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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): September 23, 1998
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EASYRIDERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 001-14509 33-0811505
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(State of (Commission (I.R.S. Employer
Incorporation) File Number) Identification No.)
567 San Nicolas Drive, Suite 400, Newport Beach, California 92660
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(Address of principal executive offices)
Registrant's telephone number, including area code (949) 718-4630
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N/A
(Former name or former address, if changed since last report)
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Item 1 Changes in Control of Registrant.
On September 23, 1998, after approval by the stockholders of Newriders, Inc., a
Nevada corporation ("Newriders"), Easyriders, Inc. (the "Registrant")
consummated a series of transactions (collectively referred to as the
"Reorganization") as described below in this report. See "Item 2. -- Acquisition
or Disposition of Assets." In connection with the Reorganization, three persons,
Mr. Joseph Teresi, Mr. John E. Martin and Mr. William E. Prather, became the
beneficial owners of a number of shares of Registrant's Common Stock, $.001 par
value per share (the "Easyriders Common Stock") representing in the aggregate
approximately sixty-seven percent (67%) of the issued and outstanding shares of
the Easyriders Common Stock as of September 23, 1998. Mr. Teresi is Publisher of
Paisano Publications, Inc., a subsidiary of Registrant. Mr. Martin is the
Chairman of the Board of Directors of Registrant. Mr. Prather is the President,
Chief Executive Officer and a member of the Board of Directors of Registrant.
In connection with the Reorganization, Mr. Teresi received 6,993,507 shares of
the Easyriders Common Stock (representing approximately 35.3% of Easyriders
Common Stock issued and outstanding as of September 23, 1998). Of these shares,
6,493,507 were received as part of the consideration for the contribution by Mr.
Teresi to the Registrant of all of the issued and outstanding common stock of
the companies comprising the Paisano Companies, as described below. See "Item 2
- -- Acquisition or Disposition of Assets." The remaining 500,000 shares were
received by Mr. Teresi upon the exchange of 1,000,000 shares of the Common
Stock, $.001 par value per share of Newriders (the "Newriders Common Stock")
previously acquired by Mr. Teresi in consideration of the forgiveness of
$211,133 in accounts payable owed by Newriders to one or more of the Paisano
Companies, which were then owned by Mr. Teresi.
In connection with the Reorganization, Mr. Martin received 5,282,947 shares of
Easyriders Common Stock (representing approximately 26.6% of Easyriders Common
Stock issued and outstanding as of September 23, 1998). Of these shares,
4,036,797 were received for a purchase price of $12,300,000, of which $5,000,000
was paid in cash, and the balance paid by delivery of the Martin Notes, as
described below. See "Item 2 -- Acquisition or Disposition of Assets." In the
Reorganization, Mr. Martin also exchanged 242,300 shares of Newriders Common
Stock for 121,150 shares of Easyriders Common Stock, and a warrant to purchase
250,000 shares of Newriders Common Stock exercisable at $4.00 per share for a
warrant to purchase 125,000 shares of Easyriders Common Stock exercisable at
$8.00 per share. Mr. Martin also exchanged in the Reorganization, his 49.0%
interest in M & B Restaurants, LLC, a Texas limited liability company which
operates four restaurants under the name El Paso Bar-B-Que ("El Paso") for
1,000,000 shares of Easyriders Common Stock.
In connection with the Reorganization, Mr. Prather and his wife received a total
of 1,000,000 shares of Easyriders Common Stock (representing approximately 5% of
Easyriders Common Stock issued and outstanding as of September 23, 1998), in
consideration for the contribution by Mr. and Mrs. Prather of all of their
interest as members in El Paso, as defined below. See "Item 2 -- Acquisition or
Disposition of Assets."
The following table sets forth certain information with respect to the
beneficial ownership of Easyriders Common Stock, by: (a) each person known by
Registrant to beneficially own more than 5% of the Easyriders Common Stock, (b)
each director of Registrant, (c) all directors and executive officers of
Registrant, as a group, as of September 23, 1998.
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AMOUNT AND NATURE PERCENTAGE OF
OF BENEFICIAL OUTSTANDING
NAME OF BENEFICIAL OWNER OWNERSHIP COMMON STOCK(1)
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John E. Martin(2)........................... 5,282,947 26.6%
William E. Prather(3)....................... 1,000,000 5.0%
Wayne L. Knyal(4)........................... 238,027 1.2%
Daniel J. Gallery(5)........................ 37,500 *
Joseph Teresi (6)........................... 8,363,507 42.2%
Ellen Meagher............................... 0 *
Robert Davis................................ 0 *
Joseph J. Jacobs............................ 0 *
All Executive Officers and
Directors of Easyriders as a
group (9 persons)(7)........................ 15,343,131 76.9%
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*Less than one percent (1%)
(1) As of the date of this Report, there are a total of 19,829,352 issued and
outstanding shares of Easyriders Common Stock.
(2) Includes: (a) warrants to purchase up to 125,000 shares at $8.00 per share
anytime on or before April 21, 1999; (b) 5,157,947 shares held in the John E.
Martin Revocable Trust dated June 16, 1992, of which Mr. Martin is trustee and
beneficiary.
(3) All shares are held jointly by Mr. Prather and his spouse.
