<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 6, 1995
THE TOPPS COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-15817 11-2849283
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
One Whitehall Street, New York, New York 10004
(Address of principal executive offices); (Zip Code)
Registrant's telephone number, including area code: 212-376-0300
Not Applicable
(Former name or former address, if changed from last report)
Page 1 of a total of_____ pages. Exhibit index appears on page _.
<PAGE>2
Item 2. Acquisition or Disposition of Assets
On July 6, 1995, The Topps Company, Inc. (the "Company") completed
the acquisition of Merlin Publishing International plc ("Merlin"), a company
incorporated in England, pursuant to an agreement for the acquisition of the
issued share capital of Merlin (the "Share Purchase Agreement"), a copy of
which is incorporated herein by reference as Exhibit 1. Pursuant to the terms
of the Share Purchase Agreement, the Company purchased the Shares from the
shareholders of Merlin for an aggregate consideration of U.S.$46,244,700.
The Company financed the acquisition using a term loan with a five
year amortization schedule provided by NationsBank N.A. (Carolinas)
("NationsBank") as Agent and as Lender, Chemical Bank ("Chemical") a
Documentation Agent and as Lender and a syndication of additional lenders
(the "Financing"). A copy of the executed Credit Agreement, dated as of
June 30, 1995 among the Company, NationsBank, Chemical and the additional
lenders, is attached hereto as Exhibit 2 and is incorporated herein by
reference.
The foregoing summary of the Share Purchase Agreement is qualified in
its entirety by reference to such agreement, a copy of which has been
incorporated by reference as an Exhibit hereto.
On July 6, 1995, the Company issued a press release relating to the
closing of the Acquisition, a copy of which is attached hereto as Exhibit 6
and incorporated herein by reference.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired: Attached hereto as
Exhibit 7 are audited financial statements of Merlin Publishing
International plc ("Merlin"), the entire issued share capital of
which was purchased by the Registrant on July 6, 1995,
for the fiscal year ended January 31, 1995 as well as the Report
of Merlin's Independent Public Accountants (which is attached
hereto as Exhibit 8). Such financial statements are presented in
accordance with accounting principles generally accepted in the
United Kingdom (U.K. GAAP). There are no differences between
U.K. GAAP and accounting principles generally accepted in the
United States which would have a material impact on net income or
shareholders' equity.
(b) Pro forma financial information: Attached hereto as Exhibit 10
are the unaudited pro forma financial statements of The Topps
Company, Inc. (the "Company") which give effect to the
acquisition of the entire issued share capital of Merlin
Publishing International plc ("Merlin") by the Company pursuant
to an Agreement for the purchase of the issued share capital of
Merlin dated May 17, 1995. The pro forma consolidated condensed
balance
<PAGE>3
sheet assumes that the acquisition occurred on February 25, 1995. The pro
forma consolidated condensed statements of operations assume that the
acquisition occurred as of the beginning of the fiscal year then ended. The
pro forma consolidated condensed financial statements are not necessarily
indicative of the results that actually would have been attained if the
acquisition had been in effect on the dates indicated or which may be attained
in the future. Such statements should be read in conjunction with the notes
to such pro forma statements and historical statements and notes of Merlin and
the Company and its subsidiaries.
(c) Exhibits:
Exhibit 1 Agreement for the acquisition of the issued share capital
of Merlin Publishing International plc, dated as of
May 17, 1995, between The Topps Company, Inc. and the
persons listed on the first schedule thereto (incorporated
herein by reference to Exhibit 10.24 of Registrant's Annual
Report on Form 10-K filed on May 22, 1995).
Exhibit 2 Credit Agreement, dated as of June 30, 1995, among The
Topps Company, Inc., NationsBank, N.A. (Carolinas),
Chemical and the additional lenders party thereto.
Exhibit 3 Stock Pledge Agreement, dated as of June 30, 1995,
between The Topps Company, Inc. and NationsBank,
N.A. (Carolinas)
Exhibit 4 Form of Subsidiary Guaranty Agreement, among
guarantors party thereto and NationsBank, N.A.
(Carolinas)
Exhibit 5 Cash Collateral Agreement, dated June 30, 1995,
between The Topps Company, Inc. and NationsBank, N.A.
(Carolinas)
Exhibit 6 Text of Press Release issued by The Topps Company, Inc.,
dated July 6, 1995.
Exhibit 7 Audited financial statements of Merlin Publishing
International plc for the fiscal year ended
January 31, 1995
Exhibit 8 Report of Independent Public Accountants dated
March 23, 1995
Exhibit 9 Consent of Independent Public Accountants dated
July 7, 1995
Exhibit 10 Unaudited pro forma financial statements of The
Topps Company, Inc. and accompanying notes
<PAGE>4
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.
THE TOPPS COMPANY, INC.
By: /s/ John Perillo
Name: John Perillo
Title: Vice President - Operations
July 10, 1995
<PAGE>5
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page No.
In Sequentially
Exhibit No. Description Numbered Schedule
<S> <C> <C>
1 Agreement for the acquisition of the issued share capital of
Merlin Publishing International plc, dated as of May 17, 1995,
between The Topps Company, Inc. and the persons listed on the
first schedule thereto (incorporated herein by reference to
Exhibit 10.24 of Registrant's Annual Report on Form 10-K filed
on May 22, 1995).
2 Credit Agreement, dated as of June 30, 1995, among The Topps
Company, Inc., NationsBank, N.A. (Carolinas), Chemical and the
additional lenders party thereto.
3 Stock Pledge Agreement, dated as of June 30, 1995,
between The Topps Company, Inc. and NationsBank,
N.A. (Carolinas)
4 Form of Subsidiary Guaranty Agreement, among
guarantors party thereto and NationsBank, N.A.
(Carolinas)
5 Cash Collateral Agreement, dated June 30, 1995,
between The Topps Company, Inc. and NationsBank, N.A.
(Carolinas)
6 Text of Press Release issued by The Topps Company, Inc., dated
July 6, 1995.
7 Audited financial statements of Merlin Publishing
International plc for the fiscal year ended January 31, 1995.
8 Report of Independent Public Accountants dated March 23, 1995.
9 Consent of Independent Public Accountants dated July 7, 1995
10 Unaudited pro forma financial statements of The Topps Company,
Inc. and accompanying notes
</TABLE>
<PAGE>1
_________________________________________________________________
CREDIT AGREEMENT
by and among
THE TOPPS COMPANY, INC.
as Borrower,
NATIONSBANK, NATIONAL ASSOCIATION (CAROLINAS),
as Agent and as Lender,
CHEMICAL BANK,
as Documentation Agent and as Lender
and
THE LENDERS PARTY HERETO FROM TIME TO TIME
June 30, 1995
_________________________________________________________________
<PAGE>2
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Terms
1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . 26
1.3. UCC Terms . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE II
The Term Loan
2.1. Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.2. Term Loan Advance . . . . . . . . . . . . . . . . . . . . . 26
2.3. Payment of Principal . . . . . . . . . . . . . . . . . . . . 27
2.4. Payment of Interest . . . . . . . . . . . . . . . . . . . . 27
2.5. Manner of Payment . . . . . . . . . . . . . . . . . . . . . 28
2.6. Optional Prepayments . . . . . . . . . . . . . . . . . . . . 28
2.7. Mandatory Prepayments. . . . . . . . . . . . . . . . . . 29
2.8. Term Notes . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.9. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . 32
2.10. Interest Periods . . . . . . . . . . . . . . . . . . . . . . 32
2.11. Conversions and Elections of Subsequent Interest Periods . . 32
2.12. Pro Rata Payments . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE III
The Revolving Credit Facility
3.1. Revolving Loans . . . . . . . . . . . . . . . . . . . . . . 33
3.2. Payment of Interest . . . . . . . . . . . . . . . . . . . . 35
3.3. Payment of Principal . . . . . . . . . . . . . . . . . . . . 36
3.4. Non-Conforming Payments . . . . . . . . . . . . . . . . . . 36
3.5. Revolving Credit Notes . . . . . . . . . . . . . . . . . . . 37
3.6. Pro Rata Payments . . . . . . . . . . . . . . . . . . . . . 37
3.7. Reductions . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.8. Conversions and Elections of Subsequent Interest Periods . . 38
3.9. Unused Fee . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.10. Deficiency Advances . . . . . . . . . . . . . . . . . . . . 39
3.11. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE IV
Letters of Credit
4.1. Letters of Credit . . . . . . . . . . . . . . . . . . . . . 39
<PAGE>3
4.2. Reimbursement . . . . . . . . . . . . . . . . . . . . . . . 40
4.3. Letter of Credit Facility Fees . . . . . . . . . . . . . . . 44
4.4. Administrative Fees . . . . . . . . . . . . . . . . . . . . 44
4.5. Unused Fee . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE V
Security
5.1. Security . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.2. Further Assurances . . . . . . . . . . . . . . . . . . . . . 45
5.3. Chief Executive Offices . . . . . . . . . . . . . . . . . . 45
ARTICLE VI
Yield Protection and Illegality
6.1. Additional Costs . . . . . . . . . . . . . . . . . . . . . . 45
6.2. Suspension of Loans . . . . . . . . . . . . . . . . . . . . 47
6.3. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.4. Compensation . . . . . . . . . . . . . . . . . . . . . . . . 48
6.5. Alternate Loan and Lender . . . . . . . . . . . . . . . . . 49
6.6. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VII
Conditions to Making Loans and Issuing Letters of Credit
7.1. Conditions of Initial Advance . . . . . . . . . . . . . . . 51
7.2. Conditions of Revolving Loans . . . . . . . . . . . . . . . 54
ARTICLE VIII
Representations and Warranties
8.1. Organization and Authority . . . . . . . . . . . . . . . . . 55
8.2. Related Transaction Documents . . . . . . . . . . . . . . . 56
8.3. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.4. Subsidiaries and Stockholders . . . . . . . . . . . . . . . 57
8.5. Ownership Interests . . . . . . . . . . . . . . . . . . . . 57
8.6. Financial Condition . . . . . . . . . . . . . . . . . . . . 57
8.7. Title to Properties . . . . . . . . . . . . . . . . . . . . 58
8.8. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.9. Other Agreements . . . . . . . . . . . . . . . . . . . . . . 59
8.10. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.11. Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . 59
8.12. Investment Company . . . . . . . . . . . . . . . . . . . . . 60
8.13. Patents, Etc. . . . . . . . . . . . . . . . . . . . . . . . 60
8.14. No Untrue Statement . . . . . . . . . . . . . . . . . . . . 60
8.15. No Consents, Etc. . . . . . . . . . . . . . . . . . . . . . 60
<PAGE>4
8.16. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 61
8.17. No Default . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.18. Hazardous Materials . . . . . . . . . . . . . . . . . . . . 62
8.19. Employment Matters . . . . . . . . . . . . . . . . . . . . . 62
8.20. Representations and Warranties from the Merlin Transaction
Documents . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.21. Seller Rights. . . . . . . . . . . . . . . . . . . . . . . . 63
8.22. Merlin License Agreements. . . . . . . . . . . . . . . . . . 63
8.23. Merlin Information. . . . . . . . . . . . . . . . . . . . . 63
8.24. Place of Business. . . . . . . . . . . . . . . . . . . . . . 63
8.25. No Change in Consolidated Net Worth. . . . . . . . . . . . . 63
ARTICLE IX
Affirmative Covenants
9.1. Financial Reports, Etc. . . . . . . . . . . . . . . . . . . 64
9.2. Maintain Properties . . . . . . . . . . . . . . . . . . . . 65
9.3. Existence, Qualification, Etc. . . . . . . . . . . . . . . . 65
9.4. Regulations and Taxes . . . . . . . . . . . . . . . . . . . 66
9.5. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.6. True Books . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.7. Payment of Other Indebtedness . . . . . . . . . . . . . . . 66
9.8. Right of Inspection . . . . . . . . . . . . . . . . . . . . 67
9.9. Observe all Laws . . . . . . . . . . . . . . . . . . . . . . 67
9.10. Governmental Licenses . . . . . . . . . . . . . . . . . . . 67
9.11. Covenants Extending to Other Persons . . . . . . . . . . . . 67
9.12. Officer's Knowledge of Default . . . . . . . . . . . . . . . 67
9.13. Suits or Other Proceedings . . . . . . . . . . . . . . . . . 67
9.14. Notice of Discharge of Hazardous Material or Environmental
Complaint . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.15. Environmental Compliance . . . . . . . . . . . . . . . . . . 68
9.16. Indemnification . . . . . . . . . . . . . . . . . . . . . . 68
9.17. Further Assurances . . . . . . . . . . . . . . . . . . . . . 69
9.18. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . 69
9.19. Termination Events . . . . . . . . . . . . . . . . . . . . . 69
9.20. ERISA Notices . . . . . . . . . . . . . . . . . . . . . . . 69
9.21. Continued Operations . . . . . . . . . . . . . . . . . . . . 69
9.22. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . 70
9.23. New Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 70
9.24. Rate Hedging Obligations . . . . . . . . . . . . . . . . . . 71
ARTICLE X
Negative Covenants
10.1. Consolidated Leverage Ratio . . . . . . . . . . . . . . . . 72
10.2. Consolidated Fixed Charge Ratio . . . . . . . . . . . . . . 72
10.3. Consolidated Net Worth . . . . . . . . . . . . . . . . . . . 72
10.4. Cash Balances . . . . . . . . . . . . . . . . . . . . . . . 72
<PAGE>5
10.5. Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.6. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.7. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 74
10.8. Transfer of Assets . . . . . . . . . . . . . . . . . . . . . 75
10.9. Investments; Acquisitions . . . . . . . . . . . . . . . . . 75
10.10. Merger or Consolidation . . . . . . . . . . . . . . . . . . 76
10.11. Transactions with Affiliates . . . . . . . . . . . . . . . . 76
10.12. Compliance with ERISA . . . . . . . . . . . . . . . . . . . 77
10.13. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . 77
10.14. Dissolution, etc. . . . . . . . . . . . . . . . . . . . . . 77
10.15. Rate Hedging Obligations . . . . . . . . . . . . . . . . . . 78
10.16. Restricted Payments . . . . . . . . . . . . . . . . . . . . 78
10.17. Reimbursement of Expenses . . . . . . . . . . . . . . . . . 78
10.18. Change in Accountants . . . . . . . . . . . . . . . . . . . 79
10.19. Limitations on Sales and Leasebacks . . . . . . . . . . . . 79
10.20. Negative Pledge Clauses . . . . . . . . . . . . . . . . . . 79
10.21. Change in Control . . . . . . . . . . . . . . . . . . . . . 79
10.22. Merlin Transaction Documents . . . . . . . . . . . . . . . . 80
ARTICLE XI
Events of Default and Acceleration
11.1. Events of Default . . . . . . . . . . . . . . . . . . . . . 80
11.2. Agent to Act . . . . . . . . . . . . . . . . . . . . . . . . 83
11.3. Cumulative Rights . . . . . . . . . . . . . . . . . . . . . 83
11.4. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 84
11.5. Allocation of Proceeds . . . . . . . . . . . . . . . . . . . 84
ARTICLE XII
The Agent
12.1. Appointment . . . . . . . . . . . . . . . . . . . . . . . . 85
12.2. Attorneys-in-fact . . . . . . . . . . . . . . . . . . . . . 85
12.3. Limitation on Liability . . . . . . . . . . . . . . . . . . 85
12.4. Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . 86
12.5. No Representations . . . . . . . . . . . . . . . . . . . . . 86
12.6. Indemnification . . . . . . . . . . . . . . . . . . . . . . 86
12.7. Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
12.8. Resignation . . . . . . . . . . . . . . . . . . . . . . . . 87
12.9. Sharing of Payments, etc . . . . . . . . . . . . . . . . . . 88
12.10. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
12.11. Notice to Lenders . . . . . . . . . . . . . . . . . . . . . 88
ARTICLE XIII
Miscellaneous
13.1. Assignments and Participations . . . . . . . . . . . . . . . 89
<PAGE>6
13.2. ERISA Matters . . . . . . . . . . . . . . . . . . . . . . . 91
13.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 91
13.4. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
13.5. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . 93
13.6. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 93
13.7. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . 93
13.8. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 94
13.9. Termination . . . . . . . . . . . . . . . . . . . . . . . . 94
13.10. Indemnification; Limitation of Liability . . . . . . . . . . 95
13.11. Headings and References . . . . . . . . . . . . . . . . . . 96
13.12. Severability . . . . . . . . . . . . . . . . . . . . . . . . 96
13.13. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 96
13.14. Agreement Controls . . . . . . . . . . . . . . . . . . . . . 96
13.15. Usury Savings Clause . . . . . . . . . . . . . . . . . . . . 97
13.16. Governing Law; Waiver of Jury Trial . . . . . . . . . . . . 97
13.17. Confidentiality . . . . . . . . . . . . . . . . . . . . . . 98
EXHIBIT A Applicable Commitment Percentages . . . . . . . . . . . . . A-1
EXHIBIT B Form of Assignment and Acceptance . . . . . . . . . . . . . B-1
EXHIBIT C Notice of Appointment (or Revocation) of Authorized
Representative . . . . . . . . . . . . . . . . . . . . . . . C-1
EXHIBIT D Form of Borrowing Notice . . . . . . . . . . . . . . . . . . D-1
EXHIBIT E Form of Interest Rate Selection Notice . . . . . . . . . . . E-1
EXHIBIT F Form of Term Note . . . . . . . . . . . . . . . . . . . . . F-1
EXHIBIT G Form of Revolving Note . . . . . . . . . . . . . . . . . . . G-1
EXHIBIT H Form of Stock Pledge Agreement . . . . . . . . . . . . . . . H-1
EXHIBIT I Form of Subsidiary Guaranty . . . . . . . . . . . . . . . . I-1
EXHIBIT J-1 Form of Opinion of Borrower's U.S. Counsel . . . . . . . . . J-1
EXHIBIT J-2 Form of Opinion of Borrower's U.K. Counsel . . . . . . . . . J-2
EXHIBIT K Form of Compliance Certificate . . . . . . . . . . . . . . . K-1
EXHIBIT L Form of Cash Collateral Agreement . . . . . . . . . . . . . L-1
Schedule 5.3 Principal Office and Collateral Locations . . . . . . . S-1
Schedule 8.4 Subsidiaries and Ownership Interests . . . . . . . . . S-2
Schedule 8.6 Indebtedness . . . . . . . . . . . . . . . . . . . . . S-3
Schedule 8.7 Liens . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Schedule 8.10 Litigation . . . . . . . . . . . . . . . . . . . . . . S-5
Schedule 8.16 ERISA Matters . . . . . . . . . . . . . . . . . . . . . S-6
Schedule 8.19 Employment Matters . . . . . . . . . . . . . . . . . . S-7
<PAGE>7
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of June 30, 1995 (the "Agreement"), is
made by and among THE TOPPS COMPANY, INC., a Delaware corporation having its
principal place of business in New York, New York (the "Borrower"),
NATIONSBANK, NATIONAL ASSOCIATION (CAROLINAS), a national banking association
organized and existing under the laws of the United States, in its capacity as
a Lender ("NationsBank"), and each other financial institution executing and
delivering a signature page hereto and each other financial institution which
may hereafter execute and deliver an instrument of assignment with respect to
this Agreement pursuant to Section 13.1 hereof (hereinafter such financial
institutions may be referred to individually as a "Lender" or collectively as
the "Lenders"), CHEMICAL BANK, a banking corporation organized and existing
under the laws of the state of New York, in its capacity as Documentation
Agent, and NATIONSBANK, NATIONAL ASSOCIATION (CAROLINAS), a national banking
association organized and existing under the laws of the United States, in its
capacity as agent for the Lenders (in such capacity, and any successor
appointed in accordance with the terms of Section 12.8 hereof, the "Agent");
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lenders make available to
the Borrower a term loan facility in the principal amount of $50,000,000, the
proceeds of which are to be used to effect the Merlin Transaction (as
hereinafter defined), a revolving credit facility of up to $13,000,000, the
proceeds of which are to be used to repay in full the Prior Facility (as
hereinafter defined) and for general working capital needs, and a letter of
credit facility of up to $2,000,000 for the issuance of standby letters of
credit; and
WHEREAS, the Lenders are willing to make such term loan, revolving credit
and letter of credit facilities available to the Borrower upon the terms and
conditions set forth herein;
NOW, THEREFORE, the Borrower, the Lenders and the Agent hereby agree as
follows:
ARTICLE I
Definitions and Terms
1.1. Definitions. For the purposes of this Agreement, in addition to the
definitions set forth above, the following terms shall have the respective
meanings set forth below:
"Acquisition" means the acquisition of (i) a controlling equity
interest in another Person (including the purchase of
<PAGE>8
an option, warrant or convertible or similar type security to acquire
such a controlling interest at the time it becomes exercisable
by the holder thereof), whether by purchase of such equity interest
or upon exercise of an option or warrant for, or conversion of securities
into, such equity interest, or (ii) assets of another Person for which
the Cost of Acquisition equals or exceeds two percent (2%) of
Consolidated Total Assets determined as of the last day of the fiscal
quarter of the Borrower immediately preceding the date of the agreement
related to such Acquisition;
"Acquisition Agreement" means that certain Agreement for the
acquisition of the issued share capital of Merlin, dated as of May 17,
1995 by and among the Borrower, the Seller and Merlin;
"Advance" means any of (i) the borrowing under the Term Loan
Facility or (ii) a borrowing under the Revolving Credit Facility
consisting of a Base Rate Loan or a Eurodollar Rate Loan;
"Affiliate" means any Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is
under common control with the Borrower; or (ii) which beneficially owns
or holds 10% or more of any class of the outstanding voting stock (or in
the case of a Person which is not a corporation, 10% or more of the
equity interest) of the Borrower; or 10% or more of any class of the
outstanding voting stock (or in the case of a Person which is not a
corporation, 10% or more of the equity interest) of which is beneficially
owned or held by the Borrower or any Person described in clause (i)
above. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting stock, by
contract or otherwise;
"Applicable Commitment Percentage" means, with respect to each
Lender at any time, a fraction, the numerator of which shall be such
Lender's Total Loan Commitment and the denominator of which shall be the
sum of the Total Loan Commitments of all Lenders, which Applicable
Commitment Percentage for each Lender as of the Closing Date is as set
forth in Exhibit A attached hereto and incorporated herein by reference;
provided that the Applicable Commitment Percentage of each Lender shall
be increased or decreased to reflect any assignments to or by such Lender
effected in accordance with Section 13.1 hereof;
"Applicable Interest Addition" means for each Loan that percent per
annum set forth below, which shall be based upon the Consolidated
Leverage Ratio for the Four-Quarter Period
<PAGE>9
ended on the most recent Determination Date as specified below:
Applicable
Interest Addition
Consolidated Leverage Base Eurodollar
Ratio Rate Rate
(a) Greater than or equal
to 1.50 to 1.00 0 1.25%
(b) Less than 1.50 to 1.00
and greater than or equal
to 1.00 to 1.00 0 1.00%
(c) Less than
1.00 to 1.00 0 .75%
The Applicable Interest Addition shall be established at the end of each
fiscal quarter of the Borrower (the "Determination Date"), except the
first Determination Date shall be August 31, 1995 and prior to such time
the Applicable Interest Addition for Eurodollar Rate Loans shall be
1.25%. Any change in the Applicable Interest Addition following each
Determination Date shall be determined based upon the computations set
forth in the certificate furnished to the Agent pursuant to Section
9.1(a)(ii) and Section 9.1(b)(ii) hereof, subject to review and approval
of such computations by the Agent and shall be effective (a) in the case
of Base Rate Loans, from the date such certificate is received (or, if
earlier, the date such certificate was required to be delivered) with
respect to all Base Rate Loans then outstanding, and (b) in the case of
Eurodollar Rate Loans, for all Interest Periods commencing on or after
the date such certificate is received (or, if earlier, the date such
certificate was required to be delivered), and in each case, until the
date a new certificate is delivered or is required to be delivered,
whichever shall first occur;
"Applicable Unused Fee" means that percent per annum set forth
below, which shall be based upon the Consolidated Leverage Ratio for the
Four-Quarter Period most recently ended as specified below:
Applicable
Consolidated Leverage Unused
Ratio Fee
(a) Greater than or equal
to 1.50 to 1.00 .375%
(b) Less than 1.50 to 1.00 .25%
<PAGE>10
The Applicable Unused Fee shall be established at the end of each
fiscal quarter of the Borrower (the "Determination Date"),
except the first Determination Date shall be August 31, 1995 and
prior to such time the Applicable Unused Fee shall be .375%.
Any change in the Applicable Unused Fee following each
Determination Date shall be determined based upon the computations
set forth in the certificate furnished to the Agent pursuant to
Section 9.1(a)(ii) and Section 9.1(b)(ii) hereof, subject to review
and approval of such computations by the Agent and shall be
effective from the date such certificate is received (or, if earlier,
the date such certificate was required to be delivered) until the
date a new certificate is delivered or is required to be delivered,
whichever shall first occur;
"Applications and Agreements for Letters of Credit" means,
collectively, the Applications and Agreements for Letters of Credit, or
similar documentation, executed by the Borrower from time to time and
delivered to the Issuing Bank to support the issuance of Letters of
Credit;
"Assignment and Acceptance" shall mean an Assignment and Acceptance
in the form of Exhibit B (with blanks appropriately filled in) delivered
to the Agent in connection with an assignment of a Lender's interest
under this Agreement pursuant to Section 13.01 hereof;
"Authorized Representative" means any of the Assistant Treasurer,
Vice President of Operations, or, with respect to financial matters, the
Chief Financial Officer, the Assistant Treasurer or the Vice President of
Operations of the Borrower or, in each case, any other Person expressly
designated by the Board of Directors of the Borrower (or the appropriate
committee thereof) as an Authorized Representative of the Borrower, as
set forth from time to time in a certificate in the form attached hereto
as Exhibit C;
"Bank of Scotland Debt Documents" means (a) the 750,000 Credit
Facilities Agreement dated January 7, 1994 between Merlin and the Bank of
Scotland, as amended, restated or supplemented from time to time, and all
debentures, mortgages charges, security documents and other agreements
and instruments delivered in connection therewith and (b) that certain
debenture dated as of June 6, 1989 in favor of the Bank of Scotland and
all loan documents, mortgages, charges, security documents and other
agreements and instruments delivered in connection therewith;
"Base Rate" means the per annum rate of interest equal to the sum of
(x) the greater of (i) the Prime Rate or (ii) the Federal Funds Effective
Rate plus one-half of one percent (1/2%), plus (y) the Applicable
Interest Addition. Any change
<PAGE>11
in the Base Rate resulting from a change in the Prime Rate or the
Federal Funds Effective Rate shall become effective as of 12:01 A.M. of
the Business Day on which each such change occurs. The Base Rate is a
reference rate used by Agent in determining interest rates on certain
loans and is not intended to be the lowest rate of interest charged
on any extension of credit to any debtor;
"Base Rate Loan" means a Loan or a Segment of the Term Loan for
which the rate of interest is determined by reference to the Base Rate;
"Base Rate Segment" means a Segment bearing interest or to bear
interest at the Base Rate;
"Board" means the Board of Governors of the Federal Reserve System
(or any successor body);
"Borrower's Account" means a demand deposit account number 00117803
or any successor account with the Agent, which may be maintained at one
or more offices of the Agent or an agent of the Agent;
"Borrowing Notice" means the notice delivered by an Authorized
Representative in connection with an Advance under the Revolving Credit
Facility or the Term Loan Facility, in the form attached hereto as
Exhibit D and incorporated herein by reference;
"Business Day" means, (i) with respect to any Base Rate Loan, any
day which is not a Saturday, Sunday or a day on which banks in the States
of New York and North Carolina are authorized or obligated by law,
executive order or governmental decree to be closed and, (ii) with
respect to any Eurodollar Rate Loan, any day which is a Business Day, as
described above, and on which the relevant international financial
markets are open for the transaction of business contemplated by this
Agreement in London, England and New York, New York;
"Capital Expenditures" means, with respect to the Borrower and its
Subsidiaries, for any period the sum of (without duplication) (i) all
expenditures (whether paid in cash or accrued as liabilities) by the
Borrower or any Subsidiary during such period for items that would be
classified as "property, plant or equipment" or comparable items on the
consolidated balance sheet of the Borrower and its Subsidiaries,
including without limitation all transactional costs incurred in
connection with such expenditures provided the same have been
capitalized, excluding, however, the amount of any Capital Expenditures
paid for with proceeds of casualty insurance as evidenced in
<PAGE>12
writing and submitted to the Agent together with any compliance
certificate delivered pursuant to Section 9.1(a) or (b) hereof,
and (ii) with respect to any Capital Lease entered into by the Borrower
or its Subsidiaries during such period, the present value of the lease
payments due under such Capital Lease over the term of such Capital
Lease applying a discount rate equal to the interest rate provided
in such lease (or in the absence of a stated interest rate, that rate
used in the preparation of the financial statements described in Section
9.1(a) hereof), all the foregoing in accordance with GAAP applied on a
Consistent Basis;
"Capital Leases" means all leases which have been or should be
capitalized in accordance with GAAP as in effect from time to time
including Statement No. 13 of the Financial Accounting Standards Board
and any successor thereof;
"Cash Collateral Agreement" means the Cash Collateral Agreement
dated as of the date hereof between the Borrower and the Agent in the
form attached hereto as Exhibit L, as amended or modified from time to
time;
"Change in Consolidated Working Capital" means, with respect to any
determination thereof as at the end of any fiscal year of the Borrower,
the result obtained, expressed as a positive or negative number as
appropriate, by subtracting from Consolidated Working Capital as at such
date the amount of Consolidated Working Capital as at the end of the
immediately preceding fiscal year of the Borrower;
"Closing Date" means the date as of which both this Agreement shall
have been executed by the Borrower, the Lenders and the Agent and on
which the conditions set forth in Section 7.1 hereof shall have been
satisfied;
"Code" means the Internal Revenue Code of 1986, as amended, and any
final and temporary regulations promulgated thereunder;
"Collateral" means, collectively, all Collateral as defined in the
Pledge Agreement and in any other Security Instrument;
"Consistent Basis" in reference to the application of GAAP means the
accounting principles observed in the period referred to are comparable
in all material respects to those applied in the preparation of the
audited financial statements of the Borrower referred to in Section
8.6(a) hereof;
"Consolidated Cash Interest Expense" means, with respect to any
period of computation thereof, Consolidated Interest Expense which has
accrued and is payable in cash;
<PAGE>13
"Consolidated Current Assets" means cash and all other assets of the
Borrower and its Subsidiaries which are expected to be realized in cash,
sold in the ordinary course of business, or consumed within one year or
which would be classified as a current asset, all determined in
accordance with GAAP applied on a Consistent Basis; provided, however,
that there shall be excluded from the calculation of Consolidated Current
Assets that portion of all assets financed through incurring liabilities
which are not included in the calculation of Consolidated Current
Liabilities;
"Consolidated Current Liabilities" means all liabilities of the
Borrower and its Subsidiaries which by their terms are payable within one
year (including all Indebtedness payable on demand or maturing not more
than one year from the date of computation and the current portion of
Indebtedness having a maturity date in excess of one year, but excluding
in all cases Revolving Credit Outstandings, the outstanding principal
amount of the Term Loan and all current maturities of long term
Indebtedness for Money Borrowed), all determined in accordance with GAAP
applied on a Consistent Basis;
"Consolidated EBITDA" means, with respect to the Borrower and its
Subsidiaries for any Four-Quarter Period ending on the date of
computation thereof, the sum of, without duplication, (i) Consolidated
Net Income, (ii) Consolidated Interest Expense, (iii) taxes on income,
(iv) amortization, and (v) depreciation, all determined on a consolidated
basis in accordance with GAAP applied on a Consistent Basis;
"Consolidated Fixed Charge Ratio" means, with respect to the
Borrower and its Subsidiaries for any Four-Quarter Period ending on the
date of computation thereof, the ratio of (i) Consolidated EBITDA for
such period less (without duplication) Capital Expenditures for such
period less all income taxes accrued during such period, to (ii)
Consolidated Fixed Charges for such period;
"Consolidated Fixed Charges" means, with respect to Borrower and its
Subsidiaries for any Four-Quarter Period ending on the date of
computation thereof, the sum of, without duplication, (i) Consolidated
Cash Interest Expense, (ii) scheduled principal or lease payments of
Consolidated Indebtedness and (iii) all dividends and other distributions
(other than distributions in the form of capital stock of the Borrower)
paid during such period (regardless of when declared) on any shares of
capital stock of the Borrower then outstanding, all determined on a
consolidated basis in accordance with GAAP applied on a Consistent Basis;
<PAGE>14
"Consolidated Indebtedness" means all Indebtedness for Money
Borrowed of the Borrower and its Subsidiaries, all determined on a
consolidated basis;
"Consolidated Interest Expense" means, with respect to any period of
computation thereof, the gross interest expense of the Borrower and its
Subsidiaries, including without limitation (i) the current amortized
portion of debt discounts to the extent included in gross interest
expense, (ii) the current amortized portion of all fees (including,
without limitation, fees payable in respect of a Hedging Agreement)
payable in connection with the incurrence of Indebtedness to the extent
included in gross interest expense and (iii) the portion of any payments
made in connection with Capital Leases allocable to interest expense, all
determined on a consolidated basis in accordance with GAAP applied on a
Consistent Basis;
"Consolidated Leverage Ratio" means, as of the date of computation
thereof, the ratio of (i) the sum of (without duplication) Consolidated
Indebtedness (determined as at such date) plus the aggregate stated
amount of all Standby Letters of Credit then outstanding plus the
aggregate principal amount of Indebtedness for which the Borrower or any
Subsidiary has entered into a Guaranty to (ii) Consolidated EBITDA (for
the Four-Quarter Period ending on (or most recently ended prior to) such
date); provided, however, that for each of the second and third fiscal
quarters of the Fiscal Year ended March 2, 1996, Consolidated EBITDA
shall be determined, instead of for the Four Quarter Period then ended,
on an annualized basis as follows:
Consolidated EBITDA for
Fiscal Quarter ended: such period multiplied by:
Two Fiscal Quarters ended
August 26, 1995 2
Three Fiscal Quarters
ended November 25, 1995 4/3
"Consolidated Net Income" means, for any period of computation
thereof, the gross revenues from operations of the Borrower and its
Subsidiaries (including payments received by the Borrower and its
Subsidiaries of (i) interest income, and (ii) dividends and distributions
made in the ordinary course of their businesses by Persons in which
investment is permitted pursuant to this Agreement and not related to an
extraordinary event) less all operating and non-operating expenses (not
related to extraordinary events) of the Borrower and its Subsidiaries
including taxes on income, all determined on a consolidated basis in
accordance with GAAP applied on a
<PAGE>15
Consistent Basis; but excluding (for all purposes other than (x)
compliance with Section 10.3 hereof and (y) the computation of
Consolidated EBITDA utilized to determine Excess Cash Flow) in such
calculation: (i) net gains on the sale, conversion or other disposition
of capital assets, (ii) net gains on the acquisition, retirement,
sale or other disposition of capital stock and other securities of the
Borrower or its Subsidiaries, (iii) net gains on the collection of
proceeds of life insurance policies, (iv) any write-up of any asset,
and (v) any other net gain of an extraordinary nature as determined in
accordance with Generally Accepted Accounting Principles applied
on a Consistent Basis;
"Consolidated Net Worth" means at any time as of which the amount
thereof is to be determined, Consolidated Shareholders' Equity minus
(without duplication of deductions in respect of items already deducted
in arriving at surplus and retained earnings) all reserves (other than
contingency reserves not allocated to any particular purpose), including
without limitation reserves for depreciation, depletion, amortization,
obsolescence, deferred income taxes, insurance and inventory valuation
all as determined on a consolidated basis in accordance with GAAP applied
on a Consistent Basis;
"Consolidated Shareholders' Equity " means at any time as of which
the amount thereof is to be determined, the sum of the following in
respect of the Borrower and its Subsidiaries (determined on a
consolidated basis and excluding intercompany items among the Borrower
and its Subsidiaries and any upward adjustment after the Closing Date due
to revaluation of assets): (i) the amount of issued and outstanding
share capital, plus (ii) the amount of additional paid-in capital and
retained income (or, in the case of a deficit, minus the amount of such
deficit), plus (iii) the amount of any foreign currency translation
adjustment (if positive, or, if negative, minus the amount of such
translation adjustment) minus (iv) the amount of any treasury stock, all
as determined in accordance with GAAP applied on a Consistent Basis;
"Consolidated Total Assets" means, as at any time of calculation
thereof, the net book value of all assets of the Borrower and its
Subsidiaries as determined on a consolidated basis in accordance with
GAAP applied on a Consistent Basis;
"Consolidated Working Capital" means at any time the amount thereof
is to be determined, the excess of Consolidated Current Assets over
Consolidated Current Liabilities;
"Contingent Obligation" of any Person means all contingent
liabilities required (or which, upon the creation or incurring thereof,
would be required) to be included in the
<PAGE>16
financial statements (including footnotes) of such Person in accordance
with GAAP applied on a Consistent Basis, including Statement No. 5 of the
Financial Accounting Standards Board, all Rate Hedging Obligations and
any obligation of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly,
including obligations of such Person however incurred:
(1) to purchase such Indebtedness or other obligation or any
property or assets constituting security therefor;
(2) to advance or supply funds in any manner (i) for the
purchase or payment of such Indebtedness or other obligation, or
(ii) to maintain a minimum working capital, net worth or other
balance sheet condition or any income statement condition of the
primary obligor;
(3) to grant or convey any lien, security interest, pledge,
charge or other encumbrance on any property or assets of such Person
to secure payment of such Indebtedness or other obligation;
(4) to lease property or to purchase securities or other
property or services primarily for the purpose of assuring the owner
or holder of such Indebtedness or obligation of the ability of the
primary obligor to make payment of such Indebtedness or other
obligation; or
(5) otherwise to assure the owner of the Indebtedness or such
obligation of the primary obligor against loss in respect thereof;
"Cost of Acquisition" means, with respect to any Acquisition, as at
the date of entering into any agreement therefor, the sum of the
following (without duplication): (i) the value of the capital stock,
warrants or options to acquire capital stock of Borrower or any
Subsidiary to be transferred in connection therewith, (ii) any cash or
other property (excluding property described in clause (i)) and the
unpaid principal amount of any debt instrument given as consideration,
(iii) any Indebtedness assumed by the Borrower or its Subsidiaries in
connection with such Acquisition, and (iv) out of pocket transaction
costs for the services and expenses of attorneys, accountants and other
consultants incurred in effecting such a transaction, and other similar
transaction costs so incurred (all such costs in excess of such amount
being included as a "Cost of Acquisition" for such transaction). For
purposes of determining the Cost of Acquisition for any transaction, (A)
the capital stock of the Borrower shall be valued (I) at its market value
as reported
<PAGE>17
on the NASDAQ National Market System with respect to shares that
are freely tradeable, and (II) with respect to shares that are not
freely tradeable, as determined by the Board of Directors of the
Borrower and, if requested by the Agent, determined to be a
reasonable valuation by the independent public accountants referred
to in Section 9.1(a) hereof, (B) the capital stock of any Subsidiary
shall be valued as determined by the Board of Directors of such
Subsidiary and, if requested by the Agent, determined to be a
reasonable valuation by the independent public accountants referred to
in Section 9.1(a) hereof, and (C) with respect to any Acquisition
accomplished pursuant to the exercise of options or warrants or the
conversion of securities, the Cost of Acquisition shall include both
the cost of acquiring such option, warrant or convertible security as
well as the cost of exercise or conversion;
"Disclosure Letter" means that certain Disclosure Letter dated May
17, 1995 delivered to the Borrower by the Seller in connection with the
Merlin Transaction;
"Default" means any event or condition which, with the giving or
receipt of notice or lapse of time or both, would constitute an Event of
Default hereunder;
"Dollars" and the symbol "$" means dollars constituting legal tender
for the payment of public and private debts in the United States of
America;
"Elevated Financial Covenant Levels" means at any time with respect
to Consolidated Leverage Ratio, 1.50 to 1.00, and with respect to
Consolidated Fixed Charge Ratio, 1.50 to 1.00;
"Eligible Securities" means the following obligations and any other
obligations previously approved in writing by the Agent:
(a) Government Securities;
(b) obligations of any corporation organized under the laws of
any state of the United States of America or under the laws of any
other nation, payable in the United States of America, expressed to
mature not later than 270 days following the date of issuance
thereof and rated in an investment grade rating category by S&P and
Moody's;
(c) interest bearing demand or time deposits issued by any
bank or certificates of deposit maturing within one hundred eighty
(180) days from the date of issuance thereof and, in either case,
issued by a bank or trust company organized under the laws of the
United States or of any state thereof having capital surplus and
undivided
<PAGE>18
profits aggregating at least $400,000,000 and being rated A or
better by S&P or A2 or better by Moody's;
(d) Repurchase Agreements;
(e) Municipal Obligations;
(f) shares of mutual funds which invest in obligations
described in paragraphs (a) through (e) above, the shares of which
mutual funds are at all times rated "AAA" by S&P; and
(g) shares of "money market funds" of financial institutions
rated A or better by S&P or A2 or better by Moodys;
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA, other than a Multiemployer Plan, which
is or has at any time since June 1, 1989 been maintained for the
employees of the Borrower or any current or former ERISA Affiliate;
"Environmental Laws" means, collectively, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, the Superfund Amendments and Reauthorization Act of 1986, the
Resource Conservation and Recovery Act, the Toxic Substances Control Act,
as amended, the Clean Air Act, as amended, the Clean Water Act, as
amended, any other "Superfund" or "Superlien" law or any other federal,
or applicable state or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to, or imposing
liability or standards of conduct concerning, any Hazardous Material;
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor statute and all final and
temporary regulations promulgated thereunder;
"ERISA Affiliate", as applied to the Borrower, means any Person or
trade or business which is a member of a group which is under common
control with the Borrower, who together with the Borrower, is treated as
a single employer within the meaning of Section 414(b) and (c) of the
Code;
"Eurodollar Rate Loan" means a Loan or Segment of the Term Loan for
which the rate of interest is determined by reference to the Eurodollar
Rate;
"Eurodollar Rate" means the interest rate per annum calculated
according to the following formula:
<PAGE>19
Eurodollar = Interbank Offered Rate + Applicable
Rate 1- Eurodollar Reserve Percentage Interest Addition
"Eurodollar Rate Segment" means a Segment bearing interest or to
bear interest at the Eurodollar Rate;
"Eurodollar Reserve Percentage" means, for any day, that percentage
(expressed as a decimal) which is in effect from time to time as the
maximum reserve requirement (including, without limitation, any basic,
supplemental, emergency, special, or marginal reserves) applicable with
respect to Eurocurrency liabilities as that term is defined in
Regulation D or any successor regulation (or against any other category
of liabilities that includes deposits by reference to which the interest
rate of Eurodollar Rate Loans is determined), whether or not any Lender
has any Eurocurrency liabilities subject to such requirements without
benefits of credits or proration, exceptions or offsets that may be
available from time to time to Agent. The Eurodollar Rate shall be
adjusted automatically on and as of the effective date of any change in
the Eurodollar Reserve Percentage;
"Event of Default" means any of the occurrences set forth as such in
Section 11.1 hereof;
"Excess Cash Flow" means, with respect to the Borrower and its
Subsidiaries for any period, the difference of (a) Consolidated EBITDA
for such period (including within "Consolidated Net Income" for purposes
of computing Consolidated EBITDA as used in this definition any other
cash net gain or loss, as applicable, of an extraordinary nature
otherwise excluded from the calculation thereof in the definition of
"Consolidated Net Income") minus (b) the sum of (i) Change in
Consolidated Working Capital as at the end of such period, provided any
positive Change in Consolidated Working Capital shall not exceed
$4,000,000 during such period, plus (ii) the sum of (A) Capital
Expenditures up to a maximum amount of $5,500,000 during the Fiscal Year
ending in March 1996, $5,600,000 during the Fiscal Years ending in March
1997 and February 1998 and $5,700,000 during the Fiscal Year ending in
February 1999 and thereafter, (B) Consolidated Cash Interest Expense, (C)
required principal payments on Consolidated Indebtedness and optional
prepayments of the Term Loan and (D) taxes on income accrued during such
period;
"Existing LC" means that certain standby letter of credit in the
notional amount of up to $1,500,000 issued under the Prior Facility and
outstanding on the date hereof, such Existing LC to terminate upon its
stated termination date without renewal or extension, whether automatic
or otherwise.
