<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A1
--------------------------
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported):
DECEMBER 31, 1997
--------------------------
WHEELS SPORTS GROUP, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 0-22321 56-2007717
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
149 GASOLINE ALLEY DRIVE
MOORESVILLE, NORTH CAROLINA 28115
(Address of principal executive offices)
(704) 662-6442
(Registrant's telephone number, including area code)
1368 SALISBURY ROAD
MOCKSVILLE, NORTH CAROLINA 27028
(Former address, if changed since last report)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) The following exhibits are furnished herewith in
accordance with the provisions of Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
Reg. S-K
Exhibit No. Description Item No.
- ----------- ----------- ---------
<S> <C> <C>
* 2.4 Merger Agreement and Plan of Reorganization among SM Acquisition 2
Company, J/B Acquisition Company, Wheels Sport Group, Inc.,
Synergy Marketing, Inc. and J/B Press Pass, Inc., dated
October 3, 1997.
* 2.4.1 Amendment to Merger Agreement and Plan of Reorganization 2
among SM Acquisition Company, J/B Acquisition Company,
Wheels Sport Group, Inc., Synergy Marketing, Inc. and
J/B Press Pass, Inc., dated December 29, 1997.
* 2.4.2 Registration Rights Agreement, dated December 31, 1997, by and 2
among the Company and the shareholders of the partners of Press
Pass.
* 10.1.12 Employment Agreement, dated October 3, 1997 and effective 10
December 31, 1997, by and between Victor Shaffer and the Company.
* 10.1.13 Employment Agreement, dated October 3, 1997 and effective 10
December 31, 1997, by and between Robert Bove and the Company.
* 10.15.4 Form of Promissory Note, issued in the aggregate principal 10
amount of $1,000,000, dated December 31, 1997, from the Company to
shareholders of Synergy Marketing, Inc. and J/B Press Pass, Inc.
+ 10.16.1 Credit Agreement, dated December 31, 1997, among the Company 10
and Credit Agricole Indosuez, as agent, and the lending
institutions named therein.
+ 10.16.2 Warrant, dated December 29, 1997, granted by the Company to 10
Credit Agricole Indosuez, to purchase up to 509,358 shares of
Common Stock.
</TABLE>
* Previously filed with the Company's Form 8-K filed on October 17, 1997.
+ Filed herewith.
2
<PAGE> 3
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.
WHEELS SPORTS GROUP, INC.
Date: January 26, 1998 By: /s/ Howard L. Correll, Jr.
------------------------------------
Howard L. Correll, Jr., Chairman
of the Board, Chief Executive
Officer and President
3
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
Reg. S-K
Exhibit No. Description Item No.
- ----------- ----------- ---------
<S> <C> <C>
+ 10.16.1 Credit Agreement, dated December 31, 1997, among the Company 10
and Credit Agricole Indosuez, as agent, and the lending
institutions named therein.
+ 10.16.2 Warrant, dated December 29, 1997, granted by the Company to 10
Credit Agricole Indosuez, to purchase up to 509,358 shares of
Common Stock.
</TABLE>
<PAGE> 1
EXHIBIT 10.16.1
================================================================================
CREDIT AGREEMENT
among
WHEELS SPORTS GROUP, INC.
and
CREDIT AGRICOLE INDOSUEZ,
AS AGENT,
AND
THE LENDING INSTITUTIONS LISTED HEREIN
-----------------------------------
Dated as of December 31, 1997
-----------------------------------
$17,747,783
================================================================================
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TABLE OF CONTENTS
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SECTION 1. Amount and Terms of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Minimum Amount of Each Borrowing; Maximum Number of Borrowings . . . . . . . . . . . . . . . . . . . . . . 2
1.03 Notice of Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.04 Disbursement of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.05 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.06 Continuations and Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.07 Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.08 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.09 Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.10 Special Provisions Governing Reserve Adjusted Eurodollar Loans . . . . . . . . . . . . . . . . . . . . . . 9
1.11 Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.12 Total Loan Commitments; Limitations on Outstanding Loan Amounts . . . . . . . . . . . . . . . . . . . . . 13
1.13 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2. Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.01 Voluntary Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.02 Mandatory Adjustments of Commitments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.03 Commitment Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.01 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.02 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.03 Method and Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.04 Net Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.01 Conditions Precedent to Initial Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.02 Conditions Precedent to All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.03 Conditions Precedent to All Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 5. Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.01 Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
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5.02 Corporate Power and Authority; Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.03 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.04 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.05 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.06 Governmental Approvals, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.07 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.08 Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.09 True and Complete Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.10 Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.11 Financial Condition; Financial Statements; Projections . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.12 Security Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.13 Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.14 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.15 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.16 Patents, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.17 Compliance with Laws, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.18 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.19 Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.20 Collective Bargaining Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.21 Indebtedness Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.22 Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.23 Environmental Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.24 Representations and Warranties in the Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 6. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.01 Information Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.02 Books, Records and Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.03 Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
6.04 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
6.05 Corporate Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.06 Compliance with Statutes, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.07 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.08 Performance of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.09 End of Fiscal Years; Fiscal Quarters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.10 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.11 Interest Rate Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.12 Equal Security for Loans and Notes; No Further Negative Pledges . . . . . . . . . . . . . . . . . . . . . 64
6.13 Lender Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.14 Pledge of Additional Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.15 Security Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.16 Environmental Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.17 Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.18 Landlord Lien Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
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SECTION 7. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
7.01 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
7.02 Amendments or Waivers of Certain Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
7.03 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
7.04 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
7.05 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
7.06 Advances, Investments and Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
7.07 Prepayments of Indebtedness, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
7.08 Dividends, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
7.09 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
7.10 Total Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
7.11 Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
7.12 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
7.13 Minimum Consolidated EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
7.14 Issuance of Subsidiary Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
7.15 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.16 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
7.17 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
7.18 Merger and Consolidations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
7.19 Sale and Lease-Backs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
7.20 Sale or Discount of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 8. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
8.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
8.02 Representations, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
8.03 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
8.04 Default Under Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
8.05 Bankruptcy, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
8.06 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
8.07 Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
8.08 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
8.09 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
8.10 Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 9. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 10. The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
10.01 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
10.02 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
10.03 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
10.04 Reliance by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
10.05 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
10.06 Non-Reliance on Agent and Other Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
10.07 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
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10.08 The Agent in Its Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
10.09 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
10.10 Resignation by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
SECTION 11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
11.01 Payment of Expenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
11.02 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
11.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
11.04 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
11.05 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
11.06 Payments Pro Rata . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
11.07 Calculations; Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
11.08 Governing Law; Submission to Jurisdiction; Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
11.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
11.10 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
11.11 Headings Descriptive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
11.12 Amendment or Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
11.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
11.14 Domicile of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
11.15 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
11.16 Independence of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
</TABLE>
Annex I - List of Banks
Annex II - Bank Addresses
Annex III - Summary of Corporate Insurance Policies
Annex IV - Schedule of Existing Debt
Annex V - Schedule of Collective Bargaining Agreements
Annex VI - Prior Liens
Annex VII - Environmental
Annex VIII - Subsidiaries
Annex IX - List of Mortgaged Real Property
Annex X - Securities
Exhibit A - Form of Term Note
Exhibit B - Form of Revolving Note
Exhibit C-1 - Form of Opinion of Berliner Zisser Walter & Gallegos
Exhibit C-2 - Form of Local Counsel Opinions
Exhibit C-3 - Form of Opinion of Windels, Marx, Davies & Ives
Exhibit C-4 - Opinion of Counsel to Press Pass
Exhibit D - [Intentionally Omitted]
Exhibit E - Form of Subsidiary Guarantee
Exhibit F-1 - Form of Borrower Securities Pledge Agreement
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<PAGE> 6
Exhibit F-2 - Form of Subsidiary Securities Pledge Agreement
Exhibit G-1 - Form of Borrower Intellectual Property Security Agreement
Exhibit G-2 - Form of Subsidiary Intellectual Property Security Agreement
Exhibit H-1 - Form of Borrower General Security Agreement
Exhibit H-2 - Form of Subsidiary General Security Agreement
Exhibit I-1 - Form of Notice of Assignment
Exhibit I-2 - Form of Assignment and Assumption Agreement
Exhibit J - Form of Notice of Borrowing
Exhibit K - Form of Notice of Continuation/Conversion
Exhibit L - Form of Borrowing Base Certificate
Exhibit M - Form of Officer's Certificate Regarding Environmental
Review
Exhibit N - Form of Officers' Solvency Certificate
Exhibit O - Form of Landlord Lien Assurance
Exhibit P - Form of Escrow Agreement
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<PAGE> 7
CREDIT AGREEMENT, dated as of December 31, 1997, among WHEELS SPORTS
GROUP, INC., a North Carolina corporation (the "Borrower"), the lending
institutions listed in Annex I (each a "Bank" and, collectively, the "Banks")
and CREDIT AGRICOLE INDOSUEZ ("Indosuez"), as agent for the Banks (in such
capacity "Agent") and as collateral agent for the Banks (in such capacity, the
"Collateral Agent"). Unless otherwise defined herein, all capitalized terms
used herein and defined in Section 9 are used herein as so defined.
W I T N E S S E T H :
WHEREAS, the Borrower wishes to incur Term Loans from the Banks to finance
its acquisition of Press Pass and High Performance pursuant to the Acquisition
Documents and to pay certain fees and expenses arising in connection with the
Acquisitions and to incur Revolving Loans to provide for working capital and
other general corporate purposes;
WHEREAS, the Guarantors, in accordance with the terms and conditions
hereinafter set forth, have agreed to guarantee the obligations of the Borrower
hereunder; and
WHEREAS, the Banks are willing to make available the credit facilities
provided for herein.
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 Commitments. Subject to and upon the terms and conditions herein
set forth, each Bank severally agrees in the case of any Borrowing under the
Term Loan Facility on the Closing Date, and in the case of any Borrowing under
the Revolving Portion, at any time and from time to time on and after the
Closing Date and prior to the Revolving Loan Commitment Termination Date, to
make a Loan or Loans to the Borrower, which Loans shall be drawn under the Loan
Facility (including the Revolving Portion and Term Portion thereof), as set
forth below.
(a) Loans under the Term Portion of the Loan Facility (each a "Term Loan"
and, collectively, the "Term Loans") may be made under the Term Loan Facility
(each a "Term Loan" and, collectively, the "Term Loans"). Once repaid, Term
Loans may not be reborrowed. Each Term Loan under the Term Loan Facility (i)
shall be made as a single drawing on the Closing Date in an amount not to
exceed the
<PAGE> 8
Total Term Loan Commitment, (ii) except as hereinafter provided, shall
initially be made as a Base Rate Loan and shall at the Borrower's option and
subject to the terms hereof, be a Base Rate Loan or a Reserve Adjusted
Eurodollar Loan; provided that all Term Loans made by all Banks pursuant to
the same Borrowing shall, unless otherwise specifically provided herein,
consist entirely of Loans of the same Type and (iii) shall not exceed for any
Bank at any time outstanding that aggregate principal amount which equals the
Term Loan Commitment of such Bank.
(b) Loans under the Revolving Portion of the Loan Facility (each a
"Revolving Loan" and, collectively, the "Revolving Loans") (i) shall be made
as a single drawing on the Closing Date in an amount up to $3,000,000,
provided, that the full amount of the total Term Loan Commitment has been
utilized on the Closing Date, (ii) shall be made at any time and from time to
time after the Closing Date and prior to the Revolving Loan Commitment
Termination Date, (iii) except as hereinafter provided, shall initially be
made as a Base Rate Loan and shall, at the Borrower's option and subject to
the terms hereof, be a Base Rate Loan or a Reserve Adjusted Eurodollar Loan,
provided that all Revolving Loans made by all Banks pursuant to the same
Borrowing shall, unless otherwise specifically provided herein, consist
entirely of Loans of the same Type, (iv) may be repaid and reborrowed in
accordance with the provisions hereof, (v) shall not exceed for any Bank at
any time outstanding the Revolving Loan Commitment of such Bank at such time
and (vi) shall not in any case be made if the aggregate principal amount of
Revolving Loans then outstanding, after giving effect to the Revolving Loan
requested by the relevant Notice of Borrowing, plus the then outstanding
Letters of Credit Usage, after giving effect to the issuance of all Letters
of Credit subject to outstanding requests for issuance, would exceed the
lesser of the Borrowing Base as shown in the Borrowing Base Certificate that
was last required to be delivered pursuant to Section 6.01 or the Total
Revolving Loan Commitment then in effect.
1.02 Minimum Amount of Each Borrowing; Maximum Number of Borrowings. The
minimum aggregate principal amount of a Borrowing of Term Loans consisting of
Reserve Adjusted Eurodollar Loans or Base Rate Loans shall be the Minimum
Borrowing Amount and, if greater, shall be in integral multiples of $100,000;
provided, however, that the Borrowing of the Term Loan portion of the Initial
Loans shall be in an aggregate
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<PAGE> 9
principal amount of $7,747,783. The minimum aggregate principal amount of a
Borrowing of Revolving Loans consisting of Reserve Adjusted Eurodollar Loans or
Base Rate Loans shall be the Minimum Borrowing Amount (other than a Borrowing
of Base Rate Loans such that the total amount of Revolving Loans to be
outstanding after giving effect to such Borrowing shall be equal to the Total
Revolving Commitment) and, if greater, shall be in integral multiples of
$100,000. More than one Borrowing may be incurred on any date; provided that
at no time shall there be outstanding more than six Borrowings of Reserve
Adjusted Eurodollar Loans.
1.03 Notice of Borrowings. Whenever the Borrower desires that the Banks
make the Initial Loans, an Authorized Officer of the Borrower shall give the
Agent at the Agent's Office prior to 10:00 a.m. (New York time) at least two
Business Days' prior written notice (or telephone notice promptly confirmed in
writing) of such Borrowing. Whenever the Borrower desires that the Banks make
Reserve Adjusted Eurodollar Loans under the Loan Facility after the Closing
Date an Authorized Officer of the Borrower shall give the Agent at the Agent's
Office prior to 10:00 a.m. (New York time) at least three Business Days' prior
written notice (or telephonic notice promptly confirmed in writing) of each
such Borrowing of Reserve Adjusted Eurodollar Loans. Whenever the Borrower
desires that the Banks make Base Rate Loans under the Loan Facility after the
Closing Date an Authorized Officer of the Borrower shall give the Agent at the
Agent's Office prior to 10:00 a.m. (New York time) on the proposed date of such
Borrowing prior written notice (or telephonic notice promptly confirmed in
writing) of each such Borrowing of Base Rate Loans. Each such notice, which
shall be substantially in the form of Exhibit J hereto (each a "Notice of
Borrowing"), shall be irrevocable, shall be deemed a representation by the
Borrower that all conditions precedent to such Borrowing have been satisfied
and shall specify (i) whether such Borrowing is to be made from the Term Loan
Facility or the Revolving Loan Facility, (ii) the aggregate principal amount in
Dollars of the Loans to be made pursuant to such Borrowing, all of which shall
be specified in such manner as is necessary to comply with all limitations on
Term Loans and Revolving Loans outstanding hereunder, including without
limitation, availability under the Borrowing Base, (iii) the date of Borrowing
(which shall be a Business Day) and (iv) for notices delivered after the
Closing Date, whether the respective Borrowing shall consist of Base Rate Loans
or Reserve Adjusted Eurodollar Loans and, if Reserve Adjusted Eurodollar Loans,
the Interest Period to be initially applicable thereto. The Agent shall as
promptly as practicable give each Bank writ-
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<PAGE> 10
ten notice (or telephonic notice promptly confirmed in writing) of each
proposed Borrowing, of such Bank's proportionate share thereof and of the other
matters covered by the Notice of Borrowing.
1.04 Disbursement of Funds. (a) No later than 1:00 P.M. (New York time)
on the date specified in each Notice of Borrowing, each Bank will make
available to the Agent in New York its pro rata portion of each Borrowing
requested to be made on such date in the manner provided below.
(b) Each Bank shall make available all amounts it is to fund under any
Borrowing on or after the Closing Date in immediately available funds to the
Agent to the account specified therefor by the Agent or if no account is so
specified at the Agent's Office and the Agent will make such funds available to
the Borrower by depositing to the account specified therefor by the Borrower or
if no account is so specified to its account at the Agent's Office the
aggregate of the amounts so made available in the type of funds received.
Unless the Agent shall have been notified by any Bank prior to the date of any
such Borrowing that such Bank does not intend to make available to the Agent
its portion of the Borrowing or Borrowings to be made on such date, the Agent
may assume that such Bank has made such amount available to the Agent on such
date of Borrowing, and the Agent, in reliance upon such assumption, may (in its
sole discretion and without any obligation to do so) make available to the
Borrower a corresponding amount. If such corresponding amount is not in fact
made available to the Agent by such Bank and the Agent has made such
corresponding amount available to the Borrower, the Agent shall be entitled to
recover such amount from such Bank. If such Bank does not pay such
corresponding amount forthwith upon the Agent's demand therefor, the Agent
shall promptly notify the Borrower, and the Borrower shall immediately pay such
corresponding amount to the Agent (it being understood that if the Borrower
makes a request for a Revolving Loan to reimburse the Agent, such Revolving
Loan, if made, shall be an immediate repayment). The Agent shall also be
entitled to recover from such Bank or the Borrower, as the case may be,
interest on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Agent to the Borrower to the
date such amount is recovered by the Agent, at a rate per annum equal to (x) if
paid by such Bank, the Federal Funds Rate or (y) if paid by the Borrower
(and/or one or more other Credit Parties), the then applicable rate of
interest, calculated in accordance with Section 1.08, for the respective Loans.
The Agent shall also be entitled to recover from any Bank an amount equal to
any other
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<PAGE> 11
losses incurred by the Agent as a result of the failure of such Bank to provide
such amount as provided in this Agreement.
(c) Nothing herein shall be deemed to relieve any Bank from its
obligation to fulfill its Commitment hereunder or to prejudice any rights which
the Borrower or any other Credit Party may have against any Bank as a result of
any default by such Bank hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal of and
interest on all the Loans made to it by each Bank shall be evidenced: (i) if
Term Loans, by a promissory note (each, a "Term Note" and, collectively, the
"Term Notes") duly executed and delivered by the Borrower, substantially in the
form of Exhibit A hereto, each with blanks appropriately completed in
conformity herewith; and (ii) if Revolving Loans, by a promissory note (each, a
"Revolving Note" and, collectively, the "Revolving Notes") duly executed and
delivered by the Borrower substantially in the form of Exhibit B hereto, with
blanks appropriately completed in conformity herewith.
(b) The Term Note of the Borrower issued to each Bank shall (i) be
executed by the Borrower, (ii) be payable to the order of such Bank and be
dated the Effective Date, (iii) be in a stated principal amount equal to the
Term Loan Commitment of such Bank and be payable in the aggregate principal
amount of the Term Loans evidenced thereby, (iv) mature, with respect to each
Loan evidenced thereby, on the Final Term Loan Maturity Date, (v) be subject to
mandatory prepayment as provided in Section 3.02, (vi) bear interest as provided
in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Reserve Adjusted Eurodollar Loans, as the case may be, evidenced thereby and
(vii) be entitled to the benefits of this Agreement and the other applicable
Credit Documents.
(c) The Revolving Note of the Borrower issued to each Bank shall (i) be
executed by the Borrower, (ii) be payable to the order of such Bank and be
dated the Effective Date, (iii) be in a stated principal amount equal to the
Revolving Loan Commitment of such Bank and be payable in the aggregate
principal amount of the Revolving Loans evidenced thereby, (iv) mature, with
respect to each Loan evidenced thereby, on the Revolving Maturity Date, (v) be
subject to mandatory prepayment as provided in Section 3.02, (vi) bear interest
as provided in the appropriate clause of Section 1.08 in respect of the Base
Rate Loans and Reserve Adjusted Eurodollar Loans, as the case
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<PAGE> 12
may be, evidenced thereby and (vii) be entitled to the benefits of this
Agreement and the other applicable Credit Documents.
(d) Each Bank will note on its internal records the amount of each Loan
made by it and each payment in respect thereof and will, prior to any transfer
of any of its Notes, endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced thereby. Failure to make any such notation
shall not affect the Borrower's or any Credit Party's obligations hereunder or
under the other applicable Credit Documents in respect of such Loans.
1.06 Continuations and Conversions. The Borrower shall have the option
to convert on any Business Day all or a portion (which portion shall not be
less than the Minimum Borrowing Amount) of the outstanding principal amount of
the Loans owing by the Borrower pursuant to a single Portion of the Loan
Facility into a Borrowing or Borrowings pursuant to such Portion of another
Type of Loan; provided that (i) except as otherwise provided in Section
1.10(b), Reserve Adjusted Eurodollar Loans may be converted into Base Rate
Loans or continued as Reserve Adjusted Eurodollar Loans only on the last day of
an Interest Period applicable thereto, (ii) no such partial conversion of
Reserve Adjusted Eurodollar Loans shall reduce the outstanding principal amount
of Reserve Adjusted Eurodollar Loans under the Loan Facility (or Portion
thereof) made pursuant to a single Borrowing to less than the Minimum Borrowing
Amount and (iii) one Type of Loan may only be continued as or converted into
Reserve Adjusted Eurodollar Loans if no Default or Event of Default is in
existence on the date of the conversion. Each such conversion (or
continuation) shall be effected by the Borrower by giving the Agent at the
Agent's Office prior to 10:00 a.m. (New York time) at least three Business
Days' (or the same Business Day in the case of a conversion into or
continuation of Base Rate Loans) prior written notice (or telephonic notice
promptly confirmed in writing) (each a "Notice of Continuance/Conversion"),
substantially in the form of Exhibit K hereto, specifying the Loans to be so
converted or continued, the Type of Loans to be converted into and, if to be
converted into or continued as Reserve Adjusted Eurodollar Loans, the Interest
Period to be initially applicable thereto. The Agent shall give each Bank
notice as promptly as practicable of any such proposed conversion affecting any
of its Loans. Notwithstanding the foregoing or the provisions of Section 1.09,
if a Default or Event of Default is in existence at the time any Interest
Period in respect of any Borrowing of Reserve Adjusted Eurodollar Loans is to
expire, such Loans may not be continued as Reserve Adjusted Eurodollar Loans
but instead shall be auto-
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<PAGE> 13
matically converted on the last day of such Interest Period into Base Rate
Loans. If no Notice of Continuance/Conversion has been duly delivered with
respect to a Reserve Adjusted Eurodollar Loan on or before the third Business
Day prior to the last day of the Interest Period applicable thereto, such
Reserve Adjusted Eurodollar Loan shall be automatically converted into a Base
Rate Loan.
1.07 Pro Rata Borrowings. All Borrowings under this Agreement shall be
loaned by the Banks pro rata on the basis of their Term Loan Commitments or
Revolving Loan Commitments, as the case may be. No Bank shall be responsible
for any default by any other Bank in its obligation to make Loans hereunder and
each Bank shall be obligated to make the Loans provided to be made by it
hereunder, regardless of the failure of any other Bank to fulfill its
commitments hereunder.
1.08 Interest. (a) The unpaid principal amount of each Base Rate Loan
shall bear interest from the date of the Borrowing thereof until maturity
(whether by acceleration or otherwise) (or unless sooner converted into a
Reserve Adjusted Eurodollar Loan) at a rate per annum which shall at all times
be equal to the sum of (i) the Base Rate in effect from time to time and (ii)
the applicable Interest Margin.
(b) The unpaid principal amount of each Reserve Adjusted Eurodollar Loan
shall bear interest from the date of the Borrowing thereof until maturity
(whether by acceleration or otherwise) (or unless sooner converted to a Base
Rate Loan) at a rate per annum which shall at all times be equal to the sum of
(i) the relevant Eurodollar Rate and (ii) the applicable Interest Margin.
(c) The unpaid principal amount of each Loan, upon the occurrence and
during the continuance of a Default, overdue principal and, to the extent
permitted by law, overdue interest in respect of each Loan shall bear interest
at a rate per annum equal to 2% plus the rate (including any applicable margin)
in effect from time to time.
(d) Interest shall accrue from and including the date of any Borrowing to
but excluding the date of any repayment thereof and shall be payable (i) in
respect of each Base Rate Loan, quarterly in arrears on the last Business Day
of each March, June, September and December beginning December 31, 1997; (ii)
in respect of each Reserve Adjusted Eurodollar Loan, in arrears on the last day
of each Interest Period applicable thereto and, in the case of an Interest
Period in excess of
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<PAGE> 14
three months, on each date occurring at three-month intervals after the first
date of such Interest Period; and (iii) in respect of each Loan, on any
prepayment (on the amount prepaid), at maturity (whether by acceleration or
otherwise) and, after such maturity, on demand. Notwithstanding the foregoing,
interest payable at the rate provided in Section 1.08(c) shall be payable on
demand.
(e) All computations of interest hereunder shall be made in accordance
with Section 11.07(b).
(f) The Agent, upon determining the interest rate for any Borrowing of
Reserve Adjusted Eurodollar Loans for any Interest Period, shall promptly
notify the Borrower and the Banks thereof. Such determination shall, absent
manifest error, be final, conclusive and binding upon all parties hereto.
1.09 Interest Periods. At the time the Borrower gives a Notice of
Borrowing or Notice of Continuance/Conversion in respect of the making of,
continuance of, or conversion into, a Borrowing of Reserve Adjusted Eurodollar
Loans, it shall have the right to elect, by giving the Agent written notice (or
telephonic notice promptly confirmed in writing), the Interest Period
applicable to such Borrowing, which Interest Period shall, at the option of the
Borrower, be a one, two, three or six month period. Notwithstanding anything
to the contrary contained above:
(a) the initial Interest Period for any Borrowing of Reserve Adjusted
Eurodollar Loans shall commence on the date of such Borrowing (including the
date of any conversion from a Borrowing of Base Rate Loans) and each
Interest Period occurring thereafter in respect of such Borrowing shall
commence on the date on which the next preceding Interest Period expires;
(b) if any Interest Period relating to a Borrowing of Reserve Adjusted
Eurodollar Loans begins on a date for which there is no numerically
corresponding date in the calendar month in which such Interest Period ends,
such Interest Period shall end on the last Business Day of such calendar
month;
(c) if any Interest Period would otherwise expire on a day
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<PAGE> 15
which is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that if any Interest Period in respect of a
Reserve Adjusted Eurodollar Loan would otherwise expire on a day which is not
a Business Day but is a day of the month after which no further Business Day
occurs in such month, such Interest Period shall expire on the next preceding
Business Day;
(d) no Interest Period shall extend with respect to Term Loans, beyond
the Final Term Loan Maturity Date, and, with respect to Revolving Loans,
beyond the Final Revolving Loan Maturity Date; and
(e) no Interest Period with respect to any Borrowing of Reserve Adjusted
Eurodollar Loans shall extend beyond any date upon which the Borrower is
required to make a scheduled payment of principal with respect to the Term
Loans if, after giving effect to the selection of such Interest Period, the
aggregate principal amount of Term Loans maintained as Reserve Adjusted
Eurodollar Loans with Interest Periods ending after such date of scheduled
payment of principal would exceed the amount of Term Loans permitted to be
outstanding after such scheduled payment of principal.
1.10 Special Provisions Governing Reserve Adjusted Eurodollar Loans.
Notwithstanding any other provision of this Agreement, the following provisions
shall govern with respect to Reserve Adjusted Eurodollar Loans as to the
matters covered:
(a) On an Interest Rate Determination Date, the Agent shall determine
(which determination shall, absent manifest error, be final, conclusive and
binding upon all parties hereto) the interest rate which shall apply to the
Reserve Adjusted Eurodollar Loans for which an interest rate is then being
determined for the applicable Interest Period and shall promptly give notice
thereof (in writing or by telephone confirmed in writing) to the Borrower and
to each Bank.
(b) In the event that (x) in the case of clause (i) below, the Agent, or
(y) in the case of clause (ii) or (iii) below, any Bank, shall have
determined (which determination shall, absent manifest error, be final,
conclusive and binding upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any Interest
Period that, by reason of any changes arising on or after the Effective
Date affecting the interbank eurodollar market, adequate and fair means do
not exist for ascertaining the applica-
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<PAGE> 16
ble interest rate on the basis provided for in the definition of
Eurodollar Rate;
(ii) at any time that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Reserve Adjusted Eurodollar Loans or its obligation to make Reserve
Adjusted Eurodollar Loans because of (x) any change since the Effective
Date (including changes proposed or published prior to the Effective Date
but taking effect thereafter) in any applicable law, governmental rule,
regulation, guideline or order, whether or not having the force of law, or
in the interpretation or administration thereof and including the
introduction of any new law or governmental rule, regulation, guideline or
order such as, for example, but not limited to: (A) a change in the basis
of taxation of payments to any Bank of the principal of or interest on the
Notes or any other amounts payable hereunder (except for changes in the
rate of tax on the net income or profits of such Bank pursuant to the laws
of the jurisdiction in which its principal office or applicable lending
office is located) or (B) a change in official reserve requirements, but,
in all events, excluding reserves required under Regulation D to the
extent included in the computation of the Eurodollar Rate and/or (y) other
circumstances affecting such Bank, the interbank eurodollar market, or
the position of such Bank in such market; or
(iii) at any time that the making or continuance of any Reserve Adjusted
Eurodollar Loan has become unlawful by compliance by such Bank in good
faith with any law, governmental rule, regulation, guideline or order (or
would conflict with any such governmental rule, regulation, guideline or
order not having the force of law even though the failure to comply
therewith would not be unlawful), or has become impracticable as a result
of a contingency occurring after the Effective Date which materially and
adversely affects the interbank eurodollar market;
then, and in any such event, the Agent in the case of clause (i) above or
such Bank in the case of clause (ii) or (iii) above shall on such date give
notice (by telephone confirmed in writing) to the Borrower and, in the case
of clause (ii) or (iii), to the Agent, of such deter-
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<PAGE> 17
mination (which notice the Agent shall promptly transmit to each of the other
Banks). Thereafter (x) in the case of clause (i) above, Reserve Adjusted
Eurodollar Loans shall no longer be available until such time as the Agent
notifies the Borrower and the Banks that the circumstances giving rise to
such notice by the Agent no longer exist, and any Notice of Borrowing or
Notice of Continuance/Conversion given by the Borrower with respect to the
borrowing of or conversion into (including continuance of) Reserve Adjusted
Eurodollar Loans which have not yet been incurred shall be deemed rescinded
by the Borrower, (y) in the case of clause (ii) above, the Borrower shall pay
to such Bank, upon written demand therefor, such additional amounts (in the
form of an increased rate of, or a different method of calculating, interest
or otherwise as such Bank in its reasonable discretion shall determine) as
shall be required to compensate such Bank for such increased costs or
reductions in amounts receivable hereunder (a written notice as to the
additional amounts owed to such Bank, showing the basis for the calculation
thereof, submitted to the Borrower shall, absent manifest error, be final,
conclusive and binding upon all parties hereto) and (z) in the case of clause
(iii) above, the Borrower shall take one of the actions specified in Section
1.10(c) as promptly as possible and, in any event, within the time period
required by law.
(c) At any time that any Reserve Adjusted Eurodollar Loan is affected by
the circumstances described in Section 1.10(b)(ii) or (iii), the Borrower may
(and in the case of a Reserve Adjusted Eurodollar Loan affected pursuant to
Section 1.10(b)(iii) shall) either (i) if a Notice of Borrowing or Notice of
Continuance/Conversion has been given with respect to the affected Adjusted
Eurodollar Loan cancel said Notice of Borrowing or Notice of
Continuance/Conversion by giving the Agent telephonic notice (confirmed
promptly in writing) thereof on the same date that Borrower was notified by a
Bank pursuant to Section 1.10(b)(ii) or (iii), or (ii) if the affected
Reserve Adjusted Eurodollar Loan is then outstanding, upon at least three
Business Days' notice to the Agent, require the affected Bank to convert each
such Reserve Adjusted Eurodollar Loan into a Base Rate Loan, or prepay such
Reserve Adjusted Eurodollar Loan; provided that if more than one Bank is
affected at any time, then all affected Banks must be treated the same
pursuant to this Section 1.10(c); and provided, further, that the Borrower
shall compensate any such affected Banks as set forth in Section 1.10(f).
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<PAGE> 18
(d) Anything herein to the contrary notwithstanding, if on any Interest
Rate Determination Date no Eurodollar Rate is available by reason of the
inability of the Agent to determine such interest rate in accordance with the
definition thereof, the Agent shall give the Borrower and each Bank prompt
notice thereof and the Loans requested to be made as Reserve Adjusted
Eurodollar Loans shall, subject to the applicable notice requirements, be
made as Base Rate Loans.
(e) Each Bank agrees that, as promptly as practicable after it becomes
aware of the occurrence of any event or the existence of a condition that
would cause it to be an affected Bank under Section 1.10(b) (ii) or (iii), it
will, to the extent not inconsistent with such Bank's internal policies, use
reasonable efforts to make, fund or maintain the affected Reserve Adjusted
Eurodollar Loans of such Bank through another lending office of such Bank if
as a result thereof the additional moneys which would otherwise be required
to be paid in respect of such Loans pursuant to Section 1.10(b)(ii) would be
materially reduced or the illegality or other adverse circumstances which
would otherwise require prepayment of such Loans pursuant to Section
1.10(b)(iii) would cease to exist, and if, as determined by such Bank, in
its reasonable discretion, the making, funding or maintaining of such Loans
through such other lending office would not otherwise adversely affect such
Loans or such Bank. The Borrower hereby agrees to pay all reasonable
expenses incurred by any Bank in transferring the Loans to another lending
office of such Bank pursuant to this Section 1.10(e).
(f) The Borrower shall compensate each Bank, upon written request by that
Bank, for all reasonable losses, expenses and liabilities (including, without
limitation, such factors as any interest paid by that Bank to lenders of
funds borrowed by it to make or carry its Reserve Adjusted Eurodollar Loans
and any loss sustained by that Bank in connection with re-employment of such
funds (based upon the difference between the amount earned in connection with
re-employment of such funds and the amount payable by the Borrower if such
funds had been borrowed or remained outstanding) which that Bank may sustain
with respect to the Borrower's Reserve Adjusted Eurodollar Loans: (i) if for
any reason (other than a default or error by that Bank) a Borrowing of any
such Reserve Adjusted Eurodollar Loan does not occur on a date specified
therefor in a Notice of Borrowing or a Notice of Continu-
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<PAGE> 19
ance/Conversion or in a telephonic request for borrowing or conversion, or a
successive Interest Period in respect of any such Reserve Adjusted Eurodollar
Loan does not commence after notice therefor is given pursuant to Section
1.06, (ii) if any prepayment (as required by Sections 3.01 and 3.02, by
acceleration or otherwise) or conversion of any of such Bank's Reserve
Adjusted Eurodollar Loans to the Borrower occurs on a date which is not the
last day of the Interest Period applicable to that Loan, (iii) if any
prepayment of any such Bank's Reserve Adjusted Eurodollar Loans to the
Borrower is not made on any date specified in a notice of prepayment given by
the Borrower, or (iv) as a consequence of any other failure by the Borrower
to repay such Bank's Reserve Adjusted Eurodollar Loans to the Borrower when
required by the terms of this Agreement.
1.11 Capital Requirements. If any Bank shall have determined that the
adoption or effectiveness after the Effective Date of any applicable law, rule
or regulation regarding capital adequacy, or any change therein, or any change
in the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Bank or such Bank's parent with
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency
(including in each case any such change proposed or published prior to the date
hereof but taking effect thereafter), has or would have the effect of reducing
the rate of return on such Bank's or such Bank's parent's capital or assets as
a consequence of such Bank's obligations hereunder to a level below that which
such Bank or such Bank's parent could have achieved but for such adoption,
effectiveness or change or as a consequence of an increase in the amount of
capital required to be maintained by such Bank (including in each case, without
limitation, with respect to any Bank's Commitment or any Loan), then from time
to time, within 15 days after demand by such Bank (with a copy to the Agent),
the Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank or such Bank's parent, as the case may be, for such
reduction. Each Bank, upon determining in good faith that any additional
amounts will be payable pursuant to this Section 1.11, will give written notice
thereof to the Borrower, which notice shall set forth in reasonable detail the
basis of the calculation of such additional amounts.
1.12 Total Loan Commitments; Limitations on Outstanding Loan Amounts.
The original amount of the (i) Total
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<PAGE> 20
Commitments is $17,747,783, (ii) Total Term Loan Commitment is $7,747,783, and
(iii) Total Revolving Loan Commitment is $10,000,000, including up to
$1,000,000 of Letters of Credit. Anything contained in this Agreement to the
contrary notwithstanding, (a) in no event shall the sum of the aggregate
principal amount of all Term Loans and Revolving Loans of any Bank at any time
exceed such Bank's portion of the Total Commitments, (b) in no event shall the
sum of the aggregate principal amount of all Term Loans and Revolving Loans
from all Banks at any time exceed the Total Commitments and (c) in no event
shall the Total Utilization of Revolving Loan Commitments and Letters of Credit
Usage exceed the lesser of the Total Revolving Loan Commitments or the
Borrowing Base.
