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EXHIBIT 10.4.12
PROMISSORY NOTE
$2,300,000 September 23, 1998
FOR VALUE RECEIVED, John Martin ("Maker") promises to pay to
Easyriders, Inc., a Delaware corporation ("Payee"), at the place and in the
manner specified below, the principal sum of Two Million Three Hundred Thousand
Dollars ($2,300,000), together with interest on the unpaid principal balance
hereof at the rate per annum set forth below.
SECTION 1. Definitions.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banks are required or authorized to be closed in the State of California.
"Events of Default" is defined in Section 3 of this Note.
"Interest Payment Date" is defined in Section 2.2(b) of this Note.
"Martin Mirror Note" means that certain Promissory Note of Maker, dated
the date hereof, in the original principal amount of $5,000,000, payable to
Payee.
"Note" means this Promissory Note, as the same may be amended from time
to time.
"Obligations" means all of Maker's liabilities, obligations and
indebtedness to Payee under this Note (including, without limitation, Maker's
obligation to make payments of principal and interest to Payee hereunder),
whether now existing or hereafter arising.
"Payment Default" is defined in Section 3 of this Note.
"Person" means any person or entity (including, without limitation, a
corporation, limited liability company, partnership, trust or joint venture).
"Rate" is defined in Section 2.2 of this Note.
"Stock Contribution and Sale Agreement" means the Stock Contribution
and Sale Agreement, dated as of June 30, 1998, by and among Payee, Newriders,
Inc., Easyriders Sub II, Inc., Joseph Teresi and the Paisano Companies (as
defined therein), as amended from time to time.
Unless otherwise defined herein, terms used in the Stock Contribution
and Sale Agreement shall have the same meanings when used in this Note.
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SECTION 2. Terms.
SECTION 2.1 Repayment of Principal. The principal balance of this
Note shall be payable by Maker in lawful money of the United States of America
and in immediately payable funds on September 23, 2003, unless the date for
payment of the Martin Mirror Note is extended, in which case, the date for
payment of the principal balance of this Note shall be similarly extended (as
such date may be so extended, the "Maturity Date").
SECTION 2.2 Interest; Payments.
(a) Maker shall pay interest on the unpaid principal amount
of this Note at a rate per annum as follows (the "Rate"):
(i) From the date hereof until September 23, 1999,
the Rate shall be six percent (6%);
(ii) From September 23, 1999 until September 23,
2000, the Rate shall be seven percent (7%);
(iii) From September 23, 2000 until September 23,
2001, the Rate shall be eight percent (8%);
(iv) From September 23, 2001 until September 23,
2002, the Rate shall be nine percent (9%); and
(v) From September 23, 2002 until such time as the
principal balance of this Note shall be repaid, the Rate shall be ten percent
(10%).
(b) Accrued interest on the outstanding principal amount of
this Note shall be paid in arrears on the 23rd day of each September, December,
March and June, commencing with the first such date to occur after the date
hereof and at maturity (each an "Interest Payment Date"), until the Obligations
are paid in full, except that Maker shall have the right to defer up to one-half
of the interest payable on any Interest Payment Date during the first two years
of this Note if, and to the extent, that interest is so deferred under the
Martin Mirror Note. The amount of any interest deferred pursuant to this Section
will be added to the principal balance of this Note on the Interest Payment Date
as of which it is deferred. If the Maturity Date of this Note is extended
pursuant to Section 2.1 hereof, Maker shall pay to Payee on the date such
extension period commences, an amount of principal equal to the amount of
deferred interest which was added to the principal balance of this Note in
accordance with the immediately preceding sentence. Interest hereunder shall be
computed on the basis of a year of 365 days for the actual number of days
elapsed. If any payment of principal or interest hereunder shall become due on a
day which is not a Business Day, such payment shall be due on the next
succeeding Business Day, and such extension of time shall be included in
computing interest in connection with such payment. Both principal and interest
hereunder are payable to Payee or such other Person as
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Payee may from time to time designate to Maker in writing, by wire transfer to
such account as Payee may from time to time designate to Maker in writing.
