Exhibit 10.7
- --------------------------------------------------------------------------------
HF HOLDINGS, INC.
----------------------------------
AMENDED AND RESTATED
NOTE AGREEMENT
----------------------------------
DATED AS OF SEPTEMBER 27, 1999
$7,500,000
0% CONVERTIBLE SUBORDINATED NOTES DUE SEPTEMBER 27, 2011
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
(NOT PART OF AGREEMENT)
PAGE
1.
PAYMENTS............................................................1
1.1 INTEREST PAYMENT............................................1
1.2 REQUIRED PRINCIPAL PAYMENTS.................................1
1.3 MANNER OF PAYMENTS..........................................1
2. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.......................2
2.1 REGISTRATION OF NOTES.......................................2
2.2 EXCHANGE OF NOTES...........................................2
2.3 REPLACEMENT OF NOTES........................................3
2.4 ISSUANCE TAXES..............................................3
3. GENERAL COVENANTS...................................................3
3.1 PAYMENT OF NOTES AND MAINTENANCE OF OFFICE..................4
3.2 MERGERS AND CONSOLIDATIONS..................................4
3.3 FINANCIAL AND BUSINESS INFORMATION..........................4
4. EVENTS OF DEFAULT...................................................5
4.1 EVENTS OF DEFAULT...........................................5
4.2 DEFAULT REMEDIES............................................6
4.3 ANNULMENT OF ACCELERATION OF NOTES..........................7
5. SUBORDINATION.......................................................7
5.1 GENERAL.....................................................7
5.2 INSOLVENCY..................................................7
5.3 PROOFS OF CLAIM.............................................8
5.4 DEFAULT IN RESPECT OF SENIOR DEBT...........................8
5.5 TURNOVER OF PAYMENTS........................................10
5.6 SUBORDINATION UNAFFECTED BY CERTAIN EVENTS.... ............10
5.7 WAIVER AND CONSENT..........................................11
5.8 REINSTATEMENT OF SUBORDINATION..............................11
5.9 OBLIGATIONS NOT IMPAIRED....................................12
5.10 PAYMENT OF SENIOR DEBT; SUBROGATION.........................12
5.11 RELIANCE OF HOLDERS OF SENIOR DEBT..........................12
5.12 IDENTITY OF HOLDERS OF SENIOR DEBT..........................13
6. INTERPRETATION OF THIS AGREEMENT....................................13
6.1 TERMS DEFINED...............................................13
6.2 ACCOUNTING PRINCIPLES.......................................24
6.3 SECTION HEADINGS AND TABLE OF CONTENTS AND CONSTRUCTION.....25
6.4 GOVERNING LAW...............................................26
7. CONVERSION AND EXCHANGE OF NOTES FOR COMMON STOCK...................26
7.1 NOTICE OF OCCURRENCE OF A TRIGGERING EVENT..................26
7.2 CONVERSION OF NOTES AT OPTION OF HOLDER.....................26
7.3 EXCHANGE OF NOTES FOR COMMON STOCK BY THE COMPANY...........28
7.4 RESERVATION OF SHARES.......................................29
7.5 ADJUSTMENT OF CONVERSION PRICE IN RESPECT OF STOCK
DIVIDENDS, STOCK SPLITS, ETC................................30
7.6 DE MINIMIS CHANGES IN CONVERSION PRICE......................30
7.7 NOTICE OF CHANGE IN CONVERSION PRICE........................31
7.8 EFFECT OF CONSOLIDATION, MERGER, SALE OR RECLASSIFICATION...31
7.9 COMMON STOCK SUBJECT TO STOCKHOLDERS AGREEMENT..............32
7.10 INTEREST IN EXCESS OF 24.9%.................................32
7.11 AUTOMATIC CONVERSION UPON INSOLVENCY.... ...................33
8. MISCELLANEOUS.......................................................34
8.1 COMMUNICATIONS..............................................34
8.2 REPRODUCTION OF DOCUMENTS...................................35
8.3 ENTIRE AGREEMENT............................................35
8.4 SUCCESSORS AND ASSIGNS......................................35
8.5 AMENDMENT AND WAIVER........................................36
8.6 EXPENSES....................................................37
8.7 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; ETC..........37
8.8 EXECUTION IN COUNTERPART....................................39
Annex 1 -- Address of Purchaser; Payment Instructions
Annex 2 -- Addresses for Notices
Attachment A -- Form of Note
AMENDED AND RESTATED NOTE AGREEMENT
AMENDED AND RESTATED NOTE AGREEMENT, dated as of September 27, 1999,
among HF HOLDINGS, INC., a Delaware corporation (together with its successors
and assigns, the "COMPANY"), and CREDIT SUISSE FIRST BOSTON CORPORATION, a
Massachusetts corporation (together with its affiliates and their respective
successors and assigns, the "PURCHASER").
RECITALS
WHEREAS, pursuant to the Securities Purchase Agreement, the Purchaser has
agreed to purchase from the Company, and the Company has agreed to sell to the
Purchasers, Seven Million Five Hundred Thousand Dollars ($7,500,000) in
aggregate principal amount of the Notes; and
WHEREAS, the Company and the Purchaser wish to enter into this Agreement
to govern the terms of the Notes;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the parties to this Agreement hereby agree as
follows:
1. PAYMENTS
1.1 NO INTEREST PAYMENTS.
No interest shall accrue or be payable on the Notes.
1.2 PAYMENT UPON MATURITY.
The entire principal of the Notes outstanding on September 27, 2011
shall become due and payable on such date.
1.3 MANNER OF PAYMENTS.
(a) MANNER OF PAYMENT. The Company shall pay all amounts
payable with respect to each Note (without any presentment of such
Notes and without any notation of such payment being made thereon) by
crediting, by federal funds bank wire transfer, the account of the
holder thereof in any bank in the United States of America as may be
designated in writing by such holder, or in such other manner as may be
reasonably directed or to such other address in the United States of
America as may be reasonably designated in writing by such holder.
Annex 1 shall be deemed to constitute notice, direction or designation
(as appropriate) by the Purchaser to the Company with respect
to payments to be made to the Purchaser as aforesaid. In the absence of
such written direction, all amounts payable with respect to each Note
shall be paid by check mailed and addressed to the registered holder of
such Note at the address shown in the register maintained by the
Company pursuant to Section 2.1.
(b) PAYMENTS DUE ON HOLIDAYS. If any payment due on, or with
respect to, any Note shall fall due on a day other than a Business Day,
then such payment shall be made on the first Business Day following the
day on which such payment shall have so fallen due.
(c) PAYMENTS, WHEN RECEIVED. Any payment to be made to the
holders of Notes hereunder or under the Notes shall be deemed to have
been made on the Business Day such payment actually becomes available
at such holder's bank prior to the close of business of such bank.
2. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
With respect to any transfer of Notes under this Agreement, the
respective rights and obligations of the holders of the Notes and the Company
under this Section 2 are, notwithstanding the provisions of this Section 2,
subject to, and shall be construed consistent with, the terms of the
Stockholders Agreement.
2.1 REGISTRATION OF NOTES.
The Company will keep at its office, maintained pursuant to Section
3.1, a register for the registration and transfer of Notes. The name and address
of each holder of one or more Notes, each transfer thereof made in accordance
with Section 2.2 and the name and address of each transferee of one or more
Notes shall be registered in such register. The Person in whose name any Note
shall be registered shall be deemed and treated as the owner and holder thereof
for all purposes hereof, and the Company shall not be affected by any notice or
knowledge to the contrary, other than in accordance with Section 2.2.
2.2 EXCHANGE OF NOTES.
(a) EXCHANGE OF NOTES. Upon surrender of any Note at the
office of the Company maintained pursuant to Section 3.1, duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or such holder's attorney duly
authorized in writing, the Company will execute and deliver, at the
Company's expense (except as provided in Section 2.2(b)), a new Note or
Notes in exchange therefor, in an aggregate principal amount equal to
the unpaid principal amount of the surrendered Note. Each such new Note
shall be registered in the name of such Person as such holder may
request and shall be substantially in the form of Attachment A. Each
such new Note shall be dated the date of
2
the surrendered Note. Each such new Note shall carry the same rights
that were carried by the Note so exchanged or transferred. Notes shall
not be transferred in denominations of less than One Hundred Thousand
Dollars ($100,000), PROVIDED that a holder of Notes may transfer its
entire holding of Notes regardless of the principal amount of such
holder's Notes.
(b) COSTS. The Company will pay the cost of delivering to or
from such holder's home office or custodian bank from or to the
Company, insured to the reasonable satisfaction of such holder, the
surrendered Note and any Note issued in substitution or replacement for
the surrendered Note. The Company may require payment of a sum
sufficient to cover any stamp tax or governmental charge imposed in
respect of any such transfer of Notes.
2.3 REPLACEMENT OF NOTES.
Upon receipt by the Company from the registered holder of a Note of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Note (which evidence shall be, in the case of an
institutional investor, notice from such institutional investor of such loss,
theft, destruction or mutilation), and:
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company; PROVIDED, HOWEVER, that if the
holder of such Note is a Purchaser, an institutional investor or a
nominee of either, the unsecured agreement of indemnity of such
Purchaser or such institutional investor (but not of any nominee
therefor) shall be deemed to be satisfactory; or
(b) in the case of mutilation, upon surrender and cancellation
thereof;
the Company at its own expense will execute and deliver, in lieu thereof, a
replacement Note, dated the date of such lost, stolen, destroyed or mutilated
Note.
2.4 ISSUANCE TAXES.
The Company will pay all taxes (if any) due in connection with and as
the result of the initial issuance and sale of the Notes.
3. COVENANTS
The Company covenants that on and after the Closing Date and so long as
any of the Notes shall be outstanding:
3
3.1 PAYMENT OF NOTES AND MAINTENANCE OF OFFICE.
The Company will punctually pay, or cause to be paid, the principal of
the Notes, as and when the same shall become due according to the terms hereof
and of the Notes, and will maintain an office at the address of the Company as
provided in Section 8.1 where notices, presentations and demands in respect
hereof or the Notes may be made upon it. Such office will be maintained at such
address until such time as the Company notifies the holders of the Notes of any
change of location of such office, which will in any event be located within the
United States of America.
3.2 MERGERS AND CONSOLIDATIONS.
The Company will not merge into, consolidate with, or Transfer all or
substantially all of its Property to, any other Person or permit any other
Person to consolidate with or merge into it; PROVIDED, HOWEVER, that the
foregoing restriction does not apply to the merger or consolidation of the
Company with, or the Transfer by the Company of all or substantially all of its
Property to, another corporation, so long as:
(a) the Person (the "SUCCESSOR CORPORATION") that results from
such merger or consolidation or that purchases, leases, or acquires all
or substantially all of such Property is a corporation duly
incorporated under the laws of the United States of America or a
jurisdiction thereof; and
(b) if the Company is not the Successor Corporation, the
Successor Corporation shall expressly assume in writing, pursuant to
such agreements and instruments as shall be reasonably satisfactory to
the Required Holders, the due and punctual payment of the principal of
the Notes, according to their tenor, and the due and punctual
performance and observance of all the covenants in the Notes, this
Agreement and the other Financing Documents to be performed or observed
by the Company.