1.13 Letters of Credit.
(a) Letters of Credit. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of the
Borrower set forth herein and in the other Credit Documents, in addition to
requesting that the Banks make Revolving Loans pursuant to Section 1.03, the
Borrower may request, in accordance with the provisions of this Section 1.13,
that one or more Issuing Banks issue Letters of Credit for the account of the
Borrower; provided that (i) the Borrower shall not request that any Bank issue
any Letter of Credit and a Bank shall not issue any Letter of Credit, if after
giving effect to such issuance the sum of (A) the Letters of Credit Usage on
the date of such issuance, after giving effect to the issuance of all Letters
of Credit subject to outstanding requests for issuance of a Letter of Credit,
plus (B) the Total Utilization of Revolving Loan Commitments then outstanding,
after giving effect to the making of all Revolving Loans then requested by all
outstanding but unfunded Notices of Borrowing, would exceed the lesser of the
Borrowing Base as would be shown in the Borrowing Base Certificate that was
last required to be delivered pursuant to Section 6.01 or the Total Revolving
Loan Commitment then in effect, (ii) in no event shall any Issuing Bank issue
(A) any Letter of Credit having an expiration date later than thirty (30)
Business Days prior to the Revolving Maturity Date, after giving effect to any
possible renewal of such Letter of Credit pursuant to the proviso to the
following clause (ii)(B), (B) subject to the foregoing clause (ii)(A), any
Letter of Credit having an expiration date more than one year after its date of
issuance; provided that, subject to the foregoing clause (ii)(A), this clause
(B) shall not prevent any Issuing Bank from issuing a Letter of Credit
containing a provision to the effect that such Letter of Credit will
automatically be renewed annually for a period not to ex-
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<PAGE> 21
ceed one year, so long as such renewable Letter of Credit provides that it
shall not at any time be renewed for an additional year if (I) the Borrower
notifies the Issuing Bank in writing one Business Day prior to the applicable
renewal date that the Borrower elects to allow the Letter of Credit to expire
without being renewed, or (II) the Issuing Bank or the Required Banks notify
the Borrower in writing, prior to the date set forth in such Letter of Credit
as the date by which the beneficiary thereof is to be notified whether such
Letter of Credit is to be renewed, that such Letter of Credit shall not be so
renewed, in which case such Letter of Credit shall not be so renewed, (C) any
Letter of Credit the initial stated amount of which is less than $100,000, or
(D) any Letter of Credit (I) as to which a drawing can be made in a location
other than in the United States of America, (II) which is governed by laws
other than the laws of the State of New York, without regard to the principles
of conflicts of laws, or (III) as to which the beneficiary is not required, by
acceptance of the Letter of Credit, to be subject to the exclusive jurisdiction
of any competent state or federal court in the State of New York with regard to
such Letter of Credit and (iii) the Borrower shall not request that any Issuing
Bank issue and no Issuing Bank shall issue any Letter of Credit if, after
giving effect to such issuance and the issuance of all other requested Letters
of Credit, the then outstanding Letters of Credit Usage in respect of all
Letters of Credit would exceed $1,000,000. The issuance of any Letter of
Credit in accordance with the provisions of this Section 1.13 shall be given
effect in the calculation of the aggregate principal amount of Revolving Loans
outstanding and the Letters of Credit Usage and shall require the satisfaction
of each condition set forth in Sections 4.01, 4.02 and 4.03.
Immediately upon the issuance of each Letter of Credit, each Bank other
than the Issuing Bank or Banks shall be deemed to, and hereby agrees to, have
irrevocably purchased from the Issuing Bank a participation (such participation
of each Bank in each Letter of Credit being hereinafter referred to as its
"Letter of Credit Participation") in such Letter of Credit and each drawing
thereunder in an amount equal to such Bank's pro rata share (determined on the
basis of such Bank's Revolving Loan Commitment) of the maximum amount which is
or at any time may become available to be drawn thereunder.
Each Letter of Credit may provide that the Issuing Bank may (but shall not
be required to) pay the beneficiary thereof upon the occurrence of an Event of
Default and the acceleration of the maturity of the Revolving Loans or, if pay-
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<PAGE> 22
ment is not then due to the beneficiary, provide for the deposit of funds in an
account to secure payment to the beneficiary and that any funds so deposited
shall be paid to the beneficiary of the Letter of Credit if conditions to such
payment are satisfied or returned to the Issuing Bank for distribution to the
Banks (or, if all Obligations shall have been paid in full, to the Borrower) if
no payment to the beneficiary has been made and the final date available for
drawings under the Letter of Credit has passed. Each payment or deposit of
funds by an Issuing Bank as provided in this paragraph shall be treated for all
purposes of this Agreement as a drawing duly honored by such Issuing Bank under
the related Letter of Credit.
(b) Request for Issuance. Whenever the Borrower desires the issuance of
a Letter of Credit, it shall deliver to the Agent a request for issuance of a
Letter of Credit no later than Noon (New York time) at least three Business
Days, or such shorter period as may be agreed to by any Issuing Bank in any
particular instance, in advance of the proposed date of issuance. The request
for issuance with respect to any Letter of Credit shall specify (i) the
proposed date of issuance (which shall be a business day under the laws of the
jurisdiction of the Issuing Bank) of such Letter of Credit, (ii) the face
amount of such Letter of Credit, (iii) the expiration date of such Letter of
Credit and (iv) the name and address of the beneficiary of such Letter of
Credit. As soon as practicable after delivery of such request for issuance of
a Letter of Credit, the Issuing Bank for such Letter of Credit shall be
determined as provided in Section 1.13(c). Prior to the date of issuance, the
Borrower shall specify a precise description of the documents and the verbatim
text of any certificate to be presented by the beneficiary of such Letter of
Credit which, if presented by such beneficiary prior to the expiration date of
the Letter of Credit, would require the Issuing Bank to make payment under the
Letter of Credit; provided that the Issuing Bank, in its sole judgment, may
require changes in any such documents and certificates; and provided, further,
that no Letter of Credit shall require payment against a conforming draft to be
made thereunder earlier than Noon in the time zone of the Issuing Bank on the
Business Day (which shall be a business day under the laws of the jurisdiction
of the Issuing Bank) next succeeding the Business Day (which shall be a
Business Day under the laws of the jurisdiction of the Issuing Bank) that such
draft is presented. In determining whether to pay under any Letter of Credit,
the Issuing Bank shall be responsible only to determine that the documents and
certificates required to be delivered under that Letter of Credit have been
delivered and
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<PAGE> 23
that they comply on their face with the requirements of that Letter of Credit.
Promptly after receipt of a request for issuance of a Letter of Credit and the
determination of the Issuing Bank thereof, the Agent shall notify each Bank of
the proposed issuance, the identity of the Issuing Bank and the amount of each
other Bank's respective participation therein, determined in accordance with
Section 1.13(a).
(c) Determination of Issuing Bank.
(1) Upon receipt by the Agent of a request for issuance pursuant to
Section 1.13(b) with respect to a Letter of Credit, in the event the Agent
elects to issue such Letter of Credit, the Agent shall so notify the
Borrower, and the Agent shall be the Issuing Bank with respect thereto. In
the event that the Agent, in its sole discretion, elects not to issue such
Letter of Credit, the Agent shall promptly so notify the Borrower, and the
Borrower may request any other Bank to issue such Letter of Credit. Each
such Bank so requested to issue such Letter of Credit shall promptly notify
the Borrower and the Agent whether or not, in its sole discretion, it has
elected to issue such Letter of Credit, and any such Bank that so elects to
issue such Letter of Credit shall be the Issuing Bank with respect thereto.
In the event that each other Bank elects not to issue such Letter of Credit,
the Agent agrees to issue such Letter of Credit and to be the Issuing Bank
with respect thereto. No Issuing Bank shall issue any Letter of Credit
denominated in a currency other than Dollars.
(2) Each Issuing Bank that elects to issue a Letter of Credit shall
promptly give written notice to the Agent and each other Bank of the
information required under Section 1.13(b)(i)-(iv) relating to the Letter of
Credit.
(d) Payment of Amounts Drawn Under Letters of Credit. In the event of
any request for drawing under any Letter of Credit by the beneficiary thereof,
the Issuing Bank shall notify the Borrower and the Agent on or before the date
on which such Issuing Bank intends to honor such drawing, and the Borrower
shall reimburse such Issuing Bank on the day on which such drawing is honored
in an amount in same day funds equal to the amount of such drawing; provided
that, anything contained in this Agreement to the contrary notwithstanding, (i)
unless the Borrower shall have notified the Agent and such Issuing Bank prior
to Noon (New York time) on the Business Day of the date of such drawing that
the Borrower intends to reim-
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<PAGE> 24
burse such Issuing Bank for the amount of such drawing with funds other than
the proceeds of Revolving Loans, the Borrower shall be deemed to have timely
given a Notice of Borrowing to the Agent requesting the Banks to make Revolving
Loans that are Base Rate Loans on the date on which such drawing is honored in
an amount equal to the amount of such drawing, and (ii) subject to satisfaction
or waiver of the conditions specified in Section 4.02, the Banks shall, on the
date of such drawing, make Revolving Loans that are Base Rate Loans in the
amount of such drawing, the proceeds of which shall be applied directly by the
Agent to reimburse such Issuing Bank for the amount of such drawing; and
further provided that if, for any reason, proceeds of Revolving Loans are not
received by such Issuing Bank on such date in an amount equal to the amount of
such drawing, the Borrower shall reimburse such Issuing Bank, on the Business
Day (which shall be a business day under the laws of the jurisdiction of such
Issuing Bank) immediately following the date of such drawing, in an amount in
same day funds equal to the excess of the amount of such drawing over the
amount of such Revolving Loans, if any, that are so received, plus accrued
interest on such amount at the rate set forth in Section 1.13(f)(1)(i).
(e) Payment by Banks. In the event that the Borrower shall fail to
reimburse an Issuing Bank as provided in Section 1.13(d) in an amount equal to
the amount of any drawing honored by such Issuing Bank under a Letter of Credit
issued by it, such Issuing Bank shall promptly notify each Bank of the
unreimbursed amount of such drawing and of such Bank's respective participation
therein. Each Bank shall make available to such Issuing Bank an amount equal
to its respective participation in same day funds, at the office of such
Issuing Bank specified in such notice, not later than 1:00 P.M. (New York
time) on the Business Day (which shall be a business day under the laws of the
jurisdiction of such Issuing Bank) after the date notified by such Issuing
Bank. In the event that any Bank fails to make available to such Issuing Bank
the amount of such Bank's participation in such Letter of Credit as provided in
this Section 1.13(e), such Issuing Bank shall be entitled to recover such
amount on demand from such Bank together with interest at the customary rate
set by the Agent for the correction of errors among banks for three Business
Days and thereafter at the Base Rate. Each Issuing Bank shall distribute to
each other Bank which has paid all amounts payable by it under this Section
1.13(e) with respect to any Letter of Credit issued by such Issuing Bank such
other Bank's pro rata share of all payments received by such Issuing Bank from
the Borrower in reimbursement of drawings honored by such Issuing Bank under
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such Letter of Credit when such payments are received. Nothing in this Section
1.13(e) shall be deemed to relieve any Bank from its obligation to pay all
amounts payable by it under this Section 1.13(e) with respect to any Letter of
Credit issued by an Issuing Bank or to prejudice any rights that the Borrower
or any other Bank may have against a Bank as a result of any default by such
Bank hereunder.
(f) Compensation.
(1) The Borrower agrees to pay the following amounts with respect to all
Letters of Credit:
(i) with respect to drawings made under any Letter of Credit,
interest, payable on demand, on the amount paid by such Issuing Bank in
respect of each such drawing from and including the date of the drawing
through the date such amount is reimbursed by the Borrower (including any
such reimbursement out of the proceeds of Revolving Loans pursuant to
Section 1.13(d)) at a rate which is equal to the interest rate then
applicable to Base Rate Loans for the period from the date of such drawing
to and including the first Business Day after the date of such drawing and
thereafter at a rate equal to 2% per annum in excess of the rate of
interest otherwise payable under this Agreement for Base Rate Loans during
such period; provided that amounts reimbursed after 1:00 p.m. (New York
time) on any date shall be deemed to be reimbursed on the next succeeding
Business Day; and
(ii) with respect to the issuance, amendment or transfer of each Letter
of Credit and each drawing made thereunder, documentary and processing
charges in accordance with such Issuing Bank's standard schedule for such
charges in effect at the time of such amendment, transfer or drawing, as
the case may be.
(2) The Borrower agrees to pay to the Agent for distribution to each Bank
in respect of each Letter of Credit outstanding such Bank's pro rata share of
a commission equal to 2% per annum of the maximum amount available from time
to time to be drawn under such outstanding Letters of Credit, payable in
arrears on and through the last day of each fiscal quarter of the Borrower
and calculated on the basis of a 365-day year and the actual number of days
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elapsed. Upon the happening and during the continuance of an Event of
Default described in Section 8.01, the commission referred to in the
preceding sentence shall be 4% per annum.
(3) The Borrower agrees to pay to each Issuing Bank in respect of each
Letter of Credit on the date of issuance a commission equal to the greater of
(A) 0.50% per annum of the maximum amount available at any time to be drawn
under such Letter of Credit issued by such Issuing Bank or (B) $2,500,
payable in arrears on and through the last day of each fiscal quarter of the
Borrower and calculated on the basis of a 365-day year and the actual number
of days elapsed.
Amounts payable under clauses (1)(i) and (2) of this Section 1.13(f),
shall be paid to the Agent on behalf of the Banks. The Agent shall distribute
promptly to each Bank its pro rata share of such amount. Amounts payable under
clauses (1)(ii) and (3) of this Section 1.13(f) shall be paid directly to the
Issuing Bank.
(g) Obligations Absolute. The obligation of the Borrower to reimburse
each Issuing Bank for drawings made under the Letters of Credit issued by it
and the obligations of the Banks under Section 1.13(e) shall be unconditional
and irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including, without limitation, the following
circumstances:
(1) any lack of validity or enforceability of any Letter of Credit;
(2) the existence of any claim, setoff, defense or other right that the
Borrower or any Affiliate of the Borrower or any other Person may have at any
time against a beneficiary or any transferee of any Letter of Credit (or any
persons or entities for whom any such beneficiary or transferee may be
acting), such Issuing Bank, any Bank or any other Person, whether in
connection with this Agreement, the transactions contemplated herein or any
unrelated transaction;
(3) any draft, demand, certificate or any other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
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(4) payment by such Issuing Bank under any Letter of Credit against
presentation of a demand, draft or certificate or other document that does
not comply with the terms of such Letter of Credit;
(5) any other circumstance or happening whatsoever that is similar to any
of the foregoing; or
(6) the fact that a Default or Event of Default shall have occurred and
be continuing.
(h) Additional Payments. If by reason of (a) any change after the
Effective Date in applicable law, regulation, rule, decree or regulatory
requirement or any change in the interpretation or application by any judicial
or regulatory authority of any law, regulation, rule, decree or regulatory
requirement or (b) compliance by any Issuing Bank or any Bank with any
direction, request or requirement (whether or not having the force of law) of
any governmental or monetary authority including, without limitation,
Regulation D:
(i) such Issuing Bank or any Bank shall be subject to any tax, levy,
charge or withholding of any nature or to any variation thereof or to any
penalty with respect to the maintenance or fulfillment of its obligations
under this Section 1.13, whether directly or by such being imposed on or
suffered by such Issuing Bank or any Bank;
(ii) any reserve, deposit or similar requirement is or shall be
applicable, imposed or modified in respect of any Letter of Credit issued
by such Issuing Bank or participations therein purchased by any Bank; or
(iii) there shall be imposed on such Issuing Bank or any Bank any other
condition regarding this Section 1.13, any Letter of Credit or any
participation therein;
and the result of the foregoing is to directly or indirectly increase the cost
to such Issuing Bank or any Bank of issuing, making or maintaining any Letter
of Credit or of purchasing or maintaining any participation therein, or to
reduce the amount receivable in respect thereof by such Issuing Bank or any
Bank, then and in any such case such Issuing Bank or such Bank shall, as
promptly as practical after the additional cost is incurred or the amount
received is reduced, notify the Borrower and the Borrower shall pay on demand
such amounts as such Issuing Bank or such Bank may specify to be necessary to
compensate such Issuing Bank or such Bank for such additional cost or reduced
re-
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ceipt, together with interest on such amount from the date demanded until
payment in full thereof at a rate per annum equal at all times to the rate
applicable to Base Rate Loans then in effect; provided, however, that the
failure of any Bank to so timely give such notice shall not affect the
obligations of the Borrower to pay such amounts. A certificate in reasonable
detail as to the amount of such increased cost or reduced receipt, submitted to
the Borrower and the Agent by that Issuing Bank or any Bank, as the case may
be, shall, absent manifest error, be final, conclusive and binding for all
purposes.
(i) Indemnification; Nature of Issuing Bank's Duties. In addition to
amounts payable as elsewhere provided in this Section 1.13, without
duplication, the Borrower hereby agrees to protect, indemnify, pay and save
each Issuing Bank (and if the other Banks have been requested to participate
pursuant to Section 1.13(e), the Banks) harmless from and against any and all
claims, demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys' fees and allocated costs of internal counsel)
which such Bank may incur or be subject to as a consequence, direct or
indirect, of (i) the issuance of the Letters of Credit or (ii) the failure of
such Issuing Bank to honor a drawing under any Letter of Credit as a result of
any act or omission, whether rightful or wrongful, of any present or future de
jure or de facto government or Governmental Authority (all such acts or
omissions herein called "Government Acts").
As between the Borrower and each Issuing Bank, the Borrower assumes all
risks of the acts and omissions of, or misuse of the Letters of Credit issued
by such Issuing Bank at the Borrower's request by, the respective beneficiaries
of such Letters of Credit. In furtherance and not in limitation of the
foregoing, such Issuing Bank shall not be responsible: (i) for the form,
validity, sufficiency, accuracy, genuineness or legal effects of any document
submitted by any party in connection with the application for and issuance of
such Letters of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, that may prove to
be invalid or ineffective for any reason; (iii) for failure of the beneficiary
of any such Letter of Credit to comply fully with conditions required in order
to draw upon such Letter of Credit; (iv) for errors, omissions, interruptions
or delays in transmission or delivery of any messages, by mail, cable, tele-
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graph, telex or otherwise, whether or not they are in cipher; (v) for errors in
interpretation of technical terms; (vi) for any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (vii) for the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; and (viii) for any consequences
arising from causes beyond the control of such Issuing Bank, including, without
limitation, any Government Acts. None of the above shall affect, impair, or
prevent the vesting of any of such Issuing Bank's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by any Issuing
Bank in connection with the Letters of Credit issued by it or the related
certificates, if taken or omitted in good faith, shall not put such Issuing
Bank under any resulting liability to the Borrower.
Notwithstanding anything to the contrary contained in this Section 1.13,
the Borrower shall have no obligation to indemnify any Issuing Bank in respect
of any liability incurred by such Issuing Bank arising solely out of and to the
extent of the gross negligence or willful misconduct of such Issuing Bank or
out of the wrongful dishonor by such Issuing Bank of a proper demand for
payment under the Letters of Credit issued by it.
SECTION 2. Commitments.
2.01 Voluntary Reduction of Commitments. Upon at least one Business
Day's prior written notice (or telephonic notice promptly confirmed in writing)
to the Agent at the Agent's Office (which notice the Agent shall promptly
transmit to each of the Banks), the Borrower shall have the right, without
premium or penalty, to terminate the unutilized portion of the Total Revolving
Loan Commitment, in part or in whole, available to the Borrower; provided that
(x) any such termination shall permanently reduce the Revolving Loan
Commitment, respectively, of each of the Banks and (y) any partial reduction
pursuant to this Section 2.01 shall be in the amount of at least $250,000 and
integral multiples of $100,000 in excess of that amount; provided, further,
that the Total Revolving Loan Commitment shall not be reduced to an amount less
than the aggregate Total Utilization of Revolving Loan Commitments and Letters
of Credit Usage then outstanding.
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2.02 Mandatory Adjustments of Commitments, etc. (a) The Total Revolving
Loan Commitment shall terminate on the Revolving Loan Commitment Termination
Date.
(b) The Total Term Loan Commitment shall be reduced (i) on the Closing
Date to the amount of Term Loans then outstanding and (ii) on the date on which
any payments of principal on the Term Loans are made (other than pursuant to
Section 3.02(A)(a)) in an aggregate amount equal to such payments.
(c) The Total Revolving Loan Commitment shall be permanently reduced in
the amount and at the time of any payment on the Loans required to be applied
to the Revolving Loans or Revolving Loan Commitments or to cash collateralize
Letters of Credit pursuant to Section 3.02(B)(a).
(d) Each reduction or termination of the Term Loan Commitment or the
Total Revolving Loan Commitment pursuant to this Section 2.02 shall apply
proportionately to the Term Loan Commitment or the Revolving Loan Commitment,
as the case may be, of each Bank.
2.03 Commitment Commission. The Borrower agrees to pay the Agent a
commitment commission ("Commitment Commission") for the account of each Bank
for the period from and including the Closing Date to but not including the
date the Total Commitments have been terminated, computed at a rate equal to
1/2% per annum on the daily average Unutilized Commitment of such Bank.
Accrued Commitment Commission shall be due and payable quarterly in arrears on
the last Business Day of each March, June, September and December, commencing
with December 31, 1997 and on the Revolving Loan Commitment Termination Date,
based on the actual number of days elapsed over a year of 360 days.
SECTION 3. Payments.
3.01 Voluntary Prepayments. The Borrower shall have the right to prepay
Term Loans and Revolving Loans incurred by it in whole or in part from time to
time, without premium or penalty, on the following terms and conditions: (i)
the Borrower shall give the Agent at the Agent's Office written notice (or
telephonic notice promptly confirmed in writing) of its intent to prepay the
Loans, the amount of such prepayment and, in the case of Reserve Adjusted
Eurodollar Loans, the specific Borrowing or Borrowings pursuant to which made,
which notice shall be given by the Borrower at least one Business Day prior to
the date of such prepayment and which notice shall promptly be transmitted by
the Agent to each of the Banks; (ii) each
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partial prepayment of any Borrowing shall be in an aggregate principal amount
of at least $100,000 and integral multiples of $100,000 in excess of that
amount; provided that no partial prepayment of Reserve Adjusted Eurodollar
Loans made pursuant to a single Borrowing under the Loan Facility (or Portion
thereof) shall reduce the outstanding Loans made pursuant to such Borrowing to
an amount less than the Minimum Borrowing Amount; and (iii) Reserve Adjusted
Eurodollar Loans may only be prepaid pursuant to this Section 3.01 on the last
day of an Interest Period applicable thereto. Voluntary prepayments of Loans
under the Term Portion of the Loan Facility shall be applied to the prepayment
of the outstanding principal amount of Term Loans pro rata to all remaining
Scheduled Term Loans Principal Payments such that each Scheduled Term Loans
Principal Payment then remaining shall be reduced by an amount equal to the
product of (A) such payment and (B) a fraction of which the numerator is equal
to the amount of such Scheduled Term Loans Principal Payment then remaining and
the denominator is equal to the amount of all Scheduled Term Loans Principal
Payments remaining.
3.02 Mandatory Prepayments.
(A) Requirements:
(a) The Borrower shall prepay the outstanding principal amount of the
Term Loans or the Revolving Loans on any date on which the aggregate
outstanding principal amount of such Loans (after giving effect to any other
repayments or prepayments on such day and together with the outstanding
principal amount of Letters of Credit Usage) exceeds the Total Term Loan
Commitment or the Total Revolving Loan Commitment, as the case may be, in the
amount of such excess.
(b) If the aggregate principal amount of outstanding Revolving Loans and
Letters of Credit Usage exceeds the Borrowing Base as set forth in the most
recent Borrowing Base Certificate required to be delivered pursuant to
Section 6.01 of this Agreement, then the Borrower shall prepay Revolving
Loans in a principal amount equal to such excess no later than two (2)
Business Days after the Borrower has delivered, or was required to deliver,
such Borrowing Base Certificate to the Agent and the Banks.
(c) The Borrower shall cause to be paid Scheduled Term Loans Principal
Payments on the Term Loans until the Term Loans are paid in full in the
amounts and at the
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times specified in the definition of Scheduled Term Loans Principal Payments
to the extent that prepayments have not previously been applied to such
Scheduled Term Loans Principal Payments (and such Scheduled Term Loans
Principal Payments have not otherwise been reduced) pursuant to the terms
hereof.
(d) After the Closing Date, on the date of receipt thereof by the
Borrower and/or any of its Subsidiaries of Net Cash Proceeds or Net Financing
Proceeds (other than Indebtedness permitted by Sections 7.04(c), (g) and
(i)), an amount equal to 100% of such Net Cash Proceeds or Net Financing
Proceeds shall be applied as provided in Section 3.02(B)(a).
(e) On the date which is 90 days after the last day of the Borrower's
fiscal year, commencing with fiscal year end 1998, an amount equal to 75% of
the Borrower's Excess Cash Flow for such fiscal year shall be applied as
provided in Section 3.02(B)(a).
(f) On the date of the receipt thereof by the Borrower and/or any of its
Subsidiaries, an amount equal to 100% of the proceeds received by such Person
(net of underwriting discounts and commissions and other reasonably incurred
costs and expenses directly associated therewith) of the sale after the
Closing Date of equity (other than upon the exercise of Vested Options) shall
be applied as provided in Section 3.02(B)(a).
(g) At the Agent's discretion, on the date of receipt thereof by the
Borrower and/or any of its Subsidiaries, an amount equal to 100% of any
insurance proceeds (less reasonably incurred costs to recover) received less
any portion of such proceeds not in excess of $50,000, so long as there
exists no Event of Default, that is promptly applied to repair or replace the
damaged property shall be applied as provided in Section 3.02(B)(a).
(h) If any of the Mortgaged Real Property is the subject of a Taking or
Destruction and either the Borrower or its applicable Subsidiary has elected
not to effect a Restoration or neither the Collateral Agent nor the Borrower
or its applicable Subsidiary, as the case may be, has elected to effect a
Restoration, in each case, in accordance with the provisions of the
applicable Mortgage, then on the first Business Day following the last day
the Borrower or its applicable Subsidiary can elect to effect
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a Restoration (in the event that the Borrower or its applicable Subsidiary
has the right to make such an election) or, in the event that the Borrower or
its applicable Subsidiary does not have the right to make an election to
effect a Restoration, the day the Collateral Agent has notified the Borrower
or its applicable Subsidiary that a Restoration will not be required in the
case of any of the Mortgaged Real Property being the subject of a Taking or
Destruction, an amount equal to the applicable Net Award or Net Proceeds, as
the case may be, as a result of such Taking or Destruction, shall be applied
as provided in Section 3.02(B)(a).
(i) On the date of the receipt thereof by the Borrower and/or any of its
Subsidiaries, an amount equal to 100% of (i) any surplus assets of any
Pension Plan returned to the Borrower or such Subsidiary or (ii) any tax
refund made to the Borrower or such Subsidiary shall be applied as provided
in Section 3.02(B)(a).
(j) On the date of receipt thereof by the Borrower and/or any of its
Subsidiaries, an amount equal to 100% of any (i) cash post-closing adjustment
in the Borrower's favor to the purchase price paid in respect of the
Acquisitions (other than those made on the Closing Date) and (ii) payments
received as a result of any indemnities provided in the Acquisition Documents
to the extent such payments exceed out-of-pocket losses actually incurred and
paid by the Borrower shall be applied as provided in Section 3.02(B)(a).
(B) Application:
(a) Prepayments to be applied pursuant to this Section 3.02(B)(a) shall
be applied as follows: (i) first, to prepay Term Loans in inverse order of
maturity; (ii) second, to prepay Revolving Loans and to permanently reduce
the Revolving Loan Commitment in the amount prepaid; (iii) third, to cash
collateralize Letters of Credit in a manner reasonably satisfactory to the
Agent and thereafter, the Revolving Loan Commitment will be permanently
reduced in an amount equal to the amount otherwise required to be prepaid.
Amounts applied pursuant to this Section 3.02(B)(a) may not be reborrowed;
and
(b) With respect to each prepayment of Loans required by Section 3.02(A),
the Borrower shall give the Agent two Business Days notice and may designate
the Types
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of Loans and the specific Borrowing or Borrowings which are to be prepaid;
provided that (i)(x) Reserve Adjusted Eurodollar Loans may be designated for
prepayment pursuant to this Section 3.02 only on the last day of an Interest
Period applicable thereto unless all Reserve Adjusted Eurodollar Loans with
Interest Periods ending on such date of required prepayment and all Base Rate
Loans have been or are concurrently being paid in full and (y) if any
prepayment of Reserve Adjusted Eurodollar Loans made pursuant to a single
Borrowing shall reduce the outstanding Loans made pursuant to such Borrowing
to an amount less than the Minimum Borrowing Amount, such Borrowing shall
immediately be converted into Base Rate Loans and (ii) any prepayment of any
Loans made pursuant to a single Borrowing shall be applied pro rata among
such Loans. In the absence of a designation by the Borrower, the Agent
shall, subject to the above, make such designation in its sole discretion.
All prepayments shall include payment of accrued interest on the principal
amount so prepaid, shall be applied to the payment of interest before
application to principal and shall include amounts payable, if any, under
Section 1.10(f).
3.03 Method and Place of Payment. (a) Except as otherwise specifically
provided herein, all payments under this Agreement shall be made to the Agent,
for the ratable account of the Banks entitled thereto, not later than 1:00 P.M.
(New York time) on the date when due and shall be made in immediately available
funds in lawful money of the United States of America to the account specified
therefor by the Agent or if no account has been so specified at the Agent's
Office, it being understood that written notice by the Borrower to the Agent to
make a payment from the funds in the Borrower's account at the Agent's Office
shall constitute the making of such payment to the extent of such funds held in
such account. The Agent will thereafter cause to be distributed on the same
day (if payment is actually received by the Agent in New York prior to 1:00
P.M. (New York time) on such day) funds relating to the payment of principal or
interest or fees ratably to the Banks entitled to receive any such payment in
accordance with the terms of this Agreement. If and to the extent that any
such distribution shall not be so made by the Agent in full on the same day (if
payment is actually received by the Agent prior to 1:00 P.M. (New York time) on
such day), the Agent shall pay to each Bank its ratable amount thereof and each
such Bank shall be entitled to receive from the Agent, upon demand, interest on
such amount at the Federal Funds Rate for each day from the date
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such amount is paid to the Agent until the date the Agent pays such amount to
such Bank.
(b) Any payments under this Agreement which are made by the Borrower
later than 1:00 P.M. (New York time) shall be deemed to have been made on the
next succeeding Business Day. Whenever any payment to be made hereunder shall
be stated to be due on a day which is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and, with respect to
payments of principal, interest shall be payable during such extension at the
applicable rate in effect immediately prior to such extension, except that with
respect to Reserve Adjusted Eurodollar Loans, if such next succeeding
applicable Business Day is not in the same month as the date on which such
payment would otherwise be due hereunder or under any Note, the due date with
respect thereto shall be the next preceding applicable Business Day.
3.04 Net Payments. All payments by the Borrower under this Agreement
and/or under any Credit Document shall be made without setoff or counterclaim
and in such amounts as may be necessary in order that all such payments (after
deduction or withholding for or on account of any present or future taxes,
levies, imposts, duties or other charges of whatsoever nature imposed by any
Governmental Authority, other than any tax on or measured by the net income of
a Bank pursuant to the income tax laws of the jurisdictions where such Bank's
principal or lending office is located (collectively, "Taxes")) shall not be
less than the amounts otherwise specified to be paid under this Agreement
and/or under any Credit Document. If the Borrower is required by law to make
any deduction or withholding on account of Taxes from any payment due hereunder
or under the Notes, then (a) the Borrower shall timely remit such Taxes to the
Governmental Authority imposing the same and (b) the amount payable hereunder
or under the Notes will be increased to such amount which, after deduction from
such increased amount of all amounts required to be deducted or withheld
therefrom, will not be less than the amount otherwise due and payable. Without
prejudice to the foregoing, if any Bank or the Agent is required to make any
payment on account of Taxes, the Borrower will, upon notification by the Bank
or the Agent promptly indemnify such person against such Taxes, together with
any interest, penalties and expenses payable or incurred in connection
therewith. The Borrower shall also reimburse each Bank, upon the written
request of such Bank, for taxes imposed on or measured by the net income of
such Bank pursuant to the laws of the jurisdiction in which the principal
office or lending office of such Bank is located or under the laws of any
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political subdivision or taxing authority of any such jurisdiction as such Bank
shall determine are payable by such Bank in respect of Taxes paid to or on
behalf of such Bank pursuant to this Section 3.04. For purposes of this
Section, the term "Taxes" includes interest, penalties and expenses payable or
incurred in connection therewith. A certificate as to any additional amounts
payable to a Bank under this Section 3.04 submitted to the Borrower by such
Bank shall, absent manifest error, be final, conclusive and binding for all
purposes upon all parties hereto. With respect to each deduction or
withholding for or on account of any Taxes, the Borrower shall promptly furnish
to each Bank such certificates, receipts and other documents as may be required
(in the judgment of such Bank) to establish any tax credit to which such Bank
may be entitled.
SECTION 4. Conditions Precedent.
4.01 Conditions Precedent to Initial Loans. The obligations of the Banks
to make the Initial Loans to the Borrower hereunder are subject, at the time of
the making of each such Initial Loan (except as otherwise hereinafter
indicated), to the substantially contemporaneous satisfaction of the following
conditions:
(a) Officers' Certificate. On the Closing Date, the Agent shall have
received certificates dated such date signed by appropriate officers of each of
the Borrower, Press Pass and High Performance stating that all of the
applicable conditions set forth in Sections 4.01, 4.02 and, if applicable, 4.03
(in each case disregarding any reference therein that such condition be deemed
satisfactory by the Agent and/or the Required Banks) have been satisfied or
waived as of such date.
(b) Opinions of Counsel. On the Closing Date, the Agent shall have
received an opinion or opinions addressed to each of the Banks and dated the
Closing Date, each in form and substance satisfactory to the Agent, from (i)
Berliner Zisser Walter & Gallegos, counsel to the Borrower, which opinion shall
be in the form of Exhibit C-1 hereto, (ii) local counsel to the Borrower in
each jurisdiction in which Collateral is located, which opinions shall be in
the form of Exhibit C-2 hereto, (iii) Windels, Marx, Davies & Ives, New York
counsel to the Borrower, which opinion shall be in the form of Exhibit C-3, and
(iv) counsel to Press Pass, in the form delivered pursuant to the Merger
Agreement and Plan of Reorganization among SM Acquisition Company, J/B
Acquisition Company, the Borrower and Press Pass dated as of October 3, 1997,
which opinion shall be in the form of Exhibit C-4 hereto.
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(c) Corporate Proceedings. All corporate and legal proceedings and all
instruments and agreements in connection with the transactions contemplated by
the Acquisitions and the Credit Documents shall be satisfactory in form and
substance to the Agent, and the Agent shall have received all information and
copies of all certificates, documents and papers, including records of
corporate proceedings and governmental approvals, if any, which the Agent
reasonably may have requested from any Credit Party, Press Pass, High
Performance or any Affiliate of any thereof in connection therewith, such
documents and papers where appropriate to be certified by proper corporate or
governmental authorities. Without limiting the foregoing, the Agent shall have
received (i) evidence satisfactory to them that the Boards of Directors of each
Credit Party, Press Pass, High Performance and any Affiliate thereof, shall
have approved the Acquisitions, (ii) resolutions of the Boards of Directors of
each Credit Party, Press Pass, High Performance and any Affiliate thereof
approving and authorizing such documents and actions as are contemplated hereby
in form and substance reasonably satisfactory to the Agent including without
limitation the execution and delivery of all Acquisition Documents and Credit
Documents to be executed by such Person, certified by its corporate secretary
or an assistant secretary as being in full force and effect without
modification or amendment, and (iii) signature and incumbency certificates of
officers of each Credit Party, Press Pass, High Performance and any Affiliate
thereof executing instruments, documents or agreements required to be executed
in connection with this Agreement and the Acquisitions.
(d) Acquisition Documents. Full, complete and accurate copies of the
Acquisition Documents shall have been provided to the Agent. The Acquisition
Documents and any amendments thereto shall be in form and substance
satisfactory to the Agent, and each of the Acquisition Documents shall have
been duly authorized, executed and delivered by each of the parties thereto and
shall be in full force and effect. No term or provision of the Acquisition
Documents shall have been modified, and no condition to the consummation of the
Acquisitions shall have been waived, in either case in a manner detrimental to
any Credit Party, by any of the parties thereto. Each Credit Party, Press
Pass, High Performance and any of their Affiliates shall have in all material
respects done and performed such acts and observed such covenants which each is
required to do or perform under the Acquisition Documents and in order to
consummate the Acquisitions on or prior to the Effective Date.
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(e) Acquisitions. Each Credit Party shall have provided evidence
satisfactory in form and substance to the Agent that the Acquisitions have been
consummated.
(f) Escrow Agreement. The Borrower shall have executed and delivered to
the Agent the Escrow Agreement, pursuant to which $3,300,000 of the Initial
Loans will be placed in escrow to fund the consideration for the acquisition of
High Performance until one of the Release Events shall have occurred and the
parties to the acquisition of High Performance shall have provided written
consent thereto and shall have further agreed in writing that the release of
such escrowed funds to the Borrower shall render the consideration for the
acquisition of High Performance to be paid in full.
