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EXHIBIT 10-4
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SECOND SENIOR BRIDGE NOTE
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$3,000,000.00 DECEMBER 15, 2000
FOR VALUE RECEIVED, HIGH FALLS BREWING COMPANY, LLC, a New York limited
liability company with an address at 000 Xx. Xxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx
00000 ("MAKER"), promises to pay to THE GENESEE BREWING COMPANY, INC. a New York
Corporation ("PAYEE"), at its office at 000 Xx. Xxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx
00000 or at such other address as may hereafter be specified by Payee, in lawful
money of the United States of America, the principal sum of THREE MILLION AND
00/100 DOLLARS ($3,000,000.00), together with interest thereon at the rate, in
the installments and at the times hereinafter provided.
1. MATURITY DATE; PRINCIPAL AND INTEREST PAYMENTS; PREPAYMENTS.
1.1 Maturity. The outstanding principal balance of this Note
plus all accrued and unpaid interest thereon and all other sums due hereunder
shall be due and payable by Maker in full on or before midnight on June 1, 2004
(the "MATURITY DATE").
1.2 Interest Rate. Prior to Acceleration (defined below), the
principal sum outstanding from time to time hereunder shall bear interest at a
rate (the "INTEREST RATE") equal to the prime rate of Manufactures & Traders
Trust Company ("M&T") as announced from time to time plus one percent (1%) per
annum. In the event that M&T's prime rate is hereafter increased or decreased,
then the Interest Rate will be automatically, without notice, increased or
decreased as of the date of such change so that the Interest Rate shall at all
times be one percent (1%) higher than the "prime rate," as announced by M&T from
time to time. Upon the occurrence, and during the continuance, of an Event of
Default, Payee may, at its option, increase the Interest Rate by three percent
(3%) over the "prime rate".
1.3 Payments of Principal and Interest. .Maker shall pay
accrued interest on the 15th day of each month commencing on January 15, 2001
and continuing through and until August 15, 2001. Unless earlier Accelerated,
commencing on September 15, 2001 and continuing on a monthly basis thereafter
until the unpaid principal balance of this Note together with all accrued
interest thereon shall be paid in full, on the 15th day of each month (each a
"PAYMENT DATE") Maker shall make installment payments of principal and accrued,
but unpaid, interest equal to the amount required to completely amortize this
Note over a two hundred forty (240) month period commencing on September 15,
2001, and continuing on in a like manner on each succeeding Payment Date through
the Maturity Date, when the entire remaining principal balance of this Note,
plus all accrued and unpaid interest thereon, shall be paid in full
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1.4 Mandatory Prepayments. Maker shall on the same business day that it
receives any proceeds from the HUD Financing or the Alternative Financing,
whichever occurs earlier, pay all proceeds therefrom directly to Maker as a
prepayment of the principal outstanding hereunder until such principal amount
and all accrued interest thereon have been paid in full, provided, however, that
if the HUD Financing or the Alternative Financing closes in more than one
transaction or if the HUD Financing or Alternative Financing does not yield
sufficient proceeds to prepay in their entirety both this Note and Maker's First
Bridge Note, then Maker may direct how the proceeds from any such financing
shall be applied in the prepayment of this Note and the First Bridge Note.
For the purposes of this Note, the following terms shall apply:
"ACT" means the Housing and Community Development Act of 1974, Pub. L.
No. 93-383 codified as 42 U.S.C. 5301 et seq., as amended, and regulations
promulgated thereunder.
"ALTERNATIVE FINANCING" means financing (other than the JDA Financing)
in the aggregate amount of Six Million Five Hundred Thousand Dollars
($6,500,000) less the principal amount received or to be received pursuant to
the HUD Loan and the XXX Xxxxx amount received or to be received pursuant to the
XXX Xxxxx.
"CITY" means the City of Rochester, New York, a New York municipal
corporation.
"XXX XXXXX" means a grant under XXX's Economic Development Initiative
in the amount of One Million Five Hundred Thousand Dollars ($1,500,000) or such
lesser amount as may actually be disbursed to Maker after Maker exerts best
efforts to secure a grant in the amount of no less than One Million Five Hundred
Thousand Dollars ($1,500,000).
"FIRST BRIDGE NOTE" shall mean Maker's First Senior Bridge Note of
even date herewith payable to Payee in the original principal amount of Three
Million Five Hundred Thousand Dollars ($3,500,000).
"HUD" means the United States Department of Housing and Urban
Development and fiscal agents and other entities involved in Section 108 Loan
Guarantee funding transactions with the City.
"HUD LOAN" means one or more loans to the Maker from the City of
Rochester from the proceeds of a loan made to the City by the Federal Short-Term
U.S. Government Trust or such other entity designated by HUD to which HUD
provides financial accommodations in the aggregate principal amount of up to
$5,000,000 or such lesser principal amount as the City may actually loan to the
Maker after the Maker exerts best efforts to secure a loan from the City under
this program in the principal amount of $5,000,000; the HUD Loan shall consist
of a $2,000,000 ten (10) year term loan secured only by a first lien on all
Xxxxxx Cooperage and filling equipment of the Maker and
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a $3,000,000 twenty (20) year first mortgage loan secured by all real property
of the Maker, each bearing interest at a fixed rate not exceeding that of a
Treasury note or bond of comparable maturity plus 2% per annum.
"HUD FINANCING" means the XXX Xxxxx and the HUD Loan.
"HUD FINANCING CLOSING" shall mean the closing and funding of the HUD
Financing or any Alternative Financing.
"JDA" means the New York Job Development Authority d/b/a Empire State
Development Corporation.
"JDA COMMITMENT" means the commitment letter dated October 23, 2000
issued by the JDA.
"JDA FINANCING" means the financing contemplated in the JDA Commitment.
"SECTION 108" means Section 108 of the Act, codified as 42 U.S.C. 5308,
as amended, and regulations promulgated thereunder.
