactions): (i) any sale, lease, exchange, or other
transfer (other than in connection with a grant of security interest or pledge
pursuant to the Credit Agreement or any Refinancing thereof) (in one transaction
or a series of related transactions) of all or substantially all of the
properties and assets of Holdings and its Subsidiaries or PlayCore Wisconsin and
its Subsidiaries, in each case, taken as a whole, to any Person or group of
related Persons for purposes of Section 13(d)(3) of the Exchange Act (a
"Group"), together with any Affiliates thereof (whether or not otherwise in
compliance with the provisions of this Agreement), other than to the Permitted
Holders or their Related Parties; (ii) the approval by the holders of Capital
Stock of Holdings or PlayCore Wisconsin of any plan or proposal for the
liquidation or
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dissolution of Holdings or PlayCore Wisconsin (whether or not otherwise in
compliance with the provisions of this Agreement) other than as provided by
Section 8.12(b) with respect to a predecessor corporation which is relieved of
its obligations hereunder; (iii) any Person or Group (other than the Permitted
Holders or their Related Parties) shall become the owner, directly or
indirectly, beneficially or of record, of shares representing more than 50% of
the aggregate ordinary voting power represented by the issued and outstanding
Capital Stock of Holdings; or (iv) the replacement of a majority of the Board of
Directors of Holdings over a two-year period from the directors who constituted
the Board of Directors of Holdings at the beginning of such period, and such
replacement shall not have been approved by the Permitted Holders or approved or
nominated for election by a vote of a majority of the Board of Directors of
Holdings then still in office who either were members of such Board of Directors
at the beginning of such period or whose election or nomination for election as
a member of such Board of Directors was previously so approved.
"Change of Control Offer" is defined in Section 7.7(a).
"Change of Control Payment" is defined in Section 7.7(a).
"Change of Control Payment Date" is defined in Section 7.7(b)(ii).
"Chartwell" means Chartwell Investments II, L.L.C.
"Closing" is defined in Section 2.3(a).
"Closing Date" is defined in Section 2.3(a).
"Closing Payment" means, with respect to each Purchaser, an amount equal to
3% of the aggregate principal amount of Notes purchased by such Purchaser as of
the Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act or, if at any time after the
execution of this Agreement such Commission is not existing and performing the
duties now assigned to it under the Exchange Act, the body performing such
duties at such time.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's Common Stock, whether outstanding on the Closing
Date or issued after the Closing Date, and includes, without limitation, all
series and classes of such common stock. Unless the context otherwise requires,
"Common Stock" means Common Stock of Holdings.
"Consolidated" or "consolidated" (including the correlative term
"consolidating") or on a "consolidated basis", when used with reference to any
financial term in this Agreement (but not when used with respect to any Tax
Return or Tax liability), means the aggregate for two
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or more Persons of the amounts signified by such term for all such Persons, with
inter-company items eliminated and, with respect to net income or earnings,
after eliminating the portion of net income or earnings properly attributable to
minority interests, if any, in the capital stock of any such Person or
attributable to shares of preferred stock of any such Person not owned by any
other such Person, in accordance with GAAP.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of: (i) Consolidated Net Income; and (ii) to the
extent Consolidated Net Income has been reduced thereby: (A) all income taxes of
such Person and its Subsidiaries paid or accrued in accordance with GAAP for
such period (other than income taxes attributable to extraordinary, unusual or
nonrecurring gains); (B) Consolidated Interest Expense; and (C) Consolidated
Non-Cash Charges less any non-cash items increasing Consolidated Net Income for
such period, all as determined on a consolidated basis for such Person and its
Subsidiaries in accordance with GAAP.
"Consolidated Interest Coverage Ratio" means, with respect to any Person,
the ratio of Consolidated EBITDA of such Person during the four full fiscal
quarters (the "Four Quarter Period") ending prior to the date of the transaction
giving rise to the need to calculate the Consolidated Interest Coverage Ratio
for which financial statements are available (the "Transaction Date") to
Consolidated Interest Expense of such Person for the Four Quarter Period. In
addition to and without limitation of the foregoing, for purposes of this
definition, "Consolidated EBITDA" and "Consolidated Interest Expense" shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to: (i) the Incurrence or repayment or retirement of any
Indebtedness of such Person or any of its Subsidiaries (and the application of
the proceeds thereof) giving rise to the need to make such calculation and any
Incurrence or repayment or retirement of other Indebtedness (and the application
of the proceeds thereof), other than the Incurrence or repayment of Indebtedness
in the ordinary course of business for working capital purposes pursuant to
working capital facilities, occurring during the Four Quarter Period or at any
time subsequent to the last day of the Four Quarter Period and on or prior to
the Transaction Date, as if such Incurrence or repayment or retirement, as the
case may be (and the application of the proceeds thereof), occurred on the first
day of the Four Quarter Period; and (ii) any Asset Sales or Asset Acquisitions
giving rise to the need to make such calculation as a result of such Person or
one of its Subsidiaries (including any Person who becomes a Subsidiary as a
result of the Asset Acquisition) Incurring Acquired Indebtedness and also
including any Consolidated EBITDA (including any pro forma expense and cost
reductions, adjustments and other operating improvements or synergies both
achieved by such Person during such period and to be achieved by such Person and
with respect to the acquired assets, all as determined in good faith by a
responsible financial or accounting officer of PlayCore Wisconsin attributable
to the assets which are the subject of the Asset Acquisition or Asset Sale
during the Four Quarter Period) occurring during the Four Quarter Period or at
any time subsequent to the last day of the Four Quarter Period and on or prior
to the Transaction Date, as if such Asset Sale or Asset Acquisition (including
the Incurrence of any such Acquired Indebtedness) occurred on the first day of
the Four Quarter Period. If such Person or any of its Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the Incurrence of such guaranteed Indebtedness as if such
Person or any Subsidiary of such Person
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had directly Incurred or otherwise assumed such guaranteed Indebtedness.
Furthermore, in calculating "Consolidated Interest Expense" for purposes of
determining the denominator (but not the numerator) of this "Consolidated
Interest Coverage Ratio": (A) interest on outstanding Indebtedness determined on
a fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on the Transaction
Date; and (B) notwithstanding clause (A) above, interest on Indebtedness
determined on a fluctuating basis, to the extent such interest is covered by
agreements relating to Interest Swap Obligations, shall be deemed to accrue at
the rate per annum resulting after giving effect to the operation of such
agreements.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, including, without limitation: (A)
any amortization of debt discount (including the amortization of costs relating
to interest rate caps or other similar agreements), (B) the net costs under
Interest Swap Obligations; (C) all capitalized interest; and (D) the interest
portion of any deferred payment obligation, but excluding amortization or
write-off of debt issuance costs, (ii) all cash dividends accrued during such
period (whether or not actually paid during such period) in respect of a
Disqualified Capital Stock of such Person, and (iii) the interest component of
Capitalized Lease Obligations paid (to the extent not accrued in a prior
period), accrued and/or scheduled to be paid or accrued by such Person and its
Subsidiaries during such period as determined on a consolidated basis in
accordance with GAAP, minus (iv) interest income for such period. Consolidated
Interest Expense shall not include any Capitalized Interest, any Special
Interest and any premiums, fees and expenses (and any amortization thereof)
payable in connection with the Transactions, all as determined on a consolidated
basis in conformity with GAAP.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP and
before any reduction in respect of non-cash dividends on Preferred Stock;
provided that there shall be excluded therefrom: (i) after-tax gains or losses
from Asset Sales or abandonments or reserves relating thereto; (ii) items
classified as extraordinary, nonrecurring or unusual gains or losses on an
after-tax basis (including, but not limited to, fees and expenses related to the
Transactions and write-offs or other costs associated or arising in connection
with the Transactions); (iii) the net income of any Person acquired in a
"pooling-of-interests" transaction accrued prior to the date it becomes a
Subsidiary of the referent Person or is merged or consolidated with the referent
Person or any Subsidiary of the referent Person; (iv) the net income (but not
loss) of any Subsidiary of the referent Person to the extent that the
declaration of dividends and the making of loans or advances or similar
distributions, loans or advances by that Subsidiary of that income is restricted
by a contract, operation of law or otherwise; (v) the net income of any Person,
other than a Subsidiary of the referent Person, except to the extent of
dividends or distributions paid in cash or Cash Equivalents to the referent
Person or to a Wholly Owned Subsidiary of the referent Person by such Person;
(vi) in the case of a successor to the referent Person by consolidation or
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merger or as a transferee of the referent Person's assets, any earnings of the
successor corporation prior to such consolidation, merger or transfer of assets;
and (vii) the effect of changes in accounting principles after the Closing Date.
"Consolidated Net Worth" of any Person means the consolidated shareholders'
equity of such Person and its Subsidiaries, determined on a consolidated basis
in accordance with GAAP.
"Consolidated Non-Cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
such Person and its Subsidiaries reducing Consolidated Net Income of such Person
and its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP.
"Contract" is defined in Section 4.5.
"Credit Agreement" means the Credit Agreement dated as of April 13, 2000,
among PlayCore Wisconsin, Holdings, Parent, Heartland Industries, Inc. (DE), the
lenders party thereto in their capacities as lenders thereunder, General
Electric Capital Corporation, as administrative agent, and Credit Agricole
Indosuez, as documentation agent, together with the related documents thereto
(including, without limitation, any Guarantees and security documents), in each
case as such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
amendment, supplement, modification or agreement adding Subsidiaries of PlayCore
Wisconsin as additional borrowers or guarantors thereunder or extending the
maturity of, refinancing, replacing or otherwise restructuring (other than, in
any such case, increasing the amount of available borrowings thereunder except
to the extent permitted to be Incurred and remain outstanding under clauses
(ii), (x) and (xiv) of the definition of "Permitted Indebtedness" and, to the
extent not otherwise Incurred, under clause (iv) of the definition of "Senior
Indebtedness"), all or any portion of the Indebtedness under such agreement or
any successor or replacement agreement and whether by the same or any other
agent, lender or group of lenders.
"Credit Documents" means the Credit Agreement and all certificates,
instruments, and other documents and agreements made and delivered from time to
time in connection therewith and related thereto.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect PlayCore
Wisconsin or any Subsidiary of PlayCore Wisconsin against fluctuations in
currency values.
"Custodian" is defined in Section 12.1(i).
"Default" means any event, act or condition that is, or with the giving of
notice, lapse of time or both would constitute, an Event of Default.
"Default Amount" is defined in Section 12.2.
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"Designated Senior Indebtedness" means (i) Senior Indebtedness under or in
respect of the Credit Agreement and (ii) any other Senior Indebtedness which, at
the time of determination, has an aggregate principal amount of at least
$25,000,000 and is specifically designated in the instrument evidencing such
Senior Indebtedness as "Designated Senior Indebtedness" by PlayCore Wisconsin.
"Director" means a member of the Board of Directors.
"Disclosure Schedule" means all schedules to this Agreement.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable at the option of the holder thereof), or upon the
happening of any event, matures (including any maturity as the result of an
optional redemption by the issuer thereof) or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole
option of the holder thereof on or prior to the Stated Maturity.
"Enforceability Exceptions" means, with respect to any specified
obligation, any limitations on the enforceability of such obligation due to
bankruptcy, insolvency, fraudulent transfer or conveyance, reorganization,
moratorium, and other similar laws of general applicability relating to or
affecting creditors' rights or general equity principles, including principles
of commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or equity).
"Entity" is defined in Section 7.8(a).
"Environmental Laws" means any Federal, state, foreign or local statute,
law, rule, regulation, ordinance, code or rule of common law now or hereafter in
effect and in each case as amended, and any legally binding judicial or written
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to the environment, employee health
and safety or Hazardous Substances, including, without limitation, CERCLA; RCRA;
the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the
Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Clean Air Act,
42 U.S.C. Section 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section
3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; the
Emergency Planning and the Community Right-to-Know Act of 1986, 42 U.S.C.
Section 11001 et seq.; the Hazardous Material Transportation Act, 49 U.S.C.
Section 1801 et seq. and the Occupational Safety and Health Act, 29 U.S.C.
Section 651 et seq.; and any state and local or foreign counterparts or
equivalents, in each case as amended from time to time.
"Environmental Matter" means any matter relating to pollution,
contamination, protection of the environment, human health or safety, and health
or safety of employees, and any matter relating to emissions, discharges,
releases or threatened releases, of Hazardous Substances into the air (indoor
and outdoor), surface water, groundwater, soil, land surface or subsurface,
buildings, facilities, real or personal property or fixtures or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances.
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"Environmental Permits" is defined in Section 4.14(a).
"Equity Financing" is defined in the second recital to this Agreement.
"Equity Offering" means a public offering of Qualified Capital Stock (other
than public offerings with respect to Holdings' Common Stock on Form S-8) of
Holdings.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated thereunder.
"ERISA Affiliate" is defined in Section 4.12(b).
"Event of Default" is defined in Section 12.1.
"Excess Proceeds" is defined in Section 8.5(c).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange and Registration Rights Agreement" is defined in the sixth
recital to this Agreement.
"Exchange Guarantees" means the guarantees issued in the Exchange Offer.
"Exchange Notes" means the Notes issued in the Exchange Offer.
"Exchange Offer" is defined in the Exchange and Registration Rights
Agreement.
"Existing Indebtedness" is defined in Section 4.18.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction between a
willing seller and a willing and able buyer. Fair market value in excess of
$5,000,000 but less than $10,000,000 shall be conclusively (absent manifest
error) determined by the Board of Directors of PlayCore Wisconsin acting in good
faith and shall be evidenced by a Board Resolution of such Board of Directors.
Fair market value of $10,000,000 or more shall be determined by an Independent
Financial Advisor.
"Financial Statements" is defined in Section 4.6.
"Financing Documents" means collectively, this Agreement, the Exchange and
Registration Rights Agreement, the Notes, the Exchange Notes and the Exchange
Guarantees, and all certificates, instruments, financial and other statements
and other documents made and delivered in connection herewith and therewith.
"Fiscal Month" means a monthly fiscal period of Holdings and its
Subsidiaries ending on the last day in each calendar month.
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"Fiscal Quarter" means a quarterly fiscal period of Holdings and its
Subsidiaries ending on March 31, June 30, September 30 and December 31 of each
calendar year.
"Fiscal Year" shall mean the fiscal year of Holdings and its Subsidiaries
ending on December 31 of each calendar year.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by the accounting profession
of the United States of America, as in effect from time to time.
"Governmental Authority" means (i) the government of the United States of
America or any State or other political subdivision thereof, (ii) any government
or political subdivision of any other jurisdiction in which Holdings or any of
its Subsidiaries conducts all or any part of its business, or which asserts
jurisdiction over any properties of Holdings or any of its Subsidiaries or (iii)
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to, any such government.
"GS Mezzanine" is defined in the preamble to this Agreement.
"GS Mezzanine Offshore" is defined in the preamble to this Agreement.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantor" means (i) Holdings and, after consummation of the Merger,
Parent; (ii) each of PlayCore Wisconsin's Subsidiaries as of the Closing Date;
and (iii) each of PlayCore Wisconsin's Subsidiaries that in the future executes
a Supplemental Agreement pursuant to Section 15.2 wherein such Subsidiary agrees
to be bound by the terms of this Agreement as a Guarantor and to become a party
to the Exchange and Registration Rights Agreement as a Guarantor; provided that
any Person constituting a Guarantor as described above shall cease to constitute
a Guarantor when its respective Guarantee is released in accordance with the
terms of this Agreement.
"Guarantor Senior Indebtedness" means, with respect to any Guarantor, the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on Indebtedness of such Guarantor, whether
outstanding on the Closing Date or thereafter Incurred (unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Guarantee of such
Guarantor) in respect of: (i) all monetary obligations of every nature of such
Guarantor under, or with respect to, the Credit Agreement, including,
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without limitation, obligations to pay principal and interest (including any
interest accruing subsequent to the filing of a petition of bankruptcy at the
rate provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under Applicable Law), reimbursement obligations
under letters of credit, fees, expenses and indemnities (including Guarantees
thereof); (ii) all Interest Swap Obligations (and Guarantees thereof) entered in
connection with the Credit Agreement; (iii) all obligations (and Guarantees
thereof) under Currency Agreements entered in connection with the Credit
Agreement; and (iv) Guarantees of Senior Indebtedness permitted by clause (iv)
of the definition of "Senior Indebtedness", in each case whether outstanding on
the Closing Date or thereafter Incurred. Notwithstanding the foregoing,
"Guarantor Senior Indebtedness" shall not include: (i) any Obligations of such
Guarantor to PlayCore Wisconsin or to a Subsidiary of PlayCore Wisconsin or such
Guarantor; (ii) Indebtedness to, or guaranteed on behalf of, any shareholder,
director, officer or employee of such Guarantor or any Subsidiary of such
Guarantor (including, without limitation, amounts owed for compensation) other
than a shareholder who is also a lender (or an Affiliate of a lender) under the
Credit Agreement and who has been such lender (or an Affiliate of such lender)
prior to its becoming such shareholder; (iii) that portion of any Indebtedness
Incurred in violation of Section 8.4 (but, as to any such obligation, no such
violation shall be deemed to exist for purposes of this clause (iii) if the
holder(s) of such obligation or their representative shall have received an
Officers' Certificate of Holdings and PlayCore Wisconsin to the effect that the
Incurrence of such Indebtedness does not (or, in the case of revolving credit
Indebtedness, that the Incurrence of the entire committed amount thereof at the
date on which the initial borrowing thereunder is made would not) violate such
provisions of this Agreement); (iv) Obligations to trade creditors and other
amounts Incurred in connection with obtaining goods, materials or services; (v)
Obligations represented by Disqualified Capital Stock; (vi) any liability for
federal, state, local or other taxes owed or owing by such Guarantor; (vii)
Indebtedness which, when Incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without recourse to Holdings
and its Subsidiaries; and (viii) any Indebtedness which is, by its express
terms, subordinated in right of payment to any other Indebtedness of such
Guarantor.
"Hazardous Substances" means (i) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is friable, urea formaldehyde
foam insulation, polychlorinated biphenyls, and radon gas; (ii) any chemicals,
materials or substances defined as or included in the definition of "hazardous
substances," "hazardous waste," "hazardous materials," "extremely hazardous
substances," "restricted hazardous waste," "toxic substances," "toxic
pollutants," "contaminants," or "pollutants," or words of similar meaning and
effect, under any applicable Environmental Law; and (iii) any other chemical,
material or substance, the Release of which is prohibited, limited or regulated
by any Environmental Law.
"Hedges" means, with respect to any Person, the obligations of such Person
at such time under commodity price swap agreements, commodity price cap
agreements, commodity price collar agreements and commodity price exchange
agreements, options or futures contract or other similar agreements or
arrangements or hedge contract or forward sale contract, in each case designed
to protect such Person or its Subsidiaries against fluctuations in commodity
prices.
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"Holder" means a Person in whose name a Note is registered on the Security
Register.
"Holders' Representative" means GS Mezzanine or such other designated
representative of the Holders designated as such by written notice from the
Holders to PlayCore Wisconsin and the Senior Indebtedness Agent.
"Holdings Party" is defined in Section 4.4(d).
"Incur" is defined in Section 8.4. "Incurred" and "Incurrence" shall have
correlative meanings.
"Indebtedness" means, with respect to any Person, without duplication: (i)
all Obligations of such Person for borrowed money (including, without
limitation, Senior Indebtedness); (ii) all Obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments; (iii) all Capitalized
Lease Obligations of such Person; (iv) all Obligations of such Person issued or
assumed as the deferred purchase price of property, all conditional sale
obligations and all Obligations under any title retention agreement (but
excluding trade accounts payable and other accrued liabilities arising in the
ordinary course of business); (v) all Obligations for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction; (vi) all Obligations of such Person in respect of its Disqualified
Capital Stock; (vii) Guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (vi) above and clause (ix)
below; (viii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any Lien on any property or asset
of such Person, the amount of such Obligation being deemed to be the lesser of
the fair market value of such property or asset or the amount of the Obligation
so secured; (ix) all Obligations under currency agreements and interest swap
agreements of such Person; and (x) all Attributable Indebtedness of such Person.
Notwithstanding anything to the contrary contained in this definition,
Indebtedness shall not include any contingent purchase price obligations or
other earn-out obligations of Holdings and its Subsidiaries in connection with
acquisitions, which obligations are not required to be included as indebtedness
on the face of Holdings consolidated balance sheet in accordance with GAAP.
"Indemnified Person" is defined in Section 16.2.
"Indemnitor" is defined in Section 16.2.
"Independent Financial Advisor" means an accounting, appraisal, valuation
or investment banking firm: (i) which does not, and whose directors, officers
and employees or Affiliates do not, have a direct or indirect financial interest
in PlayCore Wisconsin; and (ii) which, in the judgment of the Board of Directors
of Holdings, is otherwise independent and qualified to perform the task for
which it is to be engaged.
"Institutional Accredited Investors" is defined in Section 10.1(a).
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"Institutional Investor" means (i) any original purchaser of a Note and any
transferee that is an Affiliate of any original purchaser, (ii) any Holder of a
Note holding more than 25% of the aggregate principal amount of the Notes then
Outstanding, and (iii) any bank, trust company, savings and loan association or
other financial institution, any pension plan, any investment company or
investment fund, any insurance company, any broker or dealer, or any other
similar financial institution or entity, regardless of legal form organized
under the laws of the United States or a State thereof, in each case in this
clause (iii), with capital and surplus in excess of $150,000,000.
"Intellectual Property" means (i) all inventions and discoveries (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (ii)
all franchises, permits, trademarks, service marks, trade dress, logos, trade
names and corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith, (iii) all copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith, (iv) all broadcast rights,
(v) all mask works and all applications, registrations and renewals in
connection therewith, (vi) all know-how, trade secrets and confidential business
information, whether patentable or unpatentable and whether or not reduced to
practice (including ideas, research and development, know-how, formulas,
compositions and manufacturing and production process and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals), (vii) all
computer software (including data and related documentation), (viii) all other
proprietary rights, (ix) all copies and tangible embodiments thereof (in
whatever form or medium) and (x) all licenses and agreements in connection
therewith.
"Interest Accrual Date" is defined in Exhibit A hereto.
"Interest Payment Date" is defined in Exhibit A hereto.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a Guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any other Person. "Investment" shall exclude extensions of trade credit by
PlayCore
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Wisconsin and its Subsidiaries in customary trade terms in accordance with
normal trade practices of PlayCore Wisconsin or such Subsidiary, as the case may
be. For purposes of Section 8.2, the amount of any Investment shall be the
original cost of such Investment plus the cost of all additional Investments by
Holdings or any of its Subsidiaries, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment, reduced by the payment of dividends or distributions in connection
with such Investment or any other amounts received in respect of such
Investment; provided that no such payment of dividends or distributions or
receipt of any such other amounts shall reduce the amount of any Investment if
such payment of dividends or distributions or receipt of any such amounts would
be included in Consolidated Net Income. If Holdings or any Subsidiary of
Holdings sells or otherwise disposes of any Common Stock of any direct or
indirect Subsidiary of Holdings such that, after giving effect to any such sale
or disposition, Holdings no longer owns, directly or indirectly, 100% of the
outstanding Common Stock of such Subsidiary, Holdings shall be deemed to have
made an Investment on the date of any such sale or disposition equal to the fair
market value of the Common Stock of such Subsidiary not sold or disposed of.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in The City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If any payment date in
respect of the Notes is a Legal Holiday at a place of payment, payment may be
made at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.
"Liabilities" is defined in Section 16.2.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind, including any conditional sale or other title
retention agreement.
"Management Employment Contracts" shall mean each of the employment
agreements dated as of the date hereof, as amended through the Closing Date, by
and between Acquisition Company and each of the individuals listed on Schedule
3.10.
"Management Options" shall mean the options to purchase shares of Common
Stock to be issued by Holdings to certain management employees of PlayCore
Wisconsin, under Holdings' stock option plan, to be effective as of the
effective date of the Merger.
"Material" means material in relation to the business, operations,
property, assets, liabilities, management, condition (financial or otherwise) or
prospects of Holdings and its Subsidiaries, taken as a whole, in each case,
other than pursuant to or as disclosed in the Merger Agreement.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property, assets, liabilities, management, condition
(financial or otherwise) or prospects of Holdings and its Subsidiaries taken as
a whole in each case, other than pursuant to or as disclosed in the Merger
Agreement, (b) the rights or remedies of the Purchasers or Holders or the
ability of Holdings and its Subsidiaries taken as a whole to perform their
respective obligations to the Purchasers and the Holders under any of the
Financing Documents.
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"Material Contracts" means any agreements, contracts or arrangements
between Holdings or its Subsidiaries, on the one hand, and any third parties on
the other, that are Material and which will remain in place following
consummation of the Tender Offer.
"Maturity", when used with respect to any Note, means the date on which the
principal of such Note becomes due and payable as therein or herein provided,
whether at the Stated Maturity or by declaration of acceleration, call for
redemption or otherwise (including in connection with any offer to purchase that
this Agreement requires PlayCore Wisconsin to make).
"Merger" is defined in the first recital to this Agreement.
"Merger Agreement" is defined in the first recital to this Agreement.
"Merger Documents" means the Merger Agreement, the Offer to Purchase, the
Schedule TO and all agreements, certificates, instruments, and other documents
made and delivered in connection therewith.
"Multiemployer Plan" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which Holdings or any ERISA Affiliate is making or
accruing an obligation to make contributions or has within preceding five plan
years made or accrued an obligation to make contributions.
"Net Cash Proceeds" means with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
PlayCore Wisconsin or any of its Subsidiaries from such Asset Sale net of: (i)
reasonable out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees
and sales commissions); (ii) taxes paid or payable after taking into account any
reduction in consolidated tax liability due to available tax credits or
deductions and any tax sharing arrangements; (iii) repayment of Indebtedness
that is required to be repaid in connection with such Asset Sale; (iv)
appropriate amounts to be provided by PlayCore Wisconsin or any Subsidiary, as
the case may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by PlayCore Wisconsin or any
Subsidiary, as the case may be, after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale; and (v) all distributions and other
payments required to be made to minority interest holders in Subsidiaries or
joint ventures as a result of such Asset Sale.
"New Documents" is defined in Section 10.3.
"Non-Voting Observer" is defined in Section 7.8(a).
"Notation of Note Guarantee" is defined in Section 15.7.
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"Note Guarantee" means any Guarantee of the Notes by any Guarantor pursuant
to Section 15 or a Supplemental Agreement, as the case may be.
"Note Registration" means the consummation of the Exchange Offer or the
registration of Notes pursuant to the terms of this Agreement and the Exchange
and Registration Rights Agreement.
"Notes" is defined in the fourth recital to this Agreement.
"Notes Payment" is defined in Section 14.2.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnification, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Offer Amount" is defined in Section 7.9(a).
"Offer Period" is defined in Section 7.9(a).
"Offer to Purchase" is defined in the first recital to this Agreement.
"Officers' Certificate" of any Person means a certificate signed by the
chairman of the Board of Directors, the chief executive officer, the president,
the chief operating officer, or any vice president, and by the chief financial
officer, treasurer, the secretary or an assistant secretary (or any such other
officer that performs similar duties) and delivered to the Holders. One of the
officers signing an Officers' Certificate given pursuant to Section 6.1(b) or
Section 6.2(b) or shall be the principal executive, financial or accounting
officer of Holdings or PlayCore Wisconsin, as the case may be. Unless the
context otherwise requires, each reference herein to an "Officers' Certificate"
means an Officers' Certificate of Holdings or PlayCore Wisconsin. References
herein, or in any Note, to any officer of a Person that is a partnership or
limited liability company means such officer of the partnership or, if none, of
a general partner or managing member of the partnership or limited liability
company authorized thereby to act on its behalf.
"Outstanding", when used with respect to the Notes, means, as of the date
of determination, all Notes theretofore executed and delivered under this
Agreement, except:
(i) Notes theretofore canceled by PlayCore Wisconsin or delivered to
PlayCore Wisconsin for cancellation;
(ii) Notes for whose payment or redemption money in the necessary amount
has been theretofore set aside by PlayCore Wisconsin with a third party in
trust for the Holders of such Notes; provided that if such Notes are to be
redeemed, notice of such redemption has been duly given as provided in this
Agreement; and
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(iii) Notes which have been paid pursuant to Section 11.8 or in exchange
for or in lieu of which other Notes have been executed and delivered pursuant
to this Agreement;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
Holdings, PlayCore Wisconsin or any other obligor upon the Notes or any
Affiliate of Holdings or PlayCore Wisconsin or of such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether Holdings or PlayCore Wisconsin shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
Notes which Holdings or PlayCore Wisconsin knows to be so owned shall be so
disregarded. Notes so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Required Holders the pledgee's right so to act with respect to such Notes and
that the pledgee is not Holdings or PlayCore Wisconsin or any other obligor upon
the Notes or any Affiliate of Holdings or PlayCore Wisconsin or of such other
obligor.
"Parent" is defined in the preamble to this Agreement.
"Payment Blockage Period" is defined in Section 14.3.
"Pension Plan" is defined in Section 4.12(b).
"Permits" means all licenses, permits, certificates of need, approvals and
authorizations from all Governmental Authorities required to lawfully conduct a
business as presently conducted.
"Permitted Holders" means Chartwell Investments II, LLC and its Affiliates.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Notes and the Guarantees and, after giving effect to
the Exchange Offer, the Exchange Notes and the Exchange Guarantees; (ii)
Indebtedness Incurred pursuant to the Credit Agreement in an aggregate principal
amount at any time outstanding not to exceed $125,000,000 (and all Guarantees of
such Indebtedness) less the amount of all term loan repayments and permanent
commitment reductions under the Credit Agreement with the Net Cash Proceeds of
an Asset Sale applied thereto to the extent required by the Section 8.5;
provided that the amount of Indebtedness permitted to be Incurred pursuant to
the Credit Agreement in accordance with this clause (ii) shall be in addition to
any Indebtedness permitted to be Incurred pursuant to the Credit Agreement in
reliance on and in accordance with clauses (x) and (xiv) below; (iii) other
Indebtedness of PlayCore Wisconsin and its Subsidiaries outstanding on the
Closing Date reduced by the amount of any scheduled amortization payments or
mandatory prepayments when actually paid or permanent reductions thereon; (iv)
Interest Swap Obligations of PlayCore Wisconsin or any Subsidiary of PlayCore
Wisconsin covering Indebtedness of PlayCore Wisconsin or any of its
Subsidiaries; provided, however, that such Interest Swap Obligations are entered
into, in the judgment of PlayCore Wisconsin, to protect PlayCore Wisconsin and
its Subsidiaries from fluctuations in interest rates on their outstanding
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Indebtedness to the extent the notional principal amount of such Interest Swap
Obligation does not at the time of the Incurrence thereof, exceed 105% of the
principal amount of the Indebtedness to which such Interest Swap Obligations
relates; (v) Indebtedness under Currency Agreements and Hedges; provided that in
the case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of PlayCore Wisconsin and its
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder; (vi) Indebtedness of a Subsidiary of PlayCore Wisconsin to
PlayCore Wisconsin or to a Wholly Owned Subsidiary of PlayCore Wisconsin for so
long as such Indebtedness is held by PlayCore Wisconsin or a Wholly Owned
Subsidiary of PlayCore Wisconsin or the lenders or collateral agent under the
Credit Agreement, in each case subject to no Lien held by a Person other than
PlayCore Wisconsin, a Wholly Owned Subsidiary of PlayCore Wisconsin or the
lenders or collateral agent under the Credit Agreement; provided that if as of
any date any Person other than PlayCore Wisconsin, a Wholly Owned Subsidiary of
PlayCore Wisconsin or the lenders or collateral agent under the Credit Agreement
owns or holds any such Indebtedness or holds a Lien in respect of such
Indebtedness, such date shall be deemed the Incurrence of Indebtedness not
constituting Permitted Indebtedness by the issuer of such Indebtedness; (vii)
Indebtedness of PlayCore Wisconsin to a Wholly Owned Subsidiary of PlayCore
Wisconsin or the lenders or collateral agent under the Credit Agreement for so
long as such Indebtedness is held by a Wholly Owned Subsidiary of PlayCore
Wisconsin or the lenders or collateral agent under the Credit Agreement, in each
case subject to no Lien; provided that (A) any Indebtedness of PlayCore
Wisconsin to any Wholly Owned Subsidiary of PlayCore Wisconsin is unsecured and
subordinated, pursuant to a written agreement, to PlayCore Wisconsin obligations
under this Agreement and the Notes and (B) if as of any date any Person other
than a Wholly Owned Subsidiary of PlayCore Wisconsin or the lenders or
collateral agent under the Credit Agreement owns or holds any such Indebtedness
or any Person holds a Lien (other than a Lien in favor of the lenders or
collateral agent under the Credit Agreement) in respect of such Indebtedness,
such date shall be deemed the Incurrence of Indebtedness not constituting
Permitted Indebtedness by PlayCore Wisconsin; (viii) Indebtedness arising from
the honoring by a bank or other financial institution of a check, draft or
similar instrument inadvertently (except in the case of daylight overdrafts)
drawn against insufficient funds in the ordinary course of business; provided,
however, that such Indebtedness is extinguished within two Business Days of
Incurrence; (ix) Indebtedness of PlayCore Wisconsin or any of its Subsidiaries
represented by letters of credit for the account of PlayCore Wisconsin or such
Subsidiary, as the case may be, in order to provide security for workers'
compensation claims, payment obligations in connection with self-insurance or
similar requirements in the ordinary course of business; (x) Indebtedness
represented by Capitalized Lease Obligations and Purchase Money Indebtedness of
PlayCore Wisconsin and its Subsidiaries Incurred in the ordinary course of
business or in connection with Asset Acquisitions not to exceed $7,500,000 at
any one time outstanding; provided that all or a portion of the $7,500,000
permitted to be Incurred pursuant to this clause (x) may, at the option of
PlayCore Wisconsin, be Incurred under the Credit Agreement instead of pursuant
to Capitalized Lease Obligations or Purchase Money Indebtedness; (xi)
Indebtedness arising from agreements of PlayCore Wisconsin or a Subsidiary of
PlayCore Wisconsin providing for indemnification, adjustment of purchase price
or similar obligations, in each case, Incurred in connection with the
disposition of any business, assets or a Subsidiary, other than Guarantees of
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Indebtedness Incurred by any Person acquiring all or any portion of such
business, assets or a Subsidiary for the purpose of financing such acquisition;
provided, however, that (A) such Indebtedness is not reflected on the balance
sheet of PlayCore Wisconsin or any Subsidiary of PlayCore Wisconsin (contingent
obligations referred to in a footnote to financial statements and not otherwise
reflected on the balance sheet will not be deemed to be reflected on such
balance sheet for purposes of this clause (A)) and (B) the maximum assumable
liability in respect of all such Indebtedness shall at no time exceed the gross
proceeds including non-cash proceeds (the fair market value of such non-cash
proceeds being measured at the time it is received and without giving effect to
any subsequent changes in value) actually received by PlayCore Wisconsin and its
Subsidiaries in connection with such disposition; (xii) Indebtedness of PlayCore
Wisconsin or any of its Subsidiaries in respect of performance bonds, bankers'
acceptances, workers' compensation claims, surety or appeal bonds, payment
obligations in connection with self-insurance or similar obligations, and bank
overdrafts (and letters of credit in respect thereof); (xiii) Refinancing
Indebtedness; (xiv) additional Indebtedness of PlayCore Wisconsin and its
Subsidiaries in an aggregate principal amount not to exceed $5,000,000 at any
one time outstanding (which amount may, but need not, be Incurred in whole or in
part under the Credit Agreement); and (xv) Indebtedness of PlayCore Wisconsin to
a Subsidiary (other than a Wholly Owned Subsidiary) of PlayCore Wisconsin;
provided that (A) any Indebtedness of PlayCore Wisconsin to any such Subsidiary
is unsecured and fully subordinated, pursuant to a written agreement in form and
substance satisfactory to the Required Holders, to PlayCore Wisconsin's
obligations under this Agreement and the Notes, (B) if as of any date any Person
other than a Subsidiary of PlayCore Wisconsin owns or holds any such
Indebtedness or any Person holds a Lien in respect of such Indebtedness, such
date shall be deemed the incurrence of Indebtedness not constituting Permitted
Indebtedness by PlayCore Wisconsin, and (C) the aggregate amount of such
Indebtedness Incurred pursuant to this clause (xv) at any time outstanding shall
not exceed $10,000,000 in the aggregate. For purposes of determining compliance
with Section 8.4, in the event that an item of Indebtedness meets the criteria
of more than one of the categories of Permitted Indebtedness described in
clauses (i) through (xv) above or is entitled to be Incurred pursuant to the
Consolidated Interest Coverage Ratio test set forth in Section 8.4, PlayCore
Wisconsin shall, in its sole discretion, classify (or later reclassify) such
item of Indebtedness in any manner that complies with such test.
"Permitted Investments" means: (i) Investments by PlayCore Wisconsin or any
Subsidiary of PlayCore Wisconsin in any Person that is or will become
immediately after such Investment a Wholly Owned Subsidiary of PlayCore
Wisconsin or that will merge or consolidate into PlayCore Wisconsin or a Wholly
Owned Subsidiary of PlayCore Wisconsin; (ii) Investments in PlayCore Wisconsin
by any Subsidiary of PlayCore Wisconsin; provided that any Indebtedness
evidencing such Investment is unsecured and subordinated, pursuant to a written
agreement, to PlayCore Wisconsin's obligations under the Notes and this
Agreement; (iii) Investments in cash and Cash Equivalents; (iv) loans and
advances to employees and officers of PlayCore Wisconsin and its Subsidiaries in
the ordinary course of business for bona fide business purposes not in excess of
$1,000,000 at any one time outstanding, and loans and advances to employees and
officers of PlayCore Wisconsin and its Subsidiaries in the ordinary course of
business for bona fide business purposes to cover reasonable recruitment, travel
and relocation expenses; (v) Currency Agreements, Interest Swap Obligations and
Hedges entered
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into in the ordinary course of PlayCore Wisconsin's or its
Subsidiaries' businesses and otherwise in compliance with this Agreement; (vi)
additional Investments (including joint ventures) not to exceed $2,000,000 in
any single instance or $6,000,000 in the aggregate at any one time outstanding;
(vii) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers; (viii)
Investments made by PlayCore Wisconsin or its Subsidiaries as a result of
consideration received in connection with an Asset Sale made in compliance with
Section 8.5 or any Investment made by PlayCore Wisconsin or any Subsidiary in
connection with a transaction that would be an Asset Sale if it involved
aggregate consideration of $500,000 or more; (ix) Investments of a Person or any
of its Subsidiaries existing at the time such Person becomes a Subsidiary of
PlayCore Wisconsin or at the time such Person merges or consolidates with
PlayCore Wisconsin or any of its Subsidiaries, in either case in compliance with
this Agreement; provided that such Investments were not made by such Person in
connection with, or in anticipation or contemplation of, such Person becoming a
Subsidiary of PlayCore Wisconsin or such merger or consolidation; (x)
repurchases of Capital Stock of PlayCore Wisconsin deemed to occur upon the
exercise of stock options if such Capital Stock represents a portion of the
exercise price thereof; (xi) Investments made by PlayCore Wisconsin or any
Subsidiary in connection with purchase price adjustments, contingent purchase
price payments or other earn-out payments required in connection with
Investments otherwise permitted under this Agreement; (xii) Investments received
in settlement of obligations owed to PlayCore Wisconsin or any Subsidiary as a
result of bankruptcy or insolvency proceedings or upon the foreclosure or
enforcement of any Lien in favor of PlayCore Wisconsin or such Subsidiary;
(xiii) any Investment existing on the date of this Agreement; (xiv) negotiable
instruments held for deposit or collection in the ordinary course of business;
(xv) Investments in the Notes and the Exchange Notes; (xvi) prepaid expenses and
workers compensation, utility, and similar deposits in the ordinary course of
business; (xvii) Investments in Capital Stock of Holdings or immediate parent of
Holdings resulting from the purchase of such Capital Stock from any employee
upon or related to termination of employment of such employee, not to exceed
$1,000,000 in any fiscal year or $5,000,000 in the aggregate at any time
outstanding; (xviii) Investments by PlayCore Wisconsin or any Subsidiary of
PlayCore Wisconsin in any Person that is or will become immediately after such
Investment a Subsidiary (other than a Wholly Owned Subsidiary) of PlayCore
Wisconsin or that will merge or consolidate into PlayCore Wisconsin or a
Subsidiary (other than a Wholly Owned Subsidiary) of PlayCore Wisconsin;
provided that the aggregate amount of Investments made under this clause (xviii)
at any time outstanding shall not exceed $10,000,000 in the aggregate; and (xix)
loans to officers and employees of Holdings and its Subsidiaries to purchase
Capital Stock or to exercise the Management Options in an amount not to exceed
$1,000,000 in the aggregate.
"Permitted Liens" means the following types of Liens: (i) Liens for taxes,
assessments or governmental charges or claims either (a) not delinquent or (b)
contested in good faith by appropriate proceedings and as to which PlayCore
Wisconsin or its Subsidiaries shall have set aside on its books such reserves as
may be required pursuant to GAAP; (ii) statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law incurred in the ordinary course of business for sums not
yet delinquent or being contested in good faith, if such reserve or other
appropriate provision,
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if any, as shall be required by GAAP shall have been made in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security, including any Lien securing letters of credit issued in the
ordinary course of business consistent with past practice in connection
therewith, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money); (iv) judgment Liens not giving rise to an
Event of Default; (v) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not interfering in
any material respect with the ordinary conduct of the business of PlayCore
Wisconsin or any of its Subsidiaries; (vi) any interest or title of a lessor
under any Capitalized Lease Obligation; provided that such Liens do not extend
to any property or asset which is not leased property and any improvements on
such property or assets and proceeds thereof subject to such Capitalized Lease
Obligation; (vii) Liens securing Capitalized Lease Obligations and Purchase
Money Indebtedness permitted pursuant to clause (x) of the definition of
"Permitted Indebtedness"; provided, however, that in the case of Purchase Money
Indebtedness (a) the Indebtedness shall not exceed the cost of such property or
assets and shall not be secured by any property or assets of PlayCore Wisconsin
or any Subsidiary of PlayCore Wisconsin other than the property and assets so
acquired and any improvements on such property or assets and proceeds thereof
and (b) the Lien securing such Indebtedness shall be created within 180 days of
such acquisition or construction or, in the case of a Refinancing of any
Purchase Money Indebtedness, within 180 days of such Refinancing; (viii) Liens
upon specific items of inventory or other goods and proceeds of any Person
securing such Person's obligations in respect of bankers' acceptances issued or
created for the account of such Person to facilitate the purchase, shipment or
storage of such inventory or other goods; (ix) Liens securing reimbursement
obligations with respect to commercial letters of credit which encumber
documents and other property relating to such letters of credit and products and
proceeds thereof; (x) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual, or warranty requirements of
PlayCore Wisconsin or any of its Subsidiaries, including rights of offset and
set-off; (xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under this
Agreement; (xii) Liens in the ordinary course of business not exceeding
$5,000,000 at any one time outstanding that (a) are not Incurred in connection
with borrowing of money and (b) do not materially detract from the value of the
property or materially impair its use; (xiii) Liens securing Indebtedness under
Currency Agreements and Hedges permitted under this Agreement; (xiv) Liens
securing Acquired Indebtedness Incurred in accordance with Section 8.4; provided
that: (A) such Liens secured such Acquired Indebtedness at the time of and prior
to the Incurrence of such Acquired Indebtedness by PlayCore Wisconsin or a
Subsidiary of PlayCore Wisconsin and were not granted in connection with, or in
anticipation of, the Incurrence of such Acquired Indebtedness by PlayCore
Wisconsin or a Subsidiary of PlayCore Wisconsin; and (B) such Liens do not
extend to or cover any property or assets of PlayCore Wisconsin or of any of its
Subsidiaries other than the property or assets that secured the Acquired
Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of
PlayCore Wisconsin or a Subsidiary of PlayCore Wisconsin and are not materially
more favorable to the lienholders than those securing the Acquired Indebtedness
prior to the Incurrence of such Acquired Indebtedness by PlayCore Wisconsin or a
Subsidiary of PlayCore Wisconsin; (xv) Liens securing Indebtedness permitted to
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be Incurred pursuant to clauses (ii) and (xiv) of the definition of "Permitted
Indebtedness;" (xvi) leases or subleases granted to others that do not
materially interfere with the ordinary course of business in PlayCore Wisconsin
and its Subsidiaries; (xvii) Liens arising from filing Uniform Commercial Code
financing statements regarding leases and contractual landlord's Liens not
securing Indebtedness; (xviii) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in connection
with the importation of goods; (xix) Liens securing Indebtedness of Subsidiaries
of PlayCore Wisconsin organized outside of the United States of America Incurred
in accordance with this Agreement; and (xx) Liens existing on the date of this
Agreement.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Plan" is defined in Section 4.12(a).
"PlayCore Wisconsin" is defined in the preamble to this Agreement.
"Predecessor Note" of any particular Note means every previous Note
evidencing all or a portion of the same debt as that evidenced by such
particular Note.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"principal amount" means, when used with respect to any particular Note,
the principal amount of such Note (including Capitalized Interest) at its Stated
Maturity.
"Private Offering" is any offering by any of the Purchasers of some or all
of the Notes without registration under the Securities Act.
"Proceeding" is defined in Section 14.2.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Purchase Date" is defined in Section 7.9(a).
"Purchase Money Indebtedness" means any Indebtedness Incurred at the time
of or within 180 days prior to or after the acquisition of any assets solely for
the purpose of financing all or any part of the purchase price thereof or price
of construction or improvement thereof, and any Refinancings thereof, but not
any increases in the principal amounts thereof outstanding at the time.
"Purchase Price" is defined in Section 2.2.
"Purchasers" is defined in the preamble to this Agreement.
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"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Qualified Institutional Buyer" means any Person that is a "qualified
institutional buyer" within the meaning of Rule 144A.
"Redemption Date", when used with respect to any Note to be redeemed, means
the date fixed for such redemption by or pursuant to this Agreement.
"Redemption Price", when used with respect to any Note to be redeemed,
means the price at which it is to be redeemed pursuant to this Agreement.
"Reference Date" is defined in Section 8.2(a).
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by PlayCore Wisconsin or
any Subsidiary of PlayCore Wisconsin of Indebtedness Incurred in accordance with
Section 8.4 (other than pursuant to clause (ii), (v), (vi), (vii), (viii), (ix),
(x) (xi) or (xii) of the definition of "Permitted Indebtedness"), in each case
that does not:
(i) result in an increase in the aggregate principal amount of
Indebtedness of such Person as of the date of such proposed Refinancing (plus
the amount of any premium required to be paid under the terms of the
instrument governing such Indebtedness and plus the amount of reasonable
expenses incurred by PlayCore Wisconsin and its Subsidiaries in connection
with such Refinancing); or
(ii) create Indebtedness with: (A) a Weighted Average Life to Maturity
that is less than the Weighted Average Life to Maturity of the Indebtedness
being Refinanced; or (B) a final maturity earlier than the final maturity of
the Indebtedness being Refinanced;
provided that if such Indebtedness being Refinanced is Indebtedness of PlayCore
Wisconsin, then such Refinancing Indebtedness shall be Indebtedness solely of
PlayCore Wisconsin.
"Regular Record Date" is defined in Exhibit A hereto.
"Regulation S" means Regulation S under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a
portion thereof.
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"Related Party" means (i) any controlling shareholders, 80% (or more) owned
Subsidiary, or immediate family member (in the case of an individual) of any
Permitted Holder; or (ii) any trust, corporation, partnership or other entity,
the beneficiaries, shareholders, partners, owners or Persons beneficially
holding 80% or more controlling interest of which consist of any one or more
Permitted Holders and/or such other Persons referred to in the immediately
preceding clause (i).
"Release" means the disposing, discharging, injecting, spilling, pumping,
leaking, leaching, dumping, emitting, escaping, emptying, pouring or migrating,
into or upon any land or water or air, or otherwise entering into the
environment.
"Replacement Notes" is defined in Section 10.3.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Indebtedness; provided that
if, and for so long as, any Designated Senior Indebtedness lacks such a
representative, then the Representative for such Designated Senior Indebtedness
shall at all times constitute the holders of a majority in outstanding principal
amount of such Senior Indebtedness in respect of any Designated Senior
Indebtedness.
"Required Holders" means Holders holding a majority in aggregate principal
amount of the Notes at the time Outstanding.
"Restricted Payments" is defined in Section 8.2(a).
"Rule 144A" means Rule 144A under the Securities Act (or any successor
provision), as it may be amended from time to time.
"sale" is defined in Section 11.7(a).
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to PlayCore Wisconsin or a Subsidiary of any property, whether owned by
PlayCore Wisconsin or any Subsidiary at the Closing Date or later acquired,
which has been or is to be sold or transferred by PlayCore Wisconsin or such
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such property.
"Schedule TO" means the Schedule TO information statement filed by Holdings
in connection with the Tender Offer pursuant to the Exchange Act, together with
any amendment or supplement thereto, at the respective times such documents are
filed with the Commission or first published, sent or given to Holdings'
shareholders, and all information and documents as are exhibits thereto or are
incorporated by reference therein.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
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"security document" means all instruments and agreements now or at any time
hereafter securing the whole or part of any Obligations.
"Security Register" is defined in Section 11.6(a).
"Senior Indebtedness" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under Applicable Law) on
Indebtedness of PlayCore Wisconsin, whether outstanding on the Closing Date or
thereafter Incurred (unless, in the case of any particular Indebtedness, the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior in
right of payment to the Notes) in respect of: (i) all monetary obligations of
every nature of PlayCore Wisconsin under, or with respect to, the Credit
Agreement, including, without limitation, obligations to pay principal and
interest (including any interest accruing subsequent to the filing of a petition
of bankruptcy at the rate provided for in the documentation with respect
thereto, whether or not such interest is an allowed claim under Applicable Law),
reimbursement obligations under letters of credit, fees, expenses and
indemnities; (ii) all Interest Swap Obligations (including Guarantees thereof)
entered into in connection with the Credit Agreement; (iii) all obligations
under the Currency Agreements (including Guarantees thereof) entered into in
connection with the Credit Agreement; and (iv) all additional Indebtedness of
PlayCore Wisconsin (other than Permitted Indebtedness) Incurred in compliance
with Section 8.4 (which amount may, but need not, be Incurred (without
duplication) in whole or in part under the Credit Agreement), in each case
whether outstanding on the Closing Date or thereafter Incurred. Notwithstanding
the foregoing, "Senior Indebtedness" shall not include: (1) any Obligations of
PlayCore Wisconsin to a Subsidiary of PlayCore Wisconsin; (2) Indebtedness to,
or guaranteed on behalf of, any shareholder, director, officer or employee of
Holdings, PlayCore Wisconsin or any Subsidiary of PlayCore Wisconsin (including,
without limitation, amounts owed for compensation) other than a shareholder who
is a lender (or an Affiliate of a lender) under the Credit Agreement and who has
been such lender (or an Affiliate of such lender) prior to its becoming such
shareholder; (3) that portion of any Indebtedness Incurred in violation of this
Agreement provisions set forth in Section 8.4 (but, as to any such obligation,
no such violation shall be deemed to exist for purposes of this clause (3) if
the holder(s) of such obligation or their representative shall have received an
Officers' Certificate of PlayCore Wisconsin to the effect that the Incurrence of
such Indebtedness does not (or, in the case of revolving credit indebtedness,
that the Incurrence of the entire committed amount thereof at the date on which
the initial borrowing thereunder is made would not, violate such provisions of
this Agreement; (4) Obligations to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services; (5) Obligations
represented by Disqualified Capital Stock; (6) any liability for federal, state,
local or other taxes owed or owing by PlayCore Wisconsin; (7) Indebtedness
which, when Incurred and without respect to any election under Section 1111(b)
of Title 11, United States Code, is without recourse to PlayCore Wisconsin; and
(8) any Indebtedness which is, by its express terms, subordinated in right of
payment to any other Indebtedness of PlayCore Wisconsin.
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"Senior Indebtedness Agent" means General Electric Capital Corporation, as
Administrative Agent under the Credit Agreement.
"Senior Nonmonetary Default" is defined in Section 14.3.
"Senior Payment Default" is defined in Section 14.3.
"Significant Subsidiary" with respect to any Person, means any Subsidiary
of such Person that satisfies the criteria for a "significant subsidiary" set
forth in Rule 1.02(w) of Regulation S-X under the Securities Act of 1933 based
upon the most recent pro forma annual financial information filed by PlayCore
Wisconsin with the Commission. PlayCore Wisconsin acknowledges and agrees that
each Subsidiary that is a Guarantor on the date hereof constitutes a Significant
Subsidiary.
"Solvent" means, with respect to any Person as of the date of any
determination, that on such date (i) such Person is able to pay its debts and
other liabilities, contingent obligations and other commitments as they mature
in the normal course of business, (ii) 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, taking into account the
timing and amounts to be received by such Person or its Subsidiaries from any
source and the timing of and amounts of cash to be payable in respect of or in
connection with the debts and liabilities of such Person and its Subsidiaries,
and (iii) such Person is not engaged in a business or a transaction, and is not
about to engage in a business or a transaction, for which such Person's property
would constitute unreasonably small capital after giving due consideration to
current and anticipated future capital requirements and current and anticipated
future business conduct and the prevailing practice in the industry in which
such Person is engaged. In computing the amount of contingent liabilities at any
time, such liabilities shall be computed as the amount which, in light of the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Special Interest" is defined in Exhibit A hereto.
"Stated Maturity", when used with respect to any Note or any installment of
interest thereon, means the date specified in this Agreement or such Note as the
fixed date on which the principal of such Note or such installment of interest
is due and payable.
"Subsequent Purchaser" means a subsequent purchaser of any Note who
acquired such Note in a Private Offering in accordance with Section 10.1.
"Subsidiary" means, with respect to any Person, (i) any corporation, of
which the outstanding Capital Stock having a majority of the votes entitled to
be cast in the election of directors under ordinary circumstances shall at the
time be owned, directly or indirectly, by such Person and/or one or more
Subsidiaries of such Person; or (ii) any partnership, limited liability company,
association, joint venture or other entity in which such Person and/or one or
more Subsidiaries of such Person has a majority of the equity interest at that
time.
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"Supplemental Agreement" is defined in Section 15.2.
"Surviving Entity" is defined in Section 8.12(a)(i).
"Tax Returns" means all reports and returns (including elections,
declarations, disclosures, schedules, estimates and information returns)
required to be filed with respect to Taxes.
"Taxes" means all federal, state, local or foreign income, gross receipts,
windfall profits, severance, property, production, sales, use, license, excise,
franchise, employment, withholding or other taxes, duties or assessments of any
kind whatsoever imposed on any Person, together with any interest, additions or
penalties with respect thereto and any interest in respect of such additions or
penalties and includes any liability for Taxes of another Person by contract, as
a transferee or successor, under Treasury Regulation section 1.1502-6 or
analogous state, local or foreign law provision or otherwise.
"Tender Offer" is defined in the first recital to this Agreement.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as amended from time to time.
"Transaction Documents" means, collectively, the Financing Documents, the
Credit Documents and the Merger Documents.
"Transactions" means the transactions provided for in, or contemplated by,
the Transaction Documents.
"Transfer Taxes" is defined in Section 7.3(e).
"United States," for purposes of Sections 10.1 and 11.7, shall have the
meaning assigned to such term in Regulation S.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the then outstanding
aggregate principal amount of such Indebtedness into (ii) the sum of the total
of the products obtained by multiplying (A) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, 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 means any Subsidiary of such Person
of which all outstanding voting securities (other than in the case of a foreign
Subsidiary, directors' qualifying shares or an immaterial number of shares
required to be owned by other Persons pursuant to applicable law) or equity
interests in the case of a partnership or a limited liability company are owned
by such Person or one or more Wholly Owned Subsidiaries of such Person.
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1.2 Computation of Time Periods. For purposes of computation of periods of
time hereunder, the word "from" means "from and including" and the words "to"
and "until" each mean "to but excluding."
1.3 Accounting Terms. Accounting terms used but not otherwise defined
herein shall have the meanings provided, and be construed in accordance with,
GAAP.
SECTION 2.
AUTHORIZATION AND ISSUANCE OF NOTES
2.1 Authorization of Issue. On or prior to the execution and delivery of
this Agreement, PlayCore Wisconsin will authorize the issue and sale of the
Notes. The Notes shall be in the form specified in this Agreement.
2.2 Sale and Purchase of the Notes. Subject to the terms and conditions of
this Agreement, PlayCore Wisconsin will issue and sell to the Purchasers, and
the Purchasers will purchase from PlayCore Wisconsin, at the Closing provided
for in Section 2.3, the Notes for an aggregate cash purchase price (the
"Purchase Price") equal to the aggregate original principal amount of the Notes
being so purchased. Each Purchaser shall, in exchange for the payment by such
Purchaser of the portion of the Purchase Price set forth opposite such
Purchaser's name on Schedule A hereto, receive the aggregate principal amount of
Notes set forth opposite such Purchaser's name on Schedule A hereto. The
obligations of the Purchasers hereunder are several and not joint and no
Purchaser shall have any liability to any Person for the performance or
non-performance by any other Purchaser hereunder.
2.3 Closing.
(a) The sale and purchase of the Notes shall occur at the offices of Fried,
Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New York at
10:00 a.m. local time, at a closing (the "Closing") on April 25, 2000, or at
such other place or on such Business Day not later than May 31, 2000 as may be
agreed upon by PlayCore Wisconsin and the Purchasers (in either case, the date
and time of the Closing is referred to herein as the "Closing Date"). At the
Closing, PlayCore Wisconsin will deliver to each Purchaser the certificates for
the Notes to be purchased by such Purchaser on the Closing Date, in such
denominations (which will be an integral multiple of $1,000 principal amount) as
such Purchaser may request, dated the Closing Date and registered in such
Purchaser's name, against payment by such Purchaser to PlayCore Wisconsin or to
its order of immediately available funds in the amount of the applicable portion
of the Purchase Price (as provided in Section 2.2) by wire transfer of
immediately available funds to such bank account or accounts as PlayCore
Wisconsin may request in writing at least three Business Days prior to the
Closing Date.
(b) If at the Closing PlayCore Wisconsin shall fail to deliver to the
Purchasers the certificates evidencing the Notes as provided in Section 2.3(a),
or any of the conditions specified in Section 3 shall not have been fulfilled to
the Purchasers' satisfaction, then each
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Purchaser shall, at its election, be relieved of all further obligations under
this Agreement, without thereby waiving any rights such Purchaser may have by
reason of such failure or such nonfulfillment.
SECTION 3.
CONDITIONS TO CLOSING
Each Purchaser's obligation to purchase and pay for the Notes to be
purchased by it at the Closing is subject to the satisfaction or waiver by it
prior to or at the Closing of each of the conditions specified below in this
Section 3:
3.1 Representations and Warranties. Each of the representations and
warranties of Holdings and PlayCore Wisconsin in this Agreement and in each of
the other Transaction Documents shall be true and correct (in the case of such
other Transaction Documents only, where the failure to be true and correct would
reasonably be expected to have a Company Material Adverse Effect as defined in
Annex A to the Merger Agreement) when made and on or as of the Closing Date as
if made on and as of the Closing Date (unless stated to relate to a specific
earlier date, in which case such representations and warranties shall be true
and correct as of such earlier date).
3.2 Performance; No Default under Other Agreements. Holdings, PlayCore
Wisconsin and their respective Subsidiaries, to the extent parties hereto or
thereto, shall have performed and complied in all material respects with all
agreements and conditions contained in this Agreement and each of the other
Transaction Documents required to be performed or complied with by it prior to
or at the Closing (or such compliance shall have been waived in accordance with
the terms hereof or thereof, as applicable) and, after giving effect to the
issue and sale of the Notes and the other Transactions (and the application of
the proceeds thereof as contemplated by Section 4.17 and the other Transaction
Documents), no Default or Event of Default shall have occurred and be
continuing, and no default or event of default shall have occurred and be
continuing under any of the other Financing Documents or under the Credit
Documents.
3.3 Compliance Certificates.
(a) Officers' Certificate. Holdings and PlayCore Wisconsin each shall have
delivered to each Purchaser an Officers' Certificate, dated the Closing Date, in
the form of Exhibit 3.3(a) hereto, certifying that the conditions specified in
Sections 3.1, 3.2, 3.5 and 3.6 have been fulfilled.
(b) Secretary's Certificate. Holdings, Parent and PlayCore Wisconsin and
each Subsidiary that is a Guarantor shall have delivered to each Purchaser a
certificate in the form of Exhibit 3.3(b) hereto certifying as to Holdings',
Parent's, PlayCore Wisconsin's or such Guarantor's, as the case may be, articles
of incorporation, bylaws and resolutions attached thereto, the incumbency and
signatures of certain officers of Holdings, Parent, PlayCore
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Wisconsin or such Guarantor, as the case may be, and other corporate proceedings
of Holdings, Parent, PlayCore Wisconsin or such Guarantor, as the case may be,
relating to the authorization, execution and delivery of the Notes, this
Agreement and the other Transaction Documents to which Holdings, Parent,
PlayCore Wisconsin or such Guarantor, as the case may be, is a party.
3.4 Opinions of Counsel; Solvency Opinion.
(a) Each Purchaser shall have received an opinion in form and substance
satisfactory to it, dated the date of the Closing, from (i) Akin, Gump, Strauss,
Hauer & Feld, L.L.P., counsel for Parent and PlayCore Wisconsin, substantially
in the form set forth in Exhibit 3.4(a) hereto and as to such other matters as
such Purchaser may reasonably request, and (ii) Foley & Lardner, counsel for
Holdings, issued in connection with the Transactions.
(b) Each Purchaser shall have received from Houlihan Lokey Howard & Zukin,
Inc. a solvency opinion substantially in the form of Exhibit 3.4(b) hereto.
3.5 Undertaking by Parent. Parent shall have delivered to each Purchaser an
undertaking, in form and substance satisfactory to such Purchaser, to vote for
the Merger and to use its best efforts to consummate the Merger.
3.6 Refinancing of Existing Indebtedness; Credit Agreement; Equity
Financing; Minimum Aggregate Proceeds. Prior to or simultaneously with the
Closing of the sale and purchase of the Notes:
(a) Refinancing of Existing Indebtedness. The refinancing of the
outstanding Indebtedness of Holdings (other than the 10% Convertible
Debentures not owned by Affiliates of Holdings) and its Subsidiaries shall
have been consummated and each Purchaser shall have received evidence
thereof satisfactory to the Purchaser and such Purchaser's special counsel;
(b) Tender Offer. The Tender Offer and the other transactions
described in the Offer to Purchase and in the Schedule TO which are to
occur prior the Closing Date shall have been consummated concurrently with
the Closing in accordance with the terms and provisions of the Offer to
Purchase and the Schedule TO and the Purchasers shall have received a
certificate of a duly authorized officer of PlayCore Wisconsin certifying
as to such consummation;
(c) Equity Financing. The Equity Financing shall have been consummated
on terms and conditions satisfactory to each Purchaser and each Purchaser's
special counsel, Parent shall have made equity contribution to the
Acquisition Company of not less than 30% of the total combined
capitalization of PlayCore Wisconsin and Parent;
(d) Minimum Condition. After giving effect to the Tender Offer, the
Equity Financing and the transactions to occur immediately after the
closing of
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the Tender Offer, Parent shall have owned not less than 85% of the
outstanding Capital Stock of Holdings; and
(e) Credit Agreement. The Credit Agreement shall be in full force and
effect, at the Closing, PlayCore Wisconsin shall receive not less than an
aggregate amount of $95,000,000 in gross cash proceeds from loans under the
Credit Agreement.
3.7 Financial Information. Each Purchaser shall have received a pro forma
consolidated balance sheet for Holdings and its Subsidiaries as of five days
prior to the Closing Date after giving effect to the Transactions, including the
issuance of the Notes and the use of the proceeds thereof, which has been
certified by the chief financial officer of Holdings and which is in form and
substance satisfactory to such Purchaser.
3.8 Material Adverse Effect. No event or events shall have occurred since
December 31, 1999 which, individually or in the aggregate, have had or would
reasonably be expected to have a Material Adverse Effect.
3.9 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and the other
Transaction Documents, and all documents and instruments incident to such
transactions and the terms thereof, shall be reasonably satisfactory to each
Purchaser, and each Purchaser and each Purchaser's special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as it or they may reasonably request.
3.10 Management Employment Contracts. The Purchasers shall have received
true and correct copies of the Management Employment Contracts and such
documents (i) shall have been duly executed and delivered by the parties
thereto, (ii) shall be in form and substance reasonably satisfactory to the
Purchasers and their special counsel and (iii) shall be valid and binding
obligations of the parties thereto, enforceable against each of them in
accordance with its respective terms, subject to the Enforceability Exceptions.
3.11 Transaction Documents. The Purchasers shall have received true and
correct copies of all Transaction Documents and such documents (i) shall have
been duly executed and delivered by the parties thereto, (ii) shall be in form
and substance reasonably satisfactory to the Purchasers and their special
counsel and (iii) shall be valid and binding obligations of the parties thereto,
enforceable against each of them in accordance with its respective terms,
subject to the Enforceability Exceptions.
3.12 Closing Payment; Payment of Expenses. At the Closing, each Purchaser
shall have received from PlayCore Wisconsin the Closing Payment and such
Purchaser and such Purchaser's special counsel shall have received from PlayCore
Wisconsin all other fees required to be paid, and, in accordance with Section
16, all costs and expenses for which invoices have been presented.
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SECTION 4.
REPRESENTATIONS AND WARRANTIES OF PLAYCORE WISCONSIN
Holdings and PlayCore Wisconsin, jointly and severally, represent and
warrant to the Purchasers (after giving pro forma effect to the consummation on
the Closing Date of the Tender Offer, the Equity Financing, and the consummation
on or after the Closing Date of the Merger, the transactions contemplated by
this Agreement, the Credit Agreement and the other Transaction Documents, and
the issuance of the Notes and in each case the application of the proceeds
thereof) that:
4.1 Due Incorporation; Power and Authority. Each of Holdings and each of
its Subsidiaries (a) is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of organization, (b) is duly
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which such qualification is required, other than any
failures to so qualify or to be in good standing which, individually or in the
aggregate, have not had and would not be reasonably expected to have a Material
Adverse Effect, (c) has full corporate power and authority to own, lease and
operate its properties and to conduct its businesses as they are currently
conducted, and (d) has full corporate power and authority to enter into and
perform its obligations under each of the Transaction Documents to which it is a
party.
4.2 Capitalization. Immediately after consummation of the Tender Offer, the
Merger, the Equity Financing and the issuance of the Notes, (a) the authorized
Capital Stock of Parent will consist of 1,000,000 shares of Common Stock, (b)
725,000 shares of Common Stock will be issued and outstanding (with an
additional up to 72,500 shares reserved for issuance upon exercise of the
Management Options), (c) 72,500 Management Options will be issued and
outstanding, (d) no shares of any class of the Capital Stock of Parent will be
held by Parent in its treasury or by Parent's Subsidiaries and (e) all of the
Common Stock of PlayCore Wisconsin will be held by Parent and all of the Common
Stock (other than the Management Options and Common Stock held by employees of
Holdings or the Company, as disclosed on Schedule 4.2) of Parent will be held by
PlayCore Holdings LLC, a Delaware limited liability company. All the issued and
outstanding shares of Common Stock after the Closing have been duly authorized
and are validly issued, fully paid and nonassessable, subject to Wisconsin
statutory exception to nonassessibility for unpaid wages.
4.3 Subsidiaries. Schedule 4.3 correctly states (a) the name of each of
PlayCore Wisconsin's Subsidiaries each of which is a Wholly Owned Subsidiary of
PlayCore Wisconsin. Except as set forth on Schedule 4.3, Holdings does not own,
directly or indirectly, any equity interests in any Person other than direct
ownership of all of issued and outstanding Capital Stock of PlayCore Wisconsin
and indirect ownership through its equity interest in PlayCore Wisconsin of
PlayCore Wisconsin's Subsidiaries. Except as set forth on Schedule 4.3, PlayCore
Wisconsin owns no equity interests in any other Person. Each issued and
outstanding share of Capital Stock of each Subsidiary of Holdings (a) has been
duly authorized, validly issued and is fully paid and nonassessable and (b) is
owned by Holdings, directly or through
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Subsidiaries, free and clear of any Lien other than the Liens established under
the Credit Documents and Permitted Liens.
4.4 Due Authorization, Execution and Delivery.
(a) Agreement. This Agreement has been duly authorized, executed and
delivered by Holdings, PlayCore Wisconsin and the Guarantors party hereto and
constitutes a valid and legally binding obligation of Holdings, PlayCore
Wisconsin and such Guarantors, enforceable against each of them in accordance
with its terms, subject to the Enforceability Exceptions.
(b) Notes and the Exchange Notes. The Notes to be purchased by the
Purchasers from PlayCore Wisconsin are in the form contemplated by this
Agreement, have been duly authorized for issuance and sale pursuant to this
Agreement and, when issued and delivered by PlayCore Wisconsin on the Closing
Date as provided herein, will have been duly executed, issued and delivered by
PlayCore Wisconsin, and will constitute valid and legally binding obligations of
PlayCore Wisconsin, enforceable against it in accordance with their terms,
subject to the Enforceability Exceptions. If and when the Exchange Notes are
issued pursuant to the Exchange and Registration Rights Agreement and the
Indenture (as defined in the Exchange and Registration Rights Agreement) in
accordance with the terms thereof and hereof, the Exchange Notes will have been
duly and validly authorized for issuance by PlayCore Wisconsin, will have been
duly executed, issued and delivered by PlayCore Wisconsin, and will constitute
valid and legally binding obligations of PlayCore Wisconsin, enforceable against
it in accordance with their terms, subject to the Enforceability Exceptions.
(c) Exchange and Registration Rights Agreement. The Exchange and
Registration Rights Agreement has been duly authorized, executed and delivered
by PlayCore Wisconsin and the Guarantors a party thereto and constitutes a valid
and binding obligation of PlayCore Wisconsin and such Guarantors, enforceable
against each of them in accordance with its terms, subject to the Enforceability
Exceptions.
(d) Other Transaction Documents. Each Transaction Document to which
Holdings, PlayCore Wisconsin or any of their respective Subsidiaries is a party
(each such party, a "Holdings Party") (i) has been duly authorized, executed and
delivered by each Holdings Party, a party thereto and (ii) constitutes a valid
and legally binding obligation of such Holdings Party, enforceable against such
Holdings Party in accordance with its terms, subject to the Enforceability
Exceptions.
4.5 Non-Contravention; Authorizations and Approvals. Neither Holdings nor
any of its Subsidiaries is in violation of its certificate or articles of
incorporation or bylaws (or comparable constituent or governing documents) or is
in default (or, with the giving of notice, lapse of time or both, would be in
default) under any note, bond, mortgage, indenture, deed of trust, loan or
credit agreement, license, franchise, permit, lease, contract or other
agreement, instrument, commitment or obligation to which Holdings or any of its
Subsidiaries is a party or by which Holdings or any of its Subsidiaries or any
of their respective properties or assets is bound (including, without
limitation, the Credit Agreement), (each, a "Contract"), except for any
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such defaults that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect. None of (a) the
execution and delivery by Holdings or any of its Subsidiaries of any of the
Transaction Documents to which they are a party, (b) the performance by any of
them of their respective obligations thereunder, (c) the consummation of the
transactions contemplated thereby or (d) the issuance and delivery of the Notes
hereunder will: (i) violate, conflict with or result in a breach of any
provisions of the certificate or articles of incorporation or bylaws (or
comparable constituent or governing documents) of Holdings or any of its
Subsidiaries; (ii) except for Contracts for which consents have been obtained
and except for Outstanding Indebtedness of Holdings and its Subsidiaries being
refinanced at the Closing, violate, conflict with, result in a breach of any
provision of, constitute a default (or an event which, with notice, lapse of
time or both, would constitute a default) under, result in the termination or in
a right of termination of, accelerate the performance required by or benefit
obtainable under, result in the triggering of any payment or other obligations
(including any repurchase or repayment obligations) pursuant to, result in the
creation of any Lien (other than the Liens established under the Credit
Documents) upon any of the properties of Holdings or any of its Subsidiaries
under, or result in there being declared void, voidable, subject to withdrawal,
or without further binding effect, any of the terms, conditions or provisions of
any Contract, except for any such violations, conflicts, breaches, defaults,
accelerations, terminations or other matters which, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect; (iii) except as set forth on Schedule 4.5 and except for filings
perfecting or maintaining the perfection of Liens established under the Credit
Documents, require any consent, approval or authorization of, or declaration,
filing or registration with, any Governmental Authority, except for those
consents, approvals, authorizations, declarations, filings or registrations
which have been obtained or made, or the failure of which to obtain or make,
individually or in the aggregate, have not had and would not be reasonably
expected to have a Material Adverse Effect; or (iv) violate any Applicable Laws,
except for violations which, individually or in the aggregate, have not had and
would not reasonably be expected to have a Material Adverse Effect.
4.6 Financial Statements. Holdings has delivered to the Purchasers complete
and correct copies of its Annual Reports on Form 10-K containing audited
consolidated balance sheets of Holdings and its Subsidiaries as of December 31,
1999, 1998 and 1997 and the related consolidated statements of operations,
stockholders' equity, income, and cash flows for each of the three years in the
period ended December 31, 1999 (including the related notes and schedules
thereto and the report of independent public accountants) (collectively, the
"Financial Statements"). Each of the consolidated balance sheets contained in
the Financial Statements fairly present in all material respects the
consolidated financial position of Holdings and its Subsidiaries as of its date
and each of the consolidated statements of income and cash flows included in the
Financial Statements fairly presents in all material respects the consolidated
results of income, or cash flows, as the case may be, of Holdings and its
Subsidiaries for the periods to which they relate, in each case in accordance
with GAAP applied on a consistent basis during the periods involved, except as
noted therein. All projections provided by Holdings to the Purchasers in
connection with the Transactions have been prepared in good faith based on
assumptions believed by management of Holdings to be reasonable at the time, it
being understood by the Purchasers, however, that projections as to future
events are not to be viewed
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as facts and that the actual results during the period or periods covered by any
projections may differ from projected results and that the differences may be
Material). Any forward looking statements contained therein are inherently
subject to risk and uncertainties, many of which cannot be predicted with
accuracy.
4.7 Absence of Undisclosed Liabilities or Events.
(a) Except for the liabilities and obligations arising under the
Transaction Documents neither Holdings nor any of its Subsidiaries has any
liabilities or obligations, whether accrued, contingent or otherwise, except (i)
for liabilities and obligations in the respective amounts reflected or reserved
against in the consolidated balance sheet as of the Audit Date included in
Holdings' Financial Statements, (ii) borrowings under Holdings' revolving credit
facility in the ordinary course of business, (iii) liabilities and obligations
incurred in the ordinary course of business since the Audit Date which,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect or (iv) liabilities or obligations
under Contracts.
(b) The Financing Documents and the Financial Statements (but not any
projections), taken as a whole, do not contain any untrue statement of a
Material fact as to Holdings and its Subsidiaries taken as a whole or omit to
state any Material fact necessary to make the statements as to Holdings and its
Subsidiaries taken as a whole therein not misleading in light of the
circumstances under which they were made. Since the Audit Date, there has been
no change in the business, operations, property, assets, liabilities,
management, condition (financial or otherwise) or prospects of Holdings or its
Subsidiaries except for changes that, individually or in the aggregate, have not
had or would not reasonably be expected to have a Material Adverse Effect other
than pursuant to or as disclosed in the Merger Agreement. There are no facts
known to Holdings that, individually or in the aggregate, have had or would
reasonably be expected to have a Material Adverse Effect that have not been set
forth herein or in the Disclosure Schedule.
(c) The Offer to Purchase, the Schedule TO and all materials incorporated
therein by reference do not contain any untrue statement of a Material fact as
to Holdings and its Subsidiaries taken as a whole or omit to state any Material
fact necessary to make the statements as to Holdings and its Subsidiaries taken
as a whole therein not misleading in light of the circumstances under which they
were made.
4.8 No Actions or Proceedings. Except as set forth in Schedule 4.8, there
are no legal or governmental actions, suits or proceedings pending or, to the
knowledge of Holdings, threatened against or affecting Holdings, any of its
Subsidiaries, any of their Directors or officers (in their capacities as such)
or any of their property or assets which, individually or in the aggregate, have
had or would reasonably be expected to have a Material Adverse Effect or to
prohibit, delay or materially restrict the consummation of any of the
transactions contemplated by the Transaction Documents. No Governmental
Authority has notified Holdings or PlayCore Wisconsin of an intention to conduct
any audit, investigation or other review with respect to Holdings or any of its
Subsidiaries, except for those investigations or reviews which, individually
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or in the aggregate, have not had or would not be reasonably expected to have a
Material Adverse Effect.
4.9 Title to Properties. Except as set forth in Schedule 4.9, each of
Holdings and its Subsidiaries has (a) good and marketable title to and fee
simple ownership of, or a valid and subsisting leasehold interest in, all of its
real property, and (b) good title to, or a valid and subsisting leasehold
interest in, all of its equipment and other personal property, in each case free
and clear of all Liens, except Permitted Liens and Liens being released on the
Closing Date. Holdings and its Subsidiaries have paid or discharged, or reserved
for, all lawful claims which, if unpaid, might become a Lien (other than a
Permitted Lien) against any property or assets of Holdings or its Subsidiaries.
4.10 Intellectual Property Rights. Holdings and its Subsidiaries own or
possess all Intellectual Property reasonably necessary to conduct their
businesses as now conducted, except where the expiration or loss of any of such
Intellectual Property, individually or in the aggregate, has not had and would
not reasonably be expected to have a Material Adverse Effect. To the knowledge
of Holdings and its Subsidiaries, (a) there is no infringement of, or conflict
with, such Intellectual Property by any third party and (b) the conduct of their
businesses as currently conducted do not infringe or conflict with any
Intellectual Property of any third party, in each case other than any such
infringements or conflicts which, individually or in the aggregate, have not had
or would not reasonably be expected to have a Material Adverse Effect.
4.11 Tax Returns and Payments.
(a) all Tax Returns that are required to be filed by or with respect to
Holdings or any of its Subsidiaries have been timely filed;
(b) all Taxes shown to be due on the Tax Returns referred to in clause (a)
or which are otherwise due and payable have been timely paid in full or accrued;
(c) all Taxes required to be withheld and paid over by or with respect to
Holdings or any of its Subsidiaries to any relevant taxing authority in
connection with payments to employees, independent contractors, creditors,
shareholders or to third parties have been so withheld and paid over;
(d) except as disclosed on Schedule 4.11(d), the Tax Returns referred to in
clause (a) have been examined by the Internal Revenue Service or the appropriate
state, local or foreign taxing authority or the period for assessment of the
Taxes in respect of which such Tax Returns were required to be filed has expired
or have been accrued on the most recent balance sheet;
(e) except as disclosed on Schedule 4.11(e), all deficiencies asserted or
assessments made by the Internal Revenue Service or the applicable state, local
or foreign taxing authority have been paid in full;
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(f) except as disclosed on Schedule 4.11(f), no audits or examinations with
respect to Holdings or any of its Subsidiaries are ongoing, pending or, to the
knowledge of Holdings or any Subsidiaries, threatened or proposed by the
Internal Revenue Service or the appropriate state, local or foreign Tax
authority;
(g) except as disclosed on Schedule 4.11(g), no waivers or extensions of
statutes of limitation have been given by or requested with respect to any Taxes
of Holdings or any of its Subsidiaries;
(h) neither Holdings nor any Subsidiaries will be required, as a result of
(i) any adjustment under Section 481 of the Code (or any similar provision of
state, local or foreign law), or (ii) any "closing agreement" as described in
Section 7121 of the Code (or any similar provision of state, local or foreign
Tax law), to include any item of income in or exclude any item of deduction from
any Tax period ending on or after the Closing Date;
(i) except as disclosed on Schedule 4.11(i), there are no Liens for Taxes
on any of the assets of Holdings or any of its Subsidiaries other than Liens for
Taxes not yet due;
(j) except as disclosed on Schedule 4.11(j), neither Holdings nor any of
its Subsidiaries has ever been a member of an affiliated group within the
meaning of Section 1504(a) of the Code for purposes of filing any Tax Return of
which Holdings was not the common parent;
(k) neither Holdings nor any of its Subsidiaries or any predecessors to any
of such entities has made any consent under Section 341 of the Code with respect
to Holdings or any of its Subsidiaries; and
(l) no Tax authority in a jurisdiction where Holdings or any of its
Subsidiaries does not file Tax Returns has made a claim, assertion or threat
that Holdings or any of its Subsidiaries is or may be subject to Tax in such
jurisdiction.