3.3 FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes:
(a) SEC AND OTHER REPORTS -- promptly upon their becoming
available:
(i) each financial statement, report, notice or proxy
statement sent by the Company or any Subsidiary to
stockholders generally;
(ii) each regular or periodic report (including,
without limitation, each Form 10-K, Form 10-Q and Form 8-K),
any registration statement which shall have become effective,
and each final prospectus
4
and all amendments thereto filed by the Company or any
Subsidiary with the SEC; and
(iii) all press releases and other statements made
available by the Company or any Subsidiary to the public
concerning material developments in the business of the
Company or the Subsidiaries;
(b) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- within five (5)
Business Days of becoming aware:
(i) of the existence of any condition or event which
constitutes a Default or an Event of Default; or
(ii) that the holder of any Note, or of any Debt,
shall have given notice or taken any other action with respect
to a claimed Default, Event of Default or default or event of
default;
a notice specifying the nature of the claimed Default, Event of Default
or default or event of default and the notice given or action taken (if
any) by such holder and what action the Company is taking or proposes
to take with respect thereto;
(c) REQUESTED INFORMATION -- with reasonable promptness, such
other data and information as from time to time may be reasonably
requested by any holder of Notes.
4. EVENTS OF DEFAULT
4.1 EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" exists at any time if any of the following both
occurs and is continuing thereafter for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of law or otherwise):
(a) PAYMENTS ON NOTES -- the Company fails to make the
required payment of principal on any Note on or before the date such
payment is due; or
(b) INSOLVENCY --
(i) INVOLUNTARY BANKRUPTCY PROCEEDINGS --
(a) a receiver, liquidator, custodian or
trustee of the Company or any Subsidiary, or of all
or any substantial part of the Property of any of
them, is appointed by court order; or an order for
relief is entered with respect the Company or any
5
Subsidiary, or the Company or any Subsidiary is
adjudicated a bankrupt or insolvent;
(b) all or any substantial part of the
Property of the Company or any Subsidiary is
sequestered by court order; or
(C) a petition is filed against the Company
or any Subsidiary under any bankruptcy,
reorganization, arrangement, insolvency, readjustment
of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect, and
is not dismissed within sixty (60) days after such
filing;
(ii) VOLUNTARY PETITIONS - the Company or any
Subsidiary files a petition in voluntary bankruptcy or seeks
relief under any provision of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter
in effect, or consents to the filing of any petition against
it under any such law; or
(iii) ASSIGNMENTS FOR BENEFIT OF CREDITORS, ETC. -
the Company or any Subsidiary makes an assignment for the
benefit of its creditors, or consents to the appointment of a
receiver, liquidator or trustee of an Obligor or Subsidiary or
of all or a substantial part of its Property; or
4.2 DEFAULT REMEDIES.
(a) ACCELERATION OF MATURITY OF NOTES.
(i) AUTOMATIC. If any Event of Default specified in
Section 4.1(b) shall exist, all of the Notes at the time
outstanding shall automatically become immediately due and
payable, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived.
(ii) BY ACTION OF HOLDERS. Subject to the next
succeeding sentence, if any Event of Default (other than an
Event of Default specified in Section 4.1(b)) shall exist, the
holder or holders of twenty-five percent (25%) or more in
principal amount of the Notes at the time outstanding may
exercise any right, power or remedy permitted to such holder
or holders by law, and shall have, in particular, without
limiting the generality of the foregoing, the right to
declare, the entire principal of all the Notes then
outstanding to be due and payable, and such Notes shall
thereupon become forthwith due and payable, without any
presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived, and the Company shall
forthwith pay to
6
the holder or holders of all the Notes then outstanding the
entire principal of the Notes.
(b) NONWAIVER; REMEDIES CUMULATIVE. No course of dealing on
the part of any holder of Notes nor any delay or failure on the part of
any holder of Notes to exercise any right shall operate as a waiver of
such right or otherwise prejudice such holder's rights, powers and
remedies. All rights and remedies of each holder of Notes hereunder and
under applicable law are cumulative to, and not exclusive of, any other
rights or remedies any such holder of Notes would otherwise have.
4.3 ANNULMENT OF ACCELERATION OF NOTES.
If a declaration is made pursuant to Section 4.2(a)(ii), then and in
every such case, the Required Holders may, in their sole discretion, by written
instrument filed with the Company, rescind and annul such declaration, and the
consequences thereof; PROVIDED, HOWEVER, that at the time such declaration is
annulled and rescinded:
(a) no judgment or decree shall have been entered for the
payment of any moneys due on or pursuant hereto or the Notes;
(b) all sums payable hereunder and under the Notes (except any
principal of the Notes which shall have become due and payable by
reason of such declaration under Section 4.2(a)(ii)) shall have been
duly paid; and
(C) each and every other Default and Event of Default shall
have been waived pursuant to Section 8.5 or otherwise made good or
cured;
and PROVIDED FURTHER that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereon.
5. SUBORDINATION
5.1 GENERAL.
The Subordinated Debt is subordinate and junior in right of payment to
all Senior Debt to the extent provided in this Section 5.
5.2 INSOLVENCY.
In the event of:
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding
relating to the Company, its creditors or its Property;
7
(b) any proceeding for the liquidation, dissolution or other
winding-up of the Company, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings;
(C) any assignment by the Company for the benefit of
creditors; or
(D) any other marshalling of the assets of the Company;
all Senior Debt shall first be paid in full, in cash or cash equivalents, before
any payment or distribution, whether in cash, Securities or other Property
(other than Reorganization Securities), shall be made to any holder of any
Subordinated Debt on account of any Subordinated Debt. Any payment or
distribution, whether in cash, Securities or other Property (other than
Reorganization Securities), which would otherwise (but for this Section 5) be
payable or deliverable in respect of Subordinated Debt shall be paid or
delivered directly to the holders of Senior Debt in accordance with the
priorities then existing among such holders until all Senior Debt shall have
been paid in full, in cash or cash equivalents.
5.3 PROOFS OF CLAIM.
If any holder of Subordinated Debt does not file a proper claim or
proof of debt therefor prior to twenty (20) days before the expiration of the
time to file such claim or proof, then each Senior Agent is hereby authorized
and empowered (but not obligated) as the agent and attorney-in-fact for such
holder for the specific and limited purpose set forth in this paragraph, to file
such claim or proof for or on behalf of such holder; PROVIDED, HOWEVER, that
such Senior Agent shall have, prior to taking any such action, given fifteen
(15) days prior written notice (which notice may be given up to sixty (60) days
prior to the expiration of the time to file such claim) to such holder of
Subordinated Debt and each other Senior Agent that they intend to file such
claim or proof of debt. In no event may any Senior Agent or any holder of the
Senior Debt vote any claim on behalf of any holder of the Subordinated Debt, and
such agency and appointment of attorney-in-fact shall not extend to any such
right to vote any such claim.
5.4 DEFAULT IN RESPECT OF SENIOR DEBT; STANDSTILL.
In the event that a Senior Debt Default shall occur, then, unless and
until such Senior Debt Default shall have been cured or waived or shall have
ceased to exist, no direct or indirect payment (in cash, Property or Securities
or by set-off or otherwise) shall be made or agreed to be made on account of any
Subordinated Debt, or as a sinking fund for any Subordinated Debt, or in respect
of any redemption, retirement, purchase, prepayment or other acquisition or
payment of any Subordinated Debt.
Notwithstanding anything contained in this Agreement or any other
Financing Document to the contrary, for so long as any Senior Debt is
outstanding, no holder of any Subordinated Debt may take any action (other than
giving the notice of
8
acceleration referred to herein) to accelerate all or any portion of the
Subordinated Debt (and no acceleration or purported acceleration pursuant to
Section 4.2(a)(ii) shall become effective) or exercise any other remedies in
respect thereof during any period (a "STANDSTILL PERIOD") commencing on the
occurrence of an Event of Default and ending upon the earliest of:
(a) the date such Event of Default shall have been cured or
waived or shall have ceased to exist;
(b) the date three hundred sixty-five (365) days after the
commencement of such Standstill Period;
(c) the date upon which any holder or holders of any Debt of
the Company (other than Subordinated Debt) in an aggregate amount
exceeding One Million Dollars ($1,000,000), or any holder or holders of
any Senior Debt, accelerate or declare such Debt to be due and payable
prior to its stated maturity or prior to the regularly scheduled date
or dates of payment, commence any action or proceeding to collect any
such Debt or otherwise commence the exercise of any remedies against
the Company;
(d) the first date upon which any Event of Default described
in Section 4.1(b) shall have occurred and be continuing beyond any
period of grace specified therein; and, in such event, the automatic
acceleration of the Notes contemplated in respect of such Event of
Default pursuant to Section 4.2(a)(i) shall occur immediately upon the
termination of the Standstill Period; or
(e) the commencement of any foreclosure of any Lien upon
Property of the Company the proceeds of which are applied, or may be
applied, to the payment of any Debt of the Company in an aggregate
amount exceeding One Million Dollars ($1,000,000).
Notwithstanding the foregoing, any holder or holders of Subordinated Debt
seeking to accelerate all or a portion of the Subordinated Debt or exercise any
remedies in respect thereof shall give the Senior Agent at least ten (10) days
advance written notice of its intent to take such action and such action may not
in any event be taken by such holder or holders until the later of the
expiration of the applicable Standstill Period and the expiration of such ten
(10) day period.
The Company shall, and each Senior Agent may, give prompt written
notice to each holder of Subordinated Debt of its knowledge of facts which would
give rise to any Senior Debt Default.
9
5.5 TURNOVER OF PAYMENTS.
If:
(a) any payment or distribution shall be paid to or collected
or received by any holders of Subordinated Debt in contravention of any
of the terms of this Section 5; and
(b) any Senior Agent shall have notified the holders of
Subordinated Debt, within thirty (30) days of any such payment or
distribution, of the facts by reason of which such payment or
collection or receipt so contravenes this Section 5;
then such holders of Subordinated Debt will deliver such payment or
distribution, to the extent necessary to pay all such Senior Debt in full, in
cash or cash equivalents, to such Senior Agent, on behalf of the holders of the
Senior Debt, and, until so delivered, the same shall be held in trust by such
holders of Subordinated Debt as the property of the holders of such Senior Debt.