1.5 Voluntary Prepayments. Subject to the Intercreditor Agreement
referred to below, this Note may be prepaid in whole or in part at any time
prior to the Maturity Date without prior notice to Payee, without penalty or
premium. Any partial prepayments shall be applied to installments of principal
last falling due, and shall have no effect on Maker's mandatory prepayment
obligations under Section 1.4. No partial prepayment shall postpone or interrupt
payments of interest or the payment of the remaining principal balance, all of
which shall continue to be due and payable at the time and in the manner set
forth above.
1.6 Time and Manner of Payments.
(a) All payments (including prepayments) to be made in respect
of principal, interest or other amounts due from Maker hereunder shall be made
to Payee in United States dollars in funds immediately available, without
set-off, counterclaim or other deduction of any nature. Maker shall have no
right to offset against any installments of principal of, or interest due under,
this Note, whether under the Asset Purchase Agreement dated August 29, 2000, as
amended by Amendment No. 1 dated December 15, 2000 (the "ASSET PURCHASE
AGREEMENT") or any other agreement or instrument of any kind.
(b) All payments hereunder shall be applied in the following
order of priority: costs, expenses, accrued interest and thereafter to the
reduction of principal. After payment of the foregoing, all prepayments of any
kind shall be applied to the extent of available proceeds to the principal
installments payable hereunder in the inverse order of
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maturity. All prepayments of any kind shall be accompanied by all accrued
interest due on the prepaid principal at the time of prepayment.
(c) All interest shall be payable in arrears. Interest hereon
shall be calculated on the basis of a 360-day year applied to the actual number
of days elapsed. All payments of interest and principal shall be payable in
lawful currency of the United States of America.
2. SECURITY. As security for the payment when due of the principal of
and interest on this Note, the Maker has, (a) under a "SECURITY AGREEMENT" dated
of even date herewith and financing statements filed pursuant thereto, granted
to Payee a continuing perfected security interest in all of the personal
property of Maker, and all proceeds and products of such property, including
insurance payable by reason of loss or damage and (b) under a "MORTGAGE" dated
of even date herewith, granted Payee a mortgage lien on the real property
located at 000 Xx. Xxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx and the improvements thereon
(collectively, the "COLLATERAL").
3. INTERCREDITOR AGREEMENT. This Note and the Security Agreement and
the rights of Payee hereunder and thereunder are subject to an Intercreditor
Agreement (the "INTERCREDITOR AGREEMENT") by and among Xxxxx, M&T and Xxxxxx
Capital Partners, L.P. ("XXXXXX") and such other creditors of Maker as the three
named creditors may determine to make a party to such Intercreditor Agreement.
Payment of this Note is guaranteed by a certain secured Guaranty of even date
herewith executed by Genesee Brewing Equipment, LLC.
4. REPRESENTATIONS AND WARRANTIES. Maker represents and warrants to
Payee that:
4.1 Organization, Authority, Etc. (a) Maker's execution and
delivery of this Note and the enforceability against Maker of the transactions
hereby contemplated, including the HUD Financing and the JDA Financing, have
been duly authorized by all requisite limited liability company action; (b) this
Note has been duly and validly executed and delivered by Maker and constitutes
Maker's legal, valid and binding obligation; (c) the execution and delivery of
this Note by Maker does not, and the performance by it of the transactions
hereby contemplated will not result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default or event of
default (or give rise to any right of termination, cancellation or acceleration)
under its Articles of Organization or Operating Agreement or any terms,
conditions or provisions of any note, debenture, security agreement, lien,
mortgage or other agreement, instrument or obligation, oral or written, to which
Maker is a party (whether as an original party or as an assignee or successor)
or by which it or any of its properties is or will be bound; (d) except as set
forth in EXHIBIT A annexed hereto, Maker has all licenses, permits, approvals,
franchises, registrations, accreditations, authorizations, variances and the
like (the "PERMITS") necessary for the conduct of its intended business after
closing the acquisition pursuant to the Asset Purchase Agreement (the
"Acquisition"), all of which are in full force and effect; (e) no approval or
consent by any third party or governmental authority
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under any statutes, regulations or the Permits (collectively, the"GOVERNMENTAL
REGULATIONS") is required in connection with Maker's execution and delivery of
this Note and the transactions hereby contemplated; and (f) Maker has provided
Payee with true and complete copies of the JDA Commitment letter and all
amendments thereto and extensions thereof and to the knowledge of the Maker, the
JDA Commitment is in full force and effect.
4.2 Pro Forma Financial Statements. (a) Maker's Pro Forma
Financial Statements dated December 7, 2000 ("Pro Forma Financial Statements")
delivered by Maker to Payee and their underlying assumptions are reasonable and
have been prepared by Maker in good faith; and (b) except as set forth in
Maker's Recission Offer dated December 8, 2000, nothing has come to the Maker's
attention since the preparation thereof that would lead it to believe that the
Pro Forma Financial Statements are inaccurate, incomplete or misleading in any
material respect.
4.3 Debt, Etc. Except for indebtedness and obligations to
Payee and third parties contemplated by the Asset Purchase Agreement between
Maker and Payee of even date herewith, set forth on EXHIBIT A annexed hereto is
a complete and correct list of all credit agreements, indentures, guaranties,
capital leases, and other investments, agreements, and arrangements presently in
effect providing for or related to borrowed money; and the maximum principal or
face amounts of the credits in questions, outstanding or to be outstanding, are
correctly stated, and all security interests, liens or encumbrances of any
nature given or agreed to be given as security therefor are correctly described
or indicated in such Schedule.
