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EXHIBIT 10.4.4
SUBORDINATED PROMISSORY NOTE
$3,000,000 September 23, 1998
FOR VALUE RECEIVED, Easyriders, Inc., a Delaware corporation ("Maker"),
promises to pay to Joseph Teresi ("Payee"), at the place and in the manner
specified below, the principal sum of Three Million Dollars ($3,000,000),
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 4 of this Note.
"Indebtedness" means, with respect to the Maker, (i) any indebtedness of
such Maker, without duplication, whether or not contingent, in respect of
borrowed money or evidenced by bonds, notes, debentures or similar instruments
or letters of credit (or reimbursement agreements in respect thereof) or
bankers' acceptances or representing capital lease obligations or the balance
deferred and unpaid of the purchase price of any property, as well as all
indebtedness of others secured by a lien on any asset of the Maker (whether or
not such indebtedness is assumed by the Maker) and (ii) to the extent not
included in clause (i), any guarantee by the Maker of any indebtedness of any
other person or entity.
"Interest Payment Date" is defined in Section 2.2(b) of this Note.
"Note" means this Subordinated 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 4 of this Note.
"Person" means any person or entity (including, without limitation, a
corporation, limited liability corporation, partnership, trust or joint
venture).
"Rate" is defined in Section 2.2 of this Note.
"Senior Credit Agreement" shall mean the Note and Warrant Purchase
Agreement between Easyriders, Inc., Easyriders Sub II, Inc. and Nomura Holding
America Inc. dated September 23, 1998 among the Maker and the lenders from time
to time under such Credit Agreement, as such
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agreement may be modified, amended, supplemented, restated, extended, deferred,
renewed, replaced, refunded or refinanced, in whole or in part, from time to
time, and each instrument now or hereafter evidencing, governing, guarantying or
securing any Indebtedness under such Credit Agreement, as such agreement may be
modified, amended, supplemented, restated, extended, deferred, renewed,
replaced, refunded or refinanced, in whole or in part, from time to time.
"Senior Creditors" shall mean the holders from time to time of the
Senior Debt of Maker.
"Senior Debt" shall mean all obligations and liabilities of Maker for
the payment of principal, interest, penalties, fees and other amounts under or
in respect of (i) the Senior Credit Agreement (including without limitation the
contingent obligation of the Maker in respect of letters of credit issued
pursuant thereto), and (ii) any other Indebtedness of the Maker, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to this Note. Without
limitation of the foregoing, Senior Debt shall include any claim by the Senior
Creditors for interest accruing after any Insolvency Proceeding or any claim by
the Senior Creditors for such interest which would have accrued in the absence
of such Insolvency Proceeding, whether or not such interest is allowed as a
claim in such Insolvency Proceeding.
"Stock Contribution and Sale Agreement" means the Stock Contribution and
Sale Agreement dated June 30, 1998, by and among Maker, Payee, Newriders, Inc.,
Easyriders Sub II, Inc. 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.
SECTION 2. Terms.
SECTION 2.1 Repayment of Principal. Subject to Section 3 hereof, 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, 1998,
subject to Section 3 hereof (the maturity date of this Note, as it may be
extended from time to time, is referred to herein as 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, 1998, the
Rate shall be twelve percent (12%); and
(ii) On the first Business Day of each month beginning on
September 23, 1998, the Rate shall be increased by an additional one percent
(1%), provided, however, that at no time shall the Rate exceed twenty percent
(20%).
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(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. 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 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 either 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 3. Subordination.
SECTION 3.1 Nature of Subordination. Until the Senior Debt has been
indefeasibly paid in full, Payee may not (i) except for interest payments
pursuant to Section 2(b) hereof, receive, directly or indirectly, any payment,
advance, credit, security or new or further evidence of any kind whatsoever on
account of or with respect to any of the obligations evidenced by this Note,
(ii) accelerate any amount owing with respect to this Note, (iii) sue upon, take
or permit to be taken any action to assert, collect or enforce this Note, or
(iv) file or join in the filing of any petition to commence any Insolvency
Proceeding.