If any amount is delivered to such Senior Agent pursuant to this Section 5.5,
whether or not such amounts have been applied to the payment of Senior Debt, and
the outstanding Senior Debt shall thereafter be paid in full, in cash or cash
equivalents, by the Company or otherwise other than pursuant to this Section
5.5, the holders of Senior Debt shall return to such holders of Subordinated
Debt an amount equal to the amount delivered to such holders of Senior Debt
pursuant to this Section 5.5, so long as after the return of such amounts the
Senior Debt shall remain paid in full, in cash or cash equivalents.
Notwithstanding the foregoing, in the event that the holders of the
Subordinated Debt reasonably believe that there is more than one holder of
Senior Debt and the holders of the Subordinated Debt shall not have received
reasonably satisfactory evidence that such Senior Agent is both entitled to
accept such payment on behalf of all holders of Senior Debt and required to
deliver payment to the other holders of the Senior Debt in the respective
amounts, if any, due such holders of Senior Debt, then the holders of the
Subordinated Debt may turn over such payment or distribution, rather than to the
Senior Agent, to a court of competent jurisdiction in an appropriate
interpleader proceeding pending determination by such court of the holders of
Senior Debt entitled to receive all or any portion of such payment or
distribution, and, from and after the date of such payment into court, the
holders of the Subordinated Debt shall have no further liability therefor.
5.6 SUBORDINATION UNAFFECTED BY CERTAIN EVENTS.
The rights set forth in this Section 5 of the holders of the Senior
Debt as against each holder of Subordinated Debt shall remain in full force and
effect without regard to, and shall not be impaired by:
(a) any act or failure to act on the part of the Company;
10
(b) any extension or indulgence in respect of any payment or
prepayment of the Senior Debt or any part therefor in respect of any
other amount payable to any holder of Senior Debt;
(c) any amendment, modification, restatement, refinancing or
waiver of, or addition or supplement to, or deletion from, or
compromise, release, consent or other action in respect of, any of the
terms of any Senior Debt or any other agreement which may be relating
to any Senior Debt, other than such as would cause all or any portion
of such Debt to fail to meet the definition of "Senior Debt;"
(d) any exercise or non-exercise by any holder of Senior Debt
of any right, power, privilege or remedy under or in respect of any
Senior Debt or Subordinated Debt or any waiver of any such right,
power, privilege or remedy or any default in respect of any Senior Debt
or the Subordinated Debt, any dealing with or action against any
collateral security therefor or any receipt by any holder of Senior
Debt of any security, or any failure by any holder of Senior Debt to
perfect a security interest in, or any release by any such of Senior
Debt of, any security for the payment of any Senior Debt;
(e) any merger or consolidation of the Company or any of its
Subsidiaries into or with any of its Subsidiaries or into or with any
Person, or any Transfer of any or all of the Property of the Company or
any of its Subsidiaries to any other Person; or
(f) the absence of any notice to, or knowledge by, any holder
of Subordinated Debt of the existence or occurrence of any of the
matters or events set forth in the foregoing clauses (a) through (e).
5.7 WAIVER AND CONSENT.
Each holder of Subordinated Debt waives any and all notices of the
acceptance of the provisions of this Section 5 or of the creation, renewal,
extension or accrual, now or at any time in the future, of any Senior Debt.
5.8 REINSTATEMENT OF SUBORDINATION.
The obligations of each holder of Subordinated Debt under the
provisions set forth in this Section 5 shall continue to be effective, or be
reinstated, as the case may be, as to any payment in respect of any Senior Debt
that is rescinded or must otherwise be returned by the holder of such Senior
Debt upon the occurrence or as a result of any bankruptcy or judicial
proceeding, all as though such payment had not been made.
11
5.9 OBLIGATIONS NOT IMPAIRED.
Nothing contained in this Section 5 shall impair, as between the
Company and any holder of Subordinated Debt, the obligation of the Company to
pay to such holder the principal thereof as and when the same shall become due
and payable in accordance with the terms thereof and to comply with each and
every provision of the Notes and this Agreement or prevent any holder of any
Subordinated Debt from exercising all rights, powers and remedies otherwise
permitted by applicable law or under this Agreement, all subject to the rights
of the holders of the Senior Debt to receive cash, Securities or other Property
otherwise payable or deliverable to the holders of Subordinated Debt.
5.10 PAYMENT OF SENIOR DEBT; SUBROGATION.
Upon the payment in full of all Senior Debt, the holders of
Subordinated Debt shall be subrogated to all rights of any holder of Senior Debt
to receive any further payments or distributions applicable to the Senior Debt
until the Subordinated Debt shall have been paid in full, and such payments or
distributions received by the holders of Subordinated Debt by reason of such
subrogation, of cash, Securities or other Property which otherwise would be paid
or distributed to the holders of Senior Debt, shall, as between the Company and
its creditors other than the holders of Senior Debt, on the one hand, and the
holders of Subordinated Debt, on the other hand, be deemed to be a payment by
the Company on account of Senior Debt and not on account of Subordinated Debt.
5.11 RELIANCE OF HOLDERS OF SENIOR DEBT.
Each holder of Subordinated Debt by its acceptance thereof shall be
deemed to acknowledge and agree that the foregoing subordination provisions are,
and are intended to be, an inducement to and a consideration of each holder of
any Senior Debt, whether such Senior Debt was created or acquired before or
after the creation of Subordinated Debt, to acquire and hold, or to continue to
hold, such Senior Debt, and such holder of Senior Debt shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
holding, or in continuing to hold, such Senior Debt. Each such holder of Senior
Debt is intended to be, and is, a third party beneficiary of this Section 5.
Each holder of Subordinated Debt acknowledges and agrees that the provisions set
forth in this Section 5 shall be enforceable against such Persons by the holders
of the Senior Debt. Notwithstanding anything contained in this Agreement or any
other Financing Document to the contrary, no amendment, modification or
supplement of the provisions of this Section 5 (including, without limitation,
this Section 5.11) shall be effective as to any holder of Senior Debt without
the consent of such holder.
12
5.12 IDENTITY OF HOLDERS OF SENIOR DEBT.
Upon the request of any holder of Subordinated Debt, the Company shall
deliver to such holder a list of all holders of Senior Debt outstanding at such
time, providing the name and address of each such holder of Senior Debt and the
principal amount of Senior Debt held by each such holder; PROVIDED, HOWEVER,
that, if any holder of Senior Debt shall have appointed an agent or other
representative with respect to the Senior Debt held by it, the Company may
provide the name and address of such agent or representative in lieu of the name
and address of such holder of Senior Debt.
6. INTERPRETATION OF THIS AGREEMENT
6.1 TERMS DEFINED.
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
AFFILIATE -- means and includes, at any time, each Person (other than a
Subsidiary):
(a) that directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, the Company;
(b) that beneficially owns or holds five percent (5%) or more
of any class of the Voting Stock of the Company;
(c) five percent (5%) or more of the Voting Stock (or in the
case of a Person that is not a corporation, five percent (5%) or more
of the equity interest) of which is beneficially owned or held by the
Company; or
(d) that is an officer or director of the Company;
at such time; PROVIDED, HOWEVER, that none of the Purchasers nor any affiliate
of any Purchaser shall be deemed to be an "Affiliate," and no Person holding any
one or more of the Notes shall be deemed to be an "Affiliate" solely by virtue
of the ownership of such securities. As used in this definition:
CONTROL -- means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
AGREEMENT, THIS -- and references thereto shall mean this Amended and
Restated Note Agreement as it may from time to time be amended or supplemented.
BANKING LAWS - means and includes the BHCA and the IBA.
13
BANKRUPTCY CODE -- means Title 11, United States Code, sections 1 ET
SEQ., as amended from time to time, and all rules promulgated thereunder.
BHCA - the Bank Holding Company Act of 1956, as amended, and the rules,
regulations and official or staff interpretations promulgated thereunder, all as
from time to time in effect.
BUSINESS DAY -- means a day other than a Saturday, a Sunday or a day on
which banks in the State of New York are required or permitted by law (other
than a general banking moratorium or holiday for a period exceeding four (4)
consecutive days) to be closed.
CAPITAL LEASE -- means, at any time, a lease with respect to which the
lessee is required to recognize the acquisition of an asset and the incurrence
of a liability in accordance with GAAP.
CAPITAL STOCK -- means any class of preferred, common or other capital
stock, share capital or similar equity interest of a Person including, without
limitation, any partnership interest in any partnership or limited partnership
and any membership interest in any limited liability company.
CLOSING DATE -- means the date any Notes are first sold.
COMMON STOCK -- means the Common Stock, par value $0.001 per share, of
the Company.
COMPANY -- the introductory paragraph.
CONVERSION PRICE - means, per share of Common Stock, Three and
Eighty-Eight Thousand Three Hundred Forty Seven Hundred-Thousandths Dollars
($3.88347), as adjusted and readjusted from time to time in accordance with
Section 7.
CONVERTIBLE NOTE SHARES - Section 6.1 (in the definition of Tentative
Purchaser Ownership Level.
DEBT -- with respect to any Person, means, without duplication, the
liabilities of such Person with respect to:
(a) BORROWED MONEY -- borrowed money;
(b) DEFERRED PURCHASE PRICE OF PROPERTY -- the deferred
purchase price of Property acquired by such Person (excluding accounts
payable arising in the ordinary course of business but including all
liabilities created or arising under any conditional sale or other
title retention agreement with respect to any such Property);
14
(c) SECURED LIABILITIES -- borrowed money secured by any Lien
existing on Property owned by such Person (whether or not such
liabilities have been assumed);
(d) CAPITAL LEASES -- Capital Leases of such Person;
(e) LETTERS OF CREDIT -- letters of credit, bankers'
acceptances or instruments serving a similar function issued or
accepted by banks and other financial institutions for the account of
such Person, other than undrawn trade letters of credit in the ordinary
course of business;
(e) SWAPS -- Swaps of such Person; and
(g) GUARANTEES -- any Guaranty of such Person of any
obligation or liability of another Person of obligations of the type
listed in clause (a) through clause (f) of this definition of Debt.
As used in this definition,
SWAPS -- means, with respect to any Person, obligations with
respect to interest rate swaps and currency swaps and similar
obligations obligating such Person to make payments, whether
periodically or upon the happening of a contingency, except that if any
agreement relating to such obligation provides for the netting of
amounts payable by and to such Person thereunder or if any such
agreement provides for the simultaneous payment of amounts by and to
such Person, then in each such case, the amount of such obligations
shall be the net amount thereof. The aggregate net obligation of Swaps
at any time shall be the aggregate amount of the obligations of such
Person under all Swaps assuming all such Swaps had been terminated by
such Person as of the end of the then most recently ended fiscal
quarter of such Person. If such net aggregate obligation shall be an
amount owing to such Person, then the amount shall be deemed to be Zero
Dollars ($0).