4.12 Employee Benefit Plans.
(a) There has been no failure by any employee benefit plan, within the
meaning of Section 3(3) of ERISA, which is maintained by Holdings or any of its
Subsidiaries or to which Holdings or any of its Subsidiaries contributes (each,
a "Plan") to comply with the applicable requirements of ERISA and the Code other
than any such failures that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Material Adverse Effect. There is no
material pending or, to the knowledge of Holdings threatened litigation relating
to the Plans. Neither Holdings nor any of its Subsidiaries has engaged in a
transaction with respect to any Plan that, assuming the taxable period of such
transaction expired as of the date hereof, could subject Holdings or any of its
Subsidiaries to a tax or penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA other than those that, individually or in the aggregate,
have not had and would not reasonably be excepted to have a Material Adverse
Effect.
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(b) No liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by Holdings or any of its Subsidiaries with respect to
any ongoing, frozen or terminated "single-employer plan", within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them,
or the single-employer plan of any entity which is considered one employer with
Holdings or any of its Subsidiaries under Section 4001 of ERISA or Section 414
of the Code (an "ERISA Affiliate"). Neither Holdings, any of its Subsidiaries
nor an ERISA Affiliate has contributed to a Multiemployer Plan, at any time on
or after December 31, 1995. No notice of a "reportable event", within the
meaning of Section 4043 of ERISA for which the 30-day reporting requirement has
not been waived, has been required to be filed for any Plan which is an
"employee pension benefit plan" within the meaning of Section 3(2) of ERISA
("Pension Plan") or by any ERISA Affiliate within the 12-month period ending on
the date hereof.
(c) Neither any Pension Plan nor any single-employer plan of an ERISA
Affiliate has an "accumulated funding deficiency" (whether or not waived) within
the meaning of Section 412 of the Code or Section 302 of ERISA and no ERISA
Affiliate has an outstanding funding waiver. Neither Holdings nor any of its
Subsidiaries has provided, or is required to provide, security to any Pension
Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Code. (d) Under each Pension Plan which is a single-employer
plan, as of the last day of the most recent plan year ended prior to the date
hereof, the actuarially determined present value of all "benefit liabilities",
within the meaning of Section 4001(a)(16) of ERISA (as determined on the basis
of the actuarial assumptions contained in the Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such Plan.
(d) Under each Pension Plan which is a single-employer plan, as of the last
day of the most recent plan year ended prior to the date hereof, the actuarially
determined present value of all "benefit liabilities", within the meaning of
Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in the Plan's most recent actuarial valuation), did not
exceed the then current value of the assets of such Plan.
(e) Neither Holdings nor any of its Subsidiaries has any obligations for
retiree health and life benefits under any Plan, except as required by
Applicable Law or as set forth on Schedule 4.12(e). Holdings or the Subsidiaries
may amend or terminate any such Plan at any time without incurring any liability
thereunder.
4.13 Private Offering; No Integration or General Solicitation; Rule 144A
Eligibility.
(a) Subject to compliance by the Purchasers with the representations and
warranties set forth in Section 5 and with the procedures set forth in Section
11, it is not necessary in connection with the offer, sale and delivery of the
Notes to the Purchasers in the manner contemplated by this Agreement to register
the Notes under the Securities Act.
(b) Neither Holdings nor PlayCore Wisconsin have, directly or indirectly,
offered, sold or solicited any offer to buy and will not, directly or
indirectly, offer, sell or solicit any offer to buy, any security of a type or
in a manner which would be integrated with the sale of the Notes and require the
Notes to be registered under the Securities Act. None of Holdings, PlayCore
Wisconsin, its Affiliates or any Person acting on its or any of their behalf
(other than the Purchasers, as to whom Holdings and PlayCore Wisconsin make no
representation or warranty) has engaged or will engage in any form of general
solicitation or general advertising
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(within the meaning of Rule 502(c) under the Securities Act) in connection with
the offering of the Notes. With respect to the Notes, if any, sold in reliance
upon the exemption afforded by Regulation S: (i) none of Holdings, PlayCore
Wisconsin, their respective Affiliates or any person acting on its or their
behalf (other than the Purchasers, as to whom Holdings and PlayCore Wisconsin
make no representation or warranty) has engaged or will engage in any directed
selling efforts within the meaning of Regulation S and (ii) each of Holdings,
PlayCore Wisconsin and their respective Affiliates and any person acting on its
or their behalf (other than the Purchasers, as to whom PlayCore Wisconsin makes
no representation or warranty) has complied and will comply with the offering
restrictions set forth in Regulation S.
(c) The Notes are eligible for resale pursuant to Rule 144A and will not,
at the Closing Date, be of the same class as securities listed on a national
securities exchange registered under Section 6 of the Exchange Act or quoted on
a U.S. automated interdealer quotation system.
4.14 Environmental Matters. Except as set forth in Schedule 4.14 and
except, with regard to each of the following, any matters which, individually or
in the aggregate, do not and would not reasonably be expected to have a Material
Adverse Effect:
(a) Holdings and each of the Subsidiaries is currently in compliance
with, all Environmental Laws and has obtained and is currently in
compliance with all permits, licenses, registrations, consents and other
authorizations which are required with respect to any of its facilities or
operations under any applicable Environmental Law (the "Environmental
Permits"), and all such Environmental Permits are in full force and effect;
(b) Neither Holdings nor any Subsidiary has received any written
notice of any claims, civil, criminal or administrative actions, suits,
hearings, investigations, or proceedings which are pending or, to its
knowledge, threatened against it, in each case, on the basis of, or related
to, any Environmental Matter, or indicating that such Person is or may be a
potentially responsible party or otherwise liable under Environmental Law
in connection with any location which has experienced the release or
threatened release of any Hazardous Substances;
(c) There are no conditions (including without limitation any releases
of Hazardous Substances), circumstances, actions or omissions that would
(i) give rise to any liability or obligation of Holdings or any Subsidiary
under any Environmental Laws, (ii) form the basis of any claim, action,
suit, proceeding, hearing, investigation or inquiry against Holdings or any
Subsidiary, or (iii) would interfere with or prevent continued compliance
by Holdings or any Subsidiary with Environmental Laws and/or Environmental
Permits; and
(d) There are no underground or aboveground storage tanks that are now
or ever have been used for the treatment, storage or disposal of Hazardous
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Substances at, on or under any real property owned, leased or occupied by
Holdings or any of the Subsidiaries.
4.15 Status Under Certain Statutes. Neither Holdings nor any of its
Subsidiaries is or, after receipt of payment for the Notes and the consummation
of the other transactions contemplated by the Transaction Documents, will be (a)
an "investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended, or controlled by such a company, or
(b) a "holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary" or a "holding company",
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
4.16 Insurance. Each of PlayCore Wisconsin and its Subsidiaries are insured
by financially sound institutions with policies in such amounts and with such
deductibles and covering such risks as are generally deemed adequate for their
businesses including, but not limited to, policies covering real and personal
property owned or leased by PlayCore Wisconsin and its Subsidiaries against
theft, damage, destruction and acts of vandalism.
4.17 Use of Proceeds; Margin Regulations. PlayCore Wisconsin will apply all
of the proceeds from the sale of the Notes solely to finance a portion of the
Tender Offer and the Merger and to pay fees and expenses related to the Tender
Offer and the Merger. PlayCore Wisconsin will advance proceeds from the sale of
the Notes hereunder to Acquisition Company or Holdings pursuant to the Tender
Offer and/or pursuant to the Merger, which advance will comply with the
provisions of Regulation T, Regulation U and Regulation X of the Federal Reserve
Board. Margin stock does not constitute more than 5% of the value of the
consolidated assets of PlayCore Wisconsin and its Subsidiaries and PlayCore
Wisconsin has no present intention that margin stock will constitute more than
5% of the value of such assets. As used in this Section 4.17, the terms "margin
stock" and "purpose of buying or carrying" shall have the meanings assigned to
them in Regulation U.
4.18 Existing Indebtedness; Future Liens. Schedule 4.18 sets forth a
complete and correct list of all Indebtedness of PlayCore Wisconsin and its
Subsidiaries that will be outstanding immediately after the Closing except for
any such Indebtedness not so scheduled which does not exceed $100,000
individually and $500,000 in the aggregate (such scheduled and unscheduled
Indebtedness, the "Existing Indebtedness"). Neither PlayCore Wisconsin nor any
Subsidiary of PlayCore Wisconsin is in default, and no waiver of default is
currently in effect, in the payment of the principal of or interest on any
Indebtedness of PlayCore Wisconsin or such Subsidiary and no event or condition
exists with respect to any Indebtedness of PlayCore Wisconsin or any Subsidiary
of PlayCore Wisconsin that would permit (or that with notice, lapse of time or
both, would permit) any Person to cause such Indebtedness to become due and
payable before its stated maturity or before its regularly scheduled dates of
payment. Neither PlayCore Wisconsin nor any of its Subsidiaries has agreed or
consented to cause or permit in the future (upon the happening of a contingency
or otherwise) any of its property or assets, whether now owned or hereafter
acquired, to be subject to a Lien that would be prohibited by this Agreement if
incurred after the Closing.
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4.19 Compliance with Laws; Permits. Except as disclosed on Schedule 4.19,
each of Holdings and each of its Subsidiaries has complied, and is in
compliance, in all material respects with all Applicable Laws and has all
Permits Material to, and necessary in, the conduct of its business as currently
conducted and all such Permits are in full force and effect. No violations have
been recorded in respect of any such Permits, and no proceeding is pending or,
to the knowledge of Holdings and its Subsidiaries, threatened to revoke or limit
any Permit, except for violations and proceedings which, individually or in the
aggregate, have not and could not reasonably be expected to have a Material
Adverse Effect.
4.20 Solvency. Holdings and its Subsidiaries on a consolidated basis are,
and after giving effect to the Transactions will be, Solvent.
4.21 Affiliate Transactions. Except as set forth on Schedule 4.21, (a)
there is no Indebtedness between Holdings or any of its Subsidiaries, on the one
hand, and any officer, shareholder, director or Affiliate (other than Holdings
or any of its Subsidiaries) of Holdings, on the other, (b) no such officer,
shareholder, director or Affiliate provides or causes to be provided any asset
or facilities to Holdings or any of its Subsidiaries which, individually or in
the aggregate, are Material, (c) neither Holdings nor any of its Subsidiaries
provides or causes to be provided any assets, services, or facilities to any
such officer, shareholder, director or Affiliate which, individually or in the
aggregate, are Material (other than Affiliate Transactions permitted by Section
9.3), (d) neither Holdings nor any Subsidiary beneficially owns, directly or
indirectly, any investment in or issued by any such officer, director or
Affiliate, and (e) no such officer, shareholder or director has any direct or
indirect ownership interest in any Person with which Holdings or any of its
Subsidiaries competes or has a business relationship.
4.22 Material Contracts. Schedule 4.22 contains a true, correct and
complete list of all Material Contracts in effect on the Closing Date. Except as
described on Schedule 4.22, as of the Closing Date each Material Contract is in
full force and effect and no material defaults enforceable against Holdings or
any of its Subsidiaries currently exist thereunder. To the knowledge of Holdings
and its Subsidiaries, no party to any Material Contract intends to terminate
such Material Contract.
4.23 Indebtedness. On the Closing Date, after consummation of the
Transactions, the consolidated Indebtedness of Holdings and its Subsidiaries
will not exceed $125,000,000 (excluding the Indebtedness evidenced by the Notes
and contingent obligations).
4.24 Fees. All fees and other expenses payable in connection with the
consummation of the Transactions and all other fees payable to Parent or its
Affiliates, in each case by Holdings or any of its Subsidiaries, have been
disclosed to the Purchasers prior to the Closing Date.
4.25 Labor and Employment Matters. Except as set forth in Schedule 4.25,
(a) neither Holdings nor any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement or other Contracts or understanding with a labor
union or labor organization; and (b) there is no (i) unfair labor practice,
labor dispute (other than routine individual grievances) or labor arbitration
proceeding pending or, to the knowledge of Holdings,
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threatened against Holdings or its Subsidiaries, (ii) to the knowledge of
Holdings activity or proceeding by a labor union or representative thereof to
organize any employees of Holdings or any of its Subsidiaries, (iii) lockout,
strike, slowdown, work stoppage or to the knowledge of Holdings threat thereof
by or with respect to any such employees or (iv) dispute, grievance or
litigation relating to labor matters involving any employee (other than routine
individual grievances). Holdings and its Subsidiaries each is in compliance with
all Applicable Laws regarding employment, employment practices, terms and
conditions of employment and wages, except for such noncompliance which,
individually or in the aggregate, do not and could not reasonably be expected to
have a Material Adverse Effect. Other than as provided pursuant to the Merger
Documents, no employee of Holdings will receive, accrue or be entitled to
received or accrue any additional benefits, service or accelerated rights to
payments of benefits, or any severance or termination payments as a result of
the consummation of the Transactions.
4.26 Brokerage Fees. Except as disclosed in Schedule 4.26, neither Holdings
nor any of its Subsidiaries has paid, or is obligated to pay, to any Person any
brokerage or finder's fees in connection with the Transactions.
4.27 Activities of Holdings. Except as set forth on Schedule 4.27, the sole
business activity of Holdings is the direct ownership of all of the Capital
Stock of PlayCore Wisconsin. Immediately after the Closing Date, Holdings (a)
will have no Indebtedness outstanding (other than Indebtedness owing to PlayCore
Wisconsin pursuant to the Transaction Documents) and no agreement to Incur any
Indebtedness other than (i) Guarantees of the Notes and (ii) Guarantees of
Senior Indebtedness evidenced by the Credit Documents, (b) will own no
Investments, except for Investments in the Capital Stock of Company and
Investments by PlayCore Wisconsin or any Subsidiary of PlayCore Wisconsin
permitted hereby, or (c) will own or hold or agree to own or hold no property or
asset other than the Capital Stock of PlayCore Wisconsin and cash or Cash
Equivalents of not more than $500,000 and cash on hand required to be used to
pay expenses due within 90 days.
SECTION 5.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally and not jointly, represents and warrants to
Holdings and PlayCore Wisconsin as of the date hereof as follows:
5.1 Purchase for Investment.
(a) Such Purchaser is acquiring the Notes for its own account, for
investment and not with a view to, or present intention of, selling such Notes
in any distribution thereof within the meaning of the Securities Act in
violation of the federal securities laws or any applicable state securities
laws.
(b) Such Purchaser understands that (i) the Notes have not been registered
under the Securities Act and are being issued by PlayCore Wisconsin in
transactions exempt
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from the registration requirements of the Securities Act and (ii) the Notes may
not be offered or sold except pursuant to an effective registration statement
under the Securities Act or pursuant to an applicable exemption from
registration under the Securities Act.
(c) Such Purchaser further understands that the exemption from registration
afforded by Rule 144 (the provisions of which are known to such Purchaser)
promulgated under the Securities Act depends on the satisfaction of various
conditions, and that, if applicable, Rule 144 may afford the basis for sales
only in limited amounts.
(d) Such Purchaser did not employ any broker or finder in connection with
the transactions contemplated in this Agreement.
(e) Such Purchaser is an "Accredited Investor" (as defined in Rule 501 (a)
under the Securities Act).
(f) Such Purchaser has received all the information it considers necessary
or appropriate for deciding whether to purchase the Notes. Such Purchaser
further represents that it has had an opportunity to ask questions and receive
answers from PlayCore Wisconsin regarding the terms and conditions of the
offering of the Notes and the business, properties, prospects and financial
condition of PlayCore Wisconsin. The foregoing, however, does not limit or
modify the representations and warranties of PlayCore Wisconsin in Section 4 of
this Agreement or the rights of the Purchasers to rely thereon.
SECTION 6.
COVENANTS TO PROVIDE INFORMATION
Holdings and PlayCore Wisconsin jointly and severally covenant and agree
with each Holder that until the principal amount of (and premium, if any, on)
all the Notes, and all interest, and other obligations hereunder in respect
thereof (other than indemnity obligations that have not yet become due and
payable), shall have been paid in full:
6.1 Future Reports of Holdings to Purchasers. Holdings shall deliver to
each Purchaser and, other than reports pursuant to Section 6.1(a)(i) and (f), to
each Holder that is an Institutional Investor so long as such Purchaser or such
Holder holds any Notes:
(a) Annual, Quarterly and Monthly Information. As soon as available,
but in any event:
(i) Monthly Reports. prior to the Note Registration, within 30
days after the end of each Fiscal Month (commencing with the May 2000
Fiscal Month), but excluding the last Fiscal Month of any Fiscal
Quarter with respect to which financial statements are delivered
pursuant to Section 6.1(a)(ii), the consolidated balance sheet of
Holdings and its Subsidiaries as at the end of such Fiscal Month and
the related
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consolidated statements of income and retained earnings and statement
of cash flows for such Fiscal Month and for the elapsed portion of the
Fiscal Year ended with the last day of such Fiscal Month, in each case
setting forth comparative figures for the corresponding Fiscal Month
in the prior Fiscal Year and comparable budgeted figures for such
Fiscal Month, all of which shall be certified by the chief financial
officer of Holdings subject to normal year-end audit adjustments and
the absence of footnotes;
(ii) Quarterly Financial Statements. within 45 days after the
close of the first three Fiscal Quarters in each Fiscal Year, (i) the
consolidated balance sheet of Holdings and its Subsidiaries as at the
end of such Fiscal Quarter and the related consolidated statements of
income and retained earnings and statement of cash flows for such
Fiscal Quarter and for the elapsed portion of the Fiscal Year ended
with the last day of such Fiscal Quarter, in each case setting forth
comparative figures for the related periods prior Fiscal Year, all of
which shall be certified by the chief financial officer of Holdings,
subject to normal year-end audit adjustments and the absence of
footnotes and (ii) management's discussion and analysis of the
material operational and financial developments during such Fiscal
Quarter; and
(iii) Annual Financial Statements. within 90 days after the close
of each Fiscal Year, (i) the consolidated balance sheet of Holdings
and its Subsidiaries as at the end of such Fiscal Year and the related
consolidated statements of income and retained earnings and statement
of cash flows for such Fiscal Year setting forth comparative figures
for the preceding Fiscal Year and certified by such independent
certified public accountants of recognized national standing, together
with a report of such accounting firm (which report may be limited to
the extent required by accounting rules and guidelines) stating that
in the course of its regular audit of the financial statements of
Holdings and its Subsidiaries, which audit was conducted in accordance
with generally accepted auditing standards, such accounting firm
obtained no knowledge of any Default of an Event of Default which has
occurred and is continuing with respect to accounting matters
(including under Sections 8.2, 8.4, 8.5 and 8.12) or, if in the
opinion of such accounting firm such a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof (it
being understood that such accounting firm shall not be required
hereunder to perform any special audit procedures and shall not have
any liability for failure to obtain knowledge of such Default or Event
of Default) and (ii) management's discussion and analysis of the
material operational and financial developments during such Fiscal
Year;
provided, however, that if Holdings is then subject to the reporting
requirements under Section 13 or Section 15(d) of the Exchange Act, the delivery
by Holdings to such
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Purchaser or such Holder that is an Institutional Investor of a Quarterly Report
on Form 10-Q, of an Annual Report on Form 10-K or current reports on Form 8-K or
any successor forms within the time periods above described shall satisfy the
requirements of this Section 6.1(a)(ii) and (iii).
(b) Chief Financial Officer Certificates. At the time of the delivery
of the financial statements provided for in Sections 6.1(a)(ii) and (iii),
a certificate of the chief financial officer of Holdings certifying that,
to the best of such officer's knowledge, no Default or Event of Default has
occurred and is continuing or, if any Default or Event of Default has
occurred and is continuing, specifying the nature and extent thereof, which
certificate shall set forth in reasonable detail the calculations (if any)
required to establish whether Holdings and its Subsidiaries were in
compliance with the provisions of Sections 8.2, 8.4, 8.5 and 8.12, at the
end of such Fiscal Quarter or Fiscal Year, as the case may be.
(c) Auditors' Reports. Promptly upon receipt thereof, copies of all
final reports submitted to Holdings or to any of its Subsidiaries by
independent certified public accountants in connection with each annual,
interim or special audit of the books of Holdings or any of its
Subsidiaries made by such accountants, including, without limitation, any
final comment letter submitted by such accountants to management in
connection with their annual audit.
(d) Information to Securityholders. Promptly upon their becoming
available, copies of all financial statements, reports, notices and proxy
statements and all regular and periodic reports and all registration
statements and final prospectuses, if any, filed by Holdings or any of its
Subsidiaries with any securities exchange or with the Commission or any
Governmental Authority succeeding to any of its functions and, promptly
upon request, such additional financial and other information as any
Purchasers or Holders which are Institutional Investors may from time to
time reasonably request.
(e) Notice of Default or Event of Default. Promptly, but in any event
within five (5) Business Days, after an officer of Holdings becomes aware
of the existence of any Default or Event of Default or that any Person has
given any notice or taken any other action with respect to a claimed
Default or Event of Default, a written notice thereof specifying the nature
and existence thereof and what action Holdings is taking or proposes to
take with respect thereto.
(f) Additional Information to Holders of Other Indebtedness. Prior to
the Note Registration simultaneously with the furnishing of such
information to any other holder of Indebtedness of Holdings or any of its
Subsidiaries, (i) copies of all other financial statements, reports or
projections with respect to Holdings or its Subsidiaries which are broader
in scope or on a more frequent basis than Holdings is required to provide
under this Agreement and (ii) copies of all studies, reviews, reports or
assessments relating to environmental matters that reveal
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circumstances, events or other matters that would reasonably be expected to
have a Material Adverse Effect.
(g) Information Following Consummation of an Equity Offering.
Following the consummation of an Equity Offering, Holdings will file a copy
of all information and reports with the Commission required to be filed by
the rules and regulations of the Commission for public availability within
the time periods specified in the Commission's rules and regulations, and
make such information available to securities analysts and prospective
investors upon request. In addition, for so long as any Notes remain
Outstanding and are "restricted securities" with the meaning of Rule 144,
Holdings will furnish to the Holders and prospective investors, upon their
request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act of 1933.
6.2 Future Reports of PlayCore Wisconsin to Purchasers. PlayCore Wisconsin
shall deliver to each Purchaser and, other than reports pursuant to Section
6.2(a)(i) and (e), to each Holder that is an Institutional Investor so long as
such Purchaser or such Holder holds any Notes:
(a) Annual, Quarterly and Monthly Information. As soon as available,
but in any event:
(i) Monthly Reports. prior to the Note Registration, within 30
days after the end of each Fiscal Month (commencing with the May 2000
Fiscal Month), but excluding the last Fiscal Month of any Fiscal
Quarter with respect to which financial statements are delivered
pursuant to Section 6.2(a)(ii), the consolidated balance sheet of
PlayCore Wisconsin and its Subsidiaries as at the end of such Fiscal
Month and the related consolidated statements of income and retained
earnings and statement of cash flows for such Fiscal Month and for the
elapsed portion of the Fiscal Year ended with the last day of such
Fiscal Month, in each case setting forth comparative figures for the
corresponding Fiscal Month in the prior Fiscal Year and comparable
budgeted figures for such Fiscal Month, all of which shall be
certified by the chief financial officer of PlayCore Wisconsin subject
to normal year-end audit adjustments and the absence of footnotes;
(ii) Quarterly Financial Statements. within 45 days after the
close of the first three Fiscal Quarters in each Fiscal Year, (i) the
consolidated balance sheet of PlayCore Wisconsin and its Subsidiaries
as at the end of such Fiscal Quarter and the related consolidated
statements of income and retained earnings and statement of cash flows
for such Fiscal Quarter and for the elapsed portion of the Fiscal Year
ended with the last day of such Fiscal Quarter, in each case setting
forth comparative figures for the related periods prior Fiscal Year,
all of which shall be certified by
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the chief financial officer of PlayCore Wisconsin, subject to
normal year-end audit adjustments and the absence of footnotes
and (ii) management's discussion and analysis of the material
operational and financial developments during such Fiscal
Quarter; and
(iii) Annual Financial Statements. within 90 days after the
close of each Fiscal Year, (i) the consolidated balance sheet of
PlayCore Wisconsin and its Subsidiaries as at the end of such
Fiscal Year and the related consolidated statements of income and
retained earnings and statement of cash flows for such Fiscal
Year setting forth comparative figures for the preceding Fiscal
Year and certified by the chief financial officer of PlayCore
Wisconsin and (ii) management's discussion and analysis of the
material operational and financial developments during such
Fiscal Year;
provided, however, that if PlayCore Wisconsin is then subject to the reporting
requirements under Section 13 or Section 15(d) of the Exchange Act, the delivery
by PlayCore Wisconsin to such Purchaser or such Holder that is an Institutional
Investor of a Quarterly Report on Form 10-Q, of an Annual Report on Form 10-K or
current reports on Form 8-K or any successor forms within the time periods above
described shall satisfy the requirements of this Section 6.2(a)(ii) and (iii).
(b) Chief Financial Officer Certificates. At the time of the
delivery of the financial statements provided for in Sections
6.2(a)(ii) and (iii), a certificate of the chief financial officer of
PlayCore Wisconsin certifying that, to the best of such officer's
knowledge, no Default or Event of Default has occurred and is
continuing or, if any Default or Event of Default has occurred and is
continuing, specifying the nature and extent thereof, which
certificate shall set forth in reasonable detail the calculations (if
any) required to establish whether PlayCore Wisconsin and its
Subsidiaries were in compliance with the provisions of Sections 8.2,
8.4, 8.5 and 8.12, at the end of such Fiscal Quarter or Fiscal Year,
as the case may be.
(c) Auditors' Reports. Promptly upon receipt thereof, copies of
all final reports submitted to PlayCore Wisconsin or to any of its
Subsidiaries by independent certified public accountants in connection
with each annual, interim or special audit of the books of PlayCore
Wisconsin or any of its Subsidiaries made by such accountants,
including, without limitation, any final comment letter submitted by
such accountants to management in connection with their annual audit.
(d) Notice of Default or Event of Default. Promptly, but in any
event within five (5) Business Days, after an officer of PlayCore
Wisconsin becomes aware of the existence of any Default or Event of
Default or that any Person has given any notice or taken any other
action with respect to a claimed Default or Event of Default, a
written notice thereof specifying the nature and existence
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thereof and what action PlayCore Wisconsin is taking or proposes to
take with respect thereto.
(e) Additional Information to Holders of Other Indebtedness.
Prior to the Note Registration, simultaneously with the furnishing of
such information to any other holder of Indebtedness of PlayCore
Wisconsin or any of its Subsidiaries, (i) copies of all other
financial statements, reports or projections with respect to PlayCore
Wisconsin or its Subsidiaries which are broader in scope or on a more
frequent basis than PlayCore Wisconsin is required to provide under
this Agreement and (ii) copies of all studies, reviews, reports or
assessments relating to environmental matters that reveal
circumstances, events or other matters that would reasonably be
expected to have a Material Adverse Effect.
SECTION 7.
OTHER AFFIRMATIVE COVENANTS
Holdings and PlayCore Wisconsin further jointly and severally covenant and
agree with each Holder that (i) in the case of Sections 7.4 and 7.8, for so long
as such Sections apply by their respective terms and (ii) in the case of each
other Section in this Section 7, until the principal amount of (and premium, if
any, on) all the Notes, and all interest, and other obligations hereunder in
respect thereof (other than indemnification obligations that have not become due
and payable), shall have been paid in full:
7.1 Preservation of Corporate Existence and Franchises. Subject to Sections
8.5 and 8.12, Holdings shall, and shall cause its Subsidiaries to, do or cause
to be done all things necessary to preserve and keep in full force and effect
(a) its corporate existence, and the corporate, limited liability company or
other existence of each of its Subsidiaries, in accordance with the respective
organizational documents (as the same may be amended from time to time) of
Holdings or any such Subsidiary and (b) the rights (charter and statutory),
licenses and franchises of Holdings and its Subsidiaries; provided, however,
that Holdings shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any of its
Subsidiaries if (i) the Board of Directors of Holdings shall determine in good
faith that the preservation thereof is no longer desirable in the conduct of the
business of Holdings and its Subsidiaries, taken as a whole, and (ii) the loss
thereof does not and would not reasonably be expected to result in a Material
Adverse Effect.
7.2 Maintenance of Properties. Holdings shall, and shall cause its
Subsidiaries to, cause all properties used or useful in the conduct of its
business or the business of any of its Subsidiaries to be maintained and kept in
good condition, repair and working order (ordinary wear and tear excepted) and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of Holdings or any of its Subsidiaries may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that the foregoing shall not prevent
Holdings from discontinuing the operation or
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maintenance of any of such properties if (i) the Board of Directors of Holdings
determines that such discontinuance is desirable in the conduct of its business
or the business of any Subsidiary and (ii) does not and would not reasonably be
expected to result in a Material Adverse Effect.
7.3 Taxes.
(a) Payment of Taxes. Holdings shall pay or discharge or cause to be paid
or discharged, before the same shall become delinquent, (i) all Taxes of
Holdings or any of its Subsidiaries and (ii) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a Lien upon the
property of Holdings or any of its Subsidiaries; provided, however, that
Holdings shall not be required to pay or discharge or cause to be paid or
discharged any such Tax or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings; provided that
appropriate reserves therefor are established in Holdings' consolidated
financial statements in accordance with GAAP.
(b) Tax Returns. Holdings or any of its Subsidiaries shall timely file or
cause to be filed when due all Tax Returns that are required to be filed by or
with respect to Holdings or any of its Subsidiaries for taxable years ending
after the Closing Date and shall pay any Taxes due in respect of such Tax
Returns.
(c) Contest Provisions. Holdings shall promptly notify the Purchasers in
writing upon receipt by Holdings or any of its Subsidiaries or any of their
Affiliates of notice of any pending or threatened federal, state, local or
foreign income or franchise Tax audits or assessments which, if determined
adversely to Holdings or any of its Subsidiaries, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
(d) Transfer Taxes. All transfer, transfer gains, documentary, sales, use,
stamp, registration and other similar Taxes and fees (including costs and
expenses relating to such Taxes) (collectively "Transfer Taxes") incurred in
connection with the consummation of the transactions contemplated by this
Agreement, shall be borne by PlayCore Wisconsin. PlayCore Wisconsin shall, at
its own expense, prepare and timely file, in accordance with all applicable laws
and regulations, all necessary Tax Returns and other documentation with respect
to all such Transfer Taxes. The Purchasers shall reasonably cooperate with
PlayCore Wisconsin in the preparation and filing of any such Tax Returns and
other documentation.
7.4 Books, Records and Access. Holdings, PlayCore Wisconsin and each of
their respective Subsidiaries shall keep adequate books and records of their
transactions in accordance with good accounting practices on the basis of GAAP
applied on a consistent basis (including the establishment and maintenance of
appropriate reserves). Holdings and its Subsidiaries or PlayCore Wisconsin and
its Subsidiaries, as the case may be, will provide reasonable opportunities to
GS Mezzanine to consult with and advise management of Holdings or PlayCore
Wisconsin, as the case may be, on significant business issues, including
management's proposed annual operating plans. Holdings and PlayCore Wisconsin
each agree to give due consideration to the advice given and any proposals made
by GS Mezzanine. Subject to the next succeeding sentence, Holdings shall, and
shall cause its Subsidiaries to, permit representatives of any Purchaser upon
reasonable notice (at the expense of such Purchaser unless
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there is an occurrence and continuance of a Default or an Event of Default, in
which case, at the expense of Holdings) to visit and inspect any of the
properties of Holdings and its Subsidiaries and examine and make copies from any
of its or its Subsidiaries' books and records at any reasonable time and as
often as may reasonably be requested upon reasonable notice, and to discuss the
business, affairs, operations, properties and financial and other conditions of
Holdings and its Subsidiaries with officers and employees thereof and with their
independent public accountants (and by this provision, Holdings authorizes such
accountants to discuss with any Purchaser or its representative the business,
affairs, operations, properties, financial and accounts of Holdings and its
Subsidiaries). The rights afforded to any Purchaser in the immediately preceding
sentence will be afforded to the Purchaser or any other Holder who is an
Institutional Investor so long as such Purchaser and its Affiliates or such
Holder and its Affiliates, as the case may be, hold at least 40% in aggregate
principal amount of the Notes at the time Outstanding.
7.5 Compliance with Law. Holdings shall, and shall cause each of its
Subsidiaries to, comply with all Applicable Laws and will obtain and maintain,
and will cause each of its Subsidiaries to obtain and maintain, all Permits
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, except for (i) such non-compliances or failures the
applicability or validity of which are being contested in good faith by
appropriate proceedings or (ii) such non-compliance with Applicable Law or any
failure to obtain or maintain such Permits, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect.
7.6 Insurance. Holdings shall, and shall cause each of its Subsidiaries to,
maintain, insurance with respect to their respective properties and business
consistent with similarly situated companies in like industries.
7.7 Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, PlayCore Wisconsin shall
make an offer (a "Change of Control Offer") to each Holder to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of each Holder's
Notes at an offer price in cash equal to 101% of the original principal amount
thereof as of the Change of Control Payment Date, plus accrued and unpaid
interest, Capitalized Interest and any Special Interest thereon, if any, until
the Change of Control Payment Date (the "Change of Control Payment"). PlayCore
Wisconsin shall comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of the
Notes as a result of a Change of Control, and PlayCore Wisconsin shall not be in
violation of this Agreement by reason of such compliance with such rule or other
applicable law.
(b) Within 30 days following any Change of Control, PlayCore Wisconsin
shall mail a notice to each Holder stating:
(i) that the Change of Control Offer is being made pursuant to this
Section 7.7 and that all Notes tendered will be accepted for payment;
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(ii) the purchase price and the purchase date, which shall be at least
30 but no more than 60 days from the date on which PlayCore Wisconsin mails
notice of the Change of Control (the "Change of Control Payment Date");
(iii) that any Notes not tendered will continue to accrue interest,
Capitalized Interest, if any, and Special Interest, if applicable;
(iv) that, unless PlayCore Wisconsin defaults in the payment of the
Change of Control Payment, all Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest, including
Capitalized Interest, if applicable, and any Special Interest after the
Change of Control Payment Date;
(v) that Holders electing to have any Notes purchased pursuant to a
Change of Control Offer shall be required to surrender the Notes, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Notes completed, to PlayCore Wisconsin or its designated agent for such
purpose, at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control Payment
Date;
(vi) that Holders will be entitled to withdraw their election if
PlayCore Wisconsin or its designated agent for such purpose, receives, not
later than the close of business on the second Business Day preceding the
Change of Control Payment Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount of
Notes delivered for purchase, and a statement that such Holder is
withdrawing its election to have the Notes purchased; and
(vii) that Holders whose Notes are being purchased only in part will
be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof.
(c) On the Change of Control Payment Date, PlayCore Wisconsin shall, to the
extent lawful, (i) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer and (ii) pay to the Holders of
Notes or portions thereof so tendered an amount equal to the Change of Control
Payment in respect of all Notes or portions thereof so tendered. PlayCore
Wisconsin shall promptly mail to each Holder of Notes so tendered the Change of
Control Payment for such Notes, and PlayCore Wisconsin shall promptly execute
and mail (or cause to be transferred by book-entry) to each Holder a new Note
equal in principal amount to any unpurchased portion of the Notes surrendered,
if any; provided, however, that each such new Note shall be in a principal
amount of $1,000 or an integral multiple thereof.
(d) PlayCore Wisconsin shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in a manner, at the times and otherwise in compliance with the
requirements set forth in this Section 7.7 and such third party purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
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(e) Prior to the mailing of the notice referred to above in clause (b),
but in any event within 30 days following any Change of Control, PlayCore
Wisconsin covenants to:
(i) repay in full all Indebtedness under the Credit Agreement
and all other Senior Indebtedness to the extent the terms of which require
repayment upon a Change of Control or offer to repay in full all
Indebtedness under the Credit Agreement and all other such Senior
Indebtedness and to repay the Indebtedness owed to each lender which has
accepted such offer; or
(ii) obtain the requisite consents under the Credit Agreement
and all other Senior Indebtedness to permit the repurchase of the Notes as
set forth above in Section 7.7(c).
7.8 Non-Voting Observer. So long as the Purchasers and their Affiliates
(but not their assigns) own at least $5,000,000 in aggregate principal amount of
the Notes at the time Outstanding:
(a) Holdings and PlayCore Wisconsin (each being herein called an
"Entity") each shall cause, at the request of GS Mezzanine, the appointment of a
person, who may be a managing director, officer or employee of The Goldman Sachs
Group, Inc. or any of its Affiliates, as a non-voting observer (a "Non-Voting
Observer") to the Board of Directors of such Entity, which person may or may not
be the same person, it being understood that The Goldman Sachs Group, Inc. may
from time to time change the designation of such Non-Voting Observer. In the
event of a vacancy caused by the resignation or other cessation of service of
any Non-Voting Observer from such Entity, such Entity shall cause the
appointment of a new Non-Voting Observer nominated by GS Mezzanine at least
seven (7) days prior to the date of a regular meeting of the Board of Directors
of such Entity. Any such Non-Voting Observer shall be permitted to attend
meetings of the Board of Directors of such Entity.
(b) The Non-Voting Observer shall be entitled to be present at all
meetings of the Board of Directors of such Entity and such Non-Voting Observer
shall be notified of any meeting of any such Board of Directors, including such
meeting's time and place, in the same manner as Directors of such Entity and
shall have the same access to information (including any copies of all materials
distributed to members of such Board of Directors) concerning the business and
operations of such Entity and at the same time as Directors of such Entity and
shall be entitled to participate in discussions and consult with, and make
proposals and furnish advice to, such Board of Directors, without voting;
provided, however, that such Entity shall not be under any obligation to take
any action with respect to any proposals made or advice furnished by any
Non-Voting Observer, other than to take such proposals or advice seriously and
to give due consideration thereto. Each Non-Voting Observer shall have a duty of
confidentiality to the relevant Entity comparable to the duty of confidentiality
of a Director of such Entity.
(c) Each Entity shall indemnify and hold harmless, to the fullest
extent permitted under the Applicable Law, any Non-Voting Observer to the same
extent as all other Directors of such Entity and on terms no less favorable than
under the relevant organizational documents of such Entity on the date hereof.
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(d) At all times after the first consummation of an Equity
Offering, the relevant Entity shall cause to be maintained directors' and
officers' liability insurance covering all Directors and officers of such Entity
and covering any Non-Voting Observer (regardless of whether such insurance shall
be obtained prior to an Equity Offering or after an Equity Offering) (i) to the
same extent as that maintained for all other Directors of such Entity and (ii)
on terms no less favorable than the coverage provided for in such Entity's
directors', officers' and corporate liability insurance then so maintained.
7.9 Offer to Purchase by Application of Excess Proceeds.
(a) In the event that, pursuant to Section 8.5(c), PlayCore
Wisconsin shall be required to commence on an Asset Sale Offer Trigger
Date an offer to all Holders to purchase Notes (an "Asset Sale Offer"),
it shall follow the procedures specified in this Section 7.9. Each
Asset Sale Offer shall remain open for not less than thirty (30) nor
more than sixty (60) days immediately following its commencement,
except to the extent that a longer period is required by Applicable Law
(the "Offer Period"). On the Business Day immediately after the
termination of the Offer Period (the "Purchase Date"), PlayCore
Wisconsin shall purchase the principal amount of Notes required to be
purchased pursuant to Section 8.5 plus accrued and unpaid interest and
any Special Interest thereon, if any, to the Purchase Date (the "Offer
Amount") or, if less than the Offer Amount has been tendered, PlayCore
Wisconsin shall purchase all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the
same manner as interest payments are made. PlayCore Wisconsin shall
comply with the requirements of Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase
of the Notes as a result of an Asset Sale Offer and PlayCore Wisconsin
shall not be in violation of this Agreement by reason of such
compliance with such rule or other applicable law.
(b) Upon the commencement of an Asset Sale Offer, PlayCore
Wisconsin shall send, by first class mail, a notice to each of the
Holders stating:
(i) that the Asset Sale Offer is being made pursuant to this
Section 7.9 and Section 8.5 and the length of time the Asset Sale
Offer shall remain open;
(ii) the Offer Amount, the purchase price and the Purchase
Date;
(iii) that any Note not tendered or accepted for payment shall
continue to accrue interest and any Special Interest;
(iv) that, unless PlayCore Wisconsin defaults in making such
payment, any Note accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest and any Special Interest
after the Purchase Date;
(v) that Holders electing to have a Note purchased pursuant to
an Asset Sale Offer may only elect to have all of such Note
purchased and may not elect to have only a portion of such Note
purchased;
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(vi) that Holders electing to have a Note purchased pursuant
to any Asset Sale Offer shall be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed to PlayCore Wisconsin at the address specified in the notice
at least three Business Days before the Purchase Date;
(vii) that Holders shall be entitled to withdraw their
election if PlayCore Wisconsin receives, not later than the second Business
Day preceding the Purchase Date of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing its election to have such Note
purchased;
(viii) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the Offer Amount, PlayCore Wisconsin shall
select the Notes to be purchased on a pro rata basis (with such adjustments
as may be deemed appropriate by PlayCore Wisconsin so that only Notes (or
portions thereof) in denominations of $1,000, or integral multiples
thereof, shall be purchased); and
(ix) that Holders whose Notes were purchased only in part
shall be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered.
(c) On or before the Purchase Date, PlayCore Wisconsin shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Offer Amount of Notes or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Holders an Officers' Certificate stating that
such Notes or portions thereof were accepted for payment by PlayCore Wisconsin
in accordance with the terms of this Section 7.9. PlayCore Wisconsin (to the
extent lawful) shall promptly (but in any case not later than five days after
the Purchase Date) mail or deliver to each tendering Holder an amount equal to
the purchase price of the Notes tendered by such Holder and accepted by PlayCore
Wisconsin for purchase, and PlayCore Wisconsin shall promptly issue a new Note
and deliver it to such Holder, in a principal amount equal to any unpurchased
portion of the Note surrendered. Any Note not so accepted shall be promptly
mailed or delivered by PlayCore Wisconsin to the Holder thereof.
7.10 Post-Closing Note Guarantees. So long as any Notes remain
Outstanding, PlayCore Wisconsin shall cause all of its future Subsidiaries which
at any time become guarantors of the obligations of PlayCore Wisconsin under any
Senior Indebtedness to become Guarantors and to execute simultaneously with and
as a precondition to such Person becoming a Subsidiary, a Notation of Note
Guarantee and to otherwise acknowledge its agreement to be bound by the
provisions of Section 15.
7.11 Further Assurances. Holdings shall and shall cause its
Subsidiaries to make, execute, endorse, acknowledge and deliver any amendments,
modifications or supplements hereto and restatements hereof and any other
agreements, instruments or documents, and take any and all such other actions,
as may from time to time be reasonably requested by the Purchasers to effect,
confirm or further assure or protect and preserve the
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interests, rights and remedies of the Purchasers under this Agreement and the
other Financing Documents.
7.12 Redemption of Convertible Debentures. Within 75 days after the Closing
Date, PlayCore Wisconsin shall redeem all of its 10% Convertible Debentures
which are then outstanding.
SECTION 8.
NEGATIVE COVENANTS OF PLAYCORE WISCONSIN
PlayCore Wisconsin hereby covenants and agrees with each Holder that until
the principal amount of (and premium, if any, on) all the Notes, and all
interest, and other obligations hereunder in respect thereof (other than
indemnification obligations that have not become due and payable), shall have
been paid in full:
8.1 Stay, Extension and Usury Laws. PlayCore Wisconsin covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, that may affect the covenants or the performance of its obligations
under the Notes or this Agreement, and (to the extent that it may lawfully do
so) PlayCore Wisconsin hereby expressly waives all benefit or advantage of any
such law, and covenants (to the extent that it may lawfully do so) that it shall
not, by resort to any such law, hinder, delay or impede the execution of any
power herein granted to the Purchasers, but shall (to the extent it may lawfully
do so) suffer and permit the execution of every such power as though no such law
has been enacted.
8.2 Restricted Payments.
(a) Except for the consummation of the Transactions, PlayCore Wisconsin
shall not, and shall not permit any of its Subsidiaries to, (i) declare or make
any dividend payment or other distribution of assets, properties, cash, rights,
obligations or securities on account of any shares of any class of its Capital
Stock or other Equity Interests, (ii) purchase, redeem or otherwise acquire for
value any shares of its Capital Stock or other Equity Interests now or hereafter
outstanding, (iii) make any payment or prepayment of principal of, premium, if
any, interest, redemption, exchange, purchase, retirement, defeasance, sinking
fund or other payment with respect to, any Indebtedness that is subordinated in
any manner to the Notes or (iv) making any Investment other than Permitted
Investments (the items described in clauses (i), (ii), (iii) and (iv) are
referred to as "Restricted Payments"); except that any Subsidiary of PlayCore
Wisconsin may declare and pay dividends to PlayCore Wisconsin or any Subsidiary
of PlayCore Wisconsin, and except that PlayCore Wisconsin and its Subsidiaries
may make a Restricted Payment if, immediately after giving to such Restricted
Payment:
(A) no Default or Event of Default has occurred and is continuing or would
arise as a result of such Restricted Payment;
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(B) after giving effect to such Restricted Payment, PlayCore
Wisconsin is able to Incur at least $1.00 of additional Indebtedness other
than Permitted Indebtedness; and
(C) the aggregate of all Restricted Payments declared or made
after the Closing Date does not exceed the sum (without duplication) of (1)
50% of the cumulative Consolidated Net Income of PlayCore Wisconsin (or
minus 100% of any cumulative deficit in Consolidated Net Income) for the
period (treated as one accounting period) from the first day of the Fiscal
Quarter in which the Closing Date occurs through the last day of the Fiscal
Quarter immediately preceding such Restricted Payment, (2) 100% of the
aggregate proceeds in cash received by PlayCore Wisconsin from the issuance
or sale, after the Closing Date (other than to a Subsidiary), of (x)
Capital Stock (other than Disqualified Capital Stock) of PlayCore Wisconsin
or (y) any Indebtedness or other securities of PlayCore Wisconsin that are
convertible into or exercisable or exchangeable for Capital Stock (other
than Disqualified Capital Stock) of PlayCore Wisconsin which have been so
converted or exercised or exchanged (other than by a Subsidiary of PlayCore
Wisconsin), excluding, in the case of clause (C)(2), any proceeds from the
initial Equity Offering to the extent used to redeem the Notes in
accordance with clause (a) of the second paragraph of the Form of Reverse
of Note in Exhibit A attached hereto and (3) 100% of the aggregate amount
return in cash on Investments (other than Permitted Investments),
subsequent to the Closing Date, in any Person, through payments of interest
on Indebtedness, dividends, repayments of loans or advances or other
transfers or distributions of Property or return of capital (but only to
the extent such interest, dividends or repayments or other transfers or
distributions of property or return of capital are not included in the
calculation of Consolidated Net Income), in each case to PlayCore Wisconsin
or any Subsidiary from any Person not to exceed in the case of any Person
the amount of Investments (other than Permitted Investments) previously
made by PlayCore Wisconsin or any Subsidiary in such Person.
(b) The provisions of this covenant shall not prohibit, so long as
no Default or Event of Default has occurred and is continuing or would result
therefrom:
(i) the payment of any distribution within 60 days after the
date of declaration thereof, if at such date of declaration such
payment would comply with the provisions hereof;
(ii) the retirement of any shares of Capital Stock of PlayCore
Wisconsin or Indebtedness that is subordinated in right of payment
to the Notes by conversion into, or by or in exchange for, shares
of Capital Stock (other than Disqualified Capital Stock of
PlayCore Wisconsin, or out of, the proceeds of the substantially
concurrent sale (other than to a Subsidiary of PlayCore Wisconsin)
of other shares of Capital Stock of PlayCore Wisconsin (other than
Disqualified Capital Stock); provided that any such proceeds are
excluded from clause (a)(C)(2) of the immediately preceding
paragraph for the purposes of this calculation (and were not
included therein at any time);
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(iii) the redemption, repayment or retirement of Indebtedness that is
subordinated in right of payment to the Notes in exchange for, by
conversion into, or out of the proceeds of, (x) a substantially concurrent
sale or Incurrence of Indebtedness that is subordinated in right of payment
to the Notes to the same extent as the Indebtedness being so redeemed,
repaid or retired and has the same or greater Weighted Average Life to
Maturity (other than any Indebtedness owed to a Subsidiary) or (y) a
substantially concurrent sale (other than to a Subsidiary of PlayCore
Wisconsin) of shares of Capital Stock of PlayCore Wisconsin; provided that
any such proceeds are excluded from clause (C)(2) of the immediately
preceding paragraph (and were not included therein at any time);
(iv) the retirement of any shares of Disqualified Capital Stock by
conversion into, or by exchange for, shares of Disqualified Capital Stock
of PlayCore Wisconsin, or out of the proceeds of the substantially
concurrent sale (other than to a Subsidiary of PlayCore Wisconsin) of other
shares of Disqualified Capital Stock of PlayCore Wisconsin;
(v) the purchase, redemption, retirement or other acquisition for
value of Capital Stock of PlayCore Wisconsin, of Holdings or of any Person
that directly or indirectly controls (as defined in the definition of
Affiliate) Holdings held by employees or former employees of PlayCore
Wisconsin or any Subsidiary (or their estates or beneficiaries under their
estates) upon death, disability, retirement, termination of employment and
pursuant to the terms of any agreement under which such Capital Stock was
issued; provided, that the aggregate fair market value of the consideration
paid for such purchase, redemption, retirement or other acquisition of such
Capital Stock does not exceed $1,000,000 in any fiscal year;
(vi) payments that would otherwise constitute Restricted Payments, not
to exceed $1,000,000 in the aggregate;
(vii) payments that would constitute Restricted Payments in an amount
sufficient (but not in excess of the amount necessary) to pay the
transaction fee and Chartwell's expenses of the Transactions, and the
management fees and expenses (provided that the requirement that no such
Restricted Payment shall be made if a Default or an Event of Default has
occurred or is continuing or would result therefrom shall not apply to the
payment of reasonable out-of-pocket expenses of Chartwell incurred in
connection with rendering the management services to the Company or
Holdings permitted under this clause (vii)) permitted by Section
9.3(b)(viii) in the case of management fees;
(viii) Payments to Holdings in an amount sufficient (but not in excess
of the amount necessary) to permit Holdings to pay its ordinary operating
and administrative expenses, including out-of-pocket expenses (including
fees) relating to auditors, attorneys, franchise taxes and other similar
administrative
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expenses, in an aggregate amount (exclusive of auditors' fees and expenses)
not to exceed $350,000 during any fiscal year of PlayCore Wisconsin; and
(ix) in the event PlayCore Wisconsin files a consolidated income tax
return with Holdings or a direct parent of Holdings in respect of which
Holdings or such parent is a member of a consolidated tax group of the
Company, distributions to Holdings to permit Holdings or such parent to pay
federal and state income taxes then due and owing, franchise taxes and
other similar licensing expenses incurred in the ordinary course of
business; provided that the amount of such distribution shall not be
greater, nor the receipt by PlayCore Wisconsin of tax benefits less, than
they would have been had PlayCore Wisconsin not filed a consolidated return
with Holdings.
provided, that in calculating the aggregate amount of Restricted Payments made
subsequent to the Closing Date for purposes of clause (a) of the immediately
preceding paragraph, amounts expended pursuant to clauses (i) (but only if the
declaration thereof has not been counted in a prior period), (v) and (vi) shall
be included, without duplication, in such calculation and clauses (ii), (iii)
and (iv) shall not be included in such calculation. Nothing in the immediately
preceding proviso is meant to affect whether any amount expended pursuant to
clause (viii) should be reflected in Consolidated Net Income.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued to or by PlayCore Wisconsin or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
shall be determined by the Board of Directors of PlayCore Wisconsin whose
resolution with respect thereto shall be conclusive. The determination of the
Board of Directors of PlayCore Wisconsin must be based upon an opinion or
appraisal issued by an Independent Financial Adviser if the fair market value
equals or exceeds $10,000,000.
8.3 Dividend and Other Payment Restrictions Affecting Subsidiaries.
PlayCore Wisconsin shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any consensual encumbrance or restriction on the
ability of any Subsidiary of PlayCore Wisconsin to:
(a) pay dividends or make any other distributions on or in respect of its
Capital Stock;
(b) make loans or advances or pay any Indebtedness or other obligation owed
to PlayCore Wisconsin or any other Subsidiary of PlayCore Wisconsin; or
(c) transfer any of its property or assets to PlayCore Wisconsin or any
other Subsidiary of PlayCore Wisconsin, except, with respect to each of this
clause (c) and clauses (a) and (b) above, for such encumbrances or restrictions
existing under or by reason of:
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(i) Applicable Law;
(ii) this Agreement;
(iii) non-assignment provisions of any contract of, any lease governing a
leasehold interest of, or any license held by, any Subsidiary of PlayCore
Wisconsin;
(iv) any instrument governing Acquired Indebtedness or Capital Stock of a
Person acquired by PlayCore Wisconsin or any of its Subsidiaries or of any
Person that becomes a Subsidiary as in effect at the time of such acquisition or
such Person becoming a Subsidiary, which encumbrance or restriction is not
applicable to any Person, or the Properties or assets of any Person, other than
the Person or the Properties or assets of the Person (including any Subsidiary
of such Person) so acquired;
(v) any encumbrance or restriction pursuant to an agreement relating to an
acquisition of Property or assets, so long as the encumbrances or restrictions
in any such agreement relate solely to the Property or assets so acquired and
are not and were not created in anticipation of or in connection with the
acquisition thereof;
(vi) the Credit Agreement;
(vii) agreements existing on the Closing Date to the extent and in the
manner such agreements are in effect on the Closing Date; or
(viii) an agreement governing Indebtedness Incurred to Refinance the
Indebtedness Incurred pursuant to an agreement referred to in clauses (ii),
(iv), (vi) and (vii) above and (ix) and (xi) below; provided, however, that the
provisions relating to such encumbrance or restriction contained in any such
Indebtedness are not materially more restrictive to PlayCore Wisconsin and its
subsidiaries as a whole as determined by the Board of Directors of PlayCore
Wisconsin or senior management in its good faith judgment than the provisions
relating to such encumbrance or restriction contained in agreements referred to
in such clauses (ii), (iv), (vi), (vii), (ix) and (xi);
(ix) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature set forth in clause
(b) above on the property so acquired;
(x) contracts for the sale of assets, including without limitation,
customary restrictions with respect to a Subsidiary of PlayCore Wisconsin
pursuant to an agreement that has been entered into for the sale or disposition
of the Capital Stock or assets of such Subsidiary;
(xi) secured Indebtedness otherwise permitted to be Incurred pursuant to
Section 8.4 and Section 8.7 that limits the right of the debtor to dispose of
the assets securing such Indebtedness;
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(xii) customary provisions in joint venture agreements, licenses and
leases and other similar agreements entered into in the ordinary course of
business;
(xiii) net worth provisions in leases and other agreements entered
into by PlayCore Wisconsin or any Subsidiary; and
(xiv) an agreement governing Indebtedness (including the Credit
Agreement) permitted to be Incurred pursuant to Section 8.4; provided that
provisions relating to such encumbrance or restriction contained in such
Indebtedness are not materially more restrictive to PlayCore Wisconsin and
its Subsidiaries as a whole as determined in good faith by the Board of
Directors of PlayCore Wisconsin in its good faith judgment than the
provisions contained in the Credit Agreement as in effect on the Closing
Date.
8.4 Incurrence of Additional Indebtedness. PlayCore Wisconsin shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly, create,
incur, assume, guarantee, acquire, become liable, contingently or otherwise,
with respect to, or otherwise become responsible for payment of (collectively,
"Incur") any Indebtedness, other than Permitted Indebtedness; provided, however,
that if no Default or Event of Default shall have occurred and be continuing at
the time of or as a consequence of the Incurrence of any such Indebtedness,
PlayCore Wisconsin or any of its Subsidiaries may Incur Indebtedness including,
without limitation, Acquired Indebtedness, if on the date of the Incurrence of
such Indebtedness, after giving effect to the Incurrence thereof, the
Consolidated Interest Coverage Ratio of PlayCore Wisconsin is greater than 2.25
to 1.00. Accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of additional
Indebtedness with the same terms, and the payment of dividends on Disqualified
Capital Stock in the form of additional shares of the same class of Disqualified
Capital Stock will not be deemed to be an Incurrence of Indebtedness or an
issuance of Disqualified Capital Stock for purposes of this Section 8.4.
Furthermore, Guarantees (or obligations with respect to letters of credit), to
the extent otherwise included in the determination of such amount, shall not be
included to such extent.
8.5 Asset Sales. PlayCore Wisconsin shall not, and shall not permit any
of its Subsidiaries to, consummate an Asset Sale unless:
(a) PlayCore Wisconsin or the applicable Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale which, taken as a whole,
is at least equal to the fair market value of the assets sold or otherwise
disposed of (except from any sale or disposition as a result of a foreclosure or
sale of by the lenders under the Credit Documents), as determined in good faith
by the Board of Directors of PlayCore Wisconsin;
(b) at least 75% of the consideration received by PlayCore Wisconsin or
such Subsidiary, as the case may be, from such Asset Sale shall be in the form
of cash or Cash
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Equivalents and is received at the time of such disposition; provided that each
of the following shall be deemed to be cash for purposes of this provision:
(i) any liabilities (as shown on PlayCore Wisconsin's or such
Subsidiary's most recent balance sheet) of PlayCore Wisconsin or any
Subsidiary, other than liabilities that are by their terms subordinated to
the Notes, that are assumed by the transferee of any such assets; and
(ii) any notes or other obligations received by PlayCore Wisconsin or
any such Subsidiary from such transferee that are converted by PlayCore
Wisconsin or such Subsidiary into cash within 180 days after such Asset
Sale, to the extent of the cash received.
(c) upon the consummation of an Asset Sale, PlayCore Wisconsin shall, at
its option, apply, or cause such Subsidiary to apply, the Net Cash Proceeds
relating to such Asset Sale within 365 days of receipt thereof either:
(i) to prepay any Senior Indebtedness or Guarantor Senior Indebtedness
and, in the case of any prepayment of any Senior Indebtedness or Guarantor
Senior Indebtedness under any revolving credit facility, effect a permanent
reduction in the availability under such revolving credit facility;
(ii) to invest in or to acquire other properties and assets that
replace the properties and assets that were the subject of such Asset Sale
or in properties and assets that will be used in the business of PlayCore
Wisconsin and its Subsidiaries as conducted on the Closing Date or at the
time such assets are sold or in businesses reasonably related,
complementary or ancillary thereto or a reasonable expansion thereof;
and/or
(iii) to make a Capital Expenditure or commit, or cause such
Subsidiary to commit, to make a Capital Expenditure, such commitments to
include amounts anticipated to be expended pursuant to PlayCore Wisconsin's
capital investment plan as adopted by the Board of Directors of PlayCore
Wisconsin or such Subsidiary of PlayCore Wisconsin, within 24 months of
such Asset Sale.
Pending the final application of any Net Cash Proceeds, PlayCore Wisconsin may
temporarily reduce revolving credit borrowings or otherwise invest such Net Cash
Proceeds in any manner that is not prohibited by this Agreement. Any Net Cash
Proceeds from Asset Sales that are not applied or invested as provided in
Section 8.5(c)(i), (ii) or (iii) shall be deemed to constitute "Excess
Proceeds". If on the 366th day after any Asset Sale, or such earlier date, if
any, as the senior management or the Board of Directors, as the case may be, of
PlayCore Wisconsin or a Subsidiary which made such Asset Sale determines (each,
an "Asset Sale Offer Trigger Date"), the amount of Excess Proceeds of such Asset
Sale, when aggregated with Excess Proceeds of all prior Asset Sales by PlayCore
Wisconsin and its Subsidiaries that have not been reset in accordance with the
last sentence of this paragraph, equals or exceeds $3,000,000 (or such lesser
amount as the senior management or the Board of Directors, as the case may be,
of PlayCore
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Wisconsin or such Subsidiary determines), PlayCore Wisconsin or such Subsidiary
shall make a pro rata Asset Sale Offer pursuant to Section 7.9 to purchase the
maximum principal amount of Notes and other pari passu Indebtedness that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof, plus accrued and unpaid interest,
if any, thereon to the date of purchase, in accordance with the procedures set
forth in Section 7.9. To the extent that the aggregate principal amount of Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds
allocable to the Notes, PlayCore Wisconsin or such Subsidiary may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds allocable to the Notes, PlayCore Wisconsin shall select the
Notes to be purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds of all Asset Sales shall be reset at
zero.
8.6 Transactions with Affiliates.
(a) Except for the consummation of the Transactions, PlayCore Wisconsin
shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, enter into or permit to exist any transaction or series of related
transactions, including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service, with, or for the
benefit of, any of its Affiliates (each an "Affiliate Transaction"), other than
(x) Affiliate Transactions permitted under Section 9.3.
8.7 Limitation on Liens. PlayCore Wisconsin shall not, and shall not
cause or permit any of its Subsidiaries to, directly or indirectly, create,
incur, assume, permit or suffer to exist any Liens of any kind against or upon
any property or assets of PlayCore Wisconsin or any of its Subsidiaries whether
owned on the Closing Date or acquired after the Closing Date, or any proceeds
therefrom, or assign or otherwise convey any right to receive income or profits
therefrom unless:
(a) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Notes, the Notes are secured by
a Lien on such property, assets or proceeds that is senior in priority to such
Liens; and
(b) in all other cases, the Notes are equally and ratably secured, except
for:
(i) Liens existing as of the Closing Date to the extent and in the
manner such Liens are in effect on the Closing Date;
(ii) Liens securing Senior Indebtedness and Liens securing Guarantor
Senior Indebtedness;
(iii) Liens securing the Notes and the Guarantees;
(iv) Liens of PlayCore Wisconsin or a Wholly Owned Subsidiary of
PlayCore Wisconsin on assets of any Subsidiary of PlayCore Wisconsin;
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(v) Liens securing Refinancing Indebtedness which is Incurred to
Refinance any Indebtedness which has been secured by a Lien permitted under
this Agreement and which has been Incurred in accordance with the
provisions of this Agreement; provided, however, that such Liens (A) are
not materially more restrictive to PlayCore Wisconsin and not more
favorable to the lienholders with respect to such Liens than the Liens in
respect of the Indebtedness being Refinanced and (B) do not extend to or
cover any property or assets of PlayCore Wisconsin or any of its
Subsidiaries not securing the Indebtedness so Refinanced; and
(vi) Permitted Liens.
8.8 Prohibition on Incurrence of Senior Subordinated Debt. PlayCore
Wisconsin shall not, and shall not permit any Guarantor to, Incur or suffer to
exist Indebtedness that is senior in right of payment to the Notes or such
Guarantor's guarantee thereof, as the case may be, and subordinate in right of
payment to any other Indebtedness of PlayCore Wisconsin or such Guarantor, as
the case may be.
8.9 Limitation on Issuances and Sales of Capital Stock of Subsidiaries.
PlayCore Wisconsin (a) shall not, and shall not permit any Subsidiary of
PlayCore Wisconsin to, transfer, convey, sell, lease or otherwise dispose of any
Capital Stock of any Subsidiary of PlayCore Wisconsin to any Person (other than
PlayCore Wisconsin or a Wholly Owned Subsidiary of PlayCore Wisconsin), unless
(i) such transfer, conveyance, sale, lease or other disposition is of all the
Capital Stock of such Subsidiary and (ii) the Net Cash Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in accordance
with the provisions of Section 8.5; provided, however, that this clause (a)
shall not apply to any pledge of Capital Stock of any Subsidiary of PlayCore
Wisconsin permitted under Section 8.7, and (b) shall not permit any Subsidiary
of PlayCore Wisconsin to issue any of its Capital Stock or any securities
convertible into or exchangeable for such Capital Stock (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than (A) Capital Stock issued or sold to PlayCore
Wisconsin or a Wholly Owned Subsidiary of PlayCore Wisconsin or a Subsidiary
that is an existing shareholder of the issuer of such Capital Stock, (B) Capital
Stock issued by a Person prior to the time (x) such Person becomes a Subsidiary
or (z) a Subsidiary merges with or into such Person and (C) Capital Stock issued
by a Subsidiary pursuant to a capital call on a pro rata basis to all holders of
its Capital Stock; provided that, after giving effect to the issuance permitted
by the foregoing clauses (B) or (C) such Subsidiary is or remains to be a
Subsidiary. Upon the sale of any Subsidiary in accordance with this Section 8.9,
the Guarantee of such Subsidiary, if any, shall automatically terminate without
further action.
8.10 Sales and Leaseback Transactions. PlayCore Wisconsin shall not, and
shall not permit any Subsidiary to, enter into any Sale and Leaseback
Transaction; provided, however, that PlayCore Wisconsin may enter into a Sale
and Leaseback Transaction if (a) PlayCore Wisconsin could have (i) Incurred
Indebtedness in an amount equal to the Attributable Indebtedness relating to
such Sale and Leaseback Transaction pursuant to Section 8.4 and (ii) incurred a
Lien to secure such Indebtedness pursuant to the provisions of
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Section 8.7, (b) the gross cash proceeds of such Sale and Leaseback Transaction
are at least equal to the fair market value (as determined in good faith by the
Board of Directors of PlayCore Wisconsin) of the property that is the subject of
such Sale and Leaseback Transaction and (c) the transfer of assets in such Sale
and Leaseback Transaction is permitted by, and PlayCore Wisconsin applies the
proceeds of such transaction in compliance with, the provisions of Section 8.5.
8.11 Conduct of Business. PlayCore Wisconsin shall not, and shall not
permit any Subsidiary to, directly or indirectly, engage in any business other
than business of the type engaged by PlayCore Wisconsin on the Closing Date or
any business reasonably related, complementing or ancillary thereto or a
reasonable expansion thereof.
8.12 Merger, Consolidation, or Sales of Assets.
(a) PlayCore Wisconsin shall not, in a single transaction or series of
related transactions, consolidate or merge with or into any Person, or sell,
assign, transfer, lease, convey or otherwise dispose of (other than Permitted
Liens and the Merger), or cause or permit any Subsidiary of PlayCore Wisconsin
to sell, assign, transfer, lease, convey or otherwise dispose of (other than
Permitted Liens), all or substantially all of PlayCore Wisconsin's assets, which
are determined on a consolidated basis for PlayCore Wisconsin and PlayCore
Wisconsin's Subsidiaries, whether as an entirety or substantially as an entirety
to any Person unless:
(i) either:
(A) PlayCore Wisconsin shall be the surviving or continuing
corporation; or
(B) the Person, if other than PlayCore Wisconsin, formed by such
consolidation or into which PlayCore Wisconsin is merged or the Person
which acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of PlayCore Wisconsin and of
PlayCore Wisconsin's Subsidiaries substantially as an entirety (the
"Surviving Entity"):
(x) shall be a corporation, partnership, trust or a limited
liability company organized and validly existing under the laws
of the United States of America or any State thereof or the
District of Columbia;
(y) shall have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth
of PlayCore Wisconsin immediately preceding the transaction; and
(z) shall expressly assume, by an assumption agreement, in
form and substance satisfactory to the Required
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Holders, executed and delivered to the Holders, the due and
punctual payment of the principal of, and premium, if any, and
interest on all of the Notes and the performance of every
covenant of the Notes, this Agreement and the Exchange and
Registration Rights Agreement on the part of PlayCore Wisconsin
to be performed or observed; provided that if at any time
PlayCore Wisconsin or the Surviving Entity is a limited liability
company, partnership or trust there shall be a co-issuer of the
Notes that is a Subsidiary of PlayCore Wisconsin and that is a
corporation organized and existing under the laws of the United
States or any State thereof or the District of Columbia;
(ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(B)(z) above to the extent applicable,
including giving effect to any Indebtedness and Acquired Indebtedness
Incurred or anticipated to be Incurred in connection with or in respect of
such transaction, PlayCore Wisconsin or such Surviving Entity, as the case
may be, shall be able to Incur at least $1.00 of additional Indebtedness,
other than Permitted Indebtedness, pursuant to Section 8.4;
(iii) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (1)(B)(z) above to
the extent applicable, including, without limitation, giving effect to any
Indebtedness and Acquired Indebtedness Incurred or anticipated to be
Incurred and any Lien granted in connection with or in respect of the
transaction, no Default or Event of Default shall have occurred or be
continuing;
(iv) there has been delivered to the Holders an opinion of counsel to
the effect that Holders of the Notes will not recognize income, gain, or
loss for United States federal income tax purposes as a result of such
consolidation, merger, conveyance, transfer or lease and will be subject to
United States federal income tax with respect to the Notes in the same
manner, in the same amount, and at the same time as would have been the
case if such merger, conveyance, transfer or lease had not occurred; and
(v) PlayCore Wisconsin or the Surviving Entity shall have delivered to
the Holders an Officers' Certificate and an opinion of counsel, each
stating that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if an assumption agreement is required
in connection with such transaction, such assumption agreement comply with
the applicable provisions of this Agreement and that all conditions
precedent in this Agreement relating to such transaction have been
satisfied.
Notwithstanding the foregoing, the merger of PlayCore Wisconsin with an
Affiliate incorporated solely for the purpose of reincorporating PlayCore
Wisconsin in another jurisdiction shall be permitted and a Wholly Owned
Subsidiary may merge with and into PlayCore Wisconsin without complying with
clause (a)(ii) above.
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For purposes of this Section 8.12(a), the transfer, by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions, of all or substantially all of the properties or assets of one or
more Subsidiaries of PlayCore Wisconsin, the Capital Stock of which constitutes
all or substantially all of the properties and assets of PlayCore Wisconsin,
shall be deemed to be the transfer of all or substantially all of the properties
and assets of PlayCore Wisconsin.
(b) Upon any consolidation of PlayCore Wisconsin with, or merger of
PlayCore Wisconsin into, any other Person or any transfer, conveyance, sale,
lease or other disposition of all or substantially all of the properties and
assets of PlayCore Wisconsin and its Subsidiaries taken as a whole in one or
more related transactions (other than pursuant to the Credit Documents) in which
PlayCore Wisconsin is not the continuing entity, the successor company shall
succeed to, and be substituted for, and may exercise every right and power of,
PlayCore Wisconsin under this Agreement and the Notes with the same effect as if
such successor company had been named as PlayCore Wisconsin herein, and
thereafter, except in the case of a lease, the predecessor Company shall be
relieved of all obligations and covenants under this Agreement and the Notes.
SECTION 9
NEGATIVE COVENANTS OF HOLDINGS
Holdings hereby covenants and agrees with each Holder that until the
principal amount of (and premium, if any, on) all the Notes, and all interest,
and other obligations hereunder in respect thereof (other than indemnity
obligations that have not yet become due and payable) shall have been paid in
full:
9.1 Business, Indebtedness, Investments, Etc. Holdings will not (a)
engage in any business other than (i) the direct ownership of the Capital Stock
of PlayCore Wisconsin, (ii) the performance of its obligations and activities
incidental thereto under the Credit Documents and the Financing Documents, and
(iii) the payment of taxes and general administrative costs and expenses in the
ordinary course of business; (b) Incur or suffer to exist any Indebtedness
(other than (i) any Guarantee of the Notes, (ii) any Guarantee of Senior
Indebtedness evidenced by the Credit Documents and (iii) Indebtedness to
PlayCore Wisconsin otherwise permitted to be Incurred under this Agreement); (c)
create or acquire any Subsidiary other than PlayCore Wisconsin or a Subsidiary
of PlayCore Wisconsin or make or otherwise own or hold any Investment (other
than in the Cash Equivalents and the Capital Stock of PlayCore Wisconsin); (d)
create or suffer to exist any Lien upon any property or assets now owned or
hereafter acquired by it other than the Liens created under the Credit Documents
to which it is a party; (e) sell or otherwise dispose of any Capital Stock of
PlayCore Wisconsin or make any other Asset Sale; (f) make any Asset Acquisition;
(g) fail to at all times preserve and keep in full force and effect its rights
and franchises; or (h) fail to hold itself out to the public as a legal entity
separate and distinct from all other Persons; provided that prior to the
consummation of the Merger,
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Holdings may (i) Incur and remain liable with respect to (x) the Indebtedness
Incurred in connection with the Transactions and (y) the Existing Indebtedness
of Holdings and (ii) engage in business activities and hold Investments as
disclosed on Schedule 4.27.
9.2 Merger, Consolidation or Sales of Assets of Holdings. Holdings
shall not consolidate or merge with or into (whether or not Holdings is the
surviving corporation), or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the properties and assets of Holdings in
one or more related transactions, to any other Person; provided that Holdings
may consummate the Merger in accordance with the terms of the Merger Agreement
so long as, after giving effect thereto, Holdings will not be in breach of
Section 9.1.
9.3 Transactions with Affiliates.
(a) Except in connection with the Transactions, Holdings shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, enter into
or permit to exist any Affiliate Transaction or series of related Affiliate
Transactions, other than (x) Affiliate Transactions permitted under paragraph
(b) below and (y) Affiliate Transactions on terms that are not materially less
favorable than those that might reasonably have been obtained in a comparable
transaction at such time on an arm's-length basis from a Person that is not an
Affiliate of Holdings or such Subsidiary.
All Affiliate Transactions, and each series of related Affiliate
Transactions which are similar or part of a common plan, involving aggregate
payments or other property with a fair market value in excess of $2,500,000
shall be approved by the Board of Directors of Holdings or such Subsidiary, as
the case may be, such approval to be evidenced by a Board Resolution stating
that such Board of Directors has determined that such transaction complies with
the foregoing provisions. If Holdings or any Subsidiary of Holdings enters into
an Affiliate Transaction, or a series of related Affiliate Transactions related
to a common plan, that involves an aggregate fair market value of $10,000,000 or
more, Holdings or such Subsidiary, as the case may be, shall, prior to the
consummation thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to Holdings or the relevant
Subsidiary, as the case may be, from a financial point of view, from an
Independent Financial Advisor and file the same with the Holders.
(b) The restrictions set forth in paragraph (a) of this Section 9.3
shall not apply to:
(i) reasonable fees, expenses and compensation paid to and indemnity
provided on behalf of officers, Directors, employees, consultants or
investment bankers of Holdings or any Subsidiary of Holdings as determined
in good faith by Holdings' Board of Directors;
(ii) transactions exclusively between or among Holdings and any of its
Subsidiaries or exclusively between or among such Subsidiaries; provided
such transactions are not otherwise prohibited by this Agreement;
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(iii) any agreement as in effect as of the Closing Date or any
amendment thereto or any transaction contemplated thereby, including
pursuant to any amendment thereto, or any replacement agreement thereto so
long as such amendment or replacement agreement is not more disadvantageous
to the Holders in any material respect than the original agreement as in
effect on the Closing Date;
(iv) Restricted Payments or Permitted Investments permitted by this
Agreement;
(v) transactions in which Holdings or any of its Subsidiaries, as the
case may be, delivers to the Holders a letter from an Independent Financial
Advisor stating that such transaction is fair to Holdings or such
Subsidiary from a financial point of view or meets the requirements of the
first sentence of this Section 9.3;
(vi) the existence of, or the performance by Holdings or any of its
Subsidiaries of its obligations under the terms of, any shareholders'
agreement, including any registration rights agreement or purchase
agreement related thereto, to which it is a party as of the Closing Date
and any similar agreements which it may enter into thereafter; provided,
however, that the existence of, or the performance by Holdings or any of
its Subsidiaries of obligations under, any future amendment to any such
existing agreement or under any similar agreement entered into after the
Closing Date shall only be permitted by this clause (vi) to the extent that
the terms of any such amendment or new agreement are not otherwise
disadvantageous to the Holders in any material respect;
(vii) the issuance of securities or other payments, awards or grants,
in cash, securities or otherwise, pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans approved
by the Board of Directors of Holdings in good faith and loans to employees
of Holdings and its Subsidiaries which are approved by the Board of
Directors of Holdings in good faith;
(viii) the payment of transaction, management, consulting and advisory
fees and related expenses of Chartwell Investments II, L.L.C.; provided
that such fees shall not, in the aggregate, exceed (x) in connection with
the Transactions, the amount payable to Chartwell Investments II, L.L.C.
pursuant to the Transaction Fee Agreement, dated as of the date hereof,
among Chartwell Investments II, L.L.C., Holdings, PlayCore Wisconsin and
Acquisition Company, as in effect on the date hereof or (y) in any calendar
year commencing after the date of the Transactions, the greater of (1)
$500,000 and (2) 2% of Consolidated EBITDA of Holdings and its Subsidiaries
for the Fiscal Year immediately preceding the date of such payment;
provided that in no event the annual fee referred to in this clause (y)
shall exceed $2,000,000;
(ix) transactions with customers, franchisees, clients, suppliers,
purchasers or sellers of goods or services, in each case in the ordinary
course of business and otherwise in compliance with the terms of this
Agreement, which are fair to Holdings or its
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Subsidiaries, in the reasonable determination of senior management of
Holdings, or are on terms at least as favorable as might reasonably have
been obtained at such time from an unaffiliated party;
(x) loans to officers and employees of Holdings and its Subsidiaries
to purchase Capital Stock of Holdings or to exercise the Management Options
in an amount not to exceed $1,000,000 in any calendar year and $5,000,000
in the aggregate; and
(xi) the sale of Qualified Capital Stock to Affiliates of Holdings.
SECTION 10.
PROVISIONS RELATING TO RESALES OF NOTES
10.1 Private Offerings. PlayCore Wisconsin and the Purchasers agree
that the following provisions will apply to any Private Offerings:
(a) Offers and Sales only to Institutional Accredited Investors or
Qualified Institutional Buyers. Offers and sales of the Notes will be made only
by the Purchasers or Affiliates thereof who are qualified to do so in the
jurisdictions in which such offers or sales are made. Each such offer or sale
shall only be made (i) to persons whom the offeror or seller reasonably believes
to be Qualified Institutional Buyers, (ii) to a limited number of other
institutional accredited investors (as such term is defined in Rule 501(a)(1),
(2), (3) or (7) of Regulation D) that the offeror or seller reasonably believes
to be and, with respect to sales and deliveries, that are Accredited Investors
("Institutional Accredited Investors") or (iii) non-U.S. persons outside the
United States to whom the offeror or seller reasonably believes offers and sales
of the Notes may be made in reliance upon Regulation S under the Securities Act.
(b) No General Solicitation. The Notes will be offered by approaching
prospective Subsequent Purchasers on an individual basis. No general
solicitation or general advertising (within the meaning of Rule 502(c) under the
Securities Act) will be used in the United States and no directed selling
efforts (as defined in Regulation S) will be made outside the United States in
connection with the offering of the Notes.
(c) Purchases by Non-Bank Fiduciaries. In the case of a non-bank
Subsequent Purchaser acting as a fiduciary for one or more third parties, in
connection with an offer and sale to such purchaser pursuant to this Section
10.1, such third parties shall, in the reasonable judgment of the applicable
Purchaser, be an Institutional Accredited Investor or a Qualified Institutional
Buyer or a non-U.S. person outside the United States.
(d) Restrictions on Transfer. Upon original issuance by PlayCore
Wisconsin, and until such time as the same is no longer required under the
applicable requirements of the Securities Act, the Notes (and all securities
issued in exchange therefor or in substitution thereof, other than the Exchange
Notes) shall bear such legend as is required under Section 11.4. The
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restrictions on transfer set forth in this Section 10.1 are in addition to any
other restrictions on transfer set forth in this Agreement.
10.2 Exchange and Registration Rights Agreement. PlayCore Wisconsin
shall, and shall cause the Guarantors a party thereto to, comply with all
provisions and obligations of the Exchange and Registration Rights Agreement and
shall comply with all applicable federal and state securities laws in connection
therewith.