(g) Organizational Documentation, etc. On or prior to the Closing Date,
the Banks shall have received copies of true and complete certified copies of
the following documents of each Credit Party, the provisions of which shall be
reasonably satisfactory to the Agent:
(i) Each such Person's respective Certificate or Articles of
Incorporation, which shall be certified and be accompanied by a good standing
certificate, if any, from the jurisdiction of its organization and good
standing certificates, if any, from the jurisdictions in which it is
qualified to do business as a foreign corporation, each to be dated a recent
date prior to the Closing Date; and
(ii) Each such Person's respective By-laws, certified as of the Closing
Date by its corporate secretary.
(h) Credit Documents. Each of this Agreement and each other Credit
Document shall (i) be in form and substance satisfactory to the Agent and (ii)
have been, on or prior to the Closing Date, duly authorized, executed and
delivered by each of the parties signatory thereto.
(i) Notes. There shall have been delivered to the Agent for the account
of each of the Banks the Term Notes and the Revolving Notes executed by the
Borrower in the amounts and maturities and as otherwise provided herein.
(j) Certain Fees. All costs, fees and expenses (including, without
limitation, legal fees and expenses) payable to Indosuez by the Borrower
pursuant to the letter agreements between the Borrower and Indosuez dated
November 18, 1997 and December 15, 1997 shall have been paid in full and the
Bor-
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rower shall have paid or have caused to be paid the commitment and other fees
and expenses (including, without limitation, reasonable legal fees and
expenses) contemplated hereby and/or in connection with the other Documents.
(k) Financial Statements, etc. Prior to the Closing Date, the Agent
shall have received (i) audited financial statements, including a balance sheet
and statements of income and cash flow of the Borrower and its Subsidiaries for
the fiscal years ended December 31, 1994, December 31, 1995, and December 31,
1996, and unaudited financial statements for the nine month period ended
September 30, 1997; (ii) audited financial statements, including a balance
sheet and statements of revenues and cash flow of Press Pass Partners for the
years ended December 31, 1994, December 31, 1995 and December 31, 1996 and
unaudited financial statements for the nine month period ended September 30,
1997; (iii) unaudited financial statements, including a balance sheet and
statements of income of High Performance for the years ended December 31, 1994,
December 31, 1995 and December 31, 1996 and for the nine month period ended
September 30, 1997; and (iv) the pro forma balance sheet of the Borrower as of
November 30, 1997, after giving effect to the Acquisitions and the Borrowings
under this Agreement. The Borrower shall have delivered to the Agent financial
projections for the fiscal years ending December 31, 1998 through December 31,
2003 (including monthly financial projections for the fiscal year ending
December 31, 1998), accompanied by a statement by the Borrower that such
projections are based on assumptions believed by it in good faith to be
reasonable as to the future financial performance of the Borrower, reasonably
satisfactory to the Agent.
(l) Insurance. Set forth on Annex III is a summary of all insurance
policies maintained by the Credit Parties and their respective Subsidiaries,
and the insurance coverage provided for the Credit Parties and their respective
Subsidiaries by such insurance policies shall be reasonably satisfactory to the
Agent.
(m) Performance Bonds. On the Closing Date, the Agent shall be
reasonably satisfied that the Borrower will be able to service and maintain any
performance bonds that may be required in the ordinary course of business on
reasonable terms and conditions.
(n) Security Documents and Guarantees. The Security Documents and the
Guarantees shall have been duly executed and delivered by the respective
parties thereto and there shall
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have been delivered to the Collateral Agent (i) certificates representing all
Pledged Securities (if certificated), together with executed and undated stock
powers and/or assignments in blank, (ii) evidence of the filing of appropriate
financing statements or comparable documents under the provisions of the UCC
and applicable domestic or local laws, rules or regulations in each of the
offices where such filing is necessary or appropriate to grant to the
Collateral Agent a perfected first priority Lien in such Collateral superior to
and prior to the rights of all third persons and subject to no other Liens,
(iii) certified copies of Requests for Information (Form UCC-11 or the
equivalent) or equivalent reports or lien search reports listing all effective
financing statements or comparable documents which name any Credit Party or any
of its Subsidiaries (prior to and after giving effect to the Acquisitions) as
debtor and which are filed in those jurisdictions in which any of the
Collateral is located and the jurisdictions in which any Credit Party or any of
its Subsidiaries maintains its chief executive office, none of which shall
encumber the Collateral covered or intended or purported to be covered by the
Security Documents, (iv) evidence of the completion of all recordings and
filings of each Security Document and delivery of such other security and other
documents as may be necessary or, in the opinion of the Collateral Agent,
desirable to perfect the Liens created, or purported or intended to be created,
by the Security Documents.
(o) Due Diligence; Legal Matters. (i) The Agent and the Banks shall be
satisfied in their absolute and sole discretion with all business, tax,
accounting, environmental, employee health and safety exposure and other
structural, legal and regulatory matters relating to the transactions
contemplated by the Acquisitions and the Acquisition Documents, by this
Agreement and by the other Credit Documents. In addition, the Agent and the
Banks shall be satisfied in their absolute and sole discretion with the
capital, organizational, tax and management structure of the Borrower and its
Subsidiaries, both before and after giving effect to the Acquisitions.
(ii) The Agent shall have completed its legal due diligence investigation
of the Borrower and its Subsidiaries (including, without limitation, a review
of all material contracts, licenses and instruments to which any Credit Party
is a party and all management letters delivered to any Credit Party), and the
results of such due diligence shall be satisfactory to the Agent and the Banks,
respectively, in their sole discretion.
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(iii) The Agent shall be satisfied in its sole discretion with the
completion of the accounting review performed by Arthur Andersen LLP as
contemplated in the letter from the Agent to the Borrower dated December
15, 1997.
(p) Consents, etc. All material governmental and third party approvals
and consents (including, without limitation, all material approvals and
consents required in connection with any environmental statutes, rules or
regulations), if any, in connection with the Acquisitions, the transactions
contemplated by the Credit Documents and the Acquisition Documents, and in
either case otherwise referred to herein or therein to be completed on or
before the Closing Date shall have been obtained and remain in effect, and all
applicable waiting periods shall have expired without any action being taken by
any competent authority which restrains, prevents or imposes, in the judgment
of the Agent, materially adverse conditions upon the consummation of the
Acquisitions. There shall not exist any judgment, order, injunction or other
restraint issued or filed with respect to the making of the Loans hereunder or
the consummation of the Acquisitions.
(q) Environmental Review. At or prior to the Effective Date, there shall
have been delivered to the Agent for each of the Banks an Officers' Certificate
of the Borrower in substantially the form of Exhibit M hereto.
(r) Borrowing Base Certificate. Prior to the initial Revolving Loan the
Agent and the Banks shall have received and the Agent shall be satisfied (both
as to form and substance) with a Borrowing Base Certificate which shall
indicate that the Borrowing Base on the Closing Date will exceed the Revolving
Loan Borrowing by at least $250,000.
(s) Leases. Except as set forth on Annex IV, all Capital Leases of the
Credit Parties or their respective Subsidiaries have been repaid (unless
otherwise agreed to by the Agent) and all Operating Leases of the Credit
Parties or their respective Subsidiaries outstanding immediately prior to the
Acquisitions shall remain outstanding after giving effect to the Acquisitions,
on terms satisfactory to the Agent.
(t) Solvency. On the Closing Date, the Banks shall have received an
Officers' Solvency Certificate supporting the conclusions that, before and
after giving effect to the Acquisitions, the contemplated borrowings of the
full amounts which will be available under the Total Term Loan Commitments and
the
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Total Revolving Loan Commitments, the execution of the Guarantees and the
Security Documents and the execution of any guarantees and security documents
in connection therewith, none of the Credit Parties will be insolvent, will be
rendered insolvent by the indebtedness incurred in connection therewith, will
be left with unreasonably small capital with which to engage in its business
or will have incurred debts, including Contingent Obligations, beyond its
ability to pay such debts as they mature.
(u) Conditions Relating to Mortgaged Real Property and Real Property. On
or prior to the Closing Date, the Borrower shall have caused to be delivered to
the Collateral Agent, on behalf of the Banks, the following documents and
instruments:
(i) a Mortgage encumbering each Mortgaged Real Property in favor of the
Collateral Agent, for the benefit of the Banks, duly executed and
acknowledged by the applicable Credit Party, and otherwise in form for
recording in the recording office where each such Mortgaged Real Property is
situated, together with such certificates, affidavits, questionnaires or
returns as shall be required in connection with the recording or filing
thereof to create a lien under applicable law, and such UCC-1 financing
statements and other similar statements as are contemplated by the counsel
opinions described in Section 4.01(b)(ii) in respect of such Mortgage, all of
which shall be in form and substance satisfactory to the Collateral Agent,
and any other instruments necessary to grant a mortgage lien under the laws
of any applicable jurisdiction, which Mortgage and financing statements and
other instruments shall when recorded be effective to create a first priority
Lien on such Mortgaged Real Property subject to no Liens other than Prior
Liens;
(ii) with respect to each Mortgaged Real Property, such consents,
approvals, amendments, supplements, estoppels, tenant subordination
agreements or other instruments as necessary or required to consummate the
Acquisitions contemplated hereby or as shall reasonably be deemed necessary
by the Collateral Agent in order for the owner or holder of the fee or
leasehold interest constituting such Mortgaged Real Property to grant the
Lien contemplated by the Mortgage with respect to such Mortgaged Real
Property;
(iii) with respect to each Mortgage, a policy (or commitment to issue a
policy) of title insurance insuring (or
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committing to insure) the Lien of such Mortgage as a valid first mortgage
Lien on the real property and fixtures described therein in an amount not
less than 115% of the fair market value thereof, which policies (or
commitments) shall (w) be issued by the Title Company, (x) include such
reinsurance arrangements (with provisions for direct access) as shall be
reasonably acceptable to the Collateral Agent, (y) contain a "tie-in" or
"cluster" endorsement (if available under applicable law) (i.e., policies
which insure against losses regardless of location or allocated value of the
insured property up to a stated maximum coverage amount) and have been
supplemented by such endorsements (or where such endorsements are not
available, opinions of special counsel, architects or other professionals
reasonably acceptable to the Collateral Agent to the extent that such
opinions can be obtained at a cost which is reasonable with respect to the
value of the real property subject to such Mortgage) as shall be reasonably
requested by the Collateral Agent (including, without limitation,
endorsements on matters relating to usury, first loss, last dollar, zoning,
contiguity, revolving credit, doing business and so-called comprehensive
coverage over covenants and restrictions) and (z) contain only such
exceptions to title as shall be Prior Liens or are otherwise agreed to by the
Collateral Agent on or prior to the Closing Date with respect to such
Mortgaged Real Property;
(iv) with respect to each Mortgaged Real Property, policies or
certificates of insurance as required by the Mortgage relating thereto, which
policies or certificates shall comply with the insurance requirements
contained in such Mortgage;
(v) with respect to each Mortgaged Real Property, UCC, judgment and tax
lien searches (or foreign jurisdiction equivalents) confirming that the
personal property comprising a part of such Real Property or Mortgaged Real
Property is subject to no Liens other than Prior Liens;
(vi) with respect to each Mortgaged Real Property, such affidavits,
certificates, information (including financial data) and instruments of
indemnification (including, without limitation, a so-called "gap"
indemnification) as shall be required to induce the Title Company to issue
the policy or policies (or commitment) and endorsements contemplated in
subparagraph (iii) above;
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(vii) evidence acceptable to the Collateral Agent of payment by the
appropriate Credit Party or Subsidiary thereof of all applicable title
insurance premiums, search and examination charges, survey costs and related
charges, mortgage recording taxes, fees, charges, costs and expenses required
for the recording of the Mortgages and issuance of the title insurance
policies referred to in subparagraph (iii) above;
(viii) with respect to each Real Property or Mortgaged Real Property,
copies of all Leases, leases in which a Credit Party or Subsidiary thereof
holds the tenant's interest or other agreements relating to possessory
interests. To the extent any of the foregoing affect any Mortgaged Real
Property, such agreement shall be subordinate to the Mortgage to be recorded
against such Mortgaged Real Property and otherwise acceptable to the
Collateral Agent; and
(ix) with respect to each Mortgaged Real Property, an Officers'
Certificate or other evidence satisfactory to the Collateral Agent that as of
the date thereof there (x) has been issued and is in effect a valid and
proper certificate of occupancy or other local equivalent, if any, for the
use then being made of such Mortgaged Real Property and that there is not
outstanding any citation, violation or similar notice indicating that such
Mortgaged Real Property contains conditions which are not in compliance with
local codes or ordinances relating to building or fire safety or structural
soundness, (y) has not occurred any Taking or Destruction of any Mortgaged
Real Property or Real Property and (z) are no disputes regarding boundary
lines, location, encroachment or possession of any Real Property or Mortgaged
Real Property and no state of facts existing which could give rise to any
such claim.
(v) Labor Matters. There shall be no labor disputes, strikes or work
stoppages, pending or threatened, involving any Credit Party or any of their
Subsidiaries that could reasonably be expected to adversely affect the
consummation of the Acquisitions or that could reasonably be expected to have a
Materially Adverse Effect.
(w) Indebtedness. Except as set forth on Annex IV, on or prior to the
Closing Date, the Borrower (after giving effect to the Acquisitions) shall have
no Indebtedness outstanding.
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(x) Landlord Lien Assurance. Within 30 days of the Closing Date, unless
otherwise agreed to by the Agent, the Borrower shall have used its best efforts
to obtain Landlord Lien Assurances from the landlords of leased Real Property
of the Borrower and its Subsidiaries where Inventory is located and shall have
delivered such Landlord Lien Assurances to the Agent.
(y) Insurance Certificates. On the Closing Date, the Banks shall have
received the insurance certificates required to be so delivered by the Security
Documents.
(z) Merger Agreement. On or prior to the Closing Date, the Borrower
shall have executed a merger agreement with Racing Champions Corporation.
(aa) Litigation. On the Closing Date, there shall be no actions,
judgments, suits or proceedings pending or, to any Credit Party's knowledge,
threatened with respect to (i) the Acquisitions or the Credit Documents and
(ii) any Credit Party or its respective Subsidiaries as to which in the Agent's
good faith judgment could reasonably be expected to have a Materially Adverse
Effect.
The acceptance of the proceeds of each Borrowing of Initial Loans shall
constitute a representation and warranty by each Credit Party to each of the
Banks that all of the applicable conditions specified above have been satisfied
or waived as of that time and that, at the time of a Borrowing of such Initial
Loan (or substantially contemporaneous therewith), the conditions specified in
Section 4.02 have been satisfied or waived. All of the certificates, legal
opinions and other documents and papers referred to in this Section 4.01,
unless otherwise specified, shall be delivered to the Agent at the Agent's
Office (or such other location as may be specified by the Agent) for the
account of each of the Banks and in sufficient counterparts for each of the
Banks and shall be satisfactory in form and substance to the Agent.
4.02 Conditions Precedent to All Loans. The obligation of the Banks to
make all Loans (which term shall not include a conversion or continuation of a
Loan), including the Initial Loans, is subject, at the time of each such Loan,
to the satisfaction of the following conditions:
(a) Effectiveness. This Agreement shall have become effective as
provided in Section 11.10.
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(b) No Default; Representations and Warranties. At the time of the
making of each Loan and also after giving effect thereto (i) there shall exist
no Default or Event of Default and (ii) all representations and warranties
contained herein or in the other Credit Documents in effect at such time shall
be true and correct in all material respects with the same effect as though
such representations and warranties had been made on and as of the date of the
making of such Loan, unless such representation and warranty expressly
indicates that it is being made as of any other specific date in which case on
and as of such other date.
(c) Adverse Change, etc. (i) Since December 31, 1996, nothing shall
have occurred or become known which the Required Banks or the Agent shall have
determined has a Materially Adverse Effect; such determination shall be made
both before (only for the Initial Loans) and after giving effect to the
Acquisitions and the making of the Loans hereunder.
(ii) All material governmental and third party approvals and consents
(including, without limitation, all material approvals and consents required in
connection with any environmental statutes, rules or regulations), if any, in
connection with the conduct of the business of each Credit Party or its
respective Subsidiaries shall have been obtained and remain in effect.
(iii) There shall not exist any judgment, order, injunction or other
restraint issued or filed with respect to the making of any Loans hereunder the
effect of which judgment, order, injunction or restraint is adverse to any
Bank.
(d) Documentation and Opinions of Counsel. The Agent shall have received
such documentation and opinion or opinions, addressed to each of the Banks,
from counsel to each Credit Party as may be reasonably required, with
reasonable notice under the circumstances, by and shall be reasonably
satisfactory to the Agent from (i) such counsel to each Credit Party and (ii)
appropriate local counsel, which opinions shall cover such matters as
reasonably requested by, and be in form and substance satisfactory to, the
Agent.
(e) Margin Rules. On the date of each Borrowing of Loans, neither the
making of any Loan nor the use of the proceeds thereof will violate the
provisions of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System.
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(f) Borrowing Base Certificate. The Agent and the Required Banks shall
have received and shall be reasonably satisfied (both as to form and substance)
with the Borrowing Base Certificate last required to be delivered to the Banks.
(g) Real Property Disclosure. Each Credit Party shall have made all
notifications, registrations, and filings in accordance with all State and
Local Disclosure Requirements applicable to the Real Property, including the
use of forms provided by state or local agencies, where such forms exist,
whether to the Borrower or to or with the state or local agency to the extent
failure to make such filings could reasonably be expected to have a Materially
Adverse Effect.
The acceptance of the proceeds of each Borrowing of Loans shall constitute
a representation and warranty by each Credit Party to each of the Banks that
all of the applicable conditions specified in Section 4.02 have been satisfied
or waived.
All of the certificates, legal opinions and other documents and papers
referred to in this Section 4.02, unless otherwise specified, shall be
delivered to the Agent at the Agent's Office (or such other location as may be
specified by the Agent) for the account of each of the Banks and in sufficient
counterparts for each of the Banks and shall be satisfactory in form and
substance to the Agent.
4.03 Conditions Precedent to All Letters of Credit. The right of the
Borrower to obtain the issuance of any Letter of Credit that the relevant
Issuing Bank determines to issue in its sole discretion hereunder is subject to
prior or concurrent satisfaction of all of the following conditions:
(A) Required Documentation. On or prior to the date of issuance of a
Letter of Credit, the Agent shall have received, in accordance with the
provisions of Section 1.13(f), a request for issuance with respect to such
Letter of Credit (the furnishing by the Borrower of each such request for
issuance shall be deemed to constitute a representation and warranty of the
Borrower to the effect that the conditions set forth in Sections 4.01 and
4.02 are satisfied as of the date of delivery and will be satisfied on the
relevant date of issuance), all other information specified in Section
1.13(f), and such other documents as the Issuing Bank may reasonably require
in connection with the issuance of such Letter of Credit.
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(B) Conditions. On the date of issuance of each such Letter of Credit,
all conditions precedent described in Sections 4.01 and 4.02 shall be
satisfied to the same extent as though the issuance of such Letter of Credit
were the making of a Revolving Loan.
SECTION 5. Representations, Warranties and Agreements. In order to
induce the Agent and the Banks to enter into this Agreement and to make the
Loans provided for herein, the Credit Parties make the following
representations and warranties to, and agreements with, the Agent and the
Banks, all of which shall survive the execution and delivery of this Agreement
and the making of the Loans (with the execution and delivery of this Agreement
and the making of each Loan thereafter being deemed to constitute a
representation and warranty that the matters specified in this Section 5 are
true and correct in all material respects both before and after giving effect
to the Acquisitions and the related transactions and as of the date of each
such Loan unless such representation and warranty expressly indicates that it
is being made as of any specific date):
5.01 Status. Each Credit Party and each of its respective Subsidiaries
(i) is a duly organized and validly existing corporation in good standing under
the laws of the jurisdiction of its organization; (ii) has the requisite
corporate power and authority and has obtained all requisite governmental
licenses, authorizations, consents and approvals to own and operate its
property and assets and to transact the business in which it is engaged and
presently proposes to engage, except for those governmental licenses,
authorizations, consents or approvals the failure of which to be so obtained
would not have a Materially Adverse Effect and (iii) is duly qualified, or as
of the Closing Date has taken appropriate steps to qualify, and is authorized
to do business, or as of the Closing Date has taken appropriate steps to be
authorized to do business, and is in good standing in all jurisdictions where
it is required to be so qualified and where the failure to be so qualified
would have a Materially Adverse Effect.
5.02 Corporate Power and Authority; Business. Each Credit Party and each
of its respective Subsidiaries has the requisite corporate power and authority
to execute, deliver and carry out the terms and provisions of the Documents to
which it is a party and has taken all necessary corporate action to authorize
the execution, delivery and performance of the Documents to which it is a
party. Each Credit Party and each of its respective Subsidiaries has duly
executed and delivered
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each Document to which it is a party and each such Document constitutes the
legal, valid and binding obligation of such Person enforceable in accordance
with its terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability.
5.03 No Violation. Neither the execution, delivery and performance by
any Credit Party or its respective Subsidiaries of this Agreement or the other
Documents to which it is a party nor compliance with the terms and provisions
hereof and thereof, nor the consummation of the Acquisitions contemplated
herein and therein (i) will contravene any applicable provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality, (ii) will conflict or be inconsistent with or
result in any breach of any of the terms, covenants, conditions or provisions
of, or constitute a default under, or (other than pursuant to the Security
Documents) result in the creation or imposition of (or the obligation to create
or impose) any Lien upon any of the property or assets of any Credit Party or
its respective Subsidiaries pursuant to the terms of any indenture, mortgage,
deed of trust, agreement or other instrument to which any Credit Party or its
respective Subsidiaries is a party or by which it or any of its property or
assets is bound or to which it may be subject or (iii) will violate any
provision of the charter or by-laws or the certificate of formation or
operating agreement, as applicable, of any Credit Party or its respective
Subsidiaries, except, in each case, where such contravention, conflict,
inconsistency, breach, default, creation, imposition, obligation or violation
would not have a Materially Adverse Effect.
5.04 Litigation. There are no actions, judgments, suits or proceedings
pending or, to any Credit Party's knowledge, threatened with respect to (i) the
Acquisitions or the Credit Documents and (ii) any Credit Party or its
respective Subsidiaries as to which in the Agent's good faith judgment could
reasonably be expected to have a Materially Adverse Effect.
5.05 Use of Proceeds. (a) The proceeds of all Term Loans to be made to
the Borrower hereunder shall be utilized by the Borrower to:
(i) pay $3,000,000 of cash consideration in connection with the
acquisition of Press Pass;
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(ii) pay $3,300,000 to be placed in escrow pursuant to the Escrow
Agreement in connection with the acquisition of High Performance; and
(iii) pay up to $1,447,783 for fees and expenses incurred in connection
with the Acquisitions.
(b) Provided that the Total Term Loan Commitment has been utilized on the
Closing Date and that the borrowing conditions therefor have otherwise been
met, up to $3,000,000 of the proceeds of all Revolving Loans may be utilized by
the Borrower to refinance certain indebtedness of High Performance; the
remaining portion shall be utilized after the Closing Date for working capital
and other general corporate purposes.
(c) Neither the making of any Loan hereunder, nor the use of the proceeds
thereof, will violate or be inconsistent with the provisions of Regulation G,
T, U or X of the Board of Governors of the Federal Reserve System.
5.06 Governmental Approvals, etc. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any third party or any foreign or domestic governmental or public
body or authority, or by any subdivision thereof (other than those orders,
consents, approvals, licenses, authorizations or validations which, if not
obtained or made, would not reasonably be expected to have a Materially Adverse
Effect or which have previously been obtained or made or, filings to perfect
security interests granted pursuant to the Security Documents, which will be
accomplished on or prior to the Closing Date (unless otherwise agreed to by the
Agent)), is required to authorize or is required in connection with (i) the
execution, delivery and performance of any Document or the Acquisitions
contemplated therein or (ii) the legality, validity, binding effect or
enforceability of any Document. At the time of the making of the Initial
Loans, there does not exist any judgment, order, injunction or other restraint
issued or filed with respect to the consummation of the Acquisitions or the
making of Loans or the performance by the Credit Parties or their respective
Subsidiaries of their respective obligations under the Documents.
5.07 Investment Company Act. No Credit Party or any of its respective
Subsidiaries is, or will be after giving effect to the Acquisitions
contemplated hereby, an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as
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amended, or subject to any foreign, federal or local statute or regulation
limiting its ability to incur indebtedness for money borrowed or guarantee such
indebtedness as contemplated hereby or by any other Credit Document.
5.08 Public Utility Holding Company Act. No Credit Party or any of its
respective Subsidiaries is, or will be after giving effect to the Acquisitions
contemplated hereby, a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
5.09 True and Complete Disclosure. All factual information (taken as a
whole) heretofore or contemporaneously furnished by or on behalf of the Credit
Parties in writing to any Bank (including, without limitation, all information
contained in the Acquisition Documents) for purposes of or in connection with
this Agreement or any transaction contemplated herein is (or was, on the date
of making the Initial Loans), and all other such factual information (taken as
a whole) hereafter furnished by or on behalf of any such Person in writing to
any Bank will be, true and accurate in all material respects on the date as of
which such information is dated or certified and not incomplete by omitting to
state any material fact necessary to make such information not misleading at
such time in light of the circumstances under which such information was
provided. The projections and pro forma financial information contained in
such materials are based on good faith estimates and assumptions believed by
such Persons to be reasonable at the time made, it being recognized by the
Banks that such projections as to future events are not to be viewed as facts
and that actual results during the period or periods covered by any such
projections may differ from the projected results. There is no fact known to
any Credit Party which materially and adversely affects the business,
operations, property, assets, nature of assets, liabilities, condition
(financial or otherwise) or prospects of the Credit Parties, taken as a whole,
which has not been disclosed herein or in such other documents, certificates
and written statements furnished to the Banks for use in connection with the
Acquisitions contemplated hereby.
5.10 Acquisitions. At the time of making the Initial Loans, all
necessary governmental and third-party approvals in connection with the
Acquisitions have been or, prior to the time when required, will have been,
obtained and remain in effect, and all applicable waiting periods have or,
prior to the time when required, will have, expired without, in all such
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cases, any action being taken by any competent authority which is reasonably
likely to have a Materially Adverse Effect on the Acquisitions.
5.11 Financial Condition; Financial Statements; Projections. (a) No
Credit Party is entering into the arrangements contemplated hereby and by the
other Credit Documents, or intends to make any transfer or incur any
obligations hereunder or thereunder with actual intent to hinder, delay or
defraud either present or future creditors. On and as of the Closing Date, on
a pro forma basis after giving effect to the Acquisitions and to all
Indebtedness incurred and Liens and Guarantees created, or to be created, by
each Credit Party or its respective Subsidiaries in connection with the
Acquisitions, (w) the Borrower does not expect that final judgments against any
Credit Party or its respective Subsidiaries in actions for money damages with
respect to pending or threatened litigation will be rendered at a time when, or
in an amount such that, such Credit Party will be unable to satisfy any such
judgments promptly in accordance with their terms (taking into account the
maximum reasonable amount of such judgments in any such actions and the
earliest reasonable time at which such judgments might be rendered and the cash
available to each Credit Party or its respective Subsidiaries, after taking
into account all other anticipated uses of the cash of such Credit Party or its
respective Subsidiaries (including the payments on or in respect of debts and
insurance proceeds (including their Contingent Obligations)); (x) no Credit
Party or its respective Subsidiaries will have incurred or intends to, or
believes that it will, incur debts beyond its ability to pay such debts as such
debts mature (taking into account the timing and amounts of cash to be received
by such Credit Party or its respective Subsidiaries from any source, and of
amounts to be payable on or in respect of debts of such Credit Party or its
respective Subsidiaries and the amounts referred to in the preceding clause
(w)); (y) each Credit Party or its respective Subsidiaries, after taking into
account all other anticipated uses of the cash of such Credit Party or its
respective Subsidiaries, anticipates being able to pay all amounts on or in
respect of debts of such Credit Party or its respective Subsidiaries when such
amounts are required to be paid; and (z) each Credit Party and its respective
Subsidiaries will have sufficient capital with which to conduct its present and
presently proposed business and the property of such Credit Party and its
respective Subsidiaries does not constitute unreasonably small capital with
which to conduct its present or proposed business. For purposes of this
Section 5.11, "debt" means any liability on a claim, and "claim" means a (i)
right to payment whether or not
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such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured
or unsecured; or (ii) right to an equitable remedy for breach of performance if
such breach gives rise to a payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured. On the date of each Borrowing and the
issuance of each Letter of Credit (and after giving effect to all Borrowings
and Letters of Credit as of such date), the representations set forth in this
Section 5.11(a) shall be true and correct with respect to the Borrower on such
date and any Credit Party which is a guarantor with respect to any or all of
such Borrowings or Letters of Credit.
(b) The Borrower has heretofore delivered to the Banks the consolidated
financial statements referred to in Section 4.01(k). The financial statements
referred to in the preceding sentence were prepared in accordance with GAAP
consistently applied and fairly present the financial position and results of
operations of each such Person for the periods covered thereby. There has also
been delivered the pro forma (after giving effect to the Acquisitions) balance
sheet of the Borrower and its Subsidiaries as of November 30, 1997, which
presents a good faith estimate of the consolidated pro forma financial position
of the Borrower and its Subsidiaries for such periods.
The assumptions made in preparing such pro forma balance sheet are
reasonable as of the date of such statements and as of the Closing Date and all
material assumptions are set forth therein. Except as contemplated hereby,
since December 31, 1996 (on a pro forma basis after giving effect to the
Acquisitions) no event or events have occurred that could reasonably be
expected to have a Materially Adverse Effect.
(c) There have heretofore been delivered to the Banks pro forma
consolidating income projections for the Borrower and its Subsidiaries, pro
forma consolidating balance sheet projections for the Borrower and its
Subsidiaries and pro forma consolidating cash flow projections for the Borrower
and its Subsidiaries, all for the fiscal years ending December 31, 1998
through December 31, 2002, inclusive, and for each month of the fiscal year
ending December 31, 1998 (the "Projected Financial Statements"), which give
effect to the Acquisitions and all Indebtedness and Liens incurred or created
in connection with the Acquisitions. The assumptions made in preparing the
Projected Financial Statements are reasonable as of the date of
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such projections and as of the Closing Date and all material assumptions with
respect to the Projected Financial Statements are set forth therein. The
Projected Financial Statements present a good faith estimate by the Borrower of
the consolidated financial information contained therein at the date thereof.
(d) As of the Closing Date, except as fully reflected or reserved against
in the financial statements and the notes thereto described in Section 5.11(b),
to the knowledge of the Credit Parties there were no liabilities or obligations
with respect to the Borrower or its respective Subsidiaries of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether or
not due) which, either individually or in aggregate, would reasonably be
expected to result in a Materially Adverse Effect on the Borrower and its
respective Subsidiaries, taken as a whole. As of the Closing Date, the
Borrower does not know of any basis for the assertion against any Credit Party
or its respective Subsidiaries of any liability or obligation of any nature
whatsoever that is not fully reflected in the financial statements described in
Section 5.11(b) or (c), except as incurred by any Credit Party in connection
with the Acquisitions, which, either individually or in the aggregate, could
reasonably be expected to be material to such Credit Party and its respective
Subsidiaries.
5.12 Security Interests. The Security Documents, when filed and/or
recorded, will create, in favor of the Collateral Agent for the benefit of the
Banks, as security for the obligations purported to be secured thereby, a valid
and enforceable perfected first priority security interest in and Lien upon all
of the Collateral, superior to and prior to the rights of all third persons and
subject to no other Liens except Prior Liens applicable to such Collateral.
The mortgagor under each Mortgage has good and marketable title to the
Mortgaged Real Property free and clear of all Liens other than Prior Liens.
The respective pledgor or assignor, as the case may be, has (or on and after
the time it executes the respective Security Document, will have) good and
marketable title to all items of Collateral (other than real property subject
to a Mortgage) covered by such Security Document free and clear of all Liens
except Prior Liens. No filings or recordings are required in order to perfect
the security interests created under any Security Document except for filings
or recordings required in connection with any such Security Document which
shall have been made prior to or contemporaneously with the execution and
delivery thereof (unless otherwise agreed to by the Agent).
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5.13 Tax Returns and Payments. Each of the Credit Parties and each of
its respective Subsidiaries has filed all tax returns required to be filed by
it and has paid all material taxes and assessments payable by it which have
become due, other than those not yet delinquent and except for those contested
in good faith and for which adequate reserves have been established. Each of
the Credit Parties and each of its respective Subsidiaries has paid, or has
provided adequate reserves (in accordance with GAAP) for the payment of, all
federal, state, local and foreign income taxes (including, without limitation,
franchise taxes based upon income) applicable for all prior fiscal years and
for the current fiscal year to the date hereof. The Borrower does not know of
any proposed tax assessment against any Credit Party or any of its respective
Subsidiaries that could reasonably be expected to have a Materially Adverse
Effect which is not being actively contested in good faith by such Person to
the extent affected thereby in good faith and by appropriate proceedings;
provided that such reserves or other appropriate provisions, if any, as shall
be required in conformity with GAAP shall have been made or provided therefor.
The pro forma financial statements delivered pursuant to Section 5.11(b)
reflected all taxes resulting from the transactions contemplated by the
Acquisitions.
5.14 ERISA. (a) Each Credit Party, its respective Subsidiaries and its
respective ERISA Affiliates is in compliance in all material respects with all
applicable provisions of ERISA and the regulations and published
interpretations thereunder with respect to all employee benefit plans.
(b) No Termination Event has occurred or is reasonably expected to occur
with respect to any Pension Plan which resulted or would result in a liability
to any Credit Party, its respective Subsidiaries or its respective ERISA
Affiliates.
(c) The sum of the amount of unfunded benefit liabilities (determined in
accordance with Statement of Financial Accounting Standards No. 87) under all
Title IV Plans (excluding each Title IV Plan with an amount of unfunded benefit
liabilities of zero or less) is not more than $100,000. As of the Closing
Date, the sum of the amount of unfunded benefit liabilities (within the meaning
of Section 4001(a)(18) of ERISA) under all Title IV Plans (excluding each
Pension Plan with an amount of unfunded benefit liabilities of zero or less) is
not more than $100,000.
(d) As of the Closing Date, none of the Credit Parties, their respective
Subsidiaries nor their respective ERISA
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Affiliates has any obligation to contribute to or any liability or potential
liability (including, but not limited to, actual or potential withdrawal
liability) with respect to any Multiemployer Plan or any employee benefit plan
of the type described in Sections 4063 and 4064 of ERISA or in Section 413(c)
of the Code. None of the Credit Parties, their respective Subsidiaries nor
their respective ERISA Affiliates has incurred or reasonably expects to incur
any withdrawal liability under Section 4201 et seq. of ERISA to any
Multiemployer Plan or any employee benefit plan of the type described in
Sections 4063 and 4064 of ERISA or in Section 413(c) of the Code.
(e) None of the Credit Parties, their respective Subsidiaries nor their
respective ERISA Affiliates has incurred any accumulated funding deficiency
(whether or not waived) with respect to any Pension Plan.
(f) None of the Credit Parties, their respective Subsidiaries nor their
respective ERISA Affiliates has or reasonably expects to become subject to a
Lien in favor of any Pension Plan under Section 302(f) or 307 of ERISA or
Section 401(a)(29) or 412(n) of the Code.
(g) Assuming that no portion of the Loans to be advanced hereunder is
attributable, directly or indirectly, to the assets of any employee benefit
plan, the execution, performance and delivery of the Credit Documents by any
party thereto will not involve any prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975 of the Code for which an exemption
therefrom is not available.
As used in this Section 5.14, the term "accumulated funding deficiency"
has the meaning specified in Section 302 of ERISA and Section 412 of the Code,
and the term "employee benefit plan" has the meaning specified in Section 3(3)
of ERISA.
5.15 Subsidiaries. After giving effect to the Acquisitions, all of the
outstanding common stock, as the case may be, of each Credit Party shall be
validly issued, fully paid and nonassessable and shall be owned beneficially
and of record by each Credit Party as set forth as Annex VIII hereto, subject
to no Liens other than Liens in favor of the Collateral Agent. After giving
effect to the Acquisitions, there shall be no preemptive rights on the part of
any holder of any class of securities of any Credit Party.
5.16 Patents, etc. Each Credit Party or its respective Subsidiaries owns
or possesses adequate licenses or other
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rights to use all material patents, patent applications, trademark
registrations, trademark applications, servicemark registrations, servicemark
applications, trade names, copyright registrations, trade secrets and know how
(collectively, the "Intellectual Property") that are necessary for the
operation of its respective businesses as presently conducted and as currently
proposed to be conducted. No claim is pending or, to the knowledge of each
Credit Party and its respective Subsidiaries, threatened to the effect that any
Credit Party or its respective Subsidiaries infringes upon or conflicts with
the asserted rights of any other person under any Intellectual Property, and,
to the knowledge of each Credit Party and its respective Subsidiaries, there is
no basis for any such claim (whether or not pending or threatened). No claim
is pending or, to the knowledge of each Credit Party and its respective
Subsidiaries, threatened to the effect that any such Intellectual Property
owned or licensed by any Credit Party or its respective Subsidiaries or which
any Credit Party or its respective Subsidiaries otherwise has the right to use,
is invalid or unenforceable by such Credit Party or its respective
Subsidiaries, and, to the knowledge of each Credit Party and its respective
Subsidiaries, there is no basis for any such claim (whether or not pending or
threatened).