(4) Includes an option to purchase up to 15,000 shares of Easyriders Common
Stock exercisable at $5.00 per share. On June 10, 1998, Mr. Knyal purchased
$1,000,000 face value of Newriders convertible debentures. The debentures are
convertible into shares of Easyriders Common Stock at the lesser of $4.75 per
share or 75% of the average closing bid price of Easyriders Common Stock during
the five trading period prior to conversion. For purposes of this table the
conversion ratio of $4.75 per share has been used, which would provide for the
issuance of 210,527 shares of Easyriders Common Stock upon conversion. In
connection with Mr. Knyal's purchase of the debentures, Mr. Knyal was also
issued a warrant which was exchanged in connection with the Reorganization to
purchase up to 12,500 shares of Easyriders Common Stock exercisable at a price
equal to 115% of the conversion price of the debentures.
(5) Mr. Gallery holds a fully vested option to purchase up to 15,000 shares of
Easyriders Common Stock exercisable at $5.00 per share. Shares beneficially
owned also includes 17,500 shares held of record by G3 Holdings, LLC, a limited
liability company in which Mr. Gallery, his brother and his sister are
co-managers and owners.
(6) Includes 1,370,000 shares owned by three unrelated individuals, for which
shares Mr. Teresi holds irrevocable proxies which expire May 29, 2000, and in
which Mr. Teresi has no pecuniary interest.
(7) Registrant has treated as issued and outstanding, 125,000 shares subject to
a warrant exercisable at $8.00 per share in favor of Mr. Martin, 125,000 shares
subject to a warrant exercisable at $8.00 per share in favor of Mr. William R.
Nordstrom, Registrant's Executive Vice President, 27,500 shares
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covered by options granted to Mr. Knyal, 15,000 shares covered by options
granted to Mr. Gallery, and 210,527 shares issuable to Mr. Knyal upon conversion
of certain convertible debentures.
STOCKHOLDER'S AGREEMENT, BOARD OF DIRECTORS AND MANAGEMENT OF REGISTRANT
In connection with the Reorganization, Mr. Martin, Mr. Teresi and the Registrant
have entered into that certain Stockholders' Agreement dated September 23, 1998
(the "Stockholders' Agreement"). The Stockholders' Agreement provides that Mr.
Martin and Mr. Teresi are each entitled to designate four individuals to serve
on the Board of Directors of the Registrant, and that Mr. Martin and Mr. Teresi
shall each vote their shares for the persons designated by the other to so
serve, so long as amounts remain owing to Mr. Teresi for the purchase of the
Paisano Companies. Mr. Martin and Mr. Teresi are respectively the beneficial
owners of, and entitled to vote, approximately 5,157,947 and 6,993,507 shares of
Easyriders Common Stock presently subject to the Stockholders Agreement,
representing an aggregate of approximately 61.3% of the number of shares of
Easyriders Common Stock, Mr. Martin and Mr. Teresi together will control the
election of all of the directors of the Registrant for the foreseeable future
and stockholders other than Mr. Martin and Mr. Teresi will not have any power to
elect directors of the Registrant. The Easyriders Board of Directors presently
has no provision in place to break ties and resolve disagreements.
In addition, Mr. Teresi holds irrevocable proxies to vote 1,370,000 shares of
Easyriders Common Stock, which expire May 29, 2000.
Since consummation of the Reorganization, Registrant has been managed by a Board
of Directors consisting of eight members, all of whom have been designated by
Mr. Martin and Mr. Teresi in accordance with the Stockholders' Agreement. The
following four directors were designated by Mr. Martin: John E. Martin, William
E. Prather, Wayne L. Knyal, and Daniel J. Gallery, each of whom was a director
of Newriders prior to the Reorganization. The following four directors were
designated by Mr. Teresi: Joseph Teresi, Ellen Meagher, Robert Davis, and Joseph
J. Jacobs.
The names and ages of the directors of Registrant appear in the table below:
NAME AGE POSITION
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John E. Martin 52 Director and Chairman of the Board
William E. Prather 51 President, Chief Executive Officer and Director
Daniel J. Gallery 43 Director
Wayne L. Knyal 51 Director
Joseph Teresi 56 Director of Registrant and Publisher of Paisano
Publications
Robert Davis 50 Director of Registrant and Chief Financial Officer
of Paisano Publications
Ellen Meagher 43 Director
Joseph J. Jacobs 73 Director
Mr. John E. Martin has been the Chairman of the Board of Directors of the
Registrant since its inception in May, 1998. He has been Chairman of the Board
of Directors of Newriders since July 1997. He served as Chief Executive Officer
of Newriders from July 1997 until October 1997. Mr. Martin served as President
and Chief Executive Officer of Taco Bell Corp. from August 1983 until October
1995. In
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October 1995, Mr. Martin became Chairman and continued as Chief Executive
Officer of Taco Bell Corp. until October 1996. From October 1996 until June
1997, Mr. Martin was Chairman and Chief Executive Officer of PepsiCo Casual
Dining International, a division of PepsiCo. Mr. Martin is a member of the
Educational Foundation of the National Restaurant Association's Board of
Trustees, and is a founding member of the Chief Executive Round Table at the
University of California, Irvine. Mr. Martin is a director of The Good Guys,
Inc., Williams-Sonoma, Inc., Franchise Mortgage Acceptance Company, LLC ("FMAC")
and Chevy's Mexican Restaurants, Inc.
Mr. William E. Prather has been the President, Chief Executive Officer and a
director of the Registrant since its inception in May, 1998. He has been
President, Chief Executive Officer and a director of Newriders since October
1997. Mr. Prather was employed by Burger King in various capacities beginning
1972 until 1986, which capacities included at different times Regional Manager,
Head of European Operations and Executive Vice President of Worldwide
Operations. Mr. Prather was Chief Executive Officer of Hardee's from March 1986
to July 1991, and the Chief Executive Officer of Furr's Bishop's Cafeteria, Inc.
from February 1992 to October 1994. Mr. Prather is the founder and President of
El Paso.
