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EXHIBIT 10-3
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FIRST SENIOR BRIDGE NOTE
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$3,500,000.00 December 15, 2000
FOR VALUE RECEIVED, HIGH FALLS BREWING COMPANY, LLC, a New York limited
liability company with an address at ▇▇▇ ▇▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ ("MAKER"), promises to pay to THE GENESEE BREWING COMPANY, INC. a New York
Corporation ("PAYEE"), at its office at ▇▇▇ ▇▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ 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 FIVE
HUNDRED THOUSAND AND 00/100 DOLLARS ($3,500,000.00), 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 all
accrued interest on each March 15, June 15, September 15 and December 15 of each
year (each a "PAYMENT DATE"), commencing March 15, 2001. Unless earlier
accelerated, Maker shall make a principal payment of $125,000 on September 15,
2001 and subsequent principal payments of $125,000 each on each subsequent
Payment Date, and continuing thereafter until the Maturity Date, when the entire
remaining principal balance of this Note, plus all accrued and unpaid interest
thereon, shall be paid in full.
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
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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 Second Bridge Note, then Maker may
direct how the proceeds from any such financing shall be applied in the
prepayment of this Note and the Second 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 ▇▇▇ ▇▇▇▇▇ amount received or to be received pursuant to the
▇▇▇ ▇▇▇▇▇.
"CITY" means the City of Rochester, New York, a New York
municipal corporation.
"▇▇▇ ▇▇▇▇▇" means a grant under ▇▇▇'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).
"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 term loan secured only by a first lien on all ▇▇▇▇▇▇ Cooperage
and filling equipment of the Maker and 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 ▇▇▇ ▇▇▇▇▇ and the HUD Loan.
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"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.
"SECOND BRIDGE NOTE" shall mean Maker's Second Senior Bridge
Note of even date herewith payable to Payee in the original principal amount of
Three Million Dollars ($3,000,000).
"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 acknowledges that
it 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 maturity. All prepayments
of any kind shall be accompanied by all accrued interest due on the prepaid
principal at the time of prepayment.
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(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, 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 (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 ▇▇▇▇▇, M&T and ▇▇▇▇▇▇
Capital Partners, L.P. ("▇▇▇▇▇▇") 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 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 under any statutes, regulations or the Permits (collectively,
"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.
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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 or other equity interest in Maker except with
respect to the repurchase obligations for the warrants issued to ▇▇▇▇▇▇ Capital
Partners, L.P. on even date herewith, (ii) the capitalization of Maker is as set
forth on EXHIBIT B annexed hereto; and (iii) all issued and outstanding
membership, capital distribution or 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.
6. EVENTS OF DEFAULT. Each of the following shall constitute an event
of default (each, an "EVENT OF DEFAULT") hereunder:
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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, ▇▇▇▇▇▇ 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 Purchase Agreement and other than those
items referred to above in this Section 6.4), which failure is not cured within
thirty (30) days after receipt of notice from Payee.
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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
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pursuant to which the obligations to the Payee are evidenced, including as
permitted by 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 ▇▇▇▇▇,
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.
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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.
MAKER: HIGH FALLS BREWING COMPANY, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: President
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EXHIBIT A
REQUIRED PERMITS AND LICENSES
1. Ohio Beer Malt Beverage Certificate of Registration - Application in
process per ▇▇▇▇▇ ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇ License - State will issue week of
12/10/00.
6. Delaware Suppliers' License - State will issue week of 12/10/00, per
▇▇▇▇▇ ▇▇▇▇▇▇ 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 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.
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(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 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & 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);
(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;
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(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 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
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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) 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.
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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 ▇▇▇▇▇'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) ▇▇▇▇▇ 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) ▇▇▇▇▇ 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) ▇▇▇▇'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
Page 100 of 272
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.
Page 101 of 272
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
Page 102 of 272
investments money market mutual funds, provided that: (a) the total
amount of 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 ▇▇▇▇▇'s prior written consent, agree or consent to
any
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changes or modifications in the JDA Commitment or any of the terms of
the financing contemplated thereunder or any subordinated financing
documents.
16. MODIFICATIONS TO CERTAIN FINANCING DOCUMENTS. Without ▇▇▇▇▇'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 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