10.3 Exchange Right. Upon the request of the Required Holders at any
time or from time to time, PlayCore Wisconsin will (a) exchange all or any
portion (pro rata among all the Holders) of the Outstanding Notes for any other
evidences of indebtedness or debt securities of PlayCore Wisconsin (the
"Replacement Notes") in the same aggregate principal amount as the then
principal amount of the Notes being exchanged and (b) enter into, and cause the
Guarantors to enter into, any such agreements, whether in the form of an
amendment hereto or to any other Financing Document, an indenture, a note
purchase agreement or otherwise (the "New Documents") as the Purchaser shall
deem necessary or desirable in connection with a resale of the Notes, whether as
a private placement, registered public offering or otherwise. The Replacement
Notes will have identical terms as the Notes for which they are exchanged except
for any changes to the relative ranking, interest rate or yield for such
Replacement Notes that shall be approved by all the Holders; provided, however,
that the aggregate principal amount of all Notes and Replacement Notes
Outstanding and the aggregate cash interest and premium expense and aggregate
cost on any Interest Payment Date to PlayCore Wisconsin of all Notes and
Replacement Notes Outstanding after giving effect to any such exchange shall not
exceed such principal amount or cash interest and premium expense of the Notes
and any Replacement Notes Outstanding immediately before such exchange. Each
Replacement Note shall be subject to the requirements of Sections 11.6 and 11.7.
Notwithstanding the foregoing, the New Documents will (a) contain such
additional terms and provisions as are customarily contained in such documents
governing the issuance of debt, including provisions governing the rights of
indenture trustees and/or administrative agents and bank set-off and sharing
provisions, as applicable, and such other additional terms and provisions as are
reasonably requested by the Purchasers in order to effectuate the resale of the
Replacement Notes and (b) be in such form and will contain such terms and
provisions as are necessary to comply with all Applicable Laws, including in the
case of an indenture, the TIA. All Notes and Replacement Notes will vote
together as one series on all matters requiring the vote of the Notes or
Replacement Notes, except for matters affecting one series of Notes or
Replacement Notes and not affecting another series of Notes or Replacement
Notes. Unless the context otherwise requires, all references to the Notes herein
includes the Replacement Notes and all references to the Purchasers herein
includes any trustee for any indenture pursuant to which the Replacement Notes
are issued.
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SECTION 11.
THE NOTES
11.1 Form and Execution. The Notes shall be in the form of Exhibit A
hereto. The Notes shall be executed on behalf of PlayCore Wisconsin by its
President or one of its Vice Presidents. The signature of any of these officers
on the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of PlayCore Wisconsin shall bind PlayCore
Wisconsin, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the execution and delivery of such Notes or did not
hold such offices at the date of such Notes.
11.2 Terms of the Notes. The terms of the Notes shall be as set forth
in Exhibit A hereto. Without limiting the foregoing:
(a) Stated Maturity. The Stated Maturity of the Notes shall be May 31,
2008.
(b) Interest. The Notes will bear and accrue interest as provided in
Exhibit A hereto.
11.3 Denominations. The Notes shall be issuable only in registered form
without coupons and only in denominations of $1,000 and any integral multiple
thereof.
11.4 Form of Legend for the Notes. Unless otherwise permitted by
Section 11.7, every Note issued and delivered hereunder shall bear a legend in
substantially the following form:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD
OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT IS IN
EFFECT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER
SUCH ACT AND APPLICABLE STATE SECURITIES LAWS. THE HOLDER OF THIS NOTE
IS SUBJECT TO THE TERMS OF THE PURCHASE AGREEMENT, DATED AS OF APRIL
11, 2000 (AS AMENDED, SUPPLEMENTED OR MODIFIED FROM TIME TO TIME, THE
"AGREEMENT"), AMONG PLAYCORE, INC., PLAYCORE WISCONSIN, INC, PLAYCORE
HOLDINGS, INC., THE SUBSIDIARIES LISTED ON THE SIGNATURE PAGES
THEREOF, GS MEZZANINE PARTNERS II, L.P., AND GS MEZZANINE PARTNERS
OFFSHORE II, L.P.
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11.5 Payments and Computations. All payments of interest on the Notes
shall be paid to the persons in whose names such Notes are registered on the
Security Register at the close of business on the Regular Record Date and all
payments of principal on the Notes shall be paid to the persons in whose names
such Notes are registered at Maturity. The principal of and any premium on any
Note shall be payable only against surrender therefor, while payments of
interest on Notes shall be made, in accordance with this Agreement and subject
to applicable laws and regulations, by check mailed on or before the due date
for such payment to the person entitled thereto at such person's address
appearing on the Security Register (or, in the case of a Holder holding not less
than $1,000,000 original aggregate principal amount of Notes, by wire transfer
to such account as such Holder shall designate by written instructions received
by PlayCore Wisconsin no less than 15 days prior to any applicable Interest
Payment Date, which wire instruction shall continue in effect until such time as
the Holder otherwise notifies PlayCore Wisconsin or such Holder no longer is the
registered owner of such Note or Notes).
Interest will be computed on the basis of a 360-day year of twelve
30-day months.
11.6 Registration, Registration of Transfer and Exchange.
(a) Security Register. PlayCore Wisconsin shall maintain a register
(the "Security Register") for the registration or transfer of the Notes. The
name and address of the Holder of each Note, records of any transfers of the
Notes and the name and address of any transferee of a Note shall be entered in
the Security Register and PlayCore Wisconsin shall, promptly upon receipt
thereof, update the Security Register to reflect all information received from a
Holder. There shall be no more than one Holder for each Note, including all
beneficial interests therein. PlayCore Wisconsin shall also enter in the
Register the amount of any Capitalized Interest added to the principal amount of
the Note on any Interest Accrual Date.
(b) Registration of Transfer. Upon surrender for registration of
transfer of any Note at the office or agency of PlayCore Wisconsin, PlayCore
Wisconsin shall execute and deliver, in the name of the designated transferee or
transferees, one or more new Notes, of any authorized denominations and like
aggregate principal amount.
(c) Exchange. At the option of the Holder, Notes may be exchanged for
other Notes, of any authorized denominations and of like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, PlayCore Wisconsin shall
execute and deliver the Notes which the Holder making the exchange is entitled
to receive.
(d) Effect of Registration of Transfer of Exchange. All Notes issued
upon any registration of transfer of exchange of Notes shall be the valid
obligations of PlayCore Wisconsin, evidencing the same indebtedness, and
entitled to the same benefits under this Agreement, as the Notes surrendered
upon such registration of transfer or exchange.
(e) Requirements; Charges. Every Note presented or surrendered for
registration of transfer or for exchange shall (if so required by PlayCore
Wisconsin) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to PlayCore
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Wisconsin duly executed by the Holder thereof or its attorney duly authorized in
writing. No service charge shall be made for any registration of transfer or
exchange of Notes, but PlayCore Wisconsin may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 11.8 not involving any transfer.
(f) Certain Limitations. If the Notes are to be redeemed in part,
PlayCore Wisconsin shall not be required (i) to issue, register the transfer of
or exchange any Note during a period beginning at the opening of business 15
days before the day of the mailing of a notice of redemption of any such Notes
selected for redemption under Section 13.2 and ending at the close of business
on the day of such mailing, or (ii) to register the transfer of or exchange any
Note so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part.
11.7 Transfer Restrictions.
(a) No Note may be sold, transferred or otherwise disposed of (any such
sale, transfer or other disposition is herein referred to as a "sale"), except
in compliance with this Section 11.7. A pledge by any Holder of a Note shall not
constitute a sale unless and until such pledge shall be realized upon.
(b) A Holder may sell its Notes to a transferee that is an Accredited
Investor or a Qualified Institutional Buyer; provided, however, that each of the
following conditions is satisfied:
(i) such transferee shall make same the representations and
warranties with respect to itself Notes to be required to be made by the
Purchasers in clauses (a), (b), (c) and (e) of Section 5.1;
(ii) such transferee agrees to be bound by the provisions of this
Agreement (including the confidentiality provisions set forth in Section
16.4); and
(iii) (A) if such transferee is an Accredited Investor, such
transferee shall deliver to PlayCore Wisconsin a certification to that
effect and, at the option of PlayCore Wisconsin, an opinion of counsel
reasonably satisfactory to PlayCore Wisconsin to the effect that such
transfer is in compliance with the Securities Act or (B) if such
transferee is a Qualified Institutional Buyer, such transferee shall
deliver to PlayCore Wisconsin a certification to that effect.
(c) A Holder may sell its Notes to a transferee in accordance with
Regulation S under the Securities Act; provided, however, that each of the
following conditions is satisfied:
(i) if such Holder would be deemed to be PlayCore Wisconsin, a
distributor or any of their respective affiliates or any person acting on
behalf of any of the foregoing for purposes of Regulation S under the
Securities Act:
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(A) PlayCore Wisconsin is a "reporting issuer" as such term is
defined in Rule 902(i) under the Securities Act;
(B) any distributor (as defined in Rule 902(d) under the
Securities Act) involved in a sale of Notes has agreed in writing
that all offers and sales of Notes shall be made only in accordance
with the provisions of Rule 903 or Rule 904 under the Securities
Act;
(C) all offering materials and documents (other than press
releases) used in connection with offers and sales of the Notes
shall conform to the requirements of Rule 902(g)(2) under the
Securities Act; and
(D) each distributor (as defined in clause (i)(B) above)
selling Notes to a distributor, dealer (as defined in Section 2(12)
of the Securities Act), or a person receiving a selling concession,
fee or other remuneration in respect of the Notes sold sends a
confirmation or other notice to the purchaser stating that the
purchaser is subject to the same restrictions on offers and sales
that apply to a distributor prescribed by Regulation S under the
Securities Act.
(ii) if such exercise and/or sale by a Holder is not governed by
(i) above:
(A) the offer of Notes is not made to a Person in the United
States;
(B) either:
(1) at the time the buy order is originated, the transferee
is outside the United States or the Holder and any person acting
on its behalf reasonably believes that the transferee is outside
the United States, or
(2) the transaction is executed in, on or through the
facilities of a designated offshore securities market and neither
the Holder nor any person acting on its behalf knows that the
transaction was pre-arranged with a buyer in the United States;
(C) no directed selling efforts are made in contravention of
the requirements of Rule 903(b) or 904(b) of Regulation S under the
Securities Act, as applicable; and
(D) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act.
(d) In the event of a proposed exercise or sale that does not qualify
under either Section 11.7(b) or 11.7(c) above, a Holder may sell its Notes only
if:
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(i) such Holder gives written notice to PlayCore Wisconsin of its
intention to exercise or effect such sale, which notice (A) shall describe
the manner and circumstances of the proposed transaction in reasonable
detail and (B) shall designate the counsel for such Holder, which counsel
shall be reasonably satisfactory to PlayCore Wisconsin;
(ii) counsel for the Holder shall render an opinion, to the effect
that such proposed sale may be effected without registration under the
Securities Act or under applicable Blue Sky laws; and
(iii) such Holder or transferee complies with Sections 11.7(b)(i)
and 11.7(b)(ii).
11.8 Mutilated, Destroyed, Lost and Stolen Notes. If any mutilated Note
is surrendered to PlayCore Wisconsin, PlayCore Wisconsin shall executed and
deliver in exchange therefor a new Note of the same principal amount and bearing
a number not contemporaneously outstanding.
If there shall be delivered to PlayCore Wisconsin (a) evidence to its
satisfaction of the destruction, loss or theft of any Note and (b) such security
or indemnity as may be required by PlayCore Wisconsin and any agent to save each
of PlayCore Wisconsin and such agent harmless, then, in the absence of notice
that such Note has been acquired by a bona fide purchaser, PlayCore Wisconsin
shall execute and deliver, in lieu of any such destroyed, lost or stolen Note, a
new Note of a like principal amount and bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, PlayCore Wisconsin in its discretion may,
instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note, PlayCore Wisconsin may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses connected therewith.
The provisions of this Section 11.8 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
11.9 Persons Deemed Owners. Prior to due presentment of a Note for
registration of transfer, PlayCore Wisconsin and any agent of PlayCore Wisconsin
shall treat the Person in whose name such Note is registered as the owner of
such Note for the purpose of receiving payment of principal of and interest on
such Note and for all other purposes whatsoever, whether or not such Note be
overdue and neither PlayCore Wisconsin nor any agent of PlayCore Wisconsin shall
be affected by notice or knowledge to the contrary.
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11.10 Cancellation. All Notes surrendered for payment, redemption,
registration of transfer or exchange shall, if surrendered to any Person other
than PlayCore Wisconsin, be delivered to PlayCore Wisconsin and shall be
promptly canceled by it. PlayCore Wisconsin shall cancel any Notes previously
issued and delivered hereunder which PlayCore Wisconsin may have reacquired.
11.11 Home Office Payment. So long as any Purchaser or its nominee
shall be the holder of any Note, and notwithstanding anything contained in this
Agreement or such Note to the contrary, PlayCore Wisconsin will pay all sums
becoming due on such Note for principal, premium, if any, and interest by such
method and at the address specified for such purpose in Schedule B or at such
other address as such Purchaser shall have from time to time specified to
PlayCore Wisconsin in writing for such purpose, without the presentation or
surrender of such Note or the making of any notation thereon, except that upon
written request of PlayCore Wisconsin made concurrently with or reasonably
promptly after payment or prepayment in full of any Note, such Purchaser shall
surrender such Note for cancellation reasonably promptly after any such request,
to PlayCore Wisconsin at its principal executive office. Prior to any sale or
other disposition of any Note held by such Purchaser or its nominee such
Purchaser will, at its election, either endorse thereon the amount of principal
paid thereon and the last date to which interest has been paid thereon or
surrender such Note to PlayCore Wisconsin in exchange for a new Note or Notes
pursuant to Section 11.6. PlayCore Wisconsin will afford the benefits of this
Section 11.11 to any Institutional Investor that is the direct or indirect
transferee of any Note purchased by such Purchaser under this Agreement and that
has made the same agreement relating to such Note as such Purchaser made in this
Section 11.11.
SECTION 12.
EVENTS OF DEFAULT; REMEDIES
12.1 Events of Default. An Event of Default shall exist upon the
occurrence of any of the following specified events (each an "Event of
Default"):
(a) PlayCore Wisconsin defaults in the payment when due of interest
and Special Interest, if any, on the Notes and such default continues for
a period of thirty (30) days (whether or not such payment is prohibited
under Section 14);
(b) PlayCore Wisconsin defaults in the payment when due of principal
of or premium, if any, on the Notes when the same becomes due and payable
at its Maturity, upon redemption or otherwise (whether or not such payment
is prohibited under Section 14);
(c) Holdings or PlayCore Wisconsin fail to comply with any of the
provisions of Sections 7.7, 7.8, 7.9, 8.1 through 8.12, inclusive, 9.1,
9.2 or 9.3 and, if such failure occurs after the Note Registration, such
failure continues for a period of thirty (30) days after such occurrence;
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(d) Holdings or PlayCore Wisconsin fails to observe or perform any
other covenant or other agreement in this Agreement or the Notes and such
failure continues for a period of thirty (30) days after Holdings or
PlayCore Wisconsin has received a notice of such failure from the Holders
of at least 25% in aggregate principal amount of the Notes at the time
Outstanding, which notice must specify the failure, demand that it be
remedied and state that the notice is a "Notice of Default";
(e) any representation, warranty or certification made by or on
behalf of Holdings, PlayCore Wisconsin or any of their respective
Subsidiaries or by any officer of Holdings, PlayCore Wisconsin or any of
their respective Subsidiaries in any certificate furnished by Holdings,
PlayCore Wisconsin or any of their respective Subsidiaries pursuant
thereto shall be false in any material respect on the date as of which
made;
(f) a default occurs under any mortgage, indenture or agreement or
instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by Holdings,
PlayCore Wisconsin or any of their respective Subsidiaries (or payment of
which is guaranteed by Holdings, PlayCore Wisconsin or any of their
respective Subsidiaries) in an aggregate outstanding amount of $5,000,000
or more, whether such Indebtedness now exists, or is created after the
date of this Agreement, which (i) constitutes a failure to pay at final
maturity (after giving effect to any applicable grace periods and any
extensions thereof) the principal amount of such Indebtedness or (ii)
shall have resulted in such Indebtedness being accelerated or otherwise
become or being declared due and payable prior to its stated maturity;
(g) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against Holdings,
PlayCore Wisconsin or any of their respective Significant Subsidiaries (or
a group of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary) and such judgment or judgments remain unpaid and
undischarged for a period (during which execution shall not be effectively
stayed) of sixty (60) days; provided that the aggregate of all such
undischarged judgments exceeds $5,000,000 (exclusive of amounts covered by
insurance or selling shareholders' indemnification);
(h) Holdings, PlayCore Wisconsin or any of their respective
Significant Subsidiaries (or a group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary) pursuant to or within
the meaning of Bankruptcy Law:
(i) commences a voluntary case or proceeding under any
Bankruptcy Law,
(ii) consents to the entry of a decree or order for relief
against it in an involuntary case or proceeding or to the
commencement of any case or proceeding against it under any
Bankruptcy Law,
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(iii) consents to the filing of a petition or to the appointment
of or taking possession by a Custodian (as defined below) of it or for
all or any substantial part of its property,
(iv) makes or consents to the making of a general assignment for
the benefit of its creditors,
(v) generally is not paying, or admits in writing that it is not
able to pay, its debts as they become due, or
(vi) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against Holdings, PlayCore Wisconsin or
any of their respective Significant Subsidiaries (or a group of
Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary), in an involuntary case or proceeding
under any Bankruptcy Law;
(B) appoints a Custodian of Holdings, PlayCore Wisconsin or
any of their respective Significant Subsidiaries (or a group of
Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary), or for all or any substantial part of
the property of Holdings, PlayCore Wisconsin or any of their
respective Significant Subsidiaries (or a group of Subsidiaries
that, taken as a whole, would constitute a Significant
Subsidiary), or approves as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in
respect of any of the foregoing; or
(C) orders the winding up or liquidation of Holdings,
PlayCore Wisconsin or any of their respective Significant
Subsidiaries (or a group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary), or adjudges any of
them a bankrupt or insolvent;
and any such order or decree remains unstayed and in effect for sixty (60)
consecutive days;
(i) Parent fails to perform any of its obligations under the
undertaking referred to in Section 3.5;
(j) any Note Guarantee ceases to be in force and effective or any Note
Guarantee is declared to be null and void and unenforceable or any Note
Guarantee is found to be invalid or any Guarantor denies its liability
under its Note Guarantee (other
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than by reason of release of a Guarantor in accordance with the terms of
this Agreement); or
(k) PlayCore Wisconsin, for any reason, ceases to be a direct Wholly
Owned Subsidiary of Holdings.
The term "Custodian" means any custodian, receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bankruptcy Law.
12.2 Remedies. If an Event of Default (other than an Event of Default
specified in Section 12.2(h)) occurs and is continuing, and, if the Credit
Agreement is then in effect, upon the earlier of (x) 10 days advance notice to
the Senior Indebtedness Agent or (y) the acceleration of any Senior Indebtedness
under the Credit Agreement, then and in every such case the Holders of more than
25% in aggregate principal amount of the Notes at the time Outstanding may
declare all principal of, accrued and unpaid interest on, any premium on, and
all other amounts owing in respect of, all Notes (the "Default Amount") to be
due and payable immediately, by a notice in writing to PlayCore Wisconsin, and
upon any such declaration such Default Amount and any accrued interest and
Special Interest, if any, shall become immediately due and payable. If an Event
of Default specified in Section 12.1(h) occurs and is continuing, the Default
Amount of and any accrued interest and Special Interest, if any, on the
Outstanding Notes shall automatically, and without any declaration or other
action on the part of any Holder, become immediately due and payable. If a
default in the payment when due of interest on (including any Special Interest),
principal of, or premium, if any, on, this Note or an Event of Default has
occurred and is continuing, the Notes will accrue interest at 2% per annum plus
the stated interest rate on the Notes until such time as no Event of Default
shall be continuing (to the extent that the payment of such interest shall be
legally enforceable).
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained, the
Required Holders, by written notice to PlayCore Wisconsin, may rescind and annul
such declaration and its consequences if:
(a) PlayCore Wisconsin has paid a sum sufficient to pay
(i) all overdue interest and Special Interest, if any, on all Notes;
(ii) the principal of (and premium, if any, on) any Notes which have
become due otherwise than by such declaration of acceleration (including
any Notes required to have been purchased pursuant to an offer to purchase
that PlayCore Wisconsin is required to make hereunder) and any interest
and overdue interest thereon at the rate borne by the Notes; and
(iii) to the extent that payment of such interest is lawful,
interest upon overdue interest and Special Interest, if any, at the rate
provided therefor in the Notes; and
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(b) all Events of Default, other than the nonpayment of the Default
Amount which have become due solely by such declaration of acceleration, have
been cured or waived as provided in Section 12.3.
12.3 Waiver of Past Defaults. The Required Holders may on behalf of the
Holders of all the Notes waive any existing Default or Event of Default
hereunder and its consequences, except a Default or Event of Default:
(i) in the payment of the principal of (or premium, if any) or
interest or any Special Interest on, any Note (including any Note which is
required to have been purchased pursuant to an offer to purchase that
PlayCore Wisconsin is required to make hereunder), or
(ii) in respect of a covenant or provision hereof which under
Section 17.4 cannot be modified or amended without the consent of the
Holder of each Outstanding Note affected.
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured and cease, for
every purpose of this Agreement; provided, however, no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any right
consequent thereon.
12.4 No Personal Liability of Directors, Officers, Employees and
Stockholders. No director, officer, partner, manager, incorporator, member,
employee or stockholder of Holdings or any Subsidiary, as such, shall have any
liability for any Obligations of Holdings and its Subsidiaries under the Notes,
this Agreement or the Note Guarantees or the Exchange Guarantees or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes, by accepting a Note, waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Notes.
SECTION 13.
REDEMPTION
13.1 Right of Redemption. The Notes may be redeemed at the election of
PlayCore Wisconsin at such times, in such amounts and at the Redemption Prices
(together with any applicable accrued interest and any Special Interest to the
Redemption Date) specified in the form of Note attached as Exhibit A hereto.
13.2 Partial Redemptions. In case PlayCore Wisconsin elects to redeem
less than all of the Notes, PlayCore Wisconsin shall redeem the Notes pro rata
from each Holder; provided, however, that any such redemption shall be for an
aggregate principal amount of not less than $2,000,000. For all purposes of this
Agreement, unless the context otherwise requires, all provisions relating to the
redemption of Notes shall relate, in the case of any Notes redeemed or to be
redeemed only in part, to the portion of the principal amount of such Notes
which has been or is to be redeemed.
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13.3 Notice of Redemption. Notice of redemption shall be given by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date, to each Holder of Notes to be redeemed, at its
address appearing in the Security Register. Notice of redemption of Notes to be
redeemed at the election of PlayCore Wisconsin shall be given by PlayCore
Wisconsin and at the expense of PlayCore Wisconsin.
All notices of redemption shall state:
(a) the Redemption Date,
(b) the Redemption Price,
(c) if less than all the Outstanding Notes are to be redeemed, the
portion of each Note to be redeemed,
(d) that on the Redemption Date the Redemption Price will become due
and payable upon each such Note to be redeemed and that interest and
Special Interest, if any, thereon will cease to accrue on and after
said date, and
(e) the place or places where such Notes are to be surrendered for
payment of the Redemption Price.
13.4 Deposit of Redemption Price. Prior to any Redemption Date,
PlayCore Wisconsin shall segregate and hold in trust an amount of money
sufficient to pay the Redemption Price of, and (except if the Redemption Date
shall be an Interest Payment Date) any applicable accrued interest and Special
Interest, if any, on, all the Notes which are to be redeemed on that date.
13.5 Notes Payable on Redemption Date. If notice of redemption shall
have been given as provided above, the Notes so to be redeemed shall, on the
Redemption Date, become due and payable at the Redemption Price therein
specified, and from and after such date (unless PlayCore Wisconsin shall default
in the payment of the Redemption Price and any applicable accrued interest and
Special Interest, if any,) such Notes shall not bear interest. Upon surrender of
any such Note for redemption in accordance with said notice, such Note shall be
paid by PlayCore Wisconsin at the Redemption Price, together with any applicable
accrued interest and Special Interest, if any, to the Redemption Date; provided,
however, that installments of interest and Special Interest whose Stated
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Notes, or one or more Predecessor Notes, registered as such at the close
of business on the relevant Regular Record Dates according to their terms and
the provisions of this Agreement.
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If any Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate provided by the Note.
13.6 Notes Redeemed in Part. Any Note which is to be redeemed only in
part shall be surrendered at the principal offices of PlayCore Wisconsin (with,
if PlayCore Wisconsin so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to PlayCore Wisconsin duly executed by, the
Holder thereof or its attorney duly authorized in writing), and PlayCore
Wisconsin shall execute and deliver to the Holder of such Note without service
charge, a new Note or Notes, of any authorized denomination as requested by such
Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Note so surrendered.
SECTION 14.
SUBORDINATION OF NOTES
14.1 Notes Subordinate to Senior Indebtedness. PlayCore Wisconsin
covenants and agrees, and each Holder of a Note, by its acceptance thereof,
likewise covenants and agrees, that, to the extent and in the manner hereinafter
set forth in this Section 14, the payment of the principal of (and premium, if
any) and interest and any Special Interest on each and all of the Notes are
hereby expressly made subordinate and subject in right of payment to the prior
payment in full in cash or Cash Equivalents of all Senior Indebtedness of
PlayCore Wisconsin. The provisions of this Section 14 shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Senior Indebtedness is rescinded or must otherwise be returned by a
holder of Senior Indebtedness upon any Proceeding or otherwise, all as though
such payment had not been made.
14.2 Payment Over of Proceeds Upon Dissolution, Etc. In the event of
(a) any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding in connection
therewith, relative to PlayCore Wisconsin or to its creditors, as such, or to
its assets, or (b) any liquidation, dissolution or other winding up of PlayCore
Wisconsin, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshaling of assets and liabilities of PlayCore Wisconsin, then and
in any such event specified in clause (a), (b) or (c) above (each such event, if
any, herein sometimes referred to as a "Proceeding") the holders of Senior
Indebtedness shall be entitled to receive or retain payment in full in cash or
Cash Equivalents of all amounts due or to become due on or in respect of all
Senior Indebtedness, before the Holders of the Notes are entitled to receive any
payment or distribution of any kind or character, whether in cash, property or
securities, on account of principal of (or premium, if any) or interest or any
Special Interest on or other obligations in respect of the Notes (including any
interest or any Special Interest accruing on or after the filing of any
Proceeding relating to PlayCore Wisconsin, whether or not allowed in such
Proceeding) or on account of any purchase or other acquisition of Notes by
PlayCore Wisconsin or any Subsidiary of PlayCore
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Wisconsin (all such payments, distributions, purchases and acquisitions herein
referred to, individually and collectively, as a "Notes Payment"), and to that
end the holders of Senior Indebtedness shall be entitled to receive, for
application to the payment thereof, any Notes Payment which may be payable or
deliverable in respect of the Notes in any such Proceeding. The holders of
Senior Indebtedness are hereby authorized to file an appropriate claim for and
on behalf of the Holders if they or any of them do not file, and there is not
otherwise filed on behalf of the Holders, a proper claim or proof of claim in
the form required in any such proceeding prior to 15 days before the expiration
of the time to file such claim or claims.
In the event that, notwithstanding the foregoing provisions of this
Section 14.2, the Holder of any Note shall have received any Notes Payment
before all Senior Indebtedness of PlayCore Wisconsin is paid in full in cash or
Cash Equivalents, then and in such event such Notes Payment shall be paid over
or delivered forthwith to the trustee in bankruptcy or other person making
payment or distribution of assets of PlayCore Wisconsin for the application to
the payment of all Senior Indebtedness remaining unpaid, to the extent necessary
to pay the Senior Indebtedness in full in cash or Cash Equivalents, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Indebtedness.
For purposes of this Section 14 only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include (i) Capitalized Interest (including any such
Capitalized Interest accruing on or after the filing of any Proceeding relating
to PlayCore Wisconsin, whether or not allowed in such Proceeding) and (ii) a
payment or distribution of stock or securities of PlayCore Wisconsin provided
for by a plan of reorganization or readjustment authorized by an order or decree
of a court of competent jurisdiction in a reorganization proceeding under any
applicable bankruptcy law or of any other corporation provided for by such plan
of reorganization or readjustment which stock or securities (x) are subordinated
in right of payment to all then outstanding Senior Indebtedness to substantially
the same extent as, or to a greater extent than, the Notes are so subordinated
as provided in this Section 14 and (y) have been approved by the Senior
Indebtedness Agent (including by acceptance or approval by the Senior
Indebtedness Agent of such plan of reorganization or otherwise). The
consolidation of PlayCore Wisconsin with, or the merger of PlayCore Wisconsin
into, another Person or the liquidation or dissolution of PlayCore Wisconsin
following the conveyance or transfer of all or substantially all of its
properties and assets as an entirety to another Person upon the terms and
conditions set forth in Section 8.12 shall not be deemed a Proceeding for the
purposes of this Section 14.2 if the Person formed by such consolidation or into
which PlayCore Wisconsin is merged or the Person which acquires by conveyance or
transfer such properties and assets, as the case may be, shall, as a part of
such consolidation, merger, conveyance or transfer, complies with the conditions
set forth in Section 8.12.
14.3 No Payment When Senior Indebtedness in Default. In the event that
any Senior Payment Default (as defined below) shall have occurred and be
continuing, then no Notes Payment shall be made unless and until such Senior
Payment Default shall have been cured or waived or shall have ceased to exist or
all amounts then due and payable in respect of Senior Indebtedness shall have
been paid in full in cash or Cash Equivalents. "Senior Payment Default"
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means any default in the payment of principal of (or premium, if any), interest
on, fees or other amounts owing in connection with any Designated Senior
Indebtedness when due, whether at the due date of any such payment or by
declaration of acceleration, prepayment, call for redemption or otherwise.
Upon the occurrence of a Senior Nonmonetary Default and receipt of
written notice by the Holders' Representative of the occurrence of such Senior
Nonmonetary Default from the Representative under the Credit Agreement, no Notes
Payment shall be made during a period (the "Payment Blockage Period") commencing
on the date of the receipt by the Holders' Representative of such notice and
ending the earlier of (i) the date on which such Senior Nonmonetary Default
shall have been cured or waived or ceased to exist or all Designated Senior
Indebtedness which was the subject of such Senior Nonmonetary Default shall have
been paid in full in cash or Cash Equivalents and (ii) the 179th day after the
date of the receipt of such notice. No Senior Nonmonetary Default that existed
or was continuing on the date of the commencement of a Payment Blockage Period
may be made the basis of the commencement of a subsequent Payment Blockage
Period whether or not within a period of 360 consecutive days, unless such
Senior Nonmonetary Default shall have been cured for a period of not less than
90 consecutive days; provided, however, any breach of any financial covenant for
a period commencing after the expiration of a Payment Blockage Period that would
give rise to a new event of default, even though such breach is a breach of a
provision under which a prior event of default previously existed, shall
constitute a new event of default for this purpose. In any event,
notwithstanding the foregoing, no more than one Payment Blockage Period may be
commenced during any 360-day period and there shall be a period of at least 181
days during each 360-day period when no Payment Blockage Period is in effect.
"Senior Nonmonetary Default" means the occurrence or existence and continuance
of an event of default with respect to Designated Senior Indebtedness, other
than a Senior Payment Default, that permits the holders of the Designated Senior
Indebtedness (or a trustee or other agent on behalf of the holders thereof) then
to declare such Designated Senior Indebtedness due and payable prior to the date
on which it would otherwise become due and payable.
The failure to make any payment on the Notes by reason of the
provisions of this Section 14.3 will not be construed as preventing the
occurrence of an Event of Default with respect to the Notes arising from any
such failure to make payment. Upon termination of any period of Payment Blockage
Period PlayCore Wisconsin shall resume making any and all required payments in
respect of the Notes, including any missed payments.
In the event that, notwithstanding the foregoing, PlayCore Wisconsin
shall make any Notes Payment to any Holder prohibited by the foregoing
provisions of this Section 14.3, then and in such event such Notes Payment shall
be paid over and delivered forthwith to the holders of the Senior Indebtedness
of PlayCore Wisconsin in the same form received and, until so turned over, the
same shall be held in trust by such Holder as the property of the holders of the
Senior Indebtedness.
By reason of such subordination, in the event of insolvency by PlayCore
Wisconsin, unsubordinated creditors of PlayCore Wisconsin who are not holders of
Senior
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Indebtedness or of the Notes may recover less, ratably, than holders of Senior
Indebtedness and more, ratably, than Holders of the Notes.
The provisions of this Section 14.3 shall not apply to any Notes
Payment with respect to which Section 14.2 would be applicable.
14.4 Payment Permitted If No Default. Nothing contained in this Section
14 or elsewhere in this Agreement or in any of the Notes shall prevent PlayCore
Wisconsin, at any time except during the pendency of any Proceeding referred to
in Section 14.2 or under the conditions described in Section 14.3, from making
Notes Payments; provided, however, PlayCore Wisconsin shall not make any
voluntary prepayment on, or voluntarily redeem, the Notes nor voluntarily
advance the scheduled maturity date or any interest payment date, or increase
the interest rate, of the Notes, amend the financial covenants of the Notes to
make them more restrictive nor amend the subordination provisions of the Notes,
without the prior written consent of the Requisite Lenders under the Credit
Agreement (as defined therein) as long as the Credit Agreement is in effect. The
Required Holders shall give a prompt notice of any acceleration of the Notes to
the Representative under the Credit Agreement; provided, however, that all
Senior Indebtedness then due or thereafter declared to be due shall first be
paid in full before the Holders are entitled to receive any payment from
PlayCore Wisconsin of principal of, or interest on, the Notes, it being
understood that payments made to the Holders at a time when no Senior
Indebtedness is due and payable shall not be deemed a violation of this proviso.
14.5 Subrogation to Rights of Holders of Senior Indebtedness. Only
after the payment in full in cash or Cash Equivalents of all amounts due or to
become due on or in respect of Senior Indebtedness of PlayCore Wisconsin and,
unless the holders of Senior Indebtedness shall have the ability to terminate
such commitments, the termination of all commitments in respect thereof, the
Holders of the Notes shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to such Senior Indebtedness until the principal of (and
premium, if any) and interest (including any Special Interest) on the Notes
shall be paid in full. For purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness of PlayCore Wisconsin of
any cash, property or securities to which the Holders of the Notes would be
entitled except for the provisions of this Section 14, and no payments pursuant
to the provisions of this Section 14 to the holders of Senior Indebtedness by
Holders of the Notes, shall, as among PlayCore Wisconsin, its creditors other
than holders of Senior Indebtedness and the Holders of the Notes, be deemed to
be a payment or distribution by PlayCore Wisconsin to or on account of the
Senior Indebtedness of PlayCore Wisconsin.
14.6 Provisions Solely to Define Relative Rights. The provisions of
this Section 14 are and are intended solely for the purpose of defining the
relative rights of the Holders on the one hand and the holders of Senior
Indebtedness on the other hand. Nothing contained in this Section 14 or
elsewhere in this Agreement or in the Notes is intended to or shall (a) impair,
as among PlayCore Wisconsin, its creditors other than holders of Senior
Indebtedness and the Holders of the Notes, the obligation of PlayCore Wisconsin,
which is absolute and unconditional (and which, subject to the rights under this
Section 14 of the holders of Senior
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Indebtedness, is intended to rank equally with all other general unsecured
obligations of PlayCore Wisconsin), to pay to the Holders of the Notes the
principal of (and premium, if any) and interest (including any Special Interest)
on the Notes as and when the same shall become due and payable in accordance
with their terms; or (b) affect the relative rights against PlayCore Wisconsin
of the Holders of the Notes and creditors of PlayCore Wisconsin other than the
holders of Senior Indebtedness; or (c) prevent the Holder of any Note from
exercising all remedies otherwise permitted by applicable law upon default under
this Agreement, subject to the rights, if any, under this Section 14 of the
holders of Senior Indebtedness to receive cash, property and securities
otherwise payable or deliverable to such Holder.
14.7 No Waiver of Subordination Provisions. No right of any present or
future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of PlayCore Wisconsin or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by PlayCore
Wisconsin with the terms, provisions and covenants of this Agreement, regardless
of any knowledge thereof any such holder may have or be otherwise charged with.
14.8 Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets or securities of PlayCore Wisconsin
referred to in this Section 14, the Holders of the Notes shall be entitled to
rely upon any order or decree entered by any court of competent jurisdiction in
which such Proceeding is pending, or a certificate of the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee for the benefit of creditors,
agent or other Person making such payment or distribution, delivered to the
Holders of Notes, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior
Indebtedness and other Indebtedness of PlayCore Wisconsin, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Section 14.
14.9 Reliance by Holders of Senior Indebtedness on Subordination
Provisions. Each Holder of a Note, by accepting such Note, acknowledges and
agrees that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration to each holder of any Senior Indebtedness,
whether such Senior Indebtedness was created or acquired before or after the
issuance of the Note, to acquire and continue to hold, or to continue to hold,
such Senior Indebtedness, and such holder of such Senior Indebtedness shall be
deemed conclusively to have relied on such subordination provisions in acquiring
and continuing to hold, or in continuing to hold, such Senior Indebtedness and
shall be deemed a third party beneficiary hereof.
14.10 Reinstatement. The provisions of this Section 14 shall continue
to be effective or be reinstated, and the Senior Indebtedness shall not be
deemed to be paid in full, as the case may be, if at any time any payment of any
of the Senior Indebtedness is rescinded or must otherwise be returned by the
holder thereof upon the insolvency, bankruptcy or reorganization of PlayCore
Wisconsin or otherwise, all as though such payment had not been made.
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SECTION 15.
NOTE GUARANTEES
15.1 Note Guarantees. Each of the Guarantors hereby, jointly and
severally, unconditionally guarantees, on a senior subordinated basis, to each
Holder of a Note executed and delivered by PlayCore Wisconsin, irrespective of
the validity and enforceability of this Agreement, the Notes or the obligations
of PlayCore Wisconsin hereunder or thereunder, that: (a) the principal of and
premium and interest (including any Special Interest) on the Notes shall be
promptly paid in full when due, whether at Stated Maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of (and any
premium) and interest (including any Special Interest) on the Notes, and all
other obligations of PlayCore Wisconsin to the Holders hereunder or thereunder
shall be promptly paid in full or performed, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that the same shall be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at Stated Maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors shall be jointly and severally
obligated to pay the same immediately. The Guarantors hereby agree that their
obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Notes or this Agreement, the absence of any
action to enforce the same, any waiver or consent by any Holder with respect to
any provisions hereof or thereof, the recovery of any judgment against PlayCore
Wisconsin, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
Each Guarantor hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of insolvency or bankruptcy of PlayCore
Wisconsin, any right to require a prior proceeding against PlayCore Wisconsin,
protest, notice and all demands whatsoever and covenant that this Note Guarantee
shall not be discharged except by complete performance of the obligations
contained in the Notes and this Agreement. If any Holder is required by any
court or otherwise to return to PlayCore Wisconsin or Guarantors, or any
Custodian, trustee, liquidator or other similar official acting in relation to
either PlayCore Wisconsin or Guarantors, any amount paid by such Holder, this
Note Guarantee, to the extent theretofore discharged, shall be reinstated in
full force and effect. Each Guarantor agrees that it shall not be entitled to
any right of subrogation in relation to the Holders of Notes in respect of any
obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby. Each Guarantor further agrees that, as between the
Guarantors, on the one hand, and the Holders, on the other hand, (a) the
Maturity of the obligations guaranteed hereby may be accelerated as provided in
Section 12 for the purposes of this Note Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby and (b) in the event of any declaration of
acceleration of such obligations as provided in Section 12, such obligations
(whether or not due and payable) shall forthwith become due and payable by the
Guarantors for the purpose of this Note Guarantee. The Guarantors shall have the
right to seek contribution from any non-paying Guarantor so long as the exercise
of such right does not impair the rights of the Holders under this Note
Guarantee.
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15.2 Execution and Delivery of Note Guarantees. To evidence its Note
Guarantee set forth in Section 15.1, each Guarantor hereby agrees that this
Agreement shall be executed on behalf of such Guarantor by its President or one
of its Vice Presidents and, to the extent not a party to this Agreement on the
date hereof, each Guarantor shall execute and deliver to the Holders a
supplemental agreement substantially in the form of Exhibit C hereto
("Supplemental Agreement"), pursuant to which such Subsidiary shall become a
Guarantor under this Section 15 and a party to the Exchange and Registration
Rights Agreement as a Guarantor and shall guarantee the Obligations of PlayCore
Wisconsin under this Agreement and the Notes. Concurrently with the execution
and delivery of such Supplemental Agreement, such Guarantor shall deliver to the
Holders an opinion of counsel reasonably acceptable to the Purchasers that the
foregoing have been duly authorized, executed and delivered by such Guarantor
and that such Supplemental Agreement any Note with respect to which this Note
Guarantee is given, this is a valid and legally binding obligation of such
Guarantor, enforceable against such Guarantor in accordance with its terms
(subject to customary limitations, qualifications and exceptions).
If an officer whose signature is on this Agreement or on a Supplemental
Agreement no longer holds that office at the time PlayCore Wisconsin executes
and delivers any Note with respect to which this Note Guarantee is given, this
Note Guarantee shall be valid nevertheless. The execution and delivery of any
Note by PlayCore Wisconsin shall constitute due delivery of the Note Guarantee
set forth in this Agreement on behalf of the Guarantors.
15.3 Guarantors May Consolidate, Etc. On Certain Terms. No Guarantor
may consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person), another corporation, Person or entity (other than PlayCore
Wisconsin or another Guarantor) unless in the case of a Guarantor that is a
Subsidiary:
(a) subject to the provisions of Section 15.4, the Person formed by or
surviving any such consolidation or merger (if other than such Guarantor)
unconditionally assumes all the obligations of such Guarantor under the Notes
and this Agreement pursuant to a Supplemental Agreement;
(b) immediately after giving effect to such transaction, no Default or
Event of Default exists; and
(c) immediately after giving effect to such transaction, PlayCore
Wisconsin would be permitted to Incur at least $1.00 of additional Indebtedness,
other than Permitted Indebtedness, under Section 8.4.
Notwithstanding the foregoing, no Guarantor shall be permitted to
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person), another Person (other than PlayCore Wisconsin or any
Guarantor) pursuant to the preceding sentence if such consolidation or merger
would not be permitted by Section 8.12.
In case of any such consolidation or merger and upon the assumption by
the successor entity, by Supplemental Agreement executed and delivered to the
Holders, of the Note Guarantee and execution of the Notation of Note Guarantee
endorsed upon the Notes and the due
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and punctual performance of all of the covenants and conditions of this
Agreement to be performed by the Guarantor, such successor entity shall succeed
to and be substituted for the Guarantor with the same effect as if it had been
named herein as a Guarantor. Such successor corporation thereupon may cause to
be signed any or all of the Note Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by PlayCore
Wisconsin. All the Note Guarantees so given shall in all respects have the same
legal rank and benefit under this Agreement as the Note Guarantees theretofore
and thereafter issued in accordance with the terms of this Agreement as though
all of such Note Guarantees had been issued at the date of the execution hereof.
Nothing contained in this Agreement or in any of the Notes shall
prevent any consolidation or merger of a Guarantor with or into PlayCore
Wisconsin or another Guarantor, or shall prevent any sale or conveyance of any
of the property of a Guarantor to PlayCore Wisconsin or another Guarantor.
15.4 Releases of Note Guarantees. In the event of (i) a sale or other
disposition of all or substantially all of the assets of any Subsidiary that is
a Guarantor, by way of merger, consolidation or otherwise in a transaction that
complies with the provisions of Section 15.3, (ii) a sale or other disposition
of all of the capital stock of any Subsidiary (including by way of merger or
consolidation) that is a Guarantor or (iii) a distribution of all of the capital
stock of any Subsidiary that is a Guarantor to shareholders of Holdings in a
transaction that complies with the provisions of Section 8.2, such Guarantor (in
the event of a sale or other disposition, by way of such a merger,
consolidation, distribution or otherwise, of all of the capital stock of such
Guarantor) or the entity acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) will be
released and relieved of any obligations under such Guarantor's Note Guarantee;
provided that the Net Cash Proceeds of such sale or other disposition shall be
applied in accordance with the provisions of Section 8.5. Any Guarantor not
released from its obligations under its Note Guarantee shall remain liable for
the full amount of principal of and interest on the Notes.
15.5 Subordination of Note Guarantees. The Obligations of each
Guarantor under its Note Guarantee pursuant to this Section 15 shall be junior
and subordinated to the Guarantor Senior Indebtedness of such Guarantor on the
same basis as the Notes are junior and subordinated to Senior Indebtedness of
PlayCore Wisconsin. For the purposes of the foregoing sentence, the Holders
shall have the right to receive and/or retain payments by any of the Guarantors
only at such times as they may receive and/or retain payments in respect of the
Notes pursuant to this Agreement, including Section 14.
15.6 Limitation on Guarantor Liability. Each Guarantor, and by its
acceptance of the Notes, each Holder, hereby confirms that it is the intention
of all such parties that the Note Guarantee of such Guarantor not constitute a
fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
federal or state law to the extent applicable to any Note Guarantee. To
effectuate the foregoing intention, the Holders and the Guarantors hereby
irrevocably agree that the obligations of such Guarantor under its Note
Guarantee and this Section 15 shall be limited to the
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maximum amount as will, after giving effect to such maximum amount and all other
contingent and fixed liabilities of such Guarantor that are relevant under such
laws, and after giving effect to any collections from, rights to receive
contribution from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under this Section 15, result
in the obligations of such Guarantor under its Note Guarantee not constituting a
fraudulent transfer or conveyance.
15.7 Endorsement of Note Guarantees. To evidence its Note Guarantee set
forth in Section 15.1, each Guarantor hereby agrees that a notation of such Note
Guarantee substantially in the form of Exhibit D hereto ("Notation of Note
Guarantee") shall be endorsed by an officer of such Guarantor on each Note
executed and delivered by PlayCore Wisconsin.
Each Guarantor hereby agrees that its Note Guarantee set forth in
Section 15.1 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a Notation of Note Guarantee.
SECTION 16.
EXPENSES, INDEMNIFICATION AND CONFIDENTIALITY
16.1 Expenses. Whether or not the transactions contemplated hereby are
consummated, Holdings, Parent and PlayCore Wisconsin will jointly and severally
pay all costs and expenses (including reasonable and documented attorneys' and
accountants' fees and disbursements) incurred by the Purchasers or any holder of
a Note in connection with the Transactions and in connection with any
amendments, waivers or consents under or in respect of the Financing Documents
(whether or not such amendment, waiver or consent becomes effective), including,
without limitation: (a) the Purchaser's reasonable and documented out-of-pocket
expenses in connection with the Purchaser's examinations and appraisals of
Holdings' or any or its Subsidiaries' properties, books and records; (b) the
reasonable and documented costs and expenses incurred in enforcing, defending or
declaring any rights or remedies under the Financing Documents or in responding
to any subpoena or other legal process or informal investigative demand issued
in connection with the Financing Documents or by reason of being a holder of any
Note; and (c) the costs and expenses, including reasonable and documented
consultants' and advisors' fees, incurred in connection with the insolvency or
bankruptcy of Holdings, PlayCore Wisconsin or any Subsidiary of Holdings or
PlayCore Wisconsin or in connection with any work-out or restructuring of the
transactions contemplated by the Financing Documents. Holdings, Parent and
PlayCore Wisconsin will jointly and severally pay, and will save the Purchasers
and each other holder of a Note harmless from, all claims in respect of any
fees, costs or expenses if any, of brokers and finders in relation to the
Transactions (other than any brokers or Lenders of the Purchasers or any other
Holder); provided that, in each such instance under this Section 16.1, Holdings,
Parent and PlayCore Wisconsin shall be responsible for the fees and expenses of
only one separate counsel for all Purchasers and Holders. Notwithstanding the
foregoing, if the transactions contemplated hereby are not consummated,
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Parent (and not Holdings or PlayCore Wisconsin) shall be solely responsible for
the expenses described in this Section 16.1.
16.2 Indemnification. In addition to all other sums due hereunder or
provided for in this Agreement, Holdings and PlayCore Wisconsin jointly and
severally shall and shall cause each of the Subsidiaries that are Guarantors
(each, an "Indemnitor") to indemnify and hold harmless each Purchaser and its
Affiliates and its officers, directors, agents, employees, subsidiaries,
partners and controlling Persons (each, an "Indemnified Person") to the fullest
extent permitted by law, from and against any and all out-of-pocket losses,
claims, damages, expenses (including reasonable fees, disbursements and other
charges of counsel) or other liabilities (collectively, "Liabilities") resulting
from or arising out of any investigation or proceeding against Holdings, any of
its Subsidiaries or any Indemnified Person and arising out of or in connection
with this Agreement or any of the Transaction Documents, whether or not the
transactions contemplated by this Agreement are consummated, which investigation
or proceeding requires the participation of, or is commenced or filed against,
any Indemnified Person because of this Agreement, any other Transaction Document
or such other documents and the transactions contemplated hereby or thereby;
provided that no Indemnitor shall be liable under this Section 16.2 to an
Indemnified Person for any Liabilities resulting primarily from any actions that
involved the gross negligence or willful misconduct of such Indemnified Person
or the breach by such Indemnified Person of any representation, warranty,
covenant or other agreement of such Indemnified Person contained herein or in
the other Financing Documents; and provided, further, that if and to the extent
that such indemnification is unenforceable for any reason, each Indemnitor shall
be liable to make the maximum contribution to the payment and satisfaction of
such Liabilities for which it would otherwise be liable hereunder which shall be
permissible under applicable laws. In connection with the obligation of any
Indemnitor to indemnify for Liabilities as set forth above, any Indemnitor
further agrees, upon presentation of appropriate invoices containing reasonable
detail, to reimburse each Indemnified Person for all such Liabilities (including
reasonable fees, disbursements and other charges of counsel) as they are
incurred by such Indemnified Person; provided that if an Indemnified Person is
reimbursed hereunder for any Liabilities, such reimbursement of Liabilities
shall be refunded to the extent it is finally judicially determined that the
Liabilities in question resulted primarily from the willful misconduct or gross
negligence of such Indemnified Person. The obligations of any Indemnitor under
this paragraph will survive any transfer of the Notes or the Exchange Notes by
the Purchasers. In the event that the foregoing indemnity is unavailable or
insufficient to hold an Indemnified Person harmless, then the Indemnitors or
PlayCore Wisconsin will contribute to amounts paid or payable by such
Indemnified Person in respect of such Indemnified Person's Liabilities in such
proportions as appropriately reflect the relative benefits received by and fault
of the Indemnitors combined and such Indemnified Person in connection with the
matters as to which such Liabilities relate and other equitable considerations.
Notwithstanding the foregoing, if the transactions contemplated hereby are not
consummated, Parent (and not Holdings or PlayCore Wisconsin) shall be solely
responsible for the indemnification obligations described in this Section 16.2.
16.3 Notification. Each Indemnified Person under this Section 16 will,
promptly after the receipt of notice of the commencement of any action,
investigation, claim or
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other proceeding against such Indemnified Person in respect of which indemnity
may be sought from an Indemnitor under this Section 16, notify Holdings in
writing of the commencement thereof. The omission of any Indemnified Person so
to notify PlayCore Wisconsin of any such action shall not relieve any Indemnitor
from any liability which it may have to such Indemnified Person under this
Section 16 unless, and only to the extent that, such omission results in the
forfeiture by any Indemnitor of substantive rights or defenses or an Indemnitor
is otherwise irrevocably prejudiced in defending such proceeding. In case any
such action, claim or other proceeding shall be brought against any Indemnified
Person and it shall notify Holdings of the commencement thereof, Holdings shall
be entitled to assume the defense thereof at its own expense, with counsel
satisfactory to Holdings; provided that any Indemnified Person may, at its own
expense, retain separate counsel to participate in such defense. Notwithstanding
the foregoing, in any action, claim or proceeding in which both an Indemnitor,
on the one hand, and an Indemnified Person, on the other hand, is, or is
reasonably likely to become, a party, such Indemnified Person shall have the
right to employ separate counsel at Holdings' expense and to control its own
defense of such action, claim or proceeding if, (a) Holdings has failed to
assume the defense and employ counsel as provided herein, (b) Holdings has
agreed in writing to pay such fees and expenses of separate counsel or (c) in
the reasonable opinion of counsel to such Indemnified Person, a conflict or
likely conflict exists between Holdings, on the one hand, and such Indemnified
Person, on the other hand, that would make such separate representation
advisable; provided, however, that Holdings shall not in any event be required
to pay the fees and expenses of more than one separate counsel (and if deemed
necessary by such separate counsel, appropriate local counsel who shall report
to such separate counsel). Holdings agrees that it will not, without the prior
written consent of an Indemnified Person, settle, compromise or consent to the
entry of any judgment in any pending or threatened claim, action or proceeding
relating to the matters contemplated hereby (if such Indemnified Person is a
party thereto or has been actually threatened to be made a party thereto) unless
such settlement, compromise or consent includes an unconditional release of such
Indemnified Person from all liability arising or that may arise out of such
claim, action or proceeding. Holdings shall not be liable for any settlement of
any claim, action or proceeding effected against an Indemnified Person without
the prior written consent of Holdings. The rights accorded to Indemnified
Persons hereunder shall be in addition to any rights that any Indemnified Person
may have at common law, by separate agreement or otherwise.
16.4 Confidentiality.
(a) Subject to the provisions of clause (b) of this Section 16.4, each
Purchaser agrees that it will use its reasonable efforts not to disclose without
the prior consent of Holdings (other than to its employees, auditors, creditors,
advisors or counsel or to another Purchaser if the Purchaser or such Purchaser's
holding or parent company in its sole discretion determines that any such party
should have access to such information; provided such Persons shall be subject
to the provisions of this Section 16.4 to the same extent as such Purchaser) any
non public information which is now or in the future furnished pursuant to this
Agreement or any other Financing Document and which is designated by Holdings to
the Purchasers in writing, as confidential; provided that any Purchaser may
disclose any such information (i) as has become generally available to the
public other than by virtue of a breach of this Section 16.4(a) by such
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Purchaser or any other Person to whom such Purchaser has provided such
information as permitted by this Section 16.4, (ii) as may be required or
appropriate in any report, statement or testimony submitted to any municipal,
state or Federal regulatory body having or claiming to have jurisdiction over
such Purchaser or to the Commission or similar organizations (whether in the
United States of America or elsewhere) or their successors, (iii) as may be
required or appropriate in respect to any summons or subpoena or in connection
with any litigation, (iv) in order to comply with any law, order, regulation or
ruling applicable to such Purchaser, and (v) to any prospective or actual
transferee or participant in connection with any contemplated transfer of any of
the Notes by such Purchaser; provided that such prospective transferee agrees to
be bound by the confidentiality provisions contained in this Section 16.4.
(b) Each of Holdings and PlayCore Wisconsin hereby acknowledges and
agrees that each Purchaser may share with any of its Affiliates, and such
Affiliates may share with such Purchaser, any information related to Holdings or
any of its Subsidiaries (including, without limitation, any nonpublic customer
information regarding the creditworthiness of Holdings and its Subsidiaries);
provided such Persons shall agree in writing to be subject to the provisions of
this Section 16.4 to the same extent as such Purchaser.
SECTION 17.
MISCELLANEOUS
17.1 Notices. Except as otherwise expressly provided herein, all
notices and other communications shall have been duly given and shall be
effective (a) when personally delivered, (b) when transmitted via telecopy (or
other facsimile device) to the number set out below (or to such other number as
such party may specify by written notice to the other parties hereto) if the
sender on the same day sends a confirming copy of such notice by a recognized
overnight delivery service (charges prepaid), (c) the day following the day on
which the same has been delivered prepaid to a reputable national overnight air
courier service or (d) the third Business Day following the day on which the
same is sent by certified or registered mail, postage prepaid, in each case to
the respective parties at the address set forth below, or at such other address
as such party may specify by written notice to the other party hereto:
(a) if to a Purchaser or its nominee, to the Purchaser or its
nominee at the address specified for such communications in Schedule B, with a
copy to Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New York,
New York 10004, attention: Arthur S. Kaufman, Esq., Facsimile No.: (212)
859-8586, or at such other address as the Purchaser or its nominee shall have
specified to PlayCore Wisconsin in writing;
(b) if to any other Holder of any Note, to such Holder at the
address of such Holder appearing in the Security Register or such other address
as such other Holder shall have specified to Holdings in writing; or
(c) if to Holdings, Parent or PlayCore Wisconsin, to PlayCore
Wisconsin at PlayCore, Inc., Riverfront Centre, Suite 204, 15 West Milwaukee
Street, Janesville,
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Wisconsin 53545 Attention: President, Facsimile No.: (608) 741-7183, with copies
to (i) Holdings, c/o Chartwell Investments II, LLC, 717 Fifth Avenue, New York,
New York 10022, Attention: Michael S. Shein, Facsimile: (212) 521-5533, and (ii)
Akin, Gump, Strauss, Hauer & Feld, L.L.P., 1333 New Hampshire Avenue, N.W.,
Suite 400, Washington, DC 20036, Attention: William A. Bianco, Esq., Facsimile:
(202) 887-4288, or at such other address as Holdings shall have specified to the
holder of each Note in writing.
17.2 Benefit of Agreement; Assignments and Participations. Except as
otherwise expressly provided herein, all covenants, agreements and other
provisions contained in this Agreement by or on behalf of any of the parties
hereto shall bind, inure to the benefit of and be enforceable by their
respective successors and permitted assigns (including, without limitation, any
subsequent permitted Holder of a Note) whether so expressed or not; provided,
however, that neither Holdings nor PlayCore Wisconsin may assign and transfer
any of its rights or obligations without the prior written consent of the other
parties hereto and each such Holder, except as expressly permitted by Sections
8.12 and 9.2.
Nothing in this Agreement or in the Notes, express or implied, shall
give to any Person other than the parties hereto (and, with respect to Section
14 and Section 15.5 only, the holders of Senior Indebtedness and the holders of
Guarantor Senior Indebtedness), their successors and permitted assigns and the
holders from time to time of the Notes any benefit or any legal or equitable
right, remedy or claim under this Agreement.
17.3 No Waiver; Remedies Cumulative. No failure or delay on the part of
any party hereto or any Holder in exercising any right, power or privilege
hereunder or under the Notes and no course of dealing between Holdings, PlayCore
Wisconsin and any other party or Holder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
or under the Notes preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or thereunder. The
rights and remedies provided herein and in the Notes are cumulative and not
exclusive of any rights or remedies which the parties or Holders would otherwise
have. No notice to or demand on Holdings or PlayCore Wisconsin in any case shall
entitle Holdings or PlayCore Wisconsin to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the rights of the
other parties hereto or the Holders to any other or further action in any
circumstances without notice or demand.
17.4 Amendments, Waivers and Consents. This Agreement may be amended,
and the observance of any term hereof may be waived (either retroactively or
prospectively) with (and only with) the written consent of Holdings, PlayCore
Wisconsin and the Required Holders; provided, however, that no such amendment or
waiver may, without the prior written consent of the Holder of each Note then
Outstanding and affected thereby (i) subject any Holder to any additional
obligation, (ii) reduce the principal of (or premium, if any) or rate of
interest on, any Note, (iii) postpone the date fixed for any payment of
principal of (or premium, if any) or interest on, any Note or Exchange Note,
(iv) change the ranking or priority of the Notes or the percentage of the
aggregate principal amount of the Notes the Holders of which shall be required
to consent or take any other action under this Section 17.4 or any other
provision of this Agreement,
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(v) modify or change any provision of this Agreement or the related definitions
affecting the subordination or ranking of the Notes or any Note Guarantee in a
manner which adversely affects the Holders, or (vi) release any Guarantor that
is a Significant Subsidiary from any of its obligations under its Note Guarantee
or this Agreement otherwise than in accordance with the terms of this Agreement;
provided, further, that no such amendment or waiver may, without the prior
written consent of GS Mezzanine (so long as GS Mezzanine owns any Notes or
Exchange Notes), amend or waive the provisions of Sections 7.4 or 7.8. No
amendment or waiver of this Agreement will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or thereby impair any right consequent thereon. As used herein, the term this
"Agreement" and references thereto shall mean this Agreement as it may from time
to time be amended, supplemented or modified.
17.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall constitute one and the same instrument. It shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart. Each counterpart may consist of a number of copies hereof,
each signed by less than all, but together signed by all, of the parties hereto.
17.6 Reproduction. This Agreement, the other Transaction Documents and
all documents relating, hereto and thereto, including, without limitation, (a)
consents, waivers and modifications that may hereafter be executed, (b)
documents received by the Purchasers at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished in connection herewith, may be reproduced by
any photographic, photostatic, microfilm, microcard, miniature photographic or
other similar process and any original document so reproduced may be destroyed.
Holdings and PlayCore Wisconsin each agree and stipulate that, to the extent
permitted by Applicable Law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made in the regular course of business) and any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence. This Section 17.6 shall not prohibit Holdings, PlayCore
Wisconsin, any other party hereto or any holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
17.7 Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.
17.8 Survival of Covenants and Indemnities. All covenants and
indemnities set forth herein shall survive the execution and delivery of this
Agreement, the issuance of the Notes and, except as otherwise expressly provided
herein with respect to covenants, the payment of principal of the Notes and any
other obligations hereunder.
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<PAGE> 104
17.9 Governing Law; Submission to Jurisdiction; Venue.
(a) THIS AGREEMENT AND THE NOTES SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK, EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH
STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER
THAN SUCH STATE.
(b) If any action, proceeding or litigation shall be brought by any
Purchaser or any holder of a Note in order to enforce any right or remedy under
this Agreement or any of the Notes, Holdings and PlayCore Wisconsin hereby
consent and will submit, and will cause each of their respective Subsidiaries to
submit, to the jurisdiction of any state or federal court of competent
jurisdiction sitting within the area comprising the Southern District of New
York on the date of this Agreement. Holdings and PlayCore Wisconsin each hereby
irrevocably waive any objection, including, but not limited to, any objection to
the laying of venue or based on the grounds of forum non conveniens, which they
may now or hereafter have to the bringing of any such action, proceeding or
litigation in such jurisdiction. Holdings and PlayCore Wisconsin each further
agree that they shall not, and shall cause their respective Subsidiaries not to,
bring any action, proceeding or litigation arising out of this Agreement or the
Notes in any state or federal court other than any state or federal court of
competent jurisdiction sitting within the area comprising the Southern District
of New York on the date of this Agreement.
(c) Holdings and PlayCore Wisconsin irrevocably consent to the service
of process of any of the aforementioned courts in any such action, proceeding or
litigation by the mailing of copies thereof by registered or certified mail,
postage prepaid, to Holdings at its said address, such service to become
effective thirty (30) days after such mailing.
(d) Nothing herein shall affect the right of any holder of a Note to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against Holdings or PlayCore Wisconsin in any
other jurisdiction. If service of process is made on a designated agent it
should be made by either (i) personal delivery or (ii) mailing a copy of summons
and complaint to the agent via registered or certified mail, return receipt
requested.
(e) HOLDINGS AND PLAYCORE WISCONSIN HEREBY WAIVE ANY AND ALL RIGHTS IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OF THE NOTES.
17.10 Severability. If any provision of this Agreement is determined to
be illegal, invalid or unenforceable, such provision shall be fully severable to
the extent of such illegality, invalidity or unenforceability and the remaining
provisions shall remain in full force and effect and shall be construed without
giving effect to the illegal, invalid or unenforceable provisions.
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<PAGE> 105
17.11 Entirety. This Agreement together with the other Financing
Documents represents the entire agreement of the parties hereto and thereto, and
supersedes all prior agreements and understandings, oral or written, if any,
relating to the Financing Documents or the transactions contemplated herein or
therein, except for the provisions of the Commitment Letter, dated as of January
14, 2000, as extended as of February 28, 2000, March 31, 2000 and April 6, 2000,
from GS Mezzanine to Chartwell which shall terminate in accordance with its
terms, upon consummation of the Transactions.
17.12 Survival of Representations and Warranties. All representations
and warranties made by Holdings or PlayCore Wisconsin herein shall survive the
execution and delivery of this Agreement, the issuance and transfer of all or
any portion of the Notes, and the payment of principal of the Notes and any
other obligations hereunder issuance and delivery of the Notes hereunder,
regardless of any investigation made at any time by or on behalf of the
Purchasers or any other holder that is Affiliated with the Purchasers. All
statements contained in any certificate delivered by or on behalf of Holdings
pursuant to this Agreement shall be deemed representations and warranties of
Holdings under this Agreement.
17.13 Construction. Each covenant contained herein shall be construed
(absent express provision to the contrary) as being independent of each other
covenant contained herein, so that compliance with any one covenant shall not
(absent such an express contrary provision) be deemed to excuse compliance with
any other covenant. Where any provision herein refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person, whether or not expressly specified in such provision.
17.14 Intent to Limit Interest to Maximum. In no event shall the
interest rate payable on the Notes under this Agreement, plus any other amounts
paid by PlayCore Wisconsin to the Holders in connection therewith, exceed the
highest rate permissible under law that a court of competent jurisdiction shall,
in the final determination, deem applicable. PlayCore Wisconsin and the
Purchasers, in executing and delivering this Agreement, intend legally to agree
upon the rate or rates of interest and the manner of payment stated within it;
provided, however, that, anything contained herein to the contrary
notwithstanding, if said rate or rates of interest or manner of payment exceed
the maximum allowable under applicable law, then, ipso facto as of the date of
this Agreement, PlayCore Wisconsin is and shall be liable only for the payment
of such maximum as allowed by law, and payment received from PlayCore Wisconsin
in excess of such legal maximum, whenever received, shall be applied to reduce
the principal balance of any Notes then outstanding to the extent of such
excess, or, if such excess exceeds the then outstanding principal balance, such
excess shall be first set-off against any other amounts then due and owing by
PlayCore Wisconsin and refunded to PlayCore Wisconsin.
17.15 Incorporation. All Exhibits and Schedules attached hereto are
incorporated as part of this Agreement as if fully set forth herein.
17.16 Acknowledgement by Parent. By executing this Agreement, Parent
acknowledges and agrees that, effective upon consummation of the Merger, it
shall succeed to all
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<PAGE> 106
of the liabilities obligations, covenants and agreements of Holdings hereunder
(including, without limitation, under the Note Guarantee set forth in Section
15) and under each other Financing Document, whereupon Parent shall be
substituted for Holdings under this Agreement and each other Financing Document,
as it had been named as Holdings herein and therein.
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<PAGE> 107
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Agreement to be duly executed and delivered as of the date first above
written.
PLAYCORE WISCONSIN, INC.
By: /s/ RICHARD E. RUEGGER
------------------------------------------
Name: Richard E. Ruegger
Title: Chief Financial Officer
PLAYCORE, INC.
By: /s/ RICHARD E. RUEGGER
------------------------------------------
Name: Richard E. Ruegger
Title: Chief Financial Officer
HEARTLAND INDUSTRIES, INC. (DE)
By: /s/ RICHARD E. RUEGGER
------------------------------------------
Name: Richard E. Ruegger
Title: Secretary
PLAYCORE HOLDINGS, INC.
By: /s/ MICHAEL SHEIN
------------------------------------------
Name: Michael Shein
Title: Vice President
<PAGE> 108
GS MEZZANINE PARTNERS II, L.P.
By: GS Mezzanine Advisors II, L.L.C.,
its general partner
By: /s/ JOHN E. BOWMAN
------------------------------------------
Name: John E. Bowman
Title: Vice President
GS MEZZANINE PARTNERS II OFFSHORE, L.P.
By: GS Mezzanine Advisors II, L.L.C.
its general partner
By: /s/ JOHN E. BOWMAN
------------------------------------------
Name: John E. Bowman
Title: Vice President
<PAGE> 109
EXHIBIT A
FORM OF FACE OF NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT IS IN EFFECT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS. THE HOLDER OF THIS NOTE IS SUBJECT TO THE TERMS OF THE PURCHASE
AGREEMENT, DATED AS OF APRIL 11, 2000 (AS AMENDED, SUPPLEMENTED OR MODIFIED FROM
TIME TO TIME, THE "AGREEMENT"), AMONG PLAYCORE, INC., PLAYCORE WISCONSIN, INC.,
PLAYCORE HOLDINGS, INC., THE SUBSIDIARIES LISTED ON THE SIGNATURE PAGES THEREOF,
GS MEZZANINE PARTNERS II, L.P., AND GS MEZZANINE PARTNERS OFFSHORE II, L.P.
The following information is provided pursuant to Treas. Reg. Section 1.1275-3:
THIS DEBT INSTRUMENT IS ISSUED AT THE ORIGINAL ISSUE DISCOUNT. __________
(TELEPHONE NO.: (608) 741-7183), AS A REPRESENTATIVE OF THE ISSUER, WILL MAKE
AVAILABLE ON REQUEST TO HOLDER(S) OF THIS DEBT INSTRUMENT THE FOLLOWING
INFORMATION: ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE AND
YIELD TO MATURITY.
18% SENIOR SUBORDINATED NOTES DUE 2008
No. __________ $________
PlayCore Wisconsin, Inc., a corporation duly organized and existing
under the laws of Wisconsin (herein called "PlayCore Wisconsin", which term
includes any successor Person under the Agreement referred to below), for value
received, hereby promises to pay to __________________, or registered assigns,
the original principal sum of _____________________ Dollars plus Capitalized
Interest (as hereinafter defined) then outstanding on May 31, 2008 (the "Stated
Maturity"), and to pay interest on such original principal sum plus Capitalized
Interest from _________, 2000* or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi-annually in arrears on
November 30 and May 31 in each year commencing with __________** (each, an
"Interest Payment Date") at the rate of 18% per annum, until the principal
hereof is paid; provided,
- - --------------------------
* Insert original issue date.
** Insert first Interest Payment Date after original issue date.
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<PAGE> 110
however, that (to the extent that the payment of such interest shall be legally
enforceable) following the occurrence of a default in the payment when due of
interest on (including any Special Interest), principal of, or premium, if any,
on, this Note or an Event of Default under the Agreement, this Note shall bear
interest at the rate of 20% per annum for so long as such Event of Default shall
be continuing, and such interest shall be payable on demand. All interest
payable with respect to this Note shall be paid in cash; provided that on any
Interest Payment Date on or prior to May 31, 2004 (each, an "Interest Accrual
Date"), to the extent interest payable on this Note for the period ending on
such Interest Accrual Date exceeds the rate of 14% per annum, such interest in
excess of 14% per annum shall be capitalized as principal on each Interest
Accrual Date and thereby added to the principal amount of this Note. Such
interest capitalized as principal and thereby added to the principal amount of
this Note shall be referred to as "Capitalized Interest."
In the event that (a) a registration statement under the Securities
Act of 1933, as amended (the "Securities Act"), registering this Note for resale
(a "Resale Registration Statement") shall not have been filed with the
Securities and Exchange Commission (the "Commission") or a registration
statement under the Securities Act (the "Exchange Offer Registration Statement")
registering a note substantially identical to this Note (an "Exchange Note")
pursuant to an exchange offer (the "Exchange Offer") upon the terms and
conditions set forth in the Exchange and Registration Rights Agreement, dated
__________ __, 2000 (the "Exchange and Registration Rights Agreement"), among
PlayCore Wisconsin, PlayCore Inc., PlayCore Holdings, Inc., the Subsidiaries
parties thereto and GS Mezzanine Partners II, L.P. and GS Mezzanine Partners II
Offshore, L.P. (collectively, the "Purchasers") shall not have been filed with
the Commission, in each case by the date which is 90 days after the date on
which a written request therefore by the Purchasers in accordance with the terms
of the Exchange and Registration Rights Agreement (the "Request Date"), (b) the
Resale Registration Statement has not become or been declared effective by the
date which is 150 days after the Request Date or the Exchange Offer Registration
Statement has not been declared effective by the date which is 180 days after
the Request Date, (c) the Exchange Offer has not been consummated within 45
business days after the initial effective date of the Exchange Offer
Registration Statement (if the Exchange Offer is then required to be made) or
(d) any Resale Registration Statement or Exchange Offer Registration Statement
required by Section 2(a) of the Exchange and Registration Rights Agreement is
filed and declared effective but shall thereafter cease to be effective or
usable for transfers of Notes during the periods referred to in such Section
2(a) without being succeeded immediately by an additional registration statement
filed and declared effective (each such event referred to in clauses (a) through
(d), a "Registration Default"), then PlayCore Wisconsin shall pay, in addition
to the interest provided for above, cash interest on the principal amount of
this Note ("Special Interest") to the Holder hereof in an amount equal to 0.5%
per annum, which amount shall increase to 1.0% per annum after the first 120-day
period following the occurrence of the first Registration Default, for the
period from and including the date of occurrence of the first Registration
Default until such time as no Registration Default is in effect (after which
such Special Interest shall cease to be payable). Accrued Special Interest shall
be paid semi-annually on the Interest Payment Dates; and the amount of accrued
Special Interest shall be determined on the basis of the number of days actually
elapsed. Upon the issuance of an Exchange Note in exchange for this Note, any
accrued and unpaid interest (including Special
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<PAGE> 111
Interest) on this Note shall cease to be payable to the Holder hereof but such
accrued and unpaid interest (including Special Interest) shall be payable on the
next Interest Payment Date for such Exchange Note to the Holder thereof on the
related Regular Record Date. The interest so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, as provided in the
Agreement, be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on the "Regular Record
Date" for such interest, which shall be May 15 or November 15, as applicable
(whether or not a Business Day), immediately preceding such Interest Payment
Date. Notwithstanding the foregoing, if this Note is issued after a Regular
Record Date and prior to an Interest Payment Date, the record date for such
Interest Payment Date shall be the original issue date.
Payment of the principal of (and premium, if any) and any such
interest on this Note will be made at the principal place of business of
PlayCore Wisconsin, or as provided in Section 11.11 of the Agreement, in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided, however, that at
the option of PlayCore Wisconsin payment of interest and Special Interest may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, PlayCore Wisconsin has caused this instrument to
be duly executed as of the date first above written.
PLAYCORE WISCONSIN, INC.
By:
------------------------
Name:
Title:
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<PAGE> 112
FORM OF REVERSE OF NOTE
This Note is one of a duly authorized issue of securities of PlayCore
Wisconsin designated as its 18% Senior Subordinated Notes Due 2008 (herein,
together with all notes issued in exchange or replacement therefor, called the
"Notes"), limited in aggregate original principal amount (exclusive of
Capitalized Interest) to $30,000,000, issued and to be issued pursuant to the
Purchase Agreement, dated as of April 13, 2000 (herein, as amended, supplemented
or modified from time to time, called the "Agreement"), among PlayCore
Wisconsin, PlayCore Inc., a Delaware corporation (prior to the effectiveness of
the Merger, "Holdings"), PlayCore Holdings, Inc., a Delaware corporation
("Parent", and upon the effectiveness of the Merger, "Parent" or "Holdings"),
the Subsidiaries parties thereto and the Purchasers, to which Agreement
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of PlayCore Wisconsin and the
Holders of the Notes and of the terms upon which the Notes are, and are to be,
issued and delivered.
The Notes are subject to the redemption, at the option of PlayCore
Wisconsin, upon not less than 30 nor more than 60 days' notice by mail, as
follows:
(a) at any one time prior to May 31, 2003, PlayCore Wisconsin may
redeem up to 35% of the aggregate principal amount of the Notes then
Outstanding, from proceeds of the initial Equity Offering, at a Redemption Price
equal to 114.00% of the principal amount (excluding Capitalized Interest) of
Notes to be so redeemed; provided that at least 65% of the aggregate principal
amount of Notes Outstanding immediately prior to such prepayment, remain
Outstanding after giving effect to any such redemption; and
(b) at any time on or after May 31, 2003, PlayCore Wisconsin may
redeem the Notes then Outstanding, in whole or in part, at the following
Redemption Prices (expressed as percentages of the principal amount (excluding
Capitalized Interest) of Notes to be so redeemed) during each 12-month period
beginning May 31 of the years indicated:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2003 107.00%
2004 103.50%
2005 101.75%
2006 and thereafter 100.0000%
</TABLE>
together in the case of any such redemption with Capitalized Interest, accrued
interest and any Special Interest to the Redemption Date, but interest
installments whose Stated Maturity is on or prior to such Redemption Date will
be payable to the Holders of such Notes, or one or more
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<PAGE> 113
Predecessor Notes, of record at the close of business on the relevant Regular
Record Dates referred to on the face hereof, all as provided in the Agreement.
If less than all the Notes are to be redeemed, the Notes shall be
redeemed pro rata from each Holder; provided, however, that any such redemption
shall be for an aggregate principal amount of not less than $2,000,000.
The Notes do not have the benefit of any sinking fund obligations.
In the event of redemption or purchase pursuant to an Asset Sale Offer
of this Note in part only, a new Note or Notes for the unredeemed or unpurchased
portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof.
The indebtedness evidenced by this Note is, to the extent provided in
the Agreement, subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness, and this Note is issued subject to the
provisions of the Agreement with respect thereto. Each Holder of this Note, by
accepting the same, agrees to and shall be bound by such provisions.
If an Event of Default under the Agreement shall occur and be
continuing, the principal of all the Notes may be declared due and payable in
the manner and with the effect provided in the Agreement. Upon payment of (i)
the principal so declared due and payable and any overdue installment of
interest, (ii) any overdue principal and premium (if any) payable upon
redemption or repurchase of this Note, and (iii) as provided on the face hereof,
interest on any overdue principal of, and any premium, interest and any Special
Interest on, this Note (in each case to the extent that the payment of such
interest shall be legally enforceable), all of PlayCore Wisconsin's obligations
in respect of the payment of the principal of, interest, any Special Interest
and any premium on, this Note shall terminate.
The Agreement provides that, subject to certain conditions, if (i)
certain Excess Proceeds are available to PlayCore Wisconsin as a result of Asset
Sales or (ii) a Change of Control occurs, PlayCore Wisconsin shall be required
to make an offer to purchase all or a specified portion of the Notes.
The Agreement permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of
PlayCore Wisconsin and certain rights of the Holders of the Notes under the
Agreement at any time by PlayCore Wisconsin with the consent of the Holders of a
majority in aggregate principal amount of the Notes at the time Outstanding. The
Agreement also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Notes at the time Outstanding,
on behalf of the Holders of all the Notes, to waive compliance by PlayCore
Wisconsin with certain provisions of the Agreement and certain past defaults
under the Agreement and their consequences. Any such consent or waiver by the
Holder of this Note shall be conclusive and binding upon such Holder and upon
all future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Note.
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<PAGE> 114
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Note is registrable in the Security
Register, upon surrender of this Note for registration of transfer at the
principal offices of PlayCore Wisconsin, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to PlayCore Wisconsin duly
executed by, the Holder hereof or its attorney duly authorized in writing, and
thereupon one or more new Notes, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees. Prior to due presentment for registration of transfer, PlayCore
Wisconsin shall treat the person in whose name this Note is registered as the
owner and holder hereof for the purpose of receiving payment and for all other
purposes, and PlayCore Wisconsin will not be affected by any notice or knowledge
to the contrary.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Agreement and subject to certain limitations therein set forth, Notes are
exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but PlayCore Wisconsin may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
In no event shall the interest rate payable on this Note under the
Agreement, plus any other amounts paid by PlayCore Wisconsin to the Holders in
connection therewith, exceed the highest rate permissible under law that a court
of competent jurisdiction shall, in the final determination, deem applicable.
PlayCore Wisconsin and the Purchasers, in executing and delivering the
Agreement, intend legally to agree upon the rate or rates of interest and the
manner of payment stated within it; provided, however, that, anything contained
herein to the contrary notwithstanding, if said rate or rates of interest or
manner of payment exceed the maximum allowable under applicable law, then, ipso
facto as of the date of the Agreement, PlayCore Wisconsin is and shall be liable
only for the payment of such maximum as allowed by law, and payment received
from PlayCore Wisconsin in excess of such legal maximum, whenever received,
shall be applied to reduce the principal balance of this Note then outstanding
to the extent of such excess, or, if such excess exceeds the then outstanding
principal balance, such excess shall be first set-off against any other amounts
then due and owing by PlayCore Wisconsin and refunded to PlayCore Wisconsin.
Interest on this Note shall be computed on the basis of a 360-day year
of twelve 30-day months.