5.17 Compliance with Laws, etc. Each Credit Party and its respective
Subsidiaries is in material compliance with all laws and regulations in all
jurisdictions in which it is presently doing business, and each Credit Party
and its respective Subsidiaries will comply with all such laws and regulations
which may be imposed in the future in jurisdictions in which it or such
Subsidiary may then be doing business except to the extent the non-compliance
with such laws and regulations would not reasonably be expected to have a
Materially Adverse Effect. To its knowledge, no Credit Party is currently
under investigation for the violation of any crime the conviction for which
would reasonably be expected to have a Materially Adverse Effect.
5.18 Properties. Each Credit Party or its respective Subsidiaries has
good and marketable title to and beneficial ownership of all material
properties owned by it, including after the Closing Date all property reflected
in the most recent balance sheet referred to in Section 5.11(b) (except as sold
or otherwise disposed of since the date of such balance sheet in the ordinary
course of business), free and clear of all Liens, other than, in the case of
property not constituting Collateral, Permitted Encumbrances and, in the case
of property constituting Collateral, Prior Liens. Each Credit Party or its
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respective Subsidiaries holds all licenses, certificates of occupancy or
operation and similar certificates and clearances of municipal and other
authorities necessary to own and operate its properties in the manner and for
the purposes currently operated by such party. Each Real Property and each
Mortgaged Real Property is suitable for its intended purposes and is served by
such utilities as are necessary for the operation thereof. There are no
actual, threatened or alleged defaults of a material nature with respect to any
Leases of Real Property under which any Credit Party or any of its respective
Subsidiaries is lessor or lessee.
5.19 Securities. Except as set forth on Annex X, there are not, as of
the Effective Date, any existing options, warrants, calls, subscriptions,
convertible or exchangeable securities, rights, agreements, commitments or
arrangements for any Person to acquire any equity security of any Credit Party
or any other securities convertible into, exchangeable for or evidencing the
right to subscribe for any such equity security.
5.20 Collective Bargaining Agreements. Set forth on Annex V hereto is a
list and description (including dates of termination) of all collective
bargaining or similar agreements between or applicable to any Credit Party or
its respective Subsidiaries as of the date hereof and any union, labor
organization or other bargaining agent in respect of the employees of any
Credit Party or its respective Subsidiaries on the date indicated in Annex VI
hereto.
5.21 Indebtedness Outstanding. Except as set forth on Annex IV, on the
Closing Date there exists no Indebtedness of the Credit Parties and their
respective Subsidiaries other than the Loans. Annex VI sets forth a true list
of all Liens other than Permitted Encumbrances on the property of the Credit
Parties immediately following the Closing Date.
5.22 Environmental Protection. Except as set forth on Annex VII hereto
and except as would not have a Materially Adverse Effect,
(a) Each Credit Party and its respective Subsidiaries has obtained all
permits, licenses and other authorizations which are required with respect to
the operation of the business and assets, and use, ownership and operation of
Real Property of the Borrower and its Subsidiaries, in each case taken as a
whole, under any Environmental Law and each such authorization is in full
force and effect.
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(b) Each Credit Party and its respective Subsidiaries is in compliance
with all terms and conditions of the permits, licenses and authorizations
specified in subsection 5.22(a) above, and is also in compliance with, and
not subject to liability under, any Environmental Laws applicable to it and
its business, assets, operations and Real Property (including, without
limitation, compliance with standards, schedules and timetables therein).
(c) There is no civil, criminal or administrative action, suit, demand,
claim, hearing, notice of violation, investigation, proceeding, notice or
demand letter or request for information pending or, to the knowledge of any
Credit Party or any of its respective Subsidiaries, threatened against any
Credit Party or any of its respective Subsidiaries under any Environmental
Law.
(d) None of the Credit Parties nor any of its respective Subsidiaries has
received notice that it has been identified as a potentially responsible
party under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (CERCLA) or any comparable state law nor
has any Credit Party or any of its respective Subsidiaries received any
notification that any Hazardous Materials that it, or any of its
Subsidiaries, or any of their respective predecessors in interest has used,
generated, stored, treated, handled, transported or disposed of, or arranged
for disposal or treatment of, or arranged with a transporter for transport
for disposal or treatment of, have been found at any site at which any
governmental agency or private party is conducting or plans to conduct a
remedial investigation or other action pursuant to any Environmental Law.
(e) There have been no releases (i.e., any past or present releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing or dumping) of Hazardous Materials
by any Credit Party or any of its respective Subsidiaries or their respective
predecessors in interest on, at, upon, into or from any of the Real
Properties. To the knowledge of any Credit Party and each of its respective
Subsidiaries after due inquiry there have been no such releases on, at, upon,
under, from or into any real property in the vicinity of any of the Real
Properties that, through soil, air, surface water or groundwater migration or
contamination, may have migrated to or under such Real Properties.
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(f) No asbestos is present in, on, or at any Real Properties or any
facility or equipment of any Credit Party or any of its respective
Subsidiaries.
(g) No Real Properties of any Credit Party or any of its respective
Subsidiaries or any of their respective predecessors in interest are (i)
listed or proposed for listing on the National Priorities List under CERCLA
or (ii) listed in the Comprehensive Environmental Response, Compensation,
Liability Information System List promulgated pursuant to CERCLA or (iii)
included on any comparable lists maintained by any governmental authority.
(h) There are no past or present events, conditions, circumstances,
activities, practices, incidents, actions or plans which may interfere with
or prevent compliance with any Environmental Law, or which may give rise to
any liability under any Environmental Law, including, without limitation,
liability under CERCLA or similar state, local or foreign laws, or otherwise
form the basis of any claim, action, demand, suit, proceeding, hearing or
notice of violation, notice of potential liability or investigation, based on
or related to the manufacture, processing, distribution, use, generation,
treatment, storage, disposal, transport, shipping or handling, or the
emission, discharge, release or threatened release into the environment, of
any Hazardous Materials.
(i) No Lien has been recorded under any Environmental Law with respect to
any assets, facility, inventory or Real Property owned, operated, leased or
controlled by any Credit Party or any of its respective Subsidiaries.
5.23 Environmental Investigations. All environmental investigations,
studies, audits, assessments or reviews conducted of which any Credit Party has
knowledge in relation to the current or prior business or assets of any Credit
Party or any of its respective Subsidiaries or any Real Property, assets or
facility now or previously owned, operated, leased, used or controlled by any
Credit Party or any of its respective Subsidiaries have been delivered to the
Agent.
5.24 Representations and Warranties in the Merger Agreement. As of the
Closing Date, all representations and warranties of the Borrower, Press Pass
and High Performance set forth in the Acquisition Documents were true and
correct (excluding all materiality exceptions contained therein) in all
material respects as of the time as of which such representa-
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tions and warranties were made and shall be true and correct (excluding all
materiality exceptions contained therein) in all material respects as of the
Closing Date as if such representations and warranties were made on and as of
such date, unless such representation and warranty expressly indicates that it
is being made as of any other specific date.
SECTION 6. Affirmative Covenants. The Borrower covenants and agrees that
on the Effective Date and thereafter for so long as this Agreement is in effect
and until the Commitments have terminated and the Loans together with interest
and fees are paid in full and all other Obligations incurred hereunder, to the
extent due and payable, are paid in full:
6.01 Information Covenants. The Borrower will furnish or cause to be
furnished to each Bank:
(a) As soon as available and in any event within 90 days after the close
of each fiscal year of the Borrower, the consolidating and consolidated
balance sheets of the Borrower and its Subsidiaries as at the end of such
fiscal year and the related consolidating and consolidated statements of
income, of stockholders' equity and of cash flows for such fiscal year,
setting forth comparative consolidating and consolidated figures for the
preceding fiscal year and a report on such consolidated balance sheets and
financial statements by Arthur Andersen LLP or another firm of independent
certified public accountants of recognized national standing, which report
shall not be qualified as to the scope of audit or as to the status of the
Borrower and its Subsidiaries as a going concern and shall state that such
consolidated financial statements present fairly the consolidated financial
position of the Borrower and its Subsidiaries as at the dates indicated and
the results of their operations and their cash flows for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years (except for such changes with which the independent certified public
accountants concur) and the examination by such accountants was conducted in
accordance with generally accepted auditing standards.
(b) As soon as practicable and in any event within 30 days after the end
of each month ending after the Closing Date, (i) the consolidating and
consolidated balance sheet of the Borrower and its Subsidiaries as at the end
of such period and (ii) the related statements of income and cash flows of
the Borrower and its Subsidiaries, in each case for such fiscal month and for
the period from
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the beginning of the then current fiscal year to the end of such fiscal
month, setting forth in comparative form the corresponding periods of the
prior fiscal year, the corresponding periods of the current fiscal year's
budget and a Management's Discussion and Analysis for such financial
statements covering the month then ended and the year to date.
(c) Together with each delivery of financial statements of the Borrower
and its Subsidiaries pursuant to subsection (a) above, a written statement by
the independent public accountants giving the report thereon (i) stating that
their audit examination has included a review of the terms of Sections 6, 7,
8 and 9 of this Agreement as they relate to accounting matters but without
having conducted any special auditing procedures in connection therewith,
(ii) stating whether, in connection with their audit examination, any
condition or event which constitutes a Default or Event of Default has come
to their attention, and if such a condition or event has come to their
attention, specifying the nature and period of existence thereof; provided
that such accountants shall not be liable by reason of any failure to obtain
knowledge of any such Default or Event of Default that would not be disclosed
in the course of their audit examination, and (iii) stating that based on
their audit examination nothing has come to their attention which causes them
to believe that as of the end of such fiscal year of the Borrower there
existed a Default or an Event of Default related to the breach of any
covenant set forth in Section 6 or 7 as they relate to accounting matters and
if such a condition or event has come to their attention, specifying the
nature and period of existence thereof and what action the Borrower has
taken, is taking and propose to take with respect thereto.
(d) At the time of the delivery of the financial statements provided for
in Sections 6.01(a) and (b), a certificate of the chief financial officer,
controller, chief accounting officer or other Authorized Officer of the
Borrower to the effect that no Default or Event of Default exists, or, if any
Default or Event of Default does exist, specifying the nature and extent
thereof and what actions have been or will be taken in respect thereof, which
certificate shall be accompanied on a quarterly basis by a Compliance
Certificate in a form reasonably acceptable to the Agent setting forth the
calculations required to establish whether the Borrower was in compliance
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with the covenants in this Agreement (including without limitation the
covenants set forth in Sections 7.05 and 7.10 through 7.13 inclusive) as at
the end of such fiscal period or year, as the case may be.
(e) Promptly upon receipt thereof, a copy, if any, of each annual
"management letter" submitted to the Borrower by its independent accountants
in connection with any annual audit made by them of the books of the Borrower
or any of its Subsidiaries.
(f) Promptly upon their becoming available, copies of all consolidating
and consolidated financial statements, reports, notices and proxy statements
sent or made available generally by the Borrower or any Subsidiary of the
Borrower to its security holders in their capacity as such (other than to the
Borrower or another Subsidiary) of all regular and periodic reports and all
registration statements and prospectuses, if any, filed by the Borrower or
any of its Subsidiaries with any securities exchange or with the SEC and of
all press releases and other statements made available generally by the
Borrower or any Subsidiary of the Borrower to the public concerning material
developments in the business of the Borrower and its Subsidiaries.
(g) Promptly upon any officer of the Borrower obtaining knowledge (w) of
any condition or event which constitutes a Default or Event of Default, or
becoming aware that any Bank has given any notice or taken any other action
with respect to a claimed Default or Event of Default under this Agreement,
(x) that any Person has given any notice to the Borrower or taken any other
action with respect to a claimed default or event or condition of the type
referred to in Section 8.04, or (y) of a material adverse change in the
business, operations, properties, assets, nature of assets, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries,
taken as a whole, an Officers' Certificate specifying the nature and period
of existence of any such condition or event, or specifying the notice given
or action taken by such holder or Person and the nature of such claimed
Default, Event of Default, event or condition, or material adverse change,
and what action the Borrower has taken, is taking and proposes to take with
respect thereto.
(h) (w) Promptly upon any officer of the Borrower obtaining knowledge of
the institution of, or written
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threat of, any action, suit, proceeding, governmental investigation or
arbitration against or affecting any Credit Party or its respective
Subsidiaries or any property of any Credit Party or its respective
Subsidiaries not previously disclosed to the Banks, which action, suit,
proceeding, governmental investigation or arbitration seeks (or in the case
of multiple actions, suits, proceedings, governmental investigations or
arbitrations arising out of the same general allegations or circumstances
which seek) recovery from any Credit Party or its respective Subsidiaries
aggregating $100,000 (exclusive of claims covered by insurance policies
unless the insurers of such claims have disclaimed coverage or reserved the
right to disclaim coverage on such claims), the Borrower shall give notice
thereof to the Banks and provide such other information as may be reasonably
available to enable the Banks and their counsel to evaluate such matters; (x)
as soon as practicable and in any event within 45 days after the end of each
fiscal quarter, the Borrower shall provide a quarterly report to the Banks
covering the institution of, or written threat of, any action, suit,
proceeding, governmental investigation or arbitration (not previously
reported) against or affecting any Credit Party or its respective
Subsidiaries or any property of any Credit Party or its respective
Subsidiaries not previously disclosed to the Banks, which action, suit,
proceedings, governmental investigation or arbitration seeks (or in the case
of multiple actions, suits, proceedings, governmental investigations or
arbitrations arising out of the same general allegations or circumstances
which seek) recovery from any Credit Party or its respective Subsidiaries
aggregating $100,000 or more (exclusive of claims covered by insurance
policies unless the insurers of such claims have disclaimed coverage or
reserved the right to disclaim coverage on such claims); (y) in addition to
the requirements set forth in clauses (w) and (x) of this Section 6.01(h),
the Borrower upon request shall promptly give notice of the status of any
action, suit, proceeding, governmental investigation or arbitration covered
by a report delivered to the Banks pursuant to clause (w) or (x) above to the
Banks and provide such other information as may be reasonably available to
them to enable the Banks and their counsel to evaluate such matters and (z)
promptly upon any officer of the Borrower obtaining knowledge of any dispute
in respect of or the institution of, or written threat of, any action, suit,
proceeding, governmental investigation or arbitration in respect of any
material contract of any Credit Party or its respective Subsidiaries, the
Borrower
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shall give notice thereof to the Banks and shall provide such other
information as may be reasonably available to enable the Banks and their
counsel to evaluate such matters.
(i) Within 15 days of any material changes to the terms of any insurance
policy as in effect on the Effective Date and described on Annex III or any
cancellation of any such policy without replacement with a substantially
similar policy, a report in form and substance reasonably satisfactory to
Agent outlining such changes or the terms of the replacement policy, as the
case may be.
(j) To the extent reasonably requested by the Agent, as soon as
practicable and in any event within ten days of the later of such request and
the making of any such amendment or waiver, copies of amendments or waivers
with respect to Indebtedness of any Credit Party or its respective
Subsidiaries.
(k) (A) On or prior to the Closing Date and each December 31 thereafter,
commencing December 31, 1998, a consolidated plan/budget for each month in
the succeeding fiscal year and (B) on or prior to the Closing Date, a
consolidated plan for the next succeeding five fiscal years, in each case
prepared in accordance with the Borrower's normal accounting procedures (and
which will represent management's reasonable estimate of the Borrower's
projected performance during such periods) applied on a consistent basis,
including, without limitation, (i) forecasted consolidated balance sheets,
consolidated statements of operations, of stockholders' equity and of cash
flows of the Borrower and its Subsidiaries on a consolidated basis for such
periods, (ii) the amount of forecasted capital expenditures for such fiscal
periods, (iii) forecasted compliance with Sections 7.05 and 7.10-7.13 and
(iv) an appropriate discussion of the principal assumptions on which such
plan/budget is based; provided that if any such forecast indicates that the
Borrower may not be in compliance with any provision of this Agreement at
some future date, such forecast shall not constitute a Default or an Event of
Default or anticipatory or other breach thereof. Together with each delivery
of financial statements pursuant to Sections 6.01(a) and (b), a comparison of
the current year to date financial results against the plan/budget required
to be submitted pursuant to this subsection (k) shall be presented.
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(l) Within ten (10) Business Days after the last Business Day of each
bi-weekly period, a borrowing base certificate in the form of Exhibit L
hereto (the "Borrowing Base Certificate") detailing the Borrower's Eligible
Accounts Receivable and Eligible Inventory as of the last day of such
bi-weekly period, certified as complete and correct on behalf of the Borrower
by the chief executive officer, chief financial officer, controller or other
Authorized Officer of the Borrower. In addition, each Borrowing Base
Certificate shall have attached to it such additional schedules and/or other
information as the Agent may reasonably request. If the Borrower fails to
deliver any such Borrowing Base Certificate within fifteen (15) days after
the end of any such bi-weekly period, then the Borrowing Base shall be deemed
to be $0 until such time as the Borrower shall deliver such required
Borrowing Base Certificate.
(m) Within thirty (30) days of the Effective Date, pro forma financial
statements (including the pro forma estimated opening balance sheet as of
November 30, 1997), accompanied by a statement by the Borrower that such
projections are based on assumptions believed by it in good faith to be
reasonable as to the future financial performance of the Borrower, reasonably
satisfactory to the Agent. The Agent also shall have received a letter from
Arthur Andersen LLP expressing their having analyzed the pro forma estimated
opening balance sheet of the Borrower as of November 30, 1997, after giving
effect to the Acquisitions and the Borrowings under this Agreement, which
such report shall be reasonably satisfactory to the Agent and reasonably
consistent with the pro forma information previously provided to the Agent.
(n) With reasonable promptness, such other information and data with
respect to any Credit Party or its respective Subsidiaries or any other
similar entity in which the Borrower has an investment, as from time to time
may be reasonably requested by the Agent.
6.02 Books, Records and Inspections. The Borrower will, and will cause
each of its Subsidiaries to, keep true books of records and accounts in which
full and correct entries will be made of all of its business transactions, and
will reflect in its financial statements adequate accruals and appropriations
to reserves, all in accordance with GAAP. The Borrower will, and will cause
each of its Subsidiaries to, permit officers and designated representatives of
the Agent or any
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Bank to visit and inspect any of the properties or assets of the Borrower or
any of its Subsidiaries in whosesoever possession, and to examine the books of
account of the Borrower or any of its Subsidiaries and discuss the affairs,
finances and accounts of the Borrower or any of its Subsidiaries with, and be
advised as to the same by, its and their officers and independent accountants
(in the presence of such officers), all at such reasonable times and intervals
and to such reasonable extent as the Agent or any Bank may reasonably request.
6.03 Maintenance of Property; Insurance. (a) The Borrower and its
Subsidiaries will exercise commercially reasonable efforts to maintain or cause
to be maintained in good repair, working order and condition (subject to normal
wear and tear) all properties used in its businesses and from time to time will
make or cause to be made all appropriate repairs, renewals and replacements
thereof and will maintain and renew as necessary all licenses, permits and
other clearances necessary to use and occupy such properties.
(b) Subject to the provisions of subsection 6.03(c) below, the Borrower
and its Subsidiaries will maintain or cause to be maintained, with financially
sound and reputable insurers, insurance with respect to its properties and
business against loss or damage of the kinds customarily insured against by
corporations of established reputation engaged in the same or similar
businesses and similarly situated, of such types and in such amounts as are
customarily carried under similar circumstances by such other corporations to
the extent that such types and such amounts of insurance are available at
commercially reasonable rates. The Borrower will, and will cause each of its
Subsidiaries to, furnish to each Bank, upon reasonable request, information as
to the insurance carried, and will not cancel, without replacement with a
substantially similar policy, any such insurance without the reasonable consent
of the Required Banks.
(c) The Borrower will, and will cause each of its Subsidiaries to,
maintain in full force the insurance coverages in respect of the Collateral as
set forth in the Security Documents.
6.04 Payment of Taxes. The Borrower will, and shall cause each of its
Subsidiaries to, pay and discharge all material taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits,
or upon any properties belonging to it, prior to the date on which material
penalties attach thereto, and all lawful claims which, if un-
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paid, might become a Lien or charge upon any properties of the Borrower or any
of its Subsidiaries or cause a failure or forfeiture of title thereto; provided
that neither the Borrower nor any of its Subsidiaries shall be required to pay
any such tax, assessment, charge, levy or claim that is being contested in good
faith and by proper proceedings promptly instituted and diligently conducted,
which proceedings have the effect of preventing the forfeiture or sale of the
property or asset that may become subject to such Lien, if it has maintained
adequate reserves with respect thereto in accordance with and to the extent
required under GAAP.
6.05 Corporate Franchises. The Borrower will, and will cause each of its
Subsidiaries to, do or cause to be done all things necessary to preserve and
keep in full force and effect its existence, rights and authority, and its
Intellectual Property, except where such failure to keep in full force and
effect such rights and authority would not have a Materially Adverse Effect.
6.06 Compliance with Statutes, etc. The Borrower will, and will cause
each of its Subsidiaries to, comply with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property (including applicable statutes, regulations, orders
and restrictions relating to environmental standards and controls) other than
non-compliance which could not reasonably be expected to have a Materially
Adverse Effect.
6.07 ERISA. The Borrower will furnish to each of the Banks:
(a) promptly upon the Borrower knowing or having reason to know of the
occurrence of any (i) Termination Event or (ii) "prohibited transaction"
within the meaning of Section 406 of ERISA or Section 4975 of the Code, in
connection with any Pension Plan or any trust created thereunder, which in
the case of all such events described in clause (i) or (ii) results or could
reasonably be expected to result in a liability of any Credit Party or its
respective Subsidiaries in the aggregate in excess of $100,000 or the
imposition of a Lien on the assets of a Credit Party, a written notice
specifying the nature thereof, what action such Credit Party, its respective
Subsidiaries or its respective ERISA Affiliates have taken, are taking or
propose to take with respect thereto,
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and, when known, any action taken or threatened by the Internal Revenue
Service, Department of Labor, PBGC or Multiemployer Plan sponsor with respect
thereto; and
(b) with reasonable promptness copies of (i) all notices received by any
Credit Party, its respective Subsidiaries or its respective ERISA Affiliates
of PBGC's intent to terminate any Title IV Plan or to have a trustee
appointed to administer any Title IV Plan, the notice of which event is
required pursuant to the preceding paragraph (a); (ii) upon the request of
the Agent each Schedule B (Actuarial Information) to the annual report (Form
5500 Series) filed by any Credit Party, its respective Subsidiaries or its
respective ERISA Affiliates with the Internal Revenue Service with respect to
each Pension Plan; (iii) upon the request of the Agent, the most recent
actuarial valuation report for each Title IV Plan which is then maintained by
any Credit Party, its respective Subsidiaries or its respective ERISA
Affiliates or as to which any Credit Party, its respective Subsidiaries or
its respective ERISA Affiliates has any continuing funding obligations; and
(iv) all notices received by any Credit Party, its respective Subsidiaries or
its respective ERISA Affiliates from a Multiemployer Plan sponsor concerning
the imposition or amount of withdrawal liability pursuant to Section 4202 of
ERISA, the notice of which event is required pursuant to the preceding
paragraph (a).
6.08 Performance of Obligations. The Borrower will, and will cause each
of its Subsidiaries to, perform in all material respects all of their
respective obligations under the terms of each mortgage, indenture, security
agreement, other debt instrument and material contract by which they are bound
or to which they are a party, except where such nonperformance would not have a
Materially Adverse Effect.
6.09 End of Fiscal Years; Fiscal Quarters. Each Credit Party will, for
financial reporting purposes, and will cause each of its Subsidiaries to, have
its (i) fiscal years end on December 31, and (ii) fiscal quarters end on March
31, June 30, September 30, and December 31.
6.10 Use of Proceeds. All proceeds of the Loans shall be used as
provided in Section 5.05.
6.11 Interest Rate Protection. The Borrower shall no later than 180 days
after the Closing Date enter into Inter-
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est Rate Agreements reasonably acceptable to the Agent relating to 50% of the
Term Portion outstanding at such time.
6.12 Equal Security for Loans and Notes; No Further Negative Pledges.
(a) If the Borrower or any of its respective Subsidiaries shall create or
assume any Lien upon any of its property or assets, whether now owned or
hereafter acquired and whether or not such property or assets constitutes
Collateral, other than Liens permitted by the applicable Security Document
(unless prior written consent to the creation or assumption thereof shall have
been obtained from the Agent and the Required Banks), the Borrower shall, and
shall cause any applicable Subsidiary to, make or cause to be made effective
provisions whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness thereby secured as long as any such
Indebtedness shall be secured; provided that this covenant shall not be
construed as consent by the Agent and the Required Banks to any violation by
the Borrower of the provisions of Section 7.03.
(b) Except with respect to prohibitions against other encumbrances on
specific property encumbered to secure payment of particular Indebtedness
permitted hereunder (which Indebtedness relates solely to the acquisition or
improvement of such specific property), neither the Borrower nor any of its
Subsidiaries shall enter into any agreement prohibiting the creation or
assumption of any Lien upon its properties or assets, whether now owned or
hereafter acquired.
6.13 Lender Meeting. The Borrower will participate in a meeting of the
Banks once during each fiscal year (commencing with the fiscal year ending
December 31, 1998) relating to the financial statements of the previous fiscal
year to be held at a location and a time selected by the Borrower and
reasonably acceptable to the Agent.
6.14 Pledge of Additional Collateral. Subject to Section 6.12(b), and in
any event within 30 days after the acquisition by the Borrower or any of its
Subsidiaries of (i) Real Property, (ii) assets of the type that would have
constituted Collateral (pursuant to the appropriate Security Document on the
Closing Date or Effective Date, as applicable, executed by such Person) at the
Closing Date or the Effective Date or (iii) capital stock of any Subsidiary
other than the acquisition of Shares (whether by capital contribution or
acquisition) (collectively, (i), (ii), (iii) and the assets of any Subsidiary
described in (iii), the "Additional Collateral"), the Borrower will, and will
cause each of its Subsidiaries to,
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take all necessary action, including the filing of appropriate financing
statements under the provisions of the UCC, applicable domestic or local laws,
rules or regulations in each of the offices where such filing is necessary or
appropriate, entering into or amending Security Documents or, in the case the
Borrower or any of its Subsidiaries creates or acquires a Subsidiary, entering
into such additional pledge agreements and security agreements in form and
substance satisfactory to the Collateral Agent or, in the case the Borrower or
any of its Subsidiaries acquires Real Property for a purchase price in excess
of $50,000, entering into Mortgages (and, in the case of the acquisition of
Real Property, satisfaction of the conditions set forth in Sections
4.01(b)(ii), 4.01(q) and 4.01(u) as if such Real Property were Mortgaged Real
Property and, in the case of the acquisition of personal property, satisfaction
of the conditions set forth in Sections 4.01(b)(ii) and 4.01(n)), to grant to
the Collateral Agent a perfected first priority Lien in such Collateral
pursuant to and to the full extent required by the Security Documents and this
Agreement. All actions taken by the parties in connection with the pledge of
Additional Collateral, including, without limitation, costs of counsel for the
Agent or the Collateral Agent, shall be for the account of the Borrower, which
shall pay all sums due on demand.
6.15 Security Interests. The Borrower will, and will cause its
Subsidiaries to, perform any and all acts and execute any and all documents
(including, without limitation, the execution, amendment or supplementation of
any financing statement and continuation statement) for filing in any
appropriate jurisdiction under the provisions of the UCC, local law or any
statute, rule or regulation of any applicable jurisdiction which are necessary
in order to maintain or confirm in favor of the Collateral Agent for the
benefit of the Banks a valid and perfected Lien on the Collateral and any
Additional Collateral, subject to no Liens except for Prior Liens. The
Borrower shall, as promptly as practicable after the filing of any financing
statements, deliver or cause to be delivered to the Agent acknowledgment copies
of, or copies of lien search reports confirming the filing of, financing
statements duly filed under the UCC of all jurisdictions as may be necessary
or, in the reasonable judgment of the Agent, desirable to perfect the Lien
created, or purported or intended to be created, by each Security Document.
6.16 Environmental Events. (a) The Borrower will promptly give notice
to the Agent upon becoming aware thereof (i) of any violation of any
Environmental Law, (ii) of any in-
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quiry, proceeding, investigation or other action, including a request for
information or a notice of potential liability under any Environmental Law from
any Person or (iii) of the discovery of the release or threatened release of
any Hazardous Material at, on, upon, under or from any of the Real Properties
or any facility or equipment thereat in excess of reportable quantities or
allowable standards or levels under any Environmental Law, or in a manner
and/or amount which could reasonably be expected to result in liability under
any Environmental Law, in each case which would have a Materially Adverse
Effect.
(b) In the event of the presence of any Hazardous Material on, at, upon
or under any of the Real Properties which is in violation of, or which could
reasonably be expected to result in liability under, any Environmental Law, in
each case which would have a Materially Adverse Effect, the Borrower or any of
its Subsidiaries, upon discovery thereof, shall take all necessary steps to
initiate and expeditiously complete all responsive, corrective and other action
required under any Environmental Law to mitigate and eliminate any such adverse
effect.
(c) The Borrower shall as promptly as practicable notify the Agent of the
occurrence of any event specified in Section 6.16(b) and shall thereafter keep
the Agent informed on a periodic basis of any actions taken in response to such
event and the results of such actions.
(d) The Borrower shall provide the Agent with copies of any notice,
submittal or documentation provided by the Borrower or any of its Subsidiaries
to any governmental authority or third party under any Environmental Law if the
matter which is the subject of the notice, submittal or other documentation
could reasonably be expected to result in a Materially Adverse Effect. Such
notice, submittal or documentation shall be provided to the Agent promptly and,
in any event, within 5 business days after such material is provided to the
governmental authority or third party.
6.17 Subsidiary Guarantees. In the event the Borrower or any of its
Subsidiaries creates or acquires a Subsidiary, the Borrower will cause
Subsidiary to execute and deliver to the Collateral Agent for the benefit of
the Banks a subsidiary guarantee, in form and substance satisfactory to the
Collateral Agent, guaranteeing the Obligations.
6.18 Landlord Lien Assurance. The Borrower will use its best efforts to
obtain Landlord Lien Assurances from the
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landlords of leased Real Property of the Borrower and its Subsidiaries where
Inventory is located.
6.19 Post-Closing Covenants. Within 30 days of the date of this
Agreement, (i) the Borrower will (x) enter into an intercreditor agreement with
Peoples Bank containing reasonable and customary subordination provisions,
including but not limited to a provision whereby Peoples Bank will agree that
in the event the Indebtedness referred to in Section 7.04(h) is not repaid on
the maturity date thereof, Peoples Bank will not, for a period of 180 days
after such maturity date, commence the judicial or other enforcement of its
rights and remedies relating to such Indebtedness, (y) cause High Performance
Sports Marketing, Inc. to amend the promissory note dated December 30, 1997
evidencing the Indebtedness referred to in Section 7.04(h) to the satisfaction
of the Agent, which amendment will include but not be limited to the deletion
of clauses (g) and (i) as events of default for High Performance Sports
Marketing, Inc., and (z) close any accounts the Borrower or any of its
Subsidiaries may have at Peoples Bank, or (ii) the Borrower will cause Racing
Champions Corporation to guarantee the entire amount of the Indebtedness
referred to in Section 7.04(h).
SECTION 7. Negative Covenants. The Credit Parties hereby covenant and
agree that as of the Closing Date and thereafter for so long as this Agreement
is in effect and until the Commitments have terminated and the Loans together
with interest and fees are paid in full and all other Obligations incurred
hereunder, to the extent due and payable, are paid in full:
7.01 Conduct of Business. The Borrower will, and will cause each of its
Subsidiaries to, at all times take any and all such actions as may be necessary
or appropriate to permit the Borrower and its Subsidiaries to continue to
conduct its business in substantially the same manner as heretofore conducted
prior to the Acquisitions by the Borrower's predecessors. The Borrower will
not, and will not permit any of its Subsidiaries to, engage in any business
other than such business and any businesses or activities substantially similar
or related thereto.
7.02 Amendments or Waivers of Certain Documents. After the Closing Date,
no Credit Party or its respective Subsidiaries will amend or otherwise change
the terms of the Acquisition Documents in a manner adverse to the Banks without
the prior written consent of the Required Banks.
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7.03 Liens. The Borrower will not, and will not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or permit or
suffer to exist any Lien upon or with respect to any item constituting
Collateral, whether now owned or hereafter acquired, or sell any such
Collateral subject to an understanding or agreement, contingent or otherwise,
to repurchase such Collateral or assign any right to receive income, or file or
permit the filing of any financing statement under the UCC or any other similar
notice of Lien under any similar recording or notice statute, except for the
Lien of the Security Document relating thereto, Prior Liens applicable thereto
and other Liens expressly permitted by such Security Document. The Borrower
will not, and will not permit any of its Subsidiaries to, create, incur, assume
or suffer to exist any Lien upon or with respect to any property or assets of
the Borrower or any Subsidiary which does not constitute Collateral whether now
owned or hereafter acquired, or sell any Collateral, property or assets subject
to an understanding or agreement, contingent or otherwise, to repurchase such
property or assets or assign any right to receive income, or file or permit the
filing of any financing statement under the UCC or any other similar notice of
Lien under any similar recording or notice statute, except the following, which
are herein collectively referred to as "Permitted Encumbrances":
(a) Liens for taxes, assessments or governmental charges or claims not
yet delinquent or Liens for taxes, assessments or governmental charges or
claims being contested in good faith and by appropriate proceedings for which
adequate reserves, as may be required by GAAP, have been established;
(b) Liens in respect of property or assets of the Borrower or any of its
Subsidiaries imposed by law (i) which were incurred in the ordinary course of
business, such as carriers', warehousemen's and mechanics' Liens and other
similar Liens arising in the ordinary course of business, and (x) which do
not in the aggregate materially detract from the value of such property or
assets or materially impair the use thereof in the operation of the business
of the Borrower or any of its Subsidiaries or (y) which are being contested
in good faith by appropriate proceedings, which proceedings have the effect
of preventing the forfeiture or sale of the property or asset subject to such
Lien or (ii) which do not relate to material liabilities of the Borrower or
any of its Subsidiaries and do not in the aggregate materially detract from
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the value of the property and assets of the Borrower and its Subsidiaries
taken as a whole;
(c) Liens in connection with any attachment or judgment (including
judgment or appeal bonds) not in excess of $50,000 in the aggregate for the
Borrower and its Subsidiaries (exclusive of any amount adequately covered by
insurance as to which the insurance company has acknowledged coverage) unless
the judgment it secures shall, within 60 days after the entry thereof, not
have been discharged or execution thereof not stayed pending appeal, or shall
not have been discharged within 30 days after the expiration of any such
stay;
(d) Liens (other than any Lien imposed by ERISA) incurred or deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security, or
to secure the performance of tenders, statutory obligations, surety and
appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations incurred in the ordinary
course of business (exclusive of obligations in respect of the payment for
borrowed money or the equivalent);
(e) Subject to the provisions of Section 7.19, and, with respect to any
Mortgaged Real Property, to the provisions of any applicable Mortgage, Leases
with respect to the assets or properties of the Borrower or any of its
Subsidiaries entered into in the ordinary course of the Borrower's or such
Subsidiary's business and subordinate in all respects to the Liens granted
and evidenced by the Security Documents;
(f) Easements, rights of way, restrictions, minor defects or
irregularities in title not interfering in any material respect with the
business of the Borrower or any of its Subsidiaries, in each case incurred in
the ordinary course of business and which do not materially impair for its
intended purposes the use or value of the Real Property to which it relates;
(g) Liens upon real or tangible personal property acquired by the
Borrower or any of its Subsidiaries after the date hereof; provided that (i)
any such Lien is created solely for the purpose of securing Indebtedness
representing, or incurred to finance, the cost of the item of property
subject thereto, (ii) the principal amount of the
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<PAGE> 76
Indebtedness secured by such Lien is at least 70%, and does not exceed 100%
of the fair value (as determined in good faith by the board of directors or
members of the appropriate entity) of the respective property at the time it
was so acquired, (iii) such Lien does not extend to or cover any other
property other than such item of property and (iv) the incurrence of such
Indebtedness secured by such Lien is permitted by Section 7.04(c) or (g); and
(h) Subordinated Liens contemplated by the Pledge Agreement, dated as of
the date hereof, of the Borrower in favor of Ronald Beck, as agent for
himself and each of Victor H. Shaffer, Robert Bove, Peter T. Joseph and Neal
K. Aronson, the Guaranty, dated as of the date hereof, by Press Pass in favor
of Ronald Beck, as agent for himself and each of Victor H. Shaffer, Robert
Bove, Peter T. Joseph and Neal K. Aronson, the Security Agreement, dated as
of the date hereof, made by Press Pass in favor of Ronald Beck, as agent for
himself and each of Victor H. Shaffer, Robert Bove, Peter T. Joseph and Neal
K. Aronson and the Intercreditor Agreement, dated as of the date hereof,
among the Agent, the lenders listed therein and Ronald Beck, as agent for
himself and each of Victor H. Shaffer, Robert Bove, Peter T. Joseph and Neal
K. Aronson securing the Indebtedness set forth in Section 7.04(f).
The Borrower shall use its commercially reasonable best efforts to obtain
the waiver of any Lien referred to in clause (b)(i) above on or in respect of
any Equipment or Inventory. The term "Permitted Encumbrances" shall mean, with
respect to Mortgaged Real Property, Liens permitted under the Mortgages.