4.4 Capitalization. (i) Maker has provided Payee with a true
and complete copy of its Articles of Organization and Operating Agreement and
all subscription agreements and there are no obligations for the repurchase or
acquisition of any membership, capital, distribution or other equity interest in
Maker except with respect to the repurchase obligations for the warrants issued
to Xxxxxx Capital Partners, L.P. on even date herewith, (ii) the capitalization
of Maker is as set forth on EXHIBIT B; and (iii) all issued and outstanding
membership, capital distribution or equity interests in Maker are fully paid and
non-assessable.
4.5 Solvency. Both before and after giving effect to the
transactions contemplated by the Asset Purchase Agreement and the financing
therefor, Maker is and will be Solvent. As used herein, "SOLVENT" means Maker
(i) has assets having a fair value in excess of its Debts, and (ii) has and
expects to continue to have adequate capital for the conduct of its business and
the ability to pay its Debts as the same mature. For a definition of "Debt" see
Section 16 of Exhibit C.
5. COVENANTS. So long as any portion of the principal amount of this
Note remains outstanding and unpaid or any accrued interest has not been paid,
(a) Maker shall comply with each of the affirmative covenants set forth in
EXHIBIT C annexed hereto and (b) without the prior written consent of the Payee,
Maker shall observe and not violate any of the negative covenants set forth in
EXHIBIT D annexed hereto. All exhibits are incorporated herein by reference.
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6. EVENTS OF DEFAULT. Each of the following shall constitute an event
of default (each, an "EVENT OF DEFAULT") hereunder:
6.1 Payment Failure. If Maker fails to make any payment of any
installment of interest and/or principal hereunder or any other sum due
hereunder within ten (10) days after such payment is due.
6.2 Failure to Perform, Etc.
(a) Any representation or warranty made or deemed made by
Maker herein, in the Security Agreement or the Intercreditor Agreement shall
prove to have been incorrect, incomplete or misleading in any material respect
on or as of the date made or deemed made.
(b) Maker shall fail to perform or observe any term,
covenant or agreement set forth on EXHIBIT C, which failure is not cured within
thirty (30) days after receipt of notice from Payee, or Maker fails to observe
or abide by any term, covenant or agreement contained in EXHIBIT D.
6.3 Bankruptcy. If any proceeding under the Bankruptcy Code or
any law of the United States or of any state relating to insolvency,
receivership, or debt adjustment is instituted by Maker or any Guarantor, or if
any such proceeding is instituted against Maker or any Guarantor and is
consented to by the respondent or an order for relief shall be entered in such
proceeding or such proceeding shall remain undismissed for sixty (60) days, or
if a trustee or receiver is appointed for any substantial part of Maker's or any
Guarantor's property and such appointment remains undismissed for sixty (60)
days, or if Maker or any Guarantor makes an assignment for the benefit of
creditors, admits in writing its inability to pay debts generally as they become
due or becomes insolvent.
6.4 Cross-Default. Maker shall (i) fail to pay any Debt for
borrowed money of Maker (including but not limited to Manufacturers and Traders
Trust Company, Xxxxxx Capital, L.P., financing provided by Maker pursuant to the
Asset Purchase Agreement and certain investor notes issued by Maker pursuant to
the Offering Summary dated September 20, 2000 and Recission Offer dated December
8, 2000), or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise); (ii) fail to
perform or observe any term, covenant, or condition on its part to be performed
or observed under any agreement or instrument relating to any such Debt when
required to be performed or observed, if the effect of such failure to perform
or observe is to accelerate, or to permit the acceleration after the giving of
notice or passage of time, or both, of the maturity of such Debt, whether or not
such failure to perform or observe shall be waived by the holder of such Debt,
or any such Debt shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), prior to the
stated maturity thereof; (iii) materially breach the Asset Purchase Agreement;
or (iv) Maker shall fail to perform or observe any material term, covenant or
agreement set forth in any agreement or instrument executed by Maker with or in
favor of Payee (other than in the Asset
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Purchase Agreement and other than those instruments referred to above in this
Section 6.4), which failure is not cured within thirty (30) days after receipt
of notice from Payee.
6.5 Judgment. A final judgment or order for the payment of
money in excess of $100,000 shall be rendered against the Maker or any Guarantor
and such judgment or order shall continue unsatisfied, in effect and unstayed
for a period of thirty (30) consecutive days.
6.6 Discontinuance of Business. Maker's failure to conduct
business in the ordinary course, dissolution or termination of existence.
6.7 Change of Control. The occurrence of a Change of Control.
As used herein a "CHANGE OF CONTROL" means a change of control of the Maker of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act,
whether or not the Maker is then subject to such reporting requirement;
provided, that, without limitation, such a Change of Control shall be deemed to
have occurred if:
(i) any "person" (as defined in Sections 13(d) and 14(d) of
the Exchange Act) or "group" (as defined in Section 13(d) of the Exchange Act)
other than the Management Group is or becomes the "beneficial owner" (as defined
in Rule 13(d)(3) of the Exchange Act), directly or indirectly, of securities of
Maker representing 30% or more of the combined voting power of the Maker's then
outstanding securities in the election of Managers or with respect to any sale
or disposition by Maker of its assets or the dissolution of Maker ("VOTING
power");
(ii) the members of the Maker approve a merger or
consolidation of the Maker with any other limited liability company or
corporation, other than a merger or consolidation which would result in the
voting securities of the Maker outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 70% of the combined voting power of
the voting securities of the Maker or such surviving entity outstanding
immediately after such merger or consolidation;
(iii) if any recapitalization event occurs as a result of
which the holders of voting securities of the Maker outstanding immediately
prior thereto do not continue to hold at least 70% of the combined voting power
of the voting securities of the Maker immediately after such recapitalization
event;
(iv) the members of the Maker approve a plan of complete
liquidation of the Maker or an agreement for the sale or disposition by the
Maker of all or substantially all of the Maker's assets.
6.8 Intercreditor Agreement. The Intercreditor Agreement shall
at any time after its execution and delivery and for any reason cease to be in
full force and effect or shall be declared null and void, or the enforceability
thereof shall be contested by any party thereunder other than Payee, or any such
party shall deny that it is bound thereby.