SECTION 3.2 Insolvency Proceedings.
(a) Upon any distribution of assets of Maker to creditors of
Maker upon or in connection with an Insolvency Proceeding, any payment
or distribution of any kind (whether in cash, property or securities)
which otherwise would be payable or deliverable upon or with respect to
the obligations evidenced by this Note shall be paid or delivered
directly to the Senior Creditors for application (in case of cash) to,
or as collateral (in case of non-cash property or securities) for, the
payment or prepayment of the Senior Debt until the Senior Debt has been
indefeasibly paid in full.
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(b) If any Insolvency Proceeding is commenced by or against
Maker, the Senior Creditors are hereby irrevocably authorized and
empowered (in their own names or otherwise), but shall have no
obligation, to (i) demand, sue for, collect and receive every payment or
distribution referred to in subsection (a) above and give acquittance
therefor and (ii) file claims and proofs of claim and take such other
action (including without limitation voting the obligations evidenced by
this Note and enforcing any security interest or other lien securing
payment of this Note) as it may deem necessary or advisable for the
exercise of any of the rights or interests of the Senior Creditors.
(c) If any Insolvency Proceeding is commenced by or against
Maker, Payee shall duly and promptly take such action as the Senior
Creditors may request to (i) collect the obligations evidenced by this
Note for the account of the Senior Creditors, and file appropriate
claims or proofs of claim in respect of the obligations evidenced by
this Note, (ii) execute and deliver to the Senior Creditors such powers
of attorney, assignments or other instruments as the Senior Creditors
may request in order to enable them to enforce any and all claims with
respect to this Note and any security interests and other liens securing
payment of this Note, and (iii) collect and receive any and all payments
and distributions which may be payable or deliverable upon or with
respect to this Note.
SECTION 3.3 Liens. To the extent that Payee now has or hereafter obtains
a lien or security interest in any assets of Maker:
(a) Such lien or security interest shall be at all times subject
and subordinate to any lien or security interest which the Senior
Creditors now have or hereafter obtain in such assets without regard to
the time or manner in which the respective liens and security interests
of the parties hereto may have been created or perfected; and
(b) Payee may not at any time exercise any rights or remedies
with respect to or otherwise enforce any lien or security interest it
now has or hereafter obtains in Maker's assets, or apply any assets
covered by any such lien or security interest to any claim now or
hereafter existing against Maker.
SECTION 3.4 Waivers. Maker and Payee waive notice of acceptance of this
Note by the Senior Creditors, and Payee waives notice of and consents to the
making, amount and terms of (i) any loans or other extensions of credit which
the Senior Creditors may make to Maker from time to time, (ii) any renewal or
extension thereof and (iii) any action which the Senior Creditors may take or
omit in their sole and absolute discretion with respect thereto.
SECTION 3.5 Rights of the Senior Creditors.
(a) This Subordination Agreement shall constitute a continuing
agreement of subordination and the Senior Creditors may, from time to
time and without notice to Payee, lend money to or make other financial
arrangements with Maker in reliance hereon.
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(b) In the event that any payment or distribution, or any
security, proceeds thereof or property or funds payable as protection
for use, sale or lease of such security, is received by Payee, such
property shall be received and held in trust for the benefit of the
Senior Creditors, shall be segregated from other funds and property held
by Payee, and shall be immediately paid over to the Senior Creditors, as
their interests may appear, in the form received (together with any
endorsements or documents as may be necessary to effectively negotiate
or transfer such property) for application (in case of cash) to, or as
collateral (in case of non-cash property or securities) for, the payment
or prepayment of the Senior Debt.
