CT, a newly formed joint venture between Tecnica and H.D. Cleven, the principal shareholder of Volkl, will own 85% of Newco and Marker will own the remaining 15%. Pursuant to the terms of the Operating Agreement, CT will have the right to acquire Marker's 15% ownership interest in Newco at some future time at the then fair market value
M&T Bank agreed to reduce its Claim under the M&T Foreign Exchange Contract from $3,675,823.37 (plus interest thereon after May 16, 1999 at a rate of prime plus 2%, plus costs and expenses) to $1,838,000 (the "Reorganized Debt"). nt, (i) Newcol assumed the Reorganized Debt and (ii) in full and complete satisfaction of the Reorganized Debt and M&T Bank's Foreign Exchange Contract Claims against Marker. M&T Bank will receive from Newco (a) Cash in an amount equal to $788,000 and (b) the M&T Bank Note. The M&T Bank Note is an unsecured five (5) year promissory note to be issued to M&T Bank in the aggregate principal amount of $1,050,000. Pursuant to the "most favored nations clause" agreed to in the M&T Letter Agreement described below, the M&T Bank Note will be issued jointly and severally by Newco and Marker Japan Co. Ltd. ("Marker Japan") . 12 Principal payments under the M&T Bank Note will be made (x) in consecutive equal quarterly installments of $50,000 during the first four years of the term, the first of which will be paid ninety (90) days after the Effective Date, and (y) in consecutive equal quarterly installments of $62,500 during the fifth year of the term. Interest will be paid quarterly at the rate of 2% per annum until the fourth anniversary of the Effective Date and thereafter until the maturity date at the prime lending rate extended by commercial banks on commercial loans in Japan from time to time plus one-half (1/2) of one percent. .
KeyBank agrees to reduce its Claim under the KeyBank Foreign Exchange Contracts from $1,279,626.31 to $638,534 (the "Reorganized KeyBank Debt"). Contemporaneously with execution of the KeyBank Settlement Agreement, Marker and 13 Marker Japan delivered to KeyBank a promissory note (the "KeyBank FX Debt Note") for the entire KeyBank FX Debt, payable upon demand with interest at ten percent, issued by Marker and Marker Japan. KeyBank cannot make any demand under the KeyBank FX Debt Note except upon termination of the KeyBank Settlement Agreement. Pursuant to the Plan and the KeyBank Settlement Agreement, on the Effective Date Newco will (i) assume the Reorganized KeyBank Debt, (ii) make a Cash payment to KeyBank of $273,840 (the "Cash Payment") and (iii) issue, jointly and severally with Marker Japan, the KeyBank Note. The KeyBank Note is an unsecured five (5) year promissory note to be issued by Newco to KeyBank in the aggregate principal amount of $364,694. Principal payments under the KeyBank Note will be made (x) in consecutive equal quarterly installments of $17,095 during the first four years of the term, the first of which will be paid ninety (90) days after the Effective Date, and (y) in consecutive equal quarterly installments of $22,793 during the fifth year of the term. Interest will be paid quarterly at the rate of 2% per annum until the fourth anniversary of the Effective Date and thereafter until the maturity date at the prime lending rate extended by commercial banks on commercial loans in Japan from time to time plus one-half (1/2) of one percent.
(iii) Isomura Settlement On August 16, 1994, Marker issued Series A Bonds to Isomura Sangyo Kaisha Ltd., a Japanese Corporation ("Isomura"), in the aggregate principal amount of $19 million. Marker did not make the required interest payment of $125,000 due in October 1998 and $125,000 due in April 1999 on the Series A Bonds. As a result, Isomura, the bondholder, has the right to declare the Series A Bonds in default and accelerate the entire outstanding balance of approximately $11.5 million plus accrued interest of approximately $600,000. On March 26, 1999, CT entered into a restructuring agreement with Isomura (as amended, the "Isomura Agreement"). Pursuant to the Isomura Agreement, Isomura agreed to reduce the amount due under the Series A Bonds to an aggregate principal amount of $5,750,000. Pursuant to the Plan and the Isomura Agreement, on the Effective Date, Isomura, the holder of the Allowed Series A Bonds Claim, will receive the Isomura Note, to be issued by Newco, in the aggregate principal amount of $5,750,000 in full and complete satisfaction of the Series A Bonds Claim. The Isomura Note is a five year unsecured promissory note with the following principal terms: (i) principal amortization in four (4) equal annual installments of $750,000 commencing on the first anniversary of the date on which the Confirmation Order shall become a Final Order (hereafter, the "Final Confirmation Date") and the remaining principal amount of $2,750,000 to be payable on the fifth anniversary of the Final Confirmation Date; (ii) interest will be paid annually until the second anniversary of the Final Confirmation Date and semi-annually thereafter at an interest rate of 2% per annum both before and after default until the fourth anniversary of the Final Confirmation Date and thereafter, the interest rate, both before and after default will be the rate Isomura pays to the bank or other financial institution that funded the purchase of the Series A Bonds by Isomura or has taken over said position from the original funding bank or institution, provided said rate of interest does not exceed the prime lending rate extended by said bank or other financial institution on commercial loans in Japan from time to time plus one-half of one percent (.5%); and (iii) interest will accrue under the Isomura Note commencing April 1, 1999. The Isomura Note will be in substantially the form annexed to the Plan as Exhibit 2 . Pursuant to the Isomura Agreement, Newco and Eiichi Isomura will enter into an employment agreement, effective on the Confirmation Date, pursuant to which Eiichi Isomura agrees to be employed by Marker Japan for a term of at least five (5) years as President and Representative Director at compensation levels to be negotiated. In addition, commencing on the sixth anniversary of the Confirmation Date, Newco will satisfy Eiichi Isomura's obligations under personal guaranties made by him as credit support for Marker Japan Co. Ltd.'s obligations under a certain term loan facility and a working capital facility, by making three equal annual payments of up to $1,166,666 on the then aggregate principal amount outstanding under the term loan and working capital facilities. Eiichi Isomura's personal guaranties will be terminated and 11 all obligations thereunder will be discharged on the eighth anniversary of the Confirmation Date. The liability of Eiichi Isomura under the personal guaranties will be limited to $3,500,000.