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6.9 Guarantees. Any guaranty of this Note shall at any time
after its executed and delivery for any reason cease to be in full force and
effect or shall be declared null and voice, or the validity or enforceability
thereof shall be contested by any guarantor, or any guarantor shall deny it has
any further liability or obligation under, or shall fail to perform its
obligations under the Security Agreement.
6.10 Boston Beer. The occurrence of any event which would
entitle Boston Brewing Company, Inc. d/b/a The Boston Beer Company, a
Massachusetts corporation, for itself and as the sole general partner of Boston
Beer Company Limited Partnership, a Massachusetts limited partnership
(collectively, "BOSTON BEER") to receive payment from Payee on its Guaranty of
even date herewith made in favor of Boston Beer by Payee for the benefit of the
Maker in respect of a certain Amended and Restated Agreement dated April 30,
1997, other than (i) pursuant to a Refunding Obligation Payment (as defined in
an Indemnification Agreement of even date herewith between Maker and Payee) or
(ii) a breach by Payee of its "Net Worth" covenant under its Guaranty in favor
of Boston Beer Company.
6.11 UDV Agreement. Borrower shall fail to execute an
agreement before January 3, 2001 with UDV North America, Inc. ("UDV") upon the
terms and conditions referenced in that certain letter agreement by UDV to Maker
dated September 25, 2000.
6.12 Security Agreement. The Security Agreement shall at any
time after its execution and delivery and for any reason cease (a) to create a
valid and perfected security interest in and to the property purported to be
subject to such Security Agreement, except as provided in the Intercreditor
Agreement; or (b) to be in full force and effect or shall be declared null and
void, or the validity or enforceability thereof shall be contested by Maker or
Maker shall deny it has any further liability or obligation under the Security
Agreement, or Maker shall fail to perform in any material respect any of its
obligations under the Security Agreement.
7. REMEDIES. Upon the occurrence of any Event of Default hereunder, the
entire unpaid principal balance of this Note, together with all accrued and
unpaid interest thereon and all other sums owing hereunder shall, at the option
of Payee, become immediately due and payable (an "ACCELERATION"), without
presentation, demand or further action of any kind, and Payee may forthwith
exercise, singly, concurrently, successively or otherwise, any and all rights
and remedies available to Payee hereunder. The failure of payee to accelerate
the outstanding principal balance of this Note upon the occurrence of an Event
of Default hereunder shall not constitute a waiver of such Event of Default or
of the right to accelerate this Note at any time thereafter so long as the Event
of Default remains uncured. If Payee retains the services of counsel in order to
enforce any remedy available to Payee hereunder, all reasonable attorneys' fees
which are actually incurred by Payee shall be payable upon demand. Upon the
occurrence and continuation of any one or more Events of Default, and whether or
not the Payee shall have accelerated the maturity of this Note, the Payee may,
proceed to protect and enforce its rights by suit in equity, action at law or
other appropriate proceeding, whether for the specific performance of any
covenant or agreement contained in this Note or any instrument pursuant to which
the obligations to the Payee are evidenced, including as permitted by
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applicable law the obtaining of the ex parte appointment of a receiver, and, if
such amount shall have become due, by declaration or otherwise, proceed to
enforce the payment thereof or any other legal or equitable right of the Payee.
No remedy herein conferred upon the Payee or the holder of this Note is intended
to be exclusive of any other remedy and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or any other provision
of law.
8. INTEREST LIMITATIONS. Nothing herein contained nor any transaction
related hereto shall be construed or shall operate either presently or
prospectively to require Maker to pay interest at a rate greater than is now
lawful in such case to contract for, but shall require payment of interest only
to the interest paid in excess of the lawful rate shall be refunded to Maker.
9. SEVERABILITY. In the event that for any reason one or more of the
provisions of this Note or their application to any person or circumstance shall
be held to be invalid, illegal or unenforceable in any respect or to any extent,
such provisions shall, to such extent, be held for naught as though not herein
contained but shall nevertheless remain valid, legal and enforceable in all such
other respects and to such extent as may be permissible. In addition, any such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Note, but this Note shall be construed as if such invalid, illegal or
unenforceable provisions had never been contained herein.
10. SUCCESSORS AND ASSIGNS. This Note inures to the benefit of Xxxxx,
its successors and assigns, and is binding upon Maker, its successors and
assigns, provided that any successor or assign of the Payee of this Note first
executes a written undertaking agreeing to be bound by all of the provisions of
the Intercreditor Agreement. The words "Payee" and "Maker" whenever used herein
shall be deemed and construed to include such respective successors and assigns.
11. NOTICES. All notices required to be given to any of the parties
hereunder shall be in writing and shall be deemed to have been sufficiently
given for all purposes when given in accordance with the terms and conditions of
the Asset Purchase Agreement.
12. CAPTIONS. The captions or headings of the sections in this Note are
for convenience only and shall not control or affect the meaning or construction
of any of the terms or provisions of this Note.
13. GOVERNING LAW; AMENDMENT. This Note shall be governed by and
construed in accordance with the laws of the State of New York. This Note may
only be amended by an instrument in writing signed by both Maker and Payee.
IN WITNESS WHEREOF, Maker, intending to be legally bound hereby, has
duly executed this Note, under seal, on the date and year first above written.
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MAKER: HIGH FALLS BREWING COMPANY, LLC
By: /s/ Xxxxxx X. Xxxxxxx, Xx.
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Name: Xxxxxx X. Xxxxxxx, Xx.
Title: President
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EXHIBIT A
REQUIRED PERMITS AND LICENSES
1. Ohio Beer Malt Beverage Certificate of Registration - Application in
process per Xxxxx Xxxxxx of Ohio Liquor Authority.