7.04 Indebtedness. The Borrower will not, and will not permit any of its
Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to the Credit Documents; provided that
the aggregate principal amount of Indebtedness incurred pursuant to this
Agreement shall in no event exceed the Total Commitments;
(b) Interest Rate Agreements to the extent required by Section 6.11;
(c) $250,000 of Indebtedness in the aggregate outstanding at any time for
the Borrower and its Subsidiaries
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<PAGE> 77
incurred to finance the cost of the acquisition of real or tangible personal
property (including Capital Leases); provided that such Indebtedness shall be
at least 70% and shall not exceed 100% of the fair value of such property;
and provided, further, that such Indebtedness is not secured by any Lien
other than a Lien referred to in clause (g) of Section 7.03;
(d) Contingent Obligations permitted by Section 7.16;
(e) the promissory notes dated October 24, 1997 of the Borrower issued to
David W. Dupree and Randy C. Baker in the amount of $150,000 and $850,000,
respectively;
(f) the promissory notes dated December 31, 1997 of the Borrower issued
to Ronald N. Beck, Victor H. Shaffer, Robert Bove, Peter T. Joseph and Neal
K. Aronson, in an aggregate amount of $1,000,000 in connection with the
Merger Agreement and Plan of Reorganization, dated as of October 3, 1997,
among the Borrower, SM Acquisition Company, J/B Acquisition Company, Synergy
Marketing, Inc. and J/B Press Pass, Inc.;
(g) $500,000 of Indebtedness in the aggregate outstanding at any time for
the Borrower and its Subsidiaries incurred to finance the cost of the
acquisition of tractor trailers; provided that such Indebtedness shall be at
least 70% and shall not exceed 100% of the fair value of such property; and
provided, further, that such Indebtedness is not secured by any Lien other
than a Lien referred to in clause (g) of Section 7.03;
(h) unsecured Indebtedness outstanding on the date of this Agreement not
exceeding $703,000 in the aggregate for High Performance Sports Marketing,
Inc.; provided that such Indebtedness shall not be reincurred once it is
repaid; and
(i) other unsecured Indebtedness not exceeding $250,000 in the aggregate
for the Borrower and its Subsidiaries at any time outstanding.
7.05 Capital Expenditures. The Borrower will not, and will not permit
any of its Subsidiaries to, make Consolidated Capital Expenditures for any
purpose in excess of the amounts set forth below for the fiscal year end set
forth on the date listed below:
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<PAGE> 78
<TABLE>
<CAPTION>
Amount
Period in $ Thousands
------ --------------
<S> <C>
December 31, 1998 . . . . . . . . $225
December 31, 1999 . . . . . . . . 250
December 31, 2000 . . . . . . . . 300
December 31, 2001 . . . . . . . . 300
December 31, 2002 . . . . . . . . 300
December 31, 2003 . . . . . . . . 300
</TABLE>
provided that funds used to acquire tractor trailers with the proceeds of
Indebtedness incurred pursuant to Section 7.04(g) shall not be considered
"Consolidated Capital Expenditures" for purposes of this Section 7.05.
7.06 Advances, Investments and Loans. The Borrower will not, and will
not permit any of its Subsidiaries to, lend money or credit or make advances to
any Person, or purchase or acquire any stock, obligations or securities of, or
any other interest in, or make any capital contribution to any Person, except:
(a) investments in Cash and Cash Equivalents;
(b) receivables owing to them and advances to customers and suppliers, in
each case if created, acquired or made in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms;
(c) investments (including debt obligations) received in connection with
the bankruptcy or reorganization of suppliers and customers and in settlement
of delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
(d) the acceptance of a form of consideration other than Cash or Cash
Equivalents in connection with the sale or disposition of assets to the
extent provided in Section 7.15; and
(e) additional loans, advances and/or investments of a nature not
contemplated by the foregoing clauses (a) through (d); provided that all
loans, advances and investments made pursuant to this clause (e) shall not
exceed $100,000 in the aggregate at any time outstanding for the Borrower and
its Subsidiaries.
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7.07 Prepayments of Indebtedness, etc. The Borrower will not, and will
not permit any of its Subsidiaries to: (a) after the issuance thereof, amend or
modify (or permit the amendment or modification of) any of the terms or
provisions, to the extent any such amendment or modification would be adverse
to the issuer thereof or to the interests of the Banks, of any of the
Indebtedness (or any agreement relating thereto) of the type described in
Section 7.04(c), (e) or (f); (b) make (or give any notice in respect of) any
voluntary or optional payment or prepayment or redemption or acquisition for
value of (including, without limitation, by way of depositing with any trustee
with respect thereto money or securities before such Indebtedness is due for
the purpose of paying such Indebtedness when due) or exchange of any such
Indebtedness; and/or (c) amend, modify or change any of its respective
Certificate of Incorporation or Bylaws, or any agreement entered into by the
Borrower or its Subsidiaries with respect to its equity securities, or enter
into any new agreement with respect to the equity securities of the Borrower or
any Subsidiary the result of which is reasonably likely to be adverse to the
interests of the Banks (in their capacity as such) hereunder.
7.08 Dividends, etc. The Borrower will not, and will not permit any of
its Subsidiaries to, declare or pay any dividends or return any capital to, its
shareholders or authorize or make any other distribution, payment or delivery
of property or cash to its shareholders as such, or redeem, retire, purchase or
otherwise acquire, directly or indirectly, for any consideration, any of its
equity interest now or hereafter outstanding (or any warrants for or options or
stock appreciation rights in respect of any of such equity interests), or make
any loans or advances to Affiliates, or set aside any funds for any of the
foregoing purposes, or permit any of its Subsidiaries to purchase or otherwise
acquire for consideration any equity interest of the Borrower or any other
Subsidiary, as the case may be, now or hereafter outstanding (or any options or
warrants or stock appreciation rights issued by such Person with respect to its
equity interest) (all of the foregoing, "Dividends"), except that any
Subsidiary of the Borrower may pay Dividends to its parent corporation if such
parent corporation is (x) the Borrower or (y) a Wholly-Owned Subsidiary of the
Borrower.
7.09 Transactions with Affiliates. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any transaction or series of
transaction, whether or not in the ordinary course of business, with any holder
of 5% or more of the equity securities of the Borrower or with any Af-
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<PAGE> 80
filiate of the Borrower other than on terms and conditions substantially as
favorable to the Borrower or any Subsidiary as would be obtainable by the
Borrower or such Subsidiary at the time in a comparable arm's-length
transaction with a Person other than a holder of 5% or more of the equity
securities of the Borrower or an Affiliate of the Borrower; provided that the
foregoing restrictions shall not apply to (i) transactions between or among the
Borrower and its Wholly-Owned Subsidiaries and (ii) the payment of fees to
Indosuez and its Affiliates for financial services, such fees not to exceed
Indosuez' usual and customary fees for similar services.
7.10 Total Interest Coverage Ratio. The ratio of (i) Consolidated EBITDA
to (ii) Consolidated Interest Expense for the Borrower set forth below for the
Test Period ending on each date listed below shall not be less than the ratio
set forth opposite such date below:
<TABLE>
<CAPTION>
Test Period Ratio
----------- -----
<S> <C>
March 31, 1998 . . . . . . . . . . . . . 6.00 to 1.0
June 30, 1998 . . . . . . . . . . . . . 6.50 to 1.0
September 30, 1998 . . . . . . . . . . . 6.75 to 1.0
December 31, 1998 . . . . . . . . . . . 7.00 to 1.0
March 31, 1999 . . . . . . . . . . . . . 7.00 to 1.0
June 30, 1999 . . . . . . . . . . . . . 7.00 to 1.0
September 30, 1999 . . . . . . . . . . . 7.25 to 1.0
December 31, 1999 . . . . . . . . . . . 7.50 to 1.0
March 31, 2000 . . . . . . . . . . . . . 8.50 to 1.0
June 30, 2000 . . . . . . . . . . . . . 8.50 to 1.0
September 30, 2000 . . . . . . . . . . . 8.50 to 1.0
December 31, 2000 . . . . . . . . . . . 8.50 to 1.0
March 31, 2001 . . . . . . . . . . . . . 8.50 to 1.0
June 30, 2001 . . . . . . . . . . . . . 8.50 to 1.0
September 30, 2001 . . . . . . . . . . . 8.50 to 1.0
December 31, 2001 . . . . . . . . . . . 8.50 to 1.0
March 31, 2002 . . . . . . . . . . . . . 8.50 to 1.0
June 30, 2002 . . . . . . . . . . . . . 8.50 to 1.0
September 30, 2002 . . . . . . . . . . . 8.50 to 1.0
December 31, 2002 . . . . . . . . . . . 8.50 to 1.0
</TABLE>
7.11 Fixed Charge Coverage Ratio. The Borrower will not permit the ratio
of (i) Consolidated EBITDAC of the Borrower to (ii) the Consolidated Interest
Expense of the Borrower plus the amount of scheduled mandatory payments on
account of principal of Indebtedness of the Borrower plus cash taxes paid for
the Test Period ending on each date listed below, to be less than the ratio set
forth opposite such date below:
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<PAGE> 81
<TABLE>
<CAPTION>
Test Period Ratio
----------- -----
<S> <C>
March 31, 1998 . . . . . . . . . . . . . 1.50 to 1.0
June 30, 1998 . . . . . . . . . . . . . 1.75 to 1.0
September 30, 1998 . . . . . . . . . . . 2.00 to 1.0
December 31, 1998 . . . . . . . . . . . 2.00 to 1.0
March 31, 1999 . . . . . . . . . . . . . 2.00 to 1.0
June 30, 1999 . . . . . . . . . . . . . 2.00 to 1.0
September 30, 1999 . . . . . . . . . . . 2.00 to 1.0
December 31, 1999 . . . . . . . . . . . 2.00 to 1.0
March 31, 2000 . . . . . . . . . . . . . 2.00 to 1.0
June 30, 2000 . . . . . . . . . . . . . 2.00 to 1.0
September 30, 2000 . . . . . . . . . . . 2.00 to 1.0
December 31, 2000 . . . . . . . . . . . 2.00 to 1.0
March 31, 2001 . . . . . . . . . . . . . 2.00 to 1.0
June 30, 2001 . . . . . . . . . . . . . 2.00 to 1.0
September 30, 2001 . . . . . . . . . . . 2.00 to 1.0
December 31, 2001 . . . . . . . . . . . 2.00 to 1.0
March 31, 2002 . . . . . . . . . . . . . 2.00 to 1.0
June 30, 2002 . . . . . . . . . . . . . 2.00 to 1.0
September 30, 2002 . . . . . . . . . . . 2.00 to 1.0
December 31, 2002 . . . . . . . . . . . 2.00 to 1.0
</TABLE>
7.12 Leverage Ratio. The Borrower will not permit the ratio of (i)
Indebtedness of the Borrower and its Subsidiaries on each date listed below to
(ii) Consolidated EBITDA of the Borrower for the Test Period ending on each
date listed below to be more than the ratio set forth below; provided that the
portion of Indebtedness of the Borrower and its Subsidiaries which constitute
Revolving Loans shall be the average of the aggregate amount of Revolving Loans
outstanding on the last day of each of the lesser of the number of months since
the Closing Date and the twelve consecutive months prior to the date listed
below:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
March 31, 1998 . . . . . . . . . . . . . 7.50 to 1.0
June 30, 1998 . . . . . . . . . . . . . 3.00 to 1.0
September 30, 1998 . . . . . . . . . . . 2.00 to 1.0
December 31, 1998 . . . . . . . . . . . 1.75 to 1.0
March 31, 1999 . . . . . . . . . . . . . 1.50 to 1.0
June 30, 1999 . . . . . . . . . . . . . 1.50 to 1.0
September 30, 1999 . . . . . . . . . . . 1.50 to 1.0
December 31, 1999 . . . . . . . . . . . 1.50 to 1.0
March 31, 2000 . . . . . . . . . . . . . 1.25 to 1.0
June 30, 2000 . . . . . . . . . . . . . 1.25 to 1.0
September 30, 2000 . . . . . . . . . . . 1.25 to 1.0
</TABLE>
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<PAGE> 82
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
December 31, 2000 . . . . . . . . . . . 1.25 to 1.0
March 31, 2001 . . . . . . . . . . . . . 1.00 to 1.0
June 30, 2001 . . . . . . . . . . . . . 1.00 to 1.0
September 30, 2001 . . . . . . . . . . . 1.00 to 1.0
December 31, 2001 . . . . . . . . . . . 1.00 to 1.0
March 31, 2002 . . . . . . . . . . . . . 1.00 to 1.0
June 30, 2002 . . . . . . . . . . . . . 1.00 to 1.0
September 30, 2002 . . . . . . . . . . . 1.00 to 1.0
December 31, 2002 . . . . . . . . . . . 1.00 to 1.0
</TABLE>
7.13 Minimum Consolidated EBITDA. The Borrower will maintain a Consolidated
EBITDA of at least the amount set forth below for the Test Period ending on
each date listed below:
Minimum EBITDA
<TABLE>
<CAPTION>
Test Period ($ Thousands)
----------- -------------
<S> <C>
March 31, 1998 . . . . . . . . . . . . . $ 1,800
June 30, 1998 . . . . . . . . . . . . . 4,250
September 30, 1998 . . . . . . . . . . . 6,500
December 31, 1998 . . . . . . . . . . . 7,750
March 31, 1999 . . . . . . . . . . . . . 8,000
June 30, 1999 . . . . . . . . . . . . . 8,250
September 30, 1999 . . . . . . . . . . . 8,500
December 31, 1999 . . . . . . . . . . . 8,750
March 31, 2000 . . . . . . . . . . . . . 9,250
June 30, 2000 . . . . . . . . . . . . . 9,500
September 30, 2000 . . . . . . . . . . . 9,750
December 31, 2000 . . . . . . . . . . . 10,000
March 31, 2001 . . . . . . . . . . . . . 10,250
June 30, 2001 . . . . . . . . . . . . . 10,500
September 30, 2001 . . . . . . . . . . . 10,750
December 31, 2001 . . . . . . . . . . . 11,000
March 31, 2002 . . . . . . . . . . . . . 11,250
June 30, 2002 . . . . . . . . . . . . . 11,500
September 30, 2002 . . . . . . . . . . . 11,750
December 31, 2002 . . . . . . . . . . . 12,000
</TABLE>
7.14 Issuance of Subsidiary Stock. The Borrower will not, and will not
permit any of its Subsidiaries, directly or indirectly, to issue, sell, assign,
pledge or otherwise encumber or dispose of any shares of any Subsidiaries'
capital stock or other securities or equity interests (or warrants, rights or
options to acquire capital stock or convertible securities or other equity
securities) of such Subsidiary, other
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than pursuant to the Security Documents and as contemplated by the
Acquisitions.
7.15 Disposition of Assets. (a) The Borrower will not, and will not
permit any of its Subsidiaries to, dispose of all or any part of its interest
in any asset, except that the Borrower and its Subsidiaries may sell assets so
long as (i) such sales are approved by the Required Banks and the sales price
thereof is, in the reasonable judgment of the Agent, at least equal to the fair
market value of such assets, or (ii) such sales are for at least the fair
market value of such assets and the aggregate amount of such asset sales is
less than $100,000 in any 12-month period and, in any such case, the Borrower
complies with the mandatory prepayment and Commitment reduction provisions of
this Agreement and, in the case of Collateral, so long as the conditions to the
release of Collateral described herein and in the applicable Security Documents
are met, or (iii) such sales are of inventory in the ordinary course of
business, (iv) such sales are (A) of obsolete equipment, (B) for at least the
fair market value of such equipment, (C) not in excess of $50,000 per year in
the aggregate and (D) the proceeds of such sales are used within 90 days of
such sales to (1) purchase equipment used in substantially similar lines of
business or (2) repay Indebtedness under this Agreement pursuant to Section
3.02 or (v) such sales are of tractors or trailers owned on the date of this
Agreement and the aggregate amount of such asset sales is less than $300,000.
The consideration received by the Borrower or its Subsidiaries from each
sale of assets permitted above shall be received in whole at the time of sale
and at least 70% of the consideration from each sale shall consist of Cash or
Cash Equivalents. Any non-cash proceeds received from the sale of assets shall
be pledged to the Collateral Agent pursuant to and in accordance with the
applicable Security Documents and shall constitute Collateral.
(b) Upon compliance with the conditions in subsection (a) of this Section
7.15, the Release Conditions and the Partial Release Conditions (each as
hereinafter defined), the Borrower shall be entitled to receive from the
Collateral Agent an instrument in form and substance reasonably satisfactory to
the Borrower (each, a "Release") releasing the Lien of the Mortgage with
respect to all or any portion of a Mortgaged Real Property (each, a "Released
Real Property"). The Borrower shall exercise its rights under this Section by
delivering to the Collateral Agent a notice (each, a "Release Notice"), which
shall refer to this Section, describe with particularity the
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proposed Released Real Property and be accompanied by (i) four counterparts of
the Release fully executed and acknowledged by all necessary parties other than
Collateral Agent, (ii) executed counterparts of UCC or other applicable
termination statements necessary to terminate the Lien of the applicable
Mortgage and (iii) an Officers' Certificate certifying that no Default or Event
of Default shall have occurred and the parties executing any and all documents
in connection with the Release (other than the Collateral Agent) were duly
authorized to do so (collectively, the "Release Conditions"). In the event the
proposed Released Real Property consists of less than all of the Mortgaged Real
Property subject to a single Mortgage, the Partial Release Conditions must be
satisfied in order for the Borrower to receive the Release.
(c) The Collateral Agent's obligation to deliver a Release in respect of
less than all of the Mortgaged Real Property subject to a single Mortgage shall
be contingent upon the satisfaction of the conditions in subsection (a) of this
Section 7.15 and the Release Conditions as well as the following conditions
(collectively, the "Partial Release Conditions"):
(i) following the sale, transfer or other disposition of and release of
the Lien of the applicable Mortgage with respect to the proposed Released
Real Property, the remaining Mortgaged Real Property shall have utility
services and access to public roads, rail spurs and other transportation
structures sufficient and necessary for the continued use of such Mortgaged
Real Property in the manner utilized prior to the Release;
(ii) following the sale, transfer or other disposition of the proposed
Released Real Property, the remaining Mortgaged Real Property shall comply in
all respects with applicable laws, rules, regulations and ordinances relating
to environmental protection, zoning, land use, configuration and building and
workplace safety;
(iii) following the sale, transfer or other disposition of the proposed
Released Real Property, the value of the remaining Mortgaged Real Property
shall not be less than the value of such remaining Mortgaged Real Property
prior to the Release;
(iv) the Title Company shall have issued an endorsement to the Banks'
title insurance policy relating to the Mortgaged Real Property confirming
that after the proposed release, the Lien of the applicable Mortgage
continues un-
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impaired as a first priority Lien upon the remaining Mortgaged Real Property
subject only to Prior Liens; and
(v) the Borrower shall cause to have been delivered to Collateral Agent an
Officer's Certificate certifying that the conditions set forth in subsections
(i) through (iv) have been satisfied.
(d) The Collateral Agent shall execute, acknowledge (if applicable) and
deliver to the Borrower counterparts of the documents described in subsection
(b)(i) and (ii) within 30 days after receipt by the Collateral Agent of a
Release Notice provided that the Release Conditions and the Partial Release
Conditions (if applicable) have been satisfied. The Borrower shall (i)
execute, deliver, obtain and record such instruments as the Collateral Agent
may require, including, without limitation, amendments to the Security
Documents or this Agreement and (ii) deliver to the Collateral Agent such
evidence of the satisfaction of the Release Conditions and the Partial Release
Conditions as the Collateral Agent may require. The Borrower shall reimburse
the Collateral Agent, Agent and the Banks upon demand for all costs or expenses
incurred in connection with any actions taken pursuant to this Section 7.15.
7.16 Contingent Obligations. The Borrower will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create or become or be
liable with respect to any Contingent Obligation except:
(i) guarantees resulting from endorsement of negotiable instruments for
collection in the ordinary course of business;
(ii) Interest Rate Agreements to the extent required by Section 6.11 of
this Agreement, and Letters of Credit and Guarantees permitted by this
Agreement;
(iii) $3,250,000 payable to Randy C. Baker as consideration for the
acquisition of High Performance in the event the $3,300,000 of the Initial
Loans held in escrow is not released to the Borrower upon the occurrence of a
Release Event as contemplated in this Agreement and in the Escrow Agreement;
and
(iv) other Contingent Obligations not to exceed $250,000 in the aggregate
for the Borrower and its Subsidiaries outstanding at any one time.
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7.17 ERISA. The Borrower will not, and will not permit any of its
Subsidiaries to:
(i) engage in any transaction in connection with which the Borrower or
its Subsidiaries could be subject to either a tax imposed by Section 4975(a)
of the Code or the corresponding civil penalty assessed pursuant to Section
502(i) of ERISA, which penalties and taxes for all such transactions could
reasonably be expected to be in an aggregate amount in excess of $100,000;
(ii) permit to exist any accumulated funding deficiency, for which a
waiver has not been obtained from the Internal Revenue Service, with respect
to any Pension Plan which is then maintained by the Borrower or its
Subsidiaries or as to which the Borrower or its Subsidiaries has any
continuing funding obligations;
(iii) permit to exist any failure to make contributions or any unfunded
benefits liability which creates, or with the passage of time would create, a
statutory lien or requirement to provide security under ERISA or the Code in
favor of the PBGC or any Pension Plan, Multiemployer Plan or other entity;
(iv) permit the sum of the amount of unfunded benefit liabilities
(determined in accordance with Statement of Financial Accounting Standards
No. 87) under all Title IV Plans which are then maintained by the Borrower or
its Subsidiaries or as to which any Credit Party or its Subsidiaries have any
funding obligations (excluding each Title IV Plan with an amount of unfunded
benefit liabilities of zero or less) to exceed $100,000 for a period in
excess of twelve months; or
(v) fail to make any payment to any Multiemployer Plan that it may be
required to make under such Multiemployer Plan, any agreement relating to
such Multiemployer Plan, or any law pertaining thereto.
As used in this Section 7.17, the term "accumulated funding deficiency"
has the meaning specified in Section 302 of ERISA and Section 412 of the Code,
and the term "amount of unfunded benefit liabilities" has the meaning specified
in Section 4001(a)(18) of ERISA.
7.18 Merger and Consolidations. No Credit Party will merge or
consolidate with or into any other entity except
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for the Acquisitions. The merger or consolidation of any Credit Party with or
into Racing Champions Corporation will require mandatory refinancing of the
Loans.
7.19 Sale and Lease-Backs. Unless constituting a permitted disposition
of assets under Section 7.15 hereof, the Borrower will not, and will not permit
its Subsidiaries to, directly or indirectly, become or thereafter remain liable
as lessee or as guarantor or other surety with respect to the lessee's
obligations under any lease, whether an Operating Lease or a Capital Lease, of
any property (whether real or personal or mixed) whether now owned or hereafter
acquired (i) which the Borrower or its Subsidiaries has sold or transferred or
is to sell or transfer to any other Person (other than in connection with the
Acquisitions) or (ii) which the Borrower or its Subsidiaries intends to use for
substantially the same purpose as any other property which has been or is to be
sold or transferred by the Borrower or its Subsidiaries to any Person in
connection with such lease, if in the case of clause (i) or (ii) above, such
sale and such lease are part of the same transaction or a series of related
transactions or such sale and such lease occur within one year of each other or
are with the same other Person; provided, however, that the Borrower or any of
its Subsidiaries may become and thereafter remain liable as lessee of the
tractors or trailers which may be sold pursuant to Section 7.15(a).
7.20 Sale or Discount of Receivables. The Borrower will not, and will
not permit its Subsidiaries to, sell, with or without recourse, or discount
(other than in connection with trade discounts in the ordinary course of
business consistent with past practice) or otherwise sell for less than the
face value thereof, notes or accounts receivable.
SECTION 8. Events of Default. Upon the occurrence and during the
continuance of any of the following specified events (each an "Event of
Default"):
8.01 Payments. The Borrower shall (i) default in the payment when due of
any principal of the Loans, (ii) default, and such default shall continue for
two or more Business Days, in the payment when due of any interest on the Loans
or under any other Credit Document or (iii) fail to pay any other amounts owing
hereunder for five days after receiving notice from the Agent of such default;
or
8.02 Representations, etc. Any representation, warranty or statement
made or deemed made by any Credit Party or
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its respective Subsidiaries herein or in any other Credit Document or in any
statement or certificate delivered or required to be delivered pursuant hereto
or thereto shall prove to be untrue in any material respect on the date as of
which made or deemed made; or
8.03 Covenants. Any Credit Party or its respective Subsidiaries shall
(a) default in the due performance or observance by it of any term, covenant or
agreement contained in Section 6.11, 6.12, 6.14, 6.15, 6.19 or Section 7 hereof
or in applicable sections of any Mortgage or (b) default in the due performance
or observance by it of any other term, covenant or agreement contained in this
Agreement or any Security Document (other than those referred to in Section
8.01, 8.02 or 8.03(a)) and such default shall continue unremedied for a period
of at least thirty days after the date of such default; or
8.04 Default Under Other Agreements. (a) Any Credit Party or its
respective Subsidiaries shall (i) default in any payment with respect to any
Indebtedness (other than Obligations) having a principal amount in excess of
$100,000 in the aggregate for all Credit Parties and their Subsidiaries, beyond
the period of grace, if any, provided in the instrument or agreement under
which such Indebtedness was created or (ii) default in the observance or
performance of any agreement or condition relating to any such Indebtedness or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause any such Indebtedness to become due prior to its stated
maturity; or (b) any such Indebtedness of any Credit Party or any of its
respective Subsidiaries shall be declared to be due and payable, or required to
be prepaid other than by a regularly scheduled required prepayment, prior to
the stated maturity thereof; or
8.05 Bankruptcy, etc. Any Credit Party or its respective Subsidiaries
shall commence a voluntary case concerning itself under Title 11 of the United
States Code entitled "Bankruptcy," as now or hereafter in effect, or any
successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced
against any Credit Party or any of its respective Subsidiaries and the petition
is not controverted within 10 days, or is not dismissed within 60 days, after
commencement of the case; or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substantially all of
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the property of any Credit Party or any of its respective Subsidiaries; or any
Credit Party or any of its respective Subsidiaries commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to any Credit Party or
any of its respective Subsidiaries; or there is commenced against any Credit
Party or any of its respective Subsidiaries any such proceeding which remains
undismissed for a period of 60 days; or any Credit Party or any of its
respective Subsidiaries is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or any
Credit Party or any of its respective Subsidiaries suffers any appointment of
any custodian or the like for it or any substantial part of its property to
continue undischarged or unstayed for a period of 60 days; or any Credit Party
or any of its respective Subsidiaries makes a general assignment for the
benefit of creditors; or any corporate action is taken by any Credit Party or
any of its respective Subsidiaries for the purpose of effecting any of the
foregoing; or
8.06 ERISA.
(i) Any "reportable event" as described in Section 4043 of ERISA or the
regulations thereunder (excluding those events for which the requirement for
notice has been waived by the PBGC), or any other event or condition, which
the Required Banks determine constitutes reasonable grounds under Section
4042 of ERISA for the termination of any Pension Plan by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer or liquidate any Title IV Plan shall have occurred; or
(ii) A trustee shall be appointed by a United States District Court to
administer any Title IV Plan; or
(iii) The PBGC shall institute proceedings to terminate any Title IV Plan
or to appoint a trustee to administer any Title IV Plan; or
(iv) Any Credit Party, its respective Subsidiaries or its respective
ERISA Affiliates shall become liable to the PBGC or any other party under
Section 4062, 4063, 4064 or 4069 of ERISA with respect to any Title IV Plan;
or
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(v) Any Credit Party, its respective Subsidiaries or its respective
ERISA Affiliates shall become liable to any Multiemployer Plan under Section
4201 et seq. of ERISA; and
if the sum of each of such Credit Party's, its respective Subsidiaries' and its
respective ERISA Affiliates' various liabilities (such liabilities to include,
without limitation, any liability to the PBGC or to any other party under
Section 4062, 4063, 4064 or 4069 of ERISA) with respect to any Title IV Plan,
or to any Multiemployer Plan under Section 4201 et seq. of ERISA which the
Required Banks determine could reasonably be expected to be incurred as a
result of such events listed in subclauses (i) through (v) above exceeds
$100,000; or
8.07 Security Documents. Any Security Document shall cease to be in full
force and effect, or shall cease to give the Collateral Agent the Liens,
rights, powers and privileges purported to be created thereby, in favor of the
Collateral Agent, superior to and prior to the rights of all third Persons and
subject to no Liens other than Prior Liens and Liens expressly permitted by
the applicable Security Document; or
8.08 Guarantees. Any Guarantee or any provisions thereof shall cease to
be in full force or effect in all material respects, or the Guarantor
thereunder or Person acting by or on behalf of such Guarantor shall deny or
disaffirm such Guarantor's obligations under such Guarantee or the Guarantor
shall default in the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant to any Guarantee; or
8.09 Judgments. One or more judgments or decrees shall be entered
against any Credit Party or any of its respective Subsidiaries involving a
liability of $50,000 or more in the case of any one such judgment or decree and
$100,000 or more in the aggregate for all such judgments and decrees for all
Credit Parties and their respective Subsidiaries (in either case in excess of
the amount covered by insurance as to which the insurance company has
acknowledged coverage) and (i) any such judgments or decrees shall not have
been vacated, discharged, bonded or enforcement thereof stayed pending appeal
within 30 days from the entry thereof or (ii) any enforcement proceeding
therefor shall have been commenced; or
8.10 Ownership. (i) The consummation of any transaction the result of
which is that any person or "group" (as such term is used in Section 13(d)(3)
of the Exchange Act) owns (x)
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directly or indirectly 50% or more of the issued and outstanding Common Stock
of the Borrower or (y) 50% or more of the equity securities of the Borrower
entitled (without regard to the occurrence of any contingency) to vote for the
election of the members of the board of directors of the Borrower or (ii)
individuals who constituted the board of directors of the Borrower on the
Closing Date (together with any new directors whose proposal for election by
the members of the Borrower was approved by a vote of a majority of the
directors of the Borrower then still in office who either were directors on the
Closing Date or whose election or nomination for election was previously so
approved) shall cease for any reason to constitute a majority of the members of
the board of directors of the Borrower still in office or (iii) any two of the
following four individuals cease to be employed by the Borrower or its
Subsidiaries in a senior executive capacity: Randy C. Baker, Howard L.
Correll, Randy Duncan and Victor Shaffer (each, a "Change in Control").
Then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, the Agent shall, upon the written request of
the Required Banks, by written notice to the Borrower, take any or all of the
following actions, without prejudice to the rights of the Agent or any Bank to
enforce its claims against the Borrower, except as otherwise specifically
provided for in this Agreement (provided that, if an Event of Default specified
in Section 8.05 shall occur, with respect to any Credit Party or its respective
Subsidiaries, the result which would occur upon the giving of written notice by
the Agent as specified in clauses (i) and (ii) below shall occur automatically
without the giving of any such notice): (i) declare the Total Commitments
terminated, whereupon the Commitment of each Bank shall forthwith terminate
immediately and any accrued and unpaid Commitment Commission shall forthwith
become due and payable without any other notice of any kind; (ii) declare the
principal of and accrued interest in respect of all Loans and all Obligations
owing hereunder and thereunder to be, whereupon the same shall become,
forthwith due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by each Credit Party; and/or (iii)
enforce, as Collateral Agent (or direct the Collateral Agent to enforce), any
or all of the remedies created pursuant to the Security Documents. If an Event
of Default is cured or waived in accordance with the terms of the Agreement, it
ceases (and, if waived, pursuant to the terms, and to the extent, of such
waiver).
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SECTION 9. Definitions. As used herein, the following terms shall have
the meanings herein specified unless the context otherwise requires. Defined
terms in this Agreement shall include in the singular number the plural and in
the plural the singular:
"Account" means all of the "accounts" (as that term is defined in Section
9-106 of the Uniform Commercial Code as in effect in the State of New York) of
the Borrower and its Subsidiaries whether or not such Account has been earned
by performance, whether now existing or existing in the future, including,
without limitation, all (i) accounts receivable, including, without limitation,
all accounts created by or arising from all of the Borrower's and its
Subsidiaries' sales of goods or rendition of services or licensing or
subleasing of any of the Borrower's and its Subsidiaries' Intellectual
Property; (ii) unpaid seller's rights (including rescission, replevin,
reclamation and stopping in transit) relating to the foregoing or arising
therefrom; (iii) rights to any goods represented by any of the foregoing,
including returned or repossessed goods; (iv) reserves and credit balances held
by the Borrower and its Subsidiaries with respect to any such accounts
receivable or any account debtor; (v) guarantees or collateral for any of the
foregoing; and (vi) insurance policies or rights relating to any of the
foregoing.
"Acquisitions" shall mean the acquisition by the Borrower of Press Pass
and High Performance.
"Acquisition Documents" mean (i) the Merger Agreement and Plan of
Reorganization among SM Acquisition Company, J/B Acquisition Company, the
Borrower, Synergy Marketing, Inc. and J/B Press Pass, Inc. dated as of October
3, 1997 and amended as of December 29, 1997 and (ii) the Agreement and Plan of
Reorganization among the Borrower, High Performance Acquisition Company, High
Performance, Randy C. Baker and David W. Dupree dated as of October 3, 1997 and
amended as of December 17, 1997, in each case together with all schedules,
annexes and exhibits thereto.
"Additional Collateral" has the meaning provided in Section 6.14.
"Affiliate" means with respect to any Person, any other Person directly or
indirectly controlling (including but not limited to all directors, managers
and executive officers of such Person), controlled by, or under direct or
indirect common control with, such Person. A Person shall be deemed to
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control a corporation or a limited liability company for the purposes of this
definition if such Person possesses, directly or indirectly, the power (i) to
vote 10% or more of the securities having ordinary voting power for the
election of directors or managers of such corporation or limited liability
company or (ii) to direct or cause the direction of the management and policies
of such corporation or limited liability company, whether through the ownership
of voting securities, by contract or otherwise.
"Agent" has the meaning provided in the first paragraph of this Agreement
and shall include any successor thereto appointed in accordance herewith.
"Agent's Office" means the office of the Agent located at 1211 Avenue of
the Americas, 7th Floor, New York, New York 10036, or such other office in New
York as the Agent may hereafter designate in writing as such to the other
parties hereto.
"Agreement" means this Credit Agreement, as the same may after its
execution be amended, supplemented or otherwise modified from time to time in
accordance with the terms hereof.
"Asset Sale" means the sale, transfer or other disposition, to the extent
consummated after the Closing Date, by the Borrower or any of its Subsidiaries
of any asset of the Borrower or its Subsidiaries to any Person (other than
transactions included in the definition of Net Financing Proceeds and sales,
transfers or other dispositions of inventory in the ordinary course of business
and/or of obsolete equipment effected in compliance with Section 7.15(a)(iv)
and sales, transfers or other dispositions of tractors or trailers effected in
compliance with Section 7.15(a)(v)).
"Authorizations" has the meaning provided in Section 5.22(a).
"Authorized Officer" means any senior officer of the Borrower designated
as such in writing to the Agent by the Borrower, to the extent acceptable to
the Agent.
"Bank" has the meaning provided in the first paragraph of this Agreement
and in Section 11.04.
"Bankruptcy Code" has the meaning provided in Section 8.05.
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"Base Rate" means the higher of (x) 1/2% per annum in excess of the
Federal Funds Rate and (y) the rate which the Agent announces from time to time
as its prime lending rate, as in effect from time to time. The rate the Agent
announces as its prime lending rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any customer.
The Agent may make commercial loans or other loans at rates of interest at,
above or below the rate it announces as its prime lending rate.
"Base Rate Loan" means each Loan bearing interest at the rate provided in
Section 1.08(a).
"Borrower" means Wheels Sports Group, Inc.
"Borrower General Security Agreement" means the Borrower General Security
Agreement substantially in the form of Exhibit H-1 hereto, except for such
changes as shall have been approved by the Agent, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with its
terms and the terms hereof.
"Borrower Intellectual Property Security Agreement" means the Borrower
Intellectual Property Security Agreement substantially in the form of Exhibit
G-1 hereto, except for such changes as shall have been approved by the Agent,
as the same may be amended, supplemented or otherwise modified from time to
time in accordance with its terms and the terms hereof.
"Borrower Securities Pledge Agreement" means the Borrower Securities
Pledge Agreement substantially in the form of Exhibit F-1 hereto, except for
such changes therein as shall have been approved by the Agent, as the same may
after its execution be amended, supplemented or otherwise modified from time to
time in accordance with the terms thereof and hereof.
"Borrowing" means the incurrence pursuant to a Notice of Borrowing and to
the Loan Facility of one Type of Loan by the Borrower from all of the Banks on
a pro rata basis on a given date (or resulting from conversions on a given
date), having in the case of Reserve Adjusted Eurodollar Loans the same
Interest Periods.
"Borrowing Base" means an amount equal to the sum of (i) 80% of the
Eligible Accounts Receivable and (ii) 50% of the Eligible Inventory; provided,
that prior to February 15, 1998, Eligible Inventory shall account for no more
than $3,500,000 of the total availability under the Revolving Portion and pro-
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vided, further, that on February 15, 1998 and thereafter, Eligible Inventory
shall account for no more than 50% of the total availability under the
Revolving Portion.
"Borrowing Base Certificate" has the meaning assigned to that term in
Section 6.01.