(c) Notwithstanding anything to the contrary contained
herein, Maker may elect to prepay the outstanding principal amount of this Note,
at any time in whole or in part, without penalty. Any such prepayment shall be
accompanied by the amount of accrued interest on the amount prepaid. Maker shall
deliver written notice of such prepayment to Payee at least ten (10) days prior
to prepayment. Each notice of prepayment delivered pursuant to this subsection
(c) shall set forth the amount of such prepayment and the proposed date of such
prepayment. Upon payment in full of this Note, Payee shall surrender this Note
to Maker for cancellation. Upon prepayment in part of principal, Payee shall
make a notation of such prepayment on the Schedule of Payments attached as
Exhibit A hereto and deliver a copy of such schedule to Maker. The aggregate
unpaid principal amount set forth on such schedule shall be rebuttably
presumptive evidence of the principal amount owing and unpaid hereunder, but the
failure to record any such amount on such schedule shall not limit or otherwise
affect the obligation of the Maker hereunder to make payments on this Note when
due.
SECTION 2.3 Recourse. This Note is a full recourse note.
SECTION 2.4 Right of Offset. Reference is made to that certain Term
Sheet for Annual Incentive Awards/Long-Term Incentive Performance Awards to John
Martin (the "Bonus Agreement") between Maker and Payee providing for, among
other things, (i) annual bonus payments from Payee to Maker in the amount of the
annual interest due from Maker under this Note and the Martin Mirror Note,
subject to achievement by Payee of certain predetermined levels of EBITDA and
(ii) a bonus in the amount of the principal amount of this Note and the Martin
Mirror Note (and any accrued interest hereunder or thereunder) upon Payee's
successful completion of a public or private offering of equity or debt
securities and the application of the proceeds thereof to the payment in full of
(a) all amounts due pursuant to the Payee's Senior Credit Agreement (as such
term is defined in the Stock Contribution and Sale Agreement), and (b) the
Contributor Notes (as such term is defined in the Stock Contribution and Sale
Agreement), subject to achievement by Payee of certain predetermined levels of
EBITDA. To the extent Maker shall be entitled to amounts pursuant to the Bonus
Agreement which have not been timely paid to Maker, Maker shall be entitled to
offset amounts otherwise due from Maker to Payee pursuant to this Note.
SECTION 3. Events of Default; Acceleration. If any of the following
events ("Events of Default") shall occur:
(a) Maker shall fail to make any required payment of
interest on this Note when the same shall become due and payable, and such
failure shall have continued for a period of five (5) days after written notice
thereof has been given to Maker by Payee (a "Payment Default"); provided,
however that Maker shall have the right to cure any such Payment Default for an
additional period of twenty-five days on two occasions during the term of this
Note;
(b) Maker shall fail to pay the principal amount of this
Note on the Maturity Date;
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(c) Maker makes an assignment for the benefit of creditors,
or admits in writing his inability to pay or generally fails to pay his debts as
they mature or become due or petitions or applies for the appointment of a
trustee or other custodian, liquidator or receiver of Maker or of any
substantial part of the assets of Maker or commences any case or other
proceeding relating to Maker under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar law of
any jurisdiction, now or hereafter in effect, or takes any action to authorize
or in furtherance of any of the foregoing, or if any such petition or
application is filed or any such case or other proceeding is commenced against
Maker and Maker indicates his approval thereof, consent thereto or acquiescence
therein; or
(d) a decree or order is entered appointing any such
trustee, custodian, liquidator or receiver or adjudicating Maker bankrupt or
insolvent, or approving a petition in any such case or other proceeding, or a
decree or order for relief is entered in respect of Maker in an involuntary case
under Federal bankruptcy laws as now or hereafter constituted, and such decree
or order remains in effect for more than sixty (60) days, whether or not
consecutive;
then Payee may by notice in writing to Maker declare all amounts owing with
respect to this Note to be, and they shall thereupon forthwith mature and
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by Maker.