<PAGE>20
"Facility Termination Date" means the date on which both the
Revolving Credit Termination Date and the Term Loan Termination Date
shall have occurred and the Borrower shall have fully paid and satisfied
all Obligations hereunder;
"Federal Funds Effective Rate" means, for any day, the rate per
annum (rounded upward to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business
Day next succeeding such day, provided that (a) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day, and (b) if no such
rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate quoted to the Agent on
such day on such transaction as determined by the Agent;
"Fiscal Year" means the twelve month fiscal period of the Borrower
and its Subsidiaries ending on the Saturday nearest to February 28 of
each calendar year;
"Foreign Benefit Law" means any applicable statute, law, ordinance,
code, rule, regulation, order or decree of any foreign nation or any
province, state, territory, protectorate or other political subdivision
thereof regulating, relating to, or imposing liability or standards of
conduct concerning, any Employee Benefit Plan;
"Four-Quarter Period" means a period of four full consecutive fiscal
quarters of the Borrower and its Subsidiaries, taken together as one
accounting period;
"Foreign Subsidiaries" means all Subsidiaries which are incorporated
in any jurisdiction other than any state of the United States of America
or the District of Columbia;
"GAAP" or "Generally Accepted Accounting Principles" means Generally
Accepted Accounting Principles, being those principles of accounting set
forth in pronouncements of the Financial Accounting Standards Board, the
American Institute of Certified Public Accountants or which have other
substantial authoritative support and are applicable in the circumstances
as of the date of a report, as such principles are from time to time
supplemented and amended;
"Government Securities" means direct obligations of, or obligations
the timely payment of principal and interest on which are fully and
unconditionally guaranteed by, the United States of America;
<PAGE>21
"Governmental Authority" shall mean any Federal, state, municipal,
national or other governmental department, commission, board, bureau,
agency or instrumentality or political subdivision thereof or any entity
or officer exercising executive, legislative or judicial, regulatory or
administrative functions of or pertaining to any government or any court,
in each case whether a state of the United States, the United States or
foreign;
"Guaranties" means all obligations of the Borrower or any Subsidiary
directly or indirectly guaranteeing, or in effect guaranteeing, any
Indebtedness or other obligation of any other Person;
"Guarantors" means, at any date, the Subsidiaries party to a
Subsidiary Guaranty at such date and shall in any event include all
Material Subsidiaries, other than Foreign Subsidiaries, at such date;
"Hazardous Material" means and includes any hazardous, toxic or
dangerous waste, substance or material, the generation, handling,
storage, disposal, treatment or emission of which is subject to any
Environmental Law;
"Hedging Agreement" means one or more agreements between the
Borrower and any Person with respect to Indebtedness evidenced by the
Notes, on terms mutually acceptable to Borrower and such Person and
approved by each of the Lenders, which agreements create Rate Hedging
Obligations; provided, however, that no such approval of the Lenders
shall be required to the extent such agreements are entered into between
the Borrower and any Lender;
"Indebtedness" means with respect to any Person, without
duplication, all Indebtedness for Money Borrowed, all indebtedness of
such Person for the acquisition of property, all indebtedness secured by
any Lien on the property of such Person whether or not such indebtedness
is assumed, all liability of such Person by way of endorsements (other
than for collection or deposit in the ordinary course of business), all
Contingent Obligations, that portion of obligations with respect to
Capital Leases and other items which in accordance with GAAP is
classified as a liability on a balance sheet; but excluding all accounts
payable in the ordinary course of business so long as payment therefor is
due within one year; provided that in no event shall the term
Indebtedness include surplus and retained earnings, lease obligations
(other than pursuant to Capital Leases), reserves for deferred income
taxes and investment credits, other deferred credits and reserves, and
deferred compensation obligations;
<PAGE>22
"Indebtedness for Money Borrowed" means for any Person, without
duplication, all indebtedness in respect of money borrowed, including
without limitation all Capital Leases and the deferred purchase price of
any property or asset, evidenced by a promissory note, bond, debenture or
similar written obligation for the payment of money, other than trade
payables incurred in the ordinary course of business;
"Interbank Offered Rate" means, with respect to any Eurodollar Rate
Loan for the Interest Period applicable thereto, the average (rounded
upward to the nearest one one- hundredth (1/100) of one percent) per
annum rate of interest determined by the office of Agent then determining
such rate (each such determination to be conclusive and binding) as of
two Business Days prior to the first day of such Interest Period, as the
effective rate at which deposits in immediately available funds in
Dollars are being, have been, or would be offered or quoted by Agent to
major banks in the applicable interbank market for Eurodollar deposits at
any time during the Business Day which is the second Business Day
immediately preceding the first day of such Interest Period, for a term
comparable to such Interest Period and in the amount of the Eurodollar
Rate Loan;
"Interest Period" for each Eurodollar Rate Loan means a period
commencing on the date such Eurodollar Rate Loan is made or converted and
each subsequent period commencing on the last day of the immediately
preceding Interest Period for such Eurodollar Rate Loan, and ending, at
the Borrower's option, on the date one, two, three, six or, if available
to all Lenders, twelve months thereafter as notified to the Agent by the
Authorized Representative no later than three (3) Business Days prior to
the beginning of such Interest Period; provided, that,
(i) if the Authorized Representative fails to notify the Agent
of the length of an Interest Period three (3) Business Days prior to
the first day of such Interest Period, the Loan for which such
Interest Period was to be determined shall be deemed to be a Base
Rate Loan as of the first day thereof;
(ii) if an Interest Period for a Eurodollar Rate Loan would end
on a day which is not a Business Day such Interest Period shall be
extended to the next Business Day (unless such extension would cause
the applicable Interest Period to end in the succeeding calendar
month, in which case such Interest Period shall end on the next
preceding Business Day); and
(iii) any Interest Period which begins on the last Business Day
of a calendar month (or on a day for which
<PAGE>23
there is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last Business Day of
a calendar month;
(iv) no Interest Period shall extend past July 6, 2000;
(v) there shall not be more than six (6) Interest Periods in
effect on any day;
"Interest Rate Selection Notice" means the notice delivered by an
Authorized Representative in connection with the election of a subsequent
interest period for any Eurodollar Rate Loan or the conversion of any
Eurodollar Rate Loan into a Base Rate Loan or the conversion of any Base
Rate Loan into a Eurodollar Rate Loan, in the form of Exhibit E attached
hereto;
"Issuing Bank" means initially NationsBank and thereafter any Lender
which is successor to NationsBank as issuer of Letters of Credit under
Article IV hereof;
"Lending Office" means, as to each Lender, the Lending Office of
such Lender designated on the signature pages hereof or in an Assignment
and Acceptance or such other office of such Lender (or of an affiliate of
such Lender) as such Lender may from time to time specify to the
Authorized Representative and the Agent as the office by which its Loans
are to be made and maintained;
"Letter of Credit" means any Standby Letter of Credit;
"Letter of Credit Commitment" means with respect to each Lender, the
obligation of such Lender to acquire Letter of Credit Participations up
to an aggregate stated amount at any one time outstanding equal to such
Lender's Applicable Commitment Percentage of the Total Letter of Credit
Commitment as the same may be increased or decreased from time to time
pursuant to this Agreement;
"Letter of Credit Facility" means the facility described in Article
IV hereof providing for the issuance by the Issuing Bank for the account
of the Borrower of Letters of Credit in an aggregate stated amount at any
time outstanding not exceeding the Total Letter of Credit Commitment;
"Letter of Credit Outstandings" means, as of any date of
determination, all amounts of Letters of Credit then undrawn plus
Reimbursement Obligations then outstanding;
"Lien" means any interest in property securing any obligation owed
to, or a claim by, a Person other than the
<PAGE>24
owner of the property, whether such interest is based on the common
law, statute or contract, and including but not limited to the lien
or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. For the purposes of
this Agreement, the Borrower and any Subsidiary shall be deemed to
be the owner of any property which it has acquired or holds subject
to a conditional sale agreement, financing lease, or other arrangement
pursuant to which title to the property has been retained by or vested
in some other Person for security purposes;
"Loan" or "Loans" means any of the Revolving Loans or the Term Loan
made under the Revolving Credit Facility or the Term Loan Facility,
respectively;
"Loan Documents" means this Agreement, the Notes, the Security
Instruments, the Subsidiary Guaranties, the Applications and Agreements
for Letter of Credit, and all other instruments and documents heretofore
or hereafter executed or delivered to or in favor of any Lender or the
Agent in connection with the Loans made, Letters of Credit issued and
transactions contemplated under this Agreement, as the same may be
amended, supplemented or replaced from the time to time;
"Material Adverse Effect" means a material adverse effect on the
business, properties, operations or condition, financial or otherwise, of
the Borrower and its Subsidiaries taken as a whole;
"Material Subsidiary" means (i) any direct or indirect Subsidiary of
the Borrower which (a) has total assets equal to or greater than 5% of
Consolidated Total Assets (calculated as of the most recent fiscal period
with respect to which the Agent shall have received financial statements
required to be delivered pursuant to Sections 9.1(a) or (b) (or if prior
to delivery of any financial statements pursuant to such Sections, then
calculated with respect to the Fiscal Year end financial statements
referenced in Section 8.6 hereof) (the "Required Financial Information"))
or (ii) has net income equal to or greater than 5% of Consolidated Net
Income (each calculated for the most recent period for which the Agent
has received the Required Financial Information); provided, however, that
notwithstanding the foregoing, the term "Material Subsidiaries" shall
mean Subsidiaries of the Borrower that together with the Borrower have
assets equal to not less than 95% of Consolidated Total Assets
(calculated as described above) and net income of not less than 95% of
Consolidated Net Income (calculated as described above); provided further
that if more than one combination of
<PAGE>25
Subsidiaries satisfies such threshold, then those Subsidiaries so
determined to be "Material Subsidiaries" shall be specified by the
Borrower, but in all cases above the term "Material Subsidiary"
shall exclude all Foreign Subsidiaries;
"Merlin" means Merlin Publishing International plc, a company
registered in England under number 2331336 and incorporated as a public
company limited by shares under the Companies Act 1985;
"Merlin Shareholders Agreement" means that certain Shareholders
Agreement dated as of December 4, 1991 among Merlin and the owners of all
the share capital of Merlin;
"Merlin Transaction" means the acquisition by the Borrower of all of
the issued share capital of Merlin in accordance with the terms of the
Acquisition Agreement;
"Merlin Transaction Documents" means the Acquisition Agreement and
each schedule, exhibit, document, agreement, instrument or certificate
incorporated therein or delivered in connection therewith, including
without limitation the Disclosure Letter as therein defined;
"Moody's" means Moody's Investors Service, Inc.;
"Multiemployer Plan" means a "multiemployer plan", as defined in
Section 4001(a)(3) of ERISA, which is subject to Title IV of ERISA and to
which the Borrower or any ERISA Affiliate is making, or is accruing an
obligation to make, contributions or has made, or been obligated to make,
contributions since June 1, 1989;
"Municipal Obligations" means general obligations issued by, and
supported by the full taxing authority of, any state of the United States
of America or of any municipal corporation or other public body organized
under the laws of any such state which are rated in the highest
investment rating category by both S&P and Moody's;
"NCMI" means NationsBanc Capital Markets, Inc. and its successors;
"Net Proceeds" from the issuance of equity or Indebtedness or sale
of assets means cash payments received therefrom as and when received,
net of all legal, accounting, banking, underwriting, title and recording
fees and expenses, commissions, discounts and other issuance expenses
incurred in connection therewith and all taxes required to be paid or
accrued as a consequence of such issuance or sale;
<PAGE>26
"Notes" means, collectively, the Term Notes and the Revolving Notes;
"Obligations" means the obligations, liabilities and Indebtedness of
the Borrower with respect to (i) the principal and interest on the Loans
as evidenced by the Notes, (ii) the Reimbursement Obligations and
otherwise in respect of the Letters of Credit, (iii) all liabilities of
Borrower to any Lender which arise under a Hedging Agreement, and (iii)
the payment and performance of all other obligations, liabilities and
Indebtedness of the Borrower to the Lenders or the Agent hereunder, under
any one or more of the other Loan Documents or with respect to the Loans;
"Outstandings" means, collectively, at any date, the Letter of
Credit Outstandings, Revolving Credit Outstandings and Term Loan
Outstandings on such date;
"Participation" means, with respect to any Lender (other than the
Issuing Bank) and a Letter of Credit, the extension of credit represented
by the participation of such Lender hereunder in the liability of the
Issuing Bank in respect of a Letter of Credit issued by the Issuing Bank
in accordance with the terms hereof;
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor thereto;
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Title IV of
ERISA or Section 412 of the Code and which is, or was since June 1, 1989,
maintained for employees of the Borrower or any ERISA Affiliate;
"Permitted Liens" shall have the meaning given to such term in
Section 10.6 hereof;
"Permitted Stock Repurchases" shall have the meaning given to such
term in Section 10.16 hereof;
"Person" means an individual, partnership, corporation, trust,
unincorporated organization, association, joint venture or a government
or agency or political subdivision thereof;
"Pledge Agreement" means that certain Stock Pledge Agreement dated
as of the date hereof between the Borrower and the Agent for the benefit
of the Agent and the Lenders and substantially in the form of Exhibit H
hereto, as hereafter amended, supplemented or replaced from time to time;
"Pledged Stock" has the meaning given to such term in the Pledge
Agreement;
<PAGE>27
"Prime Rate" means the rate of interest per annum announced publicly
by the Agent as its prime rate from time to time. The Prime Rate is not
necessarily the best or the lowest rate of interest offered by the Agent;
"Principal Licenses" shall have the meaning given to such term in
Section 9.21 hereof;
"Principal Office" means the office of the Agent at NationsBank,
National Association (Carolinas), Independence Center, 15th Floor, NC1
001-15-04, Charlotte, North Carolina 28255, Attention: Ms. Angela Berry,
Agency Services, or such other office and address as the Agent may from
time to time designate;
"Principal Subsidiaries" means Merlin, Topps Ireland Limited and any
other direct Subsidiaries of the Borrower which would qualify as a
Material Subsidiary notwithstanding the fact that such Subsidiary may be
a Foreign Subsidiary;
"Prior Facility" means the line of credit facility of up to
$25,000,000 made available to the Borrower by Chemical Bank scheduled to
expire on August 31, 1995;
"Pro Forma Historical Statements" means the pro forma consolidated
financial statements of the Borrower and its Subsidiaries for the fiscal
year ending February 25, 1995, giving historical pro forma effect to the
Merlin Transaction as of January 31, 1995, which have been furnished to
the Agent and the Lenders prior to the Closing Date;
"Pro Forma Projections" means the pro forma consolidated financial
statement projections of the Borrower and its Subsidiaries for the five
fiscal years ending 2000, giving effect to the Merlin Transaction, which
have been furnished to the Agent and the Lenders prior to the Closing
Date;
"Rate Hedging Obligations" means any and all obligations of the
Borrower or any Subsidiary, whether absolute or contingent and howsoever
and whensoever created, arising, evidenced or acquired (including all
renewals, extensions and modifications thereof and substitutions
therefor), under (i) any and all agreements, devices or arrangements
designed to protect at least one of the parties thereto from the
fluctuations of interest rates, exchange rates or forward rates
applicable to such party's assets, liabilities or exchange transactions,
including, but not limited to, Dollar-denominated or cross-currency
interest rate exchange agreements, forward currency exchange agreements,
interest rate cap or collar protection agreements, forward rate currency
or interest rate options, puts, warrants and those commonly known as
interest rate "swap" agreements; and (ii)
<PAGE>28
any and all cancellations, buybacks, reversals, terminations or
assignments of any of the foregoing;
"Regulation D" means Regulation D of the Board as the same may be
amended or supplemented from time to time;
"Regulatory Change" means any change effective after the Closing
Date in United States federal or state laws or regulations (including
Regulation D and capital adequacy regulations) or foreign laws or
regulations or the adoption or making after such date of any
interpretations, directives or requests applying to a class of banks,
which includes any of the Lenders, under any United States federal or
state or foreign laws or regulations (whether or not having the force of
law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof or compliance by any Lender with
any request or directive regarding capital adequacy, whether or not
having the force of law, whether or not failure to comply therewith would
be unlawful and whether or not published or proposed prior to the date
hereof;
"Reimbursement Obligation" shall mean at any time, the obligation of
the Borrower with respect to any Letter of Credit to reimburse the
Issuing Bank and the Lenders to the extent of their respective
Participations (including by the receipt by the Issuing Bank of proceeds
of Loans pursuant to Section 4.2) for amounts theretofore paid by the
Issuing Bank pursuant to a drawing under such Letter of Credit plus any
interest accrued on such amounts paid;
"Related Transaction Documents" means, collectively, the Loan
Documents and the Merlin Transaction Documents;
"Repurchase Agreement" means a repurchase agreement entered into
with any financial institution whose debt obligations or commercial paper
are rated "A" by either of S&P or Moody's or "A-1" by S&P or "P-1" by
Moody's;
"Required Lenders" means, as of any date, Lenders on such date
having Credit Exposures (as defined below) aggregating at least (i) if
there shall be fewer than three (3) Lenders, 100% of the aggregate Credit
Exposures of all Lenders on such date, and (ii) if there shall be three
(3) or more Lenders, 51% of the aggregate Credit Exposures of all the
Lenders on such date. For purposes of the preceding sentence, the amount
of the "Credit Exposure" of each Lender shall be equal to the aggregate
principal amount of the Revolving Loans owing to such Lender plus the
aggregate unutilized amounts of such Lender's Revolving Credit Commitment
plus the amount of such Lender's Applicable Commitment Percentage of
Letter of Credit Outstandings plus the amount of such Lender's Applicable
<PAGE>29
Commitment Percentage of the Term Loan Outstandings; provided that,
if any Lender shall have failed to pay to the Issuing Bank its
Applicable Commitment Percentage of any drawing under any Letter
of Credit resulting in an outstanding Reimbursement Obligation,
such Lender's Credit Exposure attributable to Letters of Credit
and Reimbursement Obligations shall be deemed to be held by the
Issuing Bank for purposes of this definition;
"Restricted Payment" means (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock of
Borrower now or hereafter outstanding, except a dividend payable solely
in shares of that class of stock to the holders of that class; (b) any
redemption, conversion, exchange, retirement or similar payment, purchase
or other acquisition for value, direct or indirect, of any shares of any
class of stock of Borrower now or hereafter outstanding; and (c) any
payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of stock
of Borrower or any Subsidiary now or hereafter outstanding;
"Revolving Credit Commitment" means, with respect to each Lender,
the obligation of such Lender to make Revolving Loans to the Borrower up
to an aggregate principal amount at any one time outstanding equal to
such Lender's Applicable Commitment Percentage of the Total Revolving
Credit Commitment;
"Revolving Credit Facility" means the facility described in Article
III hereof providing for Loans to the Borrower by the Lenders in the
aggregate principal amount of the Total Revolving Credit Commitment;
"Revolving Credit Outstandings" means, as of any date of
determination, the aggregate principal amount of all Revolving Loans then
outstanding and all interest accrued therein;
"Revolving Credit Termination Date" means (i) July 6, 2000 or (ii)
such earlier date of termination of Lenders' obligations pursuant to
Section 11.1 upon the occurrence of an Event of Default, or (iii) such
date as the Borrower may voluntarily and permanently terminate the
Revolving Credit Facility by payment in full of all Revolving Credit
Outstandings and cancellation of the Total Revolving Credit Commitment
pursuant to Section 3.7 hereof;
"Revolving Loan" means any borrowing pursuant to an Advance under
the Revolving Credit Facility in accordance with Article III hereof;
"Revolving Notes" means, collectively, the promissory notes of the
Borrower evidencing Revolving Loans executed and
<PAGE>30
delivered to the Lenders as provided in Section 3.5 hereof
substantially in the form attached hereto as Exhibit G, with
appropriate insertions as to amounts, dates and names of Lenders;
"S&P" means Standard & Poor's Ratings Group;
"Security Instruments" means, collectively, the Pledge Agreement,
the Cash Collateral Agreement and all other agreements, instruments and
other documents, whether now existing or hereafter in effect, pursuant to
which the Borrower or any Subsidiary shall grant or convey to the Agent
or the Lenders a Lien in property as security for the Obligations or a
Guaranty thereof, as any of them may be amended, supplemented or replaced
from time to time;
"Segment" means a portion of the Term Loan (or all thereof) with
respect to which a particular interest rate is (or is proposed to be)
applicable;
"Seller" means all of the beneficial and legal owners of the entire
issued share capital of Merlin;
"Solvent" means, when used with respect to any Person, that at the
time of determination:
(i) the fair value of its assets (both at fair valuation and
at present fair saleable value on an orderly basis) is in excess of
the total amount of its liabilities, including, without limitation,
Contingent Obligations; and
(ii) it is then able and expects to be able to pay its debts as
they mature; and
(iii) it has capital sufficient to carry on its business as
conducted and as proposed to be conducted;
"Standby Letter of Credit" means any irrevocable standby letter of
credit issued by the Issuing Bank for the account of the Borrower
pursuant to Article IV hereof;
"Subsidiary" means any corporation or other entity in which more
than 50% of its outstanding voting stock or more than 50% of all equity
interests is owned directly or indirectly by the Borrower and/or by one
or more of the Borrower's Subsidiaries and including without limitation
Merlin and its subsidiaries;
"Subsidiary Guaranty" means each Guaranty Agreement between one or
more Subsidiaries and the Agent, delivered as
<PAGE>31
of the Closing Date and otherwise pursuant to Section 9.23 hereof,
and substantially in the form of Exhibit I hereto, as the same may be
amended, modified or supplemented;
"Term Loan" means the loan made pursuant to the Term Loan Facility
in accordance with Article II hereof;
"Term Loan Commitment" means, with respect to each Lender, the
obligation of such Lender to make the Term Loan to the Borrower in a
principal amount equal to such Lender's percentage of the Total Term Loan
Commitment as set forth on Exhibit A hereto;
"Term Loan Facility" means the facility described in Article II
hereof providing for a Term Loan to the Borrower by the Lenders in the
principal amount of $50,000,000;
"Term Loan Maturity Date" means July 6, 2000;
"Term Loan Outstandings" means, as of any date of determination, the
aggregate principal amount of the Term Loan then Outstanding and all
interest accrued thereon;
"Term Loan Termination Date" means (i) the Term Loan Maturity Date
or (ii) such earlier date of termination of Lenders' obligations pursuant
to Section 11.1 upon the occurrence of an Event of Default, or (iii) such
date as the Borrower may voluntarily and permanently terminate the Term
Loan Facility by payment in full of all Obligations incurred in
connection with the Term Loan;
"Term Notes" means, collectively, the promissory notes of the
Borrower evidencing Term Loans executed and delivered to the Lenders as
provided in Section 2.8 hereof substantially in the form attached hereto
as Exhibit F, with appropriate insertions as to amounts, dates and names
of Lenders;
"Termination Event" means: (a) a "Reportable Event" described in
Section 4043 of ERISA (unless the notice requirement has been waived by
applicable regulation); or (b) the withdrawal of the Borrower or any
ERISA Affiliate from a Pension Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA or was
deemed such under Section 4068(f) of ERISA; or (c) the termination of a
Pension Plan, the filing of a notice of intent to terminate a Pension
Plan or the treatment of a Pension Plan amendment as a termination under
Section 4041 of ERISA; or (d) the institution of proceedings to terminate
a Pension Plan by the PBGC or any other event or condition which would
constitute grounds under Section 4042(a) of ERISA for the termination of,
or the appointment of a trustee to administer, any Pension Plan; or (e)
the partial or complete
<PAGE>32
withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer
Plan; or (f) the imposition of a Lien pursuant to Section 412 of the Code
or Section 302 of ERISA; or (g) any event or condition which
results in the reorganization or insolvency of a Multiemployer Plan
under Section 4241 or Section 4245 of ERISA, respectively; or (h)
any event or condition which results in the termination of a
Multiemployer Plan under Section 4041A of ERISA or the institution
by the PBGC of proceedings to terminate a Multiemployer Plan
under Section 4042 of ERISA;
"Total Letter of Credit Commitment" means an amount not to exceed
$2,000,000 less the notional amount of the Existing LC; provided,
however, the full $2,000,000 commitment shall be available in connection
with the issuance of a replacement Letter of Credit for the Existing LC;
"Total Loan Commitment" means the sum of the Total Revolving Credit
Commitment and the Total Term Loan Commitment;
"Total Revolving Credit Commitment" means a principal amount equal
to $13,000,000, as reduced from time to time in accordance with Section
3.7 hereof;
"Total Term Loan Commitment" means a principal amount equal to
$50,000,000.
1.2 Accounting Terms. All accounting terms not specifically defined
herein shall have the meanings assigned to such terms and shall be interpreted
in accordance with GAAP applied on a Consistent Basis.
1.3 UCC Terms. Each term defined in Article 1 or 9 of the New York
Uniform Commercial Code shall have the meaning given therein unless otherwise
defined herein, except to the extent that the Uniform Commercial Code of
another jurisdiction is controlling, in which case such terms shall have the
meaning given in the Uniform Commercial Code of the applicable jurisdiction.
ARTICLE II
The Term Loan
2.1. Term Loan. (a) Subject to the terms and conditions of this
Agreement, each Lender severally agrees to make an Advance of the Term Loan to
the Borrower on the Closing Date on a pro rata basis determined by its
Applicable Commitment Percentage up to the Term Loan Commitment of such
Lender. The principal amount of each Segment of the Term Loan outstanding
hereunder from time to time shall bear interest, at the Borrower's election,
at an interest rate per annum equal to the Base Rate or the Eurodollar Rate;
<PAGE>33
provided, however, that (x) no Eurodollar Rate Segment shall have an Interest
Period that extends beyond the Term Loan Termination Date, (y) each Eurodollar
Rate Segment shall be in the minimum amount of $1,000,000 and if greater, an
integral multiple of $100,000, and (z) each Eurodollar Rate Segment may,
subject to the provisions of Sections 2.4 and 2.6 hereof, be repaid only on
the last day of the Interest Period with respect thereto. No amount of the
Term Loan repaid or prepaid by the Borrower may be reborrowed hereunder, and
no subsequent Advances of Term Loan amounts shall be made by any Lender after
the initial such Advance.
(b) Interest on Eurodollar Rate Loans and all fees hereunder shall
be computed on the basis of a year of 360 days and calculated for the actual
number of days elapsed, and interest on all Base Rate Loans shall be computed
on the basis of the actual number of days elapsed over a year of 365 or 366
days, as appropriate.
2.2. Term Loan Advance. Not later than 9:00 A.M., Charlotte, North
Carolina time on the Closing Date, each Lender shall, pursuant to the terms
and subject to the conditions of this Agreement, make the amount of the
Advance to be made by it on such day available by wire transfer to the Agent
in the amount of its Term Loan Commitment representing its pro rata share of
the Term Loan as determined according to the Applicable Commitment Percentage
of such Lender. Such wire transfer shall be directed to the Agent at the
Principal Office and shall be in the form of immediately available funds. The
amount so received by the Agent shall, subject to the terms and conditions of
this Agreement, be made available to the Borrower by delivery of the proceeds
thereof to the Borrower's Account or otherwise as shall be directed by the
Authorized Representative.
2.3. Payment of Principal. The principal amount of the Term Loan shall
be repaid in twenty (20) installments on the dates and in the amounts set
forth below:
<PAGE>34
August 28, 1995 $ 1,875,000
November 27, 1995 $ 1,875,000
March 4, 1996 $ 1,875,000
June 3, 1996 $ 1,875,000
September 3, 1996 $ 2,500,000
December 2, 1996 $ 2,500,000
March 3, 1997 $ 2,500,000
June 2, 1997 $ 2,500,000
September 2, 1997 $ 2,500,000
December 1, 1997 $ 2,500,000
March 2, 1998 $ 2,500,000
June 1, 1998 $ 2,500,000
August 31, 1998 $ 2,500,000
November 30, 1998 $ 2,500,000
March 1, 1999 $ 2,500,000
May 31, 1999 $ 2,500,000
August 30, 1999 $ 3,125,000
November 29, 1999 $ 3,125,000
February 28, 2000 $ 3,125,000
July 6, 2000 $ 3,125,000
2.4. Payment of Interest. The Borrower shall pay interest on the
outstanding and unpaid principal amount of each Segment of the Term Loan
commencing on the date of determination of the interest rate applicable to
such Segment until such Segment shall be due at the applicable Base Rate or
Eurodollar Rate as designated by the Borrower in the applicable Borrowing
Notice or Interest Rate Selection Notice. Interest on each Segment of the
Term Loan shall be paid on the earlier of (a) in the case of any Segment which
bears interest at the Base Rate, quarterly in arrears of the last Business Day
of each May, August, November and February, commencing on August 31, 1995,
until the Term Loan Termination Date on which date the entire principal amount
of and all accrued interest on the Term Loan shall be paid in full, (b) in the
case of any Segment which bears interest at the Eurodollar Rate, on last day
of the applicable Interest Period for such Segment and if such Interest Period
extends for more than three (3) months, at intervals of three (3) months after
the first day of such Interest Period and (c) upon payment in full of the Term
Loan; provided, however, that if any amount of principal or interest or fees
to any Lender due under this Agreement shall not be paid when due (at
maturity, by acceleration or otherwise), all amounts outstanding hereunder
shall bear interest so long as such amount shall remain unpaid (i) with
respect to Eurodollar Rate Loans, until the end of the Interest Period with
respect to such Eurodollar Rate Loan at a rate of two percent (2%) above the
Eurodollar Rate applicable to such Loan, and thereafter at a rate of interest
per annum which shall be two percent (2%) above the Base Rate, (ii) with
respect to Base Rate Loans, fees, or other amounts owing hereunder, at a rate
of interest per annum which shall be two percent (2%) above the Base
<PAGE>35
Rate and (iii) in any case, the maximum rate permitted by applicable law, if
lower.
2.5. Manner of Payment. (a) Each payment of principal (including any
prepayment) and payment of interest and fees, and any other amount required to
be paid to the Lenders with respect to the Term Loan, shall be made to the
Agent at the Principal Office for the account of each Lender in Dollars in
immediately available funds on or before 12:30 P.M., Charlotte, North Carolina
time on the date such payment is due. The Agent may, but shall not be
obligated to, debit the amount of such payment from any one or more ordinary
deposit accounts of the Borrower with the Agent.
(b) The Agent shall deem any payment made by or on behalf of the
Borrower that is not made both in Dollars in immediately available Funds and
prior to 12:30 P.M., Charlotte, North Carolina time on the date such payment
is to be made to be a non-conforming payment. Any such non-conforming payment
shall not be deemed to be received by the Agent until the later of (i) the
time such funds become available funds and (ii) the next Business Day. Any
non-conforming payment may constitute or become a Default or Event of Default.
Interest shall continue to accrue on any principal as to which a non-
conforming payment is made until the later of (i) the date such funds become
available funds or (ii) the next Business Day at the respective rates of
interest per annum specified in the proviso to Section 2.4 hereof regarding
late payments of interest, from the date such amount was due and payable.
(c) In the event that any payment hereunder or under the Term Notes
becomes due and payable on a day other than a Business Day, then such due date
shall be extended to the next succeeding Business Day unless provided
otherwise under clause (ii) of the definition of "Interest Period"; provided,
however, that interest shall continue to accrue during the period of any such
extension; and provided further, however, that in no event shall any such due
date be extended beyond the Term Loan Termination Date.
2.6. Optional Prepayments. The Borrower may prepay the Term Loan in
whole or in part from time to time on any Business Day, without penalty or
premium, upon not less than three (3) Business Days' prior written notice
(effective upon receipt) to the Agent, which notice shall be irrevocable. Any
prepayment, whether a Base Rate Segment or a Eurodollar Rate Segment, shall be
made at a prepayment price equal to (i) the amount of principal to be prepaid,
plus (ii) all accrued and unpaid interest on the amount so prepaid, to the
date of prepayment. All prepayments under this Section 2.6 shall be made in
the minimum principal amount of $1,000,000 or any integral multiple of
$500,000 in excess thereof, and all such prepayments of principal shall be
applied to installments of principal in the manner specified by the Borrower
and, if not specified, in chronological order. No such prepayment shall
result in the payment of any Eurodollar Rate Segment other
<PAGE>36
than on the last day of the Interest Period of such Segment unless such
prepayment is accompanied by amounts due, if any, under Section 6.4 hereof.
2.7. Mandatory Prepayments. In addition to the required payments of
principal of the Term Loan set forth in Section 2.3 above and any optional
payments of principal of the Term Loan effected under Section 2.6 above, the
Borrower shall make the following required prepayments of the Term Loan, each
such payment to be made to the Agent for the benefit of the Lenders within the
time period specified below and rounded down to the nearest $50,000:
(a) until the outstanding principal balance of the Term Loan is
less than $25,000,000 (such outstanding amount to be determined after
taking into account any portion of any prepayment being made under this
Section 2.7), the Borrower shall make a prepayment from the proceeds of
each private or public offering of equity securities of the Borrower or
any Subsidiary (other than offerings in respect of employee and director
stock option plans) in an amount equal to fifty percent (50%) of the Net
Proceeds of each issuance of equity securities of the Borrower or any
Subsidiary (including without limitation any security not constituting
Indebtedness exchangeable, exercisable or convertible for or into equity
securities), each such prepayment to be made within ten (10) Business
Days of receipt of such proceeds and upon not less than five (5) Business
Days' written notice to the Agent, which notice shall include a
certificate of an Authorized Representative setting forth in reasonable
detail the calculations utilized in computing the amount of such
prepayment;
(b) without limiting the prohibition on additional Indebtedness set
forth in Section 10.7 hereof, the Borrower shall make a prepayment in an
amount equal to (x) until the outstanding principal balance of the Term
Loan is less than $25,000,000 (such outstanding amount to be determined
after taking into account any portion of any prepayment being made under
this Section 2.7), one hundred percent (100%), and (y) at all other
times, fifty percent (50%), in each case, of the Net Proceeds from the
issuance or incurring of Indebtedness for Money Borrowed (other than the
Term Loan, Revolving Loans and other indebtedness permitted under Section
10.7) by the Borrower or any Subsidiary after the Closing Date, such
prepayment to be made within ten (10) Business Days of receipt of such
proceeds and upon not less than five (5) Business Days written notice to
the Agent, which notice shall include a certificate of an Authorized
Representative setting forth in reasonable detail the calculations
utilized in computing the amount of such prepayment;
<PAGE>37
(c) until the outstanding principal balance of the Term Loan is
less than $25,000,000 (such outstanding amount to be determined after
taking into account any portion of any prepayment being made under this
Section 2.7), the Borrower shall make a prepayment in an amount equal to
one hundred percent (100%) of the net cash proceeds received by Borrower
or any Subsidiaries from each liquidation of any overfunded pension plan,
such prepayment to be made within ten (10) Business Days of receipt of
such proceeds and upon not less than five (5) Business Days written
notice to the Agent, which notice shall include a certificate of an
Authorized Representative setting forth in reasonable detail the
calculations utilized in computing the amount of such prepayment;
(d) until the outstanding principal balance of the Term Loan is
less than $25,000,000 (such outstanding amount to be determined after
taking into account any portion of any prepayment being made under this
Section 2.7) at which time no prepayment shall be due under this Section
2.7(d), the Borrower shall make an annual prepayment in an amount equal
to (x) seventy five percent (75%) of Excess Cash Flow as at the end of
each Fiscal Year of Borrower so long as the outstanding principal balance
of the Term Loan is greater than $35,000,000 (such outstanding amount to
be determined after taking into account any portion of any prepayment
being made under this Section 2.7) and (y) fifty percent (50%) of Excess
Cash Flow as at the end of each Fiscal Year of Borrower so long as the
outstanding principal balance of the Term Loan is greater than
$25,000,000 and less than or equal to $35,000,000 (such outstanding
amount to be determined after taking into account any portion of any
prepayment being made under this Section 2.7), each such prepayment to be
made on the date financial statements of the Borrower and its
Subsidiaries for such fiscal period are required to be delivered (or if
earlier, the date such financial statements are delivered) pursuant to
Section 9.1 hereof, which payment shall be accompanied by a certificate
of an Authorized Representative (which may be incorporated within the
certificate regarding compliance with certain covenants otherwise
required to be delivered under Section 9.1) setting forth in reasonable
detail the calculations utilized in computing Excess Cash Flow and the
amount of such prepayment; provided, however, that Excess Cash Flow for
the Fiscal Year ended March 2, 1996 shall be an amount equal to Excess
Cash Flow for the last two consecutive fiscal quarters of such Fiscal
Year; and provided further that, to the extent there is a Change in
Working Capital in excess of the amount permitted to be deducted from the
calculation of Excess Cash Flow as provided in the definition thereof
(the "Surplus Working Capital Amount"), the amount of such mandatory
prepayment attributable to the Surplus Working Capital Amount shall not
be due until 90 days following the
<PAGE>38
date the remainder of such mandatory prepayment was required to have
been made; and
(e) the Borrower shall make a prepayment in an amount equal to (x)
seventy five percent (75%) of the Net Proceeds of the sale and leaseback
transaction relating to the Borrower's Pennsylvania manufacturing
facility ("Sale and Leaseback Net Proceeds") so long as the outstanding
principal balance of the Term Loan is greater than $25,000,000 (such
outstanding amount to be determined after taking into account any portion
of any prepayment being made under this Section 2.7) and (y) fifty
percent (50%) of Sale and Leaseback Net Proceeds so long as the
outstanding principal balance of the Term Loan is less than or equal to
$25,000,000 (such outstanding amount to be determined after taking into
account any portion of any prepayment being made under this Section 2.7),
each such prepayment to be made not less than ten (10) Business Days
following each receipt of any Sale and Leaseback Net Proceeds, which
payment shall be accompanied by a certificate of an Authorized
Representative setting forth in reasonable detail the calculations
utilized in computing the Sale and Leaseback Net Proceeds and the amount
of such prepayment.
The Agent shall give each Lender, within one (1) Business Day, telefacsimile
notice of each notice of prepayment described in clauses (a), (b), (c), (d)
and (e) of this Section 2.7. All mandatory prepayments made pursuant to this
Section 2.7 shall be applied ratably to the installments of principal
remaining outstanding pursuant to Section 2.3 (as adjusted to give effect to
any prior payments or prepayments of principal). Any prepayment required by
this Section 2.7 shall be applied first to Base Rate Segments and then to
Eurodollar Rate Segments. If as a result of the making of any payment
required to be made pursuant to this Section 2.7 the Borrower would incur
costs pursuant to Section 6.4, it may deposit the amount of such payment with
the Agent, for the benefit of the Lenders, in a cash collateral account with
and in the name of the Agent established for such purpose pursuant to the Cash
Collateral Agreement and as to which the Agent shall have exclusive control,
until the end of the applicable Interest Period at which time such payment
shall automatically be made.
2.8. Term Notes. The portion of the Term Loan made by each Lender shall
be evidenced by, and be repayable with interest in accordance with the terms
of, the Term Note payable to the order of such Lender in the respective amount
of its Applicable Commitment Percentage of the Term Loan Commitment, which
Term Notes shall be dated the Closing Date or such later date pursuant to an
Assignment and Acceptance and shall be duly completed, executed and delivered
by the Borrower.
2.9. Use of Proceeds. The proceeds of the Term Loan hereunder shall be
used by the Borrower exclusively to (a) finance the Merlin
<PAGE>39
Transaction, and (b) pay costs and expenses incurred in connection therewith
and for general working capital purposes not to exceed $3,000,000.
2.10. Interest Periods. The Term Loan shall be, at the option of the
Borrower specified in the Borrowing Notice or in an Interest Rate Selection
Notice, comprised of either Eurodollar Rate Segments or Base Rate Segments.
Eurodollar Rate Segments and Base Rate Segments may be outstanding at the same
time, provided, however, there shall not be outstanding at any one time
Eurodollar Rate Loans (including Revolving Loans that are Eurodollar Rate
Loans) having more than six (6) different Interest Periods. If the Agent does
not receive an Interest Rate Selection Notice giving notice of election of the
duration of an Interest Period or of conversion by the time prescribed by
Section 2.11 hereof, the Borrower shall be deemed to have elected to convert
such Segment of the Term Loan to (or continue such Segment as) a Base Rate
Loan until the Borrower notifies the Agent in accordance with Section 2.11
hereof.
2.11. Conversions and Elections of Subsequent Interest Periods.
Provided that no Event of Default shall have occurred and be continuing and
subject to the limitations set forth below and in Sections 6.1(b), 6.2 and 6.3
hereof, the Borrower may:
(a) upon delivery of a properly completed Interest Rate Selection
Notice to the Agent on or before 10:30 A.M. Charlotte, North Carolina
time on any Business Day, convert any Eurodollar Rate Segment to a Base
Rate Segment on the last day of the Interest Period for such Eurodollar
Rate Segment; and
(b) upon delivery of a properly completed Interest Rate Selection
Notice to the Agent on or before 10:30 A.M. Charlotte, North Carolina
time three (3) Business Days' prior to the date of such conversion:
(i) elect a subsequent Interest Period for any Eurodollar Rate
Segment to begin on the last day of the current Interest Period for
such Eurodollar Rate Segment; and
(ii) convert any Base Rate Segment to a Eurodollar Rate Segment
on any date.
Each conversion pursuant to this Section 2.11 shall be subject to the
limitations on Eurodollar Rate Loans set forth in the definition of "Interest
Period" herein and in Sections 2.1, 2.10 and Article VI hereof. The Agent
shall give written notice to each Lender of such notice of conversion prior to
2:00 P.M., Charlotte, North Carolina time on the day such notice of election
or conversion is received. All such continuations or conversions of
<PAGE>40
Loans shall be effected pro rata based on the Applicable Commitment
Percentages of the Lenders.
2.12. Pro Rata Payments. Except as otherwise provided herein, (a) each
payment on account of the principal of and interest on the Term Loan shall be
made to the Agent for the account of the Lenders pro rata based on their
Applicable Commitment Percentages, (b) all payments to be made by the Borrower
for the account of each of the Lenders on account of principal, interest and
fees, shall be made without set-off or counterclaim, and (c) the Agent will
distribute payments received from the Borrower to the Lenders on the same day
such payments are received in accordance with the terms of this Agreement.
ARTICLE III
The Revolving Credit Facility
3.1. Revolving Loans.
(a) Commitment. Subject to the terms and conditions of this
Agreement, each Lender severally agrees to make Advances to the Borrower under
the Revolving Credit Facility from time to time from the Closing Date until
the Revolving Credit Termination Date on a pro rata basis as to the total
borrowing requested by the Borrower on any day determined by such Lender's
Applicable Commitment Percentage up to but not exceeding the Revolving Credit
Commitment of such Lender. Within such limits, the Borrower may borrow, repay
and reborrow under the Revolving Credit Facility on a Business Day from the
Closing Date until, but (as to borrowings and reborrowings) not including, the
Revolving Credit Termination Date; provided, however, that (y) no Revolving
Loan that is a Eurodollar Rate Loan shall be made which has an Interest Period
that extends beyond the Revolving Credit Termination Date and (z) each
Revolving Loan that is a Eurodollar Rate Loan may, subject to the provisions
of Section 3.7 hereof, be repaid only on the last day of the Interest Period
with respect thereto.
(b) Amounts. Except as otherwise permitted by the consent of all
the Lenders from time to time, the aggregate unpaid principal amount of the
Revolving Credit Outstandings shall not exceed at any time the Total Revolving
Credit Commitment. Each Revolving Loan hereunder and each conversion under
Section 3.7 hereof shall be in an amount of at least $1,000,000, and, if
greater than $1,000,000, an integral multiple of $100,000.
(c) Advances. (i) An Authorized Representative shall give the
Agent (1) at least three (3) Business Days' irrevocable telephonic notice of
each Revolving Loan that is a Eurodollar Rate Loan (whether representing an
additional borrowing hereunder or the conversion of borrowing hereunder from
Base Rate Loans to Eurodollar Rate Loans) prior to 10:00 A.M., Charlotte,
North
<PAGE>41
Carolina time and (2) irrevocable written notice of each Revolving Loan that
is a Base Rate Loan (whether representing an additional borrowing hereunder or
the conversion of borrowing hereunder from Eurodollar Rate Loans to Base Rate
Loans) prior to 10:00 A.M. Charlotte, North Carolina time on the day of such
proposed Revolving Loan. Each such telephonic notice, which shall be
effective upon receipt by the Agent, shall specify the amount of the
borrowing, the type of Revolving Loan (Base Rate or Eurodollar Rate), the date
of borrowing and, if a Eurodollar Rate Loan, the Interest Period to be used in
the computation of interest. The Authorized Representative shall provide the
Agent written confirmation of each such telephonic notice no later than 11:00
A.M. on the same day received by telefacsimile transmission in the form of a
Borrowing Notice for additional Advances, or in the form of an Interest Rate
Selection Notice for the selection or conversion of interest rates for
outstanding Revolving Credit Loans, in each case with appropriate insertions,
but failure to provide such confirmation shall not affect the validity of such
telephonic notice. Notice of receipt of such Borrowing Notice or Interest
Rate Selection Notice, as the case may be, together with the amount of each
Lender's portion of an Advance requested thereunder, shall be provided by the
Agent to each Lender by telefacsimile with reasonable promptness, but not
later than 12:00 noon, Charlotte, North Carolina time on the same day as
Agent's receipt of such notice.
(ii) Not later than 1:00 P.M., Charlotte, North Carolina time on the date
specified for each borrowing under this Section 3.1, each Lender shall,
pursuant to the terms and subject to the conditions of this Agreement, make
the amount of the Advance or Advances to be made by it on such day available
by wire transfer to the Agent in the amount of its pro rata share, determined
according to such Lender's Applicable Commitment Percentage, of the Revolving
Loan or Revolving Loans to be made on such day. Such wire transfer shall be
directed to the Agent at the Principal Office and shall be in the form of
immediately available funds. The amount so received by the Agent shall,
subject to the terms and conditions of this Agreement, be made available to
the Borrower by delivery of the proceeds thereof to the Borrower's Account or
otherwise as shall be directed in the applicable Borrowing Notice by the
Authorized Representative not later than 2:00 P.M., Charlotte, North Carolina
time on the day so received.