All terms used in this Note which are defined in the Agreement shall
have the meanings assigned to them in the Agreement.
THE AGREEMENT AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCLUDING CHOICE-OF-LAW
PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE
LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
-6-
<PAGE> 115
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased in its entirety by
PlayCore Wisconsin pursuant to Section 7.7 or Section 7.9 of the Agreement,
check the box:
[ ]
If you want to elect to have only a part of the principal amount of
this Note purchased by PlayCore Wisconsin pursuant to Section 7.7 of the
Agreement, state the portion of such amount: $_________
Dated: Your Signature:
---------------------
(Sign exactly as name appears
on the other side of this Note)
-7-
<PAGE> 116
EXHIBIT C
FORM OF SUPPLEMENTAL AGREEMENT
SUPPLEMENTAL AGREEMENT (this "Supplemental Agreement"), dated as of
_______________, between ____________________ (the "Guarantor"), a direct or
indirect subsidiary of PlayCore Wisconsin, Inc. (or its successor), a Wisconsin
corporation (the "Company"), GS Mezzanine Partners II, L.P., a limited
partnership organized under the laws of Delaware ("GS Mezzanine") and GS
Mezzanine Partners II Offshore, L.P., an exempted limited partnership organized
under the laws of the Cayman Islands ("GS Mezzanine Offshore" and, collectively
with GS Mezzanine, the "Purchasers").
W I T N E S S E T H
WHEREAS, PlayCore Wisconsin, PlayCore, Inc., a Delaware corporation
(prior to the effectiveness of the Merger, "Holdings"), PlayCore Holdings, Inc.,
a Delaware corporation ("Parent", and upon the effectiveness of the Merger,
"Parent" or "Holdings"), the Subsidiaries listed on the signature pages thereof,
and the Purchasers have each heretofore executed and delivered to each other a
Purchase Agreement (as amended, supplemented and modified from time to time, the
"Purchase Agreement"), dated as of April 13, 2000, providing for the issuance
and sale by PlayCore Wisconsin to the Purchasers of an aggregate original
principal amount of up to $30,000,000 of 18% Senior Subordinated Notes Due 2008
(together with all notes issued in exchange or replacement therefor, the
"Notes"); and
WHEREAS, Section 15.2 of the Purchase Agreement provides that under
certain circumstances PlayCore Wisconsin is required to cause the Guarantor to
execute and deliver to the Holders a supplemental agreement pursuant to which
the Guarantor shall unconditionally guarantee all of PlayCore Wisconsin's
obligations under the Notes pursuant to a Note Guarantee on the terms and
conditions set forth herein;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor covenants and agrees for the equal and ratable benefit of the Holders
of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Purchase Agreement.
2. AGREEMENT TO GUARANTEE; EXCHANGE AND REGISTRATION RIGHTS AGREEMENT.
The Guarantor hereby agrees, jointly and severally with all other Guarantors, to
unconditionally guarantee PlayCore Wisconsin's obligations under the Notes on
the terms and subject to the conditions set forth in Section 14 of the Purchase
Agreement and to be bound by all other applicable provisions of the Purchase
Agreement. The Guarantor further agrees to become a party to the Exchange and
Registration Rights Agreement and to be bound by all provisions thereof.
-1-
<PAGE> 117
3. NO RECOURSE AGAINST OTHERS. No director, officer, member, partner,
manager, employee, incorporator or shareholder of the Guarantor, as such, shall
have any liability for any obligations of PlayCore Wisconsin or any Guarantor
under the Notes, the Purchase Agreement or this Supplemental Agreement or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Securities and Exchange
Commission that such a waiver is against public policy.
4. EFFECTIVENESS. This Supplemental Agreement shall be effective upon
execution by the parties hereto.
5. RECITALS. The recitals contained herein shall be taken as the
statements of PlayCore Wisconsin and the Guarantors assume no responsibility for
their correctness.
6. NEW YORK LAW TO GOVERN. THE INTERNAL LAWS OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL AGREEMENT.
7. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement.
8. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
[Guarantor]
By:
-----------------------------------------
Name:
Title:
-2-
<PAGE> 118
EXHIBIT D
FORM OF NOTATION OF NOTE GUARANTEE
The undersigned have guaranteed this Note on a subordinated basis as
provided in the Agreement.
PLAYCORE, INC.
By:
-----------------------------------------
Name:
Title:
HEARTLAND INDUSTRIES, INC. (DE)
By:
-----------------------------------------
Name:
Title:
PLAYCORE HOLDINGS, INC.
By:
-----------------------------------------
Name:
Title:
-1-
<PAGE> 119
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
<TABLE>
<CAPTION>
Name and Address Principal Amount of the Notes
of Purchaser to be Purchased
---------------- -----------------------------
<S> <C>
GS MEZZANINE PARTNERS II, L.P.
85 Broad Street $ 22,989,000
New York, New York 10004
Telecopy: (212) 902-3000
Attention: Ben Adler
GS MEZZANINE PARTNERS II
OFFSHORE, L.P. $ 7,011,000
c/o GS Mezzanine Partners L.P.
85 Broad Street
New York, New York 10004
Telecopy: (212) 902-3000
Attention: Ben Adler
</TABLE>
-2-
<PAGE> 1
LOAN AGREEMENT
BETWEEN
PLAYCORE, INC.
AND
JASDREW ACQUISITION CORP.
AS BORROWERS,
AND
PLAYCORE WISCONSIN, INC.
AS LENDER
Dated as of April 13, 2000
<PAGE> 2
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "AGREEMENT") is made as of this 13th day of
April, 2000, by and among PlayCore, Inc., a Delaware corporation ("HOLDINGS" and
a "BORROWER"), Jasdrew Acquisition Corp., a Delaware corporation ("MERGER SUB"
and a "BORROWER"), and PlayCore Wisconsin, Inc., a Wisconsin corporation (the
"COMPANY").
RECITALS
WHEREAS, Holdings, Merger Sub and PlayCore Holdings, Inc. ("PARENT"), a
Delaware corporation, are parties to a certain Agreement and Plan of Merger
dated as of April 13, 2000 (the "MERGER AGREEMENT"), pursuant to which (a)
Merger Sub will be merged with and into Holdings with Holdings being the
surviving corporation by way of a two step merger consisting of (i) a joint
tender offer (the "TENDER OFFER") by Merger Sub and Holdings with respect to
Holdings' common stock, par value $.01 per share (the "COMMON STOCK") and (ii) a
subsequent merger of Merger Sub with and into Holdings, with Holdings being the
surviving corporation (the "MERGER"), and (b) immediately thereafter Holdings
will be merged with and into the Company, with the Company being the surviving
corporation (the "SECOND MERGER");
WHEREAS, the Company has entered into a certain Credit Agreement, dated
as of April 13, 2000 (the "CREDIT AGREEMENT") by and among Parent, Holdings,
the Company, its subsidiaries listed on the signature pages thereto, the lenders
party thereto and General Electric Capital Corporation, as Administrative Agent
and Credit Agricole Indosuez, as Documentation Agent, pursuant to which
approximately $95,000,000 will be disbursed to Lender at the closing of the
Tender Offer;
WHEREAS, under the terms of a certain Purchase Agreement, dated as of
April 13, 2000 by and among Parent, Holdings, the Company, its subsidiaries
listed on the signature pages thereto, GS Mezzanine Partners II, L.P. and GS
Mezzanine Partners II Offshore, L.P., the Company will sell $30,000,000
aggregate principal amount of its 18% Senior Subordinated Notes dues 2008 (the
"SENIOR NOTES"); and
WHEREAS, in order to satisfy the funding requirements of Merger Sub and
Holdings in conjunction with the closing of the Tender Offer, the Company is
willing to lend certain amounts of money to Merger Sub and/or Holdings as herein
provided.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good, valuable and binding consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
GENERAL TERMS
SECTION 1.1 Loan to Holdings. If immediately after the closing of the
Tender Offer, and the other transactions contemplated in Section 1.1(a) of the
Merger Agreement, Merger Sub would not be able to effect the Merger pursuant to
Section 253 of the Delaware General
<PAGE> 3
Corporation Law ("SECTION 253"), the Company agrees, subject to the terms and
conditions of this Agreement, to lend to Holdings (or at the request of Holdings
to advance funds on behalf of Holdings), and Holdings agrees to borrow from the
Company in connection with the closing of the Tender Offer, such amount, not to
exceed $43,000,000, as is necessary for Holdings to (i) complete the Tender
Offer (to the extent that the aggregate price for all shares tendered in the
Tender Offer plus the purchase price of the GG Securities (as defined in the
Merger Agreement) exceeds $72,500,000) and (ii) purchase all of its outstanding
warrants issued on March 13, 1997 to Massachusetts Mutual Life Insurance Company
and certain of its affiliates (and initially exercisable for 592,177 shares of
Holdings' Common Stock) (the "MASSMUTUAL WARRANTS").
SECTION 1.2 Loan to Merger Sub. If immediately after the closing of the
Tender Offer and the other transactions contemplated in Section 1.1(a) of the
Merger Agreement, Merger Sub would be able to immediately effect the Merger
pursuant to Section 253, the Company agrees, subject to the terms and conditions
of this Agreement, to lend to Merger Sub, and Merger Sub may borrow from the
Company (or request that the Company advance funds on behalf of Merger Sub), in
connection with the closing of the Tender Offer, such amount in excess of
$72,500,000, which amount shall not exceed $43,000,000, as is necessary for
Merger Sub to (i) purchase all shares of Common Stock tendered in the Tender
Offer, (ii) purchase all of the outstanding MassMutual Warrants, (iii) purchase
all outstanding shares of Common Stock (or options exercisable into Common
Stock) held by officers, directors and employees of Holdings or any of its
subsidiaries; and (iv) purchase the GG Securities.
SECTION 1.3 Promissory Note. The amount borrowed by Holdings under
Section 1.1 or by Merger Sub under Section 1.2., as the case may be (such
amount, the "LOAN"), shall be evidenced by a promissory note (the "NOTE") to be
executed by Holdings or Merger Sub, as the case may be (the "BORROWER").
SECTION 1.4 Principal. To the extent not previously paid, the entire
unpaid principal balance of the Loan, plus all accrued but unpaid interest
thereon shall be due and payable on the termination date of the Merger
Agreement. On the effective date of the Second Merger, all outstanding principal
and interest shall be deemed paid in full. The date on which the principal
balance of the Loan, plus all accrued but unpaid interest thereon, is due and
payable or deemed paid in full in accordance with this Section 1.4 is referred
to herein as the "MATURITY DATE."
SECTION 1.5 Interest. The Borrower agrees to pay interest in respect of
the unpaid principal amount of the Loan from the date of the borrowing thereof
to the Maturity Date at a rate per annum equal to ten percent (10%). Interest
under this Agreement shall be due and payable upon the Maturity Date, when the
outstanding principal balance of the Loan and all accrued interest shall be due
and payable in full. Should any principal remain unpaid after the Maturity Date,
interest shall accrue from the Maturity Date at a rate of twelve percent (12%),
compounded daily.
SECTION 1.6 Payments.
(a) General. All payments under this Agreement shall be made on
the date when due and shall be made in lawful money of the United States of
America in immediately available funds. Whenever any payment to be made under
this Agreement shall be stated to be
-2-
<PAGE> 4
due on a day that is not a business day, the due date thereof shall be extended
to the next succeeding Business Day. For the purposes of this Agreement,
"Business Day" shall mean any day other than a Saturday, Sunday or other day on
which banks in the State of New York are authorized or required to close.
(b) Interest Payments / Additional Notes. To the extent
permitted and agreed to by the Company, whenever any interest payment is due
hereunder, the Borrower may issue an additional promissory note or notes in lieu
of payment of such interest in the manner set forth in Section 1.6(a). Such
additional notes shall have the same terms as set forth in this Agreement and
under the original Note (except for the date of making and amount), including
without limitation the same Maturity Date, rate of interest, payment terms and
conversion rights.
(c) Prepayment and Prepayment Premium. The Borrower may pay the
unpaid principal amount under this Agreement, together with all unpaid interest
thereon, at any time prior to the Maturity Date.
(d) Payments After an Event of Default. Upon the occurrence of
any Event of Default (as defined in Section 4.1 herein), the Borrower shall be
considered to be in default, and the Company shall have the remedies set forth
in Section 4.2. After such occurrence of an Event of Default which remains
uncured as set forth in Section 4.1, the principal amount outstanding under this
Agreement shall accrue interest at the rate of twelve percent (12%) per annum
compounded daily and shall continue to accrue interest until such amounts are
repaid in full.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
To induce the Company to enter into this Agreement and to make the
Loan, each Borrower hereby represents and warrants to the Company that:
SECTION 2.1 Organization. Such Borrower (a) is duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
(b) is duly qualified to transact business in every jurisdiction where, because
of the nature of its business or property, such qualification is required, (c)
has full power and authority to own its property and assets and to carry on its
business as now conducted, and (d) has full power to execute, deliver and
perform its obligations under this Agreement and the Note.
SECTION 2.2 Authorization; Compliance. The execution and delivery of,
and the performance by Borrower of its obligations under this Agreement and the
Note (a) are within its corporate powers, (b) have been duly authorized by all
requisite corporate action, (c) do not violate any provision of law, any order
of any court or other agency of government, or the Certificate of Incorporation
or other charter documents of such Borrower, and (d) do not violate any
indenture, agreement or other instrument to which such Borrower is a party, or
by which it is bound, or be in conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under, or except
as may be provided by this Agreement, result in the creation or imposition of
any lien upon any of the property or assets of such Borrower pursuant to, any
such indenture, agreement or instrument.
-3-
<PAGE> 5
SECTION 2.3 Enforceability. This Agreement and the Note are the legal,
valid and binding obligations of such Borrower and are enforceable against such
Borrower, in accordance with their terms except as such enforceability may be
limited by (a) the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and (b) general principles of equity.
ARTICLE III
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to make the Loan hereunder is subject to
the satisfaction of the following conditions precedent:
(a) The representations and warranties set forth in Article II hereof
shall be true and correct.
(b) The applicable Borrower shall have executed and delivered to the
Company, or caused to be executed and delivered to the Company, on or prior to
the date of execution of this Agreement, the Note, and all other documents
reasonably necessary to consummate the lending transactions contemplated hereby.
(c) No default or Event of Default (as defined in Section 4.1 herein)
shall have occurred and be continuing or would result from the making of the
Loan.
ARTICLE IV
DEFAULTS/REMEDIES UPON DEFAULT
SECTION 4.1 Default.
(a) Events of Default. The occurrence of any of the following
events shall constitute an "Event of Default" under this Agreement:
(1) a Borrower fails to pay when due any principal of or
interest under this Agreement with respect to moneys borrowed by such Borrower
when and as the same shall become due and payable under this Agreement,;
(2) there is a default in the performance of any covenant,
condition, or agreement contained in, or any breach or threatened breach by
Borrower under this Agreement;
(3) a Borrower becomes insolvent or otherwise cannot pay its
debts as they become due;
(4) a Borrower takes any voluntary action with respect to or
is the subject of any involuntary action seeking bankruptcy, insolvency
administration, receivership, reorganization, arrangement among creditors,
composition or other similar action and such action is not stayed or dismissed
within a period of sixty (60) days after the date thereof; or
-4-
<PAGE> 6
(5) Borrower's existence is terminated or it is dissolved
(other than by Merger into another Borrower or the Company).
(b) Waiver. Except as set forth herein, Borrower hereby waives
presentment, demand and presentation for payment, notice of nonpayment and
dishonor, protest and notice of protest and expressly agrees that this Agreement
or any payment hereunder may be extended from time to time by the Company
without in any way affecting the liability of such Borrower.
SECTION 4.2 Remedies. Upon the occurrence of an Event of Default which
remains uncured as set forth in Section 4.1, the Company may, at its option: (a)
declare the principal and accrued interest outstanding under this Agreement and
the Note, in whole or in part, immediately due and payable; or (b) exercise any
other rights and remedies available to the Company under this Agreement, the
Note, or applicable laws. Notwithstanding the foregoing, upon the occurrence of
an Event of Default under Section 4.1(a)(3) or Section 4.1(a)(4), the entire
unpaid principal balance under this Agreement, together with all accrued but
unpaid interest thereon, shall automatically and immediately become due and
payable, and thereafter the Company may proceed to enforce payment of the same
and to exercise any and all of the rights and remedies afforded herein as well
as all other rights and remedies possessed by the Company by law or otherwise.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 Survival. This Agreement and all covenants, agreements,
representations and warranties herein and in the certificates delivered pursuant
hereto, shall survive the making by the Company of the Loan and the execution
and delivery to the Company of the Note and shall continue in full force and
effect so long as the Note and any other indebtedness of Borrower to the Company
is outstanding and unpaid.
SECTION 5.2 Indemnification. Each Borrower shall and hereby agrees to
indemnify, defend and hold harmless the Company and its officers, directors,
agents, employees and counsel from and against any and all losses, claims,
damages, liabilities, deficiencies, duties, levies, imposts, fees, charges,
judgments or expenses incurred by any of them (except to the extent that it is
finally judicially determined to have resulted from their own gross negligence
or willful misconduct) arising out of or by reason of any litigation,
investigations, claims or proceedings which arise out of or are in any way
related to (a) this Agreement or the transactions contemplated hereby, (b) any
actual or proposed use by such Borrower of the proceeds of the Loan, (c) any
breach by such Borrower of any of the provisions of this Agreement or (d) the
Company's entering into this Agreement, the Note or any other agreements and
documents relating hereto, including, without limitation, amounts paid in
settlement, court costs and fees and disbursements of counsel incurred in
connection with any such litigation, investigation, claim or proceeding or any
advice rendered in connection with any of the foregoing. Each such Borrower's
obligations set forth in this Section 5.2 shall survive any termination of this
Agreement and the Note and the payment in full of the obligations hereunder and
thereunder, and are in addition to, and not in substitution of, any other of its
obligations set forth in this Agreement or otherwise. In addition, each Borrower
shall, upon demand, pay to the Company
-5-
<PAGE> 7
all costs and expenses (including the reasonable fees and disbursements of
counsel) paid or incurred by the Company in (i) enforcing or defending its
rights under or in respect of this Agreement, the Note or any other document or
instrument now or hereafter executed and delivered in connection herewith, (ii)
collecting any amounts due under this Agreement or the Note, and (iii) obtaining
any legal, accounting or other advice in connection with any of the foregoing,
provided that such claims were found by the applicable court or arbitrator to be
properly brought under and consistent with the terms and conditions of this
Agreement or the Note, as the case may be.
SECTION 5.3 Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the conflicts of laws principles thereof.
SECTION 5.4 Amendments. No amendment or waiver of any provision of this
Agreement, nor consent to any departure by a Borrower from a provision, shall be
effective unless the same shall be in writing and signed by the Company. A
written amendment, consent or waiver shall be effective only in the specific
instance, and for the purpose, for which given. No notice to, or demand, on a
Borrower, in any one case, shall entitle a Borrower to any other or future
notice or demand in the same, similar or other circumstances.
SECTION 5.5 Waiver. Neither any failure nor any delay on the part of
the Company in exercising any right, power or privilege hereunder, shall operate
as a waiver thereof, nor shall a single or partial exercise thereof preclude any
other or future exercise, or the exercise of any other right, power or
privilege.
SECTION 5.6 Notices. All notices and correspondence hereunder shall be
in writing and sent by certified or registered mail, return receipt requested,
or by overnight delivery service, with all charges prepaid, to the applicable
party at the addresses set forth below, or by facsimile transmission (including,
without limitation, computer generated facsimile), promptly confirmed in writing
sent by first class mail, to the fax numbers and addresses set forth below:
If to the Company: PlayCore Wisconsin, Inc.
Riverfront Center, Suite 204
15 West Milwaukee Street
Janesville, WI 53545
Attn: President
Facsimile: (608) 741-7191
If to Holdings: PlayCore, Inc.
Riverfront Center, Suite 204
15 West Milwaukee Street
Janesville, WI 53545
Attn: President
Facsimile: (608) 741-7191
-6-
<PAGE> 8
If to Merger Sub: Jasdrew Acquisition Corp.
c/o Chartwell Investments II, LLC
717 Fifth Avenue, 23rd Floor
New York, NY 10022
Attn: Michael S. Shein
Facsimile: (212) 521-5533
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section. All such notices and correspondence shall be deemed given upon
the earliest to occur of (a) actual receipt, (b) if sent by certified or
registered mail, three (3) Business Days after being postmarked, (c) if sent by
overnight delivery service, when received at the above stated addresses or when
delivery is refused or (d) if sent by facsimile transmission, when receipt of
such transmission is acknowledged.
SECTION 5.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of Holdings, Merger Sub and the Company and their
respective successors and assigns, except that no party hereto shall have the
right to assign this Agreement or any of its rights, obligations or interests
herein without the prior written consent of the other parties hereto.
SECTION 5.8 Severability. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
SECTION 5.9 Headings. The Article and Section headings in this
Agreement are inserted for convenience of reference only and shall not in any
way affect the meaning or construction of any provision of this Agreement.
SECTION 5.10 Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties hereto in separate counterparts,
each of which when so executed and delivered shall be an original, but both of
which shall together constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
-7-
<PAGE> 9
IN WITNESS WHEREOF, each of Holdings, Merger Sub and the Company have
caused this Agreement to be executed by their duly authorized officers, as of
the date first set out above.
PLAYCORE, INC.
By: /s/ FREDERIC L. CONTINO
----------------------------------
Name: Frederic L. Contino
--------------------------------
Title: President
-------------------------------
JASDREW ACQUISITION CORP.
By: /s/ MICHAEL SHEIN
----------------------------------
Name: Michael Shein
--------------------------------
Title: Vice President
-------------------------------
PLAYCORE WISCONSIN, INC.
By: /s/ FREDERIC L. CONTINO
----------------------------------
Name: Frederic L. Contino
--------------------------------
Title: Chief Executive Officer
-------------------------------
<PAGE> 1
------------
Confidential
------------
Presentation Regarding the Sale of
[PLAYCORE LOGO]
APRIL, 2000
Donaldson, Lufkin & Jenrette
<PAGE> 2
[PLAYCORE LOGO]
TABLE OF CONTENTS
1 EXECUTIVE SUMMARY
2 THE SALE PROCESS
3 PLAYCORE OVERVIEW
4 THE CHARTWELL PROPOSAL
5 VALUATION SUMMARY
6 APPENDIX
Donaldson, Lufkin & Jenrette
<PAGE> 3
[PLAYCORE LOGO]
EXECUTIVE SUMMARY
Donaldson, Lufkin & Jenrette 1
<PAGE> 4
[PLAYCORE LOGO]
TRANSACTION BACKGROUND
THE FOLLOWING PROVIDES BACKGROUND INFORMATION ON THE SALE OF PLAYCORE, INC.
("PLAYCORE" OR THE "COMPANY") TO CHARTWELL INVESTMENTS L.L.C. ("CHARTWELL")
FOR $10.10 PER SHARE IN CASH (THE "SALE PRICE").
o ON AUGUST 19, 1999, DLJ WAS ENGAGED BY PLAYCORE TO SELL THE COMPANY
o ON SEPTEMBER 20, 1999, THE COMPANY ANNOUNCED TO THE PUBLIC THAT DLJ HAD
BEEN RETAINED TO EXPLORE THE POSSIBILITY OF A SALE
o DLJ WAS AUTHORIZED TO ADMINISTER A BROAD AUCTION PROCESS AND CONTACTED
ONE-HUNDRED NINETEEN (119) POTENTIAL BUYERS
This universe included 90 financial buyers and 29 strategic buyers
- Of the parties contacted, 56 executed confidentiality agreements
("CA") (51 financial buyers and 5 strategic buyers) and received the
Confidential Information Memorandum ("CIM")
o PLAYCORE EARNED $27.5 MILLION IN ADJUSTED EBITDA IN THE YEAR ENDED DECEMBER
31, 1999(1)
The Company had estimated EBITDA of $29.1 million for the fiscal year
- $29.1 million was the figure provided in the CIM
o CHARTWELL HAS COMPLETED ITS DILIGENCE AND IS PREPARED TO ACQUIRE THE
COMPANY AT $10.10 PER SHARE
(1) Adjusted EBITDA excludes the impact of the Hechingers bankruptcy and
includes the full-year effects of the Heartland acquisition. Unless
otherwise noted, adjusted (or pro forma) EBITDA is used throughout this
document.
Donaldson, Lufkin & Jenrette 2
<PAGE> 5
[PLAYCORE LOGO]
TRANSACTION BACKGROUND
ADDITIONAL BACKGROUND INFORMATION ON THE SALE PROCESS IS PROVIDED BELOW.
o THIRTEEN (13) INTERESTED PARTIES SUBMITTED PRELIMINARY INDICATIONS OF
INTEREST TO DLJ
The thirteen parties were all financial buyers
All strategic buyers declined to pursue the opportunity
The preliminary bids were submitted based on the CIM and discussions with
DLJ
o NINE INTERESTED PARTIES ATTENDED MANAGEMENT PRESENTATIONS AND WERE PROVIDED
ACCESS TO THE DATA ROOM
o AT THE FINAL BID DATE, ONLY CHARTWELL AND FIRST ATLANTIC CAPITAL ("FIRST
ATLANTIC") PRESENTED FINAL PROPOSALS TO ACQUIRE PLAYCORE
Chartwell's offer was superior to First Atlantic's for the following
reasons:
- Chartwell had completed substantially more due diligence
- Chartwell provided firm commitment letters from senior and mezzanine
sources
- Chartwell was willing to pursue a cash tender offer
o ON FEBRUARY 18, PLAYCORE AND CHARTWELL ENTERED INTO A PERIOD OF EXCLUSIVITY
Donaldson, Lufkin & Jenrette 3
<PAGE> 6
[PLAYCORE LOGO]
THE TRANSACTION
THE TABLE BELOW ILLUSTRATES THE PROGRESS MADE ON SEVERAL KEY ISSUES SINCE
THE JANUARY 14 PROPOSAL.
<TABLE>
<CAPTION>
JAN. 14, 2000 PROPOSAL CURRENT PROPOSAL
---------------------- ----------------
- - --------------------------------------------------------------------------------------------------
<S> <C> <C>
Value per share $10.00 $10.10
Recapitalization $4.2 rollover from GreenGrass None
Due Diligence Indicated confirmatory due Due diligence complete
diligence was necessary
Financing Fully committed subject to Fully committed
additional due diligence - GE Capital - senior debt
- Goldman Sachs Mezzanine Fund
Contract Provided memo that mentioned Negotiated definitive documents
material issues; no detailed
mark-up
Agreements with Requirement to close Agreed
Management
- - --------------------------------------------------------------------------------------------------
</TABLE>
Donaldson, Lufkin & Jenrette 4
<PAGE> 7
[PLAYCORE LOGO]
THE TRANSACTION
DLJ HAS BEEN ASKED BY PLAYCORE TO PROVIDE ITS OPINION AS TO THE FAIRNESS,
FROM A FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO BE RECEIVED BY THE
SHAREHOLDERS
o CHARTWELL INTENDS TO PAY $10.10 PER SHARE FOR ALL OF THE OUTSTANDING SHARES
OF PLAYCORE
This equates to an enterprise value of $187.1 million
o THE SALE PRICE REPRESENTS A PREMIUM TO CURRENT MARKET VALUE AND IMPLIES THE
FOLLOWING MULTIPLES OF FY'99 FINANCIAL RESULTS
<TABLE>
<CAPTION>
FINANCIAL RESULTS MULTIPLE
-------------------------------------------
<S> <C>
FY (DECEMBER 31, 1999)
Revenue 1.0x
EBITDA 6.8x
EBIT 8.7x
-------------------------------------------
</TABLE>
o THE SALE PRICE FALLS WITHIN DLJ'S ESTIMATED VALUATION RANGE OF $180 MILLION
TO $200 MILLION
o PLAYCORE AND CHARTWELL EXPECT TO EXECUTE A DEFINITIVE AGREEMENT ON APRIL
11, 2000
o CHARTWELL HAS AGREED TO COMMENCE A TENDER OFFER PROMPTLY AFTER THE
EXECUTION OF THE DEFINITIVE AGREEMENT
o GREENGRASS CAPITAL LLC ("GREENGRASS") HAS AGREED TO TENDER ITS 6.77 MILLION
SHARES, CONSTITUTING 59.4% OF FULLY DILUTED SHARES
DLJ's full fairness opinion is included as an Exhibit to this presentation
Donaldson, Lufkin & Jenrette 5
<PAGE> 8
[PLAYCORE LOGO]
THE SALE PROCESS
Donaldson, Lufkin & Jenrette 6
<PAGE> 9
[PLAYCORE LOGO]
CALENDAR AND KEY EVENTS
OVERVIEW OF THE SALE OF PLAYCORE.
<TABLE>
<CAPTION>
o AUGUST 1999 o SEPTEMBER 1999 o NOVEMBER 1999 o NOVEMBER 1999
<S> <C> <C> <C>
DLJ engaged by PlayCore Commence PlayCore calling effort Receive preliminary PlayCore management
- Distribute CAs and CIMs indications of interest from team delivers management
to 56 parties 13 parties presentations to
- Preliminary indications 9 parties
within the range of
PlayCore expectations
o DECEMBER 1999 o DECEMBER 1999 o JANUARY 2000 o FEBRUARY 18, 2000
DLJ receives revised bids from Extensive due diligence and Chartwell and * submit PlayCore and Chartwell
8 parties facility tours for 2 parties final bid to acquire PlayCore enter into exclusivity
- Chartwell and * agreement
o FEBRUARY / MARCH 2000
Confirmatory due diligence
</TABLE>
Donaldson, Lufkin & Jenrette 7
* The information is subject to confidentiality agreements.
<PAGE> 10
[PLAYCORE LOGO]
SUMMARY OF COMPANIES CONTACTED
THE FOLLOWING TABLE SHOWS THE STRATEGIC AND FINANCIAL BUYERS THAT SIGNED A
CA AND RECEIVED A CIM.
<TABLE>
<CAPTION>
SIGNED CA/RECEIVED BOOK
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 * 15 Chartwell Investments, Inc. 29 *
2 * 16 * 30 *
3 * 17 * 31 *
4 * 18 * 32 *
5 * 19 * 33 *
6 * 20 * 34 *
7 * 21 * 35 *
8 * 22 * 36 *
9 * 23 * 37 *
10 * 24 * 38 *
11 * 25 * 39 *
12 * 26 * 40 *
13 * 27 * 41 *
14 * 28 * 42 *
- - -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
SIGNED CA/RECEIVED BOOK
- - ------------------------------------------
<C> <C>
43 *
44 *
45 *
46 *
47 *
48 *
49 *
50 *
51 *
52 *
53 *
54 *
55 *
56 *
- - ------------------------------------------
</TABLE>
Donaldson, Lufkin & Jenrette 8
* The information is subject to confidentiality agreements.
<PAGE> 11
[PLAYCORE LOGO]
SUMMARY OF COMPANIES CONTACTED (CONT'D)
THE FOLLOWING TABLE SHOWS THE STRATEGIC AND FINANCIAL BUYERS THAT SUBMITTED
BIDS FOR PLAYCORE.
<TABLE>
<CAPTION>
SUBMITTED PRELIMINARY BID SUBMITTED FINAL BID
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. * 1. Chartwell Investments
2. * 2. *
3. *
4. *
5. *
6. *
7. *
8. *
9. *
10. *
11. *
12. *
13. *
- - ------------------------------------------------------------------------------------------
</TABLE>
Donaldson, Lufkin & Jenrette 9
* The information is subject to confidentiality agreements.
<PAGE> 12
[PLAYCORE LOGO]
PLAYCORE OVERVIEW
Donaldson, Lufkin & Jenrette 10
<PAGE> 13
[PLAYCORE LOGO]
PLAYCORE OVERVIEW
PLAYCORE IS THE WORLD'S LEADING SUPPLIER OF COMMERCIAL AND CONSUMER PLAY
SYSTEMS AND BACKYARD WOODEN STORAGE PRODUCTS.
o PLAYCORE'S PRODUCTS INCLUDE PLAYSETS (AND RELATED ACCESSORIES) FOR BOTH
COMMERCIAL AND CONSUMER MARKETS AND WOODEN STORAGE PRODUCTS (YARDBARNS) FOR
BACKYARD STORAGE PRODUCTS.
o PLAYCORE IS COMPRISED OF THREE DISTINCT DIVISIONS
GameTime (1999 revenue - $84.7 million)
- Commercial playsets
Swing-N-Slide (1999 revenue - $40.2 million)
- Consumer playsets (DIY) and OEM products to the playset market
Heartland Industries (1999 revenue - $69.7 million)
- Outdoor wooden storage products and premium redwood playsets
Donaldson, Lufkin & Jenrette 11
<PAGE> 14
[PLAYCORE LOGO]
PLAYCORE PRO FORMA FINANCIAL SUMMARY
THE TABLE BELOW SHOWS PLAYCORE'S HISTORICAL PRO FORMA OPERATING RESULTS.
<TABLE>
<CAPTION>
($ in millions)
1996 1997 1998 1999 (1) CAGR %
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
REVENUES
GameTime $ 50.2 $ 60.0 $ 74.5 $ 84.7 19.0%
Swing-N-Slide 41.9 36.4 40.3 40.2 (1.4)
Heartland 76.3 77.5 80.6 69.7 (3.0)
-------- -------- -------- -------- --------
TOTAL REVENUES $ 168.4 $ 173.9 $ 195.4 $ 194.6 4.9%
Growth % -- 3.3 12.4 (0.4)
-------- -------- -------- -------- --------
EBITDA
GameTime $ 7.0 $ 10.4 $ 15.5 17.8 36.5%
Swing-N-Slide 12.1 7.7 8.6 9.2 (8.7)
Heartland 2.2 1.6 1.9 3.0 10.9
Corporate expense (2.8) (3.0) (4.0) (2.5)
-------- -------- -------- -------- --------
TOTAL EBITDA $ 18.5 $ 16.7 $ 22.0 $ 27.5 14.1%
Margin % 11.0 9.6 11.3 14.1
Growth % -- (9.7) 31.7 25.0
-------- -------- -------- -------- --------
</TABLE>
(1) Pro forma adjustments exclude the impact of the Hechingers bankruptcy and
include the full-year effects of the Heartland acquisition.
Donaldson, Lufkin & Jenrette 12
<PAGE> 15
[PLAYCORE LOGO]
PLAYCORE FINANCIAL SUMMARY
THE TABLE BELOW SHOWS PLAYCORE'S PROJECTED OPERATING RESULTS AS PRESENTED
IN THE CIM.
<TABLE>
<CAPTION>
($ in millions)
2000E 2001E 2002E
------- ------- -------
<S> <C> <C> <C>
Revenues $ 223.6 $ 256.5 $ 290.2
Growth % 16.8 14.7 13.1
------- ------- -------
Cost of Goods Sold 125.1 142.2 160.5
------- ------- -------
GROSS PROFIT $ 98.5 $ 114.3 $ 129.7
Gross Margin % 44.1 44.6 44.7
Selling Expense 42.5 48.1 53.6
General and Admin. Expense 25.6 29.1 32.7
------- ------- -------
EBIT $ 27.7 $ 34.4 $ 40.7
Margin % 12.4 13.4 14.0
------- ------- -------
Growth % 19.4 24.6 18.3
------- ------- -------
Depreciation & Amortization $ 6.4 $ 6.7 $ 6.8
------- ------- -------
EBITDA $ 34.1 $ 41.1 $ 47.5
Margin % 15.3 16.0 16.4
Growth % 17.2 20.9 15.6
------- ------- -------
</TABLE>
Donaldson, Lufkin & Jenrette 13
<PAGE> 16
[PLAYCORE LOGO]
THE CHARTWELL PROPOSAL
Donaldson, Lufkin & Jenrette 14
<PAGE> 17
[PLAYCORE LOGO]
THE CHARTWELL PROPOSAL
THE KEY TERMS OF THE CHARTWELL PROPOSAL ARE SUMMARIZED IN THE TEXT BELOW.
o THE SALE PRICE OF $10.10 PER SHARE
This equates to an enterprise value of $187.1 million
o CAPITALIZATION SUMMARY
<TABLE>
<CAPTION>
DRAWN TOTAL
------ ------
<S> <C> <C>
Revolving Credit Facility $ 10.0 $ 30.0
Term Loans A & B 85.0 85.0
Mezzanine Loan 30.0 30.0
Common Stock 70.0 70.0
------ ------
Total Capitalization $195.0 $215.0
====== ======
</TABLE>
o THE SALE PRICE REPRESENTS A PREMIUM TO CURRENT MARKET VALUE AND IMPLIES THE
FOLLOWING MULTIPLES OF '99 PRO FORMA AND '00 PROJECTED FINANCIAL RESULTS
<TABLE>
<CAPTION>
FINANCIAL RESULTS
-----------------
FY'99 FY'00E
----- ------
<S> <C> <C>
Revenue 1.0x 0.8x
EBITDA 6.8x 5.5x
EBIT 8.7x 6.8x
==== ====
</TABLE>
Donaldson, Lufkin & Jenrette 15
<PAGE> 18
[PLAYCORE LOGO]
KEY TRANSACTION TERMS
KEY TRANSACTION TERMS ARE SUMMARIZED IN THE TABLE BELOW.
<TABLE>
<CAPTION>
TRANSACTION SPECIFICS
==================================================================================================================================
<S> <C>
Form of Transaction Stock Purchase / Tender offer with Second-step Merger
- - ----------------------------------------------------------------------------------------------------------------------------------
Form of Consideration / Accounting Cash / Purchase
- - ----------------------------------------------------------------------------------------------------------------------------------
Tax Treatment Taxable to stockholders
- - ----------------------------------------------------------------------------------------------------------------------------------
Purchase Price $10.10 per share
- - ----------------------------------------------------------------------------------------------------------------------------------
Purchase Price Adjustments None
- - ----------------------------------------------------------------------------------------------------------------------------------
Break-up Fee $2,300,000 plus transaction expenses of up to $2,500,000
- - ----------------------------------------------------------------------------------------------------------------------------------
No-Shop Provision Solicitation or initiation of discussions with a third party regarding an
acquisition proposal is prohibited
- - ----------------------------------------------------------------------------------------------------------------------------------
Fiduciary Out Fiduciary out on account of an un-solicited superior proposal
- - ----------------------------------------------------------------------------------------------------------------------------------
Material Adverse Change Out Buyer may terminate and require payment of expenses upon material adverse change
- - ----------------------------------------------------------------------------------------------------------------------------------
Expiration Date Tender must close by May 19, 2000
- - ----------------------------------------------------------------------------------------------------------------------------------
Indemnification Provisions None - Buyer has purchased representation and warranty insurance
- - ----------------------------------------------------------------------------------------------------------------------------------
Survivability Representations and warranties survive for purposes of insurance
- - ----------------------------------------------------------------------------------------------------------------------------------
Non-compete Agreement None
==================================================================================================================================
</TABLE>
Donaldson, Lufkin & Jenrette 16
<PAGE> 19
[PLAYCORE LOGO]
VALUATION SUMMARY
Donaldson, Lufkin & Jenrette 17
<PAGE> 20
[PLAYCORE LOGO]
OVERVIEW OF VALUATION
IN VALUING PLAYCORE, DLJ CONSIDERED THE FOLLOWING QUANTITATIVE MEASURES.
o THE VALUATIONS OF THE PUBLICLY TRADED COMPANIES IN THE LEISURE AND OUTDOOR
PRODUCTS MARKETS
o PRECEDENT M&A TRANSACTIONS - INCLUDING THOSE TRANSACTIONS COMPLETED BY THE
COMPANY
o PLAYCORE'S RECENT FINANCIAL RESULTS AND MARGINS IN RELATION TO THE
COMPARABLE UNIVERSE
o LEVERAGED BUYOUT ANALYSIS
o DISCOUNTED CASH FLOW ANALYSIS
o THE CHARTWELL OFFER REPRESENTS A 27.2% PREMIUM TO THE PRICE THE DAY BEFORE
DLJ WAS ENGAGED, A 28.2% PREMIUM TO THE PRICE ON THE DAY BEFORE THE
ANNOUNCEMENT THAT THE COMPANY HAD RETAINED DLJ AND A 36.9% PREMIUM TO
CURRENT STOCK PRICE
Donaldson, Lufkin & Jenrette 18
<PAGE> 21
[PLAYCORE LOGO]
PUBLICLY TRADED COMPARABLES
DLJ HAS ANALYZED THE CURRENT TRADING MULTIPLES OF SELECTED RECREATION /
LEISURE PRODUCTS COMPANIES; NONE OF WHICH ARE DIRECTLY COMPARABLE TO THE
COMPANY.
VALUATION MULTIPLES
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
PRICE EQUITY (PRICE / EPS)(1)(3) BOOK ENTERPRISE
----------------------------
COMPARABLE COMPANIES 3/27/00 VALUE LTM CY1999 CY2000 VALUE VALUE
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
BRUNSWICK CORP (BC) $ 19.50 $1,790.4 8.3x 47.6x 7.2x $1,300.2 $2,419.8
K2 INC (KTO) 7.63 136.49 0.2x 15.3x 7.0x 212.30 266.91
CANNONDALE CORP (BIKE) 7.66 57.43 24.4x 9.9x 8.3x 73.89 123.93
FIRST YEARS INC (KIDD) 7.13 71.21 8.7x 8.0x 7.1x 53.91 57.32
ESCALADE INC (ESCA) 16.50 49.01 7.2x NM NM 26.40 62.17
KOALA CORP (KARE) 14.13 95.82 15.6x 17.4x 14.4x 30.33 109.62
SAFETY FIRST INC (SAFT) 10.44 88.70 5.8x 16.3x 12.3x 142.30
AVERAGE 9.1x 14.7x 8.7x
HIGH 24.4 47.6 14.4
LOW 0.2 8.0 7.0
PLAYCORE INC. (PCO)- at offer price $ 10.10 $ 114.1 9.0x 9.0x 6.8x $ 187.1
PLAYCORE INC. (PCO)- at current price $ 7.38 $ 83.4 6.6x 6.6x 5.0x $ 156.4
PLAYCORE INC. (PCO)-August 19, 1999 (2) $ 7.94 $ 89.7 9.3x 7.1x 5.4x $ 170.1
=====================================================================================================================
<CAPTION>
ENTERPRISE VALUE / LTM
--------------------------
COMPARABLE COMPANIES SALES EBITDA EBIT
====================================================================
<S> <C> <C> <C>
BRUNSWICK CORP (BC) 0.6x 4.2x 6.0x
K2 INC (KTO) 0.4x 5.8x 7.9x
CANNONDALE CORP (BIKE) 0.8x 10.9x 20.5x
FIRST YEARS INC (KIDD) 0.4x 3.8x 4.3x
ESCALADE INC (ESCA) 0.7x 4.0x 5.1x
KOALA CORP (KARE) 3.0x 9.1x 11.4x
SAFETY FIRST INC (SAFT) 0.7x 5.9x 5.0x
AVERAGE 0.6x 5.8x 7.1x
HIGH 3.0 10.9 20.5
LOW 0.4 3.8 4.3
PLAYCORE INC. (PCO)- at offer price 1.0x 6.8x 8.7x
PLAYCORE INC. (PCO)- at current price 0.8x 5.7x 7.3x
PLAYCORE INC. (PCO)-August 19, 1999 (2) 1.2x 7.0x 8.5x
====================================================================
</TABLE>
Note: Figures have been adjusted to exclude unusual and nonrecurring items.
Averages exclude high and low.
(1) EPS estimates as reported by First Call.
(2) Multiples reflect the LTM June, 1999 data and exclude the impact of
Hechingers and include the full year effect of Heartland.
(3) Adjusted EPS for PlayCore.
Donaldson, Lufkin & Jenrette 19
<PAGE> 22
[PLAYCORE LOGO]
PUBLICLY TRADED COMPARABLES
THE FOLLOWING ANALYSIS COMPARES CERTAIN FINANCIAL STATISTICS OF PUBLIC
COMPARABLES WITH PLAYCORE.
OPERATING STATISTICS
($ in millions)
<TABLE>
<CAPTION>
REVENUES LTM MARGINS
---------------------- ---------------------
COMPARABLE COMPANIES LTM 3 YR CAGR EBITDA EBIT
========================================================================================
<S> <C> <C> <C> <C>
BRUNSWICK CORP (BC) $4,283.8 8.2% 13.3% 9.5%
K2 INC (KTO) 594.0 1.4% 7.7% 5.7%
CANNONDALE CORP (BIKE) 163.9 4.3% 7.0% 3.7%
FIRST YEARS INC (KIDD) 133.1 4.9% 11.2% 10.0%
ESCALADE INC (ESCA) 85.0 1.2% 18.2% 14.5%
KOALA CORP (KARE) 37.1 65.1% 32.3% 25.8%
SAFETY FIRST INC (SAFT) 194.6 22.7% 12.3% 14.7%
MEDIAN $ 163.9 4.9% 12.3% 10.0%
HIGH 4,283.8 65.1 32.3 25.8
LOW 37.1 1.2 7.0 3.7
PLAYCORE, INC (PCO) $ 194.6 47.5% 14.1% 11.1%
========================================================================================
</TABLE>
Note: Figures have been adjusted to exclude unusual and nonrecurring items.
Donaldson, Lufkin & Jenrette 20
<PAGE> 23
[PLAYCORE LOGO]
COMPARABLE M&A TRANSACTIONS
THE FOLLOWING M&A TRANSACTIONS WERE ANALYZED BY DLJ.
<TABLE>
<CAPTION>
($ in millions) ENTERPRISE VALUE /
------------------------
ENTERPRISE LTM LTM LTM
ANN. DATE TARGET / ACQUIROR TARGET DESCRIPTION VALUE REVENUES EBITDA EBIT
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
06/29/98 True Temper Sports/ Leading manufacturer of golf club shafts $206.4 2.3x 9.1x 10.8x
Cornerstone Equity Investors both domestically and worldwide. Products
include tubular components for other
recreational markets.
- - -----------------------------------------------------------------------------------------------------------------------------------
04/10/97 ERO Inc./ Company markets slumber products, water $203.6 1.3x 7.3x 9.4x
Hedstrom Corp. sports products, back to school products and
children's activities, arts and crafts products.
- - -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE 1.8X 8.2X 10.1X
PLAYCORE DEALS
- - -----------------------------------------------------------------------------------------------------------------------------------
03/13/97 Game Time Inc./ Company designs, markets and sells commercial $ 27.0 0.5x 3.9x 4.7x
Swing N Slide Corp. outdoor park and playground equipment.
- - -----------------------------------------------------------------------------------------------------------------------------------
02/16/99 Heartland Industries, Inc./ Company designs, markets and sells yard barns $ 13.3 0.2x 7.0x 14.8x
PlayCore, Inc. for the consumer market.
- - -----------------------------------------------------------------------------------------------------------------------------------
02/15/96 Swing N Slide Corp./ Company designs, markets and sells consumer (DIY) $ 46.6 1.0x 3.5x 4.2x
GreenGrass Holdings (1) outdoor park and playground equipment.
- - -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE (PLAYCORE TRANSACTIONS) 0.6x 4.8x 7.9x
----------------------------------------------------------------------------------
AVERAGE (ALL TRANSACTIONS) 1.1x 6.2x 8.8x
HIGH (ALL TRANSACTIONS) 2.3 9.1 14.8
LOW (ALL TRANSACTIONS) 0.2 3.5 4.2
PLAYCORE AT OFFER PRICE $187.1 1.0x 6.8x 8.7x
===================================================================================================================================
</TABLE>
(1) Assumes that GreenGrass acquired 100% of outstanding stock.
Donaldson, Lufkin & Jenrette 21
<PAGE> 24
[PLAYCORE LOGO]
LEVERAGED BUYOUT ANALYSIS
THE TABLES BELOW SUMMARIZE KEY ASPECTS OF A LEVERAGED BUYOUT MODEL USING
CHARTWELL'S PROPOSED CAPITAL STRUCTURE.
o THE MODEL USES THE MANAGEMENT FORECAST (WHICH WAS INCLUDED IN THE CIM) FOR
YEARS 2000-2002 AND ASSUMES 5% REVENUE GROWTH THEREAFTER WITH STABLE
MARGINS
($ in millions, except multiples)
<TABLE>
<CAPTION>
SOURCES USES
============================ =====================================================
<S> <C> <C> <C>
Excess Cash $ 7.4 Purchase Price - Common $ 114.1
Revolver 10.0 Transaction Expenses 10.0
Term Loans 85.0 Refinance Short Term Debt 9.1
Mezzanine 30.0 Refinance Long Term Debt 71.3
Common 72.1
- - ---------------------------- -----------------------------------------------------
Total Sources $ 204.5 Total Uses $ 204.5
============================ =====================================================
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL SPONSOR RETURN
% OF FD EQUITY
------------------------
90.0%
<S> <C> <C>
IMPLIED
EBITDA 5.5x 21.6%
EXIT 6.0x 24.4%
MULTIPLE 6.5x 27.0%
</TABLE>
<TABLE>
<CAPTION>
COVERAGE RATIOS PRO FORMA
- - --------------- ---------
1999
----
<S> <C>
EBITDA /
Cash Interest Expense .............. 1.87x
Long-Term Debt less Cash /
EBITDA ............................. 4.55x
</TABLE>
(1) Sponsor returns assume incentive options of 10% of fully diluted equity.
Donaldson, Lufkin & Jenrette 22
<PAGE> 25
[PLAYCORE LOGO]
DISCOUNTED CASH FLOW ANALYSIS
DLJ HAS CONDUCTED A PRESENT VALUE ANALYSIS BASED ON MANAGEMENT'S FORECAST.
o THE MODEL USES THE MANAGEMENT FORECAST (WHICH WAS INCLUDED IN THE CIM) FOR
YEARS 2000-2002 AND ASSUMES 5% REVENUE GROWTH THEREAFTER WITH STABLE
MARGINS
o DLJ made the following key assumptions
Discount rate range: 13% - 17%
- This discount rate range reflects the following:
o Potential impact of a recession on the business
o Lack of historical growth when compared to the management
forecast
o Variability of actual Company performance versus plan in 1999
Terminal value - based on 5.5x - 6.5x EBITDA; this is consistent with the
historical valuations of the Company
Donaldson, Lufkin & Jenrette 23
<PAGE> 26
[PLAYCORE LOGO]
<TABLE>
<CAPTION>
DCF SENSITIVITY ANALYSIS: IMPLIED ENTERPRISE VALUE (1)
---------------------------------------------------------------
WEIGHTED AVERAGE COST OF CAPITAL (WACC)
---------------------------------------------------------------
13.0% 14.0% 15.0% 16.0% 17.0%
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
IMPLIED
EBITDA 5.5x 205.1 196.8 188.9 181.4 174.2
EXIT MULTIPLE 6.0x 219.3 210.4 201.9 193.8 186.2
6.5x 233.5 223.9 214.9 206.3 198.1
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DCF SENSITIVITY ANALYSIS: IMPLIED EQUITY VALUE PER SHARE
---------------------------------------------------------------
WEIGHTED AVERAGE COST OF CAPITAL (WACC)
---------------------------------------------------------------
13.0% 14.0% 15.0% 16.0% 17.0%
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
IMPLIED
SHARE 5.5x 11.69 10.96 10.26 9.59 8.96
VALUE 6.0x 12.95 12.16 11.41 10.69 10.01
6.5x 14.20 13.36 12.56 11.79 11.07
---------------------------------------------------------------
</TABLE>
(1) Less estimated transaction expenses of $10.0 million
Donaldson, Lufkin & Jenrette 24
<PAGE> 27
[PLAYCORE LOGO]
APPENDIX
Donaldson, Lufkin & Jenrette 25
<PAGE> 28
[PLAYCORE LOGO]
PUBLICLY TRADED COMPARABLES
BRIEF DESCRIPTIONS OF THE PUBLIC COMPARABLES ARE LISTED BELOW.
<TABLE>
<CAPTION>
------------------------------------------------------------------------
COMPANY BUSINESS DESCRIPTION
====================================================================================================================================
<S> <C>
Brunswick Corp. Brunswick Corp. makes outboard motors, stern-drives and inboard engines
and replacement parts; makes boats and boat trailers and marine
accessories; makes and sells products for the bowling, fishing, biking
and camping industries; and operates bowling recreation centers.
K2 Inc. K2 Inc. designs, makes and sells a diversified line of brand name
sporting goods which include K2 and Olin alpine skis, K2 snowboards and
in-line skates, Shakespeare fishing rods, and ProFlex mountain bikes;
and apparel and other recreational products. It also supplies industrial
products.
Cannondale Corp. Cannondale Corp. makes and distributes bicycles and bicycling
accessories and equipment.
First Years Inc. First Years Inc. develops products for infants and toddlers, including
nursing equipment, training seats, feeding equipment, educational
playthings, teethers and pacifiers, rattles and novelties, bibs,
machine-washable toys, electronic toys, and bathtub playthings.
Safety First Safety 1st, Inc. develops, markets and distributes child safety and
child care, convenience and activity products and a line of home
security products. Co.'s juvenile products are designed to enhance the
safety of, or to be used by, newborns to children five years of age.
Escalade, Inc. Escalade, Inc. makes and sells sporting goods mainly under the
Indian and Harvard brand names; and produces and sells office and
graphic arts products mainly under the Martin Yale and Master Products
brand name and the Premier trademark.
Koala Corp. Koala Corp. develops, designs, makes and sells infant and child
protection products for use in commercial, institutional, and
recreational settings. Primary product is the Koala Bear Kare Baby
Changing Station, designed to be mounted in restrooms, either over
commodes or in the wash area.
====================================================================================================================================
</TABLE>
Donaldson, Lufkin & Jenrette 26
<PAGE> 1
PURCHASE, WAIVER AND CONSENT AGREEMENT
This Purchase, Waiver and Consent Agreement (this "Agreement") is
entered into as of this 13th day of April, 2000, by and among Massachusetts
Mutual Life Insurance Company, MassMutual Corporate Investors, MassMutual
Participation Investors, MassMutual Corporate Value Partners Limited and Gerlach
& Co. (each a "MassMutual Entity" and together the "MassMutual Entities"),
PlayCore, Inc. (the "Company"), PlayCore Wisconsin, Inc., a wholly-owned
subsidiary of the Company ("PlayCore Wisconsin"), and Jasdrew Acquisition Corp.,
an affiliate of Chartwell Investments II, LLC ("Acquisition Company").
RECITALS
A. The MassMutual Entities, the Company and PlayCore Wisconsin
are parties to those separate Securities Purchase Agreements dated as of March
13, 1997, as amended by Amendment No. 1 thereto dated March 12, 1999 (the
"Securities Purchase Agreements"), pursuant to which PlayCore Wisconsin has
issued the Notes (as defined in the Securities Purchase Agreements) and the
Company has issued the Warrants (as defined in the Securities Purchase
Agreements).
B. The Company and Heartland Industries, Inc. (DE), a
wholly-owned subsidiary of PlayCore Wisconsin, have each entered into a Note
Guarantee guaranteeing the Notes (the "Guarantees") dated March 13, 1997 and
February 16, 1999, respectively.
C. Acquisition Company, the Company and PlayCore Holdings, Inc.
("Parent") have entered into an Agreement and Plan of Merger dated as of the
date hereof (the "Merger Agreement") pursuant to which the Company and
Acquisition Company have agreed to commence a joint tender offer (the "Offer")
for the Company's common stock, par value $.01 (the "Common Stock") at a price
of $10.10 per share (the "Offer Price") and, upon consummation of the Offer,
Acquisition Company will merge with and into the Company, with the Company being
the surviving corporation (the "Merger").
D. Pursuant to the Merger, each share of Common Stock not
tendered in the Offer shall be cancelled in return for an amount equal to the
Offer Price, and Parent will become the sole stockholder of the Company.
E. The consummation of the Offer and the Merger will be deemed a
"Change of Control" under the Securities Purchase Agreements, thereby resulting
in a breach of a number of provisions thereof and providing certain rights and
remedies thereunder to the MassMutual Entities.
F. The parties hereto have entered into this Agreement to set
forth their respective rights and obligations upon the consummation of the Offer
and the Merger.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual promises contained herein, the parties agree as follows:
<PAGE> 2
1. Waiver of Notices. Each of the MassMutual Entities, the
Company and PlayCore Wisconsin waive any and all notices required to be provided
or received under the Securities Purchase Agreements, the Warrants, the Notes,
the Guarantees or any documents entered into in connection therewith
(collectively, the "MassMutual Agreements").
2. Sale of Warrants. The MassMutual Entities, the Company and
Acquisition Company agree that, upon the request of Acquisition Company and the
satisfaction of the conditions set forth in Section 5 hereof, the MassMutual
Entities shall immediately transfer and assign to Acquisition Company (or to the
Company if Acquisition Company is not able to consummate the Merger pursuant to
Section 253 of the General Corporation Law of the State of Delaware), and
Acquisition Company (or the Company, if applicable) shall purchase, the Warrants
for an aggregate purchase price of $6,416,692.52 (determined by multiplying the
number of shares for which the Warrants are exercisable by the Offer Price less
$0.001 per share). The Company represents and warrants to each of the MassMutual
Entities and Acquisition Company that (a) Schedule 1 hereto sets forth the
number of shares of Common Stock for which each of the Warrants is exercisable
on the date hereof, which number has been accurately determined in accordance
with the applicable provisions of the Warrants, and (b) no other adjustments are
required under the terms of the Warrants as of the date hereof. The parties
agree that the purchase price set forth above represents the "Fair Value" of the
Warrants (as defined therein). Each of the MassMutual Entities waives any rights
it may have under any anti-dilution provisions set forth in the Warrants
relating to the transactions contemplated by the Merger Agreement.
3. Redemption of Notes. The MassMutual Entities and PlayCore
Wisconsin agree that, upon satisfaction of the conditions set forth in Section 5
hereof, and notwithstanding any provision in the MassMutual Agreements
(including Section 9.8 of the Securities Purchase Agreements) to the contrary,
PlayCore Wisconsin shall promptly redeem the Notes for an amount equal to: (a)
the principal amount thereof, plus all accrued but unpaid interest thereon, as
of the date of redemption and (b) a pre-payment fee of $500,000.
4. Consents; Waiver of Rights. Each of the MassMutual Entities
consents to the Offer and the Merger and the execution and delivery by the
Company and PlayCore Wisconsin of the Merger Agreement, the Credit Agreement
dated as of the date hereof by and among PlayCore Wisconsin, the other Credit
Parties signatory thereto, the Lenders signatory thereto, General Electric
Capital Corporation and Credit Agricole Indosuez, and the Purchase Agreement
dated as of the date hereof by and among the Company, PlayCore Wisconsin, the
Subsidiaries signatory thereto, GS Mezzanine Partners II, L.P. and GS Mezzanine
Partners Offshore II, L.P. (collectively, the "Transaction Documents"). Each of
the MassMutual Entities waives any and all rights and remedies it may have under
the MassMutual Agreements arising out of or relating to any breach of the
MassMutual Agreements caused by the Offer, the Merger, the execution and
delivery of any of the Transaction Documents or (so long as the sale of the
Warrants and the redemption of the Notes occur in connection therewith) the
consummation of any of the transactions contemplated thereby.
5. Conditions. The purchase of the Warrants and the redemption of
the Notes is conditioned upon:
-2-
<PAGE> 3
a. The first to occur of (x) consummation of the Offer and
the purchase by Acquisition Company and/or Parent of all shares of Common Stock
tendered thereunder and (y) consummation of the Merger; and
b. There being no preliminary or permanent injunction or
other final, non-appealable judgment by a court of competent jurisdiction
preventing or prohibiting the sale of the Warrants or redemption of the Notes
hereunder.
6. Representations and Warranties of the MassMutual Entities.
Each MassMutual Entity hereby represents and warrants, severally and not
jointly, to Acquisition Company as follows:
a. Ownership of Securities. Except as set forth on Schedule 1
hereto, such MassMutual Entity is the sole registered and beneficial owner of
the Warrants and the Notes set forth opposite such MassMutual Entity's name on
Schedule 1 hereto and such Warrants constitute all of the Warrants and the Notes
held by such MassMutual Entity.
b. Power; Binding Agreement. Such MassMutual Entity has the
legal capacity, power and authority to enter into and perform all of its
obligations under this Agreement. The execution, delivery and performance of
this Agreement has been duly authorized by such MassMutual Entity and does not
and will not violate any other agreement to which such MassMutual Entity is a
party or by which it is bound, including, without limitation, any voting
agreement, stockholders' agreement or voting trust. This Agreement has been duly
and validly executed and delivered by such MassMutual Entity and constitutes the
valid and binding agreement of such MassMutual Entity, enforceable against such
MassMutual Entity in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
c. No Conflicts. No filing with, and no permit,
authorization, consent or approval of, any state or federal public body or
authority or any other person is necessary for the execution of this Agreement
by such MassMutual Entity and the consummation by such MassMutual Entity of the
transactions contemplated hereby, other than any such filing, permit,
authorization, consent or approval that have been made or obtained as of the
date hereof. None of the execution and delivery of this Agreement by such
MassMutual Entity, the consummation by such MassMutual Entity of the
transactions contemplated hereby or compliance by such MassMutual Entity with
any of the provisions hereof shall (i) conflict with or result in any breach of
any applicable organizational documents of such MassMutual Entity, (ii) result
in a violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which such MassMutual Entity is a party or by which
such MassMutual Entity or any of such MassMutual Entity's properties or assets
may be bound, or (iii) violate any order, writ, injunction, decree, judgment,
order, statute, rule or regulation applicable to such MassMutual Entity or any
of such MassMutual Entity's properties or assets.
-3-
<PAGE> 4
d. No Encumbrances. Except pursuant to this Agreement, such
MassMutual Entity's Warrants and Notes are, and upon transfer and assignment to
Acquisition Company hereunder will be, free and clear of all claims, options,
third party rights, liens, hypothecations, security interests, proxies, voting
trusts or agreements, understandings or arrangements or any other encumbrances
whatsoever, granted or created by such MassMutual Entity.
7. Representations and Warranties of Acquisition Company.
Acquisition Company hereby represents and warrants to the MassMutual Entities
that (a) it is an "accredited investor" as defined in Rule 501 of Regulation D
under the Securities Act of 1933, as amended, (b) that it has been furnished
with all information that it has requested for the purpose of evaluating its
proposed acquisition of the securities to be purchased by it pursuant hereto and
it is not relying upon any representations of the MassMutual Entities other than
those set forth herein, and (c) that it will acquire such securities for its own
account for investment and not for distribution in any manner that would violate
applicable securities laws. The acquisition of such securities by Acquisition
Company pursuant to Section 2 hereof shall constitute Acquisition Company's
confirmation of the foregoing at the closing.
8. Release of Liability. Upon consummation of the sale of the
Warrants and redemption of the Notes as contemplated by this Agreement, each
MassMutual Entity, on its own behalf and on behalf of its predecessors,
successors and assigns acknowledges that no obligations or liabilities of the
Company, PlayCore Wisconsin or any of their subsidiaries shall be outstanding
under or with respect to the Warrants or the Notes. Each of the Company and
PlayCore Wisconsin acknowledge and agree that all of the indemnification
provisions included in the Securities Purchase Agreements, including without
limitation those set forth in sections 21 and 22 thereof, shall remain in full
force and effect and survive the sale of the Warrants and redemption of the
Notes pursuant hereto. The sale of the Warrants and the redemption of the Notes
pursuant hereto shall, upon such sale and redemption, be irrevocable and without
recourse against any of the MassMutual Entities, other than for breaches of the
MassMutual Entities' representations, warranties and covenants set forth herein.
Except as expressly set forth herein, none of the MassMutual Entities makes any
warranties or representations, express or implied, with respect to any of the
Warrants to be sold pursuant hereto or any of the Notes to be redeemed pursuant
hereto.
9. Termination. This Agreement shall automatically terminate if
the Warrants have not been purchased and the Notes have not been redeemed
pursuant to this Agreement prior June 30, 2000 (unless extended in writing by
the parties hereto).
10. Miscellaneous.
a. Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
among any of the parties with respect to the subject matter hereof.
b. Assignment. This Agreement shall not be assigned without
the prior written consent of the other parties hereto and no rights, or any
direct or indirect interest
-4-
<PAGE> 5
herein, shall be transferable hereunder without the prior written consent of the
other parties hereto; provided, that, Acquisition Company may assign or transfer
its rights hereunder to any other Person that is an Affiliate (as defined in the
Securities Purchase Agreements) of Parent, which assignment shall not relieve
Acquisition Company of any of its respective obligations hereunder.
c. Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by all of
the parties to this Agreement.
d. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier services, such as Federal Express,
providing proof of delivery. All communications hereunder shall be delivered to
the respective parties at the following addresses:
If to any of the MassMutual Entities:
At the addresses set forth on Schedule 1
hereto
If to Acquisition Company:
Chartwell Investments II, LLC
717 Fifth Avenue
23rd Floor
New York, New York 10022
Attention: Michael S. Shein
Telephone: (212) 521-5500
Telecopy: (212) 521-5533
with a copy to: Akin, Gump, Strauss, Hauer
& Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Attention: Russell W. Parks, Jr.
Telephone: (202) 887-4092
Telecopy: (202) 887-4288
If to the Company PlayCore, Inc.
or PlayCore Wisconsin: Riverfront Center, Suite 204
15 West Milwaukee Street
Janesville, WI 53545
Attention: President
Telephone: (608) 741-7183
Telecopy: (608) 741-7191
-5-
<PAGE> 6
with a copy to: Foley & Lardner
Firstar Center
777 East Wisconsin Avenue
Milwaukee, WI 53202-5367
Attention: Benjamin F. Garmer, III
Telephone: (414) 297-5675
Telecopy: (414) 297-4900
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
e. Severability. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
f. Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other parties to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore each of the parties hereto agrees that in the event of any such breach
the aggrieved parties shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which they may be entitled, at law or in equity.
g. Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
h. No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder or thereunder, and any custom or
practice of the parties at variance with the terms hereof or thereof, shall not
constitute a waiver by such party of its right to exercise any such or other
right, power or remedy or to demand such compliance.
i. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
j. Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of the United States District Court for the District of
Delaware or any court
-6-
<PAGE> 7
of the State of Delaware located in the City of Wilmington in any action, suit
or proceeding arising in connection with this Agreement, and agrees that any
such action, suit or proceeding shall be brought only in such court (and waives
any objection based on forum non conveniens or any other objection to venue
therein); provided, however, that such consent to jurisdiction is solely for the
purpose referred to in this Section j and shall not be deemed to be a general
submission to the jurisdiction of said Courts or in the State of Delaware other
than for such purposes.
k. Counterparts; Effectiveness. This Agreement may be
executed in counterparts, each of which shall be deemed to be an original, but
all of which, taken together, shall constitute one and the same Agreement.
l. Expenses. The Company and PlayCore Wisconsin jointly and
severally shall pay all reasonable fees and disbursements incurred by the
MassMutual Entities in connection herewith, including without limitation, the
reasonable fees, expenses and disbursements of Choate, Hale & Stewart; provided,
however, that the Company and PlayCore Wisconsin shall not be liable for any
such fees or disbursements in excess of $5,000.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Purchase,
Waiver and Consent Agreement to be duly executed as of the day and year first
above written.
<TABLE>
<CAPTION>
<S> <C>
MASSACHUSETTS MUTUAL LIFE MASSMUTUAL CORPORATE VALUE
INSURANCE COMPANY PARTNERS LIMITED
By: David L. Babson and Company By: David L. Babson and Company Incorporated,
Incorporated, as Investment Advisor under delegated authority from Massachusetts
Mutual Life Insurance Company, as
Investment Manager
By: /s/ MICHAEL P. HERMSEN By: /s/ MICHAEL P. HERMSEN
----------------------------------------- --------------------------------------------
Managing Director (Title) Managing Director (Title)
MASSMUTUAL CORPORATE INVESTORS MASSMUTUAL PARTICIPATION INVESTORS
By: /s/ MICHAEL P. HERMSEN By: /s/ MICHAEL P. HERMSEN
----------------------------------------- --------------------------------------------
Vice President (Title) Vice President (Title)
The foregoing is executed on behalf of The foregoing is executed on behalf of
MassMutual Corporate Investors, organized under a MassMutual Participation Investors, organized
Declaration of Trust, dated September 13, 1985, as under a Declaration of Trust, dated April 7,
amended from time to time. The obligations of such 1988, as amended from time to time. The
Trust are not personally binding upon, nor shall resort obligations of such Trust are not personally
be had to the property of, any of the Trustees, binding upon, nor shall resort be had to the
shareholders, officers, employees or agents of such property of, any of the Trustees, shareholders,
Trust, but the Trust's property only shall be bound. officers, employees or agents of such Trust, but
the Trust's property only shall be bound.
</TABLE>
<PAGE> 9
<TABLE>
<S> <C>
GERLACH & CO. JASDREW ACQUISITION CORP.
By: /s/ , Partner By: /s/ MICHAEL SHEIN
----------------------------------------- --------------------------------------------
Name: Partner Name: Michael Shein
Title: Title: Vice President
PLAYCORE, INC. PLAYCORE WISCONSIN, INC.
By: /s/ FREDERIC L. CONTINO By: /s/ FREDERIC L. CONTINO
----------------------------------------- --------------------------------------------
Name: Frederic L. Contino Name: Frederic L. Contino
Title: President Title: Chief Executive Officer
</TABLE>
<PAGE> 10
SCHEDULE 1
<TABLE>
<CAPTION>
SHARES FOR PRINCIPAL
WHICH WARRANTS AMOUNT
HOLDER WARRANTS ARE EXERCISABLE NOTES OF NOTES
------ --------- --------------- ------ ----------
<S> <C> <C> <C> <C>
Massachusetts Mutual Life Insurance Company No. RW-1 199,689 No. R-1 $3,928,500
Massachusetts Mutual Life Insurance Company No. RW-2 98,145 No. R-2 $1,931,000
MassMutual Corporate Investors No. RW-3 158,845 No. R-3 $3,125,000
MassMutual Participation Investors No. RW-4 79,422 No. R-4 $1,562,500
Gerlach & Co. No. RW-5 99,278 No. R-5 $1,953,000
</TABLE>
Total Shares for which the Warrants are exercisable is 635,379.
Gerlach & Co. is the record holder of Warrant RW-5 and Note No. R-5 and holds
such Warrant and Note as nominee for MassMutual Corporate Value Partners
Limited. MassMutual Corporate Value Partners Limited is the beneficial owner of
Warrant No. RW-5 and Note No. R-5.
Addresses for each of the MassMutual Entities:
If to a MassMutual Entity (other than Gerlach & Co. or MassMutual Corporate
Value Partners Limited):
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attention: Securities Investment Division
Michael P. Hermsen
Telephone: (413) 788-8411
Telecopy: (413) 846-5033
If to Gerlach & Co. or MassMutual Corporate Value Partners Limited:
Gerlach & Co.
c/o CitiCorp Worldwide Securities Services
3800 Citibank Center Tampa
Tampa, FL 33610
Attention:
--------------------------------
Telephone:
--------------------------------
Telecopy:
--------------------------------
and MassMutual Corporate Value Partners Limited
c/o Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111
Attention: Securities Investment Division
Michael P. Hermsen
Telephone: (413) 788-8411
Telecopy: (413) 846-5033
<PAGE> 1
EXECUTION COPY
OPTION EXERCISE/CANCELLATION AGREEMENT
THIS OPTION EXERCISE/CANCELLATION AGREEMENT (this
"Agreement"), is dated as of April __, 2000, by and among PlayCore, Inc., a
Delaware corporation (the "Company"), Jasdrew Acquisition Corp., a Delaware
corporation ("Acquisition Company"), and _____________, a current director of
the Company ("Optionee").
WHEREAS, the Company has entered into an Agreement and Plan of
Merger (the "Merger Agreement"), dated as of April __, 2000, by and among the
Company, Acquisition Company and PlayCore Holdings, Inc., a Delaware corporation
("Parent"), pursuant to which (i) Acquisition Company and the Company, among
others, have agreed to make a joint tender offer (the "Offer") for all of the
outstanding common stock, $0.01 par value, of the Company ("Shares"), and (ii)
after consummation of the Offer, Acquisition Company will be merged with and
into the Company (the "Merger").
WHEREAS, pursuant to one or both of the Company's 1992 Stock
Program and the Company's 1996 Incentive Stock Plan (collectively, the "Plans"),
Optionee has been granted certain stock options to purchase Shares (the
"Options").
WHEREAS, as a condition to Acquisition Company and Parent
entering into the Merger Agreement, the Company has agreed to cause Optionee to
enter into this Agreement, pursuant to which the Optionee agrees that (i) upon
consummation of the Offer, if requested by Acquisition Company, Optionee will
exercise Optionee's Options that have a per Share exercise price (the "Exercise
Price") less than the price per Share paid in the Offer ("In-the-Money Options")
and sell to Acquisition Company the Option Shares that are issued to Optionee
upon the exercise of such In-the-Money Options (the "Exercised Shares"), (ii)
upon consummation of the Merger, the Company will cancel all of the Optionee's
Options that are not In-the-Money Options ("Out-of-the-Money Options"), and
cancel all the In-the-Money Options not exercised by Optionee for the
consideration provided in Section 2 below and (iii) he will tender any Shares
(other than the Exercised Shares) in the Offer as provided in Section 4 below.
NOW, THEREFORE, in consideration of the foregoing, the
agreements set forth herein and the mutual benefits to be gained by the
performance thereof, the Company, Acquisition Company and Optionee hereby agree
as follows:
1. Exercise of In-the-Money Options. The Optionee agrees that,
upon the consummation of the Offer and request by Acquisition Company, and
provided that Acquisition Company holds at least a majority of the outstanding
Shares at the time of such request, the Optionee shall (i) immediately exercise
all of the Optionee's In-the-Money Options in accordance with the terms of the
Plans and this Agreement, by delivery of a Notice of Exercise in the form
attached hereto as Exhibit A and (ii) sell to Acquisition Company all
<PAGE> 2
Exercised Shares at a price per Share equal to the price per share paid in the
Offer (the "Share Purchase Price"). The aggregate Exercise Price for the
Exercised Shares shall be paid by Optionee in the form of (i) a cash payment in
the form of a check payable to the Company in an amount equal to the product of
(a) the number of Exercised Shares and (b) the par value of such Exercised
Shares (such product, the "Cash Exercise Price") and (ii) a promissory note (the
"Optionee Note") in the form attached hereto as Exhibit B in a principal amount
equal to (x) the number of Exercised Shares multiplied by the Exercise Price
minus (y) the Cash Exercise Price. The Share Purchase Price shall be paid by
Acquisition Company by a promissory note (the "Acquisition Company Note") in the
form of Exhibit C attached hereto.
2. Cancellation of In-the-Money Options. In the event that
Acquisition Company has not requested the Optionee to exercise the Optionee's
In-the-Money Options pursuant to Section 1 above, Optionee hereby agrees that
the Company shall at the Effective Time (as defined in the Merger Agreement)
cancel all of the Optionee's In-the-Money Options in exchange for a cash payment
to Optionee in an amount equal to the product, as to each Option, of (a) the
Share Purchase Price less the Exercise Price per Share for each such Option
cancelled pursuant to this Section 2 and (b) the number of Shares subject to
such Option.
3. Cancellation of Out-of-the-Money Options. In consideration
of the agreements set forth herein and without further consideration, Optionee
further agrees that upon the exercise of the In-the-Money Options pursuant to
Section 1 or the cancellation of the In-the-Money Options pursuant to Section 2
above, the Company shall cancel all of Optionee's Out-of-the-Money Options.
4. Tender of Shares. Optionee hereby agrees to validly tender
(and not to withdraw) pursuant to and in accordance with the terms of the Offer
(provided that the Offer is commenced and not amended in a manner adverse to
Optionee), not later than the Expiration Date (as defined in the Merger
Agreement), the Shares (other than Exercised Shares) owned by Optionee. Each
Optionee hereby acknowledges and agrees that the obligation of the Company or
Acquisition Company to accept for payment and pay for Shares in the Offer,
including the Optionee's Shares, is subject to the terms and conditions of the
Offer.
5. Waiver and Release.
(a) Optionee hereby acknowledges the effect of and consents
to the exercise and/or cancellation of the Options as herein provided.
Without limiting the generality of the foregoing, upon exercise and/or
cancellation of the Options, Optionee waives all rights and benefits
associated with such Options and relinquishes any and all claims that
Optionee may have against the Company, Acquisition Company or Parent
related to such Options or the Plans.
(b) Upon the exercise and/or cancellation of the Options,
Optionee hereby unconditionally releases and discharges the Company,
Acquisition Company and Parent and their respective directors,
officers, employees, agents and assigns from, without limitation, any
and all claims, awards, damages, obligations, promises,
-2-
<PAGE> 3
liabilities or any other compensation whatsoever, arising or in any way
related to the Plans or the Options.
6. Other Covenants, Representations and Warranties of
Optionee. Optionee hereby represents, warrants and covenants to the Company and
Acquisition Company with respect to Optionee as follows:
(a) Ownership of Shares. Optionee is the owner of the: (i)
Options set forth on Schedule 1 hereto, which Schedule indicates the
number of Shares into which the Options are exercisable, the Plan under
which such Options were granted, the grant date of such Options and the
Exercise Price therefor, and (ii) the Shares set forth on Schedule 1.
On the date hereof, the Options and the Shares set forth on Schedule 1
hereto constitute all of the securities of the Company and its
subsidiaries owned of record by Optionee. Except with respect to any
applicable marital property rights, Optionee has sole power to issue
instructions with respect to the matters set forth in this Agreement,
sole power of disposition, sole power of exercise and conversion, sole
power to demand appraisal rights and sole power to agree to all of the
matters set forth in this Agreement, in each case with respect to all
of the securities set forth opposite Optionee's name on Schedule 1
hereto, with no limitations, qualifications or restrictions on such
rights, subject to applicable securities laws, marital property laws
and the terms of this Agreement.
(b) Power; Binding Agreement. Optionee has the legal
capacity, power and authority to enter into and perform all of
Optionee's obligations under this Agreement. This Agreement has been
duly and validly executed and delivered by Optionee and constitutes a
valid and binding agreement of Optionee, enforceable against Optionee
in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by
general equitable principles (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
(c) No Conflicts. (i) No filing with, and no permit,
authorization, consent or approval of, any state or federal public body
or authority or any other person or entity is necessary for the
execution of this Agreement by Optionee and the consummation by
Optionee of the transactions contemplated hereby and (ii) none of the
execution and delivery of this Agreement by Optionee, the consummation
by Optionee of the transactions contemplated hereby or compliance by
Optionee with any of the provisions hereof shall (A) result in a
violation or breach of, or constitute (with or without notice or lapse
of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which
Optionee is a party or by which Optionee or any of Optionee's
properties or assets may be bound, or (B) violate any order, writ,
injunction, decree,
-3-
<PAGE> 4
judgment, order, statute, rule or regulation applicable to Optionee or
any of Optionee's properties or assets.
(d) No Encumbrances. Except pursuant to this Agreement and
any applicable marital property rights, Optionee's securities and the
certificates representing such securities are now, and at all times
during the term hereof will be, held by Optionee, or by a nominee or
custodian for the benefit of Optionee, free and clear of all claims,
options, third party rights, liens, hypothecations, security interests,
proxies, voting trusts or agreements, understandings or arrangements or
any other encumbrances whatsoever.
(e) Restriction on Transfer, Proxies and Non-Interference.
Beginning on the date hereof and ending on the earlier of the Effective
Time or the Termination Date, except as required to comply with the
provisions of this Agreement, the Optionee shall not: (i) directly or
indirectly, offer for sale, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose of, or enter into any contract or option
with respect to the sale, transfer, tender, pledge, encumbrance,
assignment or other disposition of, any or all of Optionee's securities
or any interest therein; (ii) grant any proxies or powers of attorney,
deposit any securities held by Optionee into a voting trust or enter
into a voting agreement with respect to any securities; (iii) take any
action that would make any representation or warranty of Optionee
contained herein untrue or incorrect or have the effect of preventing
or disabling Optionee from performing Optionee's obligations under this
Agreement; or (iv) acquire any Company securities.
(f) Waiver of Appraisal Rights. Each Optionee hereby waives
any rights of appraisal or rights to dissent from the Merger that
Optionee may have with respect to any securities held by Optionee.