Mr. Wayne L. "Buz" Knyal has been a director of the Registrant since September
23, 1998. He has served as a director of Newriders since August 1997. Mr. Knyal
has been the President, Chief Executive Officer and a Director of FMAC since its
inception in June 1995. Prior to founding FMAC's predecessor in 1991, Mr. Knyal
founded and owned CBI Insurance Services, Inc. and concurrently served as
President of CBI Mortgage Company, a residential mortgage banker. From 1968 to
1980, Mr. Knyal was an Executive Vice President of Krupp/Taylor Advertising and
served clients in the fast food industry.
Mr. Daniel J. Gallery has been a director of the Registrant since September 23,
1998. He has served as a director of Newriders since August 1997. Mr. Gallery is
a co-founder of Carts of Colorado, Inc., which is engaged in mobile and modular
merchandising and the utilization of non-traditional locations for food service
operations, including airports, stadiums and arenas, convenience stores, and
golf courses. Mr. Gallery continues as Executive Vice President for Carts of
Colorado, Inc., a position he has held for a period of more than five years. He
is a member of the Board of Directors of Cohabaco Cigar Company, a private
venture engaged in cigar marketing, Monterey Pasta Company, a pasta
manufacturing company, and the National Association of Concessionaires.
Mr. Joseph Teresi has been a director of the Registrant since September 23,
1998. He founded Paisano Publications in 1970 and since 1986 has been the sole
stockholder of Paisano Publications. He has served as Chairman of the Board of
Directors of Paisano Publications and the other companies comprising the Paisano
Companies for more than the past five years, respectively, or such shorter time
as they may have been in existence. From 1968 to 1978, Mr. Teresi was involved
with the manufacturing, distribution and retailing of motorcycle parts and
accessories.
Ms. Ellen Meagher has been a director of the Registrant since September 23,
1998. She is also a director of Paisano Publications. Ms. Meagher joined Paisano
Publications in 1986 and has held positions as Controller, Treasurer, Chief
Financial Officer and Chief Operating Officer. Ms. Meagher is also Secretary and
Director of Easyriders Franchising and President of Easyriders of Columbus.
Mr. Robert Davis has been a director of the Registrant since September 23, 1998.
Mr. Davis is the Vice President of Finance of Paisano Publications. Mr. Davis
has been with Paisano Publications since
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January, 1993. Mr. Davis is also Treasurer and Director of Easyriders
Franchising and Treasurer of Easyriders of Columbus.
Mr. Joseph J. Jacobs has been a director of the Registrant since September 23,
1998. Mr. Jacobs has been an independent legal consultant on merger and
acquisition matters since 1992. Between November 1989 and December 1991, he
served as Vice President and General Counsel of Graphic Scanning Corp. where he
negotiated the acquisition of that company by Bell South Corporation, and
subsequent to that acquisition in 1992 was Vice President and General Counsel of
Ram/BSE LP, a wireless and paging partnership in which Bell South Corporation
had a 50% interest. Mr. Jacobs served in various legal positions between 1954
and 1961, with American Broadcasting Company, including Assistant to the
President for Legal and Broadcasting Division Affairs -- Washington, and
Assistant General Counsel, and in 1961 as General Attorney of Metromedia, Inc.
Between 1961 - 1971 he served as Director of Program and Talent Negotiation for
United Artists Television and Vice President and Counsel of United Artists
Broadcasting. Between 1972 - 1987, he was Director of Legal Affairs for ITT
Corporation's Communications Operations Group and Vice President and General
Counsel of both ITT World Communications, Inc. and United States Transmission
Systems, Inc. In 1988, Mr. Jacobs became Counsel to the law firm of Seyfarth,
Shaw, Fairweather and Geraldson. Prior to joining American Broadcasting Company,
he was an Associate with the law firm of Proskauer, Rose, Goetz and Mendelsohn.
The Compensation Committee of the Board of Directors of Easyriders consists of
Joseph J. Jacobs and Daniel J. Gallery. The Audit Committee of the Board of
Directors of Easyriders consists of Joseph J. Jacobs, Ellen Meagher, Daniel J.
Gallery and Wayne L. Knyal. The Executive Officers of Easyriders consists of
John E. Martin, Chairman of the Board, William E. Prather, President and Chief
Executive Officer and William R. Nordstrom, Vice President, Chief Financial
Officer, Treasurer and Secretary.
Item 2. Acquisition or Disposition of Assets.
On September 23, 1998, the Registrant consummated a series of transactions
(collectively referred to as the "Reorganization"), including the following: (i)
the acquisition (the "Paisano Acquisition") by Registrant of all of the
outstanding common stock of Paisano Publications, Inc., a California corporation
("Paisano Publications") and certain affiliated corporations (the "Paisano
Companies"), which are engaged in publishing special interest magazines relating
to motorcycles and tattooing, marketing motorcycle apparel and accessories,
promoting tattoo and motorcycle related events, and franchising retail stores
which market motorcycle apparel and accessories; (ii) the acquisition (the "El
Paso Acquisition") by Registrant of all of the outstanding membership interests
of M & B Restaurants, L.C., a Texas limited liability company ("El Paso"), which
is engaged in the operation of four restaurants under the name "El Paso
Bar-B-Que;" and (iii) the merger (the "Merger") of a subsidiary of Easyriders
("Easyriders Sub") with and into Newriders.