Unless the context otherwise requires, "Debt" means Debt of the Company or of a
Subsidiary.
DEFAULT -- means any event which, with the giving of notice or the
passage of time, or both, would become an Event of Default.
EVENT OF DEFAULT -- Section 4.1.
EXCHANGE ACT -- means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations of the SEC thereunder.
EXCESS SHARES - means, at any time:
15
(a) for purposes of Section 7.10(a)(i), a number of LLC Shares
equal to the lesser of (a) all LLC Shares and (b) the minimum number of
LLC Shares, Convertible Note Shares and Option Shares that, when
subtracted from both the numerator and denominator of the Tentative
Purchaser Ownership Level, will cause the Tentative Purchaser Ownership
Level not to exceed the Permissible Purchaser Ownership Level;
(b) for purposes of Section 7.10(a)(ii) and Section 7.10(b), a
number of Convertible Note Shares equal to the lesser of (a) all
Convertible Note Shares and (b) the minimum number of LLC Shares,
Convertible Note Shares and Option Shares that, when subtracted from
both the numerator and denominator of the Tentative Purchaser Ownership
Level, will cause the Tentative Purchaser Ownership Level not to exceed
the Permissible Purchaser Ownership Level; and
(c) for purposes of Section 7.10(a)(iii), a number of Option
Shares equal to the lesser of (a) all Option Shares and (b) the minimum
number of LLC Shares, Convertible Note Shares and Option Shares that,
when subtracted from both the numerator and denominator of the
Tentative Purchaser Ownership Level, will cause the Tentative Purchaser
Ownership Level not to exceed the Permissible Purchaser Ownership
Level.
EXCHANGE DATE -- Section 7.3(b).
EXEMPT TRANSFEREE - Section 6.1 (in the definition of "Purchaser
Transferee").
FINANCING DOCUMENTS -- means and includes this Agreement, the
Securities Purchase Agreement, the Notes, the Stockholders Agreement and the
other agreements, certificates and instruments to be executed pursuant to the
terms of each of the foregoing, as each may be amended, restated or otherwise
modified from time to time.
GAAP -- means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States of
America.
GUARANTY -- means with respect to any Person (for the purposes of this
definition, the "Guarantor") any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or collection)
of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend
or other obligation of any other Person (the "Primary Obligor") in any manner,
whether directly or
16
indirectly, including, without limitation, obligations incurred through an
agreement, contingent or otherwise, by the Guarantor:
(a) to purchase such indebtedness or obligation or any
Property constituting security therefor;
(b) to advance or supply funds
(i) for the purchase or payment of such indebtedness,
dividend or obligation; or
(ii) to maintain working capital or other balance
sheet condition or any income statement condition of the
Primary Obligor or otherwise to advance or make available
funds for the purchase or payment of such indebtedness,
dividend or obligation;
(c) to lease Property or to purchase securities or other
Property or services primarily for the purpose of assuring the owner of
such indebtedness or obligation of the ability of the Primary Obligor
to make payment of the indebtedness or obligation; or
(d) otherwise to assure the owner of the indebtedness or
obligation of the Primary Obligor against loss in respect thereof.
For purposes of computing the amount of any Guaranty, in connection with any
computation of indebtedness or other liability:
(i) in each case where the obligation that is the subject of
such Guaranty is in the nature of indebtedness for money borrowed it
shall be assumed that the amount of the Guaranty is the amount of the
direct obligation then outstanding; and
(ii) in each case where the obligation that is the subject of
such Guaranty is not in the nature of indebtedness for money borrowed
it shall be assumed that the amount of the Guaranty is the amount (if
any) of the direct obligation that is then due.
IBA - the International Banking Act of 1978, as amended, and the rules,
regulations and official or staff interpretations promulgated thereunder, all as
from time to time in effect.
ICON -- means ICON Health & Fitness, Inc., a Delaware corporation and
Subsidiary of the Company, together with its successors and assigns.
ICON RESTRUCTURING -- means the closing of the issuance and sale of the
Notes and the other transactions contemplated by the Term Sheet.
17
INITIAL PUBLIC OFFERING - means "Initial Public Offering" as defined in
the Stockholders Agreement.
LENDER -- means "Lender" as defined in the Senior Credit Agreement.
LIEN -- means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property (for purposes of
this definition, the "Owner"), whether such interest is based on the common law,
statute or contract, and includes but is not limited to:
(a) the security interest lien arising from a mortgage,
encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes, and the filing of any
financing statement under the Uniform Commercial Code of any
jurisdiction, or an agreement to give any of the foregoing;
(b) reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting real Property;
(c) stockholder agreements, voting trust agreements, buy-back
agreements and all similar arrangements affecting the Owner's rights in
stock owned by the Owner; and
(d) any interest in any Property held by the Owner evidenced
by a conditional sale agreement, Capital Lease or other arrangement
pursuant to which title to such Property has been retained by or vested
in some other Person for security purposes.
The term "Lien" does not include negative pledge clauses in loan agreements and
equal and ratable security clauses in loan agreements.
LIQUIDITY EVENT - means "Liquidity Event" as defined in the
Stockholders Agreement.
LLC - means HF Investment Holdings, LLC, a Delaware limited liability
company.
LLC AGREEMENT - means the Amended and Restated Limited Liability
Company Agreement of the LLC, dated as of September 27, 1999, by and among Bain
Capital Fund IV, L.P., Bain Capital Fund IV-B, L.P., BCIP Associates and BCIP
Trust Associates, L.P., each a Delaware limited partnership, Gary Stevenson, an
individual residing in Riverheight, Utah, Scott Watterson, an individual
residing in Providence, Utah, and such other Persons as may from time to time be
admitted as Members (as defined therein), as amended, restated or otherwise
modified from time to time.
18
LLC SHARES - Section 6.1 (in the definition of Tentative Purchaser
Ownership Level).
NOTE -- means and includes each 0% Convertible Subordinated Note due
September 27, 2011 issued pursuant to this Agreement.
OPTION SHARES - Section 6.1 (in the definition of Tentative Purchaser
Ownership Level).
OWNERSHIP BASE - Section 6.1 (in the definition of Tentative Purchaser
Ownership Level).
PERMISSIBLE PURCHASER OWNERSHIP LEVEL - means at any time the greater
of (a) twenty-four and nine-tenths percent (24.9%) of the Shares, and (b) the
amount of Shares in a portfolio company that the Purchaser is allowed to own or
control under the Banking Laws and other applicable law.
PERSON -- means an individual, partnership, corporation, limited
liability company, joint venture, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
PROPERTY -- means any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
PURCHASER -- the introductory paragraph.
PURCHASER TRANSFEREE - means any direct or indirect purchaser from, or
transferee or assignee of, the Purchaser OTHER THAN: (a) a purchaser, transferee
or assignee to which Shares or any portion of this Note representing the right
to receive Shares is sold, transferred or assigned from the Purchaser either (i)
in a widely dispersed public distribution, or (ii) in one or more private
transactions that do not result in one purchaser, transferee or assignee
obtaining more than four and nine-tenths percent (4.9%) of the Shares, or that
portion of this NOTE representing the right to receive more than four and
nine-tenths percent (4.9%) of the Shares, which purchaser, transferee or
assignee purchases such Shares or such portion of this NOTE in the normal course
of its business for investment purposes only, and with no intention of
influencing control over the Company; and (b) any other purchaser, transferee or
assignee to which the Company (in the case of this clause (b) only) consents, in
the Company's sole discretion. A purchaser, transferee or assignee referred to
in either clause (a) or clause (b) above is referred to herein as an "EXEMPT
TRANSFEREE".
REORGANIZATION SECURITIES -- means Securities of the Company or any
other Person provided for by a plan of reorganization or readjustment the
payment of which is subordinated, at least to the extent provided in Section 5
with respect to Subordinated Debt, to the payment of all Senior Debt at the time
outstanding and to
19
any Securities issued in respect thereof under any such plan of reorganization
or readjustment.
REQUIRED HOLDERS -- means, at any time, the holders of fifty-one
percent (51%) in principal amount of the Notes at the time outstanding
(exclusive of Notes then owned by any one or more of the Company, any Subsidiary
or any Affiliate).
SEC -- means, at any time, the Securities and Exchange Commission or
any other federal agency at such time administering the Securities Act.
SECURITIES ACT -- means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
SECURITIES PURCHASE AGREEMENT -- means the Amended and Restated
Securities Purchase Agreement, dated as of the date hereof, between the Company
and the Purchaser, relating to the offering and sale of the Notes and shares of
the Common Stock.
SECURITY -- means "security" as defined by section 2(1) of the
Securities Act.
SENIOR AGENT -- means and includes:
(d) for so long as the Senior Credit Agreement remains
outstanding, General Electric Capital Corporation, as agent under the
Senior Credit Agreement; and
(e) thereafter, any one agent or lender in respect of a
successor revolving credit or similar agreement which is designated as
a Senior Credit Facility, or representative of either, designated in
writing to each holder of Notes by both the predecessor Senior Agent
and the Company as being a "Senior Agent."
SENIOR CREDIT AGREEMENT -- means the Credit Agreement, dated as of
September 24, 1999, among ICON, the other "Credit Parties" signatory thereto,
General Electric Capital Corporation, a New York corporation, for itself, as
"Lender," and as Agent for "Lenders," Fleet National Bank, as "Lender" and as
Syndication Agent, and the other "Lenders" signatory thereto from time to time,
as such agreement is from time to time amended, restated or otherwise modified.
SENIOR CREDIT FACILITY -- means and includes:
(a) the Senior Credit Agreement; or
(b) any one revolving credit agreement or similar agreement
permitting the Company, subject to the conditions therein, to obtain
loans or advances of cash, trade credits (including without limitation,
letters of credit or
20
bankers acceptances) or both, which agreement has refinanced, renewed,
replaced or extended the Senior Debt governed by the terms of a Senior
Credit Facility which both the Company and the Senior Agent under the
predecessor Senior Credit Facility (or, if no such other agreement is
then in effect, by the Company) have designated in writing to each
holder of Notes as being a "Senior Credit Facility;" PROVIDED, HOWEVER,
that, by making such designation, the predecessor Senior Credit
Facility shall cease to be the Senior Credit Facility (but any Debt
outstanding or incurred thereunder shall continue to be Senior Debt for
so long as such Debt meets the definition thereof).