(g) Reliance by Acquisition Company. Each Optionee
understands and acknowledges that Acquisition Company is entering into
the Merger Agreement in reliance upon Optionee's execution and delivery
of this Agreement.
(h) Further Assurances. From time to time and until the
Termination Date, at any other party's request and without further
consideration, Optionee shall execute and deliver such additional
documents and take all such further lawful action as may be reasonably
necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement.
7. Representations and Warranties of the Company. The Company
hereby represents and warrants to Acquisition Company and Optionee as follows:
(a) Power; Binding Agreement. The Company has the legal
capacity, power and authority to enter into and perform all of the
Company's obligations under this Agreement. The execution, delivery and
performance of this Agreement has been duly authorized by the Company.
This Agreement has been duly and validly executed and delivered by the
Company and constitutes a valid and binding agreement of the
-4-
<PAGE> 5
Company, enforceable against the Company in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(b) No Conflicts. (i) No filing with, and no permit,
authorization, consent or approval of, any state or federal public body
or authority or any other person or entity is necessary for the
execution of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby and (ii) none of the
execution and delivery of this Agreement by the Company, the
consummation by the Company of the transactions contemplated hereby or
compliance by the Company with any of the provisions hereof shall (A)
conflict with or result in any breach of any applicable organizational
documents of the Company, (B) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default
(or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement or
other instrument or obligation of any kind to which the Company is a
party or by which the Company or any of the Company's properties or
assets may be bound, or (C) violate any order, writ, injunction,
decree, judgment, order, statute, rule or regulation applicable to the
Company or any of the Company's properties or assets.
8. Other Covenants, Representations and Warranties of
Acquisition Company. Acquisition Company hereby represents and warrants to the
Company and the Optionee as follows:
(a) Power; Binding Agreement. Acquisition Company has the
legal capacity, power and authority to enter into and perform all of
Acquisition Company's obligations under this Agreement. The execution,
delivery and performance of this Agreement has been duly authorized by
Acquisition Company. This Agreement has been duly and validly executed
and delivered by Acquisition Company and constitutes a valid and
binding agreement of Acquisition Company, enforceable against
Acquisition Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(b) No Conflicts. (i) No filing with, and no permit,
authorization, consent or approval of, any state or federal public body
or authority or any other person or entity is necessary for the
execution of this Agreement by Acquisition Company and the consummation
by Acquisition Company of the transactions contemplated hereby and
thereby and (ii) none of the execution and delivery of this
-5-
<PAGE> 6
Agreement by Acquisition Company, the consummation by Acquisition
Company of the transactions contemplated hereby or compliance by
Acquisition Company with any of the provisions hereof shall (A)
conflict with or result in any breach of any applicable organizational
documents of Acquisition Company, (B) result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement or
other instrument or obligation of any kind to which Acquisition Company
is a party or by which Acquisition Company or any of Acquisition
Company's properties or assets may be bound, or (C) violate any order,
writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to Acquisition Company or any of Acquisition Company's
properties or assets.
9. Miscellaneous.
(a) Amendment. This Agreement may not be amended except by
an instrument in writing signed by the parties hereto.
(b) Waiver. Any party hereto may (i) extend the time for or
waive compliance with the performance of any obligation or other act of
any other party hereto or (ii) waive any inaccuracy in the
representations and warranties contained herein or in any document
delivered pursuant hereto. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party or
parties to be bound thereby. The failure of any party to this Agreement
to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of those rights.
(c) Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed
given if delivered personally or sent by telecopy or by overnight
courier (providing proof of delivery), if to the Optionee at the
address specified on the signature pages, and if to Acquisition Company
or the Company as specified below:
If to Acquisition Company: Chartwell Investments II LLC
717 Fifth Avenue
23rd Floor
New York, New York 10022
Attention: Michael S. Shein
Telephone: (212) 521-5500
Telecopy: (212) 521-5533
-6-
<PAGE> 7
with a copy to: Akin, Gump, Strauss, Hauer
& Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Attention: Russell W. Parks, Jr.
Telephone: (202) 887-4092
Telecopy: (202) 887-4288
If to the Company PlayCore, Inc.
Riverfront Center, Suite 204
15 West Milwaukee Street
Janesville, WI 53545
Attention:
Telephone: (608) 741-7183
Telecopy: (608) 741-7191
with a copy to: Foley & Lardner
Firstar Center
777 East Wisconsin Avenue
Milwaukee, WI 53202-5367
Attention: Benjamin F. Garmer, III
Telephone: (414) 297-5675
Telecopy: (414) 297-4900
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(d) Assignment, Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder
shall be assigned, in whole or in part, by operation of law or
otherwise, by any of the parties hereto without the prior written
consent of the other parties, except that Acquisition Company may
assign, in its discretion, any or all of its rights, interests and
obligations hereunder to Parent or any direct or indirect subsidiary of
Parent, but no such assignment shall relieve Acquisition Company of any
of its obligations hereunder. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and
permitted assigns. Notwithstanding anything contained in this Agreement
to the contrary, nothing in this Agreement, express or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
giving effect to the principles of conflicts of laws thereof.
-7-
<PAGE> 8
(f) ENFORCEMENT. THE PARTIES AGREE THAT IRREPARABLE DAMAGE
WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS AGREEMENT
WERE NOT PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE
OTHERWISE BREACHED. IT IS ACCORDINGLY AGREED THAT THE PARTIES SHALL BE
ENTITLED TO AN INJUNCTION OR INJUNCTIONS TO PREVENT BREACHES OF THIS
AGREEMENT AND TO ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS OF THIS
AGREEMENT IN ANY COURT OF THE UNITED STATES OR ANY STATE HAVING
JURISDICTION, THIS BEING IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY
ARE ENTITLED AT LAW OR IN EQUITY.
(g) Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more
counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties,
it being understood that all parties need not sign the same
counterpart.
(h) Entire Agreement. This Agreement constitutes the entire
agreement, and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter
of this Agreement.
10. Withholding. Optionee agrees that the Company or
Acquisition Company may withhold from amounts paid to Optionee by Company or
Acquisition Company hereunder such amounts as shall be required by all
applicable federal, state and local laws, regulations and rulings.
11. Termination. This Agreement shall terminate upon
termination of the Merger Agreement (such date of termination being the
"Termination Date").
-8-
<PAGE> 9
IN WITNESS WHEREOF, the undersigned has executed this
document, effective as of the date recited above.
PLAYCORE, INC.
By:
------------------------------
Name:
Title:
-9-
<PAGE> 10
IN WITNESS WHEREOF, the undersigned has executed this
document, effective as of the date recited above.
JASDREW ACQUISITION CORP.
By:
------------------------------
Name:
Title:
-10-
<PAGE> 11
IN WITNESS WHEREOF, the undersigned has executed this
document, effective as of the date recited above.
OPTIONEE
--------------------------------
Address:
-------------------------
-------------------------
-------------------------
-------------------------
-11-
<PAGE> 12
SPOUSAL CONSENT
I am the spouse of the Optionee and I acknowledge having read
the foregoing Option Exercise/Cancellation Agreement ("Option Agreement") to be
executed by my spouse, that I understand the contents thereof and that I agree
that any interest I may have under the Wisconsin Marital Property law or
otherwise in any Shares or Options which are held in the name of my spouse shall
be disposed of in accordance with the Option Agreement. I consent to the Option
Agreement and waive any legal right I may have to assert a spousal community
property or marital property interest in the Shares or the Options. I represent,
warrant and covenant that any such spousal interest I may have shall be
asserted, if at all, only against my spouse, and not against Company or
Acquisition Company or any other person or entity. I further agree that this
consent shall bind my successors, assigns, personal representatives, heirs and
legatees.
Dated ________________, 2000
------------------------------
(Signature of Spouse)
-12-
<PAGE> 13
EXHIBIT A
NOTICE OF EXERCISE
<PAGE> 14
STOCK OPTION EXERCISE NOTICE
I, ____________________________, hereby give notice to PlayCore, Inc.
of my exercise of the following stock options at the following exercise prices:
<TABLE>
<CAPTION>
Number of Shares
Covered by Options Exercise Price
------------------ --------------
<S> <C>
$ per share
------------------ --------
$ per share
------------------ --------
$ per share
------------------ --------
Total: $
------------------ ---------------
</TABLE>
The aggregate exercise price for these options will be paid in cash in
an amount of $____________ and a secured demand note in the amount of
$______________.
Please issue the stock certificate(s) for the shares in my name and
deliver such stock certificate(s) to the following:
PlayCore, Inc.
c/o
-----------------------
--------------------------
--------------------------
Dated: March __, 2000
----------------------------
Name:
<PAGE> 15
EXHIBIT B
FORM OF OPTIONEE NOTE
<PAGE> 16
FORM OF PROMISSORY NOTE
$_________________ Dated: ______________, 2000
FOR VALUE RECEIVED, the undersigned, ____________________, an
individual residing at _____________________ (the "Borrower"), HEREBY PROMISES
TO PAY to PlayCore, Inc. (the "Lender"), the principal amount of
_________________________ U.S. DOLLARS ($____________________) in lawful money
of the United States of America.
ARTICLE I.
DEFINITIONS
As used in this Note, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Acquisition Company" means Jasdrew Acquisition
Corp., a Delaware corporation.
"Acquisition Company Note" means the Promissory Note
from Acquisition Company to Borrower, dated
_________________________________, 2000, substantially in the form
attached as Exhibit 3 to the Option Exercise Agreement.
"Option Exercise Agreement" means the Option
Exercise/Cancellation Agreement, dated as of _________________, 2000,
by and among Borrower, Lender and Acquisition Company.
"Option Shares" means Shares received by Borrower
upon exercise of options to purchase shares of Common Stock of the
Company.
"Security Agreement" means a pledge, assignment and
security agreement entered into by the Borrower for the benefit of the
Lender, in substantially the form of Exhibit A hereto, as such
agreement may be amended or modified from time to time.
ARTICLE II.
AMOUNT AND TERMS OF THE LOAN
SECTION 2.1. The Loan. The Lender agrees, on the terms and
conditions hereinafter set forth, to make a loan (the "Loan") to the Borrower on
the date hereof in the amount set forth above, in order for Borrower to pay the
exercise price (other than the per share par value) for the In-the-Money Options
(as defined in the Option Exercise Agreement).
<PAGE> 17
SECTION 2.2. Repayment. The Borrower shall repay the unpaid
principal amount of the Loan on earlier of the date on which (x) Acquisition
Company acquires the Option Shares for cash consideration or (y) Acquisition
Company satisfies its payment obligations on the Acquisition Company Note.
SECTION 2.3. Prepayments. The Borrower may prepay the Note, in
whole or in part, at any time without penalty.
SECTION 2.4. Payments and Computations. The Borrower shall
make each payment hereunder not later than 1:00 P.M. (Milwaukee time) on the day
when due in U.S. Dollars to the Lender at its address referred to in Section 5.2
in same day funds or by certified check.
ARTICLE III.
SECURITY AGREEMENT
The obligation of the Lender to make the Loan hereunder is
subject to the condition precedent that the Lender shall have received on or
before the date of such Loan the Security Agreement.
ARTICLE IV.
EVENTS OF DEFAULT
SECTION 4.1. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) The Borrower shall admit in writing his inability to pay
his debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Borrower
seeking to adjudicate the Borrower a bankrupt or insolvent, or seeking
liquidation, protection, relief, or composition of the Borrower or of his debts
under any law relating to bankruptcy, insolvency or relief of debtors, or
seeking the entry of an order for relief for the Borrower or for any substantial
part of his or her property; or
(b) The Security Agreement after delivery thereof pursuant to
Article 3 shall for any reason (other than pursuant to the terms thereof) cease
to create a valid security interest in any of the collateral purported to be
covered thereby,
then, and in any such event, the Lender may, by notice to the Borrower, declare
this Note and all other amounts payable under the Note to be forthwith due and
payable, whereupon this Note and all such amounts shall become and be forthwith
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower; provided, that
in the event of an actual or deemed entry of an order for relief with respect to
the Borrower under the Federal Bankruptcy Code, this Note and all
2
<PAGE> 18
such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.
ARTICLE V.
MISCELLANEOUS
SECTION 5.1. Amendments, Etc. No amendment or waiver of any
provision of this Note, nor consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Lender and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 5.2. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic, telex or cable communication) and mailed, telecopied, telegraphed,
telexed, cabled or delivered, if to the Borrower, at its address as indicated in
the recital of parties to this Note; and if to the Lender, at its address at
__________________________, Attn: Michael Shein; or, as to each party, at such
other address and to such other individual as shall be designated by such party
in a written notice to the other party. All such notices and communications
shall, when mailed, telecopied, telegraphed, telexed or cabled, be effective
when deposited in the mails, telecopied, delivered to the telegraph company,
confirmed by telex answerback or delivered to the cable company, respectively.
SECTION 5.3. No Waiver; Remedies. No failure on the part of
the Lender to exercise, and no delay in exercising, any right under this Note
shall operate as a waiver hereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies provided in this Note are cumulative and not
exclusive of any remedies provided by law.
SECTION 5.4. Binding Effect. This Note shall (a) be binding
upon the Borrower and his personal representatives, estate, heirs, devisees,
legatees and assigns, (b) inure to the benefit of the Borrower and his assigns
and (c) be binding upon and inure to the benefit of the Lender and its
respective successors and assigns, except that the Borrower shall not have the
right to assign his rights hereunder or any interest herein without the prior
written consent of the Lender.
SECTION 5.5. Governing Law. This Note shall be governed by,
and construed in accordance with, the laws of the State of New York.
SECTION 5.6. Cost of Collection. Lender shall be entitled to
recover from Borrower all costs and expenses (including reasonable attorneys'
fees and costs) incurred in collecting any amounts due hereunder.
3
<PAGE> 19
IN WITNESS WHEREOF, the Borrower has executed and the Lender
has caused this Note to be executed by its officer thereunto duly authorized, in
each case, as of the date first above written.
-----------------------------------
, as Borrower
----------------
CONSENTED TO AND ACKNOWLEDGED:
PLAYCORE, INC.
as Lender
By:
---------------------------------
Name:
Title:
4
<PAGE> 20
EXHIBIT A TO PROMISSORY NOTE
PLEDGE, ASSIGNMENT AND SECURITY AGREEMENT
PLEDGE, ASSIGNMENT AND SECURITY AGREEMENT, dated as of
__________________, 2000, made by the individual identified on the signature
page hereof (the "Pledgor"), residing at the address indicated for the Pledgor
on the signature page hereof, to PlayCore, Inc. (the "Pledgee").
PRELIMINARY STATEMENTS:
(1) The Pledgor has made a Promissory Note to the Pledgee,
(the "Note"), any terms defined therein and not otherwise defined herein being
used herein are as therein defined.
(2) The Pledgor is the owner of the number of Option Shares
set forth on the Signature Page hereof (the "Pledged Shares").
(3) The Note requires that the Pledgor shall grant the
security interest contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Pledgee to make the loans under the Note, the Pledgor hereby
agrees with the Pledgee as follows:
SECTION 1. Grant of Security. The Pledgor hereby assigns,
transfers and pledges to the Pledgee, and hereby grants to the Pledgee a
security interest in, all of the Pledgor's right, title and interest in, to and
under the following, whether now owned or hereafter acquired, wherever located
and whether now or hereafter existing (the "Collateral")
(a) the Pledged Shares; and
(b) all dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such Pledged Shares:
SECTION 2. Security for Obligations. This Agreement secures
the payment of all obligations of the Pledgor now or hereafter existing under
the Note (all such obligations of the Pledgor being the "Obligations"). Without
limiting the generality of the foregoing, this Agreement secures the payment of
all amounts that constitute part of the Obligations and would be owed by the
Pledgor to the Pledgee under the Note but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Pledgor.
SECTION 3. Delivery of Collateral. All certificates or
instruments representing or evidencing the Collateral are being delivered to and
will be held by or on
<PAGE> 21
behalf of the Pledgee pursuant hereto and shall be in suitable form for transfer
by delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Pledgee.
SECTION 4. Representations and Warranties. The Pledgor
represents and warrants as follows:
(a) The residence of the Pledgor is located at the address
specified on the signature page of this Agreement.
(b) The Pledgor is the legal and beneficial owner of the
Collateral free and clear of any lien, security interest, option or other charge
or encumbrance, except for the security interests created by this Agreement and
under the Option Exercise Agreement.
(c) This Agreement has been duly executed and delivered by the
Pledgor and is a valid and binding obligation of the Pledgor, enforceable
against the Pledgor in accordance with its terms.
(d) The execution and delivery by the Pledgor of this
Agreement and the performance of its obligations thereunder are within the
Pledgor's authority and capacity and do not contravene any law, regulation,
order or contractual restriction binding on or affecting the Pledgor.
SECTION 5. Further Assurances. (a) The Pledgor agrees that
from time to time, at the expense of the Pledgee, the Pledgor will promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable, or that the Pledgee may reasonably
request, in order to perfect and protect any pledge, assignment or security
interest granted or purported to be granted hereby or to enable the Pledgee to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral.
SECTION 6. Transfers and Other Liens. The Pledgor shall not
(a) sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to , any of the Collateral or (b) create or permit
to exist any lien, security interest, option or other charge or encumbrance upon
or with respect to any of the Collateral, except for the security interest under
this Agreement.
SECTION 7. Pledgee Appointed Attorney-in-Fact. The Pledgor
hereby irrevocably appoints the Pledgee the Pledgor's attorney-in-fact after the
occurrence of an Event of Default, with full authority in the place and stead of
the Pledgor and in the name of the Pledgor or otherwise, from time to time in
the Pledgee's discretion, to take any action and to execute any instrument that
the Pledgee may deem necessary or advisable to accomplish the purposes of this
Agreement.
SECTION 8. Pledgee May Perform. If the Pledgor fails to
perform any agreement contained herein, the Pledgee may itself perform, or cause
performance of, such
2
<PAGE> 22
agreement, and the reasonable expenses of the Pledgee incurred in connection
therewith shall be payable by the Pledgor.
SECTION 9. The Pledgee's Duties. The powers conferred on the
Pledgee hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. The Pledgee shall be
deemed to have exercised reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment equal to
that which the Pledgee accords its own property.
SECTION 10. Remedies. If any Event of Default shall have
occurred and be continuing, Pledgee shall, by Notice to Pledgor, be entitled to
take title to the Collateral and Pledgor shall take all action reasonably
requested by Pledgee to effectuate such transfer.
SECTION 11. Amendments; Etc. No amendment or waiver of any
provision of this Agreement, and no consent to any departure by the Pledgor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Pledgee, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
SECTION 12. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic, telex or cable communication) and mailed, telecopied, telegraphed,
telexed, cabled or delivered to it, if to the Pledgor or Pledgee, at its address
specified in the Note, or, as to either party, at such other address as shall be
designated by such party in a written notice to the other party. All such
notices and other communications shall, when mailed, telecopied, telegraphed,
telexed or cabled, be effective when deposited in the mails, telecopied,
delivered to the telegraph company, confirmed by telex answer back or delivered
to the cable company, respectively.
SECTION 13. Continuing Security Interest. This Agreement shall
create a continuing security interest in the Collateral and shall (a) remain in
full force and effect until the payment in full of the Obligations and all other
amounts payable under the Note, (b) be binding upon the Pledgor, its successors
and assigns and (c) inure to the benefit of, and be enforceable by, the Pledgee
and its successors, transferees and assigns.
SECTION 14. Release and Termination. The security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
the Pledgor upon the payment in full of the Obligations and all other amounts
payable under the Note.
SECTION 15. Governing Law; Terms. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York.
3
<PAGE> 23
IN WITNESS WHEREOF, the Pledgor has duly executed and
delivered this Agreement, and the Pledgee has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized, as of the date
first above written.
--------------------------------------
; as Pledgor
----------------------
Address:
-------------------------------
---------------------------------------
PLAYCORE, INC.
as Pledgee
By:
----------------------------------
Title:
Number of Shares owned by Pledgor: Shares.
-----------------------
<PAGE> 24
FORM OF SPOUSAL CONSENT
The undersigned, spouse of _________________, a holder of stock of
PlayCore, Inc., a Delaware corporation (the "Company"), executing the foregoing
Promissory Note and Pledge, Assignment and Security Agreement, hereunto
subscribes [HIS/HER] name in evidence of [HIS/HER] agreement and consent to the
pledge of interests of the Company referred to in the foregoing Promissory Note
and Pledge, Assignment and Security Agreement, and to all other provisions
thereof.
Effective as of _________________, 2000.
----------------------------------
Name:
-----------------------------
<PAGE> 25
EXHIBIT C
FORM OF ACQUISITION COMPANY NOTE
<PAGE> 26
FORM OF PROMISSORY NOTE
$_________________ Dated: ______________, 2000
FOR VALUE RECEIVED, the undersigned, Jasdrew Acquisition
Corp., a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to
________________________, an individual residing at
_________________________________ (the "Lender") the principal amount of
_________________________ U.S. DOLLARS ($____________________) in lawful money
of the United States of America.
ARTICLE I.
DEFINITIONS
As used in this Note, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"Merger Agreement" means the Merger Agreement,
dated as of _________________, 2000, by and among Borrower, PlayCore
Holdings, Inc., a Delaware corporation, and PlayCore, Inc., a Delaware
corporation.
"Option Shares" means all Shares received by Borrower
upon exercise of options to purchase shares of Common Stock of the
Company.
ARTICLE II.
AMOUNT AND TERMS OF THE LOAN
SECTION 2.1. The Loan. The Lender has, on the terms and
conditions hereinafter set forth, made a loan (the "Loan") to the Borrower on
the date hereof in the amount set forth above, in connection with Borrower's
purchase of the Option Shares.
SECTION 2.2. Repayment. The Borrower shall repay the unpaid
principal amount of the Loan on the earlier to occur of (a) the date on which
the Merger contemplated by the Merger Agreement is consummated or (b) 48 hours
following the issuance of the Note.
SECTION 2.3. Prepayments. The Borrower may prepay the Note, in
whole or in part, at any time without penalty.
SECTION 2.4. Payments and Computations. The Borrower shall
make each payment hereunder not later than 3:00 P.M. (Milwaukee time) on the day
when due in U.S. Dollars to the Lender at its address referred to in Section 5.2
in same day funds or by certified check.
<PAGE> 27
ARTICLE III.
EVENTS OF DEFAULT
SECTION 3.1. Events of Default. If Borrower shall admit in
writing his inability to pay his debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be instituted
by or against the Borrower seeking to adjudicate the Borrower a bankrupt or
insolvent, or seeking liquidation, protection, relief, or composition of the
Borrower or of his debts under any law relating to bankruptcy, insolvency or
relief of debtors, or seeking the entry of an order for relief for the Borrower
or for any substantial part of his or her property, then this Note shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower.
ARTICLE IV.
MISCELLANEOUS
SECTION 4.1. Amendments, Etc. No amendment or waiver of any
provision of this Note, nor consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Lender and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 4.2. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic, telex or cable communication) and mailed, telecopied, telegraphed,
telexed, cabled or delivered, if to the Lender, at its address as indicated in
the recital of parties to this Note; and if to the Borrower, at its address at
__________________________, Attn: Michael Shein; or, as to each party, at such
other address and to such other individual as shall be designated by such party
in a written notice to the other party. All such notices and communications
shall, when mailed, telecopied, telegraphed, telexed or cabled, be effective
when deposited in the mails, telecopied, delivered to the telegraph company,
confirmed by telex answerback or delivered to the cable company, respectively.
SECTION 4.3. No Waiver; Remedies. No failure on the part of
the Lender to exercise, and no delay in exercising, any right under this Note
shall operate as a waiver hereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies provided in this Note are cumulative and not
exclusive of any remedies provided by law.
SECTION 4.4. Binding Effect. This Note shall (a) be binding
upon the Borrower and its personal representatives, estate, heirs, devisees,
legatees and assigns, (b) inure to the benefit of the Borrower and its assigns
and (c) be binding upon and inure to the benefit of the Lender and his or her
respective successors and assigns, except that the
2
<PAGE> 28
Borrower shall not have the right to assign his rights hereunder or any interest
herein without the prior written consent of the Lender.
SECTION 4.5. Governing Law. This Note shall be governed by,
and construed in accordance with, the laws of the State of New York.
SECTION 4.6. Cost of Collection. Lender shall be entitled to
recover from Borrower all costs and expenses (including reasonable attorneys'
fees and costs) incurred in collecting any amounts due hereunder.
3
<PAGE> 29
IN WITNESS WHEREOF, the Borrower has executed and the Lender
has caused this Note to be executed by its officer thereunto duly authorized, in
each case, as of the date first above written.
-----------------------------------
By:
Name:
CONSENTED TO AND ACKNOWLEDGED:
- - --------------------------------
as Lender
- - --------------------------------
Name:
4
<PAGE> 30
SCHEDULE 1
TERENCE S. MALONE
OPTIONS:
<TABLE>
<CAPTION>
PLAN GRANTED UNDER GRANT DATE EXERCISE PRICE UNDERLYING SHARES
------------------ ---------- -------------- -----------------
<S> <C> <C> <C>
1992 1/25/93 $5.3800 4,758
1992 4/28/94 5.3800 4,758
1992 2/15/95 5.3800 2,418
1996 4/26/96 4.0000 5,000
1996 5/22/97 3.6250 5,000
1996 9/30/97 4.7500 7,500
1996 10/31/97 4.7500 7,500
1996 11/30/97 4.7500 7,500
1996 12/31/97 4.7500 7,500
1996 6/05/98 4.8125 5,000
1996 5/27/99 6.0000 5,000
SHARES CURRENTLY OWNED: 247
</TABLE>
- - --------------------------------------------------------------------------------
RONALD D. WRAY
OPTIONS:
<TABLE>
<CAPTION>
PLAN GRANTED UNDER GRANT DATE EXERCISE PRICE UNDERLYING SHARES
------------------ ---------- -------------- -----------------
<S> <C> <C> <C>
1996 5/27/99 $6.0000 5,000
SHARES CURRENTLY OWNED: 0
</TABLE>
- - --------------------------------------------------------------------------------
<PAGE> 31
GARY A. MASSEL
OPTIONS:
<TABLE>
<CAPTION>
PLAN GRANTED UNDER GRANT DATE EXERCISE PRICE UNDERLYING SHARES
------------------ ---------- -------------- -----------------
<S> <C> <C> <C>
1996 5/22/97 $3.6250 5,000
1996 6/05/98 4.8125 5,000
1996 5/27/99 6.0000 5,000
SHARES CURRENTLY OWNED: 0
</TABLE>
- - --------------------------------------------------------------------------------
GEORGE N. HERRERA
OPTIONS:
<TABLE>
<CAPTION>
PLAN GRANTED UNDER GRANT DATE EXERCISE PRICE UNDERLYING SHARES
------------------ ---------- -------------- -----------------
<S> <C> <C> <C>
1996 4/26/96 $4.0000 5,000
1996 5/22/97 3.6250 5,000
1996 6/05/98 4.8125 5,000
1996 5/27/99 6.0000 5,000
SHARES CURRENTLY OWNED: 0
</TABLE>
<PAGE> 1
EXECUTION COPY
OPTION EXERCISE/CANCELLATION AGREEMENT
THIS OPTION EXERCISE/CANCELLATION AGREEMENT (this "Agreement"), is
dated as of April 13, 2000, by and among PlayCore, Inc., a Delaware corporation
(the "Company"), Jasdrew Acquisition Corp., a Delaware corporation
("Acquisition Company"), and __________________, a current director, officer or
key employee of the Company or one of its subsidiaries ("Optionee").
WHEREAS, the Company has entered into an Agreement and Plan of Merger
(the "Merger Agreement"), dated as of April __, 2000, by and among the Company,
Acquisition Company and PlayCore Holdings, Inc., a Delaware corporation
("Parent"), pursuant to which (i) Acquisition Company and the Company, among
others, have agreed to make a joint tender offer (the "Offer") for all of the
outstanding common stock, $0.01 par value, of the Company ("Shares"), and (ii)
after consummation of the Offer, Acquisition Company will be merged with and
into the Company (the "Merger").
WHEREAS, pursuant to one or both of the Company's 1992 Stock Program
and the Company's 1996 Incentive Stock Plan (collectively, the "Plans"),
Optionee has been granted certain stock options to purchase Shares (the
"Options").
WHEREAS, as a condition to Acquisition Company and Parent entering
into the Merger Agreement, the Company has agreed to cause Optionee to enter
into this Agreement, pursuant to which the Optionee agrees that (i) upon
consummation of the Offer, if requested by Acquisition Company, Optionee will
exercise Optionee's Options that have a per Share exercise price (the "Exercise
Price") less than the price per Share paid in the Offer ("In-the-Money
Options") and sell to Acquisition Company the Option Shares that are issued to
Optionee upon the exercise of such In-the-Money Options (the "Exercised
Shares"), (ii) upon consummation of the Merger, the Company will cancel all of
the Optionee's Options that are not In-the-Money Options ("Out-of-the-Money
Options"), and cancel all the In-the-Money Options not exercised by Optionee
for the consideration provided in Section 2 below and (iii) he will tender any
Shares (other than the Exercised Shares) in the Offer as provided in Section 4
below.
WHEREAS, on the date hereof Optionee has entered into a Severance,
Change of Control and Non-Competition Agreement ("Severance Agreement") with
Acquisition Company, and acknowledges that, as a condition to Acquisition
Company entering into the Severance Agreement, Acquisition Company has required
Optionee to enter into this Agreement and further acknowledges that the
consideration to be received by Optionee under the Severance Agreement
constitutes, in part, consideration for the cancellation of the
Out-of-the-Money Options.
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing, the agreements set
forth herein and the mutual benefits to be gained by the performance thereof,
the Company, Acquisition Company and Optionee hereby agree as follows:
1. Exercise of In-the-Money Options. The Optionee agrees that, upon
the consummation of the Offer and request by Acquisition Company, and provided
that Acquisition Company holds at least a majority of the outstanding Shares at
the time of such request, the Optionee shall (i) immediately exercise all of
the Optionee's In-the-Money Options in accordance with the terms of the Plans
and this Agreement, by delivery of a Notice of Exercise in the form attached
hereto as Exhibit A and (ii) sell to Acquisition Company all Exercised Shares
at a price per Share equal to the price per share paid in the Offer (the "Share
Purchase Price"). The aggregate Exercise Price for the Exercised Shares shall
be paid by Optionee in the form of (i) a cash payment in the form of a check
payable to the Company in an amount equal to the product of (a) the number of
Exercised Shares and (b) the par value of such Exercised Shares (such product,
the "Cash Exercise Price") and (ii) a promissory note (the "Optionee Note") in
the form attached hereto as Exhibit B in a principal amount equal to (x) the
number of Exercised Shares multiplied by the Exercise Price minus (y) the Cash
Exercise Price. The Share Purchase Price shall be paid by Acquisition Company
by a promissory note (the "Acquisition Company Note") in the form of Exhibit C
attached hereto.
2. Cancellation of In-the-Money Options. In the event that Acquisition
Company has not requested the Optionee to exercise the Optionee's In-the-Money
Options pursuant to Section 1 above, Optionee hereby agrees that the Company
shall at the Effective Time (as defined in the Merger Agreement) cancel all of
the Optionee's In-the-Money Options in exchange for a cash payment to Optionee
in an amount equal to the product, as to each Option, of (a) the Share Purchase
Price less the Exercise Price per Share for each such Option cancelled pursuant
to this Section 2 and (b) the number of Shares subject to such Option.
3. Cancellation of Out-of-the-Money Options. In consideration of the
agreements set forth herein and without further consideration, Optionee further
agrees that upon the exercise of the In-the-Money Options pursuant to Section 1
or the cancellation of the In-the-Money Options pursuant to Section 2 above,
the Company shall cancel all of Optionee's Out-of-the-Money Options.
4. Tender of Shares. Optionee hereby agrees to validly tender (and not
to withdraw) pursuant to and in accordance with the terms of the Offer
(provided that the Offer is commenced and not amended in a manner adverse to
Optionee), not later than the Expiration Date (as defined in the Merger
Agreement), the Shares (other than Exercised Shares) owned by Optionee. Each
Optionee hereby acknowledges and agrees that the obligation of the Company or
Acquisition Company to accept for payment and pay for Shares in the Offer,
including the Optionee's Shares, is subject to the terms and conditions of the
Offer.
5. Waiver and Release.
(a) Optionee hereby acknowledges the effect of and consents
to the exercise and/or cancellation of the Options as herein provided.
Without limiting the
-2-
<PAGE> 3
generality of the foregoing, upon exercise and/or cancellation of the
Options, Optionee waives all rights and benefits associated with such
Options and relinquishes any and all claims that Optionee may have
against the Company, Acquisition Company or Parent related to such
Options or the Plans.
(b) Upon the exercise and/or cancellation of the Options,
Optionee hereby unconditionally releases and discharges the Company,
Acquisition Company and Parent and their respective directors,
officers, employees, agents and assigns from, without limitation, any
and all claims, awards, damages, obligations, promises, liabilities or
any other compensation whatsoever, arising or in any way related to
the Plans or the Options.
6. Other Covenants, Representations and Warranties of Optionee.
Optionee hereby represents, warrants and covenants to the Company and
Acquisition Company with respect to Optionee as follows:
(a) Ownership of Shares. Optionee is the beneficial owner of
the: i) Options set forth on Schedule 1 hereto, which Schedule
indicates the number of Shares into which the Options are exercisable,
the Plan under which such Options were granted, the grant date of such
Options and the Exercise Price therefor, and (ii) the Shares set forth
on Schedule 1. On the date hereof, the Options and the Shares set
forth on Schedule 1 hereto constitute all of the securities of the
Company and its subsidiaries owned of record by Optionee. Except with
respect to any applicable marital property rights, Optionee has sole
power to issue instructions with respect to the matters set forth in
this Agreement, sole power of disposition, sole power of exercise and
conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case
with respect to all of the securities set forth opposite Optionee's
name on Schedule 1 hereto, with no limitations, qualifications or
restrictions on such rights, subject to applicable securities laws,
marital property laws and the terms of this Agreement.
(b) Power; Binding Agreement. Optionee has the legal
capacity, power and authority to enter into and perform all of
Optionee's obligations under this Agreement. This Agreement has been
duly and validly executed and delivered by Optionee and constitutes a
valid and binding agreement of Optionee, enforceable against Optionee
in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and by
general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c) No Conflicts. (i) No filing with, and no permit,
authorization, consent or approval of, any state or federal public
body or authority or any other person or entity is necessary for the
execution of this Agreement by Optionee and the consummation by
Optionee of the transactions contemplated hereby and (ii) none of the
-3-
<PAGE> 4
execution and delivery of this Agreement by Optionee, the consummation
by Optionee of the transactions contemplated hereby or compliance by
Optionee with any of the provisions hereof shall (A) result in a
violation or breach of, or constitute (with or without notice or lapse
of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of any kind
to which Optionee is a party or by which Optionee or any of Optionee's
properties or assets may be bound, or (B) violate any order, writ,
injunction, decree, judgment, order, statute, rule or regulation
applicable to Optionee or any of Optionee's properties or assets.
(d) No Encumbrances. Except pursuant to this Agreement and
any applicable marital property rights, Optionee's securities and the
certificates representing such securities are now, and at all times
during the term hereof will be, held by Optionee, or by a nominee or
custodian for the benefit of Optionee, free and clear of all claims,
options, third party rights, liens, hypothecations, security
interests, proxies, voting trusts or agreements, understandings or
arrangements or any other encumbrances whatsoever.
(e) Restriction on Transfer, Proxies and Non-Interference.
Beginning on the date hereof and ending on the earlier of the
Effective Time or the Termination Date, except as required to comply
with the provisions of this Agreement, the Optionee shall not: (i)
directly or indirectly, offer for sale, sell, transfer, tender,
pledge, encumber, assign or otherwise dispose of, or enter into any
contract or option with respect to the sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of
Optionee's securities or any interest therein; (ii) grant any proxies
or powers of attorney, deposit any securities held by Optionee into a
voting trust or enter into a voting agreement with respect to any
securities; (iii) take any action that would make any representation
or warranty of Optionee contained herein untrue or incorrect or have
the effect of preventing or disabling Optionee from performing
Optionee's obligations under this Agreement; or (iv) acquire any
Company securities.
(f) Waiver of Appraisal Rights. Each Optionee hereby waives
any rights of appraisal or rights to dissent from the Merger that
Optionee may have with respect to any securities held by Optionee.
(g) Reliance by Acquisition Company. Each Optionee
understands and acknowledges that Acquisition Company is entering into
the Merger Agreement in reliance upon Optionee's execution and
delivery of this Agreement.
(h) Further Assurances. From time to time and until the
Termination Date, at any other party's request and without further
consideration, Optionee shall execute and deliver such additional
documents and take all such further lawful action as
-4-
<PAGE> 5
may be reasonably necessary or desirable to consummate and make
effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement.
7. Representations and Warranties of the Company. The Company
hereby represents and warrants to Acquisition Company and Optionee as follows:
(a) Power; Binding Agreement. The Company has the legal
capacity, power and authority to enter into and perform all of the
Company's obligations under this Agreement. The execution, delivery
and performance of this Agreement has been duly authorized by the
Company. This Agreement has been duly and validly executed and
delivered by the Company and constitutes a valid and binding agreement
of the Company, enforceable against the Company in accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(b) No Conflicts. (i) No filing with, and no permit,
authorization, consent or approval of, any state or federal public
body or authority or any other person or entity is necessary for the
execution of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby and (ii) none of the
execution and delivery of this Agreement by the Company, the
consummation by the Company of the transactions contemplated hereby or
compliance by the Company with any of the provisions hereof shall (A)
conflict with or result in any breach of any applicable organizational
documents of the Company, (B) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default
(or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement
or other instrument or obligation of any kind to which the Company is
a party or by which the Company or any of the Company's properties or
assets may be bound, or (C) violate any order, writ, injunction,
decree, judgment, order, statute, rule or regulation applicable to the
Company or any of the Company's properties or assets.
8. Other Covenants, Representations and Warranties of Acquisition
Company. Acquisition Company hereby represents and warrants to the Company and
the Optionee as follows:
(a) Power; Binding Agreement. Acquisition Company has the
legal capacity, power and authority to enter into and perform all of
Acquisition Company's obligations under this Agreement. The execution,
delivery and performance of this Agreement has been duly authorized by
Acquisition Company. This Agreement has been duly and validly executed
and delivered by Acquisition Company and constitutes a valid and
binding agreement of Acquisition Company, enforceable against
Acquisition
-5-
<PAGE> 6
Company in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally
and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(b) No Conflicts. (i) No filing with, and no permit,
authorization, consent or approval of, any state or federal public
body or authority or any other person or entity is necessary for the
execution of this Agreement by Acquisition Company and the
consummation by Acquisition Company of the transactions contemplated
hereby and thereby and (ii) none of the execution and delivery of this
Agreement by Acquisition Company, the consummation by Acquisition
Company of the transactions contemplated hereby or compliance by
Acquisition Company with any of the provisions hereof shall (A)
conflict with or result in any breach of any applicable organizational
documents of Acquisition Company, (B) result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which
Acquisition Company is a party or by which Acquisition Company or any
of Acquisition Company's properties or assets may be bound, or (C)
violate any order, writ, injunction, decree, judgment, order, statute,
rule or regulation applicable to Acquisition Company or any of
Acquisition Company's properties or assets.
9. Miscellaneous.
(a) Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
(b) Waiver. Any party hereto may (i) extend the time for or
waive compliance with the performance of any obligation or other act
of any other party hereto or (ii) waive any inaccuracy in the
representations and warranties contained herein or in any document
delivered pursuant hereto. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party or
parties to be bound thereby. The failure of any party to this
Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
(c) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given
if delivered personally or sent by telecopy or by overnight courier
(providing proof of delivery), if to the Optionee at the address
specified on the signature pages, and if to Acquisition Company or the
Company as specified below:
-6-
<PAGE> 7
If to Acquisition Company: Chartwell Investments II LLC
717 Fifth Avenue
23rd Floor
New York, New York 10022
Attention: Michael S. Shein
Telephone: (212) 521-5500
Telecopy: (212) 521-5533
with a copy to: Akin, Gump, Strauss, Hauer
& Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Attention: Russell W. Parks, Jr.
Telephone: (202) 887-4092
Telecopy: (202) 887-4288
If to the Company PlayCore, Inc.
Riverfront Center, Suite 204
15 West Milwaukee Street
Janesville, WI 53545
Attention:
Telephone: (608) 741-7183
Telecopy: (608) 741-7191
with a copy to: Foley & Lardner
Firstar Center
777 East Wisconsin Avenue
Milwaukee, WI 53202-5367
Attention: Benjamin F. Garmer, III
Telephone: (414) 297-5675
Telecopy: (414) 297-4900
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(d) Assignment, Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder
shall be assigned, in whole or in part, by operation of law or
otherwise, by any of the parties hereto without the prior written
consent of the other parties, except that Acquisition Company may
assign, in its discretion, any or all of its rights, interests and
obligations hereunder to Parent or any direct or indirect subsidiary
of Parent, but no such assignment shall relieve Acquisition Company of
any of its obligations hereunder. Subject to the preceding sentence,
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and
permitted assigns. Notwithstanding
-7-
<PAGE> 8
anything contained in this Agreement to the contrary, nothing in this
Agreement, express or implied, is intended to confer on any person other
than the parties hereto or their respective successors and permitted assigns
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
giving effect to the principles of conflicts of laws thereof.
(f) ENFORCEMENT. THE PARTIES AGREE THAT IRREPARABLE DAMAGE
WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS AGREEMENT WERE
NOT PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE OTHERWISE
BREACHED. IT IS ACCORDINGLY AGREED THAT THE PARTIES SHALL BE ENTITLED TO AN
INJUNCTION OR INJUNCTIONS TO PREVENT BREACHES OF THIS AGREEMENT AND TO
ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS OF THIS AGREEMENT IN ANY COURT
OF THE UNITED STATES OR ANY STATE HAVING JURISDICTION, THIS BEING IN
ADDITION TO ANY OTHER REMEDY TO WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY.
(g) Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
(h) Entire Agreement. This Agreement constitutes the entire
agreement, and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter of
this Agreement.
10. Withholding. Optionee agrees that the Company or Acquisition
Company may withhold from amounts paid to Optionee by Company or Acquisition
Company hereunder such amounts as shall be required by all applicable federal,
state and local laws, regulations and rulings.
11. Termination. This Agreement shall terminate upon termination of
the Merger Agreement (such date of termination being the "Termination Date").
-8-
<PAGE> 9
IN WITNESS WHEREOF, the undersigned has executed this document,
effective as of the date recited above.
PLAYCORE, INC.
By:
--------------------------------
Name:
Title:
-9-
<PAGE> 10
IN WITNESS WHEREOF, the undersigned has executed this document,
effective as of the date recited above.
JASDREW ACQUISITION CORP.
By:
--------------------------------
Name:
Title:
-10-
<PAGE> 11
IN WITNESS WHEREOF, the undersigned has executed this document,
effective as of the date recited above.
OPTIONEE
--------------------------------
Address:
-----------------------
-----------------------
-----------------------
-----------------------
-11-
<PAGE> 12
SPOUSAL CONSENT
I am the spouse of the Optionee and I acknowledge having read the
foregoing Option Exercise/Cancellation Agreement ("Option Agreement") to be
executed by my spouse, that I understand the contents thereof and that I agree
that any interest I may have under the Wisconsin Marital Property law or
otherwise in any Shares or Options which are held in the name of my spouse
shall be disposed of in accordance with the Option Agreement. I consent to the
Option Agreement and waive any legal right I may have to assert a spousal
community property or marital property interest in the Shares or the Options. I
represent, warrant and covenant that any such spousal interest I may have shall
be asserted, if at all, only against my spouse, and not against Company or
Acquisition Company or any other person or entity. I further agree that this
consent shall bind my successors, assigns, personal representatives, heirs and
legatees.
Dated _________________, 2000
-----------------------------
(Signature of Spouse)
-12-
<PAGE> 13
EXHIBIT A
NOTICE OF EXERCISE
<PAGE> 14
STOCK OPTION EXERCISE NOTICE
I, _____________________________, hereby give notice to PlayCore, Inc.
of my exercise of the following stock options at the following exercise prices:
<TABLE>
<CAPTION>
Number of Shares
Covered by Options Exercise Price
------------------ --------------
<S> <C>
$ per share
- - -------------------------------------------- --------
$ per share
- - -------------------------------------------- --------
$ per share
- - -------------------------------------------- --------
Total: $
---------------------- --------------
</TABLE>
The aggregate exercise price for these options will be paid in cash in
an amount of $____________ and a secured demand note in the amount of
$______________.
Please issue the stock certificate(s) for the shares in my name and
deliver such stock certificate(s) to the following:
PlayCore, Inc.
c/o
--------------------------
---------------------------
---------------------------
Dated: March __, 2000
--------------------------
Name:
<PAGE> 15
EXHIBIT B
FORM OF OPTIONEE NOTE
<PAGE> 16
FORM OF PROMISSORY NOTE
$_________________ Dated: ______________, 2000
FOR VALUE RECEIVED, the undersigned, ____________________, an
individual residing at _____________________ (the "Borrower"), HEREBY PROMISES
TO PAY to PlayCore, Inc. (the "Lender"), the principal amount of
_________________________ U.S. DOLLARS ($____________________) in lawful money
of the United States of America.
ARTICLE I.
DEFINITIONS
As used in this Note, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Acquisition Company" means Jasdrew Acquisition Corp., a
Delaware corporation.
"Acquisition Company Note" means the Promissory Note from
Acquisition Company to Borrower, dated _______________________________,
2000, substantially in the form attached as Exhibit 3 to the Option
Exercise Agreement.
"Option Exercise Agreement" means the Option
Exercise/Cancellation Agreement, dated as of _________________, 2000,
by and among Borrower, Lender and Acquisition Company.
"Option Shares" means Shares received by Borrower upon
exercise of options to purchase shares of Common Stock of the Company.
"Security Agreement" means a pledge, assignment and security
agreement entered into by the Borrower for the benefit of the Lender,
in substantially the form of Exhibit A hereto, as such agreement may
be amended or modified from time to time.
ARTICLE II.
AMOUNT AND TERMS OF THE LOAN
SECTION 2.1. The Loan. The Lender agrees, on the terms and conditions
hereinafter set forth, to make a loan (the "Loan") to the Borrower on the date
hereof in the amount set forth above, in order for Borrower to pay the exercise
price (other than the per share par value) for the In-the-Money Options (as
defined in the Option Exercise Agreement).
1
<PAGE> 17
SECTION 2.2. Repayment. The Borrower shall repay the unpaid principal
amount of the Loan on earlier of the date on which (x) Acquisition Company
acquires the Option Shares for cash consideration or (y) Acquisition Company
satisfies its payment obligations on the Acquisition Company Note.
SECTION 2.3. Prepayments. The Borrower may prepay the Note, in whole
or in part, at any time without penalty.
SECTION 2.4. Payments and Computations. The Borrower shall make each
payment hereunder not later than 1:00 P.M. (Milwaukee time) on the day when due
in U.S. Dollars to the Lender at its address referred to in Section 5.2 in same
day funds or by certified check.
ARTICLE III.
SECURITY AGREEMENT
The obligation of the Lender to make the Loan hereunder is subject to
the condition precedent that the Lender shall have received on or before the
date of such Loan the Security Agreement.
ARTICLE IV.
EVENTS OF DEFAULT
SECTION 4.1. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) The Borrower shall admit in writing his inability to pay his debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against the Borrower seeking to
adjudicate the Borrower a bankrupt or insolvent, or seeking liquidation,
protection, relief, or composition of the Borrower or of his debts under any
law relating to bankruptcy, insolvency or relief of debtors, or seeking the
entry of an order for relief for the Borrower or for any substantial part of
his or her property; or
(b) The Security Agreement after delivery thereof pursuant to Article
3 shall for any reason (other than pursuant to the terms thereof) cease to
create a valid security interest in any of the collateral purported to be
covered thereby,
then, and in any such event, the Lender may, by notice to the Borrower, declare
this Note and all other amounts payable under the Note to be forthwith due and
payable, whereupon this Note and all such amounts shall become and be forthwith
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower; provided, that
in the event of an actual or deemed entry of an order for relief with respect
to the Borrower under the Federal Bankruptcy Code, this Note and all
2
<PAGE> 18
such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.
ARTICLE V.
MISCELLANEOUS
SECTION 5.1. Amendments, Etc. No amendment or waiver of any provision
of this Note, nor consent to any departure by the Borrower therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Lender and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 5.2. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled or delivered, if to the Borrower, at its address as indicated in the
recital of parties to this Note; and if to the Lender, at its address at
__________________________, Attn: Michael Shein; or, as to each party, at such
other address and to such other individual as shall be designated by such party
in a written notice to the other party. All such notices and communications
shall, when mailed, telecopied, telegraphed, telexed or cabled, be effective
when deposited in the mails, telecopied, delivered to the telegraph company,
confirmed by telex answerback or delivered to the cable company, respectively.
SECTION 5.3. No Waiver; Remedies. No failure on the part of the Lender
to exercise, and no delay in exercising, any right under this Note shall
operate as a waiver hereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies provided in this Note are cumulative and not
exclusive of any remedies provided by law.
SECTION 5.4. Binding Effect. This Note shall (a) be binding upon the
Borrower and his personal representatives, estate, heirs, devisees, legatees
and assigns, (b) inure to the benefit of the Borrower and his assigns and (c)
be binding upon and inure to the benefit of the Lender and its respective
successors and assigns, except that the Borrower shall not have the right to
assign his rights hereunder or any interest herein without the prior written
consent of the Lender.
SECTION 5.5. Governing Law. This Note shall be governed by, and
construed in accordance with, the laws of the State of New York.
SECTION 5.6. Cost of Collection. Lender shall be entitled to recover
from Borrower all costs and expenses (including reasonable attorneys' fees and
costs) incurred in collecting any amounts due hereunder.
3
<PAGE> 19
IN WITNESS WHEREOF, the Borrower has executed and the Lender has
caused this Note to be executed by its officer thereunto duly authorized, in
each case, as of the date first above written.
-----------------------------
, as Borrower
-------------
CONSENTED TO AND ACKNOWLEDGED:
PLAYCORE, INC.
as Lender
By:
-------------------------------------
Name:
Title:
4
<PAGE> 20
EXHIBIT A TO PROMISSORY NOTE
PLEDGE, ASSIGNMENT AND SECURITY AGREEMENT
PLEDGE, ASSIGNMENT AND SECURITY AGREEMENT, dated as of
__________________, 2000, made by the individual identified on the signature
page hereof (the "Pledgor"), residing at the address indicated for the Pledgor
on the signature page hereof, to PlayCore, Inc. (the "Pledgee").
PRELIMINARY STATEMENTS:
(1) The Pledgor has made a Promissory Note to the Pledgee, (the
"Note"), any terms defined therein and not otherwise defined herein being used
herein are as therein defined.
(2) The Pledgor is the owner of the number of Option Shares set forth
on the Signature Page hereof (the "Pledged Shares").
(3) The Note requires that the Pledgor shall grant the security
interest contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Pledgee to make the loans under the Note, the Pledgor hereby agrees
with the Pledgee as follows:
SECTION 1. Grant of Security. The Pledgor hereby assigns, transfers
and pledges to the Pledgee, and hereby grants to the Pledgee a security
interest in, all of the Pledgor's right, title and interest in, to and under
the following, whether now owned or hereafter acquired, wherever located and
whether now or hereafter existing (the "Collateral")
(a) the Pledged Shares; and
(b) all dividends, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such Pledged Shares:
SECTION 2. Security for Obligations. This Agreement secures the
payment of all obligations of the Pledgor now or hereafter existing under the
Note (all such obligations of the Pledgor being the "Obligations"). Without
limiting the generality of the foregoing, this Agreement secures the payment of
all amounts that constitute part of the Obligations and would be owed by the
Pledgor to the Pledgee under the Note but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Pledgor.
SECTION 3. Delivery of Collateral. All certificates or instruments
representing or evidencing the Collateral are being delivered to and will be
held by or on
<PAGE> 21
behalf of the Pledgee pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to the
Pledgee.
SECTION 4. Representations and Warranties. The Pledgor represents and
warrants as follows:
(a) The residence of the Pledgor is located at the address specified
on the signature page of this Agreement.
(b) The Pledgor is the legal and beneficial owner of the Collateral
free and clear of any lien, security interest, option or other charge or
encumbrance, except for the security interests created by this Agreement and
under the Option Exercise Agreement.
(c) This Agreement has been duly executed and delivered by the Pledgor
and is a valid and binding obligation of the Pledgor, enforceable against the
Pledgor in accordance with its terms.
(d) The execution and delivery by the Pledgor of this Agreement and
the performance of its obligations thereunder are within the Pledgor's
authority and capacity and do not contravene any law, regulation, order or
contractual restriction binding on or affecting the Pledgor.
SECTION 5. Further Assurances. (a) The Pledgor agrees that from time
to time, at the expense of the Pledgee, the Pledgor will promptly execute and
deliver all further instruments and documents, and take all further action,
that may be necessary or desirable, or that the Pledgee may reasonably request,
in order to perfect and protect any pledge, assignment or security interest
granted or purported to be granted hereby or to enable the Pledgee to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
SECTION 6. Transfers and Other Liens. The Pledgor shall not (a) sell,
assign (by operation of law or otherwise) or otherwise dispose of, or grant any
option with respect to , any of the Collateral or (b) create or permit to exist
any lien, security interest, option or other charge or encumbrance upon or with
respect to any of the Collateral, except for the security interest under this
Agreement.
SECTION 7. Pledgee Appointed Attorney-in-Fact. The Pledgor hereby
irrevocably appoints the Pledgee the Pledgor's attorney-in-fact after the
occurrence of an Event of Default, with full authority in the place and stead
of the Pledgor and in the name of the Pledgor or otherwise, from time to time
in the Pledgee's discretion, to take any action and to execute any instrument
that the Pledgee may deem necessary or advisable to accomplish the purposes of
this Agreement.
SECTION 8. Pledgee May Perform. If the Pledgor fails to perform any
agreement contained herein, the Pledgee may itself perform, or cause
performance of, such
2
<PAGE> 22
agreement, and the reasonable expenses of the Pledgee incurred in connection
therewith shall be payable by the Pledgor.
SECTION 9. The Pledgee's Duties. The powers conferred on the Pledgee
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. The Pledgee shall be
deemed to have exercised reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment equal to
that which the Pledgee accords its own property.
SECTION 10. Remedies. If any Event of Default shall have occurred and
be continuing, Pledgee shall, by Notice to Pledgor, be entitled to take title
to the Collateral and Pledgor shall take all action reasonably requested by
Pledgee to effectuate such transfer.
SECTION 11. Amendments; Etc. No amendment or waiver of any provision
of this Agreement, and no consent to any departure by the Pledgor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Pledgee, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 12. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including
telecopier, telegraphic, telex or cable communication) and mailed, telecopied,
telegraphed, telexed, cabled or delivered to it, if to the Pledgor or Pledgee,
at its address specified in the Note, or, as to either party, at such other
address as shall be designated by such party in a written notice to the other
party. All such notices and other communications shall, when mailed,
telecopied, telegraphed, telexed or cabled, be effective when deposited in the
mails, telecopied, delivered to the telegraph company, confirmed by telex
answer back or delivered to the cable company, respectively.
SECTION 13. Continuing Security Interest. This Agreement shall create
a continuing security interest in the Collateral and shall (a) remain in full
force and effect until the payment in full of the Obligations and all other
amounts payable under the Note, (b) be binding upon the Pledgor, its successors
and assigns and (c) inure to the benefit of, and be enforceable by, the Pledgee
and its successors, transferees and assigns.
SECTION 14. Release and Termination. The security interest granted
hereby shall terminate and all rights to the Collateral shall revert to the
Pledgor upon the payment in full of the Obligations and all other amounts
payable under the Note.
SECTION 15. Governing Law; Terms. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York.
3
<PAGE> 23
IN WITNESS WHEREOF, the Pledgor has duly executed and delivered this
Agreement, and the Pledgee has caused this Agreement to be duly executed and
delivered by its officer thereunto duly authorized, as of the date first above
written.
--------------------------------------
; as Pledgor
----------------------
Address:
-----------------------------
--------------------------------------
PLAYCORE, INC.
as Pledgee
By:
-----------------------------------
Title:
Number of Shares owned by Pledgor: _______________________ Shares.
<PAGE> 24
FORM OF SPOUSAL CONSENT
The undersigned, spouse of _______________, a holder of stock of
PlayCore, Inc., a Delaware corporation (the "Company"), executing the foregoing
Promissory Note and Pledge, Assignment and Security Agreement, hereunto
subscribes [HIS/HER] name in evidence of [HIS/HER] agreement and consent to the
pledge of interests of the Company referred to in the foregoing Promissory Note
and Pledge, Assignment and Security Agreement, and to all other provisions
thereof.
Effective as of _________________, 2000.
-----------------------------
Name:
------------------------
<PAGE> 25
EXHIBIT C
FORM OF ACQUISITION COMPANY NOTE
<PAGE> 26
FORM OF PROMISSORY NOTE
$_________________ Dated: ______________, 2000
FOR VALUE RECEIVED, the undersigned, Jasdrew Acquisition Corp., a
Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to
________________________, an individual residing at
_________________________________ (the "Lender") the principal amount of
_________________________ U.S. DOLLARS ($____________________) in lawful money
of the United States of America.
ARTICLE I.
DEFINITIONS
As used in this Note, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Merger Agreement" means the Merger Agreement, dated as of
_________________, 2000, by and among Borrower, PlayCore Holdings,
Inc., a Delaware corporation, and PlayCore, Inc., a Delaware
corporation.
"Option Shares" means all Shares received by Borrower upon
exercise of options to purchase shares of Common Stock of the Company.
ARTICLE II.
AMOUNT AND TERMS OF THE LOAN
SECTION 2.1. The Loan. The Lender has, on the terms and conditions
hereinafter set forth, made a loan (the "Loan") to the Borrower on the date
hereof in the amount set forth above, in connection with Borrower's purchase of
the Option Shares.
SECTION 2.2. Repayment. The Borrower shall repay the unpaid principal
amount of the Loan on the earlier to occur of (a) the date on which the Merger
contemplated by the Merger Agreement is consummated or (b) 48 hours following
the issuance of the Note.
SECTION 2.3. Prepayments. The Borrower may prepay the Note, in whole
or in part, at any time without penalty.
SECTION 2.4. Payments and Computations. The Borrower shall make each
payment hereunder not later than 3:00 P.M. (Milwaukee time) on the day when due
in U.S. Dollars to the Lender at its address referred to in Section 5.2 in same
day funds or by certified check.
<PAGE> 27
ARTICLE III.
EVENTS OF DEFAULT
SECTION 3.1. Events of Default. If Borrower shall admit in writing his
inability to pay his debts generally, or shall make a general assignment for
the benefit of creditors; or any proceeding shall be instituted by or against
the Borrower seeking to adjudicate the Borrower a bankrupt or insolvent, or
seeking liquidation, protection, relief, or composition of the Borrower or of
his debts under any law relating to bankruptcy, insolvency or relief of
debtors, or seeking the entry of an order for relief for the Borrower or for
any substantial part of his or her property, then this Note shall automatically
become and be due and payable, without presentment, demand, protest or any
notice of any kind, all of which are hereby expressly waived by the Borrower.
ARTICLE IV.
MISCELLANEOUS
SECTION 4.1. Amendments, Etc. No amendment or waiver of any provision
of this Note, nor consent to any departure by the Borrower therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Lender and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 4.2. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled or delivered, if to the Lender, at its address as indicated in the
recital of parties to this Note; and if to the Borrower, at its address at
__________________________, Attn: Michael Shein; or, as to each party, at such
other address and to such other individual as shall be designated by such party
in a written notice to the other party. All such notices and communications
shall, when mailed, telecopied, telegraphed, telexed or cabled, be effective
when deposited in the mails, telecopied, delivered to the telegraph company,
confirmed by telex answerback or delivered to the cable company, respectively.
SECTION 4.3. No Waiver; Remedies. No failure on the part of the Lender
to exercise, and no delay in exercising, any right under this Note shall
operate as a waiver hereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies provided in this Note are cumulative and not
exclusive of any remedies provided by law.
SECTION 4.4. Binding Effect. This Note shall (a) be binding upon the
Borrower and its personal representatives, estate, heirs, devisees, legatees
and assigns, (b) inure to the benefit of the Borrower and its assigns and (c)
be binding upon and inure to the benefit of the Lender and his or her
respective successors and assigns, except that the
2
<PAGE> 28
Borrower shall not have the right to assign his rights hereunder or any
interest herein without the prior written consent of the Lender.
SECTION 4.5. Governing Law. This Note shall be governed by, and
construed in accordance with, the laws of the State of New York.
SECTION 4.6. Cost of Collection. Lender shall be entitled to recover
from Borrower all costs and expenses (including reasonable attorneys' fees and
costs) incurred in collecting any amounts due hereunder.
3
<PAGE> 29
IN WITNESS WHEREOF, the Borrower has executed and the Lender has
caused this Note to be executed by its officer thereunto duly authorized, in
each case, as of the date first above written.
-----------------------------------
By:
Name:
CONSENTED TO AND ACKNOWLEDGED:
- - --------------------------------
as Lender
- - --------------------------------
Name:
4
<PAGE> 30
SCHEDULE 1
FREDERIC L. CONTINO
OPTIONS:
<TABLE>
<CAPTION>
PLAN GRANTED UNDER GRANT DATE EXERCISE PRICE UNDERLYING SHARES
------------------ ---------- -------------- -----------------
<S> <C> <C> <C>
1996 1/5/98 $4.0000 25,000
1996 1/5/98 4.0000 50,000
1996 1/5/98 4.0000 50,000
1996 1/5/98 4.0000 50,000
1996 1/5/98 4.0000 150,000
1996 1/5/98 4.0000 50,000 *
* Constitutes Out-of-the-Money/Unvested Options
SHARES CURRENTLY OWNED: 5,400
</TABLE>
THOMAS VAN DER MEULEN
OPTIONS:
<TABLE>
<CAPTION>
PLAN GRANTED UNDER GRANT DATE EXERCISE PRICE UNDERLYING SHARES
------------------ ---------- -------------- -----------------
<S> <C> <C> <C>
1996 6/21/99 $6.1875 50,000
SHARES CURRENTLY OWNED: 0
</TABLE>
<PAGE> 31
RICHARD E. RUEGGER
OPTIONS:
<TABLE>
<CAPTION>
PLAN GRANTED UNDER GRANT DATE EXERCISE PRICE UNDERLYING SHARES
------------------ ---------- -------------- -----------------
<S> <C> <C> <C>
1992 2/27/96 $3.7000 25,198
1996 5/21/97 7.0000 38,750
1996 5/21/97 8.0000 38,750
1996 5/21/97 9.2500 38,750
1996 5/21/97 10.6250 38,750
SHARES CURRENTLY OWNED: 0
</TABLE>
ROBERT FARNSWORTH
OPTIONS:
<TABLE>
<CAPTION>
PLAN GRANTED UNDER GRANT DATE EXERCISE PRICE UNDERLYING SHARES
------------------ ---------- -------------- -----------------
<S> <C> <C> <C>
1996 5/4/98 $4.6875 50,000
SHARES CURRENTLY OWNED: 10,000
</TABLE>
WES SUTTON
OPTIONS:
<TABLE>
<CAPTION>
PLAN GRANTED UNDER GRANT DATE EXERCISE PRICE UNDERLYING SHARES
------------------ ---------- -------------- -----------------
<S> <C> <C> <C>
1996 5/21/97 $7.0000 5,000
1996 5/21/97 8.0000 5,000
1996 5/21/97 9.2500 5,000
1996 5/21/97 4.5000 5,000
SHARES CURRENTLY OWNED: 1,000
</TABLE>
<PAGE> 32
RICHARD L. KUHN
OPTIONS:
<TABLE>
<CAPTION>
PLAN GRANTED UNDER GRANT DATE EXERCISE PRICE UNDERLYING SHARES
------------------ ---------- -------------- -----------------
<S> <C> <C> <C>
1996 5/21/97 $7.0000 8,500
1996 5/21/97 8.0000 8,500
1996 5/21/97 9.2500 8,500
1996 5/21/97 4.5000 8,500
SHARES CURRENTLY OWNED: 500
</TABLE>
THOMAS NORQUIST
OPTIONS:
<TABLE>
<CAPTION>
PLAN GRANTED UNDER GRANT DATE EXERCISE PRICE UNDERLYING SHARES
------------------ ---------- -------------- -----------------
<S> <C> <C> <C>
1996 5/21/97 $7.0000 15,000
1996 5/21/97 8.0000 15,000
1996 5/21/97 9.2500 15,000
1996 5/21/97 4.5000 15,000
SHARES CURRENTLY OWNED: 7,000
</TABLE>
<PAGE> 33
JOHN E. CALDWELL
OPTIONS:
<TABLE>
<CAPTION>
PLAN GRANTED UNDER GRANT DATE EXERCISE PRICE UNDERLYING SHARES
------------------ ---------- -------------- -----------------
<S> <C> <C> <C>
1996 3/01/97 $4.6700 20,000
1996 5/21/97 7.0000 20,000
1996 5/21/97 8.0000 20,000
1996 5/21/97 9.2500 20,000
1996 5/21/97 10.6250 20,000
SHARES CURRENTLY OWNED: 2,028*
</TABLE>
* All Shares are owned by members of Caldwell's family.
DAVID H. HAMMELMAN
OPTIONS:
<TABLE>
<CAPTION>
PLAN GRANTED UNDER GRANT DATE EXERCISE PRICE UNDERLYING SHARES
------------------ ---------- -------------- -----------------
<S> <C> <C> <C>
1992 2/27/96 $3.7000 22,895
1996 5/21/97 7.0000 17,500
1996 5/21/97 8.0000 17,500
1996 5/21/97 9.2500 17,500
1996 5/21/97 10.6250 17,500
SHARES CURRENTLY OWNED: 0
</TABLE>
<PAGE> 34
CURTIS A. COLE
OPTIONS:
<TABLE>
<CAPTION>
PLAN GRANTED UNDER GRANT DATE EXERCISE PRICE UNDERLYING SHARES
------------------ ---------- -------------- -----------------
<S> <C> <C> <C>
1992 2/27/96 $3.7000 25,198
1996 5/21/97 7.0000 11,250
1996 5/21/97 8.0000 11,250
1996 5/21/97 9.2500 11,250
1996 5/21/97 10.6250 11,250
SHARES CURRENTLY OWNED: 0
</TABLE>
LORI WETZEL
OPTIONS:
<TABLE>
<CAPTION>
PLAN GRANTED UNDER GRANT DATE EXERCISE PRICE UNDERLYING SHARES
------------------ ---------- -------------- -----------------
<S> <C> <C> <C>
1996 5/21/97 $7.0000 5,000
1996 5/21/97 8.0000 5,000
1996 5/21/97 9.2500 5,000
1996 5/21/97 10.6250 5,000
SHARES CURRENTLY OWNED: 3,614
</TABLE>
<PAGE> 1
EXHIBIT (d)(vii)
THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of April 13, 2000
is made and entered into by and between Jasdrew Acquisition Corp. and FREDERIC
L. CONTINO (the "Executive"), residing at 12109 Grandview Terrace, Apple Valley,
MN 55124.
WHEREAS, the Executive is an officer and a key employee of PlayCore
Wisconsin, Inc. (the "PlayCore Wisconsin");
WHEREAS, PlayCore, Inc. intends to enter into an Agreement and Plan of
Merger (the "Merger Agreement") with Jasdrew contemporaneously with the
execution hereof pursuant to which Jasdrew will merge (the "Merger") into
PlayCore, Inc. (after which PlayCore, Inc. is to merge into PlayCore Wisconsin);
WHEREAS, the Executive, in consideration of the agreement of Jasdrew
contained herein that Executive will receive payment of a cash bonus from
PlayCore Wisconsin in an amount of $500,000 (the "Closing Amount") promptly
following the effective date of the Merger and a grant of phantom common stock
of PlayCore Holdings, Inc. ("Holdings") to be set forth in a separate phantom
stock grant agreement, desires to enter into this Agreement to provide for the
continued employment of Executive with PlayCore Wisconsin under the terms and
conditions set forth herein;
WHEREAS, the Executive acknowledges and agrees that the terms of this
Agreement shall supersede all prior agreements between the parties as set forth
in Section 13.1 hereof;
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and as an inducement for Jasdrew
to enter into, and to proceed with the transactions contemplated in, the Merger
Agreement, the parties hereto agree as follows:
1. EMPLOYMENT AND DUTIES
1.1 Subject to the terms and conditions of this Agreement, PlayCore
Wisconsin, Inc. ("PlayCore Wisconsin") shall continue to employ the Executive to
serve as the President and Chief Executive Officer of PlayCore Wisconsin. The
Executive and one other individual designated by the Executive (and consented to
by PlayCore Holdings, L.L.C. "Holdings, L.L.C."), using its good faith judgment)
shall be elected to the Board of Directors of PlayCore Wisconsin (the "Board")
effective as of the Commencement Date (as defined below). PlayCore Wisconsin
must use its best efforts to retain the Executive and his designee on the Board
during the Term (as defined below) and any extensions thereof.
1.2 The Executive shall report directly to the Board of Directors of
PlayCore Wisconsin. The Executive shall perform the duties, and assume the
responsibilities and obligations, contemplated by the title referred to in
Section 1.1, and shall perform such other duties and undertake such other
responsibilities and obligations, consistent with his position, as the Board
shall determine from time to time.
1.3 The Executive shall (i) devote his full business time and attention
and best efforts to the business and affairs of PlayCore Wisconsin and its
affiliates, (ii) use his best efforts to
<PAGE> 2
promote and further the interests of PlayCore Wisconsin, and (iii) faithfully
and diligently perform his responsibilities and duties hereunder.
1.4 The Executive shall not, without the prior written consent of
PlayCore Wisconsin, render services, whether or not compensated, to any other
person or as an employee, independent contractor or otherwise; provided,
however, that nothing herein shall prevent or restrict the Executive from (a)
rendering services to charitable, civic or other not-for-profit organizations or
managing his personal and family interests in such a manner as shall not
materially interfere with Executive's performance of his duties under this
Agreement, or (b) serving on the board of directors of a corporation not in
competition with PlayCore Wisconsin, with the consent of PlayCore Wisconsin
which shall not be unreasonably withheld; or (c) accepting speaking engagements
which do not materially interfere with the normal performance of the Executive's
duties.
1.5 The Executive shall comply with all employment policies and
practices of PlayCore Wisconsin as announced in writing from time to time,
provided that none of such policies conflict with any provision of this
Agreement, as the same may be modified from time to time.
2. TERM OF AGREEMENT
2.1 The term of employment under this Agreement shall commence on the
effective date of the Merger (the "Commencement Date").
2.2 Unless extended by mutual consent or as provided in Section 2.3
below, this Agreement shall terminate on the fifth (5th) anniversary of the
Commencement Date (such five-year period being hereinafter referred to as the
"Initial Term").
2.3 Following the initial expiration date of the Initial Term, and if
extended, each year thereafter, this Agreement shall be extended for an
additional twelve months (each such twelve month period an "Extension Year")
unless, no later than six (6) months prior to the end of the Initial Term or
Extension Year either party shall have notified the other in writing that it
does not elect to extend the Term past its then expiration date. The expression
"Term" as used herein shall mean the Initial Term and all Extension Years during
which this Agreement remains in effect.
3. COMPENSATION
3.1 Annual Base Salary. During the Term, PlayCore Wisconsin shall pay
to the Executive an annual base salary of Four Hundred Fifty Thousand Dollars
($450,000), payable in equal installments in arrears in accordance with PlayCore
Wisconsin's customary payroll practices. The Compensation Committee of the Board
(the "Compensation Committee") will review the Executive's performance within
forty-five (45) days after the end of each fiscal year of the Term and may
increase the Executive's annual base salary for the then-current year by up to
ten percent (10%) of the previous year's annual base salary, based upon a good
faith evaluation by the Board, or the Compensation Committee, of the Executive's
performance in such previous year. The increase, if any, will be retroactive to
the beginning of the then-current year.
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3.2 Incentive Bonus. In addition to the annual base salary, the
Executive shall be eligible to receive, with respect to each fiscal year, a
target incentive bonus (the "Incentive Bonus") computed in accordance as
follows. The Incentive Bonus shall equal up to two hundred percent (200%) of the
Executive's annual base salary in effect for such year for the achievement of
100% of the Board-approved corporate target or "max out" EBITDA for such fiscal
year. No Incentive Bonus shall be earned if EBITDA in a fiscal year is below the
EBITDA for the prior fiscal year. The Incentive Bonus shall be calculated
ratably for the actual increase in EBITDA versus the prior year and as compared
to the difference between the prior fiscal year's EBITDA and the corporate
target or "max out" EBITDA. The corporate target or "max out" EBITDA for the
2000 fiscal year shall be $33.1 million and the actual 1999 EBITDA is $27
million.
3.3 Calculation of Bonuses. PlayCore Wisconsin, within 15 days after
the delivery of its audited financial statements shall deliver to the Executive
a statement ("Bonus Statement"), prepared by PlayCore Wisconsin's internal
accounting staff and reviewed by PlayCore Wisconsin's regularly employed
accountants, setting forth the applicable EBITDA calculations or other relevant
financial performance criteria and the resulting Incentive Bonus calculations,
if any.
3.4 Payment of Bonuses. The Incentive Bonus will be paid within thirty
(30) days after delivery to the Executive of the applicable Bonus Statement.
3.5 Stock Options. As of the closing date Executive shall receive a
grant of a nonqualified stock option to purchase 29,000 shares of the common
stock of PlayCore Holdings, Inc. ("Holdings"), in accordance with the terms set
forth in Schedule A.
3.6 Equity Purchase. In connection with the closing of the Transaction,
Executive shall purchase an equity interest in Holdings L.L.C. in an amount of
not less than $500,000. The percentage interest in Holdings L.L.C. to be
purchased by Executive shall be based on the value of Holdings L.L.C. as of the
Closing date. The terms surrounding the purchase, holding and sale of such
equity interest in Holdings L.L.C. shall be set forth in the applicable
operating agreement and subscription agreement as agreed upon between Holdings
L.L.C. and Executive as generally set forth on Schedule B.
3.7 Phantom Stock. On the Commencement Date, Executive shall be granted
4,848 shares of phantom common stock of Holdings ("Phantom Shares") in
accordance with the terms set forth on Schedule C. In the event of the
termination of the Executive which results in the Executive's entitlement to
severance benefits set forth in Section 5, below, such severance payments shall
be reduced dollar for dollar by the greater of: (i) the value of Executive's
grant of Phantom Shares on the date this Agreement becomes effective, or (ii)
the value of such grant of Phantom Shares on the Termination Date (such value to
be determined by multiplying the "equity value" of Holdings (as defined in the
next sentence) by a fraction, the numerator of which shall be the number of
Phantom Shares represented by such grant and the denominator of which shall be
the total number of fully diluted shares of Holdings common stock (assuming that
all options, warrants or other securities which are convertible or exchangeable
for common stock are outstanding). The equity value of Holdings on a Termination
Date shall be determined by the Board of Directors of Holdings in good faith by
selecting an appropriate multiple and then multiplying the consolidated EBITDA
for the latest four fiscal quarters by such multiple and then
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subtracting from such amount all debt, preferred stock and other obligations on
a consolidated basis of Holdings, if any, provided, however, that such
severance benefits shall not be reduced for the value of the vested Phantom
Shares following a Change of Control (as defined in the attachment hereto).
3.8 Other Plans. The Executive shall be entitled to participate in
additional stock option plans or other equity plans or programs, if any, in
which executives of PlayCore Wisconsin are eligible to participate generally as
may be determined by the Board.
4. BENEFITS; EXPENSES
4.1 Benefit Plans. The Executive shall be entitled to participate in
all of the benefit plans and programs available to the senior executives of
PlayCore Wisconsin, as such plans or programs may be in effect from time to
time. PlayCore Wisconsin may, in its sole and absolute discretion, determine to
amend, revise, replace or terminate any such plans or programs at any time. In
addition, PlayCore Wisconsin shall reimburse the Executive for all costs of any
insurance (including, but not limited to, all premiums, deductibles and co-pay
requirements).
4.2 Vacation. During the Term, the Executive shall be entitled to four
(4) weeks of paid vacation per year and all other paid holidays given to
employees of PlayCore Wisconsin in accordance with PlayCore Wisconsin's regular
vacation and holiday policies. Such vacation shall be cumulative and may be
carried over to ensuing years and shall include all vacation carried over from
PlayCore, Inc. Executive shall provide PlayCore Wisconsin with reasonable notice
regarding the taking of vacation and shall always attempt to schedule vacations
so as to minimize conflict with PlayCore Wisconsin's reasonable business needs.
4.3 Business Expenses. PlayCore Wisconsin, upon presentation by the
Executive of appropriate documentation, shall reimburse the Executive for all
reasonable and necessary business expenses incurred by Executive in connection
with the performance of his duties under this Agreement, including reasonable
accommodation expenses during travel required in connection with the performance
of Executive's duties, and subject to PlayCore Wisconsin's written policies with
respect thereto as in effect from time to time. PlayCore Wisconsin shall provide
Executive with a corporate credit card, which Executive shall use solely for
purposes of performing his duties under this Agreement and not for personal use.
4.4 Use of Automobile. PlayCore Wisconsin shall lease and make
available to the Executive, during the Term, an automobile of a model of his
selection reasonably acceptable to PlayCore Wisconsin. PlayCore Wisconsin shall
pay for all expenses associated with the use and enjoyment of the automobile.
4.5 Life Insurance. PlayCore Wisconsin will reimburse Executive for the
standard rate premium for a term life insurance policy having a face amount of
five (5) times Executive's Annual Base Salary, with such additional travel and
accident benefits as may be standard with PlayCore Wisconsin's life insurance
policies provided to senior executives.
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4.6 Country Club Membership. Promptly following the Commencement Date,
PlayCore Wisconsin will reimburse the Executive for a husband and wife
membership in a reasonably appropriate country club.
4.7 Professional Services. PlayCore Wisconsin will reimburse the
Executive for up to $15,000 in the aggregate per year for: (a) his reasonable
legal services in connection with this Agreement, (b) reasonable professional
assistance in the preparation of his income tax returns, and (c) his reasonable
estate and retirement planning services.
4.8 Qualified Retirement Plans. PlayCore Wisconsin shall make
contributions to an account for Executive in such "employee pension benefits
plans" (within the meaning of Section 3(2) of ERISA) as PlayCore Wisconsin shall
maintain from time to time, all in accordance with PlayCore Wisconsin company
policies applicable generally to its employees and subject to such restrictions
and limitations as may be necessary and appropriate for such plans to remain in
compliance with all applicable laws and regulations.
4.9 Supplemental Executive Retirement Plan. PlayCore Wisconsin shall
make annual contributions to a PlayCore Wisconsin sponsored supplemental
executive retirement plan in accordance with the terms of such plan in an amount
not less than twelve percent (12%) of Executive's base salary earned in such
fiscal year.
4.10 Tax Gross-Up Payments. If any reimbursement or payment made to or
for the benefit of the Executive pursuant to this Section 4 ("Section 4
Payment"), would be subject to any federal, state or local income tax (the
"Income Tax"), PlayCore Wisconsin shall pay to the Executive an additional
payment (the "Gross-Up Amount") such that, upon receipt thereof, the sum of (a)
all Section 4 Payments less (b) any Income Tax on the Section 4 Payments and any
Income Tax upon the Gross-Up Amount, shall be equal to the aggregate of the
Section 4 Payments. The Gross-Up Amount shall (a) be calculated based upon the
highest combined federal, state and local marginal income tax rate applicable to
the Executive and (b) shall be paid on or before April 1 of each year or partial
year of Executive's employment in respect of which Section 4 Payments are made.
5. TERMINATION PAYMENTS
5.1 General. This Agreement may be terminated by PlayCore Wisconsin, at
any time, with or without Cause (as defined below).
5.2 Termination Without Cause or Good Reason. If this Agreement is
terminated by PlayCore Wisconsin without Cause or by the Executive for Good
Reason, the Executive shall be entitled to receive the payments specified in the
following subsections of this Section 5.2.