(iii) The duration of the initial Interest Period for each Revolving Loan
that is a Eurodollar Rate Loan shall be as specified in the initial Borrowing
Notice for such Loan. The Borrower shall have the option to elect the
duration of subsequent Interest Periods and to convert the Loans in accordance
with Section 3.8 hereof. If the Agent does not receive an Interest Rate
Selection Notice giving notice of election of duration of an Interest Period
or conversion by the time prescribed by Section 3.8 hereof, the Borrower shall
be deemed to have elected to convert such Revolving
<PAGE>42
Loan to (or continue such Revolving Loan as) a Base Rate Loan until the
Borrower notifies the Agent in accordance with Section 3.8 hereof.
(iv) Notwithstanding the foregoing, if a drawing is made under any Letter
of Credit prior to the Revolving Credit Termination Date, the drawing shall be
paid by the Agent without the requirement of notice from the Borrower from
immediately available funds which shall be advanced by the Lenders under the
Revolving Credit Facility and such advance shall be deemed to be a Base Rate
Loan; provided that after giving effect to any such Advance the Revolving
Credit Outstandings shall not exceed the Total Revolving Credit Commitment.
If a drawing is presented under any Letter of Credit in accordance with the
terms thereof and provided that after giving effect to an Advance necessary to
satisfy the applicable Reimbursement Obligation the Revolving Credit
Outstandings shall not exceed the Total Revolving Credit Commitment, then
notice of such drawing or payment shall be provided promptly by NationsBank to
the Agent and the Agent shall provide notice to each Lender by telephone. If
notice to the Lenders of a drawing under any Letter of Credit is given by the
Agent at or before 11:00 A.M. Charlotte, North Carolina time on any Business
Day, each Lender shall, pursuant to the conditions of this Agreement, make a
Base Rate Loan in the amount of such Lender's Applicable Commitment Percentage
of such drawing or payment and shall pay such amount to the Agent for the
account of the Issuing Bank at the Principal Office in Dollars and in
immediately available funds before 1:00 P.M. Charlotte, North Carolina time on
the same Business Day. If notice to the Lenders of a drawing under a Letter
of Credit is given by the Agent after 11:00 A.M. Charlotte, North Carolina
time on any Business Day, each Lender shall, pursuant to the terms and subject
to the conditions of this Agreement, make a Base Rate Loan in the amount of
such Lender's Applicable Commitment Percentage of such drawing or payment and
shall pay such amount to the Agent for the account of the Issuing Bank at the
Principal Office in Dollars and in immediately available funds before 1:00
P.M. Charlotte, North Carolina time on the next following Business Day. Such
Base Rate Loan shall continue unless and until the Borrower converts such Base
Rate Loan in accordance with the terms of Section 3.8 hereof.
3.2. Payment of Interest. (a) The Borrower shall pay interest to the
Agent for the account of each Lender on the outstanding and unpaid principal
amount of each Revolving Loan made by such Lender for the period commencing on
the date of such Revolving Loan until such Revolving Loan shall be due at the
then applicable Base Rate for Base Rate Loans or applicable Eurodollar Rate
for Eurodollar Rate Loans, as designated by the Authorized Representative
pursuant to Section 3.1 hereof; provided, however, that if any amount of
principal or interest or fees to any Lender shall not be paid when due (at
maturity, by acceleration or otherwise), all amounts outstanding hereunder
shall bear interest so long as such amount shall remain unpaid (i) in the case
of a
<PAGE>43
Eurodollar Rate Loan, until the end of the Interest Period with respect to any
Eurodollar Rate Loan at a rate of two percent (2%) above the applicable
Eurodollar Rate for such Eurodollar Rate Loan and thereafter at a rate per
annum which shall be two percent (2%) plus the Base Rate, (ii) with respect to
Base Rate Loans, fees or other amounts owing hereunder, at a rate of interest
per annum which shall be two percent (2%) above the Base Rate, and (iii) in
any case, the maximum rate permitted by applicable law, if lower.
(b) Interest on each Revolving Loan shall be computed on the basis
of a year of 360 days and calculated in each case for the actual number of
days elapsed in the case of Eurodollar Rate Loans and on the basis of the
actual number of days elapsed over a year of 365 or 366 days, as appropriate,
in the case of Base Rate Loans. Interest on each Revolving Loan shall be paid
(i) quarterly in arrears on the last Business Day of each May, August,
November and February, commencing August 31, 1995 for each Base Rate Loan,
(ii) on the last day of the applicable Interest Period for each Eurodollar
Rate Loan and if such interest period extends for more than three (3) months,
at intervals of three (3) months after the first day of such Interest Period
and (iii) upon payment in full of the principal amount of such Revolving Loan.
3.3. Payment of Principal. The principal amount of each Revolving Loan
shall be due and payable to the Agent for the benefit of each Lender in full
on the Revolving Credit Termination Date, or earlier as specifically provided
herein. The principal amount of any Base Rate Loan may be prepaid in whole or
in part on any Business Day provided the Borrower gives the Agent notice of
such prepayment by telecopy at or prior to 10:00 A.M. on the date of such
prepayment. The principal amount of any Eurodollar Rate Loan may be prepaid
only at the end of the applicable Interest Period unless the Borrower shall
pay to the Agent for the account of the Lenders the amount, if any, required
under Section 6.4 hereof. If at any time the amount of Revolving Credit
Outstandings exceeds the Total Revolving Credit Commitment, a principal amount
of the outstanding Revolving Loans equal to such excess shall be due and
payable immediately. All prepayments of Revolving Loans made by the Borrower
shall be in the amount of $1,000,000 or such greater amount which is an
integral multiple of $100,000, or such other amount as necessary to comply
with this Section 3.3 or with Section 3.8 hereof.
3.4. Non-Conforming Payments. (a) Each payment of principal (including
any prepayment) and payment of interest and fees, and any other amount
required to be paid to the Lenders with respect to the Revolving Loans, shall
be made to the Agent at the Principal Office, for the account of each Lender,
in Dollars and in immediately available funds before 12:30 P.M. Charlotte,
North Carolina time on the date such payment is due. The Agent may, but shall
not be obligated to, debit the amount of any such payment
<PAGE>44
which is not made by such time to any ordinary deposit account, if any, of the
Borrower with the Agent.
(b) The Agent shall deem any payment made by or on behalf of the
Borrower hereunder that is not made both in Dollars and in immediately
available funds and prior to 12:30 P.M. Charlotte, North Carolina time to be a
non-conforming payment. Any such payment shall not be deemed to be received
by the Agent until the later of (i) the time such funds become available funds
and (ii) the next Business Day. Any non-conforming payment may constitute or
become a Default or Event of Default. Interest shall continue to accrue on
any principal as to which a non-conforming payment is made until the later of
(x) the date such funds become available funds or (y) the next Business Day at
the respective rates of interest per annum specified in the proviso to Section
3.2 hereof regarding late payments of interest, from the date such amount was
due and payable.
(c) In the event that any payment hereunder or under the Revolving
Notes becomes due and payable on a day other than a Business Day, then such
due date shall be extended to the next succeeding Business Day unless provided
otherwise under clause (ii) of the definition of "Interest Period"; provided
that interest shall continue to accrue during the period of any such extension
and provided further, that in no event shall any such due date be extended
beyond the Revolving Credit Termination Date.
3.5. Revolving Credit Notes. Revolving Credit Loans made by each Lender
shall be evidenced by the Revolving Notes, which Revolving Credit Notes shall
be dated the Closing Date or such later date pursuant to an Assignment and
Acceptance and shall be duly completed, executed and delivered by the
Borrower.
3.6. Pro Rata Payments. Except as otherwise provided herein, (a) each
payment on account of the principal of and interest on the Revolving Loans and
the fees described in Section 3.9 hereof shall be made to the Agent for the
account of the Lenders pro rata based on their Applicable Commitment
Percentages, (b) all payments to be made by the Borrower for the account of
each of the Lenders on account of principal, interest and fees, shall be made
without set-off or counterclaim, and (c) the Agent will distribute payments
received from the Borrower to the Lenders on the same day such payments are
received in accordance with the terms of this Agreement.
3.7. Reductions. The Borrower shall, by notice from an Authorized
Representative, have the right from time to time, upon not less than three (3)
Business Days written notice to the Agent, to reduce the Total Revolving
Credit Commitment. Each such reduction shall be in the aggregate amount of
$1,000,000 or such greater amount which is in an integral multiple of
$100,000, and shall permanently reduce the Total Revolving Credit Commitment.
No
<PAGE>45
such reduction shall result in the payment of any Eurodollar Rate Loan other
than on the last day of the Interest Period of such Eurodollar Rate Loan
unless such prepayment is accompanied by amounts due, if any, under Section
6.4 hereof. Each reduction of the Total Revolving Credit Commitment shall be
accompanied by payment of the Revolving Notes to the extent that the amount of
Revolving Credit Outstandings exceeds the Total Revolving Credit Commitment
after giving effect to such reduction, together with accrued and unpaid
interest on the amounts prepaid.
3.8. Conversions and Elections of Subsequent Interest Periods. Provided
that no Event of Default shall have occurred and be continuing and subject to
the limitations set forth below and in Sections 6.1(b), 6.2 and 6.3 hereof,
the Borrower may:
(a) upon delivery of a properly completed Interest Rate Selection
Notice to the Agent on or before 10:30 A.M. Charlotte, North Carolina time on
any Business Day, convert all or a part of Eurodollar Rate Loans to Base Rate
Loans on the last day of the Interest Period for such Eurodollar Rate Loans;
and
(b) upon delivery of a properly completed Interest Rate Selection
Notice to the Agent on or before 10:30 A.M. Charlotte, North Carolina time
three (3) Business Days prior to the date of such election or conversion:
(i) elect a subsequent Interest Period for all or a portion of
Eurodollar Rate Loans to begin on the last day of the current
Interest Period for such Eurodollar Rate Loans; and
(ii) convert Base Rate Loans to Eurodollar Rate Loans on any
date.
Each election and conversion pursuant to this Section 3.8 shall be
subject to the limitations on Eurodollar Rate Loans set forth in the
definition of "Interest Period" herein and in Sections 3.1, 3.3 and Article VI
hereof. The Agent shall give written notice to each Lender of such notice of
election or conversion prior to 2:00 P.M. on the day such notice of election
or conversion is received. All such continuations or conversions of Loans
shall be effected pro rata based on the Applicable Commitment Percentages of
the Lenders.
3.9. Unused Fee. For the period beginning on the Closing Date and ending
on the Revolving Credit Termination Date, the Borrower agrees to pay to the
Agent, for the pro rata benefit of the Lenders based on their Applicable
Commitment Percentages, an unused fee equal to the Applicable Unused Fee
multiplied by the average daily amount by which the Total Revolving Credit
Commitment exceeds Revolving Credit Outstandings. Such payments of fees
provided for in this Section 3.9 shall be due in arrears on the last Business
<PAGE>46
Day of each May, August, November and February commencing August 31, 1995 to
and on the Revolving Credit Termination Date. Notwithstanding the foregoing,
so long as any Lender fails to make available any portion of its Revolving
Credit Commitment when required, such Lender shall not be entitled to receive
payment of its pro rata share of such fee until such Lender shall make
available such portion. Such fee shall be calculated on the basis of a year
of 360 days for the actual number of days elapsed.
3.10. Deficiency Advances. No Lender shall be responsible for any
default of any other Lender in respect to such other Lender's obligation to
make any Loan hereunder nor shall the Revolving Credit Commitment of any
Lender hereunder be increased as a result of such default of any other Lender.
Without limiting the generality of the foregoing, in the event any Lender
shall fail to advance funds to the Borrower as herein required, the Agent may
in its discretion, but shall not be obligated to, advance under the Revolving
Note in its favor as a Lender all or any portion of such amount or amounts
(each, a "deficiency advance") and shall thereafter be entitled to payments of
principal of and interest on such deficiency advance in the same manner and at
the same interest rate or rates to which such other Lender would have been
entitled had it made such advance under its Revolving Note; provided that,
upon payment to the Agent from such other Lender of the entire outstanding
amount of each such deficiency advance, together with accrued and unpaid
interest thereon, from the most recent date or dates interest was paid to the
Agent by the Borrower on each Revolving Loan comprising the deficiency advance
at the interest rate per annum for overnight borrowing by the Agent from the
Federal Reserve Bank, then such payment shall be credited against the
applicable Revolving Note of the Agent in full payment of such deficiency
advance and the Borrower shall be deemed to have borrowed the amount of such
deficiency advance from such other Lender as of the most recent date or dates,
as the case may be, upon which any payments of interest were made by the
Borrower thereon.
3.11. Use of Proceeds. The proceeds of the Loans made pursuant to the
Revolving Credit Facility hereunder shall be used by the Borrower to repay in
full and terminate the Prior Facility, and for general working capital needs
and other corporate purposes; provided, however, no portion of the Revolving
Credit Facility shall be used, directly or indirectly, in connection with (a)
the open market or negotiated redemption, purchase, repurchase or other
retirement of any of the capital stock of the Borrower, (b) any prepayment of
the principal amount of the Term Loan or (c) any financing of a hostile
Acquisition.
<PAGE>47
ARTICLE IV
Letters of Credit
4.1. Letters of Credit. The Issuing Bank agrees, subject to the terms
and conditions of this Agreement, upon request of Borrower to issue from time
to time for the account of Borrower Letters of Credit upon delivery to the
Issuing Bank of an Application and Agreement for Letter of Credit in form and
content acceptable to the Issuing Bank; provided, that Letter of Credit
Outstandings shall not exceed the Total Letter of Credit Commitment and the
Issuing Bank agrees that all textual terms and provisions contained on the
reverse side of each page of such Application and Agreement for Letters of
Credit shall be null and void and the terms and provisions contained in this
Agreement shall control. No Letter of Credit shall be issued by the Issuing
Bank with an expiry date or payment date occurring subsequent to the date
occurring one year after the date of its issuance (except such letters of
credit may be in the form of "evergreen renewals", but with no expiration date
beyond the fifth Business Day preceding the Revolving Credit Termination
Date), and notwithstanding the foregoing to the contrary, the fifth Business
Day preceding the Revolving Credit Termination Date. No Letter of Credit
issued hereunder shall be used by the Borrower, directly or indirectly, in
connection with the open market or negotiated redemption, purchase, repurchase
or other retirement of any of the capital stock of the Borrower.
4.2. Reimbursement.
(a) The Borrower hereby unconditionally agrees immediately to pay
to the Issuing Bank on the date of any drawing under any Letter of Credit at
the Principal Office all amounts required to pay all drafts drawn or
purporting to be drawn under the Letters of Credit and all reasonable expenses
incurred by the Issuing Bank in connection with the Letters of Credit and in
any event and without demand to place in possession of the Issuing Bank (which
shall include Advances under the Revolving Credit Facility if permitted by
Section 3.1 hereof) sufficient funds to pay all debts and liabilities arising
under any Letter of Credit. The Borrower's obligations to pay the Issuing
Bank under this Section 4.2, and the Issuing Bank's right to receive the same,
shall be absolute and unconditional and shall not be affected by any
circumstance whatsoever. The Issuing Bank agrees to give the Borrower prompt
notice and, in any event, within two (2) Business Days, of any request for a
draw under a Letter of Credit. The Issuing Bank may charge any account the
Borrower may have with it for any and all amounts the Issuing Bank pays under
a Letter of Credit, plus charges and reasonable expenses as from time to time
agreed to by the Issuing Bank and the Borrower; provided that to the extent
permitted by Section 3.1(c)(iv), amounts shall be paid pursuant to Advances
under the Revolving Credit Facility. The Borrower agrees to pay the Issuing
Bank interest on any amounts not
<PAGE>48
paid when due hereunder at the Base Rate plus two percent (2.0%), or the
maximum rate permitted by applicable law, if lower, such rate to be calculated
on the basis of a year of 365 days for actual days elapsed.
(b) In accordance with the provisions of Section 3.1(c) hereof, the
Issuing Bank shall notify the Agent (and shall also notify the Borrower) of
any drawing under any Letter of Credit as promptly as practicable following
the receipt by the Issuing Bank of such drawing.
(c) Each Lender (other than the Issuing Bank) shall automatically
acquire on the date of issuance thereof, a Participation in the liability of
the Issuing Bank in respect of each Letter of Credit in an amount equal to
such Lender's Applicable Commitment Percentage of such liability, and to the
extent that the Borrower is obligated to pay the Issuing Bank under Section
4.2(a), each Lender (other than the Issuing Bank) thereby shall absolutely,
unconditionally and irrevocably assume, and shall be unconditionally obligated
to pay to the Issuing Bank as hereinafter described, its Applicable Commitment
Percentage of the liability of the Issuing Bank under such Letter of Credit.
(i) Prior to the Revolving Credit Termination Date, each
Lender (including the Issuing Bank in its capacity as a Lender) shall,
subject to the terms and conditions of Article III, pay to the Agent for
the account of the Issuing Bank at the Principal Office in Dollars and in
immediately available funds, an amount equal to its Applicable Commitment
Percentage of any drawing under a Letter of Credit, such funds to be
provided in the manner described for the making of Advances pursuant to
Section 3.1.
(ii) With respect to drawings under any of the Letters of
Credit for which a Revolving Loan is not made as set forth in clause (i)
above, each Lender, upon receipt from the Agent of notice of a drawing in
the manner described in Section 3.1(c), shall promptly pay to the Agent
for the account of the Issuing Bank, prior to the applicable time set
forth in Section 3.1(c), its Applicable Commitment Percentage of such
drawing. Simultaneously with the making of each such payment by a Lender
to the Issuing Bank, such Lender shall, automatically and without any
further action on the part of the Issuing Bank or such Lender, acquire a
Participation in an amount equal to such payment in the related
Reimbursement Obligation of the Borrower. The Reimbursement Obligations
of the Borrower shall be immediately due and payable whether by Advances
made in accordance with Section 3.1(c)(iv) or otherwise.
(iii) Each Lender's obligation to make payment to the Agent
for the account of the Issuing Bank pursuant to this
<PAGE>49
Section 4.2(c), and the right of the Issuing Bank to receive the same,
shall be absolute and unconditional, shall not be affected by any
circumstance whatsoever and shall be made without any offset,
abatement, withholding or reduction whatsoever. If any Lender is
obligated to pay but does not pay amounts to the Agent for the
account of the Issuing Bank in full upon such request as required by
this Section 4.2(c), such Lender shall, on demand, pay to the Agent
for the account of the Issuing Bank interest on the unpaid amount for
each day during the period commencing on the date of notice given to
such Lender pursuant to Section 3.1(c) until such Lender pays such
amount to the Agent for the account of the Issuing Bank in full at
the interest rate per annum for overnight borrowing by the Issuing
Bank from the Federal Reserve Bank.
(iv) In the event the Lenders have purchased Participations in
any Reimbursement Obligation as set forth in clause (ii) above, then at
any time payment of such Reimbursement Obligation, in whole or in part,
is received by Issuing Bank from the Borrower, Issuing Bank shall pay to
each Lender an amount equal to its Applicable Commitment Percentage of
such payment from the Borrower.
(d) Promptly following the end of each calendar quarter, the
Issuing Bank shall deliver to the Agent a notice describing the aggregate
undrawn amount of all Letters of Credit at the end of such quarter. Upon the
request of any Lender from time to time, the Issuing Bank shall deliver to the
Agent, and the Agent shall deliver to such Lender, any other information
reasonably requested by such Lender with respect to each Outstanding Letter of
Credit.
(e) The issuance by the Issuing Bank of each Letter of Credit
shall, in addition to the conditions precedent set forth in Article VII
hereof, be subject to the conditions that such Letter of Credit be in such
form and contain such terms as shall be reasonably satisfactory to the Issuing
Bank consistent with the then current practices and procedures of the Issuing
Bank with respect to similar letters of credit, and the Borrower shall have
executed and delivered such other instruments and agreements relating to such
Letters of Credit as the Issuing Bank shall have reasonably requested
consistent with such practices and procedures. All Letters of Credit shall be
issued pursuant to and subject to the Uniform Customs and Practice for
Documentary Credits, 1993 revision, International Chamber of Commerce
Publication No. 500 and all subsequent amendments and revisions thereto.
(f) The Borrower agrees that Issuing Bank may, in its sole
discretion, accept or pay, as complying with the terms of any Letter of
Credit, any drafts or other documents otherwise in order which may be signed
or issued by an administrator, executor, trustee in bankruptcy, debtor in
possession, assignee for the benefit of creditors, liquidator, receiver,
attorney in fact or
<PAGE>50
other legal representative of a party who is authorized under such Letter of
Credit to draw or issue any drafts or other documents.
(g) Without duplication of Section 13.10 hereof, the Borrower
hereby agrees to indemnify and hold harmless the Issuing Bank, each other
Lender and the Agent from and against any and all claims and damages, losses,
liabilities, reasonable costs and expenses which the Issuing Bank, such other
Lender or the Agent may incur (or which may be claimed against the Issuing
Bank, such other Lender or the Agent) by any Person by reason of or in
connection with the issuance or transfer of or payment or failure to pay under
any Letter of Credit; provided that the Borrower shall not be required to
indemnify the Issuing Bank, any other Lender or the Agent for any claims,
damages, losses, liabilities, costs or expenses to the extent, but only to the
extent, (i) caused by the willful misconduct or gross negligence of the party
to be indemnified or (ii) caused by the failure of the Issuing Bank to pay
under any Letter of Credit after the presentation to it of a request strictly
complying with the terms and conditions of such Letter of Credit, unless such
payment is prohibited by any law, regulation, court order or decree. The
indemnification and hold harmless provisions of this Section 4.2(g) shall
survive repayment of the Obligations, occurrence of the Revolving Credit
Termination Date and expiration or termination of this Agreement.
(h) Without limiting Borrower's rights as set forth in Section
4.2(g) above, the obligation of the Borrower to immediately reimburse the
Issuing Bank for drawings made under Letters of Credit shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement and such Letters of Credit and the related
applications for any Letter of Credit, under all circumstances whatsoever,
including, without limitation, the following circumstances:
(i) any lack of validity or enforceability of the Letter of
Credit, the obligation supported by the Letter of Credit or any other
agreement or instrument relating thereto (collectively, the "Related LC
Documents");
(ii) any amendment or waiver of or any consent to or departure
from all or any of the Related LC Documents;
(iii) the existence of any claim, setoff, defense (other than
the defense of payment in accordance with the terms of this Agreement) or
other rights which the Borrower may have at any time against any
beneficiary or any transferee of a Letter of Credit (or any persons or
entities for whom any such beneficiary or any such transferee may be
acting), Agent, Lenders or any other person or entity, whether in
connection with the Loan Documents, the Related LC Documents or any
unrelated transaction;
<PAGE>51
(iv) any breach of contract or other dispute between the
Borrower and any beneficiary or any transferee of a Letter of Credit (or
any persons or entities for whom such beneficiary or any such transferee
may be acting), Agent, Lenders or any other Person;
(v) any draft, statement or any other document presented under
the 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 whatsoever;
(vi) any delay, extension of time, renewal, compromise or other
indulgence or modification granted or agreed to by Agent, with or without
notice to or approval by the Borrower in respect of any of Borrower's
Obligations under this Agreement; or
(vii) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing.
4.3. Letter of Credit Facility Fees. The Borrower shall pay to the
Agent, for the pro rata benefit of the Lenders based on their Applicable
Commitment Percentages, a fee on the aggregate amount available to be drawn on
each outstanding Letter of Credit at a rate equal to the Applicable Interest
Addition for Eurodollar Rate Loans in effect from time to time. Such payment
of fees provided for in this Section 4.3 shall be due with respect to each
Letter of Credit quarterly in arrears on the last day of each May, August,
November and February, the first such payment to be made on the first such
date occurring after the date of issuance of a Letter of Credit. The fees
described in this Section 4.3 shall be calculated on the basis of a year of
360 days for the actual number of days elapsed.
4.4. Administrative Fees. The Borrower shall pay to the Issuing Bank
(a) on the date of issuance of each Letter of Credit an administration fee
equal to .125% of the face amount of such Letter of Credit and (b) such other
fees, if any, in connection with the Letters of Credit in such amounts and at
such times as the Issuing Bank and the Borrower shall agree from time to time.
4.5. Unused Fee. For the period beginning on the Closing Date and
ending on the Revolving Credit Termination Date, the Borrower agrees to pay to
the Agent, for the pro rata benefit of the Lenders based on their Applicable
Commitment Percentages, an unused fee equal to the Applicable Unused Fee
multiplied by the average daily amount by which the Total Letter of Credit
Commitment exceeds Letter of Credit Outstandings. Such payments of fees
provided for in this Section 4.5 shall be due in arrears on the last Business
Day of each May, August, November and February commencing August 31, 1995 to
and on the Revolving Credit
<PAGE>52
Termination Date. Such fee shall be calculated on the basis of a year of 360
days for the actual number of days elapsed.
ARTICLE V
Security
5.1. Security. As security for the full and timely payment and
performance of all Obligations, the Borrower shall on or before the Closing
Date do all things necessary in the opinion of the Agent and its counsel to
grant to the Agent for the benefit of the Lenders a duly perfected first
priority security interest in all Collateral subject to no prior Lien or other
encumbrance or restriction on transfer (other than restrictions on transfer
imposed by applicable securities laws).
5.2. Further Assurances. At the request of the Agent, the Borrower will
or will cause its Subsidiaries, as the case may be, to execute, by its duly
authorized officers, alone or with the Agent, any certificate, instrument,
statement or document and will procure any such certificate, instrument,
statement or document or take such other action (and pay all connected costs)
which the Agent reasonably deems necessary to create, continue or preserve the
liens and security interests (and the perfection and priority thereof) of the
Agent contemplated hereby and by the other Loan Documents.
5.3. Chief Executive Offices. The Borrower represents, warrants and
covenants that (i) the chief executive office of the Borrower at the Closing
Date is located at the address specified on Schedule 5.3 attached hereto, and
(ii) Schedule 5.3 attached hereto contains a true and complete list of (a) the
name and address of Borrower and of each other Person which has effected any
merger or consolidation with Borrower or at any time since January 1, 1990,
and (b) each location of the chief executive office of Borrower at any time
since January 1, 1990. Borrower shall not change the location of its chief
executive office except upon giving not less than thirty (30) days prior
written notice to the Agent and taking or causing to be taken all such action
at Borrower's expense as may be reasonably requested by the Agent to perfect
or maintain the perfection of the security interest of the Agent in
Collateral.
5.4. Collateral Release. Provided that there shall not have occurred a
Default or Event of Default which shall be continuing, at the request and
expense of the Borrower and with reasonable promptness following the date on
which the Term Loan Outstandings are less than $25,000,000, the Agent shall
release the Collateral under the Pledge Agreement from the Lien of the
Security Instruments, shall return to the Borrower certificates evidencing
Pledged Stock then in its possession, and shall cause any filings or
recordings giving record notice of such Liens to be terminated or
appropriately amended.
<PAGE>53
ARTICLE VI
Yield Protection and Illegality
6.1. Additional Costs. (a) The Borrower shall promptly pay to the Agent
for the account of a Lender from time to time, without duplication, such
amounts as such Lender may reasonably determine to be necessary to compensate
it or its parent corporation, without duplication, for any costs incurred by
such Lender or its parent corporation which it determines are attributable to
its making or maintaining any Loan or its obligation to make any Loans, or the
issuance or maintenance by the Issuing Bank of or any other Lender's
Participation in any Letter of Credit issued hereunder, or any reduction in
any amount receivable by such Lender under this Agreement or the Notes in
respect of any of such Loans or the Letters of Credit, including reductions in
the rate of return on a Lender's capital (such increases in costs and
reductions in amounts receivable and returns being herein called "Additional
Costs"), resulting from any Regulatory Change which: (i) imposes or modifies
any reserve, special deposit, or similar requirements relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender or its parent corporation (other than any such
reserve, deposit or requirement reflected in the Prime Rate, Federal Funds
Effective Rate or the Eurodollar Rate, in each case computed in accordance
with the respective definitions of such terms set forth in Section 1.1
hereof); or (ii) has or would have the effect of reducing the rate of return
on capital of any such Lender or its parent corporation to a level below that
which the Lender or its parent corporation could have achieved but for such
Regulatory Change (taking into consideration such Lender's or its parent
corporation's policies with respect to capital adequacy); or (iii) imposes any
other condition adversely affecting the Agent or the Lenders or their parent
corporations under this Agreement, the Notes or the issuance or maintenance
of, or any Lender's Participation in, the Letters of Credit (or any of such
extensions of credit or liabilities). Each Lender will notify the Authorized
Representative and the Agent of any event occurring after the Closing Date
which would entitle it to compensation pursuant to this Section 6.1(a) as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation. Subject to the last sentence of Section 6.1(c)
below, failure to provide such notice shall not in any way diminish the
Borrower's obligation to compensate the Lenders or, without duplication, their
parent corporations for such Additional Costs.
(b) Without limiting the effect of the foregoing provisions of this
Section 6.1, in the event that, by reason of any Regulatory Change, any Lender
or its parent corporation either (i) incurs Additional Costs based on or
measured by the excess above a specified level of the amount of a category of
deposits or other liabilities of the Lender or its parent corporation which
includes deposits by reference to which the interest rate on
<PAGE>54
Eurodollar Rate Loans is determined as provided in this Agreement or a
category of extensions of credit or other assets of any Lender or its parent
corporation which includes Eurodollar Rate Loans or (ii) becomes subject to
restrictions on the amount of such a category of liabilities or assets which
it may hold, then, if the Lender so elects by notice to the other Lenders, the
obligation hereunder of such Lender to make, and to convert Base Rate Loans
into, Eurodollar Rate Loans that are the subject of such restrictions shall be
suspended until the date such Regulatory Change ceases to be in effect and the
Borrower shall, on the last day(s) of the then current Interest Period(s) for
outstanding Eurodollar Rate Loans convert such Eurodollar Rate Loans into Base
Rate Loans; provided, however, that the suspension of such obligation and the
conversion of any Eurodollar Rate Loans into Base Rate Loans shall apply only
to any Lender who is affected by such restrictions and who has provided such
notice to the other Lenders, and the obligation of the other Lenders to make,
and to convert Base Rate Loans into, Eurodollar Rate Loans shall not be
affected by such restrictions. In the event that the obligation of some, but
not all, of the Lenders to make, or to convert Base Rate Loans into,
Eurodollar Rate Loans is suspended, then any request by the Borrower during
the pendency of such suspension for a Eurodollar Rate Loan shall be deemed a
request for such Eurodollar Rate Loan from the Lender(s) not subject to such
suspension and for a Base Rate Loan from the Lender(s) who are subject to such
suspension, in each case in the respective amounts based on the Lenders'
respective Revolving Credit Commitments.
(c) Determinations by any Lender or its parent corporation for
purposes of this Section 6.1 of the effect of any Regulatory Change on its
costs of making or maintaining, or being committed to make Loans, or by
NationsBank as issuer of any Letter of Credit of the effect of any Regulatory
Change on its costs in connection with the issuance or maintenance of, or any
other Lender's Participation in, any Letter of Credit issued hereunder, or the
effect of any Regulatory Change on amounts receivable by any Lender in respect
of Loans or Letters of Credit, and of the additional amounts required to
compensate the Lender in respect of any Additional Costs, shall be made taking
into account such Lender's policies, or the policies of the parent corporation
of such Lender, as to the allocation of capital, costs and other items and
shall be conclusive absent manifest error. The Lender requesting such
compensation shall furnish to the Authorized Representative and the Agent
following the incurrence of any Additional Costs for which compensation is
sought an explanation of the Regulatory Change and calculations, in reasonable
detail, setting forth such Lender's or its parent corporation's determination
of any such Additional Costs. No Lender or any parent corporation shall be
entitled to receive reimbursement for costs incurred more than one hundred
eighty (180) days prior to such delivery.
<PAGE>55
6.2. Suspension of Loans. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any interest rate for
any Eurodollar Rate Loan for any Interest Period, the Agent determines (which
determination made on a reasonable basis shall be conclusive absent manifest
error) that:
(a) quotations of interest rates for the relevant deposits referred
to in the definition of "Eurodollar Rate" in Section 1.1 hereof are not
being provided in the relevant amounts or for the relevant maturities for
purposes of determining the rate of interest for such Eurodollar Rate
Loan as provided in this Agreement; or
(b) the relevant rates of interest referred to in the definition of
"Interbank Offered Rate" in Section 1.1 hereof upon the basis of which
the Eurodollar Rate for such Interest Period is to be determined do not
adequately reflect the cost to the Lenders of making or maintaining such
Eurodollar Rate Loan for such Interest Period;
then the Agent shall give the Authorized Representative prompt notice thereof,
and so long as such condition remains in effect, the Lenders shall be under no
obligation to make Eurodollar Rate Loans that are subject to such condition,
or to convert Loans into Eurodollar Rate Loans, and the Borrower shall on the
last day(s) of the then current Interest Period(s) for outstanding Eurodollar
Rate Loans, as applicable, convert such Eurodollar Rate Loans into another
Eurodollar Rate Loan if such Eurodollar Rate Loan is not subject to the same
or similar condition, or Base Rate Loans, if available hereunder. The Agent
shall give the Authorized Representative notice describing in reasonable
detail any event or condition described in this Section 6.2 promptly following
the determination by the Agent that the availability of Eurodollar Rate Loans
is, or is to be, suspended as a result thereof and shall also promptly notify
the Authorized Representative when such suspension has terminated.
6.3. Illegality. Notwithstanding any other provision of this Agreement,
in the event that it becomes unlawful for any Lender to honor its obligation
to make or maintain Eurodollar Rate Loans hereunder, then such Lender shall
promptly notify the Borrower thereof (with a copy to the Agent) and such
Lender's obligation to make or continue Eurodollar Rate Loans, or convert Base
Rate Loans into Eurodollar Rate Loans, shall be suspended until such time as
such Lender may again make and maintain Eurodollar Rate Loans, and such
Lender's outstanding Eurodollar Rate Loans shall be converted into Base Rate
Loans in accordance with Sections 2.11 and 3.8 hereof.
6.4. Compensation. The Borrower shall promptly pay to each Lender, upon
the request of such Lender, such amount or amounts as shall be sufficient (in
the reasonable determination of Lender) to
<PAGE>56
compensate it for any loss, cost or expense incurred by it (including without
limitation any interest paid or other expense incurred by such Lender on funds
borrowed or otherwise obtained by it to make or carry its Eurodollar Rate
Loans and any loss sustained or expense incurred by such Lender in connection
with the liquidation or reemployment of deposits or other funds acquired by it
to make or carry its Eurodollar Rate Loans) as a result of:
(a) any payment, prepayment or conversion of a Eurodollar Rate Loan
on a date other than the last day of the Interest Period for such
Eurodollar Rate Loan, including without limitation any conversion
required pursuant to Section 6.3 hereof; or
(b) any failure by the Borrower to borrow or convert to a
Eurodollar Rate Loan on the date for such borrowing specified in the
relevant Borrowing Notice or Interest Rate Selection Notice under
Articles II or III hereof;
provided, such loss shall in no event include the failure to earn the
Applicable Interest Addition. A determination of a Lender as to the amounts
payable pursuant to this Section 6.4 shall be conclusive, provided that such
determinations are made on a reasonable basis. The Lender requesting
compensation under this Section 6.4 shall promptly furnish to the Authorized
Representative and the Agent calculations in reasonable detail setting forth
such Lender's determination of the amount of such compensation.
6.5. Alternate Loan and Lender. In the event any Lender suspends the
making of any Eurodollar Rate Loan pursuant to this Article VI (herein a
"Restricted Lender"), the Restricted Lender's Commitment Percentage of any
Eurodollar Rate Loan shall bear interest at the Base Rate until the Restricted
Lender once again makes available the applicable Eurodollar Rate Loan.
Notwithstanding the provisions of Sections 2.4 and 3.2(b) hereof, interest
shall be payable to the Restricted Lender at the time and manner as paid to
those Lenders making available Eurodollar Rate Loans.
6.6. Taxes. (a) All payments by the Borrower of principal of, and
interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future excise,
stamp or other taxes, fees, duties, levies, imposts, charges, deductions,
withholdings or other charges of any nature whatsoever imposed by any taxing
authority, but excluding (i) franchise taxes, (ii) any taxes (other than U.S.
withholding taxes) that would not be imposed but for a connection between a
Lender or the Agent and the jurisdiction imposing such taxes (other than a
connection arising solely by virtue of the activities of such Lender or the
Agent pursuant to or in respect of this Agreement or any other Loan Document),
(iii) any taxes imposed on or measured by any Lender's assets, net income,
receipts or
<PAGE>57
branch profits and (iv) any taxes arising after the Closing Date solely as a
result of or attributable to Lender changing its designated lending office, or
designating an additional lending office, after the date such Lender becomes a
party hereto (such non-excluded items being collectively called "Taxes"). In
the event that any withholding or deduction from any payment to be made by the
Borrower hereunder is required in respect of any Taxes pursuant to any
applicable law, rule or regulation, then the Borrower will
(x) pay directly to the relevant authority the full amount required
to be so withheld or deducted;
(y) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
(z) pay to the Agent for the account of each Lender such additional
amount or amounts as is necessary to ensure that the net amount actually
received by each Lender will equal the full amount such Lender would have
received had no such withholding or deduction been required.
If any such Taxes shall be or become applicable after the date of this
Agreement to such payments by the Borrower to a Lender, such Lender shall use
reasonable efforts to make, fund, or maintain the Loan or Loans, as the case
may be, through another lending office located in another jurisdiction so as
to reduce, to the fullest extent possible, Borrower's liability hereunder, if
the making, funding or maintenance of such Loan or Loans through such other
office does not, in the reasonable judgment of the Lender, materially affect
the Lender or such Loan. If Borrower is required to make any additional
payment to a Lender pursuant to this Section 6.6, and any such Lender
receives, or is entitled to receive, a credit against, remission for, or
repayment of, any tax paid or payable by it in respect of, or calculated with
reference to, the Taxes giving rise to such payment, such Lender shall, within
a reasonable time after it receives such credit, relief, remission or
repayment, reimburse Borrower the amount of any such credit, relief, remission
or repayment.
(b) Prior to the date that any Lender or participant organized under the
laws of a jurisdiction outside the United States becomes a party hereto, such
Person shall deliver to the Borrower and the Agent such certificates,
documents or other evidence, as required by the Code or Treasury Regulations
issued pursuant thereto, properly completed, currently effective and duly
executed by such Lender or participant establishing that such payment is
(i) not subject to United States Federal backup withholding tax and (ii) not
subject to United States Federal withholding tax under the Code because such
payment is either effectively connected with the conduct by such Lender or
<PAGE>58
participant of a trade or business in the United States or totally exempt from
United States Federal withholding tax by reason of the application of the
provisions of a treaty to which the United States is a party or such Lender is
otherwise exempt. Any Lender that fails to provide such certificates or forms
that it is required to provide under this Section 6.6(b) shall not be entitled
to the benefits of this Section 6.6 and, to the extent required by law,
Borrower shall be entitled to deduct from, and pay to the applicable taxing
authority, taxes from the payments made by Borrower to such Lender. Lenders
shall, from time to time, complete, execute and deliver such updates or
extensions or renewals or replacements of those forms, certificates and
documents as may be necessary to continue or maintain any such exemption.
(c) If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent, for the account of the
respective Lender, the required receipts or other required documentary
evidence, the Borrower shall indemnify the Lenders for any incremental Taxes,
interest or penalties that may become payable by any Lender as a result of any
such failure.
ARTICLE VII
Conditions to Making Loans and Issuing Letters of Credit
7.1. Conditions of Initial Advance. The obligation of the Lenders to
make the Term Loan and the initial Advance under the Revolving Credit
Facility, and to issue any Letter of Credit, is subject to the conditions
precedent that:
(a) the Agent shall have received on the Closing Date, in form and
substance satisfactory to the Agent and Lenders, the following:
(i) executed originals of each of this Agreement, the Notes
and the Security Instruments, together with all schedules and
exhibits thereto;
(ii) executed originals, or copies of executed originals
certified by the secretary or assistant secretary of the Borrower,
of the Acquisition Agreement and all other material Merlin
Transaction Documents (including documents terminating the Merlin
Shareholders' Agreement), which shall evidence the consummation of
the Merlin Transaction as of the Closing Date on the terms provided
in the Acquisition Agreement (without further amendment);
(iii) the favorable written opinion or opinions with respect to
the Loan Documents, the Merlin Transaction Documents and the
respective transactions contemplated thereby of counsel and special
counsel to the Borrower
<PAGE>59
dated the Closing Date, addressed to the Agent and the Lenders
and satisfactory to Smith Helms Mulliss & Moore, L.L.P., special counsel
to the Agent, substantially in the form of Exhibit J attached hereto;
(iv) resolutions of the boards of directors or other
appropriate governing body (or of the appropriate committee thereof)
of the Borrower certified by its secretary or assistant secretary as
of the Closing Date, appointing the initial Authorized
Representative and approving and adopting the Loan Documents, and
authorizing the execution and delivery thereof;
(v) specimen signatures of officers of the Borrower executing
the Loan Documents on behalf of the Borrower, certified by the
secretary or assistant secretary of the Borrower;
(vi) the charter documents of the Borrower certified as of a
recent date by the Secretary of State of its state of organization;
(vii) the bylaws of the Borrower certified as of the Closing
Date as true and correct by its secretary or assistant secretary;
(viii) certificates issued as of a recent date by the Secretaries
of State of the respective jurisdictions of formation of the
Borrower as to the due existence and good standing of the Borrower;
(ix) appropriate certificates of qualification to do business,
good standing and, where appropriate, authority to conduct business
under assumed name, issued in respect of the Borrower as of a recent
date by the Secretary of State or comparable official of each
jurisdiction in which the failure to be qualified to do business or
authorized so to conduct business could have a Material Adverse
Effect;
(x) notice of appointment of the initial Authorized
Representative;
(xi) evidence of all insurance required by the Loan Documents;
(xii) a certificate of Borrower's Vice President of Operations,
Chief Financial Officer or Assistant Treasurer dated the Closing
Date certifying that as of the Closing Date and immediately after
giving effect to the Merlin Transaction, the Term Loan and other
Advances made and Letters of Credit issued as of the Closing Date
<PAGE>60
(A) there does not exist any Default or Event of Default and (B) the Borrower
is Solvent;
(xiii) bearer share warrants or certificates (together with duly
executed stock powers in blank affixed thereto) evidencing all of
the Pledged Stock and such executed Uniform Commercial Code
financing statements relating to Collateral in such form and number
as the Agent may request;
(xiv) an initial Borrowing Notice and, if elected by the
Borrower, Interest Rate Selection Notice;
(xv) evidence that the Prior Facility, other than with respect
to the Existing LC and any documentary letters of credit permitted
under Section 10.7(k) hereof, has been fully and finally paid and
satisfied in full and all promissory notes, credit agreements,
reimbursement agreements and other documents executed in connection
therewith, and any Liens granted to secure payment and performance
thereof, have been cancelled or terminated, as appropriate;
(xvi) evidence that all fees payable by the Borrower on the
Closing Date to the Agent, NCMI and the Lenders have been paid in
full;
(xvii) UCC search results showing only those Liens as are
permitted hereunder or are otherwise acceptable to the Lenders; and
(xviii) executed waiver letter from the Bank of Scotland waiving
any and all provisions of the Bank of Scotland Debt Documents which
would be violated as a result of the consummation of the
transactions contemplated by the Loan Documents;
(xix) executed Declaration of Satisfaction releasing all liens
granted by Merlin or any of its subsidiaries to Barclays Bank plc;
(xx) Pro Forma Historical Statements;
(xxi) Pro Forma Projections; and
(xxii) such other documents, instruments, certificates and
opinions as the Agent or any Lender may reasonably request on or
prior to the Closing Date in connection with the consummation of the
Merlin Transaction and the transactions contemplated hereby;
<PAGE>61
(b) In the good faith judgment of the Agent and the Lenders:
(i) there shall not have occurred or become known to the Agent
or the Lenders any event, condition, situation or status since the
date of the information contained in the financial and business
projections, budgets, pro forma data and forecasts concerning the
Borrower delivered to the Agent on or prior to May 17, 1995 that has
had or could reasonably be expected to result in a Material Adverse
Effect;
(ii) no litigation, other than as disclosed on Schedule 8.10
hereto, shall be pending or threatened which could reasonably be
likely to result in a Material Adverse Effect, or which could
reasonably be expected to restrain or enjoin, impose burdensome
conditions on, or otherwise materially and adversely (A) affect the
ability of the Borrower and its Subsidiaries to fulfill their
respective obligations under the Loan Documents or the Merlin
Transaction Documents, or (B) impair any interests or rights of the
Agent or any Lender under the Loan Documents; and
(iii) the Borrower, its Subsidiaries and the Seller shall have
received all approvals, consents and waivers, and shall have made or
given all necessary filings and notices as shall be required to
consummate the transactions contemplated hereby and by the Merlin
Transaction Documents without the occurrence of any default under,
conflict with or violation of (A) any applicable law, rule,
regulation, order or decree of any Governmental Authority or
arbitral authority or (B) any agreement, document or instrument to
which any of the Borrower, any Subsidiary or the Seller is a party
or by which any of them or their properties is bound, except for
such approvals, consents, waivers, filings and notices the receipt,
making or giving of which is not material to the financial
condition, business or operations of the Borrower and its
Subsidiaries taken as a whole after giving effect to the Merlin
Transaction.