SENIOR DEBT -- means and includes all obligations, liabilities and
indebtedness of the Company now or hereafter existing, whether fixed or
contingent, and whether for principal, interest (including interest accruing
after the filing of a petition under the Bankruptcy Code, whether or not
allowed), fees, expenses, indemnification or otherwise, in respect of Debt for
borrowed money of the Company or any Subsidiary, whether currently existing or
hereinafter incurred; PROVIDED, HOWEVER, that "Senior Debt" shall not include
any Debt that, by its terms or the terms of any ancillary agreement with the
holders of such Debt, is expressed to be subordinated in right of payment to, or
PARI PASSU with, the Subordinated Debt. For the avoidance of doubt, trade
indebtedness, the deferred purchase price of Property (including accounts
payable arising in the ordinary course of business and all liabilities created
or arising under any conditional sale or other title retention agreement with
respect to any such Property) and all other Debt other than Debt for borrowed
money of the Company or any Subsidiary (whether or not secured by any Lien or
Guarantied by the Company) shall not be "Senior Debt" hereunder.
SENIOR DEBT DEFAULT -- means any default by the Company in the payment
of the principal of or any sinking fund installments, if any, due with respect
to, fees in respect of or interest on, any Senior Debt, or any default, or any
event which, with notice or lapse of time or both, would constitute a default,
in any other agreement, term or condition contained in any agreement under which
any Senior Debt is issued or secured, which, in any such case, would cause, or
would permit the holder thereof to cause, the acceleration of such Senior Debt .
SENIOR OFFICER -- means any one or more of the chairman of the board of
directors, the chief executive officer, the chief operating officer, the chief
financial officer, and the president, of the Company.
SHARES - means shares of the Common Stock.
STANDSTILL PERIOD - Section 5.4.
STOCKHOLDERS AGREEMENT -- means the Stockholders Agreement, dated as of
the Closing Date, among the Company, ICON, HF Investment Holdings, LLC, each
21
Person listed on the signature pages thereto as a "Junior Management Initial
Investor," Scott Watterson, Gary Stevenson and the Purchaser.
SUBSIDIARY -- means, at any time, each corporation, association,
limited liability company or other business entity which qualifies as a
subsidiary of the Company that is properly included in a consolidated financial
statement of the Company and its subsidiaries in accordance with GAAP at such
time.
SUBORDINATED DEBT -- means and includes all obligations, liabilities
and indebtedness of the Company now or hereafter existing, whether fixed or
contingent, and whether for principal, interest (including interest accruing
after the filing of a petition under the Bankruptcy Code, to the extent
allowed), fees, expenses, indemnification or otherwise, in respect of this
Agreement and the Notes.
SUCCESSOR CORPORATION -- Section 4.1.
SUCCESSOR PROPERTY --means, in the case of any consolidation, merger,
sale, conveyance or reclassification described in Section 7.8, the shares of
Capital Stock, other securities, cash, Property or rights, warrants or options
receivable upon such consolidation, merger, sale, conveyance or reclassification
in respect of the shares of Common Stock held by a holder thereof.
TENTATIVE PURCHASER OWNERSHIP LEVEL - means, at any time, a fraction
(expressed as a percentage):
(i) the NUMERATOR of which shall be the sum of: (a)
the aggregate amount of Shares then held by the Purchaser and
any Purchaser Transferees (which, for purposes of this
definition, shall be deemed to include all Shares then
outstanding and held by or for the benefit of the Purchaser or
any Purchaser Transferees PLUS, those Shares that are not then
outstanding, which are subject to options, warrants or other
conversion privileges that are held by or for the benefit of
the Purchaser or any Purchaser Transferee and that are then
exercisable (but shall be deemed not to include any Shares
that are not outstanding, which are subject to options,
warrants or other conversion privileges that are held by or
for the benefit of any other Person)), (b) the aggregate
number of Shares to which the Purchaser and any Purchaser
Transferee would otherwise then be entitled or required to own
pursuant to Section 7.2(a) or Section 7.3(a) (the "CONVERTIBLE
NOTE SHARES"), (c) the aggregate number of Shares to which the
Purchaser and any Purchaser Transferee would otherwise then be
entitled or required to own pursuant to the LLC Agreement and
the Warrant (the "LLC SHARES"), and (d) any Shares to which
the Purchaser and any Purchaser Transferee would otherwise
then be entitled or required to own upon exercise of the CSFB
Option (as such
22
term is defined in Section 5.2 of the Stockholders Agreement)
(the "OPTION SHARES"); and
(ii) the DENOMINATOR of which shall be the sum of:
(a) the aggregate number of Shares then outstanding (which,
for purposes of this definition, shall be deemed to include
all Shares then outstanding PLUS, those Shares that are not
then outstanding, which are subject to options, warrants or
other conversion privileges that are held by or for the
benefit of the Purchaser or any Purchaser Transferee and that
are then exercisable (but shall be deemed not to include any
Shares that are not outstanding, which are subject to options,
warrants or other conversion privileges that are held by or
for the benefit of any other Person)), (b) the Convertible
Note Shares, (c) the LLC Shares, and (d) the Option Shares
(such sum, the "OWNERSHIP BASE");
PROVIDED, that no specific Shares (including the LLC Shares, the Convertible
Note Shares and the Option Shares) shall be counted more than once in
calculating either the numerator or the denominator set forth in clause (i) or
clause (ii) above.
TERM SHEET --means the term sheet, dated July 8, 1999, as amended and
attached to the Exchange Offer and Consent Solicitation, dated July 30, 1999, as
supplemented, for all outstanding 13% Senior Subordinated Notes due 2002 of
ICON, 15% Senior Secured Discount Notes due 2004 of IHF Holdings, Inc., and 14%
Senior Discount Notes due 2006 of ICON Fitness Corporation.
TRANSFERS -- means and includes, with respect to any Property, any
sales, leases, transfers or other dispositions of such Property; the term
"TRANSFER," when used as a verb with respect to any Property, means to sell,
lease as lessor, transfer or otherwise dispose of such Property; and the term
"TRANSFERRED" has a correlative meaning.
TRIGGERING EVENT -- means and includes:
(a) the occurrence of an event which would constitute a
"Liquidity Event" under the definition of "Liquidity Event" set forth
in the Stockholders Agreement;
(b) the liquidation, dissolution or winding-up of the Company
or ICON; the commencement by the Company, ICON or any Subsidiary of any
proceedings therefor; the commencement of any proceedings therefor by
any other Person which the Company or ICON does not oppose; or the
commencement of any proceedings therefor by any other Person which the
Company and ICON oppose in which either any order for relief is granted
to such other Person or which remains unstayed for a period of sixty
(60) days; and
23
(c) the occurrence of an Event of Default referred to in
Section 4.1(b).
TRIGGERING EVENT NOTICE DATE -- Section 7.1(b).
TRIGGERING EVENT NOTICE EVENT -- means any event which, with the giving
of notice or the passage of time, or both, would become, or result in, a
Triggering Event, including, without limitation, the execution of any written
agreement which, when fully performed by the parties thereto, would result in a
Triggering Event.
VALUATION AGENT -- means a firm of independent certified public
accountants, an investment banking firm or appraisal firm (which firm shall own
no Securities of, and shall not be an Affiliate, Subsidiary or a related Person
of, the Company) of recognized national standing retained by the Company and
reasonably acceptable to the Required Holders.
VOTING STOCK -- means, with respect to any corporation, any shares of
stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time any stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency), and, in the case of the Company, shall include the Common Stock.
WARRANT - means the HF Class C Units Purchase Warrant, dated September
27, 1999, issued by HF Investment Holdings, LLC, a Delaware limited liability
company, to the Purchaser, as amended, restated or otherwise modified from time
to time.
6.2 ACCOUNTING PRINCIPLES.
(a) GENERALLY. Unless otherwise provided herein, all financial
statements delivered in connection herewith will be prepared in
accordance with GAAP. Where the character or amount of any asset or
liability or item of income or expense, or any consolidation or other
accounting computation is required to be made for any purpose
hereunder, it shall be done in accordance with GAAP; PROVIDED, HOWEVER,
that if any term defined herein includes or excludes amounts, items or
concepts that would not be included in or excluded from such term if
such term were defined with reference solely to GAAP, such term will be
deemed to include or exclude such amounts, items or concepts as set
forth herein.
(b) CONSOLIDATION. Whenever accounting amounts of a group of
Persons are to be determined "on a consolidated basis" it shall mean
that, as to balance sheet amounts to be determined as of a specific
time, the amount that would appear on a consolidated balance sheet of
such Persons prepared as of such time, and as to income statement
amounts to be determined for a specific
24
period, the amount that would appear on a consolidated income statement
of such Persons prepared in respect of such period, in each case with
all transactions among such Persons eliminated, and prepared in
accordance with GAAP except as otherwise required hereby.
(c) CURRENCY. With respect to any determination, consolidation
or accounting computation required hereby, any amounts not denominated
in the currency in which this Agreement specifies shall be converted to
such currency in accordance with the requirements of GAAP (as such
requirements relate to such determination, consolidation or
computation) and, if no such requirements shall exist, converted to
such currency in accordance with normal banking procedures, at the
closing rate as reported in THE WALL STREET JOURNAL published most
recently as of the date of such determination, consolidation or
computation or, if no such quotation shall then be available, as quoted
on such date by any bank or trust company reasonably acceptable to the
Required Holders.
6.3 SECTION HEADINGS AND TABLE OF CONTENTS AND CONSTRUCTION.
(a) SECTION HEADINGS AND TABLE OF CONTENTS, ETC. The titles of
the Sections of this Agreement and the Table of Contents of this
Agreement appear as a matter of convenience only, do not constitute a
part hereof and shall not affect the construction hereof. The words
"herein," "hereof," "hereunder" and "hereto" refer to this Agreement as
a whole and not to any particular Section or other subdivision.
References to Sections are, unless otherwise specified, references to
Sections of this Agreement. References to Annexes and Exhibits are,
unless otherwise specified, references to Annexes and Exhibits attached
to this Agreement.
(b) CONSTRUCTION. Each covenant contained herein shall be
construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance
with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with one or more other
covenants.
6.4 GOVERNING LAW.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
25
7. CONVERSION AND EXCHANGE OF NOTES FOR COMMON STOCK
7.1 NOTICE OF OCCURRENCE OF A TRIGGERING EVENT.
(a) NOTICE OF TRIGGERING EVENT NOTICE EVENT. In the event of
the obtaining of knowledge of a Triggering Event Notice Event by any
Senior Officer, the Company will, within five (5) Business Days after
the occurrence of such event, give notice of such Triggering Event
Notice Event to each holder of Notes. Each such notice shall:
(i) be dated the date of the sending of such notice;
(ii) be executed by a Senior Officer;
(iii) refer to this Section 7.1(a); and
(iv) specify, in reasonable detail, the nature and
date of the Triggering Event Notice Event and the Triggering
Event which would result therefrom.