5.2.1 his Annual Base Salary through the Termination Date (as
defined in Section 5.7), pro rated to the Termination Date,
5.2.2 any cash bonus previously awarded but not yet paid,
5.2.3 reimbursement for expenses incurred in accordance with
Section 4 (but not yet reimbursed) and the Gross-up Payment due in respect
thereof,
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5.2.4 for a period of twenty-four months from the Termination Date,
continuation of any benefits available (including, but not limited to medical
and life insurance and the use of an automobile) to the Executive under the
terms of the applicable benefit plans and programs in which the Executive is a
participant on the Termination Date, as if the Executive were still employed
during such period, as the same level of benefits and at the same after-tax
dollar cost to the Executive immediately prior to the Termination Date. If and
to the extent PlayCore Wisconsin is not permitted under applicable law to
provide such benefits under its existing plans, or if the provisions of such
benefits would cause the applicable plan to be deemed to be discriminating in
favor of highly compensated employees under any applicable law or regulation,
PlayCore Wisconsin must provide equivalent benefits on an individual basis at no
additional after-tax cost to the Executive or shall provide the after-tax cash
equivalent thereof. The medical, dental and other health benefits provided in
accordance with this subparagraph 5.2.4 shall be reduced by any equivalent
benefits, without waiting period or pre-existing condition limitations, provided
to the Executive by another employer.
5.2.5 a salary continuation payment commencing on the first day of
the month following the month in which the Termination Date occurs, and
continuing for twenty four months in equal monthly installments at the rate of
the Executive's annual base salary in effect on the Termination Date. PlayCore
Wisconsin may reduce each salary continuation payment in an amount necessary to
satisfy applicable federal, state and local tax withholding requirements and in
accordance with the provisions of Section 3.7 hereof.
5.2.6 payments which in the aggregate shall equal two times the
average Incentive Bonus paid to Executive in the two fiscal years (which shall
include Executive's employment with PlayCore, Inc.) prior to the year in which
the Termination Date occurs (the "Bonus Replacement Amount"). The Bonus
Replacement Amount shall be divided into twenty-four (24) equal payments (each,
a "Monthly Bonus Amount"). A Monthly Bonus Amount shall be paid on the first day
of the month following the month in which the Termination Date occurs, and a
Monthly Bonus Amount shall be paid on the first of the month for each of the
subsequent twenty-three months thereafter. PlayCore Wisconsin may also further
reduce the Bonus Replacement Amount in an amount necessary to satisfy applicable
federal, state and local tax withholding requirements and in accordance with the
provisions of Section 3.7 hereof.
5.3 Termination with Cause. If this Agreement is terminated by PlayCore
Wisconsin with Cause (as defined below), then the Executive shall be entitled to
receive:
5.3.1 his Annual Base Salary to the Termination Date, pro rated to
the Termination Date,
5.3.2 any cash bonus previously awarded but not yet paid,
5.3.3 reimbursement for expenses incurred in accordance with
Section 4 (but not yet reimbursed) and the Gross-up Payment due in respect
thereof,
5.3.4 any benefits available to the Executive under the terms of
the benefit plans and programs in which Executive is a participant on the
Termination Date.
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5.4 Voluntary Termination. The Executive agrees to provide services to
PlayCore Wisconsin as provided herein for the duration of the Term (as the same
may be extended in accordance herewith); provided, however, that in the event of
Executive's voluntary termination, Executive shall be entitled to receive:
5.4.1 his Annual Base Salary to the Termination Date, pro rated to
the Termination Date,
5.4.2 reimbursement for expenses incurred in accordance with
Section 4 (but not yet reimbursed) and the Gross-up Payment due in respect
thereof,
5.4.3 any benefits available to the Executive under the terms of
the benefit plans and programs in which Executive is a participant on the
Termination Date, and
5.4.4 any cash bonuses awarded in respect of a year prior to the
year in which the Termination Date occurs but not yet paid.
5.5 Death or Disability of Executive. A Termination Date shall occur
without any further action, upon the death of the Executive or upon the
Executive's Disability Date. In the event of the death or the occurrence of a
Disability Date, PlayCore Wisconsin shall pay to Executive, or the Executive's
estate or personal representative:
5.5.1 his Annual Base Salary through the end of the mouth in which
the Termination Date occurs by reason of death or disability,
5.5.2 in the event of the occurrence of a Disability Date, salary
continuation payments based on his Annual Base Salary then in effect, for a
period of twelve (12) months commencing on the first day of the month following
the month in which the Termination Date occurs; provided however, that such
payments shall be reduced dollar for dollar by the amount of any payments
Executive is eligible to receive under a PlayCore Wisconsin sponsored disability
plan.
5.5.3 reimbursement for expenses required to be reimbursed in
accordance with Section 4 (but not yet reimbursed) and the Gross-up Payment due
in respect thereof, and
5.5.4 for a period of twelve (12) months following the Termination
Date, subject to applicable law, continuation of any benefits available to the
Executive or the immediate family of a deceased Executive under the terms of the
applicable benefit plans and programs in which Executive is a participant on the
Termination Date, as if the Executive were still employed during such period, at
the same level of benefits and at the same after-tax dollar cost to the
Executive immediately prior to the Termination Date.
5.6 Definitions
5.6.1 "Cause" shall mean:
(i) indictment or conviction of, or a plea of nolo contendere by,
the Executive for any felony or any other crime involving moral
turpitude, fraud or misrepresentation,
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(ii) the Executive engaging (alone or with others) in any other
illegal conduct that is materially detrimental to the business or
reputation of PlayCore Wisconsin,
(iii) the repeated refusal, failure or neglect by the Executive to
perform any material duties under the terms of this Agreement for
reasons other than onset of a disability; provided that such refusal,
failure or neglect shall constitute "Cause" only if the Board of
Directors gives Executive written notice specifically describing such
refusal or neglect, and Executive either fails promptly to cure the
same if the same is reasonably curable, or Executive thereafter repeats
such refusal, failure or neglect,
(iv) the termination by PlayCore Wisconsin of this Agreement for
Cause shall be without prejudice to any claim which PlayCore Wisconsin
may have, at law or in equity, arising out of or in connection with the
events giving rise to such termination.
5.6.2 A "Disability Date" shall be deemed to have occurred on the
120th consecutive day following the first day on which the Executive is unable
substantially to perform his duties because of a disability which is expected to
be permanent or to last for an indefinite duration, as determined by a physician
mutually acceptable to Executive and PlayCore Wisconsin; and
5.6.3 "Good Reason" means: (a) any material adverse changes in job
title, status or responsibility including diminution of duties, (b) any
reduction in base salary and aggregate benefits, (c) material breach of the
Agreement by PlayCore Wisconsin, (d) only after the occurrence of a Change of
Control, relocation of the Executive's primary place of employment with PlayCore
Wisconsin to a location more than thirty-five (35) miles from the location where
Executive maintains his primary office prior to such Change of Control, or (e)
the removal of Executive as a member of the Board of Directors, except if such
removal is for Cause or upon voluntary termination of employment by the
Executive, or due to death or disability.
5.6.4 "Termination Date" means (a) the Executive's last day of
employment on or following the date upon which written notice of termination is
delivered to him by PlayCore Wisconsin, as the same shall be stated in such
notice; (b) the Executive's last day of employment on or following the date upon
which the Executive delivers written notice of resignation to PlayCore Wisconsin
(including a resignation deemed a termination for Good Reason under Section
5.6.3); (c) the Disability Date; or (d) the date of the Executive's death.
5.7 Certain Circumstances Treated as Termination Without Cause. If a
Change of Control has occurred, the expiration of this Agreement without further
extension either at the end of its Initial Term, or at the end of any Extension
Year before December 31, 2007, shall constitute a termination of the Executive
without Cause for all purposes of this Agreement.
5.8 Resignation From Board and Other Offices. The Executive agrees,
that upon a termination of employment for any reason, the Executive shall be
deemed to have automatically tendered his resignation from the Board and any
other offices or directorships of PlayCore Wisconsin or any of its affiliates
effective as of the Termination Date.
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6. CONFIDENTIAL INFORMATION
6.1 The term "Confidential Information" shall mean and include
6.1.1 any and all confidential, proprietary, secret or non-public
information related in any way to the business or operations, present or future,
of PlayCore Wisconsin or any of its affiliates or any customer of PlayCore
Wisconsin or any of its affiliates, which is now, or in the future shall become,
known to Executive as a result of his relationship with PlayCore Wisconsin; and
6.1.2 without limitation of the foregoing, any intellectual
property rights acquired or developed by PlayCore Wisconsin or any of its
affiliates, whether or not patentable or copyrightable, including all business
plans, know-how, technical information, inventions, designs, equipment,
configurations, ideas, concepts, processes, procedures, operations, research and
development plans, computer software, specifications, documentation, trade
secrets, technology (including the expression of any of the foregoing in notes,
formulas, test procedures and results, reports, memoranda or other written
materials, software or other materials of whatsoever nature) pricing
information, business, operational and marketing plans. Notwithstanding the
above, Confidential Information shall not include such information as Executive
can establish by written documentation:
(a) to have become known to the general public without fault on the
part of the Executive;
(b) to have been received by the Executive at any time from a
source other than PlayCore Wisconsin or any of its affiliates, agents,
representatives or employees, lawfully having possession of such
information without an obligation of confidentiality; or
(c) to have been in the public domain or been part of a printed
publication available to the public.
6.2 The Executive acknowledges that the Confidential Information was
and in the future may have been acquired and/or developed by PlayCore Wisconsin
or its affiliates at great expense, may be a special, valuable and unique asset
of PlayCore Wisconsin, and represents the sole exclusive property of PlayCore
Wisconsin. The Executive in the course of his employment with PlayCore Wisconsin
will obtain Confidential Information and personal knowledge of, and influence
over, clients of PlayCore Wisconsin and its affiliates. The Executive
acknowledges that any wrongful use or disclosure of any Confidential Information
would greatly damage PlayCore Wisconsin, causing it irreparable harm and injury.
The Executive covenants and agrees that, at all times during the Term and for a
period of two years thereafter, he shall not, directly or indirectly, publish,
divulge or disclose, in whole or in part, or suffer the use by any third party,
for his own benefit or the benefit of any other person, any Confidential
Information, other than;
(i) in the due course of performing his duties on behalf of
PlayCore Wisconsin, but then only to officers or others acting on
behalf of PlayCore Wisconsin or any client, where the duties of such
person require such disclosure; or
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(ii) as may be required by law.
6.3 The Executive acknowledges and agrees that all copies (in any form
whatsoever) of all memoranda, documents, data, records, notes and other written
information in his possession or under his control which contain or pertain to
any Confidential Information, shall at all times be the sole and exclusive
property of PlayCore Wisconsin. In the event Executive's employment terminates
for any reason, Executive shall promptly deliver to PlayCore Wisconsin all
copies of all such materials.
7. NON-COMPETITION
7.1 During the Term and for an additional period ending twenty-four
(24) months after the termination of his employment the Executive will not
control, manage, operate, be employed or engaged by, or otherwise participate or
engage in business as, or own any interest in, directly or indirectly, any
individual proprietorship, partnership, corporation, joint venture, trust or any
other form of business entity (whether as an individual proprietor, partner,
shareholder, joint venturer, trustee or in any other manner whatsoever) if such
entity is engaged anywhere in the world in the manufacture and/or sale or
furnishing of products and/or services of the type and character manufactured,
sold or furnished by PlayCore Wisconsin or any of its affiliates, provided,
however, that nothing contained in this clause shall be deemed to prohibit the
Executive from owning less than 2% of the shares of a publicly held corporation
engaged in any such business.
7.2 During the Term, and for two (2) years after his termination of
employment hereunder, the Executive will not, directly or indirectly employ or
attempt to employ or assist anyone else to employ any person who is then or at
any time during the preceding year was in the employ of PlayCore Wisconsin or
any of its affiliates.
7.3 During the Term, and for two (2) years after his termination of
employment hereunder, the Executive will not, directly or indirectly interfere
with any business relationship between PlayCore Wisconsin (including its
affiliates) and any of its suppliers or customers.
8. SPECIFIC PERFORMANCE; INJUNCTIVE RELIEF, REFORMATION OF RESTRICTIONS
8.1 The Executive acknowledges that the services to be rendered by
Executive are of a special, unique, extraordinary and intellectual character,
(ii) that Executive will develop a personal acquaintanceship and relationship
with many of PlayCore Wisconsin's customers, as well as an intimate knowledge of
those customer's requirements, (iii) that PlayCore Wisconsin's relationships
with established customers are likely to be placed in Executive's hands and (iv)
that Executive's position with PlayCore Wisconsin places him in a position of
utmost confidence and trust with respect to the clients and executives of
PlayCore Wisconsin. Executive also acknowledges that PlayCore Wisconsin's
marketing efforts are targeted not only to existing and potential customers in
the United States but throughout the entire world and accordingly, it is
reasonable that the restrictive covenants set forth above are not limited by
specific geographic area but by the location of PlayCore Wisconsin's clients.
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8.2 The parties recognize, acknowledge and agree that, if the Executive
commits a breach or PlayCore Wisconsin has reasonable evidence that the
Executive is about to commit a breach, of any of the provisions of Sections 6 or
7 above, PlayCore Wisconsin will suffer irreparable harm and injury, and money
damages will not provide an adequate remedy to PlayCore Wisconsin. Accordingly,
the Executive agrees that, in any such event, PlayCore Wisconsin shall be
entitled to have the provisions of this Agreement specifically enforced by any
court having jurisdiction, without being required to post a bond or other
security and without having to provide the inadequacy of the available remedies
at law. In addition, PlayCore Wisconsin shall be entitled to avail itself of all
such other actions and remedies available to it under law or in equity and shall
be entitled to such damages as it sustains by reason of such breach. PlayCore
Wisconsin agrees to notify the Executive within seven (7) days after the
discovery of any breach or anticipated breach of any of the provisions of
Sections 6 or 7 above.
8.3 The parties acknowledge that the type and periods of restriction
imposed on the Executive pursuant to the provisions of Sections 6 and 7 above
are fair and reasonable, and are reasonably required for the protection of
PlayCore Wisconsin and the goodwill associated with the business of PlayCore
Wisconsin. It is the express desire and intent of the parties that the
provisions of Sections 6 and 7 be enforced to the fullest extent permissible. If
any of the covenants in Sections 6 or 7 above, or any part thereof, is hereafter
constructed to be invalid or unenforceable, the same shall not affect the
remainder of the covenant or covenants, which shall be given full effect,
without regard to the invalid portions. If any of the covenants contained in
Sections 6 or 7, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties hereby
expressly agree that the court making such determination shall have the power to
reduce the duration of such provision and/or areas to which any such provision
shall apply, and, in its reduced or limited form, said provision shall then be
enforceable. The parties hereto intend to and hereby confer jurisdiction to
enforce the covenants contained in Sections 6 and 7 above upon the courts of any
state within the geographical scope of such covenants.
8.4 If the courts of any one or more of such states shall hold any of
the previous covenants unenforceable by reason of the breadth of such scope or
otherwise, it is the intention of the parties hereto that such determination not
bar or in any way affect PlayCore Wisconsin's rights to the relief provided
above in the courts of any other states within the geographical scope of such
covenants, as to breaches of such covenants in such other respective
jurisdictions, the above covenants as they relate to each state being, for this
purpose, severable into diverse and independent covenants.
8.5 The prevailing party in any action arising out of a dispute in
respect of any provision of this Agreement shall be entitled to recover
reasonable attorneys' fees and costs and disbursements incurred in connection
with the prosecution or defense, as the case may be, of any such action.
9. INTELLECTUAL PROPERTY
9.1 During the Term, the Executive shall disclose to PlayCore Wisconsin
all business ideas, inventions and business plans developed by him during such
Term which relate directly or indirectly to PlayCore Wisconsin's business or any
of its affiliates, including without limitation
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any process, operation, product or improvement which may be patentable or
copyrightable. The Executive agrees that all of the foregoing will be the sole
and exclusive property of PlayCore Wisconsin and that he will at PlayCore
Wisconsin's request and cost do whatever is necessary to secure the rights
thereto, by patent, copyright or otherwise, to PlayCore Wisconsin.
10. LIFE INSURANCE
The Executive agrees that PlayCore Wisconsin shall have the right to
obtain life insurance on the Executive's life, at PlayCore Wisconsin's sole
expense and with PlayCore Wisconsin as the sole beneficiary thereof. The
Executive shall (a) cooperate fully with PlayCore Wisconsin in obtaining such
life insurance, (b) sign any necessary consents, applications and other related
forms or documents, and (c) take any reasonably required medical examinations.
The Executive does not represent that he is insurable.
11. REPRESENTATIONS
11.1 By Executive. The Executive hereby represents to PlayCore
Wisconsin that the execution and delivery of this Agreement by him, and the
performance of his obligations hereunder are not in violation of, and do not
conflict with or constitute a default under any agreement by which he is bound
or any order, decree or judgment to which he is subject; that this Agreement
constitutes the valid and binding obligation of Executive and that he is not a
party to or bound by any agreement, understanding or arrangement which would
prevent him from carrying out the terms of this Agreement or subject PlayCore
Wisconsin to liability for employing the Executive pursuant to the terms hereof.
11.2 By Jasdrew
11.2.1 Corporate Authority, etc. Jasdrew represents and warrants
that it has all requisite corporate power and authority to enter into and
perform its obligations pursuant to the terms of this Agreement. The execution
and delivery of this Agreement by Jasdrew and the performance by Jasdrew of the
transactions contemplated herein have been duly and validly authorized by the
Board of Directors of Jasdrew and this Agreement has been duly and validly
authorized by all necessary corporate action. This Agreement is a legal, valid
and binding obligation of Jasdrew.
12. INDEMNIFICATION AND INSURANCE
12.1 Indemnity. PlayCore Wisconsin hereby agrees to hold harmless and
indemnify the Executive to the full extent authorized or permitted by the
provisions of Delaware law authorizing or permitting such indemnification
currently prevailing or that are adopted after the date hereof.
12.2 Maintenance of Insurance. In the event PlayCore Wisconsin
maintains a Directors and Officers Insurance Policy, PlayCore Wisconsin shall
cover Executive to the same extent as other officers and directors of PlayCore
Wisconsin covered thereunder.
12.3 Additional Indemnity. Subject only to the exclusions set forth in
Section 12.4 hereof, PlayCore Wisconsin hereby will hold harmless and indemnify
the Executive against any
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and all expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the Executive in connection
with any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (including an action by or in
the right of Corporation), to which the Executive is, was or at any time becomes
a party, or is threatened to be made a party, by reason of the fact that the
Executive is, was or at any time becomes a director, officer, employee or agent
of Corporation, or is or was serving or at any time serves at the request of
PlayCore Wisconsin as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise.
12.4 Limitation on Additional Indemnity. No indemnity pursuant to
Section 12.3, above, shall be paid by PlayCore Wisconsin:
12.4.1 except to the extent the aggregate of losses to be
indemnified thereunder exceeds the amount of such losses for which the Executive
is indemnified either pursuant to Sections 12.1 or 12.2 hereof or pursuant to
any policy or policies purchased and maintained by PlayCore Wisconsin:
12.4.2 in respect of remuneration paid to the Executive if and to
the extent it shall be determined by a final judgment or other final
adjudication that such remuneration was in violation of law;
12.4.3 on account of any suit in which final judgment is rendered
against the Executive for an accounting or profits made from the purchase or
sale by the Executive of securities of PlayCore Wisconsin pursuant to the
provisions of Section 16(b) of the Exchange Act or similar provisions of any
federal, state or local statutory law or regulation;
12.4.4 on account of the Executive's conduct that is finally
adjudged to have been knowingly fraudulent, deliberately dishonest or willful
misconduct; or
12.4.5 if a decision by a court having jurisdiction in the matter
shall finally determine that such indemnification is not lawful.
12.5 Continuation of Indemnity. All agreements and obligations of
PlayCore Wisconsin contained herein shall continue during the period the
Executive is a director, officer, employee or agent of PlayCore Wisconsin (or is
serving at the request of PlayCore Wisconsin as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise) and shall continue thereafter so long as Executive shall be subject
to any possible claim or threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that the Executive was a director or officer of PlayCore Wisconsin
or serving in any other capacity referred to herein.
13. MISCELLANEOUS
13.1 Entire Agreement. This Agreement (which includes the Exhibits
annexed hereto) sets forth the entire understanding between the parties hereto
and PlayCore Wisconsin as to the subject matter of this Agreement and supersede
all prior agreements, commitments, representations, writings and discussions
between the parties and PlayCore Wisconsin with
13
<PAGE> 14
respect to such subject matter. This Agreement may be terminated, altered,
modified or changed only by a written instrument signed by both parties hereto
prior to the Merger. After the Merger, it may be terminated, altered, modified
or changed only by a written instrument signed by both PlayCore Wisconsin and
Executive.
13.2 Subsequent Performance. The provisions of this Agreement which by
their terms call for performance subsequent to termination of this Agreement or
termination of the Executive's employment hereunder (including without
limitation the provisions of Sections 5, 6, 7, 8 and 12 hereof), shall survive
such termination.
13.3 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, sent by
facsimile transmission or sent by certified, registered or express mail
(including any private carrier guaranteeing overnight delivery), postage or
delivery charges prepaid, or sent by private overnight carrier. Any such notice
shall be deemed delivered (a) when so delivered personally or sent by confirmed
facsimile transmission (provided that a manually signed copy thereof is
delivered by any of the other means provided herein initiated no later than the
next following business day), (b) on the date of delivery if sent by express or
private carrier, or (c) if delivered by certified or registered mail, five (5)
business days after the date of deposit in the United States mail, in all cases
addressed to the recipient at the address of such recipient set forth at the
head of this Agreement or at such other address of which such recipient shall
have given notice to the other in the manner herein provided.
13.4 Government Law. This Agreement shall be deemed to be a contract
made under the internal laws of the State of Wisconsin, without regard to the
principles of the conflict of laws thereof.
13.5 Unenforceability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
13.6 Counterparts. This Agreement may be executed in any number of
counterparts, and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered (which deliveries may be
by telefax) by the parties.
14
<PAGE> 15
14. FAILURE TO CONSUMMATE. This Agreement shall be null and void if the
Merger is not consummated.
IN WITNESS WHEREOF, the Executive and Jasdrew have executed this
Agreement on the date first above written.
JASDREW ACQUISITION CORP.
BY: /s/ MICHAEL SHEIN /s/ FREDERIC L. CONTINO
---------------------------------- -------------------------------------
Vice President Frederic L. Contino
15
<PAGE> 16
SCHEDULE A
OPTION TERMS
AMOUNT OF INITIAL GRANT: A nonqualified option grant (the
"Initial Grant") of 29,000 shares of
common stock of PlayCore Holdings,
Inc. ("Holdings"). The Initial Grant
shall be pursuant to an option plan
(and underlying option grant
agreement) established by Holdings
with an initial reserve equal to 10%
of the outstanding common shares of
Holdings as of the closing date (post
transaction).
EXERCISE PRICE: The per share exercise price of the
option shall be the common stock's
fair market value on the date of grant
(which shall be equal to the fair
market value of the equivalent number
of shares of common stock as of the
closing date).
TERM: Options, or any portion thereof, not
previously exercised or terminated
will expire ten years from the date of
grant.
METHOD OF EXERCISE: Prior to an "initial public offering",
cash only; provided, however, the
Board of Directors or Compensation
Committee of Holdings may authorize
cashless exercises. An option may only
be exercised with respect to whole
shares.
VESTING: TIME OPTIONS: 50% of the total number
of shares subject to the Initial Grant
shall vest ratably (25% a year) on
each of the first through fourth
anniversaries of the date of grant ("A
Options"), provided the Executive is
in the employ of PlayCore Wisconsin,
Inc. or an affiliate ("PlayCore
Wisconsin") on each such date.
If there is a Change in Control (as
defined in the option plan) prior to
the fourth anniversary of the date of
grant, and the Executive is still in
the employ of PlayCore Wisconsin, all
unvested Time Options shall vest.
PERFORMANCE OPTIONS: The remaining 50%
of the total number of shares subject
to the Initial Grant
<PAGE> 17
shall vest if the net Internal Rate of
Return ("IRR") realized by PlayCore
Holdings, L.L.C. ("Holdings L.L.C.")
on its total investment in Holdings
(after dilution from options on shares
held by management) is 25% or more
("Target IRR") as of the
"Determination Date," ("Performance
Options") and the Executive is still
in the employ of PlayCore Wisconsin on
the Determination Date.
The Determination Date regarding the
attainment of the IRR shall be the
closing date or such other time as
Holdings L.L.C. receives cash payments
for its interests in Holdings.
TERMINATION OF EMPLOYMENT:
BY PLAYCORE WISCONSIN
WITHOUT CAUSE OR
BY THE EXECUTIVE
FOR GOOD REASON OR
UPON DEATH OR DISABILITY: TIME OPTIONS: All vested Time Options
remain outstanding and exercisable for
a period of 90 days and if not
exercised by end of business on the
90th day shall terminate. All unvested
Time Options shall be immediately
terminate on the Termination Date.
PERFORMANCE OPTIONS: Performance
Options shall vest if the Target IRR
would have been achieved based upon
the fair market value of Holdings
L.L.C.'s investment in Holdings as of
the Termination Date and Executive
will receive the applicable value of
the Performance Option as determined
at the Termination Date by the Board
of Directors of Holdings at such time
as Holdings L.L.C. receives cash
payments for its interests in
Holdings. If the Target IRR is not
achieved on both the Termination Date
and the Determination Date, then all
Performance Options shall be
terminated with no payment to or value
to Executive.
<PAGE> 18
BY PLAYCORE WISCONSIN FOR
CAUSE OR BY THE
EXECUTIVE WITHOUT
GOOD REASON: TIME OPTIONS: All vested Time Options
shall remain exercisable for 90 days
and if not exercised by the end of
business on the 90th day shall
terminate. All nonvested Time Options
shall terminate on the Termination
Date.
PERFORMANCE OPTIONS: All Performance
Options shall immediately terminate.
CALL ON SHARES ACQUIRED In the event of the Executive's
ON EXERCISE OF OPTION: employment for any reason, all shares
in Holdings held by Executive as a
result of exercising Options shall be
subject to a "call" by Holdings or its
designee (the "Company Call") at the
fair market value on the Termination
Date. The Company Call must be
exercised within six months of the
Termination Date. The purchase price
as determined above will be paid
one-third in cash within 30 days of
the exercise of the Company Call and
the remaining two-thirds payable
within two years of the date of
exercise of the Company Call (the
"Deferred Call Payments"). Any
Deferred Call Payments shall be
credited with an appropriate interest
rate or dividend rate. In the event
that Holdings is restricted from
purchasing such shares for cash under
any applicable financing or other
agreements, Holdings may issue the
Executive a note or such other
permissible security (which shall
contain commercially reasonable terms)
in full satisfaction of such call. In
no event shall the Executive be paid
less cash at the time of the exercise
of the Company Call than the
Executive's income tax liability
resulting from the sale of the shares.
EXECUTIVE PUT: In the event of Executive's
termination of employment by PlayCore
Wisconsin without Cause, by the
Executive for Good Reason, or as a
result of death or disability, the
Executive or his estate as the case
may be, may exercise a "put" to
Holdings (the "Executive Put") at fair
market value on the Termination Date,
subject to Holdings' ability under its
financing documents. The Executive Put
must be exercised within six months of
the
<PAGE> 19
Termination Date. The purchase price
as determined above will be paid
one-third in cash within 30 days of
the exercise of the Executive Put and
the remaining two-thirds will be
payable within two years of the date
of exercise of the Executive Put (the
"Deferred Put Payments"). Any Deferred
Put Payments shall be credited with an
appropriate interest rate or dividend
rate. All payments made by Holdings
with respect to its exercise of the
Executive Put are subject to Holdings'
financing agreements. In the event
that Holdings is restricted from
purchasing such shares for cash under
any applicable financing or other
agreements, Holdings may issue the
Executive a note or such other
permissible security (which shall
contain commercially reasonable terms)
in full satisfaction of such put.
REALIZATION: Except in the case of the exercise of
the Company Call or Executive Put as
set forth above, Executive shall be
required to hold the shares or Options
until such time Holdings L.L.C. sells
or otherwise exits from its equity
interest in Holdings.
TAG-ALONG RIGHTS: In the event of a sale of Holdings by
Holdings, L.L.C., the Executive will
have the same tag-along rights as
other investors.
RESTRICTIONS ON TRANSFER: The Options and shares will be
non-transferable, except with respect
to a transfer to a trust or
partnership, the only beneficiaries or
partners (as the case may be) of which
are immediate family member of
Executive, or in accordance with the
terms of any applicable operating
agreement or shareholders agreement
and the laws of descent and
distribution.
Other than with respect to transfers
pursuant to the preceding sentence, no
third party shall have any direct or
indirect beneficial interest in the
Options.
REGISTRATION RIGHTS: Executive will have the same piggyback
registration rights as other
investors.
FAIR MARKET VALUE: Fair market value of vested shares on
a Termination Date shall be determined
by multiplying the "equity value" of
Holdings by a fraction, the numerator
of which shall be the number of vested
shares and the denominator of which
shall be the total number of fully
diluted shares of Holdings common
stock (assuming that all options,
warrants or other securities which are
convertible or exchangeable for common
stock are outstanding). The equity
value of Holdings on a Termination
Date shall be determined by the Board
of Directors of Holdings in good faith
by selecting an appropriate multiple
and then multiplying the consolidated
EBITDA for the latest four fiscal
quarters by such multiple and then
subtracting from such amount all debt,
preferred stock and other obligations
on a consolidated basis of Holdings,
if any.
<PAGE> 20
SCHEDULE B
EQUITY PURCHASE TERMS
AMOUNT OF EQUITY: A percentage equity interest in
PlayCore Holdings, L.L.C. ("Holdings
L.L.C.") equal to $500,000 and
determined based on the value paid by
Chartwell Investments II, L.L.C. or
its affiliates ("Chartwell") for its
interest in Holdings L.L.C. (the
"Interest"). Upon execution of the
applicable subscription documents
relating to the Interest, Executive
shall make a cash payment to Holdings
L.L.C. of $500,000.
COMPANY CALL ON INTERESTS: In the event of Executive's
termination of employment for any
reason, the Interest held by the
Executive shall be subject to a "call"
by Holdings L.L.C. or its designee
(the "Company Call") at the fair
market value on the Termination Date.
The Company Call must be exercised
within six months of the Termination
Date. The purchase price as determined
above will be paid as follows: the
lesser of the Executive's original
investment or fair market value of the
Interest within 30 days of the
exercise of the Company Call and the
remaining amount, if any, payable
within two years of the date of
exercise of the Company Call (the
"Deferred Call Payments"). Any
Deferred Call Payments shall be
credited with an appropriate interest
rate or dividend rate. In the event
that Holdings L.L.C. is restricted
from purchasing the Interest for cash
under any applicable financing or
other agreements to which Holdings
L.L.C. or any of its subsidiaries is a
party which prevent Holdings L.L.C.
from obtaining cash, then Holdings
L.L.C. may issue the Executive a note
or such other permissible security
(which shall contain commercially
reasonable terms) in full satisfaction
of such call.
EXECUTIVE PUT: In the event of Executive's
termination of employment by PlayCore
Wisconsin, Inc. or an affiliate
("PlayCore Wisconsin") without Cause,
by the Executive for Good Reason, or
as a result of death or disability,
the Executive or his estate as the
case may be, may exercise a "put" to
Holdings
<PAGE> 21
L.L.C. (the "Executive Put") of the
Interest at fair market value on the
Termination Date, subject to
compliance with the financing
documents of Holdings L.L.C. or of any
of its subsidiaries. The Executive Put
must be exercised within six months of
the Termination Date. The purchase
price as determined above will be paid
as follows: the lesser of the
Executive's original investment or
fair market value of the Interest
within 30 days of the exercise of the
Executive Put and the remaining
amount, if any, subject to the Company
Call, will be held by Executive until
such time as Holdings L.L.C. sells or
otherwise exits from its equity
interest in PlayCore Holdings, Inc.
("Holdings"). All payments by Holdings
L.L.C. with respect to the exercise of
the Executive Put are subject to the
financing agreements of Holdings
L.L.C. or any of its subsidiaries. In
the event that Holdings L.L.C. is
restricted from purchasing the
Interest for cash under any applicable
financing or other agreements to which
Holdings L.L.C. or any of its
subsidiaries is a party which prevent
Holdings L.L.C. from obtaining cash,
then Holdings L.L.C. may issue
Executive a note or such other
permissible security (which shall
contain commercially reasonable terms)
in full satisfaction of such put.
REALIZATION: Except in the case of the exercise of
Company Call or Executive Put as set
forth above, Executive shall be
required to hold the Interest until
such time as Chartwell sells or
otherwise exits from its equity
interest in Holdings L.L.C.
TAG-ALONG RIGHTS: In the event of a sale of Holdings
L.L.C. by Chartwell, the Executive
will have the same tag-along rights as
other investors.
RESTRICTIONS ON TRANSFER: The Interest will be non-transferable,
except with respect to a transfer to a
trust or partnership, the only
beneficiaries or partners (as the case
may be) of which are immediate family
member of Executive, or in accordance
with the terms of any applicable
operating agreement or shareholders
agreement and the laws of descent and
distribution.
<PAGE> 22
Other than with respect to transfers
pursuant to the preceding sentence, no
third party shall have any direct or
indirect beneficial interest in the
Interest.
REGISTRATION RIGHTS: Executive will have the same piggyback
registration rights as other
investors.
FAIR MARKET VALUE: Fair market value of Executive's
Interest on a Termination Date shall
be determined in three steps as
follows. (1) The equity value of
Holdings on a Termination Date shall
be determined by the Board of
Directors of Holdings in good faith by
selecting an appropriate multiple and
then multiplying the consolidated
EBITDA for the latest four fiscal
quarters by such multiple and then
subtracting from such amount all debt,
preferred stock and other obligations
on a consolidated basis of Holdings,
if any. (2) Holdings L.L.C's interest
in Holdings shall be determined by
multiplying the equity value of
Holdings (as determined under step
number (1)) on the Termination Date by
a fraction, the numerator of which
shall be the number of shares of
common stock of Holdings that are
owned by Holdings L.L.C., and the
denominator of which shall be the
total number of fully diluted shares
of Holdings common stock (assuming
that all options, warrants or other
securities which are convertible or
exchangeable for common stock are
outstanding). (3) Finally, the
percentage representing Executive's
Interest shall be multiplied by the
dollar amount of Holdings L.L.C.'s
interest in Holdings as determined
under step number (2).
<PAGE> 23
SCHEDULE C
PHANTOM STOCK TERMS
AMOUNT OF INITIAL GRANT: A grant of 4,848 shares of phantom
common stock of PlayCore Holdings,
Inc. ("Holdings") (the "Phantom
Shares") pursuant to a grant by
Holdings.
VESTING: One third of the total number of
Phantom Shares shall vest on each
anniversary of the date of the grant.
In the event that the Executive's
employment with PlayCore Wisconsin,
Inc. or an affiliate ("PlayCore
Wisconsin") is terminated for any
reason, all non-vested shares shall be
forfeited; provided, however, that if
such termination occurs (i) within 180
days after a Change of Control, if the
successor does not at the closing
agree to assume all obligations under
Executive's Employment Agreement, or
(ii) if the successor does assume such
obligations under the Executive's
Employment Agreement, after 180 days
but not more than 210 days after such
a change or control, all of
Executive's Phantom Shares shall
immediately vest.
COMPANY CALL: In the event of Executive's
termination of employment for any
reason, the vested Phantom Shares held
by the Executive shall be subject to a
"call" by Holdings or its designee
(the "Company Call") at the fair
market value on the Termination Date.
The Company Call must be exercised
within six months of the Termination
Date. The purchase price shall be the
equivalent of the fair market value of
an equivalent number of common shares
of Holdings on the Termination Date.
It will be paid one-third in cash
within 30 days of the exercise of the
Company Call and the remaining
two-thirds will be payable within two
years of the date of exercise of the
Company Call (the "Deferred Call
Payments"). Any Deferred Call Payments
shall be credited with an appropriate
interest rate or dividend rate. In the
event that Holdings is restricted from
purchasing such shares for cash under
any applicable financing or other
agreements, Holdings may issue the
Executive a note or such other
permissible security (which shall
contain
<PAGE> 24
commercially reasonable terms) in full
satisfaction of such call. In no event
shall the Executive be paid less cash
at the time of the exercise of the
Company Call than the Executive's
income tax liability resulting from
the sale of the Phantom Shares.
EXECUTIVE PUT: In the event of Executive's
termination of employment by PlayCore
Wisconsin without Cause, by the
Executive for Good Reason, or as a
result of death or disability, the
Executive or his estate as the case
may be, may exercise a "put" to
Holdings (the "Executive Put") of the
vested Phantom Shares at fair market
value on the Termination Date. The
Executive Put must be exercised within
six months of the Termination Date.
The purchase price as determined above
will be paid one-third in cash within
30 days of the exercise of the
Executive Put and the remaining
two-thirds will be payable within two
years of the date of exercise of the
Executive Put (the "Deferred Put
Payments"). Any Deferred Put Payments
shall be credited with an appropriate
interest rate or dividend rate. All
payments by Holdings with respect to
its exercise of the Executive Put are
subject to Holdings' financing
agreements. In the event that Holdings
is restricted from purchasing such
shares for cash under any applicable
financing or other agreements,
Holdings may issue the Executive a
note or such other permissible
security (which shall contain
commercially reasonable terms) in full
satisfaction of such put.
REALIZATION: Except in the case of the exercise of
the Company Call or Executive Put as
set forth above, Executive shall be
required to hold the Phantom Shares
until such time as PlayCore Holdings,
L.L.C. sells or otherwise exits from
its equity interest in Holdings (any
such occurrence, a "Realization
Event").
TAX GROSS-UP PAYMENT: Upon exercise of the Company Call or
Executive Put or any other Realization
Event hereunder, Holdings shall make a
tax gross-up payment to the Executive
to compensate the Executive for the
difference between ordinary income tax
treatment and capital gains tax
treatment with respect to the
appreciated value ("Appreciated
Value") of the
<PAGE> 25
Phantom Shares from the date of
vesting to the earlier of: (i) the
Termination Date (in the case of an
Executive Put or Company Call), or
(ii) the date of the occurrence of a
Realization Event; provided, however,
that in no event shall such tax
gross-up payment exceed the tax
benefit to Holdings actually realized
for such tax year, if any, related to
the deduction for (a) the tax gross-up
payment and (b) the appreciated value
of the Phantom Shares from the date of
vesting to the earlier of: (i) the
Termination Date (in the case of an
Executive Put or Company Call), or
(ii) the date of the occurrence of a
Realization Event.
TAG-ALONG RIGHTS: In the event of a sale of Holdings by
PlayCore Holdings, L.L.C., the
Executive will have the same tag-along
rights as other investors.
RESTRICTIONS ON TRANSFER: The Phantom Shares will be
non-transferable, except with respect
to a transfer to a trust or
partnership, the only beneficiaries or
partners (as the case may be) of which
are immediate family member of
Executive, or in accordance with the
terms of any applicable operating
agreement or shareholders agreement
and the laws of descent and
distribution.
Other than with respect to transfers
pursuant to the preceding sentence, no
third party shall have any direct or
indirect beneficial interest in the
Phantom Shares.
FAIR MARKET VALUE: Fair market value of vested Phantom
Shares on a Termination Date shall be
determined by multiplying the "equity
value" of Holdings by a fraction, the
numerator of which shall be the number
of vested Phantom Shares and the
denominator of which shall be the
total number of fully diluted shares
of Holdings common stock (assuming
that all options, warrants or other
securities which are convertible or
exchangeable for common stock are
outstanding). The equity value of
Holdings on a Termination Date shall
be determined by the Board of
Directors of Holdings in good faith by
selecting an appropriate multiple and
then multiplying the consolidated
EBITDA for the
<PAGE> 26
latest four fiscal quarters by such
multiple and then subtracting from
such amount all debt, preferred stock
and other obligations on a
consolidated basis of Holdings, if
any.
<PAGE> 1
EXHIBIT (d)(viii)
SEVERANCE, CHANGE OF CONTROL AND NONCOMPETITION AGREEMENT
THIS SEVERANCE, CHANGE OF CONTROL AND NONCOMPETITION AGREEMENT (the
"Agreement") is made and entered into as of April 13, 2000 by and between
Jasdrew Acquisition Corp. ("Jasdrew"), and Thomas van der Meulen (the
"Employee").
W I T N E S S E T H:
WHEREAS, the Employee is an officer and a key employee of PlayCore
Wisconsin, Inc. ("PlayCore Wisconsin");
WHEREAS, PlayCore, Inc. intends to enter into an Agreement and Plan of
Merger (the "Merger Agreement") with Jasdrew contemporaneously with the
execution hereof pursuant to which Jasdrew will merge (the "Merger") into
PlayCore, Inc. (after which PlayCore, Inc. is to merge into PlayCore Wisconsin);
WHEREAS, the Employee, in consideration of the agreement of Jasdrew
contained herein that Employee will receive payment of a cash bonus from
PlayCore Wisconsin in an amount of $50,000 (the "Closing Amount") promptly
following the effective date of the Merger and a grant of phantom common stock
of PlayCore Holdings, Inc. ("Holdings") to be set forth in a separate phantom
stock grant agreement, desires to enter into this Agreement to provide for the
payment of certain benefits to the Employee if the Employee's employment with
PlayCore Wisconsin is terminated under certain circumstances, including a
termination following a change of control of PlayCore Wisconsin other than the
transactions contemplated in the Merger Agreement;
WHEREAS, the Employee acknowledges and agrees that the terms of this
Agreement shall supersede all prior agreements between the parties as set forth
in Section 13. c. hereof;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and as an inducement
for Jasdrew to enter into, and to proceed with the transactions contemplated in,
the Merger Agreement, the parties hereto agree as follows:
1. Definition. The capitalized terms used in this Agreement shall have
the following meanings (unless otherwise expressly provided herein):
a. "Change of Control" shall have the meaning set forth in
Exhibit A hereto.
b. "Good Reason" means any of the following:
(1) The removal of the Employee from, or any failure to
reelect or reappoint the Employee to, any of the positions held with
PlayCore Wisconsin on the date of the Change of Control or any other
positions with PlayCore Wisconsin to which the Employee shall
thereafter be elected, appointed or assigned, except in the event that
such removal or failure to reelect or reappoint
<PAGE> 2
relates to the termination by PlayCore Wisconsin of the Employee's
employment for Just Cause or by reason of Permanent Disability; or
(2) A good faith determination by the Employee that there
has been a significant adverse change, without the Employee's written
consent, in the Employee's working conditions or status with PlayCore
Wisconsin from such working conditions or status in effect during the
180-day period immediately prior to the Change of Control, or the
effective date of this Agreement for purposes of Section 3.c. hereof,
including but not limited to (A) a significant change in the nature or
scope of the Employee's authority, powers, functions, duties or
responsibilities, or (B) a significant reduction in the level of
support services, staff, secretarial and other assistance, office
space and accoutrements, or for purposes of Section 2 hereof alone,
(C) relocation of the Employee's primary place of employment with
PlayCore Wisconsin on the effective date of the Merger to a location
more than thirty-five (35) miles from such primary place of
employment.
c. "Just Cause" means, prior to a Change in Control, willful and
gross misconduct on the part of the Employee that is materially and
demonstrably detrimental to PlayCore Wisconsin, as determined in good faith
by the Board of Directors of PlayCore Wisconsin. "Just Cause" means,
following a Change in Control, the commission by the Employee of one or
more acts for which the Employee is convicted (as evidenced by binding and
final judgment. order or decree of a court of competent jurisdiction) of a
felony under United States federal, state, or local criminal law which
substantially impairs the Employee's ability to perform his duties or
responsibilities; the engaging in by the Employee of intentional conduct
not taken in good faith which has caused demonstrable and serious financial
injury to the Employer, as evidenced by a determination in a binding and
final judgment, order, or decree of a court or administrative agency of
competent jurisdiction, in effect after exhaustion or lapse of all rights
of appeal, in an action, suit, or proceeding. whether civil, criminal,
administrative, or investigative; or the continuing willful and
unreasonable refusal by the Employee to perform the Employee's duties or
responsibilities (unless significantly changed without the Employee's
consent).
d. "Permanent Disability" means that the Employee is unable by
reason of accident or illness (including mental illness) to perform the
material duties of his regular position with PlayCore Wisconsin and not
expected to recover from his disability within a period of six (6) months
from the commencement of the disability. If at any time the Employee claims
or is claimed to have a Permanent Disability, a physician acceptable to
both the Employee, or his personal representative, and PlayCore Wisconsin
(which acceptances shall not be unreasonably withheld) shall be retained by
PlayCore Wisconsin and shall examine the Employee. The Employee shall
cooperate fully with the physician. If the physician determines that the
Employee has a Permanent Disability the physician shall deliver to PlayCore
Wisconsin a certificate certifying both that the Employee has a Permanent
Disability and the date upon which the condition of Permanent Disability
commenced. The determination of the physician shall be conclusive.
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<PAGE> 3
e. "Person" means (other than with respect to the definition of
"Change of Control") any individual or any partnership, limited liability
company, corporation, joint venture, trust, or other entity (as defined in
Rule l3d-5 under the Securities Exchange Act of 1934), together with its
affiliates and the heirs, personal representatives, successors, and assigns
of the "Person" when the context so permits.
f. "Severance Period" means the applicable period of time
beginning with the Termination Date. If the Termination Date is within
eighteen (18) months after a Change of Control and the termination of
employment is either by PlayCore Wisconsin other than with Just Cause or by
the Employee for Good Reason, the Severance Period shall be eighteen (18)
months (the "18-month Severance Period"). If the Termination Date occurs
other than within such 18-month period following a Change of Control then
the Severance Period, if applicable, shall be twelve (12) months ("the
12-month Severance Period").
g. "Termination Date" means the date upon which the Employee's
employment with PlayCore Wisconsin is terminated.
h. "Transaction Benefit" means the amount that is the greater of:
(i) the value of Employee's grant of phantom common stock on the date this
Agreement becomes effective, or (ii) the value of such grant of phantom
common stock on the Termination Date (such value to be determined by
multiplying the "equity value" of Holdings (as defined in the next
sentence) by a fraction, the numerator of which shall be the number of
shares represented by such grant and the denominator of which shall be the
total number of fully diluted shares of Holdings common stock (assuming
that all options, warrants or other securities which are convertible or
exchangeable for common stock are outstanding). The equity value of
Holdings on a Termination Date shall be determined by the Board of
Directors of PlayCore Wisconsin in good faith by selecting an appropriate
multiple and then multiplying the consolidated EBITDA for the latest four
fiscal quarters by such multiple and then subtracting from such amount all
debt, preferred stock and other obligations on a consolidated basis of
Holdings, if any.
2. Termination After Change of Control. If, within eighteen (18)
months after the occurrence of a Change of Control, the Employee's employment
with PlayCore Wisconsin is terminated either: (i) by PlayCore Wisconsin (a)
other than with Just Cause or (b) due to Permanent Disability or, (ii) by the
Employee for Good Reason, then the Employee shall be entitled to receive the
following severance benefits from PlayCore Wisconsin:
a. continuation of the Employee's salary during the applicable
18-month Severance Period; and
b. continuation of coverage for the Employee and any dependents
previously covered under the group health, group life, group long-term
disability, and similar group insurance plans, if any, maintained by
PlayCore Wisconsin, at the active employee discounted cost, until
expiration of the 18-month Severance Period (provided, that if such
continued participation is precluded by the provisions of such plans or by
applicable law, PlayCore Wisconsin shall provide the Employee with
comparable benefits of equal value at no increase in cost to the Employee),
and execution of this
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<PAGE> 4
Agreement by the Employee shall not be considered a waiver of any rights or
entitlements he may have under applicable law to continuation of coverage
under the group health plan maintained by PlayCore Wisconsin.
3. Other Termination. If the Employee's employment with PlayCore
Wisconsin is terminated by PlayCore Wisconsin (a) other than with Just Cause or
(b) due to Permanent Disability and Section 2, above, is not applicable because
such termination is not within the eighteen (18) month period following a Change
of Control, then the Employee shall be entitled to receive the following
severance benefits from PlayCore Wisconsin:
a. continuation of the Employee's salary during the applicable
12-month Severance Period; provided, however, if such termination occurs
prior to a Change of Control, the total salary continuation shall be
reduced by the value of any Transaction Benefit; and
b. continuation of coverage for the Employee and any dependents
previously covered under the group health, group life, group long-term
disability, and similar group insurance plans, if any, maintained by
PlayCore Wisconsin, at the active employee discounted cost, until
expiration of the 12-month Severance Period (provided, that if such
continued participation is precluded by the provisions of such plans or by
applicable law, PlayCore Wisconsin shall provide the Employee with
comparable benefits of equal value at no increase in cost to the Employee),
and execution of this Agreement by the Employee shall not be considered a
waiver of any rights or entitlements he may have under applicable law to
continuation of coverage under the group health plan maintained by PlayCore
Wisconsin.
c. To compensate the Employee for relinquishing certain rights
with PlayCore Wisconsin in order to facilitate the acquisition of PlayCore,
Inc. by Holdings, and notwithstanding the foregoing or any provision
contained herein to the contrary, if the Employee's employment with
PlayCore Wisconsin is terminated either (x) by PlayCore Wisconsin other
than with Just Cause or (y) by the Employee for Good Reason, and the
termination of employment occurs within the period that begins on the
effective date of the Merger and ends eighteen (18) months thereafter, then
the Employee shall be entitled to receive the greater of: (i) the severance
benefits set forth above in this Section 3, or (ii) the severance benefits
that would have accrued to the Employee as a result of the acquisition of
PlayCore, Inc. by Holdings pursuant to that certain Severance, Change of
Control and Noncompetition Agreement, dated June 22, 1999, by and between
the Employee and PlayCore, Inc. (the "Old Severance Agreement") attached
hereto as Exhibit B, in either case, less the value of any Transaction
Benefit.
4. Payments.
a. Promptly following the effectiveness of the Merger, Jasdrew
(or its successor) shall pay to Employee the Closing Amount.
b. Except as otherwise provided in this Agreement, any salary
continuation amounts due to the Employee hereunder shall be payable in
equal installments on each regular payroll date of PlayCore Wisconsin after
the Termination Date.
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<PAGE> 5
5. Deduction and Withholding. All amounts payable to or on behalf of
the Employee pursuant to this Agreement shall be subject to such deductions and
withholding as may be agreed to by the Employee but not less than required by
applicable law.
6. Death and Permanent Disability. In the event of the Employee's
death, any amount payable or distributable to the Employee pursuant hereto from
rights and benefits accrued to and through the date of his death shall be paid
at the time or times indicated in such Section to the beneficiary designated by
the Employee for purposes of his group term life insurance coverage with
PlayCore Wisconsin and, if no beneficiary is designated for such purposes or if
no group term life insurance is then in effect, to the Employee's estate. In the
event that Employee's employment is terminated due to Permanent Disability,
Employee shall be entitled to accrued compensation through the Termination Date
and any other benefits (if any) to which Employee may be entitled under PlayCore
Wisconsin's benefit plans, programs and policies as then in effect.
7. Other Benefits. The benefits provided under this Agreement shall be
in addition to, and not in derogation or diminution of, any benefits that the
Employee may be entitled to receive under any other plan or program now or
hereafter maintained by PlayCore Wisconsin other than any severance pay plan.
8. Stock Options and Other Equity. Notwithstanding anything contained
in this Agreement to the contrary, the treatment of any stock options and other
equity held by the Employee on the Termination Date shall be subject to the
terms and conditions of the applicable plan documents and agreements in
accordance with the terms set forth in Schedules A, B and C attached hereto
("Applicable Equity Agreements") and the terms of the Applicable Equity
Agreements shall govern the treatment of such options and equity in the event of
Employee's termination.
9. Covenant Not to Compete. The Employee hereby agrees that he will
not, during the period of his employment with PlayCore Wisconsin and for a
period of two (2) years thereafter, as proprietor, partner, member, shareholder
(directly or indirectly owning or controlling five percent (5%) or more of any
class of stock), employee, consultant, agent, or otherwise, on his own behalf or
on behalf of another person, do any of the following in competition with
PlayCore Wisconsin, without the prior written consent of PlayCore Wisconsin:
a. solicit or assist in the solicitation of customers of PlayCore
Wisconsin or its affiliates;
b. render or assist in rendering services to customers of
PlayCore Wisconsin or its affiliates; or
c. divert or attempt to divert any customer's business from
PlayCore Wisconsin or its affiliates, or otherwise interfere with the
business relationship between PlayCore Wisconsin or its affiliates and any
of their respective customers, employees, or suppliers.
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<PAGE> 6
Notwithstanding the foregoing, this Agreement shall not in any event
be construed to prevent the Employee from earning a living utilizing his skills
in any businesses which may, as an incident to a business or activity
significantly different from the business of PlayCore Wisconsin, make or sell
some products or provide some services which may in some degree compete with the
business of PlayCore Wisconsin. However, nothing in this Section 9 shall be
deemed to permit the Employee to accept employment with companies or a division
thereof which then or thereafter will directly compete in a major way with the
business of PlayCore Wisconsin or its affiliates with which the Employee was
involved or had access to information while employed by PlayCore Wisconsin.
10. Confidential Information. The Employee agrees that he will not,
while he is employed by PlayCore Wisconsin or for a period of five (5) years
thereafter, disclose to any person to whom he is not otherwise authorized to do
so by PlayCore Wisconsin (an "Unauthorized Person"), or use for his own account,
any information (the "Confidential Information"), whether or not reduced to
written or other tangible form, in which PlayCore Wisconsin or its affiliates
has a legally protectible interest by virtue of the following:
a. such information is not generally known in the industry;
b. the Employee has had access to (or, either alone or in
cooperation with others, originated or developed) such information during
his employment with PlayCore Wisconsin;
c. such information has been treated by PlayCore Wisconsin or its
affiliates as confidential;
d. such information relates to the business of PlayCore Wisconsin
or any of its affiliates; or
e. such information is of competitive advantage to PlayCore
Wisconsin or its affiliates.
Confidential Information for which the Employee has first secured the
written consent of PlayCore Wisconsin for its disclosure or use, and
Confidential Information which becomes generally known in the industry, or which
otherwise ceases to be legally protectible (other than by the Employee's breach
of this Agreement), shall cease to be subject to the restriction set forth in
this Section 10. Notwithstanding anything contained herein to the contrary, this
Section 10 prohibits only the use and disclosure of Confidential Information and
shall not be construed as limiting the Employee's right to undertake any other
employment or business activity. The Employee shall be prohibited from competing
with PlayCore Wisconsin only as provided in Section 9 above.
11. Termination With Just Cause. Notwithstanding any provision
contained herein to the contrary, in the event that the Employee's employment
with PlayCore Wisconsin is terminated by PlayCore Wisconsin with Just Cause the
Employee shall not be entitled to any of the benefits identified in Sections 2
and 3 of this Agreement, and shall be entitled to receive only those benefits
that the Employee would otherwise be entitled to receive under any other
agreements entered into by the Employee and PlayCore Wisconsin or under
applicable law.
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<PAGE> 7
12. Rights in the Event of Dispute.
a. If a claim or dispute arises concerning the rights of the
Employee or his beneficiary (either or both of whom are hereinafter
referred to as the "claimant") to amounts or benefits described in Section
2 of this Agreement (pertaining to benefits upon termination of employment
following a Change of Control), regardless of the party by whom such claim
or dispute is initiated, PlayCore Wisconsin shall, upon presentation of
appropriate vouchers, pay all legal expenses, including reasonable
attorneys' fees, court costs and ordinary and necessary out-of-pocket costs
of attorneys' billed to and payable by the claimant in connection with the
bringing, prosecuting, defending, litigating, negotiating, or settling such
claim or dispute; provided, however, that PlayCore Wisconsin shall not be
obligated to pay such expenses unless and until final resolution of such
claim or dispute with the claimant being entitled to a substantial part of
the rights claimed by him.
b. If a claim or dispute arises concerning the rights of the
Employee or his beneficiary (either or both of whom are hereinafter
referred to as the "claimant") to amounts or benefits described in Section
3 of this Agreement (pertaining to termination of employment by PlayCore
Wisconsin other than as described in Section 2), regardless of the party by
whom such claim or dispute is initiated, each party shall pay its own legal
expenses, including reasonable attorneys' fees, court costs and ordinary
and necessary out-of-pocket costs in connection with the bringing,
prosecuting, defending, litigating, negotiating, or settling such claim or
dispute; provided, however, that the prevailing party in any court action
shall be entitled to recover from the other party, to the fullest extent
permitted by law, all such legal expenses that the prevailing party may
reasonably incur as a result of such action. Any payment pursuant to this
subsection shall include interest on any delayed payment at the applicable
federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue
Code.
13. General Provisions.
a. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given (i) when delivered
in person or (ii) when telecopied (at the date and time indicated on the
receipt of transmission if such day is a business day, and if not, at 9
a.m. on the following business day) with hard copy delivered by hand or
deposited in the United States mail postage prepaid, registered or
certified mail, on or before two (2) business days after its delivery by
telecopy, or (iii) three (3) business days after being deposited in the
United States mail, postage prepaid, registered or certified mail, or (iv)
two (2) business days after delivery to a nationally recognized express
courier, expenses prepaid, addressed to the appropriate party as follows:
to the Employee at his address on file with PlayCore Wisconsin; or to
Jasdrew or PlayCore Wisconsin, c/o PlayCore, Inc., 15 West Milwaukee
Street, Suite 204, Janesville, Wisconsin 53545, telecopier number (608)
741-7191, Attention: Chairman; and with a copy to Akin, Gump, Strauss,
Hauer & Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Suite 400,
Washington, D.C., 20036, Attention: Russell W. Parks, Jr.
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<PAGE> 8
b. Nothing herein shall be construed as an agreement to continue
the employment by PlayCore Wisconsin of the Employee.
c. This Agreement constitutes the entire agreement between the
parties and PlayCore Wisconsin with respect to the subject matter contained
herein and, as of the effective date of the Merger, supersedes any and all
prior understandings, representatives, negotiations, and agreements with
respect thereto (including, without limitation, the Old Severance
Agreement).
d. No modification or amendment of any provision of this
Agreement shall be effective unless in a written instrument executed by
both parties. Either party's failure to insist upon strict compliance with
any provision hereof shall not be deemed to be a waiver of such provision
or any other provision hereof.
e. This Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of Jasdrew and PlayCore Wisconsin.
Without limiting the foregoing, Jasdrew and PlayCore Wisconsin will require
any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of PlayCore Wisconsin, to expressly assume and agree to
perform PlayCore Wisconsin's obligations under this Agreement in the same
manner and to the same extent that Jasdrew and PlayCore Wisconsin are
required to perform them if no such succession had taken place. As used in
this Agreement, "Company" shall mean PlayCore Wisconsin and any successor
to its business and/or assets which executes and delivers the agreement
provided for in this Section 13.e. or which otherwise becomes bound by all
the terms and provisions of this Agreement as a matter of law. This
Agreement shall inure to the benefit of, and shall be enforceable by, the
Employee's heirs, legal representative or other successors in interest, but
shall not otherwise be assignable or transferable.
f. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
g. The validity, interpretation, construction and enforceability
of this Agreement shall be governed by the laws of the State of Wisconsin,
without regard to conflicts of laws principles.
14. Failure to Consummate. This Agreement shall be null and void if
the Merger is not consummated.
- SIGNATURE PAGE FOLLOWS -
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
COMPANY: EMPLOYEE:
JASDREW ACQUISITION CORP.
By: /s/ TODD R. BERMAN /s/ THOMAS VAN DER MUELEN
--------------------------- ------------------------------------
Todd R. Berman, President Thomas van der Meulen
<PAGE> 10
SCHEDULE A
OPTION TERMS
<TABLE>
<S> <C>
AMOUNT OF INITIAL GRANT: A nonqualified option grant (the "Initial Grant")
of 4,350 shares of common stock of PlayCore
Holdings, Inc. ("Holdings"). The Initial Grant
shall be pursuant to an option plan (and
underlying option grant agreement) established by
Holdings with an initial reserve equal to 10% of
the outstanding common shares of Holdings as of
the closing date (post transaction).
EXERCISE PRICE: The per share exercise price of the option shall
be the common stock's fair market value on the
date of grant (which shall be equal to the fair
market value of the equivalent number of shares of
common stock as of the closing date).
TERM: Options, or any portion thereof, not previously
exercised or terminated will expire ten years from
the date of grant.
METHOD OF EXERCISE: Prior to an "initial public offering", cash only;
provided, however, the Board of Directors or
Compensation Committee of Holdings may authorize
cashless exercises. An option may only be
exercised with respect to whole shares.
VESTING: TIME OPTIONS: 50% of the total number of shares
subject to the Initial Grant shall vest ratably
(25% a year) on each of the first through fourth
anniversaries of the date of grant ("A Options"),
provided the Employee is in the employ of PlayCore
Wisconsin, Inc. or an affiliate ("PlayCore
Wisconsin") on each such date.
If there is a Change in Control (as defined in the
option plan) prior to the fourth anniversary of
the date of grant, and the Employee is still in
the employ of PlayCore Wisconsin, all unvested
Time Options shall vest.
PERFORMANCE OPTIONS: The remaining 50% of the
total number of shares subject to the Initial
Grant shall vest if the net Internal Rate of
Return ("IRR") realized by PlayCore Holdings,
L.L.C. ("Holdings L.L.C.") on its total investment
in Holdings (after dilution from options on shares
held by management) is 25% or more ("Target IRR")
as of the "Determination Date," ("Performance
Options") and the Employee is still in the employ
of PlayCore Wisconsin on the Determination Date.
</TABLE>
<PAGE> 11
<TABLE>
<S> <C>
The Determination Date regarding the attainment of
the IRR shall be the closing date or such other
time as Holdings L.L.C. receives cash payments for
its interests in Holdings.
TERMINATION OF EMPLOYMENT:
BY PLAYCORE WISCONSIN
WITHOUT CAUSE OR
BY THE EMPLOYEE
FOR GOOD REASON OR
UPON DEATH OR DISABILITY: TIME OPTIONS: All vested Time Options remain
outstanding and exercisable for a period of 90
days and if not exercised by end of business on
the 90th day shall terminate. All unvested Time
Options shall be immediately terminate on the
Termination Date.
PERFORMANCE OPTIONS: Performance Options shall
vest if the Target IRR would have been achieved
based upon the fair market value of Holdings
L.L.C.'s investment in Holdings as of the
Termination Date and Employee will receive the
applicable value of the Performance Option as
determined at the Termination Date by the Board of
Directors of Holdings at such time as Holdings
L.L.C. receives cash payments for its interests in
Holdings. If the Target IRR is not achieved on
both the Termination Date and the Determination
Date, then all Performance Options shall be
terminated with no payment to or value to
Employee.
BY PLAYCORE WISCONSIN FOR
CAUSE OR BY THE
EMPLOYEE WITHOUT
GOOD REASON: TIME OPTIONS: All vested Time Options shall remain
exercisable for 90 days and if not exercised by
the end of business on the 90th day shall
terminate. All nonvested Time Options shall
terminate on the Termination Date.
PERFORMANCE OPTIONS: All Performance Options shall
immediately terminate.
</TABLE>
<PAGE> 12
<TABLE>
<S> <C>
CALL ON SHARES ACQUIRED In the event of the Employee's termination of
ON EXERCISE OF OPTION: employment for any reason, all shares in Holdings
held by Employee as a result of exercising Options
shall be subject to a "call" by Holdings or its
designee (the "Company Call") at the fair market
value on the Termination Date. The Company Call
must be exercised within six months of the
Termination Date. The purchase price as determined
above will be paid one-half in cash within 30 days
of the exercise of the Company Call and the
remaining one-half payable within two years of the
date of exercise of the Company Call (the
"Deferred Call Payments"). Any Deferred Call
Payments shall be credited with an appropriate
interest rate or dividend rate. In the event that
Holdings is restricted from purchasing such shares
for cash under any applicable financing or other
agreements, Holdings may issue the Employee a note
or such other permissible security (which shall
contain commercially reasonable terms) in full
satisfaction of such call. In no event shall the
Employee be paid less cash at the time of the
exercise of the Company Call than the Employee's
income tax liability resulting from the sale of
the shares.
EMPLOYEE PUT: In the event of Employee's termination of
employment by PlayCore Wisconsin without Cause, by
the Employee for Good Reason, or as a result of
death or Permanent Disability, the Employee or his
estate as the case may be, may exercise a "put" to
Holdings (the "Employee Put") at fair market value
on the Termination Date, subject to Holdings'
ability under its financing documents. The
Employee Put must be exercised within six months
of the Termination Date. The purchase price as
determined above will be paid one-half in cash
within 30 days of the exercise of the Employee Put
and the remaining one-half will be payable within
two years of the date of exercise of the Employee
Put (the "Deferred Put Payments"). Any Deferred
Put Payments shall be credited with an appropriate
interest rate or dividend rate. All payments made
by Holdings with respect to its exercise of the
Executive Put are subject to Holdings' financing
agreements. In the event that Holdings is
restricted from purchasing such shares for cash
under any applicable financing or other
agreements, Holdings may issue the Employee a note
or such other permissible security (which shall
contain commercially reasonable terms) in full
satisfaction of such put.
REALIZATION: Except in the case of the exercise of the Company
Call or Employee Put as set forth above, Employee
shall be
</TABLE>
<PAGE> 13
<TABLE>
<S> <C>
required to hold the shares or Options until such
time Holdings L.L.C. sells or otherwise exits from
its equity interest in Holdings.
TAG-ALONG RIGHTS: In the event of a sale of Holdings by Holdings,
L.L.C., the Employee will have the same tag-along
rights as other investors.
RESTRICTIONS ON TRANSFER: The Options and shares will be non-transferable,
except with respect to a transfer to a trust or
partnership, the only beneficiaries or partners
(as the case may be) of which are immediate family
member of Employee, or in accordance with the
terms of any applicable operating agreement or
shareholders agreement and the laws of descent and
distribution.
Other than with respect to transfers pursuant to
the preceding sentence, no third party shall have
any direct or indirect beneficial interest in the
Options.
REGISTRATION RIGHTS: Employee will have the same piggyback registration
rights as other investors.
FAIR MARKET VALUE: Fair market value of vested shares on a
Termination Date shall be determined by
multiplying the "equity value" of Holdings by a
fraction, the numerator of which shall be the
number of vested shares and the denominator of
which shall be the total number of fully diluted
shares of Holdings common stock (assuming that all
options, warrants or other securities which are
convertible or exchangeable for common stock are
outstanding). The equity value of Holdings on a
Termination Date shall be determined by the Board
of Directors of Holdings in good faith by
selecting an appropriate multiple and then
multiplying the consolidated EBITDA for the latest
four fiscal quarters by such multiple and then
subtracting from such amount all debt, preferred
stock and other obligations on a consolidated
basis of Holdings, if any.
</TABLE>
<PAGE> 14
SCHEDULE B
EQUITY PURCHASE TERMS
<TABLE>
<S> <C>
AMOUNT OF EQUITY: A percentage equity interest in PlayCore Holdings,
L.L.C. ("Holdings L.L.C.") equal to $55,000 and
determined based on the value paid by Chartwell
Investments II, L.L.C. or its affiliates
("Chartwell") for its interest in Holdings L.L.C.
(the "Interest"). Upon execution of the applicable
subscription documents relating to the Interest,
Employee shall make a cash payment to Holdings
L.L.C. of $55,000.
COMPANY CALL ON INTERESTS: In the event of Employee's termination of
employment for any reason, the Interest held by
the Employee shall be subject to a "call" by
Holdings L.L.C. or its designee (the "Company
Call") at the fair market value on the Termination
Date. The Company Call must be exercised within
six months of the Termination Date. The purchase
price as determined above will be paid as follows:
the lesser of the Employee's original investment
or fair market value of the Interest within 30
days of the exercise of the Company Call and the
remaining amount, if any, payable within two years
of the date of exercise of the Company Call (the
"Deferred Call Payments"). Any Deferred Call
Payments shall be credited with an appropriate
interest rate or dividend rate. In the event that
Holdings L.L.C. is restricted from purchasing the
Interest for cash under any applicable financing
or other agreements to which Holdings L.L.C. or
any of its subsidiaries is a party which prevent
Holdings L.L.C. from obtaining cash, then Holdings
L.L.C. may issue the Employee a note or such other
permissible security (which shall contain
commercially reasonable terms) in full
satisfaction of such call.
EMPLOYEE PUT: In the event of Employee's termination of
employment by PlayCore Wisconsin, Inc. or an
affiliate ("PlayCore Wisconsin") without Cause, by
the Employee for Good Reason, or as a result of
death or Permanent Disability, the Employee or his
estate as the case may be, may exercise a "put" to
Holdings L.L.C. (the "Employee Put") of the
Interest at fair market value on the Termination
Date, subject to compliance with the financing
documents of Holdings L.L.C. or of any of its
subsidiaries. The Employee Put must be exercised
within six months of the Termination Date. The
purchase price as determined above
</TABLE>
<PAGE> 15
<TABLE>
<S> <C>
will be paid as follows: the lesser of the
Employee's original investment or fair market
value of the Interest within 30 days of the
exercise of the Employee Put and the remaining
amount, if any, subject to the Company Call, will
be held by Employee until such time as Holdings
L.L.C. sells or otherwise exits from its equity
interest in PlayCore Holdings, Inc. ("Holdings").
All payments by Holdings L.L.C. with respect to
the exercise of the Employee Put are subject to
the financing agreements of Holdings L.L.C. or any
of its subsidiaries. In the event that Holdings
L.L.C. is restricted from purchasing the Interest
for cash under any applicable financing or other
agreements to which Holdings L.L.C. or any of its
subsidiaries is a party which prevent Holdings
L.L.C. from obtaining cash, then Holdings L.L.C.
may issue Employee a note or such other
permissible security (which shall contain
commercially reasonable terms) in full
satisfaction of such put.
REALIZATION: Except in the case of the exercise of Company Call
or Employee Put as set forth above, Employee shall
be required to hold the Interest until such time
as Chartwell sells or otherwise exits from its
equity interest in Holdings L.L.C.
TAG-ALONG RIGHTS: In the event of a sale of Holdings L.L.C. by
Chartwell, the Employee will have the same
tag-along rights as other investors.
RESTRICTIONS ON TRANSFER: The Interest will be non-transferable, except with
respect to a transfer to a trust or partnership,
the only beneficiaries or partners (as the case
may be) of which are immediate family member of
Employee, or in accordance with the terms of any
applicable operating agreement or shareholders
agreement and the laws of descent and
distribution.
Other than with respect to transfers pursuant to
the preceding sentence, no third party shall have
any direct or indirect beneficial interest in the
Interest.
REGISTRATION RIGHTS: Employee will have the same piggyback registration
rights as other investors.
FAIR MARKET VALUE: Fair market value of Employee's Interest on a
Termination Date shall be determined in three
steps as follows. (1) The equity value of Holdings
on a Termination Date shall be determined by the
Board of Directors of Holdings in good
</TABLE>
<PAGE> 16
<TABLE>
<S> <C>
faith by selecting an appropriate multiple and
then multiplying the consolidated EBITDA for the
latest four fiscal quarters by such multiple and
then subtracting from such amount all debt,
preferred stock and other obligations on a
consolidated basis of Holdings, if any. (2)
Holdings L.L.C's interest in Holdings shall be
determined by multiplying the equity value of
Holdings (as determined under step number (1)) on
the Termination Date by a fraction, the numerator
of which shall be the number of shares of common
stock of Holdings that are owned by Holdings
L.L.C., and the denominator of which shall be the
total number of fully diluted shares of Holdings
common stock (assuming that all options, warrants
or other securities which are convertible or
exchangeable for common stock are outstanding).
(3) Finally, the percentage representing
Employee's Interest shall be multiplied by the
dollar amount of Holdings L.L.C.'s interest in
Holdings as determined under step number (2).
</TABLE>
<PAGE> 17
SCHEDULE C
PHANTOM STOCK TERMS
<TABLE>
<S> <C>
AMOUNT OF INITIAL GRANT: A grant of 765 shares of phantom common stock of
PlayCore Holdings, Inc. ("Holdings") (the "Phantom
Shares") pursuant to a grant by Holdings.
VESTING: One third of the total number of Phantom Shares
shall vest on each anniversary of the date of the
grant. In the event that the Employee's employment
with PlayCore Wisconsin, Inc. or an affiliate
("PlayCore Wisconsin") is terminated for any
reason, all non-vested shares shall be forfeited.
COMPANY CALL: In the event of Employee's termination of
employment for any reason, the vested Phantom
Shares held by the Employee shall be subject to a
"call" by Holdings or its designee (the "Company
Call") at the fair market value on the Termination
Date. The Company Call must be exercised within
six months of the Termination Date. The purchase
price shall be the equivalent of the fair market
value of an equivalent number of common shares of
Holdings on the Termination Date. It will be paid
one-half in cash within 30 days of the exercise of
the Company Call and the remaining one-half will
be payable within two years of the date of
exercise of the Company Call (the "Deferred Call
Payments"). Any Deferred Call Payments shall be
credited with an appropriate interest rate or
dividend rate. In the event that Holdings is
restricted from purchasing such shares for cash
under any applicable financing or other
agreements, Holdings may issue the Employee a note
or such other permissible security (which shall
contain commercially reasonable terms) in full
satisfaction of such call. In no event shall the
Employee be paid less cash at the time of the
exercise of the Company Call than the Employee's
income tax liability resulting from the sale of
the Phantom Shares.
EMPLOYEE PUT: In the event of Employee's termination of
employment by PlayCore Wisconsin without Cause, by
the Employee for Good Reason, or as a result of
death or Permanent Disability, the Employee or his
estate as the case may be, may exercise a "put" to
Holdings (the "Employee Put") of the vested
Phantom Shares at fair market value on the
Termination Date. The Employee Put must be
exercised
</TABLE>
<PAGE> 18
<TABLE>
<S> <C>
within six months of the Termination Date. The
purchase price as determined above will be paid
one-half in cash within 30 days of the exercise of
the Employee Put and the remaining one-half will
be payable within two years of the date of
exercise of the Employee Put (the "Deferred Put
Payments"). Any Deferred Put Payments shall be
credited with an appropriate interest rate or
dividend rate. All payments by Holdings with
respect to its exercise of the Employee Put are
subject to Holdings' financing agreements. In the
event that Holdings is restricted from purchasing
such shares for cash under any applicable
financing or other agreements, Holdings may issue
the Employee a note or such other permissible
security (which shall contain commercially
reasonable terms) in full satisfaction of such
put.
REALIZATION: Except in the case of the exercise of the Company
Call or Employee Put as set forth above, Employee
shall be required to hold the Phantom Shares until
such time as PlayCore Holdings, L.L.C. sells or
otherwise exits from its equity interest in
Holdings (any such occurrence, a "Realization
Event").
TAX GROSS-UP PAYMENT: Upon exercise of the Company Call or Employee Put
or any other Realization Event hereunder, Holdings
shall make a tax gross-up payment to the Employee
to compensate the Employee for the difference
between ordinary income tax treatment and capital
gains tax treatment with respect to the
appreciated value ("Appreciated Value") of the
Phantom Shares from the date of vesting to the
earlier of: (i) the Termination Date (in the case
of an Employee Put or Company Call), or (ii) the
date of the occurrence of a Realization Event;
provided, however, that in no event shall such tax
gross-up payment exceed the tax benefit to
Holdings actually realized for such tax year, if
any, related to the deduction for (a) the tax
gross-up payment and (b) the appreciated value of
the Phantom Shares from the date of vesting to the
earlier of: (i) the Termination Date (in the case
of an Employee Put or Company Call), or (ii) the
date of the occurrence of a Realization Event.
TAG-ALONG RIGHTS: In the event of a sale of Holdings by PlayCore
Holdings, L.L.C., the Employee will have the same
tag-along rights as other investors.
RESTRICTIONS ON TRANSFER: The Phantom Shares will be non-transferable,
except with respect to a transfer to a trust or
partnership, the only
</TABLE>
<PAGE> 19
<TABLE>
<S> <C>
beneficiaries or partners (as the case may be) of
which are immediate family member of Employee, or
in accordance with the terms of any applicable
operating agreement or shareholders agreement and
the laws of descent and distribution.
Other than with respect to transfers pursuant to
the preceding sentence, no third party shall have
any direct or indirect beneficial interest in the
Phantom Shares.
FAIR MARKET VALUE: Fair market value of vested Phantom Shares on a
Termination Date shall be determined by
multiplying the "equity value" of Holdings by a
fraction, the numerator of which shall be the
number of vested Phantom Shares and the
denominator of which shall be the total number of
fully diluted shares of Holdings common stock
(assuming that all options, warrants or other
securities which are convertible or exchangeable
for common stock are outstanding). The equity
value of Holdings on a Termination Date shall be
determined by the Board of Directors of Holdings
in good faith by selecting an appropriate multiple
and then multiplying the consolidated EBITDA for
the latest four fiscal quarters by such multiple
and then subtracting from such amount all debt,
preferred stock and other obligations on a
consolidated basis of Holdings, if any.
</TABLE>
<PAGE> 1
EXHIBIT (d)(ix)
SEVERANCE, CHANGE OF CONTROL AND NONCOMPETITION AGREEMENT
THIS SEVERANCE, CHANGE OF CONTROL AND NONCOMPETITION AGREEMENT (the
"Agreement") is made and entered into as of April 13, 2000, by and between
Jasdrew Acquisition Corp. ("Jasdrew"), and David H. Hammelman (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee is an officer and a key employee of PlayCore
Wisconsin, Inc. ("PlayCore Wisconsin");
WHEREAS, PlayCore, Inc. intends to enter into an Agreement and Plan of
Merger (the "Merger Agreement") with Jasdrew contemporaneously with the
execution hereof pursuant to which Jasdrew will merge (the "Merger") into
PlayCore, Inc. (after which PlayCore, Inc. is to merge into PlayCore Wisconsin);
WHEREAS, the Employee, in consideration of the agreement of Jasdrew
contained herein that Employee will receive payment of a cash bonus from
PlayCore Wisconsin in an amount of $50,000 ("the Closing Amount") promptly
following the effective date of the Merger and a grant of phantom common stock
of PlayCore Holdings, Inc. ("Holdings") to be set forth in a separate phantom
stock grant agreement, desires to enter into this Agreement to provide for the
payment of certain benefits to the Employee if the Employee's employment with
PlayCore Wisconsin is terminated under certain circumstances, including a
termination following a change of control of PlayCore Wisconsin other than the
transactions contemplated in the Merger Agreement;
WHEREAS, the Employee acknowledges and agrees that the terms of this
Agreement shall supersede all prior agreements between the parties as set forth
in Section 13.c. hereof;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and as an inducement for Jasdrew
to enter into, and to proceed with the transactions contemplated in, the Merger
Agreement, the parties hereto agree as follows:
1. Definition. The capitalized terms used in this Agreement shall have the
following meanings (unless otherwise expressly provided herein):
a. "Change of Control" shall have the meaning set forth in Exhibit A
hereto.
b. "Good Reason" means any of the following:
(1) The removal of the Employee from, or any failure to reelect
or reappoint the Employee to, any of the positions held with PlayCore
Wisconsin on the date of the Change of Control or any other positions with
PlayCore Wisconsin to which the Employee shall thereafter be elected,
appointed or assigned, except in the event that such removal or failure to
reelect or reappoint
<PAGE> 2
relates to the termination by PlayCore Wisconsin of the Employee's
employment for Just Cause or by reason of Permanent Disability; or
(2) A good faith determination by the Employee that there has
been a significant adverse change, without the Employee's written
consent, in the Employee's working conditions or status with PlayCore
Wisconsin from such working conditions or status in effect during the
180-day period immediately prior to the Change of Control or the
effective date of this Agreement for purposes of Section 3.c. hereof,
including but not limited to (A) a significant change in the nature or
scope of the Employee's authority, powers, functions, duties or
responsibilities, or (B) a significant reduction in the level of
support services, staff, secretarial and other assistance, office
space and accoutrements, or for purposes of Section 2 hereof alone,
(C) relocation of the Employee's primary place of employment with
PlayCore Wisconsin on the effective date of the Merger to a location
more than thirty-five (35) miles from such primary place of
employment.
c. "Just Cause" means, prior to a Change in Control, willful and
gross misconduct on the part of the Employee that is materially and
demonstrably detrimental to PlayCore Wisconsin, as determined in good faith
by the Board of Directors of PlayCore Wisconsin. "Just Cause" means,
following a Change in Control, the commission by the Employee of one or
more acts for which the Employee is convicted (as evidenced by binding and
final judgment. order or decree of a court of competent jurisdiction) of a
felony under United States federal, state, or local criminal law which
substantially impairs the Employee's ability to perform his duties or
responsibilities; the engaging in by the Employee of intentional conduct
not taken in good faith which has caused demonstrable and serious financial
injury to the Employer, as evidenced by a determination in a binding and
final judgment, order, or decree of a court or administrative agency of
competent jurisdiction, in effect after exhaustion or lapse of all rights
of appeal, in an action, suit, or proceeding. whether civil, criminal,
administrative, or investigative; or the continuing willful and
unreasonable refusal by the Employee to perform the Employee's duties or
responsibilities (unless significantly changed without the Employee's
consent).
d. "Permanent Disability" means that the Employee is unable by
reason of accident or illness (including mental illness) to perform the
material duties of his regular position with PlayCore Wisconsin and not
expected to recover from his disability within a period of six (6) months
from the commencement of the disability. If at any time the Employee claims
or is claimed to have a Permanent Disability, a physician acceptable to
both the Employee, or his personal representative, and PlayCore Wisconsin
(which acceptances shall not be unreasonably withheld) shall be retained by
PlayCore Wisconsin and shall examine the Employee. The Employee shall
cooperate fully with the physician. If the physician determines that the
Employee has a Permanent Disability the physician shall deliver to PlayCore
Wisconsin a certificate certifying both that the Employee has a Permanent
Disability and the date upon which the condition of Permanent Disability
commenced. The determination of the physician shall be conclusive.