(c) Payee authorizes the Senior Creditors, without notice or
demand and without affecting or impairing Payee's obligations hereunder,
from time to time to (i) renew, compromise, extend, increase, accelerate
or otherwise change the time for payment of, or otherwise change any of
the other terms of the Senior Debt or any part thereof, including
without limitation to increase or decrease the rate of interest thereon;
(ii) take and hold security for the payment of the Senior Debt and
exchange, enforce, waive, release and fail to perfect any such security;
(iii) apply such security and direct the order or manner of sale thereof
as the Senior Creditors in their sole discretion may determine; and (iv)
release and substitute any one or more endorsers, warrantors, Maker or
other obligor. The Senior Creditors may without notice assign their
rights under this Note in whole or in part to any other Senior Creditor.
(d) Payee acknowledges and agrees that it shall have the sole
responsibility for obtaining from Maker such information concerning
Maker's financial condition or business operations as Payee may require,
and that the Senior Creditors have no duty at any time to disclose to
Payee any information relating to the business operations or financial
condition of Maker.
(e) The Senior Creditors may notify any assignee, trustee or
interim trustee in bankruptcy, receiver, debtor in possession or other
person or persons of their rights under this Note.
(f) Neither Payee nor Maker shall amend, extend or otherwise
change the terms of this Note without the consent of the Senior
Creditors.
(g) After the Senior Debt has been indefeasibly paid in full, the
Payee shall be subrogated to the rights of the Senior Creditors to
receive payments or distributions applicable to Senior Debt, to the
extent that distributions otherwise payable to Payee have been applied
to the payment of Senior Debt. Payee agrees that the provisions of this
Section 3 shall not be affected by any action, or failure to act, by any
Senior Creditor which results, or may result, in impairing or
extinguishing any right of reimbursement, subrogation or other right or
remedy of Payee.
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SECTION 3.6 Third Parties. The provisions of Section 3 of this Note are
intended solely for the purpose of defining the relative rights of the Senior
Creditors and the Payee. Nothing contained in this Section 3 is intended to or
shall effect or impair (i) as between Maker, its creditors (other than the
Senior Creditors) and Payee, the obligation of Maker (which is absolute and
unconditional) to pay the obligations evidenced by this Note in accordance with
the terms hereof, and (ii) the relative rights of Payee and creditors of Maker
other than the Senior Creditors.
SECTION 3.7 Subsequent Holders. Any holder of this Note by such holder's
acceptance of this Note agrees to be bound by, and take this Note subject to,
the rights of the Senior Creditors and the obligations of Payee set forth in
this Section 3.
SECTION 4. Events of Default; Acceleration. If any of the following
events ("Events of Default") shall occur:
(a) Maker shall fail to make any payment of interest on this Note
when the same shall become due and payable, and such failure shall continue 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
(25) 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;
(c) Maker makes an assignment for the benefit of creditors, or
admits in writing its inability to pay or generally fails to pay its 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 its 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 or Assignee 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.
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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. 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.
SECTION 5. Miscellaneous.
(a) This Note may not be assigned by Maker or Payee without the
express written consent of the other party.
(b) This Note may not be amended except by a writing signed by
Maker and Payee.
(c) 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.
(d) 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:
Easyriders, Inc.
567 San Nicolas Drive, Suite 400
Newport Beach, CA 92660
Attention: Bill Prather
Fax No.: (714) 719-4999
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To Payee:
Joseph Teresi
2400 Laguna Drive
Fort Lauderdale, FL 33316
Fax No.: (954) 462-0223
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.
(e) THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND 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.
(f) 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.
(g) 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.
(h) 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.
(i) Upon receipt by Maker of evidence reasonably satisfactory to
it 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 it harmless from all
reasonable costs arising as a result of its making and delivery of the new Note.
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This Note has been executed and delivered at Los Angeles, California, on
the date first above written.
EASYRIDERS, INC.
By: /s/ William E. Prather
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Name: William E. Prather
Title: President and Chief Executive
Officer
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