(b) TRIGGERING EVENT NOTICE. In the event of a Triggering
Event, the Company will, within five (5) Business Days after the
occurrence of such event, or in the case of any Triggering Event the
consummation or finalization of which would involve any action of the
Company, at least ten (10) Business Days prior to such Triggering Event
(the "TRIGGERING EVENT NOTICE DATE"), give notice of such Triggering
Event to each holder of Notes. Each such notice shall:
(i) be dated the date of the sending of such notice;
(ii) be executed by a Senior Officer;
(iii) refer to this Section 7.1(b);
(iv) specify, in reasonable detail, the nature and
date (or anticipated date) of the Triggering Event; and (V)
describe in detail the right of the holder of Notes described
in Section 7.2 hereof and the right of such holder pursuant to
Section 7.2(c) to specify the date that any conversion of the
Notes elected by such holder shall be deemed to be effected.
7.2 CONVERSION OF NOTES AT OPTION OF HOLDER.
(a) CONVERSION RIGHT. Subject to Section 7.10 and Section
7.11, each holder of a Note may, not later than fifteen (15) days
following the occurrence of a Triggering Event, at its option and
election, convert the
26
unpaid principal amount of such Note or any portion thereof, at the
Conversion Price, into that number of fully paid and nonassessable
shares of Common Stock which equals the quotient of:
(i) the principal amount to be so converted; DIVIDED
BY
(ii) the Conversion Price in effect at the time of
such conversion.
At the time of such conversion, the holder shall elect the time at
which such conversion shall become effective in accordance with Section
7.2(c) and, if no such election is made, such holder shall be deemed to
have elected the earliest date upon which such conversion could have
become effective in accordance with Section 7.2(c).
(b) MANNER OF CONVERSION; PARTIAL CONVERSION, ETC. Any Note
may be converted in full or in part by the holder thereof by surrender
of such Note, with a notice of conversion (a form of which is attached
to each Note) attached thereto duly executed by such holder (specifying
the portion of the principal amount thereof to be converted in the case
of a partial conversion), to the Company on any Business Day following
the Triggering Event Notice Date (but not later than fifteen (15) days
following the occurrence of the related Triggering Event) at its
principal office maintained in accordance with Section 3.1 of this
Agreement; PROVIDED, HOWEVER, that in no case shall any conversion of
Notes become effective unless the Triggering Event giving rise thereto
shall have occurred. Upon any partial conversion of a Note, the Company
at its expense will forthwith issue and deliver to or upon the order of
the holder thereof a new Note or Notes in an aggregate principal amount
equal to the unpaid and unconverted principal amount of such
surrendered Note.
(c) WHEN CONVERSION EFFECTIVE. Each conversion shall be deemed
to have been effected, at the option of the holder of Notes making such
election, upon either:
(i) the date of, and at the time immediately
preceding, the occurrence of the Triggering Event giving rise
to such conversion right; and
(ii) if such Business Day follows the date of such
Triggering Event, the Business Day on which such Note shall
have been surrendered to the Company as provided in Section
7.2(b) of this Agreement;
PROVIDED, HOWEVER, that in no case shall any conversion of Notes become
effective unless the Triggering Event giving rise thereto shall have
occurred.
27
In either the case of clause (i) or clause (ii) above, at such time the
Person or Persons in whose name or names any certificate or
certificates for shares of Common Stock (or Successor Property) shall
be issuable upon such conversion shall be deemed to have become the
holder or holders of record thereof.
(d) DELIVERY OF STOCK CERTIFICATES, ETC. As soon as
practicable after the conversion of any Note, in whole or in part, and
in any event within five (5) days thereafter, the Company at its
expense (including the payment by it of any applicable issue taxes)
will cause to be issued in the name of and delivered to the holder of
such Note or as such holder (upon payment by such holder of any
applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of
duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock (or Successor Property) to which such
holder shall be entitled upon such conversion, rounded up to
the nearest whole share; and
(ii) in case such conversion is in part only, a new
Note or Notes in an aggregate principal amount equal to the
unpaid and unconverted principal amount of such converted
Note.
7.3 EXCHANGE OF NOTES FOR COMMON STOCK BY THE COMPANY.
(a) EXCHANGE RIGHT. Subject to Section 7.10 and Section 7.11,
the Company may, not later than fifteen (15) days following the
occurrence of a Triggering Event, at its option and election, convert
all, but not less than all, the unpaid principal amount of all Notes,
at the Conversion Price, into that number of fully paid and
nonassessable shares of Common Stock which equals the quotient of:
(i) the principal amount to be so converted; DIVIDED
BY
(ii) the Conversion Price in effect at the time of
such conversion.
(b) NOTICE OF EXCHANGE. In order to exercise its option
pursuant to Section 7.3(a), the Company shall furnish, not later than
fifteen (15) days after the occurrence of any Triggering Event, written
notice to each holder of Notes. Such notice shall:
(i) be dated the date of the sending of such notice;
(ii) be executed by a Senior Officer;
28
(iii) refer to the right of the Company pursuant to
this Section 7.3;
(iv) state that the Company has exercised such right;
(v) state the date (the "EXCHANGE DATE") on which
such exchange shall become effective (which date shall be not
earlier than the date of, and immediately preceding, the
occurrence of the Triggering Event and not later than fifteen
(15) days following the date of the occurrence of the
Triggering Event; PROVIDED, HOWEVER, that in no case shall any
exchange of Notes pursuant to this Section 7.3 become
effective unless the Triggering Event giving rise thereto
shall have occurred);
(vi) state that, on the Exchange Date and after
giving effect to the occurrence of the relevant Triggering
Event and the effectiveness of the exchange, all rights of the
holders of the Notes (other than the right to receive shares
of Common Stock in accordance with this Section 7.3),
including the right to receive the principal amount of the
Notes at maturity, shall cease; and
(vii) state that the holder may receive certificates
for the shares of Common Stock into which the Notes held by
such holder were exchanged pursuant to Section 7.3(c) by
surrender of such Note to the Company on any Business Day
following the effective date of such exchange at its principal
office maintained in accordance with Section 3.1 of this
Agreement.
(c) DELIVERY OF SHARE CERTIFICATES. As soon as practicable
after the surrender of any Note following the exchange thereof pursuant
to this Section 7.3, and in any event within five (5) days thereafter,
the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and
delivered to the holder of such Note or as such holder (upon payment by
such holder of any applicable transfer taxes) may direct, a certificate
or certificates for the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or Successor
Property) to which such holder shall be entitled upon such conversion,
rounded up to the nearest whole share.
(d) In the case of exercises under both Section 7.2 and
Section 7.3, Section 7.3 shall control.
7.4 RESERVATION OF SHARES.
The Company shall at all times reserve and keep available out of its
authorized but unissued Common Stock, solely for the purpose of effecting the
29
conversion or exchange of the Notes, such number of its duly authorized shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding Notes. The Company covenants that all shares of
Common Stock which may be issued upon conversion or exchange of the Notes will
upon issue be fully paid and non-assessable by the Company and free from all
taxes, liens, and charges with respect to the issue thereof, and free of
preemptive rights in favor of other Persons. At and after the effective time of
any conversion or exchange, the Notes subject thereto shall evidence only the
shares of Common Stock issuable in respect thereof.
7.5 ADJUSTMENT OF CONVERSION PRICE IN RESPECT OF STOCK DIVIDENDS,
STOCK SPLITS, ETC.
In the event that the Company shall, on or after the date hereof:
(a) PAY a dividend in shares of additional Common Stock or
make a distribution in shares of additional Common Stock in respect of
shares of Common Stock;
(a) reclassify by subdivision its outstanding shares of Common
Stock into a greater number of shares; or
(b) reclassify by combination its outstanding shares of Common
Stock into a smaller number of shares;
then, and in each such case, the Conversion Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision or
combination shall be adjusted to that price determined by multiplying the
Conversion Price in effect immediately prior to such event by the quotient of:
(i) the total number of outstanding shares of Common
Stock immediately prior to such event; DIVIDED BY
(ii) the total number of outstanding shares of Common
Stock immediately after such event.
7.6 DE MINIMIS CHANGES IN CONVERSION PRICE.
No adjustment in the Conversion Price shall be required pursuant to
Section 7.5 unless such adjustment would require an increase or decrease of at
least one cent (1(cent)); PROVIDED that any adjustments that, at the time of the
calculation thereof, are less than one cent (1(cent)) at such time and by reason
of this Section 7.6 are not required to be made at such time shall be carried
forward and added to any subsequent adjustment or adjustments for purposes of
determining whether such subsequent adjustment or adjustments, as so
supplemented, exceed one cent (1(cent)) and, if any such subsequent adjustment,
as so supplemented or otherwise, should
30
exceed one cent (1(cent)), all adjustments deferred prior thereto and not
previously made shall then be made. In any case, all such adjustments being
carried forward pursuant to this Section 7.6 shall be given effect upon the
conversion or exchange of the Notes for purposes of determining the Conversion
Price applicable thereto. All calculations shall be made to the nearest cent.
7.7 NOTICE OF CHANGE IN CONVERSION PRICE.
The Company shall give prompt written notice of any change in the
Conversion Price to each holder of Notes. Each such notice shall set forth:
(a) the Conversion Price both before and after the event;
(b) a brief statement of the facts requiring such adjustments;
and
(c) the computation by which such adjustments were made.
7.8 EFFECT OF CONSOLIDATION, MERGER, SALE OR RECLASSIFICATION.
In the event that there shall be:
(a) any consolidation of the Company with, or merger of the
Company with or into, another Person (other than a merger in which the
Company is the surviving corporation and that does not result in any
reclassification or change of shares of Common Stock outstanding
immediately prior to such merger);
(b) any sale or conveyance to another Person of the Property
of the Company or ICON substantially as an entirety; or
(c) any reclassification of the Common Stock that results in
the issuance of Successor Property to the holders thereof;
then, in each such case, lawful provision shall be made as a part of the terms
of such transaction so that the holders of the Notes shall thereafter have the
right to purchase the amount and kind of Successor Property receivable upon such
consolidation, merger, sale, conveyance or reclassification by a holder of such
number of shares of Common Stock as the holder of such Notes would have had the
right to acquire upon the conversion or exchange thereof immediately prior to
such consolidation, merger, sale, conveyance or reclassification, at the
Conversion Price then in effect; and, without further action on the part of any
Person, each Note will thereafter represent the right to receive, upon
conversion or exchange thereof, such Successor Property as is so receivable. At
the time of each such consolidation, merger or sale, the Person surviving such
merger or consolidation or the Person to whom such sale or conveyance is made,
as the case may be, shall expressly assume the due and punctual observance and
performance of each and every provision of
31
this Section 7 and all obligations and liabilities of the Company hereunder
(subject to the foregoing sentence).
7.9 COMMON STOCK SUBJECT TO STOCKHOLDERS AGREEMENT.
Subject to Section 7.10, the Notes, and all Common Stock issued upon
conversion or exchange of the Notes pursuant to this Section 7, and the rights
and obligations of the Company and the holders of the Notes and the Common Stock
issued upon conversion or exchange of the Notes pursuant to this Section 7,
shall be subject to the provisions of the Stockholders Agreement and the holders
of the Notes and such Common Stock shall be entitled to all of the benefits
thereof.