As a result of the Merger (i) the Newriders Common Stock was exchanged for
Easyriders Common Stock on the basis of one share of Easyriders Common Stock for
each two shares of Newriders Common Stock, and the stockholders of Newriders
immediately prior to the Merger became stockholders of Registrant, (ii) all of
the outstanding options, warrants and other convertible securities exercisable
for or convertible into Newriders Common Stock were exchanged for the right to
purchase or convert into one-half the number of shares of Easyriders Common
Stock at an exercise price or conversion ratio per share equal to two times the
exercise price or conversion ratio provided for in the stock option, warrant or
other agreements evidencing such options, warrants or other convertible
securities, and (iii) Newriders, the Paisano Companies and El Paso became
wholly-owned subsidiaries of Registrant. Immediately following
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the Reorganization, Registrant transferred the El Paso membership interests to
Newriders, with the result that El Paso became a wholly-owned subsidiary of
Newriders.
In the Paisano Acquisition, Registrant and a second subsidiary of Registrant
("Easyriders Sub II") received all of the issued and outstanding stock (the
"Paisano Companies Stock") of each of the corporations that comprise the Paisano
Companies. The Paisano Companies are Paisano Publications, Easyriders of
Columbus, Inc., an Ohio corporation ("Columbus"), Easyriders Franchising, Inc.,
a California corporation ("Easyriders Franchising"), Teresi, Inc., a California
corporation ("Teresi, Inc."), Bros Club, Inc., a California corporation ("Bros
Club") and Associated Rodeo Riders on Wheels, a California corporation ("Rodeo
Riders"). Mr. Joseph Teresi, the sole stockholder of each of the Paisano
Companies, received in exchange for the Paisano Companies Stock, total
consideration in the amount of $48,000,000, consisting of 6,493,507 shares of
Easyriders Common Stock (representing approximately 32.7% of Easyriders Common
Stock issued and outstanding immediately following the Reorganization), and
promissory notes aggregating $28,000,000, consisting of a promissory note of
Easyriders Sub II in the principal amount of $15,000,000 which was paid in cash
immediately after the Merger occurred, and three promissory notes of Registrant
(the "Contributor Notes") in the aggregate amount of $13,000,000. The aggregate
amount received by Mr. Teresi is subject to adjustment upward or downward,
dollar for dollar, based on the amount by which the Paisano Companies' combined
working capital exceeded or was less than $4,537,000 as of the consummation of
the Paisano Acquisition. This determination is presently in process. As of June
30, 1998, the Paisano Companies combined working capital was approximately
$2,987,000.
In connection with the Paisano Acquisition, the Paisano Companies distributed
certain assets to Mr. Teresi and Mr. Teresi assumed certain liabilities of the
Paisano Companies with the anticipated effect of increasing the working capital
of the Paisano Companies. As contemplated in connection with the Paisano
Acquisition, Mr. Teresi received a dividend of $7,000,000 from Paisano
Publications, which was funded by a loan in that amount to Paisano Publications,
and was repaid by Paisano Publications upon consummation of the Reorganization.
As of June 30, 1998, the net assets of the Paisano Companies were approximately
$3,780,000. After deducting the $7,000,000 dividend paid to Mr. Teresi, the
deficiency in net assets of the Paisano Companies as of June 30, 1998, on a pro
forma basis, would have been approximately $3,220,000.
Mr. Teresi also has the right, subject to the approval of the Compensation
Committee of Registrant, to recommend that certain employees of the Paisano
Companies who continue to perform services after the Reorganization or are
consultants to any of the Paisano Companies be granted options to purchase an
aggregate of 300,000 shares of Easyriders Common Stock under the Easyriders
Plan, exercisable at $5.00 per share.
The Contributor Notes consist of a subordinated promissory note (the
"Contributor Subordinated Note") in the amount of $5,000,000, a limited recourse
subordinated promissory note (the "Contributor Mirror Note") in the amount of
$5,000,000 secured by the Martin Mirror Note (defined below) and a subordinated
promissory note (the "Contributor Short-Term Subordinated Note") in the amount
of $3,000,000. The Contributor Subordinated Note has a term of five years and
can be extended for an additional term of five years by Registrant and bears
interest at an annual rate between six and ten percent. The Contributor Mirror
Note has a term of five years and will be extended if and to the extent that the
Martin Mirror Note is extended, and bears interest at an annual rate between six
and ten percent. The Contributor Short-Term Subordinated Note has a term of
ninety days and bears interest at an annual rate of ten percent.
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In the El Paso Acquisition, John E. Martin, William E. Prather and his wife,
Marna Prather (collectively, the "El Paso Owners"), who together owned all of
the outstanding membership interests of El Paso prior to the Reorganization,
received a total of 2,000,000 shares of Easyriders Common Stock in exchange for
all of the outstanding membership interests of El Paso.
In connection with the Reorganization, John E. Martin, the Chairman of
Registrant, purchased 4,036,797 shares of Easyriders Common Stock, for a
purchase price of $12,300,000, which he paid $5,000,000 in cash and the balance
by delivery of the Martin Notes. The Martin Notes consist of the Martin Mirror
Note in the amount of $5,000,000, which note has been pledged by Registrant to
secure the Contributor Mirror Note, and the Other Martin Note in the amount of
$2,300,000. The Martin Mirror Note has a term of five years, may be extended by
Mr. Martin for an additional period of five years and bears interest at an
annual rate between six and ten percent. The Other Martin Note has a term of
five years and may be extended by Mr. Martin for an additional five years and
bears interest at an annual rate between six and ten percent.
