SUBORDINATED PROMISSORY NOTE
$12,000,000 March 4, 1996
Los Angeles, California
FOR VALUE RECEIVED, MCC ACQUISITION CORPORATION, a Delaware
corporation ("Company") promises to pay to HOLIDAY HOLDING CORP., a Texas
corporation ("Holder"), or its registered assigns, the principal sum of
Twelve Million Dollars ($12,000,000), or such lesser amount as shall equal
the outstanding principal amount hereof, together with interest from the
date of this Note on the unpaid principal balance at the rate specified in
Section 2. All unpaid principal, together with any then unpaid and
accrued interest and other amounts payable hereunder, shall be due and
payable on the earlier of (i) the third anniversary of the date hereof, or
(ii) when, upon or after the occurrence of an Event of Default (as defined
below), such amounts are declared due and payable by Holder or become
automatically due and payable in accordance with the terms hereof.
The following is a statement of the rights of Holder and the
conditions to which this Note is subject, and to which Holder, by the
acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following
capitalized terms have the following meanings:
(a) "Asset Purchase Agreement" shall mean that certain
Asset Purchase Agreement, dated as of March 4, 1996, among Company,
Holder, Harley-Davidson, Inc., Holiday World, Inc. (California), Holiday
World, Inc. (Texas), Holiday World, Inc. (Florida), Holiday World, Inc.
(Oregon), Holiday World, Inc. (Indiana), Holiday World, Inc. (Washington),
Holiday World, Inc. (New Mexico) and Parent.
(b) "Company" includes the corporation initially executing
this Note and any Person which shall succeed to or assume the obligations
of Company under this Note.
(c) "Credit Agreement" shall mean that certain Credit
Agreement, dated as of March 5, 1996, among Parent, the financial
institutions named therein, and BT Commercial Corporation, as Agent for
such financial institutions, as it may be supplemented, amended, extended,
amended and restated or otherwise modified from time to time, together
with any credit, loan or note purchase agreement replacing or refinancing
such the obligations thereunder.
(d) "EBITDA" shall mean for any fiscal year the net income
(loss) of Company (excluding extraordinary gains and non-cash
extraordinary losses) for such fiscal year (i) plus all interest expense,
tax expense, depreciation and amortization (including amortization of
goodwill and other intangibles) for such period, (ii) less gains or plus
losses attributable to any fixed asset sales in the period, and (iii) plus
or minus any other non-cash charges which have been subtracted or added in
calculating consolidated net income for the period.
(e) "Event of Default" has the meaning given in Section 5
hereof.
(f) "Excess Cash Flow" shall mean for any fiscal year
EBITDA of Company for such fiscal year minus (or plus) any increases (or
decreases) in working capital, minus the sum of the following items for
that year: (i) interest expense paid in cash, (ii) taxes paid in cash,
(iii) principal payments on or mandatory redemptions of indebtedness, (iv)
capital expenditures paid in cash; and (v) environmental cleanup
expenditures paid in cash but not deducted in the determination of net
income.
(g) "Holder" shall mean the Person specified in the
introductory paragraph of this Note or any Person who shall at the time be
the registered holder of this Note.
(h) "Lien" shall mean, with respect to any property, any
security interest, mortgage, pledge, lien, claim, charge or other
encumbrance in, of, or on such property or the income therefrom,
including, without limitation, the interest of a vendor or lessor under a
conditional sale agreement, capital lease or other title retention
agreement, or any agreement to provide any of the foregoing, and the
filing of any financing statement or similar instrument under the Uniform
Commercial Code or comparable law of any jurisdiction.
(i) "Net Cash Proceeds" shall mean, with to any sale,
transfer or other voluntary or involuntary disposition of any assets of
Company (other than the sale of inventory or worn out or obsolete
equipment in the ordinary course of business), the aggregate amount of
cash consideration actually received by Company (including cash received
in payment of any delayed purchase price or upon a release from an escrow
or holdback, but only upon the actual receipt of such cash) in connection
with such transaction after deduction of (i) all reasonable and customary
fees, costs and expenses directly incurred by Company in connection
therewith, including without limitation, reasonable and customary finders
fees and reasonable fees and expenses of counsel, (ii) environmental
clean-up costs (or reserves with respect to estimated costs thereof)
associated or required in connection with the assets disposed of, and
(iii) any tax liability associated therewith.
(j) "Parent" shall mean Monaco Coach Corporation, a
Delaware corporation.