7.2. Conditions of Revolving Loans. The obligations of the Lenders to
make any Revolving Loans, and the Issuing Bank to issue Letters of Credit,
hereunder on or subsequent to the Closing Date are subject to the satisfaction
of the following conditions:
(a) the Agent shall have received a Borrowing Notice if required by
Article III hereof;
(b) the representations and warranties of the Borrower and the
Subsidiaries set forth in Article VIII hereof and in
<PAGE>62
each of the other Loan Documents shall be true and correct in all
material respects on and as of the date of such Advance, with the same
effect as though such representations and warranties had been made on
and as of such date, except to the extent that such representations and
warranties expressly relate to an earlier date and except that the
financial statements referred to in Section 8.6(a)(i) hereof shall be
deemed to be those financial statements most recently delivered to the
Agent and the Lenders pursuant to Section 9.1 hereof;
(c) in the case of the issuance of a Letter of Credit, the Borrower
shall have executed and delivered to the Issuing Bank an Application and
Agreement for Letter of Credit in form and content acceptable to the
Issuing Bank together with such other instruments and documents as it
shall request, and the Issuing Bank agrees that all textual terms and
provisions of such Application and Agreement for Letters of Credit shall
be null and void and the terms and provisions contained in this Agreement
shall control;
(d) at the time of (and after giving effect to) each Advance or the
issuance of a Letter of Credit, (i) no Default or Event of Default
specified in Article XI hereof, shall have occurred and be continuing and
(ii) the Agent shall not have accelerated the maturity of any of the
Notes; and
(e) immediately after giving effect to:
(i) a Revolving Loan, the aggregate principal balance of all
outstanding Revolving Loans for each Lender and in the aggregate
shall not exceed, respectively, (X) such Lender's Revolving Credit
Commitment or (Y) the Total Revolving Credit Commitment; and
(ii) a Letter of Credit, the Letters of Credit Outstandings
shall not exceed the Total Letter of Credit Commitment.
(f) at the time of each Advance or issuance of a Letter of Credit,
the Borrower shall have no actual or constructive knowledge of any Lien
or charge of any type on the Collateral.
ARTICLE VIII
Representations and Warranties
The Borrower represents and warrants with respect to itself and to its
Subsidiaries (which representations and warranties shall survive the delivery
of the documents mentioned herein and the making of Loans), after giving
effect to the Merlin Transaction
<PAGE>63
(except with respect to the representations and warranties contained in
Sections 8.7, 8.8, 8.9, 8.10, 8.13 and 8.19 which shall be made on the Closing
Date without giving effect to the Merlin Transaction) and subject to the items
disclosed in the Acquisition Agreement and the Disclosure Letter with respect
to Merlin and its subsidiaries, that:
8.1. Organization and Authority.
(a) The Borrower and each Subsidiary is a corporation duly
organized and validly existing under the laws of the jurisdiction of its
incorporation;
(b) The Borrower and each Subsidiary (x) has the requisite power
and authority to own its properties and assets and to carry on its
business as now being conducted and as contemplated in the Loan
Documents, and (y) is qualified to do business in every jurisdiction in
which failure so to qualify would have a Material Adverse Effect;
(c) The Borrower has the power and authority to execute, deliver
and perform this Agreement and the Notes, and to borrow hereunder, and to
execute, deliver and perform each of the other Related Transaction
Documents to which it is a party;
(d) Each Guarantor will have the power and authority to execute,
deliver and perform each of the Loan Documents and the other Related
Transaction Documents to which it will be a party; and
(e) When executed and delivered, each of the Related Transaction
Documents to which the Borrower or any Guarantor is a party will be the
legal, valid and binding obligation or agreement, as the case may be, of
the Borrower or such Guarantor, enforceable against the Borrower or such
Guarantor in accordance with its terms, subject to the effect of any
applicable bankruptcy, moratorium, insolvency, reorganization or other
similar law affecting the enforceability of creditors' rights generally
and to the effect of general principles of equity which may limit the
availability of equitable remedies (whether in a proceeding at law or in
equity).
8.2. Related Transaction Documents. The execution, delivery and
performance by the Borrower and each Guarantor of each of the Related
Transaction Documents to which it is a party:
(a) have been duly authorized by all requisite corporate action
(including any required shareholder approval) of the Borrower required
for the lawful execution, delivery and performance thereof;
<PAGE>64
(b) do not violate any provisions of (i) applicable law, rule or
regulation, except to the extent such violation would not, or would not
be reasonably likely to, have a Material Adverse Effect, (ii) any order
of any court or other agency of government binding on the Borrower or any
Subsidiary, or its properties, or (iii) the charter documents or bylaws
of Borrower or any Subsidiary;
(c) do not and will not be in conflict with, result in a breach of
or constitute an event of default, or an event which, with notice or
lapse of time, or both, would constitute an event of default, under any
indenture, agreement or other instrument to which Borrower or any
Subsidiary is a party, or by which the properties or assets of Borrower
or any Subsidiary are bound, except to the extent such conflict, breach
or default would not, or would not be reasonably likely to, have a
Material Adverse Effect; and
(d) do not and will not result in the creation or imposition of any
Lien of any nature whatsoever upon any of the properties or assets of
Borrower or any Subsidiary except any Liens in favor of the Agent and the
Lenders created by the Security Instruments.
8.3. Solvency. The Borrower is Solvent after giving effect to the trans-
actions contemplated by this Agreement and the other Related Transaction
Documents.
8.4. Subsidiaries and Stockholders. The Borrower has no Subsidiaries
other than those Persons listed as Subsidiaries in Schedule 8.4 hereto and
additional Subsidiaries created or acquired after the Closing Date in
compliance with Section 9.23 hereof; Schedule 8.4 to this Agreement states as
of the date hereof the organizational form of each entity, the authorized and
issued capitalization of each Subsidiary listed thereon, the number of shares
or other equity interests of each class of capital stock or interest issued
and outstanding of each such Subsidiary and the number and/or percentage of
outstanding shares or other equity interest (including options, warrants and
other rights to acquire any interest) of each such class of capital stock or
equity interest owned by Borrower or by any such Subsidiary; the outstanding
shares or other equity interests of each such Subsidiary have been duly
authorized and validly issued and are fully paid and nonassessable; and
Borrower and each such Subsidiary owns beneficially and of record all the
shares and other interests it is listed as owning in Schedule 8.4, free and
clear of any Lien.
8.5. Ownership Interests. Borrower owns no equity interest in any Person
other than the Persons listed in Schedule 8.4 attached hereto, equity
investments in Persons not constituting Subsidiaries permitted under Section
10.11 hereof and additional Subsidiaries
<PAGE>65
created or acquired after the Closing Date in compliance with Section 9.23
hereof.
8.6. Financial Condition.
(a) The Borrower has heretofore furnished to each Lender (i) an
audited consolidated balance sheet of the Borrower and its Subsidiaries
as at February 25, 1995 and the notes thereto and the related
consolidated statements of income, stockholders' equity and cash flows
for the Fiscal Year then ended as examined and certified by Deloitte &
Touche L.L.P., and (ii) the Audited Accounts (as defined in the
Acquisition Agreement) and the Management Accounts (as defined in the
Third Schedule to the Acquisition Agreement). Except as set forth
therein, such financial statements of the Borrower and its Subsidiaries
(including the notes thereto) present fairly the financial condition of
the Borrower and its Subsidiaries as of the end of such Fiscal Year and
results of their operations and the changes in its stockholders' equity
for the Fiscal Year then ended, all in conformity with Generally Accepted
Accounting Principles applied on a Consistent Basis, subject however, in
the case of unaudited interim statements to year end audit adjustments
and provided that the parties hereto agree that, although not prepared in
accordance with GAAP, (y) the Audited Accounts shall be prepared in
conformity with accounting principles generally accepted by the
accounting and financial reporting authorities of the United Kingdom and
(z) the Management Accounts shall be prepared in accordance with the
normal practices of Merlin in preparing management accounts;
(b) since February 25, 1995, there has been no material adverse
change in the condition, financial or otherwise, of the Borrower and its
Subsidiaries taken as a whole or in the businesses, properties and
operations of the Borrower and its Subsidiaries, considered as a whole,
nor have such businesses or properties, taken as a whole, been materially
adversely affected as a result of any fire, explosion, earthquake,
accident, strike, lockout, unionization of workers, flood, embargo or act
of God;
(c) except as set forth in the financial statements referred to in
Section 8.6(a) or in Schedule 8.6 hereto, neither Borrower nor any
Subsidiary has incurred, other than in the ordinary course of business,
any material Indebtedness, obligations, commitments or other liability
contingent or otherwise which remain outstanding or unsatisfied and which
other liability constitutes an Event of Default hereunder;
(d) the Pro Forma Historical Statements provided to the Agent and
the Lenders accurately reflect in accordance with Generally Accepted
Accounting Principles the historical pro
<PAGE>66
forma financial condition and results of operations of the Borrower and
its Subsidiaries for the respective periods covered thereby, after
giving pro forma effect to the Merlin Transaction; and
(e) the Pro Forma Projections provided to the Agent and the Lenders
were prepared by the Borrower in good faith and is based upon assumptions
which the Borrower believes to have been reasonable as of the time of
preparation thereof and as of the Closing Date.
8.7. Title to Properties. The Borrower and its Subsidiaries have good
and marketable title to all their real and personal properties owned on the
date hereof, subject to no transfer restrictions or Liens of any kind, except
for the transfer restrictions and Liens described in Schedule 8.7 attached
hereto and incorporated herein by reference.
8.8. Taxes. The Borrower and its Subsidiaries have filed or caused to be
filed all federal, state and local tax returns which are required to be filed
by them and except for taxes and assessments being contested in good faith by
appropriate proceedings diligently conducted and against which reserves
satisfactory to the Borrower's independent certified public accountants have
been established, have paid or caused to be paid all taxes as shown on said
returns or on any assessment received by it, to the extent that such taxes
have become due.
8.9. Other Agreements. Neither the Borrower nor any Subsidiary is
(a) a party to any judgment, order, decree or any agreement or
instrument or subject to restrictions which could reasonably be likely to
have a Material Adverse Effect or to materially adversely affect the
ability of the Borrower or any Guarantor to observe the covenants and
agreements contained herein or any other Related Transaction Document; or
(b) in default in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any agreement or
instrument to which it is a party, which default has, or if not remedied
within any applicable grace period could reasonably be likely to have, a
Material Adverse Effect or to materially adversely affect the ability of
the Borrower or any Guarantor to observe the covenants and agreements
contained herein or any other Related Transaction Document.
8.10. Litigation. There is no action, suit or proceeding at law or in
equity or by or before any governmental instrumentality or agency or arbitral
body pending, or, to the knowledge of the Borrower, threatened by or against
the Borrower or any Subsidiary
<PAGE>67
or affecting the Borrower or any Subsidiary or any properties or rights of the
Borrower or any Subsidiary, which could reasonably be likely (i) to have a
Material Adverse Effect, except as set forth in Schedule 8.10, (ii) to
restrain, enjoin, impose burdensome conditions upon or otherwise materially
and adversely affect the consummation of the Merlin Transaction in accordance
with the Merlin Transaction Documents, or (iii) to materially adversely affect
the ability of the Borrower or any Guarantor to observe the covenants and
agreements contained herein or any other Related Transaction Document.
8.11. Margin Stock. The proceeds of the borrowings made pursuant to
Article II, Article III and Article IV hereof will be used by the Borrower
only for the purposes set forth in Sections 2.9 and 3.11 hereof. None of such
proceeds will be used, directly or indirectly, for the purpose of purchasing
or carrying any margin stock or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry margin stock
or for any other purpose which might constitute any of the Loans under this
Agreement a "purpose credit" within the meaning of said Regulation U or
Regulation X (12 C.F.R. Part 224) of the Board. Neither the Borrower nor any
agent acting in its behalf has taken or will take any action which might cause
this Agreement or any of the documents or instruments delivered pursuant
hereto to violate any regulation of the Board or to violate the Securities
Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended,
or any state securities laws, in each case as in effect on the date hereof.
8.12. Investment Company. Neither the Borrower nor any Subsidiary is an
"investment company," or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended (15 U.S.C. 80a-1,
et seq.). The application of the proceeds of the Loans and repayment thereof
by the Borrower and the performance by the Borrower and the Guarantors of the
transactions contemplated by this Agreement will not violate any provision of
said Act, or any rule, regulation or order issued by the Securities and
Exchange Commission thereunder, in each case as in effect on the date hereof.
8.13. Patents, Etc. The Borrower and each Subsidiary owns or has the
right to use, under valid license agreements or otherwise, all material
patents, licenses, franchises, trademarks, trademark rights, trade names,
trade name rights, trade secrets and copyrights necessary to the conduct of
its businesses as now conducted, without known conflict with any patent,
license, franchise, trademark, trade secrets and confidential commercial or
proprietary information, trade name, copyright, rights to trade secrets or
other proprietary rights of any other Person except where the failure to do so
is not reasonably likely to result in a Material Adverse Effect.
<PAGE>68
8.14. No Untrue Statement. Except with respect to statements,
representations and warranties by Persons other than the Borrower in
connection with the Merlin Transaction Documents, neither (a) this Agreement
nor any other Loan Document or certificate or document executed and delivered
by or on behalf of the Borrower or any Subsidiary in accordance with or
pursuant to any Loan Document nor (b) any statement, representation, or
warranty provided to the Agent in connection with the negotiation or
preparation of the Loan Documents contains any misrepresentation or untrue
statement of a fact which is reasonably likely to result in a Material Adverse
Effect (a "Material Fact") or omits to state a Material Fact necessary, in
light of the circumstance under which it was made, in order to make any such
representation or statement contained therein not misleading.
8.15. No Consents, Etc. Neither the respective businesses or properties
of the Borrower or any Subsidiary, nor any relationship between the Borrower
or any Subsidiary and any other Person, nor any circumstance in connection
with the execution, delivery and performance of the Related Transaction
Documents and the transactions contemplated hereby, is such as to require a
consent, approval or authorization of, or filing, registration or
qualification with, any governmental or other authority or any other Person on
the part of the Borrower or any Subsidiary as a condition to the execution,
delivery and performance of, or consummation of the transactions contemplated
by, this Agreement, the other Loan Documents or the other Related Transaction
Documents, which, if not obtained or effected, would be reasonably likely to
have a Material Adverse Effect or to materially impair or impose burdensome
conditions on the performance of any of the Related Transaction Documents, or
if so, such consent, approval, authorization, filing, registration or
qualification has been obtained or effected, as the case may be.
8.16. Employee Benefit Plans.
(a) Except as set forth on Schedule 8.16 hereto, as of the date
hereof, neither the Borrower nor any ERISA Affiliate maintains or
contributes to, or has any obligation under, any Employee Benefit Plans
(other than any foreign employee benefit plans) or any Multiemployer
Plans;
(b) The Borrower and each ERISA Affiliate is in compliance with all
applicable provisions of ERISA and in compliance with all Foreign Benefit
Laws with respect to all Employee Benefit Plans except where failure to
comply would not result in a Material Adverse Effect and except for any
required amendments for which the remedial amendment period as defined in
Section 401(b) of the Code has not yet expired. Each Employee Benefit
Plan that is intended to be qualified under Section 401(a) of the Code
has been determined by the Internal Revenue Service (the "IRS") to be so
qualified, and
<PAGE>69
each trust related to such plan has been determined to be exempt under
Section 501(a) of the Code. No material liability has been incurred
by the Borrower or any ERISA Affiliate which remains unsatisfied for
any taxes or penalties with respect to any Employee Benefit Plan or any
Multiemployer Plan;
(c) No Employee Benefit Plan has incurred an accumulated funding
deficiency (as defined in Section 412 of the Code without regard to any
waiver granted under Section 412 of the Code), nor has any funding waiver
from the IRS been received or requested with respect to any Employee
Benefit Plan, nor has the Borrower or any ERISA Affiliate failed to make
any contributions or to pay any amounts due and owing as required by
Section 412 of the Code, Section 302 of ERISA or the terms of any
Employee Benefit Plan on or prior to the due dates of such contributions
under Section 412 of the Code, Section 302 of ERISA or the terms of any
Employee Benefit Plan, nor has there been any event requiring any
disclosure under Section 4041(c)(3)(C), 4063(a) or 4068(f) of ERISA with
respect to any Employee Benefit Plan;
(d) Neither the Borrower nor any ERISA Affiliate has: (i) engaged
in a nonexempt prohibited transaction described in Section 406 of ERISA
or Section 4975 of the Code for which any penalty or tax could be imposed
under Section 502 of ERISA or Section 4975 of the Code, respectively, in
excess of $2,500,000, (ii) incurred any liability to the PBGC which
remains outstanding other than the payment of premiums and there are no
premium payments which are due and unpaid or (iii) failed to make a
required contribution or payment to a Multiemployer Plan;
(e) No Termination Event has occurred or is reasonably expected to
occur with respect to any Pension Plan or, to the best knowledge of the
Borrower, any Multiemployer Plan;
(f) No material proceeding, claim, lawsuit and/or investigation
exists or, to the best knowledge of the Borrower, is threatened
concerning or involving any Employee Benefit Plan.
8.17. No Default. As of the date hereof, there does not exist any
Default or Event of Default hereunder.
8.18. Hazardous Materials. The Borrower and each Subsidiary is in
compliance with all applicable Environmental Laws in all respects except where
the failure to do so is not reasonably likely to result in a Material Adverse
Effect and the Borrower has not been notified of any action, suit, proceeding
or investigation which calls into question compliance by the Borrower or any
Subsidiary with any Environmental Laws or which seeks to suspend,
<PAGE>70
revoke or terminate any license, permit or approval necessary for the
generation, handling, storage, treatment or disposal of any Hazardous Material
except to the extent such action, suit or proceeding or the loss of such
license, permit or approval would not reasonably be likely to result in a
Material Adverse Effect.
8.19. Employment Matters. (a) Except as disclosed on Schedule 8.19
hereto, as of the date hereof, none of the employees of the Borrower or any
Subsidiary is subject to any collective bargaining agreement and there are no
strikes, work stoppages, election or decertification petitions or proceedings,
unfair labor charges, equal opportunity proceedings, or other material
labor/employee related controversies or proceedings pending or, to the best
knowledge of the Borrower, threatened against the Borrower or any Subsidiary
or between the Borrower or any Subsidiary and any of its employees, other than
employee grievances arising in the ordinary course of business which would not
in the aggregate have a Material Adverse Effect.
(b) Except to the extent a failure to maintain compliance would not have
a Material Adverse Effect, the Borrower and each Subsidiary is in compliance
in all respects with all applicable laws, rules and regulations pertaining to
labor or employment matters, including without limitation those pertaining to
wages, hours, occupational safety and taxation and there is neither pending or
threatened any material litigation, administrative proceeding nor, to the
knowledge of the Borrower, any investigation, in respect of such matters,
which is reasonably likely to have a Material Adverse Effect.
8.20. Representations and Warranties from the Merlin Transaction
Documents. As of the Closing Date, each of the representations and warranties
made by Borrower or any Subsidiary (other than Merlin) in the Merlin
Transaction Documents are true and correct in all material respects. Borrower
is not aware of any facts or circumstances indicating that the representations
and warranties of Seller contained in the Merlin Transaction Documents are not
true and correct in all material respects as of the date hereof.
8.21. Seller Rights. Upon consummation of the Merlin Transaction,
except for preemptive rights in favor of the Borrower and for rights of Donald
Bodow described in the Disclosure Schedule to the Acquisition Agreement with
respect to Paragraph 2(B)(4) thereof, no Seller will have any preemptive or
other rights with respect to the share capital of Merlin or any subsidiary of
Merlin and there will not be any outstanding warrants, options or other rights
to acquire any shares of stock of Merlin or any of its subsidiaries.
8.22. Merlin License Agreements. None of the license agreements or
other licensing arrangements referenced in the
<PAGE>71
Disclosure Letter as terminable upon a change in control of Merlin are,
individually or in the aggregate, material to the business or operations of
Merlin or any of its subsidiaries.
8.23. Merlin Information. The share register of Merlin is true and
correct. All appropriate documents relating to Merlin have been filed with
the Companies House, London. The Borrower has not filed nor, to its
knowledge, has any other person filed any winding up petitions or petitions
for administration orders, nor, to its knowledge, has any receiver or
administrative receiver been appointed with respect to Merlin.
8.24. Place of Business. As of the date hereof, the Borrower has no
office, mailing address or other place of business in the United Kingdom.
8.25. No Change in Consolidated Net Worth. The consummation of the
Merlin Transaction will not result in a change in Consolidated Net Worth.
ARTICLE IX
Affirmative Covenants
Until the Obligations have been paid and satisfied in full, no Letters of
Credit remain outstanding and this Agreement has been terminated in accordance
with the terms hereof, unless the Required Lenders shall otherwise consent in
writing, the Borrower will, and where applicable will cause each Subsidiary
to:
9.1. Financial Reports, Etc. (a) As soon as practical and in any event
within 95 days after the end of each Fiscal Year of the Borrower, deliver or
cause to be delivered to the Agent and each Lender (i) consolidated balance
sheets of the Borrower and its Subsidiaries, and the notes thereto,
consolidating balance sheets of the Borrower and its Principal Subsidiaries,
and the notes thereto, the related consolidated and consolidating statements
of operations, stockholders' equity and cash flows, and the respective notes
thereto, for such Fiscal Year, setting forth in the case of the statements
comparative financial statements for the preceding Fiscal Year (except with
respect to the Fiscal Year ended February 25, 1995), all prepared in
accordance with Generally Accepted Accounting Principles applied on a
Consistent Basis and showing the results of operations of each product segment
and containing, with respect to the consolidated financial reports, opinions
of Deloitte & Touche, L.L.P., or other such independent certified public
accountants selected by the Borrower and approved by the Agent which approval
shall not be unreasonably withheld or delayed and shall be deemed given as to
any "big six" accounting firm, which are unqualified as to the scope of the
audit performed and as to the "going concern" status of the Borrower and
without any exception not acceptable to the Lenders, and (ii) a certificate
<PAGE>72
of an Authorized Representative demonstrating compliance with Sections 10.1,
10.2, 10.3 and 10.4 hereof, which certificate shall be in the form attached as
Exhibit K hereto;
(b) as soon as practical and in any event within 45 days after the
end of fiscal quarter (except the last fiscal quarter of the Fiscal Year),
deliver to the Agent and each Lender (i) consolidated balance sheets of the
Borrower and its Subsidiaries and consolidating balance sheets of the Borrower
and its Principal Subsidiaries, each as of the end of such fiscal quarter, and
the related consolidated and consolidating statements of operations,
stockholders' equity and cash flows for such fiscal quarter and for the period
from the beginning of the Fiscal Year through the end of such reporting
period, and showing the results of operations of each product segment and
accompanied by a certificate of an Authorized Representative to the effect
that such financial statements present fairly the financial position of the
Borrower and its Subsidiaries as of the end of such fiscal period and the
results of their operations and the changes in their financial position for
such fiscal period, in conformity with the standards set forth in Section
8.6(a) hereof with respect to interim financials, (ii) a certificate of an
Authorized Representative containing computations for such quarter comparable
to that required pursuant to Section 9.1(a)(ii) hereof and (iii) a schedule of
licenses, other than the Principal Licenses, which have generated more than
$10,000,000 in sales during the immediately preceding Four Quarter Period and
listing parties thereto and applicable expiration or termination dates, such
schedule being delivered for informational purposes only and creating no
obligation on the Borrower or its Subsidiaries to maintain or preserve the
licenses so listed;
(c) not later than the last Business Day of the first Fiscal Quarter
of each Fiscal Year, deliver to the Agent and each Lender projected balance
sheets, projected statements of operations and projected statements of cash
flows, for the Borrower and its Subsidiaries for such Fiscal Year in form and
content consistent with Borrower's official plan as presented to its Board of
Directors;
(d) together with each delivery of the financial statements
required by Section 9.1(a)(i) hereof, deliver to the Agent and each Lender a
letter from the Borrower's accountants specified in Section 9.1(a)(i) hereof
stating that in performing the audit necessary to render an opinion on the
financial statements delivered under Section 9.1(a)(i) hereof, they obtained
no knowledge of any Default or Event of Default by the Borrower in the
fulfillment of the terms and provisions of this Agreement insofar as they
relate to financial matters (which at the date of such statement remains
uncured); and if the accountants have obtained knowledge of such Default or
Event of Default, a statement specifying the nature and period of existence
thereof;
<PAGE>73
(e) promptly upon their becoming available to the Borrower, the
Borrower shall deliver to the Agent and each Lender a copy of (i) all regular
or special reports or effective registration statements which Borrower or any
Subsidiary shall file with the Securities and Exchange Commission (or any
successor thereto) or any securities exchange, (ii) any proxy statement
distributed by the Borrower or any Subsidiary to its shareholders, bondholders
or the financial community in general, and (iii) any management letter or
other report submitted to the Borrower or any Subsidiary by independent
accountants in connection with any annual, interim or special audit of the
Borrower or any Subsidiary; and
(f) promptly, from time to time, deliver or cause to be delivered
to the Agent and each Lender such other information regarding Borrower's and
any Subsidiary's operations, business affairs and financial condition as the
Agent or such Lender may reasonably request.
9.2. Maintain Properties. Maintain all properties necessary to its
operations in good working order and condition and make all needed repairs,
replacements and renewals as are reasonably necessary to conduct its business
in accordance with customary business practices.
9.3. Existence, Qualification, Etc. Do or cause to be done all things
necessary to preserve and keep in full force and effect its existence and all
material rights (other than licenses) and franchises, trade names, trademarks
and permits and maintain its license or qualification to do business as a
foreign corporation and good standing in each jurisdiction in which its
ownership or lease of property or the nature of its business makes such
license or qualification necessary except where the failure to so qualify
would not have a Material Adverse Effect.
9.4. Regulations and Taxes. Comply in all material respects with or
contest in good faith all statutes and governmental regulations and pay all
taxes, assessments, governmental charges, claims for labor, supplies, rent and
any other obligation which, if unpaid, would become a Lien against any of its
properties except liabilities being contested in good faith by appropriate
proceedings diligently conducted and against which adequate reserves have been
established.
9.5. Insurance. (a) Keep all of its insurable properties adequately
insured at all times with responsible insurance carriers against loss or
damage by fire and other hazards to the extent and in the manner as are
customarily insured against by similar businesses owning such properties
similarly situated, (b) maintain general public liability insurance at all
times with responsible insurance carriers against liability on account of
damage to persons and property having such limits, deductibles, exclusions
<PAGE>74
and co-insurance and other provisions providing no less coverages than are
maintained by similar businesses that are similarly situated, such insurance
policies to be in form reasonably satisfactory to the Agent, and (iii)
maintain insurance under all applicable workers' compensation laws (or in the
alternative, maintain required reserves if self-insured for workers'
compensation purposes) and against loss by reason by business interruption.
Each of the policies of insurance described in this Section 9.5 shall provide
that the insurer shall give the Agent not less than thirty (30) days' prior
written notice before any such policy shall be terminated, lapse or be altered
in any manner.
9.6. True Books. Keep true books of record and account in which full,
true and correct entries will be made of all of its dealings and transactions,
and set up on its books such reserves as may be required by GAAP with respect
to doubtful accounts and all taxes, assessments, charges, levies and claims
and with respect to its business in general, and include such reserves in
interim as well as year-end financial statements.
9.7. Payment of Other Indebtedness. Pay when due (or within applicable
grace periods) all Indebtedness (for which the failure to pay would constitute
an Event of Default under Section 11.1(f)) due third Persons, except when the
amount thereof is being contested in good faith by appropriate proceedings
diligently conducted and with reserves in form and amount reasonably
acceptable to the Agent therefor being set aside on the books of the Borrower
or the applicable Subsidiary.
9.8. Right of Inspection. Permit any Person designated by any Lender or
the Agent to visit and inspect any of the properties, corporate books and
financial reports of the Borrower or any Subsidiary and to discuss its
affairs, finances and accounts with its principal officers and independent
certified public accountants, all at reasonable times during regular business
hours, at reasonable intervals and with reasonable prior notice; provided,
however, that prior to the occurrence and continuation of an Event of Default,
the costs associated with all such visits and inspections by a Lender shall be
borne by such Lender and the costs associated with such visits and inspections
by the Agent, in excess of one visit and inspection each calendar year (the
reasonable costs with respect to which shall be borne by the Borrower) shall
be borne by the Agent. After the occurrence and during the continuation of an
Event of Default, all costs associated with such visits and inspections shall
be borne by the Borrower.
9.9. Observe all Laws. Conform to and duly observe in all respects all
laws, rules and regulations and all other valid requirements of any regulatory
authority with respect to the conduct of its business except where the failure
to do so is not reasonably likely to result in a Material Adverse Effect.
<PAGE>75
9.10. Governmental Licenses. Obtain and maintain all licenses, permits,
certifications and approvals of all applicable Governmental Authorities as are
required for the conduct of its business as currently conducted and herein
contemplated except where the failure to do so is not reasonably likely to
result in a Material Adverse Effect.
9.11. Covenants Extending to Other Persons. Cause each of its
Subsidiaries to do with respect to itself, its business and its assets, each
of the things required of the Borrower in Article IX.
9.12. Officer's Knowledge of Default. Upon any senior executive officer
of the Borrower obtaining knowledge of any Default or Event of Default
hereunder, cause such officer or an Authorized Representative to promptly
notify the Agent of the nature thereof, the period of existence thereof, and
what action the Borrower proposes to take with respect thereto.
9.13. Suits or Other Proceedings. Upon any senior executive officer of
the Borrower obtaining knowledge of any litigation or other proceedings being
instituted against the Borrower or any Subsidiary, or any attachment, levy,
execution or other process being instituted against any assets of the Borrower
or any Subsidiary, making a claim or claims in an aggregate amount greater
than $2,500,000 not otherwise covered by insurance, promptly deliver to the
Agent written notice thereof stating the nature and status of such litigation,
dispute, proceeding, levy, execution or other process.
9.14. Notice of Discharge of Hazardous Material or Environmental
Complaint. Promptly provide to the Agent true, accurate and complete copies
of any and all notices, complaints, orders, directives, claims, or citations
received by the Borrower or any Subsidiary relating to any (a) violation or
alleged violation by the Borrower or any Subsidiary of any applicable
Environmental Laws; (b) release or threatened release by the Borrower or any
Subsidiary, or at any facility or property owned or operated by the Borrower
or any Subsidiary, of any Hazardous Material, except where occurring legally;
or (c) liability or alleged liability of the Borrower or any Subsidiary for
the costs of cleaning up, removing, remediating or responding to a release of
Hazardous Materials.
9.15. Environmental Compliance. If the Borrower or any Subsidiary shall
receive letter, notice, complaint, order, directive, claim or citation
alleging that the Borrower or and Subsidiary has violated any Environmental
Law or is liable for the costs of cleaning up, removing, remediating or
responding to a release of Hazardous Materials, the Borrower shall, within the
time period permitted by the applicable Environmental Law or the Governmental
Authority responsible for enforcing such Environmental Law, remove or remedy,
or cause the applicable Subsidiary to remove
<PAGE>76
or remedy, such violation or release or satisfy such liability, except where
the failure to do so is not reasonably likely to result in a Material Adverse
Effect or unless the applicability of the Environmental Law, the fact of such
violation or liability or what is required to remove or remedy such violation
is being contested by the Borrower or the applicable Subsidiary by appropriate
proceedings diligently conducted and all reserves with respect thereto as may
be required under Generally Accepted Accounting Principles, if any, have been
made.
9.16. Indemnification. The Borrower hereby agrees to defend, indemnify
and hold the Agent, the Lenders, their Affiliates and their respective
officers, directors, employees and agents, harmless from and against any and
all claims, losses, penalties, liabilities, damages and expenses (including,
without limitation, assessment and cleanup costs and reasonable attorneys'
fees and disbursements) arising directly or indirectly from, out of or by
reason of (a) the violation of any Environmental Law by the Borrower or any
Subsidiary or with respect to any property owned, operated or leased by the
Borrower or any Subsidiary or (b) the handling, storage, treatment, emission
or disposal of any Hazardous Material by or on behalf of the Borrower or any
Subsidiary on or with respect to property owned or leased or operated by the
Borrower or any Subsidiary. The Borrower shall not be liable under this
Section 9.16 for any such amounts arising solely as a result of the gross
negligence or willful misconduct of any indemnified party. The provisions of
this Section 9.16 shall survive repayment of the Obligations, occurrence of
the Revolving Credit Termination Date and expiration or termination of this
Agreement.
9.17. Further Assurances. At the Borrower's cost and expense, upon
request of the Agent, duly execute and deliver or cause to be duly executed
and delivered, to the Agent such further instruments, documents, certificates,
financing and continuation statements, and do and cause to be done such
further acts that may be reasonably necessary or advisable in the reasonable
opinion of the Agent to carry out more effectively the provisions and purposes
of this Agreement and the other Loan Documents.
9.18. Employee Benefit Plans. With reasonable promptness, and in any
event within thirty (30) days thereof, give notice of and/or deliver to Agent
copies of (a) the establishment of any new Employee Benefit Plan, (b) any
material increase in the benefits of any existing Employee Benefit Plan,
(c) each funding waiver request filed with respect to any Employee Benefit
Plan and all communications received or sent by the Borrower or any ERISA
Affiliate with respect to such request and (d) the failure of the Borrower or
any ERISA Affiliate to make a required installment or payment under Section
302 of ERISA or Section 412 of the Code by the due date.
<PAGE>77
9.19. Termination Events. Promptly and in any event within fifteen (15)
days of becoming aware of the occurrence of or forthcoming occurrence of any
(a) Termination Event or (b) "prohibited transaction," as such term is defined
in Section 406 of ERISA or Section 4975 of the Code, in connection with any
Pension Plan or any trust created thereunder, deliver to the Agent a notice
specifying the nature thereof, what action the Borrower or any ERISA Affiliate
has taken, is taking or proposes to take with respect thereto and, when known,
any action taken or threatened by the IRS, the Department of Labor or the PBGC
with respect thereto.
9.20. ERISA Notices. With reasonable promptness but in any event within
fifteen (15) days of receipt, filing or occurrence, respectively, deliver to
the Agent (a) copies of any unfavorable determination letter from the IRS
regarding the qualification of an Employee Benefit Plan under Section 401(a)
of the Code, (b) copies of each Schedule B (Actuarial Information) to the
annual report (Form 5500 Series) filed by the Borrower or any ERISA Affiliate
with the Internal Revenue Service with respect to each Employee Benefit Plan
and (c) notice that the present value of all benefit liabilities under all
Pension Plans exceeds the current value of the assets of all Pension Plans
allocable to such benefit liabilities by more than $2,500,000.
9.21. Continued Operations. Continue at all times (i) to conduct its
business and engage principally in the same line or lines of business
substantially as heretofore conducted and those reasonably ancillary thereto
(including collectibles, confectionery, publishing and entertainment
products), and (ii) preserve, protect and maintain free from Liens, other than
Permitted Liens, its principal licenses listed on Schedule 9.21 hereto (the
"Principal Licenses") and its material patents, copyrights, trademarks,
trademark rights, trade names, trade name rights, trade secrets and know-how
necessary or useful in the conduct of its operations except where the failure
to so preserve, protect and maintain would not reasonably be likely to result
in a Material Adverse Effect. For the purposes of this Section 9.21 and with
respect to the Principal Licenses of the Borrower only, the term "Material
Adverse Effect" shall mean only the loss of the beneficial ownership or use of
more than two such Principal Licenses without replacement of the ability to
produce, market and sell trading cards of substantially equivalent quality and
quantity as that existing generally prior to such loss.
9.22. Use of Proceeds. Use the proceeds of the Loans solely for the
purposes specified in Sections 2.9 and 3.11 hereof.
9.23. New Subsidiaries. Simultaneously with the acquisition or creation
of any Material Subsidiary (except for any Subsidiary of Merlin existing as of
the Closing Date or any Foreign Subsidiary), cause to be delivered to the
Agent for the benefit of the Lenders each of the following:
<PAGE>78
(i) a Subsidiary Guaranty substantially in the form attached hereto
as Exhibit I;
(ii) an opinion of counsel to the Subsidiary dated as of the date of
delivery of the Subsidiary Guaranty provided in the foregoing
clause (i) and addressed to the Agent and the Lenders, in form and
substance reasonably acceptable to the Agent (which opinion may include
assumptions and qualifications of similar effect to those contained in
the opinions of counsel delivered pursuant to Section 7.1(a)(iii))
hereof), to the effect that:
(A) such Subsidiary is validly existing and in good standing
in the jurisdiction of its organization, has the requisite power and
authority to own its properties and conduct its business as then
owned and then proposed to be conducted and is duly qualified to
transact business and is in good standing as a foreign corporation
or partnership in the jurisdictions set forth in such opinion; and
(B) the execution, delivery and performance of the Subsidiary
Guaranty described in clause (i) of this Section 9.23 to which such
Subsidiary is a signatory have been duly authorized by all requisite
corporate or partnership action (including any required shareholder
or partner approval), such agreement has been duly executed and
delivered, constitutes the valid and binding obligation of such
Subsidiary, enforceable against such Subsidiary in accordance with
its terms, subject to the effect of any applicable bankruptcy,
moratorium, insolvency, reorganization or other similar law
affecting the enforceability of creditors' rights generally and to
the effect of general principles of equity which may limit the
availability of equitable remedies (whether in a proceeding at law
or in equity) and to the actual knowledge of such counsel does not
and will not violate any laws, rules or regulations applicable to
the Subsidiary or violate or constitute a breach of any contract,
agreement, indenture, lease, instrument or other document, judgment,
writ, determination, order or decree to which the Subsidiary is a
party or by which the Subsidiary or any of its properties are bound
and which is set forth on a schedule to such opinion; and
(iii) an opinion of general counsel of the Borrower or of special
counsel to the Borrower dated as of the date of delivery of the
Subsidiary Guaranty provided in clause (i) above and addressed to the
Agent and the Lenders, in form and substance reasonably acceptable to the
Agent, to the effect that such Subsidiary is duly organized in the
jurisdiction of its organization; and
<PAGE>79
(iv) current copies of the charter documents, including partnership
agreements and certificate of limited partnership, if applicable, and
bylaws of such Subsidiary, minutes of duly called and conducted meetings
(or duly effected consent actions) of the Board of Directors, partners,
or appropriate committees thereof (and, if required by such charter
documents, bylaws or by applicable laws, of the shareholders or partners)
of such Subsidiary authorizing the actions and the execution and delivery
of documents described in clause (i) of this Section 9.23 and evidence
satisfactory to the Agent (confirmation of the receipt of which will be
provided by the Agent to the Lenders) that such Subsidiary is Solvent as
of such date and after giving effect to the Subsidiary Guaranty.
9.24. Rate Hedging Obligations. Enter into Hedging Agreements in an
aggregate notional amount reasonably agreed to by the Borrower and the Agent
provided that such Hedging Agreements are available on terms and conditions
reasonably acceptable to the Borrower.
ARTICLE X
Negative Covenants
Until the Obligations have been paid and satisfied in full, no Letters of
Credit remain outstanding and this Agreement has been terminated in accordance
with the terms hereof, unless the Required Lenders shall otherwise consent in
writing, the Borrower will not, nor will it permit any Subsidiary to:
10.1. Consolidated Leverage Ratio. Permit the Consolidated Leverage
Ratio as of the end of any Four Quarter Period (or shorter period as described
in the definition thereof) to be greater than 2.00 to 1.00.
10.2. Consolidated Fixed Charge Ratio. Permit the Consolidated Fixed
Charge Ratio as of the end of any Four Quarter Period to be less than 1.35 to
1.00.
10.3. Consolidated Net Worth. Permit Consolidated Net Worth to be less
than (i) $75,773,000 at May 29, 1995 and (ii) as at the last day of each
succeeding fiscal quarter of the Borrower and until (but excluding) the last
day of the next following fiscal quarter of the Borrower, the sum of (A) the
amount of Consolidated Net Worth required to be maintained pursuant to this
Section 10.3 as at the end of the immediately preceding fiscal quarter, plus
(B) 50% of Consolidated Net Income (with no reduction for net losses during
any period) for the fiscal quarter of the Borrower ending on such day
(including within "Consolidated Net Income" certain items otherwise excluded,
as provided for in the definition of "Consolidated Net Income" and,
notwithstanding such definition,
<PAGE>80
subtracting all extraordinary losses in calculating Consolidated Net Income,
but without duplication of such extraordinary losses as are net against
extraordinary gains in such calculation), plus (C) 100% of the aggregate
amount of all increases in the stated capital and additional paid-in capital
accounts of the Borrower resulting from the issuance of equity securities or
other capital investments; provided, however, calculation of Consolidated Net
Worth for purposes of this Section 10.3 shall exclude the effect of Permitted
Stock Repurchases.
10.4. Cash Balances. At all times after the Borrower's repurchase of
any shares of its common capital stock, except as provided below, permit the
aggregate amount of cash and cash equivalents of the Borrower and its
Subsidiaries on a consolidated basis, as evidenced in the balance sheets
delivered pursuant to Section 9.1 hereof, to be less than an amount equal to
the amount of any Revolving Loan Outstandings at such time plus $5,000,000;
provided, however, this Section 10.4 shall not be applicable in the event
either (i) the outstanding principal balance of the Term Loan is less than
$25,000,000 or (ii) this Section 10.4 has been complied with continuously
without default for not less than one year after the date on which the
Borrower has repurchased shares of its common capital stock since the Closing
Date in an aggregate amount of consideration in excess of $1,000,000.
10.5. Guaranties. Other than the Guaranties existing as of the Closing
Date and listed on Schedule 8.6 hereto, incur, create or permit to exist any
Guaranties other than Guarantees in respect of Indebtedness permitted
hereunder.
10.6. Liens. Incur, create or permit to exist any pledge, Lien, charge
or other encumbrance of any nature whatsoever with respect to any property or
assets now owned or hereafter acquired by the Borrower or any Subsidiary,
other than the following (all of which shall be collectively referred to as
"Permitted Liens"):
(a) Liens created under the Security Instruments in favor of the
Agent and the Lenders, and otherwise existing as of the date hereof and
as set forth in Schedule 8.7 attached hereto;
(b) Liens imposed by law for taxes, assessments or charges of any
Governmental Authority for claims not yet due or which are being
contested in good faith by appropriate proceedings diligently conducted
and with respect to which adequate reserves or other appropriate
provisions are being maintained in accordance with GAAP;
(c) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law or
created in the ordinary course of business for amounts not yet due or
which are being contested in good faith
<PAGE>81
by appropriate proceedings diligently conducted and with respect to
which adequate reserves or other appropriate provisions are being
maintained in accordance with GAAP;
(d) Liens incurred or deposits made in the ordinary course of
business (including, without limitation, surety bonds and appeal bonds)
in connection with workers' compensation, unemployment insurance and
other types of social security benefits or to secure the performance of
tenders, bids, leases, contracts (other than for the repayment of
Indebtedness), statutory obligations and other similar obligations or
arising as a result of progress payments under government contracts;
(e) purchase money Liens to secure Indebtedness permitted under
Section 10.7 (f) hereof and incurred to purchase tangible assets or
equity interests, provided no property other than the assets or equity
interests so purchased secures such Indebtedness;
(f) Liens on assets acquired in an Acquisition permitted under
Section 10.9 so long as such Liens (i) are not incurred in contemplation
of such Acquisition and (ii) do not extend to any assets other than the
assets being acquired in such Acquisition; and
(g) Liens on property of the Borrower shipped under or in
connection with the documentary letters of credit permitted under Section
10.7(k) hereof (if such Liens are in favor of the issuer of such
documentary letters of credit) and all property of the Borrower in the
actual or constructive possession of the issuing bank with respect such
documentary letters of credit, other than property held in a fiduciary
capacity by such issuing bank.
10.7. Indebtedness. Incur, create, assume or permit to exist any
Indebtedness of the Borrower or any Subsidiary, howsoever evidenced, except:
(a) Indebtedness existing as of the date hereof and as set forth in
Schedule 8.6 attached hereto and all Indebtedness from time to time
incurred in accordance with the terms of credit facilities described in
Schedule 8.6 and any extension, renewal or refinancing thereof that does
not increase the principal amount thereof or increase, above a rate
deemed commercially reasonable by the Borrower, the interest rate payable
thereon from that existing immediately prior to such extension, renewal
or refinancing;
(b) Indebtedness currently owing to or able to be incurred under
the credit facility with the Bank of Scotland and any replacement or
refinancing thereof, whether or not
<PAGE>82
replaced or refinanced with the Bank of Scotland or another bank or
financial institution, provided the aggregate outstanding principal
amount of such Indebtedness and any replacement or refinancing
thereof may not exceed 1,500,000 at any time;
(c) Indebtedness owing to the Agent or any Lender in connection
with this Agreement, any Note or other Loan Document;
(d) Indebtedness arising from Rate Hedging Obligations permitted
under Section 10.15 hereof;
(e) the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(f) purchase money Indebtedness not to exceed an aggregate
outstanding amount at any time of $5,000,000;
(g) other Indebtedness for Money Borrowed not otherwise covered by
clauses (a) through (f) above, provided that the aggregate outstanding
principal amount of all such other Indebtedness permitted under this
clause (g) shall in no event exceed $2,000,000 at any time;
(h) Indebtedness of a Subsidiary represented by an Investment of
the Borrower in such Subsidiary permitted under Section 10.9 hereof;
(i) Indebtedness of Persons acquired in an Acquisition permitted
under Section 10.9 hereof so long as (i) such Indebtedness is not
incurred in contemplation of such Acquisition, (ii) neither the Borrower
nor any other Subsidiary (other than a Subsidiary of the Person being
acquired) is liable for such Indebtedness and (iii) the aggregate
principal amount of all such Indebtedness does not exceed $10,000,000;
(j) Obligations under the Existing LC; and
(k) Obligations under any documentary letters of credit in an
aggregate stated amount not to exceed $3,000,000 at any time.