"Business Day" means (i) for all purposes other than as covered by clause
(ii) below, any day excluding Saturday, Sunday and any day which shall be in
the City of New York a legal holiday or a day on which banking institutions are
authorized by law or other governmental actions to close and (ii) with respect
to all notices and determinations in connection with, and payments of principal
and interest on, Reserve Adjusted Eurodollar Loans, any day which is a Business
Day described in clause (i) and which is also a day for trading by and between
banks in U.S. dollar deposits in the interbank eurodollar market.
"Capital Lease" of any Person means any lease of any property (whether
real, personal or mixed) by that Person as lessee which, in conformity with
GAAP, is, or is required to be, accounted for as a capital lease on the balance
sheet of that Person, together with any renewals of such leases (or entry into
new leases) on substantially similar terms.
"Capitalized Lease Obligations" of any Person means all obligations under
Capital Leases of such Person or any of its Subsidiaries in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than three years from the date of acquisition, (ii) marketable direct
obligations issued by any State of the United States of America or any local
government or other political subdivision thereof rated (at the time of
acquisition of such security) at least AA by Standard & Poor's Corporation
("S&P") or the equivalent thereof by Moody's Investors Service, Inc.
("Moody's") having maturities of not more than one year from the date of
acquisition, (iii) U.S. dollar denominated time deposits, certificates of
deposit and bankers' acceptances of
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(x) any Bank, (y) any domestic commercial bank of recognized standing having
capital and surplus in excess of $250,000,000 or (z) any bank whose short-term
commercial paper rating (at the time of acquisition of such security) by S&P is
at least A-1 or the equivalent thereof or by Moody's is at least P-1 or the
equivalent thereof (any such bank, an "Approved Bank"), in each case with
maturities of not more than six months from the date of acquisition, (iv)
commercial paper and variable or fixed rate notes issued by any Bank or
Approved Bank or by the parent company of any Bank or Approved Bank and
commercial paper and variable rate notes issued by, or guaranteed by, any
industrial or financial company with a short-term commercial paper rating (at
the time of acquisition of such security) of at least A-1 or the equivalent
thereof by S&P or at least P-1 or the equivalent thereof by Moody's, or
guaranteed by any industrial company with a long-term unsecured debt rating (at
the time of acquisition of such security) of at least AA or the equivalent
thereof by S&P or the equivalent thereof by Moody's and in each case maturing
within one year after the date of acquisition, and (v) repurchase agreements
with any Bank or any primary dealer maturing within one year from the date of
acquisition that are fully collateralized by investment instruments that would
otherwise be Cash Equivalents; provided that the terms of such repurchase
agreements comply with the guidelines set forth in the Federal Financial
Institutions Examination Council Supervisory Policy -- Repurchase Agreements of
Depository Institutions With Securities Dealers and Others, as adopted by the
Comptroller of the Currency on October 31, 1985.
"CERCLA" has the meaning provided in Section 5.22(b).
"Change in Control" has the meaning provided in Section 8.10.
"Closing Date" means December 31, 1997.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral" means all of the Pledged Collateral, Pledged Securities and
Mortgaged Real Property.
"Collateral Agent" means Indosuez in its capacity as collateral agent for
the Banks.
"Commercial Letter of Credit" means any letter of credit or similar
instrument issued for the account of Borrower for the purpose of providing the
primary payment mechanism in
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connection with the purchase of any materials, goods or services by Borrower or
any of its Subsidiaries in the ordinary course of business of Borrower or
Subsidiaries.
"Commitment" means, with respect to each Bank, such Bank's Term Loan
Commitment and Revolving Loan Commitment.
"Commitment Commission" has the meaning provided in Section 2.03.
"Common Stock" means the common stock, par value $.01 per share, of the
Borrower.
"Compliance Certificate" means a certificate issued pursuant to Section
6.01(d) signed by a chief financial officer, controller, chief accounting
officer or other Authorized Officer of the Borrower.
"Consolidated Amortization Expense" for any Person means, for any period,
the consolidated amortization expense of such Person for such period,
determined on a consolidated basis for such Person and its Subsidiaries in
conformity with GAAP.
"Consolidated Capital Expenditures" of any Person means, for any period,
the aggregate gross increase during that period, in the property, plant or
equipment reflected in the consolidated balance sheet of such Person and its
consolidated Subsidiaries, in conformity with GAAP, but excluding expenditures
made in connection with the replacement, substitution or restoration of assets
(i) to the extent financed from insurance proceeds paid on account of the loss
of or damage to the assets being replaced or restored, (ii) with awards of
compensation arising from the taking by eminent domain or condemnation of the
assets being replaced or (iii) with regard to equipment that is purchased
simultaneously with the trade-in of existing equipment, fixed assets or
improvements, the credit granted by the seller of such equipment for the
trade-in of such equipment, fixed assets or improvements; provided that
Consolidated Capital Expenditures shall in any event include the purchase price
paid in connection with the acquisition of any other Person (including through
the purchase of all of the capital stock or other ownership interests of such
Person or through merger or consolidation) to the extent allocable to property,
plant and equipment.
"Consolidated Depreciation Expense" for any Person means, for any period,
the consolidated depreciation expense of such Person for such period,
determined on a consolidated basis
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for such Person and its consolidated Subsidiaries in conformity with GAAP.
"Consolidated EBITDA" for any Person means, for any period, the difference
between (A) the sum of the amounts for such period of (i) Consolidated Net
Income, (ii) Consolidated Tax Expense, (iii) Consolidated Interest Expense,
(iv) Consolidated Amortization Expense and (v) Consolidated Depreciation
Expense, provided that the sums included in clauses (ii) through (v) shall be
added back only to the extent deducted in calculating Consolidated Net Income,
less (B) the sum of the amounts for such period of interest income and (C) net
gains in connection with sales of assets (excluding sales in the ordinary
course of business), whether or not extraordinary, all as determined on a
consolidated basis for such Person and its consolidated Subsidiaries in
accordance with GAAP.
"Consolidated EBITDAC" for any Person means, for any period, Consolidated
EBITDA minus Consolidated Capital Expenditures.
"Consolidated Interest Expense" for any Person shall means, for any
period, total interest expense (including that attributable to Capital Leases
in accordance with GAAP) of such Person and its Subsidiaries on a consolidated
basis with respect to all outstanding Indebtedness of such Person and its
Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, but excluding, however, any amortization of deferred
financing costs, all as determined on a consolidated basis for such Person and
its consolidated Subsidiaries in accordance with GAAP.
"Consolidated Net Income" for any Person means, for any period, the net
income (or loss) of such Person and its Subsidiaries on a consolidated basis
for such period taken as a single accounting period determined on a
consolidated basis for such Person and its consolidated Subsidiaries in
conformity with GAAP; provided that there shall be excluded (i) the income (or
loss) of any other Person (other than consolidated Subsidiaries of such Person)
in which any third Person (other than such Person or any of its consolidated
Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to such Person or any of its
Subsidiaries by such other Person during such period, (ii) the income (or loss)
of any other Person accrued prior to the date it becomes a consolidated
Subsidiary of such Person or is merged into or consolidated with such Person or
any of its
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consolidated Subsidiaries or such other Person's assets are acquired by such
Person or any of its consolidated Subsidiaries, and (iii) the income of any
consolidated Subsidiary of such Person to the extent that the declaration or
payment of dividends or similar distributions by that consolidated Subsidiary
of that income is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that consolidated Subsidiary.
"Consolidated Tax Expense" for any Person means, for any period, without
duplication, the consolidated tax expense of such Person for such period,
determined on a consolidated basis for such Person and its consolidated
Subsidiaries in conformity with GAAP, which for the purposes hereof include any
amount distributed pursuant to Section 7.08(ii) hereunder.
"Contingent Obligations" means, as to any Person, without duplication, any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (d) otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the maximum amount that such Person may be obligated to expend
pursuant to the terms of such Contingent Obligation or, if such Contingent
Obligation is not so limited, the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as determined
by such Person in good faith.
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"Credit Documents" means (i) this Agreement, (ii) each Note, (iii) each
Guarantee, (iv) each Security Document and (v) the Intercreditor Agreement
between Credit Agricole Indosuez and the sellers of Press Pass named therein,
dated as of the date hereof and as it may after its execution be amended,
supplemented or otherwise modified from time to time.
"Credit Party" means at all times the Borrower and each Subsidiary thereof
that pledges any stock, grants any Lien or issues any guarantee pursuant to any
Credit Document.
"Currency Protection Agreement" shall mean any foreign exchange contract,
currency swap agreement, or other financial agreements or arrangements designed
to protect any Borrower against fluctuations in currency values.
"Default" means any event, act or condition which with notice or lapse of
time, or both, would constitute an Event of Default.
"Deposit Account" means a demand, time, savings, passbook or like account
with a bank, savings and loan association, credit union or like organization,
other than an account evidenced by a negotiable certificate of deposit.
"Destruction" has the meaning assigned to that term in each Mortgage.
"Dividends" has the meaning provided in Section 7.08.
"Documents" means each Credit Document and each Acquisition Document.
"Dollars" or "$" means United States Dollars.
"Effective Date" has the meaning provided in Section 11.10.
"Effective Time" has the meaning provided in Section 11.10.
"Eligible Accounts Receivable" means, as at any applicable date of
determination, the aggregate face amount of the Accounts of the Credit Parties
included in clause (i) of the definition of Account hereunder (excluding any
Accounts set forth in clauses (ii) through (vi) of such definition), without
duplication, in each case less (without duplication) the aggre-
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gate amount of all reserves, limits and deductions with respect to such
Accounts set forth below and less the aggregate amount of all returns,
discounts, claims, rebates, offsets, credits, charges (including warehouseman's
charges) and allowances of any nature with respect to such Accounts (whether
issued, owing, granted or outstanding). Unless otherwise approved in writing
by the Agent in its sole discretion, no individual Account shall be deemed to
be an Eligible Account Receivable if:
(a) a Credit Party does not have legal and valid title to the Account; or
(b) the Account is not the valid, binding and legally enforceable
obligation of the account debtor subject, as to enforceability, only to (i)
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
at the time in effect affecting the enforceability of creditors' rights
generally and (ii) judicial discretion in connection with the remedy of
specific performance and other equitable remedies; or
(c) the Account arises out of a sale made by a Credit Party to an
Affiliate of such Credit Party; or
(d) the Account or any portion thereof is unpaid more than 60 days after
the original invoice date, with respect to Accounts the invoice for which
provides that payment is due in 30 days or less from the date of such
invoice; or
(e) the Account is unpaid more than 30 days after the original payment
due date, with respect to Accounts the invoice for which provides that
payment is due more than 30 days from the date of such invoice; provided,
however, that the aggregate amount of all invoices providing for payment more
than 30 days from the date of the invoice that may constitute Eligible
Accounts Receivable shall not exceed 5% in face value of all Accounts of the
Credit Parties then outstanding at any one time; or
(f) such Account, when aggregated with all other Accounts of the same
account debtor (or any Affiliate thereof), exceeds 25% in face value of all
Accounts of the Credit Parties then outstanding, to the extent of such
excess; or
(g) (i) the account debtor for such Account is also a creditor of a
Credit Party, to the extent of the amount
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owed by such Credit Party to the account debtor, (ii) the Account is subject
to any claim on the part of the account debtor disputing liability under such
Account in whole or in part, to the extent of the amount of such dispute or
(iii) the Account otherwise is or is reasonably likely to become subject to
any right of setoff or any counterclaim, claim or defense by the account
debtor, to the extent of the amount of such setoff or counterclaim, claim or
defense; or
(h) the account debtor for such Account has commenced a voluntary case
under the federal bankruptcy laws, as now constituted or hereafter amended,
or made an assignment for the benefit of creditors or if a decree or order
for relief has been entered by a court having jurisdiction in the premises in
respect of the account debtor in an involuntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or if any other
petition or other application for relief under the federal bankruptcy laws
has been filed by or against the account debtor, or if the account debtor has
failed, suspended business, ceased to be solvent, or consented to or suffered
a receiver, trustee, liquidator or custodian to be appointed for it or for
all or a significant portion of its assets or affairs; or
(i) the Agent does not have a valid and perfected first priority security
interest in such Account (subject only to a tax lien being contested in good
faith and by appropriate proceedings and permitted by Section 7.03(a)); or
(j) the sale to the account debtor for such Account is on a consignment,
sale on approval, guaranteed sale or sale-and-return basis or pursuant to any
written agreement requiring repurchase or return; or
(k) such Account is from an account debtor (or any Affiliate thereof) and
fifty percent (50%) or more, in face amount, of other Accounts from either
such account debtor or any Affiliate thereof are due or unpaid for more than
60 days after the original invoice date; or
(l) fifty percent (50%) or more, in face amount, of other Accounts from
the same account debtor for such Account are not deemed Eligible Accounts
Receivable hereunder; or
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(m) the account debtor for such Account is a foreign government or any
agency, department or institution thereof; or
(n) such Account is an Account a security interest in which would be
subject to the Federal Assignment of Claims Act of 1940, as amended (31
U.S.C. Section 3727 et seq.), unless the Credit Party has assigned the
Account to the Agent in compliance with the provisions of such Act; or
(o) the account debtor for such Account is outside the continental United
States or incorporated in or conducting substantially all of its business in
any jurisdiction located outside the continental United States, unless the
sale is (i) on letter of credit or sight draft, guaranty or acceptance terms,
in each case acceptable to the agent, (ii) such Account is otherwise approved
by and reasonably acceptable to the Agent; or
(p) the Agent determines in good faith in accordance with its internal
credit policies that (i) collection of the account is insecure or (ii) such
Account may not be paid by reason of the account debtor's financial inability
to pay; provided, however, that any Account referred to in this clause (p)
shall not become ineligible until the Agent shall have given the Credit Party
three Business Days' advance notice of such determination; or
(q) the goods giving rise to such Account have not been shipped or the
services giving rise to such Account have not been performed by a Credit
Party or the Account otherwise does not represent a final sale; or
(r) such Account does not comply in all material respects with all
applicable legal requirements, including, where applicable, the Federal
Consumer Credit Protection Act, the Federal Truth in Lending Act and
Regulation Z of the Board of Governors of the Federal Reserve System, in each
case as amended.
In addition to the foregoing, Eligible Accounts Receivable includes such
Accounts as a Credit Party requests and that the Agent approves in advance, in
writing and in its sole discretion (or if the aggregate face amount to be
approved exceeds $100,000 at any one time, the approval of the Required Banks
has been obtained in writing).
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"Eligible Inventory" means (A) the gross amount of Inventory of the Credit
Parties, valued at the lower of cost (on a FIFO basis) or market, which (i) is
owned solely by a Credit Party and with respect to which such Credit Party has
good, valid and marketable title; (ii) is stored on property that is either (a)
owned or leased by a Credit Party; provided that with respect to leased
property, from and after the thirtieth (30th) day following the Closing Date,
the landlord has executed and delivered a Landlord Lien Assurance or (b) owned
or leased by a warehouseman that has contracted with a Credit Party to store
Inventory on such warehouseman's property (provided that with respect to
Inventory stored on property owned or leased by a warehouseman, such Credit
Party shall deliver to the Agent an agreement satisfactory to the Agent
executed by such warehouseman); (iii) is subject to a valid, enforceable and
first priority Lien in favor of the Agent subject only to a tax lien being
contested in good faith and by appropriate proceedings and permitted by Section
7.03(a); (iv) is located in the continental United States; and (v) is not, in
the reasonable judgment of the Agent, obsolete or slow moving in relation to
customary industry practice, and which otherwise conforms to the requirements
for eligibility contained herein; (B) less the amount of any goods returned or
rejected by the Credit Parties' customers and goods in transit to third parties
(other than to the Credit Parties' agents or warehousemen that comply with
clause (A)(ii)(b) above); and (C) less the amount of any reserves for special
order goods or otherwise. In addition to the foregoing, Eligible Inventory
shall include such items of the Credit Parties' Inventory as Borrower shall
request and that the Agent approves in advance, in writing and in its sole
discretion (or if the aggregate amount to be approved exceeds $100,000 at any
one time, the approval of the Required Banks has been obtained).
"Environmental Laws" means the common law and all federal, state, local
and foreign laws or regulations, codes, orders, decrees, judgments or
injunctions issued, promulgated, approved or entered thereunder, now or
hereafter in effect, relating to pollution or protection of public or employee
health and safety or the environment, including, without limitation, laws
relating to (i) emissions, discharges, releases or threatened releases of
Hazardous Materials, into the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata),
(ii) the manufacture, processing, distribution, use, generation, treatment,
storage, disposal, transport or handling of Hazardous Materials, and (iii)
underground and aboveground storage tanks,
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and related piping, and emissions, discharges, releases or threatened releases
therefrom.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time. Section references to ERISA are to ERISA, as in
effect at the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" means any entity, whether or not incorporated, which is
under common control or would be considered a single employer with any Credit
Party within the meaning of Section 414(b), (c) or (m) of the Code and
regulations promulgated under those sections or within the meaning of section
4001(b) of ERISA and regulations promulgated under that section.
"Escrow Agreement" means the Escrow Agreement dated as of the Closing Date
between the Borrower and the Agent on behalf of the Banks substantially in the
form of Exhibit P hereto.
"Eurodollar Rate" means with respect to each Interest Period for a Reserve
Adjusted Eurodollar Loan, (i) the arithmetic average (rounded to the nearest
1/100 of 1%) of the offered quotation to first-class banks in the interbank
Eurodollar market by each of the Reference Banks for dollar deposits of amounts
in same day funds comparable to the outstanding principal amount of the Reserve
Adjusted Eurodollar Loan of such Reference Bank for which an interest rate is
then being determined with maturities comparable to the Interest Period to be
applicable to such Eurodollar Loan, determined as of 10:00 A.M. (New York time)
on the date which is two Business Days prior to the commencement of such
Interest Period divided (and rounded upward to the next whole multiple of 1/16
of 1%) by (ii) a percentage equal to 100% minus the then stated maximum rate of
all reserve requirements (including, without limitation, any marginal,
emergency, supplemental, special or other reserves) applicable to any member
bank of the Federal Reserve System in respect of Eurocurrency liabilities as
defined in Regulation D (or any successor category of liabilities under
Regulation D); provided that if any Reference Bank fails to provide the Agent
with its aforesaid rate, then the Eurodollar Rate shall be determined based on
the rate or rates provided to the Agent by a bank designated by the Required
Banks.
"Event of Default" has the meaning provided in Section 8.
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"Excess Cash Flow" means, without duplication, for any Person for any
period for which such amount is being determined, (i) Consolidated Net Income,
minus (ii) any amount of gain included in both (x) Consolidated Net Income and
(y) either Net Cash Proceeds or Net Financing Proceeds required to be applied
to the prepayment of the Loans pursuant to Section 3.02(A)(d), plus (minus)
(iii) the amount of depreciation, depletion, amortization of intangibles,
deferred taxes and other non-cash expenses (revenues) which, pursuant to GAAP,
were deducted (added) in determining such Consolidated Net Income of such
Person minus (plus) (iv) additions (reductions) to working capital for such
period (i.e., the increase or decrease in consolidated current assets
(excluding cash) of such Person minus consolidated current liabilities
(excluding (A) changes in current liabilities for borrowed money and (B) Cash
or Cash Equivalents which are either Net Cash Proceeds or Net Financing
Proceeds required to be applied to the prepayment of the Loans pursuant to
Section 3.02(A)(d) of such Person from the beginning to the end of such period)
minus (v) the amount of Consolidated Capital Expenditures minus (vi) Term Loan
principal payments (excluding mandatory payments made pursuant to Section 3.02)
made during such period. For purposes of the foregoing and without
duplication, Consolidated Net Income will exclude (x) all losses on the sale of
capital assets or out of the ordinary course of business and (y) all write-
downs of capital assets.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Federal Funds Rate" means on any one day the weighted average of the rate
on overnight Federal funds transactions with members of the Federal Reserve
System only arranged by Federal funds brokers as published as of such day by
the Federal Reserve Bank of New York, or if not so published, the rate then
used by first class banks in extending overnight loans to other first class
banks.
"Final Term Loan Maturity Date" means the last Business Day of December,
2002.
"Financing Proceeds" means the cash (other than Net Cash Proceeds)
received by the Borrower and/or any of its Subsidiaries, directly or
indirectly, from any financing transaction of whatever kind or nature,
including without limitation from any incurrence of Indebtedness, any mortgage
or pledge of an asset or interest therein (including a transaction which is the
substantial equivalent of a mortgage or pledge), from the
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sale of tax benefits, from a lease to a third party and a pledge of the lease
payments due thereunder to secure Indebtedness, from a joint venture
arrangement, from an exchange of assets and a sale of the assets received in
such exchange, or any other similar arrangement or technique whereby the
Borrower or any of its Subsidiaries obtains Cash in respect of an asset.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, it being understood and agreed that
determinations in accordance with GAAP for purposes of Section 7, including
defined terms as used therein, are subject (to the extent provided therein) to
Section 11.07(a).
"General Security Agreements" means and includes the Borrower General
Security Agreement, the Subsidiary General Security Agreements and any other
general security agreements delivered pursuant to Section 6.14 or 6.15.
"Government Acts" shall have the meaning provided in Section 1.13(i).
"Governmental Authority" means any federal, state, local, foreign or other
governmental or administrative body, instrumentality, department or agency or
any court, tribunal, administrative hearing body, arbitration panel,
commission, or other similar dispute-resolving panel or body.
"Guarantees" means and includes each Subsidiary Guarantee and any
subsidiary guarantee delivered pursuant to Section 6.16.
"Guarantors" for purposes of this Agreement means each Subsidiary of
Borrower and any subsidiary that delivers a subsidiary guarantee pursuant to
Section 6.16.
"Hazardous Materials" means any pollutant, contaminant, chemical or
industrial, toxic or hazardous substance, constituent or waste, including
without limitation, petroleum including crude oil or any fraction thereof, or
any petroleum product, subject to regulation under any Environmental Law.
"High Performance" means High Performance Sports Marketing, Inc., a North
Carolina corporation.
"Indebtedness" of any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase
price of assets or services which in
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accordance with GAAP would be shown on the liability side of the balance sheet
of such Person, (iii) the face amount of all letters of credit issued for the
account of such Person and, without duplication, all unreimbursed drafts drawn
thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any
property owned by such first Person, whether or not such Indebtedness has been
assumed by such first Person, (v) all Capitalized Lease Obligations of such
Person, (vi) all obligations of such Person to pay a specified purchase price
for goods or services whether or not delivered or accepted, i.e., take-or-pay
and similar obligations, (vii) all obligations of such Person under Interest
Rate Agreements or Currency Protection Agreements and (viii) all net Contingent
Obligations of such Person; provided that Indebtedness shall not include trade
payables, accrued expenses, accrued dividends, stock redemption payments,
royalty payments, accrued retirees or employees benefits, deferred taxes and
accrued income taxes, in each case arising in the ordinary course of business.
For purposes of clause (iv) above (where the relevant Indebtedness has not been
assumed by such first Person), the amount of Indebtedness is equal to the
lesser of the amount of Indebtedness secured or the fair market value of the
property subject to the Lien.
"Indosuez" has the meaning provided in the first paragraph of this
Agreement.
"Initial Bank" means a Bank that was an original signatory to this
Agreement.
"Initial Loans" means the initial Loans made under this Agreement on the
Closing Date.
"Intellectual Property" has the meaning provided in Section 5.16.
"Intellectual Property Security Agreements" means and includes the
Borrower Intellectual Property Security Agreement, each Subsidiary Intellectual
Property Security Agreement, and any other intellectual property security
agreements delivered pursuant to Section 6.14 or 6.15.
"Interest Margin" shall mean, in respect of (i) Base Rate Loans that are
(a) Term Loans, 1.50% and (b) Revolving Loans, 1.50%; and (ii) Reserve Adjusted
Eurodollar Loans that are (a) Term Loans, 3.00% and (b) Revolving Loans, 3.00%.
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"Interest Period" means, with respect to any Reserve Adjusted Eurodollar
Loan, the interest period applicable thereto, as determined pursuant to Section
1.09.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement, interest rate futures
contract, interest rate option contract or other similar agreement or
arrangement to which the Borrower is a party, designed to protect the Borrower
or any of its Subsidiaries against fluctuations in interest rates.
"Interest Rate Determination Date" means each date for calculating the
Eurodollar Rate for purposes of determining the interest rate in respect of an
Interest Period. The Interest Rate Determination Date shall be the second
Business Day prior to the first day of the related Interest Period for a
Reserve Adjusted Eurodollar Loan.
"Inventory" means all of the inventory of Borrower and its Subsidiaries
(on a consolidated basis) including without limitation: (i) all raw materials,
work in process, parts, components, assemblies, supplies and materials used or
consumed in the business of the Borrower and its Subsidiaries; (ii) all goods,
wares and merchandise, finished or unfinished, held for sale or lease or leased
or furnished or to be furnished under contracts of service; and (iii) all goods
returned or repossessed by Borrower or any of its Subsidiaries.
"Issuing Bank" means the Bank that agrees to issue a Letter of Credit,
determined as provided in Section 1.13(c).
"Landlord Lien Assurance" means, with respect to any real property leased
by the Borrower or any Guarantor, either (i) an agreement executed by the
lessor of such property substantially in the form of Exhibit O hereto or (ii) a
legal opinion or other evidence, in each case reasonably satisfactory to the
Agent, that the laws of the jurisdiction or jurisdictions applicable to the
lease do not give rise to any statutory Lien in favor of the landlord with
respect to Inventory located at such facility and require a landlord to permit
reasonable access to a creditor to enable it to foreclose any Lien it may have
on the property of the tenant located at such facility.
"Lease" means any lease, sublease, franchise agreement, license, occupancy
or concession agreement.
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"Letter of Credit" or "Letters of Credit" means (i) Standby Letter or
Letters of Credit and (ii) Commercial Letter or Letters of Credit, in each
case, issued or to be issued by Issuing Banks for the account of the Borrower
pursuant to Section 1.13.
"Letter of Credit Participation" has the meaning assigned to that term in
Section 1.13(a).
"Letters of Credit Usage" means, as at any date of determination, the sum
of (i) the maximum aggregate amount that is or at any time thereafter may
become available under all Letters of Credit then outstanding plus (ii) the
aggregate amount of all drawings under Letters of Credit honored by all Issuing
Banks and not theretofore reimbursed by the Borrower.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien,
claim, hypothecation, assignment for security or charge of any kind (including
any agreement to give any of the foregoing, any conditional sale or other title
retention agreement or any lease in the nature thereof).
"Loan" means each and every Term Loan or Revolving Loan.
"Loan Facility" means the credit facility evidenced by the Total Term Loan
Commitment and the Total Revolving Loan Commitment.
"Materially Adverse Effect" means, (i) any materially adverse effect (both
before and after giving effect to the Acquisitions and the financing thereof
and the other transacitons contemplated hereby and by the other Documents) with
respect to the operations, business, properties, assets, nature of assets,
liabilities (contingent or otherwise), financial condition or prospects of the
Borrower and its Subsidiaries, taken as a whole, (ii) any fact or circumstance
(whether or not the result thereof would be covered by insurance) as to which
singly or in the aggregate there is a reasonable likelihood of (w) a materially
adverse change described in clause (i) with respect to the Borrower and its
Subsidiaries, taken as a whole, (x) the inability of any Credit Party to
perform in any material respect its Obligations hereunder or under any of the
other Documents or the inability of the Banks to enforce in any material
respect their rights purported to be granted hereunder or under any of the
other Documents or the Obligations (including realizing on the Collateral), or
(y) a materially adverse effect on the ability to effect (including hindering
or unduly delaying)
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the Acquisitions and the other transactions contemplated hereby and by the
Documents on the terms contemplated hereby and thereby or (iii) any fact or
circumstance relating to any Credit Party as to which singly or in the
aggregate there is a reasonable likelihood of any significant liability on the
part of the Banks or the Agent.
"Minimum Borrowing Amount" means $100,000.
"Mortgage" means a term loan and revolving credit mortgage or deed of
trust, assignment of rents, security agreement and fixture filing creating and
evidencing a Lien on each Mortgaged Real Property or Real Property acquired by
the Borrower or any of its Subsidiaries pursuant to Section 6.14, the form and
substance of which shall be reasonably satisfactory to the Agent, in each such
case containing such schedules and including such additional provisions and
other deviations from such Exhibit as shall be necessary to conform such
document to applicable or local law or as shall be customary under local law
and made and which shall be dated the date of delivery thereof and made by the
owner of the Mortgaged Real Property described therein for the benefit of the
Collateral Agent, as mortgagee, assignee and secured party, as the same may at
any time be amended or supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof.
"Mortgaged Real Property" means each Real Property designated on Annex IX.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA with respect to which any Credit Party or its respective
ERISA Affiliates is or has been required to contribute or otherwise may have
liability.
"Net Award" has the meaning assigned to that term in each Mortgage.
"Net Cash Proceeds" means:
(a) with respect to any Asset Sale, the aggregate cash payments received
by the Borrower and/or any of its Subsidiaries, as the case may be, from such
Asset Sale, net of the reasonably incurred direct expenses of sale; provided
that, with respect to taxes, expenses shall only include taxes to the extent
that taxes are payable in cash in the current year or in the next succeeding
year with respect to the current year as a result of such Asset Sale; and
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(b) with respect to any Taking or Destruction, the Net Award or Net
Proceeds, as applicable, resulting therefrom, to be applied as Net Cash
Proceeds under this Agreement pursuant to the provisions of each Mortgage;
provided, further, that Net Cash Proceeds shall not include any amounts or
items included in the definition of Financing Proceeds or Net Financing
Proceeds (including in any proviso appearing therein or exclusion therefrom).
"Net Financing Proceeds" means Financing Proceeds, net of the reasonably
incurred direct expenses of the transaction and net of taxes (including income
taxes) currently paid or payable in cash as a result thereof in the current
year or in the next succeeding year with respect to the current year as a
result of the transaction generating Net Financing Proceeds.
"Net Proceeds" has the meaning assigned to that term in each Mortgage.
"Non-U.S. Person" has the meaning provided in Section 3.04(c).
"Notes" means any Revolving Note or Term Note.
"Notice of Borrowing" has the meaning provided in Section 1.03.
"Notice of Continuance/Conversion" has the meaning provided in Section
1.06.
"Obligations" means all amounts, direct or indirect, contingent or
absolute, of every type or description, and at any time existing, owing to the
Agent, the Agent, the Collateral Agent or any Bank pursuant to the terms of
this Agreement or any other Credit Document or secured by any of the Security
Documents.
"Officers' Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its Chairman of the Board
(if an officer) or its President or one of its Vice Presidents and by its Chief
Financial Officer or its Treasurer or any Assistant Treasurer; provided that
every Officers' Certificate with respect to compliance with a condition
precedent to the making of any Loan hereunder shall include, on behalf of the
Borrower, (i) a statement that the officers making or giving such Officers'
Certificate have read such condition and any definitions or other provisions
con-
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tained in this Agreement relating thereto, (ii) a statement that, in the
opinion of the signers, they have made or have caused to be made such
examination or investigation as is necessary to enable them to express an
informed opinion as to whether or not such condition has been complied with,
and (iii) a statement as to whether, in the opinion of the signers, such
condition has been complied with.
"Officers' Solvency Certificate" means the Officers' Solvency Certificate
in the form set forth as Exhibit N hereto.
"Operating Lease" of any Person, shall mean any lease (including, without
limitation, leases which may be terminated by the lessee at any time) of any
property (whether real, personal or mixed) by such Person as Lessee which is
not a Capital Lease.
"PBGC" means the Pension Benefit Guaranty Corporation established pursuant
to Section 4002 of ERISA, or any successor thereto.
"Pension Plan" means any pension plan as defined in Section 3(2) of ERISA
(other than a Multiemployer Plan) which is or has been maintained by or to
which contributions are or have been made by any Credit Party or its respective
ERISA Affiliates or as to which any Credit Party or its respective ERISA
Affiliates may have liability.
"Permitted Encumbrances" has the meaning provided in Section 7.03.
"Person" means any individual, partnership, limited liability company,
joint venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or any agency, department or
instrumentality thereof.
"Pledge Agreements" means and includes the Borrower Securities Pledge
Agreement, each Subsidiary Securities Pledge Agreement and any securities
pledge agreements delivered pursuant to Section 6.14 or 6.15.
"Pledged Collateral" means all the Pledged Collateral as defined in the
General Security Agreements.
"Pledged Securities" means all the Pledged Collateral as defined in each
of the Pledge Agreements.
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"Portion" means the Term Portion or the Revolving Portion.
"Press Pass" means Press Pass Partners, a Delaware general partnership.
Prior to the Borrower's acquisition of Press Pass, the general partners of
Press Pass were J/B Press Pass, Inc., a Delaware corporation, and Synergy
Marketing, Inc., a Texas corporation.
"Prior Liens" means Liens which, to the extent permitted by the provisions
of any Security Document, are or may be superior to the Lien of such Security
Document.
"Projected Financial Statements" has the meaning provided in Section
5.10(c).
"Real Property" means all right, title and interest of any Credit Party or
its respective Subsidiaries (including, without limitation, any leasehold
estate) in and to a parcel of real property acquired by any Credit Party
together with, in each case, all improvements and appurtenant fixtures,
equipment, personal property, easements and other property and rights
incidental to the ownership, lease or operation thereof.
"Reference Banks" means Indosuez, Citibank, N.A. and Chase Manhattan Bank.
"Register" has the meaning provided in Section 11.04(b)(A) of this
Agreement.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a
portion thereof establishing reserve requirements.
"Regulation G" means Regulation G of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a
portion thereof establishing margin requirements.
"Regulation T" means Regulation T of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a
portion thereof establishing margin requirements.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in
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effect and any successor to all or a portion thereof establishing margin
requirements.
"Regulation X" means Regulation X of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a
portion thereof establishing margin requirements.
"Release Event" means the occurrence of any one of the following: (i) the
consummation of the merger of the Borrower and Racing Champions Corporation;
(ii) the attainment by the Borrower of an aggregate of Consolidated EBITDA of
at least $4,750,000 for any six consecutive months, commencing with the six
months ending June 30, 1998; (iii) the consummation by the Borrower of an
offering of its Common Stock with minimum gross offering proceeds to the
Company of $15,000,000; (iv) the exercise of outstanding common stock warrants
for cash or Racing Champions Corporation invests equity in the Borrower;
provided that each of the events specified in this clause (iv) shall be deemed
a Release Event only with respect to an amount equal to the cash proceeds
received by the Borrower; (v) the acceleration of this Agreement by the Banks;
or (vi) December 31, 1998.
"Required Banks" shall mean at any time one or more Banks holding at least
51% of the Total Commitments held by Banks (or, if the Total Commitments shall
have been terminated, Banks holding at least 51% of the outstanding Loans);
provided that for the purposes of Section 4, the requirement that any document,
agreement, certificate or other writing is to be satisfactory to the Required
Banks shall be satisfied if (x) such document, agreement, certificate or other
writing was delivered in its final form to the Banks prior to the Effective
Date (or if amended or modified thereafter, the Agent have reasonably
determined such amendment or modification not to be material), (y) such
document, agreement, certificate or other writing is satisfactory to the Agent
and (z) Banks holding more than 33-1/3% of the Total Commitments held by Banks
have not objected in writing to such document, agreement, certificate or other
writing to the Agent prior to the Closing Date.
"Reserve Adjusted Eurodollar Loan" means each Loan bearing interest based
on the Eurodollar Rate as provided in Section 1.08(b).
"Restoration" has the meaning assigned to that term in each Mortgage.
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"Revolving Loan Commitment" means, with respect to each Bank, the amount
set forth below such Bank's name on the signature pages hereto directly across
from the entry entitled "Revolving Loan Commitment," as such amount may be
reduced from time to time pursuant to Sections 2.01, 2.02, 3.02 and/or 8.
"Revolving Loan Commitment Termination Date" means the Business Day
immediately preceding the Revolving Maturity Date.
"Revolving Loans" has the meaning provided in Section 1.01(b).
"Revolving Maturity Date" means the last Business Day of December, 2002 or
such earlier date on which all Revolving Loan Commitments have been terminated.
"Revolving Note" has the meaning provided in Section 1.05(a).
"Revolving Portion" means, at any time, the Portion of the Loan Facility
evidenced by the Total Revolving Loan Commitments.
"Scheduled Term Loans Principal Payments" means, with respect to the
principal payments on the Term Loans on the last Business Day of each month set
forth below, the U.S. dollar amount of the Total Term Loan Commitment
multiplied by the percentage set forth opposite thereto:
<TABLE>
<CAPTION>
Scheduled Term Loan
Date Principal Payment
------ -------------------
<S> <C>
December 1998 2.50%
March 1999 2.50
June 1999 2.50
September 1999 2.50
December 1999 3.75
March 2000 3.75
June 2000 3.75
September 2000 3.75
December 2000 5.00
March 2001 5.00
June 2001 5.00
September 2001 5.00
</TABLE>
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<TABLE>
<CAPTION>
Scheduled Term Loan
Date Principal Payment
------ -------------------
<S> <C>
December 2001 6.25
March 2002 6.25
June 2002 6.25
September 2002 6.25
December 2002 7.50
March 2003 7.50
June 2003 7.50
September 2003 7.50
------
100.00%
</TABLE>
"SEC" means the Securities and Exchange Commission or any successor
thereto.