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<PAGE> 3
e. "Person" means (other than with respect to the definition of
"Change of Control") any individual or any partnership, limited liability
company, corporation, joint venture, trust, or other entity (as defined in
Rule l3d-5 under the Securities Exchange Act of 1934), together with its
affiliates and the heirs, personal representatives, successors, and assigns
of the "Person" when the context so permits.
f. "Severance Period" means the applicable period of time beginning
with the Termination Date. If the Termination Date is within eighteen (18)
months after a Change of Control and the termination of employment is
either by PlayCore Wisconsin other than with Just Cause or by the Employee
for Good Reason, the Severance Period shall be eighteen (18) months (the
"18-month Severance Period"). If the Termination Date occurs other than
within such 18-month period following a Change of Control then the
Severance Period, if applicable, shall be twelve (12) months ("the 12-month
Severance Period").
g. "Termination Date" means the date upon which the Employee's
employment with PlayCore Wisconsin is terminated.
h. "Transaction Benefit" means the amount that is the greater of: (i)
the value of Employee's grant of phantom common stock on the date this
Agreement becomes effective, or (ii) the value of such grant of phantom
common stock on the Termination Date (such value to be determined by
multiplying the "equity value" of Holdings (as defined in the next
sentence) by a fraction, the numerator of which shall be the number of
shares represented by such grant and the denominator of which shall be the
total number of fully diluted shares of Holdings common stock (assuming
that all options, warrants or other securities which are convertible or
exchangeable for common stock are outstanding). The equity value of
Holdings on a Termination Date shall be determined by the Board of
Directors of PlayCore Wisconsin in good faith by selecting an appropriate
multiple and then multiplying the consolidated EBITDA for the latest four
fiscal quarters by such multiple and then subtracting from such amount all
debt, preferred stock and other obligations on a consolidated basis of
Holdings, if any.
2. Termination After Change of Control. If, within eighteen (18) months
after the occurrence of a Change of Control, the Employee's employment with
PlayCore Wisconsin is terminated either: (i) by PlayCore Wisconsin (a) other
than with Just Cause or (b) due to Permanent Disability or, (ii) by the Employee
for Good Reason, then the Employee shall be entitled to receive the following
severance benefits from PlayCore Wisconsin:
a. continuation of the Employee's salary during the applicable
18-month Severance Period; and
b. continuation of coverage for the Employee and any dependents
previously covered under the group health, group life, group long-term
disability, and similar group insurance plans, if any, maintained by
PlayCore Wisconsin, at the active employee discounted cost, until
expiration of the 18-month Severance Period (provided, that if such
continued participation is precluded by the provisions of such plans or by
applicable law, PlayCore Wisconsin shall provide the Employee with
comparable benefits of equal value at no increase in cost to the Employee),
and execution of this
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<PAGE> 4
Agreement by the Employee shall not be considered a waiver of any rights or
entitlements he may have under applicable law to continuation of coverage
under the group health plan maintained by PlayCore Wisconsin.
3. Other Termination. If the Employee's employment with PlayCore
Wisconsin is terminated by PlayCore Wisconsin (a) other than with Just Cause or
(b) due to Permanent Disability and Section 2, above, is not applicable because
such termination is not within the eighteen (18) month period following a Change
of Control, then the Employee shall be entitled to receive the following
severance benefits from PlayCore Wisconsin:
a. continuation of the Employee's salary during the applicable
12-month Severance Period; provided, however, if such termination occurs
prior to a Change of Control, the total salary continuation shall be
reduced by the value of any Transaction Benefit; and
b. continuation of coverage for the Employee and any dependents
previously covered under the group health, group life, group long-term
disability, and similar group insurance plans, if any, maintained by
PlayCore Wisconsin, at the active employee discounted cost, until
expiration of the 12-month Severance Period (provided, that if such
continued participation is precluded by the provisions of such plans or by
applicable law, PlayCore Wisconsin shall provide the Employee with
comparable benefits of equal value at no increase in cost to the Employee),
and execution of this Agreement by the Employee shall not be considered a
waiver of any rights or entitlements he may have under applicable law to
continuation of coverage under the group health plan maintained by PlayCore
Wisconsin.
c. To compensate the Employee for relinquishing certain rights with
PlayCore Wisconsin in order to facilitate the acquisition of PlayCore, Inc.
by Holdings, and notwithstanding the foregoing or any provision contained
herein to the contrary, if the Employee's employment with PlayCore
Wisconsin is terminated either (x) by PlayCore Wisconsin other than with
Just Cause or (y) by the Employee for Good Reason, and the termination of
employment occurs within the period that begins on the effective date of
the Merger and ends eighteen (18) months thereafter, then the Employee
shall be entitled to receive the greater of: (i) the severance benefits set
forth above in this Section 3, or (ii) the severance benefits that would
have accrued to the Employee as a result of the acquisition of PlayCore,
Inc. by Holdings pursuant to that certain Severance, Change of Control and
Noncompetition Agreement, dated February 18, 1999, by and between the
Employee and PlayCore, Inc. (the "Old Severance Agreement") attached hereto
as Exhibit B, in either case, less the value of any Transaction Benefit.
4. Payments.
a. Promptly following the effectiveness of the Merger, Jasdrew (or its
successor) shall pay to Employee the Closing Amount.
b. Except as otherwise provided in this Agreement, any salary
continuation amounts due to the Employee hereunder shall be payable in
equal
4
<PAGE> 5
installments on each regular payroll date of PlayCore Wisconsin after the
Termination Date.
5. Deduction and Withholding. All amounts payable to or on behalf of
the Employee pursuant to this Agreement shall be subject to such deductions and
withholding as may be agreed to by the Employee but not less than required by
applicable law.
6. Death and Permanent Disability. In the event of the Employee's
death, any amount payable or distributable to the Employee pursuant hereto from
rights and benefits accrued to and through the date of his death shall be paid
at the time or times indicated in such Section to the beneficiary designated by
the Employee for purposes of his group term life insurance coverage with
PlayCore Wisconsin and, if no beneficiary is designated for such purposes or if
no group term life insurance is then in effect, to the Employee's estate. In the
event that Employee's employment is terminated due to Permanent Disability,
Employee shall be entitled to accrued compensation through the Termination Date
and any other benefits (if any) to which Employee may be entitled under PlayCore
Wisconsin's benefit plans, programs and policies as then in effect.
7. Other Benefits. The benefits provided under this Agreement shall be
in addition to, and not in derogation or diminution of, any benefits that the
Employee may be entitled to receive under any other plan or program now or
hereafter maintained by PlayCore Wisconsin other than any severance pay plan.
8. Stock Options and Other Equity. Notwithstanding anything contained
in this Agreement to the contrary, the treatment of any stock options and other
equity held by the Employee on the Termination Date shall be subject to the
terms and conditions of the applicable plan documents and agreements in
accordance with the terms set forth in Schedules A, B and C attached hereto
("Applicable Equity Agreements") and the terms of the Applicable Equity
Agreements shall govern the treatment of such options and equity in the event of
Employee's termination.
9. Covenant Not to Compete. The Employee hereby agrees that he will
not, during the period of his employment with PlayCore Wisconsin and for a
period of two (2) years thereafter, as proprietor, partner, member, shareholder
(directly or indirectly owning or controlling five percent (5%) or more of any
class of stock), employee, consultant, agent, or otherwise, on his own behalf or
on behalf of another person., do any of the following in competition with
PlayCore Wisconsin, without the prior written consent of PlayCore Wisconsin:
a. solicit or assist in the solicitation of customers of PlayCore
Wisconsin or its affiliates;
b. render or assist in rendering services to customers of PlayCore
Wisconsin or its affiliates; or
c. divert or attempt to divert any customer's business from PlayCore
Wisconsin or its affiliates, or otherwise interfere with the business
relationship between PlayCore Wisconsin or its affiliates and any of their
respective customers, employees, or suppliers.
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<PAGE> 6
Notwithstanding the foregoing, this Agreement shall not in any event be
construed to prevent the Employee from earning a living utilizing his skills in
any businesses which may, as an incident to a business or activity significantly
different from the business of PlayCore Wisconsin, make or sell some products or
provide some services which may in some degree compete with the business of
PlayCore Wisconsin. However, nothing in this Section 9 shall be deemed to permit
the Employee to accept employment with companies or a division thereof which
then or thereafter will directly compete in a major way with the business of
PlayCore Wisconsin or its affiliates with which the Employee was involved or had
access to information while employed by PlayCore Wisconsin.
10. Confidential Information. The Employee agrees that he will not,
while he is employed by PlayCore Wisconsin or for a period of five (5) years
thereafter, disclose to any person to whom he is not otherwise authorized to do
so by PlayCore Wisconsin (an "Unauthorized Person"), or use for his own account,
any information (the "Confidential Information"), whether or not reduced to
written or other tangible form, in which PlayCore Wisconsin or its affiliates
has a legally protectible interest by virtue of the following:
a. such information is not generally known in the industry;
b. the Employee has had access to (or, either alone or in cooperation
with others, originated or developed) such information during his
employment with PlayCore Wisconsin;
c. such information has been treated by PlayCore Wisconsin or its
affiliates as confidential;
d. such information relates to the business of PlayCore Wisconsin or
any of its affiliates; or
e. such information is of competitive advantage to PlayCore Wisconsin
or its affiliates.
Confidential Information for which the Employee has first secured the
written consent of PlayCore Wisconsin for its disclosure or use, and
Confidential Information which becomes generally known in the industry, or which
otherwise ceases to be legally protectible (other than by the Employee's breach
of this Agreement), shall cease to be subject to the restriction set forth in
this Section 10. Notwithstanding anything contained herein to the contrary, this
Section 10 prohibits only the use and disclosure of Confidential Information and
shall not be construed as limiting the Employee's right to undertake any other
employment or business activity. The Employee shall be prohibited from competing
with PlayCore Wisconsin only as provided in Section 9 above.
11. Termination With Just Cause. Notwithstanding any provision contained
herein to the contrary, in the event that the Employee's employment with
PlayCore Wisconsin is terminated by PlayCore Wisconsin with Just Cause the
Employee shall not be entitled to any of the benefits identified in Sections 2
and 3 of this Agreement, and shall be entitled to receive only those benefits
that the Employee would otherwise be entitled to receive under any other
agreements entered into by the Employee and PlayCore Wisconsin or under
applicable law.
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<PAGE> 7
12. Rights in the Event of Dispute.
a. If a claim or dispute arises concerning the rights of the Employee
or his beneficiary (either or both of whom are hereinafter referred to as
the "claimant") to amounts or benefits described in Section 2 of this
Agreement (pertaining to benefits upon termination of employment following
a Change of Control), regardless of the party by whom such claim or dispute
is initiated, PlayCore Wisconsin shall, upon presentation of appropriate
vouchers, pay all legal expenses, including reasonable attorneys' fees,
court costs and ordinary and necessary out-of-pocket costs of attorneys'
billed to and payable by the claimant in connection with the bringing,
prosecuting, defending, litigating, negotiating, or settling such claim or
dispute; provided, however, that PlayCore Wisconsin shall not be obligated
to pay such expenses unless and until final resolution of such claim or
dispute with the claimant being entitled to a substantial part of the
rights claimed by him.
b. If a claim or dispute arises concerning the rights of the Employee
or his beneficiary (either or both of whom are hereinafter referred to as
the "claimant") to amounts or benefits described in Section 3 of this
Agreement (pertaining to termination of employment by PlayCore Wisconsin
other than as described in Section 2), regardless of the party by whom such
claim or dispute is initiated, each party shall pay its own legal expenses,
including reasonable attorneys' fees, court costs and ordinary and
necessary out-of-pocket costs in connection with the bringing, prosecuting,
defending, litigating, negotiating, or settling such claim or dispute;
provided, however, that the prevailing party in any court action shall be
entitled to recover from the other party, to the fullest extent permitted
by law, all such legal expenses that the prevailing party may reasonably
incur as a result of such action. Any payment pursuant to this subsection
shall include interest on any delayed payment at the applicable federal
rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code.
13. General Provisions.
a. All notices or other communications required or permitted hereunder
shall be in writing and shall be deemed given (i) when delivered in person
or (ii) when telecopied (at the date and time indicated on the receipt of
transmission if such day is a business day, and if not, at 9 a.m. on the
following business day) with hard copy delivered by hand or deposited in
the United States mail postage prepaid, registered or certified mail, on or
before two (2) business days after its delivery by telecopy, or (iii) three
(3) business days after being deposited in the United States mail, postage
prepaid, registered or certified mail, or (iv) two (2) business days after
delivery to a nationally recognized express courier, expenses prepaid,
addressed to the appropriate party as follows: to the Employee at his
address on file with PlayCore Wisconsin; or to Jasdrew or PlayCore
Wisconsin, c/o PlayCore, Inc., 15 West Milwaukee Street, Suite 204,
Janesville, Wisconsin 53545, telecopier number (608) 741-7191, Attention:
Chairman; and with a copy to Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
1333 New Hampshire Avenue, N.W., Suite 400, Washington, D.C., 20036,
Attention: Russell W. Parks, Jr.
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<PAGE> 8
b. Nothing herein shall be construed as an agreement to continue the
employment by PlayCore Wisconsin of the Employee.
c. This Agreement constitutes the entire agreement between the parties
and PlayCore Wisconsin with respect to the subject matter contained herein
and, as of the effective date of the Merger, supersedes any and all prior
understandings, representatives, negotiations, and agreements with respect
thereto (including, without limitation, the Old Severance Agreement).
d. No modification or amendment of any provision of this Agreement
shall be effective unless in a written instrument executed by both parties.
Either party's failure to insist upon strict compliance with any provision
hereof shall not be deemed to be a waiver of such provision or any other
provision hereof.
e. This Agreement shall be binding upon and shall inure to the benefit
of the successors and assigns of Jasdrew and PlayCore Wisconsin. Without
limiting the foregoing, Jasdrew and PlayCore Wisconsin will require any
successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of
PlayCore Wisconsin, to expressly assume and agree to perform PlayCore
Wisconsin's obligations under this Agreement in the same manner and to the
same extent that Jasdrew and PlayCore Wisconsin are required to perform
them if no such succession had taken place. As used in this Agreement,
"Company" shall mean PlayCore Wisconsin and any successor to its business
and/or assets which executes and delivers the agreement provided for in
this Section 13.e. or which otherwise becomes bound by all the terms and
provisions of this Agreement as a matter of law. This Agreement shall inure
to the benefit of, and shall be enforceable by, the Employee's heirs, legal
representative or other successors in interest, but shall not otherwise be
assignable or transferable.
f. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
g. The validity, interpretation, construction and enforceability of
this Agreement shall be governed by the laws of the State of Wisconsin,
without regard to conflicts of laws principles.
14. Failure to Consummate. This Agreement shall be null and void if the
Merger is not consummated.
- SIGNATURE PAGE FOLLOWS -
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<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
COMPANY: EMPLOYEE:
JASDREW ACQUISITION CORP.
By: /s/ TODD R. BERMAN /s/ DAVID H. HAMMELMAN
--------------------------- ------------------------------------
Todd R. Berman, President David H. Hammelman
<PAGE> 10
SCHEDULE A
<TABLE>
<CAPTION>
OPTION TERMS
<S> <C>
AMOUNT OF INITIAL GRANT: A nonqualified option grant (the
"Initial Grant") of 2,175 shares of
common stock of PlayCore Holdings, Inc.
("Holdings"). The Initial Grant shall be
pursuant to an option plan (and
underlying option grant agreement)
established by Holdings with an initial
reserve equal to 10% of the outstanding
common shares of Holdings as of the
closing date (post transaction).
EXERCISE PRICE: The per share exercise price of the
option shall be the common stock's fair
market value on the date of grant (which
shall be equal to the fair market value
of the equivalent number of shares of
common stock as of the closing date).
TERM: Options, or any portion thereof, not
previously exercised or terminated will
expire ten years from the date of grant.
METHOD OF EXERCISE: Prior to an "initial public offering",
cash only; provided, however, the Board
of Directors or Compensation Committee
of Holdings may authorize cashless
exercises. An option may only be
exercised with respect to whole shares.
VESTING: TIME OPTIONS: 50% of the total number of
shares subject to the Initial Grant
shall vest ratably (25% a year) on each
of the first through fourth
anniversaries of the date of grant ("A
Options"), provided the Employee is in
the employ of PlayCore Wisconsin, Inc.
or an affiliate ("PlayCore Wisconsin")
on each such date.
If there is a Change in Control (as
defined in the option plan) prior to the
fourth anniversary of the date of grant,
and the Employee is still in the employ
of PlayCore Wisconsin, all unvested Time
Options shall vest.
PERFORMANCE OPTIONS: The remaining 50%
of the total number of shares subject to
the Initial Grant shall vest if the net
Internal Rate of Return ("IRR") realized
by PlayCore Holdings, L.L.C. ("Holdings
L.L.C.") on its total investment in
Holdings (after dilution from options on
shares held by management) is 25% or
more ("Target IRR") as of the
"Determination Date," ("Performance
Options") and the Employee is still in
the employ of
</TABLE>
<PAGE> 11
<TABLE>
<S> <C>
PlayCore Wisconsin on the
Determination Date.
The Determination Date regarding the
attainment of the IRR shall be the
closing date or such other time as
Holdings L.L.C. receives cash payments
for its interests in Holdings.
TERMINATION OF EMPLOYMENT:
BY PLAYCORE WISCONSIN
WITHOUT CAUSE OR
BY THE EMPLOYEE
FOR GOOD REASON OR
UPON DEATH OR DISABILITY: TIME OPTIONS: All vested Time Options
remain outstanding and exercisable for a
period of 90 days and if not exercised
by end of business on the 90th day shall
terminate. All unvested Time Options
shall be immediately terminate on the
Termination Date.
PERFORMANCE OPTIONS: Performance Options
shall vest if the Target IRR would have
been achieved based upon the fair market
value of Holdings L.L.C.'s investment in
Holdings as of the Termination Date and
Employee will receive the applicable
value of the Performance Option as
determined at the Termination Date by
the Board of Directors of Holdings at
such time as Holdings L.L.C. receives
cash payments for its interests in
Holdings. If the Target IRR is not
achieved on both the Termination Date
and the Determination Date, then all
Performance Options shall be terminated
with no payment to or value to Employee.
BY PLAYCORE WISCONSIN FOR
CAUSE OR BY THE
EMPLOYEE WITHOUT
GOOD REASON: TIME OPTIONS: All vested Time Options
shall remain exercisable for 90 days and
if not exercised by the end of business
on the 90th day shall terminate. All
nonvested Time Options shall terminate
on the Termination Date.
PERFORMANCE OPTIONS: All Performance
Options shall immediately terminate.
CALL ON SHARES ACQUIRED In the event of the Employee's
termination of
</TABLE>
<PAGE> 12
<TABLE>
<S> <C>
ON EXERCISE OF OPTION: employment for any reason, all shares in
Holdings held by Employee as a result of
exercising Options shall be subject to a
"call" by Holdings or its designee (the
"Company Call") at the fair market value
on the Termination Date. The Company
Call must be exercised within six months
of the Termination Date. The purchase
price as determined above will be paid
one-half in cash within 30 days of the
exercise of the Company Call and the
remaining one-half payable within two
years of the date of exercise of the
Company Call (the "Deferred Call
Payments"). Any Deferred Call Payments
shall be credited with an appropriate
interest rate or dividend rate. In the
event that Holdings is restricted from
purchasing such shares for cash under
any applicable financing or other
agreements, Holdings may issue the
Employee a note or such other
permissible security (which shall
contain commercially reasonable terms)
in full satisfaction of such call. In no
event shall the Employee be paid less
cash at the time of the exercise of the
Company Call than the Employee's income
tax liability resulting from the sale of
the shares.
EMPLOYEE PUT: In the event of Employee's termination
of employment by PlayCore Wisconsin
without Cause, by the Employee for Good
Reason, or as a result of death or
Permanent Disability, the Employee or
his estate as the case may be, may
exercise a "put" to Holdings (the
"Employee Put") at fair market value on
the Termination Date, subject to
Holdings' ability under its financing
documents. The Employee Put must be
exercised within six months of the
Termination Date. The purchase price as
determined above will be paid one-half
in cash within 30 days of the exercise
of the Employee Put and the remaining
one-half will be payable within two
years of the date of exercise of the
Employee Put (the "Deferred Put
Payments"). Any Deferred Put Payments
shall be credited with an appropriate
interest rate or dividend rate. All
payments made by Holdings with respect
to its exercise of the Executive Put are
subject to Holdings' financing
agreements. In the event that Holdings
is restricted from purchasing such
shares for cash under any applicable
financing or other agreements, Holdings
may issue the Employee a note or such
other permissible security (which shall
contain commercially reasonable terms)
in full satisfaction of such put.
REALIZATION: Except in the case of the exercise of
the Company Call or Employee Put as set
forth above, Employee shall be
</TABLE>
<PAGE> 13
<TABLE>
<S> <C>
required to hold the shares or Options
until such time Holdings L.L.C. sells or
otherwise exits from its equity interest
in Holdings.
TAG-ALONG RIGHTS: In the event of a sale of Holdings by
Holdings, L.L.C., the Employee will have
the same tag-along rights as other
investors.
RESTRICTIONS ON TRANSFER: The Options and shares will be
non-transferable, except with respect to
a transfer to a trust or partnership,
the only beneficiaries or partners (as
the case may be) of which are immediate
family member of Employee, or in
accordance with the terms of any
applicable operating agreement or
shareholders agreement and the laws of
descent and distribution.
Other than with respect to transfers
pursuant to the preceding sentence, no
third party shall have any direct or
indirect beneficial interest in the
Options.
REGISTRATION RIGHTS: Employee will have the same piggyback
registration rights as other investors.
FAIR MARKET VALUE: Fair market value of vested shares on a
Termination Date shall be determined by
multiplying the "equity value" of
Holdings by a fraction, the numerator of
which shall be the number of vested
shares and the denominator of which
shall be the total number of fully
diluted shares of Holdings common stock
(assuming that all options, warrants or
other securities which are convertible
or exchangeable for common stock are
outstanding). The equity value of
Holdings on a Termination Date shall be
determined by the Board of Directors of
Holdings in good faith by selecting an
appropriate multiple and then
multiplying the consolidated EBITDA for
the latest four fiscal quarters by such
multiple and then subtracting from such
amount all debt, preferred stock and
other obligations on a consolidated
basis of Holdings, if any.
</TABLE>
<PAGE> 14
SCHEDULE B
<TABLE>
<CAPTION>
EQUITY PURCHASE TERMS
<S> <C>
AMOUNT OF EQUITY: A percentage equity interest in PlayCore
Holdings, L.L.C. ("Holdings L.L.C.")
equal to $70,000 and determined based on
the value paid by Chartwell Investments
II, L.L.C. or its affiliates
("Chartwell") for its interest in
Holdings L.L.C. (the "Interest"). Upon
execution of the applicable subscription
documents relating to the Interest,
Employee shall make a cash payment to
Holdings L.L.C. of $70,000.
COMPANY CALL ON INTERESTS: In the event of Employee's termination
of employment for any reason, the
Interest held by the Employee shall be
subject to a "call" by Holdings L.L.C.
or its designee (the "Company Call") at
the fair market value on the Termination
Date. The Company Call must be exercised
within six months of the Termination
Date. The purchase price as determined
above will be paid as follows: the
lesser of the Employee's original
investment or fair market value of the
Interest within 30 days of the exercise
of the Company Call and the remaining
amount, if any, payable within two years
of the date of exercise of the Company
Call (the "Deferred Call Payments"). Any
Deferred Call Payments shall be credited
with an appropriate interest rate or
dividend rate. In the event that
Holdings L.L.C. is restricted from
purchasing the Interest for cash under
any applicable financing or other
agreements to which Holdings L.L.C. or
any of its subsidiaries is a party which
prevent Holdings L.L.C. from obtaining
cash, then Holdings L.L.C. may issue the
Employee a note or such other
permissible security (which shall
contain commercially reasonable terms)
in full satisfaction of such call.
EMPLOYEE PUT: In the event of Employee's termination
of employment by PlayCore Wisconsin,
Inc. or an affiliate ("PlayCore
Wisconsin") without Cause, by the
Employee for Good Reason, or as a result
of death or Permanent Disability, the
Employee or his estate as the case may
be, may exercise a "put" to Holdings
L.L.C. (the "Employee Put") of the
Interest at fair market value on the
Termination Date, subject to compliance
with the financing documents of Holdings
L.L.C. or of any of its subsidiaries.
The Employee Put must be exercised
within six months of the Termination
Date. The purchase price as determined
above
</TABLE>
<PAGE> 15
<TABLE>
<S> <C>
will be paid as follows: the lesser of
the Employee's original investment or
fair market value of the Interest within
30 days of the exercise of the Employee
Put and the remaining amount, if any,
subject to the Company Call, will be
held by Employee until such time as
Holdings L.L.C. sells or otherwise exits
from its equity interest in PlayCore
Holdings, Inc. ("Holdings"). All
payments by Holdings L.L.C. with respect
to the exercise of the Employee Put are
subject to the financing agreements of
Holdings L.L.C. or any of its
subsidiaries. In the event that Holdings
L.L.C. is restricted from purchasing the
Interest for cash under any applicable
financing or other agreements to which
Holdings L.L.C. or any of its
subsidiaries is a party which prevent
Holdings L.L.C. from obtaining cash,
then Holdings L.L.C. may issue Employee
a note or such other permissible
security (which shall contain
commercially reasonable terms) in full
satisfaction of such put.
REALIZATION: Except in the case of the exercise of
Company Call or Employee Put as set
forth above, Employee shall be required
to hold the Interest until such time as
Chartwell sells or otherwise exits from
its equity interest in Holdings L.L.C.
TAG-ALONG RIGHTS: In the event of a sale of Holdings
L.L.C. by Chartwell, the Employee will
have the same tag-along rights as other
investors.
RESTRICTIONS ON TRANSFER: The Interest will be non-transferable,
except with respect to a transfer to a
trust or partnership, the only
beneficiaries or partners (as the case
may be) of which are immediate family
member of Employee, or in accordance
with the terms of any applicable
operating agreement or shareholders
agreement and the laws of descent and
distribution.
Other than with respect to transfers
pursuant to the preceding sentence, no
third party shall have any direct or
indirect beneficial interest in the
Interest.
REGISTRATION RIGHTS: Employee will have the same piggyback
registration rights as other investors.
FAIR MARKET VALUE: Fair market value of Employee's Interest
on a Termination Date shall be
determined in three steps as follows.
(1) The equity value of Holdings on a
Termination Date shall be determined by
the Board of Directors of Holdings in
good
</TABLE>
<PAGE> 16
<TABLE>
<S> <C>
faith by selecting an appropriate
multiple and then multiplying the
consolidated EBITDA for the latest four
fiscal quarters by such multiple and
then subtracting from such amount all
debt, preferred stock and other
obligations on a consolidated basis of
Holdings, if any. (2) Holdings L.L.C's
interest in Holdings shall be determined
by multiplying the equity value of
Holdings (as determined under step
number (1)) on the Termination Date by a
fraction, the numerator of which shall
be the number of shares of common stock
of Holdings that are owned by Holdings
L.L.C., and the denominator of which
shall be the total number of fully
diluted shares of Holdings common stock
(assuming that all options, warrants or
other securities which are convertible
or exchangeable for common stock are
outstanding). (3) Finally, the
percentage representing Employee's
Interest shall be multiplied by the
dollar amount of Holdings L.L.C.'s
interest in Holdings as determined under
step number (2).
</TABLE>
<PAGE> 17
SCHEDULE C
<TABLE>
<CAPTION>
PHANTOM STOCK TERMS
<S> <C>
AMOUNT OF INITIAL GRANT: A grant of 540 shares of phantom common
stock of PlayCore Holdings, Inc.
("Holdings") (the "Phantom Shares")
pursuant to a grant by Holdings.
VESTING: One third of the total number of Phantom
Shares shall vest on each anniversary of
the date of the grant. In the event that
the Employee's employment with PlayCore
Wisconsin, Inc. or an affiliate
("PlayCore Wisconsin") is terminated for
any reason, all non-vested shares shall
be forfeited.
COMPANY CALL: In the event of Employee's termination
of employment for any reason, the vested
Phantom Shares held by the Employee
shall be subject to a "call" by Holdings
or its designee (the "Company Call") at
the fair market value on the Termination
Date. The Company Call must be exercised
within six months of the Termination
Date. The purchase price shall be the
equivalent of the fair market value of
an equivalent number of common shares of
Holdings on the Termination Date. It
will be paid one-half in cash within 30
days of the exercise of the Company Call
and the remaining one-half will be
payable within two years of the date of
exercise of the Company Call (the
"Deferred Call Payments"). Any Deferred
Call Payments shall be credited with an
appropriate interest rate or dividend
rate. In the event that Holdings is
restricted from purchasing such shares
for cash under any applicable financing
or other agreements, Holdings may issue
the Employee a note or such other
permissible security (which shall
contain commercially reasonable terms)
in full satisfaction of such call. In no
event shall the Employee be paid less
cash at the time of the exercise of the
Company Call than the Employee's income
tax liability resulting from the sale of
the Phantom Shares.
EMPLOYEE PUT: In the event of Employee's termination
of employment by PlayCore Wisconsin
without Cause, by the Employee for Good
Reason, or as a result of death or
Permanent Disability, the Employee or
his estate as the case may be, may
exercise a "put" to Holdings (the
"Employee Put") of the vested Phantom
Shares at fair market value on the
Termination Date. The Employee Put must
be exercised
</TABLE>
<PAGE> 18
<TABLE>
<S> <C>
within six months of the Termination
Date. The purchase price as determined
above will be paid one-half in cash
within 30 days of the exercise of the
Employee Put and the remaining one-half
will be payable within two years of the
date of exercise of the Employee Put
(the "Deferred Put Payments"). Any
Deferred Put Payments shall be credited
with an appropriate interest rate or
dividend rate. All payments by Holdings
with respect to its exercise of the
Employee Put are subject to Holdings'
financing agreements. In the event that
Holdings is restricted from purchasing
such shares for cash under any
applicable financing or other
agreements, Holdings may issue the
Employee a note or such other
permissible security (which shall
contain commercially reasonable terms)
in full satisfaction of such put.
REALIZATION: Except in the case of the exercise of
the Company Call or Employee Put as set
forth above, Employee shall be required
to hold the Phantom Shares until such
time as PlayCore Holdings, L.L.C. sells
or otherwise exits from its equity
interest in Holdings (any such
occurrence, a "Realization Event").
TAX GROSS-UP PAYMENT: Upon exercise of the Company Call or
Employee Put or any other Realization
Event hereunder, Holdings shall make a
tax gross-up payment to the Employee to
compensate the Employee for the
difference between ordinary income tax
treatment and capital gains tax
treatment with respect to the
appreciated value ("Appreciated Value")
of the Phantom Shares from the date of
vesting to the earlier of: (i) the
Termination Date (in the case of an
Employee Put or Company Call), or (ii)
the date of the occurrence of a
Realization Event; provided, however,
that in no event shall such tax gross-up
payment exceed the tax benefit to
Holdings actually realized for such tax
year, if any, related to the deduction
for (a) the tax gross-up payment and (b)
the appreciated value of the Phantom
Shares from the date of vesting to the
earlier of: (i) the Termination Date (in
the case of an Employee Put or Company
Call), or (ii) the date of the
occurrence of a Realization Event.
TAG-ALONG RIGHTS: In the event of a sale of Holdings by
PlayCore Holdings, L.L.C., the Employee
will have the same tag-along rights as
other investors.
RESTRICTIONS ON TRANSFER: The Phantom Shares will be
non-transferable, except with respect to
a transfer to a trust or partnership,
the only
</TABLE>
<PAGE> 19
<TABLE>
<S> <C>
beneficiaries or partners (as the case
may be) of which are immediate family
member of Employee, or in accordance
with the terms of any applicable
operating agreement or shareholders
agreement and the laws of descent and
distribution.
Other than with respect to transfers
pursuant to the preceding sentence, no
third party shall have any direct or
indirect beneficial interest in the
Phantom Shares.
FAIR MARKET VALUE: Fair market value of vested Phantom
Shares on a Termination Date shall be
determined by multiplying the "equity
value" of Holdings by a fraction, the
numerator of which shall be the number
of vested Phantom Shares and the
denominator of which shall be the total
number of fully diluted shares of
Holdings common stock (assuming that all
options, warrants or other securities
which are convertible or exchangeable
for common stock are outstanding). The
equity value of Holdings on a
Termination Date shall be determined by
the Board of Directors of Holdings in
good faith by selecting an appropriate
multiple and then multiplying the
consolidated EBITDA for the latest four
fiscal quarters by such multiple and
then subtracting from such amount all
debt, preferred stock and other
obligations on a consolidated basis of
Holdings, if any.
</TABLE>
<PAGE> 1
EXHIBIT (d)(x)
SEVERANCE, CHANGE OF CONTROL AND NONCOMPETITION AGREEMENT
THIS SEVERANCE, CHANGE OF CONTROL AND NONCOMPETITION AGREEMENT (the
"Agreement") is made and entered into as of April 13, 2000, by and between
Jasdrew Acquisition Corp. ("Jasdrew") and John E. Caldwell (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee is an officer and a key employee of PlayCore
Wisconsin, Inc. ("PlayCore Wisconsin");
WHEREAS, PlayCore, Inc. intends to enter into an Agreement and Plan of
Merger (the "Merger Agreement") with Jasdrew contemporaneously with the
execution hereof pursuant to which Jasdrew will merge (the "Merger") into
PlayCore, Inc. (after which PlayCore, Inc. is to merge into PlayCore Wisconsin);
WHEREAS, the Employee, in consideration of the agreement of Jasdrew
contained herein that Employee will receive payment of a cash bonus from
PlayCore Wisconsin in an amount of $70,000 (the "Closing Amount") promptly
following the effective date of the Merger and a grant of phantom common stock
of PlayCore Holdings, Inc. ("Holdings") to be set forth in a separate phantom
stock grant agreement, desires to enter into this Agreement to provide for the
payment of certain benefits to the Employee if the Employee's employment with
PlayCore Wisconsin is terminated under certain circumstances, including a
termination following a change of control of PlayCore Wisconsin other than the
transactions contemplated in the Merger Agreement;
WHEREAS, the Employee acknowledges and agrees that the terms of this
Agreement shall supersede all prior agreements between the parties as set forth
in Section 13.c. hereof;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and as an inducement for Jasdrew
to enter into, and to proceed with the transactions contemplated in, the Merger
Agreement, the parties hereto agree as follows:
1. Definition. The capitalized terms used in this Agreement shall have
the following meanings (unless otherwise expressly provided herein):
a. "Change of Control" shall have the meaning set forth in
Exhibit A hereto.
b. "Good Reason" means any of the following:
(1) The removal of the Employee from, or any failure to
reelect or reappoint the Employee to, any of the positions held with
PlayCore Wisconsin on the date of the Change of Control or any other
positions with PlayCore Wisconsin to which the Employee shall
thereafter be elected, appointed or assigned, except in the event that
such removal or failure to reelect or reappoint
<PAGE> 2
relates to the termination by PlayCore Wisconsin of the
Employee's employment for Just Cause or by reason of Permanent
Disability; or
(2) A good faith determination by the Employee that there
has been a significant adverse change, without the Employee's
written consent, in the Employee's working conditions or status
with PlayCore Wisconsin, including but not limited to (A) a
significant change in the nature or scope of the Employee's
authority, powers, functions, duties or responsibilities, (B) a
significant reduction in the level of support services, staff,
secretarial and other assistance, office space and accoutrements,
(C) relocation of the Employee's primary place of employment with
PlayCore Wisconsin on the effective date of the Merger to a
location more than thirty-five (35) miles from such primary place
of employment or (D) reduction in the amount of the Employee's
base salary.
c. "Just Cause" means, prior to a Change in Control, willful
and gross misconduct on the part of the Employee that is materially
and demonstrably detrimental to PlayCore Wisconsin, as determined in
good faith by the Board of Directors of PlayCore Wisconsin. "Just
Cause" means, following a Change in Control, the commission by the
Employee of one or more acts for which the Employee is convicted (as
evidenced by binding and final judgment. order or decree of a court of
competent jurisdiction) of a felony under United States federal,
state, or local criminal law which substantially impairs the
Employee's ability to perform his duties or responsibilities; the
engaging in by the Employee of intentional conduct not taken in good
faith which has caused demonstrable and serious financial injury to
the Employer, as evidenced by a determination in a binding and final
judgment, order, or decree of a court or administrative agency of
competent jurisdiction, in effect after exhaustion or lapse of all
rights of appeal, in an action, suit, or proceeding. whether civil,
criminal, administrative, or investigative; or the continuing willful
and unreasonable refusal by the Employee to perform the Employee's
duties or responsibilities (unless significantly changed without the
Employee's consent).
d. "Permanent Disability" means that the Employee is unable by
reason of accident or illness (including mental illness) to perform
the material duties of his regular position with PlayCore Wisconsin
and not expected to recover from his disability within a period of six
(6) months from the commencement of the disability. If at any time the
Employee claims or is claimed to have a Permanent Disability, a
physician acceptable to both the Employee, or his personal
representative, and PlayCore Wisconsin (which acceptances shall not be
unreasonably withheld) shall be retained by PlayCore Wisconsin and
shall examine the Employee. The Employee shall cooperate fully with
the physician. If the physician determines that the Employee has a
Permanent Disability the physician shall deliver to PlayCore Wisconsin
a certificate certifying both that the Employee has a Permanent
Disability and the date upon which the condition of Permanent
Disability commenced. The determination of the physician shall be
conclusive.
e. "Person" means (other than with respect to the definition of
"Change of Control") any individual or any partnership, limited
liability company, corporation, joint venture, trust, or other entity
(as defined in Rule l3d-5 under the
2
<PAGE> 3
Securities Exchange Act of 1934), together with its affiliates and the
heirs, personal representatives, successors, and assigns of the
"Person" when the context so permits.
f. "Severance Period" means the applicable period of time
beginning with the Termination Date. If the Termination Date is within
eighteen (18) months after a Change of Control and the termination of
employment is either by PlayCore Wisconsin other than with Just Cause
or by the Employee for Good Reason, the Severance Period shall be
eighteen (18) months (the "18-month Severance Period"). If the
Termination Date occurs other than within such 18-month period
following a Change of Control then the Severance Period, if
applicable, shall be twelve (12) months ("the 12-month Severance
Period").
g. "Termination Date" means the date upon which the Employee's
employment with PlayCore Wisconsin is terminated.
h. "Transaction Benefit" means the amount that is the greater of:
(i) the value of Employee's grant of phantom common stock on the date
this Agreement becomes effective, or (ii) the value of such grant of
phantom common stock on the Termination Date (such value to be
determined by multiplying the "equity value" of Holdings (as defined
in the next sentence) by a fraction, the numerator of which shall be
the number of shares represented by such grant and the denominator of
which shall be the total number of fully diluted shares of Holdings
common stock (assuming that all options, warrants or other securities
which are convertible or exchangeable for common stock are
outstanding). The equity value of Holdings on a Termination Date shall
be determined by the Board of Directors of PlayCore Wisconsin in good
faith by selecting an appropriate multiple and then multiplying the
consolidated EBITDA for the latest four fiscal quarters by such
multiple and then subtracting from such amount all debt, preferred
stock and other obligations on a consolidated basis of Holdings, if
any.
2. Termination After Change of Control. If, within eighteen (18)
months after the occurrence of a Change of Control, the Employee's employment
with PlayCore Wisconsin is terminated either: (i) by PlayCore Wisconsin (a)
other than with Just Cause or (b) due to Permanent Disability or, (ii) by the
Employee for Good Reason, then the Employee shall be entitled to receive the
following severance benefits from PlayCore Wisconsin:
a. continuation of the Employee's salary during the applicable
18-month Severance Period; and
b. continuation of coverage for the Employee and any dependents
previously covered under the group health, group life, group long-term
disability, and similar group insurance plans, if any, maintained by
PlayCore Wisconsin, at the active employee discounted cost, until
expiration of the 18-month Severance Period (provided, that if such
continued participation is precluded by the provisions of such plans
or by applicable law, PlayCore Wisconsin shall provide the Employee
with comparable benefits of equal value at no increase in cost to the
Employee), and execution of this Agreement by the Employee shall not
be considered a waiver of any rights or entitlements he may have under
applicable law to continuation of coverage under the group health plan
maintained by PlayCore Wisconsin.
3
<PAGE> 4
3. Other Termination. If the Employee's employment with PlayCore
Wisconsin is terminated either: (i) by PlayCore Wisconsin (a) other than with
Just Cause or (b) due to Permanent Disability or, (ii) by the Employee for Good
Reason, and Section 2, above, is not applicable because such termination is not
within the eighteen (18) month period following a Change of Control, then the
Employee shall be entitled to receive the following severance benefits from
PlayCore Wisconsin:
a. continuation of the Employee's salary during the applicable
12-month Severance Period; provided, however, if such termination
occurs prior to a Change of Control, the total salary continuation
shall be reduced by the value of any Transaction Benefit; and
b. continuation of coverage for the Employee and any dependents
previously covered under the group health, group life, group long-term
disability, and similar group insurance plans, if any, maintained by
PlayCore Wisconsin, at the active employee discounted cost, until
expiration of the 12-month Severance Period (provided, that if such
continued participation is precluded by the provisions of such plans
or by applicable law, PlayCore Wisconsin shall provide the Employee
with comparable benefits of equal value at no increase in cost to the
Employee), and execution of this Agreement by the Employee shall not
be considered a waiver of any rights or entitlements he may have under
applicable law to continuation of coverage under the group health plan
maintained by PlayCore Wisconsin.
c. To compensate the Employee for relinquishing certain rights
with PlayCore Wisconsin in order to facilitate the acquisition of
PlayCore, Inc. by Holdings, and notwithstanding the foregoing or any
provision contained herein to the contrary, if the Employee's
employment with PlayCore Wisconsin is terminated either (x) by
PlayCore Wisconsin other than with Just Cause or (y) by the Employee
for Good Reason, and the termination of employment occurs within the
period that begins on the effective date of the Merger and ends
eighteen (18) months thereafter, then the Employee shall be entitled
to receive the greater of: (i) the severance benefits set forth above
in this Section 3, or (ii) the severance benefits that would have
accrued to the Employee as a result of the acquisition of PlayCore,
Inc. by Holdings pursuant to that certain Severance and Change of
Control Agreement, dated December 1, 1996, by and between the Employee
and Newco, Inc. (the "Old Severance Agreement") attached hereto as
Exhibit B, in either case, less the value of any Transaction Benefit.
4. Payments.
a. Promptly following the effectiveness of the Merger, Jasdrew
(or its successor) shall pay to Employee the Closing Amount.
b. Except as otherwise provided in this Agreement, any amounts
due to the Employee hereunder shall be payable in cash within thirty
days after the Termination Date. The Employee may elect, in his sole
discretion, to receive any salary continuation payments in equal
installments on each regular payroll date of PlayCore Wisconsin after
the Termination Date. Notwithstanding any provision contained herein
to the contrary, any performance bonus payable to the Employee
hereunder may, at the
4
<PAGE> 5
option of either the Employee or PlayCore Wisconsin, be paid one-half (1/2)
within thirty (30) days after the Termination Date and the balance within
ninety (90) days after the Termination Date.
5. Deduction and Withholding. All amounts payable to or on behalf of
the Employee pursuant to this Agreement shall be subject to such deductions and
withholding as may be agreed to by the Employee but not less than required by
applicable law.
6. Death and Permanent Disability. In the event of the Employee's
death, any amount payable or distributable to the Employee pursuant hereto from
rights and benefits accrued to and through the date of his death shall be paid
at the time or times indicated in such Section to the beneficiary designated by
the Employee for purposes of his group term life insurance coverage with
PlayCore Wisconsin and, if no beneficiary is designated for such purposes or if
no group term life insurance is then in effect, to the Employee's estate. In the
event that Employee's employment is terminated due to Permanent Disability,
Employee shall be entitled to accrued compensation through the Termination Date
and any other benefits (if any) to which Employee may be entitled under PlayCore
Wisconsin's benefit plans, programs and policies as then in effect.
7. Other Benefits. The benefits provided under this Agreement shall be
in addition to, and not in derogation or diminution of, any benefits that the
Employee may be entitled to receive under any other plan or program now or
hereafter maintained by PlayCore Wisconsin other than any severance pay plan.
8. Stock Options and Other Equity. Notwithstanding anything contained
in this Agreement to the contrary, the treatment of any stock options and other
equity held by the Employee on the Termination Date shall be subject to the
terms and conditions of the applicable plan documents and agreements in
accordance with the terms set forth in Schedules A, B and C attached hereto
("Applicable Equity Agreements") and the terms of the Applicable Equity
Agreements shall govern the treatment of such options and equity in the event of
Employee's termination.
9. Covenant Not to Compete. The Employee hereby agrees that he will
not, during the period of his employment with PlayCore Wisconsin and for a
period of two (2) years thereafter, as proprietor, partner, member, shareholder
(directly or indirectly owning or controlling five percent (5%) or more of any
class of stock), employee, consultant, agent, or otherwise, on his own behalf or
on behalf of another person, do any of the following in competition with
PlayCore Wisconsin, without the prior written consent of PlayCore Wisconsin:
a. solicit or assist in the solicitation of customers of PlayCore
Wisconsin or its affiliates;
b. render or assist in rendering services to customers of
PlayCore Wisconsin or its affiliates; or
c. divert or attempt to divert any customer's business from
PlayCore Wisconsin or its affiliates, or otherwise interfere with the
business relationship between PlayCore Wisconsin or its affiliates and any
of their respective customers, employees, or suppliers.
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<PAGE> 6
Notwithstanding the foregoing, this Agreement shall not in any event
be construed to prevent the Employee from earning a living utilizing his skills
in any businesses which may, as an incident to a business or activity
significantly different from the business of PlayCore Wisconsin, make or sell
some products or provide some services which may in some degree compete with the
business of PlayCore Wisconsin. However, nothing in this Section 9 shall be
deemed to permit the Employee to accept employment with companies or a division
thereof which then or thereafter will directly compete in a major way with the
business of PlayCore Wisconsin or its affiliates with which the Employee was
involved or had access to information while employed by PlayCore Wisconsin.
10. Confidential Information. The Employee agrees that he will not,
while he is employed by PlayCore Wisconsin or for a period of five (5) years
thereafter, disclose to any person to whom he is not otherwise authorized to do
so by PlayCore Wisconsin (an "Unauthorized Person"), or use for his own account,
any information (the "Confidential Information"), whether or not reduced to
written or other tangible form, in which PlayCore Wisconsin or its affiliates
has a legally protectible interest by virtue of the following:
a. such information is not generally known in the industry;
b. the Employee has had access to (or, either alone or in
cooperation with others, originated or developed) such information
during his employment with PlayCore Wisconsin;
c. such information has been treated by PlayCore Wisconsin or its
affiliates as confidential;
d. such information relates to the business of PlayCore Wisconsin
or any of its affiliates; or
e. such information is of competitive advantage to PlayCore
Wisconsin or its affiliates.
Confidential Information for which the Employee has first secured
the written consent of PlayCore Wisconsin for its disclosure or use, and
Confidential Information which becomes generally known in the industry, or which
otherwise ceases to be legally protectible (other than by the Employee's breach
of this Agreement), shall cease to be subject to the restriction set forth in
this Section 10. Notwithstanding anything contained herein to the contrary, this
Section 10 prohibits only the use and disclosure of Confidential Information and
shall not be construed as limiting the Employee's right to undertake any other
employment or business activity.
11. Termination With Just Cause. Notwithstanding any provision
contained herein to the contrary, in the event that the Employee's employment
with PlayCore Wisconsin is terminated by PlayCore Wisconsin with Just Cause the
Employee shall not be entitled to any of the benefits identified in Sections 2
and 3 of this Agreement, and shall be entitled to receive only
6
<PAGE> 7
those benefits that the Employee would otherwise be entitled to receive under
any other agreements entered into by the Employee and PlayCore Wisconsin or
under applicable law.
12. Rights in the Event of Dispute.
a. If a claim or dispute arises concerning the rights of the
Employee or his beneficiary (either or both of whom are hereinafter
referred to as the "claimant") to amounts or benefits described in
Section 2 of this Agreement (pertaining to benefits upon termination
of employment following a Change of Control), regardless of the party
by whom such claim or dispute is initiated, PlayCore Wisconsin shall,
upon presentation of appropriate vouchers, pay all legal expenses,
including reasonable attorneys' fees, court costs and ordinary and
necessary out-of-pocket costs of attorneys' billed to and payable by
the claimant in connection with the bringing, prosecuting, defending,
litigating, negotiating, or settling such claim or dispute; provided,
however, that PlayCore Wisconsin shall not be obligated to pay such
expenses unless and until final resolution of such claim or dispute
with the claimant being entitled to a substantial part of the rights
claimed by him.
b. If a claim or dispute arises concerning the rights of the
Employee or his beneficiary (either or both of whom are hereinafter
referred to as the "claimant") to amounts or benefits described in
Section 3 of this Agreement (pertaining to termination of employment
by PlayCore Wisconsin other than as described in Section 2),
regardless of the party by whom such claim or dispute is initiated,
each party shall pay its own legal expenses, including reasonable
attorneys' fees, court costs and ordinary and necessary out-of-pocket
costs in connection with the bringing, prosecuting, defending,
litigating, negotiating, or settling such claim or dispute; provided,
however, that the prevailing party in any court action shall be
entitled to recover from the other party, to the fullest extent
permitted by law, all such legal expenses that the prevailing party
may reasonably incur as a result of such action. Any payment pursuant
to this subsection shall include interest on any delayed payment at
the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Internal Revenue Code.
13. General Provisions.
a. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given (i) when
delivered in person or (ii) when telecopied (at the date and time
indicated on the receipt of transmission if such day is a business
day, and if not, at 9 a.m. on the following business day) with hard
copy delivered by hand or deposited in the United States mail postage
prepaid, registered or certified mail, on or before two (2) business
days after its delivery by telecopy, or (iii) three (3) business days
after being deposited in the United States mail, postage prepaid,
registered or certified mail, or (iv) two (2) business days after
delivery to a nationally recognized express courier, expenses prepaid,
addressed to the appropriate party as follows: to the Employee at his
address on file with PlayCore Wisconsin; or to Jasdrew or PlayCore
Wisconsin, c/o PlayCore, Inc., 15 West Milwaukee Street, Suite 204,
Janesville, Wisconsin 53545, telecopier number (608) 741-7191,
Attention: Chairman; and with a copy to Akin, Gump, Strauss, Hauer &
Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Suite 400, Washington,
D.C., 20036, Attention: Russell W. Parks, Jr.
7
<PAGE> 8
b. Nothing herein shall be construed as an agreement to continue
the employment by PlayCore Wisconsin of the Employee.
c. This Agreement constitutes the entire agreement between the
parties and PlayCore Wisconsin with respect to the subject matter
contained herein and, as of the effective date of the Merger,
supersedes any and all prior understandings, representatives,
negotiations, and agreements with respect thereto (including, without
limitation, the Old Severance Agreement).
d. No modification or amendment of any provision of this
Agreement shall be effective unless in a written instrument executed
by both parties. Either party's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a
waiver of such provision or any other provision hereof.
e. This Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of Jasdrew and PlayCore
Wisconsin. Without limiting the foregoing, Jasdrew and PlayCore
Wisconsin will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of PlayCore Wisconsin, to expressly
assume and agree to perform PlayCore Wisconsin's obligations under
this Agreement in the same manner and to the same extent that Jasdrew
and PlayCore Wisconsin are required to perform them if no such
succession had taken place. As used in this Agreement, "Company" shall
mean PlayCore Wisconsin and any successor to its business and/or
assets which executes and delivers the agreement provided for in this
Section 13.e. or which otherwise becomes bound by all the terms and
provisions of this Agreement as a matter of law. This Agreement shall
inure to the benefit of, and shall be enforceable by, the Employee's
heirs, legal representative or other successors in interest, but shall
not otherwise be assignable or transferable.
f. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and
effect.
g. The validity, interpretation, construction and enforceability
of this Agreement shall be governed by the laws of the State of
Wisconsin, without regard to conflicts of laws principles.
14. Failure to Consummate. This Agreement shall be null and void if
the Merger is not consummated.
- SIGNATURE PAGE FOLLOWS -
8
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
COMPANY: EMPLOYEE:
JASDREW ACQUISITION CORP.
By: /s/ TODD R. BERMAN /s/ JOHN E. CALDWELL
--------------------------- ----------------------------
Todd R. Berman, President John E. Caldwell
<PAGE> 10
. SCHEDULE A
OPTION TERMS
AMOUNT OF INITIAL GRANT: A nonqualified option grant (the "Initial Grant")
of 4,350 shares of common stock of PlayCore
Holdings, Inc. ("Holdings"). The Initial Grant
shall be pursuant to an option plan (and
underlying option grant agreement) established by
Holdings with an initial reserve equal to 10% of
the outstanding common shares of Holdings as of
the closing date (post transaction).
EXERCISE PRICE: The per share exercise price of the option
shall be the common stock's fair market value on
the date of grant (which shall be equal to the
fair market value of the equivalent number of
shares of common stock as of the closing date).
TERM: Options, or any portion thereof, not previously
exercised or terminated will expire ten years from
the date of grant.
METHOD OF EXERCISE: Prior to an "initial public offering", cash only;
provided, however, the Board of Directors or
Compensation Committee of Holdings may authorize
cashless exercises. An option may only be
exercised with respect to whole shares.
VESTING: TIME OPTIONS: 50% of the total number of shares
subject to the Initial Grant shall vest ratably
(25% a year) on each of the first through fourth
anniversaries of the date of grant ("A Options"),
provided the Employee is in the employ of PlayCore
Wisconsin, Inc. or an affiliate ("PlayCore
Wisconsin") on each such date.
If there is a Change in Control (as defined in the
option plan) prior to the fourth anniversary of
the date of grant, and the Employee is still in
the employ of PlayCore Wisconsin, all unvested
Time Options shall vest.
PERFORMANCE OPTIONS: The remaining 50% of the
total number of shares subject to the Initial
Grant shall vest if the net Internal Rate of
Return ("IRR") realized by PlayCore Holdings,
L.L.C. ("Holdings L.L.C.") on its total investment
in Holdings (after dilution from options on shares
held by management) is 25% or more ("Target IRR")
as of the "Determination Date," ("Performance
Options") and the Employee is still in the employ
of PlayCore Wisconsin on the Determination Date.
<PAGE> 11
The Determination Date regarding the attainment of
the IRR shall be the closing date or such other
time as Holdings L.L.C. receives cash payments for
its interests in Holdings.
TERMINATION OF EMPLOYMENT:
BY PLAYCORE WISCONSIN
WITHOUT CAUSE OR
BY THE EMPLOYEE
FOR GOOD REASON OR
UPON DEATH OR DISABILITY: TIME OPTIONS: All vested Time Options remain
outstanding and exercisable for a period of 90
days and if not exercised by end of business on
the 90th day shall terminate. All unvested Time
Options shall be immediately terminate on the
Termination Date.
PERFORMANCE OPTIONS: Performance Options shall
vest if the Target IRR would have been achieved
based upon the fair market value of Holdings
L.L.C.'s investment in Holdings as of the
Termination Date and Employee will receive the
applicable value of the Performance Option as
determined at the Termination Date by the Board of
Directors of Holdings at such time as Holdings
L.L.C. receives cash payments for its interests in
Holdings. If the Target IRR is not achieved on
both the Termination Date and the Determination
Date, then all Performance Options shall be
terminated with no payment to or value to
Employee.
BY PLAYCORE WISCONSIN FOR
CAUSE OR BY THE
EMPLOYEE WITHOUT
GOOD REASON: TIME OPTIONS: All vested Time Options shall remain
exercisable for 90 days and if not exercised by
the end of business on the 90th day shall
terminate. All nonvested Time Options shall
terminate on the Termination Date.
PERFORMANCE OPTIONS: All Performance Options shall
immediately terminate.
<PAGE> 12
CALL ON SHARES ACQUIRED In the event of the Employee's termination of
ON EXERCISE OF OPTION: employment for any reason, all shares in Holdings
held by Employee as a result of exercising Options
shall be subject to a "call" by Holdings or its
designee (the "Company Call") at the fair market
value on the Termination Date. The Company Call
must be exercised within six months of the
Termination Date. The purchase price as determined
above will be paid one-half in cash within 30 days
of the exercise of the Company Call and the
remaining one-half payable within two years of the
date of exercise of the Company Call (the
"Deferred Call Payments"). Any Deferred Call
Payments shall be credited with an appropriate
interest rate or dividend rate. In the event that
Holdings is restricted from purchasing such shares
for cash under any applicable financing or other
agreements, Holdings may issue the Employee a note
or such other permissible security (which shall
contain commercially reasonable terms) in full
satisfaction of such call. In no event shall the
Employee be paid less cash at the time of the
exercise of the Company Call than the Employee's
income tax liability resulting from the sale of
the shares.
EMPLOYEE PUT: In the event of Employee's termination of
employment by PlayCore Wisconsin without Cause, by
the Employee for Good Reason, or as a result of
death or Permanent Disability, the Employee or his
estate as the case may be, may exercise a "put" to
Holdings (the "Employee Put") at fair market value
on the Termination Date, subject to Holdings'
ability under its financing documents. The
Employee Put must be exercised within six months
of the Termination Date. The purchase price as
determined above will be paid one-half in cash
within 30 days of the exercise of the Employee Put
and the remaining one-half will be payable within
two years of the date of exercise of the Employee
Put (the "Deferred Put Payments"). Any Deferred
Put Payments shall be credited with an appropriate
interest rate or dividend rate. All payments made
by Holdings with respect to its exercise of the
Executive Put are subject to Holdings' financing
agreements. In the event that Holdings is
restricted from purchasing such shares for cash
under any applicable financing or other
agreements, Holdings may issue the Employee a note
or such other permissible security (which shall
contain commercially reasonable terms) in full
satisfaction of such put.
REALIZATION: Except in the case of the exercise of the Company
Call or Employee Put as set forth above, Employee
shall be required to hold the shares or Options
until such time Holdings L.L.C. sells or otherwise
exits from its equity interest in Holdings.
<PAGE> 13
TAG-ALONG RIGHTS: In the event of a sale of Holdings by Holdings,
L.L.C., the Employee will have the same tag-along
rights as other investors.
RESTRICTIONS ON TRANSFER: The Options and shares will be non-transferable,
except with respect to a transfer to a trust or
partnership, the only beneficiaries or partners
(as the case may be) of which are immediate family
member of Employee, or in accordance with the
terms of any applicable operating agreement or
shareholders agreement and the laws of descent and
distribution.
Other than with respect to transfers pursuant to
the preceding sentence, no third party shall have
any direct or indirect beneficial interest in the
Options.
REGISTRATION RIGHTS: Employee will have the same piggyback registration
rights as other investors.
FAIR MARKET VALUE: Fair market value of vested shares on a
Termination Date shall be determined by
multiplying the "equity value" of Holdings by a
fraction, the numerator of which shall be the
number of vested shares and the denominator of
which shall be the total number of fully diluted
shares of Holdings common stock (assuming that all
options, warrants or other securities which are
convertible or exchangeable for common stock are
outstanding). The equity value of Holdings on a
Termination Date shall be determined by the Board
of Directors of Holdings in good faith by
selecting an appropriate multiple and then
multiplying the consolidated EBITDA for the latest
four fiscal quarters by such multiple and then
subtracting from such amount all debt, preferred
stock and other obligations on a consolidated
basis of Holdings, if any.
<PAGE> 14
SCHEDULE B
EQUITY PURCHASE TERMS
AMOUNT OF EQUITY: A percentage equity interest in PlayCore Holdings,
L.L.C. ("Holdings L.L.C.") equal to $65,000 and
determined based on the value paid by Chartwell
Investments II, L.L.C. or its affiliates
("Chartwell") for its interest in Holdings L.L.C.
(the "Interest"). Upon execution of the applicable
subscription documents relating to the Interest,
Employee shall make a cash payment to Holdings
L.L.C. of $65,000.
COMPANY CALL ON INTERESTS: In the event of Employee's termination of
employment for any reason, the Interest held by
the Employee shall be subject to a "call" by
Holdings L.L.C. or its designee (the "Company
Call") at the fair market value on the Termination
Date. The Company Call must be exercised within
six months of the Termination Date. The purchase
price as determined above will be paid as follows:
the lesser of the Employee's original investment
or fair market value of the Interest within 30
days of the exercise of the Company Call and the
remaining amount, if any, payable within two years
of the date of exercise of the Company Call (the
"Deferred Call Payments"). Any Deferred Call
Payments shall be credited with an appropriate
interest rate or dividend rate. In the event that
Holdings L.L.C. is restricted from purchasing the
Interest for cash under any applicable financing
or other agreements to which Holdings L.L.C. or
any of its subsidiaries is a party which prevent
Holdings L.L.C. from obtaining cash, then Holdings
L.L.C. may issue the Employee a note or such other
permissible security (which shall contain
commercially reasonable terms) in full
satisfaction of such call.
EMPLOYEE PUT: In the event of Employee's termination of
employment by PlayCore Wisconsin, Inc. or an
affiliate ("PlayCore Wisconsin") without Cause, by
the Employee for Good Reason, or as a result of
death or Permanent Disability, the Employee or his
estate as the case may be, may exercise a "put" to
Holdings L.L.C. (the "Employee Put") of the
Interest at fair market value on the Termination
Date, subject to compliance with the financing
documents of Holdings L.L.C. or of any of its
subsidiaries. The Employee Put must be exercised
within six months of the Termination Date. The
purchase price as determined above
<PAGE> 15
will be paid as follows: the lesser of the
Employee's original investment or fair market
value of the Interest within 30 days of the
exercise of the Employee Put and the remaining
amount, if any, subject to the Company Call, will
be held by Employee until such time as Holdings
L.L.C. sells or otherwise exits from its equity
interest in PlayCore Holdings, Inc. ("Holdings").
All payments by Holdings L.L.C. with respect to
the exercise of the Employee Put are subject to
the financing agreements of Holdings L.L.C. or any
of its subsidiaries. In the event that Holdings
L.L.C. is restricted from purchasing the Interest
for cash under any applicable financing or other
agreements to which Holdings L.L.C. or any of its
subsidiaries is a party which prevent Holdings
L.L.C. from obtaining cash, then Holdings L.L.C.
may issue Employee a note or such other
permissible security (which shall contain
commercially reasonable terms) in full
satisfaction of such put.
REALIZATION: Except in the case of the exercise of Company Call
or Employee Put as set forth above, Employee shall
be required to hold the Interest until such time
as Chartwell sells or otherwise exits from its
equity interest in Holdings L.L.C.
TAG-ALONG RIGHTS: In the event of a sale of Holdings L.L.C. by
Chartwell, the Employee will have the same
tag-along rights as other investors.
RESTRICTIONS ON TRANSFER: The Interest will be non-transferable, except with
respect to a transfer to a trust or partnership,
the only beneficiaries or partners (as the case
may be) of which are immediate family member of
Employee, or in accordance with the terms of any
applicable operating agreement or shareholders
agreement and the laws of descent and
distribution.
Other than with respect to transfers pursuant to
the preceding sentence, no third party shall have
any direct or indirect beneficial interest in the
Interest.
REGISTRATION RIGHTS: Employee will have the same piggyback registration
rights as other investors.
FAIR MARKET VALUE: Fair market value of Employee's Interest on a
Termination Date shall be determined in three
steps as follows. (1) The equity value of Holdings
on a Termination Date shall be determined by the
Board of Directors of Holdings in good
<PAGE> 16
faith by selecting an appropriate multiple and
then multiplying the consolidated EBITDA for the
latest four fiscal quarters by such multiple and
then subtracting from such amount all debt,
preferred stock and other obligations on a
consolidated basis of Holdings, if any. (2)
Holdings L.L.C's interest in Holdings shall be
determined by multiplying the equity value of
Holdings (as determined under step number (1)) on
the Termination Date by a fraction, the numerator
of which shall be the number of shares of common
stock of Holdings that are owned by Holdings
L.L.C., and the denominator of which shall be the
total number of fully diluted shares of Holdings
common stock (assuming that all options, warrants
or other securities which are convertible or
exchangeable for common stock are outstanding).
(3) Finally, the percentage representing
Employee's Interest shall be multiplied by the
dollar amount of Holdings L.L.C.'s interest in
Holdings as determined under step number (2).
<PAGE> 17
SCHEDULE C
PHANTOM STOCK TERMS
AMOUNT OF INITIAL GRANT: A grant of 855 shares of phantom common stock of
PlayCore Holdings, Inc. ("Holdings") (the "Phantom
Shares") pursuant to a grant by Holdings.
VESTING: One third of the total number of Phantom Shares
shall vest on each anniversary of the date of the
grant. In the event that the Employee's employment
with PlayCore Wisconsin, Inc. or an affiliate
("PlayCore Wisconsin") is terminated for any
reason, all non-vested shares shall be forfeited.
COMPANY CALL: In the event of Employee's termination of
employment for any reason, the vested Phantom
Shares held by the Employee shall be subject to a
"call" by Holdings or its designee (the "Company
Call") at the fair market value on the Termination
Date. The Company Call must be exercised within
six months of the Termination Date. The purchase
price shall be the equivalent of the fair market
value of an equivalent number of common shares of
Holdings on the Termination Date. It will be paid
one-half in cash within 30 days of the exercise of
the Company Call and the remaining one-half will
be payable within two years of the date of
exercise of the Company Call (the "Deferred Call
Payments"). Any Deferred Call Payments shall be
credited with an appropriate interest rate or
dividend rate. In the event that Holdings is
restricted from purchasing such shares for cash
under any applicable financing or other
agreements, Holdings may issue the Employee a note
or such other permissible security (which shall
contain commercially reasonable terms) in full
satisfaction of such call. In no event shall the
Employee be paid less cash at the time of the
exercise of the Company Call than the Employee's
income tax liability resulting from the sale of
the Phantom Shares.
EMPLOYEE PUT: In the event of Employee's termination of
employment by PlayCore Wisconsin without Cause, by
the Employee for Good Reason, or as a result of
death or Permanent Disability, the Employee or his
estate as the case may be, may exercise a "put" to
Holdings (the "Employee Put") of the vested
Phantom Shares at fair market value on the
Termination Date. The Employee Put must be
exercised
<PAGE> 18
within six months of the Termination Date. The
purchase price as determined above will be paid
one-half in cash within 30 days of the exercise of
the Employee Put and the remaining one-half will
be payable within two years of the date of
exercise of the Employee Put (the "Deferred Put
Payments"). Any Deferred Put Payments shall be
credited with an appropriate interest rate or
dividend rate. All payments by Holdings with
respect to its exercise of the Employee Put are
subject to Holdings' financing agreements. In the
event that Holdings is restricted from purchasing
such shares for cash under any applicable
financing or other agreements, Holdings may issue
the Employee a note or such other permissible
security (which shall contain commercially
reasonable terms) in full satisfaction of such
put.
REALIZATION: Except in the case of the exercise of the Company
Call or Employee Put as set forth above, Employee
shall be required to hold the Phantom Shares until
such time as PlayCore Holdings, L.L.C. sells or
otherwise exits from its equity interest in
Holdings (any such occurrence, a "Realization
Event").
TAX GROSS-UP PAYMENT: Upon exercise of the Company Call or Employee Put
or any other Realization Event hereunder, Holdings
shall make a tax gross-up payment to the Employee
to compensate the Employee for the difference
between ordinary income tax treatment and capital
gains tax treatment with respect to the
appreciated value ("Appreciated Value") of the
Phantom Shares from the date of vesting to the
earlier of: (i) the Termination Date (in the case
of an Employee Put or Company Call), or (ii) the
date of the occurrence of a Realization Event;
provided, however, that in no event shall such tax
gross-up payment exceed the tax benefit to
Holdings actually realized for such tax year, if
any, related to the deduction for (a) the tax
gross-up payment and (b) the appreciated value of
the Phantom Shares from the date of vesting to the
earlier of: (i) the Termination Date (in the case
of an Employee Put or Company Call), or (ii) the
date of the occurrence of a Realization Event.
TAG-ALONG RIGHTS: In the event of a sale of Holdings by PlayCore
Holdings, L.L.C., the Employee will have the same
tag-along rights as other investors.
RESTRICTIONS ON TRANSFER: The Phantom Shares will be non-transferable,
except with respect to a transfer to a trust or
partnership, the only
<PAGE> 19
beneficiaries or partners (as the case may be) of
which are immediate family member of Employee, or
in accordance with the terms of any applicable
operating agreement or shareholders agreement and
the laws of descent and distribution.
Other than with respect to transfers pursuant to
the preceding sentence, no third party shall have
any direct or indirect beneficial interest in the
Phantom Shares.
FAIR MARKET VALUE: Fair market value of vested Phantom Shares on a
Termination Date shall be determined by
multiplying the "equity value" of Holdings by a
fraction, the numerator of which shall be the
number of vested Phantom Shares and the
denominator of which shall be the total number of
fully diluted shares of Holdings common stock
(assuming that all options, warrants or other
securities which are convertible or exchangeable
for common stock are outstanding). The equity
value of Holdings on a Termination Date shall be
determined by the Board of Directors of Holdings
in good faith by selecting an appropriate multiple
and then multiplying the consolidated EBITDA for
the latest four fiscal quarters by such multiple
and then subtracting from such amount all debt,
preferred stock and other obligations on a
consolidated basis of Holdings, if any.
<PAGE> 1
EXHIBIT (d)(xi)
SEVERANCE, CHANGE OF CONTROL AND NONCOMPETITION AGREEMENT
THIS SEVERANCE, CHANGE OF CONTROL AND NONCOMPETITION AGREEMENT (the
"Agreement") is made and entered into as of April 13, 2000, by and between
Jasdrew Acquisition Corp. ("Jasdrew"), and Robert A. Farnsworth (the
"Employee").
W I T N E S S E T H:
WHEREAS, the Employee is an officer and a key employee of PlayCore
Wisconsin, Inc. ("PlayCore Wisconsin");
WHEREAS, PlayCore, Inc. intends to enter into an Agreement and Plan of
Merger (the "Merger Agreement") with Jasdrew contemporaneously with the
execution hereof pursuant to which Jasdrew will merge (the "Merger") into
PlayCore, Inc. (after which PlayCore, Inc. is to merge into PlayCore Wisconsin);
WHEREAS, the Employee, in consideration of the agreement of Jasdrew
contained herein that Employee will receive payment of a cash bonus from
PlayCore Wisconsin in an amount of $150,000 (the "Closing Amount") promptly
following the effective date of the Merger and a grant of phantom common stock
of PlayCore Holdings, Inc. ("Holdings") to be set forth in a separate phantom
stock grant agreement, desires to enter into this Agreement to provide for the
payment of certain benefits to the Employee if the Employee's employment with
PlayCore Wisconsin is terminated under certain circumstances, including a
termination following a change of control of PlayCore Wisconsin other than the
transactions contemplated in the Merger Agreement;
WHEREAS, the Employee acknowledges and agrees that the terms of this
Agreement shall supersede all prior agreements between the parties as set forth
in Section 13.c. hereof;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and as an inducement for Jasdrew
to enter into, and to proceed with the transactions contemplated in, the Merger
Agreement, the parties hereto agree as follows:
1. Definition. The capitalized terms used in this Agreement shall have the
following meanings (unless otherwise expressly provided herein):
a. "Change of Control" shall have the meaning set forth in Exhibit A
hereto.
b. "Good Reason" means any of the following:
(1) The removal of the Employee from, or any failure to reelect or
reappoint the Employee to, any of the positions held with PlayCore
Wisconsin on the date of the Change of Control or any other positions with
PlayCore
<PAGE> 2
Wisconsin to which the Employee shall thereafter be elected, appointed or
assigned, except in the event that such removal or failure to reelect or
reappoint relates to the termination by PlayCore Wisconsin of the
Employee's employment for Just Cause or by reason of Permanent Disability;
or
(2) A good faith determination by the Employee that there has been a
significant adverse change, without the Employee's written consent, in the
Employee's working conditions or status with PlayCore Wisconsin from such
working conditions or status in effect during the 180-day period
immediately prior to the Change of Control or the effective date of this
Agreement for purposes of Section 3.c. hereof, including but not limited
to (A) a significant change in the nature or scope of the Employee's
authority, powers, functions, duties or responsibilities, or (B) a
significant reduction in the level of support services, staff, secretarial
and other assistance, office space and accoutrements, or for purposes of
Section 2 hereof alone, (C) relocation of the Employee's primary place of
employment with PlayCore Wisconsin on the effective date of the Merger to
a location more than thirty-five (35) miles from such primary place of
employment.
c. "Just Cause" means, prior to a Change in Control, willful and gross
misconduct on the part of the Employee that is materially and demonstrably
detrimental to PlayCore Wisconsin, as determined in good faith by the Board
of Directors of PlayCore Wisconsin. "Just Cause" means, following a Change
in Control, the commission by the Employee of one or more acts for which
the Employee is convicted (as evidenced by binding and final judgment.
order or decree of a court of competent jurisdiction) of a felony under
United States federal, state, or local criminal law which substantially
impairs the Employee's ability to perform his duties or responsibilities;
the engaging in by the Employee of intentional conduct not taken in good
faith which has caused demonstrable and serious financial injury to the
Employer, as evidenced by a determination in a binding and final judgment,
order, or decree of a court or administrative agency of competent
jurisdiction, in effect after exhaustion or lapse of all rights of appeal,
in an action, suit, or proceeding. whether civil, criminal, administrative,
or investigative; or the continuing willful and unreasonable refusal by the
Employee to perform the Employee's duties or responsibilities (unless
significantly changed without the Employee's consent).
d. "Permanent Disability" means that the Employee is unable by reason
of accident or illness (including mental illness) to perform the material
duties of his regular position with PlayCore Wisconsin and not expected to
recover from his disability within a period of six (6) months from the
commencement of the disability. If at any time the Employee claims or is
claimed to have a Permanent Disability, a physician acceptable to both the
Employee, or his personal representative, and PlayCore Wisconsin (which
acceptances shall not be unreasonably withheld) shall be retained by
PlayCore Wisconsin and shall examine the Employee. The Employee shall
cooperate fully with the physician. If the physician determines that the
Employee has a Permanent Disability the physician shall deliver to PlayCore
Wisconsin a certificate certifying both that the Employee has a Permanent
Disability and the date upon which the condition of
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<PAGE> 3
Permanent Disability commenced. The determination of the physician shall be
conclusive.
e. "Person" means (other than with respect to the definition of
"Change of Control") any individual or any partnership, limited liability
company, corporation, joint venture, trust, or other entity (as defined in
Rule l3d-5 under the Securities Exchange Act of 1934), together with its
affiliates and the heirs, personal representatives, successors, and assigns
of the "Person" when the context so permits.
f. "Severance Period" means the applicable period of time beginning
with the Termination Date. If the Termination Date is within eighteen (18)
months after a Change of Control and the termination of employment is
either by PlayCore Wisconsin other than with Just Cause or by the Employee
for Good Reason, the Severance Period shall be eighteen (18) months (the
"18-month Severance Period"). If the Termination Date occurs other than
within such 18-month period following a Change of Control then the
Severance Period, if applicable, shall be twelve (12) months ("the 12-month
Severance Period").
g. "Termination Date" means the date upon which the Employee's
employment with PlayCore Wisconsin is terminated.
h. "Transaction Benefit" means the amount that is the greater of: (i)
the value of Employee's grant of phantom common stock on the date this
Agreement becomes effective, or (ii) the value of such grant of phantom
common stock on the Termination Date (such value to be determined by
multiplying the "equity value" of Holdings (as defined in the next
sentence) by a fraction, the numerator of which shall be the number of
shares represented by such grant and the denominator of which shall be the
total number of fully diluted shares of Holdings common stock (assuming
that all options, warrants or other securities which are convertible or
exchangeable for common stock are outstanding). The equity value of
Holdings on a Termination Date shall be determined by the Board of
Directors of PlayCore Wisconsin in good faith by selecting an appropriate
multiple and then multiplying the consolidated EBITDA for the latest four
fiscal quarters by such multiple and then subtracting from such amount all
debt, preferred stock and other obligations on a consolidated basis of
Holdings, if any.
2. Termination After Change of Control. If, within eighteen (18) months
after the occurrence of a Change of Control, the Employee's employment with
PlayCore Wisconsin is terminated either (i) by PlayCore Wisconsin (a) other than
with Just Cause or (b) due to Permanent Disability or, (ii) by the Employee for
Good Reason, then the Employee shall be entitled to receive the following
severance benefits from PlayCore Wisconsin:
a. continuation of the Employee's salary during the applicable
18-month Severance Period; and
b. continuation of coverage for the Employee and any dependents
previously covered under the group health, group life, group long-term
disability, and similar group insurance plans, if any, maintained by
PlayCore Wisconsin, at the active
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<PAGE> 4
employee discounted cost, until expiration of the 18-month Severance Period
(provided, that if such continued participation is precluded by the
provisions of such plans or by applicable law, PlayCore Wisconsin shall
provide the Employee with comparable benefits of equal value at no increase
in cost to the Employee), and execution of this Agreement by the Employee
shall not be considered a waiver of any rights or entitlements he may have
under applicable law to continuation of coverage under the group health
plan maintained by PlayCore Wisconsin.
3. Other Termination. If the Employee's employment with PlayCore Wisconsin
is terminated by PlayCore Wisconsin (a) other than with Just Cause or (b) due to
Permanent Disability and Section 2, above, is not applicable because such
termination is not within the eighteen (18) month period following a Change of
Control, then the Employee shall be entitled to receive the following severance
benefits from PlayCore Wisconsin:
a. continuation of the Employee's salary during the applicable
12-month Severance Period; provided, however, if such termination occurs
prior to a Change of Control, the total salary continuation shall be
reduced by the value of any Transaction Benefit; and
b. continuation of coverage for the Employee and any dependents
previously covered under the group health, group life, group long-term
disability, and similar group insurance plans, if any, maintained by
PlayCore Wisconsin, at the active employee discounted cost, until
expiration of the 12-month Severance Period (provided, that if such
continued participation is precluded by the provisions of such plans or by
applicable law, PlayCore Wisconsin shall provide the Employee with
comparable benefits of equal value at no increase in cost to the Employee),
and execution of this Agreement by the Employee shall not be considered a
waiver of any rights or entitlements he may have under applicable law to
continuation of coverage under the group health plan maintained by PlayCore
Wisconsin.
c. To compensate the Employee for relinquishing certain rights with
PlayCore Wisconsin in order to facilitate the acquisition of PlayCore, Inc.
by Holdings, and notwithstanding the foregoing or any provision contained
herein to the contrary, if the Employee's employment with PlayCore
Wisconsin is terminated either (x) by PlayCore Wisconsin other than with
Just Cause or (y) by the Employee for Good Reason, and the termination of
employment occurs within the period that begins on the effective date of
the Merger and ends eighteen (18) months thereafter, then the Employee
shall be entitled to receive the greater of: (i) the severance benefits set
forth above in this Section 3, or (ii) the severance benefits that would
have accrued to the Employee as a result of the acquisition of PlayCore,
Inc. by Holdings pursuant to that certain Severance, Change of Control and
Noncompetition Agreement, dated August 18, 1999, by and between the
Employee and PlayCore, Inc. (the "Old Severance Agreement") attached hereto
as Exhibit B, in either case, less the value of any Transaction Benefit.