In connection with the Reorganization, four of the largest shareholders of
Newriders, Inc. ("Newriders") agreed to return to Newriders an aggregate of
6,156,480 shares of Newriders common stock to be cancelled. A total of 4,848,480
of these shares were delivered to Newriders for cancellation at or prior to
closing. One of the four shareholders, Rick L. Pierce, failed to deliver
1,308,000 of the Newriders shares to be cancelled, of which 464,000 Newriders
shares are beneficially owned by another individual, Leon Hatcher, who had
consented to their cancellation. Mr. Teresi waived the condition for
cancellation of the 1,308,000 Newriders shares at closing, on the condition that
Newriders continue to pursue the cancellation of the 1,308,000 Newriders shares.
The Registrant has issued stop transfer instructions concerning the 1,308,000
Newriders shares which is equivalent to 654,000 shares of Easyriders, Inc.
common stock. Following the closing on September 23, 1998, a petition for an
involuntary bankruptcy proceeding under Chapter 11 of the U. S. Bankruptcy Code
involving Mr. Pierce was filed. The Registrant, through its subsidiary,
Newriders, intends to pursue its claim for cancellation of the 1,308,000
Newriders shares in the bankruptcy proceeding involving Mr. Pierce.
TERMS OF THE SENIOR CREDIT AGREEMENT
Newriders and Paisano Publications have received a loan from Nomura Holding
America, Inc. (the "Senior Lender") of $22,000,000 in the aggregate, $17,000,000
of which consists of term loans (the "Term Loans") and $5,000,000 of which
consists of revolving loans (the "Revolving Loans" and collectively with the
Term Loans, the "Senior Loans").
The Term Loans plus up to $3,500,000 of the Revolving Loans was used to repay
the $15,000,000 note issued by Easyriders Sub II to Mr. Teresi and to repay
$7,000,000 of the loan incurred by Paisano Publications in order to fund the
$7,000,000 dividend paid to Mr. Teresi by Paisano Publications prior to the
Paisano Acquisition and $500,000 of expenses. The remaining portion of the
Revolving Loans will be used by Paisano Publications for working capital
purposes. $15,000,000 of the Senior Loans was initially lent to Easyriders Sub
II, which used the proceeds thereof to repay the promissory note in the
principal amount of $15,000,000 issued by it to Mr. Teresi in connection with
the Paisano Acquisition. Simultaneously therewith, Easyriders Sub II was merged
with and into Paisano Publications, with Paisano Publications being the
surviving company and the obligor on the Senior Loans.
The Senior Loans are guaranteed (the "Guarantees") by Registrant and the Paisano
Companies other than Paisano Publications (the "Guarantors"). The Senior Loans
will mature on the third anniversary of
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September 23, 1998, and bear interest at an annual rate equal to the prime rate
of the Senior Lender from time to time plus 1.85%. The Senior Loans and the
Guarantees are secured by a first priority security interest in substantially
all of the tangible and intangible assets (owned or hereafter acquired) of
Registrant and the Paisano Companies, including all of the capital stock or
equity interests of the Paisano Companies, Newriders and El Paso. The Senior
Loans and the Guarantees constitute the sole senior secured indebtedness of
Paisano Publications and the Guarantors and rank senior to all other
indebtedness of Paisano Publications and the Guarantors, including the
$13,000,000 of Contributor Notes.
Paisano Publications is obligated to pay the Senior Lender a fee equal to 0.25%
per annum of the average daily undrawn amount of the Revolving Loans.
At the end of each six-month period in which the Term Loans are outstanding,
Paisano Publications is required to prepay the Term Loans in an aggregate
principal amount equal to 35% of Excess Cash Flow for such period. Excess Cash
Flow will be defined as the sum of (i) net income, plus (ii) net non-cash
charges (net of credits), reduced by allowable capital expenditures and changes
in working capital, plus (or minus) (iii) net losses (or net gains) resulting
from any asset sale.
Subject to certain limitations on dividends, provided that no event of default
has occurred, Paisano Publications may loan funds to Registrant monthly, limited
to the lesser of $100,000 or 35% of the Excess Cash Flow for the preceding
monthly period.
The net proceeds from any public offering or Rule 144A offering or private
placement of debt, equity or hybrid securities, and any funds raised through the
incurrence of bank indebtedness by Easyriders, Paisano Publications or any other
Paisano Company will be applied toward the mandatory prepayment of the principal
of the Term Loans plus accrued interest. Notwithstanding the foregoing,
Easyriders may retain up to $5,000,000 in the aggregate, from the net proceeds
of any approved sale of debt or equity securities for purposes of refinancing
the Contributor Short-Term Subordinated Note or funding operating expenses of
Easyriders.
The Senior Loans may be repaid in whole or in part from time to time, at the
option of Paisano Publications without premium.
Warrants to purchase 348,157 shares of Easyriders Common Stock will be issued
and sold to the Senior Lender on the closing date of the Reorganization at
nominal cost. The exercise price of the Warrants will be $3.00 per share. The
Warrants will be exercisable at any time for a period of seven years from their
date of issuance. The Warrants and the underlying common stock issuable upon
exercise of the Warrants will be covered by agreements which provide for
registration rights.