"Security Documents" means each of the Pledge Agreements, the General
Security Agreements, the Intellectual Property Security Agreements, the
Mortgages and any other documents utilized to pledge as Collateral for the
Obligations any property or assets of whatever kind or nature.
"State and Local Real Property Disclosure Requirements" means any state or
local laws requiring notification of the buyer of real property, or
notification, registration, or filing to or with any state or local agency,
prior to the sale of any real property or transfer of control of an
establishment, of the actual or threatened presence or release into the
environment, or the use, disposal, or handling of Hazardous Materials on, at,
under, or near the real property to be sold or the establishment for which
control is to be transferred.
"Subsidiary" of any Person means and includes (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(excluding stock of any class or classes of such corporation that might have
voting power solely by reason of the happening of any contingency) is at the
time owned by such Person directly or indirectly through Subsidiaries, and (ii)
any partnership, limited liability company, association, joint venture or other
entity in which such Person directly or indirectly through Subsidiaries has
more than a 50% equity interest at the time.
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"Subsidiary General Security Agreement" means the Subsidiary General
Security Agreement substantially in the form of Exhibit H-2 hereto, except for
such changes as shall have been approved by the Agent, as the same may be
amended, supplemented or otherwise modified from time to time in accordance
with its terms and the terms hereof.
"Subsidiary Guarantee" means the Guarantee executed and delivered by each
Subsidiary of the Borrower substantially in form of Exhibit E, except for such
changes as shall have been approved by the Agent, as the same may after its
execution be amended, supplemented or otherwise modified from time to time in
accordance with its terms and the terms hereof.
"Subsidiary Intellectual Property Security Agreement" means the Subsidiary
Intellectual Property Security Agreement substantially in the form of Exhibit
G-2 hereto, except for such changes as shall have been approved by the Agent,
as the same may be amended, supplemented or otherwise modified from time to
time in accordance with its terms and the terms hereof.
"Subsidiary Securities Pledge Agreement" means the Subsidiary Securities
Pledge Agreement substantially in the form of Exhibit F-2 hereto, except for
such changes therein as shall have been approved by the Agent, as the same may
after its execution be amended, supplemented or otherwise modified from time to
time in accordance with the terms thereof and hereof.
"Taking" has the meaning assigned to that term in each Mortgage.
"Taxes" has the meaning provided in Section 3.04.
"Term Loan" has the meaning provided in Section 1.01(a).
"Term Loan Commitment" means, with respect to each Bank, the amount set
forth below such Bank's name on the signature pages hereto directly across from
the entry entitled "Term Loan Commitment," as the same may be reduced from
time to time pursuant to Sections 2.02, 3.02 and/or 8.
"Term Loan Facility" means the Loan Facility evidenced by the Total Term
Loan Commitment.
"Term Note" has the meaning provided in Section 1.05(a).
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<PAGE> 119
"Term Portion" means, at any time, the portion of the Loan Facility
evidenced by the Total Term Loan Commitment.
"Termination Event" means (i) a "reportable event" described in Section
4043 of ERISA or in the regulations thereunder (excluding events for which the
requirement for notice of such reportable event has been waived by the PBGC by
regulation) with respect to a Title IV Plan, or (ii) the withdrawal of any
Credit Party or any of its respective ERISA Affiliates from a Title IV Plan
during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to
terminate a Title IV Plan or the treatment of a Title IV Plan amendment as a
termination under Section 4041 of ERISA, or (iv) the institution of proceedings
by the PBGC to terminate a Title IV Plan or to appoint a trustee to administer
a Title IV Plan, or (v) any other event or condition which might constitute
reasonable grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan, or (vi) the complete
or partial withdrawal (within the meaning of Sections 4203 and 4205,
respectively, of ERISA) of any Credit Party or any of its respective ERISA
Affiliates from a Multiemployer Plan, or (vii) the insolvency or reorganization
(within the meaning of Sections 4245 and 4241, respectively, of ERISA) or
termination of any Multiemployer Plan, or (viii) the failure to make any
payment or contribution to any Pension Plan or Multiemployer Plan or the making
of any amendment to any Pension Plan which could result in the imposition of a
lien or the posting of a bond or other security.
"Test Period" means the shorter of (i) the four consecutive complete
fiscal quarters of the Borrower then last ended or (ii) the period of all
complete fiscal quarters of the Borrower since Closing Date.
"Title Company" means such title insurance or abstract company as shall be
designated by the Borrower to the satisfaction of the Agent.
"Title IV Plan" means any Pension Plan described in Section 4021(a) of
ERISA, and not excluded under Section 4021(b) of ERISA.
"Total Commitment" means the sum of the Total Term Loan Commitments and
the Total Revolving Loan Commitments.
"Total Revolving Loan Commitment" means the sum of the Revolving Loan
Commitments of each of the Banks.
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"Total Term Loan Commitment" means the sum of the Term Loan Commitments of
each of the Banks.
"Total Utilization of Revolving Loan Commitments" means, at any date of
determination, the sum of the aggregate principal amount of all outstanding
Revolving Loans.
"Type" means a Base Rate Loan or Reserve Adjusted Eurodollar Loan.
"UCC" means the Uniform Commercial Code as in effect in the State of New
York.
"Unutilized Commitment" for any Bank at any time means, on and after the
Closing Date, the unutilized Revolving Loan Commitment of such Bank, after
taking into effect the Letters of Credit Usage.
"Vested Options" means exercisable options to purchase Common Stock
granted to any member of management of the Borrower pursuant to an option plan
or any similar plan.
"Wholly-Owned Subsidiary" of any Person means any Subsidiary of such
Person to the extent all of the capital stock or other ownership interests in
such Subsidiary, other than directors' or nominees' qualifying shares, is owned
directly or indirectly by such Person.
"Written" or "in writing" means any form of written communication or a
communication by means of telex, telecopier device, telegraph or cable.
SECTION 10. The Agent.
10.01 Appointment. Each Bank hereby irrevocably designates and appoints
Indosuez as Agent (such term to include the Agent acting as Collateral Agent or
in any other representative capacity under any other Credit Document) of such
Bank to act as specified herein and in the other Credit Documents and each such
Bank hereby irrevocably authorizes the Agent to take such action on its behalf
under the provisions of this Agreement and the other Credit Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Agent by the terms of this Agreement and the other Credit Documents, together
with such other powers as are reasonably incidental thereto. The Agent agrees
to act as such upon the express conditions contained in this Section 10.
Notwithstanding any provision to the contrary elsewhere in this Agreement,
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the Agent shall not have any duties or responsibilities, except those expressly
set forth herein or in the other Credit Documents, or any fiduciary
relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Agent. The provisions of this Section
10 are solely for the benefit of the Agent and the Banks, and no Credit Party
shall have any rights as a third party beneficiary of any of the provisions
hereof. In performing its functions and duties under this Agreement, the Agent
shall act solely as agent of the Banks and does not assume and shall not be
deemed to have assumed any obligation or relationship of agency or trust with
or for any Credit Party. The Borrower hereby agrees to pay the Agent an annual
agency fee as previously agreed with the Agent.
10.02 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Credit Document by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care except to the extent otherwise required by Section 10.03.
10.03 Exculpatory Provisions. Neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates shall be (i)
liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement (except for its or such
Person's own gross negligence or willful misconduct) or (ii) responsible in any
manner to any of the Banks for any recitals, statements, representations or
warranties by the Borrower, any Subsidiary of the Borrower or any of their
respective officers contained in this Agreement, any other Document or in any
certificate, report, statement or other document referred to or provided for
in, or received by the Agent under or in connection with, this Agreement or any
other Document or for any failure of the Borrower or any Subsidiary of the
Borrower or any of their respective officers to perform its obligations
hereunder or thereunder. The Agent shall not be under any obligation to any
Bank to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement, or to inspect
the properties, books or records of the Borrower or any Subsidiary of the
Borrower. The Agent shall not be responsible to any Bank for the
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of this Agreement or any Credit Document
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or for any representations, warranties, recitals or statements made herein or
therein or made in any written or oral statement or in any financial or other
statements, instruments, reports, certificates or any other documents in
connection herewith or therewith furnished or made by the Agent to the Banks or
by or on behalf of the Borrower to the Agent or any Bank or be required to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained herein or therein or
as to the use of the proceeds of the Loans or of the existence or possible
existence of any Default or Event of Default.
10.04 Reliance by the Agent. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Credit Parties), independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Credit Document unless it shall first receive such advice or concurrence
of the Required Banks as it deems appropriate or it shall first be indemnified
to its satisfaction by the Banks against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the other Credit Documents in
accordance with a request of the Required Banks (or to the extent specifically
provided in Section 11.12, all the Banks), and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Banks.
10.05 Notice of Default. The Agent shall not be deemed to have knowledge
of the occurrence of any Default or Event of Default, other than a default in
the payment of principal or interest on the Loans hereunder unless it has
received notice from a Bank or the Borrower or any other Credit Party referring
to this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default". In the event that the Agent receives
such a notice, the Agent shall give prompt notice thereof to the Banks. The
Agent shall take such action with respect to such Default or Event of Default
as shall be reasonably directed by the Required Banks; provided that, unless
and until the Agent shall
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have received such directions, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
the Banks.
10.06 Non-Reliance on Agent and Other Banks. Each Bank expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Borrower or any Subsidiary of
the Borrower, shall be deemed to constitute any representation or warranty by
the Agent to any Bank. Each Bank represents to the Agent that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, assets, operations, property,
financial and other conditions, prospects and creditworthiness of the Borrower
and its Subsidiaries and made its own decision to make its Loans hereunder and
enter into this Agreement and the other agreements contemplated hereby. Each
Bank also represents that it will, independently and without reliance upon the
Agent or any other Bank, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement,
and to make such investigation as it deems necessary to inform itself as to the
business, assets, operations, property, financial and other conditions,
prospects and creditworthiness of the Borrower and its Subsidiaries. Except
for notices, reports and other documents expressly required to be furnished to
the Banks by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, operations, assets, property, financial and other
conditions, prospects or creditworthiness of the Borrower or any of its
Subsidiaries which may come into the possession of the Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates.
Neither the Agent nor any Bank shall be deemed to be a fiduciary or have any
fiduciary duty to any other Bank or Credit Party.
10.07 Indemnification. The Banks agree to indemnify the Agent in its
capacity as such or in any other representative capacity under any other Credit
Document ratably according to their aggregate Commitments, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, reasonable expenses or disbursements
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of any kind whatsoever which may at any time (including, without limitation, at
any time following the payment of the Obligations) be imposed on, incurred by
or asserted against the Agent in its capacity as such in any way relating to or
arising out of this Agreement or any other Credit Document, or any documents
contemplated by or referred to herein or the transactions contemplated hereby
or any action taken or omitted to be taken by the Agent under or in connection
with any of the foregoing, but only to the extent that any of the foregoing is
not paid by the Borrower or any of its Subsidiaries; provided that no Bank
shall be liable to the Agent for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from the Agent's gross
negligence or willful misconduct. If any indemnity furnished to the Agent for
any purpose shall, in the opinion of the Agent, be insufficient or become
impaired, the Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished. The agreements in this Section 10.07 shall survive the payment of
all Obligations.
10.08 The Agent in Its Individual Capacity. The Agent and its Affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with the Borrower, its Subsidiaries and other Affiliates of the
Borrower as though the Agent were not the Agent hereunder. With respect to the
Loans made by it and all Obligations owing to it, the Agent shall have the same
rights and powers under this Agreement as any Bank and may exercise the same as
though it were not the Agent, and the terms "Bank" and "Banks" shall include
the Agent in its individual capacity.
10.09 Successor Agent. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, the term "Agent" shall include such successor
agent effective upon its appointment, and the resigning Agent's rights, powers
and duties as Agent shall be terminated, without any other or further act or
deed on the part of such former Agent or any of the parties to this Agreement.
After the retiring Agent's resignation hereunder as Agent, the provisions of
this Section 10 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement.
10.10 Resignation by Agent. A. The Agent may resign from the
performance of all its functions and duties hereunder at any time by giving 15
Business Days' prior written notice to the Borrower and the Banks. Such
resignation shall
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take effect upon the acceptance by a successor Agent of appointment pursuant to
subsections B and C below or as otherwise provided below.
B. Upon any such notice of resignation of the Agent, the Required Banks
shall appoint a successor Agent acceptable to the Borrower and which shall be
an incorporated bank or trust company or other qualified financial institution
with operations in the United States and total assets of at least $1 billion.
C. If a successor Agent shall not have been so appointed within said 15
Business Day period, the resigning Agent with the consent of the Borrower shall
then appoint a successor Agent (which shall be an incorporated bank or trust
company or other qualified financial institution with operations in the United
States and total assets of at least $1 billion) who shall serve as Agent until
such time, if any, as the Required Banks appoint a successor Agent as provided
above.
D. If no successor Agent has been appointed pursuant to subsection B or C
by the 20th Business Day after the date such notice of resignation was given by
the resigning Agent, such Agent's resignation shall become effective and the
Required Banks shall thereafter perform all the duties of Agent hereunder until
such time, if any, as the Required Banks with the consent of Borrower appoint a
successor Agent as provided above.
E. Notwithstanding anything to the contrary contained in this Section 10,
Indosuez, as Agent, may transfer its rights and obligations to perform all of
its functions and duties hereunder to its parent company or to any Affiliate of
it or its parent company.
SECTION 11. Miscellaneous.
11.01 Payment of Expenses, etc. The Borrower agrees to: (i) whether or
not the transactions herein contemplated are consummated, pay all out-of-pocket
costs and expenses (x) of the Agent in connection with the negotiation,
preparation, execution and delivery of the Credit
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Documents and the documents and instruments referred to therein and any
amendment, waiver or consent relating thereto (including, without limitation,
the fees and disbursements of Cahill Gordon & Reindel and local counsel to the
Banks) with prior notice to the Borrower of the engagement of any counsel and
(y) of each of the Banks in connection with the enforcement of the Credit
Documents (including in connection with any "work-out" or other restructuring
of the Borrower's Obligations or in connection with any bankruptcy,
reorganization or similar proceeding with respect to any Credit Party or its
Subsidiaries) and the documents and instruments referred to therein (including,
without limitation, the fees and disbursements of counsel for each of the
Banks) with prior notice to the Borrower of the engagement of any counsel and
the reasonable fees and expenses of any appraisers or any consultants or other
advisors engaged with prior notice to the Borrower of any such engagement with
respect to environmental or other matters; (ii) pay all out-of-pocket costs and
expenses (including attorneys' fees) of the Agent or Indosuez or in connection
with the assignment or attempted assignment to any other Person of all or any
portion of Indosuez's interest under this Agreement pursuant to Section 11.04
incurred prior to 120 days following the Closing Date; (iii) pay and hold each
of the Banks harmless from and against any and all present and future stamp and
other similar taxes with respect to the foregoing matters and save each of the
Banks harmless from and against any and all liabilities with respect to or
resulting from any delay or omission (other than to the extent attributable to
such Bank) to pay such taxes; and (iv) indemnify each Bank, its officers,
directors, employees, representatives and agents from and hold each of them
harmless against any and all losses, liabilities, claims, damages or expenses
(including, without limitation, any and all losses, liabilities, claims,
damages or expenses arising under Environmental Laws) incurred by any of them
as a result of, or arising out of, or in any way related to the entering into
and/or performance of any Document or the use of the proceeds of any Loans
hereunder or the Acquisitions or the consummation of any other transactions
contemplated in any Credit Document, including, without limitation, the
documented reasonable fees and disbursements of counsel incurred by any of them
(but excluding any such losses, liabilities, claims, damages or expenses to the
extent incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified).
11.02 Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence and during the continuance of an Event of
Default, each Bank is hereby authorized at any time or from time to time,
without presentment, demand, protest or other notice of any kind to any Credit
Party or to any other Person, any such notice being hereby expressly waived, to
set off and to appropriate and apply any and all deposits (general or special)
and any other Indebtedness at any time held or owing by such Bank
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(including, without limitation, by branches and agencies of such Bank wherever
located) to or for the credit or the account of any Credit Party against and on
account of the Obligations and liabilities of such Credit Party to such Bank
under this Agreement or under any of the other Credit Documents, including,
without limitation, all interests in Obligations of such Credit Party purchased
by such Bank pursuant to Section 11.06(b), and all other claims of any nature
or description arising out of or connected with this Agreement or any other
Credit Document, irrespective of whether or not such Bank shall have made any
demand hereunder and although said Obligations, liabilities or claims, or any
of them, shall be contingent or unmatured.
11.03 Notices. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(which may include telecopier communication) and couriered for delivery of the
next Business Day, and shall be sent, if to any Credit Party, to:
Wheels Sports Group, Inc.
149 Gasoline Alley Drive
Mooresville, North Carolina 28115
Telecopy No. (704) 662-3005
Attention: Howard L. Correll, President
with copies to:
Berliner Zisser Walter & Gallegos, P.C.
1700 Lincoln Street, Suite 4700
Denver, Colorado 80203-4547
Telecopy No. (303) 830-1705
Attention: Robert W. Walter, Esq.
if to any Bank, at its address specified for such Bank on Annex II hereto; or,
at such other address as shall be designated by any party in a written notice
to the other parties hereto. All such notices and communications shall, when
telecopied or sent by overnight courier, be effective when sent by telecopier
or delivered to the overnight courier, as the case may be, except that notices
and communications to the Agent shall not be effective until received by the
Agent.
11.04 Benefit of Agreement. (a) This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties hereto, all
future holders of the Notes, and their respective successors and assigns;
provided that no Credit Party may assign or transfer any of its inter-
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ests hereunder without the prior written consent of all of the Banks in their
sole discretion; and provided, further, that the rights of each Bank to
transfer, assign or grant participations in its rights and/or obligations
hereunder shall be limited as set forth below in this Section 11.04; provided
that nothing in this Section 11.04 shall prevent or prohibit any Bank from (i)
pledging its Loans hereunder to a Federal Reserve Bank in support of borrowings
made by such Bank from such Federal Reserve Bank and (ii) subject to Section
11.04(b)(B), granting participations in or assignments of all or a portion of
such Bank's Loans, Notes and/or Commitments hereunder (y) to its parent company
and/or to any Affiliate of such Bank that is at least 50% owned by such Bank or
its parent company or (z) to an entity managed by a Person referred to in
Section 11.04(a)(ii)(y).
(b) Each Bank shall have the right to transfer, assign or grant
participations in all or any part of its remaining Loans, Notes and/or
Commitments hereunder on the basis set forth below in this clause (b). Each
Bank may furnish any information concerning the Borrower in the possession of
such Bank from time to time to assignees and participants (including
prospective assignees and participants).
(A) Assignments. Each Bank, with the written consent of the Agent, which
shall not be unreasonably withheld, which shall be evidenced on the notice in
the form of Exhibit I-1 hereto, and with notice to the Borrower, may assign
pursuant to an Assignment and Assumption Agreement substantially in the form
of Exhibit I-2 hereto all or a portion of its Loans, Notes and/or Commitments
hereunder pursuant to this clause (b)(A) to (x) one or more Banks or (y) one
or more commercial banks or other financial or lending institutions; provided
that any such assignment pursuant to this clause (y) shall be in an amount
equal to at least $1,000,000 or such Bank's remaining Loans, Notes or
Commitments. Any assignment pursuant to this clause (b)(A) will become
effective no later than five Business Days after the Agent's receipt of (i) a
written notice in the form of Exhibit I-1 hereto from the assigning Bank and
the assignee Bank and (ii) a processing and recordation fee of $2,000 from
the assigning Bank in connection with the Agent's recording of such sale,
assignment, transfer or negotiation; provided that such fee shall only be
payable if the assignment is between a Bank and a party that is not a Bank
prior to the assignment. The Borrower shall issue new Notes to the assignee
in conformity with Section 1.05 and the assignor shall return
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the old Notes to the Borrower. Upon the effectiveness of any assignment in
accordance with this clause (b)(A), the assignee will become a "Bank" for all
purposes of this Agreement and the other Credit Documents and, to the extent
of such assignment, the assigning Bank shall be relieved of its obligations
hereunder with respect to the Loans, Notes or Commitments being assigned.
The Agent shall maintain at its address specified in Annex II hereto a copy
of each Assignment Agreement delivered to and accepted by it and a register
in which it shall record the names and addresses of the Banks and the
Commitment of, and principal amount of the Loans owing to, each Bank from
time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent demonstrable error, and the
Borrower, the Agent and the Banks may treat each Person whose name is
recorded in the Register as a Bank hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower,
the Agent or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
(B) Participations. Each Bank may transfer, grant or assign
participations in all or any part of such Bank's Loans, Notes and/or
Commitments hereunder pursuant to this clause (b)(B) to any Person; provided
that (i) such Bank shall remain a "Bank" for all purposes of this Agreement
and the transferee of such participation shall not constitute a Bank
hereunder and (ii) no participant under any such participation shall have
rights to approve any amendment to or waiver of this Agreement or any other
Credit Document except to the extent such amendment or waiver would (x)
extend the scheduled final maturity date of any of the Loans, Notes or
Commitments in which such participant is participating or (y) reduce the
principal amount, interest rate or fees applicable to any of the Loans, Notes
or Commitments in which such participant is participating or postpone the
payment of any interest or fees or (z) release all or substantially all of
the Collateral (except as expressly permitted by the Credit Documents). In
the case of any such participation, the participant shall not have any rights
under this Agreement or any of the other Credit Documents (the participant's
rights against the granting Bank in respect of such participation to be those
set forth in the agreement with such Bank creating such participation) and
all amounts payable by the Borrower hereunder shall be determined as if such
Bank had not sold such participation; provided that such partici-
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<PAGE> 130
pant shall be considered to be a "Bank" for purposes of Sections 11.02 and
11.06(b).
11.05 No Waiver; Remedies Cumulative. No failure or delay on the part of
the Agent or any Bank in exercising any right, power or privilege hereunder or
under any other Credit Document and no course of dealing between any Credit
Party and the Agent or any Bank shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power, or privilege hereunder or
under any other Credit Document preclude any other or further exercise thereof
or the exercise of any other right, power or privilege hereunder or thereunder.
The rights and remedies herein expressly provided are cumulative and not
exclusive of any rights or remedies which the Agent or any Bank would otherwise
have. No notice to or demand on any Credit Party in any case shall entitle any
Credit Party to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Agent or the Banks to
any other or further action in any circumstances without notice or demand.
11.06 Payments Pro Rata. (a) The Agent agrees that promptly after its
receipt of each payment from or on behalf of any Credit Party in respect of any
Obligations of such Credit Party, it shall distribute such payment to the Banks
pro rata based upon their respective shares, if any, of the Obligations with
respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans, of a sum which with respect to any related sum or sums that are
received by other Banks is proportionately greater as measured (immediately
prior to receipt of all related amounts) relative to the total of such
Obligations then owed and due to such Bank to the total of such Obligations
then owed and due to all of the Banks, then such Bank receiving such excess
amount shall promptly purchase for cash without recourse or warranty from the
other Banks an interest in the Obligations of the respective Credit Party to
such Banks in such amount as shall result in a proportional participation by
all of the Banks in such excess amount pro rata in accordance with their
respective shares of the Obligations with respect to which such amount was
received; provided that if all or any portion of such excess amount is
thereafter recovered from such
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<PAGE> 131
Bank, such purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest.
11.07 Calculations; Computations. (a) The financial statements to be
furnished to the Banks pursuant hereto shall be made and prepared in accordance
with GAAP consistently applied throughout the periods involved (except as set
forth in the notes thereto or as otherwise disclosed in writing by Borrower to
the Banks); provided that, except as otherwise specifically provided herein,
all computations determining compliance with Section 7 and all definitions used
herein for any purpose shall utilize accounting principles and policies in
effect at the time of the preparation of, and in conformity with those used to
prepare, the historical financial statements delivered to the Banks pursuant to
Section 4.01(j).
(b) All computations of interest and fees hereunder shall be made on the
actual number of days elapsed over a year of 365 days; provided, however, that
all computations of interest on Reserve Adjusted Eurodollar Loans and
Commitment Commission shall be made on the actual number of days elapsed over a
year of 360 days.
11.08 Governing Law; Submission to Jurisdiction; Venue. (a) This
Agreement and the rights and obligations of the parties hereunder shall be
construed and enforced in accordance with and be governed by the laws of the
State of New York applicable to contracts made and to be performed wholly
therein. Any legal action or proceeding with respect to this Agreement or any
other Credit Document may be brought in the courts of the State of New York or
of the United States for the Southern District of New York, and, by execution
and delivery of this Agreement, each Credit Party and its respective
Subsidiaries hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts. Each Credit Party and its respective Subsidiaries further
irrevocably consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to CT Corporation System, 1633
Broadway, New York, New York 10019, its agent for service of process, such
service to become effective 30 days after such mailing. Each Credit Party and
its respective Subsidiaries hereby irrevocably appoints CT Corporation System
to serve as its agent for service of process in respect of any such action or
proceeding. Nothing herein shall affect the right of the Agent or any Bank to
serve process in any other manner permitted by law or to commence legal
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<PAGE> 132
proceedings or otherwise proceed against any Credit Party or its respective
Subsidiaries in any other jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement or
any other Credit Document brought in the courts referred to in clause (a) above
and hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum.
11.09 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with the Borrower and the
Agent.
11.10 Effectiveness. This Agreement shall become effective on the date
(the "Effective Date") and at the time (the "Effective Time") on which the
Borrower and each of the Banks shall have signed a copy hereof (whether the
same or different copies) and shall have delivered the same to the Agent at the
Agent's Office or, in the case of the Banks, shall have given to the Agent
telephonic (confirmed in writing), written, telex or telecopy notice (actually
received) at such office that the same has been signed and mailed to it. The
Agent will give the Borrower and each Bank prompt written notice of the
occurrence of the Effective Date.
11.11 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not
in any way affect the meaning or construction of any provision of this
Agreement.
11.12 Amendment or Waiver. Neither this Agreement nor any other Credit
Document nor any terms hereof or thereof may be changed, waived, discharged or
terminated (other than pursuant to the terms hereof) unless such change,
waiver, discharge or termination is in writing signed by the Required Banks;
provided that no such change, waiver, discharge or termination shall, without
the consent of each affected Bank and the Agent, (i) extend the scheduled final
maturity date of any Loan, or any portion thereof, or reduce the rate or extend
the time of payment of interest thereon or fees or reduce the prin-
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<PAGE> 133
cipal amount thereof, or increase the Commitments of any Bank or the Total
Commitments, in each case over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default shall not
constitute a change in the terms of any Commitment of any Bank), (ii) release
all or substantially all of the Collateral or Guarantees (except as expressly
permitted by the Credit Documents), (iii) amend, modify or waive any provision
of Section 1.10, 1.11, 3.04, 10.07, 11.01, 11.02, 11.04, 11.06, 11.07(b) or
11.12, (iv) reduce any percentage specified in, or otherwise modify, the
definition of Required Banks, (v) modify the definition of Scheduled A Term
Loans Principal Payments or Scheduled B Term Loans Principal Payments or (vi)
consent to the assignment or transfer by any Credit Party of any of its rights
and obligations under this Agreement. No provision of Section 10 may be
amended without the consent of the Agent.
11.13 Survival. All indemnities set forth herein including, without
limitation, in Section 1.11, 3.04, 10.07 or 11.01 shall survive the execution
and delivery of this Agreement and the making of the Loans, the repayment of
the Obligations and the termination of the Total Commitments.
11.14 Domicile of Loans. Each Bank may transfer and carry its Loans at,
to or for the account of any branch office, Subsidiary or Affiliate of such
Bank.
11.15 Waiver of Jury Trial. Each of the parties to this Agreement hereby
irrevocably waives all right to a trial by jury in any action, proceeding or
counterclaim arising out of or relating to this Agreement, the Credit Documents
or the transactions contemplated hereby or thereby.
11.16 Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitation of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
condition exists.
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<PAGE> 134
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Agreement to be duly executed and delivered as of the date first above
written.
WHEELS SPORTS GROUP, INC.
By: /s/ HOWARD L. CORRELL, JR.
------------------------------
Name: Howard L. Correll, Jr.
Title: President
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Credit Agreement among Wheels Sports Group, Inc., Credit Agricole Indosuez
and the Banks listed herein.
CREDIT AGRICOLE INDOSUEZ,
as Agent and Collateral
Agent and as a Bank
By: /s/ MICHAEL AROUGHETI
-----------------------------
Name: Michael Arougheti
Title: Vice President
By: /s/ PATRICIA FRANKEL
-----------------------------
Name: Patricia Frankel
Title: First Vice President
Term Loan Commitment: $ 7,747,783
Revolving Loan Commitment: $10,000,000
<PAGE> 1
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, OFFERED
FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER SAID ACT
AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY RECEIVES AN OPINION
OF COUNSEL (WHO MAY BE AN EMPLOYEE OF SUCH HOLDER) REASONABLY SATISFACTORY TO
THE COMPANY THAT REGISTRATION, QUALIFICATION OR OTHER SUCH ACTIONS ARE NOT
REQUIRED UNDER SAID ACT. THE OFFERING OF THIS SECURITY HAS NOT BEEN REVIEWED
OR APPROVED BY ANY STATE'S SECURITIES ADMINISTRATOR. THIS WARRANT AND THE
SHARES OF COMMON STOCK PURCHASABLE HEREUNDER ARE ALSO BENEFITED BY AND SUBJECT
TO A REGISTRATION RIGHTS AGREEMENT, DATED AS OF DECEMBER 31, 1997, BY AND AMONG
THE COMPANY AND THE OTHER PARTIES LISTED THEREIN, A COPY OF WHICH IS ON FILE
WITH THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
Dated: December 31, 1997
WARRANT
To Purchase 509,358 Shares of Common Stock
EXPIRING December 31, 2007.
THIS IS TO CERTIFY THAT, for value received, INDOSUEZ CM II, INC., or
registered assigns (the "Holder") is entitled to purchase from Wheels Sports
Group, Inc., a North Carolina corporation (the "Company"), at any time or from
time to time prior to 5:00 p.m., New York City time, on December 31, 2007 at
the place where a Warrant Agency (as hereinafter defined) is located, at the
Exercise Price (as hereinafter defined), the number of shares of Common Stock,
par value $0.01 per share (the "Common Stock"), of the Company shown above, all
subject to adjustment and upon the terms and conditions as hereinafter
provided, and is entitled also to exercise the other appurtenant rights, powers
and privileges hereinafter described. This Warrant is one of one or more
warrants (the "Warrants") of the same form and having the same terms as this
Warrant. The Holder shall designate at the time of exercise whether the shares
of Common Stock to be received shall be voting Common Stock or nonvoting Common
Stock.
The Warrants granted to the Holder hereunder shall become exercisable
on March 31, 1998; provided that the Warrants shall not become exercisable on
such date and shall be void and of no further force or effect if on or prior to
such
<PAGE> 2
-2-
date the Company's merger with Racing Champions Corporation shall have been
consummated; provided further that such date shall be extended to April 30,
1998 if, on or prior to March 31, 1998, the Company pays an aggregate of
$100,000 to the Holders.
Certain terms used in this Warrant are defined in Article V.
ARTICLE I
EXERCISE OF WARRANTS
1.1 Method of Exercise. To exercise this Warrant in whole or in
part, the Holder shall deliver to the Company, at the Warrant Agency, (a) this
Warrant, (b) a written notice, in substantially the form of the Subscription
Notice attached hereto, of such Holder's election to exercise this Warrant,
which notice shall specify the number of shares of Common Stock to be
purchased, whether such shares are to be voting or non-voting shares, the
denominations of the share certificate or certificates desired and the name or
names in which such certificates are to be registered, and (c) payment of the
Exercise Price with respect to such shares. Notwithstanding the foregoing,
this Warrant shall be exercisable only, to the extent and at the time or times,
that the Holder could legally take possession and title of such shares.
Payment made pursuant to clause (c) above may be made, at the option of the
Holder: (x) by cash, money order, certified or bank cashier's check or wire
transfer, (y) the surrender to the Company of securities of the Company having
a value equal to the aggregate Exercise Price, as determined in good faith by
the Company's board of directors, or (z) the delivery of a notice to the
Company that the Holder is exercising this Warrant by authorizing the Company
to reduce the number of shares of Common Stock subject to this Warrant by the
number of shares having an aggregate value equal to the aggregate Exercise
Price, as determined in good faith by the Company's board of directors.
The Company shall, as promptly as practicable and in any event within
three Business Days thereafter, execute and deliver or cause to be executed and
delivered, in accordance with such notice, a certificate or certificates
representing the aggregate number and type of shares of Common Stock specified
in said notice. The share certificate or certificates so
<PAGE> 3
-3-
delivered shall be in such denominations as may be specified in such notice or,
if such notice shall not specify denominations, shall be in the amount of the
number of shares of Common Stock for which the Warrant is being exercised, and
shall be issued in the name of the Holder or such other name or names as shall
be designated in such notice, subject to Section 1.4. Such certificate or
certificates shall be deemed to have been issued, and such Holder or any other
Person so designated to be named therein shall be deemed for all purposes to
have become a holder of record of such shares, as of the date the
aforementioned notice is received by the Company. If this Warrant shall have
been exercised only in part, the Company shall, at the time of delivery of the
certificate or certificates, deliver to the Holder a new Warrant evidencing the
rights to purchase the remaining shares of Common Stock called for by this
Warrant, which new Warrant shall in all other respects be identical with this
Warrant, or, at the request of the Holder, appropriate notation may be made on
this Warrant which shall then be returned to the Holder. The Company shall pay
all expenses, taxes and other charges payable in connection with the
preparation, issuance and delivery of share certificates and new Warrants,
except that, if share certificates or new Warrants shall be registered in a
name or names other than the name of the Holder, funds sufficient to pay all
transfer taxes payable as a result of such transfer shall be paid by the Holder
at the time of delivering the aforementioned notice of exercise or promptly
upon receipt of a written request of the Company for payment. Notwithstanding
the foregoing, only shares of nonvoting Common Stock shall be issued to a
Regulated Stockholder if such issuance would result in a violation of
Regulation Y.
1.2 Shares To Be Fully Paid and Nonassessable. All shares of Common
Stock issued upon the exercise of this Warrant shall be validly issued, fully
paid and nonassessable and free from all preemptive rights of any stockholder,
and from all taxes, liens and charges with respect to the issue thereof (other
than transfer taxes) and, if the Common Stock is then listed on any national
securities exchanges (as defined in the Exchange Act) or quoted on NASDAQ
within 120 days after completion of a public offering of the Company's Stock
pursuant to a Registration Statement under the Securities Act, be duly listed
or quoted thereon, as the case may be; provided the Company shall not be
required to cause any shares of nonvoting Common Stock to be listed or quoted.
1.3 No Fractional Shares To Be Issued. The Company shall not be
required to issue fractions of shares of Common Stock upon exercise of this
Warrant. If any fraction of a
<PAGE> 4
-4-
share would, but for this Section, be issuable upon any exercise of this
Warrant, and if the Company shall have elected not to issue such fraction of a
share, in lieu of such fractional share the Company shall pay to the Holder, in
cash, an amount equal to such fraction of the Fair Market Value per share of
outstanding Common Stock of the Company on the Business Day immediately prior
to the date of such exercise.
1.4 Share Legend. Each certificate for shares of Common Stock issued
upon exercise of this Warrant, unless at the time of exercise such shares are
registered under the Securities Act, shall bear the following legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION
AND MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS
REGISTERED OR QUALIFIED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS
OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT REGISTRATION, QUALIFICATION OR OTHER SUCH
ACTIONS ARE NOT REQUIRED UNDER SAID ACT. THE OFFERING OF THIS SECURITY HAS
NOT BEEN REVIEWED OR APPROVED BY ANY STATE SECURITIES ADMINISTRATOR. THIS
SECURITY IS ALSO BENEFITED BY AND SUBJECT TO A REGISTRATION RIGHTS
AGREEMENT, DATED AS OF DECEMBER 31, 1997, BETWEEN THE COMPANY AND THE OTHER
PARTIES LISTED THEREIN, A COPY OF WHICH IS ON FILE WITH THE COMPANY AND
WILL BE FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon
completion of a public distribution pursuant to a registration statement under
the Securities Act) shall also bear such legend unless, in the opinion of
counsel selected by the holder of such certificate (who may be an employee of
such holder) reasonably satisfactory to the Company, the securities represented
thereby are no longer subject to restrictions on resale under the Securities
Act.
1.5 Reservation; Authorization. The Company has reserved and will
keep available for issuance upon exercise of the Warrants the total number of
shares of Common Stock deliverable upon exercise of all Warrants from time to
time outstanding. The issuance of such shares has been duly and validly
authorized and, when issued and sold in accordance with the Warrants, such
shares will be duly and validly issued, fully paid and nonassessable.
<PAGE> 5
-5-
ARTICLE II
WARRANT AGENCY; TRANSFER, EXCHANGE
AND REPLACEMENT OF WARRANTS
2.1 Warrant Agency. If the Requisite Holders shall request
appointment of an independent warrant agency with respect to the Warrants, the
Company shall promptly appoint and thereafter maintain, at its own expense, an
agency, which agency may be the Company's then existing transfer agent (the
"Warrant Agency"), for certain purposes specified herein, and shall give prompt
notice of such appointment (and appointment of any successor Warrant Agency) to
all holders of Warrants. Until an independent Warrant Agency is so appointed,
the Company shall perform the obligations of the Warrant Agency provided herein
at its address set forth in Section 6.1 hereof or such other address as the
Company shall specify by notice to all Warrantholders.