2. New Jersey Limited Wholesale License (transfer from Seller) - Seeking
temporary license.
3. Colorado Non-Resident Manufacturer License - State will issue upon
proof of closing of Acquisition.
4. Connecticut Out-of-State Beer Permit - State will issue upon closing of
Acquisition.
5. Arizona Out-of-State Xxxxxx'x License - State will issue week of
12/10/00.
6. Delaware Suppliers' License - State will issue week of 12/10/00, per
Xxxxx Xxxxxx of Delaware Liquor Authority.
7. Arkansas Non-Resident Beer Seller Permit - Transfer permitted by State;
awaiting documentation.
8. Alabama Out-of-State Manufacturer's License (Transfer) - Transfer
allowed upon surrender of Seller's license.
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EXHIBIT C
AFFIRMATIVE COVENANTS
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So long as the outstanding principal amount under the Note and all
accrued interest thereon has not been paid in full, the Maker shall:
1. MAINTENANCE OF EXISTENCE. Preserve and maintain, and cause each Person
required to become a guarantor (each a "GUARANTOR") of this Note to preserve and
maintain, its corporate existence and good standing in the jurisdiction of its
incorporation, and qualify and remain qualified, as a foreign corporation in
each jurisdiction in which qualification is required.
2. MAINTENANCE OF PERMITS. Maintain in full force and effect all license,
permits, approvals, franchises, registrations, accreditations, authorizations,
variances and the like necessary for the conduct of its intended business after
closing the Acquisition.
3. MAINTENANCE OF RECORDS. Keep, and cause any Guarantor to keep, adequate
records and books or account, in which complete entries will be made in
accordance with GAAP consistently applied.
4. MAINTENANCE OF PROPERTIES. Maintain, keep, and preserve, and cause any
Guarantor to maintain, keep, and preserve, all of its material properties
(tangible and intangible) necessary or useful in the proper conduct of its
business in good working order and condition, ordinary wear and tear excepted.
5. CONDUCT OF BUSINESS. Continue to engage in an efficient and economical manner
in a business of the same general type as proposed to be conducted by it upon
consummation of the Acquisition.
6. MAINTENANCE OF INSURANCE. Maintain, and cause any Guarantor to maintain,
insurance with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by
companies engaged in the same or a similar business and similarly situated,
which insurance may provide for reasonable deductibility from coverage thereof
and which shall name the Payee as additional insured and loss payee, as its
interests may appear.
7. COMPLIANCE WITH LAWS. Comply, and cause each Guarantor to comply, in all
material respects with all applicable laws, rules, regulations, and orders, such
compliance to include, without limitation, paying before the same become
delinquent all taxes, assessments, governmental charges imposed upon it or upon
its property.
8. RIGHT OF INSPECTION. At any reasonable time and from time to time, permit the
Payee or any agent or representative thereof to examine and make copies of and
abstracts from the records and books of account of, and visit the properties
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of, the Maker and any Guarantor, and to discuss the affairs, finances, and
accounts of the Maker and any Guarantor with any of their respective officers
and directors and the Makers' independent accountants.
9. REPORTING REQUIREMENTS. Furnish to Payee:
(a) Financial Statements.
(i) As soon as available and in any event within one hundred
twenty (120) days after the end of Maker's fiscal year ending on or after
December 31, 2001, consolidated and consolidating balance sheets of Maker and
its subsidiaries as of the end of such Fiscal Year, consolidated and
consolidating statements of income and retained earnings of Maker and its
Subsidiaries for such Fiscal Year, and consolidated and consolidating statements
of changes in financial position of Maker and its subsidiaries for such Fiscal
Year, all in reasonable detail and stating in comparative form the respective
figures for the corresponding dates and period in the prior fiscal year or in
the Pro Forma Financial Statements, as the case may be, all prepared in
accordance with GAAP consistently applied and as to the consolidated statements
accompanied by an opinion thereon acceptable to the Payee by Xxxxxx Xxxxxxxx &
Co. or other independent accountants acceptable to the Payee;
(ii) As soon as available and in any event within one hundred
twenty (120) days after the end of Fiscal Year 2000, internally prepared and
certified consolidated and consolidating balance sheets of Maker and its
subsidiaries as of the end of such fiscal year, consolidated and consolidating
statements of income and retained earnings of Maker and its subsidiaries for
such fiscal year, and consolidated and consolidating statements of changes in
financial position of Maker and its subsidiaries for such fiscal year, all in
reasonable detail and stating in comparative form the respective figures for the
corresponding dates and period in the prior fiscal year or in the Pro Forma
Financial Statements, as the case may be, all prepared in accordance with GAAP
consistently applied.