The Senior Credit Agreement and the Guarantees contain affirmative and negative
covenants concerning Paisano Publications and the Guarantors and their
subsidiaries. Affirmative covenants under the Senior Credit Agreement and the
Guarantees include, but are not limited to, compliance with contractual
obligations and law, maintenance of existence, inspection rights, payment of
taxes and other claims, maintenance of property and insurance, further
assurances and notices and reporting. Negative covenants under the Senior Credit
Agreement and the Guarantees include, but are not limited to, the following:
limitations on liens and negative pledges; limitations on sale/leasebacks;
limitations on indebtedness, capital leases, contingent obligations and
preferred stock; restrictions on the creation of any subsidiaries; limitations
on dividends or any payments on, or redemptions or repurchases of, the capital
stock and other restricted payments; limitations on the sale of assets and
transactions with affiliates; limitations on
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payments under operating leases; limitations on mergers and/or consolidations;
limitations on investments, acquisitions and joint ventures; limitations on
changes of control; and financial covenants including, but not limited to,
minimum net worth, minimum working capital, interest coverage ratio, leverage
ratio and EBITDA levels, provisions related to environmental liabilities, ERISA,
conduct of business and capital expenditures.
The Senior Credit Agreement and the Guarantees contain default provisions
including, but not limited to: failure to pay principal or interest on the
Senior Loans when and as due; failure to comply with any of the covenants or
other terms of the Senior Loans, the Guarantees or other documents (including,
without limitation, security documents); breach of any representation or
warranty in the Senior Credit Agreement, the Guarantees or other documents
(including, without limitation, security documents); cross-default on other
obligations of Paisano Publications or any Guarantor or other subsidiary;
certain events of bankruptcy of Paisano Publications or any Guarantor or other
subsidiary; ERISA -- related events; change of control of Paisano Publications
or Easyriders (Easyriders will be required to own 100% of Paisano Publications);
material judgments against Paisano Publications or any Guarantor or other
subsidiary; failure to maintain perfected security interests for the Senior
Loans or the Guarantee; and invalidity or disaffirmation of any of the
Guarantees.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
(1) NEWRIDERS, INC. AND SUBSIDIARY
Independent Auditors' Report -- Deloitte & Touche LLP.
Consolidated Balance Sheet as of December 31, 1997.
Consolidated Statement of Operations for the Year Ended
December 31, 1997.
Consolidated Statement of Stockholders' Equity for the Year
Ended December 31, 1997.
Consolidated Statement of Cash Flows for the Year Ended
December 31, 1997.
Notes to the Consolidated Financial Statements.
Independent Auditors' Report -- Jones, Jensen & Company.
Consolidated Balance Sheet as of December 31, 1996.
Consolidated Statement of Operations for the Year Ended
December 31, 1996.
Consolidated Statement of Stockholders' Equity for the Year
Ended December 31, 1996.
Consolidated Statement of Cash Flows for the Year Ended
December 31, 1996.
Notes to the Consolidated Financial Statements.
Condensed Consolidated Balance Sheets as of June 30, 1998
(unaudited) and December 31, 1997.
Condensed Consolidated Statements of Operations for the Six
Months Ended June 30, 1998 and 1997 (unaudited).
Condensed Consolidated Statements of Stockholders' Equity for
the Year Ended December 31, 1997 and the Six Months Ended June
30, 1998.
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1998 and 1997 (unaudited).
Notes to Unaudited Consolidated Financial Statements
(unaudited).
(2) PAISANO PUBLICATIONS, INC. AND AFFILIATES
Independent Auditors' Report.
Combined Balance Sheets as of December 31, 1997 and 1996.
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Combined Statements of Operations for the Years Ended December
31, 1997, 1996 and 1995 (unaudited).
Combined Statements of Shareholder's Equity for the Years
Ended December 31, 1997, 1996 and 1995 (unaudited).
Combined Statements of Cash Flows for the Years Ended December
31, 1997, 1996 and 1995 (unaudited).
Notes to Combined Financial Statements.
Condensed Combined Balance Sheet as of June 30, 1998
(unaudited).
Condensed Combined Statements of Operations for the Six Months
Ended June 30, 1998 and 1997 (unaudited).
Condensed Combined Statements of Cash Flows for the Six Months
Ended June 30, 1998 and 1997 (unaudited).
Notes to Condensed Combined Financial Statements for the Six
Months Ended June 30, 1998 and 1997 (unaudited).
(3) M & B RESTAURANTS, L.C.
Independent Auditor's Report.
Balance Sheets for the Years Ended December 30, 1997 and
December 31, 1996.
Statements of Operations for the Years Ended December 30, 1997
and December 31, 1996.
Statements of Changes in Members' Equity for the Years Ended
December 30, 1997 and December 31, 1996.
Statements of Cash Flows for the Years Ended December 30, 1997
and December 31, 1996.
Notes to Financial Statements.
Condensed Balance Sheet as of June 30, 1998 (unaudited).
Condensed Statements of Operations for the Six Months Ended
June 30, 1998 and July 1, 1997 (unaudited).
Statements of Cash Flows for the Six Months Ended June 30,
1998 and July 1, 1997 (unaudited).
Notes to Financial Statements for the Six Months Ended June
30, 1998 and July 1, 1997 (unaudited).
The foregoing financial statements are incorporated by reference from
the financial statements set forth in the Prospectus included in
Registrant's Registration Statement on Form S-4, Registration No.
333-58501.
(b) Pro forma financial information.
Newriders Equivalent Per Share Table
Unaudited Pro Forma Combined Condensed Financial Statement
The foregoing pro forma financial information is incorporated by
reference from the information set forth under the same captions in the
Prospectus included as part of Registrant's registration Statement on
Form S-4, Registration No. 333-58501.