Henry E. Tauber ("Tauber"), former president and chief executive officer of Marker and a member of Marker's board of directors, is the record and beneficial owner of 1,000,000 shares of Marker's Series B Preferred Stock (the "Preferred Stock Interests") which were acquired for $3.00 each in cash, for a total investment of $3,000,000. Each share of the Series B Preferred Stock is convertible, at the option of the holder, at any time, into shares of common stock of Marker at a rate of one and one-third shares of common stock for each share of Series B Preferred Stock. At the election of a majority of the holders of the Series B Preferred Stock, the Company is required to redeem each year, beginning September 1, 2003, and on each September 1 thereafter, 25% of the total number of outstanding shares of Marker's Series B Preferred Stock at a price per share equal to $3.00 (subject to adjustment) plus accrued and unpaid cumulative dividends. Tauber and Newco entered into an Agreement of Understanding dated as of July 13, 1999 (the "Tauber Agreement") regarding the treatment of Tauber's Preferred Stock Interests under the Plan. Pursuant to the Tauber Agreement, Tauber or the then existing holder of the Preferred Stock Interests is given an Allowed Claim in the principal amount of $1,500,000 on account of the Preferred Stock Interests (the "Tauber Claim"). Pursuant to the Plan, in full satisfaction and release of the Tauber Claim, on the Effective Date Newco will assume the Tauber Claim and will pay, as when due, the Tauber Payment Obligations. The Tauber Payment Obligations will consist of the following: (i) three equal annual installments of the principal of the Tauber Claim of $150,000 each, the first of which will be due and payable on June 1, 2000 and the second and third on the same day of each succeeding year, and (ii) four equal annual consecutive installments of the principal of the Tauber Claim of $262,500 each, the first of which is payable June 1, 2003 and the remaining three on the same day of each succeeding year until paid in full on June 1, 2006. Simple interest at the rate of 5% per annum will accrue on all installments of the principal of the Tauber Claim that have not been paid, in whole or in part, on their respective due dates; provided that interest will only commence as and from the later of June 1, 2003 and the date such installment was due and payable. Newco will have the right any time and from time to time to defer, without premium or penalty, the payment (in whole or in part) of any installment of principal and the payment of any accrued interest thereon up to and including June 1, 2007. Tauber will have no recourse against 15 Newco for failure to pay Tauber any principal installment when due; provided that all amounts due Tauber under the Plan will be paid on or before June 1, 2007.
Marker will achieve $14,570,448 in debt forgiveness with respect to $25,928,840 of debt in Marker. In addition, simultaneously herewith, Marker Deutschland, Marker's non-debtor operating Subsidiary conducting business in Germany, is undergoing a consensual debt restructuring with its working capital lenders, Hypo Vereinsbank, Deutsche Bank and BFG Bank. Substantially all of Marker's ski bindings are manufactured by Marker Deutschland. Pursuant to the German debt restructuring, Marker Deutschland will achieve debt forgiveness of approximately $15,722,280 with respect to existing working capital debt of $40,808,725.
Until March 1999, Marker Ltd., also a Subsidiary of the Company, designed, distributed and sold to retailers the Company's clothing, gloves and luggage products for skiing and other recreational activities. On March 8, 1999, the Company and Marker Ltd. granted Ski & Sports Recreation Company, L.L.C. an exclusive, worldwide right to manufacture, market and sell the Company's clothing, gloves and luggage products (the "Apparel Business") utilizing the "Marker" tradename in return for royalty payments equal to a percentage of net sales which ranges from 3% to 5%. Marker has the right to terminate the license agreement in the event annual net sales fall below a certain level. In addition, Marker and Marker Ltd. may, at any time before March 31, 2001, acquire by assignment all of the rights of Ski & Sports Recreation Company, L.L.C. under the license agreement. Marker and Marker Ltd. also have the right of first refusal through March 31, 2002 as to any sale or transfer of the business or assets used by Ski & Sports Recreation Company, L.L.C. for the manufacture, sale and marketing of the Apparel Business. In connection with the license agreement, Marker and Marker Ltd. sold certain assets (including, inventory and accounts receivable) of Marker Ltd. to Ski & Sports Recreation Company, L.L.C.