(iii) As soon as available and in any event within twenty-five
(25) days after the end of March 31, June 30, September 30 and December 31 of
each Fiscal Year, consolidated and individual balance sheets of Maker and its
Subsidiaries as of the end of the three month period then ended (each a "Fiscal
Quarter") and the period to date then ended of the then current fiscal year,
consolidated and individual statements of income and retained earnings of Maker
and its Subsidiaries for the period commencing at the end of the previous fiscal
year and ending with the end of such month, and consolidated and individual
statements of changes in financial position of Maker and its Subsidiaries for
the portion of the fiscal year ended with the last day of such month, all in
reasonable detail and stating in comparative form the respective figures for the
corresponding date and period in the previous fiscal year and with the Pro Forma
Financial Statements and all prepared in accordance with GAAP consistently
applied and certified, to the best of his knowledge, by the chief financial
officer of Maker (subject to year-end adjustments);
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(b) Management Letters. Promptly upon receipt thereof, copies of any
reports submitted to the Maker by independent certified public accountants in
connection with examination of the financial statements of the Maker made by
such accountants;
(c) Quarterly Compliance Certificate. Within twenty-five (25) days
after the end of each Fiscal Quarter, a certificate of the chief financial
officer of Maker (a) certifying that to the best of his knowledge no Event of
Default has occurred and is continuing, or if an Event of Default has occurred
and is continuing, a statement as to the nature thereof and the action which is
proposed to be taken with respect thereto; and (b) containing computations
demonstrating compliance with the covenants contained in Section 15 of this
Exhibit C;
(d) Accountant's Report. Simultaneously with the delivery of the annual
financial statements required under this Note, a certificate of the independent
public accountants who audited such statements to the effect that, in making the
examination necessary for the audit of such statements, they have obtained no
knowledge of any condition or event which constitutes an Event of Default, or if
such accountants shall have obtained knowledge of any such condition or event,
specifying in such certificate each such condition or event of which they have
knowledge and the nature and status thereof;
(e) Notice of Litigation. Promptly after the commencement thereof,
notice of all actions, suits, and proceedings before any court or governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign, affecting the Maker or any Guarantor which, if determined adversely to
the Maker or such Guarantor, could have a material adverse effect on the
financial condition, properties, or operations of the Maker or such Guarantor;
(f) Notice of Defaults and Events of Default. As soon as possible and
in any event within five (5) days after the occurrence of each Event of Default,
a written notice setting forth the details of such Event of Default and the
action which is proposed to be taken by the Maker with respect thereto;
(g) Reports to Other Creditors. Promptly after the furnishing thereof,
copies of any statements or report furnished to any other party pursuant to the
terms of any indenture, loan, credit, or similar agreement and not otherwise
required to be furnished to the Maker pursuant to any other clause above; and
(h) General Information. Such other information respecting the
condition or operations, financial or otherwise, of Maker or any Guarantor as
the Payee may from time to time reasonably request.
10. ENVIRONMENT. Be and remain, and cause any Guarantor to be and remain, in
compliance in all material respects with the provisions of all federal, state,
and local environmental, health, and safety laws, codes and ordinances, and all
rules and regulations issued thereunder; notify Payee promptly of any notice of
a hazardous
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discharge or environmental complaint received from any governmental agency or
any other party; notify Payee promptly of any hazardous discharge occurring
after the date of this Note from or affecting its premises; undertake and
complete all removal and other remedial actions required of Maker by a
governmental authority with respect to such hazardous discharge, in compliance
in all material respects with all applicable laws; promptly pay any fine or
penalty assessed in connection therewith; permit the Payee to inspect all books,
correspondence, and records pertaining thereto; and at the Payee's request, and
at the Maker's expense, provide a report of a qualified environmental engineer,
satisfactory in scope, form, and content to the Payee, and such other and
further assurances reasonably satisfactory to the Payee that the condition has
been corrected as required in accordance with applicable law.
11. GUARANTORS. Cause each subsidiary of Maker created or acquired after the
date hereof to execute and deliver to the Payee a guaranty of payment of this
Note and all other Debt of Maker to Payee of any kind, whereby such subsidiary
shall guaranty payment of all such Debt, together with legal opinions in form
and substance satisfactory to the Payee as to validity and enforceability of
such guaranty, and to such other matters as the Payee may reasonably request. In
addition, Maker shall notify the Payee of the acquisition or creation of any new
subsidiary. (Each guarantor of this Note is referred to herein as a
"Guarantor").
12. HUD FINANCING CLOSING. Take all actions necessary to consummate the HUD
Financing on the terms previously disclosed to Payee and use best efforts to
consummate the HUD Financing on or prior to September 30, 2000. The Maker shall
not undertake or enter into any transaction that would prevent the consummation
of the HUD Financing or which would prevent the Maker from obtaining such
financing. In the event that Maker is unable to obtain the HUD Financing, then
Maker shall exert best efforts to secure and close Alternative Financing as soon
as reasonably practicable. Upon request by the Payee, Maker shall provide Payee
with copies of all correspondence, written communications and draft documents
delivered to Maker, HUD, the City and/or any lender proposing to provide the
Alternative Financing by one another relating to, or involving the HUD
Financing.
13. JDA FINANCING CLOSING. Exert best efforts to close the JDA Financing as soon
as reasonably practicable, but in no event later than the expiration date
provided for under the JDA Commitment. Upon request by the Payee, Maker shall
provide Payee with copies of all correspondence between the JDA and Maker.
14. FURTHER ASSURANCES. Cooperate with the Payee and execute such further
instruments and documents as the Payee shall reasonably request to carry out to
its satisfaction the transactions contemplated by this Note and all related
agreements and documents.
15. CASH FLOW. Maintain Cash Flow Coverage of not less than 1.0 to 1.0 for the
immediately preceding twelve (12) month period (or for the first three (3)
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Fiscal Quarters following the date hereof for the period since the date hereof
to the end of such Fiscal Quarter), measured as of the end of each Fiscal
Quarter as shown on the financial statements required to be provided by Maker to
Payee pursuant to Section 9(a) above.
16. CERTAIN DEFINITIONS. As used herein, the following terms shall apply:
"CAPITAL EXPENDITURES" means for the applicable period, expenditures
made to acquire or construct fixed assets, plant and equipment (including
improvements, renovations and replacements required to be classified in
accordance with GAAP as capital expenditures, but excluding maintenance and
repairs not required to be so classified). Capital Expenditures shall include
the capital leases.
"CASH FLOW COVERAGE" means, for the applicable measurement period,
EBITDA plus the proceeds from the issuance of membership, capital, distribution
or other equity interests ("EQUITY INTERESTS") or Debt for borrowed money issued
by Maker after the date hereof (other than in connection with the financing of
the Acquisition or any refinancing or modification thereof) subordinated to this
Note (in form satisfactory to Payee) (including any amendments, modifications or
replacements hereof), compared to (i) for the measurement periods ending through
and including December 31, 2002, interest, principal and tax payments due and/or
paid plus cash required to fund repurchases of Equity Interests and (ii) for
measurement periods ending thereafter, interest, principal and tax payments due
and/or paid plus Capital Expenditures to the extent not funded by Debt for
borrowed money plus cash required to fund repurchases of Equity Interests.