(c) Exhibits
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Exhibit
No. Exhibit Description
- ------- -------------------
2.1 Agreement and Plan of Merger and Reorganization dated June 30, 1998, by
and among Newriders, the Registrant and Easyriders Sub, Inc.,
incorporated by reference from Exhibit 2.1 to Registrant's registration
statement on Form S-4, Registration No. 333-58501. (1)
2.2 Stock Contribution and Sale Agreement, dated June 30, 1998 ("Stock
Contribution and Sale Agreement"), by and among Newriders, the
Registrant, Easyriders Sub II, Inc., Paisano Publications, Inc.,
Easyriders of Columbus, Inc., Easyriders Franchising, Inc., Teresi,
Inc., Bros Club, Inc., Associated Rodeo Riders on Wheels and Mr. Joseph
Teresi, incorporated by reference from Exhibit 2.2 to Registrant's
registration statement on Form S-4, Registration No. 333-58501. (1)
2.3 LLC Interest Contribution Agreement, dated June 30, 1998 ("LLC Interest
Contribution Agreement"), by and among Newriders, the Registrant,
William E. Prather, Marna Prather, John E. Martin, and M & B
Restaurants, L.C., incorporated by reference from Exhibit 2.3 to
Registrant's registration statement on Form S-4, Registration No.
333-58501. (1)
4.1 Specimen of the Registrant's Common Stock Certificate. (2)
10.4.1 Limited Recourse Subordinated Promissory Note dated September 23, 1998,
executed by Easyriders in favor Joseph Teresi in the amount of
$5,000,000. (2)
10.4.2 Pledge Agreement dated September 23, 1998, executed by Easyriders as
pledgor and Joseph Teresi as pledgee. (2)
10.4.3 Subordinated Promissory Note dated September 23, 1998, executed by
Easyriders in favor Joseph Teresi in the amount of $5,000,000. (2)
10.4.4 Subordinated Promissory Note dated September 23, 1998, executed by
Easyriders in favor Joseph Teresi in the amount of $3,000,000. (2)
10.4.5 Employment Agreement between Paisano Publications, Inc. and Bob Davis
dated September 23, 1998. (2)
10.4.6 Employment Agreement between Paisano Publications, Inc. and Joseph
Teresi dated September 23, 1998. (2)
10.4.7 Consulting Agreement between Paisano Publications, Inc. and Joseph
Teresi dated September 23, 1998. (2)
10.4.8 Stockholders Voting Agreement comprising Exhibit I to Stock
Contribution and Sale Agreement, executed upon consummation of the
Reorganization by John E. Martin and Joseph Teresi. (2)
10.4.9 Promissory Note dated September 23, 1998, executed by Easyriders Sub
II, Inc. in favor Joseph Teresi in the amount of $15,000,000. (2)
10.4.10 Stock Purchase Agreement dated June 30, 1998, between Easyriders and
John E. Martin ("Stock Purchase Agreement"), incorporated by reference
from Exhibit 10.4.10 to Registrant's registration statement on Form
S-4, Registration No. 333- 58501. (1)
10.4.11 Promissory Note dated September 23, 1998, executed by John E. Martin in
favor Easyriders in the amount of $5,000,000. (2)
12
13
10.4.12 Promissory Note dated September 23, 1998, executed by John E. Martin in
favor Easyriders in the amount of $2,300,000. (2)
10.4.18 Letter Agreement dated August 15, 1998, regarding extension of Stock
Contribution and Sale Agreement, by and among Newriders, the
Registrant, Easyriders Sub II, Inc., Paisano Publications, Inc.,
Easyriders of Columbus, Inc., Easyriders Franchising, Factory Tours,
Inc., Bros Club, Inc., Associated Rodeo Riders on Wheels, and Mr.
Joseph Teresi, incorporated by reference from Exhibit 10.4.18 to
Registrant's registration statement on Form S-4, Registration No. 333-
58501. (1)
10.5.1 Note and Warrant Purchase Agreement between Easyriders, Inc.,
Easyriders Sub II, Inc. and Nomura Holding America, Inc., executed at
consummation of the Reorganization. List of exhibits and schedules to
Note and Warrant Purchase Agreement. (2)
10.5.2 Guarantee of Easyriders, Inc., Easyriders of Columbus, Inc., Easyriders
Franchising, Inc., Teresi, Inc., Bros Club, Inc. and Associated Rodeo
Riders on Wheels in favor of Senior Secured Lender, executed at
consummation of the Reorganization. (2)
10.5.3 Pledge and Security Agreement in favor of Senior Secured Lender to be
executed by Easyriders, Inc., Easyriders of Columbus, Inc., Easyriders
Franchising, Inc., Teresi, Inc., Bros Club, Inc. and Associated Rodeo
Riders on Wheels, executed at consummation of the Reorganization. (2)
10.5.4 Intellectual Property Security Agreement in favor of Senior Secured
Lender to be executed by Easyriders, Inc., Easyriders of Columbus,
Inc., Easyriders Franchising, Inc., Teresi, Inc., Bros Club, Inc. and
Associated Rodeo Riders on Wheels, executed at consummation of the
Reorganization. (2)
10.5.5 Warrant to Purchase Shares of Common Stock of Easyriders, Inc., dated
September 23, 1998, in favor of Nomura Holding America, Inc. (2)
10.5.6 Registration Rights Agreement between Easyriders, Inc. and Senior
Secured Lender, executed at consummation of the Reorganization. (2)
- ----------
(1) Incorporated by reference herein.
(2) Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EASYRIDERS, INC.