10.8. Transfer of Assets. Sell, lease, transfer or otherwise dispose of
any assets of Borrower or any Subsidiary other than (a) dispositions of
inventory in the ordinary course of business, (b) dispositions of equipment
which, in the aggregate during any fiscal year, have a fair market value or
book value, whichever is less, of $1,000,000 or less and is not replaced by
equipment having at least equivalent value, and (c) dispositions of property
at fair
<PAGE>83
market value that is substantially worn, damaged, obsolete or, in the judgment
of the Borrower, no longer best used or useful in its business.
10.9. Investments; Acquisitions. Make any Acquisition or otherwise
purchase, own, invest in or otherwise acquire, directly or indirectly, any
stock or other securities, or make or permit to exist any interest whatsoever
in any other Person or permit to exist any loans or advances to any Person,
except that Borrower or any Subsidiary may maintain investments or invest in:
(a) Eligible Securities;
(b) investments existing as of the date hereof and as set forth in
Schedule 8.4 attached hereto;
(c) loans and advances to and investments in Subsidiaries which are
Guarantors;
(d) accounts receivable arising and trade credit granted in the
ordinary course of business and any securities received in satisfaction
or partial satisfaction thereof in connection with accounts of
financially troubled Persons to the extent reasonably necessary in order
to prevent or limit loss;
(e) loans and advance to Subsidiaries who are not Guarantors
provided (i) the aggregate outstanding principal amount of such loans and
advances shall not at any time exceed $5,000,000 and (ii) all evidence of
such Indebtedness, including any promissory notes, shall be pledged to
the Agent for the benefit of the Lenders; and
(f) other loans, advances and investments in an aggregate principal
amount at any time outstanding not to exceed $5,000,000.
Notwithstanding and in addition to the foregoing, the Borrower and its
Subsidiaries may make Acquisitions so long as: (i) immediately prior to and
immediately after the consummation of such Acquisition, no Default or Event of
Default has occurred and is continuing, (ii) substantially all of the sales
and operating profits generated by such Person (or assets) so acquired or
invested are derived from the same general line or lines of business as then
conducted by the Borrower and its Subsidiaries, (iii) pro forma historical
financial statements as of the end of the most recently completed Fiscal Year
giving effect to such Acquisition are delivered to the Agent not less than
five (5) Business Days prior to the consummation of such Acquisition, together
with a certificate of an Authorized Representative demonstrating compliance
with Sections 10.1, 10.2, and 10.3 hereof after giving effect to such
Acquisition, (iv) the aggregate Cost of Acquisition with respect to all
Acquisitions (excluding the Merlin
<PAGE>84
Acquisition) entered into during the term of this Agreement shall not exceed
$10,000,000, provided, however, that if the Borrower is in compliance with all
Elevated Financial Covenant Levels (and will continue to be in compliance
after giving effect to all Acquisitions), such aggregate Cost of Acquisition
may exceed $10,000,000 but shall in no event exceed $25,000,000, and (v) in
the event the Person so acquired is not a Subsidiary, the Borrower's strategic
plan includes additional investment in such Person sufficient for it to become
a Subsidiary.
10.10. Merger or Consolidation. (a) Consolidate with or merge into any
other Person, or (b) permit any other Person to merge into it, or (c)
liquidate, wind-up or dissolve or sell, transfer or lease or otherwise dispose
of all or a substantial part of its assets (other than sales in the ordinary
course of business); provided, however, any Subsidiary of the Borrower may
merge or transfer all or substantially all of its assets into or consolidate
with the Borrower or any wholly owned Subsidiary of the Borrower, and any
Person may merge with the Borrower or any wholly owned Subsidiary if the
Borrower or such Subsidiary shall be the survivor thereof and such merger
shall not cause, create or result in the occurrence of any Default or Event of
Default hereunder.
10.11. Transactions with Affiliates. Other than transactions permitted
under Sections 10.9 and 10.10 hereof and transactions among the Borrower and
wholly owned Subsidiaries or among wholly owned Subsidiaries, enter into any
transaction after the Closing Date, including, without limitation, the
purchase, sale, lease or exchange of property, real or personal, or the
rendering of any service, with any Affiliate of the Borrower, except (a) that
such Persons may render services to the Borrower or its Subsidiaries for
compensation at the same rates generally paid by Persons engaged in the same
or similar businesses for the same or similar services, (b) that the Borrower
or any Subsidiary may render services to such Persons for compensation at the
same rates generally charged by the Borrower or such Subsidiary and (c) upon
terms no less favorable to the Borrower (or any Subsidiary) than would be
obtained in a comparable arm's-length transaction with a Person not an
Affiliate.
10.12. Compliance with ERISA. With respect to any Employee Benefit Plan
or Multiemployer Plan:
(a) permit the occurrence of any Termination Event which would
result in a liability to the Borrower or any ERISA Affiliate in excess of
$2,500,000; or
(b) permit any accumulated funding deficiency in excess of
$2,500,000 (as defined in Section 302 of ERISA and Section 412 of the
Code) with respect to any existing or hereafter established Employee
Benefit Plan, whether or not waived; or
<PAGE>85
(c) fail to make any contribution or payment to any Multiemployer
Plan which the Borrower or any ERISA Affiliate may be required to make
under any agreement relating to such Multiemployer Plan, or any law
pertaining thereto which results in or is likely to result in a liability
in excess of $2,500,000; or
(d) engage in, or permit any ERISA Affiliate to engage in, any
prohibited transaction under Section 406 of ERISA or Section 4975 of the
Code for which a civil penalty pursuant to Section 502(i) of ERISA or a
tax pursuant to Section 4975 of the Code in excess of $2,500,000 may be
imposed; or
(e) permit the establishment of any Employee Benefit Plan providing
post-retirement welfare benefits or establish or amend any Employee
Benefit Plan which establishment or amendment could result in liability
to the Borrower or any ERISA Affiliate or increase the obligation of the
Borrower or any ERISA Affiliate to a Multiemployer Plan which liability
or increase, individually or together with all similar liabilities and
increases, would result in a Material Adverse Effect; or
(f) fail, or permit any ERISA Affiliate to fail, to establish,
maintain and operate each Employee Benefit Plan in compliance in all
respects with the provisions of ERISA, the Code, all applicable Foreign
Benefit Laws and all other applicable laws and the regulations and
interpretations thereof, except where failure to comply would not result
in a Material Adverse Effect.
10.13. Fiscal Year. Change its Fiscal Year.
10.14. Dissolution, etc. Wind up, liquidate or dissolve (voluntarily or
involuntarily) or commence or suffer any proceedings seeking any such winding
up, liquidation or dissolution, except in connection with the merger or
consolidation of Subsidiaries into each other or into a Borrower permitted
pursuant to Section 10.10.
10.15. Rate Hedging Obligations. Incur any Rate Hedging Obligations or
enter into any agreements, arrangements, devices or instruments relating to
Rate Hedging Obligations, except pursuant to Hedging Agreements in an
aggregate notional amount not to exceed (a) the Total Loan Commitment with
respect to interest rate protection Rate Hedging Obligations and (b)
$50,000,000 with respect to foreign exchange Rate Hedging Obligations,
provided however, that no Rate Hedging Obligations shall be incurred for
speculative purposes.
10.16. Restricted Payments. Make any Restricted Payments or apply or
set apart any of their assets therefor or agree to do any
<PAGE>86
of the foregoing, other than each of the following, providing that at the time
thereof and immediately after giving thereto no Default or Event of Default
shall exist or occur and be continuing: (i) the negotiated or open market
repurchase by the Borrower of shares of its common capital stock for an
aggregate purchase price not to exceed $8,500,000 ("Permitted Stock
Repurchases"), provided that cash balances (other than those derived from
proceeds of Loans) are available to fund such purchases, and (ii) additional
negotiated or open market repurchase by the Borrower of its common capital
stock for an aggregate purchase price in any Fiscal Year not to exceed the
positive difference, if any, resulting from subtracting from Excess Cash Flow
in the immediately preceding Fiscal Year the amount thereof required to be
applied to prepayment of the Term Loan pursuant to Section 2.7(d) ("Remaining
Excess Cash Flow"); amounts of Remaining Excess Cash Flow not so expended for
such additional stock repurchases in any Fiscal Year (the "Carryover Fiscal
Year") may only be so expended in the immediately subsequent Fiscal Year (the
"Subsequent Carryover Fiscal Year") to the extent that (y) at the time of such
subsequent expenditure, the Borrower has cash and cash equivalents, as
evidenced on the balance sheet delivered pursuant to Section 9.1(a) hereof for
the Carryover Fiscal Year, in an amount equal to the Excess Cash Flow for the
Carryover Fiscal Year, net of Revolving Loan Outstandings as shown on such
balance sheet, plus the amount of Remaining Excess Cash Flow to be so expended
for such additional stock repurchases in the Subsequent Carryover Fiscal Year
and (z) no violation of Section 10.4 hereof will occur as a result of
expending such Remaining Excess Cash Flow.
10.17. Reimbursement of Expenses. Reimburse any stockholder, officer,
director, employee or agent of the Borrower or any Subsidiary for any material
expenses incurred by such Person other than reasonable expenses incurred for
or on behalf of the Borrower or any Subsidiary.
10.18. Change in Accountants. Change its independent public accountants
from a "big six" accounting firm.
10.19. Limitations on Sales and Leasebacks. Other than with respect to
the sale and leaseback of the Borrower's Pennsylvania manufacturing facility,
enter into any arrangement with any Person providing for the leasing by the
Borrower or any Subsidiary of real or personal property which has been or is
to be sold or transferred by the Borrower or any Subsidiary to such Person or
to any other Person to whom funds have been or are to be advanced by such
Person on the security of such property or rental obligations of the Borrower
or any Subsidiary unless (a) such arrangement is with respect to property on
which a Lien is attached as permitted under Section 10.6(e) prior to such
arrangement and such Lien was not attached in a related transaction or series
of related transactions or in anticipation of such arrangement or (b) such
arrangement, when combined with all other such arrangements consummated during
<PAGE>87
any Fiscal Year, does not result in aggregate proceeds during any Fiscal Year
in excess of $1,000,000.
10.20. Negative Pledge Clauses. Enter into any agreement with any Person
other than the Agent and the Lenders pursuant to this Agreement or any other
Loan Documents which prohibits or limits the ability of any of the Borrower or
any Subsidiary to create, incur, assume or suffer to exist any Lien upon any
of its property, assets or revenues, whether now owned or hereafter acquired,
provided that the Borrower and any Subsidiary may enter into such an agreement
in connection with property subject to any Lien permitted by this Agreement
and not released after the date hereof, when such prohibition or limitation is
by its terms effective only against the assets subject to such Lien, and
provided further that the Borrower and any Subsidiary may enter into any
refinancing or replacement permitted hereunder of certain existing
Indebtedness with the Bank of Ulster Limited and the Bank of Scotland
containing such prohibition or limitation on Liens, provided such prohibition
or limitation affects only the property, assets or revenue of Topps Ireland
Limited or Merlin, respectively.
10.21. Change in Control. Cause, suffer or permit (i) any "person" or
"group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act), to own or control, directly or indirectly, more than 50% of the
outstanding securities of the Borrower having voting rights in the election of
directors, in each case to be determined on a fully diluted basis and taking
into account any outstanding securities or contract rights exercisable,
exchangeable or convertible into equity interests or (ii) (A) any "person" or
"group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act) to become the "beneficial owner" (as such term is used in Rules 13d-3 and
13d-5 under the Exchange Act) of more than 35% of the total voting power of
the voting common stock of the Borrower and (B) individuals who at the Closing
Date constituted the Board of Directors (together with any new directors whose
election by the Board of Directors or whose nomination for election by the
stockholders of the Borrower was approved by a vote of a majority of the
directors of the Borrower then still in office who were either directors at
the Closing Date or whose election or nomination for election was previously
so approved) to cease for any reason to constitute at least two-thirds (2/3)
of the Board of Directors then in office.
10.22. Merlin Transaction Documents. Permit or suffer to exist any
amendment, modification or supplement to the Merlin Transaction Documents
without the prior written consent of the Agent or waive any cause of action or
claim arising therefrom or relating thereto, in each case, in any respect that
could reasonably be expected to result in a Material Adverse Effect or to
adversely affect the Borrower's ability to repay the Obligations as scheduled
for payment.
<PAGE>88
ARTICLE XI
Events of Default and Acceleration
11.1. Events of Default. If any one or more of the following events
(herein called "Events of Default") shall occur for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body), that is to say:
(a) if default shall be made in the due and punctual payment
of the principal of any Loan or other Obligation, when and as the same
shall be due and payable whether pursuant to any provision of Article II
or Article III hereof, at maturity, by acceleration or otherwise; or
(b) if default shall be made in the due and punctual payment of any
amount of interest on any Loan or of any fees or other amounts payable to
any of the Lenders or the Agent under the Loan Documents within three (3)
Business Days of the date on which the same shall be due and payable; or
(c) if default shall be made in the performance or observance of
any covenant set forth in Sections 9.8, 9.12, 9.13, 9.23 or Article X
hereof; or
(d) if a default shall be made in the performance or observance of,
or shall occur under, any covenant, agreement or provision contained in
this Agreement, the Notes or the other Loan Documents (other than as
described in clauses (a), (b) or (c) above) and such default shall
continue for 30 or more days after the earlier of receipt of notice of
such default by the Authorized Representative from the Agent at the
request of the Required Lenders or a senior executive officer of the
Borrower becomes aware of such default;
(e) if any Loan Document ceases to be in full force and effect
(other than by reason of any action by the Agent), or if without the
written consent of the Lenders, this Agreement or any other Loan Document
shall be disaffirmed or shall terminate, be terminable or be terminated
or become void or unenforceable for any reason whatsoever (other than in
accordance with its terms in the absence of default or by reason of any
action by the Lenders or the Agent); or
(f) if a default shall occur, which is not waived, (i) in the
payment of any principal, interest, premium or other amounts with respect
to any Indebtedness (other than the Loans) of the Borrower or any
Subsidiary in an amount not less than $2,500,000 in the aggregate
outstanding, or (ii) in the
<PAGE>89
performance, observance or fulfillment of any term or covenant
contained in any agreement or instrument under or pursuant to which
any such Indebtedness may have been issued, created, assumed, guaranteed
or secured by the Borrower or any Subsidiary, and such default shall
continue for more than the period of grace, if any, therein specified,
and if such default shall permit the holder of any such Indebtedness
to accelerate the maturity thereof; or
(g) if any representation, warranty or other statement of fact
contained herein or any other Loan Document or in any writing,
certificate, report or statement at any time furnished to the Agent or
any Lender by or on behalf of the Borrower or any Guarantor pursuant to
or in connection with this Agreement or the other Loan Documents, or
otherwise, shall be false or misleading in any material respect when
given; or
(h) if the Borrower, any Guarantor or any Principal Subsidiary
shall be unable to pay its debts generally as they become due; file a
petition to take advantage of any insolvency statute; make an assignment
for the benefit of its creditors; commence a proceeding for the
appointment of a receiver, trustee, liquidator or conservator of itself
or of the whole or any substantial part of its property; file a petition
or answer seeking reorganization or arrangement or similar relief under
the federal bankruptcy laws or any other applicable law or statute of the
United States, any state or the United Kingdom; or
(i) if a court of competent jurisdiction shall enter an order,
judgment or decree appointing a custodian, receiver, trustee, liquidator
or conservator of the Borrower, any Guarantor or any Principal Subsidiary
or of the whole or any substantial part of its properties and such order,
judgment or decree continues unstayed and in effect for a period of sixty
(60) days, or approve a petition filed against the Borrower, any
Guarantor or any Principal Subsidiary seeking reorganization or
arrangement or similar relief under the federal bankruptcy laws or any
other applicable law or statute of the United States of America, any
state or the United Kingdom, which petition is not dismissed within sixty
(60) days; or if, under the provisions of any other law for the relief or
aid of debtors, a court of competent jurisdiction shall assume custody or
control of the Borrower or any Guarantor or of the whole or any
substantial part of its properties, which control is not relinquished
within sixty (60) days; or if there is commenced against the Borrower or
any Guarantor any proceeding or petition seeking reorganization,
arrangement or similar relief under the federal bankruptcy laws or any
other applicable law or statute of the United States of America, any
state or the United Kingdom
<PAGE>90
which proceeding or petition remains undismissed for a period of sixty
(60) days; or if the Borrower or any Guarantor takes any action to
indicate its consent to or approval of any such proceeding or petition; or
(j) if (i) any judgment where the amount not covered by insurance
(or the amount as to which the insurer denies liability) is in excess of
$2,500,000 is rendered against the Borrower, any Guarantor or any
Principal Subsidiary, or (ii) there is any attachment, injunction or
execution against any of the properties of the Borrower, any Guarantor or
any Principal Subsidiary for any amount in excess of $2,500,000; and such
judgment, attachment, injunction or execution remains unpaid, unstayed,
undischarged, unbonded or undismissed for a period of thirty (30) days;
or
(k) if the Borrower shall breach any of the material terms or
conditions of any Hedging Agreement with any of the Lenders and such
breach shall continue beyond any grace period, if any, relating thereto
pursuant to its terms; or
(l) if the Borrower shall fail on or prior to 90 days after the
date hereof to (i) cause the release of all liens and security interests
of the Bank of Scotland on any assets of Merlin, including the
cancellation of any debenture or other security instrument constituting
part of or relating to the Bank of Scotland Debt Documents, and (ii)
terminate or cause the termination of all guarantees by subsidiaries of
Merlin in favor of the Bank of Scotland;
then, and in any such event and at any time thereafter, if such Event of
Default or any other Event of Default shall have not been waived,
(A) either or both of the following actions may be taken:
(i) the Agent, with the consent of the Required Lenders, may, and at
the direction of the Required Lenders shall, declare any obligation
of the Lenders to issue or participate in Letters of Credit or to
make further Revolving Loans terminated, whereupon the obligation of
each Lender to make further Revolving Loans hereunder shall
terminate immediately, and (ii) the Agent shall at the direction of
the Required Lenders, at their option, declare by notice to the
Borrower any or all of the Obligations to be immediately due and
payable, and the same, including all interest accrued thereon and
all other obligations of the Borrower to the Agent and the Lenders,
shall forthwith become immediately due and payable without
presentment, demand, protest, notice or other formality of any kind,
all of which are hereby expressly waived, anything contained herein
or in any instrument evidencing the Obligations to the contrary
<PAGE>91
notwithstanding; provided, however, that notwithstanding the above,
if there shall occur an Event of Default under clause (h) or (i)
above with respect to the Borrower, then the obligation of the
Lenders to make Revolving Loans hereunder shall automatically
terminate and any and all of the Obligations shall be immediately
due and payable without the necessity of any action by the Agent
or the Required Lenders or notice to the Agent or the Lenders;
(B) The Borrower shall, upon demand of the Agent or the
Required Lenders, deposit cash with the Agent in an amount equal to
the amount of any Letter of Credit Outstandings, as collateral
security for the repayment of any future drawings or payments under
such Letters of Credit, and such amounts shall be held by the Agent
pursuant to the terms of the Cash Collateral Agreement; and
(C) the Agent and each of the Lenders shall have all of the
rights and remedies available under the Loan Documents or under any
applicable law.
11.2. Agent to Act. In case any one or more Events of Default shall
occur and not have been waived, the Agent may, and at the direction of the
Required Lenders shall, proceed to protect and enforce their rights or
remedies either by suit in equity or by action at law, or both, whether for
the specific performance of any covenant, agreement or other provision
contained herein or in any other Loan Document, or to enforce the payment of
the Obligations or any other legal or equitable right or remedy.
11.3. Cumulative Rights. No right or remedy herein conferred upon the
Lenders or the Agent is intended to be exclusive of any other rights or
remedies contained herein or in any other Loan Document, and every such right
or remedy shall be cumulative and shall be in addition to every other such
right or remedy contained herein and therein or now or hereafter existing at
law or in equity or by statute, or otherwise.
11.4. No Waiver. No course of dealing between the Borrower and any
Lender or the Agent or any failure or delay on the part of any Lender or the
Agent in exercising any rights or remedies under any Loan Document or
otherwise available to it shall operate as a waiver of any rights or remedies
and no single or partial exercise of any rights or remedies shall operate as a
waiver or preclude the exercise of any other rights or remedies hereunder or
of the same right or remedy on a future occasion.
11.5. Allocation of Proceeds. If an Event of Default has
occurred and not been waived, and the maturity of the Notes has been
accelerated pursuant to Article XI hereof, all payments
<PAGE>92
received by the Agent hereunder, in respect of any principal of or interest on
the Obligations or any other amounts payable by the Borrower hereunder, shall
be applied by the Agent in the following order:
(a) amounts due to the Lenders pursuant to Sections 3.9, 4.3, 4.4
and 13.6 hereof;
(b) amounts due to the Agent pursuant to Section 12.10 hereof;
(c) payments of interest on Loans and Reimbursement Obligations, to
be applied for the ratable benefit of the Lenders;
(d) payments of principal of Loans and Reimbursement Obligations,
to be applied for the ratable benefit of the Lenders;
(e) payments of all amounts required to fund the cash collateral
account under the Cash Collateral Agreement pursuant to Section 11.1(B)
hereof;
(f) amounts due to the Lenders pursuant to Sections 9.16 and 13.10
hereof;
(g) payments of all other amounts due under this Agreement, if any,
to be applied for the ratable benefit of the Lenders;
(h) amounts due to any of the Lenders in respect of Obligations
consisting of liabilities under any Hedging Agreement with any of the
Lenders; and
(i) any surplus remaining after application as provided for herein,
to the Borrower or otherwise as may be required by applicable law.
ARTICLE XII
The Agent
12.1. Appointment. Each Lender hereby irrevocably designates and
appoints NationsBank as the Agent for the Lenders under this Agreement, and
each of the Lenders hereby irrevocably authorizes NationsBank as the Agent for
such Lender, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers as are
expressly delegated to the Agent by the terms of this Agreement, together with
such other powers as are reasonably incidental thereto. The Agent shall not
have any duties or responsibilities, except those expressly set forth herein,
or any fiduciary relationship with any
<PAGE>93
of the Lenders, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise
exist against the Agent.
12.2. Attorneys-in-fact. The Agent may execute any of its duties under
this Agreement 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, gross negligence or willful
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.
12.3. Limitation on Liability. Neither the Agent nor any of its
officers, directors, employees, agents or attorneys-in-fact shall be liable to
the Lenders for any action lawfully taken or omitted to be taken by it or them
under or in connection with this Agreement except for its or their own gross
negligence or willful misconduct. Neither the Agent nor any of its affiliates
shall be responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by the Borrower or any officer
or representative thereof contained in this Agreement or in any of the other
Related Transaction Documents, 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 for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any of the other Related Transaction Documents, or for any failure of the
Borrower or any Guarantor to perform its obligations thereunder or under any
other Loan Documents, or for any recitals, statements, representations or
warranties made, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of any collateral. The Agent shall not be under
any obligation to any of the Lenders to ascertain or to inquire as to the
observance or performance of any of the terms, covenants or conditions of this
Agreement or any of the other Related Transaction Documents on the part of the
Borrower or to inspect the properties, books or records of the Borrower or its
Subsidiaries.
12.4. Reliance. 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 or telex
message, statement, order or other document or conversation believed by it to
be genuine and correct 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 Borrower), independent accountants and
other experts selected by the Agent. The Agent may deem and treat the payee
of any Note as the owner thereof for all purposes unless an Assignment and
Acceptance shall have been filed with and accepted by the Agent. The Agent
shall be fully justified in failing or refusing to take any action under this
Agreement unless it shall first receive advice or concurrence
<PAGE>94
of the Lenders or the Required Lenders as provided in this Agreement or it
shall first be indemnified to its satisfaction by the Lenders 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 in
accordance with a request of the Required Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all present and future holders of the Notes.
12.5. No Representations. Each Lender expressly acknowledges that
neither the Agent nor any of its affiliates has made any representations or
warranties to it and that no act by the Agent hereafter taken, including any
review of the affairs of the Borrower, shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender represents
to the Agent that it has, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the financial
condition, creditworthiness, affairs, status and nature of the Borrower and
made its own decision to enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the Agent or
any other Lender, 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 status and
affairs, financial or otherwise, of the Borrower. Except for notices, reports
and other documents expressly required to be furnished to the Lenders by the
Agent hereunder, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the
affairs, financial condition or business of the Borrower which may come into
the possession of the Agent or any of its affiliates.
12.6. Indemnification. Each of the Lenders agrees to indemnify the
Agent in its capacity as such (to the extent not reimbursed by the Borrower
and without limiting any obligations of the Borrower to do so), ratably
according to the respective principal amount of the Notes held by them (or, if
no Notes are outstanding, ratably in accordance with their respective
Applicable Commitment Percentages as then in effect) from and against any and
all liabilities, obligations, losses (excluding any losses suffered by the
Agent as a result of Borrower's failure to pay any fee owing to the Agent),
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may at any time
(including without limitation at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Agent in any way relating
to or arising out of this Agreement, the other Related Transaction Documents
or any
<PAGE>95
other document contemplated by or referred to herein or the transactions
contemplated hereby or any action taken or omitted by the Agent under or in
connection with any of the foregoing; provided that no Lender shall be liable
for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross negligence or willful
misconduct. The agreements in this subsection shall survive the payment of
the Obligations and the termination of this Agreement.
12.7. Lender. The Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Borrower
as though it were not the Agent hereunder (it being understood that such loans
shall not constitute Obligations hereunder). With respect to its Loans made
or renewed by it and any Note issued to it, the Agent shall have the same
rights and powers under this Agreement as any Lender and may exercise the same
as though it were not the Agent, and the terms "Lender" and "Lenders" shall,
unless the context otherwise indicates, include the Agent in its individual
capacity.
12.8. Resignation. If the Agent shall resign as Agent under this
Agreement, then the Required Lenders may appoint, with the consent, so long as
there shall not have occurred and be continuing a Default or Event of Default,
of the Borrower, which consent shall not be unreasonably withheld, a successor
Agent for the Lenders, which successor Agent shall be a commercial bank
organized under the laws of the United States or any state thereof, having a
combined surplus and capital of not less than $500,000,000, whereupon such
successor Agent shall succeed to the rights, powers and duties of the former
Agent and the obligations of the former Agent shall be terminated and
canceled, without any other or further act or deed on the part of such former
Agent or any of the parties to this Agreement; provided, however, that the
former Agent's resignation shall not become effective until such successor
Agent has been appointed and has succeeded of record to all right, title and
interest in any collateral held by the Agent; provided, further, that if the
Required Lenders and, if applicable, the Borrower cannot agree as to a
successor Agent within ninety (90) days after such resignation, the Agent
shall appoint a successor Agent which satisfies the criteria set forth above
in this Section 12.8 for a successor Agent and the parties hereto agree to
execute whatever documents are necessary to effect such action under this
Agreement or any other document executed pursuant to this Agreement; provided,
however that in such event all provisions of this Agreement and the Loan
Documents, shall remain in full force and effect. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article XII shall inure
to its benefit as to any actions taken or omitted to be taken by it while it
was Agent under this Agreement.
<PAGE>96
12.9. Sharing of Payments, etc. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, set-off, counterclaim or
otherwise, obtain payment with respect to its Obligations (other than pursuant
to Article VI) which results in its receiving more than its pro rata share of
the aggregate payments with respect to all of the Obligations (other than any
payment pursuant to Article VI), then (a) such Lender shall be deemed to have
simultaneously purchased from the other Lenders a share in their Obligations
so that the amount of the Obligations held by each of the Lenders shall be pro
rata and (b) such other adjustments shall be made from time to time as shall
be equitable to insure that the Lenders share such payments ratably; provided,
however, that for purposes of this Section 12.9 the term "pro rata" shall be
determined with respect to both the Revolving Credit Commitment and Term Loan
Commitment of each Lender and to the Total Revolving Credit Commitments and
Total Term Loan Commitment after subtraction in each case of amounts, if any,
by which any such Lender has not funded its share of the outstanding Loans and
Obligations. If all or any portion of any such excess payment is thereafter
recovered from the Lender which received the same, the purchase provided in
this Section 12.9 shall be rescinded to the extent of such recovery, without
interest. The Borrower expressly consents to the foregoing arrangements and
agrees that each Lender so purchasing a portion of the other Lenders'
Obligations may exercise all rights of payment (including, without limitation,
all rights of set-off, banker's lien or counterclaim) with respect to such
portion as fully as if such Lender were the direct holder of such portion.
12.10. Fees. The Borrower agrees to pay to the Agent, for its
individual account, an annual Agent's fee as from time to time agreed to by
the Borrower and Agent in writing.
12.11. Notice to Lenders. The Agent shall promptly forward to each
Lender all notices and copies of all documents received by the Agent from the
Borrower hereunder in its capacity as Agent.
ARTICLE XIII
Miscellaneous
13.1. Assignments and Participations. (a) At any time after the
Closing Date each Lender may, with the prior consent of the Agent and,
provided no Event of Default has occurred and is continuing, the Borrower,
which consents shall not be unreasonably withheld, assign to one or more banks
or financial institutions all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of any Note
payable to its order); provided, that (i) each such assignment shall be of a
constant and not a varying percentage of all of the assigning Lender's rights
and obligations under both the Term Loan Facility, Revolving Credit Facility
and Letter of Credit Facility
<PAGE>97
of this Agreement, (ii) for each assignment involving the issuance and
transfer of a Note, the assigning Lender shall execute an Assignment and
Acceptance and the Borrower hereby consents to execute a replacement Note to
give effect to the assignment, (iii) the minimum Revolving Credit Commitment,
Term Loan Commitment and Letter of Credit Commitment which shall be assigned
is $5,000,000 or, if less, its total Revolving Credit Commitment, Term Loan
Commitment, and Letter of Credit Commitment, (iv) such assignee shall have an
office located in the United States, and (v) no consent of the Borrower or the
Agent shall be required in connection with any assignment by a Lender to
another Lender or to an affiliate of any Lender. Upon such execution,
delivery, approval and acceptance, from and after the effective date specified
in each Assignment and Acceptance, (x) the assignee thereunder shall be a
party hereto and, to the extent that rights and obligations hereunder or under
such Note have been assigned or negotiated to it pursuant to such Assignment
and Acceptance have the rights and obligations of a Lender hereunder and a
holder of such Note and (y) the assignor thereunder shall, to the extent that
rights and obligations hereunder or under such Note have been assigned or
negotiated by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under this Agreement. Any Lender
who makes an assignment shall pay to the Agent a one-time administrative fee
of $2,500 which fee shall not be reimbursed by the Borrower.
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) the assignment
made under such Assignment and Acceptance is made under such Assignment and
Acceptance without recourse; (ii) such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under any Loan Document or any other
instrument or document furnished pursuant hereto; (iii) such assignee confirms
that it has received a copy of this Agreement, together with copies of the
financial statements delivered pursuant to Section 8.6(f) or Section 9.1, as
the case may be, and such other Loan Documents and other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee
will, independently and without reliance upon the Agent, such assigning Lender
or any other Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement, the Notes and the other Loan
Documents as are delegated to the Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto; and (vi) such
assignee
<PAGE>98
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed
by it as a Lender and a holder of such Notes.
(c) The Agent shall maintain at its address referred to herein a
copy of each Assignment and Acceptance delivered to and accepted by it.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender, the Agent shall give prompt notice thereof to Borrower.
(e) Nothing herein shall prohibit any Lender from pledging or
assigning, without notice or consent, any Note to any Federal Reserve Bank in
accordance with applicable law.
(f) Each Lender may sell participations at its expense to one or
more banks or other financial institutions as to all or a portion of its
rights and obligations under this Agreement; provided, that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) such Lender shall remain the holder of
any Note issued to it for the purpose of this Agreement, (iv) such
participations shall be in a minimum amount of $5,000,000 or, if less, its
total Revolving Credit Commitment, Term Loan Commitment, and Letter of Credit
Commitment and shall include an allocable portion of such Lender's
Participation, (v) Borrower, the Agent and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and with regard to any and all
payments to be made under this Agreement and the Lender shall retain all
rights to consent to amendments and waivers of the Loan Documents; provided,
that the participation agreement between a Lender and its participants may
provide that such Lender will obtain the approval of such participant prior to
such Lender's agreeing to any amendment or waiver of any provisions of this
Agreement which would (A) extend the maturity of any Note, (B) reduce the
interest rates hereunder or (C) increase the Revolving Credit Commitment, Term
Loan Commitment or Letter of Credit Commitment of the Lender granting the
participation, and (vi) the sale of any such participations which require
Borrower to file a registration statement with the United States Securities
and Exchange Commission or under the securities regulations or laws of any
state shall not be permitted.
(g) The Borrower may not assign any rights, powers, duties or
obligations under this Agreement or the other Loan Documents without the prior
written consent of all the Lenders.
13.2. ERISA Matters. Each Lender which is not a bank as to itself only
hereby represents and warrants to Borrower and to each
<PAGE>99
Lender that, with respect to each source of funds to be used by it in making
the Loans to the Borrower hereunder (the "Source"), one of the following is
true and correct:
(a) The Source does not constitute "plan assets" as defined in
Department of Labor Regulation 2510.3-101 of any "employee benefit plan"
within the meaning of Section 3(3) of ERISA or any "plan" within the meaning
of Section 4975(e)(1) of the Code (each a "Plan"); or
(b) The Source constitutes "plan assets" as defined in Department
of Labor Regulation 2510.3-101 of a Plan as to which a statutory,
regulatory, administrative or other exemption from the prohibited transaction
rules set forth in Section 406 of ERISA and Section 4975 of the Code applies.
13.3. Notices. Any notice shall be conclusively deemed to have been
received by any party hereto and be effective on the day on which delivered to
such party (against receipt therefor) at the address set forth below or such
other address as such party shall specify to the other parties in writing (or,
in the case of notice by telecopy, telegram or telex (where the receipt of
such message is verified by return) expressly provided for hereunder, when
received at such telecopy or telex number as may from time to time be
specified in written notice to the other parties hereto or otherwise
received), or if sent prepaid by certified or registered mail return receipt
requested on the fifth Business Day after the day on which mailed, addressed
to such party at said address:
(a) if to the Borrower:
The Topps Company, Inc.
1 Whitehall Street
New York, New York 10004-2109
Attn: Chief Financial Officer
Vice President-Operations
General Counsel
Telephone: (212) 376-0300
Telefacsimile: (212) 376-0573 and (212) 376-0626
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attn: William E. Hiller, Esq.
Telephone: (212) 821-8000
Telefacsimile: (212) 821-8111
(b) if to the Agent:
<PAGE>100
NationsBank, National Association (Carolinas)
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Ms. Angela Berry
Telephone: (704) 386-8958
Telefacsimile: (704) 386-9923
with a copy to:
NationsBank, National Association (Carolinas)
767 Fifth Avenue, Fifth Floor
New York, New York 10153-0083
Attention: Christopher C. Browder
Telephone: (212) 407-5322
Telefacsimile: (212) 751-6909
(c) if to the Lenders:
At the addresses set forth on the signature pages hereof and on
the signature page of each Assignment and Acceptance.
13.4. Setoff. The Borrower agrees that the Agent and each Lender shall
have a lien for all the Obligations of the Borrower upon all deposits or
deposit accounts, of any kind, or any interest in any deposits or deposit
accounts thereof, now or hereafter pledged, mortgaged, transferred or assigned
to the Agent or such Lender or otherwise in the possession or control of the
Agent or such Lender (other than for safekeeping) for any purpose for the
account or benefit of the Borrower and including any balance of any deposit
account or of any credit of the Borrower with the Agent or such Lender,
whether now existing or hereafter established, and the Borrower hereby
authorizes the Agent and each Lender at any time or times with or without
prior notice to apply such balances or any part thereof to such of the
Obligations of the Borrower to the Lenders then past due and in such amounts
as they may elect, and whether or not the collateral or the responsibility of
other Persons primarily, secondarily or otherwise liable may be deemed
adequate. For the purposes of this paragraph, all remittances and property
shall be deemed to be in the possession of the Agent or such Lender as soon as
the same may be put in transit to it by mail or carrier or by other bailee.
No lien or right of setoff shall exist with respect to any funds in escrow or
trust accounts, and the Agent and each Lender shall give the Borrower written
notice within two (2) Business Days after exercising any right of setoff
hereunder.
13.5. Survival. All covenants, agreements, representations and
warranties made herein shall survive the making by the Lenders of the Loans
and the issuance of the Letters of Credit and the execution and delivery to
the Lenders of this Agreement and the
<PAGE>101
Notes and shall continue in full force and effect so long as any of
Obligations remain outstanding or any Lender has any commitment hereunder or
the Borrower has continuing obligations hereunder unless otherwise provided
herein. Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and permitted assigns
of such party and all covenants, provisions and agreements by or on behalf of
the Borrower which are contained in this Agreement, the Notes and the other
Loan Documents shall inure to the benefit of the successors and permitted
assigns of the Lenders or any of them.
13.6. Expenses. The Borrower agrees (a) to pay or reimburse the Agent
for all its reasonable out-of-pocket costs and expenses incurred in connection
with the preparation, negotiation and execution of, and any amendment,
supplement or modification to, this Agreement or any of the other Loan
Documents (including travel expenses relating to closing), and the
consummation of the transactions contemplated hereby and thereby, including,
without limitation, the reasonable fees and disbursements of counsel to the
Agent (b) to pay or reimburse the Agent and the Lenders for all their costs
and expenses incurred in connection with the enforcement or preservation of
any rights under this Agreement and the other Loan Documents, including
without limitation, the reasonable fees and disbursements of their counsel and
any payments in indemnification or otherwise payable by the Lenders to the
Agent pursuant to the Loan Documents and (c) to pay, indemnify and hold the
Agent and the Lenders harmless from any and all recording and filing fees and
any and all liabilities with respect to, or resulting from any failure to pay
or delay in paying, documentary, stamp, excise and other similar taxes, if
any, which may be payable or determined to be payable in connection with the
execution and delivery of this Agreement or any other Loan Documents, or
consummation of any amendment, supplement or modification of, or any waiver or
consent under or in respect of, this Agreement or any other Loan Documents.
13.7. Amendments. No amendment, modification or waiver of any provision
of this Agreement or any of the Loan Documents and no consent by the Lenders
to any departure therefrom by the Borrower shall be effective unless such
amendment, modification or waiver shall be in writing and signed by the Agent,
shall have been approved by the Required Lenders through their written
consent, and the same shall then be effective only for the period and on the
conditions and for the specific instances and purposes specified in such
writing; provided, however, that, no such amendment, modification or waiver
(i) which directly or indirectly changes, extends or waives
any provision of Sections 2.7 or 12.9 or this Section 13.7, or the
amount of or the due date of any scheduled installment of or the
maturity date of or the rate of interest or the fee payable on any
Obligation, or
<PAGE>102
changes the definition of Required Lenders, or which permits an
assignment by Borrower of its Obligations hereunder or which
releases any Guarantor or permits the assignment by any Guarantor
of its obligations under any Guaranty (other than in connection with any
transaction that is permitted under Section 10.10 hereof), or which
releases any Collateral, or which reduces or removes the required
consent of Lenders provided hereunder, or which increases, decreases
or extends the Total Revolving Credit Commitment, Total Term Loan
Commitment or Total Letter of Credit Commitment or the Revolving
Credit Commitment, Term Loan Commitment or Letter of Credit Commitment
of any Lender or which waives any condition to the making of any Loan
shall be effective unless in writing and signed by each of the Lenders;
or
(ii) which affects the rights, privileges, immunities or
indemnities of the Agent shall be effective unless in writing and
signed by the Agent.
Notwithstanding any provision of the other Loan Documents to the contrary, as
between the Agent and the Lenders, execution by the Agent shall not be deemed
conclusive evidence that the Agent has obtained the written consent of the
Required Lenders. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances, except as otherwise expressly provided herein. No delay
or omission on any Lender's or the Agent's part in exercising any right,
remedy or option shall operate as a waiver of such or any other right, remedy
or option or of any Default or Event of Default.
13.8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such fully-executed counterpart.
13.9. Termination. The termination of this Agreement shall not affect
any rights of the Borrower, the Lenders or the Agent or any obligation of the
Borrower, the Lenders or the Agent, arising prior to the effective date of
such termination, and the provisions hereof shall continue to be fully
operative until all transactions entered into or rights created or obligations
incurred prior to such termination have been fully disposed of, concluded or
liquidated and the Obligations arising prior to or after such termination have
been irrevocably paid in full. The rights granted to the Agent for the
benefit of the Lenders hereunder and under the other Loan Documents shall
continue in full force and effect, notwithstanding the termination of this
Agreement, until all of the Obligations have been paid in full after the
termination hereof (other than Obligations in the nature of continuing
indemnities or
<PAGE>103
expense reimbursement obligations not yet due and payable, all of which shall
continue thereafter and survive such termination) or the Borrower has
furnished the Lenders and the Agent with an indemnification satisfactory to
the Agent and each Lender with respect thereto. All representations,
warranties, covenants, waivers and agreements contained herein shall survive
termination hereof until payment in full of the Obligations unless otherwise
provided herein. Notwithstanding the foregoing, if after receipt of any
payment of all or any part of the Obligations, any Lender is for any reason
compelled to surrender such payment to any Person because such payment is
determined to be void or voidable as a preference, impermissible setoff, a
diversion of trust funds or for any other reason, this Agreement shall
continue in full force and the Borrower shall be liable to, and shall
indemnify and hold such Lender harmless for, the amount of such payment
surrendered until such Lender shall have been finally and irrevocably paid in
full. The provisions of the foregoing sentence shall be and remain effective
notwithstanding any contrary action which may have been taken by the Lenders
in reliance upon such payment, and any such contrary action so taken shall be
without prejudice to the Lenders' rights under this Agreement and shall be
deemed to have been conditioned upon such payment having become final and
irrevocable.
13.10. Indemnification; Limitation of Liability. In consideration of
the execution and delivery of this Agreement by the Agent and each Lender and
the extension of the Term Loan Commitments, the Revolving Credit Commitments
and the Letter of Credit Commitments, the Borrower hereby indemnifies,
exonerates and holds the Agent and each Lender and each of their respective
officers, directors, employees, agents and advisors (collectively, the
"Indemnified Parties") free and harmless from and against any and all claims,
actions, causes of action, suits, losses, costs, liabilities and damages, and
expenses incurred in connection therewith, including reasonable attorneys'
fees and disbursements (collectively, the "Indemnified Liabilities") that may
be incurred by or asserted or awarded against any Indemnified Party, in each
case arising out of or in connection with or by reason of, or in connection
with the execution, delivery, enforcement, performance or administration of
this Agreement and the other Loan Documents, or any transaction financed or to
be financed in whole or in part, directly or indirectly, with the proceeds of
any Loan or Letter of Credit, whether or not such action is brought by the
Agent or any Lender, the shareholders or creditors of the Agent or any Lender
or an Indemnified Party or an Indemnified Party is otherwise a party thereto
and whether or not the transactions contemplated herein are consummated,
except to the extent such claim, damage, loss, liability or expense is found
in a final, non-appealable judgment by a court of competent jurisdiction to
have resulted from such Indemnified Party's gross negligence or willful
misconduct, and if and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of
<PAGE>104
the Indemnified Liabilities which is permissible under applicable law. The
Borrower agrees that no Indemnified Party shall have any liability (whether
direct or indirect, in contract or tort or otherwise) to its security holders
or creditors arising out of, related to or in connection with the transactions
contemplated herein, except to the extent that such liability is found in a
final non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful misconduct;
provided, however, in no event shall any Indemnified Party be liable for
consequential, as opposed to direct, damages. The provisions of this Section
13.10 shall survive termination of this Agreement.
13.11. Headings and References. The headings of the Articles and
Sections of this Agreement are inserted for convenience of reference only and
are not intended to be a part of, or to affect the meaning or interpretation
of this Agreement. Words such as "hereof", "hereunder", "herein" and words of
similar import shall refer to this Agreement in its entirety and not to any
particular Section or provisions hereof, unless so expressly specified. As
used herein, the singular shall include the plural, and the masculine shall
include the feminine or a neutral gender, and vice versa, whenever the context
requires.
13.12. Severability. If any provision of this Agreement or the other
Loan Documents shall be determined to be illegal or invalid as to one or more
of the parties hereto, then such provision shall remain in effect with respect
to all parties, if any, as to whom such provision is neither illegal nor
invalid, and in any event all other provisions hereof shall remain effective
and binding on the parties hereto.
13.13. Entire Agreement. This Agreement, together with the other Loan
Documents, constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes all previous proposals,
negotiations, representations, commitments and other communications between or
among the parties, both oral and written, with respect thereto.
13.14. Agreement Controls. In the event that any term of any of the
Loan Documents other than this Agreement conflicts with any term of this
Agreement, the terms and provisions of this Agreement shall control.
13.15. Usury Savings Clause. Notwithstanding any other provision
herein, the aggregate interest rate charged under any of the Notes, including
all charges or fees in connection therewith deemed in the nature of interest
under New York law shall not exceed the Highest Lawful Rate (as such term is
defined below). If the rate of interest (determined without regard to the
preceding sentence) under this Agreement at any time exceeds the Highest
Lawful Rate (as defined below), the outstanding amount of the Loans
<PAGE>105
made hereunder shall bear interest at the Highest Lawful Rate until the total
amount of interest due hereunder equals the amount of interest which would
have been due hereunder if the stated rates of interest set forth in this
Agreement had at all times been in effect. In addition, if when the Loans
made hereunder are repaid in full the total interest due hereunder (taking
into account the increase provided for above) is less than the total amount of
interest which would have been due hereunder if the stated rates of interest
set forth in this Agreement had at all times been in effect, then to the
extent permitted by law, the Borrower shall pay to the Agent an amount equal
to the difference between the amount of interest paid and the amount of
interest which would have been paid if the Highest Lawful rate had at all
times been in effect. Notwithstanding the foregoing, it is the intention of
the Lenders and the Borrower to conform strictly to any applicable usury laws.