"DEBT" means (a) indebtedness or liability for borrowed money; (b)
obligations evidenced by bonds, debentures, notes or other similar instruments;
(c) obligations for the deferred purchase price of property or services
(including trade obligations); (d) obligations as lessee under capital leases;
(e) current liabilities in respect of unfunded vested benefits under plans
covered by ERISA; (f) obligations under letters of credit; (g) obligations under
acceptance facilities; (h) all guarantees, endorsements (other than for
collection or deposit in the ordinary course of business), and other contingent
obligations to purchase, to provide funds for payment, to supply funds to invest
in any person or entity, or otherwise to assure a creditor against loss; and (i)
obligations secured by any liens, whether or not the obligations have been
assumed.
"EBITDA" means Maker's consolidated earnings before interests, taxes,
depreciation, amortizations, dividends, distributions, and the like.
17. AMENDMENTS TO INVESTMENT NOTES. Without Xxxxx's prior written consent, Maker
shall not agree to any amendment to its Investor Notes issued pursuant to
Maker's Offering Summary dated September 20, 2000 and Recission Offer dated
December 8, 2000.
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EXHIBIT D
---------
NEGATIVE COVENANTS
So long as the Note shall remain unpaid, Maker will not, and will not
permit any Guarantor to:
1. LIENS. Create, incur assume, or suffer to exist, or permit any
Guarantor to create, incur, assume, or suffer to exist, any mortgage, deed of
trust, pledge, security interest, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority, or
other security agreement or preferential arrangement, charge, or encumbrance of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction to evidence any of the foregoing) (each a "LIEN") upon or
with respect to any of its properties, now owned or hereafter acquired, except:
(a) Liens in favor of M&T securing Debt to M&T to the extent such Debt
is permitted by Section 2;
(b) Liens in favor of the Payee;
(c) Xxxxx subordinated on terms satisfactory to the Payee to the
Maker's obligations under this Note and the Maker's Second Senior Bridge Note;
(d) Liens for taxes or assessments or other government charges or
levies if not yet due and payable or, if due and payable, if they are being
contested in good faith by appropriate proceedings and for which appropriate
reserves are maintained;
(e) Xxxxx imposed by law, such as mechanics', materialmen's,
landlords', warehousemen's, and carriers' Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due for more than forty five (45) days or which are being contested in good
faith by appropriate proceedings and for which appropriate reserves have been
established;
(f) Xxxx's under workers' compensation, unemployment insurance, Social
Security, or similar legislation;
(g) Liens, deposits, or pledges to secure the performance of bids,
tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement), public or statutory obligations,
surety, stay, appeal, indemnity, performance or other similar bonds, or other
similar obligations arising in the ordinary course of business;
(h) Judgments and other similar Liens arising in connection with court
proceedings, provided that, if the amount in question exceeds $100,000.00, the
execution or other enforcement of such Liens is effectively stayed and the
claims
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secured thereby are being actively contested in good faith and by appropriate
proceedings;
(i) Easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere with the
occupation, use, and enjoyment by the Maker or any Guarantor of the property or
assets encumbered thereby in the normal course of its business or materially
impair the value of the property subject thereto; and
(j) Purchase money security interests securing Debt permitted pursuant
to Section 2(g), provided that no such Lien (i) secures any other Debt, or (ii)
extends to assets not acquired with the proceeds of such permitted Debt; and
(k) Other Liens set forth in Exhibit B and not otherwise described
above.
2. DEBT. Create, incur, assume, or suffer to exist, or permit any Guarantor to
create, incur, assume, or suffer to exist, any Debt, except:
(a) Debt of the Maker to M&T (i) pursuant to the Revolving Loan and
Term Loan Agreement dated December 15, 2000 between M&T and Maker (the "M&T
AGREEMENT"); and (ii) as otherwise permitted by, and subject to the limitations
set forth in, the Intercreditor Agreement;
(b) Debt outstanding under this Note, the Maker's Second Bridge Note or
another Debt to Payee;
(c) Debt disclosed on EXHIBIT B (provided that the HUD Loan described
therein are on terms reasonably satisfactory to Payee), but no voluntary
prepayments, renewals, extensions, or refinancing thereof;
(d) Debt subordinated on terms satisfactory to the Payee to the Maker's
obligations under this Note and the Maker's Second Senior Bridge Note;
(e) Debt of Maker to any Guarantor or of any Guarantor to Maker;
(f) Accounts payable to trade creditors for goods or services which are
aged not more than ninety (90) days from the billing date and current operating
liabilities (other than for borrowed money) which are not more than ninety (90)
days past due, in each case incurred in the ordinary course of business, as
presently conducted, and paid within the specified time, unless contested in
good faith and by appropriate proceedings; and
(g) Debt incurred to finance the acquisition of fixed or capital assets
and secured by Liens permitted by Section 1(j), including capital leases,
provided that the aggregate principal balance of all such Debt does not exceed
such amount as permitted by the M&T Agreement at any time.
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3. MERGERS, ETC. Wind up, liquidate or dissolve itself, reorganize, merge or
consolidate with or into, or convey, sell, assign, transfer, lease, or otherwise
dispose of (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to any
individual, entity or organization, (each a "Person"), or acquire all of
substantially all of the assets or the business of any Person, except that (a)
any Guarantor may merge into or transfer assets to Maker and (b) any Guarantor
may merge into or consolidate with or transfer assets to any other Guarantor, so
long as such merger does not violate the covenants set forth herein.