7.10 INTEREST IN EXCESS OF 24.9%.
Notwithstanding any other provision of this Agreement (other than
Section 7.11), any other Financing Document, the LLC Agreement or the Warrant,
in the event and to the extent that the Tentative Purchaser Ownership Level
would at any time at or after the occurrence of a Triggering Event that this
Note is owned by or for the benefit of the Purchaser or any Purchaser Transferee
thereof, exceed the Permissible Purchaser Ownership Level, the following
provisions shall apply:
(a) GENERAL.
(i) FIRST, that portion of the Warrant which would
otherwise represent Excess Shares will not be exercisable, in
which event the number of Excess Shares will be recomputed
such that the LLC Shares which are not issuable as a result of
this Section 7.10(a)(i) are subtracted from both the numerator
and the denominator of the Tentative Purchaser Ownership Level
definition;
(ii) SECOND, that portion of the conversion right and
the exchange right in Section 7.2(a) and Section 7.3(a) of
this Agreement, which would otherwise result in the issuance
of Excess Shares, will not be exercisable and, accordingly,
shall not permit or require (as applicable) the Purchaser or
any Purchaser Transferee to acquire any Excess Shares, in
which event the number of Excess Shares will be recomputed by
subtracting the Convertible Note Shares which are not issuable
as a result of this Section 7.10(a)(ii) from both the
numerator and denominator of the Tentative Purchaser Ownership
Level definition (as previously recalculated pursuant to
Section 7.10(a)(i)); and
(iii) THIRD, that portion of the Option Shares which
would otherwise represent Excess Shares will not be
exercisable, in which event the number of Excess Shares will
be recomputed such that the Option Shares which are not
issuable as a result of this Section
32
7.10(a)(iii) are subtracted from both the numerator and the
denominator of the Tentative Purchaser Ownership Level
definition (as previously recalculated pursuant to Sections
7.10(a)(i) and 7.10(a)(ii)).
EXCESS SHARE TRANSFER RIGHTS. At the request of the Purchaser,
to the extent there has been a change in law or enforcement of the
Banking Laws, the Company shall (i) use its best efforts to assist the
Purchaser in locating one or more Exempt Transferees for that portion
of the Note representing the right to receive Excess Shares
(determined, solely, for this purpose, (x) immediately after giving
effect to any transfer of the LLC Shares to an Exempt Transferee (as
defined in Section 11 of the Warrant) pursuant to and in accordance
with Section 1.5(b) of the Warrant, to the extent such transfer occurs
prior to or simultaneously with any transfer pursuant to this Section
7.10(b), and (y) without giving effect to the recomputation of the
number of Excess Shares as contemplated by Section 7.10(a)(i), Section
7.10(a)(ii) and Section 7.10(a)(iii) of this Agreement), and (ii)
consent to the Purchaser effecting such transfer(s); PROVIDED, HOWEVER,
that no such transfer shall be effective until the transferee has
delivered to the Company a written acknowledgement and agreement in
form and substance reasonably satisfactory to the Company that any
shares of stock of the Company to be distributed by the Company to such
transferee, following exercise by such transferee of the Note, shall be
subject to all the provisions of the Stockholders Agreement and that
such transferee is bound thereby and a party thereto to the same extent
as the holder from whom the transfer was made.
(b) In the event that any portion of the Warrant, of the
conversion and exchange rights under Section 7.2(a) or 7.3(a) of this
Agreement, or of the CSFB Option becomes not exercisable by virtue of
clause (a) above (or in the case of the Warrant, by virtue of Section
1.5(a) thereof), the right to exercise (or in the case of the Company,
the right to cause the exercise of) such unexercisable portion shall be
suspended until, and become effective upon, the earliest time and to
the maximum extent consistent with the Tentative Purchaser Ownership
Level not exceeding, at the time of the effectiveness of any right to
exercise (or to cause an exercise), the Permissible Ownership Level,
such effectiveness to be allocated among the Option Shares, the Note
and the Warrant in the reverse order of clauses (iii), (ii) and (i) of
clause (a) of this Section 7.10.
7.11 AUTOMATIC CONVERSION UPON INSOLVENCY.
Notwithstanding any other provision of this Agreement, any other
Financing Document, the LLC Agreement or the Warrant, upon the occurrence of an
Event of Default referred to in Section 4.1(b), the entire unpaid principal
amount of the
33
Notes shall automatically convert, at the Conversion Price, into that number of
fully paid and nonassessable shares of Common Stock which equals the quotient
of:
(i) the principal amount so converted; DIVIDED BY
(ii) the Conversion Price in effect at the time of
such conversion.
As soon as practicable after the surrender of any Note following the occurrence
of such conversion pursuant to this Section 7.11, and in any event within five
(5) days thereafter, the Company at its expense (including the payment by it of
any applicable issue taxes) will cause to be issued in the name of and delivered
to the holder of such Note or as such holder (upon payment by such holder of any
applicable transfer taxes) may direct, a certificate or certificates for the
number of duly authorized, validly issued, fully paid and nonassessable shares
of Common Stock (or Successor Property) to which such holder shall be entitled
upon such conversion, rounded up to the nearest whole share.
8. MISCELLANEOUS
8.1 COMMUNICATIONS.
(a) METHOD; ADDRESS. All communications hereunder or under the
Notes shall be in writing and shall be delivered either by nationwide
overnight courier or by facsimile transmission (confirmed by delivery
by nationwide overnight courier sent on the day of the sending of such
facsimile transmission). Communications to the Company shall be
addressed as set forth on Annex 2, or at such other address of which
the Company shall have notified each holder of Notes. Communications to
the Senior Agent shall be addressed as set forth on Annex 2, or at such
other one address of which the Senior Agent and the Company both shall
have notified each holder of Notes. Communications to the holders of
the Notes shall be addressed as set forth on Annex 1 by such holder, or
at such other address of which such holder shall have notified the
Company (and the Company shall record such address in the register for
the registration and transfer of Notes maintained pursuant to Section
3.1.
(b) WHEN GIVEN. Any communication addressed and delivered as
herein provided shall be deemed to be received when actually delivered
to the address of the addressee (whether or not delivery is accepted)
or received by the telecopy machine of the recipient. Any communication
not so addressed and delivered shall be ineffective.
(c) SERVICE OF PROCESS. Notwithstanding the foregoing
provisions of this Section 8.1, service of process in any suit, action
or proceeding arising out of or relating to this agreement or any
document, agreement or transaction
34
contemplated hereby, or any action or proceeding to execute or
otherwise enforce any judgment in respect of any breach hereunder or
under any document or agreement contemplated hereby, shall be delivered
in the manner provided in Section 8.7(c).
8.2 REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating hereto, including, without
limitation, consents, waivers and modifications that may hereafter be executed,
documents received by you at the closing of your purchase of the Notes (except
the Notes themselves), and financial statements, certificates and other
information previously or hereafter furnished to any holder of Notes, may be
reproduced by the Company or any holder of Notes by any photographic,
photostatic, microfilm, micro-card, miniature photographic, digital or other
similar process and each holder of Notes may destroy any original document so
reproduced. Any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by the
Company or such holder of Notes in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. Nothing in this Section 8.2 shall prohibit
the Company or any holder of Notes from contesting the accuracy or validity of
any such reproduction.
8.3 ENTIRE AGREEMENT.
This Agreement, the Notes and the other Financing Documents embody the
entire agreement and understanding among the Company and the Purchasers, and
supersede all prior agreements and understandings, relating to the subject
matter hereof.
8.4 SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. The provisions hereof are
intended to be for the benefit of all holders, from time to time, of Notes, and
shall be enforceable by any such holder whether or not an express assignment to
such holder of rights hereunder shall have been made by you or your successor or
assign. Anything contained in this Section 8.4 notwithstanding, the Company may
not assign any of its respective rights, duties or obligations hereunder or
under any of the other Financing Documents without the prior written consent of
all holders of Notes. For purposes of the avoidance of doubt, any holder of a
Note shall be permitted to pledge or otherwise grant a Lien in and to such Note
(including, without limitation, pledging such Note to a trustee for the benefit
of certain secured noteholders pursuant to documents relating to the financing
of such holder or to one or more banks or other institutions providing financing
in connection with the purchase by such holder of
35
such Note); PROVIDED, HOWEVER, that any such pledgee or holder of a Lien shall
not be considered a holder hereunder until it shall have foreclosed upon such
Note in accordance with applicable law and informed the Company, in writing, of
the same. Notwithstanding the foregoing, if any conflict exists between the
terms of this Section 8.4 and the terms of the Stockholders Agreement, the terms
of the Stockholders Agreement shall control.
8.5 AMENDMENT AND WAIVER.
(a) REQUIREMENTS. This Agreement may be amended, and the
observance of any term hereof may be waived, with (and only with) the
written consent of the Company and the Required Holders; PROVIDED,
HOWEVER, that no such amendment or waiver shall, without the written
consent of the holders of all Notes (exclusive of Notes held by the
Company, any Subsidiary or any Affiliate) at the time outstanding;
(i) change the amount or time of the required payment
of principal;
(ii) amend or waive the provisions of Section 5, or
amend or waive any defined term to the extent used therein;
(iii) amend or waive the definition of "Required
Holders;" or
(iv) amend or waive this Section 8.5 or amend or
waive any defined term to the extent used herein.
The holder of any Note may specify that any such written consent
executed by it shall be effective only with respect to a portion of the
Notes held by it (in which case it shall specify, by dollar amount, the
aggregate principal amount of Notes with respect to which such consent
shall be effective) and in the event of any such specification such
holder shall be deemed to have executed such written consent only with
respect to the portion of the Notes so specified.
No amendment, supplement or modification of the provisions of
Section 5, or any defined term to the extent used therein, shall be
effective as to any holder of Senior Debt who has not consented to such
amendment, supplement or modification.
(b) BINDING EFFECT. Any amendment or waiver consented to as
provided in this Section 8.5 shall apply equally to all holders of
Notes and shall be binding upon them and upon each future holder of any
Note and upon the Company whether or not such Note shall have been
marked to indicate such amendment or waiver. No such amendment or
waiver shall extend to or affect any obligation, covenant, agreement,
Default or Event of Default not expressly amended or waived or impair
any right consequent thereon.
36
8.6 EXPENSES.
(a) AMENDMENTS AND WAIVERS. The Company shall pay when billed
the reasonable costs and expenses (including reasonable attorneys'
fees) incurred by the holders of the Notes in connection with the
consideration, negotiation, preparation or execution of any amendments,
waivers, consents, standstill agreements and other similar agreements
with respect to this Agreement or any other Financing Document (whether
or not any such amendments, waivers, consents, standstill agreements or
other similar agreements are executed).