Accordingly, if any lender contracts for, charges, or receives any
consideration which constitutes interest in excess of the Highest Lawful rate,
then any such excess shall be cancelled automatically and, if previously paid,
shall at such Lender's option be applied to the outstanding amount of the
Loans made hereunder or be refunded to the Borrower. As used in this
paragraph, the term "Highest Lawful Rate" means the maximum lawful interest
rate, if any, that at any time or from time to time may be contracted for,
charged, or received under the laws applicable to such Lender which are
presently in effect or, to the extent allowed by law, under such applicable
laws which may hereafter be in effect and which allow a higher maximum
nonusurious interest rate than applicable laws now allow.
13.16. Governing Law; Waiver of Jury Trial.
(a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH
STATE.
(b) THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND
CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE
INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE BOROUGH OF
MANHATTAN OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE BORROWER EXPRESSLY WAIVES ANY OBJECTION
THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR TO THE
JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY
SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH
COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING.
(c) THE BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE BY
PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL
PROCESS IN ANY SUCH SUIT, ACTION OR
<PAGE>106
PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO
THE ADDRESS OF THE BORROWER PROVIDED IN SECTION 13.3 HEREOF, OR BY
ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS
IN EFFECT IN THE STATE OF NORTH CAROLINA.
(d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL
PRECLUDE ANY PARTY HERETO FROM BRINGING ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS
IN THE COURTS OF ANY PLACE WHERE THE BORROWER OR ANY OF THE BORROWER'S
PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY
THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, THE BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY
WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE
JURISDICTION OF ANY OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY
REASON OF ITS PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE
TO IT.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION WITH THE FOREGOING, THE BORROWER HEREBY AGREES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY AND THE BORROWER HEREBY
WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT
MAY HAVE THAT EACH ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
13.17. Confidentiality. Each Lender agrees that it will use its
reasonable best efforts to keep confidential and to cause any representative
designated under Section 9.8 to keep confidential any information from time to
time supplied to it by the Borrower or any Subsidiary; provided, however, that
nothing herein shall affect the disclosure of any such information to: (i)
the extent such Lender in good faith believes is required by statute, rule,
regulation or judicial process, (ii) counsel for such Lender or to its
accountants, (iii) bank or insurance examiners or auditors or comparable
persons, (iv) any representative or affiliate of such Lender, (v) any other
Lender, or any assignee, transferee or participant, or any potential assignee,
transferee or participant, of all or any portion of any Lender's rights under
this Agreement or the Notes who is notified of the confidential nature of the
information and agrees to be bound by this provision or provisions reasonably
comparable hereto, or (vi) any other Person in connection with any litigation
to which any one or more of the Lenders is a party. Each Lender agrees it
will use all confidential information exclusively for the purpose of
evaluating, monitoring, selling, protecting or enforcing its Loans. Without
affecting any other rights of the Borrower and each Subsidiary, each Lender
acknowledges that the Borrower shall be entitled to
<PAGE>107
seek the remedies of injunction, specific performance and other equitable
relief for any breach of the provisions of this Section 13.17.
[Signatures on following pages]
<PAGE>108
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
made, executed and delivered by their duly authorized officers as of the day
and year first above written.
THE TOPPS COMPANY, INC.
By:/s/ John Perilio
Name: John Perilio
Title: Vice President - Operations
NATIONSBANK, NATIONAL ASSOCIATION
(CAROLINAS), as Agent for the Lenders
By:____________________________________
Name: _________________________________
Title: ________________________________
<PAGE>109
NATIONSBANK, NATIONAL ASSOCIATION
(CAROLINAS)
By: /s/ Christopher C. Browder
Name: Christopher C. Browder
Title: Senior Vice President
Lending Office:
NationsBank, National Association
(Carolinas)
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Ms. Angela Berry
Telephone: (704) 386-8958
Telefacsimile: (704) 386-9923
Wire Transfer Instructions:
NationsBank, National Association
(Carolinas)
ABA# 053000196
Account No.: 13662122506
Reference: The Topps Company, Inc.
Attention: Corporate Credit Support
<PAGE>110
CHEMICAL BANK
By: /s/ Carol Ennis___________________
Name: Carol Ennis_____________________
Title: Vice President_________________
Lending Office:
1 Pierrepont Plaza
16th Floor
Brooklyn, New York 11201
Attention: Carol Ennis
Telephone: (718) 403-6545
Telefacsimile: (718) 403-6597
Wire Transfer Instructions:
Chemical Bank
52 Broadway, 3rd Floor
New York, New York 10004
ABA# 021000128
Account No.: 0002-0000782643
Reference: The Topps Company, Inc.
Attention: Bill Quinn/Loan Services
<PAGE>111
NATWEST BANK N.A.
By: /s/ Elaine Lo
Name: Elaine Lo
Title: V.P.
Lending Office:
1133 Avenue of the Americas
New York, New York 10036
Attention: Elaine Lo
Telephone: (212) 703-1707
Telefacsimile: (212) 703-1724
Wire Transfer Instructions:
NatWest Bank N.A.
80 Pine Street
New York, New York 10005
ABA# 021000322
Reference: The Topps Company, Inc.
Attention: Loan Operations Dept. 838
<PAGE>112
THE BANK OF NEW YORK
By: /s/ Barbara A. Vallely
Name: Barbara A. Valley
Title: Vice President
Lending Office:
530 Fifth Avenue, 3rd Floor
New York, New York 10026
Attention: Kathy Albert
Telephone: (212) 852-4093
Telefacsimile: (212) 852-4292
Wire Transfer Instructions:
The Bank of New York
48 Wall Street
New York, New York 10286
ABA# 021000018
Account No.: GLA 111556
Reference: The Topps Company, Inc.
Attention: Loan Processing Support Dept.
<PAGE>113
CREDITANSTALT CORPORATE FINANCE, INC.
By: /s/ Christina T. Schoen
Name: Christina T. Schoen
Title: Vice President
By: /s/ Geoffrey D. Spillane
Name: Geoffrey D. Spillane
Title: Senior Associate
Lending Office:
2 Greenwich Plaza
Greenwich, Connecticut 06836-1300
Attention: Martin Benger
Telephone: (203) 861-6583
Telefacsimile: (203) 861-6594
Wire Transfer Instructions:
Chemical Bank
New York, New York
ABA# 021000128
Account No.: 544-7-73095
Reference: The Topps Company, Inc.
Attention: Corporate Finance Group
<PAGE>114
THE DAIWA BANK, LIMITED
By: /s/ Ronald W. Gale
Name: Ronald W. Gale
Title: V.P.
By: /s/ Carol V. Gerstmann
Name: Carol V. Gerstmann
Title: Assistant Vice President
N.Y. Office
Lending Office:
The Daiwa Bank, Ltd., Chicago Branch
233 South Wacker Drive, Suite 4500
Chicago, Illinois 60606
Telephone: (312) 876-0181
Telefacsimile: (312) 993-6255
Administrative Office:
450 Lexington Avenue, 17th Floor
New York, New York 10017
Attention: Ronald Gale
Telephone: (212) 808-2337
Telefacsimile: (212) 818-0865
Wire Transfer Instructions:
The Daiwa Bank, Ltd., Chicago Branch
ABA# 071006075
Reference: The Topps Company, Inc.
Attention: Loans Department
<PAGE>115
THE MITSUBISHI BANK, LIMITED-NEW YORK BRANCH
By: /s/ Paula Mueller
Name: Paula Mueller
Title: Vice President
Lending Office:
225 Liberty Street
Two World Financial Center
New York, New York 10281
Attention: Paula Mueller
Telephone: (212) 667-2890
Telefacsimile: (212) 667-3562
Wire Transfer Instructions:
The Mitsubishi Bank, Limited-New York Branch
225 Liberty Street
Two World Financial Center
New York, New York 10281
ABA# 026-009-661
Account No.: 000-9623-200
Reference: The Topps Company, Inc.
Attention: U.S. Corporate Banking Dept.
<PAGE>116
TORONTO DOMINION (NEW YORK), INC.
By: /s/ Jorge Garcia
Name: Jorge Garcia
Title: Vice President
Lending Office:
The Toronto-Dominion Bank
909 Fannin, Suite 1700
Houston, Texas 77010
Attention: Frederic B. Hawley
Telephone: (713) 653-8200
Telefacsimile: (713) 653-9921
Administrative Office:
The Toronto-Dominion Bank
31 West 52nd Street
New York, New York 10019
Attention: Robert G. Harris
Telephone: (212) 468-0585
Telefacsimile: (212) 262-1926
Wire Transfer Instructions:
Toronto Dominion Bank
ABA# 026003243
Account No.: TD Houston 2159251
Reference: The Topps Company, Inc.
<PAGE>117
<TABLE>
<CAPTION>
EXHIBIT A
Applicable Commitment Percentages
Total Applicable Commitment Closing Fees*
Lender Commitment Percentage $ Percentage
<S> <C> <C> <C> <C>
NationsBank, National
Association (Carolinas) $12,500,000 19.230769230%
Chemical Bank $12,500,000 19.230769230%
Natwest Bank N.A. $8,000,000 12.307692307% 40,000 0.500%
The Bank of New York $8,000,000 12.307692307% 40,000 0.500%
Toronto Dominion (New York),
Inc. $6,000,000 9.230769230% 30,000 0.500%
Creditanstalt Corporate
Finance, Inc. $6,000,000 9.230769230% 21,000 0.350%
The Daiwa Bank, Limited $6,000,000 9.230769230% 21,000 0.350%
The Mitsubishi Bank, Limited
- New York Branch $6,000,000 9.230769230% 21,000 0.350%
______________ _____________
$65,000,000 100%
___________________________
* Payable by the Agent to the Lenders from the Arrangement Fee paid by the
Borrower.
<PAGE>118
EXHIBIT B
Form of Assignment and Acceptance
DATED ______________ ,
Reference is made to the Credit Agreement dated as of ___________, 1995
(the "Agreement") among The Topps Company, Inc., a Delaware corporation (the
"Borrower"), the Lenders (as defined in the Agreement), and NationsBank,
National Association (Carolinas), as Agent for the Lenders ("Agent"). Unless
otherwise defined herein, terms defined in the Agreement are used herein with
the same meanings.
_______________________ (the "Assignor") and___________________________
___________ ( the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, WITHOUT RECOURSE, a
_______% * interest in and to all of the Assignor's rights and obligations
under the Agreement as of the Effective Date (as defined below), including,
without limitation, such percentage interest in the Loans owing to the
Assignor on the Effective Date, and evidenced by the Revolving Note and Term
Note held by the Assignor.
2. The Assignor (i) represents and warrants that, as of the date
hereof, (A) the aggregate outstanding principal amounts of the Term Loan owing
to it (without giving effect to assignments thereof which have not yet become
effective) is $________ under a Term Note dated __________, 19__ in the
principal amount of $_________, (B) the aggregate principal amount of
Revolving Loans owing to it (without giving effect to the assignments thereof
which have not yet become effective) is $__________ under a Revolving Note
dated ____________, 19__ in the principal amount of $_________ and (C) the
aggregate principal amount of the Participations purchased by it (without
giving effect to the assignments thereof which have not yet become effective)
is $_________; (ii) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (iii) makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Agreement or
any of the Loan Documents or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Agreement or any of
the Loan Documents or any other instrument or document furnished pursuant
thereto; (iv) makes no representation or warranty and assumes no
responsibility with respect to the
* Specify percentage in no more than 4 decimal points.
<PAGE>119
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under the Agreement or any of the Loan
Documents or any other instrument or document furnished pursuant thereto and
(v) attaches hereto the Revolving Note and the Term Note referred to in
paragraph 1 above and requests that the Agent exchange such Notes for
replacement Notes as follows: a Revolving Note dated _____________, 19__ in
the principal amount of $________________, and a Term Note dated __________,
19__ in the principal amount of $__________ each payable to the order of the
Assignor, and a Revolving Note, dated ____________________________ 19__, in
the principal amount of $_________________ and a Term Note dated
_________________, 19___ in the principal amount of $ , each
payable to the order of the Assignee.
3. The Assignee (i) confirms that it has received a copy of the
Agreement, together with copies of the most recent financial statements
referred to in Section 9.1 thereof and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to
enter into this Assignment and Acceptance; (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor, or any other
Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking
or not taking action under the Agreement; (iii) appoints and authorizes the
Agent to take such actions on its behalf and to exercise such powers under the
Loan Documents as are delegated to the Agent by the terms thereof, together
with such powers as are reasonably incidental thereto; (iv) will perform all
of the obligations which by the terms of the Agreement are required to be
performed by the Lender; and (v) specifies as its address for notices the
office set forth beneath its name on the signature pages hereof.
4. The effective date for this Assignment and Acceptance shall be
_____________________________ (the "Effective Date"). Following the execution
of this Assignment and Acceptance, it will be delivered to the Agent for
acceptance and recording by the Agent.
5. Upon such acceptance and recording, as of the Effective Date, (i)
the Assignee shall be a party to the Agreement and, to the extent provided in
this Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and under the Loan Documents and (ii) the Assignor shall, to the
extent provided in this Assignment and Acceptance, relinquish its rights and
be released from its obligations under the Agreement.
6. Upon such acceptance and recording, from and after the Effective
Date, the Agent shall make all payments under the Agreement and Notes in
respect of the interest assigned hereby (including, without limitation, all
payments of principal,
<PAGE>120
interest, commitment fees and letter of credit fees with respect thereto) to
the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Agreement and the Notes for periods prior to
the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by and construed in
accordance with, the laws of the State of New York.
[NAME OF ASSIGNOR]
By:
Name:
Title:
Notice Address:
____________________
____________________
After the Effective Date
Outstanding Revolving Loans:$______
Outstanding Term Loan: $___________
Outstanding LC
Participations: $___________
[NAME OF ASSIGNEE]
By:
Name:
Title:
Notice Address/Lending Office
____________________
____________________
____________________
Wire transfer Instructions:
____________________
____________________
____________________
After the Effective Date
Outstanding Revolving Loans:$_____
Outstanding Term Loan: $__________
Outstanding LC
Participations: $___________
<PAGE>121
Accepted this ____ day of _______, 19___
NATIONSBANK, NATIONAL ASSOCIATION,
(CAROLINAS), as Agent
By:
Name:
Title:
Consented to:
The Topps Company, Inc.
By:
Name:
Title:
<PAGE>122
EXHIBIT C
Notice of Appointment (or Revocation) of Authorized
Representative
Reference is hereby made to the Credit Agreement dated as of ___________,
1995 (the "Agreement") among The Topps Company, Inc., a Delaware corporation
(the "Borrower"), the Lenders (as defined in the Agreement), and NationsBank,
National Association (Carolinas), as Agent for the Lenders ("Agent").
Capitalized terms used but not defined herein shall have the respective
meanings therefor set forth in the Agreement.
The Borrower hereby appoints each individual named below as an
Authorized Representative under the Loan Documents, and hereby represents and
warrants that (i) set forth opposite each such individual's name is a true and
correct statement of such individual's office (to which such individual has
been duly elected or appointed), a genuine specimen signature of such
individual and an address for the giving of notice, and (ii) each such
individual has been duly authorized by the Borrower to act as Authorized
Representative under the Loan Documents:
Name and Address Office Specimen Signature
_________________ ___________________ ___________________
_________________
_________________
_________________
_________________
_________________ ___________________ ____________________
Borrower hereby revokes (effective upon receipt hereof by the Agent) the prior
appointment of ________________ as an Authorized Representative.
This the ___ day of __________________, 19__.
The Topps Company, Inc.
By: Name:
Title:
<PAGE>123
EXHIBIT D
Form of Borrowing Notice
To: NationsBank, National Association
(Carolinas), as Agent
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Ms. Angela Berry, Agency Services
Telefacsimile: (704)386-9923
Reference is hereby made to the Credit Agreement dated as of _______
__, 1995 (the "Agreement") among The Topps Company, Inc. (the "Borrower"), the
Lenders (as defined in the Agreement), and NationsBank, National Association
(Carolinas), as Agent for the Lenders ("Agent"). Capitalized terms used but
not defined herein shall have the respective meanings therefor set forth in
the Agreement.
The Borrower through its Authorized Representative hereby gives notice to
the Agent that Loans of the type and amount set forth below be made on the
date indicated:
Type of Loan Interest Aggregate (1) (3)
(check one) Period Amount(2) Date of Loan
Base Rate Loan ______ _________ ____________
Eurodollar Rate Loan ______ _________ ____________
_______________________
(1) For any Eurodollar Rate Loan, one, two, three, six or, if available,
twelve months.
(2) Must be $1,000,000 or if greater an integral multiple of $100,000.
(3) At least three (3) Business Days later if a Eurodollar Rate Loan;
The Borrower hereby requests that the proceeds of Loans described in this
Borrowing Notice be made available to the Borrower as follows: [insert
transmittal instructions] .
The undersigned hereby certifies, solely in his/her corporate and not in
his/her individual capacity, that:
1. No Default or Event of Default exists either now or after giving
effect to the borrowing described herein; and
<PAGE>124
2. All the representations and warranties set forth in Article VIII of
the Agreement and in the Loan Documents (other than those expressly stated to
refer to a particular date) are true and correct as of the date hereof except
that the reference to the financial statements in Section 8.6(a) of the
Agreement are to those financial statements most recently delivered to you
pursuant to Section 9.1 of the Agreement (it being understood that any
financial statements delivered pursuant to Section 9.1(b) have not been
certified by independent public accountants) and attached hereto are any
changes to the Schedules referred to in connection with such representations
and warranties.
3. After giving effect to Loans requested hereby, the principal amount
of outstanding Loans plus the Outstanding Letters of Credit will not exceed
the sum of the Total Loan Commitment and the Letter of Credit Commitment.
THE TOPPS COMPANY, INC.
BY: ___________________________________
Authorized Representative
DATE: _________________________________
<PAGE>125
EXHIBIT E
Form of Interest Rate Selection Notice
To: NationsBank, National Association
(Carolinas), as Agent
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Ms. Angela Berry, Agency Services
Telefacsimile: (704) 386-9923
Reference is hereby made to the Credit Agreement dated as of ________
__, 1995 (the "Agreement") among The Topps Company, Inc. (the "Borrower"), the
Lenders (as defined in the Agreement), and NationsBank, National Association
(Carolinas), as Agent for the Lenders ("Agent"). Capitalized terms used but
not defined herein shall have the respective meanings therefor set forth in
the Agreement.
The Borrower through its Authorized Representative hereby gives notice to
the Agent of the following selection of a type of Loan and Interest Period:
Type of Loan Interest Aggregate (1) (3)
(check one) Period Amount(2) Date of Loan
Base Rate Loan ______ _________ ____________
Eurodollar Rate Loan ______ _________ ____________
_______________________
(1) For any Eurodollar Rate Loan, one, two, three, six or, if available,
twelve months.
(2) Must be $1,000,000 or if greater an integral multiple of $100,000.
(3) At least three (3) Business Days later if a Eurodollar Rate Loan;
THE TOPPS COMPANY, INC.
BY: ________________________
Authorized Representative
DATE: _______________________
<PAGE>126
EXHIBIT F
Form of Term Note
Promissory Note
(Term Loan)
$________________ New York, New York
______ __, 1995
FOR VALUE RECEIVED, THE TOPPS COMPANY, INC., a Delaware corporation
having its principal place of business located in New York, New York (the
"Borrower"), hereby promises to pay to the order of
___________________________________ (the "Lender"), in its individual
capacity, at the office of NATIONSBANK, NATIONAL ASSOCIATION (CAROLINAS), as
agent for the Lenders (the "Agent"), located at
____________________________________________ ____________________ (or at such
other place or places as the Agent may designate in writing) at the times set
forth in the Credit Agreement dated as of ______ __, 1995 among the Borrower,
the financial institutions party thereto (collectively, the "Lenders") and the
Agent (the "Agreement" -- all capitalized terms not otherwise defined herein
shall have the respective meanings set forth in the Agreement), in lawful
money of the United States of America, in immediately available funds, the
principal amount of _____________________ DOLLARS ($______________) on the
Term Loan Termination Date or such earlier date as may be required pursuant to
the terms of the Agreement, and to pay interest from the date hereof on the
unpaid principal amount hereof, in like money, at said office, on the dates
and at the rates provided in Article II of the Agreement. All or any portion
of the principal amount of Loans may be prepaid as provided in the Agreement.
If payment of all sums due hereunder is accelerated under the terms of
the Agreement or under the terms of the other Loan Documents executed in
connection with the Agreement, the then remaining principal amount and accrued
but unpaid interest shall bear interest which shall be payable on demand at
the rates per annum set forth in the proviso to Section 2.4 of the Credit
Agreement. Further, in the event of such acceleration, this Term Note shall
become immediately due and payable, without presentation, demand, protest or
notice of any kind, all of which are hereby waived by the Borrower.
In the event this Term Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest due hereunder, all costs of collection, including reasonable
attorneys' fees, and interest thereon at the rates set forth above.
<PAGE>127
Interest hereunder shall be computed as provided in the Credit Agreement.
This Term Note is one of the Term Notes referred to in the Agreement and
is issued pursuant to and entitled to the benefits and security of the
Agreement to which reference is hereby made for a more complete statement of
the terms and conditions upon which the Term Loan evidenced hereby was made
and is to be repaid. This Term Note is subject to certain restrictions on
transfer or assignment as provided in the Agreement.
Protest, notice of protest, notice of dishonor, diligence or any other
formality are hereby waived by all parties bound hereon.
IN WITNESS WHEREOF, the Borrower has caused this Term Note to be made,
executed and delivered by its duly authorized representative as of the date
and year first above written, all pursuant to authority duly granted.
THE TOPPS COMPANY, INC.
By: _________________________________
Name: _______________________________
Title: ______________________________
<PAGE>128
EXHIBIT G
Form of Revolving Note
Promissory Note
(Revolving Loan)
$______________ New York, New York
______ __, 1995
FOR VALUE RECEIVED, THE TOPPS COMPANY, INC., a Delaware corporation
having its principal place of business located in New York, New York (the
"Borrower"), hereby promises to pay to the order of
_______________________________________________ (the "Lender"), in its
individual capacity, at the office of NATIONSBANK, NATIONAL ASSOCIATION
(CAROLINAS), as agent for the Lenders (the "Agent"), located at
________________________________ _____________ (or at such other place or
places as the Agent may designate in writing) at the times set forth in the
Credit Agreement dated as of ________________, 1995 among the Borrower, the
financial institutions party thereto (collectively, the "Lenders") and the
Agent (the "Agreement" -- all capitalized terms not otherwise defined herein
shall have the respective meanings set forth in the Agreement), in lawful
money of the United States of America, in immediately available funds, the
principal amount of ___________ DOLLARS ($__________) or, if less than such
principal amount, the aggregate unpaid principal amount of all Revolving Loans
made by the Lender to the Borrower pursuant to the Agreement on the Revolving
Credit Termination Date or such earlier date as may be required pursuant to
the terms of the Agreement, and to pay interest from the date hereof on the
unpaid principal amount hereof, in like money, at said office, on the dates
and at the rates provided in Article III of the Agreement. All or any portion
of the principal amount of Loans may be prepaid as provided in the Agreement.
If payment of all sums due hereunder is accelerated under the terms of
the Agreement or under the terms of the other Loan Documents executed in
connection with the Agreement, the then remaining principal amount and accrued
but unpaid interest shall bear interest which shall be payable on demand at
the rates per annum set forth in the proviso to Section 3.2 (a) of the
Agreement. Further, in the event of such acceleration, this Revolving Note
shall become immediately due and payable, without presentation, demand,
protest or notice of any kind, all of which are hereby waived by the Borrower.
In the event this Revolving Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection,
<PAGE>129
including reasonable attorneys' fees, and interest due hereunder thereon at
the rates set forth above.
Interest hereunder shall be computed as provided in the Credit Agreement.
This Revolving Note is one of the Revolving Notes in the principal amount
of $13,000,000 referred to in the Agreement and is issued pursuant to and
entitled to the benefits and security of the Agreement to which reference is
hereby made for a more complete statement of the terms and conditions upon
which the Revolving Loans evidenced hereby were or are made and are to be
repaid. This Revolving Note is subject to certain restrictions on transfer or
assignment as provided in the Agreement.
Protest, notice of protest, notice of dishonor, diligence or any other
formality are hereby waived by all parties bound hereon.
IN WITNESS WHEREOF, the Borrower has caused this Revolving Note to be
made, executed and delivered by its duly authorized representative as of the
date and year first above written, all pursuant to authority duly granted.
THE TOPPS COMPANY, INC.
By: _________________________________
Name: _______________________________
Title: ______________________________
<PAGE>130
EXHIBIT H
Form of Stock Pledge Agreement
<PAGE>131
EXHIBIT I
Form of Subsidiary Guaranty
<PAGE>132
EXHIBIT K
Form of Compliance Certificate
NationsBank, National Association
(Carolinas), as Agent
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Ms. Angela Berry, Agency Services
Telefacsimile: (704) 386-9923
NationsBank, National Association
(Carolinas), as Agent
767 Fifth Avenue, Fifth Floor
New York, New York 10153-0083
Attention: Mr. Christopher C. Browder
Telefacsimile: (212) 751-6909
Reference is hereby made to the Credit Agreement dated as of ______ __,
1995 (the "Agreement") among The Topps Company, Inc., a Delaware corporation
(the "Borrower"), the Lenders (as defined in the Agreement) and NationsBank,
National Association (Carolinas), as Agent for the Lenders ("Agent").
Capitalized terms used but not otherwise defined herein shall have the
respective meanings therefor set forth in the Agreement. The undersigned, a
duly authorized and acting Authorized Representative, hereby certifies to you
as of __________ (the "Determination Date") as follows:
1. Calculations:
A. Compliance with Section 10.1: Consolidated Leverage Ratio
1. Consolidated Indebtedness $__________
2. Outstanding Letters of Credit $__________
3. Guarantied Indebtedness $__________
4. A.1. + A.2. + A.3. $__________
5. Consolidated EBITDA
a. Consolidated Net Income $__________
b. Consolidated Interest Expense $__________
c. Taxes on income $__________
d. amortization and depreciation $__________
e. a. + b. + c. + d. $__________
6. Ratio of A.4. to A.5. ___________
<PAGE>133
Required: Line A.6. must not be greater
than 2.00 to 1.00.
B. Compliance with Section 10.2: Consolidated Fixed Charge Ratio
1. Consolidated EBITDA
(as calculated above) $__________
2. Capital Expenditures $__________
3. income taxes accrued $__________
4. B.1 - B.2 - B.3. $__________
5. Consolidated Fixed Charges
a. Consolidated Cash Interest
Expense $__________
b. scheduled principal payments
of Consolidated Indebtedness $__________
c. dividends and distributions
paid by the Borrower $__________
d. a. + b. + c. $__________
6. Ratio of B.4. to B.5. ___________
Required: Line B.6. must not be less
than 1.35 to 1.00.
C. Compliance with Section 10.3: Consolidated Net Worth
1. Consolidated Shareholders' Equity $__________
2. all reserves $__________
3. C.1. - C.2. $__________
Required: Line C.3. must not be less than (1) $____________ at the
Closing Date and (2) as of the last day of each succeeding fiscal
quarter, line d. below
a. Consolidated Net
Worth for immediately
preceding fiscal quarter $__________
b. Consolidated Net Income
for then ending fiscal quarter
(no deduction for net loss) $__________
c. Multiply Line b. by 50% $__________
<PAGE>134
d. Increases in stated capital
and additional paid-in
capital accounts from equity
issuances, etc. $__________
e. a. + c. + d. $__________*
* This amount shall exclude the effect of Permitted Stock
Repurchases
D. Compliance with Section 10.4: Cash Balances
1. Cash and cash equivalents $__________
2. Revolving Credit Outstandings $__________
3. D.2. + $5,000,000 $__________
Required: At all times after the repurchase by the Borrower of any
shares of its Common Stock, line D.1. must not be less than line
D.3.
E. Calculation of Excess Cash Flow (Annual calculation
only):
1. Consolidated EBITDA $__________
($__________ of which consists
of extraordinary net gain or
loss)
2. Change in Consolidated Working $__________
Capital (not more than
$4,000,000)
3. Sum of
a. Capital Expenditures $__________
b. Consolidated Cash Interest $__________
Expense
c. Principal payments and $__________
optional prepayments of
Term Loan
d. Taxes $__________
4. E.2. + E.3. $__________
5. E.1. minus E.4. $__________
2. No Default
A. Since __________ (the date of the last similar
certification), (a) the Borrower has not defaulted in the
<PAGE>135
keeping, observance, performance or fulfillment of its obligations pursuant to
any of the Loan Documents; and (b) no Default or Event of Default specified in
Article IX of the Agreement has occurred and is continuing.
B. If a Default or Event of Default has occurred since
__________ (the date of the last similar certification), the
Borrowers propose to take the following action with respect to such
Default or Event of Default:
.
(Note, if no Default or Event of Default has
occurred, insert "Not Applicable").
The Determination Date is the date of the last required financial
statements submitted to the Lenders in accordance with Section 9.1 of the
Agreement.
<PAGE>136
IN WITNESS WHEREOF, I have executed this Certificate this _____ day of
__________, 19___.
By:________________________________
Authorized Representative
Name:______________________________
Title:_____________________________
<PAGE>137
EXHIBIT L
Form of Cash Collateral Agreement
</TABLE>
<PAGE>1
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (the "Agreement") is made and entered into as
of this 30th day of June, 1995 by and between THE TOPPS COMPANY, INC., a
Delaware corporation (the "Pledgor"), and NATIONSBANK, NATIONAL ASSOCIATION
(CAROLINAS), a national banking association, as Agent (the "Agent") for each
of the lenders (the "Lenders" and collectively with the Agent, the "Secured
Parties") now or hereafter party to the Credit Agreement (as defined below).
All capitalized terms used but not otherwise defined herein shall have the
respective meanings assigned thereto in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Agent and the Lenders have agreed to provide to The Topps
Company, Inc., a Delaware corporation (the "Borrower"), certain revolving
credit, standby letter of credit and term loan facilities, each pursuant to
the terms of that certain Credit Agreement of even date herewith among the
Pledgor, the Agent and the Lenders (as from time to time amended, modified or
supplemented, the "Credit Agreement"); and
WHEREAS, the Pledgor is willing to pledge and grant to the Secured
Parties a security interest in that certain capital stock of Merlin Publishing
International plc, a company registered in England under number 2331336 (the
"Issuer"), as identified on Schedule I hereto (together with all other shares
of capital stock of the Issuer required to be pledged hereunder, the "Pledged
Stock"); and
WHEREAS, the Secured Parties are unwilling to enter into the Loan
Documents unless the Pledgor enters into this Agreement;
NOW, THEREFORE, in order to induce the Lenders to enter into the Loan
Documents and in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. Pledge of Stock; Other Collateral.
(a) As continuing collateral security for the payment and performance of
all debts, obligations or liabilities now or hereafter existing, absolute or
contingent, of the Pledgor to the Secured Parties under all the Loan Documents
and pursuant to the terms hereof and any Hedging Agreements among the Borrower
and any Lender (collectively, the "Obligations"), and subject to Section 10
hereof, the Pledgor hereby pledges, mortgages, charges and
<PAGE>2
collaterally assigns to the Agent for the benefit of the Lenders, and grants
to the Agent for the benefit of the Lenders pursuant to the New York Uniform
Commercial Code (the "UCC") a first priority security interest in, the Pledged
Stock and all of the following:
(i) all cash, securities, dividends, rights, and other
property at any time and from time to time issued, allotted, declared or
distributed in respect of or in exchange for any or all of the Pledged
Stock, other than dividends permitted to be retained by the Pledgor under
the Credit Agreement; and
(ii) all other property hereafter delivered to the Agent in
substitution for or in addition to any of the foregoing, all certificates
and instruments representing or evidencing such property and all cash,
securities, interest, dividends, rights, and other property at any time
and from time to time declared or distributed in respect of or in
exchange for any or all of the Pledged Stock.
All such Pledged Stock, certificates, instruments, cash, securities, interest,
dividends, rights and other property referred to in this Section 1, other than
dividends issued in respect of such Pledged Stock that are permitted to be
retained by the Pledgor under the Credit Agreement, are herein collectively
referred to as the "Collateral." All of the Pledged Stock is currently owned
by the Pledgor and represented by the stock certificates listed on Schedule I
hereto, which stock certificates, with stock powers duly executed in blank by
Pledgor, are being delivered to the Agent simultaneously herewith.
Notwithstanding any other provision of this Agreement, at no time shall the
aggregate Pledged Stock hereunder comprise more than 65% of the outstanding
ordinary shares of the Issuer, and the Agent shall release, upon the request
of the Pledgor, any shares of Pledged Stock in the event and to the extent
such Pledged Stock shall represent in excess of such amount. The initial
certificates delivered to the Agent are bearer certificates. Upon the request
of the Pledgor, the Agent will cooperate with the Pledgor to have such
certificates replaced by certificates registered in the name of the Pledgor so
long as arrangements satisfactory to the Agent are made to ensure that the
Agent will at all times have a valid and perfected first priority security
interest in the Pledged Stock. The Pledged Stock is not redeemable.
(b) The Pledgor agrees to deliver all the Collateral to the Agent at
such location as the Agent shall from time to time designate by written notice
pursuant to Section 19 hereof for its custody at all times until termination
of this Agreement, together
<PAGE>3
with such instruments of assignment and transfer as requested by the Agent.
(c) All advances, charges, costs and expenses, including reasonable
attorneys' fees, incurred or paid by the Agent or any Lender in exercising any
right, power or remedy conferred by this Agreement, or in the enforcement
thereof, shall become a part of the Obligations secured hereunder and shall be
paid to the Agent for the benefit of the Lenders by the Pledgor immediately
upon demand therefor, with interest thereon until paid in full at the Base
Rate. It is the intent of the parties that the security interest and charge
provided for herein be a continuing security interest and charge for all
amounts advanced by the Lenders to the Pledgor as of the date hereof and from
time to time hereafter and that, should the Pledgor receive notice, actual or
constructive, of any other charge, security interest or other equitable
interest of any other person with respect to the Pledged Stock, then notice
thereof shall be promptly delivered to the Agent and all Advances by the
Lenders subsequent to such notice to the Pledgor shall be made through a new
account established hereunder for the Pledgor.
2. Status of Pledged Stock. The Pledgor hereby represents and warrants
to the Agent for the benefit of the Lenders that (i) all of the shares of
Pledged Stock are duly authorized, validly issued and outstanding, fully paid
and nonassessable, (ii) the Pledgor is the registered and record and
beneficial owner of the Pledged Stock, free and clear of all Liens, charges,
equities, encumbrances and restrictions on pledge or transfer (other than the
pledge hereunder and applicable restrictions pursuant to federal and state
securities laws), (iii) it has full corporate power, legal right and lawful
authority to execute this Agreement and to pledge, assign and transfer the
Pledged Stock in the manner and form hereof, and (iv) the pledge, assignment
and delivery of the Pledged Stock to the Agent for the benefit of the Lenders
pursuant to this Agreement creates a valid and perfected first priority
security interest in the Pledged Stock, securing the payment of the
Obligations. Except as otherwise expressly provided herein or in the Credit
Agreement, none of the Pledged Stock (nor any interest therein or thereto)
shall be sold, transferred or assigned without the Agent's prior written
consent, which may be withheld for any reason. The Pledgor covenants with the
Agent for the benefit of the Lenders that it shall at all times cause the
Pledged Stock to be represented by the certificates now and hereafter
delivered to
<PAGE>4
the Agent in accordance with Section 1 hereof or by certificates registered in
the name of the Agent, as pledgee, or in the name of the Pledgor and that it
shall cause the Issuer not to issue any capital stock, or securities
convertible into capital stock, at any time during the term of this Agreement
other than to the Borrower and the Borrower hereby pledges, mortgages, charges
and collaterally assigns, and grants a first priority security interest in,
all such additional capital stock of the Issuer to the Agent for the benefit
of the Lenders pursuant hereto, subject to the restrictions set forth in
Section 1(a) hereof, and all such additional pledged stock is "Pledged Stock"
hereunder.
3. Preservation and Protection of Collateral.
(a) The Agent shall be under no duty or liability with respect to the
collection, protection or preservation of the Collateral, or otherwise, beyond
the use of reasonable care in the custody and preservation thereof while in
its possession.
(b) The Pledgor agrees to pay when due all taxes, charges, Liens and
assessments against the Collateral, unless being contested in good faith by
appropriate proceedings diligently conducted and against which adequate
reserves have been established in accordance with GAAP applied on a Consistent
Basis. Upon the failure of the Pledgor to so pay or contest such taxes,
charges, Liens or assessments, the Agent at its option may pay or contest any
of them (the Agent having the sole right to determine the legality or validity
and the amount necessary to discharge such taxes, charges, Liens or
assessments).
4. Obligation of Lenders. Each of the Lenders is obligated under this
Agreement, without duplication, to make Advances to the Borrower from time to
time in accordance with the terms and subject to the conditions contained in
Article III and Section 7.2 of the Credit Agreement.
5. Default. SHOULD THE PLEDGOR FAIL TO PAY THE AGENT ANY OBLIGATIONS
AS OF THE END OF THE BUSINESS DAY ON WHICH SUCH OBLIGATIONS BECOME DUE AND
PAYABLE AND AFTER THE EXPIRATION OF ALL GRACE OR CURE PERIODS, IF ANY, AND ALL
EXTENSIONS OR WAIVERS, IF ANY, AND SHOULD SUCH FAILURE CONTINUE, or should the
Borrower register or permit any registration to be made for the transfer of
any of the Pledged Stock to any Person other than the Borrower or the Agent
without the prior consent of the Agent, or should any other Event of Default
set forth in the Credit Agreement occur and be continuing, or should the
Pledgor fail otherwise to comply with the terms hereof (any of the foregoing
an "Event of Default"), the Agent is given full power and authority, then or
at any time thereafter, to sell, assign and deliver or collect the whole or
any part
<PAGE>5
of the Collateral, or any substitute therefor or any addition thereto, in one
or more sales, with or without any previous demands or demand of performance
or, to the extent permitted by law, notice or advertisement, in such order as
the Agent may elect; and any such sale may be made either at public or private
sale at the Agent's place of business or elsewhere, either for cash or upon
credit or for future delivery, at such price as the Agent may reasonably deem
fair; and the Agent may be the purchaser of any or all Collateral so sold and
hold the same thereafter in its own right free from any claim of the Pledgor
or right of redemption. Demands of performance, advertisements and presence
of property and sale and notice of sale are hereby waived to the extent per-
missible by law. Any sale hereunder may be conducted by an auctioneer or any
officer or agent of the Agent. Pledgor recognizes that the Agent may be
unable to effect a public sale of the Collateral by reason of certain
prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state law, and may be otherwise delayed or
adversely affected in effecting any sale by reason of present or future
restrictions thereon imposed by governmental authorities, and that as a
consequence of such prohibitions and restrictions the Agent may be compelled
(i) to resort to one or more private sales to a restricted group of purchasers
who will be obliged to agree, among other things, to acquire the stock for
their own account, for investment and not with a view to the distribution or
resale thereof, or (ii) to seek regulatory approval of any proposed sale or
sales, or (iii) to limit the amount of Collateral sold to any Person or group.
Pledgor agrees and acknowledges that private sales so made may be at prices
and upon terms less favorable to Pledgor than if such Collateral was sold
either at public sales or at private sales not subject to other regulatory
restrictions, and that the Agent has no obligation to delay the sale of any of
the Collateral for the period of time necessary to permit the issuer of such
Collateral to register or otherwise qualify them, even if such issuer would
agree to register or otherwise qualify such Collateral for public sale under
the Securities Act or applicable state law. The Pledgor further agrees, to
the extent permitted by applicable law, that the use of private sales made
under the foregoing circumstances to dispose of the Collateral shall be deemed
to be dispositions in a commercially reasonable manner. In addition to the
foregoing, the Secured Parties may exercise such other rights and remedies as
may be available under the Loan Documents, at law (including without
limitation the UCC) or in equity. The provisions of the U.K. Law of Property
Act 1925 relating to the power of sale conferred thereby are hereby varied so
that section 103 shall not apply, and such provisions are hereby extended as
set out herein.
6. Proceeds of Sale. The proceeds of the sale of any of the Collateral
and all sums received or collected from or on account of
<PAGE>6
such Collateral shall be applied to the payment of expenses incurred or paid
by the Agent in connection with any sale, transfer or delivery of the
Collateral, and thereafter in accordance with Section 11.5 of the Credit
Agreement.
7. Presentments, Etc. Except to the extent required by law, the Agent
shall not be under any duty or obligation whatsoever to make or give any
presentments, demands for performances, notices of nonperformance, protests,
notice of protest or notice of dishonor in connection with any obligations or
evidences of indebtedness held thereby as collateral, or in connection with
any obligations or evidences of indebtedness which constitute in whole or in
part the Obligations secured hereunder.
8. Attorney-in-Fact. The Pledgor hereby appoints the Agent as the
Pledgor's attorney-in-fact for the purposes of carrying out the provisions of
this Agreement and taking any action and executing any instrument which the
Agent may deem necessary or advisable to accomplish the purposes hereof, which
appointment is irrevocable and coupled with an interest; provided, that the
Agent shall have and may exercise rights under this power of attorney only
upon the occurrence and during the continuance of an Event of Default.
Without limiting the generality of the foregoing, upon the occurrence and
during the continuance of an Event of Default, the Agent shall have the right
and power to receive, endorse and collect all checks and other orders for the
payment of money made payable to the Pledgor representing any dividend,
interest payment, principal payment or other distribution payable or
distributable in respect to the Collateral or any part thereof and to give
full discharge for the same.
9. Waiver by Pledgor. The Pledgor waives (to the extent permitted by
applicable law) any right to require any Secured Party or any other obligee of
the Obligations to (a) proceed against any Person or entity, (b) proceed
against or exhaust any collateral, or (c) pursue any other remedy in its
power; and waives (to the extent permitted by applicable law) any defense
arising by reason of any disability or other defense of any other Person, or
by reason of the cessation from any cause whatsoever of the liability of any
other Person or entity. Until all Obligations shall have been fully paid and
the Credit Agreement terminated, the Pledgor shall have no right of
subrogation, and the Pledgor waives any right to enforce any remedy which any
Secured Party or any other obligee of the Obligations now has or may hereafter
have against any other Person and waives (to the extent permitted by
applicable law) any benefit of and any right to participate in any collateral
or security whatsoever now or hereafter held by the Agent for the benefit of
the Lenders. The Pledgor authorizes any Secured Party and any other obligee
of the Obligations without notice (except
<PAGE>7
notice required by applicable law) or demand and without affecting its
liability hereunder or under the Loan Documents from time to time to: (i) take
and hold security, other than the Collateral herein described, for the payment
of such Obligations or any part thereof, and exchange, enforce, waive and
release the Collateral herein described or any part thereof or any such other
security; and (ii) apply such Collateral or other security and direct the
order or manner of sale thereof as such Secured Party or obligee in its
discretion may determine.
The Agent, subject to the Credit Agreement, may at any time deliver
(without representation, recourse or warranty) the Collateral or any part
thereof to the Pledgor and the receipt thereof by the Pledgor shall be a
complete and full acquittance for the Collateral so delivered, and the Secured
Parties shall thereafter be discharged from any liability or responsibility
therefor.
10. Dividends and Voting Rights.
(a) All dividends and other distributions with respect to the Pledged
Stock shall be subject to the pledge hereunder, except for dividends permitted
to be retained by the Pledgor under the Credit Agreement. So long as no Event
of Default shall have occurred and be continuing, any such dividends may be
retained by Pledgor free from any Liens hereunder. Upon the occurrence and
during the continuance of any Event of Default, all dividends shall be
promptly delivered to the Agent (together, if the Agent shall request, with
stock powers or instruments of assignment duly executed in blank affixed to
any capital stock or other negotiable document or instrument so distributed)
to be held, released or disposed of by it hereunder or, at the option of the
Agent, to be applied to the Obligations hereby secured as they become due.
(b) So long as no Event of Default shall have occurred and be
continuing, once the Pledged Stock has been converted from a bearer security
held by the Agent to a certificated security registered in the name of the
Pledgor, the registration of the Collateral in the name of the Pledgor shall
not be changed and the Pledgor shall be entitled to exercise all voting and
other rights and powers pertaining to the Collateral for all purposes not
inconsistent with the terms hereof.
(c) Upon the occurrence and during the continuance of any Event of
Default, at the option of the Agent, all rights of the Pledgor to receive and
retain dividends upon the Collateral shall cease and shall thereupon be vested
in the Agent for the benefit of the Lenders.