The Company owns its 57,000 square foot combined headquarters and western United States distribution facility located in Salt Lake City, Utah, which was constructed in 1995. Marker USA leases an 8,600 square foot warehouse in Manchester, New Hampshire for use as its eastern United States distribution hub.
Pursuant to the Newco Agreement, CT will contribute $13,974,499 in cash (i.e., $15,000,000 minus the $1,025,501 previously contributed by CT as a result of the consummation of the sale of the 66.66% equity interest in Marker Canada) to Newco in consideration for an 85% equity interest in Newco. In connection with the Newco Agreement, the Company and CT will enter into the Operating Agreement which, among other things, provides that CT will be granted an option (the "Option") to purchase all, but not less than all, of the Company's 15% 34 equity interest in Newco at any time on or after the second anniversary of the consummation date of the plan of reorganization at the then fair market value,
To permit it to monitor its investment, Marker will have the right to appoint a person to serve on Newco's Board of Directors. Newco will put into place minority shareholder protections designed to permit Marker to review the fairness of any transactions between the majority shareholders and Newco. (vii) Marker will not reapply for trading in NASDAQ National Markets or any exchange. (viii) Marker will not promote more active trading of its securities. In this regard, Marker will not engage the services of a market maker or advertise its securities' prices or terms upon which they can be bought or sold, nor will it encourage third parties to do so.
Hypo Vereinsbank agrees to sell to Newco, effective as of the Closing Date, DM 22,455,000 (U.S. $12,274,000) of the outstanding debt balance of DM 40,761,000 (U.S. $22,280,000) (as of August 13, 1999) under the Loan Agreement between Hypo Vereinsbank and Marker Germany dated October 13, 1998, as amended, for a consideration of DM 1, which effectively reduces the amount of debt that Marker Germany owes to Hypo Vereinsbank by DM 22,455,000 (U.S. $12,274,000) to an outstanding balance of DM 18,306,000 (U.S. $10,006,000) (as of August 13, 1999), which balance will be included in the New Financing Facility
Hypo Vereinsbank forgave, in full, the outstanding 8 indebtedness of Marker (DM 2,755,000 (plus interest from 4/19/99 to 8/13/99) as of August 13, 1999).. Hypo Vereinsbank sold to Newco, DM 22,455,000 of the outstanding balance of DM 40,761,000 (as of August 13, 1999) under the Loan Agreement between Hypo Vereinsbank and Marker Deutschland dated October 13, 1998, as amended (the "Cash Credit") for a nominal consideration of DM 1.00 (one Deutschmark). The parties also agreed that, the balance of the Cash Credit will be DM 18,306,000 which balance will be available to Marker Deutschland for financing during the 1999-2000 fiscal year and will be added to the New Financing Facility (defined below). In addition, Marker Deutschland is also a party to six (6) loan agreements entered into with Hypo Vereinsbank from 1995 to 1997 (collectively, the "Medium Term Loan"). Hypo Vereinsbank agrees that the Medium Term Loan in the amount of DM 4,648,000 will remain available to Marker Deutschland for financing the 1999-2000 fiscal year. Finally, Marker's and Marker USA's guarantees of Marker Deutschland's obligations to Hypo Vereinsbank under the Loan Agreement and Medium Term Loan pursuant to guarantees issued by each of Marker and Marker USA on August 1, 1990 in the amount of DM 80,000,000, will be canceled, released and terminated and of no further effect. Hypo Vereinsbank also agreed to make available to Marker Deutschland, (the "New Financing Facility") to be used for financing Marker Deutschland's 1999-2000 fiscal year in an amount up to DM 58,480,000 consisting of DM 18,306,000 remaining balance on the Cash Credit and DM 40,174,000 additional commitment (the "Hypo New Commitment"). The Hypo New Commitment has already been made available to Marker Deutschland since April 1, 1999, to be replaced by the New Financing Facility. The New Financing Facility will be secured by a first-priority security interest in (i) all existing and future accounts receivable of Marker Deutschland, (ii) all existing and future inventory of Marker Deutschland, and (iii) all existing and future trademarks, patents and licenses of Newco relating in any way to the production or sale of ski bindings and their components. Newco will become a contract party to, and liable for, the New Financing Facility
Deutsche Bank sold to Newco, DM 5,690,000 of the outstanding balance of DM 10,798,000 (as of August 13, 1999) under the DBAG Cash Credit for a nominal consideration of DM 1.00 (one Deutschmark). The parties also agreed the balance of the DBAG Cash Credit will be DM 5,108,000 which balance will be available to Marker Deutschland for financing during the 1999-2000 fiscal year and will be added to a new financing facility. |