(b) RESTRUCTURING AND WORKOUT, INSPECTIONS. At any time when
the Company and the holders of Notes are conducting restructuring or
workout negotiations in respect hereof, or a Default or Event of
Default exists, the Company shall pay when billed the reasonable costs
and expenses (including reasonable attorneys' fees and the fees of
professional advisors) incurred by the holders of the Notes in
connection with the assessment, analysis or enforcement of any rights
or remedies that are or may be available to the holders of Notes,
including, without limitation, in connection with inspections of any of
the Properties, books of account, records, reports and other papers of
the Company or any of the Subsidiaries; PROVIDED, HOWEVER, that at all
times during which no restructuring or workout negotiations are
continuing and no Default or Event of Default exists, inspections will
be at the expense of the inspecting holder of Notes.
(c) COLLECTION. If the Company shall fail to pay when due the
principal of any Note, the Company shall pay to each holder of Notes,
to the extent permitted by law, such amounts as shall be sufficient to
cover the costs and expenses, including but not limited to reasonable
attorneys' fees, incurred by such holder in collecting any sums due on
such Note.
8.7 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION; ETC.
(a) WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES
AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT
OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY
ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR
OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT OF OR
BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS
CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING. EACH
37
PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER
PARTIES HERETO THAT THIS SECTION 8.7(A) CONSTITUTES A MATERIAL
INDUCEMENT UPON WHICH THEY ARE RELYING AND WILL RELY IN ENTERING INTO
THIS AGREEMENT. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS SECTION 8.7(A) WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
(b) CONSENT TO JURISDICTION. Each party to this Agreement, by
its execution hereof, (a) hereby irrevocably submits to the exclusive
jurisdiction of the state courts of the State of New York sitting in
the County of New York or the United States District Court for the
Southern District of New York for the purpose of any action, claim,
cause of action or suit (in contract, tort or otherwise), inquiry,
proceeding or investigation arising out of or based upon this Agreement
or relating to the subject matter hereof, (b) hereby waives to the
extent not prohibited by applicable law, and agrees not to assert, and
agrees not to allow any of its subsidiaries to assert, by way of
motion, as a defense or otherwise, in any such action, any claim that
it is not subject personally to the jurisdiction of the above-named
courts, that its property is exempt or immune from attachment or
execution, that any such proceeding brought in one of the above-named
courts is improper, or that this Agreement or the subject matter hereof
or thereof may not be enforced in or by such court and (c) hereby
agrees not to commence or maintain any action, claim, cause of action
or suit (in contract, tort or otherwise), inquiry, proceeding or
investigation arising out of or based upon this Agreement or relating
to the subject matter hereof or thereof other than before one of the
above-named courts nor to make any motion or take any other action
seeking or intending to cause the transfer or removal of any such
action, claim, cause of action or suit (in contract, tort or
otherwise), inquiry, proceeding or investigation to any court other
than one of the above-named courts whether on the grounds of
inconvenient forum or otherwise. Notwithstanding the foregoing, to the
extent that any party hereto is or becomes a party in any litigation in
connection with which it may assert indemnification rights, the court
in which such litigation is being heard shall be deemed to be included
in clause (a) above.
(c) SERVICE OF PROCESS. Each party hereto hereby consents to
service of process in any such proceeding in any manner permitted by
New York law, and agrees that service of process by registered or
certified mail, return receipt requested, at its address specified
pursuant to Section 8.1 is reasonably calculated to give actual notice.
The provisions of this Section 8.7(c) shall not restrict the ability of
any party to enforce in any court any judgment obtained in the federal
or state courts of the State of New York.
38
8.8 EXECUTION IN COUNTERPART.
This Agreement may be executed in one or more counterparts and shall be
effective when at least one counterpart shall have been executed by each party
hereto, and each set of counterparts that, collectively, show execution by each
party hereto shall constitute one duplicate original.
[Remainder of page left intentionally blank; Next page is the signature page.]
39
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed and delivered by one of its duly authorized
officers or representatives.
HF HOLDINGS, INC.
By:_________________________________
Name:
Title:
CREDIT SUISSE FIRST BOSTON CORPORATION
By:_________________________________
Name:
Title:
[Signature page to the Note Agreement]
ANNEX 1
ADDRESS OF PURCHASER; PAYMENT INSTRUCTIONS
================================================================================
PURCHASER NAME CREDIT SUISSE FIRST BOSTON CORPORATION
- --------------------------------------------------------------------------------
Name in which Note is Registered CREDIT SUISSE FIRST BOSTON CORPORATION
================================================================================
Note Registration Number; Principal R-1; $7,500,000
Amount of Note
- --------------------------------------------------------------------------------
Payments on Account of Note
Method
Federal Funds Wire Transfer
Account Information
Citibank
New York, NY
ABA No.: 021-000-089
Acct. Name: Credit Suisse First
Boston-Distressed
Acct. No.: 4080-4716
Re: HF Holdings, Inc.
Attn.: Demetri Catis
- --------------------------------------------------------------------------------
Accompanying Information Name of Company: HF HOLDINGS, INC.
Description of
Security: 0% Convertible Subordinated
Notes due September 27, 2011
Due Date and Application (as among
principal) of the payment being made:
================================================================================
================================================================================
Address for Notices Related Credit Suisse First Boston Corporation
to Payments Eleven Madison Avenue
New York, NY 10010-3629
Attn: Christopher Pechock
Fax: 212.325.8290
- --------------------------------------------------------------------------------
Address for All Other Notices Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Attn: Christopher Pechock
Fax: 212.325.8290
WITH A COPY TO:
Bingham Dana LLP
One State Street
Hartford, CT 06103-3178
Attn: Evan D. Flaschen
Fax : 860.240.2800
- --------------------------------------------------------------------------------
Other Instructions Signature Page Format:
CREDIT SUISSE FIRST BOSTON CORPORATION
By___________________________
Name:
Title:
- --------------------------------------------------------------------------------
Tax Identification Number 13-5659485
================================================================================
Annex 1-2
ANNEX 2
ADDRESSES FOR NOTICES
ADDRESS OF COMPANY FOR NOTICES:
HF Holdings, Inc.
c/o ICON Health & Fitness, Inc.
875 South Main Street
Logan, Utah 84321
Telephone: 435 750-4000
Facsimile: 435 753-3665
Attn: President
ADDRESS OF SENIOR AGENT FOR NOTICES:
General Electric Capital Corporation
10 South LaSalle Street, Suite 2700
Chicago, Illinois 60603
Attention: ICON Health & Fitness, Account Manager
Telephone: 312 419-0985
Facsimile: 312 419-5992
Annex 2-1
ATTACHMENT A
[FORM OF NOTE]
THIS NOTE WAS ISSUED IN A PRIVATE PLACEMENT, WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD,
ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION UNDER THE ACT COVERING THE TRANSFER OR AN OPINION OF COUNSEL,
SATISFACTORY TO THE ISSUER, THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
IN ADDITION, THIS NOTE IS SUBJECT TO RESTRICTIONS ON VOTING AND
TRANSFER AND REQUIREMENTS OF SALE AND OTHER PROVISIONS AS SET FORTH IN THE
STOCKHOLDERS AGREEMENT DATED AS OF SEPTEMBER 27, 1999, AS AMENDED AND IN
EFFECT FROM TIME TO TIME, AND CONSTITUTES A CSFB SECURITY AS DEFINED IN
SUCH STOCKHOLDERS AGREEMENT. THE COMPANY WILL FURNISH A COPY OF SUCH
AGREEMENT TO THE HOLDER OF THIS NOTE WITHOUT
CHARGE UPON WRITTEN REQUEST.
HF HOLDINGS, INC.
0% CONVERTIBLE SUBORDINATED NOTE DUE SEPTEMBER 27, 2011
No. R-__
$_______ __________ __, ____
HF HOLDINGS, INC. (together with its successors, the "Company"), a
Delaware corporation, for value received, hereby promises to pay to ______ or
registered assigns the principal sum of ______ DOLLARS ($______) on September
27, 2011.
Payment of principal shall be made in such coin or currency of the
United States of America as at the time of payment is legal tender for the
payment of public and private debts to the registered holder hereof at the
address shown in the register maintained by the Company for such purpose, in the
manner provided in the Note Agreement (defined below).
This Note is one of an issue of Notes of the Company issued in an
aggregate principal amount limited to Seven Million Five Hundred Thousand
Dollars ($7,500,000) pursuant to the Amended and Restated Note Agreement (as may
be amended, restated or otherwise modified from time to time, the "Note
Agreement"), dated as of September 27, 1999, between the Company and the
purchaser listed on Annex 1 thereto. The holder of this Note is entitled to the
benefits of the Note Agreement. This Note is subject to the terms of the Note
Agreement, and such terms are incorporated herein by reference. Capitalized
terms used herein and not defined herein have the meanings specified in the Note
Agreement.
All of the principal of this Note may, under certain circumstances, be
declared due and payable in the manner and with the effect provided in the Note
Agreement.
-1-
This Note is a registered Note and is transferable only by surrender at
the principal office of the Company as specified in the Note Agreement, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
The obligations evidenced by this Note are subordinated to the Senior
Debt on the terms provided in the Note Agreement.
THIS NOTE AND THE NOTE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
HF HOLDINGS, INC.
By:_________________________
Name:
Title:
-2-
[FORM OF NOTICE OF CONVERSION]
To HF HOLDINGS, INC.
The undersigned elects to convert $______________________ in principal
amount of the accompanying Note into the number of shares of Common Stock of HF
Holdings, Inc. issuable upon the conversion of such principal amount of such
Note, and requests that the certificates for such shares be issued in the name
of:
- ------------------------------------------------------------------------
(Please print or type name, address and zip code.)
- ------------------------------------------------------------------------
(Please insert social security number or tax ID number
If such principal amount of the accompanying Note shall not be the entire
principal amount of the accompanying Note, a new Note or Notes for the balance
remaining of such Note shall be registered in the name of and delivered to:
- ------------------------------------------------------------------------
(Please print or type name, address and zip code.)
- ------------------------------------------------------------------------
(Please insert social security number or tax ID number
The undersigned elects that the conversion of the accompanying Note shall be
deemed to have been effected upon:
|_| the date of, and at the time immediately preceding, the occurrence
of the "Triggering Event" giving rise to such conversion right; or
|_| the Business day on which the accompanying Note shall have been
surrendered to the Company.
Dated: ____________________, _________
[HOLDER]
By:_________________________
NOTICE
The signature to the foregoing Notice of Conversion must correspond to
the name as written upon the face of the accompanying Note or any prior
assignment thereof in every particular, without alteration or enlargement or any
change whatsoever.
-3-