2.2 Ownership of Warrant. The Company may deem and treat the Person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any
Person other than the Warrant Agency) for all purposes and shall not be
affected by any notice to the contrary, until presentation of this Warrant for
registration of transfer as provided in this Article II.
2.3 Transfer of Warrant. The Company agrees to maintain at the
Warrant Agency books for the registration of transfers of the Warrants, and
transfer of this Warrant and all rights hereunder shall be registered, in whole
or in part, on such books, upon surrender of this Warrant at the Warrant
Agency, together with a written assignment of this Warrant duly executed by the
Holder or his duly authorized agent or attorney, with (unless the Holder is the
original Warrantholder) signatures guaranteed by a bank or trust company or a
broker or dealer registered with the NASD, and funds sufficient to pay any
transfer taxes payable upon such transfer. Upon surrender the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denominations specified in the instrument of assignment,
and this Warrant shall promptly be cancelled. Notwithstanding the foregoing, a
Warrant may be exercised by a new holder in accordance with the procedures set
forth herein without having a new Warrant issued. The Warrant Agency shall not
be required to register any transfers if the Holder fails to furnish to the
Company, after a request therefor, an opinion of counsel reasonably
<PAGE> 6
-6-
satisfactory to the Company that such transfer is exempt from the registration
requirements of the Securities Act; provided that the Company agrees not to
request an opinion of counsel with respect to transfers by an affiliate of
Credit Agricole Indosuez to its employees so long as such persons furnish
documentation reasonably satisfactory to the Company.
2.4 Division or Combination of Warrants. This Warrant may be divided
or combined with other Warrants upon surrender hereof and of any Warrant or
Warrants with which this Warrant is to be combined at the Warrant Agency,
together with a written notice specifying the names and denominations in which
the new Warrant or Warrants are to be issued, signed by the holders hereof and
thereof or their respective duly authorized agents or attorneys. Subject to
compliance with Section 2.3 as to any transfer which may be involved in the
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
2.5 Loss, Theft, Destruction or Mutilation of Warrants. Upon receipt
of evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security reasonably satisfactory to
the Company (the original Warrantholder's or any institutional Holder's
indemnity being satisfactory indemnity in the event of loss, theft or
destruction of any Warrant owned by such holder), or, in the case of any such
mutilation, upon surrender and cancellation of such Warrant, the Company will
make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant,
a new Warrant of like tenor and representing the right to purchase the same
aggregate number of shares of Common Stock as provided for in such lost,
stolen, destroyed or mutilated Warrant.
2.6 Expenses of Delivery of Warrants. The Company shall pay all
expenses, taxes (other than transfer taxes or income taxes of a Holder) and
other charges payable in connection with the preparation, issuance and delivery
of Warrants and shares issuable upon exercise of the Warrants hereunder.
<PAGE> 7
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ARTICLE III
CERTAIN RIGHTS
3.1 Registration Rights. The Common Stock issuable upon exercise of
this Warrant is entitled to the benefits of the Registration Rights Agreement
dated as of December 31, 1997, by and among the Company and the other parties
listed therein (the "Registration Rights Agreement"). The Company shall keep a
copy of the Registration Rights Agreement, and any amendments thereto, at the
Warrant Agency and shall furnish copies thereof to the Holder upon request.
3.2 Contest and Appraisal Rights. Upon each determination of Fair
Market Value hereunder (other than a determination relating solely to setting
the value of fractional shares), the Company shall promptly give notice thereof
to all Warrantholders, setting forth in reasonable detail the calculation of
such Fair Market Value and the method and basis of determination thereof, as
the case may be. If the Requisite Holders shall disagree with such
determination and shall, by notice to the Company given within 30 days after
the Company's notice of such determination, elect to dispute such
determination, such dispute shall be resolved in accordance with this Section
3.2. In the event that a determination of Market Price, or a determination of
Fair Market Value solely involving Market Price, is disputed, such dispute
shall be submitted, at the Company's expense, to a New York Stock Exchange
member firm selected by the Company and acceptable to the Warrantholders, whose
determination of Fair Market Value and/or Market Price, as the case may be,
shall be binding on the Company and the Warrantholders. In the event that a
determination of Fair Market Value, other than a determination solely involving
Market Price, is disputed, such dispute shall be resolved through the
Appraisal Procedure.
3.3 Certain Covenants. The Company covenants and agrees that:
(a) Promptly after the effective date of the Credit Agreement dated
as of December 31, 1997 among the Company, Credit Agricole Indosuez, as Agent
and Collateral Agent, and the lending institutions party from time to time
thereto and, in any case, prior to the time when this Warrant becomes
exercisable, the Company will use its best efforts to amend its certificate of
incorporation to authorize shares of nonvoting securities in form and substance
satisfactory to each Holder.
<PAGE> 8
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(b) Until exercise or cancellation of this Warrant, as soon as
available but not later than ninety (90) days after the close of the fiscal
year of the Company, the Company will deliver to each Holder a consolidated
balance sheet of the Company as at the end of such year and the related
consolidated and consolidating statements of income, of stockholders' equity
and of cash flows for such year, such consolidated statements to be audited by
Arthur Andersen & Co. LLP or other "Big Six" accounting firm;
(c) Until exercise or cancellation of this Warrant, as soon as
available but not later than forty-five (45) days after the end of each
quarter, the Company will deliver to each Holder a consolidated balance sheet
of the Company as at the end of, and the related consolidated statements of
income, of stockholders' equity and of cash flows for the portion of the
Company's fiscal year then elapsed, all prepared in accordance with generally
accepted accounting principles;
(d) Until exercise or cancellation of this Warrant, as soon as
available, the Company will deliver to each Holder any and all management
letters provided to the Company's board of directors or audit committee by the
Company's auditors; and
(e) Until exercise or cancellation of this Warrant, as soon as
available, the Company will deliver to each Holder any and all reports filed by
the Company under the Securities Act and the Exchange Act.
3.4 Observation Rights. The initial holders of the Warrants (or
shares issued upon exercise thereof bearing the legend set forth in Section 1.4
hereof) shall, so long as they and their Affiliates own at least 50,000
Warrants (or 50,000 shares issued upon exercise thereof), be entitled to
designate one observer (an "Observer") to attend all meetings of the Board and
all committees thereof. The Company will give the Observer reasonable prior
notice (it being agreed that the same prior notice given to the Board shall be
deemed reasonable prior notice) in any matter permitted in the Company's
by-laws for notice to directors of the time and place of any proposed meeting
of the Board, such notice in all cases to include true and complete copies of
all documents furnished to any director in connection with such meeting. The
Observer will be entitled to be present in person as an observer to any such
meeting or, if a meeting is held by telephone conference, to participate
therein for the purpose of listening thereto. The Company will deliver to the
Observer copies of all papers which may be distributed from time to time to the
directors of the Company at
<PAGE> 9
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such time as such papers are so distributed to them, including copies of any
written consent. The right to an Observer shall terminate upon the earlier of
the closing of the merger with Racing Champions Corporation or December 31,
1999.
ARTICLE IV
ANTIDILUTION PROVISIONS
4.1 Adjustments Generally. The Exercise Price and the number of
shares of Common Stock (or other securities or property) issuable upon exercise
of this Warrant shall be subject to adjustment from time to time upon the
occurrence of certain events, as provided in this Article IV.
4.2 Common Stock Reorganization. If the Company shall after the date
of issuance of this Warrant subdivide its outstanding shares of Common Stock
into a greater number of shares or consolidate its outstanding shares of Common
Stock into a smaller number of shares (any such event being called a "Common
Stock Reorganization"), then (a) the Exercise Price shall be adjusted,
effective immediately after the record date at which the holders of shares of
Common Stock are determined for purposes of such Common Stock Reorganization,
to a price determined by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding on such record date before giving
effect to such Common Stock Reorganization and the denominator of which shall
be the number of shares of Common Stock outstanding after giving effect to such
Common Stock Reorganization, and (b) the number of shares of Common Stock
subject to purchase upon exercise of this Warrant shall be adjusted, effective
at such time, to a number determined by multiplying the number of shares of
Common Stock subject to purchase immediately before such Common Stock
Reorganization by a fraction, the numerator of which shall be the number of
shares outstanding after giving effect to such Common Stock Reorganization and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately before such Common Stock Reorganization.
4.3 Common Stock Distribution. (a) If the Company shall after the
date of issuance of this Warrant issue or otherwise sell or distribute any
shares of Common Stock, otherwise than pursuant to a Common Stock
Reorganization (any such event, including any event described in paragraphs (b)
and (c) below,
<PAGE> 10
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being herein called a "Common Stock Distribution"), if such Common Stock
Distribution shall be for a consideration per share less than the Fair Market
Value per share of outstanding Common Stock of the Company on the date of such
Common Stock Distribution, or on the first date of the announcement of such
Common Stock Distribution (whichever is less), then, effective upon such Common
Stock Distribution, the number of shares of Common Stock purchasable upon
exercise of this Warrant shall be adjusted by multiplying the number of shares
of Common Stock subject to purchase upon exercise of this Warrant by a
fraction, the numerator of which shall be the total number of shares of Common
Stock outstanding (and issuable upon exercise or conversion of outstanding
options, warrants and convertible securities) immediately prior to such Common
Stock Distribution plus the number of shares of Common Stock issued (or deemed
to be issued pursuant to paragraphs (b) and (c) below) in such Common Stock
Distribution and the denominator of which shall be an amount equal to the sum
of (A) the number of shares of Common Stock outstanding (and issuable upon
exercise or conversion of outstanding options, warrants and convertible
securities) immediately prior to such Common Stock Distribution, plus (B) the
number of shares of Common Stock which the aggregate consideration, if any,
received by the Company (determined as provided below) for such Common Stock
Distribution would buy at the Fair Market Value thereof, as of the date
immediately prior to such Common Stock Distribution or as of the date
immediately prior to the date of announcement of such Common Stock Distribution
(whichever is less). In the event of any such adjustment, the Exercise Price
for each Warrant shall be adjusted to a number determined by dividing the
Exercise Price immediately prior to such Common Stock Distribution by the
fraction used for purposes of the aforementioned adjustment.
The provisions of this paragraph (a), including by operation of
paragraph (b) or (c) below, shall not operate to increase the Exercise Price or
to reduce the number of shares of Common Stock subject to purchase upon
exercise of this Warrant.
(b) If the Company shall after the date of issuance of this Warrant
issue, sell, distribute or otherwise grant in any manner (whether directly or
by assumption in a merger or otherwise) any rights to subscribe for or to
purchase, or any warrants or options for the purchase of, Common Stock or any
stock or securities convertible into or exchangeable for Common Stock (such
rights, warrants or options being herein called "Options" and such convertible
or exchangeable stock or securities being herein called "Convertible
Securities"), whether or
<PAGE> 11
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not such Options or the rights to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which
Common Stock is issuable upon the exercise of such Options or upon conversion
or exchange of such Convertible Securities (determined by dividing (i) the
aggregate amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Company upon the exercise of
all such Options, plus, in the case of Options to acquire Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the exercise of
such Options) shall be less than the Fair Market Value per share of outstanding
Common Stock of the Company on the date of granting such Options or on the date
of announcement thereof (whichever is less), then for purposes of paragraph (a)
above, the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of such
Options shall be deemed to have been issued as of the date of granting of such
Options and thereafter shall be deemed to be outstanding and the Company shall
be deemed to have received as consideration such price per share, determined as
provided above, therefor. Except as otherwise provided in paragraph (d) below,
no additional adjustment of the number of shares of Common Stock purchasable
upon the exercise of this Warrant or of the Exercise Price shall be made upon
the actual exercise of such Options or upon conversion or exchange of such
Convertible Securities.
(c) If the Company shall after the date of issuance of this Warrant
issue, sell or otherwise distribute or grant (whether directly or by assumption
in a merger or otherwise) any Convertible Securities, whether or not the rights
to exchange or convert thereunder are immediately exercisable, and the price
per share for which Common Stock is issuable upon such conversion or exchange
(determined by dividing (i) the aggregate amount received or receivable by the
Company as consideration for the issue, sale or distribution of such
Convertible Securities, plus, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible Securities) shall be
less than the Fair
<PAGE> 12
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Market Value per share of outstanding Common Stock of the Company on the date
of such issue, sale or distribution or on the date of announcement thereof
(whichever is less), then, for purposes of paragraph (a) above, the total
maximum number of shares of Common Stock issuable upon conversion or exchange
of all such Convertible Securities shall be deemed to have been issued as of
the date of the issue, sale or distribution of such Convertible Securities and
thereafter shall be deemed to be outstanding and the Company shall be deemed to
have received as consideration such price per share, determined as provided
above, therefor. Except as otherwise provided in paragraph (d) below, no
additional adjustment of the number of shares of Common Stock purchasable upon
exercise of this Warrant or of the Exercise Price shall be made upon the actual
conversion or exchange of such Convertible Securities.
(d) If the purchase price provided for in any Option referred to in
paragraph (b) above, the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in paragraph
(b) or (c) above, or the rate at which any Convertible Securities referred to
in paragraph (b) or (c) above are convertible into or exchangeable for Common
Stock shall change at any time (other than under or by reason of provisions
designed to protect against, and having the effect of protecting against,
dilution upon an event which results in a related adjustment pursuant to this
Article IV), the number of shares of Common Stock purchasable upon exercise of
this Warrant and the Exercise Price then in effect shall forthwith be
readjusted (effective only with respect to any exercise of this Warrant after
such readjustment) to the number of shares of Common Stock purchasable upon
exercise of this Warrant and the Exercise Price which would then be in effect
had the adjustment made upon the issue, sale, distribution or grant of such
Options or Convertible Securities been made based upon such changed purchase
price, additional consideration or conversion rate, as the case may be;
provided, however, that such readjustment shall give effect to such change only
with respect to such Options and Convertible Securities as then remain
outstanding. If, at any time after any adjustment of the number of shares of
Common Stock purchasable upon exercise of each Warrant or the Exercise Price
shall have been made pursuant to this Article IV on the basis of the issuance
of any Option or Convertible Securities or after any new adjustments of the
number of shares of Common Stock purchasable upon exercise of each Warrant or
the Exercise Price shall have been made pursuant to this paragraph, the right
of conversion, exercise or exchange in such Option or Convertible Securities
shall expire or terminate, and the right of conversion, exercise
<PAGE> 13
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or exchange in respect of a portion of such Option or Convertible Securities
shall not have been exercised, such previous adjustment shall be rescinded and
annulled. Thereupon, a recomputation shall be made of the effect of such
Option or Convertible Securities on the basis of treating the number of shares
of Common Stock, if any, theretofore actually issued or issuable pursuant to
the previous exercise of such right of conversion, exercise or exchange as
having been issued on the date or dates of such conversion, exercise or
exchange and for the consideration actually received and receivable therefor,
and treating any such Option or Convertible Securities which then remain
outstanding as having been granted or issued immediately after the time of any
such issuance for the consideration per share for which shares of Common Stock
are issuable under such Option or Convertible Securities; and, if and to the
extent called for by the foregoing provisions of this Section on the basis
aforesaid, a new adjustment of the number of shares of Common Stock purchasable
upon exercise of each Warrant and the Exercise Price shall be made, which new
adjustment shall supersede (effective only with respect to any exercise of this
Warrant after such readjustment) the previous adjustment so rescinded and
annulled.
(e) If the Company shall after the date of issuance of this Warrant
pay a dividend or make any other distribution upon any capital stock of the
Company payable in Common Stock, Options or Convertible Securities, then, for
purposes of paragraph (a) above, such Common Stock, Options or Convertible
Securities, as the case may be, shall be deemed to have been issued or sold
without consideration.
(f) If any shares of Common Stock, Options or Convertible Securities
shall be issued, sold or distributed for cash, the consideration received
therefor shall be deemed to be the amount received by the Company therefor net
of any underwriting commissions or concessions paid or allowed by the Company
in connection therewith. If any shares of Common Stock, Options or Convertible
Securities shall be issued, sold or distributed for a consideration other than
cash, the amount of the consideration other than cash received by the Company
shall be deemed to be the Fair Market Value of such consideration, after
deduction of any expenses incurred and any underwriting commissions or
concessions paid or allowed by the Company in connection therewith. If any
shares of Common Stock, Options or Convertible Securities shall be issued in
connection with any merger in which the Company is the surviving corporation,
the amount of consideration therefor shall be deemed to be the Fair Market
Value of such portion of the assets and business of the
<PAGE> 14
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nonsurviving corporation as shall be attributable to such Common Stock, Options
or Convertible Securities, as the case may be. If any Options shall be issued
in connection with the issue and sale of other securities of the Company,
together comprising one integral transaction in which no specific consideration
is allocated to such Options by the parties thereto, such Options shall be
deemed to have been issued for consideration to be determined pursuant to the
Appraisal Procedure.
(g) If the Company shall take a record of the holders of the Common
Stock for the purpose of entitling them to receive a dividend or other
distribution payable in Common Stock, Options or Convertible Securities or to
subscribe for or purchase Common Stock, Options or Convertible Securities, then
such record date shall be deemed to be the date of the issue, sale,
distribution or grant of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(h) For purposes of determining whether any adjustment is required
pursuant to this Article IV, any security of the Company having rights
substantially equivalent to the Common Stock as to dividends or upon
liquidation, dissolution or winding up of the Company shall be treated as if
such security were Common Stock.
4.4 Dividends. If the Company shall after the date of issuance of
this Warrant issue or distribute to all or substantially all holders of shares
of Common Stock evidences of indebtedness, any other securities of the Company
or any property, assets or cash, and if such issuance or distribution does not
constitute a Common Stock Reorganization or a Common Stock Distribution (any
such nonexcluded event being herein called a "Dividend"), (i) the number of
shares of Common Stock subject to purchase upon exercise of this Warrant shall
be increased (but not decreased), effective immediately after the record date
at which the holders of shares of Common Stock are determined for purposes of
such Dividend, to a number determined by multiplying the number of shares of
Common Stock subject to purchase immediately before such Dividend by a
fraction, the numerator of which shall be the Fair Market Value per share of
outstanding Common Stock on such record date and the denominator of which shall
be the Fair Market Value per share of outstanding Common Stock of the Company
on such record date less the then Fair Market Value of the evidences of
indebtedness, securities, cash, or property or other assets issued or
distributed
<PAGE> 15
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in such Dividend with respect to one share of Common Stock, and (ii) the
Exercise Price shall be decreased (but not increased) to a price determined by
multiplying the Exercise Price then in effect by a fraction, the numerator of
which shall be the number of shares of Common Stock subject to purchase upon
exercise of this Warrant immediately before such Dividend and the denominator
of which shall be the number of shares of Common Stock subject to purchase upon
exercise of this Warrant immediately after such Dividend. If after the date of
issuance of this Warrant the Company repurchases shares of Common Stock for a
per share consideration which exceeds the Fair Market Value (as calculated
immediately prior to such repurchase), then the number of shares of Common
Stock purchasable upon exercise of this Warrant and the Exercise Price shall be
adjusted in accordance with the foregoing provisions, as if, in lieu of such
repurchases, the Company had (I) distributed a Dividend having a Fair Market
Value equal to the Fair Market Value of all property and cash expended in the
repurchases, and (II) effected a reverse split of the Common Stock in the
proportion required to reduce the number of shares of Common Stock outstanding
from (A) the number of such shares outstanding immediately before such first
repurchase to (B) the number of such shares outstanding immediately following
all the repurchases.
4.5 Capital Reorganization. If after the date of issuance of this
Warrant there shall be any consolidation or merger to which the Company is a
party, other than a consolidation or a merger in which the Company is a
continuing corporation and which does not result in any reclassification of, or
change (other than a Common Stock Reorganization or a change in par value), in,
outstanding shares of Common Stock, or any sale or conveyance of the property
of the Company as an entirety or substantially as an entirety (any such event
being called a "Capital Reorganization"), then, effective upon the effective
date of such Capital Reorganization, the Holder shall have the right to
purchase, upon exercise of this Warrant, the kind and amount of shares of stock
and other securities and property (including cash) which the Holder would have
owned or have been entitled to receive after such Capital Reorganization if
this Warrant had been exercised immediately prior to such Capital
Reorganization, assuming such holder (i) is not a person with which the Company
consolidated or into which the Company merged or which merged into the Company
or to which such sale or conveyance was made, as the case may be ("constituent
person"), or an Affiliate of a constituent person and (ii) failed to exercise
his rights of election, if any, as to the kind or amount of securities, cash or
other property receivable upon such
<PAGE> 16
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Capital Reorganization (provided that if the kind or amount of securities, cash
or other property receivable upon such Capital Reorganization is not the same
for each share of Common Stock held immediately prior to such consolidation,
merger, sale or conveyance by other than a constituent person or an Affiliate
thereof and in respect of which such rights of election shall not have been
exercised ("non-electing share"), then for the purposes of this Section the
kind and amount of shares of stock and other securities or other property
(including cash) receivable upon such Capital Reorganization shall be deemed to
be the kind and amount so receivable per share by a plurality of the
non-electing shares). As a condition to effecting any Capital Reorganization,
the Company or the successor or surviving corporation, as the case may be,
shall execute and deliver to each Warrantholder and to the Warrant Agency an
agreement as to the Warrantholder's rights in accordance with this Section 4.5,
providing for subsequent adjustments as nearly equivalent as may be practicable
to the adjustments provided for in this Article IV. The provisions of this
Section 4.5 shall similarly apply to successive Capital Reorganizations.
4.6 Certain Other Events. If any event occurs after the date of
issuance of this Warrant as to which the foregoing provisions of this Article
IV are not strictly applicable or, if strictly applicable, would not, in the
good faith judgment of the Board of Directors of the Company, fairly protect
the purchase rights of the Warrants in accordance with the essential intent and
principles of such provisions, then such Board shall make such adjustments in
the application of such provisions, in accordance with such essential intent
and principles, as shall be reasonably necessary, in the good faith opinion of
such Board, to protect such purchase rights as aforesaid, but in no event shall
any such adjustment have the effect of increasing the Exercise Price or
decreasing the number of shares of Common Stock subject to purchase upon
exercise of this Warrant, or otherwise adversely affect the Warrantholders.
4.7 Adjustment Rules. (a) Any adjustments pursuant to this Article
IV shall be made successively whenever an event referred to herein shall occur.
(b) If the Company shall set a record date to determine the holders
of shares of Common Stock for purposes of a Common Stock Reorganization, Common
Stock Distribution, Dividend or Capital Reorganization, and shall legally
abandon such action prior to effecting such Action, then no adjustment shall be
made pursuant to this Article IV in respect of such action.
<PAGE> 17
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(c) No adjustment in the amount of shares purchasable upon exercise
of this Warrant or in the Exercise Price shall be made hereunder unless such
adjustment increases or decreases such amount or price by one percent or more,
but any such lesser adjustment shall be carried forward and shall be made at
the time and together with the next subsequent adjustment which together with
any adjustments so carried forward shall serve to adjust such amount or price
by one percent or more.
(d) No adjustment in the Exercise Price shall be made hereunder if
such adjustment would reduce the exercise price to an amount below par value of
the Common Stock, which par value shall initially be $0.01 per share of Common
Stock.
(e) No adjustment shall be made pursuant to this Article IV in
respect of the issuance (or deemed issuance) or repurchase of shares of Common
Stock in connection with the exercise of the Warrants.
4.8 Proceedings Prior to Any Action Requiring Adjustment. As a
condition precedent to the taking of any action which would require an
adjustment pursuant to this Article IV, the Company shall take any action which
may be necessary, including obtaining regulatory approvals or exemptions, in
order that the Company may thereafter validly and legally issue as fully paid
and nonassessable all shares of Common Stock which the holders of Warrants are
entitled to receive upon exercise thereof.
4.9 Notice of Adjustment. Not less than 30 nor more than 40 days
prior to the record date or effective date, as the case may be, of any action
which requires or might require an adjustment or readjustment pursuant to this
Article IV, the Company shall give notice to each Warrantholder of such event,
describing such event in reasonable detail and specifying the record date or
effective date, as the case may be, and, if determinable, the required
adjustment and the computation thereof. If the required adjustment is not
determinable at the time of such notice, the Company shall give notice to each
Warrantholder of such adjustment and computation promptly after such adjustment
becomes determinable.
<PAGE> 18
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ARTICLE V
DEFINITIONS
The following terms, as used in this Warrant, have the following
respective meanings:
"Appraisal Procedure" means a procedure whereby two independent
appraisers, one chosen by the Company and one by the Requisite Holders, shall
mutually agree upon the determinations then the subject of appraisal. Each
party shall deliver a notice to the other appointing its appraiser within 15
days after the Appraisal Procedure is invoked. If within 30 days after
appointment of the two appraisers they are unable to agree upon the amount in
question, a third independent appraiser shall be chosen within 10 days
thereafter by the mutual consent of such first two appraisers or, if such first
two appraisers fail to agree upon the appointment of a third appraiser, such
appointment shall be made by the American Arbitration Association, or any
organization successor thereto, from a panel of arbitrators having experience
in the appraisal of the subject matter to be appraised. The decision of the
third appraiser so appointed and chosen shall be given within 30 days after the
selection of such third appraiser. If three appraisers shall be appointed and
the determination of one appraiser is disparate from the middle determination
by more than twice the amount by which the other determination is disparate
from the middle determination, then the determination of such appraiser shall
be excluded, the remaining two determinations shall be averaged and such
average shall be binding and conclusive on the Company and the Warrantholders;
otherwise the average of all three determinations shall be binding and
conclusive on the Company and the Warrantholders. The costs of conducting any
Appraisal Procedure shall be borne by the Warrantholders requesting such
Appraisal Procedure, except (a) the fees and expenses of the appraiser
appointed by the Company and any costs incurred by the Company shall be borne
by the Company, (b) the fees and expenses of the appraiser appointed by the
Requisite Holders and any costs incurred by the Requisite Holders shall be
borne by the Requisite Holders, and (c) the fees and expenses of a third
appraiser shall be borne equally by the Company and the Requisite Holders,
provided that if such Appraisal Procedure shall result in a determination that
is disparate by 5% or more to the benefit of the holder from the Company's
initial determination, all costs of conducting such Appraisal Procedure shall
be borne by the Company.
<PAGE> 19
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"Business Day" shall mean (a) if any class of Common Stock is listed
or admitted to trading on a national securities exchange, a day on which the
principal national securities exchange on which such class of Common Stock is
listed or admitted to trading is open for business or (b) if no class of Common
Stock is so listed or admitted to trading, a day on which any New York Stock
Exchange member firm is open for business.
"Capital Reorganization" shall have the meaning set forth in Section
4.5.
"Closing Price" with respect to any security on any day means (a) if
such security is listed or admitted for trading on a national securities
exchange, the reported last sales price regular way or, if no such reported
sale occurs on such day, the average of the closing bid and asked prices
regular way on such day, in each case as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which such class of security is listed or
admitted to trading, or (b) if such security is not listed or admitted to
trading on any national securities exchange, the last quoted sales price, or,
if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market on such day as reported by NASDAQ or any comparable
system then in use or, if not so reported, as reported by any New York Stock
Exchange member firm reasonably selected by the Company for such purpose.
"Common Stock" shall have the meaning set forth in the first paragraph
of this Warrant subject to adjustment pursuant to Article IV.
"Common Stock Distribution" shall have the meaning set forth in
Section 4.3(a).
"Common Stock Reorganization" shall have the meaning set forth in
Section 4.2.
"Company" shall have the meaning set forth in the first paragraph of
this Warrant.
"Convertible Securities" shall have the meaning set forth in Section
4.3(b).
"Dividend" shall have the meaning set forth in Section 4.4.
<PAGE> 20
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"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any similar or successor federal statute, and the rules and regulations of
the Securities and Exchange Commission (or its successor) thereunder, all as
the same shall be in effect at the time.
"Exercise Price" shall mean $3.50 per share of Common Stock purchased
pursuant to the exercise of this Warrant.
"Fair Market Value" means the fair market value of the business or
property in question, as determined in good faith by the Board of Directors of
the Company, provided, however, that the Fair Market Value of any security for
which a Closing Price is available shall be the Market Price of such security.
The Fair Market Value of the Common Stock shall be the Fair Market Value of the
entire equity interest in the Company and its subsidiaries as a going concern,
minus the Fair Market Value of the Company's equity securities (if any)
entitled to a preference over the Common Stock in the event of a liquidation of
the Company. Notwithstanding the foregoing, if, at any date of determination
of the Fair Market Value of the entire equity interest in the Company, the
Common Stock of any class shall then be publicly traded, the Fair Market Value
of the Company on such date shall be the Market Price on such date multiplied
by the number of shares of Common Stock on a fully diluted basis, giving effect
to any consideration to be paid to the Company in connection with the exercise
or conversion of any security.
"Holder" shall have the meaning set forth in the first paragraph of
this Warrant.
"Market Price" with respect to any security on any day means the
average of the daily Closing Prices of a share or unit of such security for the
10 consecutive Business Days ending on the most recent Business Day for which a
Closing Price is available; provided, however, that in the event that, in the
case of Common Stock, the Market Price is determined during a period following
the announcement by the Company of (A) a dividend or distribution of Common
Stock, or (B) any subdivision, combination or reclassification of Common Stock
and prior to the expiration of 20 Business Days after the ex-dividend date for
such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the Market Price
shall be appropriately adjusted to reflect the current market price per share
equivalent of Common Stock.
<PAGE> 21
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"NASD" means The National Association of Securities Dealers, Inc.
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"Options" shall have the meaning set forth in Section 4.3(b).
"Registration Rights Agreement" shall have the meaning set forth in
Section 3.1.
"Regulated Stockholder" shall mean (i) any stockholder that is subject
to the provisions of Regulation Y of the Board of Governors of the Federal
Reserve System (12 C.F.R. Part 225) or any successor to such regulation
("Regulation Y"), so long as such stockholder shall hold, and only with respect
to, any voting Common Stock or nonvoting Common Stock, or securities issued
upon conversion(s) of such Common Stock, (ii) any affiliate of a Regulated
Stockholder that is a transferee of any voting Common Stock or nonvoting Common
Stock, so long as such affiliate shall hold, and only with respect to, any such
Common Stock or securities issued upon conversion(s) of such Common Stock and
(iii) any Holder to which such Regulated Stockholder or any of its affiliates
has transferred any voting Common Stock or nonvoting Common Stock, so long as
such transferee shall hold, and only with respect to, any Common Stock
transferred by such stockholder or affiliates or any securities issued upon
conversion of such Common Stock but only if such Holder is (or any affiliate of
such Holder is) subject to the provisions of Regulation Y.
"Requisite Holders" means the Holders of Warrants to purchase a
majority of the shares of Common Stock issuable upon exercise of the Warrants
(excluding Warrants held by the Company or any of its subsidiaries) at the time
outstanding.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and any similar or successor federal statute, and the rules and regulations of
the Securities and Exchange Commission (or its successor) thereunder, all as
the same shall be in effect at the time.
"Warrant Agency" shall have the meaning set forth in Section 2.1.
"Warrantholder" means a holder of a Warrant.
<PAGE> 22
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"Warrants" shall have the meaning set forth in the first paragraph of
this Warrant.
ARTICLE VI
MISCELLANEOUS
6.1 Notices. All notices, requests, consents and other
communications provided for herein shall be in writing and shall be effective
upon delivery in person, faxed, or mailed by certified or registered mail,
return receipt requested, postage pre-paid, addressed as follows:
(i) if to the Company, to Wheels Sports Group, Inc., 149
Gasoline Alley Drive, Mooresville, North Carolina 27028, Telecopy No.
(704) 662-3005, Attention: Howard L. Correll, President; with a copy
to Berliner Zisser Walter & Gallegos, P.C., 1700 Lincoln Street, Suite
4700, Denver, Colorado 80203-4547, Telecopy No. (303) 830-1705,
Attention: Robert W. Walter, Esq;
(ii) if to an initial Holder of Warrants, to such Holder
c/o Credit Agricole Indosuez at 1211 Avenue of the Americas, 7th
Floor, New York, New York 10036, Telecopy No. (212) 278-2203,
Attention: Michael Arougheti, with a copy to Cahill Gordon & Reindel,
80 Pine Street, New York, New York 10005, Telecopy No. (212)
269-5420, Attention: John Schuster, Esq., and if to any subsequent
Holder of Warrants, to it at such address as may have been furnished
to the Company in writing by such Holder;
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of Warrants) or to
the Holders of Warrants (in the case of the Company) in accordance with the
provisions of this paragraph.
6.2 Waivers; Amendments. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be
<PAGE> 23
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amended, modified or waived with (and only with) the written consent of the
Company and the Requisite Holders; provided, however, that no such amendment,
modification or waiver shall, without the written consent of each Warrantholder
whose interest might be adversely affected by such amendment, modification or
waiver, (a) change the number of shares of Common Stock subject to purchase
upon exercise of this Warrant, the Exercise Price or provisions for payment
thereof or (b) amend, modify or waive the provisions of this Section or
Articles III or IV. The provisions of the Registration Rights Agreement may be
amended, modified or waived only in accordance with the respective provisions
thereof.
Any such amendment, modification or waiver effected pursuant to this
Section or the applicable provisions of the Registration Rights Agreement shall
be binding upon the holders of all Warrants and Warrant Shares, upon each
future holder thereof and upon the Company. In the event of any such
amendment, modification or waiver the Company shall give prompt notice thereof
to all Warrantholders and, if appropriate, notation thereof shall be made on
all Warrants thereafter surrendered for registration of transfer or exchange.
No notice or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances.
6.3 Governing Law. This Warrant shall be construed in accordance
with and governed by the laws of the State of New York without regard to
principles of conflicts of law.
6.4 Survival of Agreements; Representations and Warranties etc. All
representations, warranties and covenants made by the Company herein or in any
certificate or other instrument delivered by or on behalf of it in connection
with the Warrants shall be considered to have been relied upon by the Holder
and shall survive the issuance and delivery of the Warrants, regardless of any
investigation made by the Holder, and shall continue in full force and effect
so long as any Warrant is outstanding. All statements in any such certificate
or other instrument shall constitute representations and warranties hereunder.
6.5 Covenants to Bind Successor and Assigns. All covenants,
stipulations, promises and agreements in this Warrant contained by or on behalf
of the Company shall bind its successors and assigns, whether so expressed or
not.
<PAGE> 24
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6.6 Severability. In case any one or more of the provisions
contained in the Registration Rights Agreement or this Warrant shall be
invalid, illegal or unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby. The parties shall endeavor in
good faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
6.7 Section Headings. The section headings used herein are for
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
6.8 No Rights as Stockholder. This Warrant shall not entitle the
Holder to any rights as a stockholder of the Company.
6.9 No Impairment. The Company shall not by any action including,
without limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder against impairment. Without limiting the generality of
the foregoing, the Company will (a) not, directly or indirectly, increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the amount payable therefor upon such exercise immediately prior
to such increase in par value, (b) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, and
(c) use its commercially reasonable best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.
6.10 Submission to Jurisdiction; Venue. (a) Any legal action or
proceeding with respect to this Warrant may be brought in the courts of the
State of New York or of the United States for the Southern District of New
York, and, by execution and delivery of this Warrant, the Company irrevocably
accepts
<PAGE> 25
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for itself and in respect of its property, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts. The Company further
irrevocably consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to CT Corporation Systems at its
address at 1633 Broadway, New York, New York 10019, such service to become
effective 30 days after such mailing. Nothing herein shall affect the right of
the Holder to serve process in any other manner permitted by law or to commence
legal proceedings or otherwise proceed against the Company in any other
jurisdiction.
(b) The Company hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or or in connection with this Warrant brought in the
courts referred to in clause (a) above and hereby further irrevocably waives
and agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum.
<PAGE> 26
IN WITNESS WHEREOF, Wheel Sports Group, Inc. has caused this Warrant
to be executed in its corporate name by one of its officers thereunto duly
authorized, as of the day and year first above written.
Wheel Sports Group, Inc.
By: /s/ HOWARD L. GOFFER, JR.
-------------------------------
Name: Howard L. Goffer, Jr.
Title: President
<PAGE> 27
SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
TO :
The undersigned hereby irrevocably elects to exercise the right to
purchase represented by the attached Warrant for, and to purchase thereunder,
_________________ shares of voting [non-voting] Common Stock, as provided for
therein, and tenders herewith payment of the Exercise Price in full in
accordance with the terms of the attached Warrant.
Please issue a certificate or certificates for such shares of Common
Stock in the following name or names and denominations:
If said number of shares shall not be all the shares issuable upon
exercise of the attached Warrant, a new Warrant is to be issued in the name of
the undersigned for the balance remaining of such shares less any fraction of a
share paid in cash.
Dated: , 19
------------- --
------------------------------------------
Note: The above signature should
correspond exactly with the name on
the face of the attached Warrant or
with the name of the assignee
appearing in the assignment form
below.
<PAGE> 28
ASSIGNMENT
(To be executed upon assignment of Warrant)
For value received, ______________________________ hereby sells,
assigns and transfers unto __________________ the attached Warrant, together
with all rights, title and interest therein, and does hereby irrevocably
constitute and appoint _________________ attorney to transfer said Warrant on
the books of ____________________, with full power of substitution in the
premises.
------------------------------------------
Note: The above signature should
correspond exactly with the name
on the face of the attached
Warrant.