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<PAGE> 5
4. Payments.
a. Promptly following the effectiveness of the Merger, Jasdrew (or its
successor) shall pay to Employee the Closing Amount.
b. Except as otherwise provided in this Agreement, any salary
continuation amounts due to the Employee hereunder shall be payable in
equal installments on each regular payroll date of PlayCore Wisconsin after
the Termination Date.
5. Deduction and Withholding. All amounts payable to or on behalf of the
Employee pursuant to this Agreement shall be subject to such deductions and
withholding as may be agreed to by the Employee but not less than required by
applicable law.
6. Death and Permanent Disability. In the event of the Employee's death,
any amount payable or distributable to the Employee pursuant hereto from rights
and benefits accrued to and through the date of his death shall be paid at the
time or times indicated in such Section to the beneficiary designated by the
Employee for purposes of his group term life insurance coverage with PlayCore
Wisconsin and, if no beneficiary is designated for such purposes or if no group
term life insurance is then in effect, to the Employee's estate. In the event
that Employee's employment is terminated due to Permanent Disability, Employee
shall be entitled to accrued compensation through the Termination Date and any
other benefits (if any) to which Employee may be entitled under PlayCore
Wisconsin's benefit plans, programs and policies as then in effect.
7. Other Benefits. The benefits provided under this Agreement shall be in
addition to, and not in derogation or diminution of, any benefits that the
Employee may be entitled to receive under any other plan or program now or
hereafter maintained by PlayCore Wisconsin other than any severance pay plan.
8. Stock Options and Other Equity. Notwithstanding anything contained in
this Agreement to the contrary, the treatment of any stock options and other
equity held by the Employee on the Termination Date shall be subject to the
terms and conditions of the applicable plan documents and agreements in
accordance with the terms set forth in Schedules A, B and C attached hereto
("Applicable Equity Agreements") and the terms of the Applicable Equity
Agreements shall govern the treatment of such options and equity in the event of
Employee's termination.
9. Covenant Not to Compete. The Employee hereby agrees that he will not,
during the period of his employment with PlayCore Wisconsin and for a period of
two (2) years thereafter, as proprietor, partner, member, shareholder (directly
or indirectly owning or controlling five percent (5%) or more of any class of
stock), employee, consultant, agent, or otherwise, on his own behalf or on
behalf of another person., do any of the following in competition with PlayCore
Wisconsin, without the prior written consent of PlayCore Wisconsin:
a. solicit or assist in the solicitation of customers of PlayCore
Wisconsin or its affiliates;
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<PAGE> 6
b. render or assist in rendering services to customers of PlayCore
Wisconsin or its affiliates; or
c. divert or attempt to divert any customer's business from PlayCore
Wisconsin or its affiliates, or otherwise interfere with the business
relationship between PlayCore Wisconsin or its affiliates and any of their
respective customers, employees, or suppliers.
Notwithstanding the foregoing, this Agreement shall not in any event be
construed to prevent the Employee from earning a living utilizing his skills in
any businesses which may, as an incident to a business or activity significantly
different from the business of PlayCore Wisconsin, make or sell some products or
provide some services which may in some degree compete with the business of
PlayCore Wisconsin. However, nothing in this Section 9 shall be deemed to permit
the Employee to accept employment with companies or a division thereof which
then or thereafter will directly compete in a major way with the business of
PlayCore Wisconsin or its affiliates with which the Employee was involved or had
access to information while employed by PlayCore Wisconsin.
10. Confidential Information. The Employee agrees that he will not, while
he is employed by PlayCore Wisconsin or for a period of five (5) years
thereafter, disclose to any person to whom he is not otherwise authorized to do
so by PlayCore Wisconsin (an "Unauthorized Person"), or use for his own account,
any information (the "Confidential Information"), whether or not reduced to
written or other tangible form, in which PlayCore Wisconsin or its affiliates
has a legally protectible interest by virtue of the following:
a. such information is not generally known in the industry;
b. the Employee has had access to (or, either alone or in cooperation
with others, originated or developed) such information during his
employment with PlayCore Wisconsin;
c. such information has been treated by PlayCore Wisconsin or its
affiliates as confidential;
d. such information relates to the business of PlayCore Wisconsin or
any of its affiliates; or
e. such information is of competitive advantage to PlayCore Wisconsin
or its affiliates.
Confidential Information for which the Employee has first secured the written
consent of PlayCore Wisconsin for its disclosure or use, and Confidential
Information which becomes generally known in the industry, or which otherwise
ceases to be legally protectible (other than by the Employee's breach of this
Agreement), shall cease to be subject to the restriction set forth in this
Section 10. Notwithstanding anything contained herein to the contrary, this
Section 10 prohibits only the use and disclosure of Confidential Information and
shall not be construed as limiting the Employee's right to undertake any other
employment or business activity. The
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<PAGE> 7
Employee shall be prohibited from competing with PlayCore Wisconsin only as
provided in Section 9 above.
11. Termination With Just Cause. Notwithstanding any provision contained
herein to the contrary, in the event that the Employee's employment with
PlayCore Wisconsin is terminated by PlayCore Wisconsin with Just Cause the
Employee shall not be entitled to any of the benefits identified in Sections 2
and 3 of this Agreement, and shall be entitled to receive only those benefits
that the Employee would otherwise be entitled to receive under any other
agreements entered into by the Employee and PlayCore Wisconsin or under
applicable law.
12. Rights in the Event of Dispute.
a. If a claim or dispute arises concerning the rights of the Employee
or his beneficiary (either or both of whom are hereinafter referred to as
the "claimant") to amounts or benefits described in Section 2 of this
Agreement (pertaining to benefits upon termination of employment following
a Change of Control), regardless of the party by whom such claim or dispute
is initiated, PlayCore Wisconsin shall, upon presentation of appropriate
vouchers, pay all legal expenses, including reasonable attorneys' fees,
court costs and ordinary and necessary out-of-pocket costs of attorneys'
billed to and payable by the claimant in connection with the bringing,
prosecuting, defending, litigating, negotiating, or settling such claim or
dispute; provided, however, that PlayCore Wisconsin shall not be obligated
to pay such expenses unless and until final resolution of such claim or
dispute with the claimant being entitled to a substantial part of the
rights claimed by him.
b. If a claim or dispute arises concerning the rights of the Employee
or his beneficiary (either or both of whom are hereinafter referred to as
the "claimant") to amounts or benefits described in Section 3 of this
Agreement (pertaining to termination of employment by PlayCore Wisconsin
other than as described in Section 2), regardless of the party by whom such
claim or dispute is initiated, each party shall pay its own legal expenses,
including reasonable attorneys' fees, court costs and ordinary and
necessary out-of-pocket costs in connection with the bringing, prosecuting,
defending, litigating, negotiating, or settling such claim or dispute;
provided, however, that the prevailing party in any court action shall be
entitled to recover from the other party, to the fullest extent permitted
by law, all such legal expenses that the prevailing party may reasonably
incur as a result of such action. Any payment pursuant to this subsection
shall include interest on any delayed payment at the applicable federal
rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code.
13. General Provisions.
a. All notices or other communications required or permitted hereunder
shall be in writing and shall be deemed given (i) when delivered in person
or (ii) when telecopied (at the date and time indicated on the receipt of
transmission if such day is a business day, and if not, at 9 a.m. on the
following business day) with hard copy delivered by hand or deposited in
the United States mail postage prepaid, registered or certified mail, on or
before two (2) business days after its delivery by telecopy, or
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<PAGE> 8
(iii) three (3) business days after being deposited in the United States
mail, postage prepaid, registered or certified mail, or (iv) two (2)
business days after delivery to a nationally recognized express courier,
expenses prepaid, addressed to the appropriate party as follows: to the
Employee at his address on file with PlayCore Wisconsin; or to Jasdrew or
PlayCore Wisconsin, c/o PlayCore, Inc., 15 West Milwaukee Street, Suite
204, Janesville, Wisconsin 53545, telecopier number (608) 741-7191,
Attention: Chairman; and with a copy to Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 1333 New Hampshire Avenue, N.W., Suite 400, Washington, D.C.,
20036, Attention: Russell W. Parks, Jr.
b. Nothing herein shall be construed as an agreement to continue the
employment by PlayCore Wisconsin of the Employee.
c. This Agreement constitutes the entire agreement between the parties
and PlayCore Wisconsin with respect to the subject matter contained herein
and, as of the effective date of the Merger, supersedes any and all prior
understandings, representatives, negotiations, and agreements with respect
thereto (including, without limitation, the Old Severance Agreement).
d. No modification or amendment of any provision of this Agreement
shall be effective unless in a written instrument executed by both parties.
Either party's failure to insist upon strict compliance with any provision
hereof shall not be deemed to be a waiver of such provision or any other
provision hereof.
e. This Agreement shall be binding upon and shall inure to the benefit
of the successors and assigns of Jasdrew and PlayCore Wisconsin. Without
limiting the foregoing, Jasdrew and PlayCore Wisconsin will require any
successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of
PlayCore Wisconsin, to expressly assume and agree to perform PlayCore
Wisconsin's obligations under this Agreement in the same manner and to the
same extent that Jasdrew and PlayCore Wisconsin are required to perform
them if no such succession had taken place. As used in this Agreement,
"Company" shall mean PlayCore Wisconsin and any successor to its business
and/or assets which executes and delivers the agreement provided for in
this Section 13.e. or which otherwise becomes bound by all the terms and
provisions of this Agreement as a matter of law. This Agreement shall inure
to the benefit of, and shall be enforceable by, the Employee's heirs, legal
representative or other successors in interest, but shall not otherwise be
assignable or transferable.
f. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
g. The validity, interpretation, construction and enforceability of
this Agreement shall be governed by the laws of the State of Wisconsin,
without regard to conflicts of laws principles.
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<PAGE> 9
14. Failure to Consummate. This Agreement shall be null and void if the
Merger is not consummated.
SIGNATURE PAGE FOLLOWS -
9
<PAGE> 10
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
COMPANY: EMPLOYEE:
JASDREW ACQUISITION CORP.
By: /s/ TODD R. BERMAN /s/ ROBERT A. FARNSWORTH
-------------------------------- ---------------------------------
Todd R. Berman, President Robert A. Farnsworth
<PAGE> 11
SCHEDULE A
<TABLE>
<CAPTION>
OPTION TERMS
<S> <C>
AMOUNT OF INITIAL GRANT: A nonqualified option grant (the "Initial
Grant") of 7,250 shares of common stock of
PlayCore Holdings, Inc. ("Holdings"). The
Initial Grant shall be pursuant to an option
plan (and underlying option grant agreement)
established by Holdings with an initial
reserve equal to 10% of the outstanding
common shares of Holdings as of the closing
date (post transaction).
EXERCISE PRICE: The per share exercise price of the
option shall be the common stock's fair
market value on the date of grant (which
shall be equal to the fair market value of
the equivalent number of shares of common
stock as of the closing date).
TERM: Options, or any portion thereof, not
previously exercised or terminated will
expire ten years from the date of grant.
METHOD OF EXERCISE: Prior to an "initial public offering", cash
only; provided, however, the Board of
Directors or Compensation Committee of
Holdings may authorize cashless exercises.
An option may only be exercised with respect
to whole shares.
VESTING: TIME OPTIONS: 50% of the total number of
shares subject to the Initial Grant shall
vest ratably (25% a year) on each of the
first through fourth anniversaries of the
date of grant ("A Options"), provided the
Employee is in the employ of PlayCore
Wisconsin, Inc. or an affiliate ("PlayCore
Wisconsin") on each such date.
If there is a Change in Control (as defined
in the option plan) prior to the fourth
anniversary of the date of grant, and the
Employee is still in the employ of PlayCore
Wisconsin, all unvested Time Options shall
vest.
PERFORMANCE OPTIONS: The remaining 50% of
the total number of shares subject to the
Initial Grant shall vest if the net Internal
Rate of Return ("IRR") realized by PlayCore
Holdings, L.L.C. ("Holdings L.L.C.") on its
total investment in Holdings (after dilution
from options on shares held by management)
is 25% or more ("Target
</TABLE>
<PAGE> 12
<TABLE>
<S> <C>
IRR") as of the "Determination Date,"
("Performance Options") and the Employee is
still in the employ of PlayCore Wisconsin on
the Determination Date.
The Determination Date regarding the
attainment of the IRR shall be the closing
date or such other time as Holdings L.L.C.
receives cash payments for its interests in
Holdings.
TERMINATION OF EMPLOYMENT:
BY PLAYCORE WISCONSIN
WITHOUT CAUSE OR
BY THE EMPLOYEE
FOR GOOD REASON OR
UPON DEATH OR DISABILITY: TIME OPTIONS: All vested Time Options remain
outstanding and exercisable for a period of
90 days and if not exercised by end of
business on the 90th day shall terminate.
All unvested Time Options shall be
immediately terminate on the Termination
Date.
PERFORMANCE OPTIONS: Performance Options
shall vest if the Target IRR would have been
achieved based upon the fair market value of
Holdings L.L.C.'s investment in Holdings as
of the Termination Date and Employee will
receive the applicable value of the
Performance Option as determined at the
Termination Date by the Board of Directors
of Holdings at such time as Holdings L.L.C.
receives cash payments for its interests in
Holdings. If the Target IRR is not achieved
on both the Termination Date and the
Determination Date, then all Performance
Options shall be terminated with no payment
to or value to Employee.
BY PLAYCORE WISCONSIN FOR
CAUSE OR BY THE
EMPLOYEE WITHOUT
GOOD REASON: TIME OPTIONS: All vested Time Options shall
remain exercisable for 90 days and if not
exercised by the end of business on the 90th
day shall terminate. All nonvested Time
Options shall terminate on the Termination
Date.
</TABLE>
<PAGE> 13
<TABLE>
<S> <C>
PERFORMANCE OPTIONS: All Performance Options
shall immediately terminate.
CALL ON SHARES ACQUIRED In the event of the Employee's termination
ON EXERCISE OF OPTION: of employment for any reason, all shares in
Holdings held by Employee as a result of
exercising Options shall be subject to a
"call" by Holdings or its designee (the
"Company Call") at the fair market value on
the Termination Date. The Company Call must
be exercised within six months of the
Termination Date. The purchase price as
determined above will be paid one-half in
cash within 30 days of the exercise of the
Company Call and the remaining one-half
payable within two years of the date of
exercise of the Company Call (the "Deferred
Call Payments"). Any Deferred Call Payments
shall be credited with an appropriate
interest rate or dividend rate. In the event
that Holdings is restricted from purchasing
such shares for cash under any applicable
financing or other agreements, Holdings may
issue the Employee a note or such other
permissible security (which shall contain
commercially reasonable terms) in full
satisfaction of such call. In no event shall
the Employee be paid less cash at the time
of the exercise of the Company Call than the
Employee's income tax liability resulting
from the sale of the shares.
EMPLOYEE PUT: In the event of Employee's termination of
employment by PlayCore Wisconsin without
Cause, by the Employee for Good Reason, or
as a result of death or Permanent
Disability, the Employee or his estate as
the case may be, may exercise a "put" to
Holdings (the "Employee Put") at fair market
value on the Termination Date, subject to
Holdings' ability under its financing
documents. The Employee Put must be
exercised within six months of the
Termination Date. The purchase price as
determined above will be paid one-half in
cash within 30 days of the exercise of the
Employee Put and the remaining one-half will
be payable within two years of the date of
exercise of the Employee Put (the "Deferred
Put Payments"). Any Deferred Put Payments
shall be credited with an appropriate
interest rate or dividend rate. All payments
made by Holdings with respect to its
exercise of the Executive Put are subject to
Holdings' financing agreements. In the event
that Holdings is restricted from purchasing
such shares for cash under any applicable
financing or other agreements, Holdings may
issue the
</TABLE>
<PAGE> 14
<TABLE>
<S> <C>
Employee a note or such other permissible
security (which shall contain commercially
reasonable terms) in full satisfaction of
such put.
REALIZATION: Except in the case of the exercise of the
Company Call or Employee Put as set forth
above, Employee shall be required to hold
the shares or Options until such time
Holdings L.L.C. sells or otherwise exits
from its equity interest in Holdings.
TAG-ALONG RIGHTS: In the event of a sale of Holdings by
Holdings, L.L.C., the Employee will have the
same tag-along rights as other investors.
RESTRICTIONS ON TRANSFER: The Options and shares will be
non-transferable, except with respect to a
transfer to a trust or partnership, the only
beneficiaries or partners (as the case may
be) of which are immediate family member of
Employee, or in accordance with the terms of
any applicable operating agreement or
shareholders agreement and the laws of
descent and distribution.
Other than with respect to transfers
pursuant to the preceding sentence, no third
party shall have any direct or indirect
beneficial interest in the Options.
REGISTRATION RIGHTS: Employee will have the same piggyback
registration rights as other investors.
FAIR MARKET VALUE: Fair market value of vested shares on a
Termination Date shall be determined by
multiplying the "equity value" of Holdings
by a fraction, the numerator of which shall
be the number of vested shares and the
denominator of which shall be the total
number of fully diluted shares of Holdings
common stock (assuming that all options,
warrants or other securities which are
convertible or exchangeable for common stock
are outstanding). The equity value of
Holdings on a Termination Date shall be
determined by the Board of Directors of
Holdings in good faith by selecting an
appropriate multiple and then multiplying
the consolidated EBITDA for the latest four
fiscal quarters by such multiple and then
subtracting from such amount all debt,
preferred stock and other obligations on a
consolidated basis of Holdings, if any.
</TABLE>
<PAGE> 15
SCHEDULE B
<TABLE>
<CAPTION>
EQUITY PURCHASE TERMS
<S> <C>
AMOUNT OF EQUITY: A percentage equity interest in PlayCore
Holdings, L.L.C. ("Holdings L.L.C.") equal
to $75,000 and determined based on the value
paid by Chartwell Investments II, L.L.C. or
its affiliates ("Chartwell") for its
interest in Holdings L.L.C. (the
"Interest"). Upon execution of the
applicable subscription documents relating
to the Interest, Employee shall make a cash
payment to Holdings L.L.C. of $75,000.
COMPANY CALL ON INTERESTS: In the event of Employee's termination of
employment for any reason, the Interest held
by the Employee shall be subject to a "call"
by Holdings L.L.C. or its designee (the
"Company Call") at the fair market value on
the Termination Date. The Company Call must
be exercised within six months of the
Termination Date. The purchase price as
determined above will be paid as follows:
the lesser of the Employee's original
investment or fair market value of the
Interest within 30 days of the exercise of
the Company Call and the remaining amount,
if any, payable within two years of the date
of exercise of the Company Call (the
"Deferred Call Payments"). Any Deferred Call
Payments shall be credited with an
appropriate interest rate or dividend rate.
In the event that Holdings L.L.C. is
restricted from purchasing the Interest for
cash under any applicable financing or other
agreements to which Holdings L.L.C. or any
of its subsidiaries is a party which prevent
Holdings L.L.C. from obtaining cash, then
Holdings L.L.C. may issue the Employee a
note or such other permissible security
(which shall contain commercially reasonable
terms) in full satisfaction of such call.
EMPLOYEE PUT: In the event of Employee's termination of
employment by PlayCore Wisconsin, Inc. or an
affiliate ("PlayCore Wisconsin") without
Cause, by the Employee for Good Reason, or
as a result of death or Permanent
Disability, the Employee or his estate as
the case may be, may exercise a "put" to
Holdings L.L.C. (the "Employee Put") of the
Interest at fair market value on the
Termination Date, subject to compliance with
the financing documents of Holdings L.L.C.
or of any of its subsidiaries. The Employee
Put must be exercised within six months of
the
</TABLE>
<PAGE> 16
<TABLE>
<S> <C>
Termination Date. The purchase price as
determined above will be paid as follows:
the lesser of the Employee's original
investment or fair market value of the
Interest within 30 days of the exercise of
the Employee Put and the remaining amount,
if any, subject to the Company Call, will be
held by Employee until such time as Holdings
L.L.C. sells or otherwise exits from its
equity interest in PlayCore Holdings, Inc.
("Holdings"). All payments by Holdings
L.L.C. with respect to the exercise of the
Employee Put are subject to the financing
agreements of Holdings L.L.C. or any of its
subsidiaries. In the event that Holdings
L.L.C. is restricted from purchasing the
Interest for cash under any applicable
financing or other agreements to which
Holdings L.L.C. or any of its subsidiaries
is a party which prevent Holdings L.L.C.
from obtaining cash, then Holdings L.L.C.
may issue Employee a note or such other
permissible security (which shall contain
commercially reasonable terms) in full
satisfaction of such put.
REALIZATION: Except in the case of the exercise of
Company Call or Employee Put as set forth
above, Employee shall be required to hold
the Interest until such time as Chartwell
sells or otherwise exits from its equity
interest in Holdings L.L.C.
TAG-ALONG RIGHTS: In the event of a sale of Holdings L.L.C. by
Chartwell, the Employee will have the same
tag-along rights as other investors.
RESTRICTIONS ON TRANSFER: The Interest will be non-transferable,
except with respect to a transfer to a trust
or partnership, the only beneficiaries or
partners (as the case may be) of which are
immediate family member of Employee, or in
accordance with the terms of any applicable
operating agreement or shareholders
agreement and the laws of descent and
distribution.
Other than with respect to transfers
pursuant to the preceding sentence, no third
party shall have any direct or indirect
beneficial interest in the Interest.
REGISTRATION RIGHTS: Employee will have the same piggyback
registration rights as other investors.
</TABLE>
<PAGE> 17
FAIR MARKET VALUE: Fair market value of Employee's Interest on
a Termination Date shall be determined in
three steps as follows. (1) The equity value
of Holdings on a Termination Date shall be
determined by the Board of Directors of
Holdings in good faith by selecting an
appropriate multiple and then multiplying
the consolidated EBITDA for the latest four
fiscal quarters by such multiple and then
subtracting from such amount all debt,
preferred stock and other obligations on a
consolidated basis of Holdings, if any. (2)
Holdings L.L.C's interest in Holdings shall
be determined by multiplying the equity
value of Holdings (as determined under step
number (1)) on the Termination Date by a
fraction, the numerator of which shall be
the number of shares of common stock of
Holdings that are owned by Holdings L.L.C.,
and the denominator of which shall be the
total number of fully diluted shares of
Holdings common stock (assuming that all
options, warrants or other securities which
are convertible or exchangeable for common
stock are outstanding). (3) Finally, the
percentage representing Employee's Interest
shall be multiplied by the dollar amount of
Holdings L.L.C.'s interest in Holdings as
determined under step number (2).
<PAGE> 18
SCHEDULE C
<TABLE>
<CAPTION>
PHANTOM STOCK TERMS
<S> <C>
AMOUNT OF INITIAL GRANT: A grant of 878 shares of phantom common
stock of PlayCore Holdings, Inc.
("Holdings") (the "Phantom Shares") pursuant
to a grant by Holdings.
VESTING: One third of the total number of Phantom
Shares shall vest on each anniversary of the
date of the grant. In the event that the
Employee's employment with PlayCore
Wisconsin, Inc. or an affiliate ("PlayCore
Wisconsin") is terminated for any reason,
all non-vested shares shall be forfeited.
COMPANY CALL: In the event of Employee's termination of
employment for any reason, the vested
Phantom Shares held by the Employee shall be
subject to a "call" by Holdings or its
designee (the "Company Call") at the fair
market value on the Termination Date. The
Company Call must be exercised within six
months of the Termination Date. The purchase
price shall be the equivalent of the fair
market value of an equivalent number of
common shares of Holdings on the Termination
Date. It will be paid one-half in cash
within 30 days of the exercise of the
Company Call and the remaining one-half will
be payable within two years of the date of
exercise of the Company Call (the "Deferred
Call Payments"). Any Deferred Call Payments
shall be credited with an appropriate
interest rate or dividend rate. In the event
that Holdings is restricted from purchasing
such shares for cash under any applicable
financing or other agreements, Holdings may
issue the Employee a note or such other
permissible security (which shall contain
commercially reasonable terms) in full
satisfaction of such call. In no event shall
the Employee be paid less cash at the time
of the exercise of the Company Call than the
Employee's income tax liability resulting
from the sale of the Phantom Shares.
EMPLOYEE PUT: In the event of Employee's termination of
employment by PlayCore Wisconsin without
Cause, by the Employee for Good Reason, or
as a result of death or Permanent
Disability, the Employee or his estate as
the case may be, may exercise a "put" to
Holdings (the "Employee Put") of the vested
Phantom Shares at fair market value on the
</TABLE>
<PAGE> 19
<TABLE>
<S> <C>
Termination Date. The Employee Put must be
exercised within six months of the
Termination Date. The purchase price as
determined above will be paid one-half in
cash within 30 days of the exercise of the
Employee Put and the remaining one-half will
be payable within two years of the date of
exercise of the Employee Put (the "Deferred
Put Payments"). Any Deferred Put Payments
shall be credited with an appropriate
interest rate or dividend rate. All payments
by Holdings with respect to its exercise of
the Employee Put are subject to Holdings'
financing agreements. In the event that
Holdings is restricted from purchasing such
shares for cash under any applicable
financing or other agreements, Holdings may
issue the Employee a note or such other
permissible security (which shall contain
commercially reasonable terms) in full
satisfaction of such put.
REALIZATION: Except in the case of the exercise of the
Company Call or Employee Put as set forth
above, Employee shall be required to hold
the Phantom Shares until such time as
PlayCore Holdings, L.L.C. sells or otherwise
exits from its equity interest in Holdings
(any such occurrence, a "Realization
Event").
TAX GROSS-UP PAYMENT: Upon exercise of the Company Call or
Employee Put or any other Realization Event
hereunder, Holdings shall make a tax
gross-up payment to the Employee to
compensate the Employee for the difference
between ordinary income tax treatment and
capital gains tax treatment with respect to
the appreciated value ("Appreciated Value")
of the Phantom Shares from the date of
vesting to the earlier of: (i) the
Termination Date (in the case of an Employee
Put or Company Call), or (ii) the date of
the occurrence of a Realization Event;
provided, however, that in no event shall
such tax gross-up payment exceed the tax
benefit to Holdings actually realized for
such tax year, if any, related to the
deduction for (a) the tax gross-up payment
and (b) the appreciated value of the Phantom
Shares from the date of vesting to the
earlier of: (i) the Termination Date (in the
case of an Employee Put or Company Call), or
(ii) the date of the occurrence of a
Realization Event.
TAG-ALONG RIGHTS: In the event of a sale of Holdings by
PlayCore Holdings, L.L.C., the Employee will
have the same tag-along rights as other
investors.
</TABLE>
<PAGE> 20
<TABLE>
<S> <C>
RESTRICTIONS ON TRANSFER: The Phantom Shares will be non-transferable,
except with respect to a transfer to a trust
or partnership, the only beneficiaries or
partners (as the case may be) of which are
immediate family member of Employee, or in
accordance with the terms of any applicable
operating agreement or shareholders
agreement and the laws of descent and
distribution.
Other than with respect to transfers
pursuant to the preceding sentence, no third
party shall have any direct or indirect
beneficial interest in the Phantom Shares.
FAIR MARKET VALUE: Fair market value of vested Phantom Shares
on a Termination Date shall be determined by
multiplying the "equity value" of Holdings
by a fraction, the numerator of which shall
be the number of vested Phantom Shares and
the denominator of which shall be the total
number of fully diluted shares of Holdings
common stock (assuming that all options,
warrants or other securities which are
convertible or exchangeable for common stock
are outstanding). The equity value of
Holdings on a Termination Date shall be
determined by the Board of Directors of
Holdings in good faith by selecting an
appropriate multiple and then multiplying
the consolidated EBITDA for the latest four
fiscal quarters by such multiple and then
subtracting from such amount all debt,
preferred stock and other obligations on a
consolidated basis of Holdings, if any.
</TABLE>
<PAGE> 1
EXHIBIT (d)(xii)
SEVERANCE, CHANGE OF CONTROL AND NONCOMPETITION AGREEMENT
THIS SEVERANCE, CHANGE OF CONTROL AND NONCOMPETITION AGREEMENT (the
"Agreement") is made and entered into as of April 13, 2000, by and between
Jasdrew Acquisition Corp. ("Jasdrew"), and Richard E. Ruegger (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee is an officer and a key employee of PlayCore
Wisconsin, Inc. ("PlayCore Wisconsin");
WHEREAS, PlayCore, Inc. intends to enter into an Agreement and Plan of
Merger (the "Merger Agreement") with Jasdrew contemporaneously with the
execution hereof pursuant to which Jasdrew will merge (the "Merger") into
PlayCore, Inc. (after which PlayCore, Inc. is to merge into PlayCore Wisconsin);
WHEREAS, the Employee, in consideration of the agreement of Jasdrew
contained herein that Employee will receive payment of a cash bonus from
PlayCore Wisconsin in an amount of $150,000 (the "Closing Amount") promptly
following the effective date of the Merger and a grant of phantom common stock
of PlayCore Holdings, Inc. ("Holdings") to be set forth in a separate phantom
stock grant agreement, desires to enter into this Agreement to provide for the
payment of certain benefits to the Employee if the Employee's employment with
PlayCore Wisconsin is terminated under certain circumstances, including a
termination following a change of control of PlayCore Wisconsin other than the
transactions contemplated in the Merger Agreement;
WHEREAS, the Employee acknowledges and agrees that the terms of this
Agreement shall supersede all prior agreements between the parties as set forth
in Section 13. c. hereof;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and as an inducement for Jasdrew
to enter into, and to proceed with the transactions contemplated in, the Merger
Agreement, the parties hereto agree as follows:
1. Definition. The capitalized terms used in this Agreement shall
have the following meanings (unless otherwise expressly provided herein):
a. "Change of Control" shall have the meaning set forth in
Exhibit A hereto.
b. "Good Reason" means any of the following:
(1) The removal of the Employee from, or any failure to
reelect or reappoint the Employee to, any of the positions held with
PlayCore Wisconsin on the date of the Change of Control or any other
positions with PlayCore Wisconsin to which the Employee shall
thereafter be elected, appointed or assigned, except in the event that
such removal or failure to reelect or reappoint
<PAGE> 2
relates to the termination by PlayCore Wisconsin of the Employee's
employment for Just Cause or by reason of Permanent Disability; or
(2) A good faith determination by the Employee that there
has been a significant adverse change, without the Employee's written
consent, in the Employee's working conditions or status with PlayCore
Wisconsin from such working conditions or status in effect during the
180-day period immediately prior to the Change of Control, or the
effective date of this Agreement for purposes of Section 3.c. hereof,
including but not limited to (A) a significant change in the nature or
scope of the Employee's authority, powers, functions, duties or
responsibilities, or (B) a significant reduction in the level of
support services, staff, secretarial and other assistance, office
space and accoutrements, or for purposes of Section 2 hereof alone,
(C) relocation of the Employee's primary place of employment with
PlayCore Wisconsin on the effective date of the Merger to a location
more than thirty-five (35) miles from such primary place of
employment.
c. "Just Cause" means, prior to a Change in Control, willful
and gross misconduct on the part of the Employee that is materially and
demonstrably detrimental to PlayCore Wisconsin, as determined in good faith
by the Board of Directors of PlayCore Wisconsin. "Just Cause" means,
following a Change in Control, the commission by the Employee of one or
more acts for which the Employee is convicted (as evidenced by binding and
final judgment. order or decree of a court of competent jurisdiction) of a
felony under United States federal, state, or local criminal law which
substantially impairs the Employee's ability to perform his duties or
responsibilities; the engaging in by the Employee of intentional conduct
not taken in good faith which has caused demonstrable and serious financial
injury to the Employer, as evidenced by a determination in a binding and
final judgment, order, or decree of a court or administrative agency of
competent jurisdiction, in effect after exhaustion or lapse of all rights
of appeal, in an action, suit, or proceeding. whether civil, criminal,
administrative, or investigative; or the continuing willful and
unreasonable refusal by the Employee to perform the Employee's duties or
responsibilities (unless significantly changed without the Employee's
consent).
d. "Permanent Disability" means that the Employee is unable by
reason of accident or illness (including mental illness) to perform the
material duties of his regular position with PlayCore Wisconsin and not
expected to recover from his disability within a period of six (6) months
from the commencement of the disability. If at any time the Employee claims
or is claimed to have a Permanent Disability, a physician acceptable to
both the Employee, or his personal representative, and PlayCore Wisconsin
(which acceptances shall not be unreasonably withheld) shall be retained by
PlayCore Wisconsin and shall examine the Employee. The Employee shall
cooperate fully with the physician. If the physician determines that the
Employee has a Permanent Disability the physician shall deliver to PlayCore
Wisconsin a certificate certifying both that the Employee has a Permanent
Disability and the date upon which the condition of Permanent Disability
commenced. The determination of the physician shall be conclusive.
2
<PAGE> 3
e. "Person" means (other than with respect to the definition of
"Change of Control") any individual or any partnership, limited liability
company, corporation, joint venture, trust, or other entity (as defined in
Rule l3d-5 under the Securities Exchange Act of 1934), together with its
affiliates and the heirs, personal representatives, successors, and assigns
of the "Person" when the context so permits.
f. "Severance Period" means the applicable period of time
beginning with the Termination Date. If the Termination Date is within
eighteen (18) months after a Change of Control and the termination of
employment is either by PlayCore Wisconsin other than with Just Cause or by
the Employee for Good Reason, the Severance Period shall be eighteen (18)
months (the "18-month Severance Period"). If the Termination Date occurs
other than within such 18-month period following a Change of Control then
the Severance Period, if applicable, shall be twelve (12) months ("the
12-month Severance Period").
g. "Termination Date" means the date upon which the Employee's
employment with PlayCore Wisconsin is terminated.
h. "Transaction Benefit" means the amount that is the greater
of: (i) the value of Employee's grant of phantom common stock on the date
this Agreement becomes effective, or (ii) the value of such grant of
phantom common stock on the Termination Date (such value to be determined
by multiplying the "equity value" of Holdings (as defined in the next
sentence) by a fraction, the numerator of which shall be the number of
shares represented by such grant and the denominator of which shall be the
total number of fully diluted shares of Holdings common stock (assuming
that all options, warrants or other securities which are convertible or
exchangeable for common stock are outstanding). The equity value of
Holdings on a Termination Date shall be determined by the Board of
Directors of PlayCore Wisconsin in good faith by selecting an appropriate
multiple and then multiplying the consolidated EBITDA for the latest four
fiscal quarters by such multiple and then subtracting from such amount all
debt, preferred stock and other obligations on a consolidated basis of
Holdings, if any.
2. Termination After Change of Control. If, within eighteen (18)
months after the occurrence of a Change of Control, the Employee's employment
with PlayCore Wisconsin is terminated either (i) by PlayCore Wisconsin (a) other
than with Just Cause or (b) due to Permanent Disability or, (ii) by the Employee
for Good Reason, then the Employee shall be entitled to receive the following
severance benefits from PlayCore Wisconsin:
a. continuation of the Employee's salary during the applicable
18-month Severance Period; and
b. continuation of coverage for the Employee and any dependents
previously covered under the group health, group life, group long-term
disability, and similar group insurance plans, if any, maintained by
PlayCore Wisconsin, at the active employee discounted cost, until
expiration of the 18-month Severance Period (provided, that if such
continued participation is precluded by the provisions of such plans or by
applicable law, PlayCore Wisconsin shall provide the Employee with
comparable benefits of equal value at no increase in cost to the Employee),
and execution of this
3
<PAGE> 4
Agreement by the Employee shall not be considered a waiver of any rights or
entitlements he may have under applicable law to continuation of coverage
under the group health plan maintained by PlayCore Wisconsin.
3. Other Termination. If the Employee's employment with PlayCore
Wisconsin is terminated by PlayCore Wisconsin (a) other than with Just Cause or
(b) due to Permanent Disability and Section 2, above, is not applicable because
such termination is not within the eighteen (18) month period following a Change
of Control, then the Employee shall be entitled to receive the following
severance benefits from PlayCore Wisconsin:
a. continuation of the Employee's salary during the applicable
12-month Severance Period; provided, however, if such termination occurs
prior to a Change of Control, the total salary continuation shall be
reduced by the value of any Transaction Benefit; and
b. continuation of coverage for the Employee and any dependents
previously covered under the group health, group life, group long-term
disability, and similar group insurance plans, if any, maintained by
PlayCore Wisconsin, at the active employee discounted cost, until
expiration of the 12-month Severance Period (provided, that if such
continued participation is precluded by the provisions of such plans or by
applicable law, PlayCore Wisconsin shall provide the Employee with
comparable benefits of equal value at no increase in cost to the Employee),
and execution of this Agreement by the Employee shall not be considered a
waiver of any rights or entitlements he may have under applicable law to
continuation of coverage under the group health plan maintained by PlayCore
Wisconsin.
c. To compensate the Employee for relinquishing certain rights
with PlayCore Wisconsin in order to facilitate the acquisition of the
PlayCore, Inc. by Holdings, and notwithstanding the foregoing or any
provision contained herein to the contrary, if the Employee's employment
with PlayCore Wisconsin is terminated either (x) by PlayCore Wisconsin
other than with Just Cause or (y) by the Employee for Good Reason, and the
termination of employment occurs within the period that begins on the
effective date of the Merger and ends eighteen (18) months thereafter, then
the Employee shall be entitled to receive the greater of: (i) the severance
benefits set forth above in this Section 3, or (ii) the severance benefits
that would have accrued to the Employee as a result of the acquisition of
PlayCore, Inc. by Holdings pursuant to that certain Severance, Change of
Control and Noncompetition Agreement, dated February 18, 1999, by and
between the Employee and PlayCore, Inc. (the "Old Severance Agreement")
attached hereto as Exhibit B, in either case, less the value of any
Transaction Benefit.
4. Payments.
a. Promptly following the effectiveness of the Merger, Jasdrew
(or its successor) shall pay to Employee the Closing Amount.
b. Except as otherwise provided in this Agreement, any salary
continuation amounts due to the Employee hereunder shall be payable in
equal
4
<PAGE> 5
installments on each regular payroll date of PlayCore Wisconsin after the
Termination Date.
5. Deduction and Withholding. All amounts payable to or on behalf of
the Employee pursuant to this Agreement shall be subject to such deductions and
withholding as may be agreed to by the Employee but not less than required by
applicable law.
6. Death and Permanent Disability. In the event of the Employee's
death, any amount payable or distributable to the Employee pursuant hereto from
rights and benefits accrued to and through the date of his death shall be paid
at the time or times indicated in such Section to the beneficiary designated by
the Employee for purposes of his group term life insurance coverage with
PlayCore Wisconsin and, if no beneficiary is designated for such purposes or if
no group term life insurance is then in effect, to the Employee's estate. In the
event that Employee's employment is terminated due to Permanent Disability,
Employee shall be entitled to accrued compensation through the Termination Date
and any other benefits (if any) to which Employee may be entitled under PlayCore
Wisconsin's benefit plans, programs and policies as then in effect.
7. Other Benefits. The benefits provided under this Agreement shall
be in addition to, and not in derogation or diminution of, any benefits that the
Employee may be entitled to receive under any other plan or program now or
hereafter maintained by PlayCore Wisconsin other than any severance pay plan.
8. Stock Options and Other Equity. Notwithstanding anything
contained in this Agreement to the contrary, the treatment of any stock options
and other equity held by the Employee on the Termination Date shall be subject
to the terms and conditions of the applicable plan documents and agreements in
accordance with the terms set forth in Schedules A, B and C attached hereto
("Applicable Equity Agreements") and the terms of the Applicable Equity
Agreements shall govern the treatment of such options and equity in the event of
Employee's termination.
9. Covenant Not to Compete. The Employee hereby agrees that he will
not, during the period of his employment with PlayCore Wisconsin and for a
period of two (2) years thereafter, as proprietor, partner, member, shareholder
(directly or indirectly owning or controlling five percent (5%) or more of any
class of stock), employee, consultant, agent, or otherwise, on his own behalf or
on behalf of another person., do any of the following in competition with
PlayCore Wisconsin, without the prior written consent of PlayCore Wisconsin:
a. solicit or assist in the solicitation of customers of
PlayCore Wisconsin or its affiliates;
b. render or assist in rendering services to customers of
PlayCore Wisconsin or its affiliates; or
c. divert or attempt to divert any customer's business from
PlayCore Wisconsin or its affiliates, or otherwise interfere with the
business relationship between PlayCore Wisconsin or its affiliates and any
of their respective customers, employees, or suppliers.
5
<PAGE> 6
Notwithstanding the foregoing, this Agreement shall not in any event be
construed to prevent the Employee from earning a living utilizing his skills in
any businesses which may, as an incident to a business or activity significantly
different from the business of PlayCore Wisconsin, make or sell some products or
provide some services which may in some degree compete with the business of
PlayCore Wisconsin. However, nothing in this Section 9 shall be deemed to permit
the Employee to accept employment with companies or a division thereof which
then or thereafter will directly compete in a major way with the business of
PlayCore Wisconsin or its affiliates with which the Employee was involved or had
access to information while employed by PlayCore Wisconsin.
10. Confidential Information. The Employee agrees that he will not,
while he is employed by PlayCore Wisconsin or for a period of five (5) years
thereafter, disclose to any person to whom he is not otherwise authorized to do
so by PlayCore Wisconsin (an "Unauthorized Person"), or use for his own account,
any information (the "Confidential Information"), whether or not reduced to
written or other tangible form, in which PlayCore Wisconsin or its affiliates
has a legally protectible interest by virtue of the following:
a. such information is not generally known in the industry;
b. the Employee has had access to (or, either alone or in
cooperation with others, originated or developed) such information during
his employment with PlayCore Wisconsin;
c. such information has been treated by PlayCore Wisconsin or
its affiliates as confidential;
d. such information relates to the business of PlayCore
Wisconsin or any of its affiliates; or
e. such information is of competitive advantage to PlayCore
Wisconsin or its affiliates.
Confidential Information for which the Employee has first secured the
written consent of PlayCore Wisconsin for its disclosure or use, and
Confidential Information which becomes generally known in the industry, or which
otherwise ceases to be legally protectible (other than by the Employee's breach
of this Agreement), shall cease to be subject to the restriction set forth in
this Section 10. Notwithstanding anything contained herein to the contrary, this
Section 10 prohibits only the use and disclosure of Confidential Information and
shall not be construed as limiting the Employee's right to undertake any other
employment or business activity. The Employee shall be prohibited from competing
with PlayCore Wisconsin only as provided in Section 9 above.
11. Termination With Just Cause. Notwithstanding any provision
contained herein to the contrary, in the event that the Employee's employment
with PlayCore Wisconsin is terminated by PlayCore Wisconsin with Just Cause the
Employee shall not be entitled to any of the benefits identified in Sections 2
and 3 of this Agreement, and shall be entitled to receive only those benefits
that the Employee would otherwise be entitled to receive under any other
agreements entered into by the Employee and PlayCore Wisconsin or under
applicable law.
6
<PAGE> 7
12. Rights in the Event of Dispute.
a. If a claim or dispute arises concerning the rights of the
Employee or his beneficiary (either or both of whom are hereinafter
referred to as the "claimant") to amounts or benefits described in Section
2 of this Agreement (pertaining to benefits upon termination of employment
following a Change of Control), regardless of the party by whom such claim
or dispute is initiated, PlayCore Wisconsin shall, upon presentation of
appropriate vouchers, pay all legal expenses, including reasonable
attorneys' fees, court costs and ordinary and necessary out-of-pocket costs
of attorneys' billed to and payable by the claimant in connection with the
bringing, prosecuting, defending, litigating, negotiating, or settling such
claim or dispute; provided, however, that PlayCore Wisconsin shall not be
obligated to pay such expenses unless and until final resolution of such
claim or dispute with the claimant being entitled to a substantial part of
the rights claimed by him.
b. If a claim or dispute arises concerning the rights of the
Employee or his beneficiary (either or both of whom are hereinafter
referred to as the "claimant") to amounts or benefits described in Section
3 of this Agreement (pertaining to termination of employment by PlayCore
Wisconsin other than as described in Section 2), regardless of the party by
whom such claim or dispute is initiated, each party shall pay its own legal
expenses, including reasonable attorneys' fees, court costs and ordinary
and necessary out-of-pocket costs in connection with the bringing,
prosecuting, defending, litigating, negotiating, or settling such claim or
dispute; provided, however, that the prevailing party in any court action
shall be entitled to recover from the other party, to the fullest extent
permitted by law, all such legal expenses that the prevailing party may
reasonably incur as a result of such action. Any payment pursuant to this
subsection shall include interest on any delayed payment at the applicable
federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue
Code.
13. General Provisions.
a. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given (i) when delivered
in person or (ii) when telecopied (at the date and time indicated on the
receipt of transmission if such day is a business day, and if not, at 9
a.m. on the following business day) with hard copy delivered by hand or
deposited in the United States mail postage prepaid, registered or
certified mail, on or before two (2) business days after its delivery by
telecopy, or (iii) three (3) business days after being deposited in the
United States mail, postage prepaid, registered or certified mail, or (iv)
two (2) business days after delivery to a nationally recognized express
courier, expenses prepaid, addressed to the appropriate party as follows:
to the Employee at his address on file with PlayCore Wisconsin; or to
Jasdrew or PlayCore Wisconsin, c/o PlayCore, Inc., 15 West Milwaukee
Street, Suite 204, Janesville, Wisconsin 53545, telecopier number (608)
741-7191, Attention: Chairman; and with a copy to Akin, Gump, Strauss,
Hauer & Feld, L.L.P., 1333 New Hampshire Avenue, N.W., Suite 400,
Washington, D.C., 20036, Attention: Russell W. Parks, Jr.
7
<PAGE> 8
b. Nothing herein shall be construed as an agreement to
continue the employment by PlayCore Wisconsin of the Employee.
c. This Agreement constitutes the entire agreement between the
parties and PlayCore Wisconsin with respect to the subject matter contained
herein and, as of the effective date of the Merger, supersedes any and all
prior understandings, representatives, negotiations, and agreements with
respect thereto (including, without limitation, the Old Severance
Agreement).
d. No modification or amendment of any provision of this
Agreement shall be effective unless in a written instrument executed by
both parties. Either party's failure to insist upon strict compliance with
any provision hereof shall not be deemed to be a waiver of such provision
or any other provision hereof.
e. This Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of Jasdrew and PlayCore Wisconsin.
Without limiting the foregoing, Jasdrew and PlayCore Wisconsin will require
any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of PlayCore Wisconsin, to expressly assume and agree to
perform PlayCore Wisconsin's obligations under this Agreement in the same
manner and to the same extent that Jasdrew and PlayCore Wisconsin are
required to perform them if no such succession had taken place. As used in
this Agreement, "Company" shall mean PlayCore Wisconsin and any successor
to its business and/or assets which executes and delivers the agreement
provided for in this Section 13.e. or which otherwise becomes bound by all
the terms and provisions of this Agreement as a matter of law. This
Agreement shall inure to the benefit of, and shall be enforceable by, the
Employee's heirs, legal representative or other successors in interest, but
shall not otherwise be assignable or transferable.
f. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
g. The validity, interpretation, construction and
enforceability of this Agreement shall be governed by the laws of the State
of Wisconsin, without regard to conflicts of laws principles.
14. Failure to Consummate. This Agreement shall be null and void if the
Merger is not consummated.
- SIGNATURE PAGE FOLLOWS -
8
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
COMPANY: EMPLOYEE:
JASDREW ACQUISITION CORP.
By: /s/ TODD R. BERMAN /s/ RICHARD E. RUEGGER
---------------------------------- ---------------------------------
Todd R. Berman, President Richard E. Ruegger
<PAGE> 10
SCHEDULE A
OPTION TERMS
AMOUNT OF INITIAL GRANT: A nonqualified option grant (the "Initial
Grant") of 5,800 shares of common stock of
PlayCore Holdings, Inc. ("Holdings"). The
Initial Grant shall be pursuant to an option
plan (and underlying option grant agreement)
established by Holdings with an initial
reserve equal to 10% of the outstanding
common shares of Holdings as of the closing
date (post transaction).
EXERCISE PRICE: The per share exercise price of the
option shall be the common stock's fair
market value on the date of grant (which
shall be equal to the fair market value of
the equivalent number of shares of common
stock as of the closing date).
TERM: Options, or any portion thereof, not
previously exercised or terminated will
expire ten years from the date of grant.
METHOD OF EXERCISE: Prior to an "initial public offering",
cash only; provided, however, the Board of
Directors or Compensation Committee
of Holdings may authorize cashless
exercises. An option may only be exercised
with respect to whole shares.
VESTING: TIME OPTIONS: 50% of the total number of
shares subject to the Initial Grant shall
vest ratably (25% a year) on each of the
first through fourth anniversaries of the
date of grant ("A Options"), provided the
Employee is in the employ of PlayCore
Wisconsin, Inc. or an affiliate ("PlayCore
Wisconsin") on each such date.
If there is a Change in Control (as defined
in the option plan) prior to the fourth
anniversary of the date of grant, and the
Employee is still in the employ of PlayCore
Wisconsin, all unvested Time Options shall
vest.
PERFORMANCE OPTIONS: The remaining 50% of
the total number of shares subject to the
Initial Grant shall vest if the net Internal
Rate of Return ("IRR") realized by PlayCore
Holdings, L.L.C. ("Holdings L.L.C.") on its
total investment in Holdings (after dilution
from options on shares held by management)
is 25% or more ("Target IRR") as of the
"Determination Date," ("Performance
Options") and the Employee is still in the
employ of PlayCore Wisconsin on the
Determination Date.
<PAGE> 11
The Determination Date regarding the
attainment of the IRR shall be the closing
date or such other time as Holdings L.L.C.
receives cash payments for its interests in
Holdings.
TERMINATION OF EMPLOYMENT:
BY PLAYCORE WISCONSIN
WITHOUT CAUSE OR
BY THE EMPLOYEE
FOR GOOD REASON OR
UPON DEATH OR DISABILITY: TIME OPTIONS: All vested Time Options remain
outstanding and exercisable for a period of
90 days and if not exercised by end of
business on the 90th day shall terminate.
All unvested Time Options shall be
immediately terminate on the Termination
Date.
PERFORMANCE OPTIONS: Performance Options
shall vest if the Target IRR would have been
achieved based upon the fair market value of
Holdings L.L.C.'s investment in Holdings as
of the Termination Date and Employee will
receive the applicable value of the
Performance Option as determined at the
Termination Date by the Board of Directors
of Holdings at such time as Holdings L.L.C.
receives cash payments for its interests in
Holdings. If the Target IRR is not achieved
on both the Termination Date and the
Determination Date, then all Performance
Options shall be terminated with no payment
to or value to Employee.
BY PLAYCORE WISCONSIN FOR
CAUSE OR BY THE
EMPLOYEE WITHOUT
GOOD REASON: TIME OPTIONS: All vested Time Options shall
remain exercisable for 90 days and if not
exercised by the end of business on the 90th
day shall terminate. All nonvested Time
Options shall terminate on the Termination
Date.
PERFORMANCE OPTIONS: All Performance Options
shall immediately terminate.
<PAGE> 12
CALL ON SHARES ACQUIRED In the event of the Employee's termination
ON EXERCISE OF OPTION: of employment for any reason, all shares in
Holdings held by Employee as a result of
exercising Options shall be subject to a
"call" by Holdings or its designee (the
"Company Call") at the fair market value on
the Termination Date. The Company Call must
be exercised within six months of the
Termination Date. The purchase price as
determined above will be paid one-half in
cash within 30 days of the exercise of the
Company Call and the remaining one-half
payable within two years of the date of
exercise of the Company Call (the "Deferred
Call Payments"). Any Deferred Call Payments
shall be credited with an appropriate
interest rate or dividend rate. In the event
that Holdings is restricted from purchasing
such shares for cash under any applicable
financing or other agreements, Holdings may
issue the Employee a note or such other
permissible security (which shall contain
commercially reasonable terms) in full
satisfaction of such call. In no event shall
the Employee be paid less cash at the time
of the exercise of the Company Call than the
Employee's income tax liability resulting
from the sale of the shares.
EMPLOYEE PUT: In the event of Employee's termination of
employment by PlayCore Wisconsin without
Cause, by the Employee for Good Reason, or
as a result of death or Permanent
Disability, the Employee or his estate as
the case may be, may exercise a "put" to
Holdings (the "Employee Put") at fair market
value on the Termination Date, subject to
Holdings' ability under its financing
documents. The Employee Put must be
exercised within six months of the
Termination Date. The purchase price as
determined above will be paid one-half in
cash within 30 days of the exercise of the
Employee Put and the remaining one-half will
be payable within two years of the date of
exercise of the Employee Put (the "Deferred
Put Payments"). Any Deferred Put Payments
shall be credited with an appropriate
interest rate or dividend rate. All payments
made by Holdings with respect to its
exercise of the Executive Put are subject to
Holdings' financing agreements. In the event
that Holdings is restricted from purchasing
such shares for cash under any applicable
financing or other agreements, Holdings may
issue the Employee a note or such other
permissible security (which shall contain
commercially reasonable terms) in full
satisfaction of such put.
REALIZATION: Except in the case of the exercise of the
Company Call or Employee Put as set forth
above, Employee shall be
<PAGE> 13
required to hold the shares or Options until
such time Holdings L.L.C. sells or otherwise
exits from its equity interest in Holdings.
TAG-ALONG RIGHTS: In the event of a sale of Holdings by
Holdings, L.L.C., the Employee will have the
same tag-along rights as other investors.
RESTRICTIONS ON TRANSFER: The Options and shares will be
non-transferable, except with respect to a
transfer to a trust or partnership, the only
beneficiaries or partners (as the case may
be) of which are immediate family member of
Employee, or in accordance with the terms of
any applicable operating agreement or
shareholders agreement and the laws of
descent and distribution.
Other than with respect to transfers
pursuant to the preceding sentence, no third
party shall have any direct or indirect
beneficial interest in the Options.
REGISTRATION RIGHTS: Employee will have the same piggyback
registration rights as other investors.
FAIR MARKET VALUE: Fair market value of vested shares on a
Termination Date shall be determined by
multiplying the "equity value" of Holdings
by a fraction, the numerator of which shall
be the number of vested shares and the
denominator of which shall be the total
number of fully diluted shares of Holdings
common stock (assuming that all options,
warrants or other securities which are
convertible or exchangeable for common stock
are outstanding). The equity value of
Holdings on a Termination Date shall be
determined by the Board of Directors of
Holdings in good faith by selecting an
appropriate multiple and then multiplying
the consolidated EBITDA for the latest four
fiscal quarters by such multiple and then
subtracting from such amount all debt,
preferred stock and other obligations on a
consolidated basis of Holdings, if any.
<PAGE> 14
SCHEDULE B
EQUITY PURCHASE TERMS
AMOUNT OF EQUITY: A percentage equity interest in PlayCore
Holdings, L.L.C. ("Holdings L.L.C.") equal
to $110,000 and determined based on the
value paid by Chartwell Investments II,
L.L.C. or its affiliates ("Chartwell") for
its interest in Holdings L.L.C. (the
"Interest"). Upon execution of the
applicable subscription documents relating
to the Interest, Employee shall make a cash
payment to Holdings L.L.C. of $110,000.
COMPANY CALL ON INTERESTS: In the event of Employee's termination of
employment for any reason, the Interest held
by the Employee shall be subject to a "call"
by Holdings L.L.C. or its designee (the
"Company Call") at the fair market value on
the Termination Date. The Company Call must
be exercised within six months of the
Termination Date. The purchase price as
determined above will be paid as follows:
the lesser of the Employee's original
investment or fair market value of the
Interest within 30 days of the exercise of
the Company Call and the remaining amount,
if any, payable within two years of the date
of exercise of the Company Call (the
"Deferred Call Payments"). Any Deferred Call
Payments shall be credited with an
appropriate interest rate or dividend rate.
In the event that Holdings L.L.C. is
restricted from purchasing the Interest for
cash under any applicable financing or other
agreements to which Holdings L.L.C. or any
of its subsidiaries is a party which prevent
Holdings L.L.C. from obtaining cash, then
Holdings L.L.C. may issue the Employee a
note or such other permissible security
(which shall contain commercially reasonable
terms) in full satisfaction of such call.
EMPLOYEE PUT: In the event of Employee's termination of
employment by PlayCore Wisconsin, Inc. or an
affiliate ("PlayCore Wisconsin") without
Cause, by the Employee for Good Reason, or
as a result of death or Permanent
Disability, the Employee or his estate as
the case may be, may exercise a "put" to
Holdings L.L.C. (the "Employee Put") of the
Interest at fair market value on the
Termination Date, subject to compliance with
the financing documents of Holdings L.L.C.
or of any of its subsidiaries. The Employee
Put must be exercised within six months of
the Termination Date. The purchase price as
determined above
<PAGE> 15
will be paid as follows: the lesser of the
Employee's original investment or fair
market value of the Interest within 30 days
of the exercise of the Employee Put and the
remaining amount, if any, subject to the
Company Call, will be held by Employee until
such time as Holdings L.L.C. sells or
otherwise exits from its equity interest in
PlayCore Holdings, Inc. ("Holdings"). All
payments by Holdings L.L.C. with respect to
the exercise of the Employee Put are subject
to the financing agreements of Holdings
L.L.C. or any of its subsidiaries. In the
event that Holdings L.L.C. is restricted
from purchasing the Interest for cash under
any applicable financing or other agreements
to which Holdings L.L.C. or any of its
subsidiaries is a party which prevent
Holdings L.L.C. from obtaining cash, then
Holdings L.L.C. may issue Employee a note or
such other permissible security (which shall
contain commercially reasonable terms) in
full satisfaction of such put.
REALIZATION: Except in the case of the exercise of
Company Call or Employee Put as set forth
above, Employee shall be required to hold
the Interest until such time as Chartwell
sells or otherwise exits from its equity
interest in Holdings L.L.C.
TAG-ALONG RIGHTS: In the event of a sale of Holdings L.L.C. by
Chartwell, the Employee will have the same
tag-along rights as other investors.
RESTRICTIONS ON TRANSFER: The Interest will be non-transferable,
except with respect to a transfer to a trust
or partnership, the only beneficiaries or
partners (as the case may be) of which are
immediate family member of Employee, or in
accordance with the terms of any applicable
operating agreement or shareholders
agreement and the laws of descent and
distribution.
Other than with respect to transfers
pursuant to the preceding sentence, no third
party shall have any direct or indirect
beneficial interest in the Interest.
REGISTRATION RIGHTS: Employee will have the same piggyback
registration rights as other investors.
FAIR MARKET VALUE: Fair market value of Employee's Interest on
a Termination Date shall be determined in
three steps as follows. (1) The equity value
of Holdings on a Termination Date shall be
determined by the Board of Directors of
Holdings in good
<PAGE> 16
faith by selecting an appropriate multiple
and then multiplying the consolidated EBITDA
for the latest four fiscal quarters by such
multiple and then subtracting from such
amount all debt, preferred stock and other
obligations on a consolidated basis of
Holdings, if any. (2) Holdings L.L.C's
interest in Holdings shall be determined by
multiplying the equity value of Holdings (as
determined under step number (1)) on the
Termination Date by a fraction, the
numerator of which shall be the number of
shares of common stock of Holdings that are
owned by Holdings L.L.C., and the
denominator of which shall be the total
number of fully diluted shares of Holdings
common stock (assuming that all options,
warrants or other securities which are
convertible or exchangeable for common stock
are outstanding). (3) Finally, the
percentage representing Employee's Interest
shall be multiplied by the dollar amount of
Holdings L.L.C.'s interest in Holdings as
determined under step number (2).
<PAGE> 17
SCHEDULE C
PHANTOM STOCK TERMS
AMOUNT OF INITIAL GRANT: A grant of 594 shares of phantom common
stock of PlayCore Holdings, Inc.
("Holdings") (the "Phantom Shares") pursuant
to a grant by Holdings.
VESTING: One third of the total number of Phantom
Shares shall vest on each anniversary of the
date of the grant. In the event that the
Employee's employment with PlayCore
Wisconsin, Inc. or an affiliate ("PlayCore
Wisconsin") is terminated for any reason,
all non-vested shares shall be forfeited.
COMPANY CALL: In the event of Employee's termination of
employment for any reason, the vested
Phantom Shares held by the Employee shall be
subject to a "call" by Holdings or its
designee (the "Company Call") at the fair
market value on the Termination Date. The
Company Call must be exercised within six
months of the Termination Date. The purchase
price shall be the equivalent of the fair
market value of an equivalent number of
common shares of Holdings on the Termination
Date. It will be paid one-half in cash
within 30 days of the exercise of the
Company Call and the remaining one-half will
be payable within two years of the date of
exercise of the Company Call (the "Deferred
Call Payments"). Any Deferred Call Payments
shall be credited with an appropriate
interest rate or dividend rate. In the event
that Holdings is restricted from purchasing
such shares for cash under any applicable
financing or other agreements, Holdings may
issue the Employee a note or such other
permissible security (which shall contain
commercially reasonable terms) in full
satisfaction of such call. In no event shall
the Employee be paid less cash at the time
of the exercise of the Company Call than the
Employee's income tax liability resulting
from the sale of the Phantom Shares.
EMPLOYEE PUT: In the event of Employee's termination of
employment by PlayCore Wisconsin without
Cause, by the Employee for Good Reason, or
as a result of death or Permanent
Disability, the Employee or his estate as
the case may be, may exercise a "put" to
Holdings (the "Employee Put") of the vested
Phantom Shares at fair market value on the
Termination Date. The Employee Put must be
exercised
<PAGE> 18
within six months of the Termination Date.
The purchase price as determined above will
be paid one-half in cash within 30 days of
the exercise of the Employee Put and the
remaining one-half will be payable within
two years of the date of exercise of the
Employee Put (the "Deferred Put Payments").
Any Deferred Put Payments shall be credited
with an appropriate interest rate or
dividend rate. All payments by Holdings with
respect to its exercise of the Employee Put
are subject to Holdings' financing
agreements. In the event that Holdings is
restricted from purchasing such shares for
cash under any applicable financing or other
agreements, Holdings may issue the Employee
a note or such other permissible security
(which shall contain commercially reasonable
terms) in full satisfaction of such put.
REALIZATION: Except in the case of the exercise of the
Company Call or Employee Put as set forth
above, Employee shall be required to hold
the Phantom Shares until such time as
PlayCore Holdings, L.L.C. sells or otherwise
exits from its equity interest in Holdings
(any such occurrence, a "Realization
Event").
TAX GROSS-UP PAYMENT: Upon exercise of the Company Call or
Employee Put or any other Realization Event
hereunder, Holdings shall make a tax
gross-up payment to the Employee to
compensate the Employee for the difference
between ordinary income tax treatment and
capital gains tax treatment with respect to
the appreciated value ("Appreciated Value")
of the Phantom Shares from the date of
vesting to the earlier of: (i) the
Termination Date (in the case of an Employee
Put or Company Call), or (ii) the date of
the occurrence of a Realization Event;
provided, however, that in no event shall
such tax gross-up payment exceed the tax
benefit to Holdings actually realized for
such tax year, if any, related to the
deduction for (a) the tax gross-up payment
and (b) the appreciated value of the Phantom
Shares from the date of vesting to the
earlier of: (i) the Termination Date (in the
case of an Employee Put or Company Call), or
(ii) the date of the occurrence of a
Realization Event.
TAG-ALONG RIGHTS: In the event of a sale of Holdings by
PlayCore Holdings, L.L.C., the Employee will
have the same tag-along rights as other
investors.
RESTRICTIONS ON TRANSFER: The Phantom Shares will be non-transferable,
except with respect to a transfer to a trust
or partnership, the only
<PAGE> 19
beneficiaries or partners (as the case may
be) of which are immediate family member of
Employee, or in accordance with the terms of
any applicable operating agreement or
shareholders agreement and the laws of
descent and distribution.
Other than with respect to transfers
pursuant to the preceding sentence, no third
party shall have any direct or indirect
beneficial interest in the Phantom Shares.
FAIR MARKET VALUE: Fair market value of vested Phantom Shares
on a Termination Date shall be determined by
multiplying the "equity value" of Holdings
by a fraction, the numerator of which shall
be the number of vested Phantom Shares and
the denominator of which shall be the total
number of fully diluted shares of Holdings
common stock (assuming that all options,
warrants or other securities which are
convertible or exchangeable for common stock
are outstanding). The equity value of
Holdings on a Termination Date shall be
determined by the Board of Directors of
Holdings in good faith by selecting an
appropriate multiple and then multiplying
the consolidated EBITDA for the latest four
fiscal quarters by such multiple and then
subtracting from such amount all debt,
preferred stock and other obligations on a
consolidated basis of Holdings, if any.
<PAGE> 1
EXHIBIT (d)(xiii)
GREENGRASS HOLDINGS
190 South LaSalle Street, Suite 2830
Chicago, IL 60603
August 17, 1999
PRIVATE AND CONFIDENTIAL
PlayCore, Inc.
15 West Milwaukee Street, Suite 204
Janesville, WI 53545
Attention: Mr. Terence S. Malone
Chairman of the Board
Dear Mr. Malone:
This letter agreement (the "Agreement") confirms our understanding
that PlayCore, Inc. (the "Company") has engaged GreenGrass Holdings
("GreenGrass") to act as its financial advisor with respect to the sale, merger,
consolidation or any other business combination, involving all or a substantial
amount of the business, securities or assets of the Company, (each, a
"Transaction").
As requested by you, we have provided and will continue to provide
certain services on your behalf, which shall consist of the following: (i)
identifying and evaluating investment banking firms to serve as financial
advisor with respect to the Transaction; (ii) assisting you in the preparation
and review of an offering memorandum describing the Company, its operations, its
historical performance and its future prospects; (iii) assisting you in the
identification of a list of potential acquirers who may be interested in a
Transaction; and (iv) negotiating the financial aspects of any proposed
Transaction under your guidance.
As compensation for the services to be provided by GreenGrass
hereunder, the Company agrees (i) to pay to GreenGrass cash compensation as set
forth below, and (ii) upon request by GreenGrass from time to time, to reimburse
GreenGrass promptly for all out-of-pocket expenses (including the reasonable
fees and expenses of any counsel retained with your consent) incurred by
GreenGrass in connection with its engagement hereunder, whether or not a
Transaction is consummated. As GreenGrass will be acting on your behalf, the
Company agrees to the indemnification and other obligations set forth in
Schedule I attached hereto, which Schedule is an integral part hereof.
The cash compensation referred to in clause (i) above shall be in an
amount equal to .4% of the aggregate value of outstanding common stock of the
Company (treating any shares issuable upon exercise of options, warrants or
other rights of conversion as outstanding), plus the amount of any debt assumed,
acquired, remaining outstanding, retired or defeased or preferred stock redeemed
or remaining outstanding in connection with the Transaction. Such compensation
shall be payable in cash at consummation of a Transaction. For purposes of this
Agreement, a Transaction shall be deemed to have
<PAGE> 2
Mr. Terence Malone
August 17, 1999
been consummated upon the earliest of any of the following events to occur: (a)
the acquisition by another person of a majority of the outstanding common stock
of the Company calculated on a fully-diluted basis; (b) a merger or
consolidation of the Company or an affiliate of the Company with another person;
(c) the acquisition by another person of assets of the Company representing a
majority of the Company's book value; or (d) in the case of any other
Transaction, the consummation thereof.
The value per share of common stock of the Company, for purposes of
calculating the compensation, shall be (i) in the event the consideration for
such common stock is in the form of cash and/or securities with an existing
public trading market (including any such securities subject to resale
restrictions), the amount of cash to be paid per share of common stock being
acquired and/or the last sales price for such securities on the last trading day
thereof prior to the consummation of the Transaction, or otherwise, (ii) the
fair market value thereof, as the parties hereto shall mutually agree, on the
day prior to the consummation of the Transaction.
The Company shall make available to GreenGrass all financial and other
information concerning its business and operations that GreenGrass reasonably
requests as well as any other information relating to any Transaction prepared
by the Company or any of its other advisors. In performing its services
hereunder, GreenGrass shall be entitled to rely without investigation upon all
information that is available from public sources as well as all other
information supplied to it by or on behalf of the Company or its advisors or an
acquirer or potential acquirer or its advisors and shall not in any respect be
responsible for the accuracy or completeness of, or have any obligation to
verify, the same or to conduct any appraisal of assets or liabilities. To the
extent consistent with legal requirements, all information given to GreenGrass
by the Company, unless publicly available or otherwise available to GreenGrass
without restriction or breach of any confidentiality agreement, will be held by
GreenGrass in confidence and will not be disclosed to anyone other than
GreenGrass's agents and advisors without the Company's prior approval or used
for any purpose other than those referred to in the Agreement.
Any advice, written or oral, provided by GreenGrass pursuant to this
agreement will be treated by the Company as confidential, will be solely for the
information and assistance of the Company in connection with its consideration
of the Transaction and will not be reproduced, summarized, described or referred
to, or furnished to any other party or used for any other purpose, except in
each case with our prior written consent.
This Agreement may be terminated by either the Company or GreenGrass
upon receipt of written notice to that effect by the other party. Upon any
termination of this Agreement, GreenGrass will be entitled to prompt payment of
all fees accrued prior to such termination and reimbursement of all
out-of-pocket expenses as described above. The indemnity and other provisions
contained in Schedule I will also remain operative and in full force and effect
regardless of any termination of this Agreement.
The Company acknowledges and agrees that GreenGrass has been retained
solely to provide the advice or services set forth in this Agreement. GreenGrass
shall act as an independent contractor, and any duties of GreenGrass arising out
of its engagement hereunder shall be owed solely to the Company.
This Agreement shall be binding upon and inure to the benefit of the
Company, GreenGrass, each Indemnified Person (as defined in Schedule I) and
their respective successors and assigns.
<PAGE> 3
Mr. Terence Malone
August 17, 1999
This agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Wisconsin.
The prevailing party in any suit, action or proceeding arising out of
or relating to this Agreement shall be entitled to recover from the
non-prevailing party all of the attorney fees and other expenses the prevailing
party may incur in such suit, action or proceeding and in any subsequent suit to
enforce a judgment.
If any term, provision, covenant or restriction contained in this
Agreement, including Schedule I, is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
After reviewing this Agreement, please confirm that the foregoing is
in accordance with your understanding by signing and returning to me the
duplicate of this letter attached hereto, whereupon it shall be our binding
Agreement.
Very truly yours,
GREENGRASS HOLDINGS
By: /s/ David S. Evans
----------------------------------
Accepted and agreed to
this 2nd day of November, 1999.
By: /s/ Terence Malone
---------------------------
<PAGE> 4
SCHEDULE I
This Schedule I is a part of and is incorporated into that certain
letter agreement (together, the "Agreement"), dated August 17, 1999, by and
between PlayCore, Inc. (the "Company") and GreenGrass Holdings ("GreenGrass").
The Company agrees to indemnify and hold harmless GreenGrass and its
affiliates, and the respective directors, officers, agents and employees of
GreenGrass and its affiliates (GreenGrass and each such entity or person, an
"Indemnified Person") from and against any losses, claims, damages, judgments,
assessments, costs and other liabilities (collectively "Liabilities"), and will
reimburse each Indemnified Person for all fees and expenses (including the
reasonable fees and expenses of counsel) (collectively, "Expenses") as they are
incurred in investigating, preparing, pursuing or defending any claim, action,
proceeding or investigation, whether or not in connection with pending or
threatened litigation or arbitration and whether or not any Indemnified Person
is a party (collectively, "Actions"), arising out of or in connection with
advice or services rendered or to be rendered by any Indemnified Person pursuant
to this Agreement, the transactions contemplated hereby or any Indemnified
Person's actions or inactions in connection with any such advice, services or
transactions; provided that the Company will not be responsible for any
Liabilities or Expenses of any Indemnified Person that are determined by a
judgment of a court of competent jurisdiction which is no longer subject to
appeal or further review to have resulted solely from such Indemnified Person's
negligence or willful misconduct in connection with any of the advice, actions,
inactions or services referred to above. The Company also agrees to reimburse
each Indemnified Person for all Expenses as they are incurred in connection with
enforcing such Indemnified Person's rights under this Agreement (including,
without limitation, its rights under this Schedule I).
Upon receipt by an Indemnified Person of actual notice of an Action
against such Indemnified Person with respect to which indemnity may be sought
under this Agreement, such Indemnified Person shall promptly notify the Company
in writing; provided that failure so to notify the Company shall not relieve the
Company from any liability which the Company may have on account of this
indemnity or otherwise, except to the extent the Company shall have been
materially prejudiced by such failure. The Company shall, if requested by
GreenGrass, assume the defense of any such Action including the employment of
counsel reasonably satisfactory to GreenGrass. Any Indemnified Person shall have
the right to employ separate counsel in any such Action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person, unless: (i) the Company has failed promptly
to assume the defense and employ counsel or (ii) the named parties to any such
Action (including any impleaded parties) include such Indemnified Person and the
Company, and such Indemnified Person shall have been advised by counsel that
there may be one or more legal defenses available to it which are different from
or in addition to those available to the Company; provided that the Company
shall not in such event be responsible hereunder for the fees and expenses of
more than one firm of separate counsel in connection with any Action in the same
jurisdiction, in addition to any local counsel. The Company shall not be liable
for any settlement of any Action effected without its written consent. In
addition, the Company will not, without prior written consent of GreenGrass,
settle, compromise or consent to the entry of any judgment in or otherwise seek
to terminate any pending or threatened Action in respect of which
indemnification or contribution may be sought hereunder (whether or not any
Indemnified Person is a party thereto) unless such settlement, compromise,
consent or termination includes an unconditional release of each Indemnified
Person from all Liabilities arising our of such Action.
<PAGE> 5
In the event that the foregoing indemnity is unavailable to an
Indemnified Person other than in accordance with this Agreement, the Company
shall contribute to the Liabilities and Expenses paid or payable by such
Indemnified Person in such proportion as is appropriate to reflect (i) the
relative benefits to the Company and its shareholders, on the one hand, and to
GreenGrass, on the other hand, of the matters contemplated by this Agreement or
(ii) if the allocation provided by the immediately preceding clause is not
permitted by the applicable law, not only such relative benefits but also the
relative fault of the Company, on the one hand, and GreenGrass, on the other
hand, in connection with the matters as to which such Liabilities or Expenses
relate, as well as any other relevant equitable considerations; provided that in
no event shall the Company contribute less than the amount necessary to ensure
that all Indemnified Persons, in the aggregate, are not liable for any
Liabilities and Expenses in excess of the amount of fees actually received by
GreenGrass pursuant to this Agreement. For purposes of this paragraph, the
relative benefits to the Company and its shareholders, on the one hand, and to
GreenGrass, on the other hand, of the matters contemplated by this Agreement
shall be deemed to be in the same proportion as (a) the total value paid or
contemplated to be paid or received or contemplated to be received by the
Company or the Company's shareholders, as the case may be, in the transaction or
transactions that are within the scope of this Agreement, whether or not any
such transaction is consummated, bears to (b) the fees paid or contemplated to
be paid to GreenGrass under this Agreement.
The Company also agrees that no Indemnified Person shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to the
Company for or in connection with advice or services rendered or to be rendered
by any Indemnified Person pursuant to this Agreement, the transactions
contemplated hereby or any Indemnified Person's actions or inactions in
connection with any such advice, services or transactions except for Liabilities
(and related Expenses) of the Company that are determined by a judgment of a
court of competent jurisdiction which is no longer subject to appeal or further
review to have resulted solely from such Indemnified Person's gross negligence
or willful misconduct in connection with any such advice, actions, inactions or
services.
The reimbursement, indemnity and contribution obligations of the
Company set forth herein shall apply to any modification of this Agreement and
shall remain in full force and effect regardless of any termination of, or the
completion of any Indemnified Person's services under or in connection with,
this Agreement.
<PAGE> 1
[CHARTWELL INVESTMENTS II, L.L.C. LETTERHEAD]
April 13, 2000
PlayCore Wisconsin, Inc.
Riverfront Centre
15 West Milwaukee Street
Suite 204
Janesville, Wisconsin 53545
Attention: President
Jasdrew Acquisition Corp.
c/o Chartwell Investments II, L.L.C.
717 Fifth Avenue
23rd Floor
New York, New York 10022
Dear Sirs:
This letter is to confirm our agreement that in connection with the
transactions (the "TRANSACTIONS") contemplated in the Agreement and Plan of
Merger (the "MERGER AGREEMENT") by and among PlayCore, Inc., PlayCore Holdings,
Inc. and Jasdrew Acquisition Corp. ("MERGER SUBSIDIARY") dated as of April 13,
2000, you have agreed to reimburse us at any time after the Offer Closing for
the reasonable out-of-pocket costs and expenses which we have incurred in
connection with the Transactions. You have also agreed to pay us a fee for
advisory services we have rendered to you in connection with the financing of
the Transactions (the "FINANCING") at the Closing equal to: one percent (1%) of
total capitalization of Merger Subsidiary and the Company including, without
limitation but without duplication, all debt funded in connection with the
Transactions and common equity interests (the "ADVISORY FEE"). Capitalized terms
not defined herein shall have the meanings ascribed to them in the Merger
Agreement.
These services are attributable to acting as exclusive financial
advisor with respect to the Transactions and the Financing and negotiating and
assisting with the documentation related to the Financing (collectively, the
"ADVISORY SERVICES").
Each of the parties hereto acknowledges that the Advisory Services for
which the Advisory Fee is to be paid hereunder have been heretofore rendered by
Chartwell Investments II, L.L.C. at your request in connection with the
Financing as described above.
<PAGE> 2
PlayCore Wisconsin, Inc.
Jasdrew Acquisition Corp.
April 13, 2000
Page 2
From and after the Offer Closing, PlayCore Wisconsin, Inc. and Merger
Subsidiary agree to indemnify and hold Chartwell Investments II, L.L.C., its
officers, employees and agents (each an "INDEMNIFIED PARTY") harmless against
any liability, claim, loss or expenses, as and when incurred ("DAMAGES"), to
which an Indemnified Party may become subject as a result of the performance of
the services described herein; provided, however, that Merger Subsidiary shall
not be liable to an Indemnified Party for Damages resulting primarily and
directly from the Indemnified Party's bad faith, gross negligence or willful
misconduct, and Chartwell Investments II, L.L.C. shall so indemnify Merger
Subsidiary for damages arising from its bad faith, gross negligence or willful
misconduct.
The benefits of this Agreement shall inure to the respective successors
and assigns of the parties hereto and of the indemnified parties hereunder and
their successors and assigns and representatives, and the obligations and
liabilities assumed hereunder by the parties hereto shall be binding upon their
respective successors and assigns.
This Agreement shall not be assignable by the parties hereto without
mutual written consent.
This Agreement shall be subject to and governed by the laws of the
State of Delaware without regard to its conflict of laws principles and rules.
<PAGE> 3
PlayCore Wisconsin, Inc.
Jasdrew Acquisition Corp.
April 13, 2000
Page 3
If the foregoing comports with your understanding of our agreement,
please sign below, whereupon this letter shall be a valid and binding agreement.
Very truly yours,
CHARTWELL INVESTMENTS II, L.L.C.
By: /s/ TODD R. BERMAN
----------------------------------
Name: Todd R. Berman
--------------------------------
Title: President
-------------------------------
ACCEPTED AND AGREED AS OF THIS
DAY OF APRIL, 2000
- - ---
PLAYCORE WISCONSIN, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
JASDREW ACQUISITION CORP.
By: /s/ MICHAEL SHEIN
----------------------------------
Name: Michael Shein
--------------------------------
Title: Vice President
-------------------------------