<PAGE>8
(d) Upon the occurrence and during the continuance of any Event of
Default, at the option of the Agent, all rights of the Pledgor to exercise the
voting or consensual rights and powers which it is authorized to exercise
pursuant to subsection (b) above shall cease and the Agent may thereupon (but
shall not be obligated to), at its request, cause such Collateral to be
registered in the name of the Agent or its nominee or agent for the benefit of
the Lenders and/or exercise such voting or consensual rights and powers as
appertain to ownership of such Collateral, and to that end the Pledgor hereby
appoints the Agent as its proxy, with full power of substitution, to vote and
exercise all other rights as a shareholder with respect to the Pledged Stock
hereunder upon the occurrence and during the continuance of any Event of
Default, which proxy is coupled with an interest and is irrevocable prior to
termination of this Agreement, and the Pledgor hereby agrees to provide such
further proxies as the Agent may request; provided, however, that the Agent in
its discretion subject to the Credit Agreement may from time to time refrain
from exercising, and shall not be obligated to exercise, any such voting or
consensual rights or such proxy.
11. Other Rights. The rights, powers and remedies given to the Agent
for the benefit of the Lenders by this Agreement shall be in addition to all
rights, powers and remedies given to any Secured Party by virtue of any
statute or rule of law. Any forbearance or failure or delay by the Agent in
exercising any right, power or remedy hereunder shall not be deemed to be a
waiver of such right, power or remedy, and any single or partial exercise of
any right, power or remedy hereunder shall not preclude the further exercise
thereof; and every right, power and remedy of the Secured Parties shall
continue in full force and effect until such right, power or remedy is
specifically waived by the Required Lenders by an instrument in writing.
12. Further Assurances. The Pledgor agrees at its own expense to do
such further acts and things, and to execute and deliver such additional
conveyances, assignments, financing statements, agreements and instruments, as
the Agent may at any time reasonably request in connection with the
administration or enforcement of this Agreement or related to the Collateral
or any part thereof or in order better to assure and confirm unto the Agent
its rights, powers and remedies for the benefit of the Lenders hereunder. The
Pledgor hereby consents and agrees that the issuers of or obligors in respect
of the Collateral shall be entitled to accept the provisions hereof as
conclusive evidence of the right of the Agent, on behalf of the Lenders, to
exercise its rights hereunder with respect to the Collateral, notwithstanding
any other notice or direction to the contrary heretofore or
<PAGE>9
hereafter given by the Pledgor or any other Person to any of such issuers or
obligors.
13. Binding Agreement; Assignment. This Agreement, and the terms,
covenants and conditions hereof, shall be binding upon and inure to the
benefit of the parties hereto, and to their respective successors and assigns,
except that the Pledgor shall not be permitted to assign this Agreement or any
interest herein or in the Collateral, or any part thereof, or otherwise
pledge, encumber or grant any option with respect to the Collateral, or any
part thereof, or any cash or property held by the Agent as Collateral under
this Agreement. All references herein to the Agent shall include any
successor thereof, each Lender and any other obligees from time to time of the
Obligations.
14. Severability. In case any Lien, security interest or other right of
any Secured Party or any provision hereof shall be held to be invalid, illegal
or unenforceable, such invalidity, illegality or unenforceability shall not
affect any other Lien, security interest or other right granted hereby or
provision hereof.
15. Counterparts. This Agreement may be executed in any number of
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
16. Termination. This Agreement and all obligations of the Pledgor
hereunder shall terminate without delivery of any instrument or performance of
any act by any party on the earlier to occur of (i) the date the Agent
receives notice from the Borrower and confirms that the outstanding principal
balance of the Term Loan is less than $25,000,000 and (ii) the date when all
of the Obligations have been fully paid and the Credit Agreement terminated.
Upon such termination of this Agreement, the Agent shall, at the sole expense
of the Pledgor, deliver to the Pledgor the certificates evidencing the Pledged
Stock (and any other property received as a dividend or distribution or
otherwise in respect of the Pledged Stock), together with any cash then
constituting the Collateral, not then sold or otherwise disposed of in
accordance with the provisions hereof and take such further actions as may be
necessary to effect the same.
17. Indemnification. The Pledgor hereby covenants and agrees to pay,
indemnify, and hold the Agent and each Lender harmless from and against any
and all other out-of-pocket liabilities, costs, expenses or disbursements of
any kind or nature whatsoever arising in connection with any claim or
litigation by any Person resulting from the execution, delivery, enforcement,
performance and administration of this Agreement or the Loan Documents, or the
<PAGE>10
transactions contemplated hereby or thereby, or in any respect relating to the
Collateral or any transaction pursuant to which the Pledgor has incurred any
Obligation (all the foregoing, collectively, the "indemnified liabilities");
provided, however, that the Pledgor shall have no obligation hereunder with
respect to indemnified liabilities arising from the willful misconduct or
gross negligence of the Agent or any Lender. The agreements in this
subsection shall survive repayment of all Obligations and termination or
expiration of this Agreement.
18. Hedging Agreements. All obligations of the Borrower under Hedging
Agreements shall be deemed to be Obligations secured hereby, and each Lender
or affiliate of a Lender party to any such Swap Agreement shall be deemed to
be a Secured Party hereunder.
19. Notices. Any notice shall be conclusively deemed to have been
received by any party hereto and be effective on the day on which delivered to
such party (against receipt therefor) at the address set forth below or such
other address as such party shall specify to the other parties in writing (or,
in the case of telephonic notice or notice by telecopy (where the receipt of
such message is verified by return) expressly provided for hereunder, when
received at such telephone or telecopy number as may from time to time be
specified in written notice to the other parties hereto or otherwise
received), or if sent prepaid by certified or registered mail return receipt
requested on the third Business Day after the day on which mailed, or if sent
prepaid by a national overnight courier service, on the first Business Day
after the day on which delivered to such service against receipt therefor,
addressed to such party at said address:
(a) if to the Pledgor:
The Topps Company, Inc.
1 Whitehall Street
New York, New York
Attention: Chief Financial Officer
Vice President - Operations
General Counsel
Telephone: (212) 376-0300
Telecopy: (212) 376-0573
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
Attention: William E. Hiller, Esq.
Telephone: (212) 821-8000
<PAGE>11
Telecopy: (212) 820-8111
(b) if to the Agent:
NationsBank, National Association (Carolinas)
Independence Center, 15th Floor
Charlotte, North Carolina 28255
Attention: Ms. Angela Berry
Telephone: (704) 386-8958
Telecopy: (704) 386-9923
with a copy to:
NationsBank, National Association (Carolinas)
767 Fifth Avenue, 5th Floor
New York, New York 10153-0083
Attention: Mr. Christopher Browder
Telephone: (212) 407-5332
Telecopy: (212) 751-6909
20. Governing Law; Waivers of Trial by Jury, Etc.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.
(b) EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS
THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN
ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF
NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF
THIS AGREEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR
HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH
SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND
UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING.
(c) EACH PARTY AGREES THAT SERVICE OF PROCESS MAY BE MADE BY
PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR
CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH PARTY PROVIDED IN
SECTION 13.3 OF THE CREDIT AGREEMENT OR BY ANY OTHER METHOD OF SERVICE
PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW
YORK.
<PAGE>12
(d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL
PRECLUDE ANY PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE
COURTS OF ANY PLACE WHERE ANY OTHER PARTY OR ANY OF SUCH PARTY'S PROPERTY
OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE
APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH PARTY HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN
RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY
OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR
FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE TO IT.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY AND EACH PARTY HEREBY WAIVES,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY HAVE
THAT EACH ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
[Signature page follows.]
<PAGE>13
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
day and year first written above.
THE TOPPS COMPANY, INC.
By: /s/ John Perillo
Name: John Perillo
Title: Vice President - Operations
<PAGE>14
NATIONSBANK, NATIONAL ASSOCIATION (CAROLINAS),
as Agent for the Lenders
By: /s/ Christopher C. Browder
Name: Christopher C. Browder
Title: Senior Vice President
<PAGE>15
SCHEDULE I
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
No. of No. of No. of No. of Certificate
Shares Shares Shares Shares Nos. for
Name of Subsidiary Class of Stock Authorized Issued Outstanding Pledged Pledged Shares
Merlin Publishing Ordinary 178,571 178,571 178,571 116,071 14
International plc Shares
</TABLE>
<PAGE>1
SUBSIDIARY GUARANTY AGREEMENT
THIS SUBSIDIARY GUARANTY AGREEMENT (the "Guaranty Agreement" or the
"Guaranty"), dated as of ________________, _______, is made by each of the
undersigned (each a "Guarantor" and collectively the "Guarantors") to
NATIONSBANK, NATIONAL ASSOCIATION (CAROLINAS) a national banking association,
as Agent (the "Agent") for each of the lenders now or hereafter party to the
Credit Agreement (as defined below) (each a "Lender" and collectively the
"Lenders").
W I T N E S S E T H:
WHEREAS, the Agent and the Lenders have agreed to provide to THE TOPPS
COMPANY, INC. (the "Borrower") a revolving credit facility, a standby letter
of credit facility and a term loan, each pursuant to the terms of that certain
Credit Agreement dated as of June 30, 1995 among the Borrower, the Agent and
the Lenders (as from time to time amended, modified or supplemented, the
"Credit Agreement"); and
WHEREAS, each Guarantor is a Material Subsidiary of the Borrower and is
required pursuant to Section 9.23 of the Credit Agreement to guarantee to the
Lenders payment of the Borrower's Liabilities (as hereinafter defined) in
accordance with the terms of this Agreement; and
WHEREAS, each Guarantor will materially benefit from the loans and
advances made and to be made, and the letters of credit issued and to be
issued, under the Credit Agreement, and each Guarantor is willing to enter
into this Guaranty to provide an inducement for the Lenders to make loans and
advances, and to issue letters of credit, thereunder.
NOW, THEREFORE, as required under the Credit Agreement and in order to
induce the Lenders to make loans and advances to the Borrower, and to issue
letters of credit for the account of the Borrower, thereunder, each Guarantor
agrees as follows:
1. Definitions. All capitalized terms not otherwise defined herein
shall have the meanings ascribed to such terms in the Credit Agreement.
2. Guaranty. Each Guarantor hereby jointly and severally,
unconditionally, absolutely, continually and irrevocably guarantees to the
Agent and the Lenders the payment and performance in full of the Borrower's
Liabilities (as defined below). For all purposes of this Guaranty
Agreement, "Borrower's Liabilities" means: (a) the Borrower's prompt payment
in full, when due or declared due and at
<PAGE>2
all such times, of all Obligations and all other amounts pursuant to the terms
of the Credit Agreement, the Notes, and all other Loan Documents executed in
connection with the Credit Agreement heretofore, now or at any time or times
hereafter owing, arising, due or payable from the Borrower to the Lenders,
including without limitation principal, interest, premium or fee (including,
but not limited to, loan fees and attorneys' fees and expenses); and (b) the
Borrower's prompt, full and faithful performance, observance and discharge of
each and every agreement, undertaking, covenant and provision to be performed,
observed or discharged by the Borrower under the Credit Agreement and all
other Loan Documents executed in connection therewith. Each Guarantor's
obligations to the Agent and the Lenders under this Guaranty Agreement are
hereinafter collectively referred to as the "Guarantors' Obligations";
provided, however, that the liability of each Guarantor with respect to the
Guarantors' Obligations shall not exceed at any time the Maximum Amount (as
hereinafter defined). The "Maximum Amount" means 95% of (i) the fair salable
value of the assets of a Guarantor as of the date hereof minus (ii) the total
liabilities of such Guarantor (including contingent liabilities, but excluding
liabilities of such Guarantor under this Guaranty and any other Loan Documents
executed by such Guarantor) as of the date hereof; provided further, however,
that if the calculation of the Maximum Amount in the manner provided above as
of the date payment is required of such Guarantor pursuant to this Guaranty
would result in a greater positive number, then the Maximum Amount shall be
deemed to be such greater positive number.
Each Guarantor agrees that it is jointly and severally, directly and
primarily liable for the Borrower's Liabilities.
3. Payment. If the Borrower shall default in payment or performance of
any Borrower's Liabilities, whether principal, interest, premium, fee
(including, but not limited to, loan fees and attorneys' fees and expenses),
or otherwise, when and as the same shall become due, whether according to the
terms of the Credit Agreement, by acceleration, or otherwise, or upon the
occurrence of any other Event of Default under the Credit Agreement that has
not been cured or waived, then each Guarantor, upon demand thereof by the
Agent or its successors or assigns, will AS OF THE DATE OF THE AGENT'S DEMAND
fully pay to the Agent, for the benefit of the Lenders, subject to any
restriction set forth in Section 2 hereof, an amount equal to all Guarantor's
Obligations then due and owing.
4. Unconditional Obligations. This is a guaranty of payment and not of
collection. The Guarantors' Obligations under this Guaranty Agreement shall
be joint and several, absolute and unconditional irrespective of the validity,
legality or enforceability of the Credit Agreement, the Notes or any other
Loan
<PAGE>3
Document or any other guaranty of the Borrower's Liabilities, and shall not be
affected by any action taken under the Credit Agreement, the Notes or any
other Loan Document, any other guaranty of the Borrower's Liabilities, or any
other agreement between the Agent or the Lenders and the Borrower or any other
person, in the exercise of any right or power therein conferred, or by any
failure or omission to enforce any right conferred thereby, or by any waiver
of any covenant or condition therein provided, or by any acceleration of the
maturity of any of the Borrower's Liabilities, or by the release or other
disposal of any security for any of the Borrower's Liabilities, or by the
dissolution of the Borrower or the combination or consolidation of the
Borrower into or with another entity or any transfer or disposition of any
assets of the Borrower or by any extension or renewal of the Credit Agreement,
any of the Notes or any other Loan Document, in whole or in part, or by any
modification, alteration, amendment or addition of or to the Credit Agreement,
any of the Notes or any other Loan Document, any other guaranty of the
Borrower's Liabilities, or any other agreement between the Agent or the
Lenders and the Borrower or any other Person, or by any other circumstance
whatsoever (with or without notice to or knowledge of any Guarantor) which may
or might in any manner or to any extent vary the risks of any Guarantor, or
might otherwise constitute a legal or equitable discharge of a surety or
guarantor; it being the purpose and intent of the parties hereto that this
Guaranty Agreement and the Guarantors' Obligations hereunder shall be absolute
and unconditional under any and all circumstances and shall not be discharged
except by payment as herein provided.
5. Currency and Funds of Payment. Each Guarantor hereby guarantees
that the Guarantors' Obligations will be paid in lawful currency of the United
States of America and in immediately available funds, regardless of any law,
regulation or decree now or hereafter in effect that might in any manner
affect the Borrower's Liabilities, or the rights of the Agent or any Lender
with respect thereto as against the Borrower, or cause or permit to be invoked
any alteration in the time, amount or manner of payment by the Borrower of any
or all of the Borrower's Liabilities.
6. Events of Default. In the event that (a) any Guarantor shall file a
petition to take advantage of any insolvency statute; (b) any Guarantor shall
commence or suffer to exist a proceeding for the appointment of a receiver,
trustee, liquidator or conservator of itself or of the whole or substantially
all of its property; (c) any Guarantor shall file a petition or answer seeking
reorganization or arrangement or similar relief under the Federal bankruptcy
laws or any other applicable law or statute of the United States of America or
any state or similar law of any other country; (d) a court of competent
jurisdiction shall enter an
<PAGE>4
order, judgment or decree appointing a custodian, receiver, trustee,
liquidator or conservator of any Guarantor or of the whole or substantially
all of its properties, or approve a petition filed against any Guarantor
seeking reorganization or arrangement or similar relief under the Federal
bankruptcy laws or any other applicable law or statute of the United States of
America or any state or similar law of any other country, or if, under the
provisions of any other law for the relief or aid of debtors, a court of
competent jurisdiction shall assume custody or control of any Guarantor or of
the whole or substantially all of its properties and such order, judgment,
decree, approval or assumption remains unstayed or undismissed for a period of
sixty (60) consecutive days; (e) there is commenced against any Guarantor any
proceeding or petition seeking reorganization, arrangement or similar relief
under the Federal bankruptcy laws or any other applicable law or statute of
the United States of America or any state, which proceeding or petition
remains unstayed or undismissed for a period of sixty (60) consecutive days;
(f) there shall occur an Event of Default under the Credit Agreement; (g) any
default shall occur in the payment of amounts due hereunder; or (h) any other
default shall occur hereunder which remains uncured or unwaived for a period
of thirty (30) days (each of the foregoing an "Event of Default" hereunder);
then notwithstanding any collateral that the Lenders may possess from Borrower
or any Guarantor or any other guarantor of the Borrower's Liabilities, or any
other party, at the Agent's election and without notice thereof or demand
therefor, so long as such Event of Default shall be continuing, the
Guarantors' Obligations shall immediately become due and payable.
7. Suits. Each Guarantor from time to time shall pay to the Agent for
the benefit of the Lenders, on demand, at the Agent's place of business set
forth in the Credit Agreement, the Guarantors' Obligations as they become or
are declared due, and in the event such payment is not made forthwith, the
Agent or the Lenders or any of them may proceed to suit against any one or
more or all of the Guarantors. At the Agent's election, one or more and
successive or concurrent suits may be brought hereon by the Agent against any
one or more or all of the Guarantors, whether or not suit has been commenced
against the Borrower, any other guarantor of the Borrower's Liabilities, or
any other Person and whether or not the Agent or any Lender has taken or
failed to take any other action to collect all or any portion of the
Borrower's Liabilities.
8. Set-Off and Waiver. Each Guarantor waives any right to assert
against the Agent and the Lenders as a defense, counterclaim, set-off or cross
claim, any defense (legal or equitable) or other claim which such Guarantor
may now or at any time hereafter have against the Borrower, the Agent or the
Lenders, without waiving any additional defenses, set-offs, counterclaims or
<PAGE>5
other claims otherwise available to such Guarantor. If at any time hereafter
the Agent or any Lender employs counsel for advice or other representation to
enforce the Guarantors' Obligations that arise out of an Event of Default,
then, in any of the foregoing events, all of the reasonable attorneys' fees
arising from such services and all expenses, costs and charges in any way or
respect arising in connection therewith or relating thereto shall be jointly
and severally paid by the Guarantors to the Agent, for the benefit of the
Lenders, on demand.
9. Waiver; Subrogation.
(a) Each Guarantor hereby waives notice of the following events or
occurrences: (i) the Agent's acceptance of this Guaranty Agreement; (ii) the
Lenders' heretofore, now or from time to time hereafter loaning monies or
giving or extending credit to or for the benefit of the Borrower, whether
pursuant to the Credit Agreement or the Notes or any amendments,
modifications, or supplements thereto, or replacements or extensions thereof;
(iii) the Agent, the Lenders or the Borrower heretofore, now or at any time
hereafter, obtaining, amending, substituting for, releasing, waiving or
modifying the Credit Agreement, the Notes or any other Loan Documents;
(iv) presentment, demand, notices of default, non-payment, partial payment and
protest; (v) the Agent or the Lenders heretofore, now or at any time hereafter
granting to the Borrower (or any other party liable to the Lenders on account
of the Borrower's Liabilities) any indulgence or extensions of time of payment
of the Borrower's Liabilities; and (vi) the Agent or the Lenders heretofore,
now or at any time hereafter accepting from the Borrower or any other person,
any partial payment or payments on account of the Borrower's Liabilities or
any collateral securing the payment thereof or the Agent settling,
subordinating, compromising, discharging or releasing the same. Each
Guarantor agrees that the Agent and each Lender may heretofore, now or at any
time hereafter do any or all of the foregoing in such manner, upon such terms
and at such times as the Agent and each Lender, in its sole and absolute
discretion, deems advisable, without in any way or respect impairing,
affecting, reducing or releasing such Guarantor from the Guarantors'
Obligations, and each Guarantor hereby consents to each and all of the
foregoing events or occurrences.
(b) Each Guarantor hereby agrees that payment or performance by such
Guarantor of the Guarantors' Obligations under this Guaranty Agreement may be
enforced by the Agent on behalf of the Lenders upon demand by the Agent to
such Guarantor without the Agent being required, each Guarantor expressly
waiving any right it may have to require the Agent, to (i) prosecute
collection or seek to enforce or resort to any remedies against the Borrower
or any other Guarantor or any other guarantor of the Borrower's Liabilities,
IT BEING EXPRESSLY UNDERSTOOD, ACKNOWLEDGED AND AGREED TO BY EACH GUARANTOR
THAT DEMAND UNDER THIS GUARANTY AGREEMENT MAY BE MADE BY THE AGENT, AND THE
PROVISIONS HEREOF ENFORCED BY THE AGENT, EFFECTIVE AS OF THE FIRST DATE ANY
EVENT OF DEFAULT OCCURS AND IS CONTINUING UNDER THE CREDIT AGREEMENT, or
(ii) seek to enforce or resort to any remedies with respect to any security
interests, Liens or encumbrances granted to the Agent by the Borrower or any
other Person on account of the Borrower's Liabilities or any guaranty thereof.
Neither the Agent nor any
<PAGE>6
Lender shall have any obligation to protect, secure or insure any of the
foregoing security interests, Liens or encumbrances on the properties or
interests in properties subject thereto. The Guarantors' Obligations shall in
no way be impaired, affected, reduced, or released by reason of the Agent's or
any Lender's failure or delay to do or take any of the acts, actions or things
described in this Guaranty Agreement including, without limiting the general-
ity of the foregoing, those acts, actions and things described in this
Section 9.
(c) Each Guarantor further agrees with respect to this Guaranty
Agreement that to the extent the ruling in Levit v. Ingersoll Rand Financial
Corp. (In re V.N. Deprizio Construction Co.),874 F2d 1186 (7th Cir 1989), is
found applicable by a court of competent jurisdiction to this Guaranty
Agreement, such Guarantor shall have no right of subrogation, reimbursement or
indemnity, nor any right of recourse to security for the Borrower's
Liabilities. This waiver is expressly intended to prevent the existence of
any claim in respect to such reimbursement by the Guarantor against the estate
of Borrower within the meaning of Section 101 of the Bankruptcy Code, and to
prevent the Guarantor from constituting a creditor of Borrower in respect of
such reimbursement within the meaning of Section 547(b) of the Bankruptcy Code
in the event of a subsequent case involving the Borrower.
10. Effectiveness; Enforceability. This Guaranty Agreement shall be
effective as of the date of the initial Advance under the Credit Agreement and
shall continue in full force and effect until the Borrower's Obligations are
fully paid and the Credit Agreement has terminated. The Agent shall give each
Guarantor written notice of such termination at each Guarantor's address set
forth in the Credit Agreement. This Guaranty Agreement shall be binding upon
and inure to the benefit of each Guarantor, the Agent and the Lenders and
their respective successors and assigns. Notwithstanding the foregoing, no
Guarantor may, without the prior written consent of the Agent, assign any
rights, powers, duties or obligations hereunder. Any claim or claims that the
Agent and the Lenders may at any time hereafter have against any Guarantor
under this Guaranty Agreement may be asserted by the Agent or any Lender by
written notice directed to any one or more or all of the Guarantors at the
address specified in the Credit Agreement.
11. Representations and Warranties. Each Guarantor warrants and
represents to the Agent for the benefit of the Lenders that it is duly
authorized to execute, deliver and perform this Guaranty Agreement, that this
Guaranty Agreement is legal, valid, binding and enforceable against such
Guarantor in accordance with its terms except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the
<PAGE>7
enforcement of creditors' rights generally and by general equitable
principles; and that such Guarantor's execution, delivery and performance of
this Guaranty Agreement do not violate or constitute a breach of its
certificate of incorporation or other documents of corporate governance or any
agreement to which such Guarantor is a party, or any applicable laws, in each
case, which violation or breach could reasonably be expected to have a
Material Adverse Effect.
12. Expenses. Each Guarantor agrees to be liable for the payment of all
reasonable fees and expenses, including attorney's fees, incurred by the Agent
in connection with the enforcement of this Guaranty Agreement.
13. Reinstatement. Each Guarantor agrees that this Guaranty Agreement
shall continue to be effective or be reinstated, as the case may be, at any
time payment received by the Agent under the Credit Agreement or this Guaranty
Agreement is rescinded or must be restored for any reason.
14. Counterparts. This Guaranty Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original as against
any party whose signature appears thereon, and all of which shall constitute
one and the same instrument.
15. Reliance. Each Guarantor represents and warrants to the Agent, for
the benefit of the Agent and the Lenders, that: (a) such Guarantor has
adequate means to obtain from Borrower, on a continuing basis, information
concerning Borrower and Borrower's financial condition and affairs and has
full and complete access to Borrower's books and records; (b) such Guarantor
is not relying on the Agent or any Lender, its or their employees, agents or
other representatives, to provide such information, now or in the future; (c)
such Guarantor is executing this Guaranty Agreement freely and deliberately,
and understands the obligations and financial risk undertaken by providing
this Guaranty; (d) such Guarantor has relied solely on the Guarantor's own
independent investigation, appraisal and analysis of Borrower and Borrower's
financial condition and affairs in deciding to provide this Guaranty and is
fully aware of the same; and (e) such Guarantor has not depended or relied on
the Agent or any Lender, its or their employees, agents or representatives,
for any information whatsoever concerning Borrower or Borrower's financial
condition and affairs or other matters material to such Guarantor's decision
to provide this Guaranty or for any counselling, guidance, or special
consideration or any promise therefor with respect to such decision. Each
Guarantor agrees that neither the Agent nor any Lender has any duty or
responsibility whatsoever, now or in the future, to provide to any Guarantor
any information concerning Borrower or Borrower's
<PAGE>8
financial condition and affairs, other than as expressly provided herein, and
that, if such Guarantor receives any such information from the Agent or any
Lender, its or their employees, agents or other representatives, such
Guarantor will independently verify the information and will not rely on the
Agent or any Lender, its or their employees, agents or other representatives,
with respect to such information.
16. Termination. This Guaranty Agreement and all obligations of the
Guarantors hereunder shall terminate without delivery of any instrument or
performance of any act by any party on the date when all of the Obligations
have been fully paid and the Credit Agreement has terminated.
17. Governing Law; Waivers of Trial by Jury, Etc.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.
(b) EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS
THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN
ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF
NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF
THIS AGREEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR
HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH
SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND
UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING.
(c) EACH PARTY AGREES THAT SERVICE OF PROCESS MAY BE MADE BY
PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR
CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH PARTY PROVIDED IN
SECTION 13.3 OF THE CREDIT AGREEMENT OR BY ANY OTHER METHOD OF SERVICE
PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW
YORK.
(d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL
PRECLUDE ANY PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE
COURTS OF ANY PLACE WHERE ANY OTHER PARTY OR ANY OF SUCH PARTY'S PROPERTY
OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE
APPLICABLE
<PAGE>9
LAWS OF ANY SUCH JURISDICTION, EACH PARTY HEREBY IRREVOCABLY SUBMITS
TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT
OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY OTHER
COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT
OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE TO IT.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY AND EACH PARTY HEREBY WAIVES,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY HAVE
THAT EACH ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
[Signature page Follows.]
<PAGE>10
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
day and year first written above.
GUARANTORS:
_______________________________
By: ___________________________
Name: _________________________
Title: ________________________
_______________________________
By: ___________________________
Name: _________________________
Title: ________________________
AGENT:
NATIONSBANK, NATIONAL ASSOCIATION
(CAROLINAS), as Agent for
the Lenders
By:
Name:
Title:
<PAGE>1
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (the "Agreement") is made and entered into as
of this 30th day of June, 1995 by and between THE TOPPS COMPANY, INC., a
Delaware corporation (the "Pledgor"), and NATIONSBANK, NATIONAL ASSOCIATION
(CAROLINAS), a national banking association, as Agent (the "Agent") for each
of the lenders (the "Lenders" and collectively with the Agent, the "Secured
Parties") now or hereafter party to the Credit Agreement (as defined below).
All capitalized terms used but not otherwise defined herein shall have the
respective meanings assigned thereto in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Agent and the Lenders have agreed to provide to The Topps
Company, Inc., a Delaware corporation (the "Borrower"), certain revolving
credit, standby letter of credit and term loan facilities, each pursuant to
the terms of that certain Credit Agreement of even date herewith among the
Pledgor, the Agent and the Lenders (as from time to time amended, modified or
supplemented, the "Credit Agreement"); and
WHEREAS, the Pledgor is willing to pledge and grant to the Secured
Parties a security interest in that certain capital stock of Merlin Publishing
International plc, a company registered in England under number 2331336 (the
"Issuer"), as identified on Schedule I hereto (together with all other shares
of capital stock of the Issuer required to be pledged hereunder, the "Pledged
Stock"); and
WHEREAS, the Secured Parties are unwilling to enter into the Loan
Documents unless the Pledgor enters into this Agreement;
NOW, THEREFORE, in order to induce the Lenders to enter into the Loan
Documents and in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
1. Pledge of Stock; Other Collateral.
(a) As continuing collateral security for the payment and performance of
all debts, obligations or liabilities now or hereafter existing, absolute or
contingent, of the Pledgor to the Secured Parties under all the Loan Documents
and pursuant to the terms hereof and any Hedging Agreements among the Borrower
and any Lender (collectively, the "Obligations"), and subject to Section 10
hereof, the Pledgor hereby pledges, mortgages, charges and
<PAGE>2
collaterally assigns to the Agent for the benefit of the Lenders, and grants
to the Agent for the benefit of the Lenders pursuant to the New York Uniform
Commercial Code (the "UCC") a first priority security interest in, the Pledged
Stock and all of the following:
(i) all cash, securities, dividends, rights, and other
property at any time and from time to time issued, allotted, declared or
distributed in respect of or in exchange for any or all of the Pledged
Stock, other than dividends permitted to be retained by the Pledgor under
the Credit Agreement; and
(ii) all other property hereafter delivered to the Agent in
substitution for or in addition to any of the foregoing, all certificates
and instruments representing or evidencing such property and all cash,
securities, interest, dividends, rights, and other property at any time
and from time to time declared or distributed in respect of or in
exchange for any or all of the Pledged Stock.
All such Pledged Stock, certificates, instruments, cash, securities, interest,
dividends, rights and other property referred to in this Section 1, other than
dividends issued in respect of such Pledged Stock that are permitted to be
retained by the Pledgor under the Credit Agreement, are herein collectively
referred to as the "Collateral." All of the Pledged Stock is currently owned
by the Pledgor and represented by the stock certificates listed on Schedule I
hereto, which stock certificates, with stock powers duly executed in blank by
Pledgor, are being delivered to the Agent simultaneously herewith.
Notwithstanding any other provision of this Agreement, at no time shall the
aggregate Pledged Stock hereunder comprise more than 65% of the outstanding
ordinary shares of the Issuer, and the Agent shall release, upon the request
of the Pledgor, any shares of Pledged Stock in the event and to the extent
such Pledged Stock shall represent in excess of such amount. The initial
certificates delivered to the Agent are bearer certificates. Upon the request
of the Pledgor, the Agent will cooperate with the Pledgor to have such
certificates replaced by certificates registered in the name of the Pledgor so
long as arrangements satisfactory to the Agent are made to ensure that the
Agent will at all times have a valid and perfected first priority security
interest in the Pledged Stock. The Pledged Stock is not redeemable.
(b) The Pledgor agrees to deliver all the Collateral to the Agent at
such location as the Agent shall from time to time designate by written notice
pursuant to Section 19 hereof for its custody at all times until termination
of this Agreement, together
<PAGE>3
with such instruments of assignment and transfer as requested by the Agent.
(c) All advances, charges, costs and expenses, including reasonable
attorneys' fees, incurred or paid by the Agent or any Lender in exercising any
right, power or remedy conferred by this Agreement, or in the enforcement
thereof, shall become a part of the Obligations secured hereunder and shall be
paid to the Agent for the benefit of the Lenders by the Pledgor immediately
upon demand therefor, with interest thereon until paid in full at the Base
Rate. It is the intent of the parties that the security interest and charge
provided for herein be a continuing security interest and charge for all
amounts advanced by the Lenders to the Pledgor as of the date hereof and from
time to time hereafter and that, should the Pledgor receive notice, actual or
constructive, of any other charge, security interest or other equitable
interest of any other person with respect to the Pledged Stock, then notice
thereof shall be promptly delivered to the Agent and all Advances by the
Lenders subsequent to such notice to the Pledgor shall be made through a new
account established hereunder for the Pledgor.
2. Status of Pledged Stock. The Pledgor hereby represents and warrants
to the Agent for the benefit of the Lenders that (i) all of the shares of
Pledged Stock are duly authorized, validly issued and outstanding, fully paid
and nonassessable, (ii) the Pledgor is the registered and record and
beneficial owner of the Pledged Stock, free and clear of all Liens, charges,
equities, encumbrances and restrictions on pledge or transfer (other than the
pledge hereunder and applicable restrictions pursuant to federal and state
securities laws), (iii) it has full corporate power, legal right and lawful
authority to execute this Agreement and to pledge, assign and transfer the
Pledged Stock in the manner and form hereof, and (iv) the pledge, assignment
and delivery of the Pledged Stock to the Agent for the benefit of the Lenders
pursuant to this Agreement creates a valid and perfected first priority
security interest in the Pledged Stock, securing the payment of the
Obligations. Except as otherwise expressly provided herein or in the Credit
Agreement, none of the Pledged Stock (nor any interest therein or thereto)
shall be sold, transferred or assigned without the Agent's prior written
consent, which may be withheld for any reason. The Pledgor covenants with the
Agent for the benefit of the Lenders that it shall at all times cause the
Pledged Stock to be represented by the certificates now and hereafter
delivered to
<PAGE>4
the Agent in accordance with Section 1 hereof or by certificates registered in
the name of the Agent, as pledgee, or in the name of the Pledgor and that it
shall cause the Issuer not to issue any capital stock, or securities
convertible into capital stock, at any time during the term of this Agreement
other than to the Borrower and the Borrower hereby pledges, mortgages, charges
and collaterally assigns, and grants a first priority security interest in,
all such additional capital stock of the Issuer to the Agent for the benefit
of the Lenders pursuant hereto, subject to the restrictions set forth in
Section 1(a) hereof, and all such additional pledged stock is "Pledged Stock"
hereunder.
3. Preservation and Protection of Collateral.
(a) The Agent shall be under no duty or liability with respect to the
collection, protection or preservation of the Collateral, or otherwise, beyond
the use of reasonable care in the custody and preservation thereof while in
its possession.
(b) The Pledgor agrees to pay when due all taxes, charges, Liens and
assessments against the Collateral, unless being contested in good faith by
appropriate proceedings diligently conducted and against which adequate
reserves have been established in accordance with GAAP applied on a Consistent
Basis. Upon the failure of the Pledgor to so pay or contest such taxes,
charges, Liens or assessments, the Agent at its option may pay or contest any
of them (the Agent having the sole right to determine the legality or validity
and the amount necessary to discharge such taxes, charges, Liens or
assessments).
4. Obligation of Lenders. Each of the Lenders is obligated under this
Agreement, without duplication, to make Advances to the Borrower from time to
time in accordance with the terms and subject to the conditions contained in
Article III and Section 7.2 of the Credit Agreement.
5. Default. SHOULD THE PLEDGOR FAIL TO PAY THE AGENT ANY OBLIGATIONS
AS OF THE END OF THE BUSINESS DAY ON WHICH SUCH OBLIGATIONS BECOME DUE AND
PAYABLE AND AFTER THE EXPIRATION OF ALL GRACE OR CURE PERIODS, IF ANY, AND ALL
EXTENSIONS OR WAIVERS, IF ANY, AND SHOULD SUCH FAILURE CONTINUE, or should the
Borrower register or permit any registration to be made for the transfer of
any of the Pledged Stock to any Person other than the Borrower or the Agent
without the prior consent of the Agent, or should any other Event of Default
set forth in the Credit Agreement occur and be continuing, or should the
Pledgor fail otherwise to comply with the terms hereof (any of the foregoing
an "Event of Default"), the Agent is given full power and authority, then or
at any time thereafter, to sell, assign and deliver or collect the whole or
any part
<PAGE>5
of the Collateral, or any substitute therefor or any addition thereto, in one
or more sales, with or without any previous demands or demand of performance
or, to the extent permitted by law, notice or advertisement, in such order as
the Agent may elect; and any such sale may be made either at public or private
sale at the Agent's place of business or elsewhere, either for cash or upon
credit or for future delivery, at such price as the Agent may reasonably deem
fair; and the Agent may be the purchaser of any or all Collateral so sold and
hold the same thereafter in its own right free from any claim of the Pledgor
or right of redemption. Demands of performance, advertisements and presence
of property and sale and notice of sale are hereby waived to the extent per-
missible by law. Any sale hereunder may be conducted by an auctioneer or any
officer or agent of the Agent. Pledgor recognizes that the Agent may be
unable to effect a public sale of the Collateral by reason of certain
prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state law, and may be otherwise delayed or
adversely affected in effecting any sale by reason of present or future
restrictions thereon imposed by governmental authorities, and that as a
consequence of such prohibitions and restrictions the Agent may be compelled
(i) to resort to one or more private sales to a restricted group of purchasers
who will be obliged to agree, among other things, to acquire the stock for
their own account, for investment and not with a view to the distribution or
resale thereof, or (ii) to seek regulatory approval of any proposed sale or
sales, or (iii) to limit the amount of Collateral sold to any Person or group.
Pledgor agrees and acknowledges that private sales so made may be at prices
and upon terms less favorable to Pledgor than if such Collateral was sold
either at public sales or at private sales not subject to other regulatory
restrictions, and that the Agent has no obligation to delay the sale of any of
the Collateral for the period of time necessary to permit the issuer of such
Collateral to register or otherwise qualify them, even if such issuer would
agree to register or otherwise qualify such Collateral for public sale under
the Securities Act or applicable state law. The Pledgor further agrees, to
the extent permitted by applicable law, that the use of private sales made
under the foregoing circumstances to dispose of the Collateral shall be deemed
to be dispositions in a commercially reasonable manner. In addition to the
foregoing, the Secured Parties may exercise such other rights and remedies as
may be available under the Loan Documents, at law (including without
limitation the UCC) or in equity. The provisions of the U.K. Law of Property
Act 1925 relating to the power of sale conferred thereby are hereby varied so
that section 103 shall not apply, and such provisions are hereby extended as
set out herein.
6. Proceeds of Sale. The proceeds of the sale of any of the Collateral
and all sums received or collected from or on account of
<PAGE>6
such Collateral shall be applied to the payment of expenses incurred or paid
by the Agent in connection with any sale, transfer or delivery of the
Collateral, and thereafter in accordance with Section 11.5 of the Credit
Agreement.
7. Presentments, Etc. Except to the extent required by law, the Agent
shall not be under any duty or obligation whatsoever to make or give any
presentments, demands for performances, notices of nonperformance, protests,
notice of protest or notice of dishonor in connection with any obligations or
evidences of indebtedness held thereby as collateral, or in connection with
any obligations or evidences of indebtedness which constitute in whole or in
part the Obligations secured hereunder.
8. Attorney-in-Fact. The Pledgor hereby appoints the Agent as the
Pledgor's attorney-in-fact for the purposes of carrying out the provisions of
this Agreement and taking any action and executing any instrument which the
Agent may deem necessary or advisable to accomplish the purposes hereof, which
appointment is irrevocable and coupled with an interest; provided, that the
Agent shall have and may exercise rights under this power of attorney only
upon the occurrence and during the continuance of an Event of Default.
Without limiting the generality of the foregoing, upon the occurrence and
during the continuance of an Event of Default, the Agent shall have the right
and power to receive, endorse and collect all checks and other orders for the
payment of money made payable to the Pledgor representing any dividend,
interest payment, principal payment or other distribution payable or
distributable in respect to the Collateral or any part thereof and to give
full discharge for the same.
9. Waiver by Pledgor. The Pledgor waives (to the extent permitted by
applicable law) any right to require any Secured Party or any other obligee of
the Obligations to (a) proceed against any Person or entity, (b) proceed
against or exhaust any collateral, or (c) pursue any other remedy in its
power; and waives (to the extent permitted by applicable law) any defense
arising by reason of any disability or other defense of any other Person, or
by reason of the cessation from any cause whatsoever of the liability of any
other Person or entity. Until all Obligations shall have been fully paid and
the Credit Agreement terminated, the Pledgor shall have no right of
subrogation, and the Pledgor waives any right to enforce any remedy which any
Secured Party or any other obligee of the Obligations now has or may hereafter
have against any other Person and waives (to the extent permitted by
applicable law) any benefit of and any right to participate in any collateral
or security whatsoever now or hereafter held by the Agent for the benefit of
the Lenders. The Pledgor authorizes any Secured Party and any other obligee
of the Obligations without notice (except
<PAGE>7
notice required by applicable law) or demand and without affecting its
liability hereunder or under the Loan Documents from time to time to: (i) take
and hold security, other than the Collateral herein described, for the payment
of such Obligations or any part thereof, and exchange, enforce, waive and
release the Collateral herein described or any part thereof or any such other
security; and (ii) apply such Collateral or other security and direct the
order or manner of sale thereof as such Secured Party or obligee in its
discretion may determine.
The Agent, subject to the Credit Agreement, may at any time deliver
(without representation, recourse or warranty) the Collateral or any part
thereof to the Pledgor and the receipt thereof by the Pledgor shall be a
complete and full acquittance for the Collateral so delivered, and the Secured
Parties shall thereafter be discharged from any liability or responsibility
therefor.
10. Dividends and Voting Rights.
(a) All dividends and other distributions with respect to the Pledged
Stock shall be subject to the pledge hereunder, except for dividends permitted
to be retained by the Pledgor under the Credit Agreement. So long as no Event
of Default shall have occurred and be continuing, any such dividends may be
retained by Pledgor free from any Liens hereunder. Upon the occurrence and
during the continuance of any Event of Default, all dividends shall be
promptly delivered to the Agent (together, if the Agent shall request, with
stock powers or instruments of assignment duly executed in blank affixed to
any capital stock or other negotiable document or instrument so distributed)
to be held, released or disposed of by it hereunder or, at the option of the
Agent, to be applied to the Obligations hereby secured as they become due.
(b) So long as no Event of Default shall have occurred and be
continuing, once the Pledged Stock has been converted from a bearer security
held by the Agent to a certificated security registered in the name of the
Pledgor, the registration of the Collateral in the name of the Pledgor shall
not be changed and the Pledgor shall be entitled to exercise all voting and
other rights and powers pertaining to the Collateral for all purposes not
inconsistent with the terms hereof.
(c) Upon the occurrence and during the continuance of any Event of
Default, at the option of the Agent, all rights of the Pledgor to receive and
retain dividends upon the Collateral shall cease and shall thereupon be vested
in the Agent for the benefit of the Lenders.
<PAGE>8
(d) Upon the occurrence and during the continuance of any Event of
Default, at the option of the Agent, all rights of the Pledgor to exercise the
voting or consensual rights and powers which it is authorized to exercise
pursuant to subsection (b) above shall cease and the Agent may thereupon (but
shall not be obligated to), at its request, cause such Collateral to be
registered in the name of the Agent or its nominee or agent for the benefit of
the Lenders and/or exercise such voting or consensual rights and powers as
appertain to ownership of such Collateral, and to that end the Pledgor hereby
appoints the Agent as its proxy, with full power of substitution, to vote and
exercise all other rights as a shareholder with respect to the Pledged Stock
hereunder upon the occurrence and during the continuance of any Event of
Default, which proxy is coupled with an interest and is irrevocable prior to
termination of this Agreement, and the Pledgor hereby agrees to provide such
further proxies as the Agent may request; provided, however, that the Agent in
its discretion subject to the Credit Agreement may from time to time refrain
from exercising, and shall not be obligated to exercise, any such voting or
consensual rights or such proxy.
11. Other Rights. The rights, powers and remedies given to the Agent
for the benefit of the Lenders by this Agreement shall be in addition to all
rights, powers and remedies given to any Secured Party by virtue of any
statute or rule of law. Any forbearance or failure or delay by the Agent in
exercising any right, power or remedy hereunder shall not be deemed to be a
waiver of such right, power or remedy, and any single or partial exercise of
any right, power or remedy hereunder shall not preclude the further exercise
thereof; and every right, power and remedy of the Secured Parties shall
continue in full force and effect until such right, power or remedy is
specifically waived by the Required Lenders by an instrument in writing.
12. Further Assurances. The Pledgor agrees at its own expense to do
such further acts and things, and to execute and deliver such additional
conveyances, assignments, financing statements, agreements and instruments, as
the Agent may at any time reasonably request in connection with the
administration or enforcement of this Agreement or related to the Collateral
or any part thereof or in order better to assure and confirm unto the Agent
its rights, powers and remedies for the benefit of the Lenders hereunder. The
Pledgor hereby consents and agrees that the issuers of or obligors in respect
of the Collateral shall be entitled to accept the provisions hereof as
conclusive evidence of the right of the Agent, on behalf of the Lenders, to
exercise its rights hereunder with respect to the Collateral, notwithstanding
any other notice or direction to the contrary heretofore or
<PAGE>9
hereafter given by the Pledgor or any other Person to any of such issuers or
obligors.
13. Binding Agreement; Assignment. This Agreement, and the terms,
covenants and conditions hereof, shall be binding upon and inure to the
benefit of the parties hereto, and to their respective successors and assigns,
except that the Pledgor shall not be permitted to assign this Agreement or any
interest herein or in the Collateral, or any part thereof, or otherwise
pledge, encumber or grant any option with respect to the Collateral, or any
part thereof, or any cash or property held by the Agent as Collateral under
this Agreement. All references herein to the Agent shall include any
successor thereof, each Lender and any other obligees from time to time of the
Obligations.