(Registrant)
Date: October 7, 1998 By: /s/William E. Prather
--------------- -------------------------------------
William E. Prather
President and Chief Executive Officer
14
15
EXHIBIT INDEX
Exhibit
No. Exhibit Description
- ------- -------------------
2.1 Agreement and Plan of Merger and Reorganization dated June 30, 1998, by
and among Newriders, the Registrant and Easyriders Sub, Inc.,
incorporated by reference from Exhibit 2.1 to Registrant's registration
statement on Form S-4, Registration No. 333-58501. (1)
2.2 Stock Contribution and Sale Agreement, dated June 30, 1998 ("Stock
Contribution and Sale Agreement"), by and among Newriders, the
Registrant, Easyriders Sub II, Inc., Paisano Publications, Inc.,
Easyriders of Columbus, Inc., Easyriders Franchising, Inc., Teresi,
Inc., Bros Club, Inc., Associated Rodeo Riders on Wheels and Mr. Joseph
Teresi, incorporated by reference from Exhibit 2.2 to Registrant's
registration statement on Form S-4, Registration No. 333-58501. (1)
2.3 LLC Interest Contribution Agreement, dated June 30, 1998 ("LLC Interest
Contribution Agreement"), by and among Newriders, the Registrant,
William E. Prather, Marna Prather, John E. Martin, and M & B
Restaurants, L.C., incorporated by reference from Exhibit 2.3 to
Registrant's registration statement on Form S-4, Registration No.
333-58501. (1)
4.1 Specimen of the Registrant's Common Stock Certificate. (2)
10.4.1 Limited Recourse Subordinated Promissory Note dated September 23, 1998,
executed by Easyriders in favor Joseph Teresi in the amount of
$5,000,000. (2)
10.4.2 Pledge Agreement dated September 23, 1998, executed by Easyriders as
pledgor and Joseph Teresi as pledgee. (2)
10.4.3 Subordinated Promissory Note dated September 23, 1998, executed by
Easyriders in favor Joseph Teresi in the amount of $5,000,000. (2)
10.4.4 Subordinated Promissory Note dated September 23, 1998, executed by
Easyriders in favor Joseph Teresi in the amount of $3,000,000. (2)
10.4.5 Employment Agreement between Paisano Publications, Inc. and Bob Davis
dated September 23, 1998. (2)
10.4.6 Employment Agreement between Paisano Publications, Inc. and Joseph
Teresi dated September 23, 1998. (2)
10.4.7 Consulting Agreement between Paisano Publications, Inc. and Joseph
Teresi dated September 23, 1998. (2)
10.4.8 Stockholders Voting Agreement comprising Exhibit I to Stock
Contribution and Sale Agreement, executed upon consummation of the
Reorganization by John E. Martin and Joseph Teresi. (2)
10.4.9 Promissory Note dated September 23, 1998, executed by Easyriders Sub
II, Inc. in favor Joseph Teresi in the amount of $15,000,000. (2)
10.4.10 Stock Purchase Agreement dated June 30, 1998, between Easyriders and
John E. Martin ("Stock Purchase Agreement"), incorporated by reference
from Exhibit 10.4.10 to Registrant's registration statement on Form
S-4, Registration No. 333- 58501. (1)
10.4.11 Promissory Note dated September 23, 1998, executed by John E. Martin in
favor Easyriders in the amount of $5,000,000. (2)
10.4.12 Promissory Note dated September 23, 1998, executed by John E. Martin in
favor Easyriders in the amount of $2,300,000. (2)
10.4.18 Letter Agreement dated August 15, 1998, regarding extension of Stock
Contribution and Sale Agreement, by and among Newriders, the
Registrant, Easyriders Sub II, Inc., Paisano Publications, Inc.,
Easyriders of Columbus, Inc., Easyriders Franchising, Factory Tours,
Inc., Bros Club, Inc., Associated Rodeo Riders on Wheels, and Mr.
Joseph Teresi, incorporated by reference from Exhibit 10.4.18 to
Registrant's registration statement on Form S-4, Registration No. 333-
58501. (1)
10.5.1 Note and Warrant Purchase Agreement between Easyriders, Inc.,
Easyriders Sub II, Inc. and Nomura Holding America, Inc., executed at
consummation of the Reorganization. List of exhibits and schedules to
Note and Warrant Purchase Agreement. (2)
10.5.2 Guarantee of Easyriders, Inc., Easyriders of Columbus, Inc., Easyriders
Franchising, Inc., Teresi, Inc., Bros Club, Inc. and Associated Rodeo
Riders on Wheels in favor of Senior Secured Lender, executed at
consummation of the Reorganization. (2)
10.5.3 Pledge and Security Agreement in favor of Senior Secured Lender to be
executed by Easyriders, Inc., Easyriders of Columbus, Inc., Easyriders
Franchising, Inc., Teresi, Inc., Bros Club, Inc. and Associated Rodeo
Riders on Wheels, executed at consummation of the Reorganization. (2)
10.5.4 Intellectual Property Security Agreement in favor of Senior Secured
Lender to be executed by Easyriders, Inc., Easyriders of Columbus,
Inc., Easyriders Franchising, Inc., Teresi, Inc., Bros Club, Inc. and
Associated Rodeo Riders on Wheels, executed at consummation of the
Reorganization. (2)
10.5.5 Warrant to Purchase Shares of Common Stock of Easyriders, Inc., dated
September 23, 1998, in favor of Nomura Holding America, Inc. (2)
10.5.6 Registration Rights Agreement between Easyriders, Inc. and Senior
Secured Lender, executed at consummation of the Reorganization. (2)
- ----------
(1) Incorporated by reference herein.
(2) Filed herewith.