4. LEASES. Create, incur, assume, or suffer to exist, any obligation as lessee
for the rental or hire of any real or personal property, except (a) leases
existing on the date of this Agreement as described on EXHIBIT B and any
extensions or renewals thereof; (b) leases (other than capital leases) which do
not in the aggregate require the Maker and the Guarantors on a consolidated
basis to make payments (including taxes, insurance, maintenance, and similar
expenses which the Maker or the Guarantors are required to pay under the terms
of any lease) in any Fiscal Year in excess of such amount as is permitted under
the M&T Agreement; and (c) leases between the Maker and any Guarantor or between
any Guarantors.
5. SALE AND LEASEBACK. Sell, transfer, or otherwise dispose of, any real or
personal property to any Person and thereafter directly or indirectly lease back
the same or similar property.
6. RESTRICTED PAYMENTS. Maker shall not declare or pay any dividends, other than
reasonable "tax distributions" sufficient to cover the members' tax liabilities
associated with their membership interests in Maker; or pay more than $200,000
per year to, purchase, redeem, retire, or otherwise acquire for value any of its
equity interests now or hereafter outstanding, or make any distribution of
assets to its members or other holders of equity securities issued by Maker; or
allocate or otherwise set apart any sum for the payment of any dividend or
distribution on, or for the purchase, redemption, or retirement of any
membership interest, whether in income, distributions, capital or otherwise; or
make any other distribution by reduction of capital or otherwise in respect of
any membership interest.
7. SALE OF ASSETS. Sell, lease, assign, transfer, or otherwise dispose of, or
permit any Guarantor to sell, lease, assign, transfer, or otherwise dispose of,
any of its now owned of hereafter acquired assets (including, without
limitation, shares of stock and Debt of Subsidiaries, receivables, and leasehold
interests), except: (a) inventory disposed of in the ordinary course of
business; and (b) the sale or other disposition of assets no longer used or
useful in the conduct of its business.
8. INVESTMENTS. Make any loan or advance to any Person; or purchase or otherwise
acquire, any capital stock, assets, obligations, or other securities of, make
any capital contribution to, or otherwise invest in or acquire any interest in
any Person, or participate as a partner or joint venture with any other Person,
except for investments money market mutual funds, provided that: (a) the total
amount of
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cash so invested at any one time does not exceed $250,000.00, (b) after giving
effect to each such investment, no Default or Event of Default shall have
occurred hereunder, (c) the Maker shall give the Payee notice of each such
investment as soon as practical and in any event within thirty (30) days thereof
and (d) the Maker shall provide the Payee with such additional information
(including semi-annual financial statements) about any investment under this
Section 8 as it may reasonably request.
9. GUARANTIES, ETC. Assume, guarantee, endorse, or otherwise be or become
directly or contingently responsible or liable (including, but not limited to,
an agreement to purchase any obligation, stock, assets, goods, or services, or
to supply or advance any funds, assets, goods, or services, or an agreement to
maintain or cause such Person to maintain a minimum working capital or net worth
or otherwise to assure the creditors of any Person against loss), for
obligations of any Person, except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business.
10. TRANSACTIONS WITH AFFILIATES. Enter into any transaction or series of
related transactions for a consideration (singly or in the aggregate) of more
than $50,000, including, without limitation, the purchase, sale, or exchange of
property or the rendering of any service, with any Affiliate, except in the
ordinary course of and pursuant to the reasonable requirements of Maker's or
Guarantor's business and upon fair and reasonable terms no less favorable to
Maker or such Guarantor than would obtain in a comparable arm's-length
transaction with a Person not an Affiliate.
11. BUSINESS ACTIVITIES. Engage directly or indirectly (whether through
Subsidiaries or otherwise) in any type of business not engaged in on the date
hereof, unless incidental or related to any type of business engaged in by such
Person on such date.
12. CAPITALIZATION. The Maker will not and will not permit any Guarantor to
issue any Equity Interests interest having debt-like features (such as mandatory
cash dividends, mandatory redemption provisions or other provisions which create
monetary obligations payable in cash), except to the extent that the same, (i)
if classified as Debt, would be permitted by Section 2 hereof and (ii) would not
require Maker to violate Section 6 hereof.
13. FISCAL YEAR. Change the date of its fiscal year end from December 31.
14. MANAGEMENT GROUP. Make any change in the composition or duties and authority
of the Management Group other than by reason of death or disability.
15. MODIFICATIONS TO JDA COMMITMENT AND SUBORDINATED FINANCING DOCUMENTS.
Without Xxxxx's prior written consent, agree or consent to any changes or
modifications in the JDA Commitment or any of the terms of the financing
contemplated thereunder or any subordinated financing documents.
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16. MODIFICATIONS TO CERTAIN FINANCING DOCUMENTS. Without Xxxxx's written
consent, agree or consent to any changes or modifications to any financing
documents or any of the terms of the financing contemplated thereunder (other
than a certain Revolving Loan and Term Loan Agreement dated December 15, 2000)
or any subordinated financing documents.
17. CERTAIN DEFINITIONS. As used herein, the following terms shall apply:
"DEBT" means (a) indebtedness or liability for borrowed money; (b)
obligations evidenced by bonds, debentures, notes or other similar instruments;
(c) obligations for the deferred purchase price of property or services
(including trade obligations); (d) obligations as lessee under capital leases;
(e) current liabilities in respect of unfunded vested benefits under plans
covered by ERISA; (f) obligations under letters of credit; (g) obligations under
acceptance facilities; (h) all guarantees, endorsements (other than for
collection or deposit in the ordinary course of business), and other contingent
obligations to purchase, to provide funds for payment, to supply funds to invest
in any person or entity, or otherwise to assure a creditor against loss; and (i)
obligations secured by any Liens, whether or not the obligations have been
assumed.
"MANAGEMENT GROUP" means Xxxxxx X. Xxxxxxx, Xx., Xxxx X. Xxxxxxxxx,
Xxxx X. Xxxxxx and Xxxxxx X. Xxxxxxxx.