14. Severability. In case any Lien, security interest or other right of
any Secured Party or any provision hereof shall be held to be invalid, illegal
or unenforceable, such invalidity, illegality or unenforceability shall not
affect any other Lien, security interest or other right granted hereby or
provision hereof.
15. Counterparts. This Agreement may be executed in any number of
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.
16. Termination. This Agreement and all obligations of the Pledgor
hereunder shall terminate without delivery of any instrument or performance of
any act by any party on the earlier to occur of (i) the date the Agent
receives notice from the Borrower and confirms that the outstanding principal
balance of the Term Loan is less than $25,000,000 and (ii) the date when all
of the Obligations have been fully paid and the Credit Agreement terminated.
Upon such termination of this Agreement, the Agent shall, at the sole expense
of the Pledgor, deliver to the Pledgor the certificates evidencing the Pledged
Stock (and any other property received as a dividend or distribution or
otherwise in respect of the Pledged Stock), together with any cash then
constituting the Collateral, not then sold or otherwise disposed of in
accordance with the provisions hereof and take such further actions as may be
necessary to effect the same.
17. Indemnification. The Pledgor hereby covenants and agrees to pay,
indemnify, and hold the Agent and each Lender harmless from and against any
and all other out-of-pocket liabilities, costs, expenses or disbursements of
any kind or nature whatsoever arising in connection with any claim or
litigation by any Person resulting from the execution, delivery, enforcement,
performance and administration of this Agreement or the Loan Documents, or the
<PAGE>10
transactions contemplated hereby or thereby, or in any respect relating to the
Collateral or any transaction pursuant to which the Pledgor has incurred any
Obligation (all the foregoing, collectively, the "indemnified liabilities");
provided, however, that the Pledgor shall have no obligation hereunder with
respect to indemnified liabilities arising from the willful misconduct or
gross negligence of the Agent or any Lender. The agreements in this
subsection shall survive repayment of all Obligations and termination or
expiration of this Agreement.
18. Hedging Agreements. All obligations of the Borrower under Hedging
Agreements shall be deemed to be Obligations secured hereby, and each Lender
or affiliate of a Lender party to any such Swap Agreement shall be deemed to
be a Secured Party hereunder.
19. Notices. Any notice shall be conclusively deemed to have been
received by any party hereto and be effective on the day on which delivered to
such party (against receipt therefor) at the address set forth below or such
other address as such party shall specify to the other parties in writing (or,
in the case of telephonic notice or notice by telecopy (where the receipt of
such message is verified by return) expressly provided for hereunder, when
received at such telephone or telecopy number as may from time to time be
specified in written notice to the other parties hereto or otherwise
received), or if sent prepaid by certified or registered mail return receipt
requested on the third Business Day after the day on which mailed, or if sent
prepaid by a national overnight courier service, on the first Business Day
after the day on which delivered to such service against receipt therefor,
addressed to such party at said address:
(a) if to the Pledgor:
The Topps Company, Inc.
1 Whitehall Street
New York, New York
Attention: Chief Financial Officer
Vice President - Operations
General Counsel
Telephone: (212) 376-0300
Telecopy: (212) 376-0573
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
Attention: William E. Hiller, Esq.
Telephone: (212) 821-8000
<PAGE>11
Telecopy: (212) 820-8111
(b) if to the Agent:
NationsBank, National Association (Carolinas)
Independence Center, 15th Floor
Charlotte, North Carolina 28255
Attention: Ms. Angela Berry
Telephone: (704) 386-8958
Telecopy: (704) 386-9923
with a copy to:
NationsBank, National Association (Carolinas)
767 Fifth Avenue, 5th Floor
New York, New York 10153-0083
Attention: Mr. Christopher Browder
Telephone: (212) 407-5332
Telecopy: (212) 751-6909
20. Governing Law; Waivers of Trial by Jury, Etc.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.
(b) EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS
THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN
ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF
NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF
THIS AGREEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR
HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH
SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND
UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING.
(c) EACH PARTY AGREES THAT SERVICE OF PROCESS MAY BE MADE BY
PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR
CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH PARTY PROVIDED IN
SECTION 13.3 OF THE CREDIT AGREEMENT OR BY ANY OTHER METHOD OF SERVICE
PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW
YORK.
<PAGE>12
(d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL
PRECLUDE ANY PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE
COURTS OF ANY PLACE WHERE ANY OTHER PARTY OR ANY OF SUCH PARTY'S PROPERTY
OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE
APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH PARTY HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN
RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY
OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR
FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE TO IT.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY AND EACH PARTY HEREBY WAIVES,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY HAVE
THAT EACH ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
[Signature page follows.]
<PAGE>13
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
day and year first written above.
THE TOPPS COMPANY, INC.
By: /s/John Perillo
Name: John Perillo
Title: Vice President - Operations
<PAGE>14
NATIONSBANK, NATIONAL ASSOCIATION (CAROLINAS),
as Agent for the Lenders
By: /s/ Christopher C. Browder
Name: Christopher C. Browder
Title: Senior Vice President
<PAGE>15
SCHEDULE I
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
No. of No. of No. of No. of Certificate
Shares Shares Shares Shares Nos. for
Name of Subsidiary Class of Stock Authorized Issued Outstanding Pledged Pledged Shares
Merlin Publishing Ordinary 178,571 178,571 178,571 116,071 14
International plc Shares
</TABLE>
<PAGE>1
TOPPS CONTACT: George Sard/Anna Cordasco
Sard Verbinnen & Co.
(212) 687-8080
MERLIN CONTACT: John Starr
Clareville Consultancy
011-44-1-717-364-022
FOR IMMEDIATE RELEASE
TOPPS COMPLETES ACQUISITION OF
MERLIN PUBLISHING INTERNATIONAL PLC
New York, July 6, 1995 - The Topps Company, Inc. (TOPP-Nasdaq) today announced
that it has completed its previously announced acquisition of Merlin
Publishing International plc, a rapidly growing privately held U.K. company
that is one of the world's leading publishers and marketers of sticker and
album collections, for approximately $46.2 million in cash. The transaction
has received clearance from the U.K. Office of Fair Trading.
"We are very pleased to have successfully completed the acquisition of
Merlin," said Arthur T. Shorin, Topps Chairman and Chief Executive Officer.
"Merlin is a perfect fit for Topps. We look forward to working with them to
expand the product lines and geographic reach of both companies." Merlin's
current management team will continue to lead Merlin.
Merlin Group Managing Director, Peter J. Warsop, said, "Our two business are
extremely complementary and we anticipate contributing to a bright future for
Topps."
Merlin principally publishes and markets sticker and album collections, one of
the most popular vehicles for children's collectibles in Europe and many other
parts of the world. Currently, Merlin's products feature the U.K. Premier
League Football, the Power Rangers action heroes and a variety of other
entertainment properties. In addition to its operations in the United
Kingdom, Merlin has subsidiaries in the Netherlands (serving Germany,
Switzerland, Austria, Portugal and Benelux), Italy, France, Spain and the
United States. Merlin also exports to other markets throughout the world.
The Topps Company, Inc. is a multi-national marketer of entertainment
products, principally picture cards, confections and comic books, with
manufacturing facilities in the United States and the Republic of Ireland.
The Company, founded in 1938, created BAZOOKA brand bubble gum in 1947 and
marketed its first TOPPS baseball card in 1951.
<PAGE>1
MERLIN PUBLISHING INTERNATIONAL PLC
Report and financial statements
Year ended
31 January 1995
<PAGE>2
MERLIN PUBLISHING INTERNATIONAL PLC
Annual report and financial statements for the year ended
31 January 1995
- ----------------------------------------------------------------
Contents
Directors
Page:
1 Report of the directors
4 Consolidated profit and loss account
5 Statement of total recognised gains and losses
6 Consolidated balance sheet
7 Balance sheet
8 Consolidated cash flow statement
9 Notes forming part of the financial statements
21 Report of the auditors
- ----------------------------------------------------------------
Directors
I H Currie (Chairman)
P A Dunk
K Gardner
M Hillier
P J Warsop
Mrs P Kluge (Non Executive)
A S L Walsh (Non Executive)
C Rodman
F Melegari
S R Willcox
Secretary and registered office
P A Dunk, 18 Vincent Avenue, Crownhill, Milton Keynes, MK8 OAW.
Company number
2331336
Auditors BDO Stoy Hayward, 8 Baker Street, London, W1M 1DA
<PAGE>3
MERLIN PUBLISHING INTERNATIONAL PLC
Report of the directors for the year ended 31 January 1995
- ----------------------------------------------------------------
The directors present their report together with the audited financial
statements for the year ended 31 January 1995.
Results and dividends
The profit and loss account is set out on page 4 and shows the profit for
the year under review.
On 3 January 1995 dividends of L276,792 were paid to the A and B ordinary
shareholders.
The directors recommend the payment of a dividend of L245,000 making
L521,792 for the year.
Principal activities, trading review and future developments
The principal activities of the group are the design, production and
marketing of children's sticker and trading card collections.
The group has traded successfully in the year under review and is
expected to continue to do so.
The group has continued to expand and has established a subsidiary
undertaking in Spain during the year under review.
On 30 September 1994 Squared Circle Limited ceased to trade. This
business was absorbed into Merlin Publishing Limited from that date.
Significant changes in fixed assets
Changes to fixed assets are detailed in note 8 to the financial
statements.
Directors
The directors of the company during the year and their interests in the
ordinary share capital of the company at 31 January 1995 were:
_____________________________
("L" equals U.K. pound sterling)
<PAGE>4
MERLIN PUBLISHING INTERNATIONAL PLC
Report of the directors for the year ended 31 January 1995 (Continued)
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
A ordinary shares B ordinary shares
of L1 each of L1 each
<S> <C> <C> <C> <C>
1995 1994 1995 1994
I H Currie - - - -
P A Dunk - - 21,428 21,428
K Gardner - - 21,428 21,428
M Hillier - - 5,358 5,358
P J Warsop - - 21,428 21,428
A S L Walsh (Appointed 13 June 1994) - - - -
M Ulfane (Resigned 13 June 1994) - - - -
Mrs P Kluge 71,428 71,428 - -
G Lieberthal (Resigned 1 September 1994) - - - -
C Rodman - - 1,786 -
F Melegari - - - -
S R Willcox (Appointed 1 February 1994) - - 572 -
</TABLE>
("L" equals U.K. pound sterling)
The A ordinary shares in which Mrs P Kluge has an interest, as shown above,
are held by Kluge Investments Limited, a company in which Mrs Kluge has a
material interest.
Directors' responsibilities
Company law requires the directors to prepare financial statements for
each financial year which give a true and fair view of the state of
affairs of the company and of the profit or loss of the company for that
period. In preparing those financial statements, the directors are
required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and estimates that are reasonable and prudent;
<PAGE>5
MERLIN PUBLISHING INTERNATIONAL PLC
Report of the directors for the year ended 31 January 1995 (Continued)
- -----------------------------------------------------------------
- state whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the
financial statements; and
- prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the company will continue in
business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of
the company and to enable them to ensure that the financial statements
comply with the Companies Act 1985. They are also responsible for
safeguarding the assets of the company and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
Corporate Governance
The Board
The Board comprises 7 executive directors and 3 non-executive directors
and is responsible to the shareholders for the management of the
company's assets for optimum performance and of the strategy for future
development. There are six regular meetings a year and other meetings as
needed.
The Board has appointed the following committees.
Management Executive
Comprising executive directors the Executive chaired by P J Warsop meets
monthly to deal with all executive business not specifically reserved to
the Board or to the Audit or Remuneration Committees.
Audit Committee
The Audit Committee comprises non-executive and executive directors,
chaired by I H Currie it meets not less than twice a year. The Committee
assists the Board in observing its responsibility for ensuring that the
company's financial and accounting systems provide accurate and up to
date information on its current financial position and that the company's
published financial statements represent a true and fair reflection of
this position. It also ensures that
<PAGE>6
appropriate accounting policies are in place. The external auditors
attend its meetings.
Remuneration Committee
The Committee comprises, I H Currie, A S L Walsh and P J Warsop and meets
at least once a year to set the salaries and incentives for the executive
directors and Senior Management throughout the group.
Auditors
Following their admission on 1 October 1994 as the United Kingdom
representatives of BDO International our auditors have changed their name
to BDO Stoy Hayward with effect from that date. BDO Stoy Hayward have
expressed their willingness to continue in office and a resolution to re-
appoint them will be proposed at the annual general meeting.
By order of the board
/s/ P A Dunk
P A Dunk
Secretary
23 March 1995
<PAGE>7
MERLIN PUBLISHING INTERNATIONAL PLC
Consolidated profit and loss account for the year ended 31 January 1995
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Note 1995 1994
<S> <C> <C> <C> <C> <C>
L L L L
Turnover 2 34,569,418 20,354,873
Cost of sales 24,181,208 14,003,888
--------- ---------
Gross profit 10,388,210 6,350,985
Distribution costs 2,493,563 1,828,282
Administrative expenses 4,313,066 2,615,994
--------- ---------
6,806,629 4,444,276
--------- ---------
3,581,581 1,906,709
Interest receivable 137,335 42,954
Interest payable 4 (463) (22,698)
--------- ---------
Profit on ordinary activities before
taxation 5 3,718,453 1,926,965
Taxation on profit on ordinary
activities 6 1,631,285 808,051
--------- ---------
Profit on ordinary activities after
taxation 2,087,168 1,118,914
Minority interests 7,874 -
--------- ---------
Profit for the year 2,095,042 1,118,914
Dividends 7 521,792 281,000
_________ _________
Retained profit for the year 17 1,573,250 837,914
========= =========
</TABLE>
("L" equals U.K. pound sterling)
All amounts relate to continuing activities.
The notes on pages 9 to 20 form part of these financial statements.
<PAGE>8
MERLIN PUBLISHING INTERNATIONAL PLC
Statement of total recognised gains and losses for the year ended 31 January
1995
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Group
1995 1994
L L
Profit for the year 2,095,042 1,118,914
Foreign exchange differences 106,785 20,863
--------- ---------
Total recognised gains and losses for the year 2,201,827 1,139,777
========= =========
</TABLE>
("L" equals U.K. pound sterling)
The notes on pages 9 to 20 form part of these financial statements.
<PAGE>9
MERLIN PUBLISHING INTERNATIONAL PLC
Consolidated balance sheet at 31 January 1995
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Note 1995 1994
<S> <C> <C> <C> <C> <C>
L L L L
Fixed assets
Tangible assets 8 407,127 275,167
Current assets
Stocks 10 1,246,182 1,233,842
Debtors 11 7,093,088 5,189,423
Cash at bank and in hand 7,218,215 2,947,401
---------- ----------
15,557,485 9,370,666
Creditors: amounts falling due within one
year 12 12,335,803 7,701,156
---------- ---------
Net current assets 3,221,682 1,669,510
--------- ---------
Total assets less current liabilities 3,628,809 1,944,677
Creditors: amounts falling due after more
than one year 13 21,572 _
Provision for liabilities and charges 14 6,325 23,491
--------- ---------
3,600,912 1,921,186
========= =========
Capital and reserves
Called up share capital 15 178,571 178,571
Share premium account 16 156,078 108,930
Profit and loss account 17 3,266,263 1,633,376
--------- ---------
Shareholders' funds 3,600,912 1,920,877
Minority interest - 309
--------- ---------
3,600,912 1,921,186
========= =========
</TABLE>
("L" equals U.K. pound sterling)
All shareholders' funds are equity
The notes on pages 9 to 20 form part of these financial statements
<PAGE>10
MERLIN PUBLISHING INTERNATIONAL PLC
Balance sheet at 31 January 1995
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Note 1995 1994
<S> <C> <C> <C> <C> <C>
L L L L
Fixed assets
Tangible assets 8 188,472 63,878
Investments 9 633,779 28,832
------- -------
822,251 92,710
Current assets
Stocks 10 25,000 69,074
Debtors 11 4,531,437 3,191,919
Cash at bank and in hand 3,201,257 407,417
---------- ----------
7,757,694 3,668,410
Creditors: amounts falling due within
one year 12 5,844,851 2,710,297
---------- ---------
Net current assets 1,912,843 958,113
--------- ---------
Total assets less current liabilities 2,735,094 1,050,823
Provision for liabilities and charges 14 6,325 12,250
--------- ---------
2,728,769 1,038,573
========= =========
Capital and reserves
Called up share capital 15 178,571 178,571
Share premium account 16 156,078 108,930
Profit and loss account 17 2,394,120 751,072
--------- ---------
Shareholders' funds 2,728,769 1,038,573
========= =========
</TABLE>
("L" equals U.K. pound sterling)
All shareholders' funds are equity
These financial statements were approved by the Board on 23 March 1995
/s/ PJ Warsop
PJ Warsop
Director
The notes on pages 9 to 20 form part of these financial statements
<PAGE>11
MERLIN PUBLISHING INTERNATIONAL PLC
Consolidated cash flow statement for the year ended 31 January 1995
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Note 1995 1994
<S> <C> <C> <C> <C> <C>
L L L L
Net cash inflow from operating activities 21 5,899,852 2,552,194
Returns on investments and servicing of finance
Interest received 137,335 42,954
Interest paid (463) (22,698)
Dividends paid (557,792) (400,000)
------- -------
Net cash (outflow)/inflow from returns on
investment and servicing of finance (420,920) (379,744)
Taxation
UK Corporation Tax (638,150) (120,020)
Overseas tax (304,240) (231,778)
------- -------
(942,390) (351,798)
Investing activities
Acquisition of subsidiaries - (9)
Payments to acquire tangible fixed assets (259,860) (151,797)
Sale of tangible fixed assets 1,714 4,597
-------- --------
Net cash outflow from investing activities (258,146) (147,209)
--------- --------
Net cash inflow before financing 4,278,396 1,673,443
Financing
Finance lease payments 22 (7,582) (9,840)
-------- --------
Net cash outflow from financing (7,582) (9,840)
-------- --------
Increase in cash and cash equivalents 23 4,270,814 1,663,603
========= ==========
</TABLE>
("L" equals U.K. pound sterling)
The notes on page 9 to 20 form part of these financial statements
<PAGE>12
MERLIN PUBLISHING INTERNATIONAL PLC
Notes forming part of the financial statements for the year ended 31 January
1995
- ------------------------------------------------------------------------------
1 Accounting policies
The financial statements have been prepared under the historical
cost convention and are in accordance with applicable accounting
standards. The following principal accounting policies have been
applied:
Basis of consolidation
The consolidated accounts incorporate the financial statements
of Merlin Publishing International PLC and all of its
subsidiary undertakings made up to 31 January 1995. The group
uses the acquisition method of accounting to consolidate the
results of subsidiary undertakings. The results of subsidiary
undertakings are included from the date of acquisition.
Goodwill arising on consolidation is written off directly
against reserves.
Turnover
Turnover represents gross sales to outside customers at
invoiced amounts less value added tax on a sale or return
basis.
Depreciation
Depreciation is provided to write off the cost, less estimated
residual values, of all fixed assets over their expected useful
lives. It is calculated on the original cost of the assets at
the following rates:
Motor vehicles - 25% per annum
Leasehold improvements - 10% per annum
Fixtures and fittings - 15% per annum
Office equipment - 20% per annum
Computer Equipment - 33.3% per annum
Stocks
Stocks are valued at the lower of cost and net realisable
value. Cost is based on the cost of purchase on a first in,
first out basis.
Net realisable value is based on estimated selling price less
further costs to completion and disposal.
Deferred taxation
Provision is made for timing differences between the treatment
of certain items for taxation and accounting purposes, to the
extent that it is probable that a liability or asset will
crystallise.
<PAGE>13
MERLIN PUBLISHING INTERNATIONAL PLC
Notes forming part of the financial statements for the year ended 31 January
1995 (Continued)
- ------------------------------------------------------------------------------
1 Accounting policies (Continued)
Leased assets
Where the company enters into a lease for furniture, fittings
and equipment which entails taking substantially all the risks
and rewards of ownership of an asset, the lease is treated as a
finance lease. The asset is recorded in the balance sheet as a
tangible fixed asset and is depreciated over its estimated
useful life. Future instalments under such leases, net of
finance charges, are included within creditors. Rentals
payable are apportioned between the finance element, which is
charged to the profit and loss account as interest, and the
capital element, which reduces the outstanding obligation for
future instalments.
All other leases are treated as operating leases and the rental
charges are taken to the profit and loss account on a straight
line basis over the life of the lease.
Foreign currency
Profit and loss accounts and assets and liabilities of foreign
subsidiary undertakings are translated into sterling at the
rates of exchange ruling at the balance sheet date. Exchange
differences which arise from the translation of the opening net
investment in foreign subsidiary undertakings are taken to
reserves.
All other differences are taken to the profit and loss account
with the exception of differences on foreign currency
borrowings, which, to the extent that they are used to finance
or provide a hedge against foreign equity investments, are
taken directly to reserves to the extent of the exchange
difference arising on the net investment in these enterprises.
Foreign currency transactions of individual companies are
translated at the rates ruling when they occurred. Foreign
currency monetary assets and liabilities are translated at the
rates ruling at the balance sheet dates. Any differences are
taken to the profit and loss account.
Pension costs
Contributions to defined contribution pension schemes are
charged to the profit and loss account in the year in which
they become payable.
2. Turnover and profits
The analysis of turnover by geographical market, profit before tax
and other segmental information as required by SSAP 25 for each
principal activity have not been disclosed since, in the opinion of
the directors, this would be prejudicial to the commercial interests
of the company.
<PAGE>14
MERLIN PUBLISHING INTERNATIONAL PLC
Notes forming part of the financial statements for the year ended 31 January
1995 (Continued)
- ------------------------------------------------------------------------------
3 Employees
<TABLE>
<CAPTION>
1995 1994
L L
<S> <C> <C>
Staff costs (including directors) consist of:
Wages and salaries 1,924,196 1,114,024
Social security costs 216,589 105,981
Other pension costs 98,309 83,417
------------ ------------
2,239,094 1,303,422
============ ============
The average weekly number of employees (including directors)
during the year was 55 (1994 - 39)
Directors' emoluments consist of:
Fees as Director 28,750 20,000
Remuneration for management services 650,821 473,796
Pension contributions 44,818 30,415
Amounts paid to third parties 20,000 25,780
------------- -------------
744,389 549,991
============= =============
Emoluments (excluding pension contributions) of:
Chairman - -
Highest paid director 119,403 95,203
============= ============
Other directors' emoluments (excluding pension contributions) Number Number
fell within the ranges:
L 0 - L 5,000 1 -
L 5,001 - L10,000 3 2
L15,001 - L20,000 1 1
L60,001 - L65,000 - 1
L70,001 - L75,000 - 2
L75,001 - L80,000 2 2
L80,001 - L85,000 1 -
L85,001 - L90,000 2 -
L115,001 - L120,000 1 -
</TABLE>
("L" equals U.K. pound sterling)
<PAGE>15
MERLIN PUBLISHING INTERNATIONAL PLC
Notes forming part of the financial statements for the year ended 31 January
1995 (Continued)
- ------------------------------------------------------------------------------
Mr F Melegari owns a business in Italy called Italia and Italy srl which
produces editorial and design requirements for the group. The value of the
services during the year was L746,584. (1994 - L640,000).
There were no other contracts of significance during the year in which a
director of the company had a material interest.
<TABLE>
<CAPTION>
4 Interest payable 1995 1994
<S> <C> <C> <C>
L L
Bank Overdraft 463 22,698
=== ======
5 Profit on ordinary activities before taxation
This is arrived at after charging:
Depreciation - owned assets 127,265 66,534
Auditors' remuneration - audit 46,114 40,672
- non audit 87,261 29,584
Operating lease rentals - plant and machinery 97,970 57,425
- other 120,506 59,331
======== ========
6 Taxation on profit on ordinary activities
Corporation tax at 33% (1994-33%) 1,409,396 316,747
Transfer (from)/to deferred tax (17,166) 11,241
Overseas tax 192,118 557,596
Under/(over) provision in previous years 46,937 (77,553)
--------- --------
1,631,285 808,051
========= ========
7 Dividends
Ordinary dividend paid (L1.55 per share) 276,792 -
Proposed ordinary dividend (L1.37 per share) (191994-L1.57) 245,000 281,000
-------- --------
521,792 281,000
======== ========
</TABLE>
("L" equals U.K. pound sterling)
<PAGE>16
MERLIN PUBLISHING INTERNATIONAL PLC
Notes forming part of the financial statements for the year ended 31 January
1995 (Continued)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
8 Tangible assets
<S> <C> <C> <C> <C>
Leasehold Plant & machinery
improvements L Total
L L
Group
Cost
At 1 February 1994 51,863 335,160 387,023
Additions 17,191 242,669 259,860
Disposals - (20,984) (20,984)
Exchange differences - 2,605 2,605
----------- ---------- --------
At 31 January 1995 69,054 559,450 628,504
----------- ---------- --------
Depreciation
At 1 February 1994 10,770 101,086 111,856
Provided in the year 5,856 121,409 127,265
Disposals - (19,270) (19,270)
Exchange differences - 1,526 1,526
----------- ---------- __________
At 31 January 1995 16,626 204,751 221,377
----------- ---------- --------
Net book value
At 31 January 1995 52,428 354,699 407,127
----------- ---------- --------
At 31 January 1994 41,093 234,074 275,167
=========== ========== ========
Company
Cost
At 1 February 1994 24,542 39,926 64,468
("L" equals U.K. pound sterling)
<PAGE>17
Additions 12,638 136,811 149,449
----------- ---------- --------
At 31 January 1995 37,180 176,737 213,917
----------- ---------- --------
Depreciation
At 1 February 1994 - 590 590
Provided in the year 3,123 21,732 24,855
---------- ---------- ---------
At 31 January 1995 3,123 22,322 25,445
---------- ---------- ---------
Net book value
At 31 January 1995 34,057 154,415 188,472
---------- ---------- ---------
At 31 January 1994 24,542 39,336 63,878
========== ========== =========
</TABLE>
("L" equals U.K. pound sterling)
The net book value of assets held under finance leases at 31 January 1995 was
L Nil (1994-L15,238).
<PAGE>18
MERLIN PUBLISHING INTERNATIONAL PLC
Notes forming part of the financial statements for the year ended
31 January 1995 (Continued)
- ------------------------------------------------------------------------------
9 Investments Company
L
At 1 February 1994 28,832
Shares acquired in subsidiary undertakings 604,947
-------
At 31 January 1995 633,779
========
The following were subsidiary undertakings at the end of the year:
<TABLE>
<CAPTION>
Name Country of Proportion of Nature of business
incorporation or ordinary share
registration capital held
<S> <C> <C> <C>
Merlin Publishing Ltd UK 100% Publisher of childrens sticker book
collections and trading cards
Merling Publishing BV Netherlands 100% Publisher of childrens sticker book
collections and trading cards
Merlin Publishing SRL Italy 100% Publisher of childrens sticker book
collections and trading cards
Merlin Publishing SARL France 100% Publisher of childrens sticker book
collections and trading cards
Merlin Publishing SL Spain 100% Publisher of childrens sticker book
collections and trading cards
Squared Circle Limited UK 100% Mail order services
Merlin Marketing Services Limited UK 100% Children's sticker and trading card
sales and marketing
Merlin Editions Inc. USA 95% Publisher of childrens sticker book
collections and trading cards
Merlin Publishing (Europe) Limited UK 100% Dormant
Merlin Holdings Inc. USA 100% Holding company for US interest
</TABLE>
("L" equals U.K. pound sterling)
<PAGE>19
MERLIN PUBLISHING INTERNATIONAL PLC
Notes forming part of the financial statements for the year ended
31 January 1995 (Continued)
- ------------------------------------------------------------------------------
9 Investments (Continued)
During the year the company acquired one hundred thousand 7% Non
Cumulative Redeemable Preference Shares of $10 each in Merlin Holdings
Inc. In addition the group purchased 100% of the share capital of Merlin
Publishing SL.
Under an agreement dated 29 December 1994 the minority shareholder in
Merlin Editions Inc is entitled upon attaining certain financial targets
by 31 January 1997 to exercise control over 15% of the ordinary stock of
the subsidiary undertaking. In the meantime the Parent Company controls
95% of the ordinary stock of the subsidiary undertaking.
10 Stocks
<TABLE>
<CAPTION>
Group Company
<S> <C> <C> <C> <C>
1995 1994 1995 1994
L L L L
Raw Materials 91,817 - - -
Stock of goods for resale 1,154,365 1,233,842 25,000 69,074
--------- --------- ------ ------
1,246,182 1,233,842 25,000 69,074
========= ========= ====== ======
</TABLE>
("L" equals U.K. pound sterling)
11 Debtors
<TABLE>
<CAPTION>
Amounts falling due within one year
<S> <C> <C> <C> <C>
Trade debtors 5,705,008 4,322,510 353,120 151,610
Other debtors 421,866 401,293 226,551 34,382
Amounts owing from subsidiary
undertakings - - 1,376,530 2,167,606
Prepayments and accrued income 904,964 395,370 2,513,986 768,071
--------- --------- --------- ---------
7,031,838 5,119,173 4,470,187 3,121,669
Amounts falling due after more
than one year
ACT recoverable 61,250 70,250 61,250 70,250
--------- --------- --------- ---------
7,093,088 5,189,423 4,531,437 3,191,919
========= ========= ========= =========
</TABLE>
("L" equals U.K. pound sterling)
<PAGE>20
<TABLE>
<CAPTION>
MERLIN PUBLISHING INTERNATIONAL PLC
Notes forming part of the financial statements for the year ended 31 January 1995 (Continued)
-------------------------------------------------------------------------------------------------------
12 Creditors: amounts falling due within one year
Group Company
<S> <C> <C> <C> <C>
1995 1994 1995 1994
L L L L
Trade creditors 8,131,776 5,219,174 3,365,581 1,725,057
Other creditors 129,024 648,326 - -
Taxation and social security 938,992 34,827 - -
Proposed dividend 245,000 281,000 245,000 281,000
Corporation tax 2,090,938 1,223,053 532,417 280,917
Accruals and deferred income 800,073 287,194 83,067 152,247
Amounts due to subsidiary undertakings - - 1,618,786 271,076
Obligations under finance leases and hire
purchase contracts - 7,582 - -
---------- --------- --------- ---------
12,335,803 7,701,156 5,844,851 2,710,297
========== ========= ========= =========
13 Creditors: amounts falling due after more than one year
Group
1995 1994
L L
Overseas Taxation 21,572 -
====== ======
14 Provision for liabilities and charges
Group Company
1995 1994 1995 1994
L L L L
Deferred tax 6,325 23,491 6,325 12,250
Accelerated capital allowances
===== ====== ===== ======
No unprovided deferred tax arises in respect of 1995 and 1994
("L" equals U.K. pound sterling)
<PAGE>21
MERLIN PUBLISHING INTERNATIONAL PLC
Notes forming part of the financial statements for the year ended 31 January 1995 (Continued)
-------------------------------------------------------------------------------------------------------
15 Share capital
Allotted, called up
Authorised and fully paid
1995 1994 1995 1994
L L L L
A ordinary shares of L1 each 71,428 71,428 71,428 71,428
B ordinary shares of L1 each 107,143 107,143 107,143 107,143
------- ------- ------- -------
178,571 178,571 178,571 178,571
======= ======= ======= =======
</TABLE>
("L" equals U.K. pound sterling)
<PAGE>22
MERLIN PUBLISHING INTERNATIONAL PLC
Notes forming part of the financial statements for the year ended 31 January
1995 (Continued)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
16 Share premium account
<S> <C>
Group and Company
L
Balance at 1 February 1994 108,930
Premium arising on shares reissued in the year 51,404
Premium on shares repurchased by the company in the year (4,256)
--------
Balance at 31 January 1995 156,078
========
</TABLE>
("L" equals U.K. pound sterling)
On 8 August 1994 2,358 B ordinary shares of the company were repurchased at a
premium which was adjusted through the company's accumulated reserves and
share premium account. Immediately thereafter 2,358 new B ordinary shares
were reissued at a premium of L21.80 per share.
17 Profit and loss account
The company has taken advantage of the exemption under S.230 of the
Companies Act 1985 from presenting its own profit and loss account. The
profit dealt with in the accounts of the parent company is L1,690,196
(1994 L302,669).
<TABLE>
<CAPTION>
Group Company
L L
<S> <C> <C>
At 1 February 1994 1,633,376 751,072
Profit for the year 1,573,250 1,690,196
Exchange differences 106,785 -
Purchase of company shares (note 16) (47,148) (47,148)
--------- ---------
At 31 January 1995 3,266,263 2,394,120
========= =========
</TABLE>
("L" equals U.K. pound sterling)
<PAGE>23
MERLIN PUBLISHING INTERNATIONAL PLC
Notes forming part of the financial statements for the year ended
31 January 1995 (Continued)
- ------------------------------------------------------------------------------
18 Reconciliation of movement on shareholders' funds
<TABLE>
<CAPTION>
Group Company
<S> <C> <C> <C> <C>
1995 1994 1995 1994
L L L L
Profit for the year 2,095,042 1,118,914 2,211,988 583,669
Dividends 521,792 281,000 521,792 281,000
--------- --------- --------- ---------
1,573,250 837,914 1,690,196 302,669
Foreign exchange differences 106,785 20,863 - -
--------- -------- -------- --------
Net increase in shareholders' funds 1,680,035 858,777 1,690,196 302,669
Opening shareholders' funds 1,920,877 1,062,100 1,038,573 735,904
--------- --------- --------- ---------
Closing shareholders' funds 3,600,912 1,920,877 2,728,769 1,038,573
========= ========= ========= =========
</TABLE>
("L" equals U.K. pound sterling)
19 Pension costs
The group contributes to money purchase schemes for certain of its full-
time employees. The assets of the schemes are held separately from those
of the group in independently administered funds. The employees may also
make personal voluntary contributions to the schemes to provide additional
benefits for themselves and/or their dependants.
The pension costs charge represents contributions made by the group to the
scheme in the year under review.
<PAGE>24
MERLIN PUBLISHING INTERNATIONAL PLC
Notes forming part of the financial statements for the year ended 31 January
1995 (Continued)
- ------------------------------------------------------------------------------
20 Operating lease commitments
At 31 January 1995 the group had annual commitments under non-cancellable
operating leases as set out below:
<TABLE>
<CAPTION>
Group
<S> <C> <C> <C> <C>
1995 1994
Land and buildings Other leases Land and buildings Other leases
Operating leases which expire: L L L L
Within one year 6,867 28,543 4,466 42,594
Two to five years 27,166 112,202 10,653 51,623
After five years 104,949 - 67,706 -
------- ------- ------ -------
138,982 140,745 82,825 94,217
======= ======= ====== ======
Company
1995 1994
Land and buildings Other leases Land and buildings Other leases
Operating leases which expire: L L L L
Within one year - - 4,466 42,594
Two to five years - 56,707 10,653 51,623
After five years 28,973 - 67,706 -
------ ------ ------- -------
28,973 56,707 82,825 94,217
====== ====== ======= ======
</TABLE>
("L" equals U.K. pound sterling)
21 Reconciliation of operating profit to net cash inflow from operating
activities
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
L L
Operating profit 3,581,581 1,906,709
Depreciation 127,265 67,268
Increase in stocks (12,340) (512,241)
Increase in debtors (1,760,372) (2,370,006)
Increase in creditors 3,817,909 3,472,199
Foreign exchange movements 145,809 (11,735)
--------- ---------
5,899,852 2,552,194
========= =========
</TABLE>
("L" equals U.K. pound sterling)
<PAGE>25
MERLIN PUBLISHING INTERNATIONAL PLC
Notes forming part of the financial statements for the year ended 31 January
1995
(Continued)
- ------------------------------------------------------------------------------
22 Analysis of changes in financing
<TABLE>
<CAPTION>
Share capital Loans and finance lease obligations
and premium
<S> <C> <C> <C> <C>
1995 1994 1995 1994
L L L L
Balance at start of year 287,501 287,501 7,582 17,422
Finance lease payments - - 7,582 9,840
Premium arising on shares reissued in the year 51,404 - - -
Premium on shares repurchased by the company in
the year (4,256) - - -
-------- -------- -------- -------
Balance at end of year 334,649 287,501 7,582 37,262
======== ======== ======== =======
</TABLE>
("L" equals U.K. pound sterling)
On 8 August 1994 2,358 B ordinary shares of the company were repurchased at a
premium which was adjusted through the company's accumulated reserves and
share premium account. Immediately thereafter 2,358 new B ordinary shares
were reissued at a premium of L21.80 per share.
<TABLE>
<CAPTION>
23 Analysis of changes in cash and cash equivalents
<S> <C> <C> <C>
Cash at bank Overdrafts Total
L L L
Movements in 1994 and 1995
Balance at
1 February 1993 1,340,755 (56,957) 1,283,798
Net cash inflow 1,606,646 56,957 1,663,603
---------- -------- ----------
Balance at
31 January 1994 2,947,401 - 2,947,401
Net cash
inflow 4,270,814 - 4,270,814
---------- -------- ----------
Balance at
31 January 1995 7,218,215 - 7,218,215
========== ======== ==========
</TABLE>
("L" equals U.K. pound sterling)
<PAGE>1
MERLIN PUBLISHING INTERNATIONAL PLC
Report of the auditors
To the shareholders of Merlin Publishing International PLC
We have audited the financial statements on pages 4 to 20 which
have been prepared under the accounting policies set out on pages
9 and 10.
Respective responsibilities of directors and auditors
As described on page 2 the company's directors are responsible for
the preparation of the financial statements. It is our
responsibility to form an independent opinion, based on our audit,
on those statements and to report our opinion to you.
Basis of Opinion
We conducted our audit in accordance with Auditing Standards
issued by the Auditing Practices Board. An audit includes an
examination, on a test basis, of evidence relevant to the amounts
and disclosures in the financial statements. It also includes an
assessment of the significant estimates and judgements made by the
directors in the preparation of the financial statements, and of
whether the accounting policies are appropriate to the company's
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial
statements.
Opinion
In our opinion the financial statements give a true and fair view
of the state of affairs of the company and group as at 31 January
1995 and the profit of the group for the year then ended and have
been properly prepared in accordance with the Companies Act 1985.
BDO STOY HAYWARD
Chartered Accountants
and Registered Auditors
London
23 March, 1995
<PAGE>1
[LETTERHEAD OF BDO STOY HAYWARD]
Private and Confidential
7 July 1995
Our of 89/DA/Audit M1450
The Topps Company, Inc.
We hereby consent to the incorporation by reference in Registration Statement
No. 33-17096 of The Topps Company, Inc. and Subsidiaries on Form S-8 and
Registration Statement No. 33-59625 of The Topps Company, Inc. on Form S-8 of
our report dated March 23, 1995, on our audit of the financial statements of
Merlin Publishing International plc for the fiscal year ended January 31,
1995, appearing in this Current Report on Form 8-K of The Topps Company, Inc.
Yours faithfully
/s/ BDO Stoy Hayward
BDO Stoy Hayward
<PAGE>1
<TABLE>
<CAPTION>
The Topps Company, Inc.
Unaudited Condensed Consolidated Balance Sheet
February 25, 1995
(000 omitted)
<S> <C> <C> <C> <C>
Merlin Historical
(Pounds Sterling) (Dollars) Topps Historic Adjustments Pro Forma
Current Assets
Cash and Cash Equivalents 7,218 $11,458 $17,785 ($2,200) a $27,043
Accounts Receivable, Net of Allowances 5,705 $9,056 $24,228 $33,284
Inventories 1,246 $1,978 $27,222 $29,200
Income tax receivable 0 $0 $552 $552
Prepaid expenses and current assets 1,328 $2,107 $10,158 $12,265
------ ------ ------- -------
Total Current Assets 15,497 $24,599 $79,945 ($2,200) $102,344
------ ------- ------- --------
Property, Plant and Equipment
Land 0 $0 $581 $581
Buildings and improvements 69 $110 $20,831 $20,941
Machinery and Equipment 559 $887 $28,683 $29,570
------ ------ ------- -------
628 $997 $50,095 $51,092
Accumulated depreciation 221 $351 $18,131 $18,482
------ ------ ------ ------
407 $646 $31,964 $32,610
------ ------ ------ ------
Intangible assets, Net Amortization 0 $0 $22,901 $48,933 b $71,834
Other Assets 61 $98 $1,514 $1,612
------ ------ ------ ------ ------
Total Assets 15,965 $25,343 $136,324 $46,733 $208,400
======== ====== ======== =======
Current Liabilities
Accounts Payable 8,132 $12,909 $22,396 $35,305
Accrued expenses and other liabilities 1,174 $1,863 $25,599 $27,462
Income Taxes payable 3,030 $4,810 $1,033 $5,843
------ ------ ------ ------ ------
Total Current Liabilities 12,336 $19,582 $49,028 $68,610
Deferred Income taxes 6 $10 $9,630 $2,450 c $12,090
Long-term debt 0 $0 $0 $50,000 d $50,000
Other Liabilities 22 $34 $3,797 $3,831
------ ------ ------ ------
Total Liabilities 12,364 $19,626 $62,455 $52,450 $134,531
------ ------ ------- ------- --------
Stockholders' Equity
Common Stock at par 178 $283 $475 ($283) e $475
Additional Paid-in Capital 156 $248 $16,792 ($248) e $16,792
Treasury Stock at cost (47) ($75) ($6,120) $75 e ($6,120)
Retained earnings 3,207 $5,091 $61,325 ($5,091) e $61,325
Minimum Pension liability adjustment 0 $0 $0 $0 e $0
Cumulative Adjustment Foreign 107 $170 $1,397 ($170) e $1,397
currency translation
------ ------ ------ ------
Total Stockholders equity 3,601 $5,717 $73,869 ($5,717) $73,869
------ ------ ------- -------- -------
Total liabilities and stockholders equity 15,965 $25,343 $136,324 $46,733 $208,400
======== ====== ======== =======
</TABLE>
<PAGE>2
<TABLE>
<CAPTION>
The Topps Company, Inc.
Unaudited Condensed Consolidated Statement of Operations
Year Ended February 25, 1995
(000 omitted)
<S> <C> <C> <C> <C>
Merlin Historical
(Pounds Sterling) (Dollars) Topps Historic Adjustments Pro Forma
Net Sales 34,569 $53,444 $265,386 ($11,816) a $307,014
Cost of Sales 24,181 $37,384 $183,429 ($11,816) a $209,997
$1,000 b
------ ------- -------- --------
Gross profit on sales 10,388 $16,060 $81,957 $97,017
Royalties and other income 0 $0 $2,957 $2,957
------ ------- -------- --------
10,388 $16,060 $84,914 $99,974
Selling, General, and
administrative expenses 6,807 $10,523 $57,990 $1,020 b $69,533
------ ------- -------- -------
Income from operations 3,581 $5,537 $26,924 $30,441
Interest Income (expense), net 137 $212 $461 ($3,230) c ($2,557)
------ ------- -------- -------
Income before provision for income taxes 3,718 $5,749 $27,385 $27,884
Provision for income taxes 1,631 $2,522 $11,638 ($1,234) d $12,926
------ ------- -------- -------
Net Income 2,087 $3,227 $15,747 $14,958
====== ====== ======== =======
Income per share $0.33 $0.32
====== =========
Weighted average shares outstanding 47,039,287 47,039,287
========== =======
</TABLE>
<PAGE>3
THE TOPPS COMPANY, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited pro forma consolidated condensed financial
statements give effect to the acquisition of Merlin Publishing International
plc ("Merlin") by The Topps Company, Inc. (the "Company"). The balance sheet
assumes the acquisition and related financing occurred on February 25, 1995
and the statement of operations assumes that the acquisition and related
financing occurred on the first day of the fiscal year then ended. Historic
amounts for Topps and Merlin are based on the financial statements for their
most recent fiscal years, which ended on February 25, 1995 and January 31,
1995, respectively. The pro forma financial statements are not necessarily
indicative of the results which would have occurred if the acquisition had
taken place on such date or the results which may occur in future periods.
The acquisition has been accounted for using the purchase method of
accounting. The cost of the acquisition has been allocated to the assets and
liabilities acquired based upon preliminary estimates of their respective fair
values at the acquisition date. Fair value is based upon preliminary
estimates by management; management is in the process of refining these
estimates and the allocation of purchase price may be modified as that process
is completed.
The historic financial statements of Merlin are stated in British pounds and
presented in accordance with UK GAAP. For purposes of pro forma presentation,
the balance sheet of Merlin has been translated into US dollars at the
exchange rate as of February 25, 1995 and the statement of operations at the
average exchange rate for the year then ended. There are no differences
between UK GAAP and accounting principles generally accepted in the United
States which would have a material effect upon net income of stockholder's
equity.
<PAGE>4
NOTE 2 - BALANCE SHEET ADJUSTMENTS
(a) Represents the estimated transaction costs to be paid at
the time of closing.
(b) Represents the allocation of excess of cost over fair
value of net tangible assets acquired to intangible
assets, as follows:
Deferred Financing Costs $ 1,100
Contracts 7,000
Goodwill 40,833
________
$48,933
$========
(c) Represents deferred taxes arising as a result of
differences between the income tax basis and financial
statement basis of assets acquired.
(d) Represents borrowings to finance the acquisition.
(e) Elimination of the stockholders' equity accounts of
Merlin.
NOTE 3 - STATEMENT OF OPERATIONS ADJUSTMENTS
(a) Represents reclassification of sales and cost of sales.
(b) Represents amortization of contracts over 7 years
and amortization of goodwill over 40 years.
(c) Represents additional interest cost, including
amortization of deferred financing costs, on borrowings
to finance the acquisition.
(d) Represents additional income tax expense.