Payee's failure at any time or times hereafter to require strict
performance by Maker of any of the terms, conditions and provisions contained in
this Note shall not waive, affect or diminish any right of Payee at any time or
times hereafter to demand strict performance thereof and such right shall not be
deemed to have been waived or modified by any act or knowledge of Payee, its
agents, officers or employees, unless such waiver or modification is contained
in an instrument in writing signed by an officer of Payee and directed to Maker
specifying such waiver or modification. The remedies provided herein are
cumulative and are not exclusive of any other remedies available to Payee at law
or in equity. No waiver by Payee of any Event of Default shall operate as a
waiver of any other Event of Default or the same Event of Default on a future
occasion. No delay on the part of Payee in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Payee of
any right or remedy shall preclude other or further exercise thereof or the
exercise of any other rights or remedy.
If any Event of Default occurs, Maker shall pay on demand all
reasonable out-of-pocket expenses incurred or sustained by Payee in connection
with the enforcement or protection of the rights of Payee under this Note,
including costs of collection and the fees and disbursements of counsel.
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SECTION 4. Miscellaneous.
(a) Demand, presentment, protest and notice of nonpayment
and protest and all rights to interpose any defense, setoff or counterclaim of
any nature or description, are hereby waived by Maker.
(b) This Note may not be assigned by either party without
the express written consent of the other party.
(c) This Note may not be amended except by a writing signed
by Maker and Payee.
(d) Whenever in this Note there is reference made to either
Payee or Maker, such reference shall be deemed to include a reference to the
successors and permitted assigns of such party and the provisions of this Note
shall be binding upon and inure to the benefit of said successors and permitted
assigns.
(e) Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, two (2) days after the date of deposit in the United States mails as
follows:
To Maker:
John Martin
567 San Nicolas Drive, Suite 400
Newport Beach, CA 92660
Fax No.: (714) 719-4999
To Payee:
Easyriders, Inc.
567 San Nicolas Drive, Suite 400
Newport Beach, CA 92660
Attention: William E. Prather
Fax No.: (714) 719-4999
Any party may by notice given in accordance with this Section to the
other parties designate another address or person for receipt of notices
hereunder.
(f) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
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ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING
EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. THE PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY CONSENT TO SUBMIT TO THE EXCLUSIVE JURISDICTION
OF THE COURTS OF THE STATE OF CALIFORNIA AND OF THE UNITED STATES OF AMERICA
LOCATED IN THE STATE OF CALIFORNIA (THE "CALIFORNIA COURTS") FOR ANY LITIGATION
ARISING OUT OF OR RELATING TO THIS NOTE (AND AGREE NOT TO COMMENCE ANY
LITIGATION RELATING THERETO EXCEPT IN SUCH COURTS), WAIVE ANY OBJECTION TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION IN THE CALIFORNIA COURTS AND AGREE NOT TO
PLEAD OR CLAIM IN ANY CALIFORNIA COURT THAT SUCH LITIGATION BROUGHT THEREIN HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
(g) The Section and subsection titles contained herein are
for convenience only and shall not control or affect the meaning or construction
of any provision hereof.
(h) The invalidity or unenforceability of any provision of
this Note in any jurisdiction shall not affect the validity or enforceability of
the remainder of this Note in that jurisdiction or the validity or
enforceability of this Note, including that provision, in any other
jurisdiction. If any restriction or provision of this Note is held unreasonable,
unlawful or unenforceable in any respect, such restriction or provision shall be
interpreted, revised or applied in a manner that renders it lawful and
enforceable to the fullest extent possible under law.
(i) Nothing in this Note is intended or shall be construed
to give any Person other than the parties hereto any legal or equitable right,
remedy or claim under or in respect of this Note or any provision contained
herein.
(j) Upon receipt by Maker of evidence reasonably
satisfactory to him of the loss, theft, destruction or mutilation of this Note,
Maker will make and deliver a new Note of like tenor in lieu of this Note
against receipt of Payee's undertaking to indemnify Maker against and hold him
harmless from all reasonable costs arising as a result of its making and
delivery of the new Note.
This Note has been executed and delivered at Los Angeles, California,
on the date first above written.
/s/ JOHN MARTIN
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John Martin
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