(k) "Permitted Liens" shall mean and include: (i) Liens
for taxes or other governmental charges not at the time delinquent or
thereafter payable without penalty or being contested in good faith; (ii)
Liens of carriers, warehousemen, mechanics, materialmen, vendors, and
landlords incurred in the ordinary course of business for sums not overdue
or being contested in good faith; (iii) deposits under workers'
compensation, unemployment insurance and social security laws or to secure
the performance of bids, tenders, contracts (other than for the repayment
of borrowed money) or leases, or to secure statutory obligations of surety
or appeal bonds or to secure indemnity, performance or other similar bonds
in the ordinary course of business; (iv) Liens securing obligations under
a capital lease if such lease is permitted hereunder and such Liens do not
extend to property other than the property leased under such capital
lease; (v) Liens upon any equipment acquired or held by Company to secure
the purchase price of such equipment or indebtedness incurred solely for
the purpose of financing the acquisition of such equipment; (vi)
easements, reservations, rights of way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances
affecting real property in a manner not materially or adversely affecting
the value or use of such property; (vii) Liens constituting rights of set
off or banker's liens, whether statutory or contractual, in favor of
depository institutions at which Company maintains bank accounts in the
ordinary course of business; (viii) Liens consisting of negative pledges
on the assets of Company pursuant to the terms of the Credit Agreement;
(ix) Liens on inventory (and accessions thereto and replacements and
proceeds thereof) in favor of financial institutions providing financing
of inventory, but only to the extent that such Liens secure such
financing; and (x) existing Liens set forth on Schedule 1 hereto.
(l) "Person" shall mean and include an individual, a
partnership, a corporation (including a business trust), a joint stock
company, a limited liability company, an unincorporated association, a
joint venture or other entity or a governmental authority.
(m) "Senior Guarantee" shall mean that certain Guarantee,
dated as of March 5, 1996, executed by Company in favor of BT Commercial
Corporation, as Agent under the Credit Agreement, as it may be
supplemented, amended, extended, amended and restated or otherwise
modified from time to time, or any other guarantee required of obligations
under the Credit Agreement.
(n) "Senior Indebtedness" shall mean all amounts owing
from time to time under the terms of the Senior Guarantee and shall
include all of the obligations under the Credit Agreement which are the
subject of the Senior Guarantee.
2. Interest Payments.
(a) Rate of Interest. Interest shall accrue on the outstanding
principal balance of this Note at a rate equal to the prime lending rate
announced from time to time by Bankers Trust Company minus one-half of one
percent (0.5%), such rate to change from time to time as such prime
lending rate changes.
(b) Payments. Interest on this Note shall be payable in the
amount of Thirty Thousand Dollars ($30,000) on each March 31, June 30,
September 30 and December 31; provided that (i) on March 31, 1996, the
payment shall be prorated based upon the number of days in the calendar
quarter then ending and the number of days from (but not including) the
date hereof through (and including) March 31, 1996, and (ii) if the
interest accrued and unpaid on any such date is less than Thirty Thousand
Dollars ($30,000), the amount payable shall be the amount then accrued and
unpaid. Interest accrued, but not paid according to the preceding
sentence, shall continue to accrue until paid upon the maturity of this
Note or as set forth in Section 3 hereof.
3. Prepayments.
(a) Mandatory Prepayments. Company shall make mandatory
prepayments of this Note (i) on April 30 of each year commencing with
April 30, 1997, in an amount equal to fifty percent (50%) of Excess Cash
Flow determined for the then most recently ended fiscal year; and (ii)
within two (2) business days after Company actually receives any Net Cash
Proceeds, in an amount equal to the lesser of (A) the Net Cash Proceeds
actually received and (B) the outstanding unpaid principal and interest
payable under this Note. Any such prepayment will be applied first to
interest accrued and unpaid on this Note and second, if the amount of the
prepayment exceeds the amount of all such accrued and unpaid interest, to
the payment of principal of this Note.
(b) Optional Prepayments. Company may prepay this Note
voluntarily in whole or in part at any time and any such prepayment will
be applied first to interest accrued and unpaid on this Note and second,
if the amount of the prepayment exceeds the amount of all such accrued and
unpaid interest, to the payment of principal of this Note.
4. Certain Covenants.
(a) Negative Pledge. While any amount is outstanding under the
Note, without the prior written consent of Holder, the Company shall not
create, incur, assume or permit to exist any Lien on or with respect to
any of its assets or property of any character, whether now owned or
hereafter acquired, except for Permitted Liens.
(b) Dividends, Etc. Until all of the obligations hereunder are
paid in full, Company shall not (i) make any dividends or distributions on
its capital stock or (ii) make any payments to Parent in respect of
corporate services rendered.
5. Events of Default. The occurrence of any of the following
shall constitute an "Event of Default" under this Note:
(a) Failure to Pay. Company shall fail to pay (i) when due any
principal payment on the due date hereunder or (ii) any interest or other
payment required under the terms of this Note within five (5) days of the
date due; or
(b) Breach of Covenants. Company shall fail to observe or
perform the covenants set forth in Section 4 of this Note or any other
covenant or agreement set forth herein; or
(c) Voluntary Bankruptcy or Insolvency Proceedings. Company or
Parent shall (i) apply for or consent to the appointment of a receiver,
trustee, liquidator or custodian of itself or of all or a substantial part
of its property, (ii) be unable, or admit in writing its inability, to pay
its debts generally as they mature, (iii) make a general assignment for
the benefit of its or any of its creditors, (iv) be dissolved or
liquidated, (v) become insolvent (as such term may be defined or
interpreted under any applicable statute), (vi) commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or consent to any such relief
or to the appointment of or taking possession of its property by any
official in an involuntary case or other proceeding commenced against it,
or (vii) take any action for the purpose of effecting any of the
foregoing; or
(d) Involuntary Bankruptcy or Insolvency Proceedings.
Proceedings for the appointment of a receiver, trustee, liquidator or
custodian of Company or Parent or of all or a substantial part of the
property thereof, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to Company or
Parent or the debts thereof under any bankruptcy, insolvency or other
similar law now or hereafter in effect shall be commenced and an order for
relief entered or such proceeding shall not be dismissed or discharged
within thirty (30) days of commencement; or
(e) Payment Demand. The maturity of the Senior Indebtedness
shall have been accelerated by the holder(s) thereof pursuant to the terms
of the Credit Agreement and such holder(s) have made demand under the
Senior Guarantee; or
(f) Sale of Parent. The Parent shall sell, assign, transfer or
otherwise dispose of all or substantially all of its assets (other than
the grant of security interests therein).
6. Rights of Holder upon Default. Upon the occurrence or
existence of any Event of Default (other than an Event of Default referred
to in Sections 5(c) and 5(d)) and at any time thereafter during the
continuance of such Event of Default, Holder may by written notice to
Company, declare all outstanding obligations payable by Company hereunder
to be immediately due and payable without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly waived,
anything contained to the contrary notwithstanding. Upon the occurrence
or existence of any Event of Default described in Sections 5(c) and 5(d),
immediately and without notice, all outstanding obligations payable by
Company hereunder shall automatically become immediately due and payable,
without presentment, demand, protest or any other notice of any kind, all
of which are hereby expressly waived, anything contained herein to the
contrary notwithstanding. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, Holder may exercise any
other right, power or remedy permitted to it by law, either by suit in
equity or by action at law, or both.
7. Subordination. THIS NOTE IS SUBORDINATED AS AND TO THE
EXTENT SET FORTH IN THAT CERTAIN INTERCREDITOR AGREEMENT, DATED AS OF
MARCH 5, 1996, AMONG HOLDER AND BT COMMERCIAL CORPORATION, AS AGENT FOR
CERTAIN FINANCIAL INSTITUTIONS.
8. Successors and Assigns. Subject to the restrictions on
transfer described in Section 11 below, the rights and obligations of
Company and Holder of this Note shall be binding upon and benefit the
successors, assigns, heirs, administrators and transferees of the parties.
9. Waiver and Amendment. Any provision of this Note may be
amended, waived or modified upon the written consent of Company and
Holder.
10. Transfer of this Note. Transfers of this Note shall be
registered upon registration books maintained for such purpose by or on
behalf of Company. Prior to presentation of this Note for registration of
transfer, Company shall treat the registered holder hereof as the owner
and holder of this Note for the purpose of receiving all payments of
principal and interest hereon and for all other purposes whatsoever,
whether or not this Note shall be overdue.
11. Assignment by Company. Neither this Note nor any of the
rights, interests or obligations hereunder may be assigned, by operation
of law or otherwise, in whole or in part, by Company without the prior
written consent of Holder except in connection with an assignment in whole
to a successor corporation to Company, provided that such successor
corporation acquires all or substantially all of Company's property and
assets and Holder's rights hereunder are not impaired.
12. Notices. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be deemed to
have been duly given if personally delivered or mailed by registered or
certified mail, postage prepaid, or by recognized overnight courier or
personal delivery at the respective addresses of the parties as set forth
in the Asset Purchase Agreement or on the register maintained by Company.
Any party hereto may by notice so given change its address for future
notice hereunder. Notice shall conclusively be deemed to have been given
when received.
13. Payment. Payment shall be made in lawful tender of the
United States.
14. Usury. In the event any interest is paid on this Note
which is deemed to be in excess of the then legal maximum rate, then that
portion of the interest payment representing an amount in excess of the
then legal maximum rate shall be deemed a payment of principal and applied
against the principal of this Note.
15. Expenses; Waivers. If action is instituted to collect this
Note, Company promises to pay all reasonable costs and expenses,
including, without limitation, reasonable attorneys' fees and costs,
incurred in connection with such action. Company hereby waives notice of
default, presentment or demand for payment, protest or notice of
nonpayment or dishonor and all other notices or demands relative to this
instrument.
16. Governing Law. This Note and all actions arising out of or
in connection with this Note shall be governed by and construed in
accordance with the laws of the State of Indiana, without regard to the
conflicts of law provisions of the State of Indiana or of any other state.
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IN WITNESS WHEREOF, Company has caused this Note to be issued as
of the date first written above.
MCC ACQUISITION CORPORATION,
a Delaware corporation
By:
Name:
Title: